UK:

- BOE's Tucker Says Slow Growth, Higher Inflation Likely: Speaking at the Money Macroeconomics and Finance Research Group annual conference at Birkbeck College in London, Bank of England Monetary Policy Committee member Paul Tucker said the most likely scenario in the UK was for slower economic growth and rising inflation. Tucker also said that while inflation would probably come down on prospects of weakening economic growth in the region, a monetary policy that targets growth could allow inflation to run rampant.

EUROPE:

- Juncker Re-Elected to Eurogroup Chairman: The Eurogroup, the group of euro zone finance ministers, has re-elected Luxembourg Finance Minister Jean-Claude Juncker as chairman at its meeting in Nice, France on Friday. The finance ministers had gathered in Nice to discuss inflation and growth in the euro zone. Earlier in the day, Juncker had acknowledged the economic slowdown in the monetary union, but hesitated from saying that the euro area would be entering into a period of a prolonged recession. However, he did concede that the slowdown was stronger than first expected. Juncker also stressed that inflation was needed to be brought under control.

- ECB's Trichet Keeps Focus on Inflation: European Central Bank President Jean-Claude Trichet kept the focus on the central bank's mission to keep inflation expectations anchored and preventing second-round inflation effects from pushing prices higher in the region. Trichet once again reminded listeners that the current monetary policy stance would help achieve price stability over the medium term, and warned wage setters against indexing wages to CPI.

- German Finance Minister Steinbrueck Sees No Recession: Germany and the euro zone are not in a recession, German Finance Minister Peer Steinbrueck stressed to reporters following the Eurogroup meeting in Nice, France on Friday. He also said that wage growth was not driving inflation. Moreover, Steinbrueck said that he expects the German economy to grow this year and in 2009 and said that there would be no tax cuts until the budget was balanced.

- Almunia Says Slovakia Needs to Speed Things Up: European Commissioner for Economic and Financial Affairs Joaquin Almunia said that Slovakia should think of speeding up its preparations for entry into the euro zone in January of 2009. Attending the euro zone finance ministers meeting in Nice, France, Almunia also warned that the country needs to be careful regarding its high inflation levels. Furthermore, Almunia noted that the falling euro reflects a weakening GDP. However, the EU Commissioner warned that perceptions could change and that the currency could see a rebound.

- EU Industrial Production Down 1.7% on the Year: Euro zone industrial production fell 1.7% year-over-year in July, Eurostat reported on Friday, down from both the 1.0% decline expected and the 0.8% fall reported in the previous month. Meanwhile, June's annualized figure was revised down from an initial figure of -0.5%. In monthly terms, industrial output in the monetary union continued its decline, losing 0.3% in July. Economists had anticipated a slightly less pronounced fall of 0.2% for the month, mirroring June's 0.2% loss. June's figure was revised up from a reading of 'no change'.

- Italian Industrial Production Down 3.2% on the Year: Italian industrial output declined 3.2% in weighted daily average terms in the twelve months to July 2008, the National Institute of Statistics (ISTAT) said on Friday. July's reading is down from both the 2.7% fall expected and the 1.7% loss observed in the previous month. Meanwhile, June's figure was revised up from an initial reading of -1.8%. Month-over-month, industrial output saw a loss of 1.1% in July, more than doubling the 0.5% contraction forecast and significantly widening the 0.2% fall seen in June. Meanwhile, June's figure was revised down from an initial estimate of +0.1%.

- EU Employment Up 0.2% on the Quarter: Employment in the euro zone rose 0.2% from the first quarter of 2008 to the second, Eurostat said in a press release published on Friday. The previous period had seen a gain of 0.3%. In annualized terms, euro zone employment rose 1.2% in Q2, down 0.4 percentage points from Q1's 1.6% jump.

- French Business Confidence Up to 94 Level: The Bank of France reported Friday that its business confidence rose to 94 in August from July's 92 level against expectations for a stable reading. According to the French central bank, the actual production rose to 5 in August from July's 2 level, while stocks of finished goods increased to 9 from the previous month's 8 reading. Meanwhile, the production outlook improved to 3 after tumbling all the way to -6 in July.

- French Inflation Slows to 3.2%: French annual inflation slowed more than expected in August to 3.2%, according to a report published by the National Institute for Statistics and Economic Studies (INSEE). Economists had expected a slightly less pronounced slowdown to 3.3% from July's 3.6% level. Month-over-month, the consumer price index showed no movement, despite expectations for a 0.1% gain. July's CPI level had fallen 0.2% on a monthly basis. In EU harmonized terms, French inflation fell to 3.5% year-over-year in August, down from both the 3.7% rate forecast and the 4.0% print seen in July. Meanwhile, HICP lost 0.1% in the period to August from July, when the index fallen 0.3%. Economists, on the other hand, had expected a 0.1% rise.

- Irish Retail Sales down 3.5% on the Year: Irish retail sales by volume lost 3.5% in the 12 months to July, according to a press release from the Central Statistics Office (CSO) following June's 5.0% fall. In monthly terms, retails sales rebounded 2.3% in July after falling 0.7% in the previous period.

- Swedish Economic Growth Flat in Q2: The Swedish economy stagnated in quarterly terms as expected in the second quarter of 2008, Statistics Sweden said in a report on Friday. Q2's flat growth rate reading comes on the heels of Q1's 0.1% quarterly gain. Year-over-year, Swedish GDP rose 0.6%, down from both the 0.7% increase expected and the 2.0% gain seen in the first quarter.

ASIA PACIFIC:

- Q2 Japanese GDP at -0.7% Q/Q: Final Japanese GDP for the second quarter came in slightly higher than expected at -0.7%, above the call for a 0.8 decrease. Preliminary GDP was -0.6%. On an annualized basis, final GDP decreased by 3.0%, also one tick lower than the forecasted 3.1% decrease. Preliminary annual GDP was -2.4%. Exports fell by 2.3% for the quarter and imports fell by 2.8%.

- Annual Japanese Industrial Production Up 2.4%: Japanese industrial output increased 2.4% in July on an annualized basis, up from both the preliminary estimate of 2.0% and June's stagnant growth rate, the Ministry of Economy, Trade and Industry said in a report early Friday. The economics ministry also reported on Japanese capacity utilization and noted that it had risen 1.4% from June to July 2008. This follows June's monthly loss of 1.7%.

- Chinese Retail Sales Down 23.3% on the Year: Chinese retail sales declined another 23.3% in August, despite forecasts for a fall to 23.0%. Year-to-date retail sales increased by 21.9% annually against July's 21.7% figure.

- Chinese Industrial Production Down 12.8% on the Year: Chinese industrial production saw a fall to 12.8% in August from 14.7% in July, despite forecasts for a fall to 14.5%. Year-to-date on an annual basis, industrial production increased by 15.7% against July's 16.1% figure.

- Annual New Zealand Retail Sales up 2.5%: Retail sales in New Zealand fell by 0.8% month over month despite forecasts for a 0.3% fall. The prior figure for June was upwardly revised to +1.0% from +0.9%. Retail sales ex-autos decreased by 0.2%, despite expectations for a 0.3% increase and in line with June's downwardly revised -0.2% figure. On an annual basis, retail sales increased 2.5%, and retail sales ex-autos increased 2.9%.

OTHER NEWS:

- After several month of negotiation, Deutsche Bank has acquired a 29.75% stake in Deutsche Postbank for €2.7 billion.

- Hurricane Ike Shuts Down Refineries: Despite some scaling back of the forecast, Hurricane Ike's size is expected to cause disruptions along the Gulf of Mexico coast line and shut down a large portion of U.S. Texas refineries as the storm prepares to make landfall near Houston. Crude oil and gasoline are higher as a consequence.

IN THE PRESS:

- According to the Washington Post, the U.S. government is allegedly attempting to engineer the sale of Lehman Brothers. CNBC reports possible suitors are Barclays PLC, HSBC, or Bank of America. Reuters reports that the Bank of America is the most likely suitor and that talks with the U.S. government could end as early as this weekend.

- Belgian Finance Minister Says Trichet Was Right: While not excluding a debate on interest rates in the euro zone, Belgium's Finance Minister Didier Reynders conceded that European Central Bank President Jean-Claude Trichet's monetary policy has been completely correct up to now. In an interview with French financial newspaper Les Echos published on Friday, Reynders shared the ECB's concern regarding inflation levels over the past months and said that reducing inflation pressures was the "best guarantee" to strengthen purchasing power and consumption.

JN Gross Domestic Product (Q/Q) Q2 Final -0.7% vs. Exp: -0.8% Prior: -0.6%

JN GDP Annualized Q2 Final -3.0% vs. Exp: -3.1% Prior: -2.4%

JN Nominal GDP (Q/Q) Q2 Final -0.8% vs. Exp:-0.9% Prior: -0.7%

JN GDP Deflator (Y/Y) Q2 Final -1.5% vs. Exp: -1.6% Prior: -1.6%

JN Industrial Production (M/M) July Final +1.3% vs. Prior: +0.9%

JN Industrial Production (Y/Y) July Final +2.4% vs. Prior: +2.0%

JN Capacity Utilization (M/M) July Final +1.4% Prior: -1.7%

FR Bank of France Business Sentiment August +94 vs. Exp: +92 Prior:+92

FR Consumer Price Index (M/M) August 0.0% vs. Exp: +0.1% Prior: -0.2%

FR Consumer Price Index (Y/Y) August +3.2% vs. Exp: +3.3% Prior: +3.6%

FR CPI - EU Harmonised (M/M) August -0.1% vs. Exp: +0.1% Prior: -0.3%

FR CPI - EU Harmonised (Y/Y) August +3.5% vs. Exp: +3.7% Prior: +4.0%

FR CPI Ex Tobacco Index August 118.64 vs. Exp: 118.81 Prior: 118.69

IT Industrial Production (M/M) (SA) July -1.1% vs. Exp: -0.5% Revised: -0.2% Prior: +0.1%

IT Industrial Production (Y/Y) (WDA) July -3.2% vs. Exp: -2.7% Revised: -1.7% Prior: -1.8%

IT Industrial Production (Y/Y) (NSA) July -0.6% vs. Revised: -4.2% Prior: -4.4%

EU Euro zone Employment (Q/Q) Q2 +0.2% vs. Prior: +0.3%

EU Euro zone Employment (Y/Y) Q2 +1.2% vs. Prior: +1.6%

EU Euro-Zone Industrial Production (M/M) (SA) July -0.3% vs. Exp: -0.2% Revised: -0.2% Prior: 0.0%

EU Euro-Zone Industrial Production (Y/Y) (WDA) July -1.7% vs. Exp: -1.0% Revised: -0.8% Prior: -0.5%

7:17 EDT, Market Quotes:

The euro was up 0.97 cents to 1.4095 USD.

The U.S. dollar was down 0.40 cents to 1.0712 Canadian Dollars.

The U.S. dollar was up 14.50 cents to 107.31 Yen.

The pound sterling was up 1.08 cents to 1.7686 USD.

The Australian dollar was up 0.02 cents to 0.8075 USD.

The U.S. dollar index was down 65.90 points to 79.49.

The U.S. ten-year note was up 25.0 ticks to 116.44 with yields up 1.1 bps to 3.65%.

The German ten-year bund was down 39.0 ticks to 114.40 with yields up 3.7 bps to 4.12%.

The British ten-year gilt was down 71.0 ticks to 111.45 with yields up 8.2 bps to 4.53%.

The Australian ten-year bond was down 1.0 ticks to 94.33 with yields up 1.9 bps to 5.68%.

The Japanese ten-year government bond was down 8.0 ticks to 137.27 with yields up 2.4 bps to 1.54%.

The Eurostoxx was trading up 20.73 points to 2828.27.

The FTSE 100 was trading up 49.70 points to 5368.10.

The Dax was trading up 20.56 points to 6199.46.

The Nikkei closed up 112.26 points to 12214.76.

The Australian ASX closed up 89.50 points to 4903.80.

The Hang Seng closed down 35.82 points to 19352.90.

The Shanghai Composite closed up 0.69 points to 2079.67.

Dow Jones Futures were down 22.00 points to 11425.00.

S&P 500 Futures were down 2.75 points to 1249.25.

WTI Crude oil is up $ 1.08 to $ 101.95 per barrel.

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

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