TORONTO -- A run-up in gold stocks helped send the Toronto stock market modestly higher Monday as investors nervous about the debt impasse in Washington pushed bullion prices higher.
The S&P/TSX composite index gained 29.6 points to 12,788.25 with traders worried that the debt standoff might bring the U.S. to the brink of default.
Meanwhile, the Canadian dollar was lower by 0.2 of a cent to 96.96 cents US amid a housing report that missed expectations.
Statistics Canada said that Canadian municipalities issued building permits worth $6.3 billion in August, down 21.2 per cent from July. Economists had expected a drop of 15 per cent.
On Wall Street, New York indexes were firmly in negative ground as the U.S. government entered a second week of a partial shutdown as Democrats continued to resist calls from Republicans to link funding to changes in the country's three-year-old health-care law and to spending cuts.
It's becoming clear that the Republicans intend to extend that linkage to raising the government's debt limit, which will be reached on Oct. 17.
"Everything now is predicated on Washington," said Quincy Krosby, a market strategist for Prudential in New York.
"That is what the market is focused on completely, getting a deal done to avoid a default."
The Dow Jones industrials fell 136.34 points to 14,936.24, the Nasdaq was down 37.38 points to 3,770.38 and the S&P 500 index dropped 14.38 points to 1,676.12.
Democrats insist that Republicans could easily reopen the government if House Speaker John Boehner allowed a vote on an emergency spending bill.
But Boehner calls that a non-starter, saying in a Sunday television interview that "the votes are not in the House to pass a clean debt limit, and the president is risking default by not having a conversation with us."
Meanwhile, traders are beginning to worry about the potential economic damage caused by the government shutdown. BMO senior economist Robert Kavcic noted in a commentary that his firm has revised down its fourth-quarter growth estimate to 2.5 per cent from three per cent on the assumption that the shutdown will go on for three weeks.
On the Toronto Stock Exchange, the gold sector was the leading advancer, up about 2.1 per cent as investors looking for safety pushed December bullion ahead $15.20 to US$1,325.10 an ounce.
"Gold will rally in periods when uncertainty is high and thus investors seek the safety of a hard asset," observed Craig Fehr, a Canadian markets specialist at Edward Jones in St. Louis.
"Conversely, gold will rally when the economy is doing much better and inflation expectations are ticking back up. It's really a sentiment asset, a reflection of fear or euphoria in the market over the short term."
Allied Nevada Gold (TSX:ANV) surged $1.09 or 27.88 per cent, to $5 after the miner reported record gold production and sales in the third quarter. Its Hycroft mine turned out 52,198 ounces of gold.
Shares in Rio Alto Mining (TSX:RIO) shot up eight cents, or 4.42 per cent, to $1.89 after it reported a record 59,157 ounces of gold production in the third quarter.
The tech sector was also supportive as shares in BlackBerry (TSX:BB) (Nasdaq:BBRY) were up 32 cents, or 4.06 per cent, to $8.20 on the TSX. Reuters reported Friday that the smartphone maker is in talks with Cisco Systems, Google and SAP about a possible sale.
The report came almost two weeks after BlackBerry's biggest shareholder, Fairfax Financial Holdings (TSX:FFH), offered to take the company private in a deal worth about $4.7 billion.
The energy sector was ahead 0.04 per cent as the November contract on the New York Mercantile Exchange fell 81 cents to US$103.03 a barrel. Talisman Energy (TSX:TLM) gained 60 cents to C$13.15.
The base metals sector was the biggest drag, down 1.23 per cent even as copper prices erased earlier losses to close unchanged at US$3.30 a pound. Teck Resources (TSX:TCK.B) shed 53 cents to C$27.33.
Investors also looked ahead to the start of the third-quarter earnings season in the U.S. this week. Dow components JPMorgan Chase and Wells Fargo report on Friday.
