June 10, 2008 / 12:38 PM / 10 years ago

Toronto stocks seen weaker ahead of rate decision

*TSX seen weaker ahead of rate decision

*Bank of Canada widely expected to cut rates

*Bernanke’s inflation comments could weigh

*Commodities mixed; oil price up again

TORONTO, June 10 (Reuters) - The Toronto Stock Exchange’s main index was seen slightly weaker on Tuesday, after a late-day drop in the previous session, as investors looked to an expected interest rate cut by the Bank of Canada.

Commodities were mixed, offering the resource-heavy Canadian benchmark little direction.

Global stock markets fell after U.S. Federal Reserve Chairman Ben Bernanke warned the central bank would defend against long-term inflation expectations -- remarks taken to mean U.S. interest rates may rise later this year.

But in Canada on Tuesday, the central bank was widely expected to cut its key overnight rate by 25 basis points.

Any benefit to the Toronto bourse has already been priced in, analysts say, suggesting there will be little reaction unless the Bank of Canada surprises.

“Like all good central bankers they’ll talk about inflation -- how it’s a concern, that they’ll be vigilant on it, and that they’re not about to let it get out of hand,” said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.

“I can’t see how any one of them (central banks) are going to deviate from the script.”

Rising U.S. interest rates would mean a rising U.S. dollar, which knocked down spot gold prices early on Tuesday. Soft base metals could hurt the TSX index’s heavyweight mining shares.

Crude oil was bullish again on Tuesday, which usually signals strength among TSX energy producers, which make up about a third of the key index. However, widespread concern over high fuel costs recently has hit all sectors of the market.

The S&P/TSX composite index .GSPTSE starts the day at 14,960.76 after sliding 8.79 points, or less than 0.1 percent, in the previous session. ($1=$1.03 Canadian) (Reporting by Jonathan Spicer; Editing by Bernadette Baum)

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