U.S. stock futures are flat to slightly positive this morning, with most of the major European indexes up close to half a per cent, as markets breathed a sigh of relief as U.S. jobless claims data came in stronger than expected.
The report is garnering more attention than usual, as last week's claims jumped unexpectedly to a four-month high of 385,000 and prompted a rethink of this year's powerful market rally. The data today showed initial jobless claims declining back to 346,000, suggesting that last week's spike was due to seasonal distortions.
A further disappointing reading on the U.S. job market could have produced considerable selling pressure in equities. Both the Dow Jones industrial average and S&P 500 enjoyed their best session in six weeks on Wednesday, closing at record highs. If U.S. employment growth shows more evidence of weakening, it's going to be increasingly hard for traders to justify a rally this year that has far exceeded the expectation of almost every veteran market observer.
The jobless claims number is also feeding into continuing speculation over how much longer the U.S. Fed will continue to crank out its aggressive quantitative easing measures. Minutes of the most recent Fed meeting, released on Wednesday, showed considerable disagreement among Fed officials over how much longer it should continue. This morning, the president of the Philadelphia Fed Bank, Charles Plosser, said the Fed should begin scaling back the pace of the bond-buying program starting now, given the improvement already seen in the U.S. labour market. He believes the purchases should end entirely before the end of this year.
Of course, Chairman Ben Bernanke has the final word on such matters, and expressed a commitment months ago to keep the bond buying measures going until unemployment comes down to 6.5 per cent and inflation stays below 2.5 per cent. As such, quantitative easing measures could still be with us for some time.
The gains in European markets this morning were largely inspired by Wall Street's advance on Wednesday. Japan put in another stellar performance overnight, as markets there continue to react positively to the country's own aggressive easing measures; the Nikkei rose nearly 2 per cent.
Now, here's a closer look at what's going on this morning.
U.S. futures: S&P 500 +0.1 per cent; Dow +0.1 per cent; Nasdaq -0.1 per cent
Hong Kong's Hang Seng index +0.30 per cent
Shanghai composite index -0.28 per cent
Japan's Nikkei +1.96 per cent
London’s FTSE 100 +0.32 per cent
Germany’s DAX +0.47 per cent
France's CAC 40 +0.46 per cent
Italy's FTSE MIB +0.43 per cent
WTI (Nymex May) -0.16 per cent at $94.82 (U.S.) a barrel
Gold (Comex Jun) -0.16 per cent at $1,556.20 (U.S.) an ounce
Copper (Comex May) -0.20 per cent at $3.41 (U.S.) a pound
Canadian dollar up 0.0055, or 0.56 per cent, at $0.9914 (U.S.)
ECONOMIC INDICATORS TO WATCH:
U.S. initial jobless claims for last week fell 42,000 to 346,000, a better reading than the 365,000 expected by economists.
Statistics Canada said the new housing price index in February rose 2.1 per cent from a year ago, up 0.2 per cent from January. That was close to expectations.
STOCKS TO WATCH:
Microsoft shares are down 3 per cent in the premarket after Goldman Sachs downgraded the company to sell, citing worsening PC trends. Goldman is the only research house among the 44 that cover Microsoft with a sell rating, according to Bloomberg.
Hudson’s Bay Co. said its fourth-quarter net income was down compared with a year ago as its Lord & Taylor operations in the United States felt the impact of hurricane Sandy.
Barrick Gold Corp. shares are up 0.5 per cent in the premarket, a day after the stock got clobbered on news the company suspended work on its huge gold and silver project in Chile. RBC today cut its price target on Barrick to $32 (U.S.) from $37.
Fortinet Inc. shares are down 18 per cent in premarket trading after forecasting profit and revenue in its latest quarter below analysts' expectations.
Yum Brands Inc. shares are down nearly 3 per cent after the owner of KFC and Pizza Hut chains said same-store sales in China slid 13 per cent.
Retailers are posting monthly sales results. Costco Wholesale Corp. this morning reported a 4 per cent rise in March same-store sales, which missed Street expectations.
The New York Post reported that three more top executives at J.C. Penney have left the ailing retailer following the ouster of chief executive Ron Johnson.
Earnings today include: Astral Media Inc.; Cogeco Cable Inc.; Cogeco Inc.; Corus Entertainment Inc.; Sandvine Corp.; Sirius XM Canada Holdings Inc.;Theratechnologies Inc.
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The premarket report is constantly updated to reflect the latest news developments and market moves. For instant headlines on breaking economic and corporate news in the premarket, follow Darcy Keith on Twitter at @eyeonequities