The Toronto stock market headed for a positive open Friday after the Bank of Japan unexpectedly expanded a key stimulus program aimed at boosting the world’s third-largest economy.
The bank will increase its purchases of government bonds and other assets by between 10 trillion yen and 20 trillion yen (US$91 billion to $181 billion) to about 80 trillion yen (US$725 billion) in total annually.
Bank governor Haruhiko Kuroda said the increase was required to prevent a reversal into a “deflationary mindset” that the country’s leaders contend has stymied growth for many years. The bank judged the move necessary in the wake of weakening consumer demand following a consumption tax hike and the recent substantial decline in oil prices, which have been exerting downward pressure on inflation.
The Canadian dollar rose 0.04 of a cent to 89.36 cents US.
U.S. futures signalled a sharp runup at the open with the Dow Jones industrial futures ahead 197 points to 17,311, the Nasdaq futures jumped 57.8 points to 4,147.3 and the S&P 500 futures climbed 22.9 points to 2,011.5.
The move by the Japanese central bank comes at a point when the U.S. Federal Reserve is winding up its marquee stimulus program. The Fed’s quantitative easing program has been fixture since the 2008 financial crisis.
It announced Wednesday that the third such QE exercise would end at the end of October.
Gold prices have been a major casualty of the Fed move.
That is because the QE program of massive bond purchases had elevated inflation concerns. Traders had bought into gold as an inflation hedge but the program is now wrapping up and inflation is tame in most parts of the world.
The December bullion contract dropped $25.20 to US$1,173.40 an ounce on top of a $26 slide Thursday.
A decline the price of gold, and earnings misses by some of the big miners, have pounded the Toronto gold sector over the last few days — it’s down 12 per cent this week alone.
Also working against gold and other commodity prices has been a U.S. dollar that strengthened following the Fed’s decision and moved higher against other currencies Friday following the Bank of Japan announcement. A stronger greenback makes it more expensive for holders of other currencies to buy oil and metals, which are dollar-denominated.
December crude fell 73 cents to US$80.39 a barrel but December copper partially reversed Thursday’s four-cent decline and moved up two cents to US$3.08 a pound.
It was quiet on the corporate front following a heavy slate of earnings news this week.
TransForce Inc., (TSX:TFI) one of Canada’s largest trucking and logistics groups, says it has received sufficient shareholder support for a $495-million cash takeover offer for the Ontario-based Contrans trucking group but continues to await a response from Canadian competition authorities. The Montreal-based company says it has been in discussions with the Competition Bureau and expects the 30-day waiting period will expire on Wednesday. As a result, TransForce has extended the offer deadline to Nov. 11.
The TSX could be headed for a flat week as other resource sectors have also been under selling pressure this week. The base metals sector is down four per cent this week while the energy component has shed 3.5 per cent. That performance has been balanced somewhat by a rise of one per cent in financials and three per cent gains in consumer staples and techs.