TSX closes slightly higher after two days of losses on fiscal cliff fears

TORONTO – The Toronto stock market closed higher after two days of losses amid worries about the knock-on effects from the U.S. economy going over the so-called fiscal cliff.

The S&P/TSX composite index climbed 5.75 points to 12,196.8 while the TSX Venture Exchange added 2.24 points to 1,300.92.

The fiscal cliff label refers to a string of tax increases and steep spending cuts aimed at cutting the deficit which are set to take effect at the first of the year. If they are allowed to take full effect, the cuts and tax increases will total about at least half a trillion dollars and take a big chunk out of GDP, in 2013. Failure to come up with a compromise would likely tip the U.S. back into recession and drag down other economies with it.

“I think now all focus, all emphasis, all the world is watching, is fiscal cliff, said Sadiq Adatia, chief investment officer at Sun Life Global Investment.

“And how the U.S. is going to deal with this fiscal cliff will determine how everything goes. And there will be no new money going in (the markets) until (traders) see some sort of resolution there.”

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

Traders found little comfort from an early afternoon announcement by President Barack Obama that he is inviting congressional and business leaders to a meeting next week for talks aimed at finding a compromise.

But he made it clear that spending cuts must be combined with new revenue, adding he would not accept any approach that isn’t balanced and does not include the wealthy paying more taxes.

Republicans say raising tax rates on the wealthiest Americans is a non-starter.

The Canadian dollar was down 0.09 of a cent at 99.87 cents US. The loonie has lost almost nine-tenths of a cent over the past two sessions as worries about the fiscal cliff pushed investors to the perceived safe haven of U.S. Treasuries.

New York indexes were mostly little changed after registering 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.

The Dow Jones industrials were up 4.07 points to 12,815.39.

The Nasdaq rose 9.29 points to 2,904.87 and the S&P 500 index gained 2.34 points to 1,379.85.

The TSX ended the week down 183.61 points or 1.48 per cent while the Dow fell 277.77 points or 2.12 per cent.

There was some positive consumer news Friday. The University of Michigan’s consumer sentiment survey index came in at 84.9 in November, the highest reading since July 2007, from a final October reading of 82.6, reflecting lower gasoline prices and the improvement in housing and labour market data. Economists had expected a decline to 81.5 because of concerns over the fiscal cliff and the effects of superstorm Sandy.

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

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

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.

Financials led TSX advancers Friday afternoon as Scotiabank (TSX:BNS) rose 29 cents to $53.80 while Manulife Financial (TSX:MFC) climbed 36 cents to $12.18.

The TSX telecom sector was also positive as Telus Corp. (TSX:T) reported its net profit rose eight per cent to $351 million or $1.08 per share. Overall revenue was up 5.8 per cent 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 seven per cent from a year ago, rising by $104 million to $1.5 billion and its shares were up 96 cents to $64.49.

The energy sector also advanced as the December crude contract on the New York Mercantile Exchange moved up 98 cents to US$86.07 a barrel. Talisman Energy (TSX:TLM) gained 34 cents to C$11.18 while Cenovus Energy (TSX:CNQ) advanced 65 cents to $33.79.

Copper, viewed as an economic barometer as the metal is used in so many applications, dropped two cents to US$3.45 a pound and the base metals sector was lower. Turquoise Hill Resources (TSX:TRQ) lost 20 cents to $8.38 while Taseko Mines (TSX:TKO) gained four cents to C$2.89.

The gold sector was the major weight after two days of gains even as December bullion rose $4.90 to US$1,730.90 an ounce. Goldcorp Inc. (TSX:G) faded 63 cents to C$44.28.

The European debt crisis also kept traders on edge as cash-strapped Greece said 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.

Elsewhere on the corporate front, Robert Dutton, the top executive at home improvement retailer Rona (TSX:RON) is leaving the company after 20 years as president and chief executive. It also comes just months after the company fended off a takeover by American rival Lowe’s. Rona shares ran ahead 77 cents or 8.24 per cent to $10.12.