The Toronto stock market looked set for a positive start to the session Friday as commodity prices advanced at the end of a volatile week.
Stock markets are down sharply for the week as the European debt crisis worsened with borrowing rates in Italy and Spain surpassing seven per cent, a level analysts deem to be unsustainable in the long term.
The Canadian dollar advanced as traders were willing to take on more risk, up 0.7 of a cent to 97.95 cents US.
Traders also took in data showing that Canada’s annual inflation rate fell three-tenths of a point to 2.9% last month as the rate of price increases of most consumer goods measured by Statistics Canada moderated.
That’s the first time the annual inflation rate has been within the Bank of Canada’s one-to-three per cent comfort zone since July. As well, the bank’s core inflation rate, which excludes volatile items such as energy and some foods, edged down one notch to 2.1%
U.S. futures were positive with the Dow Jones industrial futures ahead 87 points to 11,826, the Nasdaq futures gained 14.5 to 2,282.8 while the S&P 500 futures were ahead 10.9 points to 1,225.7.
Stocks have slid this week despite positive U.S. economic data including rising retail sales, higher than expected housing starts and lower jobless insurance claims.
Instead, traders have been focused on the deepening debt crisis as borrowing rates jumped, not just for Spain and Italy but also traditionally strong countries like France.
Some of the pressure on Italy and Spain has eased through the week thanks to suspected buying of their government bonds by the European Central Bank. Analysts expect figures on Monday to show that the ECB, now led by Italian Mario Draghi, stepped up its money purchases this week, in effect to give politicians more time to get a grip on the mounting crisis. By buying their bonds, the ECB is hoping to keep a lid on their borrowing rates.
For now, there appears to be some calm in the bond markets, with Italy’s ten-year yield up a tiny amount to 6.72% . Spain’s yield was also a little lower, at 6.35%.
Prices for oil and metals advanced Friday morning with the December crude contract on the New York Mercantile Exchange ahead 92 cents to US$99.74 a barrel.
The December copper contract on the Nymex gained five cents to US$3.43 a pound while the December gold contract rose $13.30 to US$1,733.50 an ounce.
European markets were mixed with London’s FTSE 100 index down 0.31%, Frankfurt’s DAX climbed 0.54% and the Paris CAC 40 was up 0.15%.
Earlier in Asia, South Korea’s Kospi tumbled two per cent while Hong Kong’s Hang Seng dropped 1.7% and Japan’s Nikkei 225 index slid 1.2%.
In mainland China, the benchmark Shanghai Composite Index fell 1.9% while the smaller Shenzhen Composite Index lost 2.7%.
In earnings news, H.J. Heinz Co., the world’s largest ketchup maker, said Friday its fiscal second-quarter net income fell almost six per cent to US$237 million. Revenue rose eight per cent to US$2.83 billion.
In other corporate developments, Yamana Gold Inc. (TSX:YRI) has started operations at its Mercedes mine in Sonora, Mexico. Yamana anticipates production to be 120,000 gold equivalent ounces each year, though the company said it’s looking to boost production to 130,000 ounces per year by 2013. Yamana has gold mines and projects in Brazil, Argentina, Chile, Mexico and Colombia.