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Stories Report on Business is following today:
Dow closes below 10,000
The Dow Jones industrial average fell below 10,000 for the first time early February, slipping late in the day after surging higher earlier. The S&P 500 was down marginally, and the S&P/TSX composite also fell back from a hefty surge to close up just more than 25 points. The Canadian dollar closed just slightly higher than yesterday, at 93.58 cents U.S.
OECD warns on household debt
Bloated debts among Canadian families pose a threat to the economic recovery, the OECD warns in a new report today. In its semi-annual outlook for the developed countries in the Organization for Economic Co-operation Development, the Paris-based group says Canada's economy is rebounding strongly from the recession, buoyed by government spending and recovering trade. The jobless rate should continue to fall and inflation should remain tame, it added.
The OECD warned, however, that "the high rate of household indebtedness is a source of risk to the outlook." The report did not go into further detail, but consumers heavily in debt would no doubt pull back their spending to meet higher debt servicing costs, among other issues.
The group is not the first to warn about the high levels of consumer debt in Canada. Just recently, the Certified General Accountants Association of Canada said household debt now stands at $41,740 per person, or 2.5 times above 1989 levels. Debt hit a record $1.41-trillion in December, and, according to a survey, Canadians don't have a problem taking on still more.
While interest rates have been at historic lows as the Bank of Canada battled to bring the country out of recession, the central bank is expected to soon begin changing course, possibly raising rates as early as next week. Indeed, the OECD urged the central bank today to begin pulling back from its extraordinary recession-era measures "without delay."
While unemployment is projected to continue falling, higher rates could still be a problem for consumers who took on more debt than they can juggle should rates rise rapidly.
The OECD report today illustrates how the global economy is sitting on a razor-sharp knife edge. It said the economy is rebounding from the recession faster than anticipated, but the government debt hangover in some countries and the potential for overheating in others, such as China, puts the recovery at risk.
In its forecast for the world's developed economies, the OECD pegged global growth at 4.6 per cent this year and 4.5 per cent. And, in a particularly bright note, said unemployment may have topped out at about 8.5 per cent, well shy of its previous forecast.
Read
Raise rates 'without delay,' OECD says
OECD boosts global growth forecast
Europe's debt crisis looms over nascent economic recovery
Apple leaps past Microsoft
Apple Inc. today overtook Microsoft Corp. as the most valuable technology company in the world. The overall value of shares of the manufacturer of the iPod, iPhone, iPad and desktop and laptop computers put the company's market value atabout $222-billion (U.S.), while stock of Microsoft carried a value of $219-billion.
The New York Times noted that Apple's surge marks a remarkable comeback, given that the company was believed close to dead 10 years ago. It also illustrates how consumers, who have made the iPod and iPhone wildly popular, have surpassed businesses as the shapers of technology, the newspaper said.
Flaherty unveils plans for regulator
Finance Minister Jim Flaherty today unveiled details of a new national securities act, his blueprint for the creation of a new national regulator to replace the system of 13 different provincial and territorial commissions. The new regulator, opposed by Alberta, Quebec and Manitoba, would have greater powers to punish criminals and protect investors. "We need to lower barriers, not multiply them," Mr. Flaherty said in Ottawa. Read the story
EU unveils bank tax proposal
The European Commission today unveiled a proposed blueprint for a new tax on banks and plans to take a leading role in pushing for global co-ordination for a levy at the upcoming G20 summit in Canada. The plan would see the banks effectively pay for any troubles down the road.
"I believe in the 'polluter pays' principle," said Michel Barnier, who heads up the EC's push to strengthen financial regulations. "We need to build a system which ensures that the financial sector will pay the cost of banking crises in the future."
But the move threatens to become a divisive issue at the summit of Group of 20 leaders, particularly where Canada is concerned. Prime Minister Stephen Harper and Finance Minister Jim Flaherty have said repeatedly they oppose such a global tax, and, in Canada's case, banks should not be punished given how well they came through the financial crisis." Read the story
France eyes later retirement age
Europeans are going to have to work longer. Some countries have already raised the legal retirement age, and France will be the next to take such as move.
France's labour minister, Eric Woerth, said in a television interview today that his government will up the retirement age beyond 60. "It's logical, it's happening in all countries. I haven't seen any convincing alternative propositions."
State pensions have to fund longer life expectancy, and debt-burdened governments in Europe have been taking similar action.
Europe's crisis scares Wall Street players
Europe's debt crisis is scaring some of the major players on Wall Street, who fear how it may play out, though they don't anticipate the troubles will drive the United States back into recession. Here are comments from some of the bigger names in finance who spoke at a Reuters Insider panel in New York:
Larry Fink, chief executive of money manager BlackRock Inc.:
"We're frightened at this moment to see how this can all play out with these countries already in a fragile position ... Now they're going to have to bring down their deficits in the tens of billions of dollars to stabilize their country, but will that destabilize their social fabric? ... The real question is how long can Netherlands, France and Germany support these Southern Rim countries."
Roger Altman, founder of Evercore Partners, a boutique investment house:
"The really serious crises of the last 150 years tend to be long and drawn out and have several stages, including a sovereign debt stage. The global financial crisis is not over, and it's not close to being over, and there are probably other large shoes that can drop beyond Europe."
Joseph Perella, CEO of investment banker Perella Weinberg Partners:
"Right now, people are concerned about the impact of this European crisis on the liquidity that will be available from their commercial banks. If you're a major corporation in Europe and you think you might want to do a big acquisition ... you wonder whether or not what's going on in Greece or other countries could ultimately impact (European banks') ability to provide liquidity for you."
BP starts 'top kill' to plug leak
BP PLC today began its so-called 'top-kill' operation to try to stop the massive oil leak in the Gulf of Mexico, sparked by the explosion on the Deepwater Horizon drilling rig in April. The process involves pumping heavy fluids into the well and then sealing it with cement. Much is at stake for the energy giant in the operation, a first at such depths, given the anger of the U.S. government over the environmental disaster.
In an interview with Bloomberg News, Gene Grabowski, chairman of the crisis and litigation practice at a Washington public relations firm, said BP is "in the position of a surgeon about to operate on one of your loved ones." Read the story
BMO tops estimates
Bank of Montreal kicked off second-quarter reporting among Canada's major banks this morning by easily topping analysts' forecasts. BMO posted a profit of $745-million, well above the $387-million of a year earlier. BMO's cash earnings per share rose to $1.28, compared to Street estimates of $1.10.
"Although the decline in provisions may slow in coming quarters, we believe that the groundwork for incremental revenue growth has been laid and that BMO can continue to grow its earnings outside of improving credit conditions," Barclays Capital analyst John Aiken said in a research note. Read the story
Australia to back down on tax, report says
Australia's government plans to pull back on the hefty tax it planned to slap on mining "super-profits," The Australian newspaper reports today. The paper said in its online edition that the government is now looking at raising the threshold to 11 per cent or 12 per cent from 6 per cent, well below the 40 per cent it proposed earlier this month. Shares of BHP Billiton and Rio Tinto surged after the report.
U.S. new home sales surge
A U.S. government tax credit help spur a jump of 14.8 per cent in sales of new homes last month as buyers rushed to beat the deadline. The U.S. Commerce Department said today sales rose to an annual rate of 504,000, seasonally adjusted. That follows a jump of almost 30 per cent in March. Prices, though, fell to a median $198,400 (U.S.).
"As I said after the existing home sales report earlier this week, focus on what happens to sales over the next few months - not just May because May will decline - to get a handle on how the sector is faring without a helping hand from the U.S. government," said BMO Nesbitt Burns senior economist Jennifer Lee. "With private sector jobs now being created, on net, and the economy recovering (sometimes in fits 'n starts), we may be pleasantly surprised. But only time will tell."
Analysts see big money for Nortel patents
Analysts believe Nortel Networks Corp. could bring in more than $1-billion (U.S.) from the sale of patents, a boon for creditors of the collapsed technology giant. Bloomberg News reports this morning that, according to data provided by an analyst, Nortel has almost 4,500 patents and just shy of 965 applications in the U.S.
Those should be worth some $1.1-billion, and would be a "natural fit" for Research in Motion Ltd. , Peter Conley of MDB Capital Group told the news agency.
"Patent estates of this size don't come along that often," said Mr. Conley. "This is the equivalent of acquiring the IP of a large technology company. If you could buy that for a billion dollars, it would be a bargain."
Nortel has already brought in almost $3-billion from asset sales.
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