Bank of England and ECB avoid base rate decreases, whilst USA productivity improves markedly sending USA indices into minor recovery

Feb 7 • Morning Roll Call • 2631 Views • Comments Off on Bank of England and ECB avoid base rate decreases, whilst USA productivity improves markedly sending USA indices into minor recovery

shutterstock_64838587Both the UK’s and Europe’s central bank decided to keep their base interest rates at record lows on Thursday, the ECB’s decision not to lower and the accompanying narrative courtesy of the bank President Mario Draghi, caused the euro to power through R1 and many European indices to rally in correlation.

In other positive news it would appear that the EU is very close to reaching a deal with the USA; the EU will lift tariffs on almost all goods imported from the USA. On the subject of the USA there was mixed news on Thursday in terms of high impact news events, however, the positives outweighed the negative…

Productivity has increased by an impressive 3.2% annual rate during the 4th quarter of 2013. Meanwhile the weekly unemployment claims in the USA came in at 331K – a decrease of 20K from the previous week. The bad USA news came in the form of the balance of goods which deteriorated. The last data available showed a negative balance of $38.7 billion. Also, what’s referred to as the Challenger jobs cuts report, showed that planned layoffs have increased by circa fifty percent over recent months, close on 45K planned in January, significantly more than the 37K planned in December that was the lowest since 2000.

As a consequence of the positive news outweighing the bad news the USA bourses accelerated upwards regaining many of the losses incurred over the past week and since the taper was adjusted by the FOMC.

EU ready to lift duties on most U.S. goods to reach trade pact

The European Union will offer to lift tariffs on nearly all goods imported from the United States as part of negotiations towards the world’s largest free-trade deal, people familiar with the proposal have told Reuters. The offer will be made on Monday, a week ahead of face-to-face talks between EU trades Chief Karel De Gucht and his U.S. counterpart Michael Froman in Washington. The European Commission, which handles trade issues for the EU’s 28 member states, will tell the United States how far it is willing to open its markets, while U.S. officials are expected to do the same.

US Productivity and Costs Fourth Quarter 2013, Preliminary

Non-farm business sector labour productivity increased at a 3.2 percent annual rate during the fourth quarter of 2013, the U.S. Bureau of Labor Statistics reported today. The increase in productivity reflects increases of 4.9 percent in output and 1.7 percent in hours worked. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the fourth quarter of 2012 to the fourth quarter of 2013, productivity increased 1.7 percent as output and hours worked rose 3.3 percent and 1.6 percent, respectively.

Unemployment insurance weekly claims report

In the week ending February 1, the advance figure for seasonally adjusted initial claims was 331,000, a decrease of 20,000 from the previous week’s revised figure of 351,000. The 4-week moving average was 334,000, an increase of 250 from the previous week’s revised average of 333,750. The advance seasonally adjusted insured unemployment rate was 2.3 percent for the week ending January 25, unchanged from the prior week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending January 25 was 2,964,000, an increase of 15,000 from the preceding week’s revised level of 2,949,000.

US International Trade in Goods and Services, December 2013

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total December exports of $191.3 billion and imports of $230.0 billion resulted in a goods and services deficit of $38.7 billion, up from $34.6 billion in November, revised. December exports were $3.5 billion less than November exports of $194.8 billion. December imports were $0.6 billion more than November imports of $229.4 billion.

Challenger: US Planned Cuts Surge 50 Percent

After falling to a 13-year low in December, monthly job cuts surged nearly 50 percent to kick off 2014, as U.S.-based employers announced plans to reduce their payrolls by 45,107 in January, according to the latest report on monthly job cuts released Thursday by global outplacement consultancy Challenger, Gray & Christmas, Inc. The 45,107 job cuts last month were 47 percent higher than a December total of 30,623, which was the lowest one-month total since 17,241 planned layoffs were announced in June 2000.

ECB Monetary policy decisions

At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.25%, 0.75% and 0.00% respectively.

Market overview at 10:00 PM UK time February 6th

The DJIA closed up 1.22% on the day, the SPX up 1.24% and the NASDAQ up 1.14%. Euro STOXX closed up 1.63%, DAX future up 1.54%, CAC up 1.71%, UK FTSE up 1.55%.

NYMEX WTI oil finished the day up 0.50% at $97.87 per barrel, NYMEX nat gas down 0.26% at $5.02 per therm. COMEX gold closed flat at $1257 per ounce, whilst silver closed up 0.63% at $19.93 per ounce.

The DJIA equity index future is at the time of writing – 10:00 PM UK time February 6th, up 1.26%, SPX up 1.35%, NASDAQ future is up 1.31%. Euro STOXX is up 1.48%, DAX future up 1.36% and CAC future up 1.89%, with FTSE future up 1.75%.

Forex focus

The euro advanced 0.4 percent to $1.3588 late New York time, the biggest gain since Jan. 23rd. The single currency rose 1.1 percent to 138.74 yen, after dropping to 136.23 yen on Feb. 4th, the weakest level since Nov. 22nd. The dollar rose 0.6 percent to 102.10 yen. The euro strengthened the most in two weeks against the dollar after European Central Bank President Mario Draghi refrained from announcing any additional stimulus measures that tend to debase a currency. The Aussie climbed 0.6 percent to 89.63 U.S. cents after advancing to the highest level since Jan. 14th. The currency surged 2 percent on Feb. 4th, the biggest gain since June, after the Reserve Bank of Australia dropped its reference to the currency being too strong.

Canada’s dollar fell 0.2 percent to C$1.1101 at 9:35 a.m. Toronto time. Government bond yields rose, with the security due in 10 years gaining to 2.42 percent from 2.39 percent, the third straight increase. Canada’s merchandise trade deficit widened for a third month in December, exceeding all economist forecasts, as imports led by energy reached a record high.

Bonds briefing

The 10-year yield advanced three basis points, or 0.03 percentage point, to 2.70 percent late afternoon in New York after rising nine basis points during the previous two days. It touched 2.57 percent on Feb. 3rd, the lowest level since Nov. 1st. The price of the 2.75 percent security due in November 2023 dropped 1/4, or $2.50 per $1,000 face amount, to 100 14/32. Treasuries fell, pushing 10-year note yields higher for a third day, as demand for the safety of U.S. government securities ebbed before a report forecast to show payrolls growth rebounded from the slowest in almost two years.

Germany’s two-year note yield rose four basis points, or 0.04 percentage point, to 0.12 percent at late London time. That’s the biggest increase since Sept. 5th. The zero percent security maturing in December 2015 slipped 0.090, or 90 euro cents per 1,000-euro face amount, to 99.770. The 10-year yield increased six basis points to 1.70 percent after dropping to 1.60 percent yesterday, the least since Aug. 1st.

Fundamental policy decisions and high impact news events for February 7th

Friday sees Japan’s leading indicators published, Germany’s trade balance is expected in at  a positive £17.3 bn. France’s trade balance is expected in at -€5.6bn. The UK’s manufacturing index is expected in up 0.6%, whilst the trade balance for the UK is expected in down £9.3 bn for the last month. German industrial production is expected up by 0.6% month on month.

Moving onto North American news Canada’s unemployment rate is expected in at 7.2 with unemployment numbers to have fallen by similar numbers to the -46K previously. The USA NFP print is expected to come in at 184K extra jobs created for the month, whilst the unemployment rate is predicted to come in at 6.7%, with earnings up 0.2% month on month.

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