The Toronto stock market was little changed Wednesday morning while a profit warning from package delivery giant FedEx added to worries about a slowing economy and what central banks can do about it.
The S&P/TSX composite index rose 10.02 points to 11,951.72 while the TSX Venture Exchange dipped 0.26 of a point to 1,242.32.
The Canadian dollar was 0.4 of a cent lower at 101.04 cents US as the Bank of Canada left its benchmark interest rate unchanged at one per cent while warning that rates will have to rise at some point in the future. The central bank also said that there is a widespread slowing of activity across most economies.
The loonie seemed unaffected by Tuesday’s Quebec election which saw the pro-independence Parti Quebecois win the contest, but only securing a minority government.
“Last night’s victory by the sovereign PQ party in Quebec has had little impact in currency markets, with election results largely foreshadowed in opinion polls,” said Mark Chandler, head of Canadian FIC strategy at RBC Dominion Securities.
New York markets were negative with the Dow Jones industrials down 5.17 points to 13,030.77, the Nasdaq composite index slipped 9.23 points to 3,065.83 while the S&P 500 index was down 2.44 points to 1,402.5.
Nervousness about a slowing global outlook was heightened after FedEx cut its first quarter earnings guidance, pointing to weakness in the global economy. Its shares were down 2.2 per cent in New York to US$85.63.
Both FedEx and larger rival UPS have warned about the impact of slower economic growth on their results. In July, UPS said customers were worried about what’s in store in the second half of the year. The delivery companies have cut or reduced the frequency of flights in Asia, as shipments both within the region and to Europe and the U.S. have slowed.
Traders anxiously awaited Thursday’s interest rate announcement from the European Central Bank amid hopes the ECB will move to ease the eurozone debt crisis by addressing the high borrowing costs that have bedevilled some of the weakest members of the monetary union, particularly Spain. It is expected some sort of bond-buying program will be announced but it would come with strings attached.
To be eligible for the central bank’s help, for example, countries would likely have to formally apply for assistance from the eurozone’s rescue facility and accept conditions on their budget policies, which many governments would be reluctant to do.
“Spain, for example, will have to apply for such support before the ECB will buy any of its bonds, and ongoing buying will be conditional on meeting the targets set by the rescue fund,” said CIBC World Markets chief economist Avery Shenfeld.
Europe’s economy also remains fundamentally weak. A survey of the eurozone’s services sector on Wednesday showed the sector continued to contract in August. The so-called purchasing managers’ index fell more than earlier estimated, suggesting the currency bloc is headed for a sharp drop in GDP in the third quarter.
Markets also looked ahead to Friday’s release of the August non-farm payrolls report to see if a weak report would persuade the U.S. Federal Reserve to embark on another round of stimulus.
Consumer discretion stocks led TSX advancers with Canadian Tire Corp. (TSX:CTC.A) up 878 cents to $70.19.
Utilities led decliners as TransAlta (TSX:TA) fell 47 cents to $14.21.
Commodity prices were mixed with the October crude contract on the New York Mercantile Exchange down 91 cents to US$94.39 a barrel. The energy sector was slightly higher as Talisman Energy (TSX:TLM) climbed seven cents to $13.81.
The base metals sector was little changed while December copper on the Nymex was up five cents at US$3.51 a pound. But Teck Resources (TSX:TCK.B) fell 38 cents to $26.20.
The gold sector was lower as December bullion lost $3.10 to US$1,692.90 an ounce. Iamgold (TSX:IMG) faded 15 cents to $12.90.
European bourses were mixed with London’s FTSE 100 index down 0.1 per cent, Frankfurt’s DAX gained 0.67 per cent and the Paris CAC 40 was ahead 0.46 per cent.
Earlier, in Asia, Japan’s Nikkei 225 index fell 1.1 per cent, Hong Kong’s Hang Seng lost 1.5 per cent, South Korea’s Kospi dropped 1.7 per cent while Australia’s S&P/ASX 200 shed 0.6 per cent.
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