The Toronto stock market was higher Tuesday amid hopes that the Chinese and U.S. central banks will move to launch stimulus measures to arrest slowing economies.
The S&P/TSX composite index advanced 25.96 points to 12,241.39 after China’s premier Wen Jiabao promised more tax cuts and measures to boost consumer spending during a speech to the World Economic Forum Tuesday. The TSX Venture Exchange rose 5.56 points to 1,276.27.
The Canadian dollar was up 0.6 of a cent to a 13-month high of 102.9 cents (U.S.) as the greenback weakened ahead of the Fed’s two-day meeting on interest rates. The U.S. central bank could announce another round of quantitative easing, which would see the Fed print more money to buy up bonds in order to keep interest rates low and encourage lending.
U.S. markets were mixed as the Dow Jones industrials gained 38.57 points to 13,292.86.
The Nasdaq composite index dipped 0.72 of a point to 3,103.3 and the S&P 500 index was ahead 1.77 points to 1,430.85.
Expectations that the Fed would move on another jolt for the economy increased after jobs data released Friday failed to meet modest expectations of 125,000 new jobs. Instead, the economy cranked out 97,000 jobs and employment numbers for June and July were revised downward.
However, there is a degree of uncertainty as to whether the Fed will act now, especially as it may not want to become a key point of debate in the upcoming U.S. presidential election.
Meanwhile, the commitment from the leader of the world’s second-biggest economy came a day after data showed that China’s economic slump is worsening.
Imports declined 2.6 per cent from a year earlier during August, below analysts’ expectations of growth in low single digits. That came on top of August’s decline in factory output to a three-year low and other signs growth is still decelerating despite repeated stimulus efforts.
A slowing Chinese economy is particularly bad news for commodity prices and stocks on the resource-intensive Toronto stock market.
Resource stocks led TSX gainers while commodities moved higher.
The energy sector was ahead 0.46 per cent as the October crude on the New York Mercantile Exchange moved up 53 cents to $97.076 (U.S.) a barrel. Canadian Natural Resources was up 32 cents to $31.95.
The mining sector was up 0.5 per cent while December copper on the Nymex was up a penny to $3.71 (U.S.) a pound, adding to a 17-cent jump over the past two sessions. Teck Resources climbed 34 cents to $29.57.
December bullion gained $5.60 to $1,737.40 (U.S.) an ounce, pushing the gold sector up 0.43 per cent. Goldcorp Inc. improved by 34 cents to $41.55.
Industrials also provided lift as Canadian National Railways advanced 57 cents to $90.92.
Traders also took in a sobering warning from Moody’s Investors Service.
The ratings agency says it would likely cut its “Aaa” rating on U.S. government debt, probably by one notch, if key budget negotiations fail.
If Congress does not reach a budget deal, more than $600-billion (U.S.) in spending cuts and tax increases will kick in next year, a scenario that’s been dubbed the “fiscal cliff” because it is likely to send the economy back into recession and drive unemployment up.
Traders also looked ahead to an important court decision being handed down on Wednesday.
A German court is expected to rule on a request to block the country’s approval of the euro zone’s permanent bailout fund, the European Stability Mechanism, or ESM.
The Germany Federal Constitutional Court on Tuesday rejected a last-minute plea to postpone its ruling.
The postponement plea was brought by Peter Gauweiler, a backbench lawmaker with Chancellor Angela Merkel’s conservative bloc and other plaintiffs. They had argued the European Central Bank’s decision last week to buy up government bonds “created a completely new situation” regarding whether the $500-billion fund was constitutional.
The court’s decision on the injunction is widely anticipated as a harbinger of how it might rule on the constitutionality of the ESM overall.
European bourses were mixed with London’s FTSE 100 index down 0.28 per cent, Frankfurt’s DAX rose 0.12 per cent and the Paris CAC 40 declined 0.29 per cent.
Earlier in Asia, Japan’s Nikkei 225 index sank 0.7 per cent but Hong Kong’s Hang Seng reversed earlier losses to close 0.2 per cent higher. Mainland Chinese stocks also fell, with the Shanghai Composite Index losing 0.7 per cent.
In corporate news, U.S. mall owner General Growth Properties, Inc., whose major shareholder is Toronto-based Brookfield Asset Management, has rejected an activist investor’s push for a sale of the company to a rival American mall owner. The board of directors at GGP filed a letter Monday to Bill Ackman’s Pershing Square Capital saying that it has decided to continue its current path for growth. Brookfield shares dipped 16 cents to $34.09.
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