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Having survived plague and war, world’s oldest bank now wounded Add to ...

These are stories Report on Business is following Wednesday, Jan. 23, 2013.

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Italian bank in spotlight
Said to be the world’s oldest bank, Italy’s Monte dei Paschi di Siena has survived everything from the plague of 1629 to the Appenine earthquakes of 1703.

Indeed, it was formed in 1472, the year of the war between Volterra and Florence that led to the Eucharistic Miracle of Volterra.

The question now is how it deals with the curse of the modern financial era: Derivatives.
After plunging for two days, the bank’s shares were suspended from trading in Milan today amid press reports in Italy that suggest a derivatives deal with Nomura Holdings will show a massive hit to the bank’s 2012 earnings.

The Italian bank is also seeking some €500-million ($660-million Canadian) in additional government aid.

The bank announced earlier this month that it has launched a “thorough analysis” of “certain structured transactions” in the recent past.

“Having assessed the potential impacts, the board will then be in a position to adopt all necessary measures to ensure a fair accounting representation of the transactions in question, including retrospectively,” the bank said yesterday.

“Upon conclusion of the assessment process, the bank shall provide a precise indication of any potential balance sheet and profit and loss impacts resulting from the analysis currently being completed.”

Where Nomura is concerned, it added in a separate statement that “it does not turn out that the transaction was submitted to the board of directors of Banca Monte dei Paschi di Siena for approval.”

House prices slip
House prices in Canada slipped 0.4 per cent in December from a month earlier, according to a fresh reading, marking the fourth decline in a row.

That's a first in a non-recessionary period, according to the Teranet-National Bank home price index.

Year-over-year, however, prices are up by 3.1 per cent in 11 centres monitored, though that's the slowest pace in three years and marks more than a year of slower growth.

The monthly decline was steepest in Vancouver, where prices fell by 1 per cent. Vancouver also stands alone as the only city with an annual decline, of 2 per cent.

Prices slipped 0.9 per cent on the month in Calgary, but were up 4.1 per cent on the year. In Toronto, prices slipped 0.3 per cent from November, but were up by a strong 6.3 per cent on the year.

Other centres: Edmonton, down 0.1 per cent and up 1.5 per cent; Halifax, down 0.7 per cent and up 5.6 per cent; Hamilton, up 0.9 per cent and 7.4 per cent; Montreal, down 0.3 per cent and up 3 per cent; Ottawa, down 0.1 per cent and up 2.6 per cent; Quebec City, up 1.7 per cent and 4.2 per cent; Victory, up 0.9 per cent and flat; Winnipeg, down 0.7 per cent and up 3.9 per cent.

The index differs from prices reported monthly by the Canadian Real Estate Association.

RIM bounces up and down
Shares of Research In Motion Ltd. are now down in premarket action, after having climbed again to top $18 (U.S.) with just one week to go before the launch of its long-awaited BlackBerry 10 devices.

The stock has made dramatic gains on optimistic reports from stock analysts, and recent comments by chief executive officer Thorsten Heins.

Analysts have cited, among other things, strong support among wireless carriers for BB10, which launches Jan. 30, a strong market campaign by RIM and the fact that the troubled BlackBerry maker is eyeing some 70,000 apps.

The stock is down about 1 per cent before markets open.

Awaiting Carney
Don’t expect the Bank of Canada to change its tune on the interest rate front this morning, though the central bank may well cut its economic forecast.

Governor Mark Carney and his colleagues on the policy-setting panel won’t change their benchmark overnight rate from its current 1 per cent, of course, and aren’t expected to change their signal for what’s next, which is an eventual hike rather than a cut.

But they are expected to trim their near-term outlook for economic growth.
“Our rate strategists expect downward revisions to growth, and consequently upward revisions to output gap forecasts and lower inflation profiles,” said senior currency strategist Elsa Lignos of RBC Europe.

“But given the positive macroeconomic tone globally to start 2013 and the BoC’s ongoing concern over household imbalances, it seems likely the eventual tightening bias will remain unchanged,” she said in a research note today.

“We will also be watching for any change to the line on [the Canadian currency] – the standard phrase is to include ‘the persistent strength of the Canadian dollar’ on a list of export/competitiveness challenges. It has been repeated at every single meeting since December 2010 in more or less unchanged form.”

Today marks a change for the central bank, which will release its statement and monetary policy report at the same time, 10 a.m. ET. The Globe and Mail’s Kevin Carmichael will report on the decision.

Markets mixed
Markets are mixed so far this morning, waiting for American politicians to vote on an extension to the country’s debt limit.

Tokyo’s Nikkei sank 2.1 per cent, and Kong Kong’s Hang Seng 0.1 per cent.

In Europe, London’s FTSE 100 was up by 0.1 per cent by about 8:30 a.m. ET, while Germany’s DAX was flat and the Paris CAC 40 was down by 0.5 per cent.

Dow Jones industrial average and S&P 500 futures were little changed.

“Bulls should be pleased with their performance so far in 2013,” said market analyst Chris Beauchamp of IG in London.

“Although January is not yet done, we have a rise of nearly 5 per cent for London’s leading index, an excellent achievement when you consider how uncertain things looked at the end of 2012,” he said in a research note.

“Tech earnings remain the focus for the U.S. sessions, as investors gear up for the latest set of Apple numbers, which will emerge after the market close,” Mr. Beauchamp added. “With U.S. economic data light today, expect most of the session to be a ‘wait and see’ period, even given the strong start provided by Apple’s fellow tech stocks.”

Cameron pledges referendum
British Prime Minister David Cameron has added more uncertainty to an already fragile Europe, which is reeling from three years of a raging debt crisis.

As our London correspondent Paul Waldie reports, Mr. Cameron today gave his long-awaited speech on the country’s future in the European Union, promising to try to amend the terms of its membership and then to put it in the people’s hands via a referendum. This would follow the next election.

“Today public disillusionment with the EU is at an all-time high,” Mr. Cameron said. “The result is that democratic consent for the EU in Britain is wafer thin.”

Europe’s politicians have struggled to find a co-ordinated approach to the region’s economic woes, notably among the 17 nations that share the euro, but also in the wider 27-member EU. Only in the last few months has some stability emerged since Greece kicked off the crisis.

“It has been suggested that David Cameron’s decision to pledge a vote on EU membership could well unsettle markets; however it is becoming abundantly clear that the current status quo is also creating just as much uncertainty,” senior analyst Michael Hewson of CMC Markets said before the prime minister’s speech.

“Whether this is the right approach only time will tell, but it is sure to attract a firestorm of debate and criticism on both sides of the political divide, in the U.K. as well as Europe.”

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