These are stories Report on Business is following Tuesday, Sept. 30, 2014.
Follow Michael Babad and The Globe's Business Briefing on Twitter.
Loonie sinks
The Canadian dollar is sinking ever closer to the 89-cent level, and could yet hit the low for the year.
The U.S. dollar continues to surge, hitting not only Canada's currency, but others as well.
"This is a pretty strong trend," said chief currency strategist Camilla Sutton of Bank of Nova Scotia.
The loonie, as Canada's dollar coin is known, hit a low of 89.14 cents (U.S.) today, down from yesterday's close. A weak economic reading from Statistics Canada didn't help. Oil prices also fell.
The loonie hit a low for the year of 88.66 cents in late March, and Ms. Sutton said she believes it could see that level again.
"There is still a lot of focus on the Canadian dollar of late ... though – once again – it is mostly a story of USD strength with CAD taking a backseat along with the other majors," added Mark Chandler and Ian Pollick of RBC Dominion Securities, referring to the U.S. and Canadian currencies by their symbols.
"The U.S. dollar remains strong on broad-based strength," added Rahim Madhavji of Knightsbridge Foreign Exchange.
"Month-end could create some volatility today. Protests in China do not help the Canadian dollar. The Canadian dollar needs strong data releases in Canada and from China to gain some strength vs. the U.S. dollar uptrend."
Chief economist David Rosenberg of Gluskin Sheff + Associates noted that the U.S. dollar may well have further to run.
"This run could just be in its infancy, and look at how the trade-weighted greenback is still far below its prior peaks," he said, referring to a chart he provided to clients in his daily research note.
"I mean, rallying another 25 per cent from here just takes us back to the levels of the U.S. dollar that prevailed at the depths of the 2001 tech-wreck-induced recession."
This comes as Statistics Canada reported today that the country's economy stalled out in July, ending a six-month streak of wins.
This, too, could feed into the currency markets as it reinforces the view that the Bank of Canada won't move off its neutral policy stance any time soon, which means it will still hold out the possibility of an interest rate cut however unlikely that may be.
"Today's report doesn't change our view that the BoC will remain cautious on the outlook and retain its neutral policy stance for some time," said Charles St-Arnaud of Nomura Securities.
Gross domestic product was basically flat in July, according to Statistics Canada, having seen growth of 0.5 per cent and 0.3 per cent in May and June, respectively.
Manufacturing and the public sector helped the economy limp along, as did construction and professional services, to a lesser extent, The Globe and Mail's David Parkinson reports.
But the mining and energy industries were hit, as was agriculture.
"The weather and GDP were linked in the sense that part of the disappointment was in a steep drop in utilities output due to the lack of air conditioning demand in central Canada," said chief economist Avery Shenfeld of CIBC World Markets.
"Over all, a disappointment that will take expectations for the quarter to below 3 per cent, even with a bounce back next month," he added.
Of course, the loonie's losses are good news for Canada's manufacturers as Bank of Canada Governor Stephen Poloz continues to bet on an export pick-up.
"We are particularly pleased to see the manufacturing sector reaching a cyclical high as it benefits from a depreciated loonie and stronger growth south of the border," said senior economist Matthieu Arseneau, referring to the gains among the country's factories documented in the Statistics Canada report.
EBay climbs
The world of electronic payments is changing even faster, with the announcement today that eBay Inc. plans to spin off PayPal next year.
This follows Apple Inc.'s launch of an electronic payment system, and pressure from activist Carl Icahn, who has pressured eBay to break the company into two.
"A thorough strategic review with our board shows that keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively," chief executive officer John Donahoe said in a statement.
"The industry landscape is changing, and each business faces different competitive opportunities and challenges."
Airline in crackdown
Air Canada has launched a trial program at Toronto's Pearson International Airport to make sure carry-on luggage is not too big or too heavy for overhead bins on its flights, The Globe and Mail's Greg Keenan reports.
The move comes ahead of the implementation on Nov. 2 of a $25 fee for checked bags on domestic flights. Air Canada announced the fee earlier this month, following WestJet Airlines Ltd. and Porter Airlines Inc.
Air Canada will add personnel to its domestic and trans-border departure gates to make sure passengers are complying with the airline's policy and Transport Canada regulations, spokesman Peter Fitzpatrick said.
"This will also facilitate an orderly transition to the implementation of a domestic first checked bag fee beginning in November," Mr. Fitzpatrick said.
E&Y strikes settlement
Accounting firm Ernst & Young will pay $8-million under a settlement agreement approved today by the Ontario Securities Commission, resolving allegations that the company performed negligent work in auditing Sino-Forest Corp. and another Chinese-based company.
The settlement is the first high-profile case to use the OSC's no-contest rules, which allow parties to settle without having to make any admissions of wrongdoing, The Globe and Mail's Richard Blackwell reports.
While that means Ernst & Young has neither admitted nor denied any wrongdoing, the OSC maintains the company didn't show enough "professional skepticism" in conducting audits, and overlooked flaws in its clients' accounting.
But the commission also said there is no evidence of "dishonest" conduct by the accounting firm.
Europe suffers
These are dark days for continental Europe.
Unemployment remains painfully high, while inflation is edging down ever closer to zero, according to the latest statistics today, adding more pressure to central banks poised to meet on Thursday.
And digging beneath today's headline numbers shows something even more troubling: Several countries face the prospect of a lost generation as unemployment among young people surges.
By the numbers:
- Unemployment among the 18 nations that make up the troubled euro zone held at 11.5 per cent in August, according to the statistics agency Eurostat. In the wider European Union, the jobless rate dipped to 10.1 per cent from 10.2 per cent.
- Almost 25 million people can’t find work in the EU, more than 18 million of them in the euro zone.
- Greece and Spain continue to have the highest unemployment in the region, at 27 per cent and 24.4 per cent, respectively.
- Austria and Germany, at 4.7 per cent and 4.9 per cent, enjoy the lowest.
- Among young people, unemployment now stands just slightly below that of July’s level, at 21.6 per cent in the EU and 23.3 per cent in the euro zone.
- More than half the youth work force in Greece and Spain is jobless. And in Italy, youth unemployment is now running at more than 44 per cent.
- Even in the stronger nations of Germany, Austria and the Netherlands, unemployment is still high.
At the same time, deflation fears are being fanned by consistently low inflation, which Eurostat pegged at 0.3 per cent this month, down from August's 0.4 per cent.
Just yesterday, as The Globe and Mail's David Parkinson reports, a major new report warned of the danger of slow economic growth and low inflation across the globe.
Today's numbers add even more pressure on chief Mario Draghi's European Central Bank, which meets Thursday after having cut interest rates twice now.
"The euro came in for a bashing again this morning, as inflation pushed further to the downside, increasing the validity of calls for the introduction of a fully blown asset purchase scheme by the ECB," said research analyst Joshua Mahony of Alpari in London.
"Mario Draghi has been fighting against the plummeting rate of CPI, which has been falling since the beginning of 2012 when it peaked out at 3 per cent," he added.
"Today's fall to 0.3 per cent was thus far from unexpected, however the continuation of this downward trend in prices makes for worrying reading and proves to the markets that all the measures introduced so far have been completely ineffective at bringing about price stability or higher growth within the region."
Mr. Mahony also pointed to today's separate reading from powerhouse Germany, where the jobless rate held steady but the number of unemployed rose for the month in a row.
"Over all, this continued weakness in Germany, accompanied by an incessantly falling inflation rate, means that Mario Draghi is being pushed into a corner to find the solution, and fast," he said.
- David Parkinson: Are we on the verge of another financial crisis?
- Euro zone inflation slows as ECB prepares for policy meeting
- Japan's economy takes another hit as output, spending slump
Auto makers in focus
Ford Motor Co. shares have settled down after yesterday's plunge amid a profit warning, and as investors eye the American auto industry.
Yesterday, Ford shares tumbled as it projected at an investor conference that its pretax profit this year would come in at about $6-billion (U.S.), compared its earlier predictions of between $7-billion and $8-billion.
Ford, of course, was alone among the Detroit auto makers in escaping bankruptcy protection during the crisis.
At the same time, according to the Wall Street Journal, General Motors Co. chief executive officer Mary Barra is expected tomorrow to unveil the auto maker's strategy for the next few years.
Ms. Barra, whose company has been in the eye of a safety storm, told the news organization she would disclose her timelines.
Streetwise (for subscribers)
Real estate
ROB Insight (for subscribers)
Business ticker