BUSINESS

Loonie down, commodities decline amid disappointing read on U.S. service sector

05/03/2012 08:40 EDT | Updated 07/03/2012 05:12 EDT
TORONTO - The Canadian dollar closed lower Thursday as losses in commodity prices picked up in the wake of a disappointing read on the American non-manufacturing sector and another round of worries about the eurozone's worsening economy.

The currency declined 0.25 of a cent to 101.12 cents US.

The Institute for Supply Management says its index of non-manufacturing activity dropped to 53.5 last month from 56 in March. Any reading above 50 indicates expansion, but that was a disappointment to traders who had expected a reading of 55.4.

The ISM’s survey covers all sectors outside of manufacturing, which make up 90 per cent of the American economy. That includes retail, construction, financial services, health care and hotels.

Meanwhile, European Central Bank president Mario Draghi offered little prospect that the bank would deliver more support for the struggling economies of the 17-country eurozone.

Instead, he is urging governments to agree to a growth strategy that would work alongside tough spending cuts.

Budget cuts and tax hikes, which have been introduced by eurozone governments to reduce debt, are now seen as hurting growth and some European governments are calling for policies to focus more on stimulating economic activity.

Demand concerns pushed the June crude contract on the New York Mercantile Exchange down $2.68 to US$102.54 a barrel.

Metal prices also continued to weaken as the July copper contract slipped five cents to US$3.74 a pound.

Oil and metals also lost ground Wednesday amid data showing that manufacturing activity across the eurozone shrank in April at a faster pace than previously estimated, while a survey of purchasing managers by HSBC showed that China’s manufacturing sector contracted in April for the sixth straight month.

Bullion prices also declined Thursday with the June contract in New York down $19.20 to US$1,634.80 an ounce.

There was positive news a day before the release of the U.S. non-farm payrolls report. The U.S. Labour Department announced that jobless insurance claims for last week came in at 365,000, down 27,000 from the previous week.

Economists believe the U.S. economy cranked out about 160,000 jobs in April.