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While you were sleeping: U.S. jobs data awaited

Thursday 7th January 2010

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Global stocks remained in a virtual holding pattern ahead of Friday’s U.S. jobs reports with shares in both Europe and the U.S. fluctuating in narrow ranges.

Overnight there were concerns about the willingness of European Union members to bail out, if necessary, Greece, which temporarily knocked the euro. In addition, the latest data on the U.S. economy showed that the service sector appeared to be lagging the recovery in manufacturing.

Later today investors will seek some wider insight on the U.S. economy from the latest minutes of the Federal Reserve’s policy committee. The minutes from the committee’s December meeting are due to be released about 2pm local time in Washington.

At midday, the Dow Jones Industrial Average was up 0.17% at 10,590.23, the Standard & Poor’s 500 was up 0.13% at 1138.00 and the Nasdaq Composite Index was up 0.13% at 2311.71.

The S&P 500 was poised to rise 8% even after reaching a 15-month high, according to a note written to clients by Bank of America technical analyst Mary Ann Bartels. 

Bartels, who predicted in October that U.S. stocks would plunge, said that call was “premature”, Bloomberg reported. “In the near term more gains are likely,” Bartels wrote.

Emerging-market stocks and economies were set to outperform the developed world this year, according to a report by Bloomberg on a speech by Bob Doll, vice chairman and chief investment officer for global equities at BlackRock Inc.

Doll said he expected the S&P 500 would reach 1250 in 2010, or 10% higher than yesterday’s close. BlackRock is the world’s largest money manager.

In his speech, Doll also said inflation would be a “non-issue” in the U.S., Europe and Japan this year and that U.S. stocks would perform better than cash and U.S. government bonds.

During the last two bull markets, the S&P 500 had an average total return of 18.6 percent a year, according to data compiled by Bloomberg.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ fell 2.58% to 18.85.

On the economic front, private employers in the U.S. cut 84,000 jobs last month, payroll firm ADP said. That was less than the 145,000 jobs shed a month earlier, which was first reported as 169,000.

The December cuts were the lowest number since March 2008, another sign that the U.S. labour market is on the road to a recovery. Still, the drop exceeded the median of estimates for December among economists surveyed by Reuters, which was for a drop of 73,000 jobs

On the services front, the Institute for Supply Management’s index of non- manufacturing businesses rose to 50.1 from 48.7 in November, according to the Tempe, Arizona-based group. Fifty is the dividing line between expansion and contraction in the industry.

The December figure compared with economists’ median forecast for an increase to 50.5, according to 67 projections in a Bloomberg News survey. Forecasts ranged from 48 to 52.1.

In late morning New York trading, the dollar rose 1.0% to 92.62 yen . The euro was also up 1% at 133.13 yen.

The yen took it on the chin after Finance Minister Hirohisa Fujii's resigned.

Australia’s dollar was the best performer against the greenback among major currencies and the Canadian dollar rose for a fifth day as metals prices climbed.

The difference in yield between U.S. and Japanese 2-year debt widened 0.02 percentage point to 0.87 percentage point. It was 0.98 percentage point at the beginning of the year, the widest level since August.

The Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.12% to 77.54.

The Dow Jones Stoxx 600 Index added 0.1% to 257.83. The FTSE 100 rose 0.16%, Germany’s DAX edged 0.06% higher and France’s CAC was up 0.07%. A number of European markets were closed for holidays.

Among the movers: Rio Tinto and Peugeot advanced; Marks & Spencer dropped.

In Europe, services and manufacturing industries expanded at the fastest pace in more than two years in December, indicating the euro-area economy is gathering strength, according to data from London-based Markit Economics.

On commodities markets, gold and other precious metals advanced, helped in part by signs that the outlook for car sales in the U.S. was improving. Oil eased after nine days of gains.

In early trading in New York, spot gold was bid at US$1128.00 an ounce. U.S. gold futures for February delivery on the COMEX division of the New York Mercantile Exchange rose US$9.40 to US$1128.10 an ounce.

U.S. crude for February delivery fell 0.35% to US$81.47 a barrel. It reached on Tuesday its highest closing level since early October 2008. London Brent crude eased 32 cents to US$80.27.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, rose 0.59% to 291.09.

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