Stocks in the U.S. finished higher in volatile trading on the final day of the month, after Fed Chairman Bernanke reiterated his promise that the central bank stands ready to act following some encouraging European headlines.
In his much-anticipated speech from Jackson Hole, Wyoming, Bernanke did not explicitly signal any monetary easing was imminent. The Fed has kept its funds rate target near zero and has indicated that policy is unlikely to change until at least 2014.
The Dow Jones Industrial Average jumped 90.31 points to close at 13,090.84, the S&P500 climbed 7.10 points to finish at 1,406.47 and the Nasdaq advanced 18.25 points to end at 3,066.96.
Spain's government approved a banking reform as the debt-ridden nation looks to accelerate the clean up the troubled sector.
European shares finished higher, reversing a three-day decline, amid optimism the ECB will announce a new program of bond buying this week.
Investors will be looking ahead to the ECB meeting next Thursday to see whether the central bank will discuss purchasing sovereign debt, following Draghi's comment that he would do whatever it takes to defend the euro.
On the economic front, consumer sentiment in the U.S. rose to a three-month high and factory orders posted the biggest gain in one year. Meanwhile, manufacturing activity in the Midwest was slightly lower than expected in August.
The response from the U.S. stock market may have been uncertain, but not so for gold. As the U.S. dollar index slid 0.6 percent to 81.25, gold jumped US$36.10 to US$1691.60/oz. The Aussie rose 0.3 percent on Friday night to US$1.0325.
Oil also jumped on Friday on the weaker U.S. dollar, with Brent gaining US$2.21 to US$114.86/bbl and West Texas rising US$1.01 to US$95.63/bbl. Base metal markets were more muted, rising only slightly.
China's PMI was expected to fall to 50.0 from 50.1 in July but dropped to 49.2, representing the first contraction since last November. It is another psychological blow to global perceptions about the Chinese economy, coming on top of last week's collapse in spot iron ore prices. The world has been impatiently awaiting a monetary policy response from Beijing but it never seems to come. With property prices in China continuing to rise, Beijing is stuck between the proverbial rock and hard place.
China will release its official service sector PMI today, while HSBC will provide its independent take on China's manufacturing PMI and follow up on Wednesday with its measure of the services PMI. This weekend will also see China's monthly data dump for August.
The corporate reporting season has come to an end in Australia, but attention now turns to the economy with a huge raft of data due out this week. The highlight will be the June quarter GDP result on Wednesday. Consensus is for a 0.8 percent growth, down from 1.3 percent in March, to provide 3.7 percent annual growth, down from 4.3 percent.
Today will see Australia's manufacturing PMI, along with those of the UK and eurozone tonight. Today also brings June quarter company profits and inventories, July retail sales, the ANZ job ads series and TD Securities inflation gauge for August.
Tomorrow it's the June quarter current account and net exports, along with the RP Data-Rismark monthly house price index. The RBA will make a rate decision tomorrow and consensus is firmly for no change.
Wednesday is the GDP release, along with the service sector PMI. Thursday it's the jobs numbers and Friday sees the trade balance and construction PMI.
It's the Labor Day holiday in the US tonight, thus shifting regular economic releases back a day. The U.S. manufacturing PMI is out tomorrow night along with construction spending, while Wednesday sees productivity and vehicle sales. Thursday it’s the services PMI and the ADP private sector unemployment report ahead of Friday's official non-farm payrolls number, which will be of great interest to Ben Bernanke.
The ECB meeting the world has been waiting for is on Thursday night, but Spain is still pre-negotiating the terms of a bail-out it hasn't yet requested and little can be promised ahead of the German court ruling next week. The Bank of England will also meet on Thursday.