Toronto stock market set for lower open, economic worries depress commodities

By Malcolm Morrison

THE CANADIAN PRESS

TORONTO — The Toronto stock market headed for a lower open Friday while commodity prices headed lower on nagging worries about the fragile global economic recovery.

The Canadian dollar’s latest run at parity with the greenback stalled, losing 0.18 to 99.05 cents US after the loonie closed at a two-month high on Thursday.

U.S. futures were lower amid a mixed bag of corporate earnings from heavyweights including Microsoft Corp., General Electric and Xerox.

The Dow Jones industrial futures lost 62 points to 12,818, the Nasdaq futures dropped 6.5 points to 2,645.75 and the S&P 500 futures declined 7.3 points to 1,364.6.

Oil prices slipped after rising Mideast tensions sent crude up by almost $3 on Thursday.

The August crude contract on the New York Mercantile Exchange fell $1.26 to US$91.40 a barrel.

Crude rose about five per cent last week as the oil market responded to a series of events that have raised concerns that Iran will try to block oil shipments through the Strait of Hormuz, a narrow waterway in the Persian Gulf through which one-fifth of the world’s oil travels every day.

Metals were also lower with copper down eight cents to US$3.46 a pound. Bullion fell $3 to US$1,577.40 an ounce.

On the earnings front, General Electric reported Friday that its quarterly net income fell 16 per cent to US$3.11 or 29 cents a share because of losses in businesses it has divested and an increase in pension costs. Excluding pension costs and losses from discontinued businesses, GE earned 38 cents, a penny better than analysts were expecting. It also reaffirmed its outlook.

GE is viewed as an important economic bellwether since its businesses range from appliances to financial services to wind and gas turbines. Its stock was down almost one per cent in pre-open trading in New York.

Microsoft said Thursday that an accounting adjustment to reflect a weak online ad business led to its first quarterly loss in its 26 years as a public company.

Microsoft racked up a $492 million loss in the April-June quarter while revenue rose four per cent to US$18.06 billion. Ex-items, the company earned 73 cents a share, a dime better than forecasts and its shares were up 1.5 per cent in pre-open trading.

But shares in Xerox Corp. fell about 5.5 per cent in pre-open trading as cut its full-year profit forecast as the provider of printers and business services said that second-quarter net income fell 3.1 per cent to US$309 million or 22 cents a share, missing forecasts by four cents. Revenue dropped 1.3 per cent to $5.54 billion, against expectations of $5.61 billion. Xerox added that third quarter profits will also miss estimates.

The TSX appeared heading for an overall gain for this week on rising expectations that central banks will step up to ensure the economic recovery stays on the rails.

Earlier this week, Federal Reserve chairman Ben Bernanke appeared before Congressional panels and while he did not indicate that another round of stimulus was imminent, his comments led investors to believe further action remained an option. The Fed has already completed two programs of asset purchases, which have the effect of increasing the supply of money.

Other central banks have embarked on more stimulus in recent weeks by cutting rates, including those in South Korea, the European Union, and China.

There was another reminder Friday how China, the world’s second biggest economy, is slowing as a result of government efforts to choke off high inflation.

The government says total profit for its biggest state-owned companies is down sharply.

The state Xinhua News Agency said Friday the agency that oversees the top 117 state companies reported first-half profit was down 16.4 per cent from a year earlier. It gave no details of individual companies.

China’s economic growth slowed to a three-year low of 7.6 per cent in the second quarter. Analysts say the decline probably has bottomed out but they say the strength of a recovery is uncertain.

European indexes were solidly in the red as London’s FTSE 100 index and Frankfurt’s DAX dropped 0.8 per cent while the Paris CAC 40 rose 1.55 per cent.

In Asia, Japan’s Nikkei 225 fell 1.4 per cent, Hong Kong’s Hang Seng added 0.4 per cent, Australia’s S&P/ASX 200 shed 0.1 per cent and China’s Shanghai Composite dropped 0.7 per cent.

08:50ET 20-07-12