TSX rises amid U.S.-China trade concerns; U.S. markets move lower

By Malcolm Morrison, The Canadian Press

TORONTO, Ont. - The Toronto stock market turned positive late Monday morning, shaking off early losses related to rising trade tensions between China and the United States.

Toronto's S&P/TSX composite index rose 46.7 points to 11,300, led by financial and energy stocks, adding to last week's rise of just over two per cent.

Concerns about a growing trade dispute rose as the Chinese government filed a World Trade Organization complaint over new U.S. tariffs on Chinese tires.

President Barack Obama approved the higher duties to slow the rapid growth of U.S. imports of Chinese-made tires blamed for the loss of thousands of American jobs. Beijing criticized the move as a violation of free trade and called on other governments to oppose protectionism.

On Sunday, Beijing announced it would investigate complaints that American auto and chicken products are being dumped in China or benefit from subsidies, saying the U.S. imports have "dealt a blow to domestic industries."

"There is fear that, could this spiral into something?" said Colin Cieszynski, market analyst at CMC Canada.

"There's enough people already wondering if the markets have gotten ahead of themselves in terms of pricing in a global recovery. And you have enough people already looking to take profits."

The TSX energy sector was up 0.45 per cent even as a stronger U.S. dollar pulled down commodity prices and made a dent in the Canadian dollar. The loonie moved down 0.58 of a cent to 92.13 cents US.

The October crude contract on the New York Mercantile Exchange moved down 22 cents to US$69.11 a barrel. On the TSX, Canadian Natural Resources (TSX: CNQ.TO) advanced 81 cents to C$71.02.

The financial sector gained 0.77 per cent with Scotiabank (TSX: BNS.TO) ahead 67 cents to $46.30.

The TSX Venture Exchange moved 6.08 points lower to 1,255.81.

Trade tensions kept New York markets weak and the Dow Jones industrial average declined 5.5 points to 9,599.9.

The Nasdaq composite index inched up 0.42 of a point to 2,081.32 while the S&P 500 index added a quarter of a point to 1,043.

Obama will also be the centre of attention as he gives a speech on the one-year anniversary of the collapse of Lehman Brothers Holdings Inc., which helped spark the worst period of the financial crisis and credit crunch. The president will discuss the actions the U.S. government has taken to help the economy and stabilize the financial sector as well as further regulation needed to help avoid a future collapse during a speech in New York.

The December bullion contract on the New York Mercantile Exchange lost $4.20 to US$1,002.20 an ounce, taking the gold sector down 0.26 per cent.

Shares in Rubicon Minerals Corp. (TSX: RMX.TO) ran ahead 35 cents or 8.5 per cent to C$4.35 after it released an update on drilling operations at its 100 per cent-owned Phoenix Gold Project, located in the Red Lake Gold District of Ontario. It called recent activity to open up a new target area "one of our best holes drilled to date."

Eldorado Gold Corp. (TSX: ELD.TO) shares declined 38 cents to $12.47 as it said Monday the due diligence conditions in a $2-billion deal to buy the rest of Australia's Sino Gold Mining Ltd. have been satisfied. The deal is expected to close in early December and will allow Vancouver-based Eldorado to expand its presence in China, and will result in a gold producer with a combined stock market value of $6.4 billion.

The base metals sector was down 1.4 per cent as December copper moved down five cents to US$2.80 a pound. First Quantum Minerals (TSX: FM.TO) lost $3.69 to $71.81.

Market heavyweight Potash Corp. (TSX: POT.TO) weighed on the TSX, down $1.14 to $95.71 after Citigroup lowered its ratings on the Saskatchewan company to "hold" from "buy' because of the likelihood of limited opportunity for fertilizer application this fall and other concerns."

In economic news, Statistics Canada said the rate of capacity utilization in Canadian industries continued to shrink in the second quarter. Industrial capacity came in at 67.4 per cent for the period, down 2.8 percentage points from the first quarter and a much better showing than the 65.5 per cent reading that economists had expected.

Statistics Canada noted that the second-quarter figure is still the lowest level since it started gathering this information in 1987.

Investors will be looking at two major pieces of economic news during the week.

Manufacturing shipments data comes out Wednesday and is expected to show a 2.5 per cent gain during July.

The key data for the week is the consumer price index report, which is being released on Thursday. Economists are looking for year-over-year growth of 1.6 per cent.

In the U.S., investors will have little in the way of economic news Monday to provide further insight into a potential economic recovery. However, reports on inflation, retail sales, industrial product and housing starts are due out later in the week.

In corporate news, Allen Vanguard Inc. (TSX: VRS.TO), a financially troubled Ottawa-based maker of bomb disposal technology, has been acquired by U.S. private equity firm Versa Capital Management Inc. The deal also recapitalizes the company and keeps it operating, but wipes out the value held by current shareholders. Financial terms were not revealed and its shares have been suspended from trading on the TSX, where they closed at 10 cents on Friday.

Drugmaker Patheon (TSX: PTI.TO) reported Monday a "disappointing" third-quarter as revenues plunged 15.7 per cent due to due to setbacks at its Puerto Rico operations, a slowdown in its pharmaceutical development services and a drop in the U.S. dollar, among other factors. Its shares were unchanged at $2.99. Its shares dipped six cents to $2.93.

The Toronto-based company, which had been at the centre of a takeover battle, said its net loss for the quarter ended July 31 was $6 million, 10.6 cents per share, compared with a loss of $14 million, 15.4 cents per share, in the year-earlier period.

Overseas, Japan's Nikkei stock average fell 2.3 per cent while Hong Kong's Hang Seng closed down 1.1 per cent.

In afternoon trading, Britain's FTSE 100 edged 0.06 per cent higher, while Germany's DAX index and Paris CAC 40 fell 0.21 per cent.