TSX heads for lower open amid Greek bailout, fiscal cliff worries

TORONTO – The Toronto stock market was in for a negative open Tuesday as traders fretted over a delay in organizing a crucial instalment of bailout money for Greece along and the approaching “fiscal cliff” in the United States.

The Canadian dollar was down 0.03 of a cent from Friday’s close to 99.84 cents US. The loonie wasn’t traded in Canada on Monday as banks were closed for the Remembrance Day holiday.

U.S. futures were in the red with the Dow Jones industrial futures down 61 points to 12,719, the Nasdaq futures were off 17.2 points at 2,563.8 while the S&P 500 futures slipped 7.9 points to 1,370.3.

Financial markets focused on Greece after ministers from the 17 countries that use the euro failed to agree on how to put Greece’s bailout program back on track.

The EU and the International Monetary Fund disagree on the timeline for bringing Greece’s debts down to a manageable level. The European Commission, the EU’s executive arm, wants to give Greece until 2022 to reduce its debt to 120 per cent of gross domestic product; but the IMF wants to stick to the original deadline of 2020.

“Of course, this means that Greece will require about €33 billion in extra funding, and the finance ministers said that they won’t decide where exactly that funding will come from until another meeting set for Nov. 20th,” said BMO Capital Markets senior economist Robert Kavcic

Greece raised €4.06 billion from the sale of short-term treasury bills Tuesday. With the disbursement of a massive €31.5-billion instalment from Greece’s international bailout long delayed, Athens would have found it impossible to repay a €5-billion treasury bill maturing on Friday, the day on which Prime Minister Antonis Samaras has said Greece would run out of money.

Meanwhile, the looming end-of-year deadline over the expiration of Bush-era tax cuts and the automatic launch of massive spending cuts also continued to cast a pall over markets. Economists reckon that such a scenario, dubbed a fiscal cliff, would take a big chunk out of economic growth, likely pushing the U.S. back into recession and taking other economies down with it.

Worries over whether Republicans and Democrats can find common ground to avoid the cliff have punished markets, particularly since last Wednesday, the day after a U.S. election that left the White House with a Democratic president, the same party controlling the Senate while the Republicans kept a lock on the House of Representatives.

Losses have been particularly severe on New York markets because of worries about higher dividend, capital gains and estate taxes.

Demand concerns and a generally higher American dollar drove commodity prices down. A rising American currency pressures commodities because a stronger greenback makes it more expensive for holders of other currencies to buy oil and metals, which are dollar-denominated.

December crude on the New York Mercantile Exchange declined 40 cents to US$85.17 a barrel.

December copper dipped two cents to US$3.45 a pound while December bullion lost $3.60 to US$1,727.30 an ounce.

Traders also took in earnings from major retailers in Canada and the U.S.

Sears Canada Inc. (TSX: SCC) reduced its net loss in the third quarter to $21.9 million, about half what the department store chain racked up last year.

The loss amounted to 22 cents per share, an improvement from the year-earlier loss of $44.1 million or 42 cents per share. Sears says its quarterly revenue was $1.03 billion, down about $76 million from a year earlier.

A boost from the gradually recovering U.S. housing market helped Home Depot’s quarterly net income edge up to US$947 million, or 63 cents per share. That’s up from $934 million, or 60 cents per share, a year earlier. Excluding a charge for closing some stores in China, earnings were 74 cents per share. That topped the 70 cents per share that analysts surveyed by FactSet predicted. Revenue rose more than four per cent to $18.13 billion.

Elsewhere, media and telecom company Quebecor Inc.(TSX:QBR.B) had $18.6 million or 30 cents per share of net income attributable to shareholders, down about 29 per cent from a year ago. On the other hand, Quebecor’s adjusted income from continuing operations rose to $52.1 million or 83 cents per share. Quarterly revenue rose about $45 million to nearly $1.06 billion.

European bourses were lower as London’s FTSE 100 index lost 0.5 per cent, Frankfurt’s DAX fell 0.74 per cent and the Paris CAC 40 was down 0.54 per cent.

Earlier in Asia, Japan’s Nikkei 225 index fell 0.2 per cent, Hong Kong’s Hang Seng lost 1.1 per cent, while South Korea’s Kospi dropped 0.6 per cent.

Mainland China’s Shanghai Composite Index lost 1.5 per cent while the Shenzhen Composite Index dropped two per cent.