TSX little changed, fiscal cliff worries overshadow strong Chinese data

TORONTO – The Toronto stock market closed little changed Friday as mining stocks benefited from the release of encouraging Chinese economic data. Elsewhere, the market stalled amid concerns about whether the U.S. can avoid a fiscal crisis at the end of the month.

The S&P/TSX composite index was 7.55 points higher at 12,296.72, while the TSX Venture Exchange climbed 9.61 points to 1,183.62.

But the Canadian dollar was down 0.17 of a cent to 101.37 cents US.

HSBC Corp. released its preliminary China Purchasing Managers’ Index for December, which showed greater expansion in the manufacturing sector of the world’s second-biggest economy. The index rose to 50.9 from November’s 50.5.

The firm said the slide reflected drops in the aerospace product and parts, motor vehicle assembly and primary metal industries. These declines were partly offset by higher sales in petroleum and coal products as well as the wood product industries.

U.S. indexes finished in the red as the positive Chinese data was overshadowed by budget talks in Washington between President Barack Obama and key Republican lawmakers.

A deal must be reached to avoid going over the so-called “fiscal cliff,” which would involve the automatic imposition of hundreds of billions of dollars in spending cuts and tax increases that could plunge the world’s largest economy back into recession and depress economies around the world.

The Dow Jones industrials lost 35.71 points to 13,135.01, the Nasdaq fell 20.83 points to 2,971.33, paced by a drop of almost four per cent in Apple Inc. (NASDAQ:AAPL) shares despite what some could interpret as a positive for the company — the return of Google Maps to the iPhone.

The S&P 500 index was off 5.87 points at 1,413.58.

Other data out Friday morning showed that U.S. factories rebounded in November from superstorm Sandy. The Federal Reserve says factory output increased 1.1 per cent in November from October, offsetting a one per cent decline the previous month that was blamed on the storm.

Total industrial output at factories, mines and utilities also rose 1.1 per cent last month.

“The economic releases are all good, they basically confirmed what everybody was already thinking,” said John Johnston, chief strategist at Davis Rea Ltd.

“Maybe there’s a bit of profit taking here but certainly there’s a better tone in the economic data. I raise the question of whether it’s sustainable or whether it’s more of a seasonal anomaly. But for the time being, the economic data are firming.”

The base metals sector led advancers, up about 2.35 per cent as commodity prices advanced in the wake of the Chinese manufacturing report. China has a huge appetite for commodities, which has sent prices higher for oil and metals in the past, along with energy and mining stocks on the TSX.

March copper was up two cents at US$3.68 a pound and Inmet Mining (TSX:IMN) ran up $3.13 to C$69.83 while Teck Resources (TSX:TCK.B) was up 71 cents to $35.28.

The tech sector also provided lift with Research In Motion Ltd. (TSX:RIM) up 25 cents or 1.83 per cent to $13.88 on increasing optimism that the new BlackBerry 10 smartphones can turn the company around. The line is being launched at the end of January. RIM stock is up 16.8 per cent this past week alone and has more than doubled from its 52-week low of $6.10.

The gold sector was ahead about 0.7 per cent while February bullion inched up 20 cents to US$1,697 an ounce. Iamgold Corp. (TSX:IMG) gained 30 cents to C$11.60.

A Canadian-based mining company operating in Kyrgyzstan says a $152-million claim from the Central Asian country for alleged environmental damages caused by a gold field it is developing is exaggerated and without foundation. Centerra Gold (TSX:CG) says that independent experts have determined its Kumtor mine project has no materially significant environmental issues. Centerra shares gained 80 cents to $8.89.

The energy sector was down 0.52 per cent as the January crude contract on the New York Mercantile Exchange rose 92 cents to US$86.81 a barrel. Cenovus Energy (TSX:CVE) was down 50 cents to C$32.25.

Natural gas giant Encana Corp. (TSX:ECA) and PetroChina subsidiary Phoenix Duvernay Gas have reached a deal to work together in the Duvernay region, a promising shale natural gas formation in west-central Alberta. Phoenix will end up owning just shy of half of the 180,000 hectares Encana has in the Duvernay. That means the $2.2-billion deal won’t be subject to the same federal review as the just approved $15.1-billion takeover of Nexen Inc. by China’s state owned energy company CNOOC. EnCana shares were down 89 cents to $19.96.

Telecoms were also weak with Telus Corp. (TSX:T) declining 63 cents to $65.30.

The TSX financial sector was slightly lower while Standard & Poor’s downgraded the ratings of six of Canada’s financial institutions, citing a softening economy, low interest rates and a slowing Canadian economy.

S&P says the risk for the Canadian banking sector is increasing and that it expects intensifying competition for loans and deposits will pressure profit growth.

The firm lowered its ratings for Scotiabank (TSX:BNS), National Bank, Laurentian Bank of Canada (TSX:LB), Central 1 Credit Union, Caisse centrale Desjardins and Home Capital Group (TSX:HCG) each by one notch. The outlooks for all six financial institutions are stable.

Asset management company Dundee Corp. (TSX:DC.A) is proposing a corporate restructuring. It will create a new parallel public company following the distribution to its shareholders of half of its ownership interest in real estate subsidiary Dundee Realty Corp. The Toronto-based company will retain a 20 per cent in Dundee Realty, while subsidiary president and CEO Michael Cooper will hold the remaining 30 per cent stake. Dundee shares jumped $3.66 or 13.65 per cent to $30.47.

The TSX ended last week up 136.95 points or 1.12 per cent despite concerns about whether U.S. politicians can head off the fiscal crisis. Mining stocks were the biggest gainer amid further signs of an expanding Chinese manufacturing sector.

The Dow industrials were flat for the week.