Business

 Soaring trade deficit slows US growth

(Toronto Today Report)

The U.S. trade deficit reached its highest point in seven months in November, driven by a surge in imports that outpaced modest growth in exports. November trade gap widened 15.8 per cent from October, to $48.7 billion.

The data suggests stymied trade will cringe economic growth in the October-December quarter as wider trade gap usually slow growth due to more spending on foreign products while U.S. businesses earning less from overseas sales.

In November, imports grew 3.8 per cent – led by gains in shipments of cellphones, including Apple’s new iPhone – while exports increased only 1 per cent.

Exports to Europe fell by 1.3 per cent due to the lingering EU debt crisis. Trade deficit with China was the largest, totalling $29 billion, slightly down from the monthly record of $29.5 billion recorded in October.

The comparatively better growth in 2012 was spurred by better trade, which may not continue in 2013 unless the European debt crisis stabilizes and growth in Asia rebounds. In the first 11 months of 2012, trade deficit ran at an annual rate of $546.6 billion, roughly about 2.4 per cent lower than the 2011 deficit.

Soaring trade deficit may have already trimmed growth by about 0.5 percentage points in the final three months of the year, according to economists. The slower growth is reflected in reduced oil imports which dropped by 2.5 per cent.

 $8 billion deal to buy Euronext by IntercontinentalExchange

IntercontinentalExchange agreed an $8 billion deal to buy New York Stock Exchange owner NYSE Euronext on Thursday, propelling the commodities player into European financial futures and helping it to take on arch rival CME Group.

Atlanta-based ICE will look at selling Euronext, NYSE’s European stock market businesses, in an initial public offering after the deal closes in the second half of next year.

The deal gives a 12-year old start-up ownership of the New York Stock Exchange, an iconic symbol of U.S. capitalism for over 200 years which has been hit by new technology and the rise of private trading venues run by Wall Street banks and brokers.

“Our transaction is responsive to the evolution of market infrastructure today and offers a range of growth opportunities,” ICE Chairman and CEO Jeff Sprecher, who will be chairman and ceo of the combined group, said in a statement.

Under the terms of the deal, ICE will pay $33.12 per NYSE share, a 28 percent premium to their closing price on Wednesday. The $8.2 billion deal will be paid one third in cash with the remainder in ICE shares.

NYSE Euronext stock rose nearly 32 percent after the deal was announced, while ICE’s shares fell four percent before clawing back some of the losses to trade down 1.7 percent at 10:10 a.m. ET.

“The Board of NYSE Euronext carefully considered a range of strategic alternatives and concluded that ICE is the ideal partner for NYSE Euronext in an evolving market landscape,” said Jan-Michiel Hessels, chairman of NYSE Euronext.

Analysts said the deal will give ICE a strategic boost with control of Liffe, Europe’s second-largest derivatives market, helping it compete against U.S.-based CME Group Inc, owner of the Chicago Board of Trade.

“ICE is after Liffe, that is the crown jewel of NYSE Euronext,” said Peter Lenardos, analyst at RBC Capital Markets. NYSE bought Euronext, including Liffe, for 8 billion euros in 2007.

“Strategically it makes sense for ICE to enter the European derivatives space in a meaningful way.”

Sprecher said the deal had been “well received” by regulators after he and NYSE CEO Duncan Niederaur completed a “whirlwind tour” in the United States and Europe ahead of Thursday’s announcement.

SWEET FOR SUGAR

ICE, founded in 2000, has its roots in electronic commodity trading and a tie-up with Liffe will boost trade in soft commodities such as sugar, buoying its profits.

“I would imagine that, having the softs contracts under one roof, would provide for easier arbitrage, financing and development of trading opportunities behind the contracts, via swaps and options,” said Jonathan Kingsman, a sugar trade veteran who heads agriculture at information provider Platts.

“If you have clearing membership of ICE, you could trade London contracts under the same membership.”

An ICE-NYSE Euronext tie-up would leap-frog Deutsche Boerse to become the world’s third-largest exchange group with a combined market value of $15.2 billion. CME Group, ICE’s largest U.S.-based rival, has a market value of $17.5 billion, Thomson Reuters data shows.

Foreign investors buy more Canadian equity

Canadian securities were beefed up phenomenally in October by foreign investors who added $13.26 billion, the third largest amount this year, in bonds. Most of the investment was  in corporate sector, according to Statistics Canada. This was the largest private corporate bond purchases since $9.19 billion in November 2001.

Good business, or desperation?

The Harper government’s approval last Friday of the $15.1 billion takeover of Nexen by the state-owned Chinese company CNOOC is drawing criticism from many quarters due to the abrupt change of rules that had to be introduced to facilitate the acquisitions of Canadian companies by foreign state-owned enterprises. The changed rules paved ways for a similar $6 billion takeover by Malaysian national energy company, Petronas, of the Calgary-based natural gas producer, Progress Energy Resources. The rash of foreign acquisitions are indicative of acute desperation to revive the economy at any cost than being good business decisions welded to  national security imperatives.

Sales slow, listing down 

The real estate sales dwindles down further in the run up to the winter, with few listings. Experts say sellers who do list now have likely already purchased another property.