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Why Ben Bernanke will determine whether you have a good or bad day Add to ...

These are stories Report on Business is following Wednesday, May 22, 2013.

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Markets await Bernanke
Get ready for the double header featuring the Federal Reserve, which will likely determine the state of play in the markets.

First up is chairman Ben Bernanke, who testifies this morning to a congressional committee. That will be followed this afternoon by the release of the minutes of the U.S. central bank’s last meeting.

Investors will be watching closely for hints about the future of the Fed’s quantitative easing program, the massive bond-buying scheme known as QE3.

Mr. Bernanke is expected to stay on script when he speaks to the Joint Economic Committee, telling the markets what they already know, which is that the QE program is going to begin tapering off at some point this year.

Investors want clarity about where the Fed may be headed. What they don’t want is a premature end to QE, which has helped drive stock markets to record highs.

The “biggest negative,” said senior economist Michael Gregory of BMO Nesbitt Burns, would be if either Mr. Bernanke or the minutes suggested that the costs of the program are outweighing the benefits to the point that the central bank plans to end it earlier than it should.

Such costs would be the risk to financial stability, in terms of excessive risk-taking in the markets, or how it is fuelling inflation expectations, which it isn’t at this point.

“Though the markets would love unlimited QE forever, they’d like more certainty and clarity about what the Fed’s thinking, and be confident that the Fed won’t remove the stimulus until the economy can absolutely withstand it, and the housing market can absolutely withstand it,” Mr. Gregory said.

“And to know that when it leaves, there’s something else positive to hang on to.”

Of the two events, investors may well pay more attention to Mr. Bernanke than the minutes, observers said, though the latter will give the wider view among the members of the Fed’s policy-setting panel.

“Mr. Bernanke’s testimony and the subsequent questioning is likely to be the more closely watched, since his comments have more of an element of unpredictability, with the Fed minutes echoing the hawkish view seen in previous iterations,” said chief market strategist David Jones of IG in London.

“Watch for the spectacle of a Fed chairman trying to signal that all options remain open, while simultaneously trying not to spook the market unnecessarily.”

Investors tentative
For now, global markets are mixed

Tokyo’s Nikkei climbed 1.6 per cent, and Hong Kong’s Hang Seng slipped 0.5 per cent, though trading was suspended because of the weather.

In Europe, London’s FTSE 100 was up by 0.1 per cent by about 8:30 a.m. ET, while Germany’s DAX was down slightly and the Paris CAC 40 was down 0.3 per cent.

Dow Jones industrial average and S&P 500 futures were up.

"It is a sombre mood overseas, where European equities are down about 0.5 per cent, although futures are pointing to a better open in North America," said senior economist Jennifer Lee of BMO Nesbitt Burns.

"The [U.S. dollar] index is having a very choppy session while it is a mixed bag for the major currencies."

Canada launches tourism push (as the world, um, cracks jokes about Toronto)
How do you launch a major tourism offensive when you’re the butt of jokes on every American talk show?

With the possible exception of trying to lure people to “Come to Toronto And See the Mayor Everyone’s Talking About,” today’s global launch by the Canadian Tourism Commission may unfortunately be ill-timed.

Toronto Mayor Rob Ford is, of course, in the eye of a storm over allegations of drug use, based on a reported video, something he has said is “ridiculous.”

If you don’t live in Canada, you may well have heard about it anyway, given that it has gained global media attention and was sport last night for Jon Stewart, Jimmy Kimmel and Jay Leno.

Unfortunately for the Canadian Tourism Commission, today’s the day it launches its “refreshed agenda” at an international trade show in Germany.

“This new focus will help the Canada tourism brand gain strength and inspire more travellers to visit Canada,” said Maxime Bernier, minister of state for small business and tourism.

One wonders what Jon Stewart thinks of the “Canada tourism brand.”

Central bank projects ‘moderate recovery path’
The Bank of Japan held a steady course today, announcing no policy changes but pointing to a stronger outlook.

“Japan’s economy has started picking up,” the central bank declared after its meeting.

“Exports have stopped decreasing as overseas economies have been moving out of the deceleration phase that had continued since last  year and are gradually heading toward a pick-up.”

The central bank projected its economy, which expanded markedly in the first quarter, will return to “a moderate recovery path,” though risks remain.

Those risks, the Bank of Japan said, include “the prospects for the European debt problem and the growth momentum of the U.S. economy as well as the emerging and commodity-exporting economies.”

BRP prices IPO
BRP Inc., the maker of Ski-Doos and the Can-Am Spyder three-wheeled motorcycle, has priced its initial public offering at $21.50 per share, with the stock exchange symbol “DOO," The Globe and Mail's Bertrand Marotte reports.

The company said today that the IPO of 12.2 million subordinate voting shares will take in about $262-million. The net proceeds of the offering are to be used to reduce debt

Retail sales flat
Clothes and shoes, with jewellery and purses thrown in for good measure, helped buoy some Canadian shops in March.

Retail sales in Canada were actually flat during the month, Statistics Canada said today, but rose 0.7 per cent in volume terms.

That’s after stripping out the impact of price changes, primarily those at the gas pump, which fell.

Six of the 11 sectors measured chalked up sales gains. They represented less than half of the total.

Clothing shops had the biggest gain, up 3.5 per cent for the third jump in four months. Shoe store sales rose for the fourth consecutive month.

And sales of jewellery, luggage and leather goods gained 2.3 per cent, ending a string of monthly declines.

Just sayin’
A major battle with big consequences for Canada’s labour movement is set to play out over the coming weeks in the Senate … The bill would force unions to make a wide range of financial disclosures to the Canada Revenue Agency that would then be posted online.

Globe and Mail, May 21

A Senate committee accused of toning down its report on Mike Duffy’s expense claims will reopen its probe of the PEI politician’s conduct.

Globe and Mail, May 21

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