Best Financial Markets Analysis Article Broadly speaking, the theme of equities making progress on the back of ample liquidity in financial markets continues to hold. Yesterday’s stronger-than-expected economic data from the US and UK were also helpful, with US retail sales of particular note. But all that glitters may not be gold. As in other countries with incentive schemes to scrap old cars in favour of new models, the boost to consumer spending is not permanent.

And weak labour market conditions combined with household deleveraging augur poorly for the domestic recovery process, especially in the US and UK. In the euro-zone meanwhile, it is helpful that there is relatively less work to do in terms of household balance sheet repair. But the outlook for net exports / world trade takes on greater significance. Indeed, following a weaker pace of improvement in Germany’s ZEW survey, markets may approach next week’s German Ifo and advance PMI surveys with more caution, fearing another bout of de-stocking given the ongoing fragility of demand. The economic recovery process is almost certainly not as clear-cut as equity market performance over recent months has suggested.

Today’s economic data calendar is busy, featuring US CPI and Q2’s current account balance. We expect the former to register 1.4% in the year to August compared with 1.5% previously. Yesterday’s firmer producer price numbers could introduce some upside risk. US industrial production and capacity utilisation data are also published. In the UK, the latest labour market statistics are likely to attract more headlines as joblessness continues to rise. We look for claimant unemployment to increase by 30k in August, pushing the rate up to 5.0% (and 8% on the ILO measure). The final estimate of August eurozone CPI is also released, where we anticipate an unrevised annual rate of -0.2%.

For more information: Emile Abu-Shakra Manager, Media Relations Lloyds TSB Group Media Relations Tel 020 7356 1878 http://www.lloydstsbcorporatemarkets.com/

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