These are stories Report on Business is following Wednesday, Feb. 29, 2012. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.
ECB hands out hundreds of billions more The European Central Bank has now doled out more than €1-trillion in cheap, long-term loans to the region's commercial banks with what one strategist dubbed a "Goldilocks" second round today. As in, not too hot, not too cold.
Some 800 banks gobbled up €529.5-billion in three-year money at 1 per cent under the ECB's longer-term refinancing operation, or LTRO, according to numbers released today. That followed the first round in December, when more than 500 banks took up almost €490-billion.
When you factor in shorter-term ECB loans that came due this week, the net amount is just shy of €379-billion from today's round, but the program has been credited with calming market angst amid the euro zone's raging debt crisis and easing concerns over the stability of its banks.
"Of course the LTRO doesn't solve any long-term problems but then no one expected it to," said Elsa Lignos of RBC in London, the currency strategist who used the Goldilocks term. "Our rates strategists argue this should keep periphery spreads in check and we see no reason to turn euro-negative on this."
What are the banks doing with the money? At least some in Italy and Spain appear to be buying their governments' bonds in a move to keep borrowing costs in check, which suggests a limited effect on the economy in terms of broader lending.
"Much more important than the size of LTRO take-up is what banks decide to do with it," said Megan Greene, head of European economics at Roubini Global Economics.
"I expect we'll see a continued domestication of sovereign debt as banks pick up their own countries' government bonds," she told me.
"Banks are in the process of deleveraging, and the LTRO might decelarate that process, but it is unlikely that we'll see banks lend significantly. The impact of the LTRO on the real economy is likely to be mild at best. The LTRO buys time for Italy and Spain to implement structural reforms, but whether that is a successful crisis strategy or not depends on what Italy and Spain do in the time that has been lent to them."
House prices slip There's more evidence today of Canada's cooling real estate market.
House prices in December slipped 0.2 per cent from November, according to the Teranet-National Bank house price index. That's the second month of decline, following two flat readings.
Prices fell in Victoria, Ottawa, Montreal, Toronto and Vancouver, rose in Quebec City, Winnipeg, Hamilton, Calgary and Halifax, and were flat in Edmonton.
Year over year, prices are up by 6.8 per cent, a slower pace than November's 7.1 per cent.
"On a national basis, the deceleration of home price inflation in December is a first in 11 months," said Marc Pinsonneault of National Bank.
"It stems from the fact that monthly changes (seasonally adjusted) have been trending down lately ... This recent trend is consistent with the fact that the Canadian resale market has remained in the midst of its balanced zone for more than a year ... Further orderly year-over-year deceleration is in the offing. This development, coupled with a slow rise in interest rates, remains consistent with our view that the Canadian housing market will experience a soft landing."
RIM in spotlight Amid all the hype over the iPad 3, Research In Motion Ltd. is putting its popular BBM into its upgraded PlayBook later this year.
BBM is the instant messaging system on the BlackBerry, and wasn't part of the last upgrade.
"It's taking a bit longer that way than I think we had time for to release with 2.0," Alec Saunders, vice-president of developer relations, told Bloomberg News at the Mobile World Congress in Barcelona.
RIM has actually had an "underwhelming presence" at the Barcelona event, UBS Securities Canada analysts Phillip Huang and Amitabh Passi said today.
"As we expected, and not a surprise, RIM's presence at MWC was underwhelming with no new product announcements, no further clarity on the timing of BB10 devices, and no updates on Mobile Fusion," they said in a research note.
"RIM's BB7 devices (hit the market in fall 2011) and its PlayBook tablet were on display at MWC. The show reinforced the uphill battle RIM faces in reversing its position in a market that continues to evolve at a torrid pace and with formidable competitors that include [Google, Apple, Microsoft]"
This comes as Apple Inc. is widely expected to unveil the iPad 3 next week.
- RIM's trade show presence 'underwhelming': analyst
- Omar El Akkad: PlayBook update makes tablet an easier sell
- Apple soars on rumours of iPad 3
- BlackBerry holds slim lead over iPhone in Canada
- Your complete guide to Research In Motion
Finley closes centres Define mind-boggling. The Globe and Mail's Gloria Galloway reports today that Human Resources Minister Diane Finley has quietly shut down the student employment centres that have been a fixture in Canada for more than 40 years.
These offices open every spring but now, the department says, the same thing can be done online, saving the government about $6.5-million a year.
Particularly galling is that Ms. Finley didn't actually announce the shutdown, but said in a news release in late January that she'd be giving our youth better tools.
I have no idea whether Ms. Finley read the last jobs report from Statistics Canada, but it shows that the unemployment rate among the country's young people is now 14.5 per cent, and that's climbing, not falling, and well above the national rate. More than 400,000 of our kids are now without work, Ms. Finley.
Investment to rise Canadian companies plan to pump about 6 per cent more into construction and equipment this year, notably in the mining and energy sectors.
Public and private concerns intend to invest almost $395-billion, Statistics Canada said, and more than half of the increase will go to mining, oil and gas.
"This sector has reported steady increases every year since the economic slowdown in 2009," the agency said today.
The companies surveyed plan to put 8 per cent more into capital construction, and 2.1 per cent more into machinery and equipment.
"Reported capital investment intentions in the mining and oil and gas extraction sector indicate a 17.7-per-cent increase to $86.9-billion," Statistics Canada added. "If this investment is realized, this sector would account for more than one-fifth (22 per cent) of total capital investment nationally in 2012."
Manufacturers plan to slow their spending to 6 per cent.
How to read this?
"Unfortunately, the pace of spending may not be enough to help Canada with its ailing international competitiveness," said Toronto-Dominion Bank economist Diana Petramala.
"Improvements in business investment intentions in the manufacturing sector are largely welcome. However, capital expenditures are still 12 per cent below levels experienced in 2000, before the Canadian dollar began its ascent to parity. In the face of a high loonie, investment in machinery and equipment could be the key to helping manufacturers compete more strongly on productivity and costs."
U.S. economy stronger The U.S. economy is doing a bit better than earlier numbers suggested.
The U.S. Commerce Department today revised its measure of gross domestic product for the fourth quarter, pegging the expansion at 3 per cent, annualized, compared to earlier estimate of 2.8 per cent.
That's the best showing since early- to mid-2010.
"Factors driving the upward revision were broad based, with personal consumption growth revised up a tick and fixed investment growth slightly stronger," said Andrew Grantham of CIBC World Markets.
"With the economy appearing to finish 2011 with slightly more momentum, and with growth more evenly distributed, this supports our view of only a modest deceleration to a 2.5-per-cent pace in Q1," he added.
Markets await Bernanke Federal Reserve chief Ben Bernanke testifies to Congress this morning, his semi-annual Humphrey-Hawkins event.
"The risk is that of veiled hints at QE3 prospects in light of a better tone to U.S. data, and expect the chairman to be cautious on the outlook and hopeful that inflation will continue to ebb which may support QE3 later in the year," said Derek Holt and Dov Zigler of Scotia Capital, referring to a third round of quantitative easing.
"We do not expect the Chairman to alter the dovish tone that he took in the press conference following the Jan. 25 FOMC meeting and in his testimony on the housing market before Congress earlier this month."