Not any more

Will Bank of Canada now pause rate-hiking campaign?

In Canada on August 20, 2010 at 09:56

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Inflation remains quite tranquil

Canada’s annual inflation rate rose by five-tenths of a point in July to 1.8 per cent.

Statistics Canada says changes in sales taxes in Nova Scotia, Ontario and British Columbia affected consumer prices in July. This was expected.

Prices were higher across the board, with increases in seven of the eight major components.

The biggest increases were in energy prices, which were up 7.9 per cent from where they were a year earlier. Within the energy price index, the cost of electricity rose 9.8 per cent in July.

“While the HST made all the noise last month, the fact is that underlying inflation remains quite tranquil, neither threatening to dip into deflation terrain nor pushing above the 2% target,” said Douglas Porter, deputy chief economist at BMO Nesbitt Burns. “With core trends remaining subdued, this gives the Bank of Canada the option to pause on its rate-hiking campaign, if the growth backdrop stumbles further. This just adds one more arrow into the quiver of reasons the Bank may take a timeout from further rate hikes this fall.”

“Beyond the HST, there were no major special factors—the overriding story was softness,” Mr. Porter said. “Ever-volatile clothing fell 1 per cent (s.a.), which took those prices down 2.7 per cent year over year. Auto prices also retreated 2.4 per cent month over month, weighing heavily on core inflation. Regionally, no surprise that Ontario posted the highest inflation rate at 2.9 per cent year over year, with B.C. well behind at 2.0 per cent — up an average 1.4 percentage points from the prior month, about as expected. In contrast, we have deflation on the prairies, as Manitoba prices fell 0.3 per cent year over year.

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Suncor faces outage

Suncor Energy Inc. SU-T says it is experiencing an outage at one of its hydrogen reformer units at the oil sands base plant in Fort McMurray, Alta.

Canada’s biggest integrated energy company reported Friday that an assessment of the unit is under way to determine the cause of the outage and timing for when it will restart.

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World stocks fall

World markets dropped further Friday as concerns about the U.S. economy continued to dominate sentiment after yet another batch of disappointing data.

In Europe, the FTSE 100 index of leading British shares was down 17.24 points, or 0.3 per cent, at 5,194.05 while Germany’s DAX fell 30.04 points, or 0.5 per cent, to 6,045.09. The CAC-40 in France was 10.97 points, or 0.3 per cent, lower at 3,561.43.

Wall Street was poised for modest declines at the open – Dow futures YM-FT were down 11 points, or 0.1 per cent, at 10,224 while the broader Standard & Poor’s 500 futures ES-FT fell 0.9 point, or 0.1 per cent, to 1,070.40.

On Thursday, stocks in Europe and the U.S. tumbled after figures showed an unexpected rise increase in weekly U.S. jobless claims to half a million and a big drop in manufacturing activity in the Philadelphia region.

That heavy selling pressure continued into the Asian session – Japan’s benchmark Nikkei 225 stock average was a big casualty, closing down 183.30 points, or 2 per cent, at 9,179.38.

The worry is that substantially lower economic growth in the U.S. will derail the global recovery from recession.

Even though the newsflow out of the U.S. has been the broadly disappointing over the last couple of weeks, the dollar does not seem to be suffering at all, particularly against the euro.

By midmorning London time, the euro was down 0.5 per cent at $1.2757, while the dollar was up 0.1 per cent at ¥85.39– on Thursday, the dollar was within touching distance of falling below the 15-year low of ¥84.75 it struck last week.

The downbeat U.S. economic news is hitting oil prices too as traders price in the prospect of lower demand for crude – benchmark crude for October delivery was down 23 cents at $74.20 a barrel in electronic trading on the New York Mercantile Exchange.

Elsewhere in Asia, South Korea’s Kospi dropped 0.2 per cent to 1,775.54, while Australia’s S&P/ASX 200 index dropped 1.1 per cent to 4,430.90 ahead of national elections Saturday.

In China, the Shanghai Composite Index shed 1.7 per cent to 2,642.31, with stocks additionally pressured by Beijing’s announcement earlier in the week that it would examine the finances of heavily indebted local government agencies set up to invest in real estate and infrastructure.

Elsewhere, Hong Kong’s Hang Seng gave up 0.4 per cent to 20,984.29. Markets in Singapore, India, and New Zealand also fell while Malaysia, Thailand and Indonesia posted moderate gains. AP

Dana faces hostile bid from KNOC

South Korea’s state-owned oil company is making a £1.87-billion ($2.9-billion) hostile bid for Dana Petroleum PLC.

Friday’s statement from Korea National Corp. – KNOC – says it hopes to boost its oil reserves and believes its offer price – equivalent to £18 per share – represents fair value for Aberdeen-based Dana.

Dana had no immediate comment. The company said last week that it wouldn’t back a £1.7-billion offer from KNOC after it refused to raise the bid and declined to sign a confidentiality agreement to investigate Dana’s books.

Suncor Energy and an affiliate recently reached an agreement to sell Petro-Canada Netherlands BV to Dana for $582-million. Dana is also said to be in advanced talks to buy U.K. North Sea fields from Suncor .

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From today’s Report on Business

Obama urges action on anemic economy

Hold the phone: CRTC reins in financial advisers

How Staples steamrolled the competition

Bad boss syndrome can feed on itself

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