October 12, 2013 / 12:35 AM / 4 years ago

TSX flat with eye on U.S. budget talks; golds weigh

A general view of the TSX (Toronto Stock Exchange) Broadcast Centre in Toronto June 20, 2008.Mark Blinch

TORONTO (Reuters) - Canada's main stock index was little changed on Friday with investors awaiting a resolution by U.S. lawmakers to end a federal government shutdown and overall market action muted ahead of the Canadian Thanksgiving long weekend.

A drop in gold producers and a decline in Potash Corp of Saskatchewan Inc (POT.TO), after the fertilizer company cut its profit forecast for the third quarter, weighed on the market, offsetting some of the optimism around a possible deal being reached in Washington.

"The TSX is of course adversely affected today by the drop in precious metals in particular ... you also had that announcement by Potash pre-warning," said David Baskin, portfolio manager and president of Baskin Financial Services

"Add that all up, and that's why Canada is not following the U.S. uphill."

After recording its biggest jump in three months in the previous session, the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE finished the session down 2.30 points, or 0.02 percent, at 12,892.11.

President Barack Obama and congressional Republican leaders worked to end their fiscal impasse on Friday but struggled to strike a deal on the details for a short-term reopening of the government and an increase in the U.S. debt limit.

Failure to raise the borrowing limit would have serious repercussions for the fiscal standing of the United States, the world's biggest economy, and for markets and economies of the United States and other nations worldwide.

Investors, who are also looking ahead to the start of the earnings session soon, hesitated to make calls until there was certainty about a resolution to the crisis.

"We're certainly sitting on the sidelines," said David Cockfield, managing director and portfolio manager at Northland Wealth Management. "I just keep my head down for the moment."

"I want to see some actual results before I make up my mind how this is going to turn out," he added. "I don't think it's over until it's over."

Five of the 10 main sectors on the index were higher Friday.

The financial sector gained 0.4 percent, with Royal Bank of Canada (RY.TO) climbing 0.5 percent to C$68.03.

Energy shares added nearly 0.5 percent, with TransCanada Corp (TRP.TO) rising 1.2 percent to C$45.33. Encana Corp (ECA.TO) added 2.1 percent to C$18.30. The two companies were among the most influential movers on the index.

But weakness in the price of bullion weighed on the materials sector, which includes mining stocks.

Gold producers fell more than 3 percent. Barrick Gold Corp (ABX.TO) shed 3.9 percent to C$17.81, and Goldcorp Inc (G.TO) fell 3.1 percent to C$24.48. The two stocks had the biggest negative influence on the market.

Potash Corp was down 1.6 percent at C$32.46 after it estimated quarterly profit would be below market expectations as customers delayed purchases amid market uncertainty.

Additional reporting by John Tilak; Editing by James Dalgleish

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