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At the open: Energy stocks propel TSX higher

Frank Gunn/THE CANADIAN PRESS

The S&P/TSX composite index opened higher, buoyed by Friday's announcement from Ottawa that the foreign takeovers of Nexen and Progress Energy Resources can now proceed. U.S. markets were close to unchanged.

In early trading, the TSX was up 53 points, or 0.4 per cent, at 12,213; the S&P 500 was down 0.10 of a point, at 1,417; and the Dow Jones industrial average was up 19 points, or 0.1 per cent, at 13,174.

Nexen shares on the New York Stock Exchange opened up 14.2 per cent at $26.89. That was still a little shy of the $27.50 (U.S.) offering price from China's state-owned oil company. Progress Energy shares opened up 13 per cent at $21.98 at the TSX, two cents below the offering price by Petronas of Malaysia.

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The TSX energy sector as a whole was up 1.1 per cent, the top gainer. But that masked some steep losses, especially among smaller producers. The new rules by Ottawa reduces the likelihood for takeovers of many firms, and there are perceptions that these companies now deserve less of a takeover premium in their valuations.

Athabasca Oil Sands was down 0.7 per cent after opening down nearly 3 per cent; Meg Energy was down 2.4 per cent; Connacher Oil and Gas was down 3.7 per cent; and Southern Pacific Resource was down 2.0 per cent.

Bigger energy firms were doing better, with Suncor Energy nearly unchanged and Canadian Natural Resources up 0.5 per cent. The larger firms could benefit from the rules given they will have less competition as they look to acquire assets.

Aside from the aftermath of the foreign takeover ruling on Friday, markets are absorbing several other new developments.

There's a lot of concern this morning over a possible flare-up of the European sovereign debt crisis after Italian Prime Minister Mario Monti Sunday said he would resign once parliament approves a 2013 budget. He has been praised for his plans to fix the country's fiscal mess, and adding to the uncertainty, the scandal-plagued former prime minister Silvio Berlusconi said he will run for prime minister in elections expected early next year.

Italian bond yields jumped sharply today as the political upheaval is threatening to push the euro zone's third largest economy back to the forefront of the debt crisis.

China this weekend reported a slew of positive economic reports, bolstered by stimulus measures and early confidence in the country's new top leavers. Both factory output and retail sales improved on October's results, up 10.1 per cent and 14.9 per cent year-on-year, respectively. Inflation ticked up slightly to 2.0 per cent, up from a 33-month low of 1.7 per cent in October, while the producer price index fell to 2.2 per cent.

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But there was a caveat: China's trade numbers were surprisingly weak, with the country's exports growing only 2.9 per cent in November, much slower than growth of 11.6 per cent in October.

Meanwhile, worries about the looming "fiscal cliff" of tax hikes and spending cuts set to take hold at the start of next year in the U.S. haven't gone away.

Talks are going on behind closed doors but there seemed to be some reason for optimism this weekend. President Barack Obama of the Democrats and House Speaker John Boehner of the Republicans met Sunday and several Senate Republicans have been dropping hints that they may be willing to accept tax hikes.

In the U.S. market, Groupon shares are down 4.1 per cent after soaring 23 per cent on Friday on a Bloomberg report that Google Inc. may reconsider buying the online coupon company.

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About the Author
Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More

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