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10 areas where economists agree (uncertainty is one)

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The common thread Bay Street economists have been revising their economic forecasts as tougher times in the United States and the debt crisis in Europe threaten the global recovery. While there are differences among them, there are many key themes, and the analysts are "generally singing from the same songbook," Toronto-Dominion Bank says.

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The difference in opinion across the economics departments of Canada's big banks are, in fact, somewhat "trivial" given the heightened uncertainty, deputy chief economist Derek Burleton said in a report today. Here's the common ground, according to Mr. Burleton:

1. Slower, longer. "Even though Bay Street forecasters had been predicting a half-speed recovery, longer-term growth expectations have been scaled back in this forecast round to better recognize the extent of structural problems that exist in the U.S. and Europe."

2. Temporary pause. "There has been broad recognition over the past year that recoveries were tenuous and could stall along the way."

3. Emerging markets growing. "While China and other BRIC economies are not immune to weakness in the advanced world, nobody has thrown cold water on the long-term story that strong growth will remain intact over the next several years."

4. Commodity prices to remain high. "Propelled by demand from emerging markets, prices for commodities are expected to remain at the high end of their 10-year ranges."

5. Canada better than peers, but not immune. "A weaker U.S. outlook and heightened stress in global financial markets will not be lost on this country's growth performance going forward."

6. Low rates, for longer. "In Canada, the central bank is expected to keep its benchmark rate at the current level of 1 per cent until at least mid-2012. TD Economics expects that first hike to be delayed until early 2013."

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7. Loonie strong, greenback weak. "Bay Street forecasters are of the mind that the currency will trade at parity (or higher) on average over the remainder of this year and in 2012."

8. High-risk environment. "The prevailing consensus view of modest growth across the advanced clearly builds in more than just bad news."

9. Volatility is key. "While forecasting is a difficult game these days, one bet looks particularly probable: volatility in financial markets will remain in the coming months as investors digest news coming out of Europe and the United States."

10. Uncertainty. "Forecasters would all agree that the path that the global economy will ultimately follow will be filled with more twists and turns than can ever be captured in their recently-released baseline projections."

Leaders back Greece German Chancellor Angela Merkel and France's President Nicolas Sarkozy gave Greece a strong vote of support today, saying they believe firmly that the embattled country will remain within the troubled euro zone.

Ms. Merkel and Mr. Sarkozy held a telephone chat with Greece's Prime Minister George Papandreou, who, according to statements, pledged to meet the country's deficit-fighting targets.

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"In response to the rumours of the recent days it was emphasized by all that Greece is an integral part of the euro zone," government spokesman Elias Mosialos said in a statement, according to a translation by Bloomberg News.

"Greece is determined to meet all its commitments to its partners, ensuring in this way the full implementation of the support program. The decisions taken by the Cabinet in recent days and the additional measures announced lead to meeting fiscal targets for 2011 and 2012 and the creation of primary surpluses. This will fortify the Greek economy, relieve the public debt burden and reinforce the country's growth prospects."

Also playing into markets today are comments from EC president Jose Manuel Barroso, who said proposals will soon be introduced for a euro zone bond, and Italy's Parliament approving Rome's austerity measures.

China has conditions, too As the world looks toward China for salvation, Beijing has its conditions, too.

Premier Wen Jiabao today warned leaders of the struggling western world to get their houses in order, and move more quickly to recognize China as a market economy, Carolynne Wheeler reports from Beijing. His comments come as the so-called BRICS group - Brazil, Russia, India, China and South Africa - prepare to meet in Washington next week to study ways of helping the euro zone out of its mess, perhaps by buying debt.

"We have been concerned about the difficulties faced by the European economy for a long time, and we have repeated our willingness to extend a helping hand and increase our investment," Mr. Wen said. "To show one's sincerity on this issue [of the market economy] a few years ahead of that time is the way a friend treats another friend."

As our Washington correspondent Kevin Carmichael reports today, the idea of the BRICS proposal is akin to the Marshall Plan after the Second World War, when the United States moved to help stabilize Europe. But there are questions today about how much help the developing powerhouses can give in bailing out the Old World.

"Clearly they aren't going to buy all the debt, but a substantial purchase is certainly within the BRIC's means and would go some ways to calming the crisis," said Benjamin Reitzes of BMO Nesbitt Burns.

"However, considering Chinese purchases of European peripheral debt over the past year have provided only temporary relief, a small purchase won't likely have much impact … go big or go home."

Mr. Reitzes noted that the foreign exchange reserves of the BRIC countries, minus South Africa, were almost equal to the debt of Portugal, Ireland, Italy, Greece and Spain in the first quarter. For his findings, see the accompanying infographic or click here.

Moody's dings French banks Moody's Investor Service took some of the uncertainty out of the markets today, with an expected downgrade of two of France's biggest banks, which have a hefty amount of Greek debt on their books.

Moody's cut the ratings of Société Générale and Crédit Agricole by one notch.

"The long awaited downgrades of French banks started this morning with ratings agency Moody's downgrading Société Générale, Crédit Agricole on their exposure to sovereign debt with Credit Agricole staying on review for a further downgrade, due to the current persistent fragility in bank financing markets," said CMC Markets analyst Michael Hewson.

"Surely it can only be a matter of time before BNP Paribas follows in their wake, as the bank announces a restructuring plan to increase capital, probably in order to head off a downgrade at the pass, as Moody's holds fire and extends the downgrade review period on the bank."

HSBC nears deal HSBC Bank Canada is one step closer to selling its retail brokerage to National Bank of Canada , Streetwise columnist Tim Kiladze reports today.

The two parties are working out the final details.

National Bank Financial and Richardson GMP were the only two firms invited to bid on the business, and a source familiar with the talks said Richardson's offer wasn't good enough.

Analysts keen on Apple RBC Dominion Securities analysts have raised their estimates for 2012 and 2013 earnings from Apple Inc. , citing "unprecedented" demand for the iPhone 5 and the domination of the iPad in the tablet market.

"Proprietary RBC survey data shows 31 per cent very/somewhat likely to buy the iPhone 5, significantly exceeding pre-launch iPhone 4 demand (25 per cent)," analysts Mike Abramsky, Mark Sue and Paul Treiber said in a research note.

"With the iPhone 4 nearly 15 months old, 66 per cent of existing iPhone users are very/somewhat likely to buy the iPhone 5, pointing to a large upgrade cycle."

The analysts, whose price target on Apple shares is $500 (U.S.), boosted its outlook for iPhone shipments in the first quarter of fiscal 2012, and the year as a whole. It also raised its fourth-quarter projection for the iPad, citing strong back-to-school sentiment.

RBC boosted its earnings per share projections to $34.50 in 2012 and $40 in 2013.

The report on Apple comes a day before its competitor, Research In Motion Ltd. reports quarterly earnings. Some analysts have been more upbeat on RIM stock of late, citing a good start for its BlackBerry OS7 smart phones.

Fast warns U.S. Canada's International Trade Minister Ed Fast issued a warning to the United States today over plans for a "Buy America" provision in President Barack Obama's new jobs package.

Mr. Fast said his officials will be talking to the Americans after details of the American Jobs Act indicated such a policy where it concerns infrastructure projects.

"In this fragile economic recovery, we know history has shown protectionist measures stall growth and kill jobs," Mr. Fast said in a statement.

"I have instructed Canadian officials to initiate the consultation process that was established as part of the 2010 Canada-U.S. Agreement on Government Procurement," he added. "Our government will raise with the Obama Administration and Congress concerns regarding measures that impede access for Canadian workers and businesses to the U.S. market, as we did for earlier U.S. stimulus programs."

U.S. sales flat The American consumer is showing more signs of caution amid a slowing economy.

Retail sales in the United States were flat last month, according to the U.S. Commerce Department today, a troubling sign for consumer spending amid high unemployment and a stalled recovery.

This comes just one day after the U.S. Census Bureau reported on the deteriorating finances of Americans in the post-recession era.

"Sales during the month were held back by declines in deparment stores, clothing and furniture outlets, with other categories generally showing modest improvement," said Peter Buchanan of CIBC World Markets.

"While there may be some tendency to attribute at least part of the softness to disruptions from Hurricane Irene, the data provide little evidence that the consumer sector is picking up solidly after a disappointing flat [second-quarter] performance."

Hathor dismisses Cameco bid Canada's Hathor Exploration Ltd. has rebuffed uranium giant Cameco Corp. , saying its $520-million takeover bid isn't worth it.

"Hathor's board of directors is firmly committed to ensuring that Hathor shareholders receive full value for their investment in this company, something this offer does not provide," James Malone, who chaired the special committee that studied the bid, said in a statement.

Calling the bid predatory, the company outlined several reasons for rejecting the bid.

In Economy Lab If the definition of insanity is trying the same things over and over again and expecting different results, then the men in the white suits need to go to the White House right away, David Rosenberg writes.

In International Business Germany must choose between a euro zone disturbingly different from the larger Germany it expected or no euro zone at all, Martin Wolf of The Financial Times writes.

In Globe Careers The online release last week of amorous e-mails between Conservative MP Bob Dechert and Shi Rong, a journalist with Xinhua News Agency, is illuminating the peculiar role of workplace e-mail in the lives of office workers across Canada. The Globe and Mail's Simon Houpt reports.

From today's Report on Business

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More

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