TSX to open higher, commodities advance amid mixed Chinese manufacturing data

TORONTO – The Toronto stock market headed for a positive session Monday as commodity prices advanced amid conflicting views of China’s manufacturing sector.

The Canadian dollar was up 0.14 of a cent to 96.59 cents US.

U.S. futures advanced as traders looked ahead to the most up-to-date snapshot of the American manufacturing sector. The Institute for Supply Management’s Index is being released mid-morning and is expected to ease to 50.5, down slightly from April’s reading of 50.7.

The Dow Jones industrial futures ran up 91 points to 15,191, the Nasdaq futures gained 10 points to 2,990.25 and the S&P 500 futures were ahead 8.8 points to 1,637.8.

HSBC’s monthly purchasing managers’ index for China fell to 49.2 in May. That’s down from 50.4 in April. Readings below 50 indicate a contraction.

A similar survey released Saturday that found manufacturing ticked up slightly in the world’s second-biggest economy. That report by the government-sanctioned China Federation of Logistics and Purchasing found manufacturing edged up to 50.8.

The contrasting reports could be a sign of a two-speed recovery.

Bigger companies and ones that cater to China’s domestic market are more strongly represented by the official PMI while smaller private companies focused on exports are better covered by HSBC and research firm Markit’s report.

Commodity prices rose despite the conflicting Chinese data with the July crude contract on the New York Mercantile Exchange up 87 cents to US$92.84 a barrel after a weak global economic outlook depressed prices more than two per cent last week.

July copper gained four cents to US$3.33 a pound while August bullion on the Nymex rose $3.50 to US$1,396.50 an ounce.

The Toronto market dipped a slight 23 points last week while the Dow industrials gave back 1.22 per cent as cracks started to show up in a rally that has gone on practically non-stop since late last year.

Trading was volatile amid doubts about how long the U.S. Federal Reserve will carry on with its program of quantitative easing. The so-called QE3 involves the Fed buying up US$85 billion of bonds every month to keep long term rates low and encourage lending.

U.S. indexes charged ahead strongly during May with the Dow industrial average gaining almost two per cent, leaving the blue chip barometer up about 15 per cent year to date.

The Toronto market hasn’t fared nearly as well, gaining about 1.8 per cent for this month and the year to date, with some of the greatest declines coming from the base metals sector amid weak demand for commodities and a stubbornly slow global economic recovery.

In corporate news, Centerra Gold Inc. (TSX:CG) said it expects the Kumtor mine in eastern Kyrgyzstan to achieve its 2013 production target despite last week’s shutdown caused by protests calling for nationalization of the operation. Centerra said on Sunday that the mine and mill had resumed operations.

Kumtor is the largest foreign-owned gold mine in the former Soviet Union.

Drug manufacturer Patheon Inc. (TSX:PTI) had a profit of $100,000 in the second quarter, an improvement from a 79.6-million loss a year earlier, when it recorded a $57.9-million impairment charge. Revenue rose 40 per cent to $253.9 million, with about $54.6 million of the increase due to an acquisition.

Canadian Pacific (TSX:CP) says there is no indication that a freight train derailment east of Sudbury on Sunday poses a danger to the public or the environment. CP said Sunday one of the rail cars derailed and as a result struck a trestle bridge near the community of Wanup.

European bourses were mixed amid data that suggested the eurozone may be stabilizing somewhat. The monthly manufacturing purchasing managers’ index from financial information company Markit rose to 48.3 points in May from the initial estimate of 47.8.

London’s FTSE 100 index declined 1.36 per cent, Frankfurt’s DAX was up 0.35 per cent and the Paris CAC 40 climbed 0.37 per cent.

Turkey’s main stock market posted the biggest fall amid protests against the government of Prime Minister Recep Tayyip Erdogan. The Borsa Istanbul 100 Index was down 6.7 per cent as investors worried about the destabilizing effect of the demonstrations on the economy.

Earlier in Asia, Japan’s Nikkei 225 index plummeted 3.7 per cent as optimism over the country’s economic outlook continued to fade. The index has been particularly volatile over the past couple of weeks due to the yen’s appreciation from lows.

The yen has spent most of this year on the retreat in the aftermath of the Bank of Japan’s big monetary stimulus.

Elsewhere, South Korea’s Kospi fell 0.6 per cent, Hong Kong’s Hang Seng fell 0.5 per cent and Shanghai’s main index dropped 0.1 per cent.