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The Globe and Mail

At midday: Dow, TSX ignore central bank efforts

Traders work at their desks in front of the Dax board at the Frankfurt stock exchange June 22, 2012.


North American stocks were down in midday trading on Thursday, despite upbeat readings on U.S. employment and stimulative efforts by three central banks.

At noon, the Dow Jones industrial average was down 24 points or 0.2 per cent, to 12, 920. The broader S&P 500 was down 4 points or 0.3 per cent, to 1,370.

In Canada, the S&P/TSX composite index was down 49 points or 0.4 per cent, to 11, 865, threatening to end what had been a six-day winning streak.

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The declines follow moves by central banks in Europe, the U.K. and China to stimulate their economies, which normally gives stocks a boost. The European Central Bank cut its key rate by a quarter of a percentage point, to an historic low of 0.75 per cent, in a move that was widely anticipated.

At around the same time, China's central bank lowered its key lending rate and the Bank of England raised the size of its asset-purchase program – a flurry of activity that suggested to some observers that central banks were acting in a co-ordinated fashion to help bolster the global economy as it shows signs of slowing down.

In the United States, where economic reports have disappointed expectations in recent weeks, there was some good news.

Initial jobless claims for the period ended last week fell to 374,000 – a bigger drop than what economists had been expecting, and bringing the number of claims to its lowest level in a month.

The ADP report on private sector employment also beat expectations, showing job gains of 176,000 in June. The report is followed on Friday by the official payrolls report from the U.S. Labor Department.

The ISM report on non-manufacturing activity did provide one disappointment: It slid to 52.1 in June from 53.7 in May, which is a bigger drop than economists were expecting.

Yet, given that the manufacturing report on Monday fell into contraction territory below 50, some observers could see an upside to the fact that the services sector continues to expand.

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In Europe, stocks were mostly down. While the U.K.'s FTSE 100 rose 0.1 per cent, Germany's DAX index fell 0.5 per cent.

The bond market was also weak, with bond yields rising among some of the more indebted countries considered at higher risk of needing a bailout.

The yield on Spain's 10-year government bond rose to 6.7 per cent, up 36 basis points. The yield on Italy's 10-year government bond rose to 5.9 per cent, up 20 basis points. There are 100 basis points in a percentage point.

In North America, financials and commodity producers were among the weakest areas of the market. Within the S&P 500, financials fell 1.3 per cent and energy stocks fell 0.7 per cent.

However, some economically sensitive areas moved higher: Consumer discretionary stocks rose 0.5 per cent and technology stocks rose 0.3 per cent.

Within Canada's benchmark index, energy stocks fell 0.7 per cent, while materials and financials fell 0.3 per cent each.

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Commodity prices moved slightly lower. Crude oil, which has been on a tear in recent trading sessions, fell to $87.36 (U.S.) a barrel, down 30 cents. Gold fell to $1,607 an ounce, down $9.

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