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At the open: TSX advances amid strong bank earnings, Chinese data

Gloria Nieto/The Globe and Mail

The Toronto stock market was higher Thursday amid solid earnings from Royal Bank and TD Bank, and Chinese manufacturing data.

The S&P/TSX composite index gained 53.18 points to 14,703.04 as both banks beat analysts' expectations.

The Canadian dollar was unchanged at 91.62 cents (U.S.) amid a worse than expected showing in retail sales during March.

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Statistics Canada reported that sales actually fell 0.1 per cent in March to $41.1-billion. Economists had expected a gain of 0.3 per cent.

U.S. indexes were positive after racking up strong gains Wednesday in the wake of the release of minutes from late April's Federal Reserve meeting, which reinforced expectations the U.S. central bank won't rush to raise interest rates.

The Dow Jones industrials climbed 11.72 points to 16,544.78, the Nasdaq gained 13.94 points to 4,145.48 while the S&P 500 index added 3.26 points to 1,891.29.

Royal Bank's quarterly net earnings were up 15 per cent from a year ago to $2.2-billion or $1.47 (Canadian) a share, helped along by record earnings in its wealth management segment. Cash diluted earnings per share were $1.49, beating estimates by five cents a share. RBC's shares ran ahead $1.41 to $75.70.

And TD shares gained $1.12 to $53.02 as the bank reported quarterly net income of $1.98-billion, up from $1.71-billion in the same quarter of 2013. Diluted earnings per share were $1.04 in the quarter, compared with 89 cents year-over-year. Adjusted net income was up at $2.07-billion, or $1.09 diluted EPS, beating estimates by seven cents a share.

Meanwhile, China's manufacturing contraction eased in May, as HSBC's preliminary purchasing managers' index rose to 49.7 in May from 48.1 in April. Numbers above 50 on the 100-point scale indicate expansion.

The HSBC reading follows a similar survey by an official group that had also been showing signs of a rebound in China, with factory activity growing weakly in April.

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"The China HSBC 'flash' PMI is the strongest sign yet that growth is improving," observed a commentary from Barclays Research.

Analysts also say that the improvements in both surveys suggest the Chinese government's targeted measures to support the economy are moderating the pace of the slowdown.

Elsewhere on the earnings front, electronics seller Best Buy says its quarterly net income was $461-million, or $1.31 (U.S.) per share, a turnaround from a loss of $81-million, or 24 cents per share, a year earlier. Adjusted earnings were 33 cents per share. Analysts expected 19 cents. Total revenue fell three per cent to $9.04-billion, well below expectations of $9.23-billion but its shares were up $1.91 to $27.26.

Sears Holdings Corp.'s first-quarter loss widened to $402-million, or $3.79 (U.S.) per share, compared with a loss of $279-million a year ago. Excluding certain items, it lost $2.24 per share. Revenue fell seven per cent to $7.88-billion amid its ongoing struggle to attract shoppers. Its shares fell back $1.59 or 4.35 per cent to $34.97. Sears Holdings has said it's considering selling its 51 per cent stake in Sears Canada.

The base metals sector also supported the TSX, up 0.6 per cent as copper prices rose in the wake of the Chinese manufacturing data with the July contract up two cents to $3.14 a pound.

June bullion gained $12.20 to $1,300.30 an ounce and the gold sector rose 0.4 per cent.

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Energy stocks were the biggest weight on the TSX with the sector down 0.3 per cent, while July crude gained three cents to $104.10 a barrel.

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