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These are stories Report on Business is following Tuesday, Oct. 1, 2013.

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Vatican Bank finances
The Vatican Bank today gave the world an historic look at what it earns and what assets it holds, part of an ongoing effort to increase transparency in the wake of scandal.

Instituto per le Opere di Religione, or the Institute for Works of Religion, released the first annual report in its long history, which dates back to 1887.

Commonly known as the Vatican Bank, the institution had a solid 2012, though 2013 looks to be a more difficult year.

The institution chalked up an enviable profit of €86.6-million, or more than $115-million U.S.), a sharp jump from 2011's €20.3-million.

"The increase in net profit was mainly due to favourable trading results and higher bond values, resulting from the general decrease of interest rates in the financial markets through the year," the institution said.

Net trading income was €51.1-million last year, a turnaround from a loss in 2011 of €38.2-million.

On the asset side of its balance sheet, the bank cited cash and equivalents of €1.2-billion, and securities of €3.6-billion. The bulk of the latter is in the form of bonds, at €3.3-billion or 92 per cent of those holdings, with equities making up just 2.6 per cent.

The report is interesting, to say the least, given that it's the first public look at earnings and holdings. For example, the institution holds €41.3-million in gold, medals and precious coins. It also owns a real estate company, SGIR, which is based in Rome and holds a portfolio of properties.

Like other banks, part of the outlook relates to the troubles of the euro zone.

"The euro zone recession and debt crisis is likely to keep interest rates and bond yields low for the foreseeable future and may mean negative real interest rates," the bank said.

"This in turn raises the issue of reinvestment risk: As bonds mature, it is proving harder to find good returns at an acceptable risk, at the maturities that the IOR invests in."

President Ernst von Freyberg also noted the expected "extraordinary expenses for the ongoing reform and remediation process."

Markets tame. But just wait
Global markets are taking the U.S. government shutdown in stride today, but that's nowhere near the whole story.

While stocks are rebounding after sinking yesterday in anticipation, trouble looms depending on the length of the shutdown, and its impact on the economy, and the more important issue of the U.S. debt ceiling.

As The Globe and Mail's Kevin Carmichael reports, non-essential services are shutting down in the United States today, and hundreds of thousands of government employees are being laid off, after the failure of U.S. politicians to reach a budget deal by the time the U.S. fiscal year ended at midnight.

So far, global markets clearly aren't that worried.

"The lift in equities is further evidence of the lack confidence in the U.S. political system, to the extent that the inevitable shutdown was seemingly factored in by Monday's declines, as well as the continued pressure that the current stand-off has on the Fed to remain accommodative, and maintain that all-important backstop to equity markets," said senior sales trader Nick Dale-Lace of CMC Markets in London.

What he means is that the Federal Reserve will likely keep all its stimulus in place given the potential impact of the shutdown on the economy.

But the initial market reaction is just that: Initial, just a few hours into the shutdown. Here's what you need to know:

The cost, in money terms
IHS Inc. estimates the United States will lose $300-million every day in output, which will accelerate depending on the length of the crisis because of the impact on confidence. "A shutdown won't help economic sentiment," said Kit Juckes, the chief of foreign exchange at Société Générale.

The cost, in economic growth terms
There are various projections about, but Goldman Sachs Group Inc. forecasts that a shutdown of three weeks could trim U.S. economic expansion by up to 0.9 per cent in the last three months of the year. Said Sal Guatieri of BMO Nesbitt Burns:

"The U.S. economy can handle a shutdown lasting one or two weeks. A short closure is largely a big inconvenience for many people, including tourists who won't be able to visit museums or parks, and roughly 800,000 civic workers who will have their paychecks delayed while on furlough. But social security checks will still be sent out, Medicare payments will continue, people will still get snail mail, and air travel won't be affected. But if the shutdown lasts more than two weeks, the economic costs begin to mount. Based on other estimates, and the still-fragile state of many households, a month-long shutdown could slice a percentage point from [fourth-quarter] GDP growth. For an economy expanding just 1.6 per cent in the past year, that would bring it pretty close to stall speed."

The markets
Every shutdown in the past has, of course, come amid a different backdrop. This one comes as the world is still struggling to rebound from the financial crisis and crippling recession. Since 1970, noted Mr. Juckes, there have been 17 such shutdowns. The S&P 500 declined nine times during those crises, and, in the week after the shutdown,  11 times. "The main message here is that such an event is not totally uncommon, and the market response has not been severe – the bigger issue continues to be the debt ceiling," added Robert Kavcic of BMO Nesbitt Burns.

Market sentiment
Mr. Dale-Lace noted the potential hit to takeover deals and initial public offerings: "Although big book deals like Twitter make the headlines, the $5-billion and under market is the 'bread and butter' of the industry and these deals just aren't happening. The lack of political confidence in the U.S. and the knock-on effect that has on the all-important debt ceiling talks does little to aid any revival in these deals."

The debt ceiling
This one's the biggie, and thus the one of greater concern. Treasury Secretary Jack Lew has warned that the U.S. government will be tapped out by Oct. 17 if the debt limit isn't raised, with just $30-billion in cash on hand. Said senior market analyst Michael Hewson of CMC Markets in London:

"As it is we have to contend with political brinkmanship and rank stupidity from politicians in both Italy and the U.S. as they play fast and loose with a weak economic recovery so that they can score cheap political points … The concern is that this fight will coalesce into the separate fight over the raising of the debt ceiling and raise fears of a U.S. default as political positions become more entrenched."

The impact on Canada
BMO's Mr. Guatieri summed it up well:

"The last time the U.S. government partially closed its doors, Canadian exports hardly winced, rising 16-per-cent annualized in the fourth quarter of 1995. However, that's when American consumers were spending at a 3-per-cent clip, compared with a sub-2-per-cent rate today, as households face much higher rates of unemployment, foreclosure and debt. With Canadian exports barely crawling forward and consumption constrained by elevated debt, a prolonged shutdown would all but erase any hopes of a near-term pickup in Canadian growth."

The threat
Congress now faces the "ticking clock" on the debt ceiling. Said chief economist Avery Shenfeld of CIBC World Markets: "Failure to do so would require a much larger reduction in government outlays: Running an immediate balanced budget would mean slashing outlays by more than $600-billion at annual rates, or roughly 4 per cent of U.S. GDP, enough to cause a recession if it persisted."

Up to two weeks could be okay, Mr. Shenfeld said, before a "huge crunch" in November, when Washington couldn't pay social security, Medicare and military obligations, as well as an interest payment.

"All this suggests that it would be political suicide for the Republicans to risk being seen as pushing the shutdown beyond October," Mr. Shenfeld said.

"Even if Tea Party GOP congressmen wanted to stand their ground, there would be pressure from business leaders, financial markets, the public (and even Senate Republicans) to put the battle off for another day," he said in a research note.

"Markets could still become more fretful if we actually cross the debt ceiling deadline, but ultimately, any market moves would be reversed as the crisis passed, provided that the deal to end the impasse does not entail any major surprises in terms of the degree of fiscal restraint imposed in this budget  year," he added.

Central bank trims outlook
The Bank of Canada is cutting its near-term forecast for the Canadian economy after an expected export and investment rebound failed to materialize, The Globe and Mail's Barrie McKenna reports.

Belatedly falling into line with most private-sector forecasts, the central bank now says gross domestic product will grow at just a 2 to 2.5 per cent annual pace in the final six months of the year.

"We need a rotation in demand towards exports and business investment," senior deputy governor Tiff Macklem said in the text of a speech in Toronto today, where he unveiled the new projection.

"Unfortunately, this rotation has proven elusive."

European labour market stable
The embattled euro zone got some good news today as the unemployment rate held steady for the second month in a row in August, at 12 per cent.

But that's where the good news ends.

Not only is the dip almost meaningless, more than 19 million people are jobless in the 17-member monetary union. Across the wider 28-nation European Union, more than 26.5 million workers can't find jobs.

High Liner strikes U.S. deal
High Liner Foods Inc. is solidifying its U.S. presence with the acquisition of frozen seafood and scallop processing business American Pride Seafoods LLC, The Globe and Mail's Bertrand Marotte reports.

The Lunenburg, N.S.-based company said today it has struck a deal to buy New Bedford, Mass.-based American Pride from Seattle-based American Seafoods Group LLC for $34.5-million (U.S.).

High Liner already has a significant presence in the U.S. following its 2011 acquisition of Icelandic Group's U.S. and Asian operations for $230.6-million.

With the American Pride deal, High Liner says it is adding significant U.S.-based scallop processing operations to its portfolio.

Abe pushes ahead with tax hike
Japan's prime minister says he plans to push ahead with an increase in the sales tax next year, to 8 per cent from 5 per cent.

But with Shinzo Abe's tax initiative comes an economic stimulus program meant to help cushion the impact as Japan's economy recovers.

"It is my government's responsibility to have Japan's economy regain hope, vigour and confidence for growth, while at the same time maintaining trust in the country, as well as securely passing on the social security system to the next generation," Mr. Abe said, according to Reuters.

An undertaking
It always sounds weird when undertakers talk about their businesses as businesses.

But, of course, for operators and shareholders (and customers) it's still good news when a funeral home can "grow our business."

Park Lawn Corp., which owns six cemeteries in the Toronto area and operations in Quebec, said today it has struck a deal to buy 50 per cent of Tubman Funeral Homes, a family operation based in the Ottawa area.

Said Tubman president Julie Tubman: "We are thrilled to continue to grow our business with Park Lawn. Tubman … has cemetery and cremation property to be developed and Park Lawn will bring their expertise so we can better care for our community."

Said Park Lawn CEO Andrew Clark: "We share similar goals and a high level of customer service. There is a strong emphasis on team culture and close connections with the community."

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