TSX set for lower open amid falling commodity prices

U.S. futures pointed to a weak open with the Dow Jones industrial futures down 27 points to 12,311, the Nasdaq futures lost 0.8 of a point to 2,315.2 while the S&P 500 futures lost 3.6 points to 1,268.5.

Markets in Toronto and New York racked up strong gains on Tuesday amid data showing growing expansion in the U.S. and Chinese manufacturing sectors, with the TSX ahead 253 points and the Dow ahead 180 points.

But that data was counter balanced Wednesday by a report showing continued economic deterioration in Europe.

The final report on the December eurozone services Purchasing Managers Index came in at 48.8.

“While the result was better than expected, the sub-50 reading indicates a contraction in the service sector and means the region is still likely headed for recession in 2012,” said BMO Capital Markets economist Carl Campus.

At the same time, there was relief as Germany successfully auctioned C4.06 billion in 10-year bonds despite concerns over the debt crisis that’s afflicting the 17-nation eurozone. Demand for the bonds outstripped supply as investors placed bids for €5.14 billion of the debt securities. The average interest yield was a low 1.93%, down from 1.98% in November.

Meanwhile, traders are looking to employment data at the end of the week for reassurance the U.S. will be able to avoid slipping back into recession. Economists expect that the U.S. economy cranked out about 140,000 jobs during December, up from 120,000 in November.

Canadian jobs data also comes out Friday.

Commodity prices were lower with the February crude contract on the New York Mercantile Exchange down 75 cents to US$102.21 a barrel. Prices surged more than $4 Tuesday in the wake of the manufacturing data and heightened geopolitical tensions.

On Tuesday, Iran ended 10 days of naval manoeuvres with a warning to the U.S. military to stay out of the Persian Gulf. Iran has threatened to close the key oil passageway Strait of Hormuz as possible retaliation to new U.S. economic sanctions. The U.S. has said it will not tolerate such a move.

Copper prices gave back a chunk of Tuesday’s nine-cent rise as the March contract slipped six cents to US$3.47 a barrel.

Bullion prices also weakened, down $5 to US$1,595.50 an ounce after running up almost $40 on Tuesday.

European markets were negative while London’s FTSE 100 index slipped 0.05%, Frankfurt’s DAX lost 0.65% and the Paris CAC 40 was down 0.96%.

Earlier, Asian stocks ended the day with gains, as Japan’s Nikkei 225 posted a 1.2% gain.

Hong Kong’s Hang Seng Index and South Korea’s Kospi slipped after strong gains a day earlier. The Hang Seng fell 0.8% while the Kospi was down 0.5%.

In corporate news, Connacher Oil and Gas Ltd. (TSX:CLL) said it has shaken up its executive offices with changes that include the departure of president and chief operating officer Peter Sametz. The company said it expects to report strong operating and financial results for the fourth quarter.