TSX closes little changed

The Canadian dollar advanced as traders were willing to take on more risk, up 0.1 of a cent to 97.35 cents US.

Traders also took in data showing that Canada’s annual inflation rate fell three-tenths of a point to 2.9% last month as the rate of price increases moderated for most consumer goods measured by Statistics Canada.

That’s the first time the annual inflation rate has been within the Bank of Canada’s one to three per cent comfort zone since July. As well, the bank’s core inflation rate, which excludes volatile items such as energy and some foods, edged down one notch to 2.1%

U.S. markets were mixed with the Dow Jones industrials up 25.43 points to 11,796.16. The Nasdaq was down 15.49 points to 2,572.5 while the S&P 500 index was off 0.48 of a point to 1,215.65.

Stock markets are down sharply for the week as the European debt crisis worsened with borrowing rates in Italy and Spain surpassing seven per cent, a level analysts deem to be unsustainable in the long term.

“The bond market is driving the boat here, there’s no doubt about that,” said Paul Taylor, chief investment officer at BMO Harris Private Banking.

“What needs to evolve is confidence, confidence that the solvency issues of euroland are manageable and the bond market is weighing in with its assessment and that is, that they’re not.”

The TSX fell 384 points or 3.13% this past week.

Stocks have slid despite positive U.S. economic data including rising retail sales, higher than expected housing starts and lower jobless insurance claims.

Instead, traders have been focused on the deepening debt crisis as borrowing rates jumped, not just for Spain and Italy but also traditionally strong countries such as France.

Some of the pressure on Italy and Spain eased through the week thanks to suspected buying of their government bonds by the European Central Bank.

Analysts expect that figures being released Monday will show that the ECB, now led by Italian Mario Draghi, stepped up its money purchases this week, in effect to give politicians more time to get a grip on the mounting crisis. By buying their bonds, the ECB is hoping to keep a lid on their borrowing rates.

For now, there appears to be some calm in the bond markets, with Italy’s 10-year yield up a tiny amount to 6.72%. Spain’s yield was also a little lower, at 6.35%.

But there is still a great deal of worry about the potential damage to financial institutions if the debt crisis is allowed to drag on.

Commodity prices were mixed Friday with the December crude contract on the New York Mercantile Exchange down $1.41 to US$97.41 a barrel. The energy sector was off 0.12% as Cenovus Energy (TSX:CVE) lost 48 cents to C$32.34 and Imperial Oil (TSX:IMO) was up 87 cents to C$42.87.

The base metals sector was down 1.17% even as the December copper contract on the Nymex gained two cents to US$3.40 a pound. Quadra FNX Mining (TSX:QUX) was up 16 cents to C$10.35 while Teck Resources (TSX:TCK.B) declined 70 cents to C$35.13

The gold sector dropped more than one per cent while the December gold contract closed up $4.90 to US$1,725.10 an ounce. Goldcorp Inc. (TSX:G) fell 49 cents to C$51.89.

Barrick Gold Corp. (TSX:ABX) faded by 49 cents to C$50.17. Government authorities in Pakistan have rejected a mining lease application by a joint venture including Barrick, which wants to build a multibillion-dollar mine in a remote corner of the country.

The industrials sector was the strongest group, up 0.28% with Canadian National Railways (TSX:CNR) ahead $1.23 to $80.02 while Canadian Pacific Railway (TSX:CP) improved by 30 cents to $60.93.

Financials also made it into the positive camp late in the session as Royal Bank (TSX:RY) climbed 47 cents to $44.42.

In earnings news, H.J. Heinz Co., the world’s largest ketchup maker, said Friday its fiscal second-quarter net income fell almost six per cent to US$237 million. Revenue rose eight per cent to US$2.83 billion and its shares fell 1.72% to US$51.10.

In other corporate developments, Yamana Gold Inc. (TSX:YRI) has started operations at its Mercedes mine in Sonora, Mexico. Yamana anticipates production to be 120,000 gold equivalent ounces a year, though the company said it’s looking to boost production to 130,000 ounces per year by 2013. Yamana shares were nine cents lower at $15.85.