The Toronto stock market was lower Monday as traders balanced surveys that showed Chinese manufacturing shrank in April for the fourth month in a row with an improving American non-manufacturing sector.
The S&P/TSX composite index dropped 80.51 points to 14,684.64 as the HSBC index of Chinese factory activity rose by 0.1 point to 48.1 in April, using a 100-point scale on which readings below 50 indicate contraction.
The gauge also fell short of its already weak preliminary result, raising another round of questions about the health of China, the world’s second biggest economy. But analysts noted that the recent mass of data indicates that the global economy is still moving in the right direction.
“It is not a surprise to anybody that the Chinese data is showing the economy growing at slower pace,” said Craig Fehr, Canadian markets specialist at Edward Jones in St. Louis.
“Broadly the economy backdrop continues to move in a favourable direction and so any data to the contrary, even if it is data that was expected like the Chinese PMI data, is enough to get investors to perhaps take a step back and exercise a little more caution.”
The Canadian dollar was up 0.12 of a cent at 91.19 cents (U.S.).
U.S. indexes were also negative but well off the worst levels of the session as other data showed greater than expected expansion in the American service sector. The Institute for Supply Management’s index hit 55.2 during April versus the reading of 54 that economists had expected.
The Dow Jones industrials recovered from a triple-digit tumble to advance 2.47 points to 16,515.36, the Nasdaq gained 5.13 points to 4,129.02 and the S&P 500 index climbed 1.46 points to 1,882.60.
Andrew Grantham, economist at CIBC World Markets, called the ISM report “further encouraging evidence that the U.S. economy is bouncing back strongly in Q2, following a weather-impacted first quarter.”
The TSX base metals led decliners, down 1.4 per cent as the Chinese data helped push July copper down a cent at $3.06 (U.S.) a pound.
The energy sector declined 0.32 per cent as June crude in New York slipped 26 cents to $99.50 a barrel.
The gold sector drifted 0.22 per cent higher as worries about deteriorating conditions in Ukraine pushed gold higher for a second day, up $8.30 to $1,311.20 an ounce.
On the corporate front, retailer Target announced Monday that chairman, president and CEO Gregg Steinhafel is stepping down nearly five months after the retailer disclosed a massive security breach, which has hurt its reputation among customers and has derailed its business. The company has struggled with its expansion into Canada, its first foray outside the U.S. and its shares fell three per cent to $60.13.
In the U.S. on Monday, drugmaker Pfizer said its first-quarter profit dropped 15 per cent due to $2.33-billion, or 36 cents per share, amid cheaper generic competition that continues to reduce sales of its multiple medicines. Earnings ex-items were 57 cents a share, two cents better than forecast. Revenue totalled $11.35-billion, down nine per cent and below expectations of $12.08-billion. Its shares fell 2.2 per cent to $30.07.
It’s a heavy earnings week in Canada where investors will take in reports from major companies including BCE Inc., Sun Life Financial, pipeline company Enbridge, Kinross Gold, Talisman Energy, Tim Hortons, Canadian Natural Resources, Canadian Tire and Valeant Pharmaceuticals.