Stocks explode on central bank intervention and US job data
Earlier in the session today's central bank intervention began with the People's Bank of China lowering the reserve requirements for their major banks by 50 basis points from December 5 which immediately sparked a 17 point move higher in the S&P 500 futures (see chart below).
At 13:00 GMT intervention in financial markets rose to a whole new level as the six major central banks the Federal Reserve, European Central Bank, Bank of Japan, Swiss National Bank and Bank of Canada lowered their USD swaps by 50 basis points, also from December 5. The move took everyone by surprise with major foreign exchange rates surging in relation to the USD; the intervention ignited a further 22 point jump higher in the S&P 500 futures - now trading 2.5 percent higher in pre-market. From a short-term trading and liquidity perspective the swap agreement lowers the funding pressure on European banks' USD funding which will relieve some of the stress in the banking system. However, long-term the global economy is still struggling with high debt and low growth which is essential in a solvency problem; and this intervention does not solve that.
ADP employment figures best since late 2010
On the economic data front investors got more pleasant news as German unemployment fell more than anticipated despite the Eurozone unemployment rate having increased, with the jobless rate now at 10.3 percent.
In US pre-market, ADP employment figures for November are 206K compared to 130K estimated and October's figures are revised up to 130K from 110K. These are the strongest figures since late 2010 indicating that the US economy is resilient despite the global economic headwinds. Economic data released in pre-market shows that US 3Q productivity is up and at the same time unit labour costs are down. In particular the latter will continue to support high corporate profit margins that many have been saying would come down.