TSX slightly higher as Canadian GDP, American consumer spending disappoint

TORONTO – The Toronto stock market was slightly higher amid data showing severe winter weather taking a bigger than expected bite out of Canadian economic growth and a slowing in U.S. consumer spending.

The S&P/TSX composite index had been negative for most of the session but late-day gains in energy and gold companies helped push the market up 15.21 points to 14,604.16.

The Canadian dollar closed down of 0.05 of a cent at 92.23 cents US as Statistics Canada said gross domestic product advanced at an annualized pace of just 1.2 per cent in the first quarter.

Economists had expected a gain of about 1.8 per cent. On a monthly basis, GDP was up 0.1 per cent in March, in line with expectations.

U.S. markets finished the session narrowly mixed amid lacklustre consumer data.

Consumer spending slipped 0.1 per cent in April, the first decline in a year, after having jumped one per cent in March, the biggest gain since the summer of 2009.

“Call this payback from the upwardly revised one per cent jump in the prior month and the quarter, for that matter,” said BMO Capital Markets senior economist Jennifer Lee.

“Still, this is not a good way to start what should be a strong Q2,” Lee said.

The Dow Jones industrials was up 18.43 points to 16,717.17, the Nasdaq fell 5.33 points to 4,242.62 and the S&P 500 index added 3.54 points to 1,923.57.

The TSX lost 104 points or 0.7 per cent this past week, largely because of sliding mining stocks. The gold sector has fallen about five per cent over the past week while base metals have shed more than three per cent.

Gold prices in particular have been under heavy pressure, losing 3.5 per cent this week with markets feeling more comfortable about the Ukraine crisis and more concerned about deflation rather than inflation, particularly in Europe.

Also, it is widely expected that European Central Bank president Mario Draghi will announce measures on Thursday aimed at raising inflation from very low levels and encouraging what has been a lacklustre economic recovery.

That speculation has sent the euro lower and the U.S. dollar higher. Gold prices have suffered because a stronger greenback makes it more expensive for holders of other currencies to buy gold and other commodities, which are dollar-denominated.

“I don’t think it’s going to be catastrophic for gold but . . . I don’t see gold having many catalysts to the upside here,” said Bob Gorman, chief portfolio strategist at TD Waterhouse.

There was also a major development in Valeant Pharmaceuticals’ (TSX:VRX) hostile bid for Botox maker Allergan. The Montreal-area company has raised its offer for Allergan to US$72 in cash and 0.83 shares of Valeant common stock for each Allergan share. That’s up from an offer of US$58.30 and 0.83 of a Valeant share made just days ago. The deal values Allergan at about US$183.25 per share or US$54.5 billion. Valeant shares rose $2.23 to C$142.34 in Toronto.

Bombardier shares fell nine cents or 2.38 per cent to $3.69 on very heavy volume of 25.4 million shares after it said the test flight program for its new CSeries jetliner has been grounded. The move was announced after what Bombardier called “an engine-related incident” on one of the aircraft during ground maintenance testing in Mirabel, north of Montreal.

The TSX made been in negative territory for most of the day but the gold sector strengthened late in the afternoon to a gain of about 1.45 per cent as the August gold contract faded $11.10 to US$1,246 an ounce.

Energy stocks also revived, up 0.34 per cent as the June crude oil contract lost 87 cents to US$102.71 a barrel.

The TSX base metals sector led the way lower Friday, down 1.15 per cent as the July copper contract lost two cents to US$3.12 a pound.