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U.S. plans new drilling moratorium
The Obama administration isn't standing pat after a U.S. judge yesterday blocked its six-month moratorium on deepwater drilling. Interior Secretary Ken Salazar said late yesterday he will soon unveil a new ban in the wake of the ruling by U.S. District Judge Martin Feldman in New Orleans, who wrote in a 22-page judgment that the government did not adequately back up its decision.
Several companies that provide services to the offshore rigs in the Gulf of Mexico, site of the massive BP oil spill that sparked the moratorium, took legal action to overturn it. Late yesterday, responding to the ruling, Mr. Salazar, who also is scheduled to testify to a Senate subcommittee today, said he will issue a new order "that eliminates any doubt that a moratorium is needed, appropriate, and within our authorities." The government is also appealing the court decision.
"We see clear evidence every day, as oil spills from BP's well, of the need for a pause on deepwater drilling," Mr. Salazar said in a statement. "That evidence mounts as BP continues to be unable to stop its blowout, notwithstanding the huge efforts and help from the federal scientific team and most major oil companies operating in the Gulf of Mexico. The evidence also continues to mount that industry needs to raise the bar on blowout prevention, containment, and response planning before deepwater drilling should continue."
Related: Judge blocks deepwater drilling ban
Shoppers 'down but not out'
Retail sales in Canada fell 2 per cent in April from a month earlier, driven down largely by a pullback in car and parts sales and partly on lower pump prices. Excluding that, noted Toronto-Dominion Bank deputy chief economist Derek Burleton, sales fell a "more muted" 1 per cent from a strong showing in March. "April's data suggest that real consumer spending growth tapered is likely to moderate to some extent in [the second quarter]following an oversized gain of 4.4 per cent in [the first quarter]" he said. "Keep in mind that we're still early in the quarter and that retail sales only captures part of the consumer spending envelope (services are a bigger component). What's more, March's blockbuster gain generated a good hand-off for sales in the April-June period. In sum, we're still confident that real consumer spending activity is on track for another strong expansion of about 3.5 to 4 per cent in [the second quarter]as a whole."
BMO Nesbitt Burns deputy chief economist Douglas Porter had a slightly different take: "There have been recent rumblings that Canada's previously impressive domestic spending revival was losing steam, and the sharp drop in April retail sales is the loudest warning shot yet. While the setback appears to be a simple case of a reversal of the weather-related jump in the prior month, the fact is that the days of easy gains are over for spending."
The poor reading on sales helped push down an already slumping Canadian dollar to below 97 cents U.S. Read the story
Investors await Fed
Markets are watching for the key policy statement from the U.S. central bank this afternoon. No change is interest rates is expected when the Federal Open Market Committee announces its decision at 2:15 p.m. ET, though investors will be pouring over its comments. "While the statement is likely to be more upbeat on recent macro developments in the United States, the FOMC will maintain the key buzzwords ('exceptionally low,' 'extended period')," Scotia Capital said. "The statement is also likely to mention - for the first time - European sovereign debt issues, supporting our view that the Fed will remain on hold until at least late this year."
The Scotia Capital economists were referring to expectations that the Federal Reserve will pledge to keep its benchmark Federal funds rate at its historic low near zero for some time yet.
BMO Nesbitt Burns economist Michael Gregory notes today that since the Fed's last meeting in late April, Europe's debt crisis has spread, economic indicators have been mixed, the massive oil spill in the Gulf of Mexico has heightened economic uncertainty, and the core measure of inflation, which factors out volatile items, has not shown signs of stabilizing. "Given these developments," Mr. Gregory said, "we wouldn't be surprised if the Fed put a bit more emphasis on the downside risks to their outlook."
German cutbacks threaten euro, Soros warns
Germany's cutbacks are threatening Europe's currency union, George Soros says, and he does not rule out a "collapse of the euro." The legendary investor told Germany's Die Zeit that if Angela Merkel's government does not change its policy, quitting the currency union could help the rest of the continent. Ms. Merkel plans to slash €80-billion from spending over four years, a move that, along with austerity measures unveiled by other European governments, promises to be an issue at the G20 summit in Toronto this year. The United States is urging world leaders to be extremely cautious in their cutbacks, fearing they could stall global growth, at the same time as sovereign debt is becoming such an issue for the markets.
"Right now the Germans are dragging their neighbours into deflation, which threatens a long phase of stagnation. And that leads to nationalism, social unrest and xenophobia," Mr. Soros said. "Democracy itself could be at risk." Read the story
RIM stock volatile
Shares of Research In Motion Ltd. have been registering double the volatility of their competitors' stocks, Bloomberg News notes today, one day before the BlackBerry manufacturer reports first-quarter results. Bloomberg research shows that over the past eight quarters, RIM shares rose or fell on average by 14 per cent the day after its earnings reports. That, the news agency noted, is more than three times the average of 4.2 per cent from Apple Inc. and well above the 8.9 per cent for Motorola Inc. "There's no doubt it's highly volatile, there is a lot of hot money in RIM," BMO Harris Private Banking chief investment officer Paul Taylor told Bloomberg.
The pressure on RIM is always intense, and market expectations high, particularly given the popularity of Apple's iPhone and the growing buzz around the Android software from Google Inc. that runs on Motorola models. RIM is expected to report strong results tomorrow, but, analysts say, investors are primarily interested in RIM's promised BlackBerry 9800, which is said to take the wireless device to an entirely new level.
Goldhar wins Henderson jersey
Canadian shopping mall king Mitchell Goldhar has won what turned out to be some serious bidding for the hockey jersey Paul Henderson wore during the legendary 1972 Canada-USSR Summit Series. Mr. Goldhar, who owns real estate developer SmartCentres, said Mr. Goldhar is paying almost $1.3-million, including fees, for the jersey the hockey star sported when he scored the famous winning goal. Mr. Goldhar topped lesser bids from Canadian Tire Ltd., Jim Pattison and others. Read the story
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