The Toronto stock market was little changed late morning Wednesday as investor attention refocused on the U.S. Federal Reserve and whether the central bank will decide to launch another round of economic stimulus to aid a struggling economy.
The S&P/TSX composite index was down from session highs but still ahead 11.51 points to 12,231.96. Markets had reacted enthusiastically after Germany’s high court rejected calls to block the European Union’s permanent rescue fund.
Opponents had challenged Germany’s ratification of the European Stability Mechanism, which is a new, permanent €500 billion bailout fund for the 17 countries that use the euro. They had argued that it violated Germany’s constitution and sought an injunction preventing the country’s president from signing the legislation into law.
Germany’s ratification of the ESM is vital, because the fund cannot work without the country’s participation.
The TSX Venture Exchange rose 3.23 points to 1,277.83.
The Canadian dollar was off 0.22 of a cent to 102.53 cents US. The currency ran up about 1.8 cents since last Wednesday as traders anticipate that last week’s disappointing U.S. jobs data for August convinced the Federal Reserve that the economy needs another round of economic stimulus.
Such measures could include a third round of quantitative easing, which would see the Fed print more money to buy up bonds in order to keep interest rates low and encourage borrowing.
U.S. markets were higher as traders looked to an announcement by the Fed on Thursday at the conclusion of their two-day meeting on interest rates.
The Dow Jones industrials climbed 21.41 points to 13,344.77, the Nasdaq was up 1.41 points to 3,105.94 while the S&P 500 index gained 2.41 points to 1,435.97.
Markets could be in for a severe disappointment Thursday. Some analysts believe that the Fed will do nothing more than reassert that it’s willing to do more, especially as a number of its policymakers may be reluctant to do something dramatic in the middle of the U.S. presidential campaign.
“The election coming up in November, it’s going to make them think twice about the political implications of announcing a massive bond-buying program or asset purchase program,” said John Stephenson, portfolio manager at First Asset Funds Inc., adding that December would be a better time to launch a massive program of stimulus.
“So I think it’s certainly open, I think they will certainly hint about keeping rates low for an extended period of time, maybe even extend that beyond the 2014 window if that’s possible.”
Industrials led TSX gainers as transport giant Bombardier Inc. gained 10 cents to $3.67.
Financials also provided lift as Manulife Financial gained 13 cents to $11.88.
The energy sector was up a slight 0.1% while the price of oil fell after the government said U.S. supplies of oil rose last week. The October crude contract on the New York Mercantile Exchange fell nine cents to US$97.08 a barrel.
Analysts had expected that the U.S. Energy Department would report that U.S. crude stockpiles fell by 3.3 million barrels.
Cenovus Energy was up 30 cents to $34.32.
The gold sector led decliners, down almost 1% as the December bullion contract shed $2.10 to US$1,732.80 an ounce. Barrick Gold Corp. was 36 cents lower to $38.04.
The base metals sector lost 0.27% while copper prices backed off slightly after rallying for the past three sessions with the December contract down two cents to US$3.68 a pound. The metal, viewed as an economic barometer as it is used in so many applications, has run up 18 cents over the last three sessions.
First Quantum Minerals climbed 18 cents to $21.78 while Taseko Mines fell 13 cents to $3.23.
In corporate news, the power struggle between the board of Telus Corp. and New York hedge fund Mason Capital Management LLC appears headed for an appeal court. Mason says it will appeal a B.C. court decision that blocks it from holding a shareholders meeting for investors with Telus voting stock, a move that rivals the company’s own plans for a meeting of all voting and non-voting shareholders.
Telus and Mason are in a bitter public battle over a plan to eliminate the Canadian telecom company’s dual-class share structure. Mason opposes a Telus plan that would swap non-voting stock for common stock on a one-to-one basis, arguing that doesn’t recognize the greater market value of the voting shares.
Telus voting shares advanced 67 cents to $62.28 while its non-voting A shares gained 67 cents to $61.72.
European bourses were mixed in the wake of the German court decision with London’s FTSE 100 index off 0.04%, Frankfurt’s DAX gained 0.69% and the Paris CAC 40 climbed 0.37%.
In other corporate news, Dollarama Inc. had a net profit of $49.8 million in its second quarter, up 32% from the comparable period last year. Dollarama’s revenue was up 13.8%, rising to $441 million from $387.5 million for the corresponding period last year. The profit amounted to 66 cents per diluted share, two cents higher than analyst forecasts but its shares fell 65 cents to $58.65.
Facebook shares were up 99 cents or 5.1% to US$20.42 after CEO Mark Zuckerberg told a conference Tuesday that the social network site cares about making money as well as pursuing his mission to make the world a “more open and connected place.”
Facebook stock has lost nearly half its value since its IPO in May. More than $50 billion has been lopped off Facebook’s market value as the company’s shares have fallen from its IPO price of $38.
Shares in Apple Inc. were $1.32 lower to US$659.26. The tech icon is expected to unveil a new iPhone later in the day. It may also unveil a mini iPad.
