By James Langton

(October 8 – 09:00 ET) – The hotly anticipated U.S. labour report hit the wires this morning, giving traders a pleasant surprise and setting up a positive beginning to the trading session. Stocks were mixed in Europe ahead of the news, and slightly down in Asia.

The labour report is viewed as critical inflation data for the U.S. Federal Reserve Board, and therefore a crucial indicator for interest rates. The report was surprisingly weak, which sent futures into a strong but short-lived rally. S&P futures settled up a few points. Non-farm payrolls were expected to rise 230,000, but they actually fell by 8,000. The unemployment rate met expectations by holding steady at 4.2%.

The Canadian jobs picture was much better, but there’s hardly the fear of inflation here and there’s much more room for labour to grow before it starts really pressuring the economy. Statistics Canada reported 63,800 new jobs in September, rebounding from a 7,000 drop. The unemployment rate dropped to 7.5%, its lowest level since June 1990. And CMHC today said housing starts in Canada rose 3.7% in September to 152,700, the highest level since March 1998.

European markets were rather subdued ahead of the U.S. data. The FTSE 100 was up just five points, while the German DAX slipped 11 points and the CAC 40 was down 13 points in Paris.

The big news in Europe is that the price for crude oil plunged more than 8% on fear that OPEC is actually not sticking to its latest agreement on production levels.

Overnight, the Tokyo market closed lower on some profit-taking, speculation that the Bank of Japan will stand pat against the Yen and a three-day weekend that wouldn’t give traders a chance to react to the U.S. data. Financials were the big news after Asahi and Tokai, two of Japan’s largest banks, announced plans to merge to create the country’s third biggest bank, with a combined US$549 billion in assets. Nevertheless the Nikkei finished down 75 points. The Hang Seng closed almost unchanged, down 0.78 points, in a quiet session.

In other business news, Volvo AB and Mitsubishi Motors Corp. have agreed to swap 5% positions in one another, building an alliance that creates the world’s largest maker of trucks and buses.

Takeover target National Westminster Bank PLC has parachuted its chairman, Sir David Rowland, into the chief executive’s seat, replacing Derek Wanless, to fight the takeover battle for the company with the Royal Bank of Scotland.

And Ballard Power Systems said it’s looking for a new chief financial officer following the resignation of Michael Graydon.