01/04/2012 08:40 EST | Updated 03/05/2012 05:12 EST

TSX set for lower open amid falling commodity prices, negative European data

TORONTO - The Toronto stock market closed little changed Wednesday as traders consolidated solid gains from the opening session of the year amid soft economic data.

The S&P/TSX composite index rose 18.04 points to 12,226.47 while the TSX Venture Exchange added 9.61 points to 1,515.89.

The Canadian dollar was down 0.13 of a cent to 98.78 cents US.

U.S. markets were mainly weak with the Dow industrials up 21.04 points to 12,418.42 and the Nasdaq dipped 0.36 of a point to 2,648.36.

The S&P 500 index edged up 0.24 of a point to 1,277.3

Markets in Toronto and New York racked up strong gains on Tuesday amid data showing growing expansion in the U.S. and Chinese manufacturing sectors, with the TSX ahead 253 points and the Dow ahead 180 points.

But that data was counter balanced Wednesday by a report showing continued economic deterioration in Europe.

The final report on the December eurozone services Purchasing Managers Index came in at 48.8.

That figure was better than expected but a reading below 50 still indicates a contraction in the service sector and reinforces the belief that the eurozone is still likely headed for recession this year.

Other data showed that orders to U.S. factories rose 1.8 per cent in November, following two months of declines. But demand for goods that signal business investment plans, such as computers and electronic equipment, dropped 1.2 per cent following a 0.9 per cent decline in October. The category is closely watched because it is a good proxy for business investment.

"Europe is more or less a foregone conclusion that it will fall into recession if it isn’t already there," said Paul Vaillancourt, CEO of Canadian Wealth Management in Calgary.

"Canada and the U.S. will decelerate but we're hopeful that they will avoid recession. and for the U.S., it’s a question of consumer confidence. Our view is it’s going to be more or less a challenging environment (this year) and the deleveraging that needs to happen all over the world is going to be a slow process."

At the same time, there was relief as Germany successfully auctioned €4.06 billion in 10-year bonds despite concerns over the debt crisis that’s afflicting the 17-nation eurozone. Demand for the bonds outstripped supply as investors placed bids for €5.14 billion of the debt securities. The average yield was a low 1.93 per cent, down from 1.98 per cent in November.

The German auction was closely watched after a bond sale late last year failed to sell a third of the bonds on offer.

But there are worries about other refinancings.

Italy, the recent focus of the crisis, must borrow to cover €53 billion in expiring debt in the first quarter alone in a series of debt auctions beginning Jan. 13.

The TSX base metals sector was up 0.81 per cent as copper prices gave back all of Tuesday's jump in price while the March contract slipped nine cents to US$3.44 a pound. Teck Resources (TSX:TCK.B) gained 42 cents to $38.79.

The energy sector advanced 0.55 per cent while the February crude contract on the New York Mercantile Exchange added 26 cents to US$103.22 a barrel. Prices surged more than $4 Tuesday in the wake of the manufacturing data and heightened geopolitical tensions.

On Tuesday, Iran ended 10 days of naval manoeuvres with a warning to the U.S. military to stay out of the Persian Gulf. Iran has threatened to close the key oil passageway Strait of Hormuz as possible retaliation to new U.S. economic sanctions. The U.S. has said it will not tolerate such a move.

Nexen Inc. (TSX:NXY) climbed 25 cents to $17 while Cenovus Energy (TSX:CVE) lost 47 cents to $34.33.

The gold sector was slightly higher as bullion prices shook off early losses to move up $12.20 to US$1,612.70 an ounce after running up almost $40 on Tuesday. Barrick Gold Corp. (TSX:ABX) ran up 58 cents to $48.71.

The financials sector was up 0.22 per cent with Bank of Montreal (TSX:BMO) ahead 39 cents to $57.43.

The tech sector was a weight as Research In Motion Ltd. (TSX:RIM) lost 43 cents or 2.74 per cent to $15.28.

RIM stock had previously moved six-per cent higher on Tuesday after reports of a possible boardroom shakeup that investors hoped could lead to a turnaround or sale of the beleaguered BlackBerry maker. Reports said Mike Lazaridis and Jim Balsillie are considering relinquishing their titles as co-chairmen of the RIM board. The two also run the company as co-CEOs.

In corporate news, Connacher Oil and Gas (TSX:CLL) shares fell 11 cents or 12.36 per cent to 78 cents amid a shakeup in the company's executive ranks. The company has announced the departure of president and chief operating officer Peter Sametz, along with vice-president and chief financial offer Richard Kines and Grant Ukrainetz, vice-president of corporate development.

Connacher also said it expects to report strong operating and financial results for the fourth quarter and expand its previously announced capital budget for 2012.