While you were sleeping: US outlook improves

Thursday 8th January 2015

Wall Street advanced as better-than-expected US jobs and trade data underpinned optimism about the economic outlook, while in Europe the first decline in consumer prices in more than five years bolstered expectations the European Central Bank will take action to stoke the region’s economy.

An ADP Research Institute report showed US private employers added 241,000 jobs in December, exceeding expectations. That bodes well for the government’s more comprehensive non-farm payrolls report due Friday. Estimates for December are at 240,000 according to a Reuters survey.

Separately, a Commerce Department showed the trade gap shrank more than expected in November, narrowing 7.7 percent to US$39 billion, the smallest since December 2013.

"The fourth quarter is shaping up to be much better than we had anticipated," Ryan Sweet, a senior economist at Moody’s Analytics in West Chester Pennsylvania, told Reuters. "The fundamentals for the US are rock solid and the economy will grow quickly this year even if the rest of the world stumbles along."

In afternoon trading in New York, the Dow Jones Industrial Average rose 1.09 percent, the Standard & Poor’s 500 Index added 1.13 percent, while the Nasdaq Composite Index gained 1.14 percent.

Gains in shares of Home Depot and those of Nike, up 2.8 percent and 2.3 percent respectively, led the Dow higher.

Shares of JC Penney soared, last up 20.7 percent, after the company said same-store sales rose 3.7 percent in November and December.

“They had the product and they had the promotions to meet the consumer’s demands,” Mary Ross Gilbert, an analyst at Imperial Capital in Los Angeles, who still has the equivalent of a sell rating on the shares, told Bloomberg News. “The promotional environment we were experiencing across the board at retail was the the most intensified I’ve ever seen. They’ve always had a value customer.”

In Europe, the Stoxx 600 Index ended the day with a 0.5 percent increase from the previous close. Germany’s DAX Index advanced 0.5 percent, France’s CAC 40 Index added 0.7 percent, while the UK’s FTSE 100 Index rose 0.8 percent.

Here, the latest data firmly raised the spectre of deflation and expectations the European Central Bank will agree to implement more aggressive measures when its board meets later this month. Euro-zone consumer prices slid 0.2 percent in December compared with the same month the previous year, according to European statistic office data. It was the first drop since October 2009.

"The deflationary data suggested the ECB will be justified in doing more and that is probably what people are betting on right now," Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin, told Reuters.

BusinessDesk.co.nz

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