Gold stocks lead TSX down; data shows U.S. economic strength, weakness elsewhere

TORONTO - The Toronto stock market closed with a small loss Thursday as traders weighed data showing an improving climate for U.S. manufacturers but worsening conditions in China and the eurozone. They also looked to a key speech by Federal Reserve chairwoman Janet Yellen on Friday for her thoughts on hiking interest rates.

The S&P/TSX composite index declined 6.69 points to 15,555.26, weighed down in particular by gold stocks as bullion prices continued to retreat.

The Canadian dollar was up 0.22 of a cent to 91.37 cents US.

U.S. markets advanced amid growing expansion in American manufacturing. The preliminary Markit manufacturing purchasing managers index jumped to a reading of 58 in August from 55.8 in July, its highest level since April 2010.

The Dow Jones industrials rose 60.36 points to 17,039.40. The Nasdaq added 5.62 points to 4,532.1 and the S&P 500 index was ahead 5.88 points to 1,992.37 as other data showed U.S. new home sales rose for a fourth straight month to the highest level in nearly a year.

"The U.S. is in great shape, Canada less so than the U.S.," said Wes Mills, chief investment officer, Scotia Private Client Group.

"It shows that if we can continue on the earnings front, which it looks very much like we’re going to, then these markets are primed to go higher."

Elsewhere, the news was glum as the preliminary version of HSBC's manufacturing index for China fell to a three-month low of 50.3 from 51.7 in July, indicating that manufacturing businesses are barely growing.

Also, the purchasing managers index for the eurozone published by Markit Economics fell to 52.8 from 53.8 in July. The report followed other data earlier this month that showed the 18-country eurozone grew at only a slow pace in August, a sign it remains sluggish after a disappointing second quarter in which it did not expand at all.

Meanwhile, the minutes from the latest U.S. Federal Reserve meeting released Wednesday indicated that the U.S. central bank is in no rush to hike rates. However, the minutes also showed greater dissension among Fed members on how fast the labour market is improving, a key element in determining when the Fed will raise rates from near zero where they've been since the financial crisis.

Slack in the labour market has been a particular concern, a topic that Fed chairwoman Janet Yellen is expected to address in her speech to the central bank's economic symposium at the end of the week.

The gold sector led decliners, down about 2.6 per cent per cent, as concerns that the Fed could move sooner than expected to hike interest rates and a lessening of tensions in the Ukraine/Russia crisis continued to pummel bullion prices. The December gold contract in New York fell $19.80 to US$1,275.40 an ounce.

"We could test the $1,200 to the downside here," Mills said.

"That seems to be in the works and you don’t want to hold gold as rates are going up because it doesn’t pay anything."

The metals and mining segment fell 1.5 per cent with September copper unchanged at US$3.18 a pound.

Financials led advancers, up 0.6 per cent a day before Royal Bank (TSX:RY) kicks off a string of earnings reports from the big Canadian banks.

The energy sector edged 0.55 per cent higher as October crude in New York gained 51 cents to US$93.96 a barrel.