By James Langton

(April 2 – 13:00 ET) – Blue chip stocks popped higher on news that the U.S. manufacturing sector is stronger than expected and may be starting to recover.

The Purchasing Managers Index released today came in higher than most analysts expected. This dashed hopes for an emergency rate cut, but it also confirmed some stability in manufacturing. The Toronto Stock Exchange 300 composite index is up 40 points to 7,648, at midday.

Volume is decent for a Monday at 85 million shares, with buyers outnumbering sellers better than four to one. Advancers have a five to four edge on decliners, too.

On a sector by sector basis, just three of the TSE’s 14 sub-indices are down at midday. Consumer products are notably weak, off almost 2%. Pipelines are down, too, and gold is barely down. Everything else is up, led by mines, and followed by media and paper stocks.

Nortel Networks is leading the rebound, today. It’s up 1.6% on weak volume of 2.6 million shares. Bargain hunting in techs world-wide seems to be behind this move. On the other hand, there’s still weakness afflicting high flyers such as Research in Motion, JDS Uniphase, Tundra Semi and Microcell.

A handful of other techs are up, too, but much of the strength is also coming in blue chips such as Bombardier and Gulf Canada. Alliance Forest Products is up almost 10% on heavy volume of 6.2 million shares on news that Bowater is bidding for the firm. The news also has Abitibi up in active trading.

BCE is up on talk that further M&A activity my be used to streamline its portfolio.

A bounce-back in techs combined with news of the megamerger between Allianz AG and Dresdner Bank AG has the financials up. CIBC and TD Bank are leading the banking group up. The insurers are almost all up, too, but the fund companies are sliding back.

The CDNX is down today. It’s off just one point to 3,004. Volume is average at 16.4 million shares. Mines are up notably, with a little strength in oils and techs. Promax Energy Inc is the top trader up 10% to $1.37 on 2.8 million shares.

In New York, stocks trended up through the morning on the PMI news, although building tension with China over the downing of a Chinese interceptor jet and the subsequent capture of the U.S. spy plane with which it collided seems to be spooking traders a little at midday.

The Dow Jones industrials index is off 24 points to 9,854, after being up 100 points earlier in the session. The Nasdaq composite index is down 29 points to 1,810.