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Day of the central bankers, and a dust-up in the tech world

April 15: Prepare yourself for monetary policy meetings in Canada and Europe, and the European Commission gets tough on Google


 

MORNING-PLAYBOOK-STORYMeetings, acquisitions, investigations, announcements, and IPOs—it’s a day of big players today, as central banks in Canada and Europe prepare for monetary policy meetings, and the European Commission prepares to take on Google.

In Canada, keep your eyes trained on Ottawa today for the Bank of Canada’s monetary-policy meeting. While the rate is largely expected to stay steady, it’s a chance to gauge the Bank’s feelings about the pressures facing the Canadian economy, most recently, Governor Stephen Poloz predicted the first quarter would be “atrocious.” In Frankfurt, the European Central Bank is also expected to keep the rate steady, but there will be plenty of talk about whether their mammoth bond-buying program has been effective.

Where things are looking especially lively today is in the tech sector. This morning, the European Commission is expected to slap Google with anti-trust charges, as Finland’s Nokia weighs a takeover of a French telecom giant. Closer to home, Ottawa’s Shopify announced yesterday it’s planning a public offering. Already moving markets this morning are China’s real GDP numbers, which showed a growth rate of seven per cent in the last quarter, another sign of a major slowdown, by Chinese standards. That’s the lowest rate of growth in a quarter since the dog days of the financial crisis, in mid-2009. The International Energy Agency (IEA) also released its oil forecast this morning, upgrading its demand forecast, even as it noted the oil world is awash in mixed signals.

Keep an eye out this morning for numbers of home sales and prices in Canada in March, and auto sales from February, coming on the tail of news that Toyota will move production of the Corolla to Mexico. There will also be lots of stories about India: The Indian prime minister is in Toronto today for the beginning of a three-day visit to Canada—the first visit by an Indian leader in four decades—amid expectations of an announcement of a major uranium deal. In the U.S., there’s the Fed’s Beige Book, industrial production numbers, and a report from the IMF due out of D.C. on financial stability. Bank of America also reports today, and e-retailer Etsy goes public.

Day of the central bankers. Today is the day for the Bank of Canada’s interest-rate announcement, and Poloz will also give a speech. While the rate is expected to stay pat—most recently, Poloz said the Bank was satisfied with the “insurance” taken out in the form of the cut at January’s meeting—the loonie is what to watch today, says Luke Kawa at the Globe and Mail. A sentiment that the rate could stay at 0.75 per cent for a while may give the loonie a boost against the dollar, undermining the Bank’s own hopes that exports to the south will pick up some of the crunch from the oil rout. Poloz has previously said that the Bank expects the impact of the oil crash to be “front-loaded”—that is, hitting hard and fast, then easing out—but the Bank’s assessment of the effect of the crash has become gradually and steadily more negative, while maintaining it won’t provide “forward guidance” (explicit hints of when future rate changes will come), though, most recently, the governor told the FT he expects the first quarter to be “atrocious.”
Meanwhile in Frankfurt, we’ll see if Mario Draghi hands out a round of back-patting for the impact of the European Central Bank’s one-trillion-euro bond-buying stimulus program, which seems to be hitting early and fast, as manufacturing and inflation in the eurozone have perked up. Now the question analysts are asking is whether the effect has actually been too much, too fast, in addition to some major balancing problems among the zone’s noisiest economies. Yesterday we talked about the conundrum of Greece versus Germany, as Germany’s bond yields fall into negative territory and Greece is, according to many reports, preparing to default. Quantitative easing aside, there are rocky waters ahead.

Google vs. the EU.  A long-running feud between regulators and the new world of the digital economy looks set to rocket to the next level today. Several papers, including the Financial Times and the Wall Street Journalare quoting sources and internal memos indicating that the European Commission is about to slam the tech giant with anti-trust charges, after a five-year investigation. Google nearly avoided the charges last year, but a settlement subsequently collapsed after complaints from the competitors and several countries. (France, for one, is also weighing legislation to force Google to disclose how it uses its search algorithms.) The main aspects are accusations that it uses its search engine to reroute traffic to its own products and services, unfairly shutting out competitors, as well as worries about restrictions for apps on the Android operating system (the WSJ has a good rundown here). Google isn’t alone in drawing the Commission’s ire: A decade ago, Microsoft also faced charges and, eventually, fines, and Intel has also been fined. The Commission has the right to fine a company up to 10 per cent of its annual sales, but it’s more likely that the repercussions would be forcing them to reveal their “secret sauce,” or how their search algorithms work, a far more damaging proposition. Google is actually more dominant as a search engine in Europe, holding up to 90 per cent of search-engine traffic in some countries, compared to 65 per cent in the U.S., according to one report.

Confused by oil prices? You’re not alone. You’re in no better company than the International Energy Agency (IEA), who, in its latest monthly report, essentially said it’s simply not clear what is going on with oil prices. “The backdrop against which the adjustment is playing out is constantly changing,” the report said (as quoted in the FT), with one of the big questions at the moment the fate of Iran’s oil industry post-sanctions. Nonetheless, the IEA raised its forecast of demand for the first half of the year, while also lowering its outlook for Canada’s oil industry. In the meantime, Norway’s sovereign wealth fund—the world’s largest—is attempting to bring a little more transparency to its investing, and to global oil companies, by pledging to reveal in advance how it will vote at shareholders’ meetings. And when you’ve got $880 billion worth of oil money on your hands, people tend to pay attention. The fund is also pushing for more clarity from oil companies about how they are managing the risks of climate change, saying they will support shareholders’ resolutions on the subject for companies including Royal Dutch Shell and BP. 

A tech I.P.O. for Ottawa. The Canadian software company Shopify—which makes software for online stores, as well as software for transactions in physical stores—announced yesterday it is planning a public offering that could raise as much as $100 million. The company will be listed on both the New York Stock Exchange and the TSX, though it’s not yet clear when the offering will take place. Shopify has long been a rising star for the Canadian tech industry, even as former star BlackBerry has fallen, and is the biggest of a new coterie of Canadian tech companies expected to go public as early as this year (at least, that’s what tech watchers hope). In the meantime, the e-retailer Etsy—known for pooling small-scale, handmade fashion and home wares—will go public today, and is hoping to raise around $267 million.

Need to know:
TSX: 15,389.28 (+5.69), Tuesday
Loonie: 80.60 (+0.64), Tuesday
Oil (WTI): $53.86, Wednesday (7:00 a.m.)


 

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