European Central Bank Raises Rates

Elena
02 Mar, 2006
New York City

Asian-Pacific benchmarks finished mixed ahead of Japan CPI data. The Nikkei slipped 0.3%, Shanghai Composite tumbled 1.6%, while Australia All Ordinaries rose 1.1%. European averages recovered from earlier weakness as the European Central Bank raised its main refinancing rate to 2.5%. London FTSE 100 rose 0.4%. In earnings news, Costco posted Q4 earnings rose 15% excluding items and topped analyst estimates. The retailer also reported 11% net sales growth.

U.S. MARKET AVERAGES

U.S. stock index futures pointed to a weak market opening on surging oil prices and some disappointing sales reports from some retailers.

In Nigeria threats of renewed violence pushed up oil prices, hurting the outlook for U.S. corporate profits and consumer spending. Crude oil futures were up 70 cents to $62.67 in electronic trading.

Several chain stores reported disappointing sales last month due to lower consumer spending on snowstorm and freezing temperatures in the Northeast.Gap Inc. said its February same-store sales fell 11%.

Merchants with solid sales gains included Costco Wholesale Corp which reported Q4 profit fall but 7% quarterly sales increase. Among the other retailers posting sales growth were Wal-Mart Stores Inc., Costco Wholesale Corp., Limited Brands Inc., Bombay Co. and Nordstrom Inc.

S&P 500 futures were down 2.3 points, below fair value. Dow Jones industrial average futures fell 21 points, and Nasdaq 100 futures were down 3.5 points.

ECONOMIC NEWS

The Department of Labor reported that the initial jobless claims in the week ended February 25 rose to 294,000 from the previous week's revised figure of 279,000. Economists had expected jobless claims to rise to 285,000 compared to the 278,000 originally reported for the previous week.

Despite the increase, initial jobless claims remained below 300,000 for the seventh consecutive week. A reading consistently below 300,000 is said to indicate strength in the labor market.

The Labor Dept. also said that the four-week moving average rose to 287,250 from the previous week's revised average of 282,000. The less volatile moving average has moved higher in two of out of the past three weeks after trending lower for the six weeks prior.

Additionally, the report showed that continuing claims fell to 2.486 million in the week ended February 18 from the preceding week's revised level of 2.488 million.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks finished mixed on general recovery of the tech sector after the selloff earlier in the week and ahead of Japan CPI data. The Nikkei advanced in the morning but eventually ended down 0.3% as investors focused on economic data due out Friday. Shanghai Composite plunged 1.6%, South Korea’s Kospi fell 0.4%, while Australia’s All Ordinaries surged 1.1%, followed by Hong Kong’s Hang Seng, up 0.4%.

European stocks recovered from early losses as the European Central Bank raised its key interest rate by a quarter of a point. Positive news from Deutsche Telecom and Aviva also provided support. The German DAX 30 was slightly down at 5,864, the French CAC 40 added 0.1%, and London’s FTSE 100 gained 0.4%.

OIL, METALS, CURRENCIES

Crude oil prices climbed above $62 on global supply concerns, despite another rise in U.S. oil inventories. Light sweet crude April delivery gained 74 cents to $62.71 a barrel. Gasoline gained 1 cent to $1.6400. Heating oil added 2 cents to $1.7650. Natural gas rose 5 cents to $6.780 per 1,000 cubic feet. London Brent for April delivery added 76 cents to $63.21 a barrel.

European gold prices climbed to a three-week high on weakening dollar. Gold for immediate delivery rose $1.37 to $564.32 per troy ounce. Silver gained 6 cents to $9.81.

The U.S. dollar weakened against the euro as the European Central Bank raised its key interest rate to 2.5%. The euro traded at $1.1935, up from $1.1923.