TSX heads for higher open, commodities up, G20 approves of Japan monetary easing

TORONTO – The Toronto stock market headed for a higher open Monday after a weekend meeting of the G20 countries gave its approval for Japan’s aggressive monetary policy.

The Canadian dollar edged up 0.01 of a cent to 97.45 cents US.

The Bank of Japan plans to end a long spell of deflation by buying more than seven trillion yen (US$70 billion) of bonds a month with a view to increasing inflation to two per cent within two years.

The decline of the yen has stirred up concerns among Japanese exporters’ key rivals that Japan’s real goal is to weaken the yen as a way to gain trade advantages. But officials at the G20 meeting were reluctant to voice any opposition to the Bank of Japan’s monetary stimulus program.

U.S. futures were also higher as the Dow Jones industrial futures gained 45 points to 14,515, the Nasdaq futures were ahead 14.2 points to 2,782.5 while the S&P 500 futures slipped 6.5 points to 1,554.

The Dow futures were off the best levels of the morning after heavy equipment manufacturer Caterpillar posted first-quarter profit of $1.31 a share on revenue of US$13.2 billion. Analysts surveyed by FactSet had expected profit of $1.36 a share on revenue of $13.8 billion. Caterpillar also cut its 2013 outlook and its shares were down 0.3 per cent in pre-market trading in New York.

Elsewhere, Air Canada (TSX:AC.A) estimates it had a $260-million net loss in the first three months of this year, down from $274 million in the first quarter of 2012. The company said it issued the preliminary report ahead of the full results and analysis on May 3 to comply with disclosure rules as it explores a range of debt financing options. It didn’t disclose what financing options are being considered.

Commodity prices were mixed after severe downturns last week.

The June crude contract on the New York Mercantile Exchange gained 48 cents to US$88.75 a barrel after data showing a weakening Chinese economy and a downgrade of global economic growth by the International Monetary Fund raised demand concerns and pushed crude down three per cent last week.

Gold prices were higher with the June contract in New York ahead $39.50 to US$1,435.10 an ounce. Bullion plunged to its lowest level in more than two years last week, falling seven per cent amid a growing conviction that inflation is firmly under control. Buying gold as a hedge against inflation has supported gold prices to record highs of almost $2,000 back in 2011.

However, copper prices continued to hover at 18-month lows. The metal, widely viewed as an economic barometer because of its use in so many applications, fell two cents to US$3.12 a pound on top of a six per cent slide last week.

Substantial losses on commodity markets also dragged the resource-heavy TSX last week into negative territory for the year. The main index lost 2.2 per cent last week and is down about three per cent year to date.

Earnings disappointments also led U.S. futures to their worst week of 2013 with the Dow giving back 2.13 per cent. But the blue chip barometer is still up 11 per cent year to date.

It is a heavy week for earnings news from corporate Canada.

Canadian National Railways (TSX:CNR) hands in results Monday and rival Canadian Pacific Railway (TSX:CP) reports Wednesday.

Major TSX resource companies handing in earnings include miners Teck Resources (TSX:TCK.B), Lundin Mining (TSX:LUN), Sherritt Resources (TSX:S), Barrick Gold (TSX:ABX), gas company EnCana (TSX:ECA), and oil companies Cenovus Energy (TSX:CVE) and Imperial Oil (TSX:IMO).

Risk appetite was also improved after the Italian parliament over the weekend re-elected Giorgio Napolitano as president, following weeks of political uncertainty.

“We think President Napolitano’s re-election is strongly tied to the formation of a grand coalition and to the implementation of its policies,” said a commentary from Barclays’s research.

Elections in late February left Europe’s third biggest economy without any one party getting enough votes to form a government.

European bourses were higher with London’s FTSE 100 index up 0.42 per cent, Frankfurt’s DAX rose 0.68 per cent and the Paris CAC 40 climbed 0.46 per cent.

Earlier in Asia, the Nikkei closed 1.9 per cent higher, South Korea’s Kospi added one per cent and Hong Kong’s Hang Seng closed 0.1 per cent higher. Australia’s S&P/ASX 200 rose 0.7 per cent. Shares in mainland China were mixed.