NEW YORK (Reuters) – New U.S. claims for unemployment benefits fell last week, further evidence of material improvement in the labor market.
KEY POINTS: * Initial claims for state unemployment benefits slipped 6,000 to a seasonally adjusted 388,000 the Labor Department said. The government revised weekly claims data back to 2006 to take into account new seasonal factors. * Economists polled by Reuters had forecast claims edging down to 380,000. The prior week's figure was revised up to 394,000 from the previously reported 382,000. * The four-week moving average of unemployment claims -- a better measure of underlying trends - rose 3,250 to 394,250.
IAN LYNGEN, SENIOR GOVERNMENT BOND STRATEGIST, CRT CAPITAL GROUP, STAMFORD, CONNECTICUT:
"Overall, a marginally weaker report for the labor market -- notable ahead of tomorrow's non-farm payrolls/unemployment rate release. Treasuries were higher ahead of the release and since the data, the price action has been constructive."
MICHAEL MULLANEY, PORTFOLIO MANAGER, FIDUCIARY TRUST CO, BOSTON:
"Futures are flat, this was a non-event. There will probably be some profit-taking given the strength of the market, up eight out of the last 10 sessions, suggesting we could be due for a slight pullback.
"There was nothing spectacular in claims, but one thing we've been looking at is that we have to get claims in the 250,000 area to be considered normal again. At level, we'll be creating enough jobs to deal with the inclusion of new people in the work force.
"This is still a relatively high number; we'd like to see claims smaller than this, but this won't be earth-shattering for markets. ADP was relatively strong, so that number and this number don't rock the boat for tomorrow's payroll. But we're just not at the kind of pace we need in order to get employment back to normalized levels."
VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS:
"Although at first glance this looks like an increase from last week's report, the new seasonal factors have pushed claims' reading for the week ending March 19 up to 394k (had originally been 387k), so today's number is really a decline of 6k, generally what the market was expecting. Additionally suggestive of a job market less inclined to layoffs is the fact that unadjusted claims (354k) were flat between the two weeks."
MARKET REACTION: STOCKS: U.S. stock index futures were little changed BONDS: U.S. bond prices added to gains FOREX: The dollar fell against the euro
LONDON – ) — Inflation in the 17 euro countries spiked to the highest level in nearly two and a half years in March, official figures showed Thursday — cementing market expectations that the European Central Bank will raise interest rates next week.
Eurostat, the EU's statistics office, said consumer prices in the eurozone were 2.6 percent higher in March than the year before. That's the highest rate since October 2008 and is way above the central bank's target of keeping inflation at "close to, but below 2 percent."
The increase was not anticipated — the consensus in the markets was for inflation to remain at 2.4 percent.
Since Thursday provided Eurostat's "flash" estimate for inflation, it included no details as to why inflation rose. Those will emerge in April.
Inflation dropped to zero percent in May 2009, but prices have since pushed higher largely on the back of rising energy and food costs as the global economy starts to grow again following the deepest recession since World War II.
Over the past month, comments from the European Central Bank have been increasingly hawkish on inflation. The bank's rate-setters, including President Jean-Claude Trichet, have been giving heavy hints that the main interest rate will rise from the current record low of 1 percent at the next meeting on April 7.
The bank cut interest rates sharply from 4.25 percent in October 2008 as it tried to stave off the impact from the financial crisis and has kept borrowing costs unchanged at 1 percent since May 2009.
In many ways, it can argue that its strategy worked and it's now time to start "normalizing" monetary policy, despite the ongoing debt difficulties and austerity measures in several countries, notably Greece, Ireland, Portugal and Spain. The eurozone economy as a whole has been growing strongly for over a year now, driven by a healthy rebound in Germany, Europe's biggest economy.
"The ECB will want to move from emergency setup to more normal levels," said Silvio Peruzzo, an economist at the Royal Bank of Scotland.
Peruzzo predicted the bank will begin the new cycle of interest rate rises next week, but he doesn't believe that Thursday's figures will cause undue alarm because much of the increase recorded in March was due to changes in the way food and clothing prices are measured in Italy and Spain.
Expectations that borrowing costs in the eurozone are on their way up have helped support the euro currency over the past few weeks. By early afternoon London time, the euro was trading 0.7 percent higher on the day at $1.4214.
Interest rate increases, or even expected ones, benefit the euro if other central banks don't do the same.
The U.S. Federal Reserve, for example, is not expected to raise its super-low interest rates until the latter part of this year, while the Bank of England's rate-setting committee is fretting about the impact of higher borrowing costs on the fragile British economy.
Michael Hewson, market analyst at CMC Markets, said the key now will be how hawkish Trichet is in the aftermath of next week's "increasingly likely" rate hike and in particular whether he will reiterate his call for "strong vigilance." Throughout his presidency, that's been code for a likely rate rise in the following month.
"As far as the single currency is concerned, it continues to benefit from yield differentials as markets factor in multiple rate hikes throughout 2011, while other central banks such as the Bank of England and the Federal Reserve fret about the effect any planned rise in rates could have on consumer spending and growth," Hewson said.
"It would appear that the ECB has no such worries about that, and seems determined to try and put the inflation genie back in the bottle," he added.
LISBON, Portugal – Portugal's National Statistics Institute estimates the debt-stressed country's national budget deficit last year was 8.6 percent — way above the government's target of 7.3 percent.
The estimate published Thursday was another severe setback for Portugal's attempts to avoid taking a bailout as Greece and Ireland had to last year.
Portugal has been overwhelmed by a financial crisis that has pushed the yield on its 10-year bond to a euro-era record of 8.23 percent, an unsustainable level.
The government quit last week in a dispute with opposition parties over measures to restore the country's fiscal health.
Rating agencies have downgraded the country's credit worthiness three times in recent days.