These are stories Report on Business is following Thursday, Sept. 5., 2013.
Flaherty rejects Fed stimulus
Canada’s finance minister gave a nod to “frugal” Germany today as he again rejected the money-printing ways of the Americans.
Jim Flaherty was seemingly referring to the Federal Reserve’s massive stimulus program known as quantitative easing, or QE, under which the U.S. central bank is acquiring $85-billion (U.S.) a month in bonds.
All eyes are on that program, of course, because of indications that the Fed could soon begin to pull back, something that has caused angst among investors who want to be certain the economy and the markets can withstand that.
“The Americans tend to emphasize creating more jobs and less concern about the accumulation of public debt and printing more money, with which I’ve never agreed,” Mr. Flaherty said in St. Petersburg, Russia, where he’s attending the G20 summit.
“The Germans tend to be more prudent and frugal like Canadians tend to be.”
The Federal Reserve is trying to ease the high level of unemployment in the U.S., where 11.5 million people can’t find work.
The U.S. jobless rate stood at 7.4 per cent in July, and the August reading is scheduled to be released tomorrow. In Canada, where unemployment rate is 7.2 per cent, 1.4 million people are without jobs.
Mr. Flaherty's comments came as his government appeared to step back from its target for reducing the national debt, even as it presses other nations at the G20 summit to follow Canada’s lead in curbing debts and deficits.
Mr. Flaherty and Prime Minister Stephen Harper used the setting of this year’s G20 leaders’ summit to release new debt targets for the federal government, The Globe and Mail's Bill Curry reports from St. Petersburg.
Ottawa is now promising to bring its debt-to-GDP ratio down to 25 per cent by 2021. The government said this would be in addition to erasing annual deficits by 2015.
However the new target of 25 per cent appears to represent a softening of a timeline Mr. Flaherty’s own department released in 2012. Last fall, Finance Canada released long-term projections suggesting a debt-to-GDP ratio of 23.8 per cent in 2020-21.
Home sales surge
Canada’s housing market continues to bounce back from a government-induced slump.
As The Globe and Mail’s Tara Perkins reports today, sales in the Toronto area climbed 21 per cent in August from a year earlier.
That new figure from the local real estate board comes after numbers reported by other cities also showed a sales bounce.
Canada’s real estate sector softened a year ago after the government tightened up the mortgage market in a bid to head off a burst bubble.
According to numbers released by other real estate boards, Vancouver sales climbed 52.5 per cent last month, Victoria sales rose almost 21 per cent, Edmonton sales jumped almost 10 per cent, and those in Calgary 27.5 per cent.
Sales in Vancouver, a particular focus, are now just 14.7 per cent below their levels of last July, when the restrictions came into effect, which suggests “the stricter rules had a material but not devastating effect on demand,” said senior economist Sal Guatieri of BMO Nesbitt Burns.
“This canary in Canada’s housing coal mine is sounding a lot chirpier after its near-death experience last year,” he added.
The bottom line, according to Mr. Guatieri, is that sales have now “stabilized” near traditional levels, and prices are on a moderate upswing in most areas of Canada, which he sees as “a near perfect soft landing with shades of taking flight again.”
- Tara Perkins: Housing market heats up as Toronto climbs on bandwagon
- Tim Kiladze: Rate hike is Bank of Canada's best option, Scotiabank's Waugh says
- Brent Jang: Vancouver house sales roar back
- Business Briefing: Canada's housing market among most 'bubbly' in world, Economist finds
BlackBerry Ltd. shares climbed again today as investors got a taste of what’s in store for the next few months.
The stock jumped more than 5 per cent yesterday amid reports that the smartphone maker, which hung out a “for sale” sign last month, has already held preliminary talks with potential suitors and plans a fast auction. It rose a further 2.3 per cent today.
BlackBerry has narrowed the list of possible bidders for all or part of the Canadian company, and hopes to wrap it all up as early as November, according to The Wall Street Journal.
That fits the timeline of some analysts who expect this won’t be a protracted process.
The auction also comes in the wake of Microsoft Corp.’s deal for Nokia Corp.’s handset business earlier this week, which in effect would make Windows the No. 3 platform for smartphones, behind Google Inc.’s Android system and Apple Corp.’s iOS.
BlackBerry, which once ruled the world of smartphones, has been eroding amid a fiercely competitive market now dominated by Samsung, and its Galaxy products, Apple’s iPhone and devices running Android.
According to IDC, the share of the market held by BlackBerry’s operating system has withered to 2.7 per cent, and is projected to slump further still.
The company launched a strategic review last month, which some analysts believe suggests poor sales of its new BB 10 devices.
Indeed, some observers have cut their projections for second-quarter sales of the new products.
Just today, analyst Michael Walkley of CanaccordGenuity said his global surveys suggest “very weak” sales of the new devices – the Z10, Q10 and Q5 - and “sharply declining” shipments of the older models.
“Given the weak BlackBerry smartphone sell-through trends, our conversations with global distributors also indicate high levels of BlackBerry smartphone channel inventory, leading us to lower our [fiscal 2014-2015] BlackBerry smartphone sell-in estimates,” said Mr. Walkley, whose price target on the shares is $8 (U.S.) and who has a “sell” recommendation on the stock.
That strategic review could see a sale of all of the company, or could result in a breakup of BlackBerry.
Microsoft, which had been rumoured as a potential suitor, is now out of the picture, of course. Prem Watsa’s Fairfax Financial Holdings, already a major BlackBerry shareholder, is known to be interested, though The Wall Street Journal had no details of who else could be looking at the company or the focus of the preliminary talks.
“We believe the special committee formed by BlackBerry’s board to explore strategic alternatives such as joint ventures, strategic partnerships, or a sale of BlackBerry is consistent with our belief BlackBerry will ultimately end up selling the company due to the difficult competitive smartphone market and low probability BlackBerry 10 can return BlackBerry to sustained profitability,” Mr. Walkley said in his research note.
- BlackBerry has talked to potential bidders, plans fast sale: Report
- Eric Reguly: Microsoft to buy Nokia’s mobile phone business for $7.2-billion
- Omar El Akkad: With Nokia deal, BlackBerry fades from Microsoft's sights
- Scott Barlow in ROB Insight (for subscribers): Nokia deal doesn't change much for BlackBerry
- New iPhone expected at Apple Sept. 10 event
Three up, three down
Three of the world’s major central banks all held the line on policy today as the economic climates in their regions show general signs of improvement.
"Thus far at least, the central bank parade has been more notable for frequency rather than market impact," said Mark Chandler and Ian Pollick of RBC Dominion Securities.
The European Central Bank kept its benchmark rate at 0.5 per cent, as did the Bank of England.
Before Europe’s moves, the Bank of Japan also held steady while it painted a brighter picture.
“With regard to the outlook, Japan’s economy is expected to continue a moderate recovery,” the central bank said.
“Regarding risks, there remains a high degree of uncertainty concerning Japan’s economy, including the prospects for the European debt problem, developments in the emerging and commodity-exporting economies, and the pace of recovery in the U.S. economy,” it added.
Streetwise (for subscribers)
ROB Insight (for subscribers)
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