Toronto stocks set to fall, banking worries weigh

Thu Mar 6, 2008 9:06am EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

TORONTO, March 6 (Reuters) - The Toronto Stock Exchange's main index looked set to start the day lower on Thursday, as weak financials were expected to offset a possible boost from hot commodity prices.

Oil and gold, key underlying commodities for the resource-heavy Toronto benchmark, both touched fresh highs earlier in the morning before easing.

But declines in the banking sector could continue amid worries over the lingering impact of the credit crunch and some disappointing quarterly results from the Canadian majors.

The financial sector could also be pressured by jitters south of the border after a default at U.S. mortgage lender Thornburg Mortgage Inc TMA.N.

"We have some strength in the commodities," said Bruce Latimer, trader at Dundee Securities. "However, I see that gold and oil are moving again (and) at some point that's just going to create a bit of an inflationary atmosphere, which I think is going to be negative for the stock market."

"The financials have certainly been hurting the market for the last while, (and we're) expecting that to continue," adding that miners could see recent gains clipped by profit-taking.

The S&P/TSX composite index .GSPTSE ended Wednesday at 13,603.32 after gaining 126.51 points, or 0.9 percent, supported by climbing resource shares and commodity prices.

On the economic front, investors were digesting morning data that showed the value of Canadian building permits slid for the third straight month in January, missing expectations of a rise.

Elsewhere, Sherritt International S.TO could see interest after it reported a 6-percent increase in fourth-quarter profit, as strong commodity prices offset the effect of a rising Canadian dollar.

Health sciences company MDS Inc MDS.TO could also see activity after the company reported a slightly higher first-quarter profit, helped by improvements at its key divisions.

European stocks fell overnight, while U.S. stock futures were lower amid worries over the financial sector, as Merrill Lynch & Co MER.N raised the conversion rate of some securities it was selling. ($1=$0.99 Canadian) (Reporting by Leah Schnurr; Editing by Scott Anderson)