Skip to main content
top business stories

These are stories Report on Business is following Thursday, Oct. 25, 2012.

Follow Michael Babad and the Globe's top business stories on Twitter.

Central bank policies buoy loonie
The combined policies of the Bank of Canada and the Federal Reserve promise to continue to buoy the Canadian dollar, not the best news for the country's exporters.

The loonie, as it's known in Canada, rose slightly today, in line with other currencies, and, according to senior currency strategist Camilla Sutton of Bank of Nova Scotia, is projected to remain above parity with the U.S. dollar through to the end of 2013.

There are many factors behind the strength of Canada's dollar, of course, but central bank policy is responsible for some of the fuel.

Two days ago, the currency rallied when the Bank of Canada watered down its rate outlook, but still maintained that the next change to its benchmark overnight rate would be up. Then yesterday, it weakened when Mr. Carney told reporters the need for such a hike is "less imminent."

On top of that, the Fed yesterday maintained its outlook, as expected, pledging an emergency low Fed funds rate through to at least 2015. It also continues its latest asset-buying program, a scheme known as QE3 because it marks the third round of quantitative easing and one that pressures the U.S. currency.

As The Globe and Mail's Kevin Carmichael reports, a rate hike in Canada is now expected somewhere between mid-2013 and the end of the year.

All of this spells a long period of a strong currency, which the Bank of Canada warned this week will affect exports, partly because of the actions of other central banks.

"Canadian exports are projected to pick up gradually but remain below their prerecession peak until the first half of 2014, reflecting weak foreign demand and ongoing competitiveness challenges," the central bank said Tuesday as it held the overnight rate at 1 per cent.

"These challenges include the persistent strength of the Canadian dollar, which is being influenced by safe haven flows and spillovers from global monetary policy."

Markets climb
Markets are on the rise across the globe so far this morning, perking up over stronger signs from China and Britain.

Tokyo's Nikkei jumped 1.1 per cent, European stocks are gaining, and New York appears headed for a stronger open.

In Europe, London's FTSE 100, Germany's DAX and the Paris CAC 40 were up by between 0.3 per cent and 0.6 per cent by about 9 a.m. ET.

Dow Jones industrial average and S&P 500 futures also rose.

Feeding into the better mood was the latest reading of economic growth in Britain, where gross domestic product expanded by 1 per cent in the third quarter of the year.

"We might be knee-deep in corporate earnings this morning, but the story of the U.K.'s return to growth (+1 per cent for Q3) isn't something the media are going to drop for a while – for its political entertainment value if nothing else," said sales trader Will Hedden of IG in London.

"Having been accused of leaking the good news yesterday, the prime minister's lose/lose situation has at least meant he gets the lesser of two evils, as defending a lack of growth would have been much harder than explaining away the leak. So after all the initial doubts, then the euphoria, it turns out the Olympics were good for the economy after all. We can't have them every year, however, so there are some tough comparatives to come. "

The tone is optimistic throughout financial markets.

"The [U.S. dollar] index is weaker this morning, as equities are generally firmer following some decent overseas data," said Benjamin Reitzes of BMO Nesbitt Burns.

"The major currencies are mostly stronger, with the British pound leading the way higher following a solid Q3 GDP report … Commodity prices are generally higher: WTI crude is up 0.6 per cent to $86.25, Brent crude is up 0.7 per cent to $108.60, gold is up $13 at $1715, base metals are mostly stronger (COMEX copper is an exception down 0.2 per cent), while the grains are little changed."

Britain bounces back
Britain has rebounded from its recession, its economy expanding by 1 per cent in the third quarter of the year.

That's the first estimate of economic growth from the country's Office of National Statistics, and can be revised, while the pop was due partly to the Olympics, so the next while may not be as bright.

But it's still a good sign for the first western economy to report third-quarter growth.

"The preliminary estimate of GDP growth in quarter three may have been affected by a number of factors, which need to be taken into account in the interpretation of the latest figures," the agency said.

"First, the growth rate is based on the level of GDP in the second quarter of 2012, which had one fewer working day than usual because of the Queen's Diamond Jubilee bank holiday. In addition the London 2012 Olympic and Paralympics Games may have affected economic activity in the third quarter. In particular, the sales of Olympic tickets increased GDP growth in the quarter by 0.2 percentage points and there may have been other effects, which are impossible to quantify."

CNOOC sees Nexen deal approval
China's CNOOC Ltd. still expects the Canadian government to approve its huge takeover of Nexen Inc. despite its rejection of a proposed deal by Malaysia's Petronas for Progress Energy Resources Corp.

"Our team is still working to obtain approval," CNOOC's chief financial officer, Zhong Hua, told reporters today as he unveiled the energy company's latest quarterly results, according to Reuters.

"We still expect the approval by the end of the year."

There is much controversy in Canada surrounding the takeovers of resource companies by foreign state-owned enterprises, though the government hasn't said why it turned down Petronas, other than it didn't meet the country's "net benefit" test.

But CNOOC believes it's not in the same boat.

This is a hugely different deal," the CFO said.

Nexen also said today it still expects the deal to go through. The comments came as the Canadian energy company posted a hefty drop in third-quarter profit to $59-million or 11 cents a share from $200-million or 38 cents a year earlier.

Potash profit slips
Changing demand patterns from major fertilizer users are hurting profits at Potash Corp. of Saskatchewan, which cut its profit outlook as sales fell for its namesake crop nutrient amid a price standoff with India and China, The Globe and Mail's Pav Jordan writes.

Saskatoon-based Potash Corp., the world's largest fertilizer maker, said profit fell to $645-million (U.S.), or 74 cents a share, in the third quarter, compared to $826-million, or 94 cents a share, in the same period last year.

It also warned that full year 2012 earnings would likely come in between $2.40 a share and $2.60 a share, or about 14 per cent below earlier guidance.

Telecom complaints rise
Canada's Commissioner for Telecommunications Services says there was a 35-per-cent increase in telecom consumer complaints in its 2011-2012 year and that wireless services topped the list for the fourth consecutive year.

About 60 per cent of the issues raise in complaints related to wireless, unregulated local or long distance telephone services or internet access came from wireless users, the CCTS said today, The Globe and Mail's Bertrand Marotte reports.

Most of the beefs were in connection with billing errors or contract disputes.

Business ticker

Report an editorial error

Report a technical issue

Editorial code of conduct

Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 27/03/24 6:55pm EDT.

SymbolName% changeLast
AAPL-Q
Apple Inc
+2.12%173.31

Interact with The Globe