These are stories Report on Business is following Monday, Sept. 16, 2013.
I don’t want to spoil the party so I’ll go
Investors are cheering the exit of Larry Summers from the race to succeed Ben Bernanke as chairman of the Federal Reserve.
Also feeding today's optimism in global markets were the talks between the United States and Russia on Syria.
“All eyes had been set on the U.S. Federal Reserve meeting this week, so last night’s news about Larry Summers withdrawing from the race to succeed ‘Helicopter Ben’ was something of a bolt from the blue,” said market analyst Chris Beauchamp of IG in London.
“To all intents and purposes it looks as if Janet Yellen is now a shoe-in for the top job, something that will keep traders in a better mood in the long winter months of tapering that probably lie ahead," he added in a research note, referring to the Fed’s current vice-chair, Ms. Yellen, who is seen continuing the Fed’s current course.
European stocks raced ahead, as did the S&P 500, Dow Jones industrial average and Toronto's S&P/TSX composite.
Playing into today’s action is also the fact that the Federal Reserve will announce on Wednesday whether it will begin pulling back on – or ‘tapering’ – its massive bond-buying program.
There had been widespread speculation that a Summers announcement could well have taken place this week, which would have removed some of the uncertainty surrounding Bernanke’s replacement," said senior market analyst Michael Hewson of CMC Markets.
"Unless Yellen is confirmed quickly then attention will inevitably shift to how robust the current rally is if the president doesn’t ratify the appointment quickly."
- Kevin Carmichael: With Summers out of Fed race, markets weigh remaining contenders
- Follow our Inside the Market blog (for subscribers)
- Economy Lab: Yellen now favourite in Fed race, no 'White House puppet'
- Brett House in Economy Lab: With or without Summers, the Fed would be dovish
- Kevin Carmichael in Economy Lab: The delicate art (and science) of tapering
- Obama accepts Summers’s decision to not seek U.S. Fed chairmanship
- Obama warns Republicans against creating more 'economic chaos'
C Series makes first flight
Bombardier Inc. officially ascended into a commercial airspace ferociously guarded by giants Airbus SAS and Boeing Co. today as its C Series took off for the first time at Mirabel, The Globe and Mail's Sophie Cousineau reports.
To the 2,700 employees and 300 Bombardier guests, it mattered little that this moment had been postponed three times or that the C Series’s development was shelved for two years, from 2006 to 2008. They applauded and cheered loudly.
The white– and blue-painted prototype plane smoothly took off in the unseasonably crisp air under a clear sky that blew clement winds. But challenging Airbus and Boeing while being attacked from behind by its Brazilian archival Embraer SA will undoubtedly be a more tumultuous ride.
“While [Bombardier’s] share price is up 33 per cent YTD, as major concerns around first flight have subsided, we do view this as a positive catalyst as it is a significant milestone,” said analyst Jacob Bout of CIBC World Markets.
- Sophie Cousineau: Launch of C Series aircraft puts Bombardier in rarefied market
- Updates from the runway: Maiden flight for Bombardier's C Series jet
- Guy Dixon: With Porter's plans in the wings, Bombardier to test 'whisper jets' on Monday
CIBC, TD reach Aeroplan deal
After testy negotiations, Canadian Imperial Bank of Commerce and Toronto-Dominion Bank have reached a compromise over the right to issue Aeroplan-branded credit cards, The Globe and Mail's Tim Kiladze reports.
Come 2014, both banks will offer Aeroplan cards, after TD buys roughly 50 per cent of CIBC’s Aeroplan portfolio. The seller will keep Aeroplan accounts that have a relationship with the bank, such as a CIBC chequing account or mortgage
TD and Aimia Inc., Aeroplan’s parent company, will pay CIBC $200-million in total upfront, and TD will also pay CIBC $37.5-million a year for the next three years. In exchange for this cash, TD will get access to a substantial number of Aeroplan accounts, rather than starting from zero and being forced to lure cardholders in the face of tough competition.
TD and Aimia Inc., Aeroplan’s parent company, will pay CIBC $200-million in total upfront, and TD will also pay CIBC $37.5-million a year for the next three years. In exchange for this cash, TD will get access to a substantial number of Aeroplan accounts, rather than starting from zero and being forced to lure cardholders in the face of tough competition
Home sales up
Canada’s housing market continues to rebound from the depths of a year ago.
Home sales across the country climbed 2.8 per cent in August from July, the Canadian Real Estate Association said today, and 11.1 per cent from a year earlier.
Last year’s showing, of course, came on the heels of tighter mortgage rules brought in by the Canadian government to cool things off.
“Sales activity dropped sharply around this time last year in the wake of tightened mortgage rules and has improved since then, so a sizable year-over-year increase this August was expected,” said Gregory Klump, CREA’s chief economist.
Average home prices rose 8.1 per cent in August from a year earlier, The Globe and Mail’s Tara Perkins reports, while the MLS home price index gained 2.9 per cent.
The realtors group today also updated its projection for sales this year, given the faster-than-expected rebound in the market.
Sales are now forecast to dip by less than 1 per cent this year to 449,000 units, largely on an expected bump in British Columbia.
Sales are projected to gain by 3.5 per cent in 2014 to 465,600.
- Tara Perkins: CREA hikes forecast after August home sales jump 11%
- Tara Perkins: Home sales continue their cross-country rebound
BlackBerry auction under way
Early signs from the auction of BlackBerry Ltd. suggest the company could be sold in pieces, Reuters reports.
“Initial indications” are that interest in the Canadian-based smartphone maker is modest, and that possible bidders are looking at just parts of BlackBerry, the news agency said, quoting sources.
Private equity groups are interested in units like the company’s services system and certain patents, Reuters says.
That’s not surprising, given the erosion in BlackBerry’s market share amid the fierce competition with Apple Inc.’s iPhone, Samsung’s Galaxy and phones powered by Google Inc.’s Android system.
Nor does it mean there won’t, in the end, be a deal for the entire company.
Prem Watsa’s Fairfax Financial Holdings Ltd., the biggest shareholder in the Waterloo, Ont.-based company, is trying to put together a consortium to take a run.
But, as The Globe and Mail’s Jacquie McNish reports, big Canadian pension funds aren’t interested in joining in at this point.
Private equity groups have signed confidentiality pacts with BlackBerry or are poised to meet with the company, Reuters says.
The company did not comment.
- Reuters: BlackBerry bidders may want to carve up business – sources
- Jacquie McNish: Pension funds cool to BlackBerry buyout overtures
- Steve Ladurantaye: Bell to cut roaming fees by half
- Colin Freeze and Rita Trichur: Wireless firms agree to give Ottawa ability to monitor calls, phone data
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