| TUESDAY, JULY 22, 2014, CANADA EDITION TOP NEWS • EU threatens Russia with more sanctions, but words ring hollow European Union foreign ministers threatened Russia with harsher sanctions over Ukraine, but tougher talk may not be matched by much action after France's president signalled the disputed delivery of a warship to Moscow would go ahead. • Verizon revenue rises on strong wireless subscriber additions The wireless telecoms company, reported a 6 percent rise in quarterly revenue as its postpaid wireless subscriber additions rose 53 percent. • CN Railway profit climbs on record volumes; lifts outlook Canadian National Railway Co, the country's largest rail operator, reported a big spike in profit on Monday as it moved record volumes of goods and made a swift recovery from last quarter's brutal winter weather. • Wary investors slow to warm to Barrick Gold's latest shakeup Worried they may be given the cold shoulder by an imperious leadership, shareholders of Barrick Gold Corp, the world's biggest gold miner, are taking a "show me" approach to the company's latest management shakeup. • China food scandal spreads, drags in Starbucks, Burger King and McNuggets in Japan The latest food scandal in China is spreading fast, dragging in U.S. coffee chain Starbucks, Burger King Worldwide Inc and others, as well as McDonald's products as far away as Japan.
BEFORE THE BELL Canadian stock market looked set to open higher as traders saw hopes of easing of tensions between Russia and the West after rebels in Ukraine handed over the black box recorder from Malaysia flight 17 to Malaysian authorities. U.S. stock index futures indicated a higher open for Wall Street. European and Asian stocks advanced with the MSCI's broadest index of Asia-Pacific shares outside Japan gaining about 0.7 percent to its highest since 2011. Gold slipped as its safe-haven appeal lost shine, while brent rose.
STOCKS TO WATCH • Canadian National Railway Co (CNR). Canada’s largest rail operator reported an 18-percent jump in second-quarter profit on Monday and revised its 2014 financial outlook. Net earnings rose to C$847 million, or C$1.03 per share, from C$717 million, or 84 Canadian cents per share, in the same period a year ago. CN said it now expects to deliver "solid double-digit EPS growth" in 2014 over 2013 earnings per share of C$3.06, versus an earlier forecast of "aiming for double-digit" growth. It also lifted its 2014 free cash flow forecast to a range of C$1.8 billion to C$2 billion, from a previous view of C$1.6 billion to C$1.7 billion.
ANALYSTS' RECOMMENDATIONS • Canadian National Railway (CNR). CIBC raises price target to C$77 from C$76 cites better-than-expected second quarter results • Kirkland Lake Gold Inc (KGI). CIBC raises target price to C$3.50 from C$3; rating sector underperformer says the company’s expansion plan for Macassa mine offers up interesting prospects for grade enhancement
ECONOMIC EVENTS No major economic events are scheduled.
COMPANIES REPORTING RESULTS 07/22 Canwel Building Materials Ltd (CWX). Expected Q2 earnings of 16 Canadian cents per share 07/23 No major companies are scheduled to report
CORPORATE EVENTS No major corporate events are scheduled.
EXDIVIDENDS No major companies are scheduled to report ex-dividend.
(All analysts' estimates are according to Thomson Reuters I/B/E/S/) | | INSIGHT
COLUMN-Russia worries in a low-volatility world
Rising tensions between Russia and the West are doing what central bankers can’t or won’t: scare investors. Global stock markets fell for a third straight session on Monday, driven in substantial part by rising tensions after the downing of a civilian airplane over Ukraine. The U.S. blames the destruction of a Malaysian Airlines jet on pro-Russian fighters armed by Russia, and EU and U.S. officials are threatening stronger sanctions on Russia, contributing to a spike in volatility and a fall in most risky assets. Contrast that to the mild reaction to a rare and specific warning last week from Fed Chair Janet Yellen about debt markets and social media and biotech shares. Or, for that matter the relative unconcern investors have displayed about the Banco Espirito Santo mess, which threatens the patched-together consensus about how best to buttress Europe’s banks. We suddenly have a source of volatility in what has been an exceptionally placid landscape. On the theory that you can learn a lot about a person by studying what they fear and why, all of this calls for a close look at the assumptions investors appear to be making. As ever, the first and often best answer for why a price moved is that it ought to have, and tensions with Russia may be no exception. Sanctions imposed on Russia, whatever their merits, carry with them undeniable costs for both sides. Specifically Russia is a major trading partner with the European Union, and maybe more importantly a key supplier of energy, one with a track record of using energy aggressively. Remember too that while a central bank can create more money and easier credit, neither the ECB nor the Federal Reserve has oil or natural gas reserves. And while the U.S. does have reserves, there is no way for the punitive sanctions to be put into place without a measure of blowback for the economies of those imposing them. To read more, click here
-- By James Saft -- The opinions expressed are his own. At the time of publication, he did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund.
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