January 23, 2014 / 2:23 PM / 4 years ago

TSX stumbles as China data disappoints investors

TORONTO (Reuters) - Canada’s main stock index slipped on Thursday after soft manufacturing data from China triggered declines in almost every major sector, overcoming a strong performance by gold-mining shares.

People attend a market open ceremony for the Toronto Stock Exchange at the TSX Broadcast Centre in Toronto June 20, 2008. REUTERS/Mark Blinch

The big jump in gold-mining shares, buoyed by a 1.4 percent gain in the price of bullion, failed to arrest the slide.

Data showed that activity in China’s factory sector dropped in January for the first time in six months. China’s Flash Markit/HSBC purchasing managers index fell to a 49.6 reading in January from December’s 50.5.

The export-driven, resource-heavy Canadian market tends to react sharply to news from China, a major commodity consumer.

“You’re going to see fluctuations in economic data that comes out of China, which is why we have a bias towards United States, Canada and Europe,” said Andy Nasr, managing director and senior portfolio manager at Middlefield Capital.

The Toronto market, which has had a strong start to the year, eased after hitting a 2-1/2-year high earlier in the session.

“In this environment, the valuations are a little bit stretched. So it only takes a little bit of bad news to precipitate a selloff,” Nasr said. “But longer-term, the trend certainly supports owning equities in North America and in developed markets, where we think we’re going to see economic growth accelerate.”

Both the World Bank and the International Monetary Fund raised their projections for global economic growth earlier this month.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE closed down 55.23 points, or 0.39 percent, at 13,932.97.

“It’s quite discouraging to see the flash PMI back under 50,” said Colin Cieszynski, senior market analyst at CMC Markets Canada, referring to the Chinese data.

“Not only is China not rebounding, but it looks like it may continue to struggle for some time into this year,” he added.

Nine of the 10 main sectors on the index were in the red on Thursday.

Financials, the index’s most heavily weighted sector, gave back 1.1 percent. Royal Bank of Canada RY.TO slipped 1.5 percent to C$71.42 and had the biggest negative influence on the index. Bank of Nova Scotia BNS.TO lost 0.6 percent to C$64.21.

Energy shares stumbled 0.4 percent, with Suncor Energy Inc SU.TO shedding 0.5 percent to C$37.80.

Shares of gold producers advanced 3.3 percent. Barrick Gold Corp ABX.TO added 3 percent to C$21.43, and Goldcorp Inc G.TO rose 4.1 percent to C$26.69.

In corporate news, Barrick’s chief executive said he expects the miner to record a further impairment charge at its Pascua-Lama gold-copper project in South America in the fourth quarter.

Editing by Peter Galloway and Nick Zieminski

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