TSX set to start 2012 trading on positive note

A growing appetite for risk following a weak finish to 2011 weakened the greenback and sent the Canadian dollar up 0.6 of a cent to 98.93 cents US.

Futures in New York were up sharply with separate surveys showing manufacturing in India, China and Australia improved in December.

The Dow Jones industrial futures moved ahead 197 points to 12,347, the Nasdaq futures up 41.8 points to 2,316.2 and the S&P 500 futures climbed 20.4 points to 1,273.

Traders were particularly relieved to see China’s main manufacturing index showed expansion, coming in at 50.3 on manufacturing and jumping to 56 on services.

China has been an important prop for the fragile global economic recovery, supporting commodity prices and energy and mining stocks on the resource-heavy TSX. But growth slowed during 2011 as the Chinese government discouraged lending to control high inflation.

Worries about a slowing global economy and a worsening eurozone government debt crisis pushed the TSX down 11% last year.

Analysts say Europe will continue to pressure markets in the absence of a convincing mechanism to deal with the crisis.

This week, both France and Germany will be tapping bond markets in what will be fairly significant tests of market confidence.

Oil prices jumped well over US$2 after Iran test-fired a surface-to-surface cruise missile Monday, part of 10-day naval manoeuvres scheduled to end Tuesday. Iran’s navy chief Adm. Habibollah Sayyari said the test showed the key oil passageway Strait of Hormuz is “completely under our control.”

Iran has threatened to close the strait, where one-sixth of global crude exports pass, as possible retaliation to new U.S. economic sanctions over Iran’s nuclear program.

The February crude contract on the New York Mercantile Exchange ran ahead $2.44 to US$101.27 a barrel.

Copper prices also advanced following the Chinese data. Copper is viewed as a key economic barometer because it is widely used in infrastructure projects and consumer products and China is the biggest buyer of the metal. The March contract in New York gained five cents to US$3.49.

A weak U.S. dollar helped push bullion higher with the February contract up $27 to US$1,593.80 an ounce. A weaker greenback usually helps depress commodity prices, which are denominated in dollars, as it makes oil and metals more expensive for holders of other currencies.

European bourses were mixed with London’s FTSE 100 ahead one per cent while Frankfurt’s DAX gained 0.61% while the Paris CAC 40 fell 0.76%.

Earlier, Asian stocks rose, with Hong Kong’s Hang Seng Index, on its first trading session of 2012, jumped 2.4%, South Korea’s Kospi index rose 2.7% and Australia’s S&P ASX 200 gained 1.1%. Benchmarks in Japan and mainland China remained closed for the extended New Year’s holiday.

In corporate developments, Athabasca Oil Sands Corp. (TSX:ATH) has exercised its option to sell its remaining 40% interest in the MacKay River oil ands project to a unit of Chinese oil giant PetroChina for about C$680 million. The deal gives PetroChina full ownership of MacKay River project, one of the newest of northern Alberta’s oilsands developments.

Vero Energy Inc. (TSX:VRO) has agreed to sell some of its natural gas assets for $209 million to pay off debt and refocus on light oil drilling.