CANADA STOCKS-TSX at 2-week low as fiscal cliff worries weigh

Wed Nov 7, 2012 4:53pm EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

* TSX ends down 130.61 points, or 1.1 pct, to 12,230.59
    * Nine of 10 sectors lower, led by energy shares
    * Materials rise 0.2 percent
    * Agrium drops nearly 11 percent

    By Claire Sibonney and John Tilak
    TORONTO, Nov 7 (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
    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.
    Suncor Energy Inc fell 2.7 percent to C$33.67 and
Canadian Natural Resources Ltd was down 4.1 percent at
    Though the United States could eventually approve
TransCanada Corp's 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.
    The Toronto Stock Exchange's S&P/TSX composite index
 ended down 130.61 points, or 1.1 percent, to
12,230.59. The index hit an intraday low of 12,201.87, marking
its biggest one-day drop since Oct. 23. Nine of the 10 main
groups were down. Materials, home to gold miners, edged up 0.2
    BMO's end-of-year target for the TSX is 12,200, leading
Belski to believe the market was already getting ahead of
    Weighing on broader sentiment, European Central Bank
President Mario Draghi underscored the weakness in Europe's
    Traders were also anxious about a vote in Greece's
parliament later on Wednesday on an austerity package needed to
secure a fresh injection of international aid and avert
bankruptcy, which would rock the euro zone and world markets.
    "Now that the distraction of the U.S. elections is over,
investors are again focusing on the two biggest threats to
global growth - the U.S. fiscal cliff and the euro zone
situation," said Elvis Picardo, strategist and vice president of
research at Global Securities.
    Some Canadian earnings reports also dampened the mood. 
    Of the 38 percent of TSX companies who have so far reported
third quarter results, 52 percent have met or beat expectations
while 48 percent have missed, according to Thomson Reuters
StarMine data. 
    One of the heaviest decliners on the index was fertilizer
producer Agrium Inc, down nearly 11 percent at C$95.03,
after it reported lower quarterly profit due to downtime at its
potash mine and dragged-out contract talks with China and India.
    Bombardier Inc dropped 4.4 percent to C$3.45 after
it said it would delay by about six months the first flight of
its C-Series jetliner because of issues related to suppliers,
and that it would cut about 1,200 jobs in its train
manufacturing division. 
    Enbridge Inc was down 1.8 percent at C$39.39.
Canada's second-largest pipeline company reported a
third-quarter profit as losses on financial derivatives fell and
it carried more oil and natural gas on some of its pipelines.
    Home-improvement retailer and distributor Rona Inc 
slipped 3.3 percent to C$9.82. It posted a drop in quarterly
profit after cutting prices to limit sales declines in a tough
    Gold companies were one of the few bright spots on the
index. Franco-Nevada Corp was up 5.2 percent at C$58.97
after the gold-focused royalty company said on Tuesday it would
buy an 11.7 percent net royalty interest in an oil field in
Saskatchewan from Penn West Petroleum Ltd for C$400
million in cash. 
    Also the upside, Intact Financial Corp was up 4.1
percent to C$63.10 after its quarterly results topped estimates.
    WestJet Airlines Ltd rose 0.6 percent to C$18.07
after beating forecasts and moving closer to starting up its
regional carrier by naming a boss for the unit.