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Trader Eric Schumacher works on the floor of the New York Stock Exchange, in New York. (Richard Drew/AP)
Trader Eric Schumacher works on the floor of the New York Stock Exchange, in New York. (Richard Drew/AP)

At the open: TSX slides despite upbeat retail sales in U.S. Add to ...

Canadian and U.S. stock indexes were modestly lower at the open, as a stronger-than-expected retail sales report in the U.S. countered market concerns that this year's equity rally has gone on too long.

In early trading, the S&P/TSX composite index was down 59 points, or 0.4 per cent, at 12,819.

In the U.S., the S&P 500 was down 3 points, or 0.2 per cent, at 1,549 and the Dow Jones industrial average was down 29 points, or 0.2 per cent, at 14,418.

The U.S. Commerce Department said retail sales in February rose 1.1 per cent, easily beating forecasts calling for a rise of 0.5 per cent. Year-over-year, retail sales grew 4.6 per cent, underscoring how the U.S. consumer has remained resilient in the face of higher payroll taxes at the start of this year. That said, a lot of the rise was driven by higher gasoline prices.

Research In Motion Ltd. opened down about 1 per cent but quickly found a floor and was last trading up 1.7 per cent.. The stock, also now known as BlackBerry, rallied nearly 14 per cent on Monday amid rumours that China's Lenovo Group could be considering a bid for the company. However, Bloomberg News quoted a Lenovo spokesman last night as saying "there is not and has not been any specific evaluation or activity underway regarding BlackBerry."

Elsewhere on the TSX, Air Canada shares were up about 4 per cent after Ottawa granted the airline more time to meet its pension funding obligations. And Transcontinental Inc. shares were up 3 per cent after reporting fiscal first-quarter adjusted earnings of 37 cents per share, a penny short of the consensus estimate, but up 5 per cent from a year ago.

European markets were mixed this morning, but mostly lower, with Italy's FTSE MIB losing 1.3 per cent and London's FTSE 100 down 0.9 per cent. Sentiment for the region was hurt a little this morning by data showing output at euro zone factories falling more than expected in January. Also, Italy held its first bond auction this morning since Fitch Ratings downgraded the country's debt last week. Not surprisingly given the country's unsettled political state, yields rose, with two-year bonds producing a yield of 2.48 per cent, up from 2.30 per cent in a bond sale in mid-February.

The Chinese and Hong Kong markets saw some of the steepest losses overnight, with home builders taking the biggest hit on a report that the city of Shenzhen banned developers from raising new housing prices. China's economic growth prospects are tied directly to the real estate sector, which has seen prices soar again in recent months, raising concerns of an expanding bubble that could burst without regulatory intervention.

Market players will keep a nervous eye on the latest budgetary moves in Washington, which has seen little progress since automatic spending cuts started kicking in at the start of this month. The Democrats Tuesday had few good things to say about a House Republican plan put forward that would cut spending by $4.6-trillion (U.S.) over the next decade without raising taxes. Senate Democrats are expected to reveal their own budget plan later today. The spending cuts that are already being phased in are likely to slow U.S. economic growth significantly this year unless a new budget deal is reached.


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