Toronto Stock Exchange Reation To U.S Government Shut Down.
The U.S. Government’s shut down last Monday, resulted in the Toronto’s stock exchange market to close lower at the end of trading hours by midnight. The uncertainties about the effects of such a shutdown resulted to most sectors plummeting down. The S&P/TSX composite index was down 56.89 points to 12,787.19; with the exception of the real estate sector which was up by 1.9 percent.
This positive indicator was brought about by Brookfield Property Partners LP’s (TSX: BYP.UN) recent announcement of wanting to buy the other shareholders of the Brookfield Office Properties, Inc., (TSX: BPO) through stocks and cash buyout arrangements that is worth US$5 billion. The Brookfield Property Partners has a 51 percent stake in the Brookfield Office Properties. The announcement of the buyout upped the share prices of the former at $2.45, while the latter closed a penny lower at $19.99.
The Canadian dollar remained flat at 97.06 brought about by strong economic indicators as of July this year. The economy grew by 0.6 percent, which was better than expected as reported by Statistics Canada for the month of July. This was a positive uptrend as compared to June’s 0.5 decline. The uptrend is one of the best movements since the onset of recession – and computed at a tenth of a point better than what was projected.
The Looming cuts in the government’s non-essential services as the midnight deadline, lead to the New York’s Stock Exchange to plummet down in the red. The Dow Jones Industrial’s decline was 128.57 lower at 15,129.67. NASDAQ dipped 10.22 points to 3,771.48 and the S&P index fell 10.2 points to $1,681.55. Some analysts attribute the losses to the stalemate in negotiations pertaining to the government budget. The portfolio manager of First Asset Funds Inc., John Stephenson said, “What is likely to happen is that President Barack Obama will not defund Obamacare; and the Republicans would try to reduce some taxes on medical devices and other services to claim victory. This impasse will soon be resolved.”
What is causing more worries is the October 17 deadline when the government begins to run out of funds to pay its bills. The global equity strategist of S&P Capital IQ in New York, Alec Young says, “The government’s main concern is its inability to pass the budget. There is the possibility that the battle will be fierce and may eventually lead to loan defaults.”
Among the losers were the base metals sector, that declined by 1.22 percent; December copper dipped to a cent at US$3. 32 a pound, and; Teck Resources (TSX: TCK.B) were down by 42 cents to C$27. 68. The other sectors that were hit on the downward spiral are: the information technology sector – with BlackBerry sliding down at 18 cents to $8.10; the telecoms sector – with Telus Corp., (TSX:T) was down by 38 cents to $34.14. The energy sector was also hit despite the deal making on the component side as it dipped to 0.05 percent.
An intent to buy Petrominerales (TSX: PMG), a gas and oil company that is based in Calgary was offered by the Pacific Rubiales Energy Corporation lately. The deal is worth around $1.6 billion computed at $11 per share for the Petrominerales stockholders. As a sweetener, they will still get individually — one share each of the new Brazil-focused oil exploration and production company, ExplorCo, which will be based in Calgary. As a result of these new developments, Petrominerales shares saw an increase of $3.96 or 51.16 percent to $11.70. However, Pacific Rubiales shares went down by $1.20 to $20.34.
The probable crippling effects of the U.S. government shut down worried lots of market players; which resulted to the plummeting down of oil prices and the contracts for November crude in the New York Mercantile Exchange. Prices were down 54 cents at US102.20 a barrel, after recovering from price fallout earlier this season. The decline in prices was also attributed to China’s increase in manufacturing activity in September – which was more than expected for the month of September. China’s manufacturing activity rose to 50.2 from August’s 50.1. Despite this, a number of analysts still noted that this was still lower than the targeted figure of 51.2 — per the survey made by HSBC Corporation.
In other developments, the gold sector went up slightly as the December bullions went down $12.29 to US$1, 327 an ounce. In the corporate arena, SNC-Lavallin (TSX: SNC) plans to sell its shareholdings at Altalink, which the company owns at more than 50 percent of transmission lines in Alberta. This is part of its corporate long term corporate strategy of reducing its holdings in infrastructure assets. This move resulted to SNC’s uptick of $1 to 42.35. Traders are also watching developments in Italy where Prime Minister Enrico Letta faces a confidence vote as a result of the pullout of the right of center group led by former premier, Silvio Berlusconi’s from the coalition. Italy faces insurmountable debts that a succession of governments had initiated a total revamped of government policies.