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Ottawa pressed to sanction Russian steel magnate Alexei Mordashov and his investment in Canadian gold mine

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Alexei Mordashov speaks during a session of the St. Petersburg International Economic Forum (SPIEF) in Saint Petersburg, Russia in June 2022.MAXIM SHEMETOV/Reuters

The federal government is under pressure to levy sanctions on one of Russia’s richest oligarchs, who has strong ties to President Vladimir Putin and whose family owns a global gold-mining company that has an exploration project in Nunavut.

Billionaire businessman Alexei Mordashov has been blacklisted and subject to asset freezes by the United States, the European Union and Australia but has so far avoided being targeted by Ottawa. The White House described him and several other sanction targets as “close to Putin.”

Mr. Mordashov is the largest shareholder of Severstal, Russia’s fourth-largest steel maker, and his family owns stakes in gold miner Nordgold, whose headquarters are in Moscow. Nordgold was majority owned by Mr. Mordashov until March, shortly after Russia’s invasion of Ukraine, when he transferred his shares to his live-in partner in an attempt to avoid sanctions.

Conservative Senator Claude Carignan raised the matter in the Senate on Dec. 14, asking Natural Resources Minister Jonathan Wilkinson why Mr. Mordashov is not on Canada’s list of banned Russian oligarchs and why Nordgold is allowed to operate in Canada.

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Mr. Wilkinson said he was open to imposing sanctions on the Russian oligarch, whose personal net worth is valued at about US$29-billion, but he said the decision rests with Foreign Affairs Minister Mélanie Joly.

“It is important because Canada is a leader when it comes to banning bad actors, including Russia, which invaded Ukraine. I am very open to the idea of having a conversation with you and then with Minister Joly,” Mr. Wilkinson told the Senate during a ministerial Question Period.

Ms. Joly herself has talked about the need to impose high costs on Russia. In May, she said the goal of Canada and its allies is to isolate Russia “economically, politically and diplomatically.”

But Ms. Joly’s office declined to say what the minister would do about Mr. Mordashov when asked by The Globe and Mail. Instead, press secretary Adrien Blanchard noted in a statement that Ottawa has imposed sanctions on 1,500 “individuals and entities complicit in Russia’s illegal invasion of Ukraine, including on Putin himself” since the Russian invasion of Ukraine on Feb. 24.

“Our objective is to be in lockstep with our allies, hold the Putin regime accountable, and starve the Russian war machine,” he added.

Mr. Blanchard, however, didn’t explain why Canada is not in lockstep with major allies on Mr. Mordashov.

Conservative Senator Leo Housakos, a former speaker in the Red Chamber, said it is embarrassing that the government has failed to act against Mr. Mordashov.

“In this particular incident, we talk tough about dealing with Putin and standing up for Ukraine and yet we see a Russian oligarch doing business here and enriching himself off Canadian natural resources,” he said.

Mr. Housakos said he fears that Canada has become “a laundry machine for dictators and oligarchs to come to Canada and use us because of our lax approach in dealing with these authoritarian criminals.”

Michael Nesbitt, a University of Calgary law professor who previously worked on sanctions policy for the federal government, said the Canada tends to lag its Western allies in levying sanctions on individuals or entities.

He also said the Canadian government appears to have a “less robust” process than major allies to decide which companies and individuals to target.

When the EU put sanctions on Mr. Mordashov, it said he was “benefiting from his links with Russian decision-makers” and cited his business company Severgroup’s financial interest in Rossiya Bank “which is considered the personal bank of senior officials of the Russian Federation.” It also cited his investments in media that “actively support the Russian government’s policies of destabilization of Ukraine” through pro-Putin television stations.

On June 3, the EU also levied sanctions on Marina Mordashova, described as Mr. Mordashov’s wife, citing the transfer of Nordgold shares to her through “various offshore companies.”

That month, Washington hit Mr. Mordashov with sanctions as well as four companies linked to him, including Nordgold. They also imposed sanctions on two of the billionaire’s children and his life partner, Ms. Mordashova.

In March, Italian police seized a yacht owned by the Russian billionaire.

The Nunavut project, known as Pistol Bay, consists of 860 square kilometres of mineral rights within the underexplored Rankin-Ennadai greenstone belt. Nordgold, through its Canadian subsidiary Northquest Ltd., is the 100-per-cent owner of the Pistol Bay venture.

In 2019, the company said on its website that Nordgold conducted an exploration drilling campaign that demonstrated the site had approximately 1.6 million ounces of gold at a grade of 2.2 grams per tonne.

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Weaker Orders, Investment Underscore Ailing US Manufacturing – Yahoo Canada Finance

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(Bloomberg) — US manufacturing showed more signs this week of succumbing to the Federal Reserve’s aggressive interest-rate hikes that are taking a bigger bite out of demand and risk upending the economic expansion.

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The government’s first estimate of gross domestic product for the fourth quarter and a report on December factory orders for durable goods pointed to sizable downshifts in both spending on business equipment and bookings for core capital goods.

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The durable goods report Thursday showed orders for nondefense capital goods excluding aircraft — a proxy for business investment — dropped 0.2% in December after no change a month earlier. Over the fourth quarter, bookings for these core capital goods posted the weakest annualized gain since 2020. Shipments, an input for GDP, decreased for the third time in four months.

“Taken in tandem with the output data where industrial production has declined in six of the past eight months, it is increasingly evident that the manufacturing recession is well underway,” Wells Fargo & Co. economists Tim Quinlan and Shannon Seery said in a note to clients.

Also on Thursday, the GDP report showed outlays for business equipment dropped an annualized 3.7%, the largest slide since the immediate aftermath of the pandemic. That decline was part of a broader demand slowdown, which included a smaller-than-forecast advance in personal spending.

While GDP growth beat expectations, details of the report that offer a clearer picture of domestic demand were decidedly weak. Inflation-adjusted final sales to private domestic purchasers, which strip out inventories and net exports while excluding government spending, rose at a paltry 0.2% rate — also the weakest since the second quarter of 2020.

Last month’s retreat in core capital goods orders indicates manufacturing output, which already registered sharp declines in the final two months of 2022, may struggle to gain traction this quarter.

Read more: Weak US Retail Sales, Factory Data Heighten Recession Concerns

The slump in housing is also spilling over into producers of non-durable goods. Shares of Sherwin-Williams Co. tumbled this week after the paintmaker pointed to pressures stemming from a weak residential real estate market and inflation.

“We currently see a very challenging demand environment in 2023 and visibility beyond our first half is limited,” Chief Executive Officer John Morikis said on a Jan. 26 earnings call. “The Fed has also been quite clear about its intention to slow down demand in its effort to tame inflation.”

An accumulation of inventories only adds to the headwinds. Inventory building accounted for about half of the 2.9% annualized increase in fourth-quarter GDP. For the year as a whole, inventories grew $123.3 billion, the most since 2015.

With demand moderating, there’s less incentive to ramp up orders or production as companies make greater efforts to sell from existing stock.

In addition to the aforementioned data, the latest surveys of manufacturers show sustained weakness. Measures of orders at factories in four regional Fed surveys have all indicated multiple months of contraction.

All surveys released so far for this month are consistent with an overall contraction in activity that extends back through most of the second half of 2022.

Next week, the Institute for Supply Management will issue its January manufacturing survey and economists project a third-straight month of shrinking activity.

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©2023 Bloomberg L.P.

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Canada expected to buck trend of big investment banking layoffs – Reuters

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TORONTO, Jan 26 (Reuters) – Some of Canada’s top investment banks plan to maintain staffing levels to meet client expectations for the same level of coverage through the ups and downs of business cycles, head hunters and industry executives said.

U.S. investment banks, including Goldman Sachs (GS.N), began cutting over 3,000 employees on Jan. 11 citing a challenging macroeconomic environment, raising fears Canadian banks may follow suit. Like their global peers, many Canadian investment banks had staffed up during the pandemic only to see dealmaking slow last year.

At Royal Bank of Canada (RY.TO), the country’s biggest lender, for instance, headcount at its capital markets division jumped by 71% over the two years ending Oct. 31, 2022 to 6,887 employees.

But in the meantime Canadian dealmaking fell 39.7% last year to $89.7 billion. That is more than the 36% drop in global deal values to $3.8 trillion following a stellar 2021, according to data from Dealogic.

Yet, Canadian banks have not announced layoffs and some even say they may increase headcount, though dealmaking in the new year is down nearly 50% to $3.2 billion from a year ago, according to Dealogic.

“Right now there is a sense that there isn’t a need for cuts in the system,” Dominique Fortier, partner at recruitment firm Heidrick & Struggles’ Toronto office, told Reuters.

“When there was an upswing in 2021, it happened so quickly that there was no corresponding increase in hiring and so I don’t see that we’ll have the same decrease in terms of headcount coming.”

Toronto Dominion Bank (TD.TO), which last year agreed to buy New York-based boutique investment bank Cowen Inc (COWN.O), expects to continue to grow its global investment banking business as it work towards closing the deal, a spokesperson said.

Desjardins, another Canadian lender, will continue to invest in its growing capital markets division, a spokesperson said.

EXPENSIVE PROPOSITION

Bill Vlaad, a Toronto-based recruiter who specializes in the financial services sector, said that while there was some nervousness around the stability of investment banking teams, Canada is unlikely to see U.S.-level redundancies aside from the annual cull of poor performers called “maintenance layoffs.”

“The U.S. is very nimble. They will go in and out of hotspots very quickly. Canada doesn’t have that same luxury and has to stay relatively consistent in coverage,” said Vlaad.

“You have a consistent group of people working…and they don’t fluctuate all that much year to year, decade to decade.”

But another down year for dealmaking could see bonuses taking a hit.

RBC, which was ranked No. 2 in Canada M&A, equity capital markets and debt capital markets last year according to Dealogic, has no layoff plans for investment banking in Canada, a source with knowledge of the matter said.

Spokespeople for JP Morgan, which topped the M&A league table last year, Scotiabank (BNS.TO) and Canadian Imperial Bank of Commerce (CM.TO) declined to comment. BMO did not respond to requests for comment.

Headhunters and lawyers say it’s less expensive to lay off bankers in the United States compared to Canada.

Howard Levitt, senior partner at employment law firm Levitt Sheikh, said Canadian investment banking employees would be entitled to somewhere between four and 27 months severance with full remuneration depending on their status, re-employability, age and length of service.

Reporting by Maiya Keidan
Editing by Denny Thomas and Deepa Babington

Our Standards: The Thomson Reuters Trust Principles.

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Weaker Orders, Investment Underscore Ailing US Manufacturing – BNN Bloomberg

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(Bloomberg) — US manufacturing showed more signs this week of succumbing to the Federal Reserve’s aggressive interest-rate hikes that are taking a bigger bite out of demand and risk upending the economic expansion.

The government’s first estimate of gross domestic product for the fourth quarter and a report on December factory orders for durable goods pointed to sizable downshifts in both spending on business equipment and bookings for core capital goods.

The durable goods report Thursday showed orders for nondefense capital goods excluding aircraft — a proxy for business investment — dropped 0.2% in December after no change a month earlier. Over the fourth quarter, bookings for these core capital goods posted the weakest annualized gain since 2020. Shipments, an input for GDP, decreased for the third time in four months.

300x250x1

“Taken in tandem with the output data where industrial production has declined in six of the past eight months, it is increasingly evident that the manufacturing recession is well underway,” Wells Fargo & Co. economists Tim Quinlan and Shannon Seery said in a note to clients.

Also on Thursday, the GDP report showed outlays for business equipment dropped an annualized 3.7%, the largest slide since the immediate aftermath of the pandemic. That decline was part of a broader demand slowdown, which included a smaller-than-forecast advance in personal spending.

While GDP growth beat expectations, details of the report that offer a clearer picture of domestic demand were decidedly weak. Inflation-adjusted final sales to private domestic purchasers, which strip out inventories and net exports while excluding government spending, rose at a paltry 0.2% rate — also the weakest since the second quarter of 2020.

Last month’s retreat in core capital goods orders indicates manufacturing output, which already registered sharp declines in the final two months of 2022, may struggle to gain traction this quarter.

Read more: Weak US Retail Sales, Factory Data Heighten Recession Concerns

The slump in housing is also spilling over into producers of non-durable goods. Shares of Sherwin-Williams Co. tumbled this week after the paintmaker pointed to pressures stemming from a weak residential real estate market and inflation.

“We currently see a very challenging demand environment in 2023 and visibility beyond our first half is limited,” Chief Executive Officer John Morikis said on a Jan. 26 earnings call. “The Fed has also been quite clear about its intention to slow down demand in its effort to tame inflation.”

An accumulation of inventories only adds to the headwinds. Inventory building accounted for about half of the 2.9% annualized increase in fourth-quarter GDP. For the year as a whole, inventories grew $123.3 billion, the most since 2015.

With demand moderating, there’s less incentive to ramp up orders or production as companies make greater efforts to sell from existing stock.

In addition to the aforementioned data, the latest surveys of manufacturers show sustained weakness. Measures of orders at factories in four regional Fed surveys have all indicated multiple months of contraction. 

All surveys released so far for this month are consistent with an overall contraction in activity that extends back through most of the second half of 2022. 

Next week, the Institute for Supply Management will issue its January manufacturing survey and economists project a third-straight month of shrinking activity.

©2023 Bloomberg L.P.

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