Toronto stocks seen cautious ahead of Fed decision

Tue Dec 11, 2007 9:06am EST
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TORONTO Dec 11 (Reuters) - The Toronto Stock Exchange's main index was expected to open higher on Tuesday ahead of the U.S. Federal Reserve's decision on interest rates, but weak metal prices could check the gains.

The Fed is expected to cut its key lending rate by at least 25 basis points from 4.5 percent. Last week, the Bank of Canada cut its key lending rate by 25 basis points to 4.25 percent.

Interest rate-sensitive issues such as banks and utilities will benefit from a rate cut, which signifies lower borrowing costs for investors and companies.

"We should open higher in anticipation of the rate hike," said Steve Ibel, an institutional equities trader at Beacon Securities in Halifax, Nova Scotia.

"But we won't open really strong because we are seeing some weakness in some of the commodities."

The key base metals including copper, nickel and lead, were all lower on demand worries due to lower expected economic growth.

Gold shares were also expected to weaken as the price for the precious metal hovered around $805 an ounce ahead of the interest rate decision.

Agnico-Eagle Mines AEM.TO could attract attention after it said on Monday that it was raising its annual cash dividend by 50 percent, and saw 2008 gold production at 50 percent above 2007 levels.

Biovail Corp BVF.TO may be in focus after it said it would pay about $85 million to settle a U.S. securities class action suit that stretched back more than 4 years involving its Wellbutrin XL and Cardizem LA products. ($1=$1.01 Canadian) (Reporting by Scott Anderson; Editing by Bernadette Baum)