The European markets finished Friday's session in positive territory, following the highly anticipated speech from Ben Bernanke. The markets initially pared their gains after the Fed Chief's speech, but still managed to retain a good portion of them. Many investors had expected Bernanke to announce a third round of quantitative easing and were disappointed that he only expressed a readiness to act as needed.
Federal Reserve Chairman Ben Bernanke acknowledged the continued challenges facing the U.S. economy on Friday, but did not specifically outline new monetary policy easing in a closely watched speech.
While speaking at the Kansas City Fed's Economic Symposium in Jackson Hole, Wyoming, Bernanke cited some positive signs for the economy but said the "economic situation is obviously far from satisfactory."
In light of the sluggishness of the economy recovery, Bernanke noted that the Fed will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.
European Central Bank Governing Council member Ewald Nowotny said the central bank is set to downgrade its economic outlook for 2012 and 2013. "There will not be an improvement, but rather a deterioration in expectations," Nowotny who also heads the Austrian central bank told reporters late Thursday. The report is due next week.
The European Central Bank's bond purchases in debt markets should be subject to strict conditionality, Executive Board member Benoit Coeure said Friday. The conditionality should be based on an official request for support from the bailout funds EFSF and ESM, he added.
Moody's Investor Service said its review of Spain's government rating for a possible downgrade will continue through the end of September because of pending information.
The review is dependent on the scope of the bank recapitalization, support available under the European Stability Mechanism and potential changes to the existing crisis-management framework, the rating agency said late Thursday.
Moody's said it cannot exclude the need for more immediate action if Spain's ability to refinance maturing debt was to deteriorate sharply, prompting the country to seek external support beyond the recapitalization programme.
The British Chambers of Commerce on Friday said the government should take bold measures to boost growth. The BCC expects government borrowing to overshoot its target, saying it will fail to hit the target of eliminating the budget deficit by 2016-17.
The Euro Stoxx 50 index of eurozone bluechip stocks increased by 1.39 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.21 percent.
The CAC 40 of France advanced by 1.00 percent and the DAX of Germany climbed by 1.09 percent. The SMI of Switzerland gained 0.15 percent, but the FTSE 100 of the U.K. fell by 0.20 percent.
In Frankfurt, Deutsche Bank finished up by 5.06 percent and Commerzbank rose by 2.11 percent.
HSBC started Fresenius with an "Overweight" rating. The stock closed higher by 1.33 percent.
Societe Generale started Fresenius Medical Care with a "Buy" rating. The stock gained 0.74 percent.
Deutsche EuroShop increased by 0.17 percent, after a broker upgrade.
In Paris, Credit Agricole surged by 7.44 percent. Societe Generale climbed by 2.59 percent and BNP Paribas added 2.10 percent.
GDF Suez gained 1.11 percent. UBS removed the stock from its "Most Preferred List."
Luxury retailer Hermes reported higher profits for the first half, but made cautious statements about the full year. The stock climbed by 1.94 percent.
Iliad increased by 4.43 percent, after announcing results for the first six months of the year.
Essilor fell by 2.25 percent, after the lens maker reported first-half results.
Carrefour dipped by 0.86 percent, despite an upgrade from Barclays.
HSBC downgraded Eurofins Scientific to "Neutral" from "Overweight." The stock lost 0.72 percent.
In London, Royal Bank of Scotland gained 1.48 percent and Lloyds Banking Group climbed by 0.21 percent.
Rio Tinto rose by 0.74 percent, Antofagasta advanced by 1.19 percent and Kazakhmys gained 1.11 percent. Vedanta Resources climbed by 0.75 percent and Fresnillo finished up by 1.17 percent.
WPP fell by 0.43 percent, after a broker downgrade.
Redrow increased by 2.72 percent. The company has received an initial approach from Bridgemere Securities Limited, Toscafund Asset Management LLP and Penta Capital LLP in connection with a possible cash offer of approximately 152 pence per share.
Restaurant Group rose by 2.33 percent, after reporting a higher profit for the first half of the year.
Eurozone unemployment rose to a record high and inflation accelerated more than expected, suggesting that household spending will remain muted going forward and weigh further on economic activity. According to Eurostat data, the seasonally adjusted jobless rate remained unchanged at a record 11.3 percent in July, in line with forecast. The June rate was revised up from 11.2 percent.
Flash estimate from Eurostat showed today that inflation accelerated more than expected in August to 2.6 percent from 2.4 percent in July. The rate was forecast to rise to 2.5 percent.
German retail sales unexpectedly dropped for the first time in three months in July amid a continued rise in unemployment, raising concerns that consumer spending may fail to underpin growth of the biggest Eurozone economy grappling with the sovereign debt crisis and the threat of a possible recession in the currency-bloc.
Retail sales fell a calendar-and-seasonally adjusted 0.9 percent month-on-month following a 0.5 percent increase for June and a flat reading for May, the Federal Statistical Office reported Friday. Economists had expected sales to grow 0.2 percent in July.
Consumer confidence in the United Kingdom remained at a low level in August, contrary to economists' forecast for an improvement, as a modest uplift from the Olympics was offset by the grim economic outlook, latest data showed Friday.
The consumer confidence index remained unchanged month-on-month at -29 in August, data from market research agency GfK NOP showed. Economists had forecast the index to improve to -27. However, the latest reading was better than -31 recorded in August last year.
While Chicago-area business activity saw continued growth in the month of August, a report released by the Institute for Supply Management - Chicago on Friday showed that the pace of growth slowed by more than economists had been anticipating.
The ISM Chicago said its business barometer fell to 53.0 in August from 53.7 in July, although a reading above 50 indicates continued growth. Economists had been expecting the business barometer to edge down to a reading of 53.5.
Consumer sentiment in the U.S. improved by more than previously estimated in the month of August, according to a report released by Thomson Reuters and the University of Michigan on Friday.
The report showed that the consumer sentiment index for August was upwardly revised to 74.3 from the mid-month reading of 73.6. Economists had expected the index to be unrevised from the preliminary reading.
Factory orders rose more than expected in July, according to new government statistics released Friday. With the advance, the figure rebounded from a decline posted in the previous month.
The U.S. Department of Commerce revealed that factory orders rose by 2.8 in July. This followed a decline of 0.5 percent in the previous month. Economists had expected factory orders to rise by 2.0 percent.
by RTT Staff Writer
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