The Toronto Stock Exchange Broadcast Centre is shown in Toronto on June 28, 2013. THE CANADIAN PRESS/Aaron Vincent Elkaim
January 27, 2014 - 5:17 AM
TORONTO - The Toronto stock market headed for a positive open after equities were mauled Friday on emerging market concerns while traders looked to Wednesday's interest rate announcement by the U.S. Federal Reserve. They're waiting to see if the central bank will launch another round of cuts to its massive monthly bond purchases.
The Canadian dollar was up 0.2 of a cent to 90.51 cents US.
U.S. futures pointed to a higher open after New York markets also sustained steep losses at the end of last week as countries such as Turkey, Argentina, South Africa and Russia found their currencies under pressure.
The Dow Jones industrial futures gained 52 points to 15,868, the Nasdaq futures climbed seven points to 3,539.3 while the S&P 500 futures rose 7.25 points to 1,789.25.
The Fed started easing its bond purchases this month by US$10 billion to $75 billion. This latest round of quantitative easing had flooded emerging markets with cheap money but now those funds are exiting those areas, in turn putting severe pressure on currencies. The worry is the contagion could spread to other markets.
Analysts expect the Fed to further taper its purchases by another $10 billion a month.
Investors were particularly focused on China last week after a widely watched purchasing managers index showed the manufacturing sector of the world's number-two economy unexpectedly slipped into contraction during January.
Emerging market worries pushed the TSX down 1.23 per cent last week while the Dow industrials tumbled 3.52 per cent.
It is also a heavy earnings week in both the U.S. and Canada this week.
On Monday, industrial bellwether Caterpillar said it earned $1 billion, or $1.54 per share. That compares with $697 million, or $1.04 per share, a year earlier. Revenue declined 10 per cent to $14.4 billion from $16.08 billion. Analysts surveyed by FactSet expected earnings of $1.27 per share on revenue of $13.41 billion and its shares were ahead six per cent in pre-market trading in new York.
In Canada, investors will take in earnings from companies including grocer Metro (TSX:MRU) PotashCorp (TSX:POT), tech firm Celestica (TSX:CLS) and the two big railways.
Canadian Pacific (TSX:CP) hands in results Wednesday while Canadian National Railways (TSX:CNR) posts earnings Thursday. Analysts expect results from both railroads to have been impacted by fierce winter weather across much of the country. However, they also expect CN and CP to have a positive 2014 with volume growth helped along by increasing crude oil shipments.
Investors will also digest the latest growth figures from Canada and the U.S. during the week.,
Statistics Canada is expected to report Friday that gross domestic product grew by 0.2 per cent in November amid rising manufacturing sales. That would be a slight dip from 0.3 per cent GDP growth in October.
Winter weather is expected to have taken a toll on December GDP growth. But senior economist Peter Buchanan at CIBC World Markets said that "a 0.2 per cent rise in November, and comparable decline in the final month of the year, would leave fourth-quarter growth headed for a 2.7 per cent annualized increase."
In the U.S., it is expected that data out Thursday will show fourth-quarter economic growth came in at an annualized pace of 3.2 per cent, following a 4.1 per cent rise in the previous quarter.
On the commodity markets, March crude on the New York Mercantile Exchange was 37 cents higher to US$97.01 a barrel.
February bullion was off a dime to US$1,264.20 an ounce while March copper was unchanged at US$3.27 a pound.
European bourses were mixed with London's FTSE 100 down 2.82 per cent, Frankfurt's DAX dipped 0.1 per cent and the Paris CAC 40 gained 0.14 per cent.
Earlier in Asia, Tokyo’s Nikkei closed 2.5 per cent lower, Hong Kong’s Hang Seng lost 2.1 per cent and Seoul’s Kospi dropped 1.6 per cent. In mainland China, the Shanghai Composite Index dropped one per cent.
News from © The Canadian Press, 2014