An increase in initial jobless claims in the US briefly hit markets after the opening bell, but evidence of steady overall improvement in the US labour market has provided further indications that the American economy is rebounding and stocks began to move into positive territory.
US jobless claims
Over the past month, the number of Americans filing for jobless benefits declined to its lowest level since July 2008. The four-week moving average was 410,750 claimants, according to figures from the US Labor Department, indicating that companies are finally beginning to halt layoffs. Claims for the week ending 1 January rose by 18,000 to 409,000, in line with the Bloomberg forecast. RBS commented that employers were gradually becoming more confident about the strength of the economic recovery in the US. The Labor Department said that the rise in claims was not unusual, as it reflected the end of temporary hiring designed to help firms cope over Christmas. Taken together with yesterday’s improved ADP data, there does seem to be an increase in momentum in the recovery of the world’s largest economy.
Eurozone economic news
As Hungary took over the rotating EU presidency, its prime minister, Viktor Orban, said that the union’s top priority would be to defend the single currency. Various indicators on the health of the eurozone appeared today. An index of executive and consumer sentiment rose to 106.2 in December from 105.1 a month earlier, according to the European Commission. The figure was the highest since October 2007 and was ahead of forecasts of an increase to 105.8. A gauge of manufacturing sentiment rose to 4 from 0.7 in November, helped by German firms, but a consumer confidence reading fell to -11 from -9.4 as Europeans, mainly those outside the German powerhouse, continued to fret about their region’s high debt levels and government austerity measures.
US shares
By 2.55pm (London time), the Dow Jones was unchanged at 11,716.93, as was the S&P 500 at 1276.55. The Nasdaq 100 was 1.1 points (0.09%) higher at 1272.90.
Wholesale retailer Costco said that like-for-like sales climbed 6% in December, just below the Thomson Reuters survey expectation of a 6.2% increase. Sales at US stores in the five weeks to 2 January rose 4%, while those in the international division surged 12%. The figures suggest that US consumers, whose spending makes up 70% of the American economy, continue to part with their cash at an acceptable rate. If the jobs reports continue to improve, with tomorrow’s non-farms payroll data for December a key point, then consumer spending may follow along in the labour market’s wake. Costco shares dropped back 0.3% to $70.80.
UK markets
The rise in initial US jobless claims led the FTSE to lose most of its morning gains. By 2.45pm (London time), the FTSE 100 was up 15.27 points (0.25%) at 6059.06.
UK retailers continue to update the market on their disappointing progress in December. Today’s heavy fallers include children’s firm Mothercare and card group Clinton. Clinton said that pre-tax profit in the year to 31 July would be significantly below expectations, with a 2% decline in like-for-like sales in the five weeks to 2 January. Mothercare’s figures were even worse, as sales slumped 5.8% against the previous period, and it too said that expectations of underlying profit would not be met. Mothercare said that the snow had played a major part in disrupting the usual pre-Christmas spending spree, but a brief update from Majestic Wine, which reported a 6.4% rise in like-for-like sales between 2 November and 3 January, may indicate that some firms are struggling due to longer-term structural issues rather than adverse weather conditions. Mothercare dropped 6% to 560.5p and Clinton Cards slumped 15% to 24p. Majestic Wine advanced 1.5% to 389.25p.
British Airways reported that it too had suffered badly as a result of December’s snowy weather. Traffic, as measured in Revenue Passenger Kilometres, fell 8.3%, while passenger capacity dropped 7.7% and cargo lost 10.2%. The difficult weather meant that airports across Britain, Europe and North America were closed, and BA thinks that its third-quarter performance will be impacted by around £50 million. However, it added that underlying conditions remain positive. BA shares rose 2.5% to 294.7p.
