Opening bell: Economy stalls in December

Q4 GDP growth rate slides to 0.8%


The Canadian economy contracted by 0.7% in December, Statistics Canada reported today. That is much worse reading than economists have been projecting. A contraction of 0.2% was the forecast from the private sector.

For the fourth quarter of 2007, annualized growth in the economy came in at 0.8%. That was down from the 3% annual pace seen in the third quarter.

In the United States, the fourth-quarter growth rate was 0.6%.

In the wake of the report, the Canadian dollar shed more than half a cent. The loonie was trading at US101.04¢.

The Bank of Canada of Canada is expected to announce a rate cut tomorrow, but the decline in Q4 GDP makes the size of any cut unclear.

South of the border, U.S. tock futures declined as the U.S. greenback fell to its worst level against a basket of currencies since 1973.

Later this morning, the Institute of Supply Management’s manufacturing gauge for February may fall back under the 50 mark. Readings under 50 in the ISM index indicate that the U.S. manufacturing sector is contracting, but it takes a much weaker reading near 41 to indicate a recession. The ISM data is due out at 10 a.m. EST.

Gold jumped as high as US$984.60 an ounce in London, up about 18% since the start of 2008 on expectations of further U.S. interest rate cuts, stock market anxiety, and fears of rising energy costs and inflation in general.

In today’s earnings news, HSBC Holdings reported a 21% profit rise for 2007, even as its earnings from North America were virtually wiped out by an ill-fated push into the subprime-mortgage market.

Overseas, worries about a U.S. recession helped pull down Japan’s Nikkei 225 index down 4.5% to 12,992.18, and markets in Hong Kong, South Korea, India and Australia also fell sharply, though shares in mainland China advanced.

The FTSE 100 was down 1.5% to 5,779.1 early in the afternoon in London, while Germany’s DAX declined 1.6% to 6,639.28 and the Paris CAC 40 lost 1.3% to 4,728.62.

A deep selloff hit North American stock markets on Friday amid continuing worries about the financial sector and the credit crunch.

The S&P/TSX composite index shed 291.20 points, or 2.1%, to at 13,582.69.

For the week, the benchmark index finished flat.

The junior S&P/TSX Venture composite index gave up 27.43 points, or 0.98%, to end at 2,782.07.

In New York, U.S. stocks tumbled as another round of weak economic data added to U.S. recession fears and a record loss at insurer AIG underscored worries about more write-downs in the financial sector.

The Dow Jones industrial average slid 315.79 points, or 2.51%, to end at 12,266.39. The S&P 500 fell 36.96 points, or 2.70%, to 1,330.72 while the Nasdaq composite index closed down 60.09 points, or 2.58%, to end at 2,271.48.

For the week, the Dow was down 0.9%, the S&P was down 1.6% and the Nasdaq was down 1.4%.