Friday, April 4, 2014

Stocks Cautious Before US Payrolls

US stocks slipped Thursday, but a rosy view of the economy kept them near record highs. The services sector hummed along in March, according to two data providers. The Institute of Supply Management reported a jump in its reading to 53.1 from 51.6 in February. Markit delivered a 55.3 reading, which though slightly lower than February’s 55.5, remains solidly in expansion territory – above the 50 mark that separates expansion from contraction.

But investors were cautious before the jobless rate announcement tonight, and a surprise widening in the trade deficit to USD42.3 billion in February. At stake: a strong reading could persuade the Federal Reserve to table a hike in interest rates. Fed officials have been taking pains to reiterate a rate hike is still some way off, possibly in mid-2015.  
Europe shares were little changed with the European Central Bank holding rates steady at 0.25%, and not providing more stimulus. President Mario Draghi dismissed fears of deflation, noting that data was consistent with the bank’s forecasts. Mr. Draghi also rejected advice from IMF head Christine Lagarde about injecting more stimulus to boost inflation. But the ECB has upped its watch over prices, and all members of the governing council (who have a vote on money policy) are now willing to use “unconventional measures… to cope with the risk of a too-prolonged period of low inflation”. This includes the Bundesbank’s Jens Weidmann, who has been resistant to the idea. These include massive asset purchases, much like what the US Federal Reserve has been doing.
In other economic news, eurozone businesses logged their busiest quarter in nine months, with Markit’s Composite PMI notching 53.1 in March, just slightly lower than February’s 53.3. But this was due to companies slashing prices, underscoring fears of deflation.
Japan shares rose with data showing US companies hired more in March, heralding good news for today’s jobless rate. Exporters such as Honda Motors, which gets over 80% of its revenue from overseas, got a boost from a weaker yen. Sharp rose 1.6% on news it will ship twice as many energy-efficient liquid-crystal smartphone displays to China. The Nikkei rose 0.84%, while the Topix was up 0.45%.