TSX to head lower, European Central Bank moves to bolster eurozone recovery

TORONTO – The Toronto stock market was set for a lower open while the European Central Bank moved to deal with the threat of deflation and give some lift to a tepid economic recovery.

The ECB announced that it’s cutting its lending rate to 0.15 per cent from 0.25 per cent.

And in a more drastic step, it is cutting its overnight deposit rate to minus 0.1 per cent from zero. Charging banks for parking funds with the ECB is an unusual step aimed at pushing banks to lend that money rather than hoard it.

Traders looked to a news conference later in the morning by ECB president Mario Draghi for further stimulus details.

The Canadian dollar was up 0.06 of a cent 91.48 cents US.

U.S. futures moved into positive territory following the ECB move with the Dow Jones industrial futures ahead 42 points to 16,676, the Nasdaq futures were 5.5 points higher to 3,748.8 while the S&P 500 futures gained three points to 1,928.75.

Investors had been counting on the ECB to take action to save the eurozone region from falling into a deflationary spiral that would choke off growth. Worries about deflation increased earlier this week with the release of data showing that inflation in the eurozone came in at 0.5 per cent in May, down from 0.7 per cent in April.

The latest data also showed that gross domestic product in the eurozone grew by a paltry 0.2 per cent in the first quarter.

Traders also looked ahead to the other major economic event of the week: the release Friday of the U.S. government’s employment report for May. Economists have forecast that about 219,000 jobs were created during May following a much stronger than expected 288,000 gain in April.

Doubts about reaching that figure were raised Wednesday after payroll firm ADP reported that the U.S. private sector created 179,000 jobs during May, the fewest number in four months.

Canadian job figures for May also come out Friday and economists expect about 21,000 jobs were created after the economy shed 29,000 the previous month.

Prices were generally lower on commodity markets with June crude in New York down 30 cents to US$102.34 a barrel.

July copper was unchanged at US$3.09 a pound while August bullion declined $1.10 to US$1,243.20 an ounce.

In corporate news, Just Energy Group Inc. (TSX:JE) sold its water heater and HVAC home services business to Reliance Comfort Limited Partnership for $505 million. Reliance is a Canadian supplier of heating, cooling and water heater rental services. Just Energy says it’s also cutting its dividend and will repay about $400 million in debt.