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TSX Dips On China, Eurozone Worries - Canadian Commentary

Toronto stocks were lingering deep in the red Thursday morning as commodities moved lower amid concerns over global economic growth following disappointing manufacturing data from China and euro zone.

China's manufacturing sector activity shrank for a fifth consecutive month and euro zone private sector activity deteriorated to a 3-month low in March.

The S&P/TSX Composite Index shed 85.78 points or 0.69 percent to 12,350.71, a day after snapping its 2-session losing streak.

The Diversified Materials Index shed over 2 percent, with First Quantum Minerals (FM.TO) losing over 3 percent. Teck Resources (TCK_B.TO) wad down nearly 2 percent. The price of crude oil dipped below $105 Thursday morning amid speculation that slowdown in Chinese economic growth will hurt demand. Crude for May was down $2.43 to $104.84 a barrel.

China's manufacturing sector activity shrank for a fifth consecutive month, as output suffered a pullback due to weakening domestic demand in the world's second-largest economy, a survey by Markit Economics revealed. The headline flash HSBC/Markit manufacturing purchasing managers' index fell to 48.1 in March from 49.6 in February, with a PMI reading below 50 indicating contraction of the sector.

In the oil patch, Niko Resources (NKO.TO) dived almost 12 percent. Imperial Oil (IMO.TO) and Baytex Energy Corp. (BTE.TO) shed around 2 percent each.

Oil and gas company Surge Energy Inc. (SGY.V) dived over 4 percent after reporting a wider fourth quarter loss of C$5.53 million or C$0.09 per share versus a loss of C$4 million or C$0.08 per share last year.

The price of gold was extending losses as the U.S. dollar was steady against a basket of currencies. Gold for April shed $13.70 to $1,636.60 an ounce.

Among gold plays, Seabridge Gold (SEA.TO) lost 2 percent.

Precious metals focused royalty company Franco-Nevada Corp. (FNV.TO) surrendered nearly 2 percent after slipping into the red in fourth quarter, reporting net loss of $105.4 million or $0.80 per basic share compared to profit of $17.2 million or $0.15 per basic share in the year ago quarter. Excluding impairment charges of $152.4 million on its Ezulwini and Podolsky streams, adjusted net income was $40.8 million or $0.31 per share.

Meanwhile, lululemon athletica inc. (LLL.TO) edged up 1 percent after reporting higher fourth quarter net income of $73.52 million or $0.51 per share versus $54.77 million or $0.38 per share last year. Analysts were expecting the athletic apparel maker to report earnings of $0.49 per share. Further, for fiscal 2012, the company projects net revenue to be in the range of $1.3 billion to $1.325 billion and earnings per share are expected to be in the range of $1.50 to $1.57 for the full year. Analysts expect the company to earn $1.61 per share, on revenues of $1.31 billion.

In economic news, Statistics Canada said retail sales rose 0.5 percent to C$38.9 billion in January, a fifth increase in six months. The advance was fueled by unusually strong demand for new motor vehicles, particularly small fuel-efficient cars. However, excluding sales at motor vehicle and parts dealers, retail sales declined 0.5 percent.

From the U.S., the U.S. Labor Department said that initial jobless claims fell to 348,000 from the previous week's revised figure of 353,000. The drop surprised economists, who had expected jobless claims to edge up to 352,000 from the 351,000 originally reported for the previous week.

Elsewhere, euro zone private sector activity deteriorated further in March, a survey by Markit Economics revealed. The flash composite output index fell to a three-month low of 48.7 in March from 49.3 in February. An index reading above 50 indicates expansion of the sector and a reading below 50 suggests contraction. Economists expected an improvement in the index reading to 49.6.

Separately, a flash data from Markit Economics revealed that Germany's private sector expanded only at a marginal pace in March as output growth eased to a four-month low. The flash Composite Output Index fell to 51.4 from 53.2 in February. Manufacturers and service providers both saw moderation in activity growth to three-month lows during March.

Meanwhile, U.K. retail sales declined more than expected in February, the Office for National Statistics said. Including automotive fuel, retail sales volume fell 0.8 percent in February from a month ago. The decline reversed a 0.3 percent rise in January and larger than the expected drop of 0.5 percent.

by RTT Staff Writer

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