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Pound holdings slip in Russia reserves amid debut of loonie Add to ...

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Russia adds the loonie The Canadian dollar now accounts for 0.8 per cent of Russia's international reserves, and its debut appears to have knocked down holdings of Britain's pound, Bloomberg News reports today.

Russia has made good on its pledge to add the loonie to its reserves, and could boost its holdings to up to 2 per cent of the total as it diversifies.

According to the central bank's annual report today, the news agency said, the pound's representation dipped to 9.3 per cent at the end of last year from 10.4 per cent in 2009.

TMX shares climb Shares of TMX Group Inc. climbed today after a group of Canadian banks and pension funds unveiled a $3.6-billion deal for Canada's premier exchange group.

Shares of London Stock Exchange Group PLC, whose TMX deal is now in doubt, also rose on speculation that it could become a takeover target on its own should its deal collapse, Globe and Mail European correspondent Eric Reguly reports.

The name of the Canadian bid - Maple Group Acquisition Corp. - says it all.

The banks and pension funds have wrapped themselves in the Canadian flag, not exactly a subtle move. There's more to this than the offered premium on TMX stock, as there has been since TMX and London Stock Exchange Group PLC first announced their proposed marriage.

But now there's a line in the sand: A Canadian bid for Canada's premier exchange, or colonization.

Nationalism has played a role in other proposed exchange deals - Australia rejected a bid for its bourse group by SIngapore Exchange Ltd., and the proposed takeover of NYSE-Euronext by Duetsche Boerse AG has raised such concerns in some quarters, though that doesn't appear to be killing the deal.

As The Globe and Mail's Boyd Erman and Karen Howlett report today, nine banks and pension funds are now seeking to break up a TMX-LSE deal with a $48-a-share cash-and-stock offer. They include National Bank of Canada , Toronto-Dominion Bank , Canadian Imperial Bank of Commerce , Bank of Nova Scotia , the Ontario Teachers' Pension Plan, the Canada Pension Plan Investment Board, Alberta Investment Management Corp., the Caisse de dépôt et placement du Quebec, and the Fonds de solidarité des travailleurs du Quebec.

That's a powerful group, and oh so Canadian.

"I know it looks like 'Oh we're preserving it for Canada' and there will be lots of rhetoric in that regard," Thomas Caldwell, a TMX shareholder, told The Canadian Press.

"But what we're preserving is something that really is regressive in terms of ownership, even governance, when in actual fact we could participate in something larger."

As The Globe and Mail's banking writer Grant Robertson reports, National Bank of Canada vice-chairman Luc Bertrand said today that keeping the exchange Canadian owned would not hurt its global growth.

Of course, there's another, potentially bigger, issue at play here, as Mr. Erman and Ms. Howlett report, and that's regulatory scrutiny of what would be a near-monopoly on stock trading in the all-Canadian deal. Canada's banks already have a big stake in Alpha Group, a trading system that competes with TMX, and CDS, a clearinghouse.

Nasdaq drops NYSE bid Notable in all this is that Nasdaq OMX Group and IntercontinentalExchange today killed their hostile bid for NYSE-Euronext because a deal could not have cleared regulatory muster.

Nasdaq said it spoke to the U.S. Justice Department, and understood it could not succeed.

"We took the decision to withdraw our offer when it became clear that we would not be successful in securing regulatory approval for our proposal despite offering a variety of substantial remedies, including the sale of the NYSE SRO and related businesses," Nasdaq chief executive officer Bob Greifeld said in a statement.

"We saw a unique opportunity to create more value for stockholders and strengthen the U.S. as a center for capital formation amid an ongoing shift of these vital activities and jobs outside of our country."

The DOJ said today it told the two companies it would have filed an antitrust suit to block the deal given that an acquisition would have "substantially eliminated competition" for a host of stock services including listings, opens and closes of stock options, off-exchange trade reporting, and real time proprietary equity data products.

While the issues are obviously different than in the TMX proposal, it highlights the focus on competition issues.

"The companies' decision to abandon their bid for NYSE Euronext eliminates the competitive concerns developed during our investigation," said Christine Varney, Assistant Attorney General in charge of the Department of Justice's Antitrust Division.

"The acquisition would have removed incentives for competitive pricing, high quality of service, and innovation in the listing, trading and data services these exchange operators provide to the investing public and to new and established companies that need access to U.S. stock markets."

Alberta fires hit energy Alberta's northern wildfires, coupled with southern flooding, have prompted a significant oil and gas company to shut down production and move employees, while other energy outfits are following suit, The Globe and Mail's Carrie Tait reports today from Calgary.

Penn West Exploration has halted production of between 25,000 and 30,000 barrels of oil a day at operations threatened by fire, Bill Andrew, the company's chief executive officer, said in an interview. "The last thing you want is a bunch of oil and gas floating around when there's a fire," he said. "That's why you shut things in."

The town of Slave Lake is burning and 7,000 have been forced to flee. Penn West has shut down operations there, as well as those in other major fire zone, Mr. Andrew said.

Carney cites Canada's fiscal strength Canada's sound fiscal footing will help the economy in the next phase of the global recovery, but its prospects also depend on efforts by key trading partners to tackle their debt loads and on how well emerging powerhouses like China manage their own rapid growth, Bank of Canada Governor Mark Carney said today.

In a speech to the Canadian Club of Ottawa, Mr. Carney gave no indication that his views on economic growth or inflation have changed since he left interest rates untouched in mid-April, Globe and Mail economics writer Jeremy Torobin reports.

Nor did he provide any signal to markets that he might use his May 31 decision to signal a return to higher borrowing costs some time this summer, repeating his oft-used phrase that future moves would need to be "carefully considered."

Manufacturing sales rebound Canadian manufacturers rebounded in March with a sales increase of 1.9 per cent, to $47.5-billion, reversing a 1.8-per-cent drop a month earlier, Statistics Canada said today. More than half of the March gain was in the transportation equipment sector, the agency said.

Fifteen of 21 industries, which represent 80 per cent of Canadian manufacturing, posted higher sales.

"Despite the decline in February, manufacturing sales in the first quarter increased 4 per centcompared with the last three months of 2010," Statistics Canada said.

"Sales for the first quarter ($141.6-billion) were also the highest since the third quarter of 2008 ($154.9-billion), before the economic downturn began. Including the first quarter of 2011, sales have advanced for seven consecutive quarters."

Production climbed almost 21 per cent in the aerospace product and parts industry, the agency said, while auto sales rose 4.1 per cent.

Inventory levels among manufacturers rose 2.1 per cent to $62-billion, marking the sixth increase in a row. And unfilled orders jumped sharply, by 9.5 per cent, to $57.3-billion. Note that that's the fastest rise, in both percentage and dollar terms, since Statistics Canada began tracking in early 1992. Unfilled orders are now at their highest since mid-2009.

"The news was largely foreshadowed by last week's report of solid exports in the same month, so there was nothing to shock markets in this nice bounce-back," said CIBC World Markets chief economist Avery Shenfeld. "Orders also looked healthy, as did unfilled orders."

Inflation concerns mount Fears over inflation continue to grow after European data released today showed consumer prices climbed 0.5 per cent in April in the EU, bringing the annual rate to 3.2 per cent, up from 3.1 per cent in March. In the 17-member euro zone, where the European Central Bank has already raised interest rates once, prices rose 0.6 per cent in April to bring the annual rate to 2.8 per cent.

"A faster-than-expected acceleration in inflationary pressures sparked last month's increase in the benchmark lending rate by the ECB, with rising speculations that this may not be its last," noted economists Karen Cordes Woods and Derek Holt of Scotia Capital.

Costs for transportation, housing, and alcohol and tobacco were the prime culprits, the statistics agency Eurostat said today.

So, what's the outlook? Not that bad, according to Andrew Kenningham of Capital Economics.

"Recent developments have reinforced our view that, although headline inflation will continue to rise in the coming months, it is likely to peak before the end of this year in both advanced and emerging economies," he said in a research note today.

"The momentum behind global growth has slowed again even before policy stimulus has been fully withdrawn, and the rally in commodity prices now seems to be reaching an end. We expect a combination of anemic growth, high unemployment and fiscal consolidation to lead to significant disinflation during 2012, despite monetary policy remaining very loose."

In Economy Lab today

There are some things to think about when you're trying to decide if a stock is cheaper or if it is simply worth less, Stephen Gordon writes.

In International Business today

The all-Canadian bid for TMX is a compelling offer, one that could leave the London Stock Exchange's bid, and the LSE itself, in tatters, Globe and Mail correspondent Eric Reguly reports from Rome.

In financial capitals everywhere, officials, analysts and journalists will be united by one question today: Who will replace Dominique Strauss-Kahn? Globe and Mail correspondent Kevin Carmichael examines the issue from Washington.

In Personal Finance today

Depressed real estate prices have created a buying opportunity, Dianne Nice reports. But know the facts or it could cost you dearly.

Learn tips for making your retirement travels affordable and enjoyable. Low-cost creativity and flexibility can make your globe-trotting dreams a reality.

You can negotiate a better rate with your TV service provider, or you can look for alternative ways to watch the tube.

From today's Report on Business

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