Mining stocks led the way to a solid early gain on the Toronto stock market Wednesday and commodity prices advanced in the wake of strong manufacturing reports from China and Europe.
The S&P/TSX composite index ran ahead 102.12 points to 12,675.2.
The Canadian dollar was lower amid Canadian retail sales report for June that was much weaker than economists were expecting. The currency moved down 0.35 of a cent to 95.13 cents US after Statistics Canada reported that retail sales fell by 0.6 per cent. Economists had forecast a 0.4 per cent dip following a strong 1.9 per cent rise in May.
Also, the American currency continued to strengthen after the minutes to the last Federal Reserve policy meeting, published Wednesday, showed most officials appeared comfortable with the idea of starting to reduce its monetary stimulus this year.
U.S. indexes also advanced but were held back by weak earnings from the retail sector.
The Dow Jones industrial average was ahead 35.78 points to 14,933.33, the Nasdaq composite index gained 28.34 points to 3,628.13 and the S&P 500 index climbed 8.99 points to 1,651.79.
There was mixed news on the employment front as the number of Americans seeking unemployment benefits rose 13,000 last week to a seasonally adjusted 336,000. But the Labor Department added that the four-week average, which smooths week to week fluctuations, fell for the sixth week in a row to 330,500. That’s the lowest for the average since November 2007.
Stocks finished negative Wednesday with the TSX and the Dow down about 100 points over disappointment that the minutes didn’t contain clarity over whether the so-called tapering will begin in September or December. The Fed has been purchasing $85-billion of financial assets a month to lower interest rates and spur growth. The asset purchases have also helped keep a strong rally going on U.S. markets.
But the mood improved Thursday after a survey from HSBC provided further evidence that China, the world’s second-largest economy, may be over its recent soft patch. Its monthly purchasing managers’ index, a gauge of business activity, rose to 50.1 points for August from July’s 47.7. Numbers above 50 indicate an expansion in activity.
“The improvement is one more piece of evidence that China’s economic growth is stabilizing,” observed BMO Capital Markets senior economist Benjamin Reitzes.
“We’ll need to see confirmation from the broader set of August data (released around mid-September), but growth levelling out around 7.5 per cent would be welcome news, as just a couple of months ago it appeared that growth was poised to decelerate towards seven per cent (or lower).”
Meanwhile, the monthly composite PMI, which includes both manufacturing and services, for the 17-country eurozone rose to 51.7 in August from 50.4. The index, published by financial information company Markit, is now at its highest level since June 2011 and provides further evidence that the eurozone recovery from recession is gathering pace.
The positive data helped send oil and metal prices higher. The mining sector led advancers, up three per cent while September copper on the Nymex gained four cents to $3.34 a pound. Turquoise Hill Resources (TSX:TRQ) gained 23 cents to $5.49 while Teck Resources (TSX:TCK.B) climbed 80 cents to $27.08.
The gold sector ran up 2.3 per cent while December bullion gained $2.10 to $1,372.20 an ounce. Barrick Gold Corp. (TSX:ABX) rose 68 cents to $20.64.
The energy sector rose 0.4 per cent as the October crude contract on the New York Mercantile Exchange climbed 39 cents to $104.24 a barrel. Suncor Energy (TSX:SU) was up 37 cents to $35.22.
Outside of the resource groups, the industrials component was the biggest gainer, up 0.6 per cent with Canadian Pacific Railway (TSX:CP) ahead $1.84 to $125.75.
U.S. bond yields continued to rise, with the benchmark 10-year Treasury up 0.01 of a point to 2.9 per cent. Yields have steadily climbed since May when Fed chairman Ben Bernanke first mentioned the possibility of the central bank cutting back on its latest quantitative easing.
On the corporate front, Hewlett-Packard shares fell 10 per cent to $22.82 after the company missed on earnings and revenue in the latest quarter. Revenue fell eight per cent to $27.2-billion and earnings ex-items came in at 86 cents a share. Analysts expected earnings of 87 cents per share on revenue of $27.3-billion, according to FactSet.
Retailer Sears Holdings Corp. lost $194-million, or $1.83 per share in the latest quarter. That compares with a loss of $132-million, or $1.25 per share, a year earlier .Excluding one-time charges, it lost $1.46 per share. Revenue for the company, declined six per cent to $8.87-billion from $9.47-billion, mostly due to store closings. Its shares fell 9.65 per cent to $39.09.
Shares in Abercrombie & Fitch plunged 19 per cent to $20.72 as the teen retailer missed analysts estimates and also gave a third-quarter earnings forecast well below Wall Street expectations. The company earned $11.4-million, or 14 cents per share. That’s down from $17.1-million, or 20 cents per share, a year earlier. Revenue dipped one per cent to $945.7-million while U.S. sales fell eight per cent. Analysts expected earnings of 28 cents per share on revenue of $996.7-million.
European bourses were sharply higher with London’s FTSE 100 index ahead 0.87 per cent while Frankfurt’s DAX and the Paris CAC 40 gained about 1.1 per cent.