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(CEP News) - The U.S. dollar is making broad-based gains despite a trio of reports showing a deteriorating job market. U.S. equities have been choppy but remain in positive territory while the TSX continues its two-day selloff. In fixed income, European markets are rallying after indications the European Central Bank will head to the sidelines.
Markets had been anticipating further rate hikes later in the year but ECB President Jean-Claude Trichet said, "current rate stance will contribute to achieving our price stability objective" and "starting today, I have no bias." Michael Woolfolk, senior currency strategist at the Bank of New York Mellon, said markets were positioned for tougher talk on inflation from the European Central Bank. "This is a classic example of buy the rumour, sell the fact. People were expecting the ECB to hike rates and come out sounding hawkish. The ECB did cut rates but they were neutral and gave absolutely no pre-commitment to rate hikes down the road." The euro is down 0.0189 to 1.5694 against the U.S. dollar, down 0.0057 to 1.6024 against the Canadian dollar, down 0.0050 to 0.7920 against the pound sterling and is lower by 0.67 to 167.55 against the yen. The U.S. dollar is up 0.84 to 106.75 against the yen and the Dollar Index is up 0.716 to 72.745. Returns on two-year German bonds are down 18.6 bps to 4.45%, with five-year yields down 15.7 bps to 4.52%, 10-year yields down 10.0 bps to 4.55% and 30-year yields down 3.9 bps to 4.81%. Along with the release of ECB decision, there was a barrage of U.S. data with the ISM non-manufacturing survey, U.S. non-farm payrolls and initial jobless claims. The change in non-farm payrolls was virtually in line with estimates but was better than earlier surveys suggested. Still, prior figures were revised downward and the unemployment rate was higher than expected. Initial jobless claims rose above 400k for the first time since March and the employment component of the ISM non-manufacturing survey fell to a record low. Still, U.S. equities were in positive territory just before an early 1 p.m. close. The Dow Jones industrial average was up 84 points to 11,299, the S&P 500 up 2 points to 1,264 and the Nasdaq down 5 points to 2,246. Elsewhere, Toronto's S&P/TSX composite index was down 52 points to 13,982. European stock markets closed with the Eurostoxx up 34 points to 2,874, the UK FTSE 100 up 50 points to 5,477 and the German DAX up 48 points to 6,354. The euro was just off session lows after comments by European Central Bank President Jean-Claude Trichet prompted broad-based losses for the currency. The Canadian dollar is down 0.0086 to 0.9794 against the U.S. dollar (1.0210 USD/CAD) and down 0.05 to 104.55 against the yen. The pound sterling is down 0.0114 to 1.9816 against the U.S. dollar and up 0.0058 to 2.0235 against the Canadian dollar. U.S. two-year yields are down 5.8 bps to 2.52%, with five-year yields down 3.4 bps to 3.26%, 10-year yields up 0.8 bps to 3.97% and 30-year yields up 1.9 bps to 4.52%. The Eurodollar September 08 contract is flat at 97.07. The yield curve is steeper, with the 10/2-year spread up 6.6 bps to 144.47 bps. Yields on two-year Canadian government bonds are down 2.4 bps to 3.21%, with five-year yields down 1.4 bps to 3.44%, 10-year yields down 1.0 bps to 3.74% and 30-year yields down 1.1 bps to 4.06%. The Canadian 10-year note is yielding 22.33 bps less than the U.S. 10-year note. Yields on UK two-year bonds are down 10.0 bps to 5.06%, with five-year yields down 10.0 bps to 5.03%, 10-year yields down 9.0 bps to 5.04% and 30-year yields down 4.0 bps to 4.65%. Commodities are generally lower on Thursday, but crude oil is stubbornly holding on to gains after hitting a record $145.82. WTI crude oil is up $0.97 to $144.54. The front month gold contract at the Chicago Board of Trade is down $12.60 to $933.30 per ounce. All data taken at 12:47 p.m. EDT. By Adam Button,
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, edited by Cristina Markham,
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