The Toronto stock market was set for a lower session Monday as buying sentiment continued to take a hit from Friday’s disappointing U.S. jobs data and word from the International Monetary Fund that it was downgrading its economic forecast.
The Canadian dollar moved down 0.2 of a cent to 97.97 cents US.
U.S. futures were firmly in the red after the data showed that the economy only cranked out an average of 75,000 jobs a month during the second quarter, down sharply from 226,000 in the January-March period.
IMF managing director Christine Legarde didn’t mention exactly how much the IMF would trim from its earlier forecast.
But the two data points were enough to further persuade traders that economic growth is faltering around the globe.
The Dow Jones industrial futures fell 55 points to 12,672, the Nasdaq futures were down 6.25 points to 2,602.75 and the S&P 500 futures lost 6.1 points to 1,345.7.
The weak jobs report on Friday increases pressure on the Federal Reserve to implement monetary stimulus measures known as quantitative easing. The release later this week of the minutes of the last Fed meeting might show whether the Fed is leaning toward more stimulus to boost growth.
There was one bit of positive news Monday morning.
Inflation figures for China showed the consumer price index at its lowest since January 2010. That will give Beijing leeway to continue adding stimulus to fight an economic slowdown. China is scheduled to release its latest trade numbers Tuesday and retail sales, industrial production and gross domestic product on Friday. In a surprise move, China last week cut interest rates for a second time in a month.
Commodity prices were higher after diminished demand prospects pushed prices for oil and metals down sharply on Friday.
The August crude contract on the New York Mercantile Exchange rose 28 cents to US$84.73 a barrel after sliding $2.77 at the end of last week.
The September copper contract edged up a penny to US$3.41 a pound following an eight-cent fall. Bullion started to recover from Friday’s $30 decline, up $4.50 to US$1,583.40 an ounce.
Transportation giant Bombardier Inc. (TSX:BBD.B) will be in focus after the company said Sunday that it received a conditional order valued at about $1 billion for 15 of the new C-Series aircraft the company aims to begin delivering by the end of next year. The company said in a statement it has firm orders for 138 C-Series airliners.
At the same time, Guy Hachey, the president of Bombardier Aerospace, said on Sunday that difficulties with flight control systems could affect the timeline for the maiden flight later this year.
In other corporate developments, Canadian biotechnology company QLT Inc. is cutting its workforce by two-thirds, leaving it with 68 employees after the downsizing. The Vancouver-based company (TSX:QLT) had been one of Canada’s most successful biotechnology firms based on its treatment for age-related blindness. But sales of Visudyne have fallen and QLT has struggled in recent years to find another commercially successful product.
The chronic eurozone debt crisis also chipped away at investor confidence as Spain’s borrowing costs rose to dangerously high levels.
The interest rate, or yield, on the country’s 10-year bonds hit seven% Monday morning. That is a level that market-watchers consider is unaffordable for a country to raise money on the bond markets in the long term and the point at which Greece, Ireland and Portugal all sought an international bailout.
Meanwhile, finance ministers of the 17 countries that use the euro are gathering in Brussels to discuss terms of a rescue package for the country’s stricken banks.
European bourses were mainly lower with London’s FTSE 100 index down 0.34%, Frankfurt’s DAX added 0.1% and the Paris CAC 40 dipped 0.16%.
Earlier in Asia, Japan’s Nikkei 225 index fell 1.4%, Hong Kong’s Hang Seng slid 1.9%, South Korea’s Kospi slipped 1.2% and China’s Shanghai Composite tumbled 2.4%.
Traders also looked ahead to the start of the second-quarter corporate earnings season in the U.S., which will be kicked off by aluminum producer Alcoa Inc. after the close.
They are braced for a lacklustre run of earnings reports with big American multinationals feeling pressure from a currency that ramped up as the European debt crisis worsened in the second quarter.
Analysts expect net income from Alcoa of seven cents per share, a decline of 78.1% from the same quarter a year ago. During the past three months, the average estimate has moved down from 12 cents per Alcoa share.
On top of a higher currency, corporations are also dealing with a slowing global economy.