The Toronto stock market was flat Thursday as relief that U.S. lawmakers have headed off a potential default was muted by the realization that Republicans and Democrats will be locking horns again over the debt issue in just a few months.
The S&P/TSX composite index dipped 0.22 of a point to 12,956.99.
The Canadian dollar was up 0.25 of a cent to 97.02 cents US while the U.S. dollar weakened after the Senate and House of Representatives passed a measure Wednesday night that reopens the government through Jan. 15 and permits the U.S. Treasury to borrow normally through Feb. 7 or perhaps a month longer.
It included nothing for Republicans demanding to eradicate or scale back President Barack Obama’s signature health-care overhaul.
U.S. indexes were down sharply after a strong relief rally over the last two sessions ran out of steam with the Dow Jones industrials falling 86.37 points to 15,287.46, pressured by weak earnings reports from IBM and Goldman Sachs.
The Nasdaq dropped 7.94 points to 3,831.49 and the S&P 500 index dipped 3.64 points to 1,717.9.
The debt deal was reached just before a deadline when the U.S. borrowing authority was set to expire, meaning the government would have started to run out of money to pay creditors.
“The deal comes not a minute too soon,” said BMO Capital Markets senior economist Sal Guatieri.
“Of course this is only a temporary solution, and more hard work needs to be done to avoid another standoff in the new year. But the political damage to the GOP could see it play nicer in the sandbox, for fear of losing their majority in the House in the November 2014 elections.”
Christine Lagarde, managing director of the International Monetary Fund, welcomed the deal but said the shaky American economy needs more stable long-term management.
Meanwhile, traders took in a fresh batch of earnings reports from a variety of companies, including market heavyweights Goldman Sachs and IBM, and looked ahead to the release of a slew of earnings reports which weren’t released this month because of the government shutdown.
On Thursday, Goldman Sachs’ posted third-quarter net earnings of UD$1.52-billion, or $2.88 a share, up from $1.51-million, or $2.85 a share a year ago. Revenue fell to $6.72-billion from $8.35-billion a year earlier. Analysts expected earnings of $2.46 a share on revenue of $7.34-billion and its shares fell $3.91 to $158.34.
After the market close Wednesday, IBM said that its third-quarter net income rose six per cent, but its revenue fell and missed Wall Street’s expectations by more than $1-billion, pushing its stock down $11.30, or six per cent, to $175.43.
The telecom sector led declines, down 0.54 per cent after the federal government outlined plans in its throne speech Wednesday that would mandate an unbundling of cable TV offerings.
The Conservatives are expected to instruct Canada’s broadcast regulator to require that cable and satellite TV service providers offer pick-and-pay pricing, where consumers can choose to pay for individual channels. But industry insiders warn that such pricing could mean fewer channels.
There was also a promise to reduce smart phone roaming charges and Rogers Communications (TSX:RCI.B) was off 19 cents to C$45.62.
Worries that the U.S. deal to avoid default only postpones the debt problems helped push commodity prices lower.
The November crude oil contract on the New York Mercantile Exchange lost $1.40 to US$100.89 a barrel. Canadian Natural Resources (TSX:CNQ) fell 30 cents to C$33.46.
December bullion gained $33.90 to US$1,316.20 an ounce and the gold sector ran ahead almost 3.5 per cent. Goldcorp (TSX:G) improved by 85 cents to C$25.26.
The base metals component rose 0.5 per cent even as December copper slipped three cents to US$3.28 a pound. Teck Resources (TSX:TCK.B) ran up 39 cents to C$28.30.
European bourses declined as London’s FTSE 100 index slipped 0.29 per cent, Frankfurt’s DAX was down 0.65 per cent and the Paris CAC 40 lost 0.36 per cent.
Earlier in Asia, Japan’s Nikkei 225 rose 0.8 per cent, Seoul’s Kospi gained 0.3 per cent, stock indexes in Australia, Taiwan and Southeast Asia also gained while Hong Kong’s rally faded with the Hang Seng down 0.6 per cent.