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TSX to open little changed, traders focus on Fed meeting and tapering concerns

December 13, 2013 - 5:08 AM

TORONTO - The Toronto stock market looked set to open little changed Friday at the end of a losing week where buying sentiment was blunted by growing concerns that the U.S. Federal Reserve is set to start reducing its monetary stimulus.

The Canadian dollar fell 0.15 of a cent to 93.83 cents US as U.S. bond yields continued to creep higher on Fed speculation. The benchmark 10-year Treasury hit 2.9 per cent earlier in the morning.

U.S. futures were higher after three days of losses with the Dow Jones industrial futures ahead 39 points to 15,721, the Nasdaq futures advanced 15 points to 3,470 and the S&P 500 futures were ahead 7.25 points to 1,775.75.

Expectations about the Fed tapering its US$85 billion of bond purchases have changed over the last month, with markets largely expecting that the central bank would hold off until March when incoming chair Janet Yellen was settled in the new job.

But a string of strong data last week, capped by a solid employment report for November, have raised concerns that the Fed could act as soon as next week, when the Federal Open Market Committee meets on Dec. 17-18.

A better than expected retail sales report for November and the passage of a budget agreement in the U.S. Congress further served to raise expectations.

The U.S. stimulus has lifted stocks over the past few years, and its potential reduction has jolted markets since May, when outgoing Fed chair Ben Bernanke first mentioned the possibility of tapering. However, any cutback in asset purchases would be gradual and is expected to be accompanied by a renewed commitment by the Fed to keep interest rates low.

The focus will likely remain on the Fed until its decision next Wednesday.

On the commodity markets, January crude on the New York Mercantile Exchange declined 44 cents to US$97.06 a barrel.

March copper was unchanged at US$3.30 a pound while February bullion gained $2.40 to US$1,227.30 an ounce.

European bourses were positive with London's FTSE 100 index up 0.13 per cent, Frankfurt's DAX was up 0.18 per cent and the Paris CAC 40 rose 0.3 per cent.

Traders also digested comments by Chinese leaders that the world’s second-largest economy faces “downward pressure” and have called for boldness in carrying out promised reforms aimed at reviving slowing growth.

In a report following an annual planning meeting, Communist Party leaders said Friday that the country faces problems including excess production capacity in some industries and environmental degradation.

Earlier in Asia, Singapore gained but markets fell in Thailand, Malaysia and Jakarta, which might be more exposed if a reduction in the Fed’s stimulus hurts U.S. demand for imports or sparks short-term capital flight from Asian economies.

Hong Kong’s Hang Seng rose 0.1 per cent, Taiwan’s Taiex added 0.2 per cent, Sydney’s S&P/ASX 200 gained 0.7 per cent and China’s benchmark Shanghai Composite Index shed 0.3 per cent.

News from © The Canadian Press, 2013
The Canadian Press

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