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Stock traders expected to tread carefully ahead of U.S. jobs data

TORONTO - Expect March trading to get off to a subdued start this week as investors await a raft of top-drawer economic news, including an announcement from the Bank of Canada on interest rates.

TORONTO - Expect March trading to get off to a subdued start this week as investors await a raft of top-drawer economic news, including an announcement from the Bank of Canada on interest rates.

Also coming is the latest reading on Canadian economic growth and a fresh reading on the U.S. manufacturing sector.

But investor attention will be particularly focused on developments in the Greek debt crisis and the release of the U.S. non-farm payrolls report on Friday.

"I would say that ahead of those (employment) numbers, there's going to be a lot of hesitation, a lot of nervousness," said Serge Pepin, director of investments at BMO Investments.

Stock markets in Toronto and New York skidded lower last week with investors frustrated in trying to determine just how strong the economic recovery is turning out to be.

After a positive start to the year, investor sentiment has been tested despite a generally positive fourth-quarter earnings.

Moves by China to curb lending raised fears about economic growth and investors were further discouraged by plans announced by the U.S. government to regulate some trading done by banks.

Sovereign debt has also weighed on markets as investors look to Greece to make drastic moves to get its deficit under control.

Investors also hope the February U.S. jobs report will show the economy is actually starting to add jobs. There are worries that those hopes will have to go on hold a while longer after data last week showed that U.S. jobless insurance claims rose unexpectedly for a second week in a row.

"I don't think we're ready to see jobs growth at this point - I think the consensus, if anything, is sort of changing by the minute," Pepin said.

"At this point people aren't using ink, they're using a pencil because they know that they have to change their forecasts."

Economists expect to see that the U.S. shed another 50,000 jobs in February and that the jobless rate edged up 0.1 per cent to 9.8 per cent.

Pepin added that investors will be especially wary of any revisions to the January employment report.

Also in the U.S., the Institute for Supply Management's index on the manufacturing sector is expected to come in at 58 for February, still showing expansion but at a slightly slower rate than January.

In Canada, investors are not looking for anything dramatic from the Bank of Canada's interest rate announcement on Tuesday, with the central bank widely expected to keep its key rate at 0.25 per cent.

"The Bank of Canada has said they will be holding rates (unchanged) until June at least," observed Jennifer Dowty, portfolio manager at MFC Global Investment Management.

"Perhaps we will get some colour as to any change in that policy - that's what people will be watching for."

Pepin also said that the Greek debt crisis will continue to overhang markets in the coming weeks.

"It's sort of like the dark cloud that keeps following us," he said.

Greece faces a March 16 deadline from the EU to show signs of fiscal improvement or take further action to boost revenues and cut spending. The country shocked EU partners and markets when it disclosed last year that budget overspending would hit 12.7 per cent of annual output.

That was four times the EU limit and up from initial estimates of under four per cent of gross domestic product, that the Socialist government says were based on skewed statistics reported by its conservative predecessor.

Statistics Canada releases gross domestic product data for the fourth quarter and the month of December on Monday.

Economists expect gross domestic product grew by an annualized rate of four per cent in the last quarter of 2009, with December GDP rising 0.4 per cent.

The Canadian quarterly earnings season will start to wind down, but before then investors will take in first-quarter reports from more of the big banks.

Bank of Montreal (TSX:BMO) hands in earnings Tuesday, Royal Bank (TSX:RY) will report on Wednesday and TD Bank (TSX:TD) on Thursday.

Expectations are high after CIBC (TSX:CM) and National Bank (TSX:NA) delivered earnings reports last week that beat expectations.

 
 
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