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TSX to open higher amid unease on Spain rescue, major deal for Bombardier

The former Toronto Stock Exchange home in Toronto, August 18 2011. THE CANADIAN PRESS/Aaron Vincent Elkaim

TORONTO - The Toronto stock market was set to open slightly higher Tuesday amid lower commodity prices and a major deal for transportation giant Bombardier Inc. (TSX:BBD.B).

One of Warren Buffett’s companies, NetJets Inc., has signed a deal to buy up to 275 Bombardier Challenger business jets that could be worth up to US$7.3 billion. Bombardier said it has also signed a 15-year service and maintenance agreement for the aircraft, worth as much as an additional US$2.3 billion if all options are exercised.

The Canadian dollar was up 0.3 of a cent to 97.27 cents US despite misgivings about the effectiveness of a planned bailout for Spain's banks.

U.S. futures were positive with the Dow Jones industrial futures ahead 39 points at 12,349, the Nasdaq futures up 5.5 points at 2,515.5 and the S&P 500 futures 1.9 points higher at 1,302.2.

Stocks, the loonie and oil prices all registered sharp declines Monday following a weekend deal to make €100 billion available to Spain to revive banks crushed by bad real estate loans. But traders worry the money will just add to the Spanish government’s already considerable debts and perhaps force it to seek its own sovereign bailout.

As a sign of investor wariness of Spain, the yield on its 10-year benchmark bond shot up. It was still climbing Wednesday, up 0.14 of a point at 6.65 per cent and dangerously close to the seven per cent yield that has forced other countries to seek rescue loans. Italy’s yields were also rising.

There is also nervousness ahead of Sunday’s election in Greece. The worry is that a left-wing party that advocates tearing up the country’s bailout agreement will be the big winner. If that happens, Greece could end up leaving the eurozone with unpredictable consequences for other debt-laden eurozone countries such as Italy.

Oil prices were down for a fourth session as traders also closely watched a quarterly meeting of the Organization of Petroleum Exporting Countries on Thursday. Some members of the cartel have suggested recently that OPEC is producing too much crude and the group could decide to cut supplies to help boost prices. The July crude contract on the New York Mercantile Exchange dropped 27 cents to US$82.43 a barrel.

July copper edged a penny lower to US$3.34 a pound while August gold dropped $7.10 to US$1,589.70 an ounce.

European bourses advanced with London's FTSE 100 index ahead 0.34 per cent, Frankfurt's DAX gaining 0.39 per cent and the Paris CAC 40 up 0.1 per cent.

Earlier in the day, Asian markets responded to the gloom that had settled over Europe and the U.S. late Monday.

Japan’s Nikkei 225 index lost one per cent, South Korea’s Kospi dropped 0.7 per cent and Hong Kong’s Hang Seng was 0.4 per cent lower.

Mainland Chinese shares also lost ground, with the benchmark Shanghai Composite Index shedding 0.5 per cent and the Shenzhen Composite Index losing 0.4 per cent.

In other corporate news, Warren Buffett’s Berkshire Hathaway Inc. is offering to buy the mortgage division and loan portfolio of Residential Capital LLC. Residential Capital, also known as ResCap, is a subsidiary of Ally Financial Inc., the former auto lending arm of General Motors. ResCap, hobbled by soured mortgage loans, filed for bankruptcy protection in May.

Canadian Pacific Railway’s (TSX:CP) David Raisbeck will step down as a member of its board of directors, reducing the number of directors at the company who were appointed before a proxy battle and subsequent boardroom shakeup. His resignation comes just weeks after New York-based Pershing Square Capital Management, CP’s biggest shareholder, succeeded in its months-long battle to oust Fred Green as CEO.

Ivernia Inc. (TSX:IVW) is withdrawing from the Prairie Downs base metals project in Western Australia. Ivernia says a review of geological data shows the project’s potential does not justify exercising a purchase option under its earn-in agreement with Prairie Downs Metals Ltd.

News from © The Canadian Press, 2012
The Canadian Press

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