North American stock markets advance on strong U.S. employment data

TORONTO – The Toronto stock market closed with a modest gain Friday even as a rebound in American job creation boosted confidence in the U.S. economy.

The S&P/TSX composite index gained 29.14 points to 14,789.78 after the U.S. Labor Department reported that the American economy created 248,000 jobs last month, which handily beat expectations of about 215,000.

The U.S. jobless rate also ticked down 0.2 of a point to 5.9 per cent, the lowest level since July 2008. August job creation was revised upward to 180,000 from 142,000.

“This is a positive set of numbers, no doubt about it,” said Bob Gorman, chief portfolio strategist at TD Waterhouse.

“Apart from the overall job increase, it was mostly on the private sector side. Average weekly hours worked up a touch, which is also good. So that means employment is up but also money in people’s pockets is up.”

Toronto gains were held back by lower resource stocks as the strong U.S. dollar continued to punish commodity prices. Gold miners fell as bullion closed under US$1,200 — its lowest close since February 2010.

U.S. indexes registered solid gains with the Dow Jones industrials ahead 208.64 points to 17,009.69, the Nasdaq gained 45.42 points to 4,475.62 and the S&P 500 index climbed 21.73 points to 1,967.9.

However, the strong U.S. dollar and subpar trade data pushed the Canadian dollar sharply lower, down 0.76 of a cent to a fresh six-month low of 88.82 cents US. Statistics Canada said that Canada’s trade balance hit a deficit of $615 million, down from a revised July surplus of $2.2 billion.

Despite the gains registered Friday, markets ended the week with losses amid a list of concerns.

While U.S. data has been generally positive, economic data from China and Europe has been weak. On Thursday, International Monetary Fund managing director Christine Lagarde described the economic recovery as “brittle, uneven and beset by risks.”

Also, the U.S. Federal Reserve will also be wrapping up its quantitative easing program at the end of the month. The massive bond-buying program had kept long-term rates low and encouraged a huge rally on stock markets over the last few years.

There has also been heightened speculation that the Fed could hike interest rates next year, earlier than expected. That scenario along with a sharply lower euro has strengthened the U.S. currency considerably over the last few weeks. The higher dollar in particular has driven prices for commodities sharply lower and shares in TSX resource companies have suffered in consequence.

A higher U.S. dollar pressures commodities because a stronger greenback makes it more expensive for holders of other currencies to buy oil and metals which are dollar-denominated.

Crude oil has fallen below US$90 a barrel this week for the first time since April, 2013 and copper finished at a six-month low.

On Friday, the Toronto market found support from a rise of 1.4 per cent in the industrials sector and a 0.4 per cent gain in financials.

The TSX energy sector was down 0.5 per cent while the November crude contract on the New York Mercantile Exchange was $1.27 lower to US$89.74 a barrel, down four per cent for the week.

The metals and mining sector gave back 1.37 per cent while December copper was unchanged at US$3.00 a pound.

The gold sector was the major decliner, falling about 3.7 per cent as December bullion tumbled $22.20 to US$1,192.90 an ounce.

Losses were especially severe on the TSX this week because the Toronto market is heavily weighted by the resource sector. It fell 237 points or 1.6 per cent.

The Dow industrials shed 103 points or 0.6 per cent.