Investors should brace for a major, triple digit move to the downside on the back of the deeply disappointing U.S. job creation figures for May. Payrolls rose on 69,000 in the month, compared to expectations for a gain of around 150,000 for the month.
About 30 minutes before the opening, futures on the Dow Jones Industrial Average pointed to a loss of 192 points or 1.5 per cent, while Canadian stock futures were indicating a roughly similar decline of 1.6 per cent.
Stocks in Europe extended losses following the release of the U.S. figures, with major markets declining by between 1.5 per cent in London to 3.6 per cent in Germany.
The yield on U.S. Treasury notes continued to dive as investors fled to the perceived safety of government bonds. The yield fell to 1.46 per cent, another new record low.
Investors also poured money into gold , a traditional safe haven in times of economic uncertainty, with the price rising $25 an ounce to $1,585 (U.S.).
The move in gold reflects hopes that the poor U.S. jobs figures will encourage the Federal Reserve Board to introduce another round of monetary easing at its June meeting.
Economists say the jobless figures were even worse than at first glance because there were downward revisions to the previous two months' data that eliminated around 49,000 jobs.
The payroll increase “was clearly bad and will hurt markets this morning,” said Krishen Rangasamy, senior economist at National Bank in a note to clients. “Full time employment is now down over 1.1 million in the last two months (the worst 2-month tally since 2009). The silver lining (if there was any) is the improved diffusion, i.e. more broad-based job gains across sectors. That gives some hope that we're probably not about to see a complete collapse of the US labour market.”
Separately, the release of Canadian growth figures did little to cheer the market, and added to signs that the global economy is slowing.
“Canada’s GDP report held little in the way of good news, with first-quarter growth coming in as expected, at a soft 1.9 per cent. Growth in March, however, was much softer than expectations, with GDP managing to eke out only a 0.1 per cent gain, vs. the street’s anticipation of a heartier 0.3 per cent lift,” said Emanuella Enenajor, at the economics department at CIBC World Markets, in a commentary on the figures.