TORONTO - The Toronto stock market was set for a lower open Thursday after a last-minute deal to avert big tax hikes and spending cuts in the U.S. sparked a relief rally on the first trading day of the year.
The deal between the White House and Congress left unsolved several budget measures, mainly government spending cuts, so the rally ran out of steam after only one session.
The commodity-sensitive Canadian dollar was down 0.02 of a cent to 101.48 cents US amid falling prices for oil and metals.
New York futures backed off as traders digested positive jobs data ahead of Friday's non-farm payrolls report for December and looked to the mid-afternoon release of the minutes from the latest U.S. Federal Reserve meeting.
The Dow Jones industrial futures were down 17 points to 13,314 as payroll firm ADP reported that the U.S. private sector created 215,000 jobs last month. Economists forecast that Friday's government report would show the economy cranked out 150,000 jobs.
The Nasdaq futures declined six points to 2,732.75 and the S&P 500 futures slipped 2.5 points to 1,454.6.
A last-minute deal agreed to by U.S. lawmakers late Tuesday triggered a global market rally on Wednesday, sending the TSX up 107 points and the Dow industrials surged 308 points.
But traders worry that U.S. budget talks could pose a threat to risk appetite for months.
For one thing, while the New Year’s Eve deal settled tax rates, the deal only postponed automatic spending cuts to defence and domestic programs for two months. And it doesn’t include any significant deficit-cutting agreement, meaning the country still doesn’t have a long-term plan on how to curb spending.
On top of that, the U.S. government also faces what are likely to be tough negotiations over raising the country’s debt limit in February.
Worries about further political wrangling pushed the U.S. currency higher, which helped depress commodity prices, which also racked up solid gains Wednesday.
That is because a stronger greenback makes it more expensive for holders of other currencies to buy oil and metals which are dollar-denominated.
The February crude contract on the New York Mercantile Exchange gave back 33 cents to US$92.79 a barrel.
March copper dipped a penny to US$3.72 a pound while February bullion lost $12.30 to US$1,676.50 an ounce.
European bourses were in the red with London's FTSE 100 index off 0.04 per cent, Frankfurt's DAX lost 0.33 per cent while the Paris CAC 40 fell 0.72 per cent.
Earlier in Asia, benchmarks in Hong Kong and Sydney rose modestly and crested above the 19-month highs hit Wednesday. Hong Kong’s Hang Seng Index rose 0.1 per cent while Australia’s S&P/ASX 200 rose 0.7 per cent. Benchmarks in Singapore, Taiwan, Indonesia, Thailand, the Philippines and New Zealand also rose while South Korea’s Kospi fell 0.6 per cent.
Markets in Japan and mainland China were closed for extended holidays until Friday.
In corporate news, Brookfield Asset Management (TSX:BAM) and New York-based fund manager Pershing Square have resolved a dispute over General Growth Properties (NYSE:GGP), owner-operator of regional shopping malls in 41 states. Brookfield is the largest shareholder of GGP and Pershing controlled the second-largest block when the dispute between the fund managers arose last summer. Regulatory documents filed Thursday show Pershing has dropped efforts to have General Growth sold and Brookfield has agreed to buy GGP warrants held by Pershing.
Hormel Foods is buying the Skippy peanut butter product line from Unilever for approximately US$700 million as it looks to strengthen its business overseas and branch out beyond its meat business that includes Spam. Skippy, which debuted in 1932, has 11 varieties of peanut butter products. It is the leading brand in China and is sold in more than 30 other countries.