TSX closes higher amid positive Chinese data, new investment rules for oilpatch

TORONTO – The Toronto stock market closed higher Monday as positive Chinese data lifted metal prices and mining stocks, while the energy sector advanced following Friday’s announcement clarifying takeovers by foreign state-owned energy companies.

The S&P/TSX composite index gained 70.88 points to 12,230.47 while the TSX Venture Exchange added 0.68 of a point to 1,186.74.

The Canadian dollar gained 0.41 of a cent to 101.32 cents US.

Global markets were, however, weighed down amid the surprise resignation of Italy’s premier, who was widely credited with restoring confidence in Italy as the country deals with a debt crisis and fiscal cliff worries.

Prime Minister Mario Monti announced that he intends to resign by the end of the year, saying he found it impossible to lead after former prime minister Silvio Berlusconi’s party, parliament’s largest, dropped its support. Monti later sought to calm financial markets, saying he would stay on until the next government takes power.

The Dow Jones industrials were up 14.75 points to 13,169.88, the Nasdaq gained 8.92 points to 2,986.96 while the S&P 500 index edged up 0.48 of a point to 1,418.55.

The federal government on Friday approved two high-profile deals. The state-controlled China National Offshore Oil Corp. (CNOOC) got the green light for its $15.1-billion purchase of Nexen Inc. (TSX:NXY). And Malaysian state-controlled energy company Petronas can go ahead with its $6-billion acquisition of Progress Energy Resources Corp. (TSX:PRQ).

Nexen shot up 13.53 per cent to $26.44 while Progress shares jumped 13.3 per cent to $21.96.

However, Prime Minister Stephen Harper made it clear that state-owned energy companies will find it extremely difficult to buy up Canadian oilsands producers in future.

There had been concerns that some of those companies could be under heavy selling pressure since they can no longer realistically hope to be snapped up by foreign state-owned enterprises at fat share price premiums.

But price declines were relatively mild. For example, MEG Energy Corp. (TSX:MEG) was down $1.07 to $33.65, Southern Pacific Resource was unchanged at $1.24, Athabasca Oil Corp. (TSX:ATH) was down 25 cents to $10 and Canadian Oil Sands (TSX:COS) gave back 22 cents to $19.78. A glaring exception was Connacher Oil and Gas (TSX:CLL), which tumbled 21 per cent to 21 cents on very heavy volume of 10.3 million shares.

But analysts pointed out that state-controlled energy companies aren’t the only source of capital or acquisitions.

“Part of the reason we’re not seeing some of these names get struck down is because they do have the ability to go up on their own merit,” said Craig Fehr, Canadian markets specialist at Edward Jones in St. Louis.

“What we haven’t seen is a lot of private interest in this or even investor interest in the sector because returns have been lower and prospects for global growth have been weak.

“But as we start to see some of that turn around, we’re going to get private capital coming in, not just energy capital, but private equity and all these other areas that will be involved in a growing business.”

Elsewhere in the energy sector, Spartan Oil Corp. TSX:STO) shares gained 34 cents or 7.73 per cent to $4.74 as it announced it has received an unsolicited takeover offer. No other details on the offer have been released. Spartan is active the Cardium light oil play in central Alberta and the Bakken light oil resource play in southeast Saskatchewan.

Precision Drilling Corp. (TSX:PD) plans to cut capital spending to $485 million in 2013 from approximately $920 million this year while also instituting a quarterly dividend of five cents per share. Its shares were up 42 cents to $7.71.

There was also mixed economic data from China, the world’s second-biggest economy. Export growth plunged to 2.9 per cent compared with a year earlier, while imports were flat, down from October’s 2.4 per cent growth.

The figures were in line with analysts’ warnings that a trade rebound that began in August was unsustainable due to weak global demand amid Europe’s debt problems and a slow U.S. recovery.

At the same time, the Chinese government reported Sunday that factory output increased 10.1 per cent from a year earlier, compared with the previous month’s rise of 9.6 per cent year on year. Retail sales rose 14.9 per cent, up from October’s 14.5 per cent. And electricity consumption rose 7.9 per cent in November from 6.4 per cent in October.

The metals and mining sector gained 1.83 per cent while copper prices also advanced sharply with the March contract ahead by four cents to US$3.71 a pound. China is the world’s biggest consumer of the metal, which is viewed as a global economic barometer. Capstone Mining (TSX:CS) was 12 cents higher to C$2.46 while HudBay Minerals (TSX:HBM) gained 56 cents to $10.33.

Oil prices lost early gains and the January crude contract on the New York Mercantile Exchange was off 37 cents to US$85.56.

The gold sector was up about cent while bullion prices also picked up with the February contract up $8.90 to US$1,714.40 an ounce. Iamgold Corp. (TSX:ABX) improved by 23 cents to C$10.87 and Barrick Gold Corp. (TSX:ABX) climbed 50 cents to $33.77.

Industrials were also supportive as Canadian Pacific Railway (TSX:CP) rose $1.94 to $99.64.

Worries about whether the U.S. can head off going over the so-called fiscal cliff at the end of the month continued to cast a shadow over markets.

The fiscal cliff is a combination of expiring Bush-era tax cuts and automatic, across-the-board spending cuts due to take effect in January. The worry is that the shock from both measures would cut economic growth significantly and likely push the U.S. back into recession.

At the same time, the interest rate on the Italian government’s 10-year bond, an indicator of how risky investors consider a country’s ability to pay down its debt, rose 0.33 percentage points to 4.8 per cent following Monti’s surprise decision to resign.

Also adding to investor unease was an announcement from Berlusconi that he was going to run for the premiership.