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Why Europe's mounting debt crisis is 'like Ebola' Add to ...

Today's top stories from Report on Business:

HP strikes deal for Palm

Hewlett-Packard Co. struck a $1-billion (U.S.) cash deal for Palm Inc. late today, transforming HP into a company that can offer smart phones, computers and business services. It already has a tiny presence in the phone sector through its iPAQ, but now is able to get its hands on the Pre, the Pixi and Palm's operating system.

Palm has been struggling as smart phones such as the Pre and Pixi couldn't dent Apple Inc.'s iPhone or Research in Motion Ltd.'s BlackBerry.

Read the story

Too big to fail, or too big to save?

European officials scrambled today to reassure investors as the continent's debt crisis widened, again pushing down the euro and overseas stocks.

Standard & Poor's, the rating agency that dropped a bombshell on the markets yesterday by downgrading Greek debt to 'junk' status and cutting Portugal's credit rating, today downgraded Spain as well.

German Chancellor Angela Merkel, whose government would pay a hefty portion of a proposed €45-billion bailout from the EU and the International Monetary Fund, met today with IMF chief Dominique Strauss-Kahn and European Central Bank president Jean-Claude Trichet. She later told reporters that officials are "on a good path" toward solving the Greek crisis, adding that "I think the handling of the Greece case shows that everyone knows we cannot allow the same situation with countries as with Lehman Brothers."

Analysts are now weighing the wider threat of the crisis to Europe and its common currency union. Europe's weaker, debt-burdened economies had already been under pressure when S&P moved on Greece and Portugal yesterday. Until then, it had been a question of the details and timing of a bailout for Greece, and whether the government could raise €9-billion to pay back a 10-year bond that matures May 19. Investors are also keenly aware that sentiment in Germany, which would shoulder a hefty portion of the bailout, is running strongly against a rescue.

Again this morning, Greek bond yields spiked to levels that make it prohibitive for the government to raise money.

"It has also thrown into doubt the ability of Greece to even fund its day-to-day funding operations with the European Central Bank," Michael Hewson of CMC Markets said in a research note. "... It has also served to make the market realize that because of the fear of creating a precedent, even if Greece is bailed out, due to the uncertainty over the final price tag, neither Germany nor the IMF would have deep enough pockets to bail out Portugal, Spain and other European countries with large deficit problems."

Mr. Hewson added that the crisis has become "an issue of credibility with the euro itself, and the likelihood is that some form of debt restructuring may now be the only option for Greece, despite the IMF and EU Commission insisting that this is out of the question."

TD Waterhouse also warned in a report that as the crisis spreads to other countries "reality is beginning to set in that it is not that they are too big to fail, but that they are too big to save," Report on Business columnist Andrew Willis writes in Streetwise.

"As a result of the downgrades, Greek debt is on the threshold of losing the credentials needed for use as collateral in European Central Bank funding operations," Waterhouse said. "This could pose further systemic risks to the European banking system, as Greek banks are probably getting most of their short-term funding from the ECB, using mainly Greek sovereign debt as collateral."

As the crisis went beyond government paper to hit Greek and Portuguese bonds today, OECD Secretary General Angel Gurria likened the troubles to the Ebola virus. "It's not a question of the danger of contagion," he told Bloomberg Television. "Contagion has already happened. This is like Ebola. When you realize you have it you have to cut your leg off in order to survive.


S&P cuts Spain rating, crisis widens

Greece needs up to €120-billion

Crisis shakes confidence in Europe

Is Greek aid only forestalling an inevitable reckoning?


Sovereign debt: The contagion spreads

Shoppers cuts sales outlook

Shoppers Drug Mart Corp. today reported a jump in first-quarter profit but warned investors by cutting by almost half its sales forecast for prescriptions for the coming fiscal year because of Ontario's proposed drug reforms.

The pharmacy chain just missed analysts' estimates, posting a jump in profit to $115.6-million or 53 cents a share from $106.8-million or 49 cents a year earlier.

Given Ontario's move, Shoppers said it now expects prescription sales at stores open a year or more to increase by between 2 per cent and 3 per cent in fiscal 2010, a drop from its earlier forecast of between 4 per cent and 5 per cent. Read the story

Fed holds its stance

The Federal Reserve this afternoon reiterated that it will hold its benchmark interest rate at an historic low near zero for an "extended" period, and cited more signs of a stabilizing economy. The U.S. central bank said spending has picked up and that the labour market is starting to improve. "For now, the Fed remains firmly fixed on being cautious on the rate front, a view nourished by their ongoing caution on the economic recovery and entrenched downtrend in core inflation," said TD Securities. Read the story


Toyota recalls thousands of Sequoias

Toyota Motor Corp. today recalled some 50,000 Sequoia SUVs from its 2003 model year, but this time it's related to unexpected slowing. The earlier recalls of millions of vehicles around the world related to unexpected acceleration. Read the story

Rogers posts strong quarter

Rogers Communications Inc. topped analysts' estimates this morning with a 23-per-cent jump in first-quarter profit to $380-million or 64 cents a share from $309-million or 49 cents a year earlier. But the telecommunications giant still continued to suffer a drop in the number of wireless subscribers added to the network - just 47,000 - given heightened competition from rivals BCE Inc. and Telus Corp.

The gradual erosion of Rogers' huge market share in the Canadian wireless market's net subscriber additions remains a concern for analysts, Report on Business telecom reporter Iain Marlow writes. Read the story

TMX profits rise

TMX Group Inc. profits are rising, but so is its competition. The stock exchange group said this morning first-quarter profit jumped 14 per cent to $49.1-million or 66 cents a share from $42.9-million or 58 cents a year earlier. Revenue climbed 2 per cent to $139.7-million.

Chief executive officer Thomas Kloet cited a "rebound" in confidence among investors and issuers, noting a marked increase in initial public offerings and financings, and higher volumes on the Montreal Exchange.

Bloomberg News noted that TMX held 73 per cent of the trading market last month, well down from 92 per cent a year earlier as it faces competition from rivals such as Alpha Group. Report on Business writer Boyd Erman reported last week that Alpha is now seeking regulatory approval to become a full-fledged exchange.

Read: IPOs boost TMX Group profit

Related: Alpha Group aims for full stock exchange status

Barrick sees record quarter

Higher gold prices and increased production drove Barrick Gold Corp. to a record quarter. Barrick posted first-quarter profit of $758-million (U.S.) or 76 cents a share, double the $371-million or 42 cents a year earlier, the world's biggest gold producer said this morning.

"We had a good start to the year with our operations performing well, and when combined with higher metal prices, the result was record earnings and operating cash flow for the quarter," said chief executive officer Aaron Regent.

"We are particularly pleased with the performance of our Cortez property. The Cortez Hills project was completed on time and budget, and the recent decision of the District Court in Nevada will allow it to continue operating. Cortez Hills is an impressive deposit and in 2010 the Cortez property will produce about 1.1 million ounces of gold at total cash costs of about $300 per ounce. We are also on track with the development of the other projects in our pipeline."

John Stephenson of First Asset Investment Management Inc. lauded the results in a note to Bloomberg News: "Barrick earnings were very strong and highlight a string of quarter beats versus us that sets the company apart from other gold miners."

Coutu boosts dividend

Quebec's Jean Coutu Group Inc. rebounded to a first-quarter profit of $42.8-million or 18 cents a share from a loss of $733.6-million or $3.11 a year earlier, just above estimates, though revenue of $637-million was just shy of what analysts had forecast. Same-store sales, a key measure, rose 3.8 per cent, the drug store chain reported this morning.

From today's Report on Business

Pipeline fees revolt widens

Profits hitched to China's economy

Goldman Sachs faces new heat

RIM sets sights on 100 million users

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