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These are stories Report on Business is following Thursday, Aug. 9, 2012.

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Capital and condos
Mark Carney says Canadians should invest more in "productive" capital rather than real estate, and that's where things appear to be headed.

In an interview with CTV, the Bank of Canada governor said Canadians need to push ahead amid the continuing volatility and instability sparked by the euro debt crisis.

"And there's a variety of things that European authorities can do, that the IMF can do, others can do to contain it so that Canadian business and Canadians can get on with their lives and focus on how we're going to grow our economy, which is largely going to be investing in productive capital, not in houses or condos, and in growing our economic relationships with the major emerging markets," Mr. Carney said.

"That's how we're going to grow our economy over a five-, 10-year period. And so the challenge is to make sure that Europe has the time … to make these adjustments."

Helped along by new mortgage rules, the housing market is in fact cooling. To Mr. Carney's point, add the Vancouver and Toronto condo markets into that mix, according to the latest readings and projections.

Today alone, Canada Mortgage and Housing Corp. reported that construction starts slipped in July to an annual pace of 208,500 from June's 222,100. That was largely due to a decline in multiple units, such as condominiums and apartments, in British Columbia.

"Canadian housing starts, particularly the multi-unit sector, have ebbed from extremely robust spring levels," said Robert Kavcic of BMO Nesbitt Burns.

"With stricter mortgage rules likely to cool demand in the remainder of the year, construction activity should moderate further to a more sustainable pace."

On the other side of the ledger is Mr. Carney's "productive capital." Consider that, according to Statistics Canada today, the country's trade surplus swelled in June on a surge in imports to record levels, led by machinery and equipment, as Canadian businesses invest.

"The import picture does represent a positive on the domestic side of the economy, especially with respect to Canada's businesses," said economist Francis Fong of Toronto-Dominion Bank.

"Imports of machinery and equipment have now surpassed their pre-recession peak and are at their highest level on record - a sign that businesses in Canada are making good use of their superior financial position."

Trade deficit widens
Canada's trade deficit widened in June to $1.8-billion as an increase in imports far outpaced tiny gains in exports.

The deficit swelled from $954-million a month earlier, Statistics Canada said today.

Imports reached a record $40.9-billion in June, largely on machinery and equipment. Export volumes climbed 1.1 per cent, though prices slipped 0.9 per cent.

"A strong gain in exports of automotive products helped offset declines in five out of seven sectors," the agency said.

Exports to the United States gained 2.2 per cent, though imports from America outpaced that, at 3 per cent.

"Despite June's gains, real exports are up only 1.1 per cent annualized in Q2," senior economist Krishen Rangasamy said of the over all numbers.

"That's the worst showing since the second quarter of 2011 when the Japanese earthquake and tsunami disrupted global trade. In Q2 of this year, real imports grew 6.6 per cent annualized. The 5.5-per-cent annualized increase in real imports of machinery and equipment in Q2, points to some support for business investment spending in the quarter."

The bank and the regulator
The Standard Chartered case is anything but standard fare.

Regulators aren't acting in concert, the British bank is putting up a vigorous response, signalling its determination to fight, and, suddenly, there's a Damn Yankees feel to the whole thing in the U.K.

To recap, a lone state regulator, New York's Department of Financial Services, issued damning allegations against Standard Chartered, citing a "rogue institution" that hid some $250-billion (U.S.) in dealings with Iranian banks, among others, over the course of almost a decade.

No allegations have been proven, and the bank said it "does not believe the order issued by the DFS presents a full and accurate picture of the facts." It is conducting an internal review, and, it said, has been talking to various U.S. regulators.

"We intend to discuss these matters with the DFS and to contest their position," said the bank, which is operating under the threat of having its New York licence revoked.

"The group takes its responsibilities very seriously, and seeks to comply at all times with the relevant laws and regulations. It is in this spirit we initiated this review and have engaged with the U.S. agencies."

New York's DFS is acting alone here, while other U.S. agencies continue to investigate. Nor has the DFS teamed with a British regulator, unlike the transatlantic action against Barclays PLC in the Libor probe.

This is not playing well in Britain, where some politicians and business leaders are complaining that the DFS has a hidden agenda, to further tarnish the image of London as a financial hub. Given recent scandals, and the financial crisis, the city is already feeling the heat.

"You can't help thinking it might actually be at least partly motivated by jealousy of London's financial sector — a simple desire to knock a rival centre," said London's mayor.

He's not alone. Another British official cited what he called "anti-British bias," and even Bank of England Governor Mervyn King came to Standard Chartered's defence, in a fashion, warning about quick judgment.

"All the U.K. authorities would ask is that the various regulatory bodies that are investigating a particular case try to work together and refrain from making too many public statements until the investigation is completed," he said this week.

There's one other element worth noting. According to The Wall Street Journal, Standard Chartered has been going through the DFS document with a fine-tooth comb, and cannot recall this quote attributed to one of its executives:

"Lest there be any doubt, SCBs obvious contempt for U.S. banking regulations was succinctly and unambiguously communicated by SCB's Group Executive Director in response. As quoted by an SCB New York branch officer, the Group Director caustically replied: 'You f---ing Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians.'"

Samsung says no
I'm not sure why investors keeping on rumour and speculation surrounding Research In Motion Ltd., but they do.

Thus, some folks lost yesterday when they drove up the BlackBerry maker's shares sharply on an analyst's report, only to see them pull back later.

Peter Misek, the respected Jefferies & Co. analyst, had put out a report on RIM suggesting that the company was trying to start talks again with Samsung Electronics Co. But he didn't say it was happening. And, in fact, he said while Samsung may have to look at an acquisition or a licensing deal for RIM's new BB10, he said that such a move wouldn't be likely until after the launch of the new BlackBerrys.

This isn't the first time investors have run up RIM shares on Samsung speculation. Same thing happened in January.

For the record, Samsung said today it's not interested at this point.

Manulife swings to loss
Manulife Financial Corp. lost $300-million, or 18 cents a share, in the second quarter, as it updated its assumptions about what interest rates will do in the long-term, resulting in a $677-million charge, The Globe and Mail's Tara Perkins reports. Both the loss and the interest-rate charge for the Canadian insurer were smaller than many analysts had expected.

But Manulife CEO Don Guloien cautioned that continuing economic headwinds will make it "more of a stretch" for the company to hit its 2015 earnings goals.

Removing the impact of stock markets and interest rates, the company's earnings amounted to $427-million. And, highlighting the stark differences in Canadian and U.S. accounting rules, Manulife's $300-million loss would actually be a $2.2-billion profit under U.S. rules.

Bombardier steady
Bombardier Inc. reported a steady second quarter today, delivering the 10 cent profit per share that analysts had expected as well as reassurance that it remains on schedule to get its showcase 100-plus seat commercial airliner into service by the end of 2013, The Globe and Mail's Sean Silcoff writes.

But the Montreal-based maker of passenger planes and trains still faces a skeptical market, as investors, which have driven Bombardier stock down 8 per cent so far this year, remain concerned about its ability to get its new jet, the C Series, into the air and to snag more robust orders than the 138 it has booked so far.

Bombardier said it earned $182-million (U.S.) in the quarter, down from $211-million or 12 cents a share a year earlier, matching expectations of analysts, although its $4.2-billion in revenue was down 12 per cent from the same period last year and below the forecasts of many analysts, due largely to a revenue shortfall in its train-manufacturing division.

T"Just sayin'
Jamie Sokalsky, new CEO of Barrick Gold Corp., July 26: "I have also initiated a thorough review of our mines and projects to evaluate their rates of return and ability to generate free cash flow as part of a more disciplined capital allocation framework. In my view, rate of return should drive production, not the other way around."

J. Paul Rollinson, new CEO of Kinross Gold Corp., late yesterday: "In addition, given rising costs, I believe we need to get back to the fundamentals of our business. To that end, I am launching a company-wide cost reduction initiative aimed at improving capital efficiency, reducing costs, and increasing margins. This may require tough decisions in a number of areas to ensure that we maximize free cash flow and shareholder returns."

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