TSX loses ground for 6 weeks in a row amid slowing Chinese growth

TORONTO – The Toronto stock market suffered a big, triple-digit decline Friday as commodity prices retreated on data showing a weakening Chinese economy.

The S&P/TSX composite index tumbled 174.25 points to 12,040.39, ending up with its sixth straight weekly loss. The TSX Venture Exchange fell 12.57 points to 1,459.93.

The world’s second-biggest economy saw its growth rate decline to 8.1 per cent in the three months ended in March, down from the previous quarter’s 8.9 per cent.

The growth was the weakest since the second quarter of 2009. But some analysts were mystified why the reading should be taken as a negative.

“It’s eight per cent plus — that’s a great number!” said Jim Muir, director at Fraser Mackenzie.

“China is not a small economy growing at 10 per cent a year, it’s a much larger economy growing at eight-plus per cent. And in terms of the effect it has on the world around us, it’s just as big.”

The commodity-sensitive Canadian dollar was down 0.39 of a cent to 100.16 cents US.

U.S. markets were also negative as the Dow Jones industrials lost 136.99 points to 12,849.59.

The Nasdaq composite index declined 44.22 points to 3,011.33 and the S&P 500 index was down 17.31 points to 1,370.26.

Commodity prices backed off in the wake of the Chinese growth data.

China has been a major contributor to the global recovery from the recession that followed the 2008 financial crisis. Its huge appetite for commodities has boosted prices for oil and metals and the stocks of resource producers on the TSX.

The base metals sector led decliners, down 2.6 per cent as copper prices fell nine cents to US$3.63 a pound. China is the world’s biggest consumer of copper, which is known as an economic barometer as it is used in so many industries. Demand worries have pushed the metal down more than seven per cent this month. Ivanhoe Mines (TSX:IVN) lost 80 cents to C$12.75 while First Quantum Minerals (TSX:FM) fell 93 cents to $21.61.

Weak Chinese growth also pushed oil prices lower with the May contract on the Nymex down 81 cents to US$102.83 a barrel. The energy sector was down about 2.2 per cent as Cenovus Energy (TSX:CVE) dropped 94 cents to C$33.47 and Suncor Energy (TSX:SU) gave back 50 cents to $30.45.

Bullion prices also declined as the June contract lost $20.40 to US$1,660.20 an ounce, taking the gold sector down about 1.35 per cent. Barrick Gold Corp. (TSX:ABX) faded 49 cents to C$41.49 and Iamgold (TSX:IMG) eased 11 cents to $12.68.

Worries about the European debt crisis helped push the financial sector 1.8 per cent lower with Manulife Financial (TSX:MFC) down 46 cents to $12.94 and TD Bank (TSX:TD) declining $1.55 to $81.95.

Losses were spread out across all sectors.

The European debt crisis also continued to weigh on sentiment.

Other data showed that borrowing by Spanish banks from the European Central Bank jumped sharply in March. The Bank of Spain said the country’s banks nearly doubled their borrowing in March from the European Central Bank to €316.3 billion against the prior month.

Yields on 10-year Spanish government bonds surged 0.15 of a point to 5.93 per cent, meaning the government has to pay more to borrow. Besides forcing those countries to spend more on interest payments, it’s also a sign that lenders continue to be nervous.

“The real problem coming up now is Spain — it’s getting to be very, very dicey there,” Muir said.

“Their problem is they have too much debt and they’re trying to solve it by adding more debt. How long can you go on with that? Something is going to break some day.”

Bonds were also under selling pressure in Italy, where yields on 10-year government bonds jumped 0.15 of a point to 5.47 per cent.

On the earnings front, JPMorgan Chase reported profit of US$5.4 billion for the first three months of the year. The largest U.S. bank by assets says it earned $1.31 a share, handily beating Wall Street estimates of $1.16 per share.

Weighing on results is mortgage-related litigation: the bank set aside $2.5 billion to fight its legal battles. Its shares fell $1.63 to $43.21.

Markets had registered strong gains earlier in the week after resource giant Alcoa Inc. delivered a surprise profit and a positive outlook for aluminum prices. Its results were especially welcome since traders expect lower profits compared with a year ago.

In Canada, Shaw Communications Inc. (TSX:SJR.B) reported its second-quarter profit rose 3.5 per cent to $178 million. The Calgary-based company’s revenue was up three per cent to $1.23 billion. Its shares fell $1.07 to $19.69.

In other corporate news, Air Canada (TSX:AC.B) was in the grip of a sick-in campaign by some of its pilots. More than 60 flights set to depart or arrive at its hub in Toronto were cancelled, while scores of others were delayed. Passengers were also disrupted in other cities, including Montreal. Its shares were unchanged at 86 cents.

In other airline news, Thomas Cook Canada Inc. is making an early exit from its five-year agreement with Jazz Aviation due to market conditions. The Halifax-based company says it will cease flying planes for Thomas Cook at the end of April, three years early. The Halifax-based company’s parent is traded publicly as Chorus Aviation Inc. (TSX:CHR.B) and its shares slipped 17 cents to $3.54.

The weak Chinese data, worries about the eurozone debt crisis and pessimism over earnings pushed the TSX down 62.72 points or 0.51 per cent this past week.