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At the open: Indexes flat as spotlight remains on 'fiscal cliff'

PAUL HACKETT Caption: A trader checks screen data at the IG Index trading floor in London

Paul Hackett/Reuters

North American stock markets opened with little direction as the latest economic data out of the U.S. did little to stir up confidence in a market focused on the acrimonious "fiscal cliff" talks in Washington.

In early trading, the S&P/TSX index was up 10 points, or 0.08 per cent, at 12,299; the S&P 500 was near unchanged; and the Dow Jones industrial average was up 5 points, or 0.04 per cent, at 13,176. Oil was up 36 cents at $86.25 and gold was down just 80 cents at $1,696.

Inflation in the U.S. continues to be nearly non-existent, providing the Federal Reserve with a lot of breathing room to maintain its ultra-easy monetary policy. The U.S. Commerce Department said its index of consumer prices dropped 0.3 per cent in November, the first decline since May, and the core rate that strips out more volatile components rose 0.1 per cent.

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The U.S. Federal Reserve Board, meanwhile, said industrial production rose 1.1 per cent in November, a stronger reading than the rise of 0.2 per cent that economists predicted.

While positive, that report did little to offset ongoing concerns about the more than $600-billion of tax hikes and spending cuts due to take hold at the start of January.

There continues to be few concrete signs that any deal is imminent. A meeting between House Speaker John Boehner and U.S. President Barack Obama late Thursday was said to be "frank" and the two sides are keeping the lines of communication open. Mr. Obama may have a bit of an upper hand in negotiations given several recent public opinion polls show broad support for his position, and Republicans could get the majority of the blame if a deal isn't reached.

Here at home, the loonie held relatively unchanged after a rather ugly reading on manufacturing shipments in Canada. They fell 1.4 per cent in October from September, much weaker than the flat reading economists were predicting.

Overnight, Chinese stocks took the starring role as the Shanghai composite index rallied 4.3 per cent, the most in three years, after a strong manufacturing reading there. The HSBC Flash PMI report came in at 50.9 so far in December, a 14-month high and providing one of the clearest signals yet that the recovery in the Chinese economy is starting to pick up momentum.

China is key to the demand picture for several commodities, but gains in the price of crude oil and copper overnight got trimmed as North American markets opened.

Japanese stocks finished slightly negative as a report showed weaker-than-expected sentiment among big manufacturers just as the country prepares for general elections this weekend.

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European stock markets are close to unchanged this morning. Manufacturing data in the euro zone wasn't nearly as rosy as China's, with disappointing German factory figures overshadowing a small pick-up in the wider euro zone purchasing manager index.

Here are some stocks in play this morning:

Inmet Mining Corp. shares are up 0.3 per cent after the company reported a 27 per cent rise in reserves at its massive Cobre Panama copper project in Central America.

Best Buy shares are down 11 per cent after the company extended the bid window for founder Richard Schulze to make a takeover offer.

Standard & Poor's has downgraded Bank of Nova Scotia and National Bank of Canada, as well as four smaller Canadian financial institutions, amid a slumping economy and high consumer debt. Shares in the two banks opened lower, but just barely.

Apple shares are down about 4 per cent after the company released the iPhone 5 in China. There are reports of lacklustre interest in stores in Beijing, though winter weather there may have kept consumers away. RIM shares are up 0.6 per cent.

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About the Author
Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More


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