TSX to move lower amid falling commodity prices, China property concerns

TORONTO – The Toronto stock market appears set to end a streak of positive sessions amid lower commodity prices, glum news from China’s financial sector and mixed earnings reports.

Lower prices for oil and copper helped push the Canadian dollar down 0.31 of a cent to 96.88 cents US ahead of the Bank of Canada’s latest interest rate announcement, to be released mid-morning.

U.S. futures were lower after a string of gains as traders took in positive earnings from Boeing and a disappointment from Caterpillar.

The Dow Jones industrial futures lost 74 points to 15,324, the Nasdaq futures declined 21 points to 3,335.5 and the S&P 500 futures were down 10.25 points to 1,739.25.

Encana Corp. (TSX:ECA) says it had US$150 million or 20 cents per share in operating earnings in the third quarter, a big drop from $263 million a year ago but better than expected.

The Canadian natural gas giant also said it is also reducing its 2013 target range for capital spending to between $2.7 billion and $2.9 billion.

Encana also reports it had US$188 million of net earnings in the third quarter, an improvement from a year earlier loss of net loss of US$1.244 billion, mostly due to asset impairments.

Canada’s two largest railroads were also in focus, both reporting strong earnings results that beat analyst estimates on several key measures.

Canadian National Railway (TSX:CNR) said after the close Tuesday that quarterly profits climbed 6.1 per cent to $705 million. CN also posted adjusted earnings of $1.72 a share, a dime better than estimates. Revenue came in at $2.7 billion, against estimates of $2.64 billion.

On Wednesday, Canadian Pacific Railway (TSX:CP) posted record earnings and the lowest operating ratio in its history in the third quarter as revenue rose by six per cent from last year to $1.5 billion. CP’s net income was $324 million or $1.84 per diluted share, up from $224 million or $1.30 per share in the third quarter of 2012. CP’s operating ratio improved to 65.9 per cent, down from 74.1 per cent.

It was a mixed bag in the U.S. where Caterpillar shares were down almost four per cent in pre-market trading after the maker of heavy equipment cut its 2013 revenue forecast to US$55 billion from earlier estimates of $56 billion to $58 billion.

Caterpillar earned $946 million, or $1.45 a share, in the third quarter, down from $1.7 billion, or $2.54 a share, a year ago. Total sales and revenue fell to $13.42 billion from $16.45 billion. Analysts expected earnings of $1.68 a share on revenue of $14.29 billion.

Aircraft maker Boeing reported third-quarter profit rose 12 per cent to $1.2 billion, or $1.51 a share. Ex-items, earnings per shares came in at $1.80 per share, up from $1.55 a year earlier. Revenue rose to $22.1 billion, from $20 billion a year earlier. Analysts had expected earnings of $1.51 a share on revenue of $21.7 billion. Boeing also raised its full-year 2013 earnings expectations and its shares rose 2.5 per cent in pre-market trading.

Commodity prices were sharply lower amid speculation that the People’s Bank of China may tighten monetary policy to cool a hot property market.

China reported Tuesday that house prices surged in some cities including Guangzhou/Shenzhen where prices jumped 20 per cent year over year, Shanghai jumped 17 per cent year over year while Beijing was up 16 per cent year over year.

The PBoC reported Wednesday that outstanding real estate loans are up 19 per cent from a year ago.

There was also a report that the amount of bad loans written off by China’s largest banks swelled in the first half of the year.

The December crude contract on the New York Mercantile Exchange dropped $1.24 to US$97.06 a barrel, its lowest level since late June as ample supplies and a slowdown in U.S. hiring suggest subdued demand.

The U.S. Energy Department will release crude stockpile figures for last week later Wednesday and a 3 million barrel increase is expected.

December copper lost five cents to US$3.29 a pound. Gold prices also headed downward with the December bullion contract down $11 to US$1,331.60 an ounce.

European bourses were negative with London’s FTSE 100 index down 0.35 per cent, Frankfurt’s DAX declined 0.43 per cent while the Paris CAC 40 fell 0.96 per cent.

Earlier in Asia, China’s Shanghai Composite Index fell 1.3 per cent, Hong Kong’s Hang Seng shed 1.4 per cent, Japan’s Nikkei 225 tumbled two per cent while Australia’s S&P/ASX 200 fell 0.3 per cent.