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It's only a half-day for markets, but even that may be too long

July 3, 2008 | 12:35 am

Thursday is looking like a big mess for financial markets. And since everybody's bracing for trouble, maybe we won't get it, and investors can limp off to their July 4th barbecues without much additional damage to their portfolios or their psyches.

Maybe.

In any case, it'll be a short day for Wall Street ahead of the Friday holiday: Stock markets will close three hours early, at 10 a.m. PDT, because who needs an extended holiday weekend more than the New York Stock Exchange's overworked mainframe computer?

Here's what on tap today:

--Pared payrolls: The government will release its June employment report at 5:30 a.m. PDT. The consensus expectation is that the economy lost a net 60,000 jobs last month, according to Bloomberg's regular survey of about 80 economists. That would make it a sixth straight month of job losses.

A much bigger number could fan the belief that a recession is underway, which would hardly be a confidence-builder for the stock market, fresh into an official bear market Wednesday on the Dow index and the Nasdaq.

Trichet What's scary is that, if we're about to fall into recession, we aren't even close to the level of payroll cuts in previous downturns. The economy lost an average of 65,000 jobs a month from January through May. That was just about one-third the 181,000-a-month average of the last recession (March-November 2001).

--Euro rate hike: Jean-Claude Trichet, head of the European Central Bank, has been threatening for months to raise interest rates to fight inflation -- because, hey, that's what central bankers are supposed to do, oui? At their meeting today ECB policymakers are almost certain to make good on that threat, lifting their key rate from 4% to 4.25%.

Not a big deal? Tell that to the dollar, which is nearing a new low against the euro. The European currency jumped to $1.589 on Wednesday from $1.579 on Tuesday. Its record high was $1.599 on April 22.

The Federal Reserve's key rate is 2%. Higher rates in Europe give the continent an edge in attracting capital. That underpins the euro.

And what happens as the buck weakens? Commodity exporters, who price their stuff in dollars worldwide, earn less. We just hand them another reason to keep prices of raw materials, including (especially?) oil, on the rise.

So let's get out there and enjoy the weekend, before the next $10-a-barrel jump in crude.

Photo: A wag of my finger to you, Monsieur Bernanke! Jean-Claude Trichet. Pier Paolo Cito/Associated Press

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