TSX flat Monday despite solid U.S. retail sales

“We’ve been saying to our clients for some time now that Canadian markets will continue to take equal cues from the improving trends in the U.S. economy and the question marks that exist about global economies, China being at the top of that list,” said Craig Fehr, Canadian markets specialist at Edward Jones in St. Louis.

The TSX Venture Exchange was 27.48 points lower at 1,432.45.

U.S. retail sales rose 0.8% in March, pushed up by higher sales of electronics and home and garden supplies.

That was below February’s one% increase but came in at twice the pace economists expected.

The Canadian dollar lost 0.13 of a cent to 100.03 cents US.

U.S. markets were mixed amid earnings reports from Citigroup and Mattel that missed expectations.

The Dow Jones industrial average ran ahead 71.82 points to 12,921.41. The Nasdaq composite index dropped 22.93 points to 2,988.4 and the S&P 500 index was off 0.69 of a point to 1,369.57.

The base metals sector led TSX decliners, down two per cent. Commodity prices initially improved following the release of the U.S. retail report but by the afternoon copper prices had closed unchanged at US$3.63 a pound.

Copper has lost more than eight per cent so far this month amid data showing slowing growth in China, which is the world’s biggest consumer of the metal. Copper is known as an economic bellwether because it is used in so many industries.

“We have Chinese GDP that came in at 8.1% last week and that was slower than expected and that’s going to have a big impact on the commodity markets,” Fehr said.

“So the varying economic trends we see out of China are going to translate into volatility on the commodity markets and resource markets which, then in turn, will have an impact on the TSX,” he added.

First Quantum Minerals (TSX:FM) gave back 73 cents to $20.88.

Shares in SouthGobi Resources Ltd. (TSX:SGQ) fell 90 cents or 12.4% to $6.36 after the Mongolian government asked that work be stopped at the company’s Ovoot Tolgoi mine. SouthGobi said the suspension was requested in connection with a plan by Ivanhoe Mines Ltd. (TSX:IVN) to sell its controlling interest in the company to Aluminum Corporation of China Ltd. Ivanhoe shares lost 72 cents to $12.03.

The gold sector dropped about 1.5% as the June bullion contract in New York lost $10.50 to US$1,649.70 an ounce. Barrick Gold Corp. (TSX:ABX) faded 70 cents to C$40.79 and Iamgold (TSX:IMG) was off 27 cents to C$12.41.

The energy sector dipped 0.13% as the May crude contract on the New York Mercantile Exchange was ahead a dime to US$102.93 a barrel.

Beyond the retail data, oil prices were also supported by news of a possible pipeline reversal weeks earlier than planned.

The owners of the Seaway pipeline, Enbridge Inc. (TSX:ENB) and Enterprise Products Partners, have asked U.S. authorities to allow them to reverse the pipeline’s flow by mid-May, earlier than their initial mid-July start date. The pipeline would carry about 150,000 barrels of oil a day from the Midwest to Gulf of Mexico refiners. Enbridge shares declined three cents to $38.61.

Suncor Energy (TSX:SU) gained 36 cents to $30.81 while Husky Energy (TSX:HSE) shed 30 cents to $23.98.

Financials led advancers with the group up 0.7% as Scotiabank (TSX:BNS) moved ahead 53 cents to $54.63.

Consumer staples were also higher with convenience store chain Alimentation Couche-Tard rising 89 cents to $33.83.

The European debt crisis weighed on investors’ minds as Spain was forced to pay higher yields on its bonds.

The yield on Spain’s 10-year government bonds jumped to 6.1% on the secondary market, according to financial data provider FactSet. Later on Monday, the yield dropped slightly to 6.02%. It had closed at 5.93% Friday after a week of persistent market tension.

The 10-year bond yield surged toward seven per cent late last year, a rate considered unsustainable for a country over a long period.

The rise reflected investor skepticism that Spain can deal with its huge debts as the country is expected to enter its second recession in three years this quarter.

Corporate earnings got a mixed reception Monday. Expectations have been ratcheted much lower after three years of solid double-digit increases.

Citigroup shares were ahead 1.77% to US$34 after handing in quarterly earnings of US$2.9 billion or 95 cents a share, six cents less than expectations.

But Mattel shares fell 9.14% to US$31.01 as first-quarter profit dropped 53% to US$7.8 million. Adjusted earnings were six cents per share. That was a penny below what analysts surveyed by FactSet were expecting.

In other corporate news, private equity giant KKR is reported to be interested in bidding for the diamond assets of BHP Billiton and Rio Tinto, a move that would create the world’s third-largest diamond producer. London’s Sunday Times reported that KKR is in competition with at least two Canadian companies — Harry Winston Diamond Corp. (TSX:HW) and Stornoway Diamond Corp. (TSX:SWY). Harry Winston shares added three cents to $13.95 and Stornoway was unchanged at 89 cents.