Every week at the Current we wrap up the week’s biggest business stories. This week: a volatile week in the stock market; commodity prices fall as China wobbles; low oil and other commodities keep the loonie low, but could have positive results; the US and Mexico swap oil; Carlsberg suffers as Russians sober up; a huge natural gas deposit near Egypt could have economic and political consequences; Britain’s growth held steady at 0.7%.
A volatile week of trading in China has ended with an almost 8% drop in prices. On Friday however the Shanghai Composite closed up 4.8% while the Shenzhen Composite closed up 5.4%, but ended overall 9.4% lower. Hong Kong’s Hang Seng closed on Friday down 1% while Japan’s Nikkei 225 closed up 3%. This volatility was mirrored by western stock markets. The TSX began the week with big losses before rebounding. Speculation and fear over the true health of China’s economy is largely to blame for the volatility. Clearly China, more so than ever, will have a big impact on stock markets across the world.
China’s slowdown spelled trouble for commodity markets. For the first time in 6 years the price of copper dipped below $5 000 per ton on the London Metal Exchange. Crude oil prices hit a new low below $39 per barrel. Commodity trading and mining giant Glencore has been one of the biggest losers in the recent economic climate with share prices falling by 47% so far this year.
Loonie laying low
The loonie has continued to be hit hard by low commodity prices. For the first time since 2004 the loonie sunk below 0.75USD. While Canadians looking to plan a trip abroad might be suffering, the low value of the loonie could be a boon to Canadian businesses. From manufacturers to software companies, a low loonie will likely boost competitiveness in cross-border trade.
Are you overtaxed?
According to the fiscally conservative Fraser Institute, Canadians are being over taxed. An income of around $80 000 would result in approximately 42% of their income going to taxes – from income, to sales, to fuel taxes. Critics point out that the Institutes study may be misleading as it included all taxes and even CPP and EI premiums.
The Obama administration has cut an oil swapping deal with Mexico. The deal would circumvent a preexisting American ban on exporting crude oil which was instituted during the Oil Embargo of the 1970s. The deal would allow American producers to exchange oil produced from shale through fracking for Mexican heavy crude. Currently Canada is the only country exempt from America’s tight oil restrictions. Supporters of the move say that the oil industry is over regulated in the United States and distorts the global oil market. The deal will, it is hoped, provide greater stability in the price of oil, and lead to further reforms.
Carlsberg, the Danish brewing giant, has been an unintended victim of harsh Western sanctions on Russia. Sales in Eastern Europe have fallen by 35%. Russia’s aching economy and a tough domestic crackdown have resulted in a sharp drop off in sales in a country which once accounted for nearly 50% of the Carlsbergs sales. The company has said it will shift its global strategy to survive in the evolving business climate.
Egyptian Gas Find
Eni, an Italian energy firm, claims it has found one of the world’s largest natural gas deposits off the coast of Egypt. The total size is said to be estimated at 30 trillion cubic feet of gas, equivalent to 5.5 billion barrels of oil. The discovery could be a huge boost to Egypt’s economy, which has struggled since the Arab Spring, and increase the stability of a country that has seen widespread instability, a number of coups and a harsh military crackdown.
Britain stays steady
Second quarter growth in Britain has held steady at 0.7% following a review. The figure is up from 0.4% growth earlier this year. Business investment also rose by nearly 3%, household spending was up 0.7%. US GDP was revised to a rate of 3.7% up from 2.3% and some held out hope that Britain’s growth would be similarly revised. Despite holding level the figures are still very positive for a county that has been flirting with basement low growth.
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