TSX set for higher open as commodities rise, traders look to central bankers

TORONTO – The Toronto stock market appeared set for a slightly higher start to September trading Tuesday while traders wondered what steps central banks might take to support the economic recovery.

Traders also took in major acquisition activity in the pharmaceutical sector.

Montreal-based Valeant Pharmaceuticals International Inc. (TSX:VRX) is buying U.S. dermatology products maker Medicis Pharmaceutical Corp. for about $2.6 billion in cash in a deal to strengthen its position in skin treatments and care.

Valeant said Monday that it is paying $44 per share for Medicis, a 39 per cent premium over Friday’s closing price of $31.87 for the Scottsdale, Ariz., company.

The Canadian dollar was ahead 0.06 of a cent to 101.51 cents US amid higher commodity prices.

U.S. futures were listless ahead of the release of a key gauge of the manufacturing sector with the Dow Jones industrial futures down three points to 13,076, the Nasdaq futures off 1.8 points at 2,769.2 and the S&P 500 futures down 1.3 points at 1,403.8.

The Institute for Supply Management’s index is expected to come in at 50.2, which would signal expansion, up from July’s reading of 49.8.

Traders are looking ahead to Thursday and an announcement from European Central Bank president Mario Draghi. He is expected to announce details of a new bond-buying program intended to bring down the borrowing costs of countries such as Spain and Italy.

The plan is a crucial step to easing the crisis, which is increasingly hurting the continent’s economy.

Moody’s ratings agency on Monday warned that it could downgrade the credit rating for the European Union as a whole, citing the mounting financial strain of the crisis on key countries like Germany and France.

There was also other negative economic news over the long Labour Day weekend.

China’s HSBC manufacturing Purchasing Managers Index fell to 47.6 in August from 49.3 in July, which was the lowest reading since March 2009.

However, there are signs that China’s central bank is resisting calls for more aggressive measures to boost the economy based on past experience. Huge stimulus enacted in response to the 2008 global crisis fuelled inflation and a wasteful spending boom.

Meanwhile, the final read on the Eurozone manufacturing PMI came in at 45.1 in August.

Canada’s central bank will be in focus Wednesday as the Bank of Canada makes its next announcement on interest rates. The bank is expected to leave its key interest rate unchanged at one per cent, but traders will look for hints as to when the bank might hike rates.

Investors also looked to employment data for clues as to whether the U.S. Federal Reserve thinks the economic downturn needs another jolt of stimulus. Economists expect the American economy created 127,000 jobs in August, on top of 163,000 in July. The Fed holds its next meeting on Sept. 13.

Canadian employment data is also being released Friday. It is believed that the economy cranked out 11,000 jobs last month.

Commodity prices advanced with the October crude contract on the New York Mercantile Exchange ahead 54 cents at US$97.01 a barrel.

Metal prices also advances, with the December copper contract on the Nymex up two cents at US$3.48 a pound.

Gold was up $7.40 to US$1,695 an ounce.

European bourses were in the red with London’s FTSE 100 down 0.97 per cent, Frankfurt’s DAX down 0.5 per cent and the Paris CAC 40 off 0.41 per cent.

Earlier, Japan’s Nikkei 225 index fell 0.1 per cent, Hong Kong’s Hang Seng lost 0.7 per cent, South Korea’s Kospi shed 0.3 per cent.

Australia’s S&P/ASX 200 fell 0.6 per cent as the country’s central bank opted to leave its key interest rate unchanged at 3.5 per cent.

Mainland China’s Shanghai Composite Index lost 0.8 per cent while the smaller Shenzhen Composite Index lost 0.9 per cent.