CANADA STOCKS-TSX drops as US worries undermine strong China data

Mon Dec 3, 2012 11:11am EST

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* TSX down 34.91 points, or 0.29 percent, at 12,204.72
    * Concern over U.S. fiscal talks overshadows China data
    * Dairy company Saputo jumps on move to buy U.S. rival

    TORONTO, Dec 3 (Reuters) - Canadian stocks slipped on Monday
as a contraction in U.S. manufacturing in November and worries
about lack of progress in U.S. fiscal-crisis talks spurred
investors to bank some recent gains despite strong manufacturing
data from China.
    The financial sector weighed most heavily on the Toronto
index, while some major gold miners also helped pull it lower.
The small consumer staples sector led gains as dairy products
maker Saputo Inc jumped after saying it will buy a U.S.
competitor.
    By 10:37 a.m. (1518 GMT), the Toronto Stock Exchange's
S&P/TSX composite index was down 34.91 points, or 0.29
percent, at 12,204.72. It has gained more than 3 percent since
hitting a trough in mid-November. 
    "We've had a pretty good rally. The concerns are that the
U.S. is going to have trouble with the fiscal cliff," said Rick
Hutcheon, chief operating officer at RKH Investments.
    Markets have focused for weeks on negotiations in Washington
over some $600 billion in spending cuts and tax hikes scheduled
to kick in next year that could tip the U.S. economy back into
recession.
    Adding to the pessimistic tone to start the week, data on
Monday showed U.S. manufacturing unexpectedly contracted in
November for its worst performance in three years.
 
    U.S. Treasury Secretary Timothy Geithner pushed Republicans
on Sunday to offer specific ideas to cut the U.S. budget deficit
and predicted they would agree to raise tax rates on the rich to
obtain a year-end deal to avoid the so-called fiscal cliff.
 
    Lingering worries about the issue eclipsed data from Chinese
factories over the weekend that pointed to the giant Asian
economy regaining its vigor after seven straight quarters of
slowing growth. 
    "It looks like things are starting to tick up a little bit.
Any time you get positive data out of China, it's a good sign
because that's one of the driving forces for the global
economy," Hutcheon said.
    Cenovus Energy Inc had the biggest positive effect
on the index, up 1 percent to C$33.69, and diversified miner
Teck Resources Ltd added 1 percent to C$33.97.
    Saputo gained 2.9 percent to C$47.37 after agreeing to buy
the Morningstar dairy division of Dean Foods Co for $1.45
billion.
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