Today all eyes will be on the US labour market report

Market movers today

• Today all eyes will be on the US labour market report. Focus remains on the unemployment rate and wage growth as these remain crucial for the Fed's decisions on quantitative tightening. In line with the continued growth in employment , we expect further declines in the unemployment rate over time. However, we expect wage growth to remain around current levels for some time and to fail to show a significant pickup as the second round effects of several years with low inflation are dragging wage growth (see Flash Comment US: Fed likely to continue tightening on strong jobs report, 7 August ).

• Focus will also be on global PMI manufacturing figures with the release of the US, euro area, Swedish and Norwegian figures. For the euro area, the most interesting numbers are the first releases in Italy and Spain. In Italy, the composite PMI new orders index is around the level in Germany, although the two economies are doing very differently. In our view, there are still significant challenges for Italy including some political risks. In Germany, in cont rast , the upcoming election should not change much (see German Election Monitor No. 1: Next euro area election unlikely to rock the boat, 29 August ). For more about the Scandi PMIs, see page 2.

• In the US, ISM manufacturing is also due for release. The gap between the ISM and PMI manufacturing figures is the biggest in 10 years, implying the two figures are sending mixed signals about the US economy currently. For the August print , we expect ISM manufacturing to stay around its existing high level and therefore not close in on the gap to PMI manufacturing. Note the preliminary PMI manufacturing figure has already been published and the final print should stay around the level seen in the preliminary report .

Selected market news

Yesterday, US Treasury Secretary Steven Mnuchin told CNBC that the debt limit deadline has been pushed forward a ‘couple of days' due to additional spending since Hurricane Harvey. It remains our base case that the debt limit will be raised or suspended eventually but we have to get closer to the deadline before a deal will be reached.

Also the Harvey storm has hit the supply of gasoline in the US, which has led to a surge in US gasoline future prices. In a very short period of time the gasoline future price for September has increased from USD1.60/gallon to now USD2.14/gallon. Higher fuel prices may affect US inflation in coming months, although it is difficult to say how much yet , as it also depends on how quickly refineries are up and running again (24% of US refining capacity remains shut ). That said, the PCE inflation data for July, which were released yesterday, showed a fall in the PCE core inflation rate to 1.4% from 1.5%, so it is unlikely to really put pressure on the Fed.

In China, state media reports the Chinese Communist Party Congress will begin on 18 October, where President Xi Jinping will out line his political programme for the coming five years and needs to fill important posit ions in the Politburo Standing Commit tee, which is the most important decision body in China.

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