of the month’s most important indicators scheduled for release (manufacturing on Wednesday and payrolls on Friday - see below). Investors will get a quick verdict of whether the weekend’s political optimism is matched with economic reality. The greater likelihood is that it is not and numbers are again likely to be below consensus. Expect another volatile week with sentiment remaining fragile ahead of next weekend’s Labour Day holiday in the US and the official end to the summer season. After that, it gets serious. The London market will be closed Monday and that usually means a quiet trading session in Moscow. However, sentiment should remain positive at the opening of the week’s trading after the very strong bounce in US equities, and for most commodities, on Friday afternoon. Bernanke’s promise that the Fed has the tools to prevent the US from slipping back into recession was a catalyst for a relief rally and his later comment that “the preconditions for a pickup in growth in 2011 appear to remain in place” ensured a strong close. The US market is very likely to give back some of Friday’s gains as weekend media assessment of Bernanke’s comments was a lot more mixed than that of investors on Friday. The advice that we have been voicing all summer, i.e. “neither to get sucked into buying in periods of market euphoria nor into selling on the dips”, remains intact for now. The high-beta steels, miners and the banks will again remain be volatile while the safest sector is the fixed line telecom as the conversion into Rostelecom is now a mathematical formula showing good upside for stocks like Uralsvyazinform, Siberia Telecom and Volga Telecom. The 2nd Qtr earnings season continues in Russia with several major companies scheduled to report. CAT Oil will report Monday and will have an investor conference call afterwards. On Tuesday it will be the turn of LUKoil, Integra (conference call Tuesday afternoon) and warehouse operator Raven Russia. On Wednesday, Gazprom will report its delayed 1st Qtr numbers. On Thursday it will be the turn of VTB, Vimpelcom and Evraz for 2nd Qtr and 1st half numbers. Uralkali and Dixy will round up the week with their reports on Friday. We have issued preview notes for most of the above during the past week. The price of oil also bounced with the global relief rally on Friday afternoon. Brent for October settlement gained $1.63 p/bbl to end at $76.65 p/bbl and the equivalent WTI contract ended at $75.17 p/bbl. Urals closed at $76.26 p/bbl. The mid week inventory report in the US was again bad and threatened to pull oil back to $70 p/bbl before the dollar retreated and Bernanke’s comments saved the week. This week, the first major hurricane of the season – Earl – may also provide some support but the main drivers will again be the economic data in the US and the direction of the dollar. The yen was again the strongest of the major currencies. It gave back some of the gain on Friday with the relief rally and on rumours that the Japanese delegation to the Jackson Hole conference were heading home early for “consultations”. Still, it closed the week up another 0.5% against the dollar at 85.23. The dollar gained 0.4% against the euro to end the week at $1.276. The main driver of the currencies – and, by default, commodities – will be any action taken by the Japanese to weaken the yen, and the interpretation of the conflicting comments made by the US Fed and ECB officials. The ECB will get a chance to elaborate its case on Thursday at the press conference usually held after the monthly interest rate meeting. That will also keep the currency markets uncertain and volatile right to the end of the week. The ruble continues to trade off the dollar-euro rate moves. Last week’s 0.4% move in that rate resulted in the ruble losing 0.3% against the dollar (to end at 30.70) and down 0.2% against the euro (to end at 39.05). The ruble should be a little better on Monday after the strong bounce in oil on Friday but where it trades later this week will clearly depend more on the international trends than on any domestic factors. Industrial metals all had a strong session on Friday. Copper gained 1.8%, to close the week with a gain of 2.2%, and Nickel ended at $20997 per tonne. That was a gain of 3.0% for Friday and that cut the loss for the week to 2.3%. Zinc and aluminum finished the week with a loss of 1.0% and a gain of 0.9% respectively. Palladium was the strongest metal last week, rising 4.5%. The price of gold continues to make small steps forward, i.e. reflecting the uncertainty with investors over the risk of a double-dip or a sustainable rally. The price closed flat on Friday and up 0.7% for the five days. It ended at $1,237.9 per ounce. Wheat fell 2.4% for the week, albeit it is still up 28.3% for the year having been down almost 20% only a few months ago. Traders are reacting to the news that extra supplies may be available from the US and other producers and that Russia may be self-sufficient this year. The anecdotal evidence is against that latter view and evidence of Russia looking to source grain imports – inevitable in coming weeks – will likely again push the price higher. Sugar rose strongly last week and Friday’s 3.6% gain brought the five-day rise to 10.6%. Friday’s bounce in Europe and the US helped the All-World Index to cut its loss for the week to only 0.6%. That was an improbable outcome in the middle of the week. The Dow Industrial Index climbed 1.7% on Friday after Bernanke’s comments and closed the week above the psychologically important 10,000 level (at 10,150.7). The S&P 500 pulled back from a technical threshold and finished the week at 1,064.6. That was a gain of 1.7% for Friday and a loss of 0.7% for the week. The Dow fell 0.6% last week and is down 2.7% for the year to date. Moscow’s bourses followed the international trend. The RTS gained 0.9% on Friday to cut the loss for the week to 0.2%. MICEX climbed 0.7% to close Friday at 1,366.5 and exactly flat for the week. The telecom sector was the best performing. This Week This is yet another critical week for market sentiment. After the political optimism of the US Fed Chairman at the Jackson Hole conference, investors face the colder reality of several of the month’s most important economic indicators this week. The more important will be Wednesday’s Manufacturing data in all countries and Friday’s payroll report in the US. Investors are now geared for a small reduction in the US ISM Manufacturing report (53.0 versus 55.5 last month) and for a cut in payrolls by around 100,000 jobs. Anything worse and Bernanke’s comments will be very quickly forgotten. Monday’s list includes the July personal incomes and spending report in the US and a broad series of consumer and business confidence indicators in the Eurozone. Another house sales report and the July Factory Order report in the US will come on Thursday and the Services industries activity report will be published on Friday. Both the Bank of England and the ECB will review interest rates on Thursday. Chris Weafer is the Chief Strategist of Uralsib Group