TSX to open lower amid declining commodities, budget battle uncertainty

TORONTO – The Toronto stock market looked set to open lower Tuesday as commodity prices continued to lose ground while uncertainty about Federal Reserve stimulus measures and a looming U.S. government fiscal fight contributed to a cautious mood.

The Canadian dollar was off 0.1 of a cent to 97.13 cents US.

U.S. futures were mainly lower as traders also awaited the latest data on American consumer confidence and house prices.

The Dow Jones industrial futures slipped three points to 15,323, the Nasdaq futures gained 3.75 points to 3,212.75 and the S&P 500 futures were down 1.7 points to 1,691.

Markets had initially rallied last week after the U.S. Federal Reserve surprised markets with its announcement that it won’t be cutting back its massive economic stimulus program just yet. The US$85 billion in monthly asset purchases by the Fed have helped keep rates low and supported strong gains on stock markets.

But the Fed is still expected to scale back on those asset purchases later this year. A slew of speeches by Fed officials this week has added to the uncertainty.

The approaching budget battle between the White House and Republican lawmakers also cast a shadow over markets. The government will reach its borrowing limit, or debt ceiling, by Oct. 1. If Congress doesn’t raise that limit, the government won’t be able to pay all its bills.

Republicans are demanding that any increase must result in expenditure cuts of an equal amount. President Barack Obama is demanding a debt limit increase with no conditions attached.

Oil prices fell to fresh, six-week lows as fears of a U.S.-led military attack on Syria faded.

The November crude contract on the New York Mercantile Exchange lost 15 cents to US$103.44 a barrel. Oil has dropped more than six per cent since closing at a two-year high of $110.53 on Sept. 6.

Metal prices also fell back with December copper down three cents to US$3.27 a pound.

December bullion faded $13.40 to US$1,313.60 an ounce.

In corporate news, Sears Canada (TSX:SCC) has named Douglas Campbell as its new president and chief executive officer. He replaces Calvin McDonald, who spearheaded a number of major initiatives to reposition the company in a hotly competitive marketplace. He resigned to pursue an opportunity with a “leading international company,” which wasn’t identified.

Chip-making equipment manufacturer Applied Materials is acquiring Tokyo Electron Ltd., a rival maker of equipment for production of semiconductors, flat panel displays and solar panels.

The two companies said Tuesday their all-stock transaction will result in the creation of a new company with market capitalization of US$29 billion.

The Toronto stock market closed little changed Monday as resource stocks failed to benefit from strong Chinese manufacturing data while BlackBerry shares (TSX:BB) (NASDAQ:BBRY) finished lower following a move to take the company private.

BlackBerry has signed a letter of intent with a consortium led by its biggest shareholder, Fairfax Financial (TSX:FFH) that involves shareholders getting US$9 a share. The Waterloo, Ont.,-based company’s shares were down four cents to US$8.78 in pre-market trading in New York.

European bourses were positive Tuesday as a closely watched index of German business confidence rose for the fifth month in a row in September.

The Ifo institute’s index edged up to 107.7 points from 107.6 in August. Market analysts had expected it to rise slightly more, to 108.

London’s FTSE 100 index gained 0.16 per cent, Frankfurt’s DAX was up 0.2 per cent while the Paris CAC 40 rose 0.58 per cent.

Asian stocks were mostly lower. Japan’s Nikkei 225 fell 0.1 per cent, Hong Kong’s Hang Seng dropped 0.8 per cent, Australia’s S&P/ASX 200 shed 0.4 per cent and South Korea’s Kospi fell 0.1 per cent. Benchmarks in mainland China were mixed.