The Road To Recovery...

“The path to recovery has narrowed, but the path is still open, if action is taken now.” IMF Managing Director Christine Lagarde

“They need to overwhelm the problem in order to get ahead of the markets.” Canadian Finance Minister Jim Flaherty

BNN has scoured the alphabet for stories and settled on a handful, including the IMF, ECB. EFSF, BOC, UBS, LME and XL. And we thought we’d slip in the G20 for good measure.

IMF officials, G20 finance chiefs and central bankers emerged from a weekend of tense negotiations and media availabilities in Washington DC in full agreement that something must be done. They also agreed that something must be done soon. And they all acknowledged that whatever will be done will be expensive. They could not agree, however, on just what should be done, when it will be done and how much it will cost. Nor could they agree on who would pay. Yet stock markets seem mollified by the seriousness of it all and the fact that the IMF conference of central bankers and finance ministers appear to be narrowing their focus on the various ways the euro-zone bailout mechanism, the EFSF, can be enhanced and deployed. The fund sits at 440 billion euros – though even its current level and use has yet to be ratified by a handful of national parliaments – with some estimating that it may need to swell to 3 trillion euros to get the job done. Other components of a plan that may or may not be taking shape include the recapitalization of European banks (but not the big French banks, mais non!) and a managed Greek default.

That’s Europe, but what about Canada? Over the weekend, Bank of Canada Governor Mark Carneysaid the economy, the Canadian banks and the central bank have all the tools necessary to withstand a worsening global economy. In other words, if the global economy is the Toronto Maple Leafs, then we’re Wendel Clark. But what about the near-term shocks of falling commodity prices and shrinking demand for manufactured goods from the middle of the country? Broad measures of the commodity market have slumped to 10-month lows with the price of oil dropping below $80, copper sinking to its lowest in more than a year and silver erasing its tremendous gains for the year. Gold is falling as some investors sell to cover losses in other assets. Let’s talk about earnings expectations for the materials and energy groups today and whether current share prices are justified as earnings expectations fall.

A key component of our energy coverage this week will be the debate over the Keystone XL pipeline, the proposed $7 billion TransCanada project that would carry Alberta oil sands crude to refineries on the Gulf Coast. Beginning today, the U.S. State Department will hold eight hearings across the six states the 2,700-km pipeline will cross. The opposition is fierce, but the U.S. appetite for energy is insatiable. The safety of the environment is a compelling argument as is the case for thousands of jobs across thousands of miles of U.S. territory. Brett Harris will be on the ground in the U.S. this week for the public hearings. He’ll be doing some live hits this week, and then filing a special series on the pipeline in the coming weeks. He starts in Port Arthur, Texas, today. Then he’s off to Nebraska and Oklahoma.

In Ottawa today, Greenpeace is leading a mass protest, including a sit-in against the oil sands and the pipeline. The protest is expected to be attended by top entertainers and actors such as Dave Thomas. At a protest in Washington DC a few weeks ago, actress Daryl Hannah (who most recently wowed audiences in 1987’s Roxanne) told cameras as she was being escorted away by police that the oil sands were an environmental disaster, the only one that could be seen from space. While that may be true, I would add that, thanks to Google Earth, I can also see my house from space, including a raccoon in my backyard, and it is digging up the new sod.

The London Metals Exchange is fielding takeover offers and we need to find out more. Could a foreign buyer purchase this jewel of the British financial industry? As an exchange that is owned by its 90 or so members, could the government block a takeover even if it wanted to?

In the wake of a $2.3-billion loss from unauthorized trading, UBS CEO Oswald Gruebel resigned over the weekend. His departure throws into turmoil the outlook for one of the cornerstones of the Swiss banking industry. Plenty of angles yet to pursue.

Paul Bagnell is attending a speech by Julie Dickson, Superintendent of Financial Institutions, this morning on the lasting impact of the financial crisis on the Canadian financial system.