TSX heads for lower open amid disappointment with Fed stance on stimulus

U.S. futures were deep in the red as Fed policy-makers said they are worried that recent strong gains in hiring could fizzle if U.S. economic growth doesn’t pick up.

However, the minutes of the Fed’s March 13 meeting showed that only a couple of members wanted to take further steps to boost the economy, such as quantitative easing, which involves the Fed buying up bonds.

The Dow Jones industrial futures tumbled 90 points to 13,042, the Nasdaq futures fell 18.5 points to 2,760.5 while the S&P 500 futures dropped 10.3 points to 1,398.5.

The disappointment with the Fed minutes comes at a time when most stock markets have racked up steady advances through the first quarter as a string of U.S. reports, particularly employment data, has reinforced the view that the recovery continues at a slow but steady pace. The U.S. economy has racked up job gains of at least 200,000 for the last three months while manufacturing data such as the Institute for Supply Management’s index have beat expectations.

The TSX is still up more than 10.26% from the lows of last October and ahead about 3% year to date after losing almost 200 points on Tuesday. However, the resource-heavy TSX has lagged other global markets because of losses in the material sector amid worries about the slowing pace of the Chinese economy.

The Chinese government has slowed growth through tightening lending requirements as a means of dealing with high inflation.

Commodity prices registered sharp declines with the May crude contact on the New York Mercantile Exchange down $1.06 to US$102.96 a barrel.

Prices were also pressured by a report showing a larger than expected increase in U.S. crude supplies, which suggested that demand may remain weak.

The American Petroleum Institute said late Tuesday that crude inventories rose 7.8 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted an increase of 1.9 million barrels.

The Energy Department’s Energy Information Administration reports its weekly supply data later Wednesday.
The May copper contract lost eight cents to US$3.84 a pound. Bullion prices fell heavily, down $44.80 to US$1,627.20 an ounce.

European bourses were negative as London’s FTSE 100 index gave back 1.2%, Frankfurt’s DAX fell 1.71% and the Paris CAC 40 dropped 1.49%.

Earlier in Asia, stocks also faltered. Japan’s Nikkei 225 index plunged 2.3% to its lowest close in nearly a month while South Korea’s Kospi tumbled 1.5%. Markets in mainland China, Hong Kong and Taiwan were closed for public holidays.

In corporate news, Moody’s Investors Service has downgraded its credit rating on General Electric Co. by a notch. The ratings agency says it lowered the rating to Aa3, Moody’s fourth-highest investment-grade rating, from Aa2 because it sees risks associated with GE’s lending unit, General Electric Capital Corp. It says the company’s industrial businesses are strong.

Rona Inc. (TSX:RON) has denied that the company is up for sale after stock in the home renovation retailer jumped more than 12% in heavy trading Tuesday on the Toronto Stock Exchange. The Quebec-based retailer issued the denial in response to movement in its stock after Robert Hull, chief financial officer of Lowe’s Companies Inc., said his U.S.-based rival might be interested if Rona put itself up for sale.