Stocks to open lower after big gains, commodities lower as greenback strengthens

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TORONTO - The Toronto stock market looks set to open lower as investors lock in some profits from last week's solid gains and commodity prices fall in response to a stronger American dollar.

The Canadian dollar was off 0.01 of a cent to 101.3 cents US.

U.S. futures were lower ahead of the open with the Dow Jones industrial futures down 11 points to 13,335, the Nasdaq futures lost one point to 2,712 while the S&P 500 futures dipped 1.25 points to 1,456.5.

The TSX gained almost two per cent last week after U.S. lawmakers passed a bill to avoid a combination of government spending cuts and tax increases that have come to be known as the "fiscal cliff."

Stocks also got a boost Friday from jobs data as U.S. employers added 155,000 jobs in December, roughly as expected — a good sign that hiring held up during the tense fiscal negotiations in Washington.

The TSX could find selling pressure from the energy and mining sectors as prices for oil and copper declined while the greenback gained ground against many other currencies.

A higher U.S. dollar pressures commodities 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 was down 49 cents to US$92.60 a barrel.

March copper dipped three cents to US$3.66 a pound while February bullion gained $8 to US$1,656.90 an ounce.

The American currency has strengthened in the wake of indications that the Federal Reserve could wind up its bond buying stimulus program by the end of the year.

Minutes from the Fed's latest policy meeting last month showed a split over how long to continue the purchases amid concerns that the continued bond purchases, known as quantitative easing, would destabilize the economy.

Overseas, banking shares were higher after global regulators eased new rules obliging lenders to set capital aside. The so-called Basel III rules are a set of new international standards to make sure banks don’t fall back into the sort of trouble that caused the 2008 financial crash. On Sunday, the officials setting those rules delayed the date by which certain amounts of cash had to be readily available.

Deutsche Bank was up 3.6 per cent but the biggest gains were among ailing Spanish banks, which some had feared would struggle to meet the new cash requirements.

Traders will also be focused on the start of the fourth-quarter earnings season in the U.S., which will be kicked off by resource giant Alcoa Inc. after the close Tuesday.

Analysts expect Alcoa to turn in earnings of six cents a share, a big improvement from the three cent a share loss the company posted a year ago and the 13-cent a share loss from the third quarter.

The company has been pressured by a global manufacturing slowdown, and in particular by falling demand from China last year. Also, aluminum prices lost about two per cent during the fourth quarter on the London Metal Exchange.

Alcoa's earnings are eagerly anticipated since the aluminum company's products are used in a wide variety of industries, everything from cars to appliances. It's also viewed as a good indication of where the overall resource sector is at, an important consideration for a market like the TSX that is heavily weighted in favour of commodity-based companies.

European bourses were lower with London's FTSE 100 index down 0.37 per cent, Frankfurt's DAX fell 0.46 per cent while the Paris CAC 40 declined 0.6 per cent.

Earlier in Asia, the Nikkei in Tokyo fell 0.8 per cent, the Hong Kong Hang Seng was nearly unchanged, South Korea’s Kospi lost less than 0.1 per cent to 2,011.25 while weakness in Australian’s resource sector sent the S&P/ASX 200 in Sydney 0.1 per cent lower.

Organizations: TSX, Dow Jones, Federal Reserve Alcoa Inc. New York Mercantile Exchange Deutsche Bank London Metal Exchange FTSE 100 Nikkei SP/ASX 200

Geographic location: U.S., TORONTO, Washington China Frankfurt Asia Tokyo Sydney

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