Actual finance blog

OTTAWA—A surging energy sector gave a healthy 0.3 per cent boost to the economy in August, suggesting Canada rebounded much more strongly than believed during the summer, following a surprising dip in the spring.

Statistics Canada also upgraded July’s gross domestic product a tick to 0.4 per cent on Monday, which places the economy on track to post a strong three per cent gain in the third quarter.

Following a 0.4 per cent contraction in the second quarter, and expectations of softness due to the market turmoil that took hold in early late July, some analysts had speculated it was possible for Canada to have suffered a technical recession of two negative quarters over the summer.

But that is no longer in the realm of possibility, given the bigger than expected numbers in the first two months.

“Even assuming a soft September, the quarter could come in at 2.9 per cent,” said Avery Shenfeld, chief economist with CIBC World Markets.

“We still see growth slipping back below two per cent in the fourth quarter, but odds are increasing that the second half should end up well above the Bank of Canada’s recent projection barring some new, unforeseen shock,” he added.

Scotiabank’s Derek Holt said the stronger two months means that September would need to have seen a disastrous 0.5 per cent retrenchment — and there were no signs that happened given the 61,000 pick up in jobs during the month — for third-quarter growth to have come in as weak as the Bank of Canada’s call of two per cent.

“Indeed, the recession chatter of a few weeks ago looks pretty ridiculous in light of almost four per cent GDP growth in the latest three months.

The consensus of economists had expected a 0.2 per cent increase in August, and did not foresee July’s revision.

However, August’s expansion was not as strong in other areas — the agency noted the country’s gross domestic product would have remained unchanged but for the 2.8 per cent jump in the energy sector.

Overall, industries tied to Canada’s domestic economy did well, while those related to exports did not.

The financial sector, as well as real estate and insurance, retail and construction all posted gains.

On the flipside, manufacturing fell 0.4 per cent, wholesale trade 1.4 per cent, and transport and warehousing was also down slightly on weak foreign demand and strong dollar.

The public sector (public administration, education and health care) overall was unchanged, as was mining.

Economists were uniform in saying the stronger than expected state of the economy is unlikely to materially impact the Bank of Canada’s position on interest rates.

Analysts still expect the central bank to keep its target overnight rate at one per cent until at least the middle of next year, and some say until well into 2013.

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SATURDAY

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The threat that floodwaters will inundate Thailand’s capital could ease by early November as record-high levels in the river carrying torrents of water downstream from the country’s north begin to decline, authorities said Sunday.

Bangkok’s immediate prospects remain uncertain, however, as the front lines in battling the flood from north, east and west of the city draw closer daily.

The relatively rosy longer term projection from the Flood Relief Operations Center came just a day after reports that Bangkok’s main Chao Phraya river was overflowing its banks and at its highest levels in seven years.

People should not be too concerned because the spillover could be drained, said the center’s chief, Justice Minister Pracha Promnok, in a televised news conference. He also said water in an overflowing main canal in Bangkok was receding, and drainage efforts east and west of the city were working well.

The situation was dire in many respects in the capital’s northern outskirts and Thailand’s central provinces, which suffered the worst of the flooding after heavy monsoon rains since July.

Off a highway heading north of the city, Associated Press reporters found people scrambling for safety in flooded streets.

The Thai military used boats to help rescue stranded residents near a domestic airport in northern outer Bangkok that has been the flood-operations headquarters and a shelter for evacuees.

Mothers walked in hip-high water with children strapped to their backs, while other people waded through the murky water holding belongings in plastic bags atop their heads.

There are concerns the Don Muang airport itself may be vulnerable, and the European Union canceled an aid-handover ceremony scheduled there Monday due to “unforeseen circumstances.”

In Nonthaburi province, just north of Bangkok, a 7-foot (2-meter) crocodile was captured while resting on dry land outside a restaurant, presumably after pulling itself out of the surrounding floodwaters. Thai television showed the beast, which had reportedly escaped from a farm, with its snout taped shut and its scaly body covering most of a boat that was carrying it away.

An Associated Press photographer saw two crocodiles that had been killed in Nonthaburi, and unconfirmed recent reports have claimed up to 100 crocodiles may have escaped from farms in the region.

Prime Minister Yingluck Shinawatra has said the waters may take up to six weeks to recede to manageable proportions around Bangkok payday loans guaranteed no fax. The government has cautioned that rumors have been quick to circulate and people should check all information, advice that follows strong criticism of the government for missteps and confusion since the crisis began.

Residents of Bangkok and its suburbs have settled into a routine of waiting and worrying.

Many are hoarding supplies, and supermarket shelves have emptied faster than they can be restocked. Bottled water, batteries and canned food were among the first items to go.

At a supermarket in central Bangkok’s business district _ which is not under immediate threat _ sandbags lined both entrances Sunday, forcing shoppers to step over to go inside. Many of the shelves were bare, with the handful of shoppers inside grabbing the few snacks that were left. Cat food and toilet paper were gone.

While larger stores in Bangkok have kept their prices fixed, smaller merchants were raising theirs in the flooded zones north of the city. A Rangsit resident, Taweetit Hongsang, complained that the price of a papaya, 10 baht (33 cents) a week ago, had shot up to 30 baht ($1).

The desperate battle to route the water away from the city has led to several conflicts in which people have used force to try to protect their own neighborhoods by removing flood barriers.

Bangkok Governor Sukhumbhand Paribatra said Sunday one crew of city workers was unable to carry out reinforcement of one barrier because of “a group of people opposing the mission and harassing” them. He said it was necessary to withdraw them “since they are not trained to deal with unruly and armed outsiders.”

In evident response, Prime Minister Yingluck Shinawatra said she had delegated high-ranking police officers to protect workers carrying out anti-flood duties.

The flooding that began in August has killed 356 people in Thailand and the $6 billion cost estimate could double if Bangkok is badly hit.

The flooding is the worst to hit Thailand since 1942 and is proving a major test for Yingluck’s nascent government, which took power in July after heated elections and has come under fire for not acting quickly or decisively enough to prevent major towns north of the capital from being ravaged by floodwaters.

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China has given the go-ahead for several local authorities to sell bonds as it moves to bridge financing shortfalls and prevent debt defaults by overextended provinces.

The Ministry of Finance said in a notice Thursday that Shanghai, Zhejiang and Guangdong provinces and Shenzhen, a special economic zone bordering Hong Kong, would be allowed to issue three-year and five-year bonds on a trial basis, subject to quotas.

China normally prohibits local governments from issuing bonds directly or from taking bank loans, confining such bonds to those issued by the central government on their behalf.

Local governments owe about 10.7 trillion yuan ($1.7 trillion) in debt through financing vehicles set up to support construction projects. Issuing bonds would help them to honor those obligations.

Instructions outlined by the ministry suggests plans for strict central government oversight of the program.

Bond quotas set for one year cannot be carried over to another, it says.

Funds raised by local government bond sales will be kept in a special account of the finance ministry which will oversee payment of interest and principal.

The ministry said the local governments also should provide timely information to the public regarding local economic and financial conditions.

With highway and railway projects running short of cash, Zhejiang province, west of Shanghai, plans to issue 8 billion yuan ($1.3 billion) worth of bonds to fund infrastructure projects this year, the official Xinhua News Agency reported earlier.

It characterized the plan as the beginning of a shift in how local government projects are financed.

Much of the money is also expected to be earmarked for so-called “affordable housing” projects.

Cities have been ordered to speed up construction of such housing, but many already debt-encumbered localities reportedly lack the financial wherewithal to follow through.

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Gannett Co.’s new CEO took over just in time to discuss third-quarter earnings, which are expected to reflect depressing trends facing the largest U.S. newspaper publisher. The numbers are due out before the stock market opens Monday.

WHAT TO WATCH FOR: Gannett’s results will be broken down by Gracia Martore, who was named the company’s CEO earlier this month after Craig Dubow resigned for health reasons. The biggest concern for investors is whether its long-running slump in print advertising worsened during the July-September period. The owner of USA Today and more than 80 other dailies has already warned investors that advertising revenue in its newspaper division fell in the quarter, extending a decline that began in 2006.

It will be a bad sign if the decline is worse than the 7 percent year-over-year decline that the company’s newspapers suffered in the April-June period.

Gannett’s situation isn’t unusual. As advertisers continue to spend more on the Internet, most major newspaper publishers have struggled. Newspapers have garnered some digital advertising, but those gains haven’t come close to making up for losses on the print side.

Gannett has more of a cushion than some of its peers because it also owns 23 television stations.

To help offset the sharp drop in advertising, Gannett and other newspaper publishers have resorted to layoffs and furloughs.

WHY IT MATTERS: Gannett, which is based in McLean, Va., will be the first major U.S. newspaper owner to report its third-quarter results, giving investors a better sense how the industry is holding up as the economy sputters.

WHAT’S EXPECTED: Analysts polled by FactSet expect Gannett to earn 44 cents per share on revenue of $1.28 billion.

LAST YEAR’S QUARTER: Gannett earned $101 million, or 43 cents per share, on revenue of $1.31 billion.

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Kirin Holdings Co. says that a Brazilian court has revoked an injunction blocking the company’s $2.5 billion takeover of Brazilian beer producer Schincariol.

The ruling in Sao Paulo paves the way for the Japanese beer maker to assume control of Schincariol and gain a valuable foothold in the rapidly growing Brazilian market.

In August, Kirin announced a $2.5 billion deal to buy the 50.45 percent stake owned by brothers Alexandre and Adriano Schincariol. Minority shareholders _ their cousins _ opposed the transaction and successfully requested an injunction.

Kirin, Japan’s No. 2 brewer, appealed the decision.

Schincariol is Brazil’s second-largest beer producer, known for brands such as Nova Schin, Devassa and Bem Loura.

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Several thousand Occupy Wall Street protesters have marched to New York City’s Washington Square Park for a peaceful general assembly.

Demonstrators marched Saturday from Manhattan’s Zuccotti Park, the group’s unofficial headquarters where protesters have been camped out for the last 22 days. The trek was peaceful and orderly.

On Wednesday, dozens were arrested when thousands marched on Wall Street in their biggest show of support yet. Last Saturday, 700 people were arrested after they spilled onto the roadway while crossing the Brooklyn Bridge.

Protesters are speaking out against corporate greed and the gap between the rich and poor. They say they have no leaders and are making decisions by consensus.

Supporters have donated food, clothing and medical supplies. Some drop off their offerings, while others have mailed them.

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U.S. stocks fell sharply in afternoon trading after seesawing through most of the morning. The Dow Jones industrial average dropped nearly 190 points and the S&P 500 hit a new low for the year.

European markets slumped, dragging U.S. stocks down along with them, after Greece said it will miss deficit reduction targets it agreed to as part of its bailout deal. Benchmark indexes in Germany, France and Spain all fell 2 percent.

The Dow briefly turned higher after 10 a.m., when the Institute of Supply Management said its gauge of U.S. manufacturing did better than Wall Street had predicted in September. The Dow and S&P turned mixed within 20 minutes, then took a sharp slide shortly after noon.

The Dow Jones industrial average was down 186 points, or 1.7 percent, to 10,729 at 1:15 p.m. Eastern.

The S&P 500 lost 22, or 2 percent, to 1,109. That’s below its closing low of 1,119 for the year, reached on Aug. 8.

The Nasdaq composite fell 52, or 2.2 percent, to 2,362.

All 10 company groups in the S&P index fell. Banks, energy, and consumer discretionary stocks had the steepest declines. The yield on the 10-year Treasury note fell to 1.79 percent from 1.91 percent late Friday as investors piled into lower-risk investments.

“The market is continuing to trade based on what is happening in Europe, and that is going to overshadow everything else,” said Quincy Krosby, market strategist at Prudential Financial. “The math (for the Greek bailout) didn’t add up a year ago, and the math doesn’t add up today. The market knows that and is waiting for the Europeans to acknowledge it.”

The renewed concerns about Europe’s debt problems pushed the U.S. dollar up 0.8 percent against the euro. That could hurt large U.S. companies that rely on exports by making their products more expensive overseas. Coca-Cola Co. fell 3 percent. Caterpillar Inc., which sells construction equipment globally, lost 3.8 percent.

Concerns that the U.S. economy is headed for another recession helped send the S&P 500 index, the basis for most mutual funds that invest in U.S. stocks, down 14 percent over the three months that ended in September. It was the worst quarter for the stock market since the financial crisis of 2008.

In corporate news, Yahoo gained 2.3 percent to $13.45, after the head of Chinese Internet company Alibaba Group Holdings said he would be interested in buying the company. Yahoo, which recently ousted Carol Bartz as its CEO, has been trying to decide whether to sell parts of the company.

Bank of America fell to its lowest price since the financial crisis in 2008. The bank lost 4.8 percent to $5.83. The company has fallen 56 percent since January.

Netflix rose 0.2 percent after an analyst from Morgan Stanley upgraded the company following a sharp drop in its stock price. Netflix has plummeted 60 percent from its recent high of $304 because of a drop in subscribers and a plan to split its streaming service from its DVD-by-mail business.

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Austrian lawmakers have voted to expand the powers of the eurozone’s bailout fund, which is designed to help Greece and other potentially struggling countries deal with their debts.

Friday’s passage means that Austria guarantees to provide euro21.6 billion ($29.4 billion) to the fund, compared to euro12.2 billion previously.

If all 17 eurozone nations agree to increase their share, the fund will have euro440 billion ($600 billion) at its disposal.

Parliament’s backing had been expected, with the governing center-left coalition supported by the opposition Greens in backing the measure. Only two rightist parties opposed the bill.

Austria’s endorsement comes a day after German parliamentarians approved beefing up the so-called European Financial Stability Facility.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

VIENNA (AP) _ Austrian lawmakers have voted to expand the powers of the eurozone’s bailout fund, which is designed to help Greece and other potentially struggling countries deal with their debts.

Friday’s passage means that Austria guarantees to provide euro21.6 billion ($29.4 billion) to the fund, compared to euro12.2 billion previously.

If all 17 eurozone nations agree to increase their share, the fund will have euro440 billion ($600 billion) at its disposal.

Parliament’s backing had been expected, with the governing center-left coalition supported by the opposition Greens in backing the measure. Only two rightist parties opposed the bill.

Austria’s endorsement comes a day after German parliamentarians approved beefing up the so-called European Financial Stability Facility.

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Stock futures are rising, signaling another day of gains on Wall Street. Investors will assess fresh U.S. economic data and closely watch developments in Europe.

The government is expected to report Wednesday that factory orders for long-lasting manufactured goods fell in August after rising in July. Manufacturing has been one of the strongest parts of the economy since the recession ended.

Investors also remain focused on Europe. Stocks have soared this week on hopes that the region is moving closer to resolving its debt crisis.

About 90 minutes before the opening, Dow Jones industrial average futures are up 64 points, or 0.6 percent, at 11,184. Standard & Poor’s 500 futures are up 7, or 0.6 percent, at 1,176. Nasdaq 100 futures are up 11, or 0.5 percent, at 2,265.

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