TSX heads for higher open following triple-digit losses on fiscal cliff fears

TORONTO – The Toronto stock market looked set for a slightly higher start to the trading session Thursday a day after markets tumbled as traders weighed the odds of the United States steering clear of a so-called fiscal cliff by the end of the year.

If a deal between the Republicans and Democrats isn’t reached, tax increases and government spending cuts to the tune of US$800 billion automatically take effect. The worry is that would result in U.S. sliding back into recession, dragging down other economies, including Canada’s.

The Canadian dollar was off 0.06 of a cent to 100.33 cents as concerns about the economic consequences of failure to reach a deal sent the greenback to a two-month high.

U.S. futures were higher after New York markets registered their steepest losses of 2012. The Dow Jones industrial futures gained 44 points to 12,907 after the blue chip index plunged 313 points. The Nasdaq futures were up seven points to 2,617 after falling 75 points while the S&P 500 futures rose 3.4 points to 1,392.5 following a 34-point slide.

Rising gold stocks helped limit damage on the TSX to a 131-point retracement.

The threat of a U.S. downgrade by ratings agency Fitch added to the negative sentiment.

Hours after Barack Obama defeated Republican challenger Mitt Romney in a cliffhanger election, Fitch said that the U.S. government’s top ‘AAA’ rating would be at risk if Congress and the president did not immediately forge an agreement to avoid the fiscal cliff.

Meanwhile, it was another heavy earnings day for Canadian investors with reports coming in from sectors right across the board.

Manulife Financial Corp. (TSX:MFC) on Thursday said it had a $227 million net loss in the third quarter, after absorbing a $1-billion charge related to the life insurance company’s annual review of actuarial assumptions. Manulife says its loss was equal to 14 cents per share under standard accounting. However, it says a better measure of its performance was $556 million in core earnings, or 29 cents per share, down from $624 million or 34 cents per share a year earlier.

On Wednesday after the market close, Sun Life Financial Inc. (TSX:SLF) said it earned $383 million, or 64 cents per share, for the latest quarter, compared with a loss of $621 million, or $1.07 per share, a year ago. Operating net income, which excludes items that the company believes are not ongoing, was $401 million, or 68 cents per share, beating expectations of 63 cents.

Air Canada (TSX:AC.B) said Thursday it had $429 million of net income in the third quarter or $1.54 per diluted share, compared with a net loss of $124 million or 45 cents per diluted share for the same period last year. Air Canada’s adjusted net income was 82 cents per share, up from 68 cents per share in the third quarter of 2011 and well above expectations of 70 cents.

Auto parts giant Magna International Inc. (TSX:MG) is reporting a jump in third-quarter net income to US$390 million, or $1.66 per diluted share, up from US$102 million, or 42 cents a share a year ago. Magna posted sales of US$7.4 billion, up from $6.97 billion in the year-ago quarter.

Magna also announced that Frank Stronach is resigning from the board of the autoparts giant he founded in his garage in 1957. Stronach said he has become involved in a number of activities outside the automotive industry including politics in his native Austria and he didn’t want his political views to be confused with his role on Magna’s board.

In the energy sector, Canadian Natural Resources Ltd. (TSX:CNQ) had $360 million of net income in the third quarter or 33 cents per share, down from $753 million or 68 cents per share a year earlier. Adjusted net earnings fell to $353 million or 32 cents per share from $606 million or 55 cents per share a year earlier as results were affected by lower prices for crude oil, synthetic crude oil, natural gas liquids and natural gas partially offset by higher volumes by higher volumes of crude oil and synthetic crude.

Commodity prices were higher following steep losses on Wednesday. December crude gained 89 cents to US$85.33 a barrel after demand concerns, higher inventories and the rising American dollar combined to send prices skidding more than $4.

December copper added a penny to US$3.45 a pound after falling seven cents while December bullion gained $3.30 to US$1,717.30 following a $1 dip.

European bourses were positive as London’s FTSE 100 index rose 0.28 per cent, Frankfurt’s DAX was up 0.46 per cent while the Paris CAC 40 was ahead 0.46 per cent.

Earlier, Asian markets backed off amid investor disappointment that there was no sign of positive policies announced Thursday during the opening of China’s weeklong Communist Party congress, the once-in-a-decade forum to name China’s top leadership.

Markets are looking for hints on how the new leadership plans to tackle the nation’s economic slowdown.

Japan’s Nikkei 225 index shed 1.5 per cent after the government reported that seasonally adjusted private-sector machinery orders, excluding volatile orders for ships and utilities, fell 4.3 per cent in September.

Hong Kong’s Hang Seng sank 2.4 per cent, South Korea’s Kospi dropped 1.2 per cent and Australia’s S&P/ASX 200 was 0.7 per cent lower.

In mainland China, the Shanghai Composite Index lost 1.6 per cent while the Shenzhen Composite Index lost 2.3 per cent.