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At the open: TSX lower amid cautious optimism over U.S. debt crisis


The Toronto stock market was lower Tuesday amid reports that U.S. senate leaders were close to reaching a deal to increase the country's debt ceiling and forestall a possible default.

Optimism faded somewhat shortly after the open on word that Republicans in the House of Representatives plan to push forward their own bill to reopen the government and raise the debt limit.

The S&P/TSX composite index lost 17.35 points to 12,874.76.

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The Canadian dollar was down 0.08 of a cent to 96.5 cents US just two days before the U.S. hits its borrowing limit, at which point the government would start to run out of money to pay creditors.

U.S. indexes gave back a chunk of Monday's gains, with the Dow Jones industrials down 42.8 points to 15,258.46. The Nasdaq was 1.15 points lower at 3,814.12 and the S&P 500 index points shed 4.54 points to 1,705.6.

The emerging senate pact would permit the Treasury to borrow normally until early to mid-February.

It would also reopen the government through Jan. 15.

Democratic and Republican aides described the outlines of the potential agreement on condition of anonymity because the discussions were ongoing.

The plan arrived at over the last few days is a far cry from the assault on Obamacare that tea party Republicans originally demanded as a condition for a short-term funding bill to keep the government fully operational and a further increase in the debt ceiling.

Any legislation backed by both Democrat Senate leader Harry Reid and Republican senate leader Mitch McConnell can be expected to sail through the Senate.

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But it's another story in the House, where conservatives plan to table a bill that would delay the medical device tax and install income verification for Obamacare recipients.

"However, if the Senate vote draws strong Republican backing, it (alongside sliding public support) could pressure the House GOP to support the bill," observed BMO Capital Markets senior economist Sal Guatieri.

"Either way, it looks like this one will go down to the wire."

The industrials sector led decliners as the Teamsters union warned of a potential strike or lockout at Canadian National Railways (TSX:CNR) starting on Oct. 28. The union represents some 3,300 conductors, trainmen, yardmen and traffic co-ordinators at CN. Spokesman Roland Hackl says concessions being sought would see CN workers work longer hours with less rest time in between trips. CN shares fell 98 cents to $108.51.

The financials sector was also lower.

The Sunday Times reported that TD Bank is considering buying the Royal Bank of Scotland's U.S. retail business Citizens for US$13-billion. TD Bank and RBS both declined to comment on the report and TD (TSX:TD) shares fell 71 cents to $91.80.

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Commodities were generally lower after optimism over reaching a U.S. debt deal sent prices higher for copper, oil and gold on Monday.

The base metals sector was the leading advancer, up one per cent with December copper unchanged at US$3.30 a pound. Teck Resources (TSX:TCK.B) climbed 60 cents to C$27.76.

The gold sector climbed 0.5 per cent even as December bullion declined $11.10 to US$1,265.50 an ounce. Barrick Gold Corp. (TSX:ABX) was ahead 21 cents to C$18.02.

The energy sector was flat as the November crude contract on the New York Mercantile Exchange was off $1.01 at US$101.40 a barrel. Canadian Natural Resources (TSX:CNQ) gained 41 cents to C$33.71.

Elsewhere On the corporate front, BlackBerry (TSX:BB) rose six cents to $8.41 as it appealed to its customers to stay with the troubled smartphone maker as it restructures. In an open letter released Monday afternoon on Twitter and Facebook, and in some newspapers Tuesday, BlackBerry tells its "customers, partners and fans" that they can continue to count on the company.

Wi-LAN Inc. (TSX:WIN) announced patent settlement deals with U.S. tech companies Hewlett-Packard Co. and Novatel Wireless Inc. The deals end litigation with both. Financial terms were not disclosed. Wi-LAN has licensed its intellectual property to more than 270 companies worldwide that manufacture or sell a wide range of communication and consumer electronics products. Wi-Lan shares gained 10 cents to $4.22.

There were several U.S. earnings reports to take in.

Coca-Cola posted quarterly earnings of $2.45-billion, or 54 cents per share, up from $2.31-billion, or 50 cents per share a year ago. Ex-items, earnings per share were 53 cents which matched expectations. Revenue fell three per cent to $12.03, which was short of the $12.05-billion analysts expected. Its shares gained seven cents to US$37.98.

Citigroup were down 72 cents to $48.88 as the bank posted quarterly net income $3.26-billion or $1.02 a share, down from $3.27-billion in the same period a year ago after excluding an accounting gain and other one-time items. That was three cents better than expected. However, revenue fell to $18.2-billion compared with $19.2-billion a year ago. Analysts had expected $17.9-billion.

Among European bourses, London's FTSE 100 index and Frankfurt's DAX were both up 0.85 per cent and the Paris CAC 40 rose 0.63 per cent.

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