The Toronto stock market headed for a positive open Tuesday as prices for oil and metals rose after Eurozone countries agreed on a new treaty to stop overspending. Hopefully, the agreement arrived at on Monday will help eurozone countries deal decisively with the region’s debt woes.
Increased appetite for risk and higher commodity prices pushed the Canadian dollar past parity with the U.S. dollar, up 0.54 of a cent to 100.26 cents. The loonie hasn’t closed above parity with the greenback since late October.
U.S. futures signalled a positive start to the session as the Dow Jones industrial futures gained 60 points to 12,662, the Nasdaq futures were ahead 10.25 points to 2,472.25 and the S&P 500 futures gained 6.6 points to 1,315.5.
The hope is that the tighter rules contained in a new treaty, commonly known as the fiscal compact, will restore confidence in the euro and convince investors that all eurozone members will get their debts under control.
For now, investors appear to be giving European policymakers the benefit of the doubt especially as there are hopes Greece will arrive at a debt-reduction deal between the country and its private creditors, possibly as soon as this week.
Greece and its bondholders are trying to reach a deal to significantly cut the country’s debt and pave the way for it to receive a much-needed €130 billion bailout.
The March crude contract on the New York Mercantile Exchange advanced $1.40 to US$100.18 a barrel.
Prices were also supported by uncertainties revolving around Iran, which has welcomed international weapons experts into the country in hopes of refuting claims that it is building a nuclear weapon.
Europe plans to embargo Iranian oil this summer to pressure Iran about its nuclear program. If that happens, Iran says it could retaliate by blocking passage through the Persian Gulf, where tankers carry one-sixth of the world’s oil exports.
Copper prices edged closed to the $4 mark, up three cents to US$3.86 a pound. Copper has surged about 12% this month, partly on hopes that China, the biggest consumer of the metal viewed as an economic bellwether as it is used in so many industries, is set to further relax lending standards to encourage growth.
A weaker U.S. currency also helped support prices Tuesday. A stronger greenback usually helps depress commodity prices, which are denominated in dollars, as it makes oil and metals more expensive for holders of other currencies.
Bullion prices also advanced with the February contract up $8.60 to US$1,739.60 an ounce.
European markets were higher with London’s FTSE 100 index ahead 0.76%, the DAX gained 1.03% and the Paris CAC 40 was ahead 1.43%.
Earlier in Asia, solid Japanese industrial data helped stocks rally.
Tokyo’s Nikkei 225 rose 0.1% to 8,802.51 after data showed December industrial activity rose four per cent over the previous month. Hong Kong’s Hang Seng gained 1.1% and Seoul’s Kospi was up 0.8%.
China’s benchmark Shanghai Composite Index was up 0.3% ahead of Wednesday’s release of a key manufacturing index. Investors are hoping for a loosening of credit curbs if it shows activity is slowing amid lacklustre global demand.
Junior miner Verde Potash Plc (TSXV:NPK) says a preliminary economic assessment report concludes its planned potash project in Brazil will cost US$654 million to build. The company said Tuesday the project is estimated to initially produce up to 600,000 tonnes of the widely used fertilizer chemical a year.
In earnings news, Mattel Inc. reported that strong holiday demand for toys including Barbie, Hot Wheels and American Girl helped push its fourth-quarter net income up 14% to US$370.6 million or $1.07 per share. This beat the $1 per share that analysts polled by FactSet expected.