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Grimmer U.S. employment picture knocks down stock-market prospects Canadian Press
August 01, 2003
TORONTO (CP) - Wall Street stock index futures reversed themselves and indicated a lower opening Friday morning after the release of the latest U.S. jobs data.
The Labor Department said the unemployment rate declined to 6.2 per cent last month from June's nine-year high of 6.4 per cent. However, the report also showed the U.S. economy lost 44,000 jobs in July, and the decline in the jobless rate came as almost half a million discouraged Americans gave up on their job searches and abandoned the workforce.
In other key economic reports Friday, the University of Michigan releases its consumer sentiment survey for July (at 9:45 a.m. EDT) which is expected to show an increase in confidence.
Also Friday morning (at 10) the Institute for Supply Management issues its index on U.S. manufacturing activity, expected to indicate a solid July upturn.
European stock markets were downbeat, after major Asian indexes closed with gains.
The Canadian dollar was off 0.10 cent at 71.08 cents US, after its fourth straight daily loss Thursday left it down 1.3 cent so far this week.
"The main driver of these moves has been the softer tone in the Canadian economy and the strengthening U.S. economy," commented Sam Lee of BMO Nesbitt Burns.
"Wednesday's Canadian GDP report for May reinforced the idea that the Bank of Canada remains on track to lower interest rates further, while the probability of a further rate reduction in the U.S. declined markedly after yesterday's strong U.S. economic data releases."
In Canadian business news, Air Canada's financial picture darkened with a report by court-appointed monitor Ernst & Young that the airline's pension plan deficit has deepened by half a billion dollars since the start of the year, to $1.8 billion. The report also said Air Canada, which sought court protection from creditors April 1, wants potential equity investors to make their bids by Sept. 15.
Second-quarter earnings reports continued Friday, with Mega Bloks turning around a year-ago loss of $2.7 million US to show a $300,000 profit as sales rose 18 per cent to $26.6 million. The Montreal toymaker also said it has acquired global rights to the "all-new" Teenage Mutant Ninja Turtles.
Four Seasons Hotels lost $1.3 million in the quarter as the rising Canadian dollar eroded its take from its international chain of high-end hotels. Excluding foreign-exchange swings and litigation costs, earnings for the quarter were $8.9 million. And CEO Isadore Sharp stated that "travel demand trends improved toward the end of the second quarter and these improvements are continuing."
In other Canadian corporate news, Stella-Jones Inc. has nailed down $16.7-million takeover of Cambium, a Quebec maker of pressure-treated wood products.
Overseas, the FT-SE 100 index was down 38.9 points or 0.95 per cent at 4,118.1 early in the afternoon in London, while Frankfurt's DAX fell 1.5 per cent and the Paris CAC-40 slipped 0.85 per cent.
Tokyo's Nikkei average ended a three-day losing streak, closing up 48.46 points at 9,611.67.
South Korean shares gained 1.9 per cent and closed at their highest level of the year on word that North Korea has agreed to multilateral talks on its suspected development of nuclear weapons.
In Hong Kong, the Hang Seng index rose 113.77 points, or 1.1 per cent, to 10,248.60, its highest close since last Aug. 22.
North American stock markets finished higher Thursday, thanks to the best U.S. economic performance in almost a year.
Late-day profit-taking cut New York's Dow Jones industrial average from a 161-point gain to a closing rise of 33.75 points at 9,233.80. Toronto's S&P/TSX index finished up 52.93 points to 7,257.92.
For July, the TSX index advanced 3.9 per cent, ahead of the Dow, up 2.8 per cent, but behind the Nasdaq, which rose 6.9 per cent on the month - its sixth consecutive monthly gain.
The Nasdaq was up 14.11 points Thursday at 1,735.02; the S&P 500 rose 2.82 at 990.31 on news that the economy grew at a much stronger than expected 2.4 per cent annualized pace in the second quarter.
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