Financial Update For June 7, 2010

• TSX -242.26. After tip-toeing carefully higher for a week, markets lurched violently lower under the weight of disappointing U.S. jobs figures and new worries about European government finances, where accusations that Hungary may have fudged some of its economic statistics -- as had been alleged previously about Greece -- raised new fears about the health of the European economy as its fiscal and sovereign debt crisis drags on. Data showing Canada continues to create solid jobs growth was brusquely dismissed by markets now grudgingly staring at a slower global recovery.
• DOW -323.31 to 9,931slid through psychological support at 10,000. The second and more crippling blow to the markets came with the release of the U.S. employment report. The eagerly anticipated report, released by the U.S. Labour Department, showed that U.S. companies added far fewer than anticipated jobs in May, putting a spotlight on the fragility of the country's economic recovery. While the United States created 431,000 jobs last month, the vast majority of those positions were temporary Census hires by the U.S. government, with only 41,000 jobs added in the private sector. Some economists had been predicting a private-sector increase of as many as 200,000 jobs.
• Dollar -.76c to 94.28cUS
• Oil -$3.10 to $71.51US per barrel.
• Gold +$7.90 to $1,216.20 USD per ounce

Janet Whitman, Financial Post Canada, which remains on much sounder economic footing than the United States, had a better-than-expected increase of 24,700 workers added to payrolls in May, with most of the gain in full-time and private-sector positions, Statistics Canada reported. Bay Street had been forecasting a 15,000 gain.

The U.S. rate isn't likely to head much lower this year or next because the expected U.S. economic growth of around 3% or 4% won't be enough to create sufficient jobs for the roughly 15 million Americans out of work and new entrants in the labour market.
Canada's strong jobs report, meanwhile, shows the Bank of Canada was on the right track by raising interest rates earlier this week despite the financial turmoil in Europe, said Benjamin Reitzes, an economist with BMO Capital Markets. "Canadian employment is now only 108,000 from the peak hit in October 2008, and is up 1.7% from a year ago, much better than the still-negative yearly change in the U.S.," he said.
The strong report indicates more interest-rate increases are coming, perhaps as soon as July, some analysts said. http://www.financialpost.com/Jobs+stall/3115343/story.html
Wal-Mart new kid on bank block John Greenwood, Financial Post •
Wal-Mart Stores Inc. changed the face of retail in North America by making life easier for the little guy through its simple formula of cutting prices and cranking up volumes.
Is banking next?
This week the retailing giant won final approval to open a bank in Canada, providing entry to an industry that has been much criticized for perceived high prices and lack of competition.
Andrew Pelletier, a spokesman for Wal-Mart Canada, said the company plans to provide "convenient and value-focused financial products and services" for its customers.
He declined to discuss details of the company's plans in advance of the official lunch of the new bank, set for June 15.
While the rise of Wal-Mart has been a boon for consumers, it has been devastating for competitors, many of whom ended up being bought out or going out of business.
In the United States, fierce resistance from the banking industry forced the retailer to abandon a bid to buy a bank early in the decade, though it continues to offer services such as cheque cashing and money transfer.
Wal-Mart applied for the licence to the Office of the Superintendent of Financial Institutions, the Canadian banking regulator, nearly two years ago. Mr. Pelletier declined to discuss why the process has taken so long.
If Wal-Mart saw opportunities south of the border where there are more than 1,000 banks fighting it out for customer deposits, there would likely be an even bigger prize waiting in this country, where the industry is dominated by a oligopoly of just six major players.
Consumer groups regularly complain about credit card fees and low interest rates on savings accounts available to bank customers in Canada. Management fees on Canadian mutual funds, most of which are controlled by the big banks, are similarly out of whack compared with the United States and other developed countries.
In the United States, Wal-Mart is a significant player in the money-transfer business, partly because many of its customers are recent immigrants still with family in other parts of the world. Additional services, such as the ability to offer deposits and make loans, would provide further opportunity to the company at a time when profits from its bread-and-butter retail business have come under pressure from the recession.
Wal-Mart would not be the first non-bank to try to break into financial services in Canada. Other retailers such as Canadian Tire Corp. and Loblaw Cos. are also working to establish themselves.
One of Wal-Mart's main advantages may be its reputation for low prices, which may help it get the word out to potential customers that it can offer a better deal than the competition at a time when Canadian consumers are scrambling for all the savings they can get.
The federal government has recently taken steps to shake up the banking sector, including the decision to make it easier for credit unions to expand across the country and the move to prohibit banks from using their websites to sell insurance.
Opening a bank is a costly undertaking for Wal-Mart and the company will likely move carefully as it plots its moves over the next few years, but it clearly believes the investment will pay off. http://www.financialpost.com/news/financials/Mart+bank+block/3115350/story.html