* Fed more likely to launch QE3 after soft job data
* U.S. interest rates may stay close to zero into 2015
* Germany's top court may hobble ECB rescue plan
By Alan Wheatley, Global Economics Correspondent
LONDON, Sept 9 Poor U.S. job figures for August
make it more likely that the Federal Reserve will take out extra
insurance this week against an economic relapse by plumping for
fresh monetary stimulus.
With Chinese growth slowing markedly and the euro zone mired
in recession, the United States is resuming its traditional role
as a motor - though not a high-powered one - for the global
Fed Chairman Ben Bernanke had already voiced 'grave concern'
about the labour market even before Friday's data showed the
economy added just 96,000 non-farm payroll jobs last month. The
average gain over the past quarter is a mere 94,000 a month.
That is weak enough in the eyes of many economists to
trigger a third round of asset purchases - or quantitative
easing in market jargon - by the U.S. central bank, to bring
down bond yields and perk up investors and companies.
A Reuters poll of 59 economists after the jobs report
revealed a 60 percent chance of such action at the Fed's Sept.
12-13 policy meeting. A poll on Aug. 24 had put the likelihood
at 45 percent
"It makes the forecast pretty easy that the Fed will move,"
said Bruce Kasman, an economist with J.P. Morgan in New York.
"We think the case has certainly been sealed."
Kasman expects the Fed to buy another $200-$300 billion of
bonds and to extend its forecast that short-term interest rates
will stay near zero from late 2014 into 2015.
Jan Hatzius with Goldman Sachs had not been expecting the
Fed to ease further before the end of the year.
But he now sees a greater than 50 percent chance it will
announce on Thursday that it will buy about $50 billion of bonds
a month, mainly mortgage-backed securities, with the end date of
the programme dependent on how the economy evolves.
The main U.S. data of the week will come on Friday. Retail
sales probably rose 0.7 percent in August and industrial output
just 0.1 percent, according to a Reuters survey of economists.
ALL EYES ON TOP GERMAN COURT
Europe has a light calendar of timely economic data - there
is a batch of backward-looking euro zone figures for July - but
a crowded schedule of political events, including Dutch
elections on Wednesday and a meeting of European finance
ministers on Friday.
Top of the list is a ruling by Germany's constitutional
court on Wednesday on a motion to block the establishment of the
European Stability Mechanism, the euro zone's new, permanent
Legal experts interviewed by Reuters all expect the court to
approve the fund, but they also believe it will impose tough
conditions limiting Berlin's flexibility on future bailouts.
The verdict could contain some "unpleasant surprises" for
investors, said Holger Schmieding, an economist with Berenberg
Bank in London.
That could have serious repercussions for the plan unveiled
last week by European Central Bank President Mario Draghi for
secondary-market bond purchases to lower what the bank sees as
unjustifiably high yields on the debt of countries such as Spain
Markets cheered Draghi for reducing the tail risk of the
break-up of the single currency.
But the initiative hinges on struggling euro zone members
applying for aid from the ESM or its current precursor fund,
which would back up the ECB by buying those governments' bonds
when they are auctioned.
So no ESM, big problem.
Even if Germany's top court does not throw a spanner in the
works, Draghi's gambit will not magically restore the European
economy to health, said Andrew Milligan, head of global strategy
at insurer Standard Life in Edinburgh.
"There is probably going to be some helpful impact for
European industry in terms of lower yields and a boost to
confidence, but from a growth point of view, this is not a game
changer," Milligan said.