Investor expectations were high for the February Department of Labor employment report. Those hopes were exceeded by a wide margin, with an increase of 295,000 in nonfarm payrolls and a reduction of the headline unemployment rate to a cyclical low of 5.5 percent. The data, which marked the 12th consecutive increase of more than 200,000 in private-sector jobs, confirms the overall strengthening trend in the job market remains in tact. Critically, one closely watch section of the report failed to meet expectations: January's bounce in wages appeared to fizzle. At 0.1 percent month-over-month, wages fell short of consensus forecasts for a 0.2 percent gain and well below the January reading of 0.5 percent. With wage growth still lagging the levels achieved during prior periods of economic recovery, some investors' enthusiasm remains subdued despite gains in hiring.
European stocks rise on stimulus. The Stoxx Europe 600 index rose to its highest level in more than seven years in trading this morning as investors cheered the commencement of European Central Bank easing. In a press conference yesterday ECB president Mario Draghi announced that the bank’s €1.1 trillion ($1.2 trillion) asset purchase facility would first be deployed on Monday and forecasted a resulting rebound in growth and inflation for the region.
SNB issues warning. Swiss National Bank officials today warned that the recent repeal of a currency cap on the Swiss franc would likely weigh on 2015 financial performance and inhibit the bank’s ability to contribute to government coffers. The bank confirmed that 2014 results were sufficient to allow profits to be distributed to the Federal Government and 26 cantons in the coming months. Last year, the Swiss central bank failed to make distributions to the state for the first time in its history.
Euro zone GDP unchanged. Aggregate growth levels for the 19-country currency bloc during the fourth quarter of 2014 were unchanged from initial estimates, at 0.3 percent for the quarter.
Federal Reserve releases results of stress test. For many of the major banks studies, the findings of the Federal Reserve’s Large Institutional Supervision Coordinating Committee proved disappointing. According to regulators, Goldman Sachs Group risk-based capital would barely be above the minimum 8 percent in a sharp economic downturn, significantly lower than the investment bank’s own estimates. Estimates by Citigroup, Wells Fargo and Bank of America are also significantly higher than those of the Fed. Despite the divergence, regulators concluded that the primary U.S. banks are sufficiently capitalized, opening the door for some financial institutions to increase shareholder dividends.
Kremlin job cuts. A series of new legislation signed into law by Russian President Vladimir Putin will cut government salaries and reduce head count as part of an emergency plan to address revenue shortfalls exacerbated by Western sanctions. Last week the Ministry of Finance asked parliament for permission to access 3.2 trillion rubles ($53.7 billion) from the nation’s sovereign wealth fund to address government funding issues.
German production levels jump. Industrial production for January rebounded by 9 percent from December levels, according to German Ministry of the Economy data released today. A combination of unseasonably good weather and resilience to geopolitical risk factors helped to bolster activity, particularly in the construction segment, which drove production levels above consensus forecasts.
