Canada’s composite leading index continued to grow at a steady pace in March, up 0.2%, Statistics Canada reported Thursday. Household demand remained the major source of growth.

Housing starts eased from the very high level they hit in February, but they remained slightly above their average level in 2002, encouraged by rising incomes and low mortgage rates. Another measure of the strength of household demand was a strong advance in services employment.

Unfortunately the good news comes as the largest business center in the country, Toronto, reels from the impact of the SARS outbreak. A travel warning issued from the World Health Organization, yesterday, has deepened the fear of foreign tourists. Toronto’s mayor, Mel Lastman, has pleaded with the city’s residents to get out and spend, spend, spend to counteract the WHO’s advice.

American economy watchers got some decidedly mixed news this morning. Durable-goods orders rose unexpectedly in March. However, initial jobless claims hit the highest level in a year. The U.S Commerce Dept. reported that orders for durable goods rose 2% to US$173.60 billion last month after a revised 1.5% fall in February.

Meanwhile, workers filing first-time applications for unemployment benefits rose 8,000 to 455,000 last week. The four-week moving average, which smoothes out weekly fluctuations, also rose to a one-year high of 439,250.

This mixed economic news follows the sober outlooks released yesterday by the Bank of Canada and the U.S. Federal Reserve, as well as another report from the OECD today. On Wednesday, the Bank of Canada downgraded its outlook for the Canadian economy in 2003.

The prevailing mood is showing on the futures and overseas markets, pointing to bad day on the equities markets.

In Europe at midday, London’s FTSE 100 index is off by half a percent, losing 19.5 points to 3,947. Paris’s CAC 40 is flat. Frankfurt’s DAX has declined 0.8%.

In Asia, Hong Kong’s Hang Seng index fell 77.49 points to 8,442.11 in Thursday trading. Tokyo’s Nikkei average is the only exchange to counter the downward trend. It gained 61.19 points to 7,854.57.

In earnings news, tech bellwether Nortel Networks reported a surprise return to profit on Thursday, a quarter ahead of its own forecast, driven by stronger-than-expected revenues for its telecommunications gear and a US$190 million boost from discontinued operations.

Nortel, which reports results in U.S. dollars, said first-quarter profit was $54 million, or 1¢ per share, compared with a loss of $841 million, or 26¢ per share, in the corresponding period last year.

The net loss from continuing operations was $136 million, or 3¢ per share. Revenues fell to $2.4 billion from $2.91 billion.