These are stories Report on Business is following Friday, Aug. 17, 2012.
Troubles in agriculture
Canada's fertilizer industry is going through something of a rough patch.
First, Agrium Inc. found itself under attack this week as New York hedge fund Jana Partners LP pushed for the agri-business giant to break in two, separating its retail business from its potash and other operations.
Then yesterday, as The Globe and Mail's Richard Blackwell reports, Brazil's Vale SA said it's delaying a $3-billion potash project in Saskatchewan, a move that will ripple through the local economy.
And last night, Potash Corp. of Saskatchewan announced a month-long shutdown of its Lanigan potash mine, east of Saskatoon, to help balance supply with demand.
These three developments aren't connected, of course. At Agrium, Jana is trying to shake things up. At Vale, the company is looking at austerity measures given the global economic climate. And at Potash, officials are simply looking at the market for potash, a primary ingredient in fertilizer.
But all three have ramifications for Saskatchewan and its key potash industry, though the province's minister of the economy told Mr. Blackwell that investment is still flooding in.
- Vale announces 'unfortunate, but not surprising' delay in $3-billion mine
- Boyd Erman's Streetwise: Jana accuses Agrium of 'scorched-earth' defence
- Jacqueline Nelson's Streetwise: More analysts weigh in on Agrium
- Some analysts not yet seeing benefits to Agrium split
- Scott Barlow's Market Blog: Agrium retail business Jana's true target
- Cool reception to hedge fund's proposal shows Agrium is no CP
Shares of Facebook Inc. are up slightly in pre-market action this morning after a rout that drove the social network's stock to a record low of under $20 (U.S.), well below its issue price just a few months ago.
As The Globe and Mail's David Berman writes in today's Report on Business, yesterday's drop of more than 6 per cent highlights the fading optimism for social media stocks.
The tumble was sparked by the end of a so-called lock-up period that had blocked early investors from selling. With the expiry, some 270 million shares hit the market.
While that had a market impact, there are still three more lock-up expiries to go, the key one coming in November when employees are allowed to sell.
Facebook, which went public at a valuation that topped $100-billion, is now down to less than $45-billion after the rapid decline since May's IPO.
For chief executive Mark Zuckerberg, the value of his holdings has been cut to about $1-billion from $19-billion.
Merkel buoys markets
Global markets are on the rise so far this morning, helped partly by Angela Merkel's support for the European Central Bank yesterday. But watch out.
Investors were buoyed by the German chancellor's comments in Canada yesterday, when she threw her support behind ECB chief Mario Draghi to do whatever it takes to to save the euro.
Mr. Draghi wants to intervene in markets and buy up the debt of the troubled euro zone countries whose bond yields have hit intolerable levels. But Germany's Bundesbank is not onside yet, highlighting the divisions in the monetary union and the apparent discrepancies among Ms. Merkel and Bundesbank officials.
Ms. Merkel, the most powerful leader in the 17-member euro zone, also has her own demands.
"Markets certainly are placing an awful lot of their chips on ECB President Mario Draghi being able to pluck a rabbit out of the proverbial hat at the next meeting in September," said senior analyst Michael Hewson of CMC Markets in London.
"Markets certainly seemed reassured by comments from German Chancellor Angela Merkel yesterday in Canada in her first official comments since returning from holiday that she agreed with ECB President Mario Draghi’s comments to defend the euro by 'whatever it takes,'" he said in a research note today.
"What markets appear to have overlooked is that she allowed herself some wiggle room by committing to do what she can to maintain the euro. It’s not exactly on a par with 'whatever it takes.' What she can do is limited by the German constitution and her European partners. The sticking point for other EU nations is her insistence on EU oversight and intervention on the sovereignty of individual countries fiscal budgets."
Remember, too, that we've been down this road many, many times. Markets react to reassuring comments, only to be disappointed later.
Still, Tokyo's Nikkei gained 0.8 per cent today, as did Hong Kong's Hang Seng. In Europe, London's FTSE 100 and Germany's DAX were up by between 0.2 per cent and 0.3 per cent by about 7:45 a.m. ET, while the Paris CAC 40 was flat. Dow Jones industrial average and S&P 500 futures were also flat.
"The slow easing of tension about the euro zone crisis has been the chief hallmark of the past two weeks of trading," said sales trader Will Hedden of IG Index.
"We know the crisis is far from a real solution, and that all we've had so far are fine words, but investors seem content to think that the ECB is readying something fairly impressive with a view to using it sometime in September," he added.
"This narrative has swept all before it so far in August, helped along by the perception that the Federal Reserve is also tiptoeing closer to more stimulus. This has allowed markets to take bad data in their stride."
One other thing worth mentioning here, from Robert Kavcic at BMO Nesbitt Burns: "The S&P 500 starts the day within inches of its closing 52-week high as the index continues to climb the proverbial wall of worry, up more than 10 per cent since bottoming in early June. All sectors are in positive territory since that point, but a number of the top industry standouts share one thing in common: exposure to U.S. housing. Homebuilders, household appliances and construction materials have all recorded gains of more than 20 per cent since early June as signs of stability in the housing market continue to mount. The TSX continues to lag, but did manage to crack above its 200-day moving average yesterday."
Annual inflation in Canada dipped in July to 1.3 per cent from 1.5 per cent in June as gas prices fell.
On a monthly basis, seasonally adjusted, consumer prices fell 0.1 per cent, marking the third monthly dip in a row, Statistics Canada said today.
The annual rise in consumer costs was driven by higher prices for cars, at restaurants, and at the meat counter. Of all the areas measured by the agency, only clothing and shoe prices slipped on lower costs for women.
Pump prices declined by 1.3 per cent, and natural gas prices by 15.2 per cent.
So-called core prices, which exclude volatile items, also slipped on an annual basis, to 1.7 per cent, the lowest in a year, from 2 per cent.
This gives Bank of Canada Governor Mark Carney all the room he needs to do nothing for now where interest rates are concerned.
"Over all, today’s data suggest little near-term inflationary pressures in the domestic economy, another reason for the BoC to keep rates on hold," said economist Emanuella Enenajor of CIBC World Markets.