July 18, 2008 / 1:14 PM / 11 years ago

Toronto stock index set to open up on banks, oil

*TSX set to open higher on U.S. bank results

*Firmer oil will be in focus after tumble

*MDS may draw attention due to charges, layoffs

TORONTO, July 18 (Reuters) - The Toronto Stock Exchange’s main index is expected to open higher on Friday as better-than-expected results from the No. 1 bank in the United States could give financials another boost, while signs of firmness in oil prices could buoy energy shares.

The effect of the smaller-than-foreseen quarterly loss at Citigroup Inc (C.N), however, could be undercut by disappointing earnings from other household names on Wall Street.

U.S. stock futures slipped early on Friday after disappointing results from Merrill Lynch MER.N and tech bellwethers Google (GOOG.O) and Microsoft (MSFT.O).

Oil, which rose to around $130 a barrel on Friday after tumbling $15 in the past three sessions, will be in the spotlight, said Robert Lauzon, executive director, head of trading at Middlefield Capital Corp.

“If we can get oil to stay flat or up you’re probably going to get a rally,” said Lauzon.

“The equities have overcorrected here and that’s why if oil can stay kind of flat this morning you’ll get a good rally out of some of these equities because they’re pricing in at a lower price of oil.”

The TSX is around 11 percent off its June record high, battered by fallout from the credit crunch and recently by falling oil prices.

Financial results from top U.S. banks this week have topped analysts’ expectations, spurring a rally in Toronto financial stocks, but the resource-heavy benchmark has been weighed down by weakness in some commodities.

“It’s been a tug of war between the financials and commodities,” Lauzon said.

MDS Inc MDS.TO could also attract attention after it said on Friday it expects to record charges totaling $28 million, mostly in the third quarter, as it cuts 210 employees and records an asset impairment charge related to its MDS Pharma Services site.

The S&P/TSX composite index .GSPTSE begins the day at 13,460.25 after falling 43.55 points, or 0.32 percent on Thursday as strength in financials was overshadowed by drops in resource shares. ($1=$1.00 Canadian) (Reporting by Jennifer Kwan; Editing by Peter Galloway)

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