TSX edges higher on gold gains

The Canadian dollar was unchanged at 96.36 cents US, matching Monday’s lowest closing level in six weeks. It had also bounced between gains and losses as investors weighed positive news from Canada against bad news from Europe and the U.S.

Statistics Canada reported that retail sales rose one per cent to $38.2 billion in September, with sales growth at most store types. It was the fifth increase in six months.

Scotia Capital economist Derek Holt said the retail sales report was much better than anticipated, with headline sales rising at twice the pace that had been expected. He said the report was a sign the overall economy has been performing well.

“With all of our observable leading indicators now in place, we are looking for a pretty decent gain in September real GDP as an increase in housing, price-adjusted retail sales and manufacturing shipments outweigh a decline in real wholesale sales and hours worked,” Holt said in a note to clients.

The January oil contract added $1.09 to US$98.01 a barrel. But the energy sector on the TSX moved 0.8% lower with shares in Suncor Energy (TSX:SU) down 1.7% or 52 cents to C$30.42.

The December gold contract was up $23.80 to US$1,702.40 an ounce. On the TSX, the gold-heavy materials group was up 1.5% with shares in Barrick Gold Corp. (TSX:ABX) up 2.2% or C$1.11 at $50.98. The copper contract gained three cents to US$3.33 a pound.

Investors took in updated third-quarter gross domestic product figures from the United States that showed the U.S. economy grew at a modest two per cent rate in the July-September quarter, lower than first estimated.

They also saw minutes from an early November meeting of Federal Reserve policy-makers, who discussed how they could give businesses and investors more information about what might trigger an increase in interest rates. But the Fed held off making any changes.

Wall Street markets fell. The Dow Jones industrial average shed 53.59 points to 11,493.72 and the Nasdaq index lost 1.86 points to 2,521.28. The S&P index lost 4.94 points to 1,188.04.

American markets are operating on a very short week because of the U.S. Thanksgiving holiday on Thursday, which could leave many investors on the sidelines. Lower volumes and the potential for increased volatility could spell more selling pressure on stock markets this week.

Accordingly, many investors are likely squaring up their positions before taking a break and starting fresh when they come back on Monday, said John Johnston, chief strategist at Davis Rea Ltd.

“One of the things we learned in 2008 is really bad things can happen on the weekend or days when the markets are closed. And the rest of the world will be functioning on Thursday, so it’s a time to keep it close to your vest,” he said.

“It’s not the time of year you want to take big risks.”

While some traders were selling for tax loss purposes and others were taking advantage of low equity valuations to buy, the overriding mood is one of caution, he added.

“There’s some good things going on but there’s some really scary things too. People are fairly negative,” he said.

And while there was a slight rebound in commodity prices Tuesday, Johnston noted it was from a big drop on Monday.

“The commodity trade is driven by the global cycle and right now the best estimates I have for the global economy is it’s still downshifting. Growing yes, but at a slower rate.”

Stocks took a pummelling on Monday after a so-called supercommittee in Congress failed to reach a deal to cut the U.S. federal budget deficit by $1.2 trillion over 10 years. While not unexpected, the failure heightened worries that political bickering — in the U.S. and Europe — will hurt efforts to cut debt during a period of declining economic growth.

Across the Atlantic, there were more signs of trouble in Europe’s debt crisis. Spain was forced to pay sharply higher interest rates in an auction of short-term debt. The higher rates suggest that investors are still skeptical that the country will get its budget under control despite a new, centre-right government coming to power this week.

Investors have been worried that Spain could become the next country to need financial support from its European neighbours if its borrowing rates climb to unsustainable levels. Greece was forced to seek relief from its lenders after its long-term borrowing rates rose above seven per cent on the bond market. The rate on Spain’s own benchmark 10-year bond is dangerously close to that level — 6.58%.

In Canadian corporate news, baked goods and grocery giant George Weston Ltd.(TSX:WN) reported third-quarter net earnings attributable to common shareholders of $264 million or $1.94 per share, compared with $176 million or $1.26 per share in the same 2010 period. Revenue for the three months ended Oct. 8 was $10.06 billion, up from $9.8 billion in the prior-year period. Its shares lost six cents to $65.83.

Magnotta Winery Corp. (TSX:MGN) shares soared 56% a day after the company said it has been advised by the Magnotta family, which controls the company, that it intends to take the wine producer private at $2.90 a share. Magnotta shares were halted on the TSX pending the news from the company. When trading resumed the stock gained 99 cents to $2.81.

Convenience store operator Alimentation Couche-Tard Inc. (TSX:ATD.B) is raising its quarterly dividend by 20% as it reported earnings of $113.5 million in its fiscal second quarter, up $5.3 million or 4.9% from the year-earlier period. Shares fell 45 cents to $29.69.