Key events to watch this week will be speeches by central bankers at the Fed annual conference in Jackson Hole, where policymakers might clarify the potential for further stimulus. Chairman Ben Bernanke is scheduled to speak on Friday, ECB President Mario Draghi on Saturday.
Expectations for dovish Bernanke comments might help improve sentiment this week, although this has already been somewhat pricedin by investors after Fed’s dovish minutes last week. Draghi’s speech will be also closely watched, however, the weekend timing of the speech means that any market reaction to ECB President’s comments will only be visible next week.
Awaiting the speeches later in the week, we expect the lack of progress in resolving the euro zone debt crisis to weigh on global equity markets. The talks conducted last week brought no breakthrough as euro zone leaders said they would await a report from Troika before making a decision on whether to ease the terms of the Greek bailout.
There are more talks between European leaders scheduled for this week, but we expect no game-changing statements to be released. Also Spain will be closely eyed by investors this week – we expect the country’s fiscal figures to be released Friday to underline the problematic situation Spain’s PM Mariano Rajoy finds himself in, as he tries to lower the budget deficit and considers whether or not to ask for international aid.