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15:11 ET Treasury Closing Summary: Treasury yields spiked higher on Friday after the Aug payrolls report proved better than expected, though the headline data still fell 54k and the jobless rate rose to 9.6%. An impromptu press conference by President Obama on the data and the economy also fed ongoing rumors that his Administration is mulling a batch of fresh stimulus options that could include a payrolls tax holiday, small business initiatives or mortgage relief. ISM services later sank, which took some pressure off Treasuries and cast further doubts over the veracity of ISM manufacturing gains earlier in the week. Fed's Lockhart cautioned against reading too much in policy terms into the Fed's move to purchase maturing MBS. See our summary.

14:28 ET U.S. week ahead: the holiday abbreviated week will be dominated by Treasury supply with the $67 bln mini refunding and some $119 bln in bills. The Fed's Beige Book will also highlight, while the data calendar is very thin. Big concession building today in front of the auctions should be supportive for decent results. The auctions kick off Tuesday with the $33 bln 3-year auction, followed by Wednesday's $21 bln 9-11/12 year auction and Thursday's $13 bln 29-11/12 year bond. The Beige Book is due out Wednesday as the September 21 FOMC meeting is right around the corner. The Beige Book should reflect the surprising weakness in some of the regional manufacturing data, a still grim labor market, modest consumer spending, and a still sluggish, if not soft real estate market. The take away from the Beige Book, however, is likely to be that conditions aren't dire enough to warrant the introduction of large scale QE Treasury purchases as the September 21 policy meeting. Data next week includes only the July trade report, expected to show some narrowing in the deficit to $46.5 bln after it gapped out nearly 20% in June to $49.9 bln.

14:21 ET N.Y. FX Summary (September 3) The August U.S. employment report was not as bad as feared, and market reaction was swift in early N.Y. trade on Friday. U.S. stock futures vaulted higher, as did Treasury yields and the dollar. USD-JPY outperformed early on, rallying from 84.40 to over 85.20, while EUR-USD, initially moving higher with risk appetite after the data, edged down toward 1.2810 from 1.2850 at the open. Later in the session, non-descript comments on the economy from president Obama, along with a weaker non-manufacturing ISM report sent the dollar broadly lower, as stocks gave back a good chunk of their earlier gains. See FX Trader page.

14:20 ET Action Economics Survey results: the August jobs data wasn't as bad as many feared, and has capped downside risks to the economy. But the report was no great shakes either and doesn't portend anything more than a slow-growth recovery. Aside from the Fed's Beige Book, next week's light calendar won't provide much new information on the economy (and the Beige Book is only likely to mirror the various data surprises seen over the past six weeks). The Survey median shows the July trade deficit narrowing modestly to $47.3 bln after gapping out to $49.9 bln in June. Of more relevance will be the following week's reports on retail sales, production, the Philly Fed, and CPI. Survey medians suggest those data will merely point to a muddling recovery with benign price pressures, much like the August employment report. See Survey results.

14:02 ET Treasury Action: Treasuries remain under pressure but have come off earlier lows. Sources say that while the "not as bad as feared" employment report might have been the catalyst for selling pressure and further asset allocation trades into stocks, other factors intensified the declines. Profit taking on the August rally that saw the 10-year yield dive some 50 bps from nearly 3.0% was a major element in today's downdraft. Disappointment that the data are expected to keep further Fed QE on the back burner was also heard. There's also been some hefty concession building ahead of next week's $67 bln mini refunding. Additionally, the corporate calendar is expected to be heavy with more issuers seen coming into the market, at least $120 bln on the month. Plus, weakness in MBS has been spilling over into Treasuries. The long end is bearing the brunt of the pressure with the 10-year yield still up over 8 bps at 2.70%, having failed to penetrate resistance at 2.76%, while the 30-year is at 3.78%, up over 6 bps, after having tested 3.88%. The 2-year note is hovering just over 0.51%. Sources suggest a little short covering could be evident heading into the long weekend to further knock yields from their highs.

13:30 ET Canadian Market Summary: Canadas extended recent losses in a shortened session after the stronger than expected U.S. employment data diminished risk of a double dip recession, raising the odds of a BoC rate hike next week. The jobs data helped extend rotation into equity markets at the start of the month. Although follow through was limited after the drop in U.S. ISM services added to evidence of a slower growth trajectory. The 10-year yield rose 8 bps to 2.95%, although pulling back from an earlier three-week high at 3.01%. And the Canadian dollar soared to a two-week high against the greenback at 1.0393, as shifting expectations for next week's BoC announcement overshadowed pullback in crude oil. See our summary.

13:13 ET U.S. Jobs Report Avoids an August Ticker-Bomb: The U.S. jobs report was taken as a relief by a market with sharply downgraded expectations, and the report notably sidestepped risk of a private payroll drop or a surge in the jobless rate that was a clear risk given weakness in the early August data. Yet, beyond a modest upside private payroll surprise and some boosts to past government job data, most of the figures tracked the previously assumed slow-growth trajectory for the August economy. See our report.

12:49 ET Treasury Action: yields are consolidating below highs after being capped by the weaker than expected ISM services reading, following the surge on the firmer than expected employment report. Recall, a number of economists had a bone to pick with the Aug ISM manufacturing reading, which sparked one of the legs higher in yields this week, but seemed to be an outlier against all the other weaker ISM-related readings. Stocks are also renewing their upward bias, however, gaining a percent and this has put a floor under yields again. The 10-year yield jumped 10 bp to clear 2.75% before stalling and reversing to 2.70% and then rebounding to 2.71%. The 2s-10s spread pulled back inside +220 bp after extending its steepening run. Real money asset allocation out of bonds and into stocks in both the U.S. and Europe this week dominated on the ISM-fueled premise that double-dip fears were overblown, while a round of Treasury supply will dominate next week, along with any stimulus initiatives, which could keep Treasuries defensive for now.

12:44 ET Canada Action: The curve has flattened as the market leans toward a rate hike next week from the BoC. It contrasts with steepening in the Treasury curve after the U.S. jobs data diminished fear of a double-dip recession and extended rotation into stocks at the start of the month. The 2s30s spread has narrowed 4 bps on the day to +219 bps and may have further to run on a close below the bottom of the August range at +224 bps.

12:13 ET There's only one Fedspeaker on next week's docket after a fairly intense end-of-summer period for the Fed, with Minneapolis Fed hawk Kocherlakota giving a view of "Inside the FOMC" at a business luncheon in Missoula, Montana, from 14:30 ET on Wednesday, September 8.

11:40 ET Treasury Action: Treasury's $67 bln in coupons next week will highlight a thin calendar. The better than feared jobs data this morning has allowed the market to start to cheapen ahead of the offerings, though the plunge in the ISM services index has halted selling pressure. The $33 bln wi 3-year note yield is up 6 bps to 0.82%. While that would still be a record yield low for this maturity, it's still 9 bps cheaper than yesterday's 0.73% Thursday. The August 3-year note was awarded at 0.844% and garnered strong safe haven demand. The $21 bln wi 9-11/12 year note was up 12 bps at 2.73% after the employment report, but drifted down to 2.72% after the ISM data. Traders would like to push it to 2.75% by next Wednesday's sale if possible. The $13 bln wi 29-11/12 bond also rose 12 bps to 3.83%, but has backed off to 3.79%. Assuming the higher yields mostly stick, the auctions should go pretty well.

11:32 ET Canadian week ahead: The BoC announcement and employment data will dominate in the holiday shortened week. The stronger than expected U.S. jobs data has hardened expectations for another 25 bps rate hike from the BoC (Wed), with the OIS market now implying a 63% probability. But slower than expected Q2 growth, reduced prospects through the rest of the year and Fed QEII argue for a dovish statement that foreshadows a near term pause. Employment (Fri) is expected to expand 15k in August following the 9k drop in July. The record 65k plunge in educational services seen in July is due for reversal, underpinning our expectation for total hiring growth. In other data, July building permit values (Tues) and August housing starts (Thurs) are expected to be consistent with moderation in the housing market through the second half of the year. The Ivey PMI (Wed) is expected to improve to 57.0 in August, consistent with the usual seasonal pattern. And the trade deficit (Thurs) is expected to narrow slightly to -C$1.0 bln in July, including further pullback in both exports and imports. See or Canadian comprehensive calendar.

11:26 ET Euro$ interest rate futures are holding gains on the near-dates as the jobs report and ISM services drop largely cancel one another out, leaving the Dec 2010 contract 1.5-ticks higher at 99.60. The Fed is unlikely to dial back monetary easing any time soon, giving confidence to the rally, though the deferreds are as much as 7-ticks lower with the Obama Administration mulling their fiscal stimulus options into next week. Penetration of the Aug 30 peak at 99.600 would improve the tone and shift sights toward a retest of 99.645, possibly expanding the current trading range to the 99.700 psych barrier, before running out of gas. That being said, we anticipate a developing trading range between 99.700 and 99.500 for an "extended period" and initial support remains at 99.540. See Euro$ futures.

11:13 ET European Fixed Income Summary: Bund and Gilt futures slumped and European stocks rose after better than expected U.S. labour market data and on talk of stimulus measures from Obama. Risk appetite has returned, but other U.S. data were mixed and uncertainty remains leaving markets vulnerable to a renewed set back. Meanwhile, key eurozone spreads have narrowed. Today's European economic calendar had the final eurozone August Services PMI, which unexpectedly was revised up to 55.9 from 55.6 in the initial release. Meanwhile, July retail sales came in weaker than expected at 0.1% m/m (median 0.4%), though not a total surprise in the light of disappointing German numbers earlier in the week. The U.K. has the August services PMI, which came in at 51.3 (median 53.0) down from 53.1. Elsewhere, Swiss August CPI decelerated to 0.3% y/y (median 0.4%) from 0.4%. As of 15:06GMT the September 10-year Bund future is down 69 ticks at 132.03, while the 10-year December Gilt future is down 42 ticks at 123.59. In the cash market the 10-year Bund yield is up 7 bp at 2.34%, while the Gilt yield is up 5 bp at 3.00%. By comparison, according to Bloomberg, the Italian 10-year yield is up 1 bp, the Spanish yield is also up 1 bp, the Greek is unchanged, the Portuguese is up 8 bp and the Irish up 7 bp. By comparison the DAX was up 0.56% and the FTSE 100 was up 0.78% on the day so of 14:55GMT.

10:38 ET Canadian technicals: The December CGB took out support from the Aug 27 low at 125.13 after this morning's U.S. jobs data, but prices are trying to stabilize ahead of the Jul 7 peak at 124.15. A brief period of base-building above 124.15 will be necessary to cement a near term floor and sponsor an oversold bounce. However, if 124.15 support is broken, look for mild follow-thru lower to affirm the 50% retracement of the Jun-Aug rally aty 123.77 before stabilizing. See our CGB technicals.

10:37 ET The U.S. ISM-NMI plunge to 51.5 in August from 54.3 in July reversed nearly all of the climb from the lean 50.5 January figure to the 55.4 cycle-high in each of the three months ending in May, before the June slip to 53.8. The ISM-adjusted measure also fell, to a similarly weak 51.9 from 54.5 in July, 54.7 in June and a 56.8 cycle-high in May. This measure is at its lowest level since February, when we had a 51.4 ISM-adjusted level. The ISM-NMI is now back within the narrow 48.8-53.5 range seen in all but one of the fifteen month period ending in September of 2008 that included half of the last recession, after spending the prior five months just barely above this range. The service sector continues to sharply undershoot the factory sector, which has benefited over the last year from an emergence of the auto-sector from bankruptcy, as well as from the normal cyclical sensitivity of the factory sector to a turn in the cycle. The ISM-NMI index failed to rise much with the inventory-led 5.0% Q4 GDP pop, and it now sits at levels that are arguably undershooting the slower 2010 GDP growth rates of 3.7% in Q1, 1.6% in Q2, and an estimated 1.8% in Q3.

10:29 ET President Obama didn't announce any new stimulus measures . But he did repeat his call for Congress to pass his small business initiatives, and said he would address a broad range of ideas next week. While a firm pledge today of new stimulus wasn't too likely in the first place, speculation had gripped the markets. We could see a little disappointment registered on Wall Street especially in the wake of the surprising erosion in the ISM services index. Though there is no early close in the bond market today, trading is likely to thin out very quickly and that could make for choppy trading into and through the afternoon.

10:18 ET FX Action: USD-JPY has more than given back its post-employment report gains, falling toward 84.30 from highs over 85.20. Wall Street has given back about half of its earlier gains, though major indices remain up from 0.7 to 0.9% on the session. Liquidity in FX Land has thinned out, say dealers, so choppy price action may continue.

10:16 ET ECB's Gonzalez-Paramo said ECB will phase out measures "in tandem with the normalisation". He stressed that markets have not yet fully normalized and that the ECB considers the current interest rate to be appropriate. The executive board member said that while the ECB longed to be back to a stable and normal framework and to phase out non-conventional extraordinary measures, the speed of the exit will depend on the situation on markets.

10:10 ET President Obama's remarks have been delayed indefinitely, according to news wires. He was slated to speak on the economy at 10 ET.

10:08 ET Altanta Fed's Lockhart said Fed MBS reinvestment was a "small precautionary action" not a change in the policy outlook or strategy, according to the hawkish non-voter, which didn't necessarily herald the start of further balance sheet expansion. He sees the economy experiencing a temporary downshift, with signs of credit easing and a better feeling recovery by year-end. Lockhart reads good news into corporate balance sheets, earnings, and manufacturing, which are all in good shape, though joblessness is taking a significant toll on household spending. He characterizes monetary policy a appropriately quite stimulative currently. See his speech "Gauging the Economy and Monetary Policy."

10:07 ET Canada Action: Canadas have trimmed earlier losses following the much weaker than expected U.S. services ISM. However, follow through has been limited in the wake of the stronger than expected U.S. jobs data and in the face of rallying equity markets. The 10-year yield has pulled back 6 bps from session highs to 2.95%, but still trading 8 bps higher on the day. The 2s10s spread has widened a bp to +159 bps, but lagging the sharp steepening in the Treasury curve. Meanwhile, the 2-year spread versus Treasuries has widened 5 bps to +84 bps along with hardening in the odds of a BoC rate hike next week. But the 30-year spread has traded 4 bps more negative at -23 bps as Treasuries underperform at the long-end.

10:04 ET U.S. ISM non-manufacturing index dropped to 51.5 in August from 54.3. So much for the "not so bad news" employment report earlier this morning. This is the second lowest reading of the year, and is down from 55.4 in May which was the highest since March 2006. The business activity index declined to 54.4 from 57.4. The employment component fell to 48.2 from 50.9. New orders slipped to 52.4 from 56.7. New export orders fell to 46.5 from 52.0. Prices paid climbed to 60.3 from 52.7. The composite manufacturing and service sector index fell to 52.1 from 54.4. The report could take some of the steam out of Wall Street and help Treasuries rebound from their day's lows.

10:04 ET FX Action: The dollar eased back versus the yen, and remained largely static against the euro after the softer non-manufacturing ISM headline. Wall Street meanwhile gave back a sliver of its strong post-employment gains. The market will be looking to president Obama now, though once the smoke clears form his comments, the N.Y. market will look to be getting out of Dodge for the holiday weekend, and ahead of hurricane Earl.

09:59 ET Fed Policy Outlook: the better than feared jobs data has bought the FOMC a little more time to discuss further QE measures at the upcoming September 21 policy meeting. Today's data have lowered the risk of a double dip recession, at least for now, and that should keep the Fed on hold for now. Many Fedwatchers are still looking for the Fed to significantly increase their purchases of Treasuries in coming months. Bernanke certainly left the door open for additional action with his Jackson Hole speech, but it would take a lot more arm twisting at the September meeting, we suspect, given the resistance implied in the FOMC minutes to last month's action. Some of the FOMC's decision could also be a function of the administration's tactics ahead of the November mid-term elections. We'll see what Mr. Obama has to say on the prospects of more stimulus in his speech.

09:54 ET The U.S. GDP outlook for Q3 will remain unrevised with today's jobs data, as today's employment figures are consistent with our 1.8% Q3 GDP forecast. Hours-worked are poised for the same 1.8% growth rate in Q3, following a 3.3% clip in Q2 and a 2.4% rate in Q1. The 2.9% growth in hours-worked through the first half of 2010 nearly matched the 2.7% GDP growth rate for the two-quarter period, with quarterly figures of 3.7% in Q1 and 1.6% in Q2, following a wide gap between GDP and hours-worked growth through late-2009. Our 1.8% Q3 GDP growth estimate actually still leaves room for an assumed 0.5% productivity growth rate in Q3, as the BLS output measure has generally been overshooting GDP growth, and we project a 2.3% Q3 growth rate for this measure. Productivity growth is moderating in 2010 overall following the big 2009 surge that included 6%-8% rates in the last three quarters of the year, and this should "compress" the gap between growth in GDP and hours-worked.

09:51 ET Chicago Fed's Evans highlighted the importance of clearing houses in a speech opening a symposium sponsored by his branch on clearing functions. There was no mention of the economy or policy outside the references to the crisis in the financial system, which elevated the importance of exchange-traded markets. See his speech on OTC Derivatives Clearing.

09:50 ET The U.S. jobs data prompted no revisions in our existing forecasts for August. We still expect personal income to rise 0.3% in August, following a 0.2% June gain and a flat June figure. For industrial production we expect a 0.1% August gain that sharply undershoots the 1.0% July pop, alongside restrained hours-worked gains of 0.1% for factories and 1.5% for mining. The August index should be depressed by a drop in the vehicle assembly rate to the 7.8 mln area after the July pop to 8.5 mln that reflected the odd GM retooling schedule. We also expect a utility sector drag as the June-July boost from the country-wide heat wave is unwound. For construction, August hours-worked rose 0.6%, alongside a 19k gain in construction payrolls that capped the declines since the March-April bounce attributable to the homebuyers' tax credit. We still assume a 0.4% August construction spending drop that follows declines of 1.0% in July, 0.8% in June, and a hefty 2.8% in May, as we reverse the 3.4% March-April bounce and resume the 21-month string of monthly declines that ended in February.

09:39 ET The U.S. jobs report provided relief in the form of a slight overshoot of expectations for both private and overall payrolls, a jobless rate that "rounded down" to only a modest climb to 9.6% (actually 9.64%), and bounces in the civilian employment and labor force data that reversed at least some of the out-sized drop over the prior three months. Yet, the workweek was unchanged as expected at 34.2, and the hour-worked measure was flat in August after a 0.1% bump to July that left the expected path overall, alongside a surprisingly firm 0.3% wage gain. The component payroll data revealed a downside August surprise from factories, at -27k, but an offsetting upside surprise for construction, at +19k, and much of the upward back-revisions reflected a 57k boost to the oddly weak ex-Census government figures for June and July. Overall, the data are in line with our existing August forecasts, though with a positive market twist given the absense of any feared "ticker bombs" in the headline readings.

09:39 ET FX Action: Wall Street opened higher, as advertised by the futures market, and the dollar has stayed firmer versus the yen. A couple of events still bear watching, as non-manufacturing ISM is due at the top of the hour, as are comments from president Obama on the economy. Normally presidential comments don't have much impact, though with rumors flying around over the potential announcement of tax holidays, tax credits etc, the comments could be market moving.

09:36 ET U.S. ISM-NMI Preview: the August ISM-non manufacturing composite index is expected at 54.5 (median 53.5) from 54.3 in July. The August ISM was surprisingly strong, rising to 56.3 from 55.5, which supports another solid reading for the non-manufacturing report. For more, see the preview.

09:07 ET President Obama will speak on the economy at 10 ET. The apparently hurriedly arranged speech announced last night had the markets abuzz earlier this morning about what he knows that we don't -- there were concerns ahead of the jobs data that the employment report was going to be quite ugly. Those worries have since been dashed, and that may be adding to the very bullish reaction in stocks and the weakness in Treasuries. Rumors are that the President will announce some new stimulus, a "Labor Day package," a tax holiday, new infrastructure spending, and or R&D tax credits.

09:00 ET U.S. equities shot higher in relief trade after the broad sweep of payrolls report was better than low expectations. After a cautious-flat start in overnight trade, the Dow surged 112-points, S&P gained 13-points and NASDAQ climbed 24-points in pre-open action. Focus has been on a 10 ET press conference by the White House, amid rumors of additional stimulus including a payrolls tax holiday, or some other stimulus measures to shore up household finances on the eve of Labor Day. In corporate news, Canada's Goldcorp reached a $3.2 bln deal to purchase Andean Resources of Australia, though Celldex dove 40% on news Pfizer backed out of a co-development drug deal. Campbell Soup posted higher than expected earnings, as did video game maker Take-Two Interactive. ISM services and Fedspeak are due next. See Dow, S&P and Nasdaq.

09:00 ET FX Action: CAD bulls were cheered by the not as bad as feared U.S. employment data, which has seen USD-CAD fall to 1,0430 from near 1.0550 ahead of the report. The surge in risk appetite helped the loonie, though the prospects for U.S. recovery, and Canada's close economic ties to the U.S. was likely the main driver. USD-CAD is on two-week lows, though from here, buyers are seen lined up into the 1.0400 region.

08:49 ET European Fixed Income Update: Bund and Gilt futures have slumped following better-than-expected U.S. non-farm payrolls data, while stock markets have extened earlier gains. Gilts continue to outperform. As of 12:46GMT the September 10-year Bund future is down 79 ticks at 131.93, while the 10-year December Gilt future is down 34 tick at 123.66. In the cash market the 10-year Bund yield is up 7 bp at 2.36%, while the Gilt yield is up 4 bp at 3.00%. By comparison the DAX was up 1.18% and the FTSE 100 was up 1.02% on the day so of 12:31GMT.

08:48 ET Canada's TSX Composite looks set to extend higher on the encouraging U.S. jobs data, after having penetrated the June peak in yesterday's session and closing above the 12,100 threshold. Front-month crude has reversed earlier losses, up $0.2 at $75.20, testing the top of the recent range. But spot gold has pulled back $11 to a still elevated $1,240/oz. Goldcorp will be in focus after agreeing to buy Andean Resources for C$3.6 bln in cash and shares, trumping a bid from Eldorado Gold. Also catching attention, market regulators are are reviewing a plan by brokerages to send more orders to alternative trading system Alpha Group. And Dubai's police chief has characterized BlackBerry as a spy tool, suggesting Dubai will take a tough line in talks with RIM.

08:38 ET FX Action: The dollar initially rose versus the yen and the euro after the modestly better than expected NFP outcome, and the upwardly revised prior months. U.S. equity futures surged higher, which appears to have helped EUR-USD higher once again. USD-JPY rallied from 84.40 to near 85.15. EUR-USD dropped under 1.2815 from 1.2835, though quickly surged back over 1.2870. FX action from here is likely to be concentrated, as with a holiday weekend ahead in North America, and a hurricane bearing down on the northeast U.S., many will be heading for the exits early.

08:37 ET Treasury Action: yields spiked higher on the better than expected payrolls results, which saw a smaller headline drop, a bigger private gain and upward back revisions in Jun and July, though the jobless rate crept back up. Overall, that sent the 10-year yield 10 basis points higher to 2.75%, now over a quarter point above recent lows. The 2s-10s spread continued to widen, out to +221 bp. That leaves ISM services and Fedspeak before the stampede onto the highways for the Labor Day weekend.

08:35 ET Canada Action: Canadas have tumbled on the stronger than expected U.S. jobs data. The 10-year yield has soared 10 bps to 2.97%, a two week high. The 2s10s spread has hled steady at +158 bps. Meanwhile, spreads versus Treasuries are mixed. The 2-year spread has widened 5 bps to +84 bps as expectations harden for a BoC rate hike next week. But the 10-year spread has narrowed 1 bp to +23 bps as Treasuries underperform at the long-end.

08:34 ET U.S. nonfarm payrolls fell 54k in August from an upwardly revised -54k in July (was -131k) and -175k in June (was -221k). The unemployment rate rose to 9.6% from July's 9.5%, as feared. Average hourly earnings jumped 0.3%. The workweek was flat at 34.2 hours. For the guts of the report, private payrolls edged up 67k from a revised 107k gain in July (was 71k). The goods producing sector was unchanged. Manufacturing jobs declined 27k, while construction employment rose 19k. The Government shed 121k jobs, with 111k losses at the Federal level. Household employment rebounded 290k after a 159k decline in July and a 301k plunge in June. The civilian labor force surged 550k. The data are a little better than many expected, considering the upward back revisions and the jump in earnings, and that could provide support to stock bulls. Treasuries are likely to suffer in the wake. Meanwhile, the markets are looking ahead to President Obama's hurriedly arranged speech for 10 ET.