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business briefing

These are stories Report on Business is following Tuesday, Sept. 16, 2014.

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Four days that …
It's true, though probably stretching it, to say that for financial markets the world could change in the next four days.

It's not stretching it, however, to say that the next four days are fraught with risk.

This all began today with a speech by Bank of Canada Governor Stephen Poloz in Drummondville, Que., where he talked about the Canadian dollar, which rose today.

Then, tomorrow brings the end of a two-meeting of the Federal Reserve, new economic forecasts from U.S. central bank policy makers, and a news conference with chair Janet Yellen.

There's more speculation than normal over what the Fed will say, and whether it will change its message to the markets in its policy statement tomorrow.

Then we move overseas, where Scots vote on Thursday in an angst-ridden independence referendum that has weighed on Scottish banks, which have threatened to move, and on the British pound.

The results should play out late Thursday and into Friday.

And rounding out the week is a Friday report from Statistics Canada on inflation, which feeds into the outlook for the Bank of Canada.

In the United States, the focus will be first on tomorrow afternoon's Fed policy statement, which some observers believe will show a shift, by changing the language to indicate that the next move in interest rates will depend more on economic data.

That would mark a change from its oft-stated signal that its rock-bottom key rate will hold steady for "a considerable time" after its asset-buying program is done.

Scotiabank's Ms. Sutton is among those who believe that the Fed will shift, which could push the U.S. dollar higher and, thus, the Canadian dollar lower, though it's not clear how much of this is already priced into the markets.

"I think that they'll shift to a slightly more hawkish stance," she said.

The Fed may well move markets regardless.

"The build-up to this month's Fed meeting is such that there could be a big reaction either way the Fed moves," said analyst Jasper Lawyer of CMC Markets.

"If the Fed keeps a more dovish tone then the U.S. dollar is extremely overbought and subject to a sharp snapback. If market expectations of a more hawkish tone play out then stocks are near all-time highs and have plenty of room to fall."

The loonie, as Canada's dollar coin is known, rose today after reports of Chinese measures to help banks, a good sign for commodity-linked currencies.

Thursday could really change the world, should Scotland vote for independence, though many market players expect  the "No" camp to rule the day.

"Today is the anniversary of 'Black Wednesday,' when the pound collapsed in value," noted market analyst David Madden of IG in London.

"The Scots go to the polls on Thursday, and we could have a 'Black Friday' on our hands depending on which way the vote goes," he added.

"Our binary bet is now pricing in a 22-per-cent chance of Scotland voting 'Yes.'"

That doesn't mean investors are necessarily rushing ahead expecting a "No" victory.

"The FTSE 100 has opened lower, financial stocks have been hit hardest, and even though the polls are showing a 'No' vote, it is likely nobody wants to stick their neck out and buy banks and insurers ahead of the Scottish referendum on Thursday," Mr. Madden said of the London market.

Poloz optimistic
Mr. Poloz also again today pointed to better times for Canadian trade.

"All things considered, then, we are cautiously optimistic about our exporting future," he said in the text of his luncheon speech.

"It will take more than a few months to establish a trend, and then still longer for it to translate into more investment and hiring by companies, but it looks like the natural sequence we've been hoping for is getting under way."

The central bank chief, by the way, also stressed there's no tinkering with the currency, The Globe and Mail's Barrie McKenna reports.

"But trying to control the loonie is off the table, as far as we are concerned at the Bank of Canada. A floating loon is a thing of beauty, and so is a floating loonie, at least from this economist's perspective."

Deal for Wind
The Canadian government's plan to spur competition in the telecom industry is back in focus today with a deal to buy upstart Wind Mobile.

As The Globe and Mail's Christine Dobby and Boyd Erman report, the bid to buy out the carrier's foreign owner is aimed at allowing Wind to become the so-called fourth player in the country's wireless sector.

Under the deal unveiled this morning, Globalive Capital will buy the debt and equity interests in Wind held by VimpelCom Ltd.

Also involved in the purchase are West Face Capital, a Canadian hedge fund, U.S. private equity firm Tennenbaum Capital Partners and LG Capital Investors.

"The federal government's delivery on its promise to create the conditions for viable long-term wireless competition has not gone unnoticed by the investment community," said West Face chief executive officer Greg Boland.

The pursuit of Tim Hortons
Burger King Worldwide Inc.'s pursuit of Tim Hortons Inc. began in March with a conversation with Warren Buffett, in which the billionaire agreed to support a takeover, according to documents filed with regulators today.

Over the ensuing months, through intensive talks, Tim Hortons pushed the price higher three times, The Globe and Mail's Boyd Erman reports.

Armed with that knowledge, a banker for Burger King called the chief executive officer of Tim Hortons on March 12. On that call the banker told CEO Mark Caira that 3G Capital, the majority owner of Burger King, wanted to do a deal to put Tims and Burger King together. Mr. Caira agreed to have dinner with Burger King's chairman, 3G executive Alexandre Behring.

That kicked off months of intensive negotiations that saw Burger King raise the price three times, from an original bid of $73 a share, and commit to extensive demands from Tim Hortons for protections of its business interests in Canada.

OECD moves on taxes
The Organization for Economic Co-operation and Development released a series of measures on Tuesday that it says, if implemented, would restrict the ability of global corporations to use national borders to game the international tax system.

The plans, agreed to by delegates from 44 countries in the Paris-based OECD and the Group of 20, are a response to worldwide controversy in recent years over aggressive tax strategies used by multinational companies sto move billions in profits out of higher-tax countries into low- or no-tax jurisdictions, The Globe and Mail's Jeff Gray reports.

The proposals, to to be submitted this weekend to the G20 finance ministers meeting in Cairns, Australia, call for new laws to "neutralize" loopholes in the international tax system that allow companies to avoid paying tax by using what are known as "hybrid mismatch arrangements," such as the multiple tax deductions that some companies can make in multiple countries for a single expense.

The plans would also impose new rules on companies trying to take unfair advantage of tax treaties between countries (so-called "treaty shopping") and the aggressive use of "transfer pricing," or the practice of assigning inflated prices to intra-company movements of goods or services for tax purposes, which allows companies to slide profits across borders.

Allergan reaches deal on meeting
Allergan Inc. and its suitors Valeant Pharmaceuticals International Inc. and Pershing Square Capital Management LP have reached a settlement in the dispute over the holding of a special shareholders' meeting, The Globe and Mail's Bertrand Marotte reports.

Under terms of the agreement announced today, Allergan will hold a special meeting on Dec. 18, as previously intended, at which Pershing Square and Valeant will seek to remove a majority of Allergan's board in a hostile $53-billion (U.S.) attempt to take over the Botox maker.

Bill Ackman's Pershing Square and Laval, Que.-based Valeant went to court last month to force a recalcitrant Allergan to hold the special meeting.

Canada's manufacturers gain
Canada's factories have bested their previous sales record.

Shipments climbed 2.5 per cent in July to $53.7-billion, Statistics Canada said today, topping the prior record of $53.2-billion in July, 2008, The Globe and Mail's David Parkinson writes.

Notably, sales rose 2.8 per cent in dollar terms, meaning the "gain was mainly due to a rise in volumes rather than prices," the agency said.

"July was a hot month for Canadian manufactured goods exports, so the only surprise was that shipments were not just hot, but scorching," said chief economist Avery Shenfeld of CIBC World Markets.

July's increase was driven largely by the auto and aerospace industries.

Sales climbed in 16 of 21 sectors measured by Statistics Canada, or 56 per cent of all manufacturing.

And, for that matter, the "bulk of the gain" was in the central province of Ontario.

Inventory levels were relatively flat, while the inventory-to-sales ratio dipped to 1.33.

Unfilled orders rose 0.6 per cent, and new orders 4.3 per cent.

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