Portugal Bonds, German Manufacturing, US Jobs

After yesterday’s US independence day holiday and with both the Bank of England (BoE) and the European Central Bank (ECB) moving toward forward guidance, today’s US employment report will be closely watched for hints on if and when the Federal Reserve will start decreasing its monthly asset purchases. But given the uncertainty over central bank policy, reactions to the employment report could very well be confused. If yesterday’s moves by the BoE and the ECB are viewed as helpful in alleviating the euro crisis, this should also help markets in the US. Eyes are now turning toward next Wednesday’s release of the minutes of the previous Federal Reserve’s Open Market Committee meeting, which dropped the ‘taper-bomb’. ECB board member Benoît Coeure makes two speeches, at 09:45 and 10:30 GMT today.

Portuguese bond yields:
On a slow macro day, a reminder of the current hotspot in Europe. Portuguese bond yields have increased steadily since their low of 5.21 percent in late May, reaching a high of eight percent on Wednesday on the resignations of senior ministers. In the past couple of days, bond markets have calmed down a bit, currently trading in a range between 7.6 and 7.1 percent. Most commentators seem to think that a debt restructuring will be eventually necessary, but that is something to worry about after the German elections. There is a chance that the crisis will escalate now, unless Portugal can quickly get back on the internal devaluation programme and the Troika gives some additional leeway on Portugal's budget deficit.

Germany May Manufacturing Orders (10:00 GMT):
After a fall of 2.3 percent in April, mostly due to domestic orders and weather-related issues, manufacturing orders are expected to increase 1.2 percent in May. As the moving average in the chart reveals, the growth rate’s trend turned in mid-2012, coinciding with the bottom in the IFO indices. The monthly figures are notoriously volatile as well as being old news because the purchasing managers' June indices have already been published. But on a slow day, perhaps worth a watch.

U.S. June Employment Report (12:30 GMT): Non-farm jobs are expected to increase by 160,000, after May’s increase of 175,000. The unemployment rate is expected to nudge slightly lower to 7.5 percent from May’s 7.6 percent. A good number would mean that tapering is closer, which would hurt asset prices, while a bad number would imply the opposite. If the recovery continues in a steady fashion and the tapering schedules become more certain, the news interpretation should start to revert back to normal, in other words, good news actually being good for asset prices as well. The confidence numbers have remained elevated, so it is possible to get nice headline numbers or an improvement in the internal data. As usual, remember to watch out for revisions to past data.