Stocks turned mildly positive on Thursday, lifted by details of stimulus from the European Central Bank though caution ahead of Friday’s important payrolls data worked to constrain gains.
By Peter Martin
Thursday, March 5, 2015
By mid-afternoon in New York, the Dow Jones was up 17 points or 0.10% at 18,114, while the S&P 500 gained just 0.05% to stand at 2099.6.
The euro plunged to a its lowest level against the dollar in more than 11 years today, undermined by ECB President Mario Draghi elucidating the central bank’s QE plan that begins next week. The ECB made no change to monetary policy in its latest meeting, as expected, but it was the details revealed by Mr Draghi in his customary post-meeting press conference, in which he kept the door open for more stimulus beyond September 2016, that moved the forex market.
EUR/USD fell 0.46% to 1.1028, dropping below 1.1000 at one point in the day, the first time the currency pair has done so since September 2003. The ECB is set to begin buying bonds on Monday March 9, which will amount to a combined monthly value of €60 billion in public and private sector securities. Mr Draghi said that the purchases are intended to continue to September 2016, but would continue until they see a ‘sustained adjustment in the path of inflation’. He added that the ECB’s monetary policy decisions have already had a number of positive effects and that ‘looking ahead, we expect the economic recovery to broaden and strengthen gradually’.
European stock indices pushed substantially higher, with the German DAX gaining 1%, though the effect on US stocks was more muted, with investors focussed on monthly employment data from the government. The Employment Situation reports is released tomorrow morning, in what is considered to be one of the most crucial economic releases on the monthly calendar. 230,000 jobs are expected to have been added to non-farm payrolls in February, compared with the 257,000 growth seen in January, while the unemployment rate is expected to edge down to 5.6% from 5.7%.
Data released today showed an unexpected jump in jobless claims last week. Initial claims were expected to fall for the week ending February 28, but instead rose 7,000 to 320,000, which pushed the four-week moving average up to 304,750 from 294,500. While unlikely to alter expectations for tomorrow’s report too much, the weakness shown in today’s data will raise concerns nonetheless that the labor market may be losing some steam heading into March.
There was also some surprisingly soft data released today for the factory sector. Factory orders shrank 0.2% in January, versus expectations for a 0.2% rise, following a 3.5% drop in December. This is the sixth consecutive decline in factory orders, with the now-familiar effects of low energy prices and weak overseas demand impacting negatively.
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