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The Week

‘We seem to have entered a utopia for investors’ Add to ...

These are stories Report on Business followed this week.

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Markets continue winning ways
As Chris Beauchamp put it this week, it's not that investors "never had it so good," but it is "a pleasant atmosphere" in the markets.

The analyst at IG in London was referring Friday to the ongoing gains on global exchanges, as the S&P 500 pushed higher by a further 2 per cent on the week.

"We seem to have entered a utopia for investors; just enough good economic data to encourage nervous investors, but also sufficient bad data to keep banks actively engaged in providing fresh liquidity," he said.

"This isn't quite 'never had it so good,' but it is certainly a pleasant atmosphere."

Senior economist Robert Kavcic of BMO Nesbitt Burns noted that the Bloomberg measure of "economic data surprises" is now at its lowest since last fall.

That's in line with the "lulls" in economic readings, relative to what was expected, seen, too, during the past two summers.

"Equities, however, refuse to break down as they have in prior years, at least in part thanks to less turmoil in Europe," Mr. Kavcic said, also citing fresh U.S. estimates from the Congressional Budget Office pegging the deficit at some $200-billion (U.S.) below a February forecast.

"Monetary policy is also supporting stocks, adding fuel to the spark of firm earnings and a strengthening housing recovery," he added.

As has been the case, Toronto's S&P/TSX composite "lagged," rising just 0.2 per cent as shares of gold companies were hurt, along with those of the banks, to a lesser extent.

"The Canadian banks remain in focus ahead of the earnings season that begins next week, and with the chorus of housing doom-and-gloomers growing louder," said Mr. Kavcic.

"Inconveniently for the bears, this week’s data continued to suggest that the market is well behaved and headed in the direction of a soft landing - supply and demand are relatively balanced, prices are rising slightly below the rate of income growth and homebuilders are again putting up homes at a rate required by demographic demand."

Telus strikes Mobilicity deal
Telus Corp.'s $380-million deal for Mobilicity has put the Canadian government somewhere between a rock and a hard place.

As The Globe and Mail's Rita Trichur and Boyd Erman report, Ottawa now has to decide whether to admit it failed in its bid for more competition in the telecom sector, or somehow keep alive its goal to have at least four wireless carriers in each of the regional markets.

All three of the upstart carriers that launched in the past few years are now on the auction block, with Mobilicity the first to find a dance partner.

The issue, of course, is that Telus is the second-biggest wireless player in Canada, and the government now has to rule on whether the deal struck Thursday will be allowed.

As an established carrier, Telus is not supposed to be allowed to buy a new entrant, but with Mobilicity running out of money, the companies are asking for an exception the rules.

Europe in deep trouble
Europe may have made some headway, but it's still a mess, with no end in sight to its economic troubles.

The embattled euro zone has taken big strides over the past year, but austerity measures are biting deep, leaving the 17-member monetary union still in recession, with unemployment at crippling levels in some of its weaker nations.

The Eurostat agency reported Wednesday that gross domestic product in the euro zone contracted in the first quarter by 0.2 per cent, marking the sixth consecutive quarter of a shrinking economy.

That of the wider 27-member European Union also contracted, by 0.1 per cent, The Globe and Mail's Eric Reguly reports.

Notable was that France slipped back into recession, while Germany's economy almost stalled out.

“While EU leaders continue to congratulate themselves on the continued fall in sovereign bond yields, citing them as a sign of confidence, of which they are nothing of the sort, they continue to waste time in failing to deal with the real problems of the banking sector and the transmission mechanism in Europe,” said senior analyst Michael Hewson of CMC Markets in London.

EC raids oil companies
European authorities raided major oil companies and a price reporting agency this week in a probe into published prices.

No allegations have been proven, or even levelled at this point. The European Commission said it does not "prejudge" the outcome of an inquiry, and "the fact that the commission carries out such inspections does not mean that the companies are guilty of anti-competitive behaviour," The Globe and Mail's Eric Reguly, Jeffrey Jones and Carrie Tait report.

“The commission has concerns that the companies may have colluded in reporting distorted prices to a price reporting agency to manipulate the published prices for a number of oil and biofuel products,” the commission said in a statement.

“Furthermore, the commission has concerns that the companies may have prevented others from participating in the price assessment process, with a view to distorting published prices.”

The companies said they are co-operating.

“The prices assessed and published by price reporting agencies serve as benchmarks for trade in the physical and financial derivative markets for a number of commodity products in Europe and globally,” the commission said.

“Even small distortions of assessed prices may have a huge impact on the prices of crude oil, refined oil products and biofuels purchases and sales, potentially harming final consumers.”The EC did not name the companies, saying only that authorities raided several. The Financial Times reported that Norway’s Statoil was among them, and that Royal Dutch Shell and Platts, a reporting agency, are involved in the probe.

Japan's economy perks up
Japan's economy is perking up in an initial reaction to "Abenomics."

Gross domestic product expanded in the first quarter of the year at an annualized pace of 3.5 per cent, buoyed by consumers and exporters.

It's very early in the process, but the numbers from Japan's Cabinet Office suggest Prime Minister Shinzo Abe's program and the Bank of Japan's stimulus measures are having an impact, at least where consumer confidence is concerned.

“It would be over-interpreting these data to suggest they are evidence that Abenomics is already paying dividends – the fiscal easing and shift in BoJ policy won’t be felt until Q2,” said Adam Cole of Royal Bank of Canada.

“But the rise in consumption in the quarter, which accounted for around half of the rise in GDP, almost certainly did benefit from improved consumer confidence and higher equity prices.”

The week in Business Briefing

The week in Streetwise (for subscribers)

The week in Economy Lab

The week in ROB Insight (for subscribers)

Required reading
Bank of America CEO Brian Moynihan has one word that he keeps coming back to in describing the U.S. economic recovery: Steady. Not vibrant, just steady. An exclusive interview with Boyd Erman and Grant Robertson.

Canadian National Railway Co. is betting that rail is the next stop for natural gas, the plentiful commodity finding new industrial uses across North America, Guy Dixon and Kelly Cryderman report.

Research In Motion Ltd. is doubling down on two of its biggest success stories, unveiling a low-cost BlackBerry aimed at emerging markets and opening its popular instant messaging service to rival manufacturers, Simon Avery and Iain Marlow write.

Now that the campaigning is over, the energy industry says it’s time to get down to the brass tacks in talks for new oil pipelines through British Columbia. Kelly Cryderman talks to the energy industry in the wake of Premier Christy Clark's election victory.

Netflix Inc. may have won the initial battle for online Canadian viewers, but its CEO says it must now survive an onslaught from traditional broadcasters scrambling to get their own video-streaming products to market. Steve Ladurantaye talks to Reed Hastings.

Follow on Twitter: @michaelbabad

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