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TSX little changed amid stronger than expected Chinese growth, oil retreats

January 20, 2015 - 1:35 PM

TORONTO - The Toronto stock market closed little changed as better than expected Chinese economic data for the last quarter helped take some of the sting out of a global economic downgrade by the International Monetary Fund.

Energy stocks continued to weigh on the Toronto Stock Exchange as crude prices fell further and the S&P/TSX composite index declined 4.06 points to 14,308.44.

China's gross domestic product growth topped expectations the fourth quarter, rising 7.3 per cent. Full-year growth came in at 7.4 per cent. It was the weakest expansion in nearly a quarter century but raised hopes for intervention by the Chinese government.

"We’re actually seeing these numbers as fairly encouraging (as) we saw signs of stabilization in Chinese growth," said Jean-Francois Dion, portfolio manager at RBC Dominion Securities.

"I think we’re seeing increasing likelihood of some kind of stimulus coming out of China over the next few months or so, which would be welcome."

The Canadian dollar fell to its lowest level since late April 2009, down 1.1 cents to 82.6 cents US a day before the Bank of Canada makes its next interest rate announcement. Investors also digested Statistics Canada data that showed manufacturing sales fell 1.4 per cent in November to $51.5 billion. Analysts had expected a smaller decline of 0.7 per cent.

U.S. indexes were positive amid an earnings miss from investment bank Morgan Stanley. The Dow Jones industrials added 3.66 points to 17,515.23, while the Nasdaq was up 20.47 points at 4,654.85 and the S&P 500 index rose 3.13 points to 2,022.55.

Morgan Stanley reported fourth-quarter earnings ex-items came in at 40 cents a share, seven cents less than analysts forecast and its shares slipped 0.4 per cent to US$34.75.

Meanwhile, the International Monetary Fund lowered its forecasts for global growth over the next two years, warning that persistent weakness in most major economies will outweigh the boost from lower oil prices. It lowered the projections it issued in October by 0.3 of a percentage point and now forecasts global growth at 3.5 per cent this year and 3.7 per cent in 2016.

The TSX energy sector was the lead decliner, down 2.4 per cent as March crude fell $2.66 to US$46.47 a barrel.

Other decliners included consumer staples and financials.

The base metals sector gained 2.15 per cent while March copper dropped two cents to US$2.59 a pound.

However, gold prices continued to climb with the February contract ahead $17.30 to US$1,294.20 an ounce and the gold sector ran ahead 4.2 per cent.

Traders also have high hopes for the European Central Bank, which is expected to unveil on Thursday a major program of quantitative easing involving the massive purchase of government bonds in a bid to increase inflationary pressures. Economic growth has been tepid and there have been worries that the region could fall prey to deflation, a situation where businesses and consumers hold off on purchases in the hope that items will just get cheaper.

Dion added that markets will be very disappointed if the ECB fails to live up to expectations.

"There’s a lot of optimism and enthusiasm out there and most investors I think expect something fairly significant to be announced. So it would be major disappointment to many out there if it wasn’t the case."

News from © The Canadian Press, 2015
The Canadian Press

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