The Canadian Press

The Toronto stock market could be in for a volatile week as investors look for signs the recession in Canada has ended, indications of slowing U.S. job losses and whether retailers are off to a positive holiday shopping season.

All this will take place while under a cloud of worry associated with the Dubai debt crisis.

Stock markets were bruised last week in the wake of news that the Dubai government’s investment company Dubai World wants a standstill in payments on its approximately US$60 billion in debt until at least May.

The news raised fears about the budding economic recovery and hit stock markets hard, but analysts think the damage will be short-lived.

“I think you measure it in days, as opposed to weeks,” said John Johnston, chief strategist at the Harbour Group at RBC Dominion Securities.

“You’re talking about a $60-billion debt load that may be defaulted on so the actual amount of money is fairly limited and so this is going to be a threat to some individual players but other than the kind of short-term dislocation, I don’t think it’s going to be a major issue.”

Johnston said the problem would be much greater if involved a major country like Japan, Italy or Greece.

“That’s a different ball game — that’s when you’re measuring something in the hundreds of billions of dollars. This is one entity in a small country.”

Canadian investors will be looking to economic growth figures from September to determine if the all-clear can be sounded on the recession.

Johnston is confident that Statistics Canada will signal an improvement.

“I think that when you look at the Canadian numbers, they show that the economy bottomed sometime in the summer and it’s now creaking upwards,” he said.

Economists are calling on average for the economy to have risen by 0.3% over August and an annualized growth rate of 0.6%.

What will also set the tone at the start of the week will be indications of just how well retailers did last week with the start of the U.S. holiday shopping season on Friday.

“There’s two sides to the story out there,” said Gareth Watson, director Canadian equities portfolio advisory group.

“Our economists point out that the savings rate has been so high recently among Americans that it’s conceivable that they might use some of those savings towards consumption so it could be better than expected.”

But he added that there is a difference with last year that could depress activity.

Watson pointed out that last year, retailers likely ordered their Christmas inventory in late summer, before the financial crisis boiled over.

“Last year I think you saw more than anything was these retailers competing on price by discounting and whatever they lost by discounting they potentially made up by volume because they had the inventory,” he said.

This season, he said, retailers are being forced to compete even harder on price, but haven’t bulked up on inventory like last year.

“You can discount, but now you don’t have the inventory to make up the lost price through volume,” he observed.

At the end of the week, investors will be looking to job statistics from Canada and the United States for signs of improving economic conditions.

Economists are looking for the U.S. economy to have shed 114,000 jobs last month, following losses of 190,000 in October, which booted the jobless rate up to 10.2%.

Canadian investors will also take in earnings reports from several of the big banks.

Bank of Montreal kicked off the earnings season with a report last week that beat expectations while reporting falling loan loss provisions — factors that bode well for the next batch.

“It looks like the banks have managed their risks very well through this cyclical down leg and it’s very encouraging,” said Johnston.

National Bank (TSX:NA), TD Bank (TSX:TD), CIBC (TSX:CM) report on Thursday while Royal Bank (TSX:RY) issues earnings on Friday.