When the Toronto stock market closed little had changed Wednesday as investor attention refocused on the U.S. Federal Reserve and whether the central bank will decide to launch another round of economic stimulus to aid a struggling economy.
The S&P/TSX composite index was down from session highs but still ahead 12.17 points to 12,232.62. Markets had earlier reacted enthusiastically after Germany's high court rejected calls to block the European Union's permanent rescue fund.
Opponents had challenged Germany's ratification of the European Stability Mechanism, which is a new, permanent C$500-billion bailout fund for the 17 countries that use the euro. They had argued that it violated Germany's constitution and sought an injunction preventing the country's president from signing the legislation into law. Germany's ratification of the ESM is vital, because the fund cannot work without the participation of the EU powerhouse.
The TSX Venture Exchange rose 8.05 points to 1,282.65. The Canadian dollar was off 0.36 of a cent to US102.4¢. The currency ran up about 1.8¢ since last Wednesday as traders anticipate that last week's disappointing U.S. jobs data for August have convinced the Federal Reserve that the economy needs another round of economic stimulus.
Such measures could include a third round of quantitative easing, which would see the Fed print more money to buy up bonds in order to keep interest rates low and encourage borrowing.
U.S. markets were lacklustre with buyers cautious ahead of an announcement by the Fed on Thursday at the conclusion of their two-day meeting on interest rates.
The Dow Jones industrials edged up 9.99 points to 13,333.35, the Nasdaq was up 9.78 points to 3,114.31 while the S&P 500 index gained three points to 1,436.56.
Markets could be in for a disappointment Thursday. Some analysts believe that the Fed will do nothing more than reassert that it's willing to do more, especially as a number of its policymakers may be reluctant to do something dramatic in the middle of the U.S. presidential campaign.
"The election coming up in November, it's going to make them think twice about the political implications of announcing a massive bond-buying program or asset purchase program," said John Stephenson, portfolio manager at First Asset Funds Inc., adding that December would be a better time to launch a massive program of stimulus. "So I think it's certainly open, I think they will certainly hint about keeping rates low for an extended period of time, maybe even extend that beyond the 2014 window if that's possible."
