BUSINESS

Loonie down on economic worries, off early lows on surprisingly positive outlook

07/09/2012 08:46 EDT | Updated 09/08/2012 05:12 EDT
TORONTO - The Canadian dollar closed slightly lower Monday, reflecting worries that the global economy is slowing.

The currency lost 0.06 of a cent to 98.11 cents U.S. but was well off the lows of the session after the Bank of Canada's new survey of business intentions suggested Canadian firms remain surprisingly optimistic about the next year, with positive expectations for sales, investment and hiring.

The most encouraging reading by the central bank survey was on hiring intentions, with 59 per cent of firms saying they plan to hire additional workers in the next 12 months, as opposed to only six per cent that plan to cut jobs.

A jump in oil prices also supported the loonie.

The August crude contract on the New York Mercantile Exchange rose $1.54 to US$85.99 a barrel after sliding $2.77 at the end of last week.

Prices took off Monday as Norway prepared for a shutdown of its North Sea crude production.

Norway's oil industry, which produces more than 3.8 million barrels of oil and natural gas per day, said platforms were set to switch off due to a strike by offshore oil workers over retirement benefits.

Global growth concerns were ratcheted higher Friday after disappointing U.S. jobs data and word from the International Monetary Fund that it was downgrading its economic forecast.

Employment data also reflected tepid Canadian growth. Statistics Canada reported Friday the economy cranked out just over 7,000 jobs last month. The result was better than the 5,000 or so that economists expected, but still a sharp slowdown from earlier in 2012.

The data Friday also showed that the U.S. economy only cranked out an average of 75,000 jobs a month during the second quarter, down sharply from 226,000 in the January-March period.

IMF managing director Christine Lagarde didn't mention exactly how much the IMF would trim from its earlier forecast, but together with the jobs data, the news was enough to further persuade traders that economic growth is faltering around the globe.

Commodities also made gains after steep losses at the end of last week.

The September copper contract edged up two cents to US$3.43 a pound following an eight-cent fall. Bullion started to recover from Friday's $30 decline, up $10.20 to US$1,589.10 an ounce.

The chronic eurozone debt crisis also chipped away at investor confidence as Spain’s borrowing costs rose to dangerously high levels.

The interest rate, or yield, on the country's 10-year bonds rose above seven per cent Monday morning, a level considered unaffordable for a country to raise money on the bond markets in the long term and the point at which Greece, Ireland and Portugal all sought bailouts.

Meanwhile, finance ministers of the 17 countries that use the euro are gathering in Brussels to discuss terms of a rescue package for the country's stricken banks.

There was one bit of positive news Monday.

Inflation figures for China showed the consumer price index at its lowest since January 2010. That will give Beijing leeway to continue adding stimulus to fight an economic slowdown. China is scheduled to release its latest trade numbers Tuesday and retail sales, industrial production and gross domestic product on Friday. In a surprise move, China last week cut interest rates for a second time in a month.