August 29, 2008 / 1:12 PM / in 9 years

Toronto stock index set for mixed open on oil, data

*Canada economy grows weaker-than-expected

*Oil firm above $117 as Gustav set to enter Gulf of Mexico

*Airlines could see rise after Zoom cancels flights

*Market seen choppy ahead of Labour Day long weekend

TORONTO, Aug 29 (Reuters) - The Toronto Stock Exchange’s main index was set for a mixed open on Friday, as a surge in energy stocks on rising oil could be offset by weak Canadian economic data, and on thin trading activity ahead of the Labour Day long weekend.

Canada’s economy grew by a weaker-than-expected 0.3 percent in the second quarter, Statistics Canada said on Friday, narrowly avoiding the common definition of a recession as demand for its exports waned. [ID:nN29254034]

Gross domestic product shrank 0.8 percent in the first quarter.

The data could weigh on the market as investors fear slower economic activity in the future, said Joe Ismail, technical analyst at Maison Placements Canada.

“In general terms, it’s probably pointing to a soft landing,” said Ismail. “We might see some slower economic activity.”

The benchmark index’s key energy sector will likely see strength on rising oil as Tropical Storm Gustav is poised to enter the U.S. Gulf, heightening worries about its impact on U.S. offshore oil and gas output. Gustav is forecast to turn into a hurricane by Friday or Saturday.

Resource-laden materials may see mixed action on little changed gold and weakness in some base metals including copper, which eased on persistent concerns about demand from China.

Financials, which rose 4.2 percent on Thursday on the back of quarterly results from three of Canada’s Big Six banks, could ease as investors lock in profits, added Ismail.

“I would not be surprised to see softness in the bank stocks today,” he said. “It’s just the nature of the game after the moves we’ve seen.”

Royal Bank of Canada (RY.TO) beat earnings forecasts and Toronto-Dominion Bank (TD.TO) surprised the market by raising its dividend, highlighting the contrasting banking environments of Canada and the United States. [ID:nN27481500]

Earlier this week, Canadian Imperial Bank of Commerce (CM.TO) reported a write-down related to the troubled U.S. housing market that came in lower than analysts’ expectations, sending shares skyward.

The S&P/TSX composite index .GSPTSE begins the day at 13,750.48, after rising 219.83 points, or 1.6 percent, in the previous session boosted by bank stocks.

In company news, Air Canada ACa.TO and WestJet Airlines (WJA.TO) could see action after Zoom Airlines, a Canadian discount transatlantic carrier stung by sky-high fuel costs, canceled all flights and began bankruptcy proceedings on Thursday. [ID:nN28332969]

Elsewhere, patent licensing firm Mosaid Technologies MSD.TO posted a lower quarterly profit on Thursday, as revenue stalled and the latest quarter didn’t include a hefty profit from discontinued operations.

In New York, futures pointed lower on higher oil and on U.S. economic data. ($1=$1.05 Canadian) (Reporting by Jennifer Kwan; Editing by Scott Anderson)

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