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The Toronto stock market looked set for a third day of decline Friday amid worries about the knock-on effects from the U.S. economy going over the so-called fiscal cliff.

The label refers to a string of tax increases and steep spending cuts to the tune of US$600 billion set to go into effect at the end of the year unless Democrats and Republicans can come together and arrange a deficit-cutting compromise. Failure to do so would likely tip the U.S. back into recession, and drag down other economies with it.

Bank of Canada governor Mark Carney says the fiscal cliff is the most imminent threat facing the Canadian economy.

The Canadian dollar continued to trade below parity with the greenback as worries about the fiscal cliff pushed investors to the perceived safe haven of U.S. Treasuries. The loonie fell 0.11 of a cent to 99.85 cents US.

The U.S. dollar also depressed commodity prices. A stronger greenback makes it more expensive for holders of other currencies to buy oil and metals, which are dollar-denominated.

U.S. futures signaled a third day of selling on New York markets with the Dow Jones industrial futures down 56 points to 12,719, the Nasdaq futures lost 7.2 points to 2,564.8 and the S&P 500 futures declined six points to 1,369.3.

New York indexes have registered their worst declines of the year over the last two sessions as investors worry that taxes on capital gains and dividends could rise substantially after the first of the year.

U.S. president Barack Obama was set to make some remarks on dealing with the fiscal cliff at 1 p.m. EST.

One reason for the lack of confidence in American lawmakers is that traders recall the fierce infighting that went on in the debate on raising the U.S. debt limit in the summer of 2011. The raucous debate pressured financial markets around the world.

Positive economic data from China seemed to have little effect on sentiment.

Auto sales, consumer spending and factory output in the world's second-largest economy improved in October.

The government reported Friday that growth in factory output accelerated 9.6% compared with a year, up from the previous month's 9.2%. Retail sales rose 14.5%, up from September's 14.2%. Auto sales rose 6.4% to 1.3 million vehicles, rebounding from September's 0.3% contraction.

Also in October, inflation eased further, giving Beijing more room to cut interest rates or launch new stimulus measures to speed a recovery with less danger of igniting politically dangerous price rises.

Commodity prices were lower, depressed by demand concerns and the higher greenback.

The December crude contract on the New York Mercantile Exchange was down 66 cents to US$84.43 a barrel.

Copper, viewed as an economic barometer as the metal is used in so many applications, dropped six cents to US$3.41 a pound.

December gold bullion rose $2.80 to US$1,728.80 an ounce.

The European debt crisis also kept traders on edge as cash-strapped Greece says it would issue unusually short-term debt on Tuesday in the hope of raising enough money to make a key bond repayment days later.

It will issue €2.1 billion in four-week treasury bills and €1 billion in 13-week bills.

Greece is not expected to get its next batch of international rescue loans by Nov. 16, when it has to roll over €5 billion in three-month treasury bills.

It was a relatively quiet morning for earnings news.

Telecom Telus Corp.'s net profit rose 8% to $351 million or $1.08 per share. Overall revenue was up 5.8% to nearly $2.8 billion, up about $200 million from just over $2.6 billion in the third quarter of 2011. Overall wireless revenue was up 7% from a year ago, rising by $104 million to $1.5 billion.

TMX Group Ltd., the owner of the Toronto Stock Exchange, has issued its first financial report since undergoing a strategic reorganization that included the acquisition of the Alpha Trading and CDS businesses and a new ownership structure led by the Maple Group.

It posted $15.3 million of net income, or 53 cents per share and $113.4 million of revenue over the two months following the reorganization.

European bourses were deep in the red as London's FTSE 100 index lost 0.72%, Frankfurt's DAX dropped 1.5% and the Paris CAC 40 was down 0.95%.

Earlier in Asia, Japan's Nikkei 225 index fell 0.9%, Hong Kong's Hang Seng shed 0.9% and South Korea's Kospi retreated 0.5%.

The Shanghai Composite Index closed down 0.1% and the Shenzhen Composite Index edged 0.4% lower.

Australia's S&P ASX 200 dropped 0.5% after the country's central bank says it was trimming growth forecasts as mining companies scale back investment plans because of declining iron ore and coal prices and a strong currency.

Originally published on Advisor.ca