The Toronto stock market headed for a lower open with gold miners likely leading declines as bullion prices retreated to three-year lows and traders take in data showing U.S. growth in the first quarter wasn’t as robust as previously thought.
The U.S. Commerce Department says it now estimates U.S. gross domestic product grew at an annualized rate of only 1.8 per cent, down sharply from the previous reading of 2.4 per cent but still stronger than in the fourth quarter.
The Canadian dollar was up 0.2 of a cent to 95.36 cents US as the loonie recovered somewhat from a string of losses resulting from a U.S. currency that has accelerated on indications that the U.S. Federal Reserve looks set to ease up on its bond purchase program.
Speculation over what the Fed will do in tapering its US$85 billion a month in bond purchases continued to pummel gold prices and the August contract fell $43.40 to US$1,231.70 an ounce.
Fed chairman Ben Bernanke said last week that the pace of bond buying could slow later this year as long as economic data shows continued improvement. A string of solid economic data released Tuesday on manufacturing, housing and consumer sentiment has further reinforced the view that the central bank is ready to act and could wind up the program by next year.
U.S. futures were higher as the Dow Jones industrial futures gained 71 points to 14,761, the Nasdaq futures were up 21.2 points to 2,879.5 while the S&P 500 futures advanced 9.75 points to 1,591.25.
Both Toronto and New York indexes registered triple-digit gains Tuesday on the strong U.S. economic data and comments by China’s central bank that eased fears of a credit crunch in the world’s second-biggest economy.
China’s central bank caused a global rout in markets on Monday after it moved to curb so-called shadow banking _ unregulated lending to companies starved of credit by traditional banks. Investors worried that would cause an increase in borrowing rates for companies, hurting business. On Tuesday, the central bank issued a statement saying it would act to keep credit markets functioning, if needed.
Other commodities were lower with the August crude contract on the New York Mercantile Exchange off 13 cents to US$95.19 a barrel. July copper was down three cents to US$3.04 a pound.
The TSX gold sector is by far the worst performer on the Toronto market, down 46 per cent so far this year. Share prices in gold miners were already feeling pressure as bottom lines were hit by rising costs. But gold prices have deteriorated steadily this year as the precious metal loses its appeal as a hedge against inflation and deteriorating currencies.
The base metals sector is the second-worst performer, down 33 per cent as commodity prices continue to slip, reflecting a tepid global economic recovery.
In corporate news, the Globe and Mail is reporting that Verizon Communications Inc. (NYSE:VZ) has made an initial offer for Wind Mobile and is starting talks with Mobilicity, two of Canada’s smaller wireless network operators. The newspaper’s online edition says two people familiar with the situation told the Globe that Verizon’s initial offer for Wind is worth about $700 million. The report says representatives of the three companies and Wind’s majority owner, VimpelCom, declined to comment.
Earlier in Asia, the Shanghai Composite Index fell 0.4 per cent but the smaller Shenzhen Composite Index jumped 2.5 per cent while in Hong Kong, the Hang Seng surged 2.4 per cent.
Japan’s Nikkei 225 fell one per cent, South Korea’s Kospi reversed early losses to rise 0.2 per cent and Australia’s S&P/ASX 200 gained 1.6 per cent.
European bourses were also higher with London’s FTSE 100 index up 0.95 per cent, Frankfurt’s DAX gained 1.66 per cent and the Paris CAC 40 advanced 1.85 per cent.