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TSX to step back after big gains sparked by Fed decision to taper stimulus

TMX Broadcast Centre is pictured in Toronto on May 16, 2011. THE CANADIAN PRESS/Frank Gunn
December 19, 2013 - 5:29 AM

TORONTO - The Toronto stock market looked set for a weak open Thursday, a day after markets responded enthusiastically to the Federal Reserve's decision to modestly cut back on a key stimulus program. The Fed also emphasized that short-term rates aren't going up any time soon.

A stronger American currency pushed the Canadian dollar down to mid-2010 lows, moving down 0.15 of a cent to 93.40 cents US early Thursday.

U.S. futures also moved lower after racking up big gains Wednesday after the Fed said it was cutting its US$85 billion of monthly bond purchases by $10 billion starting in January. Further cuts will depend on economic data, particularly jobless levels and inflation.

The Dow Jones industrial futures rose a point to 16,110, the Nasdaq futures dropped seven points to 3,501.5 and the S&P 500 futures dipped 0.25 of a point to 1,804.5.

The TSX jumped 155 points and the Dow surged almost 300 points when the Fed ended months of speculation about cutting back on economic support that kept long-term rates low and supported strong gains on many equity markets this year.

The tapering of asset purchases will be the first step toward winding down a program that has been in place since the 2008 financial crisis.

The TSX could come under pressure from the much-battered gold sector as bullion prices resumed sliding after the Fed moved to cut back on its latest quantitative easing. QE had supported gold prices because of inflationary fears. But inflation is tame in many countries and data out earlier this week showed the consumer price index rising at an annual rate of only 1.2 per cent, significantly below the Fed’s inflation target of two per cent.

The February gold contract on the New York Mercantile Exchange fell $30.10 to US$1,204.90 an ounce. Gold prices are down 39 per cent so far this year while the TSX Global Gold sector has tumbled 49 per cent.

Elsewhere on commodity markets, January crude gained a dime to US$97.90 a barrel while March copper slipped two cents to US$3.30 a pound.

In corporate news, retailer Target says that about 40 million credit and debit card accounts may have been affected by a data breach. The chain, which has 1,797 U.S. stores and 124 in Canada, said that customers who made purchases using their cards at its U.S. stores between Nov. 27 and Dec. 15 may have been exposed.

Target Corp. advised customers who suspect there has been unauthorized activity on their cards should call them at 866-852-8680.

A report from a federal review panel on Enbridge’s (TSX:ENB) proposed Northern Gateway pipeline through B.C. will be released later Thursday (at 4:30 p.m. EST) following more than a year of hearings. The final decision on whether the pipeline can go ahead rests with the federal government.

Facebook says it plans to offer 70 million shares of stock for sale that includes more than 41 million shares from chairman and CEO Mark Zuckerberg. The secondary offering of stock comes as the social media network prepares to join the Standard & Poor’s 500 index after the close Friday.

Most overseas markets also ran up sharply following the Fed's announcement as London's FTSE 100 index ran up 1.1 per cent, Frankfurt's DAX rose 1.4 per cent and the Paris CAC 40 advanced 1.3 per cent.

Earlier in Asia, Tokyo’s Nikkei 225 index gained 1.7 per cent while Sydney’s S&P ASX 200 added 2.1 per cent. But China’s benchmark Shanghai Composite Index shed 0.9 per cent as a rise in money market interest rates pushed up trading costs and raised fears of an economic slowdown. Hong Kong and India also fell.

News from © The Canadian Press, 2013
The Canadian Press

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