Market gains trimmed ahead of Central Bank decisions

European markets extended their gains on Wednesday reaching levels not seen since before the collapse of US bank Lehman Brothers in 2008, finding support from better than expected US jobs data and hope for the global economic recovery. However gains were pared going into the close as some investors chose to lock in profits ahead of a busy schedule of economic data and central bank decisions for the last two trading sessions of the week.

The FTSE closed flat; the CAC was 0.4% lower whilst the DAX remained in positive territory up over 0.6%. Across the pond the Dow Jones Industrial average continued to trade at all time highs after closing at 14253 on Tuesday, breaking October 2007’s record close of 14164.

Signs of a strengthening American economy and continued support from Central Banks have supported equities despite the downbeat reading for economic growth in the Eurozone in the fourth quarter. The Eurozone GDP was confirmed as a contraction of 0.6% for the final quarter of 2012, with Spain, Italy and France all contributing to the decline. Furthermore, trade data for the Eurozone showed that both imports and exports both shrank in the last quarter.

With little else in the way of economic data from Europe investors turned their attention to the US labour market in search of an indication the strength of the US economic revival. Non-farm payrolls are due on Friday, however an early look at ADP jobs numbers today was notably strong, with companies adding 198,000 jobs last month, above the estimated 170,000. We have seen a fairly slow but steady recovery to the US labour market and these numbers have impressed investors. However, this may also create heightened expectations ahead of Fridays more extensive labour market data and this needs to be cautioned against.

Here in the UK Vodafone topped the leader board, rallying over 6.5% following news that Verizon Communications Inc is considering several options concerning its relationship with Vodafone. The options range from ending the wireless venture relationship to a full on merger. Currently Vodafone owns a 45% stake in the Verizon Wireless Subsidiary whilst Verizon holds the remainder.

Other notable movers in the FTSE 100 include Admiral who rose over 5% after reporting a 15% rise in pre-tax profit and raising its dividend by 20%. Wood Group also pleased investors after reporting a 20% rise in revenue, which saw its share price increase over 4%.

Looking to tomorrow, traders are preparing themselves for a busy day with regards to economic data. The Bank of Japan, Bank of England and European Central Bank are all set to give their rate decision and will be watched closely for any hint of moving towards extending stimulus measures at the BoE or looking for further cuts, a move which is expected from the ECB in the near future.