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Ontario sees 'impressive' recovery Ontario is in the midst of an "impressive" economic recovery driven by government stimulus, a pickup in auto manufacturing and a hot real estate market, BMO Nesbitt Burns says. "In fact, the recovery has been so potent that the province, which had been Canada's economic whipping boy throughout the recession, has now moved to the top of the pack on a number of indicators," economist Robert Kavcic said in a research note today. "While this renewed momentum should allow for some positive near-term fiscal revisions, the pace of the recovery will slow later in 2010, and the difficult long-term budget-balancing task will continue to weigh on growth in the years ahead."
Ontario's annualized growth in real GDP was 6.8 per cent in the last quarter of 2009 and 6.2 per cent in the first quarter of this year, marking the strongest pace since 1999. BMO's provincial economic momentum index, which is made up of 36 indicators, also suggests further growth ahead, he said. Employment has increased 3.1 per cent in the past year, the best showing in Canada, as the province regained almost all the job losses from the recession, Mr. Kavcic said.
Most European banks pass stress tests All but a handful of Europe's banks have passed the widely-watched stress tests conducted by regulators amid mounting fears over the continent's debt crisis and health of the financial sector. According to the tests of 91 banks released after European markets closed, five of Spain's banks, one German bank and one Greek institution failed, meaning they would need to boost their capital strength. The banks that failed need to raise just €3.5-billion, according to the Committee of European Banking Supervisors. Among them is Hypo Real Estate Holding AG, which was taken over by the government. That had been largely expected.
European authorities hailed the results as proof of a strong financial sector. Many observers, though not all, were skeptical. Some comments:
- "Arguably the failure here is not the banks concerned but the test itself. There is little evidence that the tests have been applied consistently and there is a distinct lack of credibility, making this a wasted opportunity." Richard Cranfield, chairman of the global corporate group at Allen & Overy, to The FInancial Times
- "The stress tests do not seem that stressful and it is looking more like a political whitewash rather than a genuine attempt to reassure financial markets that euro zone banks have balance sheets that could really withstand sovereign risk shocks. They are delaying the day of reckoning." Neil MacKinnon, global macro strategist at VTB Capital, to The Associated Press
- "It's a huge non-event, it's like the Y2K of banking. The broad expectation was it wouldn't be transparent and it wouldn't be stringent and that's exactly what we had delivered." Brian Yelvington, head of fixed-income strategy at broker-dealer Knight Libertas LLC in Greenwich, Conn., to Bloomberg News
- "This outcome was pretty much in line with expectations and the Committee of European Banking Supervisors appears to have delivered reasonably rigorous methodology in an attempt to instill confidence. What can be said is that today's stress test release does not appear to have uncovered any skeletons in the closet'. Whether it goes far enough remains to be seen." Chris Turner, ING, to Agence France Presse
- "Overall, the results were largely as expected, perhaps a couple of more banks were expected to fail the tests. "On the surface, only seven failing banks needing a mere €3.5-billion in capital is definitely good news. With such a small amount of capital necessary, according to these scenarios, worries were overblown. Europe's banking system is healthy barring an extreme negative shock. However, many market participants won't be satisfied with the difficulty of the stress scenarios. The lack of sovereign default and keeping bank books from sovereign losses are decisions which will be scrutinized (and rightly so), as they no doubt limit potential losses. The results bring some relief but won't be enough to eliminate worries about Europe's banking system." BMO Nesbitt Burns economist Benjamin Reitzes