News Column

Toronto stock market set to head higher, traders balance eurozone, Chinese data

August 5, 2014

Malcolm Morrison, The Canadian Press

TORONTO - The Toronto stock market looked set to advance Tuesday amid fresh indications that the eurozone economy continued to mend.

The Canadian dollar was down 0.15 of a cent to 91.37 cents US.

U.S. futures were lower ahead of the latest readings on the U.S. non-manufacturing sector and factory orders.

The Dow Jones industrial futures lost 33 points to 16,453 following a 76-point runup on Monday, the Nasdaq futures fell 9.3 points to 3,887.5 and the S&P 500 futures declined 5.75 points to 1,926.25.

Financial information company Markit said Tuesday its purchasing managers' index — a key survey of business activity — for the 18-country eurozone rose a point to a three-month high of 53.8 in July.

Growth in the eurozone has been paltry since emerging from its longest-ever recession over a year ago. Markit’s July survey points to a quarterly growth rate of 0.4 per cent, which equates to an annualized rise of just 1.6 per cent.

However, economic data from China took some of the shine off the European data.

Service industries in the world's second-biggest economy grew at the slowest rate last month since November 2005. The HSBC index of China service businesses activity based on a survey of 400 companies fell to 50.0 in July from 53.1 in the previous month.

The weak figure shows the impact of a slowdown in China’s property market, said HSBC chief China economist Qu Hongbin.

Meanwhile, later in the morning, the U.S. Institute for Supply Management’s nonmanufacturing index is projected to show greater expansion, climbing to 56.5 in July, from 56 in June.

At the same time, factory orders from June will be released. They are expected to climb 0.6 per cent after dropping 0.5 per cent in May.

The TSX and N.Y. markets fell sharply last week, with the Toronto market losing 1.55 per cent and the Dow industrials sliding 2.75 per cent. Traders fretted over the prospect of the Federal Reserve hiking interest rates sooner than thought after second quarter economic growth came in much better than expected.

Geopolitical worries centred around Russia's support for Ukrainian rebels and the aftershocks of Argentina slipping again into default also eroded buying sentiment.

But analysts also point to the fact that the rally on stock markets has been going practically without interruption for over five years and that a correction could be in the cards.

Prices were mixed on commodity markets as September crude gained a dime to US$98.39 a barrel, September copper slipped one cent to US$3.23 a pound while December bullion gained $3.50 to US$1,292.40 an ounce.

Meanwhile, the Canadian earnings season remains in high gear with reports out this week from a variety of major corporations, including Tim Horton's (TSX:THI), telecom BCE Inc. (TSX:BCE) and retailer Canadian Tire (TSX:CTC.A).

One sector of particular interest are the insurers — three majors report including Great West Lifeco (TSX:GWO), Manulife Financial (TSX:MFC) and Sun Life Financial (TSX:SLF).

Insurers were a major casualty of the 2008 financial crisis as gains in stock markets withered and bond yields sank but now they are close to 52-week highs.

On Monday, The Second Cup Ltd. (TSX:SCU) suspended its quarterly dividend as the coffee shop chain says it looks to focus on growth to maximize shareholder value. The company posted a second-quarter adjusted profit of eight cents per share versus 14 cents a year ago.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: Canadian Press DataFile

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