US stocks pulled back on Wednesday on the backdrop of resumed slide in oil prices and news that European Central Bank will no longer accept Greek bonds as collateral. Energy, utilities and health-care stocks led the losses, with six of 10 main sectors ending the session with losses. The US economy added 213 thousand jobs in January in private sector. Though the increase was less than expected the report highlights the relative strength of the labor market which keeps adding jobs even as slumping energy prices hurt industries exposed to oil. The Institute for Supply Management’s non-manufacturing index advanced to 56.7 from a six-month low of 56.5 in December, indicating that services sector kept expanding at a slightly higher pace. The dollar strengthened with the dollar index pairing losses from the previous day. Today at 14:30 CET December Balance of Trade, Initial Jobless Claims for the week ended January 31 and Continuing Claims for the week ended January 24 will be published in US. The trade gap is forecast to decrease to -38.0B from -39.0B in previous month. The tentative outlook is moderately positive for the dollar with jobless claims expected to increase to 290000 from 265000 in the previous week, staying below the four-week average of 298500.
European stocks ended Wednesday’s choppy session mostly higher. The Stoxx Europe 600 index rose 0.5%, extending gains into a third straight day. Euro tumbled after the ECB revoked a waiver that had allowed Greek banks to use the country’s junk-rated sovereign debt as collateral for cheap loans. The decision by the ECB to reimpose minimum credit rating requirements for Greek bonds effectively shifts the burden on to the Greek central bank to finance its banks and came after the meeting of Greece’s Finance Minister Yanis Varoufakis with the ECB President Mario Draghi. Greece has also started negotiations with the International Monetary Fund on the debt-swap deal to exchange existing government debt with bonds linked to future growth. Data released on Wednesday indicated that euro-zone economy expanded more rapidly in January than previously estimated, with the retail sales rising for a third straight month in December and at the fastest pace in almost eight years. Today at 11:00 CET Retail PMIs for Euro-zone, Germany, France and Italy will be released by Markit and at 13:00 CET the Bank of England Interest Rate Decision will be announced. No change in policy is expected.
Nikkei is falling today as investors decided to take profits following earnings announcements while investor confidence was undermined by news of the ECB hardline stance on Greek debt and the resumed fall in oil prices. The yen rose against the dollar.
China’s central bank cut the required reserve requirement by half a percentage point to stimulate lending and the broader economic growth.
Oil plunged on Wednesday after advancing for four consecutive sessions as US stockpiles grew by more than expected. On Wednesday, the U.S. Energy Information Administration said crude stockpiles rose 6.3 million barrels for the week ended January 30, almost twice as much as expected. The inventory buildup indicates that the production levels are still high to rebalance the oversupply glut.
Gold and other metals prices settled higher on Wednesday buoyed by the China’s central bank decision to cut the reserve-requirement ratio for banks to free more reserves for increased lending aimed at boosting economic growth.