Crude oil is trading slightly below the all-time record at $143.03, up $2.06 on the session. The U.S. Energy Information Administration said U.S. stockpiles decreased by 1982k barrels in the week ending June 27. The drawdown was larger than the -700k expected.

Rising crude prices are expected to strain the U.S. consumer, and this was reflected in U.S. equity markets. Comments from U.S. Treasury Secretary Henry Paulson were also weighing on markets. He said the U.S. economy is facing a trio of headwinds; high energy prices, a housing correction and financial market turmoil. Despite the rally in oil and other commodities, the TSX is underperforming.

Toronto's S&P/TSX composite index is down 170 points to 14,297, the Dow Jones industrial average down 29 points to 11,354, the S&P 500 down 3 points to 1,282 and the Nasdaq down 23 points to 2,282.

European stock markets closed with the Eurostoxx down 10 points to 2,841, the UK FTSE 100 down 54 points to 5,426 and the German DAX down 11 points to 6,305.

The U.S. jobs market was also in focus after a report showed U.S. private employment declining by 79,000 jobs in June against the 20,000 decline expected. U.S. yields were up 2-3 basis points across the curve prior to the data but the worrying report sparked a reversal.

U.S. two-year yields are down 6.5 bps to 2.58%, with five-year yields down 6.5 bps to 3.29%, 10-year yields down 4.1 bps to 3.96% and 30-year yields down 3.5 bps to 4.51%. The Eurodollar September 08 contract is down 1.0 ticks to 97.05. The yield curve is steeper, with the 10/2-year spread up 2.7 bps to 137.98 bps.

Yields on two-year Canadian government bonds are flat at 3.24%, with five-year yields flat at 3.46%, 10-year yields up 2.1 bps to 3.76% and 30-year yields up 0.8 bps to 4.09%. The Canadian 10-year note is yielding 20.43 bps less than the U.S. 10-year note.

In Germany, returns on two-year German bonds are up 5.0 bps to 4.62%, with five-year yields up 4.9 bps to 4.67%, 10-year yields up 4.1 bps to 4.65% and 30-year yields up 1.7 bps to 4.84%.

Yields on UK two-year bonds are down 4.7 bps to 5.16%, with five-year yields down 3.7 bps to 5.12%, 10-year yields down 1.9 bps to 5.13% and 30-year yields down 3.3 bps to 4.70%.

The Canadian dollar is up 0.0088 to 0.9868 against the U.S. dollar (1.0134 USD/CAD) and up 0.75 to 104.59 against the yen.

The U.S. dollar is down 0.1340 to 105.9960 against the yen and the Dollar Index is down 0.271 to 72.098.

The euro is up 0.0075 to 1.5867 against the U.S. dollar, down 0.0063 to 1.6080 against the Canadian dollar, up 0.0048 to 0.7964 against the pound sterling and is higher by 0.60 to 168.19 against the yen.

The pound sterling is down 0.0025 to 1.9924 against the U.S. dollar and down 0.0200 to 2.0192 against the Canadian dollar.

The front month gold contract at the Chicago Board of Trade is up $0.40 to $945.40 per ounce.

All data taken at 12:10 p.m. EDT.

By Adam Button, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, This email address is being protected from spam bots, you need Javascript enabled to view it

CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca

The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.

A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.