The Toronto stock market is likely in for a lacklustre showing this week as disappointments over the quarterly earnings season pile up and traders exercise caution ahead of an American election too close to call.
“The next week and a half or so will likely be somewhat muted,” said Jennifer Dowty, portfolio manager at Manulife Asset Management.
“It’s certainly slowed down, you can see the activity rather benign. Volumes are low, (there’s) a lack of conviction right now until we get clarity in November with the election I think people are just going to sit on the sidelines.”
However, sentiment could find lift from top-drawer economic data, including the latest read on Canadian economic growth. Markets will also look to American consumer confidence, house prices, manufacturing activity and the week ends with job creation figures for Canada and the U.S.
The Canadian earnings season will remain in high gear, with reports coming in from the telecom, mining and energy sectors.
The Toronto and New York markets ended last week lower amid weak earnings reports from market giants Apple Inc., DuPont chemical and conglomerate 3M Inc. Data showing better than expected third quarter growth in the U.S. failed to benefit markets as analysts noted that the two per cent rise was driven largely by a jump in government spending and the housing sector.
The TSX lost 0.93 per cent while the Dow industrials backed off 1.77 per cent.
Markets are operating under a cloud of uncertainty as traders gauge who will emerge as the winner of the American election and what effect that will have on resolving the fiscal cliff that the U.S. faces at the end of December.
That is when a variety of tax hikes and budget reductions will come into effect unless Republicans and Democrats can come together with an alternative budget plan.
“You have people taking money off the table already,” said Andrew Pyle, investment adviser at ScotiaMcLeod in Peterborough, Ont.
And that nervousness is bound to increase as November wears on.
“The market will give some benefit of a doubt, in other words, after the election if things don’t get fixed on day two. That might be a couple of weeks. But at some point, probably before we get into December, the market is going to pass judgment on whether this is probable, in other words fixing it, or improbable and we’re going to have a very nasty situation in 2013.”
On the economic front, economists aren’t expecting a blowout number from the August read on Canadian gross domestic product. They see growth coming in at 0.2 per cent.