Toronto stock market to head lower amid signs of weakening Chinese economy

TORONTO – The Toronto stock market was in for a lower open Monday as commodity prices stepped back following the release of weak Chinese economic data over the weekend.

The Canadian dollar edged up 0.01 of a cent to 97.18 cents US.

U.S. futures were lower after the key Dow Jones industrial average ended last week at record highs, having recouped all the losses resulting from the 2008 financial crisis and the recession that followed.

The Dow Jones industrial futures slipped 19 points to 14,294, the Nasdaq futures were off 6.8 points to 2,791 and the S&P 500 futures were down 3.75 points to 1,590.75.

Data over the weekend showed China’s economy slowing at the beginning of the year.

Industrial production was up 9.9 per cent year over year in January while retail sales rose 12.3 per cent in February. Both figures were below expectations and weaker than the previous month.

Worries grew that the central bank is reining in lending as other figures showed that new loans came in at a less than expected 620 billion yuan.

On top of it all, inflation came in 3.2 per cent higher year over year in February, which was also higher than economists expected.

“The data suggest that growth has slowed, but it is too soon to say that activity has hit the brakes,” said BMO Capital Markets senior economist Jennifer Lee.

“Nonetheless, this will be a challenging time for the new government to take over.”

Analysts also cautioned that the Chinese numbers were likely impacted by the country’s Lunar New Year holiday period and suggested it would take a few more months of data to get a clearer picture.

Commodity prices fell following the release of the economic data from the world’s second-biggest economy with April crude on the New York Mercantile Exchange down 21 cents to US$91.74 a barrel.

May copper declined two cents to US$3.49 a pound. However, April bullion gained $2.40 to US$1,579.30 an ounce.

Overseas, Italian shares underperformed other European bourses, with the Milan exchange 0.8 per cent lower as investors wait to see if a government can be forged following inconclusive elections two weeks ago. A downgrade of the country’s credit rating from Fitch on Friday also added to the prevailing caution.

Elsewhere, London’s FTSE 100 index inched up 0.02 per cent, Frankfurt’s DAX shed 0.34 per cent while the Paris CAC 40 fell 0.42 per cent.

Earlier, Asian traders had their first chance to respond to the figures showing the U.S. unemployment rate down at 7.7 per cent in February and 236,000 jobs created during the month.

Japan’s Nikkei 225 index marched higher for the eighth straight session as the yen slid to a near three and a half year low against the U.S. dollar, which got further support from the jobs data — a lower yen potentially helps Japan’s powerhouse exporters. The Nikkei rose 0.5 per cent to close at 12,349.05.

Elsewhere, Hong Kong’s Hang Seng closed nearly unchanged while Australia’s S&P/ASX 200 added 0.5 per cent.

In corporate news, the board of Aurizon Mines Ltd. (TSX:ARZ) has adopted a new shareholder rights plan, saying it wants to prevent Alamos Gold Inc. (TSX:AGI) from using its voting power to defeat a better takeover offer from a rival company. Alamos already owns 16 per cent of Aurizon and has offered to buy up the rest of its stock.

Aurizon’s board is supporting a rival offer from Hecla Mining Co. and said Monday that its new rights plan will ensure all shareholders are treated equally.

On the economic front, data coming out at the end of the week is expected to show the housing market is cooling at a faster pace. Existing home sales for February are expected to show a 12.5 per cent year over year decline following a 5.2 per cent slide in January. Average prices for February are expected to slip one per cent.

In the U.S., investors will take in the February report on retail sales on Wednesday. It is expected sales rose by 0.5 per cent following a 0.1 per cent rise in January.

On Friday, the U.S. Consumer Price Index for February will be released. Economists forecast a 0.5 per cent rise, largely driven by higher gasoline prices.

Industrial production figures are also out Friday. They are expected to show a 0.6 per cent rise, led by auto production and mining.