The Toronto stock market looked set for a slight dip Monday morning as traders look ahead to a U.S. election Tuesday that is deemed to close to call.
The Canadian dollar was down 0.12 of a cent to 100.32 cents US while oil prices held steady following a drop of more than US$2 a barrel Friday and copper prices added to a seven-cent slide at the end of last week.
U.S. futures were little changed with the Dow industrial futures up a point at 12,992, the Nasdaq futures were unchanged at 2,641 and the S&P 500 futures slipped 1.3 points to 1,404.2.
Tuesday’s election appears to be going down to the wire, though most opinion polls indicate that President Barack Obama may have the edge over Mitt Romney in crucial swing states.
After the election, attention will turn to dealing with the looming fiscal cliff facing the U.S. economy.
The fiscal cliff refers to a variety of tax hikes and massive budget reductions that will come into effect at the end of December unless Republicans and Democrats can come together with an alternative budget plan.
Economists warn such a shock could send the economy back into recession. International Monetary Fund chief Christine Lagarde recently warned that Canada would not escape the fallout from that.
Analysts say there are worries that an Obama victory would drag out negotiations to deal with the issue.
“We believe that the possibility of going off the fiscal cliff temporarily is higher if President Obama is re-elected,” says Anshul Pradhan at Barclays Research.
“We believe that the Democrats would likely push for upper income tax cuts to expire, but we are hard-pressed to see a Republican House pro-actively agreeing to such an increase. Any resolution may come in late December or worse, after the cliff hits.”
Commodity prices were mixed with the December crude contract up 15 cents at US$85.01 a barrel.
December copper fell three cents to US$3.45 a pound and December bullion rose $6.50 to US$1,681.50 an ounce after a positive U.S. jobs report sent the American currency higher and gold prices down more than $40 on Friday.
Renewed concerns over Greece also weighed on investors Monday as two votes in the country’s parliament this week could well determine if the cash-strapped country stays in the Euro.
On Wednesday, Greek legislators are expected to vote on a C13.5-billion austerity package that is required by international creditors for the release of the next batch of the country’s bailout funds. Without the cash, Greece faces bankruptcy.
If, and when, the package of spending cuts and tax increases is passed, legislators will then have to approve the 2013 budget. That vote is penciled in for Sunday.
The prevailing view in the markets is that both votes will get passed but the margin of error is slim, given that a junior partner in the coalition government has says it will vote against the austerity bill if certain labour reforms are not extracted.
In corporate news, Silver Wheaton Corp. says its net income fell by 11% to US$119.7 million or 34 cents per share, down from 38 cents or US$135 million in the third quarter of 2011. The company’s revenue was down 13% year over year, falling to US$161.3 million from US$185.2 million, mostly as a result of lower prices for silver. The company declared a dividend of seven cents per share, about 20% of the cash generated by operations in the quarter.
Mexican authorities have awarded TransCanada Corp. another natural gas pipeline contract. The company says it will invest about US$400 million in a 413-kilometre pipeline between El Oro and Mazatlan, which will connect with the US$1-billion Topolobampo pipeline contract that TransCanada was awarded last week.
European bourses were in the red as London’s FTSE 100 index lost 0.62%, Frankfurt’s DAX fell 0.6% and the Paris CAC 40 declined 0.96%.
In Asia, Japan’s Nikkei 225 index fell 0.5%, Hong Kong’s Hang Seng lost 0.5% while South Korea’s Kospi shed 0.6%.
Mainland Chinese shares lost ground after four straight days of gains. The Shanghai Composite Index lost 0.1% and the Shenzhen Composite Index lost 0.5%.
A key political event also takes place this week in China, the world’s No. 2 economy. Thursday marks the opening of the Communist party congress—the once in a decade forum used to name China’s top leadership.
Tom Kaan, head of equity sales at Louis Capital Markets in Hong Kong, says it would be a cause of concern if China’s new leaders do not take quick action to boost employment, particularly among the ranks of middle-income earners who have lost jobs amid the country’s economic slowdown.
