\n\tBy Greg Peel<\/p>\n
\n\tThere was no new news out of Europe on Friday night to give anyone the jitters, nor to provide any comfort. After the big sell-off on Thursday night, European stock markets traded another couple of percent lower. Nor was there little comfort provided on the weekend as European politicians continue to argue publicly over the merits or otherwise of the introduction of a eurobond<\/span>.<\/p>\n \n\tThere were no US economic releases on Friday night to give anyone the jitters either. That role was left to leading PC manufacturer and Dow component Hewlett Packard. HP had been due to deliver its quarterly earnings report after the bell on Thursday, but had elected to pre-release about an hour before the bell. In a weak session HP shares were already down 5%, and closed down 6% after the release which included an announcement with regard to a major restructuring of the struggling business, and analysts were going to need some time to digest the implications.<\/p>\n \n\tHaving digested the detail, which included the pricey acquisition of a UK software firm and the intended divestment of the core PC business, Wall Street sold HP shares down 20% on Friday.<\/p>\n \n\tThe Dow fell about 100 points from the opening bell but managed then to find some buying interest, and by 11am<\/span> it was actually up 100 points. There had already nevertheless been talk that traders were unlikely to want to carry positions over the weekend in such a volatile environment, and sure enough the indices spent the rest of the session drifting lower on marginal volume. The Dow closed down 172 points or 1.6%, while the S&P lost 1.5% to 1123.<\/p>\n \n\tRoughly one third of the fall in the Dow can be contributed to the 20% fall in Hewlett Packard. <\/p>\n \n\tThe number to now note is 1101 in the cap-weighted S&P 500 index, which is the recent “downgrade low”. It's only another 2% fall away. However were Wall Street to trade to new lows, it would not elicit a lot of surprise from many quarters. For this is the way of things. As I have noted often enough in the past weeks, markets rarely turn on a sharp rebound from a sharp fall. More often the initial rally proves false and new lows are tested. The “turn” usually comes quietly, just when everyone's given up.<\/p>\n \n\tThe “turn” this time last year was nonetheless orchestrated by Ben Bernanke, who chose the annual Fed gathering in Jackson Hole, Wyoming, as the opportunity to announce QE2<\/span>. The 2011 gathering begins on Friday, when again Ben Bernanke will make a speech. Naturally there is anticipation that Bill Murray will awake in his hotel bed, Sonny & Cher will be singing I Got You Babe on the radio, and Ben Bernanke will announce QE3<\/span>.<\/p>\n \n\tExcept that the Fed has already intimated that QE3<\/span>, in a similar form to QE2<\/span>, is not on the agenda. The Fed is not likely to buy US Treasuries again unless US economic indicators became much, much worse, and inflation turns to disinflation<\/span>. Last week's US CPI data showed inflation rising. The Fed has already fixed its cash rate at zero for two years, which is somewhat of a substitute for QE3<\/span>. But it is at least assumed Bernanke will say something to calm the waters, for to say nothing would be to spark further uncertainty and fear.<\/p>\n \n\tThere's enough of that about at present, thank you very much, with gold rallying yet again on Friday by US$28.20 to US$1853.10\/oz. The VIX<\/span> volatility index is steady at a “fear and loathing” level of 43. The US ten-year bond yield is steady at near-historical lows at 2.07%.<\/p>\n \n\tBase metals stabilised<\/span> on Friday after Thursday's sell-off, rising around 0.5%, while Brent oil bounced back US$1.63 to US$108.62\/bbl<\/span> and West Texas managed US32c<\/span> to US$82.70\/bbl<\/span>. Currencies were also more stable, with the US dollar index falling 0.3% to 73.99 and the Aussie was up 0.2% to US$1.0407.<\/p>\n \n\tThis morning has brought news that Libyan rebels are making the final push into Tripoli with little resistance being encountered. With the Gaddafi<\/span> regime look set to collapse, Brent oil is moving lower in early electronic trade.<\/p>\n \n\tThe Australian market currently appears more proactive than reactive with regards to Wall Street, which is likely testament to the fact our biggest down-days and up-days are mostly driven by US selling\/buying. The exchange rate tells the tale. With the local market having fallen big-time on Friday, the SPI<\/span> Overnight was up 3 points on Saturday morning.<\/p>\n \n\tMoving to this week, the highlight, as I have noted, will be Bernanke's speech at Jackson Hole on Friday. And Friday is also the day the first revision of US June quarter GDP is released. We recall that while the S&P downgrade triggered the heaviest selling a fortnight ago, the release of the first US GDP estimate prior already had the markets in selling mode. The result came up short at 1.3% growth, but it was the downward revision of the March quarter result to 0.4% from 1.9% which really had Wall Street in shock.<\/p>\n \n\tThe 1.3% June result may have come up short (consensus then was 1.6%), but given the events of last month the forecast now is for a revision down to 1.1%.<\/p>\n \n\tPrior to Friday's activities, releases in the US this week include the Chicago Fed national activity index tonight, the Richmond Fed manufacturing index and new home sales on Tuesday, and the FHFA<\/span> house price index and durable goods orders on Wednesday. On Tuesday through Thursday the US Treasury will auction US$99bn<\/span> of two, five and seven-year notes. If the recent trend continues, the world will pile into the twos, be so-so with the fives, and shy away from the sevens.<\/p>\n \n\tThis Friday also sees a fortnightly release of the Michigan Uni<\/span> consumer sentiment survey, which a fortnight prior posted a shock fall to its lowest level since 1980 at the end of the week of turmoil.<\/p>\n \n\tIt would be reasonable to assume Wall Street may not go too crazy this week ahead of Jackson Hole, but I wouldn't bet the house. Since Merkel & Sarkozy<\/span> spoke last Tuesday night, no further developments have been forthcoming from EU officialdom despite last week's trashing of European banks. One presumes silence cannot be maintained for another whole week, but then we are talking about European officialdom. Apparently the word “urgent” has been removed from European languages.<\/p>\n \n\tDuring this week the two widely watched European business sentiment surveys will be released – the ZEW<\/span> and the German IFO<\/span> – and on Tuesday an estimate of the eurozone's<\/span> composite PMI for August will be released. Speaking of estimates, HSBC's “flash” manufacturing PMI for China will also be released on Tuesday.<\/p>\n \n\tIn Australia we're building up to the September 7 release of our own June quarter GDP. Last week saw the release of the June quarter wage cost index, and Wednesday brings construction work done along with the Conference Board leading economic index from June. Thursday it's June quarter housing affordability, and on Friday RBA<\/span> governor Glenn Stevens will make his regular testimony to the House of Reps. No doubt the idiots will all hammer him as to why he hasn't cut rates yet.<\/p>\n \n\tIt's all happening on Friday.<\/p>\n \n\tBefore we get there, this week is the biggest week of the year in the Australian corporate earnings result calendar. An avalanche of reports is due – too many from which to select highlights – and they'll keep coming through to next Wednesday when they will abruptly cease (August 31).<\/p>\n \n\tThis week's FNArena<\/span> celebrity appearances include Rudi on Sky Business on Thursday at noon and myself on Sky Business on Friday at 2pm<\/span>. But as always, the world will stop to catch FNArena's<\/span> own show – Market Insight – on Thursday on the BRR<\/span> network (brr.com.au<\/span>) at the new time of 4.30pm<\/span>. The time shift from 4pm<\/span> is in a response to overwhelming industry requests to allow time for the busy books-closing period immediately after the ASX<\/span> bell. <\/p>\n