Stock markets weaken at end of positive week

The U.S. Labour Department reported that the jobless rate fell to 8.6% during November from nine per cent while the economy created about 120,000 jobs, which was in line with expectations. The Department also revised the last two months higher by 72,000 jobs.

This was particularly good news from Canada’s largest trading partner and together with other positive reports this week reassured traders that the U.S. isn’t about to sink back into recession.

Investors have also digested strong reports on U.S. consumer confidence and the manufacturing sector over the last few days.

“And last weekend was the Thanksgiving weekend in the U.S. and all indications are that there was a lot of retail traffic and sales seem to be higher than they were last year,” said Mark Bayko, portfolio adviser for U.S. and International Equities at RBC Dominion Securities.

“So the consumer seems to be a lot more resilient than a lot of people expected and the U.S. economy has been maybe more resilient relative to expectations from a couple of months ago.”

The Canadian dollar lost early gains amid a disappointing domestic jobs report.

The loonie was down 0.39 of a cent to 98.2 cents US as Statistics Canada reported the economy shed 18,600 jobs last month while the jobless rate edged up a tenth of a percentage point to 7.4%. Economists had expected the economy to crank out about 17,000 jobs.

Canada sheds 18,600 jobs in November

New York market were little changed with traders also encouraged after German Chancellor Angela Merkel laid out some details of what could be part of an effective plan for containing the European debt crisis.

The Dow industrials drifted 0.61 of a point lower to 12,019.42.

The Nasdaq gained 0.73 of a point to 2,626.93 and the S&P 500 index eased 0.3 of a point to 1,244.28.

Stock markets finished this week’s trading sharply higher on rising optimism that eurozone leaders are finally moving to deal with the debt crisis, almost two years after it started in Greece. The TSX surged 613 points or 5.34% this week while the Dow surged 788 points or seven per cent.

“You’ve seen some positive signs this week but I think expectations are rapidly increasing ahead of next week’s European summit,” added Bayko.

Merkel is pushing for stronger rules against overspending as the long-term answer to Europe’s debt crisis, saying fixes for the euro’s flaws need to be written into changes in the basic EU treaty.

Speaking to lawmakers in Parliament ahead of a crucial European summit next week, the German leader emphasized that tougher rules against running up debt were the only path forward and warned the process could take years.

There was also a hint of more short-term help for other heavily indebted governments such as Italy from the European Central Bank. Bank President Mario Draghi on Thursday appeared to dangle an offer of new, extraordinary measures if political leaders at the Dec. 9 summit can answer his call for “a fundamental restatement of the fiscal rules.”

“Other elements might follow,” Draghi said, fuelling speculation that the bank could step up its so-far limited program to buy government bonds issued by struggling countries.

The industrials sector was the strongest group, up 1.17% with Canadian Pacific Railway (TSX:CP) ahead $1.12 to $62.31 while Bombardier Inc. (TSX:BBD.B) climbed seven cents to $4.05.

The TSX financial sector was up 0.82% amid strong earnings from two of the big banks.

Royal Bank (TSX:RY) shares gained $1.74 to $48.77 as it said earnings in Canadian banking and its insurance arm drove net income 16% higher in the fourth quarter to $1.6 billion or $1.07 a share.

Royal Bank Q4 net income rises 16% to $1.6 billion

But Scotiabank (TSX:BNS) shares lost $1.25 to $48.99 as it reported that profits rose 11% to $1.24 billion in its fourth quarter or $1.07 a share. Scotiabank’s revenue increased to $4.35 billion in the three months ended Oct. 31, rising from $3.94 billion a year earlier.

Scotiabank Q4 profit up 11% to $1.24 billion

Commodity prices ran ahead with January crude on the New York Mercantile Exchange up 76 cents to US$100.96 a barrel. The energy sector was up 0.28% with Suncor Energy (TSX:SU) up 21 cents to $30.76.

The base metals component lost 0.9% even as metals also advanced with March copper up five cents to US$3.59 a pound. A report that China is easing lending to encourage growth helped push the metal up 10% this past week. China is the world’s biggest consumer of copper. Teck Resources (TSX:TCK.B) gained 22 cents to $37.87 while HudBay Minerals (TSX:HBM) shed 15 cents to $10.10.

The gold sector was down about 2.5% as February gold in New York rose $11.50 to US$1,751.30 an ounce. Barrick Gold Corp. (TSX:ABX) gave back $1.61 to $51.88.

Tech heavyweight Research In Motion Ltd. (TSX:RIM) (NASDAQ:RIMM) was one of the biggest TSX decliners. The BlackBerry maker’s shares fell $1.73 or 9.2% to $17.08 after it said that it expects to miss its full-year financial targets as it takes a big charge because of poor tablet sales. RIM will book a pre-tax charge of about US$485 million on its books in the third-quarter.

Elsewhere on the TSX, Lululemon Athletica Inc. (TSX:LLL) stock was up $2.71 to $50.59, reversing a 5.6% slide Thursday after the retailer missed revenue expectations in its latest earnings report. However, quarterly profit soared by 51% and beat estimates.