The main Canadian stock index edged higher on Friday as healthy Chinese data provided a shot in the arm for mining companies, obscuring a broader decline as investors retreated over stalled US budget talks. China's vast manufacturing sector expanded in December at its fastest pace in 14 months as new orders and employment rose, a survey showed on Friday.
"Materials did well; financials, oil and gas, just about everything else was off," said Pat McHugh, Canadian equity strategist at Manulife Asset Management, crediting the Chinese data with boosting the materials sector, which includes miners. Evidence that China's speedy growth trajectory is getting back on track is typically positive for Canada, which provides the giant Asian economy with raw materials.
Fertiliser company Potash Corp gained 1.1 percent to C$40.44 and Teck Resources Ltd rose 2.1 percent to C$35.28. Suncor Energy Inc, Canada's biggest energy company, added 1.4 percent to C$32.12, making it the most positive influence on the index. The Toronto Stock Exchange's S&P/TSX composite index ended up 7.55 points, or 0.06 percent, at 12,296.72. It notched a 1.1 percent gain for the week. Dundee Corp shares jumped 13.7 percent to C$30.47 after the asset manager said it would spin off its real estate assets.
"It's clearly a nice way to unlock value and I'm sure we haven't seen the last of that," McHugh said of the deal. Balanced against the broad rise in miners, most other sectors recorded net losses, with energy companies weighing most heavily, even with Suncor's gains. Encana Corp lost 4.3 percent to C$19.96, falling back after rising on Thursday with the announcement of a joint venture with PetroChina Co Ltd.
Canadian resource stocks had a mixed reaction this week to Ottawa's approval of two big deals and the clarification of its stance on state-owned enterprise investment in the oil sands. "It just reinforces that this business is capital intensive and the ones with the capital are the Chinese," said John Ing, president of Maison Placements Canada. "We're going to see more of it, so it's good that we didn't put up higher barriers to them."
A slew of global data provided an uneven picture of economic recovery and stagnation, with Europe seemingly stuck in a low-growth mode and China and the United States showing signs of recovery. "The one that people seem to be missing is the uptick in some of the Chinese growth numbers," Ing said, adding that much attention was still focused on negotiations to solve a looming US budget crisis. President Barack Obama and House of Representatives Speaker John Boehner held a "frank" face-to-face meeting on Thursday in an effort to break an impasse in talks to avert the "fiscal cliff" of steep tax increases and spending cuts, which kick in early in 2013.
Frustration is mounting over the lack of progress in negotiations that have become bogged down in a daily round of finger-pointing. If a deal is not reached, many economists believe the US economy will fall back into recession, which would hurt Canadian businesses that sell into the world's largest economy. Canadian manufacturing sales plunged by 1.4 percent in October from September in the latest sign the economy is struggling to cope with market problems abroad and due to the effect of a strong Canadian dollar. The domestic data was at odds with numbers from the United States that showed demand picking up.
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