Stocks to open higher amid optimism for debt fix

The Canadian dollar was higher following the positive news from the country’s biggest trading partner, rising 0.12 of a cent to 98.71 cents US amid a disappointing jobs report from Statistics Canada.

Statistics Canada reported the economy shed 18,600 jobs last month while the jobless rate edged up a percentage point to 7.4%. Economists had expected the economy to crank out about 17,000 jobs.

Canada sheds 18,600 jobs in November

New York futures were higher with traders also encouraged after German Chancellor Angela Merkel laid out some details of what could be part of an effective plan for containing the European debt crisis.

The Dow Jones industrial futures gained 130 points to 12,133, the Nasdaq futures were up 27.2 points to 2,336.5 and the S&P 500 futures ran up 13.9 points to 1,257.5.

Merkel is pushing for stronger rules against overspending as the long-term answer to Europe’s debt crisis, saying fixes for the euro’s flaws need to be written into changes in the basic EU treaty.

Speaking to lawmakers in Parliament ahead of a crucial European summit next week, the German leader emphasized that tougher rules against running up debt were the only path forward and warned the process could take years.

There was also a hint of more short-term help for other heavily indebted governments such as Italy from the European Central Bank. Bank President Mario Draghi on Thursday appeared to dangle an offer of new, extraordinary measures if political leaders at the Dec. 9 summit can answer his call for “a fundamental restatement of the fiscal rules.”

“Other elements might follow,” Draghi said, fuelling speculation that the bank could step up its so-far limited program to buy government bonds issued by struggling countries.

Stock markets were set to finish this week’s trading sharply higher on rising optimism that eurozone leaders are finally moving to deal with the debt crisis, almost two years after it started in Greece.

Markets were particularly receptive to Wednesday’s announcement of coordinated steps by central banks to improve shaky commercial banks’ ability to borrow U.S. dollars to fund their operations.

The move had the effect of lowering the yield on Italian 10-year bonds to 6.48% on Friday from over seven per cent the day before.

Commodity prices ran up smartly with January crude on the New York Mercantile Exchange up 78 cents to US$100.98 a barrel.

Metals also advanced with March copper up eight cents to US$3.61 a pound.

And February gold in New York rose $18.90 to US$1,758.70 an ounce.

The TSX could be weighed down by tech heavyweight Research In Motion Ltd. (TSX:RIM) (NASDAQ:RIMM). The BlackBerry maker said that it expects to miss its full-year financial targets as it takes a big charge because of poor tablet sales. RIM will book a pre-tax charge of about US$485 million on its books in the third-quarter. Its shares were down 6.25% in pre-market trading in New York.

Traders also took in strong earnings reports from two of the big Canadian banks.

Scotiabank (TSX:BNS) said profits rose 11% to $1.24 billion in its fourth quarter or $1.07 a share. Scotiabank’s revenue increased to $4.35 billion in the three months ended Oct. 31, rising from $3.94 billion a year earlier.

Scotiabank Q4 profit up 11% to $1.24 billion

And Royal Bank (TSX:RY) said record earnings in Canadian banking and its insurance arm drove net income 16% higher in the fourth quarter to $1.6 billion or $1.07 a share.

Royal Bank Q4 net income rises 16% to $1.6 billion

European markets were up sharply with London’s FTSE 100 index ahead 1.76%, Frankfurt’s DAX gained 1.84% and the Paris CAC 40 rose 1.82%.

Earlier in Asia, Japan’s Nikkei 225 index rose 0.5%, Hong Kong’s Hang Seng rose 0.2%, Australia’s S&P/ASX 200 added 1.4% and South Korea’s Kospi was marginally lower.

Mainland Chinese shares also lost ground as the benchmark Shanghai Composite Index lost one per cent. The smaller Shenzhen Composite Index lost 1.9%.