While you were sleeping: Resting on January laurels

Friday 3rd February 2012

It's been a great start to the year and investors found little reason to change much today, ahead of January's US jobs report due tomorrow.

While Federal Reserve Chairman Ben Bernanke told lawmakers there were signs of improvement in the economy, he reiterated the central bank's plans to keep interest rates steady until at least late into 2014.

"Fortunately, over the past few months, indicators of spending, production, and job-market activity have shown some signs of improvement,” Bernanke said today in testimony to the House Budget Committee in Washington. “The outlook remains uncertain, however, and close monitoring of economic developments will remain necessary.”

In particular, Bernanke warned that the US economy remains vulnerable to shocks from Europe or elsewhere.

Underpinning the cautious optimism was a report showing a bigger-than-expected decline in US jobless claims last week.

New claims for unemployment benefits fell to a seasonally adjusted 367,000 versus the forecast of 375,000. The government's labour market report, due tomorrow, is expected to show that the economy created 150,000 jobs in January, less than in the month of December.

"The jobless claims continue the trend of decent news, though there have also been other indications of a general loss of momentum," Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, told Reuters. "That suggests we're in the right ballpark with estimates for the jobs report, but also that we aren't likely to see a huge upside surprise."

January's 5.7 percent gain in the MSCI All-Country index, which tracks equities in 45 developed and emerging countries, was the best performance for that month since 1994, data compiled by Bloomberg showed.

In early afternoon trading in New York, the Dow Jones Industrial Average fell 0.30 percent. The Standard & Poor's 500 Index barely budged, up 0.01 percent, and the Nasdaq Composite Index eked out a 0.08 percent gain.

In Europe, the Stoxx 600 Index closed with a 0. 2 percent advance for the day.

The latest US corporate earnings included those of Merck & Co, Dow Chemical and Abercrombie & Fitch, all of which disappointed. Gap and MasterCard, however, beat expectations, as did Green Mountain Coffee Roasters.

Earnings surpassed estimates at 67 percent of the 246 companies in the S&P 500 that reported results since January 9, according to data compiled by Bloomberg.

“The earnings season hasn’t been that positive, but it hasn’t necessarily been negative either,” Matthew DiFilippo, chief portfolio strategist at Stewart Capital in Indiana, Pennsylvania, told Bloomberg.

Glencore International held talks to buy Xstrata, boosting mining shares around the world amid expectations of more mergers and acquisitions in the industry. A combined Glencore and Xstrata would create a formidable rival to BHP Billiton.

As talks to secure Greece's next financial lifeline continue, debt auctions by France and Spain met solid demand. France sold 7.96 billion euros of six- eight- and 10-year debt at the top of its planned range. Spain sold 4.56 billion euros of bonds maturing in 2015, 2016 and 2017, just above its target for the sale, according to Bloomberg.

(BusinessDesk)

BusinessDesk.co.nz

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