Toronto stock market set to head lower after modest advance, commodities mixed

TORONTO – The Toronto stock market was set for a lower open Monday as traders consolidate last week’s modest gain and take in acquisition activity over the weekend.

The Canadian dollar edged 0.03 of a cent lower to 90.56 cents US.

U.S. futures were also lower as the Dow Jones industrial futures declined 30 points to 15,709, the Nasdaq futures were off 2.2 points to 3,555.8 while the S&P 500 futures dropped four points to 1,789.5.

The TSX gained 0.67 per cent last week while the Dow rose 0.6 per cent after jobs creation data released on Friday came in below expectations. But the unemployment rate dipped to 6.6 per cent from 6.7 per cent, the lowest rate since the global financial crisis hit in late 2008 while labour force participation increased.

“We see the report as indicating that moderate job growth remains in place, but payroll growth appears to have slowed somewhat, in line with our view that economic growth will slow to 2.5 per cent quarter over quarter in in Q1,” said a commentary from Barclays Research.

Analysts also thought the U.S. jobs data was strong enough to allow the Fed to continue its program of cutting back on its bond purchases. It has already cut those purchases by US$20 billion to $65 billion a month and Barclays expects the Fed to continue to taper at $10 billion a meeting and wrap up the stimulus program in October.

At the same time, markets were volatile last week amid nervousness focused on emerging markets and the problems some countries are having in adapting to a world no longer awash in cheap money from the Fed. Money has been flowing out of those markets, which in turn has pressured currencies and forced some countries to raise interest rates.

But analysts also point out that American markets, which ran up sharply last year thanks in large part to Fed stimulus, are also sensitive to negative news. They also note that U.S. markets haven’t undergone a meaningful correction in almost two years.

On the commodity markets, March crude on the New York Mercantile Exchange declined 37 cents to US$99.51 a barrel.

March copper was unchanged at US$3.24 a pound while April gold rose $11 to US$1,273.90 an ounce.

On the corporate front, International Forest Products Ltd. (TSX:IFP.A) will acquire Georgia-based IIim Timber Continental in a US$180-million cash and stock deal. The acquisition will increase Interfor’s annual lumber capacity by 20 per cent.

Hudbay Minerals Inc. (TSX:HBM) is out to acquire all the shares of Augusta Resources Corp. (TSX:AZC) that it doesn’t already own in a cash and stock deal worth about $540 million. August’s prime asset is its Rosemont copper deposit in Arizona. HudBay is offering $2.96 a share but Augusta is advising shareholders against acting until its board meets this week and makes its recommendation.

European bourses were largely lacklustre with London’s FTSE 100 index up 0.05 per cent, Frankfurt’s DAX dipped 0.02 per cent while the Paris CAC 40 rose 0.25 per cent.

Earlier in Asia, China’s Shanghai Composite Index added two per cent, Tokyo’s Nikkei 225 rose 1.8 per cent while Hong Kong’s Hang Seng gave up 0.4 per cent.