TSX at two-week low as fiscal cliff worries weigh

Wed Nov 7, 2012 4:55pm EST
 
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By Claire Sibonney and John Tilak

TORONTO (Reuters) - Canadian shares marked their steepest one-day drop in more than two weeks on Wednesday as the market worried about the huge economic challenges and looming fiscal showdown facing newly re-elected U.S. President Barack Obama.

While Obama promised to reach across the aisle to address these issues, investors were skeptical of a speedy resolution on the "fiscal cliff" - a mix of tax increases and spending cuts due to extract some $600 billion from the U.S. economy at the beginning of 2013 barring a deal.

Neither the election result, nor the partisan gridlock that Obama faces come as a surprise to markets, which already appeared to be pricing in a Democratic victory on Tuesday.

"It was more of a buy the rumor, sell the news type of situation in terms of the election. Market performance clearly dictated that Obama was going to be reelected and I think we as investors give politicians way too much credit," said Brian Belski, chief investment strategist at BMO Capital Markets.

"For Obama to be pushed out of office the cycle had to be much more definitely negative and it wasn't, with U.S. stocks up 14 percent year to date as of yesterday," said Belski.

Leading the decline was the energy subgroup, which fell 2.2 percent on a day when oil prices were down about 4 percent. <O/R>

Suncor Energy Inc SU.TO fell 2.7 percent to C$33.67 and Canadian Natural Resources Ltd CNQ.TO was down 4.1 percent at C$28.95.

Though the United States could eventually approve TransCanada Corp's TRP.TO Keystone pipeline, having the Democrats in power may push it further into the future. TransCanada shares were down 2.1 percent to C$44.53.   Continued...

 
A Toronto Stock Exchange (TSX) logo is seen in Toronto November 9, 2007. REUTERS/Mark Blinch