Investors will be facing mixed indicators when North American equity markets open Thursday, October 12, 2006. Strong earnings reports from Costco Wholesale Corp. and PepsiCo Inc., plus a decline in oil prices, are facing off against a ballooning U.S. trade deficit.

Canada’s merchandise trade surplus rose in August as exports advanced for the fourth consecutive month and imports fell.

Statistics Canada today reported that Canadian companies exported merchandise worth $38.7 billion in August, up 0.3% from July, with strong gains in industrial goods and materials and automotive products.

On the other hand, imports declined 0.6% to $34.5 billion, following two consecutive monthly increases.

The resulting merchandise trade surplus amounted to $4.2 billion, compared with $3.9 billion in July, StatsCan said.

The Canadian dollar opened at US88.07¢, up 0.1 of a cent.

South of the border, the U.S. trade deficit rose to a record US$69.86 billion in August, inflated by high oil prices and American demand for imports. Exports rebounded from July’s fall, rising 2.3%, but were outpaced by imports, the U.S. Commerce Department said.

The Federal Reserve’s Beige Book, a snapshot account of business conditions compiled from the 12 regional Fed banks, will be released later today.

Crude-oil prices continued to slide, falling 8¢ to IS$57.51 a barrel ahead of a weekly update on U.S. oil supplies due later Thursday.

In earnings news, PepsiCo said its third-quarter net income rose 71%, driven by strength in its international business and sales of noncarbonated drinks and salty snacks. The soft-drink maker boosted its full-year earnings forecast.

Costco Wholesale reported a 1% rise in fourth-quarter profit to US$355.6 million, or 75¢ a share.

Asian markets were mixed overnight.

The Japanese Nikkei 225 index fell 31.76 points, or 0.19%, to finish at 16,368.81 points on the Tokyo Stock Exchange.

In Hong Kong, the blue-chip Hang Seng Index rose 10.3 points, or 0.1%, to 17,873.09.

Toronto stocks dropped sharply Wednesday, as falling commodity prices and weakness in the financials sector waylaid the broader market. Investors also took in news that telecom giant BCE Inc. was converting itself into an income trust.

The S&P/TSX composite index fell 136.01 points, or 1.16%, to 11,619.14.

Five of the 10 TSX main sub-groups were down.

The telecommunications sector was up 0.33% as BCE shares moved $1.37 higher to $32.92.

The S&P TSX Venture composite index dropped 18.28 points, or 0.77%, to 2,343.48.

In New York, markets turned lower on some disappointing corporate results.

The Dow Jones industrial average finished down 15.04 points, or 0.13%, to 11,852.13, but sank as low as 73 points in intraday trading.

The tech-heavy Nasdaq composite index dipped 7.16 points, or 0.31%, to 2,308.27, while the broader S&P 500 lost 3.47, or 0.26%, to 1,349.95.