Resource stocks were set to push the Toronto stock market higher Wednesday as commodity prices ran ahead amid hopes that European leaders can deal with the region’s debt problems.
Investors shrugged off Slovakia’s rejection of Europe’s bailout fund. Instead, they focused on hopes that a possible workaround solution would be found before a summit of EU leaders next week and looked ahead to an announcement of new measures to fight the government debt crisis.
Traders also looked past an earnings disappointment from resource giant Alcoa Inc.
Higher commodities and a willingness to take on more risk took the Canadian dollar up 1.1 cents to 98.39 cents US.
U.S. futures were sharply higher with the Dow Jones industrial futures ahead 98 points to 11,428, the Nasdaq futures were up 24.2 points to 2,312.8 and the S&P 500 futures rose 9.9 points to 1,199.5.
Slovakia’s parliament on Tuesday rejected a bill that would have strengthened the powers of the regional rescue fund to help bail out strapped economies in the eurozone.
But traders were confident that the measures will pass after Slovakia’s outgoing prime minister and her main opponent say they will work to try to get the bill through Parliament.
They also looked towards a speech by EU Commission president Jose Manuel Barroso later Wednesday where he is expected to unveil proposals on how to make European banks fit enough to sustain the worsening debt crisis on Wednesday.
Barroso said Tuesday that he would unveil several initiatives that should contribute to a “comprehensive response” to the eurozone’s debt troubles, including a plan to recapitalize European banks.
Markets have been buffeted by strong headwinds since early August arising from worries that a worsening European debt crisis could derail a fragile global economic recovery. Indexes have plunged sharply as investors also worry that European banks aren’t strong enough to withstand a disorderly debt default by Greece.
Meanwhile, the third quarter earnings season in the U.S. got off to a disappointing start after aluminum producer Alcoa reported on Tuesday that its third-quarter net income fell far short of expectations.
It turned out earnings per share of 15 cents, far below already lowered expectations for 22 cents, as concerns about a slowdown in the global economy pushed down prices for aluminum by 12% in the July-through-September period. That weighed on the company, which makes everything from soda cans to aluminum sheets for airplanes and cars.
Its stock was down about 3.5% in pre-market trading in New York.
On Wednesday, food and beverage company PepsiCo Inc. said its third-quarter profit rose four per cent to US$2 billion or $1.25 a share because of higher prices and strong sales of its snacks and beverages, especially overseas. Adjusted earnings came in at $1.31 a share, a penny better than expectations.
Improved confidence sent prices for oil and metals higher Wednesday as the November crude contract on the New York Mercantile Exchange gained 21 cents to US$86.02 a barrel even as the International Energy Agency slightly lowered its demand growth forecasts.
The IEA said it was now expecting global demand to rise to 89.2 million barrels a day this year — 1 million barrels more than in 2010 — and to 90.5 million barrels a day in 2012. Compared with last month’s forecasts, these revisions were lower by 50,000 barrels a day for 2011 and by 210,000 barrels a day for 2012.
Copper prices also advanced with the December contract on the Nymex ahead seven cents to US$3.36 a pound.
Bullion prices were higher while the December contract in New York climbed $23.60 to US$1,684.60 an ounce.
Research in Motion Ltd. (TSX:RIM) will be in focus as BlackBerry users across the world faced another day of technical glitches as text and email services in numerous countries ran into further trouble. The outage initially affected users in Europe, the Middle East, Africa and some areas of South America, though it has since spread to affect some users in Asian markets including Hong Kong, Japan, Singapore and India.
Investors will also take in Minutes from the latest interest rate meeting of the U.S. Federal Reserve. The meeting saw the Fed announce its plan to “twist” the yield curve by swapping shorter-maturity government bonds for longer-dated instruments.
Earlier in Asia, Japan’s Nikkei 225 index dropped 0.4%, Hong Kong’s Hang Seng rose one per cent and South Korea’s Kospi added 0.8%. Benchmarks in Singapore, India, Indonesia and mainland China also swung into positive territory.
European markets also advanced with London’s FTSE 100 index gained 0.31%, Frankfurt’s DAX was up 1.15% and the Paris CAC 40 was ahead 1.28%.