The Toronto stock market slipped into negative territory at midday Tuesday as economic worries associated with the U.S. budget crisis sent most sectors lower.
The S&P/TSX composite index dropped 23.18 points to 12,765.07, led by sliding base metal stocks.
The Canadian dollar was down 0.12 of a cent to 96.84 cents US amid data showing a modest uptick in housing starts last month and an increase in the trade deficit in August.
Canada Mortgage and Housing Corp. said that starts came in at 193,637 units in September, up from 183,964 in August.
And Statistics Canada says the trade deficit expanded to $1.3-billion in August from $1.2-billion in July. The increase came as Canada’s imports grew 2.1 per cent in August while exports rose 1.8 per cent.
Losses on U.S. indexes gained momentum during the morning, adding to sharp declines chalked up Monday, with the Dow Jones industrials down 61.78 points to 14,874.46. The Nasdaq was off 40.81 points at 3,729.57 and the S&P 500 index gave back 8.07 points to 1,668.05.
A partial shutdown of the U.S. government is in its second week after lawmakers failed to agree on funding. Now, traders are increasingly worried that the two sides won’t be able to come to a spending agreement before Oct. 17 when the government hits its debt ceiling and starts to run out of money to pay its bills.
Republicans have said they want changes to Obama’s signature health-care law in exchange for reopening the government. They have said they want spending cuts in exchange for raising the debt limit.
Obama says he won’t negotiate over reopening the government or raising the debt limit.
Losses on markets have been steady over the past week, so far avoiding the sharp volatility that marked the last crisis over the debt limit in August, 2011.
Allan Small, senior adviser at DWM Securities, said the belief is that U.S. lawmakers will arrive at an agreement but it probably won’t come until the last minute since traders “can’t even imagine them breaching the debt ceiling.”
“The reason why the markets are going down gradually but not a lot is because you are seeing these buyers like myself who, when the market does dip, we come in and buy it so it never really falls too much,” he said.
“But at the same time, there are many people out there that are saying I’m not going to buy today because the politicians in Washington are going to take it to the 11th hour and markets will probably fall further so maybe we can get even better pricing a week from now.”
Manitoba Telecom Services (TSX:MBT) was a major TSX decliner, down $2.52, or 7.8 per cent, to $29.84 after the federal government rejected a deal that would have seen its business unit, Allstream, sold to Egyptian investment group Accelero Capital Holdings. It said the government cited “unspecified national security concerns” for the decision.
At the time the deal was announced last May, the company valued the sale at $520-million.
The base metals group led decliners, down 1.4 per cent even as December copper gained two cents to US$3.31 a pound. First Quantum Minerals (TSX:FM) dropped 41 cents to C$17.53.
The December gold bullion contract moved ahead $2.90 to US$1,328 an ounce, but the gold sector lost early gains and was down 0.3 per cent. Eldorado Gold (TSX:ELD) faded 14 cents to C$6.53.
The energy component improved by 0.1 per cent a the November crude contract on the New York Mercantile Exchange was up 42 cents to US$103.45 a barrel. Canadian Natural Resources (TSX:CNQ) was ahead 38 cents to C$32.56.
Talisman Energy (TSX:TLM) (NYSE:TLM) was in focus after activist U.S. investor Carl Icahn disclosed Monday that he has bought more than 61.5 million shares of the Calgary-based energy giant for a 5.97 per cent stake. Its shares were up 14 cents, or 1.06 per cent, to $13.29 on the TSX, on top of a 4.8 per cent advance Monday.
Icahn tweeted that he “may have conversations with management about strategic alternatives and board seats.”
“Carl Icahn will move that stock a little bit but at the end of the day, to me Talisman has been just non-existent, not really moving much over the last few years,” Small said.
“He could be able to have an effect on what the company does and his name alone will possibly move the stock a little bit.”
Elsewhere on the corporate front, resource giant Alcoa Inc. reports quarterly earnings after the close.
European bourses were in the red with London’s FTSE 100 index down 1.09 per cent, Frankfurt’s DAX off 0.42 per cent and the Paris CAC 40 down 0.72 per cent.