TSX to open little changed, traders look to data for clues about Fed intentions

TORONTO – The Toronto stock market looked set to start the trading week little changed. Traders will look to the latest read on U.S. purchases of big-ticket items during July later in the morning for clues about what the Federal Reserve may do about backing up on some of its economic stimulus later this year.

The Canadian dollar continued to weaken, down another 0.23 of a cent to 95 cents US. The loss followed a slide of almost 1.5 US cents last week as the U.S. dollar continued to advance amid growing conviction that the Federal Reserve will start cutting back on its US$85 billion of monthly bond purchases, a move that has kept long term rates low and supported a strong rally on many stock markets this year.

U.S. futures were little changed with the Dow Jones industrial futures ahead 12 points to 14,978, the Nasdaq futures gained 1.75 points to 3,123 and the S&P 500 futures slipped a point to 1,660.5.

Economists expect the Commerce Department to report Monday that orders for durable goods dropped 3.7 per cent in July. Orders rose 3.9 per cent in June thanks in part to strong plane orders.

Data released Friday showed a drop in new home sales, raising questions about the strength of the recovery in the U.S. housing market. That led to speculation that the Fed might stick with its current monetary stimulus or only reduce it very gradually.

On the commodity markets, oil prices were slightly higher with the October crude contract on the New York Mercantile Exchange up 11 cents to US$106.53.

September copper rose two cents to US$3.37 a pound while December gold declined $1 to US$1,394.80 an ounce.

The TSX finished last week with a modest rise as increases in financials and industrials were balanced by further deteriorations in interest-sensitive stocks such as utilities and telecom.

Those sectors have been under selling pressure while bond yields have risen since May when Fed chairman Ben Bernanke first mentioned that the central bank could start to taper its asset purchases.

The benchmark 10-year U.S. Treasury has surged about 120 basis points since May to as high as 2.94 per cent last week, although yields have retraced some of that runup. On Monday, the yield for the 10-year Treasury stood at 2.82 per cent.

Later in the week, traders will look to the latest growth figures from Canada and the U.S. along with earnings from most of Canada’s big banks.

Scotiabank (TSX:BNS) and Bank of Montreal (TSX:BMO) post results Tuesday while CIBC (TSX:CM), TD Bank (TSX:TD) and Royal Bank (TSXL:RY) report on Thursday.

On Friday, Statistics Canada releases figures for gross domestic product growth in June and the second quarter. Economists expect the data to show GDP contracted 0.5 per cent during the month, in part because of severe flooding in Alberta and a construction sector strike in Quebec.

Stronger growth data is expected from the U.S. The second reading on second-quarter GDP growth comes out on Thursday and economists expect the data to show the economy advanced about two per cent in the second quarter, up from the original reading of 1.7 per cent.

European bourses were mixed with London’s FTSE 100 index ahead 0.7 per cent, Frankfurt’s DAX declined 0.19 per cent and the Paris CAC 40 was down 0.5 per cent.

Earlier in Asia, Hong Kong’s Hang Seng rose 0.7 per cent while Japan’s Nikkei 225 retreated by 0.2 per cent. Benchmarks in mainland China, India, Taiwan, New Zealand and Thailand also rose.