By Malcolm Morrison, The Canadian Press

TORONTO - Stock markets could find gains elusive this week even as last week's U.S. employment report for November raised hopes that an economic rebound is under way.

However the data raised concerns about how the U.S. Federal Reserve might react to indications of a sharp slowdown in job losses and the Fed's meeting on interest rates will be the focus of attention this week.

Andrew Pyle, an investment adviser at ScotiaMcLeod in Peterborough, Ont., said the results which found that 11,000 people lost their jobs last month, compared with the 120,000 that had been expected, offered some relief for investors.

"One the fact that there were really no job loss in November, so that's a good thing from an income point of view," he said.

"Two, the fact that the unemployment rate actually turned lower (and) from a psychological point of view, from a consumer confidence point of view, I think will be positive in the latter weeks of December."

And that bodes well for the retail front since the U.S. holiday shopping season got off to a tepid start following the U.S. Thanksgiving holiday.

"People will wake up and possibly feel better and I think that may open up pocketbooks more than what we had thought," Pyle said.

Whether that strong jobs data can provide the spark for a year-end rally is up in the air.

For one thing, Pyle thinks it would not be a good idea to take the U.S. jobs report and conclude after one month of data that the U.S. economy is out of the woods. For another, North American indexes are at or near their best levels of the year.

"I'm just a little bit hesitant because we have already priced in so much good news, so much growth, how much evidence do we need to go from a 60 per cent March to December rally to an 80 per cent rally?" Pyle said.

Investors are also concerned that the jobs report could get the Federal Reserve thinking about hiking rates from near zero or remove other supports from the economy sooner than expected.

And that is why investors will be looking closely to this week's Fed meeting on rates.

"I don't think the Fed is that nonsensical as to take this one report and become the Bank of Australia next week," said Pyle, referring to a recent rate hike by the Australian central bank.

"I do think however that this report might shift the tone of the language of the statement next week and that might be equally concerning to the market."

Right now, economists aren't expecting the U.S. central bank to hike rates until around the fourth quarter of 2010.

"If they start to hint at a rise in interest rates, well that will advance the schedule for next year. So while we may not get it next week, perhaps rate hikes could come before the summer," Pyle said.

"I've been arguing that maybe it would be a good idea to actually start sneaking (rate hikes) in now and get people used to higher rates and get them off this zero interest rate routine from the past year."

Just last month, the Fed said it would keep rates near zero for the foreseeable future. The central bank has also pumped over a trillion dollars into the markets to sustain liquidity.