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(CEP News) - Equity markets are slumping on Wednesday following the worst U.S. data on private payrolls in seven years and a U.S. government report that criticizes the administration's handling of the $700 billion TARP bailout. Treasuries are selling off as the huge rally consolidates and the Canadian dollar is the worst performing major currency.
The ADP report on U.S. non-government employment showed a decline of 250k jobs in November compared to the -205k consensus. It was the worst report since December 2001. T.J. Marta, fixed income strategist from RBC Capital Markets, said the credit crunch continues to have an impact on the economy as businesses shed jobs to cut costs. He added the job market will only get worse and that he expects the unemployment rate to reach 8%. "The labor readings are consistent with recession," Marta wrote in a research note. "We believe this will prevent the Fed from hiking rates during 2009, in contrast to the futures market, which is pricing in Fed hikes in the second half of 2009." The ADP report put additional pressure on equity futures but they were already down after a report from the U.S. Government Accountability Office criticized the handling of the TARP. Market watchers said it calls into question the ability of the administration to access the remaining funds. "The lack of a singular goal or consensus on the usage of TARP funds sows uncertainty, which in turn for markets encourages a repudiation of risk," wrote Stewart Hall, economist at HSBC Securities Canada in a client note. Toronto's S&P/TSX composite index is down 112 points to 8216, the Dow Jones industrial average down 141 points to 8279, the S&P 500 down 17 points to 832 and the Nasdaq down 26 points to 1424. European stock markets are also lower, with the Eurostoxx down 40 points to 2026, the UK FTSE 100 down 52 points to 4070 and the German DAX down 122 points to 4410. Asian markets closed higher, with the Japanese Nikkei closing up 140 points to 8004 and the Hang Seng Index up 183 points to 13589. In energy markets, oil hit a fresh three-year low of $46.12 despite comments from Qatar's energy minister, Mr. Abdulla Bin Hamad Al Attiyah, who said OPEC will "definitely" cut production on Dec. 17. The rise in risk aversion and energy declines have weighed on the Canadian dollar. The Canadian dollar is down 0.0093 to 0.7928 against the U.S. dollar (1.2613 USD/CAD) and down 1.12 to 73.62 against the yen. The U.S. dollar is down 0.33 to 92.84 against the yen and the Dollar Index is up 0.417 to 87.119. The euro is down 0.0070 to 1.2643 against the U.S. dollar, up 0.0099 to 1.5947 against the Canadian dollar, up 0.0031 to 0.8554 against the pound sterling and is lower by 1.10 to 117.37 against the yen. The pound sterling is down 0.0138 to 1.4783 against the U.S. dollar and up 0.0051 to 1.8645 against the Canadian dollar. The front month gold contract at the Chicago Board of Trade is down $12.90 to $770.50 per ounce. In fixed income, Treasuries are consolidating following the recent rally. U.S. two-year yields are up 2.3 bps to 0.91%, with five-year yields up 2.6 bps to 1.66%, 10-year yields up 2.0 bps to 2.69% and 30-year yields flat at 3.17%. The Eurodollar March 09 contract is up 0.5 ticks to 98.21. The yield curve is flatter, with the 10/2-year spread down 0.1 bps to 178.38 bps. Yields on two-year Canadian government bonds are up 2.4 bps to 1.61%, with five-year yields up 2.2 bps to 2.29%, 10-year yields up 0.6 bps to 3.17% and 30-year yields up 1.8 bps to 3.79%. The December 08 BAX contract is down 0.5 ticks to 98.13. In Germany, returns on two-year German bonds are down 4.6 bps to 2.07%, with five-year yields flat at 2.48%, 10-year yields down 1.8 bps to 3.03% and 30-year yields down 15.9 bps to 3.31%. Yields on UK two-year bonds are down 5.7 bps to 1.71%, with five-year yields down 5.8 bps to 2.78%, 10-year yields down 5.7 bps to 3.43% and 30-year yields down 13.0 bps to 3.80%. All data taken at 9:35 a.m. EST. By Adam Button,
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, edited by Stephen Huebl,
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