TSX rises amid strong Chinese manufacturing data, hopes for fiscal cliff deal

TORONTO – The Toronto stock market advanced on the last trading day of 2012 with support from the resource sector in the wake of Chinese data that showed manufacturing growth in December at its strongest in 18 months.

But attention was mainly focused on Washington and attempts to head off automatic tax hikes and spending cuts due to click in at the start of the new year that could push the U.S. back into recession if they’re allowed to stand.

The S&P/TSX composite index gained 37.46 points to 12,353.58 while the TSX Venture Exchange was ahead 0.26 of a point to 1,202.1.

The Canadian dollar rose 0.12 of a cent to 100.47 cents US.

U.S. indexes were little changed as the U.S. teeters at the edge of the so-called “fiscal cliff” — despite weeks of partisan haggling between the Republicans who control the lower house of Congress and Democrats who control the White House and Senate. Any agreement must be passed by all three.

Both the House and Senate were meeting Monday, although there was no expectation that legislation could be approved by both houses by midnight, even if they reach a compromise. Instead, the best-case scenario would be pass it and have it ready for President Barack Obama to sign before much impact is felt.

The Dow Jones industrial was up 2.23 points to 12,940.34, the Nasdaq rose 18.85 points to 2,979.16 while the S&P 500 index gained 3.87 points to 1,406.3.

New York markets close at 1 p.m. EST while the TSX closes at its usual time, 4 p.m.

Stock indexes have held up well throughout December with traders inclined to think that Republicans and Democrats would arrive at a compromise on cutting spending and raising taxes for top income earners by the end of this year.

Investors remain confident that some sort of deal will be reached, if not Monday then in the coming days or weeks. As a result, they think that the potential damage caused by higher taxes and spending cuts will be limited.

Still, the TSX is heading for a 2012 gain of only about three per cent, reflecting a slowing Chinese economy during much of the year and worries about how much of a hit the U.S. economy would take from steps to cut the huge American deficit.

“The highlight really was that you had the commodity sectors underperforming,” said Norman Raschkowan, North American strategist at Mackenzie Financial Corp.

“The energy sector and the materials sector really didn’t give anything to the market. And without them, it’s hard for the Canadian market to really post any sort of impressive result.”

The resource-based TSX has also been pressured by the ongoing government debt crisis in Europe, which has sent much of the 17-nation eurozone into recession.

The best performers on the TSX during 2012 were financials, up about 12 per cent, and the consumer staples sector, which ran up almost 20 per cent.

U.S. markets have fared better with the Dow industrials up about 5.8 per cent. The tech-heavy Nasdaq is ahead 13 per cent, but off the highs of the year amid a drop of more than 20 per cent in Apple Inc. shares during the last quarter.

Copper prices rose as the HSBC China manufacturing Purchasing Managers’ Index rose to a final reading of 51.5, the best reading for the data since May 2011. The reading was an upward revision from the preliminary 50.9 result and an improvement from November’s PMI of 50.5.

The gains came amid “faster new business flows and the end of destocking,” said HSBC chief China economist Hongbin Qu.

“Such a momentum is likely to be sustained in the coming months, when infrastructure construction runs into full speed and property-market conditions stabilize.”

The March contract was up three cents to US$3.62 a pound. China is the world’s biggest consumer of copper, which is viewed as an economic barometer as it is used in so many applications.

The base metals sector rose 1.6 per cent as Teck Resources (TSX:TCK.B) rose 80 cents to C$35.87 while First Quantum Minerals (TSX:FM) advanced 61 cents to $21.81.

Gold stocks also headed higher as bullion prices also improved with the March contract ahead $7.40 to US$1,663.30 an ounce. Goldcorp Inc. (TSX:G) climbed 52 cents to C$35.97 while Iamgold (TSX:IMG) was ahead 20 cents to $11.18.

The energy sector was ahead 0.22 per cent while oil prices shook off early losses and the February contract on the New York Mercantile Exchange gained 42 cents to US$91.22 a barrel. Suncor Energy was ahead 22 cents to C$32.44.

Telecoms were the leading decliner with Telus Corp. (TSX:T) down 77 cents to $64.67.

European bourses were mixed with London’s FTSE 100 index down 0.47 per cent while the Paris CAC 40 rose 0.58 per cent.

Earlier in Asia, the picture was fairly subdued in those markets that were open — among others, markets in Japan and South Korea were closed for the New Year’s holidays.

Hong Kong’s Hang Seng, trading for a half-day, closed marginally lower while mainland Chinese stocks rose following the release of the HSBC report. Australia’s S&P/ASX 200 fell 0.5 per cent.

On the corporate front, CIBC (TSX:CM) has agreed to pay US$149.5 million to settle a claim with the Lehman Estate, which was set up after the collapse of a onetime Wall Street giant. The claims were filed against CIBC and numerous other financial institutions in September 2010, two years after the venerable investment bank Lehman Bros. went bankrupt.

The estate claimed CIBC was obliged honour a commitment made under an agreements before the September, 2008 collapse of the investment bank. CIBC shares slipped 75 cents to $79.80.

Bombardier Inc. (TSX:BBD.B) says it has an order to supply Germany’s Abellio Rail with 35 of its Talent 2 trains in a deal valued at US$226 million. Bombardier announced in a release Monday that it will supply 20 three-car and 15 five-car trains, with the vehicles due to enter service in December 2015. Bombardier shares were off one cent to $3.72.