Stocks to advance amid hopes for further Chinese stimulus, major real estate buy

TORONTO – The Toronto stock market headed for a higher open Wednesday and commodity prices climbed on hopes that China’s new leadership will back new measures to stimulate the world’s second-biggest economy.

Traders also took in major acquisition activity in the real estate sector. A group led by KingSett Capital is proposing a $4.4-billion takeover of Primaris Retail Real Estate Investment Trust (TSX:PMZ.UN), one of Canada’s largest shopping mall operators.

At the same time, RioCan Real Estate Investment Trust (TSX:REI.UN) has conditionally agreed to buy five regional malls and three other shopping centres currently owned by Primaris. RioCan values that part of the Primaris portfolio at $1.1 billion.

Canadian Pacific Railway (TSX:CP) stock will also be in focus after the Calgary-based company unveiled plans to bring down operating costs by cutting about a quarter of its workforce, or 4,500 employees, by 2016. CP expects to cut about 1,700 of those jobs by year-end through layoffs, attrition and reducing contractors as part of its restructuring plan.

The cuts are part of a plan to increase annual revenue growth between four and seven per cent from 2012 levels as well as reduce its full-year operating ratio, a closely watched measure of how much revenue is required to run the business, to the mid-60s range by 2016.

The Canadian dollar rose 0.15 of a cent to 100.83 cents US.

U.S. futures were higher while traders looked for progress in negotiations between the White House and Congress on a deal to avert the so-called “fiscal cliff” of automatic spending cuts and tax increases at the start of the new year. Without a deal, the U.S. could well fall back into recession and push much of the world down with it.

Despite political posturing and a deep divide on critical issues, most analysts think a deal will be cobbled together before the end of the year.

The Dow Jones futures rose 57 points to 12,990, the Nasdaq futures gained five points to 2,669.5 while the S&P 500 futures were up 4.5 points to 1,410.

The catalyst to the optimism across the markets was a Chinese government pledge to maintain policies intended to strengthen the economy and an expression of willingness to “fine tune” them and make them more effective.

There were also reports that the government lifted investment limits for insurance companies and that the new Chinese leadership will remain focused on urbanization, which could ramp up infrastructure spending.

China has been a major prop for a global economy still trying to recover from the financial collapse and subsequent recessions of 2008. Signs of stimulus are welcome because the Chinese government had to take steps to weaken the economy over the last couple of years to deal with higher than acceptable inflation.

Oil and metal prices advances with the January crude contract on the New York Mercantile Exchange rose 32 cents to US$88.32 a barrel.

March copper added a penny to US$3.67 a pound while February gold gained $10.10 to US$1,705.90 an ounce.

Investors also looked to a raft of U.S. economic data due for release over the coming days. Later Wednesday there’s a monthly non-manufacturing survey from the Institute for Supply Management and the private payrolls survey from ADP. Both could impact upon expectations for Friday’s official nonfarm payrolls report for November. The figures could be distorted by the impact of Superstorm Sandy, which battered much of the eastern seaboard.

The November employment report for Canada also comes out on Friday.

In other corporate news, the European Union has imposed its biggest ever cartel fine of almost €1.47 billion on seven companies for fixing the market of television and computer monitor tubes for a decade ending in 2006. It said the companies, including Philips, LG Electronics and Panasonic, artificially set prices, shared markets and restricted their output at the expense of millions of consumers.

European bourses were positive despite an unexpectedly big 1.2 per cent monthly decline in retail sales across the 17 European Union countries that use the euro in October.

London’s FTSE 100 index added 0.25 per cent, Frankfurt’s DAX gained 0.29 per cent while the Paris CAC 40 was up 0.4 per cent.

Earlier, hopes for more stimulus drove China’s main Shanghai Composite Index 2.9 per cent higher while the smaller Shenzhen Composite Index soared 3.8 per cent. Hong Kong’s Hang Seng ended the session 2.2 per cent higher.

Japan’s Nikkei 225 index rose 0.4 per cent to its highest close since April 27 while South Korea’s Kospi added 0.6 per cent.