TSX to head higher amid optimism on Chinese reforms, Fed easing

U.S. futures advanced after Janet Yellen, who is slated to become the next Fed chairman, made it clear during confirmation hearings last week that she supports the Fed’s low interest-rate policies.

Those bond purchases have kept bond yields low and encouraged people to buy into equities, resulting in a big stock boom on many markets this year.

The Dow Jones industrial futures gained 45 points to 15,958, the Nasdaq rose 2.5 points to 3,419 while the S&P 500 futures climbed 2.5 points to 1,796.

The focus on the Fed will pick up mid-week with the release Wednesday of the minutes from the Fed meeting late last month when the central bank judged the American economy still too weak to start tapering its asset purchases.

But the meeting did nothing to lessen the uncertainty surrounding when the Fed might move, particularly as its sounded more positive about the economy.

Markets also found support Monday from China’s announcements of more details to its economic and social reform program, including opening state industries to greater competition, loosening its one child policy, and abolishing its labour camps.

China’s leadership has faced pressure to replace a worn out economic model after growth slowed to a two-decade low in the second quarter.

Meanwhile, China is studying new ways to measure its economy. The country’s statistics bureau says new indicators would be added, such as farmer income from the sale of land use rights and revisions in the way it calculates the contribution from housing, the nation’s statistics bureau said Monday. The proposed revision could boost the size of the nation’s estimate of its gross domestic product, which rose 7.7 per cent over the first nine months of the year from a year earlier.

An easing of concerns about Fed tapering and word of Chinese economic reforms at the end of the week pushed the TSX up 0.8 per cent last week while the Dow industrials ran ahead 1.27 per cent.

On the corporate front, Ontario Teachers’ Pension Plan has agreed to acquire a majority stake in Burton’s Biscuit Co., a U.K. company that makes products such as Cadbury Fingers and Wagon Wheels, for an undisclosed price. The sellers include Canadian Imperial Bank of Commerce (TSX:CM) and funds managed by Apollo Global Management, LLC (NYSE:APO).

Corporate earnings reports for the third quarter have slowed considerably but traders will still take in reports this week from retailer Sears Canada (TSX:SCC) and food company George Weston (TSX:WN) on Tuesday, specialty drug company Paladin Labs (TSX:PLD) on Wednesday and Gildan Active Wear (TSX:GIL) on Thursday.

It’s a relatively soft week for economic data but the Canadian dollar could find some lift from the latest retail and inflation data coming out near the end of the week.

Economists reckon that retail sales rose by 0.2 per cent in October following a 0.2 per cent gain in September.

Traders will also likely take in data showing very little price pressure in the Canadian economy.

The consensus calls for the consumer price index to come in unchanged for October after rising by 0.2 per cent in September.

Statistics Canada releases both reports on Friday.

In the U.S., investors will look to the release of the latest data on retail sales, inflation and existing home sales on Wednesday. Traders will also look to Thursday, when the leading indicator comes out. This report tells investors how the economy should be performing in the next six months.

Commodity prices were lower with the December crude contract on the New York Mercantile Exchange down 30 cents to US$93.54 a barrel.

December copper dipped one cent to US$3.16 a pound while December bullion faded $10 to US$1,277.40 an ounce.

European bourses advanced with London’s FTSE 100 index up 0.44 per cent, Frankfurt’s DAX and the Paris CAC 40 rose 0.65 per cent.

The Chinese reforms pushed the country’s Shanghai Composite up 2.9 per cent and Hong Kong’s Hang Seng jumped 2.7 per cent. South Korea’s Kospi was up 0.3 per cent but Tokyo’s Nikkei 225 closed slightly lower.