TSX closes lower Thursday as commodities slump

The Canadian dollar shed 0.75 of a cent to 100.03 cents US after earlier falling below parity as investors retreated to the perceived safety of the greenback.

Investors took in disappointing data on Canadian retail trade and employment insurance claims from January and a report showing an improving jobs situation in the U.S. along with the weak manufacturing data from China and Europe.

“Now it really is all about China,” as fear of European debt contagion fades to the background, said Allison Mendes, a money manager at Manulife Asset Management.

HSBC said Chinese industrial activity dropped to a four-month low in March. A similarly weak eurozone survey from financial information company Markit only added to concerns.

Earlier this week, soft Chinese housing data and a warning from miner BHP Billiton stoked concerns about the outlook in the world’s second-largest economy, which has shored up the global economy over the past few years.

“With that brings the potential for additional earnings downgrades and that’s also going to continue to drive the rotation of the commodities stocks and we’re continuing to see that rotation into other sectors of the markets,” Mendes said.

Gold bullion lost $7.80 to US$1,642.50 an ounce, while copper fell eight cents to US$3.77 a pound. Oil for May delivery was down $1.92 to US$105.35 on the New York Mercantile Exchange.

The energy sector was the biggest decliner on the TSX, down, two per cent with shares in Canadian Natural Resources (TSX:CNQ) down $1.17 cents to $33.80. The mining sector was down 1.8%, with shares in Teck Resources (TCK.B) off 65 cents at C$35.05.

The main TSX index is skewed toward the energy and materials sectors, which have taken a hit since China announced it wants to focus future growth on consumer spending rather than infrastructure building — meaning a decline in demand for materials, Mendes said.

That’s why the TSX could continue to underperform the U.S. indexes this year, as the U.S. markets are less weighted toward resource stocks and have a bigger exposure to retail and consumer staples with global reach, she added.

Meanwhile, Statistics Canada said the number of people receiving regular employment insurance benefits increased by 2.3% or 12,400 in January to 561,100. In another report, it said retail sales rose a modest 0.5% against expectations for a 1.8% gain, with sales excluding autos falling 0.5%.

However, the Conference Board of Canada said consumer confidence continued to rise in March, its third consecutive month of gains. The board’s index of consumer confidence was up 4.3 points to 79.5, but most of the gains in March were due to a single factor — attitudes towards major purchases.

Wall Street also closed lower on anxiety over China’s slowing growth, with the Dow Jones industrial average falling 78.5 points to 13,046.1, the Nasdaq index down 12 points to 3,063.3 and the S&P 500 index down 10.1 points to 1,392.8.

The U.S. Labour Department said Thursday that weekly applications dropped 5,000 to a seasonally adjusted 348,000, the lowest level since February 2008. The four-week average of applications, a less volatile measure, dipped to 355,000. That’s also a four-year low.

The Conference Board in the U.S. said its measure of future U.S. economic activity rose 0.7% in February. The increase pushed the index to its highest point since June 2008.

U.S. President Barack Obama announced he would order federal agencies to expedite the approval process for the southern leg of TransCanada’s (TSX:TRP) $7.6-billion Keystone XL pipeline. The company’s shares added 76 cents to $43.56 in early trading on the TSX.

The announcement came just a few weeks after Obama rejected the entire length of Keystone XL, a pipeline that would transport Alberta oilsands bitumen from the northern reaches of the province through six U.S. states to Texas.

The president said there was not enough time to review a new route around a crucial aquifer in Nebraska in order to meet a tight deadline imposed by congressional Republicans.

Meanwhile, Canadian earnings season has largely come to a close, but there was a positive report from one of the country’s fastest growing companies.

Lululemon Athletica Inc. (TSX:LLL) posted net income of US$73.5 million or 51 cents per share for the three months ended Jan. 29, beating analyst expectations by two cents per share. That compared with earnings of $54.8 million or 38 cents per share in the year-earlier period. However, it also revised its 2012 earnings guidance to a range of $1.50 to $1.57 cents per share, lower than what analysts had been expecting. Lululemon stock added $2.44 to $74.95.

The Ontario government has selected an SNC-Lavalin (TSX:SNC) consortium as the preferred bidder to build and maintain the first phase of the eastern extension of Highway 407. Shares in the company shed five cents to $38.60.

Iamgold Corp. (TSX:IMG) said it’s business as usual at its joint venture mines in Mali despite a military coup in the country’s capital city. Shares fell 16 cents to $13.17.

And Canadian Pacific Railway Ltd. (TSX:CP) has included Pershing Square Capital Management’s Bill Ackman in its recommended director nominees in its proxy circular. Ackman wants to replace CEO Fred Green. CP shares fell 37 cents to $78.16.