Stock markets to fall on disappointing Chinese data, sequester uncertainty

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Stock markets to fall on disappointing Chinese data, sequester uncertainty

TORONTO - The Toronto stock market headed for a sharply lower open amid disappointing economic data from China.

Traders also considered the effect of deep government spending cuts due to take effect today in the United States. It's known as the sequester and involves US$85 billion of across-the-board cuts.

The Canadian dollar dipped 0.04 of a cent to an eight-month low of 96.92 cents US ahead of the release of Canadian economic growth data for the fourth quarter.

U.S. futures were also lower as traders looked to other data on the health of the U.S. manufacturing sector.

The Dow Jones industrial futures fell 57 points to 13,981, the Nasdaq futures fell 12.75 points to 2,725.25 and the S&P 500 futures were down 8.2 points to 1,505.1.

Prices for oil and copper registered sharp declines as government data showed that Chinese manufacturing activity expanded at a slower rate in February than January.

The government-sponsored version of the manufacturing Purchasing Managers’ Index came in at 50.1 for February, only marginally ahead of the 50-point threshold that signals an expansion. Economists had looked for a reading of 50.5.

On the commodity markets, the April crude contract on the New York Mercantile Exchange fell $1.26 to $90.79 a barrel.

May copper on the Nymex fell six cents to US$3.48 a pound and April gold lost $6.70 to US$1,571.40 an ounce.

Also in the background was the uncertainty surrounding Europe's third-biggest economy following inconclusive elections earlier this week. Italy's main stock index, the FTSE MIB, was down about two per cent.

Elsewhere, London's FTSE 100 index lost 0.75 per cent after British manufacturing figures came in worse than expected and unemployment in the 17-country euro area rose to 11.9 per cent from 11.8 per cent in December.

Frankfurt's DAX was down 1.07 per cent and the Paris CAC 40 fell 1.4 per cent.

In Asia, Tokyo’s Nikkei 225 stock index gained 0.4 per cent on expectations that the Bank of Japan will push ahead with more drastic monetary easing under its future new governor, Haruhiko Kuroda.

Elsewhere in Asia, markets were lower as China’s manufacturing grew at its weakest rate in five months in February as demand faltered and factories shut down for the Lunar New Year holiday. Hong Kong’s Hang Seng dropped 0.6 per cent, Australia’s S&P/ASX 200 shed 0.4 per cent and mainland China’s benchmark fell 0.3 per cent.

There was also plenty of earnings news to take in.

After the close Thursday, National Bank of Canada (TSX:NA) reported adjusted net income of $2.02 per diluted share for the first quarter of fiscal 2013, beating analyst estimates by a penny. Total revenue for the quarter, however, was $1.24 billion, mostly flat compared to the year earlier period and below analyst expectations of $1.29 billion.

On Friday, Canadian autoparts manufacturer Magna International (TSX:MG) reported a big boost in sales and profit for the fourth quarter that beat analyst estimates. Net income was up 12.5 per cent from the year-earlier period, rising to US$351 million from US$312 million in the fourth quarter of 2011. Sales rose by nearly 11 per cent to US$8 billion.

Adjusted earnings were $1.67 per share, 48 cents per share above the consensus estimate.

And toymaker Mega Brands Inc. (TSX:MB) posted quarterly earnings of US$4 million, up from $200,000 a year earlier while sales jumped 18 per cent to US$127.5 million.

There is relatively little analyst coverage of Mega Brands but it appears the company’s sales were better than expected and profit missed the mark.

Organizations: Dow Jones, TSX, New York Mercantile Exchange Nymex Mega Brands FTSE 100 Bank of Japan National Bank of Canada Magna International

Geographic location: United States, China, TORONTO Asia Europe Italy London Frankfurt

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