Mortgage Rates React to Jobs, August 5, 2010

Mortgage Rate Trend Direction:     Neutral/Down

Economic Reports/Rate Impact:    Jobless Claims, 8:30 AM ET, Moderate Rate Impact

Key News:                                          European Central Bank Rates, China Real Estate Rules

As markets continue waiting for tomorrow's Non-farm Payroll Report, it gets a different snapshot on the employment situation with today's Jobless Claims report.  Markets in Europe and Asia are mostly higher today as traders react to news impacting their respective economies.  Mortgage rates are likely to begin the day modestly lower from yesterdy's close.

Impact of economic reports

Initial Jobless Claims data for the past week were released at 8:30 AM ET and surprised anlysts with a larger than expected increase.  The US stock market futures immediately turned negative while the mortgage-backed securities market turned positive.

Impact of economic and political events

The European Central Bank kept its key interest rate unchanged today reflecting a tempered but more optimistic opinion of their economy than views in the US.  In China, the China Banking Regulatory Commission put restrictions on the mortgage market and ordered banks holding mortgages to conduct stress tests to determine the impact of up to a 50% decline in property values.  Concern is growing that a real estate value collapse could occur due to the rampant speculation in property that has occurred in the largest cities.  The impact on banks could be dramatic.