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BP shares rise after Hayward testimony Investors are giving BP PLC's embattled chief executive officer a passing grade on his performance before a U.S. congressional panel yesterday, when he was attacked from almost all sides over the massive oil spill in the Gulf of Mexico. Markets bid BP shares higher today after Tony Hayward came through yesterday's grilling seen as having survived the show with his cautious approach. There is also a sense among analysts that investors believe the worst may be over in terms of public opinion, though that remains to be seen given the outrage over the disaster caused by the explosion on the Deepwater Horizon drilling rig in April.
Yesterday's hearing later took on a bizarre tone when Rep. Joe Barton, a Texas Republican who sat on the panel and has received political contributions from the energy industry, at first apologized to BP for what he called his government's "shakedown," and then, under pressure from his own party, apologized to everyone for the apology. Mr. Barton said he was not trying to suggest that BP shouldn't pay the costs, only that the energy giant had been denied due process under the U.S. legal system. Others have made the same point, and suggest that President Barack Obama may have exceeded his authority when he struck a deal for BP to cancel its dividends and set up a $20-billion (U.S.) oil spill fund.
- Cautious BP CEO frustrates his accusers
- British taking U.S. fury at BP personally
- GOP lawmaker apologizes for apologizing to BP executive
How spill could boost oil sands One of the side effects of the massive Gulf spill could be more investment in the oil sands, which would in turn boost Canada's economy, economists say. New restrictions on deep sea drilling, and whatever regulations come into force in future, could prompt the view Alberta's oil riches are a "safer" alternative," Toronto-Dominion Bank economist Dina Cover said in a research note today. She cited the fact that offshore projects are projected to account for just 3 per cent of total output in Canada by 2025, while the oil sands are forecast to represent more than 80 per cent.
"Still, the notion that oil sands are a safer method of oil production, plus the fact that production costs may become lower than offshore costs once new regulations kick in, could attract more investment into the industry, helping to boost the Canadian economy. Moreover, lower potential output in the U.S. eases the risk of a regulatory ban on oil from Canada's oil sands, and could lead to increased oil exports to the U.S."
In a separate report today, CIBC World Markets economists noted in a report today that the oil sands are already on track to become the biggest single source of oil imports to the United States this year. "The Deepwater Horizon disaster has also focused attention on the oil sands' 170-billion [barrels] of economically recoverable reserves," said Peter Buchanan and Meny Grauman. "The [U.S. Department of Energy]expects the Obama administration's recent drilling moratorium to cut U.S. production by an average 70,000 [barrels a day]next year, which is equal to only about 1 per cent of current OPEC spare capacity."
Dollar could also benefit, RBC says The series of events that could be sparked by the environmental disaster could also give the Canadian dollar added life, RBC Dominion Securities says.
"Extraction from the Canadian oil sands continues to grow and with crude oil prices back above $70 (U.S.) a barrel, new greenfield projects and previously shelved expansions are once again starting to become viable," wrote senior currency strategist Matthew Strauss. "Also, as public and government appetite for deepwater offshore drilling ebbs, interest in onshore, safer oil extraction operations is set to increase. [The Canadian dollar's]petro status will continue to grow in coming years, but the positive [foreign exchange]impact of Canada's vast oil resources could be felt much earlier in the form of renewed foreign interest that could well translate into another round of multi-billion [mergers and acquisitions] inflows."
Foreign investors grab up Canadian bonds After a one month dip, foreign investors are loving Canadian bonds again, largely federal and provincial debt. Global investors snapped up a net $10-billion in Canadian bonds in April, Statistics Canada said today, with most of the action in government paper. "Investment activity in April focused on federal and provincial government bonds, as non-residents acquired an unprecedented $6.2-billion of Canadian dollar-denominated federal bonds on secondary markets," the federal statistics gathering agency said. "Foreign purchases of provincial bonds were the largest in a year at $3.5-billion, mainly new issues denominated in U.S. dollars."
"It seems investors, who are often heard touting the merits of Canada's relative fiscal health and commodity-sector growth prospects, are putting their money where their mouth is," BMO Nesbitt Burns economist Robert Kavcic said before the Statistics Canada report.
Related: Loonie's star keeps getting brighter
How the economy is shifting Statistics Canada's composite leading index measuring the economic outlook rose 0.9 per cent in May, which Credit Suisse likened this morning to the "Energizer Bunny." However, today's reading shows how Canada's economy is shifting: "The upturn in the index a year ago was led by housing and the stock market. These components have stopped contributing to growth, replaced instead by the manufacturing components ... The housing index fell 1.2 per cent, its first decline since April 2009. Existing home sales continued to retreat slowly from their record high reached over the winter, while the year-long rally in housing starts stalled. Despite the slowdown in housing, furniture and appliance sales continued to strengthen. Demand for other durable goods remained soft, notably for autos."
Obama urges continued economic support President Barack Obama wants his counterparts at the G20 summit to pledge continued "policy support" for the economic recovery, which could put the United States at odds with European governments that are headed in the opposite direction. Mr. Obama wrote to leaders of the G20, who meet in Toronto this month, saying that "we should reaffirm our unity of purpose to provide the policy support necessary to keep economic growth strong ... we should be prepared to respond again as quickly and as forcefully as needed to avert a slowdown in economic activity."
Not that other leaders would disagree with the need to keep the recovery going, but debt-burdened European governments are on the cutback trail, with harsh austerity measures aimed at putting their fiscal houses in order. Economists fear this could slow the recovery, certainly in Europe and potentially the rest of the world.
Mr. Obama also isn't letting China off the hook. While he didn't cite Beijing specifically, he did add that "I also want to underscore that market-determined exchange rates are essential to global economic vitality." The United States and other countries have been pushing Beijing to allow its currency to appreciate, while Chinese officials say such a move would do nothing to correct global imbalances. They have also said they will move toward reform of the yuan at their own pace, and warned as recently as today that discussion of the yuan has no place at the G20 summit.
Separately, Prime Minister Stephen Harper is urging debt-burdened nations to fix their troubles. "We believe it is important to stay the course for now, but with an important caveat," Mr. Harper wrote in a university publication to be released later today, according to The Canadian Press. "Recent events are highlighting the real risks to highly indebted countries that lack exit strategies from large budgetary deficits."
- Obama, Harper urge G20 nations to 'safeguard' recovery
- China in no mood to discuss yuan
- Slide in shipping shows global recovery running out of steam
- Global recovery a global responsibility, Carney says
- Kevin Carmichael's G/G20 Global View summit blog
Europe's governments cut back European governments are in the midst of a sweeping overhaul of their finances, which includes changes to social programs that have sparked anger and protests among their citizens. From raising retirement ages and other fixes to pension systems, to cuts to public sector costs, Europe is changing what for years has been a certain way of life for many.
Bloomberg News provides an interesting look at Greece's pension system, seen as a major problem for its government as it scrambles to slash its deficit. It has been criticized on many fronts, and is a target of the cutbacks. The news agency looks at one woman as an example, Sophia Constantinidou, a teacher at a private school in Athens who, because she is not married, gets €400 a month from the government that is part of the state pension of her late mother. As the only surviving child of the late public servant, she gets that money for life as long as she remains single.
Bloomberg notes that there is one pensioner in Greece for every 1.7 workers, and more than 600 occupations the government deems arduous enough for earlier retirement, including steam bath attendants, car washers and hairdressers. While those appear to be the examples on the extreme side, it's no wonder that Prime Minister George Papandreou is cutting back on early retirement.
Short euro, Barclays says Here's a vote of confidence: Barclays PLC analysts say investors should short the euro in anticipation of a fall. "We are prepared for an erratic corrective rally," they said in a research note, according to Bloomberg News.
Russia seeks key economic role Russia aims to be part of the "new world economic order." Already the 'R' in the BRIC countries - the emerging power economies that also include Brazil, India and China - Russia will push ahead with free market policies to build a "modern, prosperous" country, President Dmitry Medvedev told an international forum today. "We understand that international competition is the decisive stimulus for our modernization," the president said. "Russia should become an attractive country to which people from the whole world will come in search of their dreams," he said.
Japan to cut corporate taxes The Japanese government said today it will cut corporate taxes to help spur economic growth. The new government is targeting real growth of more than an average 2 per cent over the next decade. Analysts suggest the new governments goals are too lofty, particularly given that the country has a huge fiscal problem and needs to raise funds to slash its deficit. Economists told the Reuters news agency that Prime Minister Naoto Kan's government should commit to raising its sales tax to 15 per cent or 20 per cent over the next 10 to 15 years to help meet rising costs.
Gold pushes new heights The price of gold continues to push higher this morning, hitting a record in both London and New York in the $1,260 (U.S.) an ounce range. "Risk appetite has continued to improve over the past few days with equity markets, the euro and the pound continuing to trade near their recent highs," said CMC Markets analyst Michael Hewson. "However, despite this investors are continuing to push gold back to record highs against the U.S. dollar, which suggests that despite this return in the appetite for risk, there is a significant element of caution within the market, as capital also gets rotated into safer haven types of asset, over fears about further monetary stimulus programs and economic contagion."
Tembec shares on the rise Shares of Tembec Inc. surged today after the forest products company issued its latest quarterly forecast. Montreal-based Tembec said in a statement that it expects earnings before non-recurring items, interest, income taxes, depreciation, amortization and other non-operating expenses and revenues in the range of $47-million to $53-million in the third quarter, up from $32-million in the most recent quarter.
Priest develops iPad app Call it the iMass. A priest in Italy, already known for an iPhone application, has now developed an app for the iPad that would give priests the ability to celebrate Mass using the popular tablet computer from Apple Inc. , rather than the traditional missal. Rev. Paolo Padrini, who consults for the Vatican's Pontifical Council for Social Communications, said today the app will be available next month in several languages, The Associated Press reports from Rome. The app will hold the entire Roman missal, he said.
From today's Report on Business Controversy over Magna deal nothing new for Stronach