News Column

Geopolitical worries likely to depress Toronto stock market for second day

August 8, 2014

Malcolm Morrison, The Canadian Press

TORONTO - The Toronto stock market looked set for a lower open with traders wary of risky assets such as equities amid a number of geopolitical flashpoints.

The Canadian dollar dipped 0.01 of a cent to 91.56 cents US prior to the release of the employment report for July. Economists expect that the economy cranked out about 20,000 jobs.

U.S. futures were slightly ahead with the Dow industrial futures up 27 points to 16,348 the Nasdaq futures rose 8.2 points to 3,864.8 and the S&P 500 futures gained five points to 1,910.25.

Geopolitical worries helped push stock markets lower this past week. The Russia/Ukraine standoff was the primary focus for investor worry as traders considered the odds of Russia invading its neighbour in order to prop up Ukrainian rebels. There is also concern about how sanctions and countersanctions could derail a still-fragile economic recovery in Europe.

Barclays Reserch also noted that there are "fears that Russia may widen its ban on agricultural imports to include the car, shipping, and aerospace sectors" after announcing a ban in food imports from the West.

Meanwhile, President Barack Obama authorized U.S. airstrikes in northern Iraq, warning they would be launched to defend American troops and civilians under siege from Islamic State militants.

On top of this, there was a breakdown in the ceasefire between Israel and Hamas in Gaza.

There didn't seem to be much reaction to positive Chinese data. Exports jumped 14.5 per cent from a year earlier, double June’s 7.2 per cent growth, customs data showed Friday. However, imports fell 1.6 per cent, down from the previous month’s 5.5 per cent expansion.

The decline in July imports exceeded analyst forecasts and was a sign domestic economic activity might be weakening. So far this year, imports are down 0.8 per cent compared with the same period last year.

It has also been a heavy week for Canadian corporate earnings, which have been generally positive.

On Friday, auto parts giant Magna International Inc. (TSX:MG) says net income rose to $510 million during the quarter, equal to $2.32 per diluted share, up from $415 million, or $1.78 per diluted share, a year ago. Sales increased six per cent to a record $9.46 billion in the quarter. The company also boosted its sale forecast for the year to a range of $35.6 billion to $37.3 billion from previous guidance of $34.9 billion to $36.6 billion.

In other corporate developments, Chip Wilson, the founder and largest shareholder of Lululemon Athletica, (Nasdaq:LULU) has sold half of his almost 28 per cent stake in the yoga-wear retailer for US$845 million to private equity firm Advent International. The deal gives Advent two seats on the board, with one of them becoming co-chairman. Wilson is already a board member.

Investors looking for safety pushed gold prices higher for a third day with the December bullion contract in New York up $1.50 to US$1,314 an ounce. They also bought into U.S. Treasuries and the yield on the benchmark 10-year bond stood at 2.39 per cent, down from 2.43 per cent late Thursday, which was already the lowest level of the year.

Elsewhere on the commodity markets, September crude in New York gained 38 cents to US$97.72 a barrel and August copper unchanged at US$3.18 a pound.

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Source: Canadian Press DataFile

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