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(CEP News) - A late-day rally helped the S&P/TSX Composite Index close in positive territory and avoid a 1,000 point weekly decline. Similarly, U.S. equities and Treasury yields surged higher after declining sharply when a grim jobs report was released. After the equity market close, the Wall Street Journal published a story saying the U.S. Treasury is close to finalizing a plan to backstop Fannie Mae and Freddie Mac, sending yields to session highs.
The Bureau of Labor Statistics said the U.S. unemployment rate rose to 6.1% in August from the previous 5.7% level. They also said the economy shed 84k jobs in the month against the -75k consensus. "A poor jobs report, though perhaps not quite as bad as the headline numbers indicate, as job losses are a bit more concentrated than in prior months. Still, the rise in unemployment to above 6% looks mostly genuine," said the Goldman Sachs U.S. economics research team in reaction to the report. Earlier, officials said the Canadian economy added 15,200 jobs in August and the unemployment rate held at 6.1%. Economists were expecting only 10,000 jobs and a rise in unemployment to 6.2%. "These numbers show resilience in the Canadian domestic economy, confirming the Bank of Canada's on hold status, while giving boost to discussions about a U.S. recession," wrote David Watt, senior currency strategist at RBC Capital Markets in a client note. "The Canadian dollar ended the week on a strong note against U.S. and brilliantly on the crosses." The Canadian dollar was up 0.0066 to 0.9407 against the U.S. dollar (1.0631 USD/CAD) and up 0.76 to 100.88 against the yen. The U.S. dollar was up 0.17 to 107.25 against the yen and the Dollar Index was up 0.357 to 78.967. The euro was down 0.0090 to 1.4236 against the U.S. dollar, down 0.0188 to 1.5133 against the Canadian dollar, down 0.0029 to 0.8071 against the pound sterling and was lower by 0.73 to 152.66 against the yen. The pound sterling was down 0.0046 to 1.7639 against the U.S. dollar and down 0.0163 to 1.8753 against the Canadian dollar. The market action in Treasuries and equities was choppy. U.S. two-year yields were up 6.4 bps to 2.24%, with five-year yields up 6.0 bps to 2.91%, 10-year yields up 3.3 bps to 3.66% and 30-year yields up 1.2 bps to 4.27%. The Eurodollar March 09 contract was down 4.5 ticks to 97.13. The yield curve was flatter, with the 10/2-year spread down 2.8 bps to 141.93 bps. Yields on two-year Canadian government bonds were up 1.0 bps to 2.71%, with five-year yields up 2.1 bps to 2.98%, 10-year yields down 0.8 bps to 3.45% and 30-year yields down 2.1 bps to 3.93%. The December 08 BAX contract was down 6.0 ticks to 97.03. In Germany, returns on two-year German bonds were down 9.0 bps to 3.97%, with five-year yields down 11.3 bps to 3.83%, 10-year yields down 6.9 bps to 4.00% and 30-year yields flat at 4.53%. Yields on UK two-year bonds were down 6.4 bps to 4.34%, with five-year yields down 6.3 bps to 4.29%, 10-year yields down 7.5 bps to 4.38% and 30-year yields down 3.3 bps to 4.34%. Toronto's S&P/TSX composite index closed up 2 points to 12816, the Dow Jones industrial average closed up 33 points to 11221, the S&P 500 closed up 5 points to 1242 and the Nasdaq closed down 3 points to 2256. European stock markets closed in negative territory with the Eurostoxx down 58 points to 2754, the UK FTSE 100 down 121 points to 5241 and the German DAX down 152 points to 6127. All data taken at 4:24 p.m. EDT. By Adam Button,
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