Stocks set to rise despite poor economic data

U.S. futures were higher with the Dow Jones industrial futures ahead 63 points to 11,825, the Nasdaq futures were up 13.8 points to 2,242.2 while the S&P 500 futures rose 7.3 points to 1,213.6.

There was a further indication Europe is sliding toward recession after the purchasing managers’ index from financial data company Markit showed eurozone manufacturing and services output contracted for a fourth month in December, although not as much as economists were expecting. The combined index for the two sectors stood at 47.9 in December, up from 47.0 in November. A figure below 50 indicates contraction.

A problem for lenders is that Europe’s debt crisis is squeezing credit conditions for banks in the region. Not only are banks less inclined to loan to each other, they’re also reluctant to loan money to businesses and households.

In Japan, confidence at major manufacturers fell over the last quarter. The Bank of Japan’s “tankan” survey of business sentiment fell to minus four.

The figure represents the percentage of companies saying business conditions are good minus those saying conditions are unfavourable, with 100 representing the best mood and minus 100 the worst.

And a preliminary manufacturing figures showed that Chinese factory output contracted, but at a slower rate, in December. HSBC’s purchasing manager’s index for December stood at 49.0, up from 47.7 in November. Any number below 50 indicates a contraction in manufacturing activity.

Nonetheless, traders seemed set to poke around for bargains after three days of sharp losses on North American markets amid deepening pessimism about a solution to Europe’s debt crisis.

Many economists have said the best way to convince markets that heavily-indebted countries can pay their debts is to allow the European Central Bank to print more money and buy up the bonds of countries such as Italy and Spain.

That idea has come under heavy resistance from Germany and the ECB itself. And on Thursday, ECB president Mario Draghi said there’s “no external saviour” for heavily indebted governments in the eurozone debt crisis.

Draghi said governments must take the tough steps to balance budgets and reform economies to promote growth.

Draghi said the eurozone’s “firewall” is the EU bailout fund. He urged EU officials to quickly implement decisions to strengthen it to assure markets governments will pay their debts on time.

Meanwhile, the TSX should find support from higher commodity prices after oil, gold and copper sold off Wednesday as traders avoided anything risky and piled into the safe haven status of the U.S. dollar.

On Thursday, the January crude contract on the New York Mercantile Exchange advanced 80 cents to US$95.75 a barrel.

The February bullion contract rose $3.70 to USD$1,590.60 an ounce while March copper inched up two cents to US$3.30 a pound.

Earlier, stocks in Asia backed off as Japan’s Nikkei 225 index shed 1.7%, South Korea’s Kospi lost 2.1% and Hong Kong’s Hang Seng tumbled 1.8%.

Mainland Chinese shares lost ground for a sixth straight trading day, with the benchmark Shanghai Composite Index falling 2.1% while the Shenzhen Composite Index lost 2.3%.

European markets advanced with London’s FTSE 100 index up 0.76%, Frankfurt’s DAX gained 1.16% and the Paris CAC 40 climbed 0.96%.

In corporate news, tour operator Transat A.T. Inc. (TSX:TRZ.B) slid to a loss of $4.5 million in the fourth quarter compared to a profit of $52.4 million a year ago. Results were pulled down by a $16.5 million restructuring charge. Revenues increased to $809.9 million from $778.6 million.

FedEx says strong online shopping leading into the holidays nearly doubled its net income for the second quarter to US$497 million. Revenue rose 10% to US$10.59 billion.