TSX heads for lower open on concerns around Europe’s economy

U.S. futures were weak with the Dow Jones industrial futures down 12 points to 13,130, the Nasdaq futures lost two points to 2,748.75 and the S&P 500 futures eased 0.5 of a point to 1,402.7.

The Chinese government announced that its official purchasing managers index, a gauge of business activity, rose 2.1 points to 53.1, the highest in almost a year.

However, HSBC’s manufacturing PMI for China was revised up slightly to 48.3 from 48.1, the fifth month in a row the index has come in below 50, which signals contraction.

“Soft landing? Hard landing? You decide,” commented BMO Capital Markets senior economist Jennifer Lee.

“But looking at both measures combined, the data still point to a Chinese economy coming in for a soft landing.”

China’s growing economy has been a major source of support for a global economy still recovering from the 2008 financial crisis and recession. Its huge appetite for commodities has driven oil and metal prices higher and supported resource stocks on the TSX.

However, the Toronto market is up only 3.65% year to date, lagging behind other markets as the resource-intensive TSX reacts to China’s slowing economy and worsening conditions in Europe.

New York’s Dow industrials are up 8.1% so far this year while surging tech stocks have boosted the Nasdaq by almost 19% and the S&P 500 ran ahead 12%.

There were fresh indications that the eurozone’s economy is contracting as a closely-watched survey found that the manufacturing downturn got worse in March. Financial information company Markit said Monday that its purchasing managers index fell to a three-month low of 47.7 in March from the previous month’s 49.

Markit says the eurozone’s two powerhouse economies, Germany and France, saw activity levels deteriorate. France, in particular, fared worse with activity at a 33-month low.

Commodities were mixed in the wake of the economic data.

Optimism about China helped push the May copper contract on the New York Mercantile Exchange up a penny to US$3.83 a pound. China is the world’s biggest consumer of the metal, often viewed as an economic bellwether as it is used in so many applications.

However, demand concerns pushed the May crude contract on the Nymex down 59 cents to US$102.43 a barrel.

Bullion prices weakened with the April contract down $5.30 to US$1,664 an ounce.

Earlier in Asia, stocks had been lifted by the Chinese figures.

Though markets in mainland China were closed for a public holiday, the main indexes elsewhere started the second quarter positively. Japan’s Nikkei 225 index gained 0.3% while Hong Kong’s Hang Seng fell 0.2%.

European bourses were mixed with London’s FTSE 100 index up 0.38%, Frankfurt’s DAX lost 0.1% while the Paris CAC 40 declined 0.49%.

In corporate news, Ivanhoe Mines (TSX:IVN) is selling its stake of approximately 58% in Mongolian coal miner SouthGobi Resources Ltd. (TSX:SGQ) to Aluminum Corporation of China Ltd. for $889 million.

Ivanhoe says it plans to use the proceeds from the sale to fund the continued development of its flagship Oyu Tolgoi copper, gold and silver mine in southern Mongolia.

Energy producer Nexen Inc. (TSX:NXY) says exploratory drilling has confirmed the size of the Appomattox light oil discovery in the Gulf of Mexico. The company said Monday that Appomattox has the equivalent of between 120 million and 370 million barrels of oil. The company’s share would be one-fifth of that.

Encana Corp. (TSX:ECA) said it will accelerate its efforts to form partnerships for developing its oil and liquids-rich assets. The Calgary-based company announced no new partnerships but said it could apply the same partnership strategy it has used with its natural gas plays. Encana has been mostly focused on natural gas since spinning off its oilsands and refinery business into a separate company called Cenovus Energy Inc. (TSX:CVE).