North American stocks are set for a flat start Tuesday morning after a strong report on the housing market, and a rise in Canadian inflation.

Consumer prices advanced 2.8% on average between May 2005 and May 2006, a substantial gain from the 2.4% change of April.

Statistics Canada said today the Consumer Price Index, excluding the eight volatile components identified by the Bank of Canada for monetary policy, recorded its strongest 12-month increase since December 2003, jumping from 1.6% in April to 2.0% in May this year.

Separately, StatsCan reported the value of retirement savings held in trusteed pension funds approached $800 billion in the fourth quarter of 2005.

The Canadian dollar opened at US89.41¢, up 0.11 of a cent.

South of the border, U.S. housing starts climbed 5% in May, the first increase since January, suggesting that the sector is slowing in an orderly fashion despite rising interest rates.

The U.S. Commerce Department said May housing starts rose 5% to a seasonally adjusted 1.957 million-unit annualized rate. The figures beat Wall Street expectations of an increase of 1.7% to a 1.88 million-unit annual rate.

Crude-oil futures bounced back early Tuesday, rising 57¢ to US$69.55 a barrel. The Chinese government agreed to use Saudi Arabian oil in its strategic reserves.

In M&A news, Agrium Inc. announced it is paying US$74.5 million for Pursell Technologies Inc. specialty fertilizer assets.

Overseas, the FTSE 100 was down 0.3% in London.

In Asia, both Tokyo and Hong Kong dropped for a second day.

The benchmark Nikkei 225 index fell 211.94 points, or 1.43%, to finish at 14,648.41.

In Hong Kong, the blue chip Hang Seng Index fell 159.89 points, or 1.0%, to 15,608.97.

North American stocks sank Monday, as the Toronto market continued to suffer from losses in the resource sectors, and as U.S. markets worried over inflation and interest rate increases.

The S&P/TSX composite index dropped 200.37 points, or 1.79%, to 11,007.58.

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

The S&P/TSX Venture composite index slid 77.33 points, or 3%, to 2,502.60

In New York, the Dow Jones industrial average was down 73.89 points, or 0.67%, to 10,940.66. The S&P 500 I was down 11.44 points, or 0.91%, at 1,240.10, and the Nasdaq Composite Index was down 19.49 points, or 0.92%, at 2,110.46.