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Two General Motors auto assembly workers assemble engines for the Chevrolet Silverado and GMC Sierra pickup trucks at the Flint Assembly in Flint, Mich., in this file image from 2011. (REBECCA COOK/Reuters)

Two General Motors auto assembly workers assemble engines for the Chevrolet Silverado and GMC Sierra pickup trucks at the Flint Assembly in Flint, Mich., in this file image from 2011.

(REBECCA COOK/Reuters)

U.S. economy officially in trouble Add to ...

North American stock markets gave up small early gains, slumping as the U.S. Commerce Department said that factory orders fell 0.6 per cent in April.

Economists surveyed by Bloomberg had expected an increase of 0.2 per cent.

At the same time, the Commerce Department revised downward the previous month’s report, saying demand for manufactured goods fell 2.2 per cent in March, more than the 1.5 per cent first reported.

Combined with disappointing reports about U.S. employment and manufacturing released last Friday, the latest data reinforce the notion that the recovery of the world’s biggest economy is in trouble.

In Toronto, the S&P/TSX declined by 55.8 points to 11305.40 points. In New York, the S&P 500 lost 4.98 points to 1273.06 points and the Dow Jones industrial average fell 36.14 points to 12082.43 points.

In Europe stocks reversed course and found positive ground in late trading. On Wednesday, the European Central Bank holds a critical meeting at which officials are expected to urge politicians to take more decisive steps to combat the debt crisis.

Economists also say there is a chance that the ECB will cut its main lending rate from the current level of 1 per cent. Such a move would help governments that are being forced to borrow money to support their domestic banks. Following last week’s move by Spain to recapitalize some of its most fragile banks, Portugal on Monday injected 6.6-billion euros into its financial institutions.

Europe’s woes combined with slowing growth in China are stoking fears of a global slowdown and hurting commodity prices.

Oil continued its dramatic slide, losing $1.06 (U.S.) on Monday to trade at $82.17 a barrel. Copper fell 0.7 per cent to $3.292 a pound. Gold has sold off a small amount following Friday’s big rally. It recently traded down $5.80 at $1,616.30 an ounce.

With investors dumping commodities, the Canadian dollar has been under pressure in recent sessions. But on Monday, the loonie managed to advance against the U.S. dollar by 0.3 per cent, rising to 96.36 cents. The increase comes a day before the Bank of Canada provides its overnight policy rate. Expectations are for a more subdued economic outlook.

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