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Global markets slammed
Fears over U.S. job growth and Europe's debt troubles hammered global financial markets today, driving the Dow Jones industrial average , the S&P 500 and the S&P/TSX composite sharply lower. The Dow fell more than 3 per cent to close below 10,000, while the S&P 500 slumped more than 3.4 per cent. Toronto stocks fell more than 2 per cent to 11,569.61. The Canadian dollar lost about 1.75 cents to 94.28 cents U.S.
Europe, U.S. jobs roil markets
Europe's debt crisis spread to Hungary today, driving the euro below $1.20 U.S., its lowest level in more than four years. Hungary's forint also fell, slumping to a one-year low against the euro as the country warned it could may face Greek-like debt troubles. Combined with jitters over today's U.S. employment report, the renewed fears in Europe helped drive down global financial markets.s
Hungary said today its budget deficit could be in the range of 7 per cent to 7.5 per cent of gross domestic product this year, a sharp jump from earlier projections of 4 per cent.
"Hungary's economy is less than half the size of Greece's economy, so the problem is certainly manageable, but European banks have about $136-billion (U.S.) in exposure to Hungary," said BMO Nesbitt Burns economist Benjamin Reitzes. "So while Hungary alone certainly won't take down the global economy, it just serves as another reminder that the recovery remains fragile, and surprises could be lurking anywhere."
Private sector job growth slows in U.S.
This came on top of the jitters over the U.S. economy, as the Labor Department reported the United States created 431,000 jobs in May, less than expected and the bulk of them from temporary hiring of census workers. The private sector created only 41,000 jobs, fuelling fears of slowing growth in the labour market. The unemployment rate dipped to 9.7 per cent from 9.9 per cent and the so-called underemployment measure, which takes into account people who have given up looking for work and those in part-time positions who would rather be fully employed, slipped to 16.6 per cent from 17.1 per cent.
The U.S. economy is growing after the great slump, but at nowhere near the pace that require to get the millions of Americans who lost their job back to work. And even though it's just one month's measure, and the trend is positive, it remains a jobs crisis.
Canadian jobs market continues to rebound
Canada's jobs market, however, continues to rebound from the recession, creating another 25,000 jobs last month with a sharp jump in full-time positions. Full-time employment rose by 67,000 in May, Statistics Canada said this morning, while part-time work declined by 43,000. The jobless rate held steady, though, at 8.1 per cent. The federal statistics gathering agency noted that jobs have increased to the tune of 310,000, or 1.8 per cent, since the labour market began turning around in July, 2009. Even more importantly, the bulk of those gains have been full-time positions.
"Overall, the services sector continues to be the main driver of jobs in Canada, accounting for over three-quarters of the jobs created since August," noted CIBC World Markets economist Krishen Rangasamy. "The tilt towards services has become more pronounced over the course of the recovery, with that sector accounting for 87% of total jobs created in the first five months of this year versus 55% in the last five months of 2009."
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Canada numbers cap strong week
Canada's jobless numbers came at the end of a week that saw a measure of Canada's strong economy performance, as Statistics Canada reported Monday that gross domestic product grew more than 6 per cent in the first quarter at an annualized pace. Just one day later, Bank of Canada Governor Mark Carney became the first central banker in the G7 to raise his benchmark interest rate, by one-quarter of a percentage point to a still exceptionally low 0.5 per cent. But Canada, despite its strong economic and fiscal standing, is not an island, and Mr. Carney noted that further interest rate increases will be guided by the uneven nature of the global recovery.
Flaherty urges focus on bank risk
Finance Minister Jim Flaherty wants to ensure his counterparts at the G20 meeting in Busan, South Korea, aren't pushed off course by deep divisions over a global bank tax. Mr. Flaherty, among the finance ministers and central bankers at the two-day summit, wants officials instead to focus on preventing banks from making the risky choices that sparked the financial crisis. Some governments want a global bank levy, while Mr. Flaherty and Prime Minister Harper oppose such a move, arguing repeatedly that Canada's banks should not be punished, given how well they came through the crisis. It has become clear that the issue of a new levy is dead at the summit, since there is no consensus.
Read
Flaherty urges G20 not to be distracted by bank-tax row
Why Harper is taking his bank-tax fight to Europe's doorstep
Kevin Carmichael's G8/G20 Global View summit blog
New bank rules to be phased in
New international rules on bank capital will be phased in over a longer time frame than first proposed. G20 finance officials had planned to put the new regulations in place by the end of 2012, but it appears global regulators will take into account the lobbying of the banks to delay what are known as the Basel III regulations, which will lead to higher capital levels among financial institutions. "Some would like a shorter period, some would like a longer period," Finance Minister Jim Flaherty told reporters at the G20 meeting of ministers and central bankers in Busan, South Korea. "... There can be a compromise on that." Read the story
UBS cuts RIM price target
UBS Securities today shaved $5-a-share from its 12-month price target on Research In Motion Ltd. shares, citing what could be heightened competition on the enterprise, or business, side from the iPhone from Apple Inc. UBS cut the target to $70 from $75, leaving its earnings-per-share estimates largely unchanged for 2011 but slightly lowering its expectations for 2012 to $5.32 from $5.37.
"Near-term, we expect Apple to announce its [next generation]iPhone on Monday and believe Apple may cite increasing enterprise traction which could pressure [RIM](we believe fears over Europe are also weighing," UBS analysts Phillip Huang and Maynard Um said in their report. "... Checks indicate increasing interest in some alternative enterprise e-mail solutions, though we don't expect RIM to be materially impacted over the next 12 months. Although visibility at this point remains limited and new competition broadly unproven, we believe a number of market factors could potentially open the door to the first credible challenges to RIM's enterprise dominance."
Shell to close Montreal refinery
Royal Dutch Shell PLC is shutting down its Montreal refinery after failing to come up with bids it deemed strong enough, affecting about 500 people at the operation it has run for more than 75 years. The global energy giant said in January it wanted to shut the operation, but the province asked it to extend the move to try to drum up suitors. "There was a significant valuation gap and Shell will no longer pursue discussions with the interest parties," Shell said, adding it will convert the refinery into a distribution terminal. Read the story
BP hopes to capture bulk of leak
BP PLC hopes a cap it installed last night will allow the energy giant to collect more than 90 per cent of the oil spewing into the Gulf of Mexico from its undersea disaster. "That's possible with this design," the company's chief operating officer for exploration and production, Doug Suttles, told CBS today. "We have to work through the next 24 to 48 hours to optimize that."
BP officials also told analysts today that the company can bear the costs of containing the leak and cleaning up its mess and still maintain its hefty quarterly dividend. BP shareholders have watched as their stock lost tens of billions of dollars in value since the explosion on the Deepwater Horizon drilling rig several weeks ago, and have feared the loss of the dividend. Read the story
Related: BP under pressure to cut dividend
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