TSX lower key data shows US manufacturing sector falters in March

Mining stocks led the way to a negative start to second quarter trading on the Toronto stock market Monday as data showed the American manufacturing sector expanded at a much slower than expected pace last month.The S&P/TSX composite index dropped 46.13 points to 12,703.77 as stocks also failed to find lift from other data showing an improving Chinese manufacturing sector. The Canadian dollar was down 0.08 of a cent at 98.35 cents US.U.S. indexes were also in the red after the Institute for Supply Management’s manufacturing index for March came in at 51.3. Economists had expected the widely watched index to remain unchanged from February at an 18-month high of 54.2.“This could be the first sign that the impact of U.S. government budget cuts could be impacting business/manufacturing activity,” said BMO Capital Markets senior economist Jennifer Lee. “New orders and production (think of those two components as future activity and current activity, respectively) took a sizable drop to three- and six-month lows.”But the news wasn’t all bad as the manufacturing survey also showed that “employment popped up to a nine-month high, fully erasing February’s decline.”The Dow Jones industrial average declined 36.56 points to 14,451.98, the Nasdaq composite index dropped 25.58 points to 3,241.94 and the S&P 500 index points declined 8.79 points to 1,560.4 after the index hit a record high on Friday.Other data showed that U.S. construction spending rose 1.2 per cent in February compared with January, a month that had seen construction activity drop 2.1 per cent. Spending rose to a seasonally adjusted annual rate of US$885.1 billion, 7.9 per cent higher than a year ago.Meanwhile, the China Federation of Logistics and Purchasing said Monday that the country’s manufacturing picked up in March in a potentially positive sign for the world’s second-largest economy.Its Purchasing Managers’ Index rose to 50.9 in March from 50.1 in February, which was the lowest reading in five months. Numbers above 50 denote expansion on a 100-point scale.Chinese manufacturing is closely watched as an indicator of global consumer sales and demand for commodities such as copper and oil. High demand in the past has fuelled higher share prices for energy and mining stocks on the resource-intensive TSX.However, despite the improvement in factory output, analysts said investors remained worried about a possible property bubble, inflation and what policies the new Chinese government might have in store.“Better than expected (Chinese) data six months ago would have been music to the market’s ears,” said Craig Fehr, Canadian markets specialist at Edward Jones in St. Louis. “I think right now investors are weighing any better than expected data against the potential for that to heat up property values and thus put (monetary) policy against growth in the near term.”The base metals component fell 1.75 per cent as May copper slipped four cents to US$3.36 a pound. Taseko Mines (TSX:TKO) moved down eight cents to C$2.75 while Teck Resources (TSX:TCK.B) lost 31 cents to $28.29Railway stocks fell alongside miners with Canadian Pacific Railway (TSX:CP) down $2.69 to $129.85.The gold sector lost about one per cent even as June bullion gained $1.80 to US$1,597.50 an ounce. Barrick Gold Corp. (TSX:ABX) faded 30 cents to C$29.54.Tech stocks were also weak with CGI Group (TSX:GIB.A) down 45 cents to 27.16 while smartphone maker BlackBerry (TSX:BB) gained 19 cents to $15.28.The energy sector shed early gains to move down 0.16 per cent as the May crude contract on the New York Mercantile Exchange fell $1.13 to US$96.10 a barrel. But Cenovus Energy (TSX:CVE) was up 30 cents at C$31.76.The TSX started the second-quarter trading period up a slight 2.5 per cent year to date, down from highs of mid-March when the market was ahead about 3.5 per cent, reflecting a stubbornly slow global economic recovery.In contrast, a stream of positive economic indicators, including a resurgent housing sector and continued stimulus measures from the U.S. Federal Reserve, helped power the Dow Jones industrials to a string of record-high closes, leaving the blue chip index up almost 11.25 per cent year to date.Meanwhile, Russia’s first deputy prime minister, Igor Shuvalov, says his government won’t protect Russian depositors who are losing money in Cyprus but may offer assistance to some Russian state companies.Big depositors at Cyprus’ largest bank, including some Russians, may be forced to accept losses of up to 60 per cent, far more than initially estimated under the European rescue package to save the country from bankruptcy. European markets were closed Monday.The Nikkei 225 index in Tokyo declined 2.1 per cent while South Korea’s Kospi fell 0.4 per cent.Markets in mainland China were mixed as the Shanghai Composite Index fell 0.1 per cent while the Shenzhen Composite Index rose 0.6 per cent. Markets in Australia and Hong Kong were closed for an extended Easter weekend holiday.

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