The Toronto stock market started second-quarter trading with a solid advance Monday as encouraging factory data indicated that the global economic recovery continues at a slow but steady pace.
One report showed China is likely heading for a soft landing while another suggested the U.S. manufacturing sector continues to expand and a third indicated the eurozone seems to be sliding into recession.
The S&P/TSX composite index jumped 114.88 points to 12,507.06 while the TSX Venture Exchange added 3.39 points to 1,569.79.
“This morning was a pretty good, broad sense of data that gave us a good indication of what’s going on around the world on the manufacturing side of things,” said Craig Fehr, Canadian markets strategist at Edward Jones in St. Louis.
“Outside of domestic data, the data coming out of the U.S. and now China clearly will be the most important drivers for the Canadian markets and economy.”
The commodity-sensitive Canadian dollar shook off early losses amid rising oil, copper and gold prices, up 0.73 of a cent to 100.98 cents US.
U.S. markets also ran ahead after the Institute for Supply Management said that its manufacturing index came in at 53.4, slightly above expectations and up from February’s reading of 52.4. A reading above 50 indicates expansion.
The Dow industrials closed up 52.45 points to 13,264.49. The Nasdaq climbed 28.13 points to 3,119.7, and the S&P 500 index advanced 10.43 points to 1,418.9.
Meanwhile, 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, although revised slightly upward to 48.3 from 48.1, still came in below 50 – which signals contraction – for the fifth month in a row.
“Looking at both measures combined, the data still point to a Chinese economy coming in for a soft landing,” commented BMO Capital Markets senior economist Jennifer Lee.
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 other markets as the resource-intensive TSX reacts to China’s slowing economy and worsening conditions in Europe.
New York’s Dow industrials is up 8.1% so far this year while surging tech stocks have boosted the Nasdaq by almost 19% and the S&P 500 has run ahead 12%.
There were fresh indications that the eurozone’s economy is contracting. 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, both saw activity levels deteriorate. France, in particular, fared worse with activity at a 33-month low.
Commodities shot ahead in the wake of the strong manufacturing data.
The base metals sector was up 1.58% as optimism about China helped push the May copper contract on the New York Mercantile Exchange up 10 cents to US$3.92 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. Teck Resources (TSX:TCK.B) gained $1.06 to $36.67 while First Quantum Minerals (TSX:FM) climbed 30 cents to $19.32.
Ivanhoe Mines (TSX:IVN) shares were off nine cents to $15.60 as the Vancouver-based miner said it was 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.
The TSX energy sector edged up 1.2% as oil came back from the lows of the morning following the release of the U.S. manufacturing data. The May crude contract on the Nymex gained $2.21 to US$105.23 a barrel. Canadian Natural Resources (TSX:CNQ) gained 69 cents to $33.75 and Suncor Energy (TSX:SU) climbed 61 cents to $33.20.
Energy producer Nexen Inc. (TSX:NXY) said exploratory drilling had 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 and Nexen stock added 43 cents to $18.72.
Bullion prices strengthened with the April contract up $7.80 to US$1,679.70 an ounce. The gold sector was ahead about one per cent as Barrick Gold Corp. (TSX:ABX) rose 51 cents to $43.86 and Goldcorp Inc. (TSX:G) rose 81 cents to $45.77.
Financials also provided support with Manulife Financial (TSX:MFC) ahead 20 cents to $13.71.
The tech sector was the weakest group as Research In Motion Ltd. (TSX:RIM) gave back 38 cents to $14.25 while MacDonald Dettwiler (TSX:MDA) declined $1.41 to $44.01.
In other corporate news, hedge fund Pershing Square, which is making a push for the replacement of Canadian Pacific’s (TSX:CPR) top management, has named former Norfolk Southern vide-chairman Stephen Tobias to its slate of nominees to the railway’s board. Pershing Square, which has been locked in a bitter war of words with the top brass of Canada’s second-largest railway, holds a 14.2% share in Canadian Pacific. CP shares gained $1.07 to $76.78.