Will BOJ Announcement Force Mario Draghi Into A Bond-Buying Program?

Category: Economy / Apr 04, 2013 4:48PM EDT
Wall Street rose on Thursday, shrugging off weak jobs data, as the Bank of Japan announced strengthening stimulus efforts. Jobless claims hit a four-month high last week while the ADP report this week showed that private-sector job growth slowed in March, which concerned investors that the market recovery is beginning losing some steam. Initial claims for state unemployment benefits fit a four-month high and increased 28,000 to a seasonally adjusted 385,000, the Labor Department announced on Thursday. Economists had expected claims to drop to 350,000. Were seasonal factors, such as spring breaks, the Easter holiday and Passover, distorting the numbers? “ We've had a relatively nice trend to the upside where things were starting to go our way as jobless claims were actually diminishing,” Michael Guli, director at Knight Capital Americas Electronic Trading Group, said. “To see them rise is kind of disappointing, but I think that hopefully it was those seasonal effects,” he said. Also on Thursday, the European Central Bank left interest rates unchanged despite continued economic instability. In addition, the Bank of Japan governor, Haruhiko Kuroda, announced the central bank is aiming to double the money base within two years to subdue deflation and propel the economy out of a slump. After seeing the Bank of Japan pursuing an aggressive policy similar to the Federal Reserve’s, will European Central Bank President Mario Draghi be backed into a corner and put in a difficult position where he will be forced into a bond buying program? “A lot of people in the U.S. would like to see him lower rates even more than he already has, keeping below 0.75 percent,” said Guli. “It doesn't look that that’s going to happen. And yes, it does kind of put him into a corner where he may have to do more to spur things on over in Europe,” he said. In addition to the jobless claims report, the ADP Research Institute released a report on Wednesday that’s showed private-sector hiring slowed in March and grew by 158,000, below economists’ forecasts calling for a 200,000 gain. “Well, I sure hope it’s not like the two reports we just had,” said Guli. “I’d like to see them at least meet expectations, or ever surpass expectations, but third time could be the charm,” he said. The ADP report and jobless claims numbers came in before tomorrow’s closely watched non-farm payrolls report from the Labor Department. According to the median forecast of 87 economists surveyed by Bloomberg, the jobs report may show employers hired a net 195,000 workers for the month. The unemployment rate is forecast to remain at 7.7 percent. Thursday, The Dow Jones industrial average .DJI rose 55.76 points, or 0.38 percent, to close at 14,606.11, the S&P 500 .SPX gained 6.28 points, or 0.4 percent, to finish at 1,559.97 and the Nasdaq Composite .IXIC added 6.38 points, or 0.2 percent, to end at 3,224.98.