BLBG: U.S. Stock Futures Gain on ECB Decision Before Jobs Data
U.S. stock futures rose, after the Standard & Poor’s 500 Index reached an all-time high, as the European Central Bank cut its deposit rate below zero and announced additional measures to counter deflation.
Sprint Corp. advanced 2.2 percent after people with knowledge of the matter said it is nearing a price agreement for a potential acquisition of T-Mobile (TMUS) US Inc. Twitter Inc. added 2.4 percent after Pacific Crest Securities started coverage of the shares with a rating similar to buy. Ciena Corp. surged 15 percent as earnings beat analyst estimates.
Futures on the S&P 500 expiring this month rose 0.2 percent to 1,929.10 at 9:08 a.m. in New York. Dow Jones Industrial Average contracts increased 39 points, or 0.2 percent, to 16,757 today. The Stoxx Europe 600 Index jumped 1 percent while the euro reached a four-month low. Germany’s DAX Index briefly topped 10,000 for the first time.
“Mario Draghi is taking a sledgehammer to the disinflationary environment in the eurozone,” said Chad Morganlander, a fund manager at Stifel Nicolaus & Co., which oversees $160 billion, from Florham Park, New Jersey. “His actions are well beyond expectations, which have ginned up financial markets and weakened the euro, which is exactly what they need to do.”
ECB President Draghi reduced the deposit rate to minus 0.10 percent from zero, making the institution the world’s first major central bank to use a negative rate. Policy makers lowered the benchmark rate to 0.15 percent from 0.25 percent.
Stimulus Measures
Draghi said the ECB will introduce new, “targeted” offerings of liquidity to banks to encourage them to lend money to the real economy. Officials will also start work on purchases of asset-backed securities, he said. The ECB will extend its current offerings of unlimited cash to banks and will suspend the sterilization of its bond purchases at the start of the euro crisis in a bid to boost liquidity in money markets, Draghi said.
U.S. equity futures pared gains as the central bank cut growth forecasts for 2014, while raising its target for euro-zone gross domestic product in 2015.
“The stimulus from Europe is a positive thing, especially when you compare it to the fact that the U.S. is starting to ease up,” Joe Bell, senior equity analyst at Cincinnati-based Schaeffer’s Investment Research Inc., said in a phone interview. “Stimulus is being added from a different market.”
In the U.S., data showed fewer Americans filed applications for unemployment benefits over the past month than at any time in seven years, a sign the labor market continues to strengthen. The four-week average for jobless claims fell to 310,250 in the period ended May 31, the lowest since June 2007, a Labor Department report showed today in Washington.
Jobs Reports
A private report on payrolls yesterday indicated companies in the U.S. added fewer jobs than forecast in May, before tomorrow’s Labor Department data on employment. That report may show private payrolls, which exclude government agencies, increased 210,000 in May after a 273,000 gain in the month prior, according to the median estimate in a Bloomberg survey.
Fed officials are watching the labor market as they move to complete their bond-purchase program late this year and start considering the timing of the first interest-rate increase since 2006. Central-bank stimulus has helped propel the S&P 500 higher by as much as 185 percent from its bear-market low in March 2009.
The Fed said in its Beige Book business survey yesterday that the economy expanded at a modest to moderate pace last month as auto sales led household spending and the labor market improved. The survey, released two weeks before policy makers meet in Washington, supports Chair Janet Yellen’s view that the economy is rebounding from a 1 percent contraction in the first quarter caused largely by harsh winter weather.
T-Mobile Deal
Sprint climbed 2.2 percent to $9.61. The third-largest U.S. wireless carrier is nearing an agreement that could value T-Mobile US Inc. at almost $40 a share, according to people with knowledge of the matter. The deal covering the price, capital structure and termination fee could be announced as soon as July, the people said.
T-Mobile fell 0.5 percent to $34.46.
Twitter rose 2.4 percent to $33.70. Pacific Crest rated the shares outperform, projecting a gain in their price to $45 in 12 months.
Ciena surged 15 percent to $21.80. The provider of fiber-optic networking gear for carriers such as AT&T Inc. reported second-quarter revenue and profit that exceeded analyst forecasts.
To contact the reporters on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net; Joseph Ciolli in New York at jciolli@bloomberg.net; Eric Lam in Toronto at elam87@bloomberg.net
To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net; Lynn Thomasson at lthomasson@bloomberg.net Jeff Sutherland, Alan Soughley
