Canada Dollar Falls On Crude-oil Drop, U.s. Government Shutdown

TOP STORIES * As the U.S. government moved into the second week of a shutdown with no end in sight, a deadlocked U.S. Congress also confronted an Oct. 17 deadline to increase the nation’s borrowing power or risk default. * The World Bank lowered its 2013 and 2014 economic growth forecasts for China and most of developing East Asia, citing slower growth in the world’s most populous nation as well as weaker commodity prices that have hurt exports and investments in countries such as Indonesia. * Airbus announced its first jet order from Japan Airlines Co Ltd, breaking open the last big aviation market dominated by Boeing Co in a move that suggests the U.S. company may pay for the 787 Dreamliner’s troubled debut. * Apollo Tyres’ $2.5 billion acquisition of Cooper Tire & Rubber Co has flared into a war of words as the two companies haggle over the price of the deal plagued by labor issues in the United States, where Cooper is based, and in China. MARKET SNAPSHOT * Canada stock futures traded down 0.63 percent * U.S. stock futures , , were down around 0.87 percent to 0.7 percent * European shares, were down * Thomson Reuters-Jefferies CRB Index : 286.4369; fell 0.2 percent * Gold futures : $1,311.8; rose 0.16 percent * US crude : $102.82; fell 0.98 percent * Brent crude : $108.59; fell 0.79 percent * LME 3-month copper : $7,185.25; fell 1.03 percent CANADIAN STOCKS TO WATCH * BlackBerry Ltd : The company, on the block as its smartphone business struggles, is in talks with Cisco Systems, Google Inc and SAP AG about selling them all or parts of itself, several sources close to the matter said. * Bank of Nova Scotia : India’s customs department has cleared more than a tonne of gold, part of which was owned by Bank of Nova Scotia, at Mumbai airport after rule clarifications at a high-level meeting held last month, industry and bank officials said on Saturday. [ID: nL4N0HV05Z] ANALYSTS’ RECOMMENDATIONS Following is a summary of research actions on Canadian companies reported by Reuters.

Government Shutdown By Paul Cox – 2013-10-07T12:20:28Z The Canadian dollar fell against the greenback as crude oil, the nations largest export, declined and the U.S. government shutdown entered a second week. The currency was weaker against most of its 16 major peers as benchmark Canadian oil traded at the largest discount to U.S. crude since January. U.S. Speaker John Boehner said the House cant pass an increase to the U.S. debt ceiling without packaging it with other provisions — something President Barack Obama has labeled a nonstarter, adding to concern growth is slowing in Canada s largest trading partner. The loonie, nicknamed for the image of the aquatic bird on the C$1 coin, declined 0.3 percent to C$1.0325 per U.S. dollar at 8:18 a.m. in Toronto. One Canadian dollar buys 96.85 U.S. cents. Crude-oil futures dropped 0.9 percent to $102.90 a barrel in New York. The discount for Canadas benchmark Western Canada Select faced to West Texas Intermediate, its U.S. peer, was at $34.50 per barrel on Oct.

Canada’s Petro-Government

Progress Although there is still a lot of debt at Air Canada, the carrier is making strides to make it more manageable. Last month, Air Canada refinanced around $1.4 billion in long-term notes, some of which yielded up to 12%, at lower rates. Not only has this lowered the airline’s interest expense, but the stronger balance sheet puts Air Canada in a better position to finance its upcoming Boeing 787 purchases. Air Canada was also able to manage its pension liability with an agreement it reached in March with the Canadian government. Under the agreement, Air Canada will be granted until 2020 to fully fund its pension and in exchange, executive pay restrictions were put in place and the airline is banned from paying dividends or engaging in share buybacks. While the elimination of potential dividends and share buybacks is a negative, the extension of the pension funding timeframe is a major positive and prevents Air Canada from becoming insolvent over this obligation. But the big news that drove Air Canada shares higher on Friday was improved guidance on the airline’s cost-cutting program. As rival WestJet Airlines (TSX: WJA ) has grown in the Canadian market, Air Canada’s higher cost structure has come under pressure. Branding itself as a discount alternative to Air Canada, WestJet has taken a major role in the Canadian market. Guidance in the September report noted that cost per available seat mile should fall 3% to 3.5% for the third quarter compared with the 1.5% to 2.5% forecasted in August’s guidance. This is a major benefit for Air Canada as it tries to become more competitive with rivals such as WestJet. Analyst reactions Following this improved guidance, analysts have been raising price targets on Air Canada shares, noting that these results could drive shares higher. The following table summarizes some of the price target changes. Analyst Company C$5.00 Future potential As part of a fleet modernization strategy designed to cut fuel consumption, Air Canada currently has 37 Boeing 787s on order. The planes may be financed with ordinary long-term notes, but Air Canada may choose to utilize enhanced equipment trust certificates, or EETCs, as it did with its Boeing 777-300ERs.

All of a Sudden, the Market Loves Air Canada

iv Train derailments and pollution in Calgary The fallout from the recent oil train derailments in Calgary is continuing. The latest one , at CP Rails Alyth yard in the center of the city on Sept. 11, has focused attention on the efforts for several years now by residents of the adjoining Inglewood neighbourhood to restrict noise and air pollution emanating from the large, locomotive repair operations at the yard and the overall increases in rail traffic, including oil trains. In early August, the Canadian Transportation Agency ordered CP to move its locomotive repair to a more distant section of Alyth and to curb its overnight work. But when the Sept 11 derailment occurred, residents mounted a protest at the entrance to Alyth to voice additional concern over the danger of oil train movements. The rail company responded to all this, with a vengeance. On Sept 19, it announced it will move its locomotive repair operations from Alyth altogether. It did not consult or notify the workers union, Unifor. Nor were the Inglewood residents or City of Calgary informed. CP is not saying where the work will be moved. The citys mayor, Naheed Nenshi, has joined the union and residents in complaining about the lack of information and consultation coming from CP. The Inglewood Community Association has welcomed the announced move of locomotive repair out of Alyth. But it has voiced concern and solidarity with the fate of the workers. In a Sept. 19 press release, it says the Alyth closure may well be a stealth measure that is part of the vast, job-cutting moves by CP Rail ever since a new management group took over last year and declared job cuts and boosting CPs share price as its overriding priority.