TSX rises, traders hope for limited U.S. government shutdown

Photo: The Canadian Press. All rights reserved.

People walk in Toronto's financial district in Toronto, on Oct. 29, 2012. THE CANADIAN PRESS/Nathan Denette

TORONTO - The Toronto stock market closed higher Tuesday as traders hoped that a partial shutdown of the U.S. government won't last long enough to cause serious damage to the U.S. economy.

The S&P/TSX composite index climbed 60.25 points to 12,847.44, held back by mining stocks which fell alongside prices for oil and metals.

Falling commodity prices and a weaker economic outlook from the Bank of Canada helped push the Canadian dollar down 0.21 of a cent to 96.85 cents US, even as the American dollar weakened against other currencies.

The bank’s senior deputy governor, Tiff Macklem, said the central bank expects third- and fourth-quarter growth to come in at two to 2.5 per cent. It had previously forecast growth in the July-September period at 3.8 per cent and at 2.5 per cent in the final quarter.

Strong manufacturing data helped send U.S. indexes higher after Congress failed to approve a short-term funding agreement before midnight Monday night due to a political impasse rooted in a long-running dispute over President Barack Obama’s health-care law.

The Dow Jones industrials ticked 62.03 points higher to 15,191.7, the Nasdaq climbed 46.5 points to 3,817.98 and the S&P 500 index gained 13.45 points to 1,695.

The Institute for Supply Management's September index showed rising expansion, coming in at 56.2 on top of a 55.7 reading in August. Economists had expected the index to ease slightly to 55.

The clock is also ticking towards an even more worrisome prospect, an Oct. 17 deadline when the U.S. government hits its debt limit and begins to run out of cash to pay its bills.

"I think the real volatility, uncertainty and excitement is coming up with the debt ceiling," said Kash Pashootan, portfolio manager at First Avenue Advisory in Ottawa, a Raymond James company.

"What concerns me is I don’t believe the politicians truly understand the impact that could be felt by the economy and the markets if they don’t reach a resolution. It seems the only thing they’re concerned about is their agenda."

Despite the current impasse, critical parts of the government, from the military to air traffic controllers, will remain in operation. Analysts said significant damage to the U.S. economy was unlikely unless the shutdown lasted more than a few days.

But with the Republican-controlled House and Democratic-controlled Senate in a stalemate, it was unclear how long the shutdown would last.

Meanwhile, the shutdown is being felt in creating an absence of what is usually market-moving data.

On Tuesday, traders were also supposed to take in the latest reading on construction spending but numbers were held up because of the shutdown.

Also, traders had been looking to Friday and the release of the government's September employment report. That has also been put on hold with the U.S. Labor Department saying it won't collect data or issue reports during the shutdown.

The TSX industrial sector 1.5 gained per cent with Canadian National Railway (TSX:CNR) ahead $1.66 to $106.03.

The energy sector rose 0.87 per cent while oil prices were lower for a third day amid worries about the effect of the shutdown on the U.S. economy and weak Chinese manufacturing data. The November crude contract on the New York Mercantile Exchange dropped 29 cents to US$102.04 a barrel. Canadian Natural Resources (TSX:CNQ) improved by 45 cents to C$32.82.

Utilities also lent support, up 1.13 per cent with Atlantic Power (TSX:ATP) ahead 31 cents to $4.73.

Miners were the biggest TSX weight with the gold sector down about 2.6 per cent as prices for the traditional safe haven retreated. The December contract fell $40.90 to US$1,286.10 an ounce. Barrick Gold Corp. (TSX:ABX) dropped 58 cents to C$18.60.

The base metals sector was down 1.4 per cent while metal prices were also lower with December copper down five cents at US$3.27 a pound. First Quantum Minerals (TSX:FM) shed 59 cents to C$18.59.

In corporate news, shares in automaker Ford rose 32 cents or 1.9 per cent to US$17.19 in New York as its U.S. sales rose six per cent in September, with strong car sales making up for slower sales of SUVs.

But General Motors dipped six cents to $35.91 as its September sales dropped 11 per cent from a year ago. Even the company’s big pickup trucks saw sales declines, with the Chevy Silverado down almost 11 per cent and the GMC Sierra off two per cent.