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Melted gold flows out of a smelter into a mould at a plant of gold refiner in Istanbul February 27, 2009. (OSMAN ORSAL/REUTERS)
Melted gold flows out of a smelter into a mould at a plant of gold refiner in Istanbul February 27, 2009. (OSMAN ORSAL/REUTERS)

At midday: Gold rally limits TSX losses Add to ...

The Toronto stock market was lower Wednesday amid rising concerns that a partial U.S. government shutdown will last longer than thought and inflict serious damage on the economy.

Traders also worried about how the stalemate between President Barack Obama and some members of the Republican party will impact negotiations over raising the U.S. government’s debt ceiling in mid-October.

The S&P/TSX composite index dropped 28.28 points to 12,819.16 with losses limited by a strong showing in the gold sector as bullion started to appear attractive as a safe haven investment.

The Canadian dollar was down 0.08 of a cent to 96.77 cents US.

Disappointing job creation data also pressured U.S. indexes as the Dow Jones industrials fell 102.27 points to 15,089.43, the Nasdaq lost 14.38 points to 3,803.61 and the S&P 500 index shed 9.3 points to 1,685.7.

Payroll firm ADP reported that the U.S. private sector created 166,000 jobs last month, lower than the 178,000 that had been expected. It also revised lower its job creation figures for the previous two months.

That’s likely all the jobs data that traders will get this week as one of the spinoff effects of the government showdown is an absence of government data that usually moves markets. The Labor Department said Tuesday it won’t be issuing its employment report for September on Friday.

Market reaction to the partial government shutdown that started Tuesday has been relatively muted on hopes that economic damage from the budgetary impasse wouldn’t be too severe as long as it didn’t last too long.

But there is growing dismay that the standoff on Capitol Hill shows no signs of easing with some lawmakers in both parties suggesting the shutdown might last for weeks.

“(Traders) are nervous,” said Fred Ketchen, manager of equity trading at at ScotiaMcLeod.

“And as long as they’re nervous they’re not going to do anything and we’re going to have a lot more red than black.”

Adding to the grim mood is a deadline of Oct. 17 when the U.S. hits its debt limit and starts to run out of money to pay bills.

Meanwhile, Italian premier Enrico Letta has won a confidence vote in the Senate after Silvio Berlusconi delivered an about-face and announced he would support the government.

The actual voting was anticlimactic after the former premier acknowledged defeat and said he would support Letta after defections in his party robbed him of the backing he needed to bring down the government.

The telecom sector led TSX decliners, down 0.85 per cent with Rogers Communications (TSX:RCI.B) off 42 cents to $43.92.

The financials sector fell 0.65 per cent as Sun Life Financial (TSX:SLF) gave back 32 cents to $32.80.

Commodity prices were mixed and the energy sector was down 0.6 per cent while the November crude contract on the New York Mercantile Exchange erased early losses to move up $1.14 to US$103.18 a barrel. Cenovus Energy (TSX:CVE) declined 29 cents to C$30.52.

The gold sector rose 2.5 per cent and December bullion gained $33.50 to US$1,310.60 an ounce. Barrick Gold Corp. (TSX:ABX) advanced 60 cents to $19.20.

The base metals sector turned positive, up 0.77 per cent with December copper up four cents to US$3.31 a pound. Rio Alto Mining (TSX:RIO) gained nine cents to $2.04

BlackBerry shares fell 33 cents or four per cent to $7.86 as The Globe and Mail reported that BlackBerry (TSX:BB) (Nasdaq:BBRY) s looking at tapping the value of its extensive real estate holdings in the Waterloo, Ont.-area to raise cash. It said that BlackBerry has asked for ideas to generate the largest possible return from its real estate in as little time as possible, through a confidential process begun last week.

The slide also came a day after the company said in a regulatory filing that it expects to book US$400-million in charges from a variety of factors before the end of May 2014, about four times higher than thought.

European bourses were also lower while the European Central Bank kept its key interest rate at a record low 0.5 per cent, holding off on more stimulus for the economy of the 17-member euro currency union as it monitors the tentative recovery.

London’s FTSE 100 index lost 0.42 per cent, Frankfurt’s DAX declined 0.79 per cent while the Paris CAC 40 was down 1.16 per cent.

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