TSX to open flat, CP in focus, biggest shareholder plans to lighten position

TORONTO – The Toronto stock market appeared set to start trading little changed Tuesday amid lower oil and gold prices.

The Canadian dollar was down 0.4 of a cent to 96.9 cents US.

U.S. futures were flat amid strong data from the housing sector with the Dow Jones industrial futures up one point to 15,218, the Nasdaq futures gained 3.5 points to 2,989 and the S&P 500 future added a point to 1,637.2.

Canadian Pacific Railway (TSX:CP) will likely weigh on the TSX after Bill Ackman’s Pershing Square Capital Management, CP’s biggest shareholder, said Monday that it plans to sell up to seven million of the railway’s shares over the next six to 12 months. The stock has soared since Ackman won the battle to install new board members and a new chief executive, Hunter Harrison, who formerly held the top executive job at Canadian National (TSX:CNR).

Meantime, the railway has been cut to underperform from sector perform by RBC Capital Markets following Pershing Square’s announcement after the market close Monday.

It also set a price target of $104 per share. RBC said the move to sell the shares will result in limited upside for the stock and will put investor focus back on the fundamentals.

The stock is up 84 per cent over the past 12 months. It was down two per cent in pre-market trading in New York (NYSE:CP).

The telecom sector will also be in focus after Federal Industry Minister Christian Paradis said Mobilicity and other new wireless carriers won’t be allowed to transfer spectrum to other carriers. The minister’s announcement Tuesday will be a setback for Telus (TSX:T) which had asked permission to acquire unused spectrum from Mobilicity. The wireless industry has been calling on Ottawa to clarify the rules ahead of the next auction of wireless spectrum, which Paradis said will be delayed to Jan. 14 to allow more time for new entrants to prepare.

On the economic front, U.S. home prices soared 12.1 per cent in April from a year earlier, the biggest gain since February 2006. Real estate data provider CoreLogic also says prices also rose 3.2 per cent in April from March, much better than the previous month-to-month gain of 1.9 per cent.

Tuesday is probably the lightest data day of the week, but the pace picks up on Wednesday with the ADP private payrolls report for May and the ISM’s survey of activity in the services sector. Most important will be Friday’s nonfarm payrolls report for May. The payrolls figures are usually the U.S. economic release with the greatest market impact.

Canadian employment data also comes out on Friday.

It’s also a big week in Europe, with the European Central Bank meeting to discuss the ailing eurozone economy and whether anything more needs to be done to get it growing again. The latest speculation in the markets is that the ECB will refrain from announcing any big new measures Thursday.

Commodities were mixed as July crude on the New York Mercantile Exchange lost 49 cents to US$92.96 a barrel.

July copper edged up one cent to US$3.34 a pound and August gold rose $14 to US$1,397.90 an ounce.

The Toronto stock market lost ground Monday, losing 40 points after key readings on the Chinese and U.S. manufacturing sectors slipped into contraction territory during May.

The negative reading for the world’s second-biggest economy was bad news for the resource-heavy TSX, which has benefitted in the past from strong Chinese demand for oil and metals, which in turn has boosted prices for energy and mining stocks.

However, the disappointing read on American manufacturing boosted U.S. markets as the data reinforced the view that the U.S. Federal Reserve won’t be in a hurry to wrap up its economic stimulus program known as quantitative easing.

European bourses were positive as London’s FTSE 100 index climbed 0.59 per cent, Frankfurt’s DAX gained 0.33 per cent while the Paris CAC 40 index was up 0.4 per cent.

Earlier in Asia, Japan’s Nikkei 225 index clawed back some of its prior session losses with a 2.1 per cent gain. Mainland Chinese shares fell for a fourth straight day, with the Shanghai Composite Index falling 1.2 per cent, its biggest loss in more than a month. Hong Kong’s Hang Seng was nearly unchanged.

In other corporate news, Entrec Corp. (TSXV:ENT) has agreed to buy GT’s Crane and Transportation Services Inc., in a $57-million deal that positions the Alberta-based heavy-equipment operator for expanded activity in the liquefied natural gas sector.