Market update: Investors cautious ahead of ECB and BoE policy decisions

US equity markets (S&P 500 +0.1%) continued to rise yesterday, albeit modestly with the Dow Jones (+0.3%) reaching another record high. The ADP National Employment Report boosted sentiment when it was revealed that private companies had added 198,000 employees during February. This comes two days ahead of the closely-watched US non-farm payrolls report (issued by the US Bureau of Labor Statistics on Friday) where job creation is also expected to improve. Also yesterday, the Federal Reserve’s Beige Book report, which examines economic conditions across 12 Federal Reserve districts, gave a cautiously optimistic outlook for the US economy, spurring further positivity. This news follows other encouraging US releases this week from the service sector and mortgage market.

European markets are progressing nervously early this morning (FTSE 100 +0.2%; FTSE Eurofirst 300 +0.04%) ahead of policy decisions from the Bank of England (BoE) and European Central Bank. Overnight the Bank of Japan left its monetary settings on hold, where outgoing governor Masaaki Shirakawa rejected proposals from two of his board members for further monetary easing measures. It is expected that Mr Shirakawa’s successor, Haruhiko Kuroda, will take a more aggressive stance in tackling deflation. In other news, there have been some indications that the UK budget (20 March) will see Chancellor Osborne overhauling the BoE’s remit. Speculation is growing that the bank could move to a dual mandate targeting both employment and inflation, rather than just an inflation target.