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Canadian dollar sinks on ugly jobs report: ‘Needed this like another hole in the head’

These are stories Report on Business is following Friday, Jan. 10, 2014.

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Jobs report drives loonie down
Ugh, and ugh.

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Today's employment report from Statistics Canada is downright ugly, with 46,000 jobs lost in December and the unemployment rate climbing by 0.3 of a percentage point to 7.2 per cent as more people went hunting for work.

In the United States, growth in the labour market slowed last month to just 74,000 positions, though the jobless rate eased markedly to 6.7 per cent.

The Canadian jobs report added more pressure to the Canadian dollar, which tumbled fast to below 92 cents U.S.

"The Canadian dollar needed this like another hole in the head," said chief economist Douglas Porter of BMO Nesbitt Burns.

"The dismal jobs data will simply pour on the pressure for the sagging Canadian dollar, which was only spared more pain by a disappointing U.S. jobs gain in December," he added.

The loonie, as Canada's dollar coin is known, plunged as the job losses signalled that Bank of Canada Governor Stephen Poloz will likely be "dovish for longer," said chief currency strategist Camilla Sutton of Bank of Nova Scotia.

Coupled with that is the fact that Canada's weak report – economists had projected gains of about 13,000 jobs – plays into a string of several soft economic readings of late.

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As The Globe and Mail's Tavia Grant reports, the Canadian reading is all the more troubling because the job losses were driven by an erosion of full-time work.

That brought growth in the labour market over the course of 2013 to 102,000, Statistics Canada said, or 0.6 per cent. The monthly average was 8,500 jobs, well down from 2012's average of almost 26,000.

"December's labour force survey was awful across the board with an ugly headline number and even worse details," said senior economist Krishen Rangasamy of National Bank Financial, noting that the overall showing for last year was the "worst net jobs tally" since 2009.

In the United States, our Washington correspondent Kevin Carmichael writes, the U.S. economy sent a mixed signal, given the slow jobs growth but declining unemployment rate. Economists had expected the report to show job creation of 197,000, though a jobless rate still at 7 per cent.

The reading is expected to see the Federal Reserve move cautiously on its stimulus pullback.

Winners and ... bigger winners
BMO's Mr. Porter also takes a look today at who wins, and who really wins, from the erosion of the loonie.

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As always in such things, much of it depends on where investors placed their bets.

"Besides the obvious winners from a weaker currency – manufacturing, tourism, resources, NHL players who reside in Canada and just recently signed fat US$-based contracts – domestic investors who were shrewd enough to overweight in U.S. stocks have fared spectacularly well," Douglas Porter said.

"The double-headed lift of a strong S&P 500 and a rising US$ have created the biggest performance gap between U.S. and Canadian stocks in common currency terms since 1998/99."

During that period, Mr. Porter noted, American equities were "feasting" on the dot-com boom as the Asian crisis whacked Canadian resource stocks.

In Canadian-dollar terms, Mr. Porter said, the benchmark S&P 500 index has shot up by more than 38 per cent over the past year.

That, he pointed it, is almost 30 per cent more than the 9-per-cent gain in the S&P/TSX composite.

"A third of that gap is due to the C$ alone," he said.

Canada to hold another auction
The Canadian government plans to auction off wireless licences for the 2500 megahertz frequency in April 2015.

Industry Minister James Moore made the announcement today, stressing that auction of publicly-owned spectrum will include strict rules that will "support competition" in the $20-billion wireless market, The Globe and Mail's Iain Marlow and Rita Trichur report.

"Today's announcement means Canadian consumers in urban and rural areas will soon benefit from the deployment of advanced mobile and broadband services across the country, which will lead to better, faster Internet services on the latest technologies," Mr. Moore said in a statement.

"The rules for this auction, like those for the upcoming 700 MHz auction, were designed to support more choice in our wireless market while putting the interests of consumers first."

China soars
China is now believed to be the world's largest trading nation, coming in today with a "very impressive" surplus.

According to official data, Chinese trade surged in 2013 to almost $4.2-trillion, which should put it ahead of the United States, though America's numbers aren't yet known, according to The Financial Times.

As Derek Holt and Dov Zigler of Bank of Nova Scotia noted, China's December numbers were disappointing, with growth in exports slowing to 4.3 per cent.

Still, "the net leaves China with a very impressive trade surplus for 2013," its fattest, at almost $260-billion, since the recession.

"This year's surge saw the trade surplus return to the pre-crisis levels that had the U.S. up in arms over global trade imbalances," the Scotiabank economists said.

Good news, too, for China's commodity-exporting trading partners as such imports climbed.

In brief
Remember Target Corp.'s big payment card data breach? The U.S. retailer now says up to 70 million people were affected. At the same time, it cut its profit projections for its American unit in the fourth quarter.

President Barack Obama has tapped Stanley Fischer as vice-chair of the Federal Reserve.

Keep an eye on shares of Gap Inc. today, which are up after the U.S. retailer's announcement that it expects full-year earnings per share at the "high end" of its earlier forecast of $2.57 (U.S.) to $2.65.

Retailer Abercrombie & Fitch Co. is also in the spotlight, its shares up sharply after it hiked its projection for full-year profit to between $1.55 a share and $1.65, compared to its earlier $1.40 to $1.50.

Then there's Alcoa Inc., whose stock tumbled after its fourth-quarter results late yesterday fell shy of what analysts had projected.

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