Stock markets head for lower open ahead of slew of key Canadian, U.S. data

TORONTO – The Toronto stock market was set for a sharply lower open Friday as prices for oil and copper declined.

The Canadian dollar was lower ahead of the latest reading on economic performance, down 0.34 of a cent to 96.75 cents US.

Analysts have been expecting Canada’s first-quarter gross domestic product growth was above two per cent, including Bank of Montreal which estimated it would come in at 2.3 per cent.

U.S. futures were lower as traders also looked ahead to personal spending, consumer confidence and manufacturing data coming out later in the morning.

The Dow Jones industrial futures lost 78 points to 15,241, the Nasdaq futures declined 14.5 points to 2,995.5 while the S&P 500 futures were down 8.3 points to 1,645.3.

Economists expect that U.S. personal spending rose by 0.1 per cent during April following a 0.2 per cent gain in March.

Other data out later in the morning is expected to show that a key reading on manufacturing in the U.S. Midwest showed continued contraction. The Chicago Purchasing Managers Index for May is expected to come in at 49.9, which would be an improvement than the 3.5-year low of 49 posted in April.

And the final reading of the University of Michigan’s consumer sentiment survey for May is expected to edge up to 83.8, which would be the best level in more than six years.

Commodity prices were generally weak with July crude on the New York Mercantile Exchange down 77 cents to US$92.84 a barrel.

July copper edged two cents lower to US$3.29 a pound while June gold gained 30 cents to US$1,412.30 an ounce.

There was also acquisition activity in the mining sector.

New Gold Inc. (TSX:NGD) has reached a friendly deal to acquire Rainy River Resources Ltd. (TSX:RR), which has an advanced gold project in Ontario. The offer values Rainy River at about $310 million, net of its cash balance.

New Gold is offering $3.83 per share, which is than 40 per cent above the recent market price.

Canadian National Railway (TSX:CNR) will also be in focus after JPMorgan Chase upgraded its stock to neutral from underweight with a target price of $110. The stock closed Thursday at $105.96, up 30 per cent from its 52-week low.

Trading has been volatile this week amid signs if slowing growth in China and doubts about how long the U.S. Federal Reserve will carry on with its program of quantitative easing. The so-called QE3 involves the Fed buying up US$85 billion of bonds every month to keep long term rates low and encourage lending.

But U.S. indexes has charged ahead strongly during May, carrying on a rally that has gone on non-stop since late last year. For this month alone, the Dow industrial average has surged over three per cent, leaving the blue chip barometer up 17 per cent year to date, prompting speculation that the market is vulnerable to some profit taking.

The Toronto market hasn’t fared nearly as well, gaining just over two per cent for this this month and the year to date. The markets have been particularly dragged down by mining stocks. The base metals sector has fallen 15 per cent this year amid weak demand for commodities and a stubbornly slow global economic recovery. And the gold sector has plunged 32 per cent. Outside of the mining sector, many sectors have performed quite well, with financials up almost six per cent, industrials ahead 17 per cent and consumer staples up about 12 per cent.

European bourses were negative following a report showed unemployment hitting an all-time high across the 17 European Union countries that use the euro.

Eurostat, the EU’s statistics office, said Friday that unemployment rose to 12.2 per cent in April from the previous record of 12.1 per cent the month before.

London’s FTSE 100 index fall 0.8 per cent, Frankfurt’s DAX gave back 0.5 per cent and the Paris CAC 40 was down 0.46 per cent.

Asian stocks were mostly lower, although Japan’s Nikkei 225 closed 1.4 per cent higher after shedding more than five per cent the previous day. South Korea’s Kospi advanced 0.1 per cent, Australia’s S&P/ASX fell 0.1 per cent and Hong Kong’s Hang Seng fell 0.4 per cent.