Business Blog Posts

The outcome of talks to shape a bailout for Ireland could also move stocks, analysts said, but they cautioned that other highly indebted euro zone countries could still be a source of worry.

Even though light volume will define trade during the holiday-shortened week of Thanksgiving Day on Thursday, investors will watch to see if retail sales appear strong enough to give the market a Santa Claus rally.

The lighter-than-average volume expected next week could lead to exaggerated moves in the market after a week of sharp losses and advances.

Further gains would resume an uptrend that began at the end of the summer, with the Standard & Poor's 500 index up 14 percent since August 31. The market was little changed this week and suffered losses the week before.

"Bullish sentiment toward holiday sales is the most likely catalyst for the cyclical bull market to resume, so a lot rests on that," said Chris Burba, short-term market technician at Standard & Poor's in New York. If sales seem weak, "this dip could turn into something bigger."

Retailers have been optimistic in their forecasts for holiday sales, and investors will want to see evidence to support those forecasts as worries about consumer spending weigh on the economic outlook.

At a rate of 9.6 percent, unemployment is seen as one of the biggest drags on the U.S. economy,

Target Corp (TGT.N) this week was the latest retailer to give an upbeat forecast, saying it expects to post its best same-store sales in three years during the period.

The day after Thanksgiving traditionally marks the start of the U.S. holiday shopping season and is called Black Friday because retailers make enough sales to get their accounts into black ink.

Shoppers are expected to flood stores in search of bargains while retailers fight for sales. Target, for instance, is using a built-in discount for shoppers who use its store credit card.

"It's a very competitive retail environment ... a sign people are slugging it out" for every last sale, said Sasha Kostadinov, portfolio manager at Shaker Investments in Cleveland.

With the recent market weakness, the S&P 500 has had trouble staying above 1,200 and ended just below that level on Friday.

A break above the mark, however, "would be a good sign," signaling bullish momentum, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.

GDP, DURABLES ON TAP

Bernanke, facing a chorus of protests about the asset-buying spree from within and outside the central bank, said a more vigorous U.S. economy was essential to fuel the global recovery and dismissed charges he was debasing the dollar.

"The best way to continue to deliver the strong economic fundamentals that underpin the value of the dollar, as well as to support the global recovery, is through policies that lead to a resumption of robust growth in a context of price stability in the United States," Bernanke said in a speech to a conference at the European Central Bank in Frankfurt.

The Fed's November 3 decision to buy a further $600 billion in U.S. government debt with new money generated outrage among policymakers in many nations, who accused the United States of seeking to weaken the dollar to gain an export edge.

German Finance Minister Wolfgang Schaeuble called the policy "clueless" while domestic critics have argued the policy could ignite inflation and fuel asset bubbles.

Fed officials circled their wagons this week to defend the program. Two added their endorsement on Thursday, but another expressed opposition and a fourth said monetary policy should not play the main role in driving a stronger recovery.

STRUCTURAL ADJUSTMENTS

"Deficits and surpluses are generated by many countries' behavior not a single currency," Bernanke said in a later panel discussion with IMF Managing Director Dominique Strauss-Kahn and European Central Bank President Jean-Claude Trichet.

"It will be very difficult for exchange rates by themselves to restore the balance and so I think structural adjustments on both sides are necessary," Bernanke said.

Strauss-Kahn said he too recognized the difficulties involved but said global imbalances could not be tackled without "important changes in the relative values in the currencies".

"We need to move in that direction," he said.

Addressing international criticism of the Fed's action, Bernanke said much of the recent weakness of the dollar reflected an unwinding of the increases that were notched as investors fled to the safety of the greenback during the European sovereign debt crisis in the spring.

Many emerging economies have worried that volatile investment inflows sparked by the dollar's decline could be destabilizing -- either fuelling inflation or asset bubbles.

Bernanke said the failure of some emerging market economies with trade surpluses to allow their currencies to appreciate was making the problems those countries face worse.

"Currency undervaluation by surplus countries is inhibiting needed international adjustment and creating spillover effects that would not exist if exchange rates better reflected market fundamentals," he said, without explicitly pointing to China.

The euro rose and the risk premium investors demand to buy Irish and other peripheral euro zone debt instead of benchmark German bonds narrowed in a sign of optimism that an aid deal for Dublin will be sealed soon.

But a poll of participants at a high-level banking congress in Frankfurt showed that nearly three quarters believed the crisis that has shaken the euro zone for a full year would rage on even after an Irish rescue and ensnare other financially weak countries such as Portugal.

"As long as the fundamentals don't improve, the pressure will continue on other countries too," Daniel Gros, who heads the Center of European Policy Studies, told Reuters Insider TV at the congress. "The problem is that no problems are currently being solved. Many believe that the euro zone is just moving from one crisis to the next."

Ireland's central bank chief has acknowledged that the country needs a loan running into the tens of billions of euros to shore up an extremely fragile banking sector that has grown dependent on ECB funds.

Reflecting concerns among other euro zone periphery countries that Ireland's financial troubles could spread, Greece's finance minister pressed Dublin to move fast.

"We are now at a point where decisions have to be taken," George Papaconstantinou told the banking congress in Frankfurt. "Time is of the essence."

UNCLEAR ON AID AMOUNT

Irish community minister Pat Carey said the government would publish the details of a four-year fiscal plan to save 15 billion euros early next week. EU sources said the financial aid plan for Ireland would be presented at roughly the same time.

"They would be close in time," one EU source with insight into the process said.

Sources have told Reuters Ireland may need assistance of between 45 billion and 90 billion euros, depending on whether it needs help only for its banks or for public debt as well.

The head of the euro zone's temporary fiscal safety net, from which funds could come, said aid could be raised in five to eight days if needed, notably from investors in Asia.

"We are confident that we can raise the necessary funds from institutional investors, central banks and sovereign funds, in Asia in particular," Klaus Regling, chief executive of the European Financial Stability Facility, told French daily Le Monde.

Carey said it was impossible to say how much aid Ireland would need until a joint mission of the European Commission, European Central Bank and International Monetary Fund, which arrived in Dublin on Thursday, had gotten to grips with the state of the banks.

Banks in Ireland have been largely shut out of market lending due to concerns about their solvency. They are almost entirely reliant on funding from the ECB, which reached 130 billion euros by end-October, plus an extra 35 billion euros from the Irish central bank.

Federal Reserve Chairman Ben Bernanke on Thursday, in comments prepared for delivery to a conference at the European Central Bank in Frankfurt on Friday, hit back at critics of the U.S. central bank's controversial bond-buying program and issued a thinly veiled attack on China's policy of keeping its currency depressed.

At 1530 GMT (10:30 a.m. ET), Economic Cycle Research Institute releases its weekly index of economic activity for the week ended November 12. In the prior week the index read 123.9.

H.J. Heinz Company (HNZ.N) is scheduled to announce its second-quarter results. Wall Street has priced in a profit of 76 cents per share, steady with the same period one year ago.

Shares in Foot Locker (FL.N) jumped to trade 8.9 percent higher after the bell on Thursday as the athletic footwear retailer posted third-quarter results that raced past Wall Street expectations.

Salesforce.com Inc (CRM.N) beat Wall Street profit estimates on Thursday and forecast better-than-expected sales for the next fiscal year as more customers sign up for its "cloud computing" services. Its shares rose 7 percent.

The FTSEurofirst 300 .FTEU3 index of top European shares fell 0.3 percent on Friday after rising 1.4 percent in the previous session. The European benchmark is up more than 71 percent from its lifetime low of March, 2009.

Japan's Nikkei .N225 average marked a five-month closing high above 10,000 for a second day on Friday, propelled by hedge fund inflows from overseas and with a fall in the yen providing additional support.

U.S. stocks jumped on Thursday on expectations of a resolution of Ireland's banking crisis, but the S&P 500's inability to break through resistance suggested stocks could be in a tight range through the end of the year.

Initial aid talks between Ireland and a joint European/IMF mission centered on ways to reduce the size of Irish banks considered too big and reliant on ECB funding, The Irish Times said on Friday, without citing sources.

The Dow Jones industrial average .DJI gained 173.35 points, or 1.57 percent, to 11,181.23. The Standard & Poor's 500 .SPX rose 18.10 points, or 1.54 percent, to 1,196.69. The Nasdaq Composite .IXIC added 38.39 points, or 1.55 percent, to 2,514.40.

(Reporting by Atul Prakash; Editing by Jon Loades-Carter)