TSX set to advance after string of losses, traders shrug off Spain downgrade

TORONTO – The Toronto stock market looked set for a higher open Thursday with buyers set to move in after three days of losses.

Markets have been depressed by fresh signs of a slowing economic recovery, including another downward revision of global growth by the International Monetary Fund and forecasts of lower demand by resource giant Alcoa Inc.

The Canadian dollar rose alongside commodity prices, up 0.14 of a cent to 102.11 cents US.

New York futures were also positive as traders looked ahead to key earnings reports from U.S. banking giants including JPMorgan Chase and Wells Fargo.

The Dow Jones industrial futures gained 34 points to 13,302 following two back-to-back triple digit slides, the Nasdaq futures rose 11.2 points to 2,734 while the S&P 500 futures were up 4.6 points to 1,430.9.

The European government debt crisis was back in focus after Standard & Poor’s cut its rating on Spain’s debt by two notches to BBB-minus late Wednesday, leaving the country on the verge of junk status, or non-investment grade.

The Spanish government has so far refused to tap a new European Central Bank bond-buying facility that has been largely designed to keep a lid on the country’s borrowing rates. But some analysts think the downgrade will help push the government to finally request the help.

Earnings expectations are low for the third quarter as the debt crisis continues to take a toll on the economies in Europe. The malaise has also spread to developing economies such as China.

Expectations are for a 2.1 per cent year-over-year decline in S&P 500 operating earnings — the first year-over-year drop since the recession, said BMO Capital Markets senior economist Robert Kavcic.

Also, half of the 10 major sectors are expected to be in the red, so the earnings slowdown is relatively broad based, and not just a one-sector phenomenon.

Resource stocks were expected to lead TSX gainers as prices for oil and metals advanced.

The November crude contract continued to find support from worries that the Syrian conflict is escalating. Traders worry that the civil war in Syria could grow into a wider regional conflict that could threaten oil supplies from Middle East producers. The Middle East and North Africa account for about a third of global oil production. Oil was up 87 cents at US$92.12 a barrel.

December copper rose two cents to US$3.74 a pound while December bullion edged up $5.10 to US$1,771.20 an ounce.

European bourses were also positive as London’s FTSE 100 index rose 0.65 per cent, Frankfurt’s DAX gained 0.75 per cent and the Paris CAC 40 was ahead 0.46 per cent.

Earlier in Asia, Japan’s Nikkei 225 index fell 0.6 per cent, South Korea’s Kospi shed 0.8 per cent while Hong Kong’s Hang Seng rose 0.4 per cent.

Mainland Chinese shares lost ground, with the Shanghai Composite Index shedding 0.8 per cent.

In corporate news, precious metals developer NovaGold Resources Inc. (TSX:NG) has reported a third-quarter net loss of $21.5 million or eight cents per share. That is less than half the net loss of $52.1 million or 22 cents per share from a year ago.

The exploration and development miner, whose flagship asset is its 50 per cent owned Donlin gold project in Alaska, did not report any revenues for the quarter.