These are stories Report on Business is following Wednesday, Oct. 23, 2013.
What the NSA might have heard
The German government today took the extraordinary step of asking the United States if its spies monitored Chancellor Angela Merkel’s mobile phone.
Indeed, Ms. Merkel went so far as to call President Barack Obama to discuss the allegations. (I wonder if the NSA was listening in on that call.)
Germany warned such a move would be a “serious breach of trust” and “completely unacceptable” and, if true, should be halted ASAP.
The German publication Der Spiegel said it kicked off the ruckus after its research was studied by Germany’s Federal Intelligence Service and the Federal Office of Information Security.
“Berlin seems to have found their suspicions plausible enough to confront the U.S. government,” said Spiegel Online.
(It’s not clear exactly when this is alleged to have happened or, for that matter, whether we’re talking about voice or data. But, clearly, Chancellor Merkel needs a BlackBerry, whose reputation for security is renowned where hacking is concerned. A spokesman said the German government wouldn’t, as a general rule, disclose what device Ms. Merkel uses. She was pictured once with a new BlackBerry Z10, but that was at a special event, a computer fair, in Hanover in March. Other photos show her with different devices.)
The White House says U.S. spooks haven’t, don’t and won’t hack Ms. Merkel.
But just imagine what they might have heard if they did:
Ms. Merkel to Canadian Prime Minister Stephen Harper: Thanks for the canoe paddle you gave me when I visited, but I'm not actually up the creek.
Ms. Merkel to French President Francois Hollande: You’re no Nicolas Sarkozy.
Ms. Merkel to European Central Bank chief Mario Draghi: You only think you’re in charge.
Ms. Merkel to Greek Prime Minister Antonis Samaras: There is no more money. Unless you want to make a personal bet on the next Germany-versus-Greece World Cup match.
Ms. Merkel to European Council President Herman Van Rompuy: Is it your turn to pick up the tab for the summit, or mine?
- Merkel demands explanation from Obama after allegations U.S. tapped her phone
- Spiegel Online: Merkel calls Obama
Poloz takes dimmer view
The Bank of Canada is taking a dimmer view of the economy and, in a surprise move, is no longer sending a signal that the next move in interest rates will be a hike.
“Uncertain global and domestic economic conditions are delaying the pick-up in exports and business investment, leaving the level of economic activity lower than the bank had been expecting,” the Bank of Canada said in its statement today.
Before this morning’s policy statement, the central bank had been saying for some time that the next move in its benchmark interest rate would be up, not down.
The central bank also trimmed its projections for economic growth in Canada and the United States, The Globe and Mail's Barrie McKenna reports.
It now projects the economy to expand by just 1.6 per cent this year and 2.3 per cent in 2014, with no return to full production capacity until late 2015.
“A dovish statement from the Bank of Canada catches an inattentive market,” said Sébastien Galy of Société Générale.
“They increased the time it takes for inflation to return to target and reduced potential growth,” he said in a research note.
“They still haven't factored in the underlying deflationary pressures in Canada but are clearly worried, adding some emphasis on the risk of a housing correction”
- Bank of Canada likely to trim second half economic forecast
- David Parkinson in ROB Insight (for subscribers): Poloz boxed in as embers of overheated housing market flare up
- Brian Milner in ROB Insight (for subscribers): Why the Bank of Canada ought to cut rates
Bank of Canada warns of risks
The Bank of Canada is also warning about the risk of a housing “correction” given the latest strength of the market.
While it believes Canadians are cutting back on their thirst for borrowing, and that all will be fine in the end, it nonetheless cites the risk of a bubble and the fallout on the broader economy.
“The elevated level of household debt and stretched valuations in some segments of the housing market remain an important downside risk to the Canadian economy,” the central bank said today.
“The continued slowing in household credit growth and the rise in mortgage interest rates point to a gradual unwinding of household imbalances,” it added in its monetary policy report.
“However, recent data suggest some risk of renewed momentum in the housing market. This would provide a temporary boost to economic activity, but could exacerbate existing imbalances and therefore increase the probability of a correction later on.”
It’s not that things aren’t necessarily going as expected, it’s the tweaks to the language. In September, for example, the central bank said in its policy announcement that housing had been “slightly stronger than anticipated,”
The central bank’s comments today underscore the angst surrounding Canada’s housing market and record high debt burdens among consumers.
The housing market slumped in the summer of 2012 after Finance Minister Jim Flaherty moved to cool it off with another round of mortgage restrictions.
But, as The Globe and Mail’s Tara Perkins has chronicled, sales have rebounded in dramatic fashion, posing new headaches for policy makers such as Mr. Flaherty.
Remember how, before his departure, former Bank of Canada Governor Mark Carney repeatedly urged Canadians to get their personal budgets in order, going so far as to threaten a rate hike if they didn’t.
So this has not been the first time that the Bank of Canada has signalled potential trouble.
The central bank still says in the most recent report that “household imbalances are expected to unwind gradually,” its lingo for consumers pulling back. And Governor Stephen Poloz said today that he doesn't see a correction in the absence of a global economic shock. Most economists, too, project a soft landing for the market.
But the central bank is still on alert.
“Given renewed strength in housing, the central bank did recognize the need to take into consideration the risk of exacerbating household imbalances,” said Diana Petramala and Leslie Preston of Toronto-Dominion Bank.
“For now, however, it believes that slower credit growth and higher mortgage interest rates ‘point to a gradual unwinding of household imbalances.’”
- Tara Perkins: September home sales soar
- Credit Suisse on Canada's housing market: 'Not clear whether the final landing will be hard or soft'
- Richard Blackwell: Five countries with hot housing markets
Caterpillar sees trouble
Citing a “difficult” year and global uncertainty, Caterpillar Inc. today posted a drop in third-quarter profit and cut its forecast for the year amid a decline in the mining industry, driving down its share prices.
The industrial machinery giant’s profit sank to $946-million (U.S.) or $1.45 a share from $1.7-billion or $2.54 a year earlier. Revenue plunged to $13.4-billion from $16.4-billion.
Caterpillar also trimmed its projections for 2013, now expecting revenue of about $55-billion, down from a range of $56-billion to $58-billion.
It also cut its forecast for earnings per share to about $5.50.
“Not only is mining down from 2012, the demand for equipment has been difficult to forecast,” Caterpillar said in a statement, though it noted “continuing strong” commodities production.
“Orders for new mining equipment began to drop significantly in mid-212 and have continued at very low levels.”
Encana Corp. today boasted of “rapid progress” as it rebounded to a third-quarter profit.
The Canadian energy giant today posted a profit of $188-million (U.S.) or 25 cents a share, compared to a loss a year earlier of $1.2-billion.
Operating earnings slipped to $150-million or 20 cents a share, beating the estimates of analysts, from $263-million or 36 cents.
“We are making rapid progress in the development of our strategy and reached a major milestone with the recent announcement of our new organizational structure and senior management team,” said chief executive officer Doug Suttles.
“We’re focusing our energy on finalizing our strategy which will inform our capital allocation decisions for 2014 and beyond,” he added in a statement.
“Our goal is to make Encana a more focused, dynamic and efficient organization.”
CP sees strong quarter
Canadian Pacific Railway Ltd. today posted record earnings in the third quarter and says its efficiency drive has resulted in the lowest operating ratio in company history, The Globe and Mail's Bertrand Marotte reports.
Calgary-based CP boasted a third-quarter profit of $324-million or $1.84 per share, up from $224-million or $1.30 in the year-earlier period.
The third-quarter operating ratio — a key measure of efficiency (operating costs as a percentage of revenue) – dropped to 65.9 per cent, or 820 basis points from the year-earlier period.
“We enter the fourth quarter with momentum and are well positioned for what I believe will be a record 2013,” said chief executive officer Hunter Harrison.
Supposed fake reviews
BlackBerry Ltd. has been winning rave reviews for its BBM chat app on Android devices. Maybe too rave in some cases.
The Next iPhone News website has found what it says may be a “massive amount” of fishy five-star reviews of the free messaging service at the Google Play app store, finding, for example, several that used the same language: “Thank you so much blackberry team. I was waiting this app. Its really great user friendly and smooth.”
No, it appears there really can’t be that many people who don’t fully grasp grammar and punctuation.
And BlackBerry, which has had a successful rollout of the service for those using rival devices such as the iPhone and Android-powered products, is trying to deal with the problem.
“We have recently been made aware of a number of potentially fake five-star reviews of BBM for Android on Google Play,” spokeswoman Victoria Berry told The Globe and Mail’s Sean Silcoff.
“We do not approve of or condone such activities and are committed to working with Google to resolve this.”
It's unfortunate because, as Ms. Berry added, Google Play also contains "many genuinely great and useful reveiws from our new BBM users."
After a false start, BlackBerry resumed the rollout this week, and said just yesterday that there had been more than 10-million downloads in 24 hours.
BlackBerry is in the midst of an auction for all or part of the company. Canada's Fairfax Financial Holdings Ltd. has signed a letter of intent to lead a consortium that would buy the company for $4.7-billion (U.S.) or $9 a share. Other potential suitors are also kicking the tires.
- Complete coverage of BlackBerry
- Downloads of BlackBerry BBM app for iPhone, Android top 10 million in one day
- BlackBerry restarts rollout of BBM for iPhone, Android
- Sean Silcoff, Iain Marlow and Tim Kiladze: BlackBerry faces dogfight as firm returns to its corporate roots
- Sean Silcoff and Jacquie McNish: BlackBerry co-founders weigh bid for company
- Boyd Erman in Streetwise (for subscribers) Lazaridis, Fairfax and BlackBerry: quick thoughts on an unlikely team
- BlackBerry in sale talks with Cisco, Google, SAP: sources
- Tara Perkins, Sean Silcoff and Jacquie McNish: Fairfax submits draft BlackBerry offer as spectre of rival bid looms
- Sean Silcoff, Jacquie McNish and Steve Ladurantaye: An exclusive report on the fall of BlackBerry
- How BlackBerry lost World War Z
Spain inches ahead
Spain appears to be finally out recession, but hardly out of trouble.
The Bank of Spain today estimated that the economy expanded by 0.1 per cent in the third quarter of the year, after nine straight quarters of contraction sparked by a housing bust.
“During the third quarter, the gradual improvement in the Spanish economy seen since the beginning of the year continued, against a background of some easing in financial tensions and improved confidence,” the central bank said in its quarterly report.
Spain has far, far to go. More than one-quarter of its work force is unemployed, while the jobless rate among young people stands at a stunning 56 per cent.
Streetwise (for subscribers)
ROB Insight (for subscribers)
- Quest to move ahead with Quebec rare-earth project after positive results
- JPMorgan close to $6-billion settlement with investors: source
- Frank Stronach to end foray into Austrian politics
- Australian inflation surprise highlights rising price pressures in Asia