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Pre-Market Primer: ECB Cuts Rates; Jobless Claims Improve


A good sign for tomorrow's jobs report.

Stock indices are rising this morning as central banks make more accomodative monetary policy and US labor indicators improved.

Initial claims for unemployment insurance in the last week of April fell by 18,000 to 324,000, defying expectations of an increase. A separarte report showed that the US trade deficit declined to 38.8 billion in March from $43.6 billion in February.

The European Central Bank released its monetary policy decision, confirming rumors that it is cutting rates. The main interest rate was cut by 25 basis points to 0.50% starting next week. The cost that banks pay to borrow from the ECB was cut by 50 basis points to 1%. The rate cut appears to be priced into stocks as most European indices are up just slightly. The euro rose slightly to $1.319 on the dollar and gold futures gained 0.83% to $1458.20.

Eurozone investors are also processing some ugly manufacturing data from the area. Manufacturing PMI in the major eurozone economies came in below 50 in April, signaling negative growth. Germany slipped further below the 50 threshold to 48.1 from 49. France's descent slowed slightly to 44.4 and Italy gained a point to 45.5.

The bond market gave France a vote of confidence that it will not become the next country to fall victim to the regional debt crisis. French 10-year borrowing costs fell to an all-time low of 1.81% at an auction today.

The dovish ECB decision, widely expected by the markets, follows yesterday's release from the Federal Reserve which subtly signaled that it could possibly increase its asset purchase program. The Fed is "prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes."

HSBC (NYSE:HBC) released its private measure of April's Chinese manufacturing PMI, which came in slightly lower than the flash report at 50.4, down from 51.6 in March. HSBC's survey differs from the official reading because it surveys more small and medium businesses, rather than mostly big state-owned firms. HSBC's analysts speculated that the faltering manufacturing environment could push leaders into making policy more accommodating to support growth.

After yesterday's declines US stock indices are pointing toward a slightly higher opening today. Dow (INDEXDJX:.DJI) futures are up 0.39% at 14,693 and S&P (INDEXSP:.INX) futures rose 0.43% to 1,584.10. Futures on the Nasdaq (INDEXNASDAQ:.IXIC) index were up 0.46% at 2,876.75.

Yesterday, Facebook (NASDAQ:FB) reported 38% year-over-year revenue growth, but earnings per share of $0.12 missed Wall Street's expectations by a penny. One very encouraging sign was the growth of mobile revenue. Monthly active mobile users rose 54% from last year to 751 million. Mobile ads now account for 30% of the social network's revenue, up from 23% a year ago.

Yelp (NASDAQ:YELP) reported yesterday that revenue in the first quarter rose 68% year-over-year. It's loss narrowed to $0.08 per share from $0.31 per share a year earlier. The consumer review site's shares rose 11% to $28.10 as its guidance for the current quarter exceeded estimates.

Also yesterday, payment processors Visa (NYSE:V) and MasterCard (NYSE:MA) both beat estimates for Q1 profits. MasterCard missed on the top line, however. Visa grew revenue by 15% over the year earlier as credit card usage rose 9%.

Twitter: @vincent_trivett
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