31.08.12 Friday Morning

Risky assets have spent the week on the quiet ahead of the week’s most anticipated event, Ben Bernanke’s speech from Jackson Hole. Throughout the month, there has been a string of strong data from the US with the personal income and spending report suggesting that consumers got off to a good start in Q3. It was thought that investors who were positioning themselves for a proactive Fed report would push them to take profits on risk positions prior to the speech. However, with the Dow futures up 80 points at 1pm Friday it appears investors are buying into the report. Nevertheless, with the up-coming US elections will Bernanke avoid sending out a clear signal as to the Fed’s near future intentions?

In Europe, the euro continued its recovery as Spain’s risks moved back onto the showroom floor. Catalonia, which views itself as a separate entity to Spain asked for €5 billion in aid whilst media reports indicate that Valencia needs a larger bailout than previously determined. With unemployment nearing 25% and deposit flights at a 15 year high it is unlikely that the county's recession is going to turn anytime soon.

Elsewhere in Europe, data remains weak. The only breath of fresh air comes from the eurozone M3 annual growth figure of 3.8%, stronger than the Reuters poll expected. UK mortgage lending is also still depressed, although house prices recorded a surprise increase of 1.3% in August, the biggest monthly rise since January 2010. However, before we get too excited it must be noted that the 3 month figure still shows a fall of 0.5%.

Elsewhere throughout the world Philippines Q2 GDP was on the upside whilst Korean industrial output contracted 1.6% m/m in July. The slowdown in the East seems to continue with the all-important Chinese manufacturing PMI data due for release this weekend. The focus of BRIC countries now shifts to the Brazilian and Indian Q2 figures after Brazil cut their rate by 50bp.

In shares it has been a mixed week for mining and exploration stocks. Many have seen an upside after the G7 urged oil producers to increase production. BowLeven jumped, and then stalled, on Thursday after rumours of Dragon Oil returning to the bid resurfaced. The 6 month window has finished and they are now free to open bidding discussions as well.

The mess at Barclays continued after the serious fraud office opened enquiries into payments to a Qatar fund. It is the latest blow to hit the beleaguered bank after the libor scandal. The bank named Anthony Jenkins as the replacement to Bob Diamond on Thursday. Jenkins, the head of its retail and business banking unit, will undertake a thorough review of the bank's activities, focusing on costs, pay and return on equity. However, his lack of experience in investment banking, which generated 62% of underlying profit before tax in the first half, clearly raises serious questions on whether Barclays will temper its appetite for the business which has proved the source of many of recent problems and requires the most pressing cultural change.

Next week we have important manufacturing data from the UK and US and the official bank rate and MPC rate statement from the Bank of England. All of these lead to the non-farm figure on Friday which after Romney’s ‘employment is the key’ speech seems all the more important. Earnings come from Hargreaves Lansdown and Morrisons.