A growing number of economists now expect the Bank of Canada to cut interest rates in the coming months as a strong dollar takes a bite out of trade.
Weaker-than-expected reports on international trade and manufacturing over the past week show the Canadian economy likely withered in the third and fourth quarters, they say.

At the same time, the strong currency is reducing import prices and causing retailers to cut prices on their goods - putting a damper on inflation.

"We now expect that the Bank of Canada will need to cut its policy rate by 25 basis points on each of its next four decision dates through April," said Ted Carmichael, chief economist at J.P. Morgan Securities Canada on Friday. That would bring the rate to 3.5 per cent from the current 4.5 per cent.

Previously, most economists had expected the central bank would stand pat for the foreseeable future. But opinion started to shift last week, with Merrill Lynch Canada saying the probability of a rate-cut in December had tilted to a greater than 50-per-cent chance.

Royal Bank of Canada and UBS AG were the latest to weigh in on Friday, predicting lower interest rates in the next months.

"Net trade, thanks in part to the past decline in U.S. dollar versus the Canadian dollar, is going to weigh heavily on Canadian gross domestic product growth in the second half of this year and beyond," it said in a note.

"With that in mind, the BoC is laying the foundations for an eventual rate cut by steadily increasing the concern over the impact of Canadian dollar strength on output and inflation."

UBS strategists, meantime, expect the central bank to reduce rates by 50 basis points next year.
Their predictions come in the same week that Bank of Canada deputy governor Paul Jenkins warned that if the dollar stays high, economic output and inflation would be "significantly" lower.

The Canadian dollar traded at $1.0301 Friday in the most volatile week the currency has had in at least a decade.
The central bank's next meeting is Dec. 4.

TAVIA GRANT
Globe and Mail Update

Canada's three mortgage insurers; CMHC, Genworth and AIG have increased GDS/TDS guidelines for mortgage qualifying.

The new guidelines significantly help increase the purchasing power and affordability for homebuyers. Most lenders to date have endorsed the new guidelines and are on board.

The guidelines are:

680 + Beacon Score: NO GDS / 44% TDS Maximum
<680 Beacon Score: 35% GDS / 42% TDS Maximum

Zero Down Program: 680+ Beacon, NO GDS / 40% TDS Maximum

So now key lending rate is at 4.25% which will lead to prime at 6% and perhaps mortgage rates might be adjusted downward.

Lock-in mortgage rates will depend more on long term bond rates.

US expected to drop rates further at its meeting next week. Their stand is stated in the afternoons as opposed to Canada that comes out with statements in the morning before the market opens.

Maybe Canada might follow suit again in Jan. Depends on new eco data and value of loonie.

Breaking News from The Globe and Mail

Yes, investors, there is a Santa Claus rally
John Heinzl


Thursday, December 06, 2007

Here comes Santa Claus, here comes Santa Claus. Let's hope he doesn't crash his sleigh into the New York Stock Exchange.

Every year around this time, investors put out milk and cookies for the chubby guy in the red suit. And almost without fail, he arrives with a bag full of money for all the grown-up boys and girls who play the stock market.

Now, Santa's about to be put to the test.

With subprime woes, the housing slump and plunging consumer confidence all weighing on the market, some investors worry that St. Nick will be a no-show this year. But given his remarkable track record, we think it would be a mistake to count him out.

Over the past 20 Decembers, Canada's benchmark stock index has risen 19 times and fallen just once. The average gain during those months was 2.9 per cent - higher if you include dividends. That is more than four times the average gain of 0.7 per cent for all months.

In the United States, December has also been good to stocks. Since 1950, the Dow Jones industrial average has advanced an average of 1.7 per cent during the month. That's second only to April, when the Dow has gained an average of 1.8 per cent, according to the Stock Trader's Almanac.

Nobody's sure why stocks rally in December, but there are lots of theories.

The simplest explanation is that it's driven by emotion. Around Christmas, people are cheerful, and this optimism prompts investors to buy stocks. December is also when year-end bonuses are handed out; the cash that isn't spent on jewellery or flat-panel TVs winds up back in the stock market.

Technical factors may also play a role. During the final months of the year, investors sell their dogs to create losses for tax purposes. When those stocks get beaten down to bargain levels, buyers swoop in and push prices back up.

Yet another factor is "window dressing," in which fund managers buy winning stocks to make their portfolios look pretty in end-of-quarter statements. Of course, it's also possible that investors simply expect the market to rise in December, so they buy stocks, making the Santa Claus rally a self-fulfilling prophecy.

Sure enough, stock markets were already getting into the Christmas spirit yesterday. On Bay Street, the S&P/TSX advanced 155 points, led by financials and energy producers. On Wall Street, the Dow tacked on 196 points, lifted by signs that the U.S. economy might avoid a recession.

Of particular interest to U.S. investors was a report from ADP Employer Services that said companies added 189,000 jobs in November - more than three times as many as expected. The data buoyed confidence about the resilience of the economy and prompted economists to boost their predictions for job growth in tomorrow's U.S. government employment report for November.

Adding to the merriment, the Labour Department said worker productivity rose the most in four years during the third quarter, while unit labour costs - a measure of inflation - fell more than expected.

Whether the December rally will last will depend to a large extent on what the U.S. Federal Reserve Board does at its meeting next Tuesday. If Fed chairman Ben Bernanke plays Santa and delivers a half-point cut to shore up the economy, stocks will probably rally. If he plays Scrooge and only cuts the federal funds rate by a quarter-point, an awful lot of investors could be getting a lump of coal for Christmas.



http://www.globeinvestor.com/servlet/story/RTGAM.20071206.wrheinzl06/GIStory/

Strange bedfellows for sure
MARCUS GEE

From Wednesday's Globe and Mail

E-mail Marcus Gee | Read Bio | Latest Columns
December 5, 2007 at 6:15 AM EST

India and China are the twin titans of the developing world. With a combined population of 2.4 billion, they account for more than a third of the world's population and 15 per cent of world trade. That share of trade is expected to rise to 40 per cent within a generation. By then, China is forecast to be the world's biggest economy by purchasing power parity and India the third biggest.

What if these two giants put their heads together? That is the tantalizing prospect held out by Harvard business professor Tarun Khanna in his new book Billions of Entrepreneurs: How China and India are Reshaping their Futures and Yours.

Prof. Khanna concedes right off the top that the two are unlikely bedfellows. Though both have seen dramatic economic growth in recent years - 10 per cent a year in China's case, nearly 9 per cent in India of late - they have taken very different paths to development. China is a one-party, Communist state that plays a strong role in guiding economic growth. India is the world's biggest democracy whose guidance is erratic at best. China has been much better at putting in place the infrastructure needed for development - a spider's web of new superhighways, railway lines, air links and port facilities. India's railways, roads and ports are, for the most part, a shambles.

India's vibrant private sector has fostered a number of nimble, world-class companies such as IT leaders Wipro and Infosys, while China's big companies (while maturing) tend to be lumbering giants. China's boom has relied heavily on foreign direct investment. India gets by with a fraction of China's FDI. "While the government is more efficient in China, the foundations for a market economy are much more robust in India," Prof. Khanna writes.

But these very differences could make co-operation between the two countries profitable for both, he says in his book, from Harvard Business School Press.

"China and India together could have a stronger impact on each other and the world than either country could alone. What China is good at, India is not, and vice versa. The countries are inverted mirror images of each other," he writes.

The co-operation he talks about is already beginning between Indian and Chinese companies. The Indian tractor maker Mahindra & Mahindra has made a dent in John Deere's dominance of the U.S. tractor market with small tractors designed to be used by hobby farmers rather than big agribusiness. Its latest model, a 40-horsepower unit, was designed and engineered in India but will be built in China under a joint venture with eastern China's Nanchang city government. The local disco in Nanchang now plays Indian music and M&M's former chairman sang songs from Bollywood movies at the company's first banquet in China, according to Prof. Khanna.

Similarly, China's Huawei Technologies, the country's leading high-tech firm, has set up software laboratories in India's IT hub, Bangalore. "Entrepreneurial Indians now cater to the culinary needs of Huawei's Chinese employees, and it is as common to find apartment blocks in Bangalore populated largely by Chinese as it is to see Indian faces in Huawei's Shenzhen facilities" in southern China, the author writes.

Co-operation is growing in the energy sector, too. China National Petroleum Corp. and India's Oil and Natural Gas Commission have invested in exploration together in such far-flung places as Sudan and Syria.

Prof. Khanna concedes that Sino-Indian economic co-operation is still limited and tentative. Though India-China trade now exceeds $1-billion (U.S.) a month, up from $1-billion a year a decade ago, that is still a drop in the bucket beside what the two countries trade with Europe or North America. Indians, he writes, are still suspicious about the Chinese and both sides are surprisingly ignorant about each other. It was only four decades ago that the two fought a Himalayan border war that soured relations and choked off trade for years.

But if history is any guide, the two will become partners again. Indian monks brought Buddhism to China centuries ago. Trade thrived. In the 1800s, by one estimate, India and China together accounted for as much as half of global gross domestic product. Both have recently put the prosperity and well-being of their people above the antagonism that divided them for so long, now replaced by a mostly healthy rivalry. If Prof. Khanna is right, the synergies that spring from their different ways of approaching economic growth will make them a powerful pair again in decades ahead.

ArcelorMittal to extend offer for all China Oriental shares
CASSIE BIGGS


Friday, December 07, 2007

HONG KONG — ArcelorMittal, the world's largest steel maker, said Friday it will offer at least $1.65-billion for the remaining shares in China Oriental Group Co. that it does not own after a ruling by Hong Kong's securities regulator.

But an analyst said Beijing was unlikely to give its approval for foreign majority ownership in such a strategic sector of the Chinese economy as steel.

ArcelorMittal said it would offer at least 6.12 Hong Kong dollars ($0.79 U.S.) a share, the same price it paid for a 28.02 per cent stake, or 820 million shares, in the Chinese steel maker last month, according to a statement posted on China Oriental's Web site.

That would bring the total offer price for the remaining 2.1 million shares to at least $12.9-billion (Hong Kong), or $1.65-billion (U.S.).

The Luxembourg-based steel maker said it would maintain China Oriental's listing on the Hong Kong stock exchange.

The purchase would still need to be approved by China's communist leadership, which has strict rules on foreign majority ownership.

“They would have to go through an approval process, and the chances are of approval being given any time soon is highly unlikely,” said Scott Laprise, a Beijing-based steel and auto analyst for brokerage and investment bank, CLSA.

“Steel is not thought of in China as it is in other places. It's not just a commodity, it's a strategic part of the economy,” he said.

ArcelorMittal has been expanding its investments as it seeks to build its position in the world's biggest steel-making and consuming market.

However, its bid to buy a 38 per cent stake in state-owned mid-sized steel maker Laiwu Steel Corp. stalled after Chinese regulators demanded a higher price to let the deal go through.

Approval for the China Oriental takeover would depend on how much Beijing wanted to be seen as interfering with a private company, said Hubert Tang, a Shanghai-based analyst with UBS.

“The government has made it very clear that it does not want foreign majority ownership in state-owned steel mills, but in this case, it's a private-owned company, and it's up to the chairman to decide how much of his shares he wants to sell,” he said.

The Chinese company makes steel billets, strips, cold-rolled and galvanized steel at factories in Hebei province in northern China and in Guangdong province in the south.

The Hong Kong Securities and Futures Commission ruled Thursday that ArcelorMittal had acted in concert with China Oriental's chairman, Han Jingyuan, to buy the 28 per cent stake. Under Hong Kong listing rules, ArcelorMittal is now obliged to make a general offer for the rest of China Oriental, according to a statement posted on the regulator's Web site.

ArcelorMittal's support would help the company become one of China's leading producers of heavy-section steel, said Han, who holds a 45 per cent stake in the company.

ArcelorMittal said it would share technology and technical expertise with China Oriental, and assist the Chinese company with sourcing iron ore and coal.

“We have made no secret of our wish to participate more actively in the China's fast growing steel market, and the agreements we have signed are a major step forward in delivering that strategy,” Lakshmi Mittal, ArcelorMittal's president and chief executive officer, said in the statement.

China Oriental's shares have been suspended from trading on the Hong Kong stock market since Nov. 7.

© The Globe and Mail

Like man, this article is from Bloomberg- noted for financial news.

http://www.bloomberg.com/apps/news?pid=20601088&sid=a6sXAi67skhY&refer=home

Exerpt from the article

...A 10-minute rendition of ``Kashmir,'' with a spectacular light show, had thousands of fans dancing to the infectious beat .....

By the way for you Bombayites out there, Plant and Page did their first live rendition of Kashmir at Slip Disc in Colaba next to Radio Club, even before it was officially released on vinyl.

Here's the article


Led Zeppelin Reunion Wows London, Keeps World Guessing on Tour

By Mark Beech

Dec. 11 (Bloomberg) -- Led Zeppelin played its first concert in 19 years, leaving a London audience of 20,000 people calling for more -- and the world guessing on whether the band will tour.

Last night's show, described as ``rock's biggest reunion'' by other stars at the O2 Arena, was hailed by fans as immaculately performed. The only disappointment was no announcement on whether it will be the prelude to a longer return.

It was billed as a not-to-be-repeated charity event, though the demand could persuade the group to join a lucrative reunion bandwagon that includes the Police, Eagles, Who and Spice Girls. ``Led Zep'' could make $3.2 million a night, Billboard estimates.

``This was unforgettable,'' said concertgoer Martin Slaney. ``It was a monumental event that I was lucky to win a ticket for. They played like they had never been apart and were note perfect. This has to go down as one of the greatest comeback concerts of all time,'' said Slaney, who works for GFT Global Markets Ltd.

The audience ovation began with the opening ``Good Times Bad Times'' as Robert Plant intoned the words: ``In the days of my youth/ I was told what it means to be a man/ Now I've reached that age/ I've tried to do all those things the best I can.'' Blistering accounts of ``Ramble On'' and ``Black Dog'' followed. Then Plant said good evening. This was just the start.

The audience went wild at the end of a show of 16 songs and would not let the band go. A storming take on ``Whole Lotta Love,'' one of Zeppelin's most famous songs, stirred up emotions after a driving set of pounding rock by founder members -- guitarist Jimmy Page, singer Plant and bassist John Paul Jones -- joined by Jason Bonham, son of their late drummer, John Bonham.

`Gig of the Century'

``We are seven years into the millennium,'' said fan Janie Oldfield, 25, from London, in an interview. ``For me, we've seen the gig of the century. It's easily the best concert I've ever seen.'' Oldfield's ticket was bought by her mother Sue, 51, who queued with her to get the pass needed to get in. ``You could sense rock history being written,'' said Oldfield, a fashion designer.

The show, in rehearsal for three weeks, included nearly all of the Zep classics. ``For Your Life'' was given its live debut. A 10-minute rendition of ``Kashmir,'' with a spectacular light show, had thousands of fans dancing to the infectious beat, including me.

The bearded Plant, 59, told the crowd that ``Dazed and Confused'' had to be on the set list and the band responded with a standout performance, equal to some of those at its 1970s peak, crowned with spaced-out feedback.

White-haired Page, 63, added a crazed guitar solo to ``Stairway to Heaven.'' It sounded even better than some of the live performances captured on albums such as ``How The West Was Won,'' ``The Song Remains The Same'' and various bootlegs.

`No Quarter'

``I was speechless,'' said another fan, Emmet Owens, 26, from Derry, Northern Ireland, who sat three rows from the front. ``I could not find any faults. `No Quarter' was amazing.''

The event will benefit the Ahmet Ertegun Education Fund, which provides students with annual scholarships to universities in the U.S., U.K. and Turkey. The late Ertegun, an industry leader for six decades, was the co-founder of Atlantic Records. He died in New York last December from a head injury suffered when he fell backstage at a Rolling Stones concert in October. He was 83.

Singer Paolo Nutini, 20, the last British act to be signed by Ertegun, said in an interview before the concert that Led Zeppelin was ``about to prove'' that it was the best band in the world again. Foreigner's Mick Jones, also arriving for the show, said that Zeppelin's reunion ``raised the bar'' for everybody else.

Wyman, Emerson

Zeppelin, which has sold more than 300 million albums, was the biggest name on the concert list which also featured performances by Nutini, Foreigner, Bill Wyman, Keith Emerson and Paul Rodgers.

Tickets originally cost 125 pounds ($254) and were available through a ballot at http://www.ahmettribute.com . The ballot had more than a million entries. The site had 25 million hits from those trying to register and crashed as 80,000 people a minute clicked on it.

Tickets were later offered on EBay for as much as $10,000 each for ``buy it now'' sales. Promoter Harvey Goldsmith tried to prevent reselling of tickets by insisting on strict identification checks. Fans had to present a photo ID, the credit card used to book the ticket and a confirmation code. Lucky winners, who were given a non-transferable bracelet, traveled from more than 50 countries, and some queued for six hours.

The most expensive tickets were 83,000 pounds for a pair, paid by Glasgow businessman Kenneth Donnell in a charity auction.

Bonham's daughter Zoe said in an interview as the concert got under way that her brother Jason was ``not at all nervous.'' It was the first time that she had heard Led Zeppelin perform live. (For the record, Bonham was strikingly good, and Page showed no sign of suffering from his finger injury that had delayed the concert from November.)

Atlantic Label

Led Zeppelin, formed in 1968, was named after an in-joke that the band's heavy sound would ``go down like a lead balloon.'' The quartet signed with Atlantic the same year.

By the early 1970s, ``Led Zep'' was describing itself as ``the biggest band in the world.'' The group pioneered heavy-metal music with songs such as ``Whole Lotta Love'' and ``Stairway to Heaven.''

Led Zeppelin broke up after Bonham died, aged 32, in 1980. Page and Plant have often performed and recorded together since then, though not under the group's name. Jones, who played keyboards as well as bass, joined reunions at 1985's Live Aid and a 40th anniversary concert for Atlantic in 1988, also with Jason Bonham on drums.

The show was watched by Noel Gallagher of Oasis, David Gilmour of Pink Floyd and Dave Grohl, frontman of Foo Fighters.

Critic Killer

Of the many hundreds of rock gigs I have seen over the years, this was one of the best. If I hadn't got a press pass, I would have paid whatever for the privilege (though 83,000 pounds might have taken some explaining to my other half).

``Since I've Been Loving You'' was the sort of track to kill those critics who say Led Zep can only do loud and insensitive. It was as tender and sweet as they come, with Page adding little guitar flourishes to each line.

The show was filmed, so we can pray that it will be released at some stage. Even better would be a world tour so everyone else can see how good a rock band can be. Let's hope.

(Mark Beech writes for Bloomberg News. The opinions expressed are his own.)

To contact the writer on this story: Mark Beech in London at .