TORONTO - The Toronto stock market headed for a lower open Tuesday as further weak inflation data from the eurozone raised expectations that the European Central Bank will take action to support a fragile recovery.
Traders also took in a strong earnings report from retailer Hudson's Bay Company (TSX:HBC).
HBC posted first-quarter net earnings from continuing operations of $176 million or 97 cents a share, compared with a loss of $22 million or 19 cents a share in the same quarter of 2013. Retail sales jumped to $1.85 billion, up from $884 million in the same quarter last year. Same stores sales, which are stores that have been open for at least a year, were up 2.8 per cent year-over-year.
The Canadian dollar was down 0.15 of a cent to 91.61 cents US a day before the Bank of Canada delivers its next interest rate announcement.
U.S. futures were also in the red with the Dow Jones industrial futures 32 points lower to 16,690, the Nasdaq futures shed 11 points to 3,716.5 while the S&P 500 futures lost five points to 1,916.75.
The European Union’s statistics agency said that inflation in the eurozone came in at 0.5 per cent in May, down from 0.7 per cent in April and short of forecasts for 0.6 per cent.
The data raised concerns that the 18-country eurozone could fall into outright deflation, a sustained drop in consumer prices that chokes off growth as consumers delay purchases and businesses postpone investment. It also elevated expectations that the ECB will announce stimulus measures as part of its scheduled rate announcement on Thursday.
A commentary from Barclays Research said the ECB's inflation projections coming out the same day are expected to contain significant downward revisions.
"Hence, we do not see any other option for the ECB but to ease monetary policy further," Barclays said.
"Given constraints on the credit side, we think the ECB will also deploy credit easing measures."
Many analysts expect the bank to cut its main interest rate from its current record low of 0.25 per cent.
On Tuesday, investors will also consider the April report on U.S. factory orders, which is expected to show a gain of 0.6 per cent.
U.S. automakers also release sales figures during the day.
Commodity markets were lacklustre with June crude unchanged at US$102.47 a barrel.
August bullion gained $2.10 to US$1,246.10 an ounce, while July copper declined four cents to US$3.13 a pound.
In other corporate developments, Element Financial Corp. (TSX:EFN) will pay US$1.4 billion cash to buy PHH Corp.’s North American fleet management services business. PHH Arval had about US$4.6 billion of assets as of March 31, including US$4 billion invested in fleet leases.
The board of Hillshire Brands has decided to hold separate talks with Pilgrim’s Pride and Tyson Foods, as the two major U.S. meat processors engage in a bidding war for the maker of Jimmy Dean sausages and Ball Park hot dogs. The announcement by Hillshire Brands on Tuesday comes one day after Pilgrim’s Pride Corp. increased its bid to $55 per share, or $6.8 billion, from $45 per share.