Alstom, the world's third-largest power- equipment maker, surged 3.7% to 38.55 Euros. Alstom won two contracts worth 450 million Euros ($582.5 million) to design, build, and maintain two combined-cycle gas units for an Indian company.

European Aerospace Defence & Space Co. climbed 3.8% to 18.02 Euros, rising for a third day. The company's Airbus SAS unit will probably return to profit this year if it reaches an agreement with buyers of its A400M military transport plane on compensation for higher-than- expected development costs, Frankfurter Allgemeine Zeitung reported, citing Chief Executive Officer Thomas Enders.

Enders expects to sell at least 170 of the aircraft to their seven customer governments, which will put the project on an "acceptable economic footing," the newspaper reported.

Legrand SA climbed 1.9% to 25.69 Euros, its highest price since June 23. The French maker of electrical switches and plugs made an offer to buy Indo Asian Fusegear Ltd.'s switchgear division. The companies didn't disclose the size of the offer.

Scor SE surged 4.2% to 16.27 Euros, rising for the first time in more than a week. The French reinsurer said premiums from property, casualty, and specialty treaty renewals at the end of June grew 19%, before currency changes.

Pernod-Richard SA fell 2.3% to 62.61 Euros, erasing Thursday's increase, as sales excluding revenue from acquisitions advanced "close to 3%" in the fiscal fourth quarter. That missed the average prediction of a 4.2% gain in a Bloomberg survey of four analysts. The shares fell even as the maker of Absolut vodka and Chivas Regal whiskey raised its full-year profit forecast for the second time this year.

Sanofi Aventis SA, France's largest drugmaker fell 4.3% to 45.51 Euros, its lowest price in almost a year. US regulators approved the first generic version of the Lovenox anti-clotting drug, giving clearance to Novartis AG's copy.

STMicroelectronics NV, Europe's largest semiconductor maker, fell 3.6% to 6.50 Euros, the second- worst performer on the CAC 40 index. Shares fell as analysts were disappointed by results at its wireless joint venture ST- Ericsson, which posted a second-quarter net loss of $139 million compared with a net loss of $213 million a year earlier. Alcatel-Lucent SA (ALU FP), France's largest telecommunications equipment maker, fell 2.2% to 2.08 Euros, paring Thursday's gain.

Societe Television Francaise surged 6.4% to 12.45 Euros, its highest level in over a month. The owner of France's most-watched television channel said first-half profit rose by 51% and increased its full-year revenue guidance as advertising sales rose.

French business confidence rose slightly in July, but bosses are increasingly concerned about their future growth outlook, fresh data suggests. A separate survey showed that French consumer confidence remained unchanged around its depressed level.

Statistics office INSEE's business sentiment index climbed to 98 from June's 96. Analysts had forecast a score of 94.

Business leaders felt that their past activity increased in the manufacturing industry. The indicator measuring output levels climbed to 22 from 20 in June. The demand and total order levels index rose to -30 from -35, while the export order index climbed to -29 from -32.

However, the personal production outlook index, which assesses business leaders' expectations for the next month, slipped to -9 from -7. In contrast, the general production outlook index, which represents business leaders' opinion on French industry as a whole, increased to -2 from -4.

Separate data showed that consumer confidence was broadly unchanged, with rising unemployment being the biggest fear among the French. INSEE's consumer sentiment index was stable at -39 in July. Economists had predicted the indicator to rise to -40.

The only component to experience a decline during the month was consumers' assessment of their past financial situation, which lost 2 points to -28. Consumer views on the economic situation in the past 12 months, were unchanged at -71.

On the other hand, the future financial situation index and the major purchases intentions index were stable in July. Opinions on the economic situation in the next 12 months gained 2 points to -52.

Meanwhile, survey data from Markit Economics showed that the French private sector expanded at a faster pace in July compared to June. The flash purchasing managers' index, which assesses conditions at 750 companies across France, rose to 59.9 from 59.6.

The rise in the headline composite index was driven by a faster expansion of service sector activity during July, with the PMI rising to 61.3 from 60.8. Economists had forecast a score of 60.0

In contrast, manufacturing output increased at the slowest rate for ten months, with the indicator falling to 53.7 from 54.8. Analysts were looking for a score of 54.1.

New business in the French business sector remained strong in July, despite easing to a four-month low as both service providers and manufacturers recorded slower rises. Panelists cited improving demand and the securing of new clients for the growth in new work.

Employment in the French private sector rose for the third month running in July. Although still only modest, the rate of expansion of staffing levels improved to the sharpest since April 2008. The service sector added jobs at the fastest rate for over two years, while manufacturers shed jobs at the fastest pace for ten months.

Input costs faced by French companies eased to a 5-month low in July. Output charges were raised for the fourth consecutive month.

French Finance Minister Christine Lagarde reiterated that domestic banks will perform well in the stress tests.

According to excerpts of an interview published on French daily Le Figaro on Wednesday, Lagarde said she is "totally confident" about the stress test results of French banks.

A total of 91 banks across Europe are being tested to assess whether they will be able to withstand future shocks in the financial sector. The results are due to be published on July 23. Eurogroup Chairman Jean-Claude Juncker told Austrian newspaper Kurier on July 16 banking stress tests in Europe are unlikely to reveal any major catastrophes.

Rating agency Fitch said Tuesday that it expects capital will be made available by governments where the stress tests of European banking groups indicate shortfalls.

BELGIUM

In Brussels, the Bel 20 ended the week at 2,506.07, up 0.19%.

Belgium's business confidence improved in July from the previous month.

The overall synthetic curve increased to minus 6.5 in July from minus 7.7 in the previous month, a latest report from the National Bank of Belgium showed on Friday. Economists had expected a reading of minus 8.

The confidence weakened in business related services, however the business climate improved in all branches of activity in July. The confidence indicator for the manufacturing industry moved up to minus 9.5 from minus 11.2 in June and that for the building industry slightly improved to minus 5.6 from minus 6.1.

The sentiment indicator in the trade sector rose to 0.8 in July from minus 3.6 in the preceding month. At the same time, optimism weakened in the business-related services with the indicator falling to 3.1 from 4.7.

The Belgian economy grew at a slower pace in the first quarter. The gross domestic product increased 0.1% on a sequential basis, following a 0.3% gain in the fourth quarter of 2009.

Belgium's consumer confidence indicator improved again in July, a report by the National Bank of Belgium showed on Tuesday.

The consumer confidence index increased to minus 7 in July from minus 9 in the previous month. The indicator improved for the second consecutive month after a significant decline observed in May. The latest reading was the highest level for more than two years, the bank said.

The measure for households' saving capacity over the next twelve months recorded a flat reading in July, compared to a 6 in the previous month. Similarly, the financial situation indicator also remained stable in the month.

Further, the gauge for economic situation in Belgium for the next twelve months increased to 4 in July from minus 4 in the preceding month. At the same time, the measure for unemployment decreased to 31 from 40 in June.

The Belgian economy grew at a slower pace in the first quarter. The gross domestic product, or GDP, increased 0.1% on a sequential basis in the first quarter, following a 0.3% gain in the previous quarter. The consumer price inflation hit an 18-month high in June, driven by higher energy prices. Annual inflation stood at 2.46% in June. Now, inflation for July is seen at 2.48% and that for August at 2.11%.

THE NETHERLANDS

The AEX in Amsterdam closed out the Friday session on 337.14, a gain of 0.58% on the day.

SWITZERLAND

The SMI in Zurich finished the trading day Friday at 337.14, a slight gain of 0.11% for the day.

The Swiss National Bank on Wednesday said it expects CHF 4 billion loss on huge Euro-denominated investments in the first half of this year.

In a statement, the central bank said it has increased its foreign currency investments by some CHF 132 billion in the first half of 2010, with the bulk placed in Euro-denominated investments. It noted that the income from foreign currency and Swiss franc positions and the steep rise in the price of gold limited the extent of loss to an estimated CHF 4 billion.

The result for the stabilization fund is not yet included in this figure for the first half of 2010. However, it will make a significant positive contribution, the central bank said.

Further, the SNB noted that the sharp appreciation of the Swiss franc, in particular against the Euro, resulted in exchange rate losses of over CHF 14 billion.

The report on the half-yearly accounts with definitive figures on the consolidated financial statements, which will include the result for the stabilization fund, will be published on 13 August 2010.

Switzerland's trade surplus totaled CHF 9.9 billion in the first half of 2010, down from CHF 11.56 billion in the second half of 2009, the Federal Customs Administration reported Tuesday. In the first six months of 2009, the surplus totaled CHF 8.78 billion.

Driven by higher exports of watches and metallurgy, total exports, in real terms, increased at a pace of 6%, following a 10.9% fall in the second half of 2009. Imports also grew 6% annually, reversing a 9% fall. In nominal terms, exports rose 8.2% to CHF 95.99 billion and imports climbed 7.7% to CHF 86.09 billion.

Exports rose 12% in real terms on an annual basis in June and imports by 13.2%. Exports totaled CHF 17.2 billion and imports amounted to CHF 15.5 billion, resulting in a trade surplus of CHF 1.8 billion in June.

Growth in watch exports exceeded 30% for the second time this year in June, data from the Federation of the Swiss Watch Industry FH showed. The value of watch exports in June was CHF 1.4 billion, an increase of 35% compared to last year. The total for the first half-year was CHF 7.3 billion.

The main markets followed a very steady trend in June. In first place, Hong Kong showed particularly marked growth, picking up the pace from the beginning of the year. Exports to the United States continued to improve, although it lag behind Asian markets.

Europe overall registered its highest monthly rate of growth for three years. Below its average for the beginning of the year, China nonetheless recorded an increase of 69% in June.

Switzerland's M3 money supply increased at a faster pace in June.

The M3 money supply that includes M2 and time deposits, increased 7.7% year-on-year in June, faster than a 7.5% rise in the previous month, a report by the Swiss National Bank showed on Wednesday. A year earlier, M3 money supply climbed 5.9%.

The M2 money supply grew 11.4% annually in June, compared to a 10.4% growth in the previous month. The monetary aggregate M2 is the sum of the money stock M1 and savings deposits. At the same time, the monetary aggregate M1, increased to 12.7% from 11.1% in the preceding month.

Separately, the statistical office said, the real estate index for family homes totaled 378.7 in the second quarter, larger than 375.8 in the previous quarter.

AUSTRIA

The ATX in Vienna ended the week at 2,402.93, down 0.43%.

Erste Group Bank and Raiffeisen Zentralbank Oesterreich, the two Austrian banks that underwent an European Union-wide stress test on their balance sheets, Friday said they have passed.

The results were widely expected and demonstrate how Austria's banks have bolstered their balance sheets since the financial crisis, during which the two financial institutions were given state aid.

Both banks received so-called participation capital injections from the state, which means the government owns some of their shares, but doesn't have voting rights.

While Austria itself escaped relatively unscathed from the financial crisis, its banks have large exposure to eastern European economies, which were hit hard by the downturn.

Raiffeisen Zentralbank is the owner of the region's second-largest lender, Raiffeisen International Bank-Holding AG (RIBH.VI). Erste Bank is Eastern Europe's third-largest lender and number two in its Austrian home market.

A credit institution is deemed to have passed the test if its Tier 1 capital ratio does not drop below 6% of total assets, even in the most severe stress scenario. Tier 1 capital includes common and preferred stock, cash reserves and certain other long-term 'hybrid' securities.

Producer price inflation in Austria accelerated slightly to 2.9% year-on-year in May from 2.5% in April, Statistics Austria said Tuesday.

The year-on-year growth in factory prices was mainly driven by price rise in intermediate goods. Producer prices in intermediate goods industries recorded an annual increase of 4.6% compared to 2.5% rise in the previous month.

There was a 7.7% year-on-year increase in energy prices, contributing positively to the overall index. In April, energy prices were up 7.4%. Excluding energy prices, the producer price index would have risen 2.1% annually. Factory prices of consumer goods fell 0.5% in May, whereas prices of household goods increased 0.6%.

Month-on-month, producer prices rose 0.8% in May, mainly due to increase in production costs of basic metals and fabricated products, energy supply and motor vehicles.

The Alpine nation's economy grew 0.4% annually in the first quarter, compared to the 1.2% contraction in the preceding quarter. However, according to the International Monetary Fund, the country's current deficit and debt levels are not sustainable.

The IMF had urged the Austrian government to ensure that the debt is back on the downward path and the deficit should be bought below 3% of GDP by 2013. The lender expects the fiscal deficit to be at 4.75% of GDP in 2010 and said that debt should be constrained to around 70%.

SWEDEN

In Stockholm, the OMX rounded out the week at 1,057.77, a Friday drop of 0.71%.

The OMX Stockholm 30 closed down 0.71% Friday after a disappointing second quarter report by telecom giant Ericsson and as investors awaited the outcome of crucial "stress tests" on Europe's banking sector. Compared to last week the index was up 0.21%.

Swedish and European bank were mostly lower ahead of the results of the tests, expected after the market closes on Friday.

On Friday macroeconomic reports indicated improvement in global economic sentiment. The World Trade Organisation said Friday it expects global commerce to grow 10% this year, after minus 12% last year. Britain's economy surged in the second quarter of 2010, with gross domestic product expanding by 1.1%, its fastest pace of growth in four years. Germany's economy was described as being in "a party mood" after its business sentiment hits three-year high.

Shares in Stockholm-based telecom giant Ericsson tumbled more than 7% Friday after posting lower-than-expected earnings, partly explaned by an industry-wide shortage of key components that contributed to an 8% decline in sales.

"The sales were disappointing because clearly the global shortage in parts is widespread and not only affecting Ericsson and the telecom industry, but also related industries as well," an analyst in Helsinki at Danske Bank said.

Truck maker Scania increased Friday after the company reported a robust return to net profit well above analysts' expectations as global demand recovered and operating margin reached a record-high. Also its peer Volvo posted upbeat earnings Thursday and stood by its forecast of recovery in US and European markets.

Dutch-Swedish chemical group Akzo Nobel said on Friday its second-quarter net profit soared but that it remained cautious over the pace of the economic recovery.

Shares in defense company Saab -- maker of the Gripen fighter jet - dived Friday as it said second quarter net profits fell almost 40% - largely because of terminated customer contract. The company cut its outlook for the rest of the year.

Swedbank, Sweden's fourth biggest bank, said Thursday that it swung to a second-quarter net profit of 1.57 billion kronor ($212 million) from a loss of 2.01 billion kronor a year earlier. The result was more than double analyst expectations as loan losses came in well below forecasts.

Shares in Swedish SSAB, the world's largest supplier of high-tensile steel, dived more than 6% in Stockholm midday trading after it said the pace of recovery in the sector would slow next quarter.

Swedish-Swiss engineering group ABB said Thursday its net income fell 8% to 623 million Dollars in the second quarter, but issued an upbeat forecast for the rest of 2010.

DENMARK

Copenhagen's OMX completed the trading week Friday at 410.99, a marginal gain of 0.28% for the session.

Danish consumer confidence improved in July after deteriorating marginally in June, Statistics Denmark said. Consumers expected a better general and personal financial situation after the next twelve months.

The consumer confidence index rose to a three-month high of 4.1 in June after recording a reading of minus 1.5 in the previous moth. The indicator measuring the consumers' view of their personal financial situation at present rose 2.5 from a flat reading last month.

However, the gauge measuring the expected financial conditions next year, recorded a strong reading of 15.5, rising from 10.7 in June.

Households found considerable weakness in Danish economy at present but expected the situation to improve over the next 12 months. The indicator for the current general economic situation showed a minus 9.7 reading, better than the minus 20.7 recorded last month.

Meanwhile the gauge for the country's economic conditions after 12 months posted a reading of 17.9 compared to 11.8 last month.

Official data had shown that the Danish economy contracted 0.4% year-on-year in the first quarter, while the private and government consumption expenditure increased by 0.5% and 1%, respectively.

NORWAY

The OBX bourse in Oslo concluded a hectic week at 331.42, up 0.31% on the day.

Norwegian banks reported a modest fall in household credit demand in the second quarter of 2010, but corporate credit demand increased.

According to the latest bank lending survey results released by the Norges Bank on Thursday, there were wide differences among banks' reports. Some banks reported increased demand, while others reported declines. Demand for fixed-rate loans has increased since the first quarter of this year. Banks expect household credit demand to continue downwards in the period ahead.

The survey found credit standards for Norwegian households were tightened somewhat in the second quarter of 2010, as the guidelines for prudent mortgage lending issued by the Financial Supervisory Authority of Norway resulted in some tightening of credit standards. Moreover, banks' risk appetite also contributed somewhat to the tightening. In the period ahead, banks expect credit standards for households to remain broadly unchanged.

Furthermore, the central bank said commercial banks reported another increase in loan demand from non-financial corporations. Banks eased credit standards for non-financial corporations somewhat in the second quarter. Both the funding situation and capital adequacy favored an easing of credit standards, the Norges Bank said.

It noted that banks expect corporate credit demand to increase somewhat again in the period ahead, while credit standards are expected to remain unchanged.

FINLAND

Helsinki brought the OMX to a close Friday on 6,628.47, up 0.82% on the day.

Finnish producer prices increased for the fifth consecutive month in June, a report by the Statistics Finland showed on Monday.

The producer price index, or PPI, rose 5.2% year-on-year in June, same as in the previous month. However, producer prices increased for the fifth month in a raw. A year earlier, the PPI decreased 8.4%.

The rise in producer prices for manufactured products was mainly due to increase in prices of oil products and pulp from the previous year and the growth was curbed by fall in electronic products prices, the statistical office said.

On a monthly basis, the PPI for manufactured products grew 0.5% in June, but slower than 1.1% growth in the previous month. The rise was mainly due to increase in prices of pulp. Producer prices increased for the ninth consecutive month since October 2009, when it rose 0.1%.

Import price index increased 8.2% on an annual basis in June, faster than the 8% growth in the previous month. A year earlier, import prices slipped 11.9%. At the same time, export price index grew 4.9%, rising from 4.7% in May. Import prices climbed for the fourth straight month.

Month-on-month, import prices grew 0.9% in June, faster than 0.2% in the preceding month. But, export price inflation eased to 0.4% in June from 1.7% in the prior month.

Meanwhile, the wholesale price index, or WPI, rose 5.7% on an annual basis in June, faster than 5.4% growth in the previous month. Wholesale prices inflation rose for the fourth straight month. A year earlier, the WPI slipped 9.7%. On a monthly basis, the WPI inflation rose to 0.9% from 0.3% in May.

Separately, the statistical office said, producer prices for services increased 1.3% on an annual basis in the second quarter, faster than 0.8% rise in the preceding qaurter. The rise in prices was mainly due to increase in the rents of office and business premises and higher prices of goods transport by road. On a sequantial basis, producer prices for services rose 0.3%, slowing from 0.4% in the fourth quarter.

SPAIN

Forget the banks and their stress-tests!

In Madrid, the Ibex finished the day on 10,388.20, up 0.83%.

Spain sold Eur 5.97 billion treasury bills on Tuesday, hitting its maximum target. Greece and Ireland also sold its debt Friday.

Spain's 12-month bills were sold at a 2.221% yield, smaller than the 2.303% at the previous sale on June 15. The demand was 1.95 times the amount sold. The treasury also sold 18-month bills at 2.331% compared to 2.837% in June. The bid-to-cover ratio was 2.44 for 18-month issue.

Spain has the third largest deficit in Euro area. Its budget deficit is around 11.2% of GDP. The government said it has no trouble in repaying debt in July.

Spanish exports growth more-than-doubled in May compared to the previous month, official data showed Tuesday.

In May, exports climbed 25.7% year-on-year, much faster than the 10.8% rise in April, data from the Ministry of Industry, Tourism and Commerce showed on Tuesday. Exports amounted to Eur 16.21 billion and imports value was Eur 20.38 billion during the month, representing a 26.1% rise annually. In April, imports were up 16.6%.

The trade balance registered a deficit of Eur 4.17 billion, 27.5% more than last year. The deficit widened at a slower pace compared to 37.6% increase in April, when the figure was Eur 5 billion. The energy deficit increased 45.3% from the year before. Meanwhile, exports of chemical products climbed 54.9% year-on-year. Shipments of manufactured consumer products increased 16.1% annually and that of food products rose 7.9%.

As in the case of exports, all segments recorded an increase in imports. Energy product imports rose 39.4% year-on-year and purchases of petroleum and petroleum products grew 50.9%. Imports of gas fell 1.3% on an annual basis. Imports of non-energy products increased 23.5% year-on-year.

In the automotive trade, exports increased 11.3% year-on-year. There was a 30.2% rise in sales of components and 4.1% in finished vehicles. Imports of automotive vehicles grew 5.3% as a 24.3% increase in purchases of components was partially offset by a decline of 10.2% in the purchase of finished vehicles.

Shipments to the European Union, having an export share of 67.4%, increased 22.9% annually in May. Exports to Euro area countries increased 23.4%. Exports to countries outside the EU recorded a growth of 32.1% on an annual basis. Imports from the EU, with a total 56.7%, import share increased 19.3% and purchases from Euro zone countries rose 10.1%. Imports from countries outside the EU grew 36.3%.

The Spanish economy expanded 0.1% sequentially in the first quarter, growing for the first time since early 2008. However, the country's government foresee 0.3% contraction this year before expanding 1.3% next year.

On July 14, Prime Minister Jose Luis Rodriguez Zapatero said recent budget reduction measures is likely to weigh on growth in the latter half of the year. Spain's socialist government is trying to reduce its huge budget deficit, which is the third biggest in Eurozone.

PORTUGAL

The PSI General in Lisbon closed out the day Friday on 2,594.25, down 0.33%.

Portugal's current account deficit narrowed in the January to May period.

The current account deficit totaled Eur 7.20 billion in the January to May period, narrowing from Eur 7.79 billion a year ago, the Bank of Portugal said on Wednesday. Goods account showed a negative balance of Eur 6.89 billion, compared to a negative balance of Eur 6.83 billion last year. Services account decreased to Eur 1.97 billion from Eur 1.83 billion a year ago.

Income account shortfall narrowed to Eur 2.92 billion in the January to May period from Eur 3.56 billion in the same period of the previous year. The current transfers dropped to Eur 638 million from Eur 775 million a year ago.

Meanwhile, the capital account surplus amounted to Eur 438 million, smaller than Eur 760 million surplsu a year earlier. At the same time, the financial account surplus increased to Eur 7.92 billion from Eur 7.35 billion last year. The total of current and capital account narrowed to Eur 6.77 billion from Eur 7.03 billion.

Portugal producer price inflation eased in June from the pervious month.

The producer price index, or PPI, rose 3.7% year-on-year in June, but slower than a 4.2% growth in the previuos month, a report by the Statistics Portugal showed on Monday. Producer prices incresed for the seventh consecutive month. A year earlier, the PPI slipped 5.5%.

On a monthly basis, the PPI remained unchanged in June, compared to a 0.5% growth in the preceding month. In the second quarter, producer prices grew 4% on an annual basis, faster than a 2.2% rise in the previous quarter.

Meanwhile, producer prices in manufacturing industry increased 3.8% annually in June and was stable compared to the preceding month.

ITALY

Italy's benchmark FTSE MIB Index fell 90.18, or 0.4%, to 20,604.08 at the 17:30 p.m. close in Milan, trimming this week's gain to 2.2%.

Italian banks declined before European regulators begin publishing results of stress tests at 6 p.m. Brussels time Friday. Banca Popolare di Milano fell 1.9% to 3.82 Euros, paring Thursday's gain. UniCredit declined 0.5% to 2.04 Euros. Intesa Sanpaolo retreated 1% to 2.4 Euros. Banca Monte dei Paschi di Siena lost 1.5% to 96.2 cents. Banco Popolare declined 1.4% to 4.6 Euros. Unione di Banche Italiane declined 1.2% to 8 Euros.

Risanamento rallied 3.5% to 32.7 cents, rising for the first time in a week. The real-estate company is due to apply to the Tribunale di Milano for a review of the sequestration order of the Santa Giulia area, L'Ansa reported, without saying how it obtained the information.

STMicroelectronics fell 4.6% to 6.44 Euros even as Europe's largest semiconductor maker reported second-quarter net income of $356 million. Analysts were disappointed by results from its joint venture ST-Ericsson, which posted a loss of $139 million.

Italy's non-EU trade deficit narrowed in June from the previous month.

Italy's trade with non-EU countries showed a deficit of Eur 1.06 billion in June, narrowing from Eur 1.42 billion in the previous month, a preliminary report by the statistical office Istat showed on Tuesday. The nation registered a trade deficit for the sixth straight month. A year ago, the trade surplus amounted to Eur 77 million.

The country's exports to non-EU countries increased for the sixth consecutive month, rising 26.4% on an annual basis in June, faster than 15.8% in the previous month. Exports decreased 16.1% a year earlier. At the same time, imports climbed 37.4%, faster than a 35.5% rise in May. Imports increased for the fifth month in a raw.

On a seasonally adjusted basis, exports increased 9.2% month-on-month in June, accelerating from 1.4% rise in May. At the same time, imports rose 2.9%, but slower than 3.5% in the preceding month. The seasonally adjusted trade balance showed a deficit of Eur 1.07 billion in June, narrowing from Eur 1.76 billion in May.

For the first six months of the year, exports to non-EU nations rose 13.2% compared to the same period of the previous year, while imports grew 21.6%. The trade deficit widened to Eur 10.22 billion from Eur 4.28 billion last year. Excluding energy, the trade balance logged a surplus of Eur 14.27 billion compared with a Eur 16.28 billion surplus a year ago.

Italian industrial new order growth eased in May following a sharp rise in April, while industrial turnover growth picked up after slowing in the previous month.

New orders to Italian industries rose 3.2% month-on-month in May, figures released by the statistical office Istat showed Tuesday. That followed 4.8% growth in April, revised from up from 4.7% reported earlier. Economists had forecast 0.2% increase for May.

On an annual basis, the new order growth accelerated to 26.6% in May from 20.6% in April. That was an unexpected rise as economists had forecast growth to ease to 19.2%.

Further, Italy's industrial turnover increased 0.8% month-on-month, following 0.5% growth in April. The annual growth in turnover moved to 8.9% from 6.4%.

GREECE

Finally in Europe, the appropriately named Athex in Athens rounded out the week on 1,590.50, a Friday dip of 1.36%.

Greece's current account balance, which is the widest measure of the country's trade balance, swung to a surplus in May compared to the same month a year ago, official figures show.

A surplus of Eur 250 million was recorded in May, compared to a deficit of Eur 1.93 billion registered a year ago. This was mainly due to a large increase in the surplus in the current transfers account and a narrowing of the trade deficit and income account deficit.

The fall in the trade deficit was driven by a Eur 276 million fall in the trade deficit excluding oil and ships, while net payments for purchases of ships and the net oil import bill rose by Eur 47 million and Eur 37 million, respectively. The surplus in the services account rose by Eur 92 million as a result of the Eur 198 million increase in net transport receipts, while net travel receipts were down Eur 95 million annually.

The current transfers account recorded a surplus of Eur 2.04 billion in May compared with a surplus of just Eur 218 million a year ago. The income account deficit shrank by Eur 76 million due to lower net interest, dividend and profit payments.

Greece's budget deficit reduction programme is broadly on track even though there are risks, the International Monetary Fund said. The January-May cash balance of the state budget was much better than programmed, it added.

"The program appears to be broadly on track as authorities are making considerable progress in putting public finances on a sustainable path and are implementing major reforms, including of the pension system, ahead of schedule," the IMF said in an interim report released Friday.

The report was compiled by IMF staff visit to Athens during June 14-18 in cooperation with the European Commission and the European Central Bank. It contains data through June 30.

In May 2010, the IMF and the European Union gave Eur 110 billion financial aid to Greece to fix its economic crisis in exchange of tough fiscal adjustments to reduce its huge budget deficit.

The IMF said markets are still skeptical that Greece would avoid a default. "Speculation that Greek debt restructuring may have only been postponed, rather than decisively put to rest, clearly weighs on sentiment," it said.

The Fund pointed out that evidence needs to build that the program is being fully implemented, supported by social consensus and with prospects for a growth recovery.

Reasonable protection, or immunity, to external shocks and I still believe that it would be true in the future."

He said that in recent years 71 companies out of the top 100 have steadily been paying dividends, indicating they continue to perform well despite frequent interruptions such as a scare over severe respiratory syndrome, or SARS; a leadership coup in 2006; another regional health scare concerning bird flu; the closure of the international airport by protesters in 2008; and this year's protests.

Meanwhile, he said the exchange is expected to achieve its projection of new listings worth a combined 100 billion Baht this year, with 85 billion Baht reached so far. The bourse expects listings worth between 100 billion Baht and 150 billion Baht in 2011.

However, he said the planned listings for this year of Star Petroleum Refining and the nonlife and life insurance units of Krung Thai Bank PCL have been delayed until 2011. He didn't give reasons.

Star Petroleum is 64% owned by Chevron Corp. while the remainder is held by Thailand's energy conglomerate PTT PCL.

Mr. Charamporn said he expects another 10-14 listings this year on the second-tier Market for Alternative Investment.

He said the cross-trading plan among Thailand's neighbors has been pushed back until the fourth quarter of next year while they finalize details on its implementation.

Separately, he said the exchange's plan to completely demutualize and become a public company by 2012 remains on track, as do plans to liberalize brokerage licenses and the fees that brokerages charge clients. The plan has been approved by the cabinet and awaits parliamentary approval.

Some local brokerages are concerned about the move, but they need to find their own niche market, he said. Consolidation in the industry is a possibility, as are further tie-ups between local and foreign houses.

INDONESIA

Indonesian stocks hit a new record on Friday and outperformed the region for the week following the nomination of new central bank governor and low rate outlook amid economic optimism across Southeast Asia.

Indonesia's parliament approved the appointment of Darmin Nasution as central bank governor on Thursday, as expected, a move seen as positive for the country's reform drive and for bonds, stocks and the currency.

Nasution said there was no need to raise interest rates BIPG this year.

The Jakarta main share index finished up 1.07% at 3,042.02, at one point hitting 3,051.37, topping the record of 3,019.01, set on the previous day.

Its gain for the week rose to 1.66% and the bourse was Southeast Asia's best performer.

On technical charts, the outlook for the Jakarta stock index appeared to be brightening.

The next index target is 3,200 for a short-term uptrend. Darmin approved as next BI governor will be a positive impact for the market. Darmin has maintained the key interest rate at record low of 6.5% to aid credit growth and Indonesia's credit growth is one of the most significant economic drivers.

Resource shares led gains in Jakarta, with International Nickel Indonesia surging 7.7% and palm plantation firm Astra Agro Lestari rising 5.2%.

The credit growth optimism also pushed up bank shares, with the third biggest lender, Bank Central Asia, rising 0.8% and state lender Bank Mandiri up 1.7%.

INDIA

Indian markets continued to gain for the third day on Friday. Both Sensex and Nifty traded above 24-month high. At the close, the 30-share benchmark index, BSE Sensex ended flat with a rise of 1.60 points or 0.01% at 18,114.75, while the broad based NSE Nifty closed flat with a gain of 2.15 points or 0.04%, at 5,444.10.17.

However, Oil & Natural Gas Corporation contributed fall of 11.12 points in the Sensex. It was followed by H D F C Bank (9.83 points), Housing Development Finance Corporation (5.69 points), NTPC (5.68 points) and Sterlite Industries (India) (5.53 points).

Major gainers in the 30-share index were Bharti Airtel (3.59%), Bharat Heavy Electricals (1.39%), I T C (0.81%), Infosys Technologies (0.70%), State Bank Of India (0.68%), and Larsen & Toubro (0.51%).

On the other hand, Jaiprakash Associates (1.87%), Sterlite Industries (India) (1.70%), Oil & Natural Gas Corporation (1.60%), Reliance Communications (1.40%), NTPC (1.35%), and Jindal Steel & Power (1.32%) were the major losers in the Sensex.

The BSE Mid and small caps underperformed their larger counterparts declining -0.38% and -0.58% respectively.

The major losers in the BSE Midcap were A I A Engineering (1.74%), Core Projects and Technologies (1.28%), Alfa-Laval (India) (0.55%), Ackruti City (0.54%) and Aban Offshore (0.4%).

The major losers in the BSE Smallcap were Abhishek Industries (4.07%), A B G Infralogistics (3.41%), Aarti Industries (1.76%), Provogue (India) (1.59%) and A B G Shipyard (1.21%).

The TECk index was at 3,417.06, up by 20.38 points or by 0.60%. The major gainers were Idea Cellular (4.89%), Bharti Airtel (3.59%), H C L Technologies (0.3%), Mphasis (0.29%) and Tata Teleservices (Maharashtra) (0.23%).

The Capital Goods index was at 15,315.03, up by 55.48 points or by 0.36%. The major gainers were Bharat Electronics (1.77%), Bharat Heavy Electricals (1.39%), Usha Martin (1.27%), Siemens (0.95%) and Larsen & Toubro (0.51%).

The Realty index was at 3,480.68, down by 55 points or by 1.56%. The major losers were Housing Development and Infrastructure (3.57%), Indiabulls Real Estate (1.84%), D L F (1.15%), Anant Raj Industries (1.03%) and Ackruti City (0.54%).

The Metal index was at 15,478.84, down by 148.59 points or by 0.95%. The major losers were Hindustan Zinc (2.28%), Jindal Steel & Power (1.32%), National Aluminium Company (1.08%), JSW Steel (0.84%) and NMDC (0.75%).

Market breadth was negative with 1,204 advances against 1,790 declines.

United Breweries topped the value chart on the BSE with a turnover of Rs. 943.50 million. It was followed by Karuturi Global (Rs. 769.28 million), Uco Bank (Rs. 619.99 million) and ING Vysya Bank (Rs. 454.95 million).

The volume chart was led by Karuturi Global with trades of over 38.75 million shares. It was followed by FCS Software Solutions (30.99 million), Shree Ashtavinayak Cine Vision (15.00 million) and NHPC (8.49 million).

AUSTRALIA

The Australian share market jumped to a 4-week high on Friday as financials, materials and energy stocks led broad-based gains after Wall Street surged on strong earnings and outlook statements from economic bellwethers including Caterpillar, 3M and UPS.

The benchmark S&P/ASX 200 closed up 83.7 points, or 1.9%, at 4458.4, on reasonably healthy share trading volumes, after hitting a high of 4472.3. The index closed above its 50-day moving average around 4410.0, but found resistance from a weekly downtrend line from the April peak around 4460.0 on Friday.

Overnight, the S&P 500 rose 2.3% after a number of heavyweight US corporates beat earnings expectations and US existing home sales data weren't quite as weak as expected.

The Australian Dollar hit a 10-week high of 0.8950 overnight.

On Friday, major banks rose 1.4%-2.6%, while Macquarie Equities rose 2.4% to A$39.43.

In resources, BHP Billiton rose 2.1% to A$39.68 and Rio Tinto rose 2.4% to A$69.86 after London Metal Exchange copper rose 2.2% overnight.

In the energy sector, Woodside Petroleum rose 2.2% to A$41.92 and Santos rose 2.1% to A$13.84 after Nymex crude oil rose US$2.74 to US$79.30 on upbeat US corporate earnings and the potential for a hurricane to form in the Gulf of Mexico.

Woodside's second quarter production fell 10%, in line with expectations, while its 2010 production guidance was unchanged.

Industrials and consumer discretionary stocks were also strong, with Leighton up 4.2% to A$29.66 and News Corp. up 2.0% at A$16.60. News Corp. owns Dow Jones & Co., publisher of this newswire and The Wall Street Journal.

Late Friday, the Australian share market dipped from its high after Spain's El Pais newspaper reported that several Spanish banks have failed stress tests.

NEW ZEALAND

New Zealand shares ended higher Friday, bolstered by global optimism about economic growth prospects after strong gains on Wall Street and across Asia.

The benchmark NZX-50 added 0.5% or 14 points to 2994.90.

Attention is also shifting to corporate earnings with several New Zealand companies due to report full-year earnings in August. Until then, however, brokers said investors will remain largely focused on offshore markets for direction.

Pike River Coal added 2.2% to NZ$0.95. Earlier Friday, Macquarie upgraded the stock to Outperform from Neutral as hydro-mining is due to begin in the next quarter at the coal producer's mine on the west coast of the South Island.

National carrier Air New Zealand added 2.8% to NZ$1.11. Late Friday, the airline said it is willing to lead a consortium of airlines to take a cornerstone shareholding in Queenstown airport on New Zealand's South Island and commit to ensuring travel costs stay down. Earlier this month, Auckland International Airport announced it had taken an initial 25% stake in the airport. Air New Zealand said it is committed to growing the Queenstown market and doesn't believe the arrangement with Auckland Airport is "conducive to that."

Auckland Airport added 2.1% to NZ$1.96. On Friday the company also said international passenger volumes rose 6.7% in June, while domestic passenger gained 4.3%.

The generally better sentiment benefited large caps with Telecom up 0.5% to NZ$1.96 and Sky City rising 1.4% to NZ$2.96.

COMMODITIES

The cost of tin, the metal used for soldering in electronics, surged nearly 9.5% on the week as traders warned of higher consumption than supply.

On the London Metal Exchange, tin for delivery in three months rose on Friday to an intraday peak of $19,750 a tonne, the highest in nearly two years.

Analysts at Barclays Capital warned recently "tin continues to provide one of the most robust fundamental pictures across the base metals complex, in 2010 and in 2011" due to a "clear global market deficit".

The shortage is due to falling production in Indonesia, the world's largest producer, and robust consumption in Japan and, to a lesser extent, in Europe as manufacturing and electronic sectors increase output after the crisis.

Analysts and traders believe tin prices will rise above the key $20,000 a tonne level as soon as next week, but they added it is unlikely the metal would surge to its record high of more than $25,000 a tonne set in mid-2008.

"The current level of tin prices will come to be seen as a 'bargain', given that fundamental conditions are set to tighten, in our view, over the next 18 months," Barclays Capital said.

Other metals climbed, with copper above $7,000 a tonne. Iron ore prices rose 7.7% on the week.

Elsewhere in commodities markets, oil and gas prices rose this week on a storm threat to the US Gulf of Mexico's energy infrastructure.

Nymex September West Texas Intermediate lost 32 cents on Friday at $78.98 a barrel. ICE September Brent retreated 37 cents to $77.45.

Oil trading has been sluggish as prices remain in a $70-$80 range, with daily WTI volume less than half the 1m contracts that changed hands on heavy days earlier this year.

Crude prices also rose as tropical storm Bonnie, the second named storm of the Atlantic hurricane season, made landfall in Florida and threatened the Gulf of Mexico.

CURRENCIES

The Pound advanced this week as a surge in UK growth eased fears that the economy was headed for a double-dip recession.

Figures released on Friday showed the UK economy grew at its fastest pace in four years in the second quarter. The data supported Sterling, prompting speculation in some quarters that the Bank of England could move to exit its ultra-loose monetary policy stance sooner than expected.

The UK's gross domestic product rose by 1.1% in the second three months of the year. This was far greater than the 0.6% rise forecast and took the UK's annual growth rate up to 1.6%.

Over the week, the Pound rose 0.8% to $1.5416 against the Dollar, climbed 1.7% to Y134.66 against the Yen and gained 1.3% to £0.8337 against the Euro.

Meanwhile, the Euro remained supported, hitting a 10-week high of $1.3028 against the Dollar on Tuesday, as concern about possible further quantitative easing in the US and robust Eurozone data kept the single currency in demand.

Ben Bernanke, chairman of the Federal Reserve, said the outlook was "unusually uncertain" and that there was a realistic prospect of further monetary easing in the US. In contrast, Eurozone economic data came in stronger than expected.

On Thursday, Eurozone manufacturing and services purchasing managers' indices both posted surprise rises in June, helped by a surge in activity in Germany. Meanwhile, the Ifo index of German business confidence posted on Friday a record jump in July, taking it to its highest level in three years.

The Ifo reading seems to have underpinned the German economic miracle. The consensus view has been that German growth was set to decelerate markedly in the second half of this year. This report is likely to lead economists, analysts and investors to revise their growth expectations upwards for I feel.

But the Euro's gains were tempered on Friday as the credibility of stress tests on European banks was called into question.

Over the week, the Euro eased 0.6% to $1.2850 against the Dollar but climbed 0.4% to Y112.35 against the Yen.

Meanwhile, the Dollar lost ground against commodity-linked currencies as robust European data and strong quarterly corporate earnings figures boosted confidence over global growth.

The Dollar fell 2.8% to $0.8931 against the Australian Dollar on the week, lost 1.8% to C$1.0381 against the Canadian Dollar and dropped 2.3% to $0.7264 against the New Zealand Dollar.

The Dollar pulled back from a nine-month low against the Yen, rising 0.9% to Y87.39 over the week as rising investor confidence weighed on haven demand for the Japanese currency. The Dollar rose 0.2% to SFr1.0529 against the Swiss franc.

The South African Rand appreciated to the strongest level more than two months after the central bank kept its benchmark interest rate unchanged and gold and platinum prices rose.

The currency of Africa's biggest economy climbed as much as 0.5% to 7.4082 per Dollar in Johannesburg from a close of 7.4414 Thursday, the strongest intraday level since May 5. It traded 0.1% stronger at 7.4351 as of 1 p.m. The Rand has gained 2.6% this week, heading for its biggest weekly rally in six.

Finally and as always, closing out currencies this week with the RMB; China's RMB was little changed against the US Dollar late Friday afternoon, as late-session Dollar demand from banks offset the effect of a markedly lower Dollar-RMB central parity following the Euro's gains against the Dollar overnight.

Trading was quiet due to a lack of strong demand from state-owned banks, traders said, adding they expect the market to remain range bound in the near term as the US unit will likely maintain its recent strength against major global currencies.

On the over-the-counter market, the Dollar was at CNY6.7803, little changed from Thursday's close of CNY6.7800. It traded between CNY6.7761 and CNY6.7808.

CHINA

The head of China's largest credit rating agency has slammed his western counterparts for causing the global financial crisis and said that as the world's largest creditor nation China should have a bigger say in how governments and their debt are rated.

"The western rating agencies are politicised and highly ideological and they do not adhere to objective standards," Guan Jianzhong, chairman of Dagong Global Credit Rating, told the Financial Times in an interview. "China is the biggest creditor nation in the world and with the rise and national rejuvenation of China we should have our say in how the credit risks of states are judged."

On the corporate side, Mr Guan argues Moody's Investors Service, Standard & Poor's and Fitch Ratings - the three companies that dominate the global credit rating industry - have become too close to the clients they are supposed to be objectively assessing.

He specifically criticised the practice of "rating shopping" by companies who offer their business to the agency that provides the most favourable rating.

In the aftermath of the financial crisis "rating shopping" has been one of the key complaints from western regulators , who have heavily criticised the big three agencies for handing top ratings to mortgage-linked securities that turned toxic when the US housing market collapsed in 2007.

"The financial crisis was caused because rating agencies didn't properly disclose risk and this brought the entire US financial system to the verge of collapse, causing huge damage to the US and its strategic interests," Mr Guan said.

Recently, the rating agencies have been criticised for being too slow to downgrade some of the heavily indebted peripheral Eurozone economies, most notably Spain, which still holds triple A ratings from Moody's.

There is also a view among many investors that the agencies would shy away from withdrawing triple A ratings to countries such as the US and UK because of the political pressure that would bear down on them in the event of such actions.

Last week, privately-owned Dagong published its own sovereign credit ranking in what it said was a first for a non-western credit rating agency.

The results were very different from those published by Moody's, Standard & Poor's and Fitch, with China ranking higher than the United States, Britain, Japan, France and most other major economies, reflecting Dagong's belief that China is more politically and economically stable than all of these countries.

Mr Guan said his company's methodology has been developed over the last five years and reflects a more objective assessment of a government's fiscal position, ability to govern, economic power, foreign reserves, debt burden and ability to create future wealth.

"The US is insolvent and faces bankruptcy as a pure debtor nation but the rating agencies still give it high rankings ," Mr Guan said. "Actually, the huge military expenditure of the US is not created by themselves but comes from borrowed money, which is not sustainable."

A wildly enthusiastic editorial published by Xinhua , China's official state newswire, lauded Dagong's report as a significant step toward breaking the monopoly of western rating agencies of which it said China has long been a "victim".

"Compared with the US' conquest of the world by means of force, Moody's has controlled the world through its dominance in credit ratings," the editorial said.

First established in 1994, Dagong signed a three-year "technology co-operation" agreement in 1999 with Moody's, which provided the Chinese company with its "core knowledge" and its first "systemic understanding", according to Mr Guan.

In fact, Dagong is more similar to its three global competitors than it might like to admit.

Dagong's share of China's fledgling credit rating market is around 25%, while subsidiaries of the big three global agencies control most of the rest.

Dagong's next goal is to break into the international market, starting with the US.

But even if the company can overcome reluctance from US regulators it may have a hard time convincing international clients that it is more objective than its western peers, especially considering the overtly nationalistic tone it strikes at home.

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China's central bank will seek to publish a measure of the RMB's value "regularly" to help it manage the exchange rate against a basket of currencies and not just the Dollar, Deputy Governor Hu Xiaolian said.

The People's Bank of China aims to publish the nominal effective exchange rate and this "should gradually become a reference for exchange-rate adjustments," Hu said Friday in a statement on its website. These indexes are typically weighted according to the amount of trade a nation has with its partners and aren't adjusted for inflation. She said this will help shift the market's attention away from the rate against the greenback.

Premier Wen Jiabao in March urged the US to take "concrete steps" to reassure investors about the safety of Dollar assets after President Barack Obama stepped up spending to help end a recession. The country has the biggest overseas holdings of US Treasuries and cut its investment in the securities by $32.5 billion in May to $867.7 billion, the biggest decline this year.

The RMB has strengthened 0.7% versus the greenback since the central bank said on June 19 it would end a two-year peg to the Dollar and manage the exchange rate with reference to a currency basket. It has weakened 0.7% against a basket of trade-weighted currencies in the period as the Euro and the Yen both rallied against the Dollar, according to an index compiled by Westpac Banking Corp.

"The RMB should be kept stable at a reasonable and balanced level overall, while it may have two-way moves against particular currencies," Hu said, adding that the composition of the central bank's currency basket should be mainly based on trade weightings.

The Euro has been strengthening recently, but if it was to weaken again, then the PBOC's trade-weighted measure of the RMB would come in handy in justifying only small gains against the Dollar.

Any sustained weakening of the RMB could set China on a collision course with trading partners, who say the nation's exports are bolstered by an undervalued currency. Obama said last month he expected the RMB to rise "significantly." China had kept the currency at about 6.83 per Dollar since July 2008, after allowing it to gain 21% in the previous three years.

Chinese central bank adviser Zhou Qiren said that the nation will let the RMB weaken if exports fall sharply, according to an interview published on Wednesday in Japan's Asahi newspaper. He also said the peg should have been ended earlier because the economy has overheated.

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China's securities regulator said it would review China Everbright Bank's application for an initial public offering in Shanghai next Monday, potentially enabling the bank to raise about 20bn RMB ($2.9bn).

The IPO, which comes on the heels of Agricultural Bank of China's roughly $20bn dual Hong Kong-Shanghai listing, is the lastest fundraising by a Chinese lender aimed at replenishing capital.

Everbright Bank plans to sell up to 6.1bn RMB-denominated A shares, the lender said in its preliminary prospectus published on the regulator's website on Thursday.

If the bank chooses to exercise an overallotment option, it will sell up to 7bn shares. Based on its net assets per share of 1.44 RMB at the end of 2009, if it sells shares at a price-to-book ratio of around two times, which is typical for mid-sized Chinese banks' IPOs, it would be able to raise about 20bn RMB after the overallotment.

Everbright Bank, controlled by Central Huijin, the investment arm of China's sovereign wealth fund, had already completed all the technical requirements for listing, the group's chairman, Tang Shuangning, said in February.

The lead underwriters for the IPO are China Jianyin Investment Securities, Shenyin & Wanguo Securities Co, and China International Capital Corp (CICC), in which Morgan Stanley holds a stake that it is planning to sell.

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Chinese leaders pledged policy stability after speculation the government could ease lending controls to spur growth in the world's third-biggest economy.

Policy stability should be the main theme in the second half, Premier Wen Jiabao said Friday. The comments by Wen and President Hu Jintao were published by Xinhua News Agency on a government website Friday.

Wen also highlighted the importance of expanding domestic demand, saying that China would "improve" stimulus measures for boosting consumption.

Chinese stocks rose for a fourth day Friday, the longest stretch of gains since February, on speculation the government may relax curbs on property and lending. Economic growth will ease each quarter this year after peaking in January-to-March, according to the median forecasts in a Bloomberg News survey of economists.

Hu said China will continue to implement a proactive fiscal policy and moderately loose monetary policy. Wen said the government would boost domestic consumption in the second half, while continuing to balance the goals of relatively fast growth, restraining inflation expectations and restructuring the economy.

China's economic expansion eased to 10.3% in the second quarter and industrial production growth cooled more than forecast in June. The gain in gross domestic product was less than an 11.9% increase in January-March from a year earlier.

SUMMARY

Wall Street enters next week on the cusp of a breakout in US stocks, but it will need another spate of convincing earnings reports to feed the rally that sprouted at the end of this week.

The markets endured malaise with poor economic data and downbeat testimony from Federal Reserve Chairman Ben Bernanke on Wednesday but turned decisively after a number of strong results pointed to better times ahead.

Next week brings more results from bellwethers like Chevron, DuPont and Boeing. The trick will be turning the whipsaw action into accumulated gains - and hoped-for improvements in volume - that would signal an upturn in sentiment.

In my opinion as it looks here Friday early Saturday morning, there's a constant struggle between the bulls and the bears when in fact the answer is in the middle ground. This market is more like a turkey and not a bull or a bear.

Investors have been forced to readjust their expectations for the economy, with data showing the pace of the recovery has gone from a sprint to a crawl.

It has also prompted a divisive argument over the likelihood of an encore recession. But if worries over a double dip are starting to be washed out of the market, an unexpected positive could fuel the market higher.

The broad S&P 500 also finds itself standing on top of a key resistance level that could turn into a floor for the market. The index closed at 1,102.66, just above the psychologically important 1,100 level for the first time in a month. The level has been a hard one to hold and could buoy the market if the move is ultimately a decisive one.

With the S&P 500 edging out of official correction territory, trading down about 9% from this year's April high, analysts appear to have reconciled themselves to a slower recovery than they had hoped for. A correction is generally defined as a 10% decline from the top.

Analysts will be hoping to see more earnings season cheer from industrials companies next week after a slew of manufacturers this week topped expectations and raised full-year profit forecasts.

General Electric added positive sentiment to the sector on Friday by raising its dividend by 20%, illustrating the conglomerate's confidence it has put the worst of the recession behind it - wishful thinking I feel and like all thinkgs American, not shy about overstating their beliefs!

Boeing's 10-day call/put ratio shows investors have bought calls over puts in the open market at a faster clip only 6% of the time during the past year. In DuPont, near-term traders have been more optimistically aligned toward the stock only 1% of the time during the past year.

But the economy will remain the wild card I feel, even in 'rose-glassed' America because of the potential to pour cold water on investor enthusiasm and a round of top-tier economic data that will be looked at to determine the strength of the economic recovery - and no matter what other rabbits can be pulled out of the hat, some things simply never lie .... and they know that.

New home sales will kick off the week, with data expected to show a rise to 320,000 units in June, according to a Reuters poll of analysts. More housing data on Tuesday includes the Case-Shiller home price index, which is expected to rise 4% year-over-year in May.

Also on Tuesday, consumer confidence is expected to come in at 51 for July, a slight dip from the month before. Durable goods orders on Wednesday are forecast to rise 1% in June.

Weekly initial jobless gains on Thursday are expected to ease to 460,000 from 464,000 the week before. Investors will get another look at the consumer on Friday with the final July reading of consumer sentiment, which is forecast to rise from the preliminary July reading.

Lastly will be the first reading for second-quarter gross domestic product. Investors are expecting the economy to grow by 2.5%, compared to 2.7 in the first quarter.

Enough of the Us, on to matters elsewhere.

While economic data releases are light on in Australia next week, they are very important in regards to monetary policy. We learn the second quarter producer price index on Monday, the all-important consumer price index on Wednesday, and June private sector credit on Friday.

The headline CPI is tipped to exceed 3%, which will probably send the popular media into a frenzy of interest rate rise speculation, and campaigning politicians into a barrage of idiocy. Not that they need any impetus. But the only number that matters will be the trimmed mean of the CPI, which smooths seasonal fluctuations and omits volatile items like food and energy. The RBA is expecting this number to have fallen. Only if it has risen, and risen by a decent amount, will there be any remote chance of a rate rise on the following Tuesday.

In Europe and the stress tests and the fallout .... if any. Were the tests severe and transparent enough to revive investor confidence? Bankers hope the exercise will lead to more emergency equity raising, mergers and acquisitions and bond issuance. Euro zone M3 money supply and private loans data will provide a steer on how much more confident banks are to lend to the broader economy, especially as central bank policymakers gradually wean them off cheap funds.

This and how much banks will take up at the European Central Bank's 3-month liquidity operation will also determine the pace of the upward trajectory in money market rates as excess liquidity diminishes.

Startlingly this week strong data has suggested Europe's recovery is romping along, posing some profound questions for investors - are core European countries decoupling from a struggling United States?

Is the consensus that government austerity measures will lead to a sharp slowdown later this year being challenged? And of course, can this last?

Consumer confidence surveys and results from banks and carmakers will help move the story along in the absence of major data.

Tuesday's Euro zone money supply figures will give a snapshot of the strength of lending to companies and households in June. On Wednesday, the ECB's quarterly lending survey will give another guide as to whether banks are becoming freer with their money.

The big figure from the United States is GDP data on Friday.

BP reports second-quarter results on Tuesday, when accounting rules will force it to make a provision for the likely costs of the oil spill. This is a question the company has failed to answer until now - probably because it doesn't really know. Analysts think the final bill will be anywhere between 15 and 60 billion Dollars, with some convergence around 30 billion. This could, however, be a fraction of the total bill when all the lawsuits are thrown in.

One big unknown is what fines BP will face under the Clean Water Act. Polluters face penalties of 1,000 Dollars a barrel for a spill but this could rise to 4,300 Dollars if the company is deemed to have been grossly negligent.

This brings a wry smile to my face because the majority of people in the US want this all 'capped', but at the same time once again the regulators/lawmakers will not be unduly concerned if BP cannot get a final solution .... just yet. After all, 4,300 Dollars per barrel is massive when compared to the South of America's tourism/fishing/eco'life combined - a moral call if ever there was one in the US ..... and I know which way they would prefer!

Pressure is building in key grain producing countries in East and Western Europe as the drought continues to bite. German yields are seen falling between 10 and 20%, while Ukraine joins the list of countries cutting its output.

A hot political risk story for the region continues in Hungary, where Prime Minister Viktor Orban has defied the International Monetary Fund by rejecting austerity measures and pursuing a pro-growth policy that also includes a tax on banks.

Analysts believe Orban might soften his stance after municipal elections on 3 October, in which he hopes to solidify his party's sweeping parliamentary victory in April. But they also say he is playing a dangerous game with markets, which could turn negative before then. Two top ratings agencies said on Friday they might downgrade the country's sovereign debt after talks on the IMF/EU's 20-billion-Euro financing deal broke down ahead of the deal's expiry in October.

A 50-billion-Forint bond auction scheduled for Thursday will be an important test of market sentiment When taken in the overall scheme of things, Friday's bank stress-tests in Europoe will be key on Monday when markets open as to how they react fully (there was no time Friday to react). If the German banks (under duress) come back with negative figures, I think we will see a major correction bext week.

If not, markets will muddle through ...... upwards (for all the wrong reasons!). The Pound advanced this week as a surge in UK growth eased fears that the economy was headed for a double-dip recession.

Figures released on Friday showed the UK economy grew at its fastest pace in four years in the second quarter. The data supported Sterling, prompting speculation in some quarters that the Bank of England could move to exit its ultra-loose monetary policy stance sooner than expected.

The UK's gross domestic product rose by 1.1% in the second three months of the year. This was far greater than the 0.6% rise forecast and took the UK's annual growth rate up to 1.6%.

Over the week, the Pound rose 0.8% to $1.5416 against the Dollar, climbed 1.7% to Y134.66 against the Yen and gained 1.3% to £0.8337 against the Euro.

Meanwhile, the Euro remained supported, hitting a 10-week high of $1.3028 against the Dollar on Tuesday, as concern about possible further quantitative easing in the US and robust Eurozone data kept the single currency in demand.

Ben Bernanke, chairman of the Federal Reserve, said the outlook was "unusually uncertain" and that there was a realistic prospect of further monetary easing in the US. In contrast, Eurozone economic data came in stronger than expected.

On Thursday, Eurozone manufacturing and services purchasing managers' indices both posted surprise rises in June, helped by a surge in activity in Germany. Meanwhile, the Ifo index of German business confidence posted on Friday a record jump in July, taking it to its highest level in three years.

The Ifo reading seems to have underpinned the German economic miracle. The consensus view has been that German growth was set to decelerate markedly in the second half of this year. This report is likely to lead economists, analysts and investors to revise their growth expectations upwards for I feel.

But the Euro's gains were tempered on Friday as the credibility of stress tests on European banks was called into question.

Over the week, the Euro eased 0.6% to $1.2850 against the Dollar but climbed 0.4% to Y112.35 against the Yen.

Meanwhile, the Dollar lost ground against commodity-linked currencies as robust European data and strong quarterly corporate earnings figures boosted confidence over global growth.

The Dollar fell 2.8% to $0.8931 against the Australian Dollar on the week, lost 1.8% to C$1.0381 against the Canadian Dollar and dropped 2.3% to $0.7264 against the New Zealand Dollar.