The US equity markets continue to move higher as the S&P 500 recorded another solid gain finishing the day up 4 points to 1123. Market participants were not willing to buck the trend prior to the US employment report that will be released tomorrow at 1330 GMT. Expectations are for a decrease of 40 thousand jobs, but given the poor weather during February on the East Coast of the US, the market would not be surprised to see a larger number.
In Europe, the markets needed to absorb to interest rate decisions. Even though both the EMU and the BOE where not expected to raise rates, any statement on the future would be carefully analyzed. The European Central Bank left its benchmark interest rate unchanged Thursday and is expected to scale back special lending to banks introduced during the financial crisis, while the Bank of England’s Monetary Policy Committee voted to keep policy unchanged and extremely loose.
ECB President Jean-Claude Trichet will comment on the grounds for the central bank’s decision to hold its key rate at 1% at a press briefing. A calm situation on the inflation front, the ECB’s key concern, allowed Mr. Trichet to display a lenient monetary policy stance in his guidance at the briefing. The ECB will continue to conduct its weekly refinancing operations as fixed-rate tenders with full allotment for as long as is needed, and at least until Oct. 12, Mr. Trichet said at a monthly press conference after the central bank left its benchmark interest rate unchanged at 1%
BOE policy makers, meanwhile, have emphasized that they could increase the central bank’s bond-buying program, also known as quantitative easing, if the U.K.’s economic recovery begins to falter, and appear unlikely to tighten policy soon.
The U.K. economy has picked up significantly since the MPC launched its unconventional policy one year ago, but many challenges remain. The U.K. government is saddled with a huge debt burden from propping up banks and supporting demand during the financial crisis, which will require it to cut spending and raise taxes. Households and companies will also be restrained by high levels of debt.
In the US, The Labor Department said in its weekly report Thursday that initial claims for jobless benefits fell by 29,000 to 469,000 in the week ended Feb. 27. The previous week’s level was revised upward to 498,000 from 496,000. Total claims lasting more than one week, meanwhile, fell to a level not seen since January 2009. Economists surveyed expected initial claims to decrease by 23,000.
Nonfarm business productivity rose by a seasonally-adjusted annual rate of 6.9% in the last quarter of 2009, according to the Labor Department. Economists polled forecast a 6.5% increase in output per hours worked. The first reading released Feb. 4 estimated a 6.2% rise for the October-to-December period of last year.
Additionally, comparable-store sales rose 4% when 2.9% was predicted for the 28 retailers that report through Thomson Reuters. The next best month was January, at 3.3%. The positive showing marks half a year of straight gains after 12 monthly declines. With most retailers reporting, 82% beat expectations as they kept Christmas inventories low, were able to clear items without too much markdown and move spring merchandise in. The situation was helped by the dismal year-earlier comparisons, when retail sales were jolted by the economic crisis. This pushed the RTH retail holders ETF to a new 52 week high.
