WSJ:GLOBAL MARKETS: Europe Stocks Up Despite Downbeat Euro-Zone Data
-- European stocks up and euro spikes against the dollar
-- Gains maintained despite downbeat euro-zone data
-- Investors still expect ECB to report bond-buying action next week
-- Fed chairman's speech eagerly awaited for signs of QE3
By Andrea Tryphonides & Nina Bains
European stocks posted decent gains Friday, while the euro spiked higher against the dollar ahead of an all-important speech by Federal Reserve Chairman Ben Bernanke, who could signal the start of another round of quantitative easing to help boost the U.S. economy.
The buoyant tone in European financial markets prevailed despite a downbeat euro-zone jobless report.
The number of people out of work in the euro zone climbed further in July to reach a fresh record.
Eurostat, the European Union's official statistics agency, said Friday that 18.002 million people were unemployed in July, a rise of 88,000 from the previous month. That left the jobless rate in July at 11.3% of the workforce.
Meanwhile, annual inflation in the euro zone accelerated to 2.6% in the year to August from 2.4% in July. The European Central Bank's latest forecasts suggest inflation in the euro zone will slow to about 2% by the end of the year.
"Inflation should resume its downward trend over the remainder of the year and will not be enough on its own to prevent the ECB from adopting additional measures to support the economy either next week or soon after," said Ben May, European economist at Capital Economics, commenting on the data. The ECB's monthly policy-setting meeting and press conference take place next week. Many market participants hope that ECB President Mario Draghi will shed some light on ECB bond-buying proposals for under-strain euro area sovereigns.
At 1025 GMT, the benchmark Stoxx 600 index was up 0.4% at 265.96. The U.K.'s FTSE 100 was up 0.3% at 5736.18, Germany's DAX was 0.7% higher at 6941.33 and France's CAC 40 was up 0.9% at 3411.05.
Although equity markets were higher, volumes were light and traders also highlighted possible end-of-the-month repositioning by fund managers.
In addition, investors are waiting eagerly for Mr. Bernanke's speech at the Jackson Hole, Wyo., economic symposium, scheduled to start at 1400 GMT.
Hopes had been building in financial markets that the Fed would hint at further monetary policy easing but in recent sessions expectations have been scaled back a touch.
"A great deal of hype has accompanied the forthcoming Jackson Hole speech by Fed Chairman Ben Bernanke," said Rob Carnell, economist at ING Bank. While there was a slight increase in forcefulness from the text of the previous Federal Open Market Committee statement, this was not exactly a "guarantee" of more quantitative easing, although it was treated as such by many, Mr. Carnell added.
Nevertheless, Wall Street looks like it is headed for a positive start. At 1025 GMT, the Dow Jones Industrial Average front month futures contract was up 0.4% at 13,031.00. The S&P 500 front month futures contract was 0.4% higher at 1403.20.
Outside of the core of Europe, Spain's IBEX 35 was up 1.3% at 7287.40. Spain is likely to remain in focus during the session, with the government set to announce its latest financial reform measures at around 1200 GMT, including much-awaited details on a bad bank that will take on property assets from commercial banks.
Italy's FTSE Mib gained 1.7% to 15,025.46 and Greece's ASE Composite was 0.5% higher at 632.26.
In the bond market, Spain's 10-year government bond yield was nine basis points higher at 6.65%. Italy's corresponding bond yielded 5.78%, trading flat on the day. These government bond yields will garner much attention in coming days as investors position themselves defensively ahead of upcoming events, including the ECB meeting on Sept. 6.
Meanwhile, the euro jumped against the dollar on a so-called short squeeze, where investors reversed their negative bets on the currency pair. At 1030 GMT, the euro was at $1.2568 compared with $1.2506 late Thursday in New York.
Other asset classes appeared to be in wait-and-see mode ahead of Mr. Bernanke's speech. Spot gold was at $1,658.50 a troy ounce, up $3.00. The October Nymex crude oil contract was up just $0.45 at $95.07 a barrel, while the October Brent oil contract gained $0.69 to $113.34. The September bund was 0.60 lower at 143.55.
Write to Andrea Tryphonides at andrea.tryphonides@dowjones.com; Twitter @ATryphonides
