- Trichet Reiterates Message: European Central Bank President Jean-Claude Trichet stressed that as long as monetary policy demonstrate a clear and concise path, the impact of the current market rout should not have any lasting effects on the macro economy. However, Trichet conceded that these were challenging times and stressed that financial stability did not imply price stability, reiterating that the ECB's prime objective was delivering price stability over the medium term. However, Trichet did acknowledge that this "policy horizon" could be modified, depending on the circumstances.

- Stark Says Inflation in EU Worrying: Speaking in Frankfurt, Germany on Friday, European Central Bank Executive Board member Jürgen Stark stressed that inflation in the euro zone were at "worrying" levels not consistent with the ECB's primary objective of price stability. The central banker also emphasized that monetary policy challenges were intensifying and noted that past inflationary risks had materialized, while tensions in the financial sector were ongoing.

- Inflation Easing But Not Over, Says Nowotny: European Central Bank Governing Council member Ewald Nowotny gave a press conference in Vienna, Austria on Friday and speculated that consumer price index growth levels may have reached their peak in the euro zone. However, Nowotny was quick to add that it was still too early to give the all-clear signal on inflation. Nowotny, also governor of the Österreichische Nationalbank, recently replaced Klaus Liebscher as head central banker in Austria.

- Despite expectations of a 0.8% gain, German industrial output fell 0.6% year-over-year in July, the German Economics Ministry said in a report published on Friday. Industrial output had seen a 1.5% increase in weighted daily average terms in June, revised down from an initial reading of +1.7%. In monthly terms, industrial output fell 1.8%, overshadowing the 0.1% rise seen in June and more than tripling the 0.6% decline expected.

- French Government Deficit Widens: The French central government deficit widened to €51.4 billion in the year to July, up from both June's €32.8 billion deficit level and the deficit figure of €33.4 billion expected.

- Italian Trade Deficit Widens: The Italian total trade balance showed a deficit of €1.03 billion in June, down from both May's €59.0 million deficit and the €1.0 billion deficit expected. According to a report released by the National Institute of Statistics (ISTAT), Italy exported a total of €31.2 billion in products in June, reflecting a 3.8% yearly decline. Meanwhile, Italy took in €32.2 billion in imports, pointing to a 0.6% gain over the same period. Regarding trade within the euro zone, the Italian trade balance reached a surplus of €1.33 billion in June, down from the €1.7 billion surplus seen in May.

- Spanish IP Weakens in July: In weighted daily average terms, Spanish industrial output declined 4.4% in July 2008 compared to the same month one year ago. However, economists had expected a more severe fall of 6.5% after June recorded a revised annualized loss of 9.2%. In a report published on Friday, the National Statistics Institute (INE) noted that consumer durable products saw the strongest declines in the year, falling 16.6% compared to July 2007. Conversely, output in the energy sector rose 1.7% over the same period.

- Aussie Construction PMI Higher: Australia's construction sector bumped up in August, the third straight increase since May, according to AiG's performance of Australian construction index. The index scored a reading of 43.1 following July's 41.6 level.

- According to the Reserve Bank of Australia, foreign reserve assets in August fell to A$35.5 billion from A$37.4 billion in July.

- Jpn Capital Spending Declines: Japanese capital spending decreased far more than expected in the second quarter, by 6.5% despite expectations for a 0.9% increase and against a 4.9% decline in the first quarter. Capital spending excluding software also took a deeper dive than expected, decreasing by 7.5% against the forecast for a 1.0% decrease and last month's decrease of 5.3%.

- Jpn Official Reserves Fall in August: According to the Japanese Finance Ministry on Friday, official reserves in Japan declined to US$996.7 billion in August from $1004.7 billion in July.

At 6:20 a.m. EDT:

The euro was down 1.06 cents to 1.4219 USD.

The U.S. dollar was down 0.16 cents to 1.0681 Canadian Dollars.

The U.S. dollar was down 84.00 cents to 106.24 Yen.

The pound sterling was down 0.80 cents to 1.7605 USD.

The Australian dollar was down 1.22 cents to 0.8107 USD.

The U.S. dollar index was up 36.40 points to 78.97.

The U.S. ten-year note was down 25.0 ticks to 117.19 with yields down 2.2 bps to 3.60%.

The German ten-year bund was up 40.0 ticks to 115.11 with yields down 4.6 bps to 4.02%.

The British ten-year gilt was up 53.0 ticks to 112.63 with yields down 6.3 bps to 4.39%.

The Australian ten-year bond was up 3.0 ticks to 94.43 with yields down 14.0 bps to 5.62%.

The Japanese ten-year government bond was up 20.0 ticks to 138.88 with yields down 5.2 bps to 1.47%.

The Eurostoxx was trading down 30.95 points to 2780.98.

The FTSE 100 was trading down 73.20 points to 5288.90.

The Dax was trading down 103.49 points to 6176.08.

The Nikkei closed down 345.43 points to 12212.23.

The Australian ASX closed down 102.40 points to 4877.10.

The Hang Seng closed down 456.20 points to 19933.28.

The Shanghai Composite closed down 74.97 points to 2202.45.

Dow Jones Futures were down 56.00 points to 11144.00.

S&P 500 Futures were down 6.50 points to 1230.00.

WTI Crude oil is down $ 1.56 to $ 106.33 per barrel.

AU AiG Perf of Construction Index August +43.1 vs. Prior: +41.6

JP Capital Spending Q2 -6.5% vs. Exp: +0.9% Prior: -4.9%

JP Capital Spending Excluding Software Q2 -7.6% vs. Exp: -1.0% Prior: -5.3

JP Official Reserve Assets August $996.7B vs. Prior: $1004.7B

AU Foreign Reserves August +A$35.5B vs. Prior: +A$37.4B

FR Central Govt. Balance July -€51.4B vs. Exp: -€33.4B Prior: -€32.8B

IT Trade Balance (Total) June -€1030M vs. Exp: -€1000M Revised: -€84.0M Prior: -€59.0M

IT Trade Balance Eu June +€1325.0M vs. Revised: +€1689.0M Prior: +€1713.0M

DE Industrial Production (Y/Y) (NSA) (WDA) July -0.6% vs. Exp: +0.8% Revised: +1.5% Prior: +1.7%

DE Industrial Production (M/M) (SA) July -1.8% vs. Exp: -0.5% Revised: +0.1% Prior: +0.2%

By Erik Kevin Franco, This email address is being protected from spam bots, you need Javascript enabled to view it and Todd Wailoo, This email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Megan Ainscow, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Nancy Girgis, This email address is being protected from spam bots, you need Javascript enabled to view it

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