Toronto stocks may ease on oil and rate outlook

Thu Jun 5, 2008 9:03am EDT
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*Commodities mostly down, may hit resource shares

*Bernanke comments still weigh on rate-sensitive stocks

TORONTO, June 5 (Reuters) - The Toronto Stock Exchange's main index may decline for a third straight session Thursday, with little support likely from commodities and growing expectations that U.S. interest rates may rise before year-end.

The prices of key commodities were mostly lower -- with oil and most metals down, and natural gas up -- clouding the outlook for the resource-heavy Canadian index.

MDS Inc MDS.TO reported a lower second-quarter profit and the health sciences company reduced its fiscal outlook on Thursday, possibly weighing on some sectors of the TSX. For details, see: [nN04378250]

The markets are still digesting comments from U.S. Federal Reserve Chairman Ben Bernanke, which heightened inflation worries and the expectation that the central bank will hike interest rates by year-end, taking the wind out of stocks.

Bernanke said on Wednesday long-term inflation expectations were a "significant" concern. In response, European stocks dipped early on Thursday.

With crude oil on a three-day slide, TSX resource shares may weaken on Thursday.

However, CIBC Chief Economist and Strategist Jeff Rubin said he remained confident oil will head higher, taking TSX energy shares with it.   Continued...