| Sep 9 2010, 08:31:38 GMT | Sydney: | 18:31 | Tokyo: | 17:31 | Barcelona: | 10:31 | London: | 09:31 | New York: | 04:31 | San Francisco: | 01:31 |
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With US markets closed for the Independence Day holiday tomorrow, the influential labour market report is published this afternoon. We forecast a fall in non-farm payrolls in the region of 400,000 in June, from 345,000 in May, with the risk of a larger drop after the bankruptcies of GM and Chrysler LLC. Although this would represent the first rise in monthly job losses since January, it should still be a significant improvement on the 691,000 average during Q1. The unemployment rate is expected to rise to 9.6%, from 9.4% in May, and it is clear that it could reach double-digits in coming months. We believe that the weak labour market represents the main threat to a sustainable recovery, as it threatens to undermine consumer confidence and so raise savings and cut spending.
The ECB is widely expected to maintain its key interest rate at 1% this afternoon. We expect ECB president Trichet to provide further details about the plan to purchase covered bonds and is likely to be pressed on his views about the contrasting steps taken by the ECB and the Fed and BoE to improve credit conditions. Data earlier this week highlighted that the ECB's liquidity injections had yet to reverse the declining trend in bank lending, while annual inflation in the region turned negative for the first time in June.
In the UK, the BoE Credit Conditions Survey is published, providing an assessment of lending conditions in Q2 and expectations for Q3. BoE MPC member Tim Besley is speaking this morning, while David Miles will testify to Parliament on his recent appointment to the committee. The DMO will auction £2.5bn of 4.25% gilts due 2039. The UK construction PMI survey and euro zone unemployment and producer prices are also due this morning.
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