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TSX slides as fiscal cliff discussions continue

Proactive Investors
Monday, 17 December 2012

Toronto's main market was slightly lower Monday, amid investor caution as budget talks continue in the U.S. ahead of the looming fiscal cliff.

The fiscal cliff refers to the more than $600 billion in tax hikes and spending cuts set to take effect in January unless Congress can reach a budget agreement. 

Over the weekend, it was reported that House Republican leader John Boehner said he might accept higher taxes on millionaires in exchange for scaling back spending for entitlement programs such as Medicare. 

There's only about two weeks remaining to reach a budget deal, but there has been reported speculation that budget talks could extend into January.

Back in Toronto as of about 1:45 p.m. EDT, the S&P/TSX Composite was lower by 27.59 points, or 0.22%, to 12,269.13, while the more junior S&P/TSX Venture Composite rose 3.17 points, or 0.27%, to 1,186.79.

Commodities were mixed Monday afternoon, with gold for February lately adding $1.10 to $1,698.10 an ounce. Meanwhile, silver fell 2 cents to $32.21 an ounce.

Elsewhere, crude oil for January added 90 cents to $88.15 a barrel on Middle East tensions, while the base metal copper contract declined one cent to $3.67 a pound.

Toronto's main sectors were mixed, with health care, energy and utilities lately posting gains.

Gold giants were lower, with Kinross (TSE:K) down 0.41%, while Barrick Gold (TSE:ABX) lost 0.03% and Goldcorp (TSE:G) declined 0.30%.

Materials were lower, with declines seen in First Majestic Silver Corp. (TSE:FR) (NYSE:AG), down 7.88% after it announced Monday that it is strengthening its presence in Mexico by acquiring Orko Silver Corp. (CVE:OK) for $387 million.

The friendly deal gives First Majestic access to Orko's large silver deposits in the state of Durango. The offer values each Orko share at $2.72, a premium of more than 70% over its closing price of $1.58 on Friday. Both companies say the transaction would be attractive to their respective shareholders.

Meanwhile, OceanaGold Corp. (TSE:OGC) lost 5.67% and Silvercorp Metals (TSE:SVM) declined 4.81% after it reported late Friday that a temporary power suspension at its TLP, HPG and LM mines will result in a reduction of around 5,000 tonnes of ore production from the mines involved.

Advances in the sector were seen in Thompson Creek Metals (TSE:TC) – up 7.08% - while Jinshan Gold Mines (TSE:CGG) rose 7.04% and Mercator Minerals (TSE:ML) advanced 6.17% after late Friday it announced its third quarter saw continued production improvements, and record metal recoveries and output.

In other metals and mining news, Centamin plc (TSE:CEE) rose 18.18% after it early Monday said that the halt by customs on gold exports from its Sukari gold mine was lifted and a shipment was made yesterday. The company said fuel supply and normal operations at Sukari are expected to resume in the coming days, once payment for the latest shipment has been received.

Globex Mining (TSE:GMX) (OTCQX:GLBXF) has obtained a final order from the Quebec Superior Court to spin out shares of its Chibougamau Independent Mines (CIM) subsidiary to its shareholders. Completion of the spin out is conditional on CIM closing its $10 million private placement financing first announced in October, which is being co-led by Casimir Capital and Marquest Capital Markets. 

First Quantum Minerals (TSE:FM) (LON:FQM) has raised its bid for Inmet Mining (TSE:IMN), and this time decided to take its new $5.1 billion cash and stock deal directly to shareholders. The sweetened $72-a-share bid comes after First Quantum's $70-per-share offer was rejected last month, which was already significantly higher than its original approach of $62.50 per share. 

Energy was slightly higher Monday, with advancers led by Niko Resources (TSE:NKO) and Pacific Rubiales Energy (TSE:PRE), both up over 2%.

Declines in the sector were seen in Crew Energy (TSE:CR), Pason Systems (TSE:PSI) and Bonavista Energy (TSE:BNP), all down over 2%.

Elsewhere in the sector, Athabasca Oil Corp. (TSE:ATH) Monday said that in 2013, it will invest $798 million to develop its light oil and thermal oil assets in Alberta. Athabasca also reaffirmed that it is on track to exit 2012 with 10,000 to 11,000 barrels of oil equivalent per day (boe/d) from its assets in the Deep Basin.

Financials were lower. Sun Life Financial (TSE:SLF) fell 2.73% after it Monday said that it has agreed to sell its U.S. annuity business and certain life insurance businesses to Delaware Life Holdings for US$1.35 billion.

The company said the deal with Delaware Life, a company owned by shareholders of Guggenheim Partners, is in line with its efforts to reduce its risk profile and focus U.S. insurance operations on its growing employee benefits and voluntary benefits franchises. The transaction is expected to close by the end of the second quarter of 2013.

Elsewhere in the sector, Manulife Financial (TSE:MFC) gained 0.7%, while the Royal Bank of Canada (TSE:RY) shed 0.51%.

In other corporate news, Research In Motion (RIM)(TSE:RIM)(NASDAQ:RIMM) Monday unveiled a “by invitation” technical preview program of its upcoming BlackBerry 10 (BB10) smartphone. The announcement about the program, which will give "selected enterprise and government customers” the opportunity to begin beta testing its new phone and operating platform, came along side the company’s confirmation that it will unveil the BlackBerry 10 on January 30, and just three days before it releases its third quarter fiscal results.

In economic news, foreign investment in Canadian securities advanced to $13.9 billion in September on the strength of purchases of government bonds and corporate equities. 

Canadian investment in foreign securities reached a six-month high of $6.0 billion, led by the acquisition of US equities.

Meanwhile, the number of home sales processed through the Canadian Real Estate Boards and Associations was little changed in October compared to the previous month – down 0.1%, below levels reported in the first half of the year. Actual activity that was not seasonally adjusted was down 0.8% from October 2011.

*US/Europe*

U.S. stocks rose Monday on optimism that Republicans and Democrats are close to reaching a deal to avert the fiscal cliff that analysts say could push the economy back into recession. 

The Dow was lately up 59.72 points to 13, 194.73, the Nasdaq rose 22.17 points to 2,993.51, and the S&P 500 advanced 10.26 points to 1,423.84. 

On the economic front, the  Empire State manufacturing index showed that the manufacturing sector in the area of New York state has been contracting steadily since August. 

The general business conditions index of the Empire State report fell to minus 8.10 for the December reading versus minus 5.22 and minus 6.16 in the prior two months. It has been in negative territory now for the fifth month in a row.

The report for December was filled with negatives that include contraction for new orders, unfilled orders, and employment. 

In corporate news, Apple's (NASDAQ:AAPL) iPhone 5 sales in China have set a new record with the best first weekend sales ever in that country. Shares of the company edged up, erasing earlier losses after the technology company said it sold more than 2 million of its new iPhone 5s during the three days after its launch Friday, marking China's best-selling iPhone rollout ever.

Earlier Monday, Pacific Crest and Canaccord Genuity Monday cut their price targets on the stock, citing concerns about iPhone sales, which followed Citigroup lowering its rating on Apple on Sunday. 

Insurer American International Group (NYSE:AIG) could raise as much as $6.5 billion from the sale of its remaining stake in a Hong Kong-based unit, according to reports. AIG is offering its 13.69% stake in AIA Group, a business the U.S. insurer helped found nearly 100 years ago, in a range of HK$29.65 to HK$30.65 each, media sources said.

Laclede Group (NYSE:LG) Monday said it will buy Missouri Gas Energy and New England Gas Co. from Energy Transfer Equity (NYSE:ETE) and Energy Transfer Partners (NYSE:ETP) in a deal valued at $1.04 billion. 

Sprint Nextel Corp. (NYSE:S) Monday said Clearwire’s (NASDAQ:CLWR) board has agreed to its $2.2 billion bid for the remaining 49% of the company not already owned by Sprint. The deal, at $2.97 per share for the remainder of Clearwire, is an increase from Sprint’s previous offer of $2.1 billion or $2.90 per share, announced last week.

Shares of Clearwater lately fell over 12%, however, as the new deal is a 12% discount to Clearwire's Friday closing share price of $3.37.

Shares in Caribou Coffee Company (NASDAQ:CBOU) soared Monday after it announced it will be taken private by Joh. A. Benckiser (JAB) in a $340 million deal. 

Shares in Akamai Technologies (NASDAQ:AKAM) edged up after it named co-founder Tom Leighton as the new chief executive, replacing Paul Sagan, effective January 1. The naming of Leighton, Akamai’s chief scientist, as CEO culminates an executive search begun in April.

Activist investment firm Elliott Management Corp Monday made a $2.3 billion offer for business software maker Compuware Corp. (NASDAQ:CPWR).

After Monday's closing bell, Diamond Foods (NASDAQ:DMND) is expected to post first-quarter earnings of 23 cents per share on revenue of $274.4 million, according to the consensus of analysts surveyed by FactSet.

European markets finished mixed as of the most recent closing prices. The DAX gained 0.11%, while the FTSE 100 led the CAC 40 lower. They fell 0.16% and 0.14% respectively.
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