These are stories Report on Business is following Wednesday, Dec. 17, 2014.
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Awaiting the Fed
Just about everything is looking a bit shaky in the run-up to the Federal Reserve's widely-watching policy statement and economic projections this afternoon.
And there's a good chance that the embattled Canadian dollar may slide even further after the U.S. central bank releases its decision, the forecasts of the members of its policy-making panel and comments from chair Janet Yellen.
So far this morning, oil prices have dipped again, along with the Canadian currency.
And, of course, Russia's ruble, while firmer, is still basically crushed.
Stock markets, though, are mixed in advance of the Fed statement at 2 p.m. ET.
As The Globe and Mail's Brian Milner writes, it all comes down to just three words: "A considerable time."
Up to this point, the U.S. central bank has pledged to hold its benchmark rate at its current emergency low level for "a considerable time" after it ended its asset-buying stimulus program, known as quantitative easing, or QE. Which it now has.
Many observers believe the Fed will drop that pledge today, which would be the first signal of a rate hike next year and a key moment six years after the onset of the financial crisis.
Today's decision, though, comes amid turmoil across financial markets, and the central bank won't want to freak out investors even more.
Having said that, the U.S. jobs market is clearly on the mend, the economic outlook is generally better, and there's an added boost from lower energy costs.
The central bank will weigh that against tame inflation and the volatility in the markets, said chief currency strategist Camilla Sutton of Bank of Nova Scotia.
"It's quite the balancing act," she said.
Like others, Ms. Sutton believes the Fed will alter its language and hike the projections for economic growth.
Which should, in turn, support the U.S. currency and thus weigh on the loonie, as Canada's dollar coin is known.
Kit Juckes, the chief of foreign exchange at Société Générale, said his bank, too, believes the wording will be altered, but to language that "emphasizes patience" while leaving the Fed "greater freedom" for a rate hike within six months.
"That's in line with the consensus of economists, though the wider market is skeptical," he said.
"Given market pricing, any change in the statement would be dollar-supportive and volatility-inducing in general," Mr. Juckes added.
Of course, as Ms. Sutton and others noted, it could go either way.
And if it goes the other way, then all bets are off.
"After almost 1,000 points lost in the Dow Jones since the peak on Dec. 5, there is considerable room for an upside surprise from the Fed," said analyst Jasper Lawler of CMC Markets in London.
"A surprise could come in the form of leaving the 'considerable time' language in the statement, minimal change to its economic projections via the dot-plot or Janet Yellen being overly dovish in her press conference."
Leaving the language as is would not hurt the central bank's credibility given the weakness in inflation readings, said deputy chief economist Michael Gregory of BMO Nesbitt Burns.
Indeed, consumer prices slipped last month in the United States on a monthly basis, the U.S. Labor Department said today.
On a seasonally-adjusted basis, prices fell 0.3 per cent. So-called core prices, which strip out volatile items such as energy, inched up 0.1 per cent.
The annual inflation rate eased to 1.3 per cent, and the core rate 1.7 per cent.
"As such, modifying the phrase could entail more cost than benefit, given the potential negative reaction in financial markets," Mr. Gregory said.
- Brian Milner: The Fed’s return to normal hinges on three little words
- Video: The three oil benchmarks that matter to Canadian investors
Markets mixed
So far today, the loonie has touched a low point of 85.77 cents U.S., and a high of 86.03 cents, and is hovering at the 86-cent mark as North American stock markets get ready to open.
Oil prices have dipped again, and stocks are mixed, down in Europe and up in North America.
But it's still anyone's guess before the Fed's policy-making panel, the Federal Open Market Committee, makes its pronouncement, and whether "considerable" remains.
"The FOMC is believed to be considering removing it this month in a move that would clearly signal an imminent rate hike to the markets," said market analyst Craig Erlam of Alpari.
"I expect plenty of volatility around this event whatever they do. I'm sure if this is removed, Chair Janet Yellen will do her very best to assure the markets that it won't come until the middle of next year, the only question is whether the markets will buy it."
Oil patch stung
The squeeze on Canada's oil patch grows ever tighter amid the collapse in oil prices.
Two more companies, Husky Energy Inc. and Penn West Petroleum Ltd., announced cuts to capital spending today.
Penn West went even further, slashing its dividend amid new crude price assumptions.
The Calgary company said it would cut the quarterly payout to just 3 cents from 14 cents beginning next quarter. That's a reduction of some $160-million.
At the same time, Penn West said it will cut capital spending by some $215-million to $625-million.
"In November 2014, when Penn West announced its 2015 capital budget, the forward strip for crude oil was in the range of the company's Canadian per-barrel modeling assumption of $86.50," the company said.
"Since that time, however, crude oil prices have declined significantly. Reflecting this reduction in the outlook for crude oil prices, the company has reduced its Canadian crude oil pricing assumption for 2015 by approximately 25 per cent to $65 per barrel."
Husky, meanwhile, said it will cut capital spending next year to $3.4-billion from the $5.1-billion forecast this year amid the plunge in oil prices and the near competition of two big projects.
"We continue to steer a steady ship through stormy waters," chief executive officer Asim Ghosh said in a statement.
"Our strong financial position and resilient portfolio are helping weatherproof our business against current market conditions."
Husky projected average production at 325,000 to 355,000 barrels of oil equivalent a day.
- Carrie Tait and Jeff Lewis: Syncrude Canada mired in production problems
- Carrie Tait: Falling oil forces Encana to scale back budget hike
- Jeffrey Jones in ROB Insight (for subscribers): Talisman-Repsol deal a sign of hidden value in the oil patch
HBC names new chief
The former chief of North America's iconic toy store will soon be heading up Canada's iconic retail chain.
Hudson's Bay Co. today named Gerald Storch, former chairman and chief executive officer of Toys 'R' Us, as its new CEO, effective Jan. 6, The Globe and Mail's Bertrand Marotte reports.
Mr. Storch gets not only Hudson's Bay, but also Lord & Taylor, Saks Fifth Avenue, Saks OFF 5 and Home Outfitters, which are all under the HBC umbrella.
He takes over from Richard Baker, who will stay as governor and executive chairman.
"We believe this change will enhance our growth strategy," Mr. Baker said in a statement.
Toys aside, Mr. Storch has also been vice-chair of Target Corp., among other positions.
Ruble steadies
Russia's crushed ruble firmed up a tad today.
Though that's not saying much.
The currency, which has crashed amid the oil rout, was at about 65.5 rubles to the U.S. dollar.
Russia's finance ministry said it was trying to support the ruble by selling foreign currencies on the markets,
"Money is leaving Russia rather than short ruble positions being put on," said Mr. Juckes of Société Générale.
"So intervention in a thin market drives the ruble higher temporarily, but the march of money out of the country may just continue."
- Brian Milner: Despite aggressive rate hike, Russia on the brink as ruble plummets
- Video: What's the difference between ruble and rubble? (The letter B)
- Mark MacKinnon: Weakened Kremlin, plunging ruble create unpredictable Putin
- Juliet Johnson in Globe Debate: Why the West should help Putin save the ruble
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