Hello and welcome to the end of the week! Tech Week wrapped up yesterday as Google and Amazon reported their earnings, alongside companies from Ford to Visa to Shell.
Across the Atlantic, the ruble is crashing this morning as the Russian Central Bank suddenly slashed their interest rate by more than two per cent, amidst a spike in political tensions. In Europe, new details are out as eurozone deflation deepens, but the effect on consumers so far appears to be mixed.
In Canada, U.S. growth and the oil rout have continued to push the loonie down – yesterday, the dollar lost more than half a cent, remaining below 80 cents. Today, details are out on GDP by industry, and to the south, we’ll see details on the U.S. GDP for the fourth quarter.
The loonie keeps sinking. The 50 cent drop yesterday followed a 0.75 cent* drop on Wednesday, pushing the Loonie below 80 cents for the first time since 2009. Oil prices continue to falter, and WTI is just under $45 this morning. Stats Canada also provided a deeper look at the job market yesterday, estimating job loss at 33,000 in November, which was above the estimate provided in the revised Labour Force Survey. Ouch. However, overall weekly earnings stayed mostly unchanged. Today, numbers for GDP by industry for November, which might show a change in gains by oil and gas commodities: the two previous months showed consecutive gains in the industry. Of course, the big details to watch for today are how the U.S. economy fared in the final quarter of 2014.
A bad day for the ruble. This morning, the country’s central bank very unexpectedly cut its rate by two per cent, to 15 per cent. While a rate cut may not be surprising in itself, the timing and the extent of the cut immediately shocked the market: the ruble seemed to be stabilizing this morning after hitting record lows against the U.S. dollar yesterday. The currency immediately slumped by three per cent, coming after an emergency rate hike last month pushed rates to 17 per cent. It’s also a tense day politically: yesterday, two Russian bombers were intercepted over the English channel by Britain’s air force.
How low can European prices go? This morning, further evidence of deflation in Europe, as inflation numbers fell in January to negative 0.6 per cent from 0.2 per cent, a day after Germany also announced prices in the country were falling. But so far, the impact of deflation seems to be mixed: German unemployment is at record lows, and strong retail numbers there and in France seem to suggest lower prices could be getting consumers out and spending. Spain is an unexpected bright spot this morning, as a higher than expected rate of growth (0.7 per cent) has spurred some cheer on European markets.
Disappointments, surprises from Amazon and Google. Yesterday, Amazon surprised investors with an unexpected profit, as Google underwhelmed with news that competition with Facebook for mobile ads is stiff. Google’s growth in revenue was 15 per cent, below expectations, while the cost per advertisement, or “cost per click” has declined by three per cent in the last year. Meanwhile, Amazon delighted – because they weren’t expected to make much of a profit at all. The company made $214 million in sales in the last quarter, but nonetheless, as the e-retailer’s costs increased, 2014 saw a slump: it was the first annual loss in 12 years.
How much does streaming pay? For Spotify: a lot. The Swedish music streaming service has apparently signed up with Goldman Sachs to raise half a billion in a private round of financing. The service’s value was estimated as coming in at $8 billion, months after a high-profile dispute with Taylor Swift over payment for artists on the site. But Spotify is undeniably growing: the company arrived in Canada in September, and the last two months of 2014 saw 10 million new users and 2.5 million new paying subscribers. The funds will probably mean they delay an IPO, but competition is heating up from Apple, and another Swedish rival, Wimp – which, incidentally, was just bought by Jay Z for an estimated $56 million.
Need to know:
TSX: 14, 635.96 (+33.08), Thursday
Loonie: 79.30 (-0.57 cents), Thursday
Oil (WTI): $44.97, Friday morning
* Correction: A reader pointed out that the Loonie dropped 0.75 cents on Wednesday – NOT 75 per cent, as I accidentally wrote. Whoops. Had the Loonie dropped that much, we would all really be in trouble. This has now been corrected!