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The greenback goes up–and global markets go down

March 11: Will yesterday’s equity sell-off turn around today? Plus, the great Greece cash crunch, and the Blurred Lines of copyright law


 

MORNING-PLAYBOOK-STORY

Will today bring a turnaround for the world’s stock markets?

That’s the question this morning, after a day of sharp losses in global equity yesterday. Major indexes in the U.S., Europe and Asia all fell, while the TSX/S&P Composite Index lost more than 200 points, and the loonie was down more than half a cent at closing. The force behind the drop was double-fold: As the European Central Bank kicks off the third day of sovereign bond-buying for its massive quantitative easing program, the euro is sinking fast against the dollar, while in the U.S., a strong job report for February and the dollar’s rise against nearly every major currency is pushing speculation that a hike in the Fed’s benchmark rate will come sooner rather than later. This morning, however, European indexes are chipping back yesterday’s losses. We’ll have a closer look at the currency teeter-totter below.

There’s nothing large on the calendar today in Canada, but today is a busy day in Europe and the U.S. Greece is in the midst of a profound cash crunch, with members of the bailout team trying to convince the government to pry open its accounting books. In beleaguered Ukraine, the IMF is expected to approve a $17.5-billion emergency bailout. In China, a new set of economic data came up short of expectations for retail sales and production, further confirming a slowdown after the Chinese government lowered its growth expectations for the year. In the U.S., today will bring another report on the size of the oil surplus, as well as the monthly budget statement and the second round of stress testing for U.S. banks.

In the U.S., more jobs, a stronger dollar—and a weaker euro. What’s good news for the U.S. labour market can quickly become bad news for global equity markets. As the American economy looks increasingly out of step (or, perhaps, more correctly, bouncier-of-step) compared to the rest of the world, speculation about the effect of a coming boost to the U.S.’s historically low benchmark interest rate pushed almost every major index down. In the meantime, the ECB’s 1.1-trillion-euro asset-buying program is successfully pushing down European borrowing costs and the euro. The currency has lost at least 13 per cent since the start of the year, and was at a new 12-year low this morning against the dollar. The euro was only one of 14 major currencies, out of 16 in total (including the loonie) that fell against the greenback yesterday, causing worries for U.S. exporters. A stronger dollar also pushed down oil prices, which are priced in U.S. dollars—the price tends to fall slightly to compensate—and other commodities also fell, including copper.

The big Greece cash crunch. Greece is struggling to find the money to pay its debt payments—and its civil servants’ salaries and pensions. Yanis Varoufakis is reportedly trying to convince the country’s social security funds to hand over hundreds of millions of euros in cash reserves in order to pay salaries and pensions, but many of the government agencies are reluctant, for fear they won’t get the money back. The country has debt payments due on Friday, and another 1.2-billion-euro payment due to the IMF at the end of the month. Varoufakis has been insisting the country can meet those payments, while also saying payments due to government suppliers may come up short. In the meantime, reps from the country’s eurozone and IMF creditors are in Brussels, preparing for another round of meetings with Athens, to begin tomorrow, while also trying to get the country to open up its accounting books. Tensions are, again, running high after the Greek government, again, accused Germany of avoiding reparations for the occupation of Greece during the Second World War.

Yearly collection of jobs data from First Nations reserves “possible,” says StatsCan. The accuracy of the Labour Force Survey, one of Canada’s most important sets of economic data, is an ongoing debate. One part of the debate has focused on the impact of the end of the compulsory long-form census, but another aspect is a major hole in the data: Statistics Canada does not collect employment data from Aboriginal reserves, citing the cost and logistical difficulties of getting the data from often (but not always) remote First Nations communities. As a result, as the Globe has noted, about half of Canada’s First Nations are not included in job data, and since the rate of unemployment for reserves is four times the rate for the rest of the country, according to the last available data, this could be skewing regional unemployment numbers artificially low, while undermining temporary foreign worker allocations, as well as funding for skills and training programs. In the latest development, the country’s chief statistician told the Globe that a monthly review of reserves would simply be too costly and difficult. He estimated the price would be at least $10 million, but a yearly review would be “entirely possible” . . . with more funding, and government interest.

The blurred lines of music copyright. The summer megahit by Pharrell Williams and Robin Thicke, Blurred Lines, was judged to have infringed—if not intentionally—on the copyright of another megahit, Marvin Gaye’s Got to Give it Up, according to an eight-person jury. The two musicians, who claimed they had only taken inspiration from the general groove of the song, not its actual melody, were ordered to pay more than $7.4 million to the late soul singer’s family. Are they the same song? Well, the New York Times, helpfully, noted that the songs are both “upbeat dance tunes featuring lots of party-like atmospherics.” Critics worried that the ruling, which comes after British singer Sam Smith settled with Tom Petty for similarities in their hits, could have a chilling effect on musical creativity. Thicke, for his part, used the trial as an opportunity to say that lots of pop music pretty music sounds the same, anyway.

Need to know:
TSX: 14,641.76 (-212.73), Tuesday
Loonie: 78.86 (-0.53 cents), Tuesday
Oil (WTI): $48.47, Wednesday (7:20 a.m.)


 
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