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These are stories Report on Business is following Thursday, Dec. 11, 2014.

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As far as they can go
Moody's Investors Service says its outlook for Canada's provinces is still negative, though there are "signs of progress."

The outlook remains that way largely because the rating agency expects only modest economic growth in the next while.

The provinces have cut spending about as far as they're prepared to, Moody's said in today's report, funding their deficits in an era of ultra-low interest rates.

And most are expected to stay in the red next year.

Debt burdens are on the rise, with aggregate debt hitting about 160 per cent of revenue in 2016 before "stabilizing," Moody's said.

But "an increase in interest rates from current low levels would add fiscal pressure given their rising debt burden," the agency added.

Most of the provinces, said senior analyst Michael Yake and analyst Kathrin Heitmann, will see just a "marginal increase" in debt next year.

Most, however, doesn't include Ontario and Nova Scotia, whose debt burdens will rise at the fastest pace.

As a percentage of revenue, Ontario's debt is forecast to climb to 256 per cent next year, from this year's 249 per cent, while Nova Scotia's is projected to rise to 155 per cent from 144 per cent.

(This isn't in any way comparable, but it sure is fun to note: The Bank of Canada this week described households with a total debt-to-income ratio above 250 per cent as "highly indebted.")

Nor does most actually include Alberta or Newfoundland and Labrador, Mr. Yake said, though their debt levels, while rising, are "fairly low."

In the case of the former, debt as a percentage of revenue is forecast to climb to 37 per cent in 2015 from 26 per cent this year. In Newfoundland and Labrador, the respective percentages are 77 per cent from 71 per cent.

"A further decline in oil prices may also lead to lower provincial revenues for the resource-producing provinces," Moody's added.

Loonie sinks with oil
The Canadian dollar tumbled below the 87-cent mark today as oil prices resumed their "relentless drop."

The loonie, as Canada's dollar coin is known, touched a low point today of 86.59 cents U.S. amid oil's ever-deeper slump, which took West Texas Intermediate crude below $60 a barrel at one point. Its high was 87.34 cents.

You can expect the loonie to continue to shed its feathers amid the woes of the oil market.

"I think the bias is still toward weakness in the Canadian dollar," said George Davis, chief technical analyst at RBC Dominion Securities.

It will remain so, he added, until markets see signs of stability in oil prices, albeit at a lower level, and perhaps a bit of a counter-trend rally.

Until then, Mr. Davis said, markets will "err on the side of caution," which means more pressure on the loonie.

"The current backdrop is negative for CAD and we would expect the currency to trend lower into 2015," added chief currency strategist Camilla Sutton of Bank of Nova Scotia, referring to the Canadian dollar by its symbol.

"Oil prices reached fresh lows yesterday, in a relentless drop, which will weigh on domestic growth," she added.

"Canadian equities continue to underperform, warning that there is likely domestic and foreign selling, and therefore selling of CAD. The Norges Bank cut rates today, tying the decision directly to the negative economic impact of oil prices, which highlights the significant impact oil prices are having on growth, central bank policy and currencies."

North American stocks, in turn, rebounded today.

Ups and downs
The Norwegian and Russian central banks moved in opposite directions today, each reacting to the rout in the oil market.

The Norges Bank surprised markets by cutting its key rate by a quarter of a percentage point, while the Bank of Russia did the expected and hiked by a full point.

Each country, like Canada, is oil-dependent.

And though for different reasons, today's moves by the Norwegians and Russians highlight the struggles of the Bank of Canada, which just yesterday warned of the threat from the collapse in oil prices.

All of this suggests, by the way, that Bank of Canada Governor Stephen Poloz and his colleagues will be in no rush to raise their benchmark rate from its current 1 per cent.

"On balance, we continue to believe that the bank will be extraordinarily patient with interest rates, likely standing still until next October," chief economist Douglas Porter of BMO Nesbitt Burns said yesterday after the central bank released its review of the financial system.

"The slide in oil, and the associated downgrade to Canada's growth and inflation outlook, tilt the risks to a later move, despite their slow-burn concerns on the housing market."

Today's surprise move by Norway is far more important to the Canadian outlook than what the Russians did because its issues are much the same.

The Norwegians are reacting to the impact of lower oil prices on the economy, while the Russians are trying to stem a capital outflow, highlighted by the collapse of the ruble, said Scotiabank's Ms. Sutton.

The Bank of Canada isn't likely to cut rates at this point, as the Norges Bank did, but it could well sit on its hands for longer.

And unlike its Russian counterpart, the Canadian central bank would not move in to defend the loonie.

While the Bank of Canada says it doesn't talk down the Canadian dollar, it will nonetheless be cheering the ever-weaker currency because that will help boost Canadian exports.

As oil drops, that's an added benefit as it will help offset the hit from the crude market.

"This shock is especially complex: It is likely to boost global growth but to moderate growth and inflation in Canada, even though the effects should be tempered by exchange rate depreciation and stronger non-energy exports," Mr. Poloz said yesterday.

The Norges Bank said something similar today as it cut its policy rate to 1.25 per cent:

"Growth prospects in the Norwegian economy have weakened. Activity in the petroleum industry is softening and the sharp fall in oil prices is likely to amplify this tendency. This will have spillover effects on the wider economy and unemployment may edge up ahead. At the same time, the krone has depreciated markedly, which is helping to dampen the effects on the Norwegian economy and underpin inflation."

Russia's central bank, in turn, hiked its policy rate to 10.5 per cent. The ruble slipped again, nonetheless.

Separately today, Switzerland's central bank held the line, though it warned of the threat of deflation. Central banks in New Zealand, Indonesia, Korea and the Philippines also held steady.

Cenovus cuts back
Cenovus Energy Inc. is following the lead of other companies in Canada's oil patch, unveiling plans today to cut its capital spending.

Cenovus said today it will trim its capital investment next year by about 15 per cent to a range of $2.5-billion and $2.7-billion, The Globe and Mail's Bertrand Marotte reports.

It added that it may cut further.

"If the current low oil price environment continues, Cenovus has planned flexibility into its capital program and has identified additional areas where it can make further reductions to keep spending aligned with anticipated cash flows."

Lululemon hit
Lululemon Athletica Inc. today cut its sales outlook, blaming just about everything but for oil prices.

Actually, the celebrated retailer blamed oil, too, in its own way.

Lululemon beat the estimates of analysts with its third-quarter results – profit slipped to $60.5-million (U.S.), or 42 cents a share, from $66.1-million or 45 cents a year earlier – but the retailer shaved its sales forecasts.

Sales rose to $419.4-million from $379.9-million in the quarter.

Lululemon said fourth-quarter revenue will be down by some $15-million from earlier projections, to a range of $570-million to $585-million, because of port delays on the west coast, later-than-expected store openings, and the weaker Canadian dollar (which, of course, brings us back to oil prices).

It projects fourth-quarter earnings per share of 65 cents to 69 cents.

For the year, Lululemon now projects revenue of between $1.77-billion and $1.78-billion, down from its previous forecast of $1.78-billion to $1.8-billion, with earnings per share of $1.53 to $1.57.

On an adjusted basis, however, that would be between $1.74 and $1.78.

"LULU appears to be making gradual progress on its initiatives on product quality, assortment improvements, and guest experience, as sequential improvement throughout the quarter allowed the company to exceed its outlook," said analyst John Morris of BMO.

"However, we still lack visibility on a gross margin recovery given persistent erosion."

How to find a a mortgage ... and buy some clothes
You can always get one of those iconic multi-coloured blankets at Hudson's Bay.

But now, you can also find a mortgage.

Hudson's Bay Co. announced today that its amping up its financial services group, adding mortgage brokering and money transfers to the mix through partnerships with the aptly-named True North Mortgage and CanadianForex.

Customers, it said, will get "the best mortgage rates availableeither online or in-person, through a large network of lenders to compete to provide the most competitive rates and terms for customers' real estate purchases."

And via money transfers, they'll get "best-in-class values."

So you can send your cousin in New York money, along with the blanket.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 11:05am EDT.

SymbolName% changeLast
AAPL-Q
Apple Inc
-1.42%170.85
BNS-N
Bank of Nova Scotia
+0.7%51.52
BNS-T
Bank of Nova Scotia
+0.82%69.99
CADUSD-FX
Canadian Dollar/U.S. Dollar
+0.11%0.73784
CVE-N
Cenovus Energy Inc
+1.06%20.05
CVE-T
Cenovus Energy Inc
+0.67%27.11
LULU-Q
Lululemon Athletica
+0.73%392.3
TRZ-T
Transat At Inc
0%3.86

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