Stock markets to face looming 'fiscal cliff' with extreme caution

TORONTO – The Toronto stock market was weaker on Friday morning, while U.S. markets pulled back even further, as the “fiscal cliff” deadline looms, creating more uncertainty about the economy.

The S&P/TSX composite index was down 14.20 points to 12,3374.51 shortly after open, while the TSX Venture Exchange fell 7.29 points to 1,173.21.

Traders are growing concerned that U.S. leaders won’t reach an agreement by the year-end deadline, and the lack of a decision could trigger a recession south of the border.

The Canadian dollar dropped 0.61 of a cent to 100.68 cents US, as Statistics Canada reported the country’s inflation rate fell to its lowest level in more than three years. It also reported the gross domestic product grew 0.1 per cent in October.

Canada’s inflation fell to 0.8 per cent in November, affected by lower gasoline prices and rebates at new-car dealerships. The drop from the October inflation rate of 1.2 per cent was bigger the expected decline to 1.0 per cent.

Republican leaders postponed a vote on legislation that would raise taxes on wealthier Americans, bringing the country closer to the so-called “fiscal cliff.”

The Dow Jones industrials dropped 109.39 points to 13,202.33, the Nasdaq fell 39.42 points to 3,010.97 and the S&P 500 index was off 13.82 points at 1,429.87.

House Speaker John Boehner conceded late Thursday that there were not enough votes from Republican lawmakers for his plan that would have allowed higher tax rates for those making $1 million and above.

Many Republicans don’t want higher taxes at all.

A deal must be reached to avoid going over the so-called “fiscal cliff,” which would involve the automatic imposition of hundreds of billions of dollars in spending cuts and tax increases that could plunge the world’s largest economy back into recession and depress economies around the world.

In commodities, the January crude contract on the New York Mercantile Exchange slid $1.80 to US$88.33 a barrel.

March copper was up 0.7 of a cent at US$3.55 a pound while February bullion added $6.30 to US$1,652.20 an ounce.

Cogeco Cable Inc. (TSX:CCA) signed a friendly $526-million deal to buy Canadian Internet infrastructure provider Peer 1 Network Enterprises (TSX:PIX). Cogeco Cable shares were down 4.5 per cent to $1.85.

Shares of Research In Motion (TSX:RIM) fell 16 per cent after the BlackBerry maker reported its latest quarterly results late Thursday. The company’s loss on an adjusted earnings basis of US$114 million or 22 cents per diluted share, 10 cents above the consensus estimate of 32 cents per adjusted share on revenue of $2.6 billion.

But analysts responded negatively to RIM’s early details of a new plan that could see its lucrative one-plan-fits-all service fees turned into an a la carte menu, which some believe could negatively affect revenues generated by company. RIM fell $2.32 to $11.63

European shares fell. France’s CAC dropped 0.3 per cent to 3,656, while the DAX in Germany dropped 0.7 per cent at 7,620. The FTSE index of leading British shares retreated 0.6 per cent to 5,922.

In Asia, Japan’s Nikkei 225 index closed 1 per cent lower at 9,940.06. Hong Kong’s Hang Seng lost 0.7 per cent to 22,506.29. South Korea’s Kospi shed 1 per cent at 1,980.42. Australia’s S&P/ASX 200 fell 0.2 per cent to 4,623.60. Mainland Chinese stocks were mixed.