North American stocks look set to slump at Friday’s open, as a stronger than expected U.S. jobs report raised the spectre of inflation.

U.S. employers accelerated the pace of job creation in July. The U.S. Labor Department said nonfarm payrolls grew by 207,000, above expectations, and previous numbers were revised higher. The unemployment rate held steady at 5.0%.

Today’s strong jobs report makes it even more likely that the U.S. Federal Reserve fill boost interest rates when it meets next Tuesday. The Fed is widely expected to lift rates by a quarter-point to 3.5%.

Here at home, Statistics Canada said employment was unchanged in July following an increase of 79,000 during the previous three months.

The unemployment rate edged up 0.1 percentage points to 6.8% last month.

The price of crude oil also rose this morning. Light, sweet crude oil futures gained 63¢ to US$62.01 a barrel, amid reports of some refinery disruptions in the U.S.

In overseas trading, Japanese stocks dropped due to political uncertainty over the fate of a contentious vote to privatize the country’s postal system. The Nikkei 225 index lost 116.83 points, or 0.98%, to 11,766.48.

In Hong Kong, shares fell for the third consecutive day while consolidation and profit taking forced the market into a slight retreat. The blue-chip Hang Seng Index fell 60.22 points, or 0.4%, to 15,051.32.

Toronto stocks rose modestly Thursday, as a red hot energy sector overshadowed a second poor day in the financials group.

The S&P/TSX composite index finished up 27.92, or 0.26%, to close 10,626.71.

The TSX benchmark surpassed the Dow Jones industrial average for the first time since October 2000.

Volume on the senior exchange was 284 million shares.

Seven of the 10 TSX main sub-groups were up, with the energy index gaining 2.27%

Air Canada’s parent company, ACE Aviation Holdings Inc., reported a second-quarter profit of $168 million, compared with a year-earlier loss of $510 million. ACE also disclosed it plans to spin off its Jazz regional airline through an income trust structure. ACE shares rose $1.04, or 1%, to $99.50.

Among financial issues, shares of CI Fund Management Inc. fell 85¢ to $20.05 after CI dropped plans for a hostile bid for UK fund manager Amvescap plc.

Manulife Financial Corp. shares rose 85¢ to $63.75 after the insurer reported a 28% rise in second-quarter profit, boosted in part by strong investment results and growth in its Canadian, Japanese and U.S. wealth management businesses.

The junior S&P/TSX Venture composite index finished up 5.02, or 0.28%, to 1,826.80.

In New York, stocks fell on higher oil prices and disappointing July sales numbers for major U.S. retailers.

The Dow Jones industrial average moved 87.49 points lower to 10,610.1; the Nasdaq composite index was down 25.49 at 2,191.32 and the S&P 500 index lost 9.18 points to 1,235.86.