Newspaper article The Canadian Press

Toronto Stock Market, Commodity Prices Advance despite S&P Downgrades: Toronto Stock Market Little Changed

Newspaper article The Canadian Press

Toronto Stock Market, Commodity Prices Advance despite S&P Downgrades: Toronto Stock Market Little Changed

Article excerpt

TORONTO - The Toronto stock market closed slightly higher Monday as commodity prices supported the TSX despite the potential knock-on effects of a downgrade of nine eurozone countries by Standard & Poor's rating agency and Greece's difficulties in thrashing out a deal with private creditors.

The S&P/TSX composite index rose 27.54 points to 12,258.6 led by gains in the mining and information technology sector, while the TSX Venture Exchange was 2.9 points higher at 1,538.93.

The Canadian dollar was higher, up 0.45 of a cent to 98.23 cents US, a day before the Bank of Canada makes its next announcement on interest rates. The central bank is widely expected to keep its key rate at one per cent.

New York markets were closed for the Martin Luther King holiday.

Analysts said the S&P downgrades, officially announced Friday after markets closed, had been widely expected, especially in the bond markets.

There was very little shock at S&P's announcement to strip France of its treasured triple-A rating and to cut its view on a raft of other euro countries, including Italy. One bright spot was that Germany, Europe's biggest economy, retained its triple-A rating and had its outlook upgraded to stable from negative.

Also, on Monday, rival ratings agency Moody's said it was maintaining France's top-tier AAA credit rating for now, with the outlook stable. S&P rates France's outlook as negative.

There was also relief as France sold [euro]8.6 billion in short-term debt on Monday. Yields fell in a a sign investors still see the country as a good bet.

But analysts said the S&P downgrades could create a problem with expanding the eurozone's bailout fund, the European Financial Stability Facility, since France is the fund's second-largest backer.

"And they've always said how important it is for the fund to retain a AAA rating because obviously, if it's not, then it's going to cost a lot more which, in turn, would put the math of the whole bailout fund in peril," observed Gavin Graham, president of Graham Investment Strategy.

"It probably doesn't have a major effect on France's own situation in the short term. But you're going to see more concerns about whether it will lead to further downgrades and what's going to happen to the bailout fund.

On Monday, S&P downgraded the creditworthiness of the eurozone's bailout fund by one notch to AA-plus.

Another headache for markets at the moment is whether Greece can clinch a deal with its creditors. Last October, Greece's partners in the eurozone sanctioned a deal whereby creditors agreed to reduce the value of their Greek debt holdings so that the country's burden is reduced.

The deal with private investors, known as the Private Sector Involvement, or PSI, aims to reduce Greece's debt by [euro]100 billion by swapping private creditors' bonds for new ones with a lower value. …

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