TSX adds to losses Monday

The commodity sensitive loonie closed down 0.27 of a cent at 100.35 cents US.

The currency was off early lows after a Bank of Canada survey suggested that business optimism in Canada is rising sharply as the gloom of the winter months appears to be giving way to better expectations for sales, hiring and investment.

The quarterly survey of senior management from 100 representative firms, conducted over four weeks in February and March, found the outlook for future sales among the most positive since the recession.

New York markets were also in the red after the U.S. Labour Department reported Friday, while markets were closed for a holiday, that the American economy added only 120,000 jobs last month, widely missing economist expectations for gains of about 205,000.

The Dow Jones industrial index lost 130.55 points to 12,929.59. The Nasdaq composite index dropped 33.42 points to 3,047.08 and the S&P 500 index slid 15.88 points to 1,382.2.

The wide miss on March job creation followed three consecutive months of employment gains in excess of 200,000.

The negative start to the trading week followed five straight weeks of losses on the TSX, which left the Toronto market up only about 1.2% year to date.

The resource-heavy TSX had run up almost 14% from the lows of last October to the most recent highs of early March. But the rally has run out of steam amid worries about growth in China and other emerging economies.

The market has also been buffeted by worries about the European debt crisis and apprehension about the upcoming first quarter corporate earnings season, which starts this week in the U.S. where traders are braced for lower earnings.

“Estimates are still being revised lower and most of the comments that you are getting from companies are more guarded,” said Norman Raschkowan, North American strategist at Mackenzie Financial Corp.

“And there are two reasons: no one is really clear on how the sort of seasonal factors may have been influenced by the weather, by the fact we had such a mild winter. But also people are unclear about what the prospects really are in Europe or in Asia.”

China, in particular, has been an important force in helping the global economy recover from the 2008 financial crisis and recession. Its fast growing economy has had a huge appetite for commodities and this has benefited oil and metal prices and share prices of resource companies on the TSX.

But Chinese growth has slowed lately as the government deals with high inflation.

On Monday, the Chinese government reported that the country’s inflation rate edged up to 3.6% in March compared with a year earlier. That was up from February’s 3.2% but below the government’s four per cent target for the year as Beijing shifted from containing price rises to shoring up flagging growth in the world’s second-largest economy.

Analysts believe China’s economic growth, which has declined steadily over the past year, to fall to a new low of about eight per cent for the three months ended in March, down from 8.9% in the final quarter of 2011. Official data are due to be reported this week.

Demand concerns pressured oil and metal prices on Monday.

The base metals sector was off 1.9% as May the copper contract on the Nymex shed eight cents to US$3.72 a pound. Teck Resources (TSX:TCK.B) was down 72 cents to C$34.44 and Ivanhoe Mines (TSX:IVN) fell 28 cents to $13.48.

The energy sector was 1.15% lower with the May crude contract on the New York Mercantile Exchange down 85 cents to US$102.46 a barrel. Cenovus Energy (TSX:CVE) backed off 44 cents to C$33.89 while PetroBakken Energy (TSX:PBN) gave back 45 cents to C$16.12.

Blue chips also gave up ground as the financial sector lost 0.75%. Manulife Financial (TSX:MFC) shed 41 cents to $12.73 and National Bank (TSX:NA) fell 67 cents to $78.

The industrial sector was also down, off 0.83% with WestJet Airlines (TSX:WJA) declining 15 cents to $13.68 and Finning International (TSX:FTT) down 39 cents to $26.55. Finning is the world’s biggest dealer in Caterpillar products, which are widely used in the resource sector.

TSX losses were limited by a gain of about 0.7% the gold sector as bullion prices advanced $13.80 to US$1,643.90 an ounce. Barrick Gold Corp. (TSX:ABX) ran up 28 cents to C$40.79 and Goldcorp Inc. (TSX:G) rose 30 cents to $40.90.

In corporate news, AOL Inc. (NYSE:AOL) will get US$1.06 billion in cash by selling more than 800 patents to Microsoft Corp. (Nasdaq:MSFT) following a “robust auction” of the intellectual property. AOL says it will return a “significant portion” of the proceeds to its shareholders once the deal closes. AOL stock soared 43.16% to $26.37.

Facebook announced it will spend US$1 billion to buy the photo-sharing software company Instagram. The deal comes days after the service began offering a version for Android phones. The payment will be in cash and Facebook stock. Facebook is expected to complete its initial public offering of stock next month.