Yeah, forget all about that.
Oil had lost nine per cent by the end of yesterday, and the price is now back under $50 and has been vacillating on both sides of $48 so far this morning.
The cause? A reversal of hopeful assumption-making, because a drop in the number of U.S. rigs does not automatically equal a drop in production. American crude stocks once again broke records, with production hitting more than $413 million barrels last week, the highest weekly number since records began in 1982. A strengthening U.S. dollar probably didn’t help.
The loonie responded by wiping out recent gains, dropping more than a cent to close the day below 80 cents, again. The TSX also dropped by almost 70 points, which kept much of the three-digit gains of the last few days.
What’s on today? In the U.K., the Bank of England will make its interest-rate announcement. The rate is expected to stay at 0.5 per cent, but as central banks have reminded us lately, expectations are often wrong (see: Bank of Canada, Australia, Russia.) Today we also have international trade numbers for Canada, fourth-quarter productivity numbers for the U.S., and numbers on the health of the eurozone’s retail sector.
Oh, so you want to play? The Greek government is playing hardball – and the European Central Bank has decided to take them up on it. The ECB says they will no longer accept Greek bonds in exchange for providing commercial loans to Greek banks. This could force banks to go to the Greek central bank for loans, but those cost a full 1.5 per cent more than the ECB’s rate. This is a big, big problem for Greece, because it means they could run out of cash, and fast. Bloomberg quotes (anonymous) sources saying that this could happen within three weeks, but regardless of the timeline, it would be soon. The ECB’s message? If you want our money, play by our rules. Stay tuned for more high-stakes monetary drama today, as the Greek finance minister prepares to meet the German finance minister – his No. 1 critic.
China gets tough on (some) tax dodgers, lowers capital requirements. A lot of movement in China today, as the country’s tax authorities pledge to crack down on companies who are not paying the proper amount of tax. The move is focused on foreign companies operating in China, not Chinese companies evading tax elsewhere, and comes just days after Obama announced his plan to tax American companies’ offshore profits. In response to slowing growth – at 7.4 per cent, it’s the lowest rate of growth since 1990 – the People’s Bank of China also lowered the amount of money Chinese commercial banks must keep on hand, in an attempt to increase cash flow.
Sony spent $15 million dealing with The Interview, and Twitter reports today. Tech week is actually continuing this week: Twitter will report their earnings today, and the pressure is on to prove they’re actually bringing in profits and mainstream, active users – people other than, say, journalists, for example. The forecast is that Twitter brought in $440 to $450 million in revenue, but the company is still struggling to really make money from the service. Sony reported their earnings yesterday, with a mixed bag: net profits for the last quarter were twice what they were in the comparable quarter last year, despite a $15-million price tag for dealing with the fall out from The Interview debacle. But the company is still expected to post a loss at the end of their financial year in March, and plans to lay off more than 2,000 staff.
North Americans are chewing less gum. And that means Wrigley, the gum brand owned by Mars, is closing its Toronto factory, which has been in operation half a century, and laying off 383 people. The popularity of gum in Canada has been falling for three straight years, and the trend is similar in the U.S., a shift an analyst in the Globe attributed to Millennials’ changing snacking habits, which include less smoking and a belief that chomping at the office is rude. But in other parts of the world, especially China, gum remains hugely popular. Gum brands are still the candy of choice in many other countries, from Mexico to Brazil to France (check out this candy slideshow!)
Need to know:
TSX: 14, 995.65 (-67.23), Wednesday
Loonie: 79.59 (-1.08 cents), Wednesday
Oil (WTI): $48.25, Thursday morning (4:00 a.m.)