TSX to rise as traders await Federal Reserve survey

The Canadian dollar was down 0.17 of a cent to 101.07 cents US amid lower prices for oil and metals.

U.S. futures were in the red with the Dow Jones industrial futures off nine points to 13,077, the Nasdaq futures down two points at 2,778.8 and the S&P 500 futures 1.5 points lower at 1,406.3.

Markets have made minor moves this week ahead of Bernanke’s speech at the Fed’s annual retreat at Jackson Hole, Wyo. Expectations for another round of economic stimulus have risen over the past couple of weeks after the minutes from the Fed’s last interest rate meeting Aug. 1 showed more members wanting to see the central bank take more action to revive the economy.

And then, last Friday, the Wall Street Journal reported that Bernanke had written a Republican lawmaker to say there is more the Fed could do to help the economy.

But those expectations have taken place against a background of steadily improving economic data, including better than expected job creation numbers, improved retail sales and more indications of an improving housing sector.

Markets finished lower Tuesday in the wake of a report showing slipping consumer confidence over the summer prompted by employment worries.

Still, there are doubts Bernanke would commit to more stimulus ahead of important data next week, including the latest snapshot of the manufacturing sector and the August non-farm payrolls report at the end of the week. The Fed holds its next interest rate announcement Sept. 13.

The Federal Reserve releases its so-called Beige Book mid-afternoon Wednesday.

“It should affirm that the expansion is proceeding at a modest to moderate pace, though its tone should improve somewhat from the July report given the recent pickup in activity,” said BMO Capital Markets senior economist Sal Guatieri.

“It might upgrade slightly the earlier view of tepid job growth and acknowledge further healing in housing markets. Unfortunately, it will also capture the adverse impact of the worst drought in more than half a century on crop production and food prices.”

In other economic news, the second revision to second quarter U.S. gross domestic product growth will be released.

Guatieri added he expected growth to be revised up slightly to 1.7% annualized from the initial estimate of 1.5%, still below the first quarter’s 2% pace.

Crude prices were lower after finance ministers from the world’s leading industrialized economies called on oil producers to increase output and said they stood ready to ask the International Energy Agency to release strategic reserves.

A statement released by the Group of Seven finance ministers said the ministers were concerned about the impact of rising oil prices on the global economy and were prepared to act. The October crude contract on the New York Mercantile Exchange was down 72 cents to US$95.61 a barrel.

Copper prices also stepped back, down for a fourth session as September copper dropped three cents to US$3.43.

Bullion lost US$4.50 to US$1,665.20 an ounce.

Meanwhile, there were further indications that investor confidence in Italy has improved. Italy paid sharply lower interest rates to raise €9 billion six-month treasury bonds, with an interest rate of 1.585 per cent, down from 2.45% in the last such auction in July.

Borrowing rates for Italy and Spain have dropped sharply in recent weeks on expectations that the European Central Bank will approve a plan to buy those countries’ government bonds.

European markets declined as London’s FTSE 100 index, Frankfurt’s DAX and the Paris CAC 40 were all down about 0.5%.

Earlier, stocks were mixed in Asia. The Tokyo Stock Exchange’s benchmark Nikkei rose 0.4%, South Korea’s Kospi added 0.6%, while Hong Kong’s Hang Seng Index turned 0.1 per cent lower and Australia’s S&P/ASX 200 lost nearly 0.1%.

On mainland China, the Shanghai Composite Index lost one per cent to its lowest closing in more than three years. The slide came as the head of China’s planning agency said government efforts to reverse China’s economic slump are taking effect and growth is “stabilizing at a slow pace.”

Beijing cut interest rates twice in June and is trying to pump up the economy by approving a wave of new industrial investments. Authorities have resisted calls for more aggressive stimulus after huge spending in response to the 2008 crisis fuelled inflation and a wasteful building boom.

In corporate news, oil and gas producer Calgary-based Fairborne Energy Ltd. (TSX:FEL) is selling dry natural gas assets for a total of $189 million. Fairborne said depressed natural gas prices and volatility in capital markets have challenged its ability to fund growth.

Stakeholders in Progress Energy Resources Corp. (TSX:PRQ) have overwhelmingly approved the $6-billion takeover of the company by a subsidiary of Malaysia’s state-owned Petronas. The company says more than 99% of both stockholders and debenture holders have approved the arrangement, which the company says is not being opposed by the federal Competition Bureau.