Not any more

Prudence shifts: Americans saving more than Canadians

In Canada on August 4, 2010 at 08:48

These are stories Report on Business is following today. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.

Global stock markets dip
Stocks are sinking across the globe this morning, hounded again by fears of a rapidly slowing recovery in the United States and slower growth overseas. In Asia, Japan’s Nikkei 225 index fell about 2 per cent, though the Shanghai composite and the Hang Seng in Hong Kong rose slightly. London’s FTSE 100, Germany’s DAX and the CAC-40 in Paris were also all down, though by less than 1 per cent.

“Risky assets are generally weaker … but moves are not large by recent standards,” said Adam Cole, global chief of foreign exchange strategy at RBC Dominion Securities.

U.S. markets appeared set to follow Europe’s cue as Dow Jones industrial average V and S&P 500 futures ES-FT both slipped. The Canadian dollar CAD/USD-I was again well above 97 cents U.S.

“Despite yesterday’s slip, the S&P 500 has quietly staged a near-10-per-cent rally from the closing low set on July 2, reclaiming both the 50- and 200-day moving averages in the process,” said BMO Nesbitt Burns economist Robert Kavcic. “This is made all the more encouraging by the fact that copper prices and Chinese stocks have confirmed the move, and the relative sector strength has shifted back in favour of cyclicals over defensives in recent weeks. Meantime, the better risk appetite has the [Canadian dollar] sitting just below the 98-cent mark ($1.02/US$), a level last seen in mid June – firm commodity prices are helping, including oil which is currently hovering around $82.”

Canadian, U.S. saving rate

U.S. saving more, Canada less
The dynamics of savings in the U.S. and Canada are changing. According to data released yesterday, the personal savings rate in the U.S. rose to 6.4 per cent in June, and came in at an average 6.2 per cent for the second quarter. But for one quarter when the recession was at its raging worst, that’s the highest since the early 1990s, BMO Nesbitt Burns notes. Compare that to Canada, where the savings rate fell below 3 per cent in the first quarter.

“The gap between the U.S. and Canadian savings rate is the widest since the early 1970s, and looks poised to reach levels not seen since the 1960s,” said BMO deputy chief economist Douglas Porter. “This is a huge change from most of the 40 years when Canadian savings rates were almost always higher than in the U.S.”

In the U.S., many are saving more as unemployment remains high and prospects in the jobs market low.

Agrium profit surges
Like Potash Corp. of Saskatchewan POT-T last week, Agrium Inc. AGU-T today posted sharply higher second-quarter profits as demand improves. Agrium earned $506-million (U.S.) or $3.20 a share, compared to $370-million or $2.35 a year earlier, as revenue climbed to almost $4.4-billion from just shy of $4.1-billion.

“Global grain prices have risen considerably over the past month, on concerns over drought conditions in Europe and Russia and significantly lower acreage in Western Canada,” noted chief executive officer Mike Wilson. “Furthermore, U.S. corn ending inventories have been revised downward twice so far this year. Strong agricultural fundamentals should support the outlook for all crop inputs in the second half of 2010 … We anticipate North American crop nutrient demand to be strong in the second half at both the grower and retail level, due to firming crop prices, weather induced constraints on nutrient application this spring, an anticipated increase in U.S. corn acreage next year and the current low inventory level of crop nutrients in the U.S. retail system.”

AOL posts huge loss
AOL Inc. AOL-N posted a huge writedown and hefty loss today, though it says it’s encouraged by recent strength in the advertising market. AOL lost $1.06-billion (U.S.) or $9.89 a share, compared to a profit of $90.7-million or 86 cents a year earlier. Revenue declined by 26 per cent to $584.1-million. Both subscription revenue and ad revenue fell, though AOL’s churn rate fell to 2.6 per cent, the lowest in years.

Time Warner tops estimates
Time Warner Inc. TWX-N, the other half of what used to be the AOL-TIme Warner marriage, beat analysts’ estimates today and raised its outlook for the year to project a jump in per-share earnings of at least 20 per cent. Time Warner earned $562-million or 49 cents a share, up more than 7 per cent from $524-million or 43 cents a year earlier. Revenue jumped almost 8 per cent.

“Our investments in high-quality content across the company continue to pay off,” said chief executive officer Jeff Bewkes. “Turner’s original programming strategy contributed to the quarter’s strong advertising growth and helped to generate pricing gains at the high end of the recent 2010-2011 upfront. HBO achieved impressive audience growth for its returning shows, and it has more original series in development than at any time in its history.”

Toyota rebounds to profit
Toyota Motor Corp. TM-N today swung back to a quarterly profit and boosted its projections for the year, bouncing back strongly from both the global recession and its recall nightmare. Toyota posted a profit of ¥190.5-billion in its fiscal first quarter, coming back from a loss of ¥77.8-billion a year earlier. Revenue jumped 27 per cent to ¥4.9-trillion from ¥3.8-trillion. The Japanese auto giant also raised its forecast for annual profit.

From today’s Report on Business

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