TSX set to open little changed after stocks mauled by emerging market worries

TORONTO – The Toronto stock market looked to open little changed Tuesday after worries about global manufacturing performance helped send North American exchanges into a sharp selloff.

The Canadian dollar was up 0.21 of a cent to 90.32 cents US.

U.S. futures were positive with the Dow Jones industrial futures ahead 39 points to 15,331 following a 326-point plunge, the Nasdaq gained 11 points to 3,441 while the S&P 500 futures climbed 6.75 points to 1,739.5.

Stocks plunged Monday with the TSX losing 209 points after data showed the U.S. manufacturing sector continued to expand in December — but at a slower than expected pace during January.

Other data showed a similar performance for China’s manufacturing sector last month, which added to anxieties about emerging markets.

These negative developments come at a time when the U.S. Federal Reserve is cutting back on a key stimulus measure, its bond purchases that kept long-term rates low and supported a strong rally on stock markets. The Fed has moved twice in the past two months to cut those purchases by a total of US$20 billion to $65 billion a month.

The withdrawal of stimulus is also proving to be difficult for emerging markets such as India, South Africa and Turkey that had benefitted from a steady inflow of cheap money courtesy of Fed easing. Now, they’re being hit with steady outflows of that money, which in turn has pressured currencies and raised worries that economic problems in emerging countries could spread to developed markets.

Some analysts suggest markets that benefitted strongly from the Fed’s loose monetary policy have been ripe for a correction. The S&P 500 rocketed more than 30 per cent last year but is already down 5.75 per cent from the start of the year.

In earnings news, Suncor Energy’s (TSX:SU) quarterly operating earnings were $973 million or 66 cents a share, 12 cents short of expectations. It also hiked its dividend 15 per cent to 23 cents a share.

WestJet (TSX:WJA) posted $67.8 million of quarterly net income, or 52 cents per diluted share, which met expectations. The carrier also raised its quarterly dividend by 20 per cent to 12 cents a share.

CIBC (TSX:CM) will also be in focus after the Ontario Court of Appeal said that it will allow three major securities class actions seeking almost $4 billion in damages against the bank to go to trial. The actions seek damages arising from alleged non-disclosure of CIBC’s exposure to the U.S. subprime market.

Meanwhile, March crude in New York gained 13 cents to US$96.56 a barrel, March copper rose two cents to US$3.20 a pound while April gold declined $4.90 to US$1,255 an ounce.

London’s FTSE 100 slipped 0.5 per cent, Frankfurt’s DAX was down 1.11 per cent while the Paris CAC 40 was off 0.08 per cent.

Earlier, Japan’s Nikkei moved further into official correction territory, tumbling 4.2 per cent. The index is down 14 per cent over the past month amid the uncertain outlook for emerging economies.