Canadian Investors Cheer Vote But Markets Remain Wary Of Long-Term Prospects

The Quebec referendum vote that preserved Canada lifted stocks and the Canadian dollar Tuesday. But the federalist victory was so narrow, and long-term prospects so cloudy, that investors and executives remained wary.

The outcome was “a reprieve, not a pardon,” said Desmond Morton, director of the McGill University Institute for the Study of Canada.

“The Canadian dollar may go up, but not as far as if the issue had been put in a box and buried,” he said.

The Toronto Stock Exchange composite index shot ahead 130 points at opening but gave up some of the gains later to close up 79.40 points at 4,459.16. The Canadian dollar closed its North American trading day at 74.35 U.S. cents, up 0.77 cents from Monday.

In response, the Bank of Canada lowered a key interest rate used to set consumer rates. Analysts predicted it will also slash up to 1.25 percentage points off the bank rate. Standard and Poor’s and Dominion Bond Rating Service reaffirmed Quebec’s bond ratings.

“In the short term, it’s good,” said Steven Polidoro, president of a Quebec-based bag manufacturing. “Now, we’re worried about the long term.”

The vote Monday gave those opposed to Quebec independence a mere 50.6 percent to 49.4 percent victory.

Maurice Marchon of the University of Montreal School of Advanced Business Studies said the markets may be relieved by the separatists’ defeat but that the message remains clear: “Accept radical change in Canada, otherwise next time it will be 60 percent Yes.”