The Canadian stock market reeled back yesterday as the U.S. government shutdown reached its second day, while struggling tech giant BlackBerry continued to lose money following the revision of certain charges.
The Standard & Poor’s TSX Composite Index dropped 0.3 percent to 12,812.21 as of 11:46 a.m. yesterday in Toronto, while eight out of ten sectors on the index suffered losses. The U.S. economic shutdown started on October 1 as House Republicans and Democrats remained divided on issues regarding the government’s budget cap and health care policy.
This is the first shutdown on record since 1996, and not much optimism is in the air, as both sides remain at loggerheads regarding the aforementioned issues. If the shutdown lasts for one week, this could result in a 0.1 percent decrease in economic growth, while costs may further increase the longer the shutdown lasts.
Going back to the Canadian market, information technology (IE) lost 0.4 percent. BlackBerry Ltd. (TSE: BB), which was once the world’s leading smartphone manufacturer, lost 5 percent to C$7.75, a 52-week low for the Waterloo, Ont. company. This followed confirmation that the cost of restructuring BlackBerry operations may be four times more expensive than previous estimates, and may further increase going forward.
BlackBerry expects charges to reach $400 million through the end of fiscal 2014 (May next year), which is substantially higher than the $100 million expected in early 2013. The company is undertaking a comprehensive cost-cutting scheme that will involve reducing its workforce by 40 percent and writing down close to $1 billion worth of unsold phones.
BlackBerry shares have lost about 34 percent throughout 2013, despite the launch of a new operating system (OS) and a new all-touch screen “flagship” phone known as the Z10.