The Toronto stock market registered a solid gain for a second session Friday as investors built on strong manufacturing data from China and Europe.
However, there was some disappointment with a much weaker than expected report on U.S. home sales.
The S&P/TSX composite index gained 82.44 points to 12,756.79.
The Canadian dollar continued to slide, down another 0.3 of a cent to 94.79 cents US, as Statistics Canada said the July consumer price index came in at an annualized rate of 1.3 per cent, up from 1.2 per cent in June.
Economists had looked for Canada’s inflation rate to rise by two-tenths of a point to 1.4 per cent.
The loonie has tumbled about two U.S. cents this past week as the American dollar rose against other currencies amid growing conviction that the U.S. Federal Reserve will move this year to cut back on its monetary stimulus.
The Fed has been buying $85-billion (U.S.) of bonds every month in a measure known as quantitative easing to keep rates low and encourage investment. There is still a great deal of doubt about when the Fed might embark on tapering its asset purchases and the pace of such a cutback.
U.S. indexes largely shed early, minor gains after the U.S. Commerce Department said new-home sales dropped 13.4 per cent during July to a seasonally adjusted annual rate of 394,000. That’s down from a sales pace of 455,000 in June, which was revised sharply lower from a previously reported 497,000.
“The data may have markets reassessing U.S. growth and when (or by how much) the Fed will taper QE,” said CIBC World Markets economist Andrew Grantham.
The Dow Jones industrials were 6.79 points lower to 14,956.95.
The Nasdaq climbed 11.67 points to 3,650.38, supported by a seven per cent rise in Microsoft shares after the software giant announced that CEO Steve Ballmer is retiring in the next 12 months. The S&P 500 index was up 0.83 of a point at 1,657.79.
The gold sector led TSX advancers, up 2.6 per cent while December bullion moved up $16.70 to $1,387.50 (U.S.) an ounce. Iamgold (TSX:IMG) improved by 29 cents to $6.96 (Canadian) while Barrick Gold Corp. (TSX:ABX) climbed 66 cents to $21.23.
The base metals component rose one per cent while September copper was up a cent at $3.34 a pound. Lundin Mining (TSX:LUN) gained 14 cents to $4.77.
The TSX tech sector rose 0.8 per cent with BlackBerry (TSX:BB) ahead 12 cents to $10.87.
The energy sector also rose 0.5 per cent with the October crude contract on the New York Mercantile Exchange off 47 cents to $104.56 a barrel. Cenovus Energy (TSX:CVE) rose 31 cents to C$30.26.
Financials were also positive ahead of earnings reports next week from most of the big Canadian banks. TD Bank (TSX:TD) was ahead 82 cents to $88.79.
The TSX advance followed data from HSBC Corp. Thursday which showed an expansion in China’s manufacturing in August. Traders took that as evidence that the world’s second-largest economy may be over its recent weakness. HSBC’s preliminary purchasing managers index rose to 50.1 from July’s 47.7, crossing the critical 50 threshold to indicate an expansion in activity.
Traders were also encouraged by other manufacturing and service sector data which provided further evidence that the eurozone’s recovery from recession is gathering momentum.
Speculation about what the Fed may do about its asset purchases has driven bond yields higher. On Friday, the benchmark 10-year U.S. Treasury was down 0.01 of a point from late Thursday afternoon at 2.88 per cent.
Bond yields are up about 120 basis points since Fed chairman Ben Bernanke first mentioned the possibility of the Fed tapering its bond purchases in May.
Those rising bond yields have particularly impacted interest sensitive stocks including utilities and telecoms. The utilities sector is down almost three per cent this week alone and more than eight per cent this month. Telecoms have also retreated, down about 1.75 per cent this week although the sector has also been pressured recently by the prospect of American telco giant Verizon entering the Canadian wireless market.
U.S. markets have also softened this month following a strong runup that saw the Dow up as much as 20 per cent year to date at the beginning of August.
In other corporate news, Maple Leaf Foods Inc. (TSX:MFI) is selling its Rothsay business unit to Darling International Inc. of Irving, Texas. The Rothsay business operates six rendering plants and a biodiesel plant employing a total of 550 in four provinces. Maple Leaf says it will receive about $645-million for Rothsay and use the money to pay down corporate debt and its shares gained $1.06 or 7.92 per cent to $34.73.
European bourses were higher and London’s FTSE 100 index gained 0.6 per cent, Frankfurt’s DAX dipped 0.03 per cent while the Paris CAC 40 added 0.22 per cent.