TORONTO - The Toronto stock market goes into the second quarter of 2013 trading down from its best levels of the year and not a great deal of hope that global economic conditions will improve to a point where the resource-based market can gain traction.
But during the coming week, traders will look to assurance that job growth remains strong while keeping a wary eye on countries most impacted by the eurozone debt crisis.
The TSX ended the January-March period up a slight per cent year to date, down from highs of mid-March when the market was ahead about 3.5 per cent.
In contrast, a stream of positive economic indicators, including a resurgent housing sector, and continued stimulus measures from the U.S. Federal Reserve helped power the Dow Jones industrials to a series of record-high closes, leaving the blue chip index up almost 12 per cent year to date.
But looking ahead, the resource-heavy TSX will continue to be hobbled by a stubbornly slow global economic recovery.
"I think it really is a function of commodity prices not really going anywhere because it’s a tepid global recovery and most of the revisions in terms of growth expectations that occurred over the quarter have been downwards," said Norman Raschkowan, North American strategist at Mackenzie Investments.
"People initially had some positive adjustments to the view on China and now those have sort of reversed and for the U.S., things have been probably OK and data particularly on the housing side has been positive. I think that’s been overwhelmed in the global context by the estimates for Europe being revised downwards pretty materially."
Miners led TSX losers by a long shot, with the Global Gold Index losing while the Metals and Mining group fell per cent.
However, it wasn't all bad news as the financial sector gained per cent while the energy component rose per cent.
At the same time, Raschkowan says that it's hard to see what can drive the U.S. market up from here.
"It wouldn’t surprise me if the U.S. market pauses here," he said.
"It’s hard to see anything definitive so maybe you have a drift higher or sideways until there is another new development that is positive."
The eurozone debt crisis will likely weigh on markets in the wake of a controversial bailout secured by the tiny Mediterranean nation of Cyprus at the beginning of last week.
Early relief gave way to concern that the Cyprus bailout agreement may be a model for the future since for the first time, many large depositors will lose a big chunk of their money as part of the pricetag for securing the money.
"The people for whom this is really a game changer is corporate treasurers and companies that hold large amounts of cash in transit let’s say in banks, and they’re not going to be prepared to leave that money in a bank that they consider to be in a risky locale," said Raschkowan.
"And whether it’s Spain, or Greece or Portugal or Italy, I think that’s where you’re going to see a meaningful impact from its decision."
The major economic reports of the week come out Friday.
In the U.S., traders hope to see another month of job gains around the 200,000 mark. Economists expect the government report will show that the economy created about 190,000 jobs during March after cranking out 236,000 during February, with the jobless rate staying unchanged at 7.7 per cent.
In Canada, Statistics Canada was expected to report that about 10,000 jobs were created during March. However, CIBC said in a note that it expects only about 5,000 new positions following a blowout performance in February when 50,700 jobs were created.
"While resource-sector hiring could fare better, public sector headcounts were likely trimmed with the ongoing drive to restrain public sector costs," said CIBC World Markets economist Emanuella Enenajor.
"A slowing residential construction market likely also saw hiring there falter."