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TSX set for higher open amid positive German confidence data, higher oil prices

TORONTO – The Toronto stock market looked set for a minor gain at the open Tuesday amid reassuring data suggesting Germany will be able to avoid slipping into recession.

Traders also looked to the start of the U.S. Federal Reserve’s two-day meeting on interest rates and hoped for a resolution to the fiscal cliff crisis.

They also took in the first earnings report issued by Hudson’s Bay Co. (TSX:HBC) since the retailer returned to the Toronto stock market. HBC said its loss from continuing operations was $8.5 million or eight cents per share in the third quarter. That compared with a loss from continuing operations of $7.5 million or seven cents per share in the same year-earlier period.

Revenues in the three months ended Oct. 27 were $930.4 million, up from $896.7 million in the 2011 period. Hudson’s Bay Co. also said it will initiate a quarterly dividend of just over nine cents per share.

The Canadian dollar slipped 0.03 of a cent to 101.29 cents US amid rising oil prices.

New York futures were higher while negotiations to avoid a fiscal crisis yielded no tangible signs of progress on Monday.

Fiscal cliff is the name for a situation that will arise at the beginning of the year when automatic tax increases and steep spending cuts are due to take hold. The subsequent shock to the economy would likely push the U.S. back into recession.

The Dow Jones industrial futures gained 32 points to 13,219, the Nasdaq futures rose 7.2 points to 2,657.8 while the S&P 500 index was up three points to 1,423.2.

Investors took in an index of German investor optimism which rose more than expected in December.

The ZEW indicator of economic sentiment rose to plus 6.9 points, from minus 15.7 in November. Markets had expected the index to rise only to minus 11.5. Germany’s economy grew a modest 0.2 per cent in the third quarter.

Meanwhile, investors are expecting the Federal Reserve to embark on another round of stimulus when it wraps up its meeting Wednesday. The Fed’s US$400-billion stimulus program know as Operation Twist is set to expire after 2012.

It involved the Fed buying $400-billion of longer-term Treasuries and simultaneously selling some of the shorter-dated issues it already held in order to bring down long-term interest rates.

Now, economists expect that the Fed will begin buying $40 million of long-term treasury securities each month.

This would be on top of an existing plan announced in September that involves the Fed buying $40 billion per month in mortgage-backed securities.

The eurozone government debt crisis also returned to centre stage following the surprise weekend announcement by Italian Prime Minister Mario Monti that he will resign after Italy’s 2013 budget has gone through parliament.

Monti, a technocratic leader who has been credited with restoring confidence in Italy’s economy, said he found it impossible to lead after former prime minister Silvio Berlusconi’s party, parliament’s largest, dropped its support for the government. Analysts fear Monti’s resignation could spark a new round of Italian political turmoil.

Commodities were mixed as the January crude contract on the New York Mercantile Exchange gained 56 cents to US$86.12 a barrel.

Copper prices gave up half of Monday’s four-cent rise as the March contract dipped two cents to US$3.68 a pound.

February gold added 40 cents to US$1,714.80 an ounce.

European bourses advanced in the wake of the German economic data as London’s FTSE 100 index gained 0.12 per cent, Frankfurt’s DAX was up 0.6 per cent and the Paris CAC 40 gained 0.64 per cent.

Earlier in Asia, Japan’s Nikkei 225 index fell 0.1 per cent with Japanese utilities coming under pressure a day after a team of geologists said that a nuclear power plant in western Japan is likely located on an active fault. Japanese guidelines prohibit nuclear facilities above active faults.

Hong Kong’s Hang Seng rose 0.2 per cent but shares in mainland China fell, with the main Shanghai index closing 0.4 per cent lower.

In other corporate news, patent-licensing firm Wi-LAN Inc. (TSX:WIN) has started litigation against Research in Motion Ltd. (TSX:RIM) alleging patent infringement. The case, launched the Southern District of Florida, alleges infringement of a patent related to Bluetooth technologies.

HSBC will pay US$1.9 billion to settle a U.S. money-laundering probe, avoiding a protracted legal battle that would have further embarrassed the British banking giant. The probe of Europe’s largest bank by market value focused on the transfer of funds through the U.S. financial system from Mexican drug cartels and on behalf of countries such as Iran that are under international sanctions.