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Pre-Market Primer: August Job Growth Blows Past Expectations


In a preview for tomorrow's jobs report, ADP's employment report and initial jobless claims beat expectations.

MINYANVILLE ORIGINAL Stocks rallied this morning as Mario Draghi gives a press conference detailing the European Central Bank's bond-purchasing program aimed at helping countries with the highest borrowing costs and US employment figures beat expectations.

The controversial decision is seen by some economists, including prominent central bankers and Germany's Bundesbank, as a violation of the ECB's mandate. As Draghi previously stated, the ECB will buy bonds with maturities of up to three years to press down the left-hand side of the yield curve for the countries whose borrowing costs are unsustainable. This morning, Spanish and Italian bonds rallied. Spain's 10-year bond yield fell 19 basis points to 6.211%, and Italy's fell 14 basis points to 4.812%.

The euro rallied this morning ahead of the ECB's press conference. The ECB left benchmark interest rates unchanged at 0.75%. The Bank of England also kept benchmark rates still at 0.5%. While Draghi spoke to the press, European indices were rallying and US futures pointed towards a higher open. Futures on the Dow (^DJI) rose 0.51% to 13,116, S&P 500 (SPY) futures gained 0.58% to 1,411.60, and Nasdaq (^IXIC) futures rose 0.50% to 2,781.25.

This news came along with a separate report on the eurozone's GDP, which contracted by 0.2% in the second quarter after shrinking by the same amount in the first three months of this year. On a yearly basis, the 17-member union's GDP fell by 0.5%. France's unemployment rate rose by 0.1% to a 13-year high of 9.7% in the second quarter. Economists expected a greater increase in the unemployment rate.

The Organization of Economic Cooperation and Development's chief economist Carlo Padoan said that Europe and the US need to do more to avoid a global recession.

The slowdown will persist if leaders fail to address the main cause of this deterioration, which is the continuing crisis in the euro area," he said. "Resolving the euro area's banking, fiscal, and competitiveness problems is still the key to recovery."

Padoan also noted that a recent lack of confidence in the US manufacturing sector is a "source of concern."

The ISM non-manufacturing index, which is due out at 10:00 a.m., is expected to show that the US service sector made gains last month. The index rose to 53, according to economists' consensus.

In the US, the ADP employment report showed a much greater-than-expected increase in payrolls in August. The US added 201,000 jobs last month, the payroll company said. ADP also revised up its estimate for July to 173,000 from 163,000. The biggest gains came from service-providing jobs. As usual, companies with fewer than 50 employees hired the most people last month. Initial claims for unemployment insurance unexpectedly fell by 9,000 last week to 365,000.

Amazon (AMZN) will hold an event today in Los Angeles where it might unveil the next Kindle device or a smartphone.

Twitter: @vincent_trivett
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