Concerns ratcheted by disappointing US jobs data and an IMF economic forecast downgrade.
July 9, 2012
by The Canadian Press
TORONTO: The Canadian dollar was lower Monday, reflecting worries that the global economy is slowing.
Those concerns were ratcheted higher Friday after disappointing US jobs data and word from the International Monetary Fund (IMF) that it was downgrading its economic forecast.
The currency moved down 0.23 of a cent to 97.95 cents US as employment data also reflected tepid Canadian growth. Statistics Canada reported Friday the economy cranked out just over 7,000 jobs last month. That was better than the 5,000 or so that economists expected but the figure still represents a sharp slowdown in hiring from earlier in 2012.
Friday’s data showed that the US economy only cranked out an average of 75,000 jobs a month during the second quarter, down sharply from 226,000 in the January-March period.
IMF managing director Christine Lagarde didn’t mention exactly how much the IMF would trim from its earlier forecast.
But the data points were enough to further persuade traders that economic growth is faltering around the globe.
Commodity prices were higher after diminished demand prospects pushed prices for oil and metals down sharply on Friday.
The August crude contract on the New York Mercantile Exchange rose 45 cents to US$84.90 a barrel after sliding $2.77 at the end of last week.
The September copper contract edged up two cents to US$3.42 a pound following an eight-cent fall. Bullion started to recover from Friday’s $30 decline, up $6.30 to US$1,585.20 an ounce.
Traders looked ahead to the release of the Bank of Canada’s quarterly Business Outlook/Senior Loan Officer surveys later in the morning, partly for clues about what the central bank may do about interest rates.
“These reports weigh pretty heavily in the central bank’s decision making process which, at this stage, seems to boil down to the choice of maintaining their tightening bias at next week’s rate meeting,” said Mark Chandler, head of Canadian FIC Strategy at RBC Dominion Securities.
There was one bit of positive news Monday morning.
Inflation figures for China showed the consumer price index at its lowest since January 2010. That will give Beijing leeway to continue adding stimulus to fight an economic slowdown. China is scheduled to release its latest trade numbers Tuesday and retail sales, industrial production and gross domestic product on Friday. In a surprise move, China last week cut interest rates for a second time in a month.
The chronic eurozone debt crisis also chipped away at investor confidence as Spain’s borrowing costs rose to dangerously high levels.
The interest rate, or yield, on the country’s 10-year bonds hit seven per cent Monday morning. That is a level that market-watchers consider is unaffordable for a country to raise money on the bond markets in the long term and the point at which Greece, Ireland and Portugal all sought an international bailout.
Meanwhile, finance ministers of the 17 countries that use the euro are gathering in Brussels to discuss terms of a rescue package for the country’s stricken banks.
©The Canadian Press