Toronto stock market to head lower amid World Bank revisions, U.S. bank earnings

TORONTO – The Toronto stock market looked set for a lower open Wednesday while traders take in strong U.S. bank earnings and a cut in the World Bank’s global growth forecast for this year.

The Canadian dollar was down 0.22 of a cent to 101.4 cents US as the greenback strengthened on worries about the impasse over raising the U.S. debt ceiling while traders awaited the release of the U.S.

The Federal Reserve’s latest regional study on the economy, the so-called Beige Book, comes out mid-afternoon.

U.S. futures were mixed with the Dow Jones industrial futures fell 53 points to 13,410, the Nasdaq futures added 0.2 of a point to while the S&P 500 futures slipped 3.5 points to 1,461.75.

The lacklustre action on markets came after the World Bank on Tuesday projected that the global economy will expand by 2.4 per cent in 2013, down from a forecast of three per cent growth in June.

“Overall, the global economic environment remains fragile and prone to further disappointment, although the balance of risks is now less skewed to the downside than it has been in recent years,” the World Bank said in its twice-yearly report.

Meanwhile, there was good news from the American banking sector.

JPMorgan Chase, the country’s biggest bank by assets, says its fourth-quarter earnings shot up 55 per cent over the year to US$5.3 billion or $1.40 a share, after paying preferred dividends. That blew away the $1.16 expected by analysts polled by FactSet.

Revenue also beat expectations, rising 10 per cent over the year, to $24.4 billion, after stripping out an accounting charge. However, the stock fell 0.8 per cent in pre-market trading.

But Goldman Sachs ran ahead three per cent in pre-market trading after the U.S. investment bank reported that fourth-quarter net income nearly tripled to US$2.89 billion or $5.60 a share, much higher than the $3.71 that analysts had expected. Net revenue of $9.24 billion beat expectations of $7.98 billion.

Aircraft maker Boeing was a drag on the Dow industrials. Its stock fell four per cent in pre-market trading as Japan’s two biggest airlines grounded all their Boeing 787 aircraft for safety checks after one was forced to make an emergency landing in the latest blow for the new jet.

The 787, known as the Dreamliner, is Boeing’s newest and most technologically advanced jet. But since its launch, which came after delays of more than three years, the plane has been plagued by a series of problems including a battery fire and fuel leaks.

In other corporate news, Canadian autoparts giant Magna International Inc. (TSX:MG) says it expects between US$31.3 billion and US$32.7 billion of sales globally this year. Magna says it expects about half of its total 2013 revenue will come the sale of parts to North American manufacturing operations.

Magna estimates automotive manufacturers will produce 15.3 million vehicles in North America this year and 12 million in Europe.

Commodity prices were mixed with February crude on the New York Mercantile Exchange unchanged at US$93.28 a barrel.

March copper lost three cents to US$3.61 a pound while February bullion declined $8.40 to US$1,675.50 an ounce.

Also in the background was increasing nervousness about a fight brewing in Washington over raising the U.S. debt ceiling so that the government can keep borrowing money to pay its bills. The U.S. Treasury says it will run out of money to pay all the government’s obligations sometime in February or March if Congress doesn’t raise the current $16.4 trillion limit on borrowing.

Republican lawmakers say they will demand major spending cuts in exchange for any agreement to raise the debt limit. But President Barack Obama has said he won’t negotiate on the debt limit.

European bourses were lower as London’s FTSE 100 index lost 0.64 per cent, Frankfurt’s DAX was down 0.4 per cent and the Paris CAC 40 was off 0.18 per cent.

In Asia, Japanese shares were sharply lower after a minister warned over an excessive fall in the value of the yen. The Japanese currency has been sold off sharply in recent weeks, and that’s helped the country’s main stock market clamber to 32-month highs,

The Nikkei 225 index closed 2.6 per cent lower.

Hong Kong’s Hang Seng fell 0.1 per cent while South Korea’s Kospi fell 0.3 per cent.