Stock futures lower on U.S.-China trade concerns; C$ dollar, commodities fall

By The Canadian Press

TORONTO - A brewing trade dispute between the United States and China soured Monday's stock market outlook, with major futures indexes in New York falling modestly in premarket trading.

Downward movement in the price of oil will also likely be a major anchor for the Toronto Stock Market, which ended last week with a 98.23 point rise to take it to 11,253.23 at Friday's close with much help from strong gold prices.

Overseas markets also fell sharply on concern about unrest between two of the world's largest economies.

Late Friday, the U.S. administration imposed trade penalties on tires coming into the country from China. The Chinese government quickly condemned the move, calling it protectionist and a violation of global trade rules.

President Barack Obama has until Thursday to accept, reject or modify a U.S. International Trade Commission ruling that an increase of Chinese tires moving into the U.S. hurts American producers.

China accused Washington on Monday of violating World Trade Organization rules by raising tariffs on Chinese tires and demanded talks in the WTO on the dispute.

The Dow Jones industrial futures were off 65 points at 9,466, the S&P 500 ticked down eight points to 1,029.3 and the Nasdaq was lower by 16.5 at 1,667.

Oil prices dropped below US$69 a barrel Monday in Asia amid a stronger U.S. dollar and a slide in regional stock markets. Benchmark crude for October delivery was down 77 cents at $68.52 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. On Friday, the contract tumbled $2.65 to settle at $69.29.

The stronger greenback also depressed other commodity prices with the December gold contract on the New York Mercantile Exchange down $6.40 to US$1000 while December coppr lost four cents to US$2.81 a pound.

The rise in the U.S. currency helped send the Canadian dollar down 0.98 to 91.73 cents US. Canadian economic reports were expected in the morning on second-quarter national balance sheet accounts and second-quarter industrial capacity utilization rates.

In corporate news, former technology equipment heavyweight Nortel Networks, now in the process of being broken up and sold off in chunks, announced it has selected Avaya Inc. as the successful bidder for its Enterprise Solutions division.

Avaya has agreed to pay US$900 million, with an additional $15 million for an employee retention program.

In the U.S., investors will have little in the way of economic news Monday to provide further insight into a potential economic recovery. However, reports on inflation, retail sales, industrial product and housing starts are due out later in the week.

Allen Vanguard Inc. (TSX: VRS.TO), a financially troubled Ottawa-based maker of bomb disposal technology, has been acquired by U.S. private equity firm Versa Capital Management Inc. The deal also recapitalizes the company and keeps it operating, but wipes out the value held by current shareholders. Financial terms were not revealed.

Overseas, Japan's Nikkei stock average fell 2.3 per cent. In afternoon trading, Britain's FTSE 100 declined 0.7 per cent, Germany's DAX index fell 0.8 per cent, and France's CAC-40 dropped 0.9 per cent.