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Stocks head for lower open, buyers discouraged by worsening eurozone debt crisis

The Toronto Stock Exchange (TSX)'s name is shown on the facade of its former home on Bay Street in Toronto. THE CANADIAN PRESS/Chris Young

TORONTO - The Toronto stock market headed for a negative open Wednesday with buyers inclined to do little on concerns about the worsening eurozone debt crisis and ahead of Greek elections Sunday.

Attention was focused on Spain and Italy and the higher borrowing costs both countries are facing.

The Canadian dollar was little changed, up 0.03 of a cent to 97.43 cents US.

U.S. futures were lower ahead of the release of American retail sales data for May later in the morning. Economists looked for sales to slip by 0.1 per cent from April.

The Dow Jones industrial futures were down 25 points to 12,489, the Nasdaq futures dropped eight points to 2,537 and the S&P 500 futures lost 4.5 points to 1,315.6.

The Toronto and New York markets registered solid gains Tuesday on hopes the U.S. Federal Reserve was about to step up with a new round of stimulus measures. Comments by Charles Evans, president of the Fed’s Chicago bank, that he supported action to produce faster job growth helped mask concerns about the effectiveness of a Spanish bank rescue announced over the weekend and a downgrade of the country's banks by ratings agency Fitch.

About €100 billion euros is being made available to Spain to aid banks mired in massive amounts of bad loans stemming from a collapsed real estate sector. But traders worry that the money will just add to the Spanish government’s already considerable debts and perhaps force it to seek its own sovereign bailout.

The lack of confidence has been expressed in bond markets where Spain has been forced to pay higher yields to attract buyers for its debt. The yield Spain's benchmark 10-year bond dropped slightly Wednesday from euro-era highs to 6.72 per cent.

Spanish contagion has spread to other heavily-indebted countries. Italy paid 3.972 per cent interest rates — up from 2.34 per cent last month — to sell €6.5 billion in 12-month paper. The bond auction enjoyed strong demand. The sale was a warm-up for Thursday’s weightier longer-term paper auction.

The debt crisis is not just rattling financial markets, but also affecting households and businesses by creating uncertainty over the future of the economy. The latest report from Eurostat, the EU statistics agency, showed industrial production in April among the 17 countries that use the euro slipped 0.8 per cent. Analysts noted that even that poor showing is worse than it seems because a cold Spring pushed up energy demand.

Investors are nervously awaiting Greek elections on Sunday, when a party that’s threatening to renege on the country’s bailout terms could come away the big winner. That might force the country out the euro.

Oil prices weakened with the July contract on the New York Mercantile Exchange down 14 cents to US$83.18 a barrel.

Bullion prices slipped $1.20 to US$1,612.60 an ounce while July copper edged up two cents to US$3.36 a pound.

European bourses were in the red with London's FTSE 100 off 0.06 per cent, Frankfurt's DAX fell 0.37 per cent and the Paris CAC 40 dipped 0.14 per cent.

Earlier in Asia, Japan’s Nikkei 225 index gained 0.6 per cent after machinery orders rose 5.7 per cent to the highest level in four years.

South Korea’s Kospi closed 0.2 per cent higher, Hong Kong’s Hang Seng rose 0.8 per cent while Australia’s S&P/ASX 200 fell 0.2 per cent.

Mainland Chinese shares rose on hopes authorities would bring in more economy-boosting measures. The benchmark Shanghai Composite Index added 1.3 per cent while the smaller Shenzhen Composite Index gained 1.8 per cent.

On the earnings front, discount retailer Dollarama Inc. (TSX:DOL) said its first-quarter profit rose 40 per cent to $42.6 million or 56 cents a share, which beat estimates by six cents.

The Montreal-based company’s revenue for the 13 weeks ended April 29 was just under $398 million, up 15 per cent from the comparable period last year.

News from © The Canadian Press, 2012
The Canadian Press

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