Toronto stocks seen declining as commodities hit

Thu May 1, 2008 8:57am EDT
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TORONTO May 1 (Reuters) - The Toronto Stock Exchange's main index was set to dip on Thursday as commodity prices sagged and corporate earnings offered little upward incentive.

The resource-heavy Canadian benchmark advanced 4.4 percent last month, and begins May 0.8 percent higher than it started the year.

But key commodities such as crude oil, natural gas, gold and most base metals dipped in early trade. Commodities often move opposite to the U.S. dollar, which recovered after a quarter-point cut to U.S. interest rates on Wednesday.

"The (U.S.) dollar is strengthening and will get stronger, so my view is that some of these commodities will come off... which unfortunately means the TSX will have to come off," said Paul Harris, portfolio manager at Avenue Investment Management.

Energy and materials producers make up about half of the overall TSX.

In the materials sector, Centerra Gold CG.TO reported a big rise in first-quarter profit on Thursday, crediting the results to a recent spike in gold prices. For details, see: [nN0143307]

Elsewhere, coffee and doughnut chain Tim Hortons reported a modest increase in earnings in the quarter, but missed full-year targets. See: [nN30553952]

"If you look at earnings in general, it's a very mixed picture of what is going on," Harris said of North American companies. "There's also a very mixed picture of actually where they are making their money."

Later in the day, results are expected from autoparts maker Magna International MGa.TO and engineering-construction firm SNC-Lavalin SNC.TO.

The S&P/TSX composite index .GSPTSE starts the day at 13,937.04 after rising 111.44 points, or 0.8 percent, in the previous session. The index has fallen in five of the last seven days, shedding 2.7 percent.

($1=$1.01 Canadian) (Reporting by Jonathan Spicer; Editing by Renato Andrade)