Toronto stock market set to head higher, oil and gold rise after sharp losses

TORONTO – The Toronto stock market looked set for a higher open Thursday as investors look for direction in what has been a choppy week amid signs of slowing economic growth around the world.

The Canadian dollar lost 0.27 of a cent to 97.68 cents US.

U.S. futures rose after sharp losses on Wednesday as traders looked to the release of the U.S. government’s latest snapshot on the job market.

The Labour Department is expected to report that applications for unemployment benefits last week were little changed, which would be good news. Should weekly applications remain below 350,000, it would suggest that the job market is stronger than last month’s weak hiring suggested.

The Dow Jones industrial futures were up 46 points to 14,598 after sliding 138 points Wednesday as a disappointment from Bank of America raised concerns about corporate earnings.

The Nasdaq futures gained 12.2 points to 2,786.8 following a 60-point slide and the S&P 500 futures were ahead 6.75 points to 1,552.75 after falling 23 points.

On Wednesday, markets failed to benefit from some positive news in the U.S. Federal Reserve’s so-called Beige Book which showed economic activity expanded at a moderate pace in late February and March. The central bank added that real estate construction is improving markedly in most districts.

The TSX fell 173 points Wednesday, led by steep drops in mining stocks as commodity prices retreated after the International Monetary Fund cut its forecast for global growth to 3.3 per cent this year from its forecast in January of 3.5 per cent. The tumble left the TSX at a five-month low and down about 3.5 per cent year to date.

The IMF data deepened pessimism about the strength of the global recovery as data released earlier in the week had shown growth in China slowing earlier this year.

And on the domestic front, the Bank of Canada cut its 2013 economic growth forecast to 1.5 per cent from an earlier estimate of two per cent.

Commodity prices largely turned around Thursday but copper, viewed as an economic bellwether, continued to plumb 18-month lows because of falling demand prospects. On Thursday, the May copper contract on the New York Mercantile Exchange slipped three cents to US$3.15 a pound. Copper has fallen 13 per cent year to date.

Oil prices have also lost ground this week following the Chinese and IMF data. Prices fell a further $2 Wednesday even as a report by the U.S. Energy Information Administration showed U.S. crude inventories falling by 1.23 million barrels in the week ended April 12. But inventories are still near their highest level since 1990.

The May crude contract on the Nymex advanced $1.22 Thursday to US$87.90 a barrel.

Gold prices were higher with the June contract up $15.20 to US$1,397.90 an ounce. A higher U.S. dollar and the prospect of troubled eurozone countries selling off part of their gold reserves to tackle debt problems have sent gold to their lowest levels in over two years, with prices falling $140 on Monday alone.

Traders had a mixed reaction to the latest earnings news.

Earnings at investment bank Morgan Stanley totalled $1.2 billion or 61 cents, down about 12 per cent from a year earlier. The showing beat expectations of 57 cents. Revenue totalled $8.5 billion. That was down five per cent from a year earlier, but it beat analysts’ expectations of $8.3 billion. Its shares were off 0.8 per cent in pre-market trading.

PepsiCo Inc. earned $1.08 billion, or 69 cents per share in the latest quarter. That’s down from $1.13 billion, or 71 cents per share, a year earlier. Ex-items, however, it earned 77 cents per share. Analysts expected 70 cents, according to FactSet.

Revenue rose one per cent to $12.58 billion, beating analysts’ prediction of $12.54 billion and its shares edged up 0.19 per cent in pre-market trading.

European bourses advanced with London’s FTSE 100 and DAX ahead 0.3 per cent while the Paris CAC 40 was up 0.87 per cent.

Earlier in Asia, stock markets dropped with investors in Hong Kong still feeling cautious due to a bird flu outbreak in eastern China and the rapid rise of Chinese government debt.

Hong Kong’s Hang Seng shed 0.3 per cent, Japan’s Nikkei 225 index tumbled 1.2 per cent, South Korea’s Kospi dropped 1.2 per cent and Australia’s S&P/ASX 200 slid 1.6 per cent.