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Lines in the sand One wonders how much headway EU leaders will make Thursday in their emergency summit in Brussels given what are already hard lines in the zand.
Last Friday, as the euro crisis refused to ease, Herman Van Rompuy, the president of the European Council, called the extraordinary summit of heads of state. On the agenda is nothing less than "the financial stability of the euro area as a whole and the future financing of the Greek program," according to his statement.
That's a lot to digest, and EU leaders aren't making it easy for him. In an interview with The Financial Times Deutschland published today, the chief of the European Central Bank, Jean-Claude Trichet, stuck to his line that the ECB will not accept as collateral Greek bonds deemed in default. That means Greece's banks would not have those bonds to offer in return for borrowing.
German Chancellor Angel Merkel, in turn, said on the weekend that any deal would have to see private debtholders sharing the pain voluntary, which would likely be deemed a default by credit rating agencies. Indeed, Ms. Merkel said she wouldn't even attend the Brussels meeting unless she's assured everyone agrees on a new plan to bail out Greece
"It is becoming increasingly apparent that some form of debt restructuring will have to happen and the ECB will have to back track on its opposition to such a measure given that the current debt burdens remain completely unsustainable," said CMC Markets analyst Michael Hewson.
"In the meantime while the current policy paralysis continues, investors are now becoming concerned that politicians have no concerted plan to deal with a problem that could be starting to run out of control and spread to Spain and Italy, which could well then spell the demise of the euro as we currently know it.".
And so has gone the euro debt saga, which is fast tearing apart the 17-member monetary union, where Italian and Spanish yields spiked again today.
"This week's meeting of EU leaders continues to take on a greater importance with respect to the current crisis, however in focussing on a new Greece bailout and talking about setting up a new European ratings agency, politicians would appear to be focusing on the wrong issue at a time when Italian and Spanish bond yields are pushing up near and above 6 per cent towards the key 7-per-cent level that precipitated bailouts for Greece, Ireland and Portugal," Mr. Hewson said.
Carl Weinberg, the chief economist at High Frequency Economics who has long criticized European policy makers for failure to solve the crisis, said the turmoil in the bond markets is a result of the EU's inability to "marshal its resources and compromise national principals" by finding a solution to Greece's troubles.
"If they - the EU governments, the ECB and the IMF - together cannot fix Greece, how can they be expected to have a credible solution to the much bigger problems of Portugal, Ireland, Spain or Italy," he said.
Murdoch's Corleone moment Watching Rupert Murdoch's rapid-fire moves Friday reminded me of the scene in The Godfather when Al Pacino's Michael Corleone - after whacking Barzini, Tattaglia, Greene, Stracci and Cuneo - tells Carlo Rizzi that "today I settled all family business."
So it was on Friday as Rebekah Brooks of News International and Les Hinton of Dow Jones were publicly executed and Mr. Murdoch, humbled before God and cleansing himself before the British people, tearfully expressed his sorrow to the family of a murdered schoolgirl, who became a flash point in the phone-hacking scandal, and launched an ad blitz to apologize.
He had already shut down the News of the World, the tabloid at the centre of the scandal, but that failed to stop the outrage. Then he jettisoned his bid for control of British Sky Broadcasting, and still the criticism mounted.
There have been several arrests, a host of investigations, and some resignations - London's police commissioner resigned yesterday, and the assistant commissioner quit today - and Mr. Murdoch has been apologizing to anyone who'll listen.
News Corp. stock sank again today, and Ms. Brooks' lawyer said she isn't guilty of any criminal wrongdoing.
"It may take some time for us to rebuild trust and confidence, but we are determined to live up to the expectations of our readers, colleagues and partners," Mr. Murdoch's News Corp. said in a second round of ads in yesterday's papers.
This is not to suggest any comparison whatsoever between the Murdochs and the fictional Corleones, only the striking similarity in what was meant to be a one-day strike to "settle the family business."
Is it enough to stave off the assault on an empire that includes British papers, the Fox TV network, The Wall Street Journal and the New York Post, among other holdings? Can Mr. Murdoch and his son, James, scrape through the public flogging sure to come as they're pulled before a British parliamentary committee this week?
Only time will tell. Britain's opposition leader wants the Murdoch empire broken up. And, amid added allegations that News of the World bribed police for story tips, there's speculation that the U.S. could invoke its Foreign Corrupt Practices Act.
None of these allegations has been proven in court - indeed, The Financial Times notes that the accusation of trying to hack into the messages of 9/11 victims was based on one unnamed source in one British paper - but there is a sense now of bloodlust. And that's hard to stop.
- Scotland Yard's Yates resigns amid intensifying Murdoch scandal
- Phone-hacking investigation brought into Murdoch's inner circle
- Murdoch the kingmaker now in damage control
- The beginning of the end of the Murdoch era
Earnings season picks up Remember just a few years ago when governments were flush, handing out billions, and companies were ailing? That tide has turned amid government austerity and corporate earnings expected to come in strong again this reporting season.
Earnings season gathers steam this week in particular with reports from the likes of Apple Inc. and Goldman Sachs Group Inc. tomorrow, through to Loblaw Cos. Ltd. L-T and Shoppers Drug Mart Corp. Thursday, and McDonald's Corp. and General Electric Co. Friday.
As Globe and Mail investment writer Simon Avery reports today, 109 of the S&P 500 companies are reporting results this week. So far - and it's early in the season, he writes - 29 of 39 companies have done better than expected.
This week's numbers should continue to illustrate the "financial health" of the corporate sector, said economist Robert Kavcic of BMO Nesbitt Burns.
"Expectations are currently for 7.4-per-cent year-over-year growth in S&P 500 profits, which marks a slowdown from the 18.9-per-cent year-over-year growth seen in Q1 and the 40-per-cent growth registered in 2010," Mr. Kavcic said.
"A slowdown in earnings growth is no surprise given that unit labour costs are again inching up after being slashed during the downturn and raw materials prices are also moving higher, but this should not undermine the health of the corporate sector," he added in a research note. "U.S. corporate profits have surged to 11.5 per cent of GDP, within striking distance of the 12.3 per cent high set in 2006, while liquid assets are at the highest level on record relative to liabilities."
- Markets may get a bigger lift from earnings this week
- Shoppers second-quarter report may yield CEO clues
- Three charts to start your week
Manulife sells unit Canada's Manulife Financial Corp. is selling its Life Retrocession unit for what it expects will net about $275-million, The Globe and Mail's Tara Perkins reports.
The life insurance company said today it will sell the business, which employs about 90 people in Toronto, Boston, Barbados and Cologne, to Pacific Life Insurance Co. in the United States.
"The Life Retrocession business does not align with Manulife's strategy because of changes in the life reinsurance market going forward," said chief executive officer Donald Guloien.
"Although this business is profitable, it does not have a growth profile acceptable to us. Also, as a result of more restrictive Canadian regulatory requirements for this business, a buyer in another jurisdiction can operate this business with less capital. The transaction releases capital which will be reinvested in higher growth businesses or to reduce leverage."
RBC trims Nexen target RBC Dominion Securities has trimmed its one-year price target on shares of Calgary's Nexen Inc. by $1 after the energy company's second-quarter results last week, which generally met Street expectations.
Analyst Greg Pardy cut his target to $26, though maintaned his "sector perform" rating on the company.
"We are maintaining a neutral stance on Nexen, with its principal catalysts revolving around ongoing appraisal drilling at its Appomattox ... discovery in the Gulf of Mexico, operating performance at Long Lake, and the start-up of its Usan field off-shore Nigeria during the first-half of 2012," Mr. Pardy said.
Insolvencies decline Insolvencies among Canadian businesses and consumers fell 2.8 per cent in May from April.
Insolvencies include both bankruptcies and what are known as proposals, where a deal is struck with creditors. Bankruptcies fell in May by 4 per cent, and proposals by 0.6 per cent, the Office of the Superintendent of Bankruptcy Canada said today.
Compared to a year earlier, insolvencies were down 4.5 per cent. Over that period, business insolvencies climbed 6 per cent, and consumer insolvencies fell 4.9 per cent.
In International Business today The real surprise in Hillary Clinton's visit to Athens? Her blazing cheerleading of Prime Minister George Papandreou and his struggling attempts to fix Greece's crisis-wacked economy. Anthee Carassava reports.
In Personal Finance today Statistics show thieves tend to strike in the summer. We outline simple steps to cut your losses or even prevent a home burglary.
Most people hit yard sales to save money, but some have ended up making thousands of dollars in the process.
From today's Report on Business