The Toronto Stock Exchange was poised to open lower Monday as investor take in growing doubts that the United States can reach agreement on a solution to its debt, adding to concerns about European debt.
The Canadian dollar lost 0.78 of a cent to 96.57 cents U.S. as commodity prices tumbled along with global markets. The January oil contract fell $1.05 to $96.62 a barrel. The December gold contract was down $17.30 to $1,707.80 an ounce and the copper contract shed eight cents to $3.32 a pound.
U.S. equity futures saw big pre-market drops as politicians south of the border approach a Nov. 23 deadline to agree on how to improve government finances by $1.2 trillion over the coming decade. The main hurdle in the bipartisan panel’s negotiations was how much to raise in new taxes.
Dow futures were off 159 points to 11,608 and Nasdaq futures fell 22.25 points to 2,227.5. S&P futures lost 18.7 points to 1,195.2.
The panel’s failure would trigger about $1 trillion over nine years in automatic across-the-board spending cuts that some investors fear might not be tuned well enough to sustain growth and create jobs.
The talks’ expected collapse revived market fears that politicians — whether in the U.S. or Europe — are often unable to take the decisive action required to reduce debt during a difficult period of economic slowdown.
In addition, American markets will be operating on a very short work 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.
Meanwhile, Spain on Sunday became the third European country in as many weeks — after Greece and Italy — to change its government because of discontent generated by the debt crisis. It dumped its ruling Socialists for the conservative leadership of Mariano Rajoy, who inherits an economy wracked by debt and nightmarish unemployment, which at more than 21% is the highest among the 17 nations that use the euro.
Rajoy must lower Spain’s soaring borrowing costs with deficit-reducing measures while preventing an already moribund economy from heading into a double-dip recession.
Britain’s FTSE 100 dropped two per cent, while Germany’s DAX fell 2.4% and France’s CAC-40 slid 2.3%.
The Toronto market tumbled 384 points or 3.13% last week as investors become more wary of making bets because of the uncertainty surrounding the debt crisis and frustration over Eurozone leaders apparent lack of recognition that time is running out and the available options for dealing with it dwindle.
In Canadian corporate news, Valeant Pharmaceuticals International, Inc. (TSX:VRX) says it has signed an agreement to acquire iNova, a private Australian pharmaceutical group in a deal that could be worth as much as $714 million.
Aecon Group Inc. (TSX:ARE) said it has a preliminary agreement worth $250-million to do interior work on a new process mill at the PotashCorp mine site in Saskatchewan.