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Sharing the burden European leaders warned Greece today that it's running out of time as its politicians quarrel over austerity measures that could determine when it gets its next handout from the EU, the IMF and the European Central Bank.
An emergency meeting in Athens today failed to bring opposition parties onside with a government plan.
That prompted a sharp warning from the EU's economic and monetary affairs commissioner, Olli Rehn, that it is "essential" that all Greek parties support the EU-IMF agenda.
"We expect that the efforts towards a cross-party agreement to support the EU-IMF program will continue," Mr. Rehn said in a statement reported by wire services.
"An agreement has to be found soon. Time is running out ... The magnitude of the challenge is a test to the Greek society as a whole, and therefore requires a contribution by all parties and all citizens."
Markets believe Greece will be forced to restructure its debts, despite its protestations, a year into its debt crisis.
"The talk of the town is that throwing any money into Greece's coffers is the same as throwing it down the drain, since Athens will not be able to return to global credit markets for funds anytime in the foreseeable future, if present bond yields are an indication," said Carl Weinberg, chief economist at High Frequency Economics.
"We continue to fear that eurolanders are botching this crisis, allowing Greece to come too close to default for anyone's good. Restructuring is inevitable, and we say the best thing to do is simply to get on with it."
It's interesting to note, too, that Europe's leaders are becoming increasingly adept at finding nice ways to say that the Greeks may not be able to pay their debts.
The term heard most often is "restructuring," which means Greece would strike a deal with its debtholders to change the terms.
Earlier this month, Luxembourg's Prime Minister Jean-Claude Juncker suggested that EU finance officials would study the idea of "reprofiling," or a "soft restructuring" that would push out maturity dates.
Then today, French President Nicolas Sarkozy told reporters at the G8 summit in Deauville, France, that he doesn't like the word restructuring.
"If the question is, can we think about how private investors or private partners can take a share of the burden, then it's not restructuring at all. Then there are formulas," Mr. Sarkozy said.
Greece, of course, says it won't default, restructure, soft restructure, reprofile or share the burden. But if today's meeting is any indication, it may want to adopt the word "collapse."
Canada's Prime Minister Stephen Harper told reporters at the summit that he has "every confidence" in Europe's abilities to manage the crisis. Perhaps he knows something the markets don't.
Ottawa to beat target Ottawa is expected to beat its deficit target for the last fiscal year, but the final numbers won't be known until fall, The Globe and Mail's Bill Curry reports today.
According to the Fiscal Monitor - a monthly tracking report - the federal deficit from April 1, 2010 to March 31, 2011 stands at $34.4-billion. That's almost $6-billion below the $40.5-billion deficit forecast in the March budget that failed to win Parliamentary support before the election.
However the report cautions against citing the $6-billion figure, as further adjustments are expected before the final number is released.
Competition Bureau sues Toronto board The Competition Bureau is suing the largest real estate board in Canada, alleging the Toronto Real Estate Board is preventing agents from creating new services that would make it easier for consumers to buy and sell homes.
The Competition Bureau alleged today that the board is "restricting how its member agents can provide information from the Toronto MLS system to their customers, thereby denying member agents the ability to provide innovative brokerage services over the Internet," The Globe and Mail's Steve Ladurantaye reports.
The listings system to which agents have access contains more information than the public can see on Realtor.ca, the Canadian Real Estate Association's hub for listings. While agents can provide customers with that data by hand, mail, fax or e-mail, the Competition Bureau alleged that the board's "anti-competitive practices effectively prevent agents from providing the same MLS listing information to customers via a password-protected Web site."
TREB president Bill Johnston said allowing the information to sit on a website poses privacy concerns.
Roubini sees 'tipping point' The man who warned of the financial crisis now warns that stocks are at a 'tipping point.'
Nouriel Roubini, the New York University professor and chairman and co-founder of Roubini Global Economics, told a conference today that stocks could be pulled down by signals of slower economic growth, according to Bloomberg News.
"Until two weeks ago I'd say markets were shrugging off all these concerns, saying they don't matter because they were believing the global economic recovery was on track," Mr. Roubini said in Budapest, the Bloomberg report said.
"But I think right now we're on the tipping point of a market correction. Data from the U.S., from Europe, from Japan, from China are suggesting an economic slowdown."
G8 to support Arab Spring countries The world's big wealthy democracies have endorsed a $20-billion-plus package of assistance to Egypt and Tunisia, asserting a willingness to support transitions to democracy in North Africa and the Middle East, The Globe and Mail's Campbell Clark reports from Deauville.
Leaders of many of the G8 countries meeting in Deauville had raised fears that the pro-Democracy movements dubbed the Arab Spring could be derailed by economic hardship which could lead to a rise of extremism.
RBC boosts dividend Royal Bank of Canada also boosted its quarterly dividend today as it posted a stronger second quarter, though it fell shy of analysts estimates.
RBC hiked its dividend by 8 per cent, to 54 cents, the first increase in nearly four years, Grant Robertson reports.
Canada's largest bank earned $1.51-billion, or $1 a share in the quarter, compared to $1.33-billion, or 88 cents a year earlier. Revenue rose 2 per cent to $7.13-billion. Analysts, on average, expected $1.11 a share in the quarter.
"Canadian banking continued to underpin our results, generating over half of our earnings," said chief executive officer Gordon Nixon.
"We continued to outperform and drove solid volume growth of 7 per cent by leveraging our strong branch network and alternative distribution capabilities."
Analyst Michael Goldberg of Desjardins said he hadn't expected a dividend hike until the fourth quarter.
"Royal's annual 2011 dividend is C$0.01 below the consensus annual dividend for 2011 of C$2.05," he said. "The payout of 46 per cent (based on our FY11 EPS forecast) is within [Royal's] 40-50 per cent payout range and implies sustainable quarterly EPS of C$1.08-1.35 to support the higher dividend."
Analysts downbeat on CIBC Analysts are taking a dimmer view of Canadian Imperial Bank of Commerce after the bank missed estimates on second-quarter results yesterday.
UBS Securities Canada and National Bank of Canada, for example, cut their targets on CIBC shares after the bank posted a quarterly profit of $678-million or $1.60 a share, up from a year earlier but about 20 cents off what analysts had expected on earnings per share.
UBS analyst Peter Rozenberg cut his 12-month price target on the stock to $88 from $90, though maintained his "buy" rating, saying loan growth remains the biggest issue for the bank.
"Lower retail margins, and higher expenses, imply a more competitive environment," he said. "This is a key theme this quarter that implies a more moderate outlook. It also implies a preference for more international focused banks like BNS or TD."
National Bank analyst Peter Routledge trimmed his target to $89 from $91, and cut his rating to "sector perform" from "outperform."
"We continue to like [CIBC's]long-term risk/return profile - that is, reinvesting capital in domestic businesses that hold good competitive positions will ultimately produce rising dividends for shareholders," Mr. Routledge said.
"The bank has also held open the possibility of accretive preferred share redemptions in addition to the one announced [Thursday] In the nearer term, however, [CIBC's]overweight position toward the Canadian household combined with slowing credit demand and intensifying price competition in retail markets warrant a sector perform rating, in our view."
As Globe and Mail reporters Grant Robertson and Tim Kiladze note today, Canadian banks are feeling the squeeze of tighter competition on everything from mortgages and home equity lines of credit to interest rates on deposits.
"Key themes evident in Canadian banks' 2Q FY11 results so far include: (1) slower growth and increased competition in Canada, and (2) loan quality that is even better than expected," said Desjardins analyst Michael Goldberg.
"With these themes in mind, we believe that the stance we have taken toward our favoured banks - TD, BNS and BMO - is validated. These stocks should continue to be superior performers among the banks. The key reason is that their international businesses provide them with more sources of growth and leave them less vulnerable to domestic competition."
Also, Mr. Rozenberg boosted his price target on National Bank of Canada to $82 from $78 after its strong results and dividend increase yesterday.
- CIBC profit climbs, revenue dips
- Canadian banks feeling margin pressure
- National bank boosts payout
- Cautious consumers pressure BMO's bottom line
Consumer prices rise in Japan Finally, there's inflation in Japan, though it's slight.
Consumer prices inched up 0.3 per cent in April from a year earlier in Japan, which has struggled through a deflationary period, and 0.6 per cent when fresh food is taken out of the measure. That latter measure marks the first increase in over two years, but the headline inflation rate has been positive, though barely, off and on.
"Granted, the 0.3-per-cent year-over-year rise in April consumer prices is still extremely modest and only comes about after the earthquake put pressure on supplies, but at least it looks like deflation, by definition, is over, for now, and strictly by definition (I like to stress that point)," said senior economist Jennifer Lee of BMO Nesbitt Burns.
Separately today, the Fitch ratings agency knocked down its outlook on Japan's debt to negative, saying the disaster that struck the country in mid-March will add pressure to its bloated debt.
UBS trims CP outlook UBS Securities Canada has trimmed its outlook on shares of Canadian Pacific Railway , reflecting "modest reductions" in the security firm's long-term projections for earnings per share.
Analyst Tasneem Azim cut her 12-month price target on the stock to $70.50 from $72, though she held her "buy" rating. She also trimmed her earnings per share estimate for the second quarter to 78 cents from $1.06.
"Notwithstanding these reductions, we maintain our constructive investment thesis on CP," she said.
"While investors have reason to be sceptical given the performance year-to-date, we believe there is some truth to the idea that CP was dealt a bad hand in [the first half of 2011] Further, with [the first half]nearly in the rear-view mirror, we believe investors' focus should return to the growth opportunity that lies ahead. In our view, there is scope for earnings and volumes to stage a meaningful recovery as operating conditions across the network normalize, and the company is able to focus on its long-term strategic goals rather than quarterly obstacles."
The railway has been hurt by harsh weather, though earlier this month boosted its quarterly dividend by 3 cents.
In Economy Lab today
Parents can relas, says economist Frances Woolley, strikes by teachers aren't likely to have a long-term impact on the achievement of students.
In International Business today
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In Personal Finance today
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From today's Report on Business