TSX to open slightly higher, traders look to testimony from incoming Fed chair

TORONTO – The Toronto stock market looked set for a minor advance at the open amid indications that the next likely head of the U.S. Federal Reserve doesn’t plan on doing away with its economic stimulus until well into next year.

The Canadian dollar fell 0.33 of a cent to 95.25 cents US.

U.S. futures were little changed as traders awaited the start of confirmation hearings on Janet Yellen’s nomination to lead the Federal Reserve.

The Dow Jones industrial futures were three points higher to 15,782, the Nasdaq futures fell 9.2 points to 3,392.8 and the S&P 500 futures rose 2.5 points to 1,781.25.

Yellin’s prepared remarks were released Wednesday after the market close and they indicated she won’t be straying from the low-interest rate policies of outgoing chairman Ben Bernanke.

She said the economy has regained ground lost to the recession, but unemployment remains too high.

Yellen reiterated the U.S. economy must show continued signs of improvement before the Fed starts tapering off its US$85 billion of monthly bond purchases.

Analysts say markets will be particularly interested in the Q-and-A session with senators following her remarks, which are scheduled for 10 a.m. EST.

“Republicans will query her views on possible asset bubbles or financial instability stemming from easy money policies,” observed BMO Capital Markets senior economist Sal Guatieri.

“If she downplays this risk, it would suggest she is in no hurry to taper.”

A strong rally on markets during October has largely stalled this month on concerns that the Fed could start tapering as soon as next month. The Fed’s bond purchases have kept long-term rates low and supported a strong advance on many markets.

In earnings news, CGI Group Inc. (TSX:GIB.A) earned $141 million in its fourth quarter, after deducting acquisition- and tax-related items that reduced the total by about $76.2 million. On an adjusted basis, the IT services company earned $213.6 million or 67 cents per share, up from $100 million or 37 cents per share a year ago, excluding items in both years. Analysts had estimated CGI’s adjusted earnings for the fourth quarter would be 62 cents per share.

After the close of markets Wednesday, Kinross Gold Corp. (TSX:K) reported a big drop in third-quarter net earnings amid falling gold prices and higher production costs. Kinross said net income fell to US$49.9 million or four cents per share in the three months ended Sept. 30. Adjusted earnings were $54.4 million or five cents per share, in line with analyst estimates.

Tech bellwether Cisco Systems Inc. posted lower-than-expected revenue for its first quarter on Wednesday and warned that its revenue for the current period could fall as much as 10 per cent from a year ago. Its stock tumbled 11.3 per cent in pre-market trading in New York.

Wal-Mart Stores said its third-quarter profit rose 2.8 per cent, but the world’s largest retailer reported a sales shortfall. The discounter also cut its outlook for the full year and issued fourth-quarter profit guidance that was below analysts’ projections and its shares slipped 1.5 per cent in pre-market trading.

In other corporate news, a subsidiary of Manulife Financial Corp. (TSX:MFC) will pay the equivalent of C$31.6 million cash to acquire Malaysian mutual fund operator MAAKL Mutual Bhd. The acquisition will increase Manulife’s assets under management in Malaysia by about 54 per cent to seven billion Malaysian ringgits, about C$2.3 billion.

Commodities were mixed with December crude on the New York Mercantile Exchange down cents to US$ a barrel ahead of the latest U.S. inventory figures which are being released later in the morning.

Copper lost ground for a third day, reflecting disappointment that a meeting of Chinese leaders earlier this week failed to yield hoped-for economic reforms. The December contract declined one cent to US$3.15 a pound.

Bullion prices advanced with December gold ahead $11.70 to US$1,280.10 an ounce.

European markets were higher as official figures showed that the recovery from recession in the 17-country eurozone continued in the third-quarter of the year — but only just. Eurostat, the EU’s statistics agency, said Thursday the region posted economic growth of 0.1 per cent during the July to September period compared with the previous three-month period. That was in line with market expectations but below the previous quarter’s 0.3 per cent growth.

London’s FTSE 100 index gained 0.59 per cent, Frankfurt’s DAX was up 0.8 per cent and the Paris CAC 40 rose 0.7 per cent.

Earlier in Asia, Tokyo’s Nikkei 225 surged 2.1 per cent, helped by renewed weakness in the yen as it approached 100 to the dollar.

China’s Shanghai Composite rose 0.6 per cent and Hong Kong’s Hang Seng gained 0.8 per cent.