TSX heads for lower session amid weak earnings, European growth data

TORONTO – The Toronto stock market headed for a lower open Thursday amid data showing the economic recovery in the European Union proceeding at a slower than expected pace and weak earnings reports from Air Canada and retail giant Wal-Mart stores.

The Canadian dollar was up 0.08 of a cent to 91.97 cents US ahead of the release of the latest reading on manufacturing shipments.

U.S. futures were in the red as the Dow Jones industrial futures declined 33 points to 16,554, the Nasdaq futures were down 6.8 points to 3,589.5 and the S&P 500 futures slipped 4.25 points to 1,881.

Air Canada (TSX:AC.B) posted a quarterly net loss of $341 million, or $1.20 per diluted share, as it was impacted by a lower Canadian dollar. That compares with a net loss of $260 million, or 95 cents a year earlier. The airline says the net loss in the first quarter included foreign exchange losses of $161 million as the Canadian dollar fell about four per cent against the greenback. On an adjusted basis, the airline reported a net loss of $132 million, or 46 cents per diluted share, compared with a net loss of $143 million, or 52 cents per share, year-over-year.

And regional airline Chorus Aviation Inc. (TSX:CHR.B) reported a lower net profit of $5.6 million, or five cents per share, compared with $9.1 million, or seven cents per share, in the same quarter last year. However, Halifax-based Chorus says it had higher operating income helped by cost cutting.

Wal-Mart earned $3.59 billion, or $1.11 per share, for the period ended April 30, down from $3.78 billion, or $1.14 per share a year ago as bad winter weather kept shoppers away from its stores and pushed operating expenses higher than expected. Its performance missed Wall Street’s view, and the world’s biggest retailer gave a second-quarter earnings forecast below analysts’ estimates. Wal-Mart’s stock fell more than two per cent in premarket trading.

Meanwhile, Eurostat, the EU’s statistics office, said the economy of the 18 countries that share the euro saw economic output grew by only 0.2 per cent in the first quarter from the previous three-month period. The modest rise came despite a better-than-expected 0.8 per cent advance in Germany and was below economists’ expectations for a 0.4 per cent increase.

A large chunk of the blame for the underperformance can be placed on a flat performance in France, Europe’s second largest economy behind Germany.

The figures are likely to strengthen arguments for the European Central Bank to cut interest rates and take further stimulus measure at its next meeting June 5.

On the commodity markets, June crude on the New York Mercantile Exchange fell 40 cents to US$101.97 a barrel.

July copper was unchanged at US$3.16 a pound and June bullion slipped 80 cents to US$1,305.10 an ounce.

A late-day sell off in the tech sector helped push the Toronto stock market slightly lower Wednesday, while New York markets fell sharply as the latest producer price index reading suggested inflation is starting to pick up, which in turn raised concerns about when the Federal Reserve might start to hike interest rates.