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Trichet talks up Europe Whether talking about the economy or the World Cup, European Central Bank chief Jean-Claude Trichet had the same message today: Don't underestimate Europe.
After holding the ECB's benchmark interest rate steady, Mr. Trichet told reporters that Europe's economy, a focus among investors given the fears over mounting debt troubles, is stronger than some believe. He said there is a tendency outside Europe to be "excessively pessimistic" about the continent but that the numbers don't bear that out.
As for soccer, Mr. Trichet cited the success of teams from the euro zone, the countries that share the common currency, saying that "in the best four you have three European teams ... I have said from time to time that one should not underestimate Europe."
European rates unchanged Both the ECB and the Bank of England held their benchmark lending rates steady today. That was expected but markets were more interested in what Mr. Trichet had to say about bank stress tests. The stress tests, the results of which will be released July 23, are a big issue across Europe.
"There is a lot of apprehension in the market over what may be potentially revealed by the stress tests, and there are some already voicing criticism that these tests may not be putative enough," said Scotia Capital currency strategist Sacha Tihanyi. "We hold the view that transparency is preferred to opacity, and while there is risk that banks are shown to be sitting on unstable capital bases, European policy makers can manage the risks by suggesting financial support for vulnerable cases (as they have in recent days)."
Mr. Trichet welcomed the tests, saying they would help drive confidence in the financial sector and that "appropriate action will have to be taken where needed." Read the story
Germany shows strength Europe's biggest economy is picking up steam and, on a brighter note for G20 leaders, taking "a step in the right direction" in the area of global imbalances. Industrial production in Germany rose 2.6 per cent in May while its exports soared more than 9 per cent, fresh signs of a rebound driven by industry. What may be more notable - at least from the perspective of other countries that are watching Germany closely - the country's trade surplus narrowed markedly in May to €9.7-billion from €13.1-billion. That was due to a surge in imports of 14.8 per cent, good news for other countries as demand grows. Correcting global imbalances was a key theme at the recent G20 summit in Toronto and, while it's just a one-month measure, it is a step in the right direction, said BMO Nesbitt Burns economist Benjamin Reitzes.
"Improved demand out of Germany is something global leaders have been pleading for, to help rebalance the global economy and boost global growth," Mr. Reitzes said.
China's current account surplus to shrink China says its current account surplus will shrink for a second consecutive year this year as domestic demand grows. The State Administration of Foreign Exchange, or SAFE, said the current account surplus fell last year to 6.1 per cent of gross domestic product from 9.6 per cent a year earlier. The current account is the broadest measure of trade.
"The momentum for the trade surplus to widen will moderate," it said. "The current-account surplus as a percentage of GDP will decline further."
IMF prods U.S. on debt The International Monetary Fund today urged the United States to move quickly to slash its budget deficit, suggesting it could raise taxes, cut social benefits or kill the deduction on interest on mortgages. The IMF, in an annual look at the U.S., projected its economy will expand 3.3 per cent this year, but fall shy of 3-per-cent growth for the next five years. David Robinson, the group's deputy director for the Western Hemisphere, said that as it sees a weaker growth path than the government, it also sees "a need for more fiscal measures than the authorities at present do."
IMF sees slower growth next year Canada's economy will perform better this year than the International Monetary Fund expected, but the outlook for next year is growing dimmer. The global economy is rebounding faster than originally projected, the IMF said in a new report today, but it warned the spreading fears over swollen government debts could derail the recovery. For Canada, the group raised its growth forecast to 3.6 per cent this year, from its earlier projection of 3.1 per cent, but cut its 2011 outlook to 2.8 per cent from 3.2 per cent.
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Viterra warns of industry sales slump Viterra Inc. warned investors today that it espects agricultural products industry sales to slump 15 per cent to 17 per cent this year, with the biggest hits to fertilizer and chemicals, and that its third-quarter results would be affected. The company said western Canadian farmers typically spend between $70 and $110 per acre, depending on the types of crops. But due to heavy rains, about 8 million acres were unseeded this season, and another 2 million that were seeded were lost.
"The impact to Viterra in its third quarter will be reflective of the company's market share, which is currently approximately 32 per cent," it said. "Viterra estimates that every 1 per cent change in retail sales impacts EBITDA by approximately $2-3 million."
Results from retailers mixed The bedroom and the bathroom are among the high points of U.S. retailers reporting June sales results today. While some retailers reported sluggish sales, largely because of discounts on clothes, others are reporting stronger gains, including Abercrombie & Fitch Co. and J.C. Penney Co. .Limited Brands , which runs the Victoria's Secret and Bath and Body Works chains, did better than projected, seeing a 6-per-cent jump in June.
Merck shuts down plants Merck & Co. announced today plans to shut down eight plans and eight research sites, including its research centre in Montreal. Merck, the second largest pharmaceutical company in the world after last year's takeover of Schering-Plough Corp., has announced plans to shed 15 per cent of its post-merger work force, representing some 16,000 jobs. Merck said it is also sticking to its target of annual savings of $3.5-billion (U.S.) by 2012.
The company said it will phase out the Merck Frosst Centre for Therapeutic Research in Quebec, and that some 180 employees there will be offered other jobs in the company.
"The difficult decision to phase out the research facility in Kirkland represents one part of the company's ongoing consolidation of its operations and research activities," said Rich Tillyer, senior vice president, Discovery and Preclinical Sciences, Merck Research Laboratories. "It does not detract from the important contributions made historically by research scientists at this site." Read the story
Cogeco Cable shows cable growth Cogeco Cable Inc. posted third-quarter results today that showed continued growth in its Canadian cable business and some stabilization of its Portuguese subsidiary, where tough competition and a dismal economy had driven the company into deep discounting. Revenue of $319.3-million fell below analysts' estimates. But profit of $31.2-million, or 64 cents a share, beat estimates even though it trailed last year's showing of $32.5-million or 67 cents.
"Overall, we continue to believe the stock is fundamentally undervalued, with a discounted multiple that is well below multiples for its peers," said Desjardins analyst Maher Yaghi. "The Portuguese operations are continuing to show stabilization in terms of subscribers, which should eventually lead to stabilization financially and thus remove the drag from Portugal on consolidated results. At the same time, the Canadian operations continue to show decent growth trends, driven by subscriber additions and pricing increases." Read the story
Madison Square Gardens stock sinks LeBron James may not be Ben Bernanke but he can still move markets, it appears. Shares of Madison Square Garden Inc. sank today after reports in the United States that the NBA's Most Valuable Player for the past two years is likely headed to the Miami Heat instead of the New York Knicks. Madison Square Garden owns the Knicks, and there had been hopes that Mr. James would announce tonight that he was leaving the Cleveland Cavaliers for the Knicks.
Yesterday, Madison Square Garden's stock ran up but slipped today after ESPN said Mr. James is likely headed to Miami. Mr. James will announce his decision tonight on ESPN.
"Madison Square's action has been the ultimate in event-related trading," Michael Block, chief equities strategist at Phoenix Partners Group LP in New York, told Bloomberg News. "I'm not sure anyone thinks he's going anywhere but Miami right now."
Related: Raptors among those waiting on LeBron
From today's Report on Business
- Battle of the soccer brands
- Total SA gets its oil sands prize
- Montreal retail icon Ogilvy back in Quebec hands
- Census revamp prompts debate over right to reliable data
And, read our Streetwise blog and Your Business section