European equities were expected to be marginally higher, with financial spreadbetters calling London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX to open up as much as 0.2 percent.

Bernanke's speech at 1400 GMT at the annual Jackson Hole, Wyoming, gathering precedes the Fed's September 12-13 policy meeting, with market views mixed over whether the Fed would provide a shot in the arm, and if so, whether it would be a forceful quantitative easing or something else.

Investors squared positions ahead of this week's biggest event to limit losses on recently oversold assets such as the Australian dollar and shares, which took a hit from slumping prices for iron ore, Australia's biggest export earner, due to concerns over demand weakening on slowing global growth.

"We go into the Jackson Hole conference with the market adjusted to more reasonable expectations of what Ben Bernanke will deliver. We would even go as far as saying that traders could be expecting to be disappointed," said Chris Weston, trader at IG Markets.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.1 percent and was set for a monthly drop of about 1 percent, swinging into the red from July's 3.5 percent gain.

Japan's Nikkei stock average slid 1.4 percent to a three-week low.

Australian shares recovered from Thursday's 0.9 percent loss to inch up 0.1 percent while the Aussie traded at $1.0291, holding off a five-week low of $1.0276 hit on Thursday. But it traded near an eight-week low against the euro.

The euro steadied at $1.2506 while the dollar edged down 0.2 percent to 78.47 yen.

Sentiment was still underpinned by hopes central banks will take additional easing measures to support fragile global growth, but investors have shifted focus to China's slackening economy and uncertainty over Europe's plan to tackle its debt crisis.

Data published on Friday showed Japan's industrial output unexpectedly fell in July while Japanese manufacturing activity contracted in August to the lowest level in 16 months.

"Markets will remain in a holding pattern until policy decisions are made in the United States and Europe, but even so, that won't solve the underlying structural problem which has deterred investors from fully returning to a 'risk on' mode," said Tetsuro Ii, CEO of Commons Asset Management, referring to the euro zone's protracted debt crisis.

"Worries over global demand deceleration are also heightening, with emerging economies becoming sluggish," he said.


China's official manufacturing managers' index due out on Saturday may have eased to a 9-month low of 50 in August, supporting the case for fresh easing measures by the central bank.

The monthly U.S. jobs report due on September 7 could shed more light on the Fed's next policy decision.

The German constitutional court ruling on the region's bailout funds due on September 12 could affect the implementation of the European Central Bank's planned bond-buying scheme aimed at driving down soaring borrowing costs in struggling countries such as Spain and Italy.

Euro zone finance ministers meet on September 14-15 while Greece's crucial bailout depends on a positive review by international lenders of its austerity reforms due by early October.

As markets mark time with persistent bias for more stimulus, assets will become even more expensive, with investors seen likely flocking to limited opportunities.

"While easy money does little for growth, investors will continue to be squeezed out of 'safe' assets and drawn to corporate debt, equities and 'foreign stuff'. The Fed will continue to help asset prices and undermine the dollar," said Kit Juckes, currency strategist at Societe Generale.


Even if Bernanke fails to give any clues on the possible policy decision next month, investors could still look to the ECB's concrete action to soothe euro zone bond market jitters.

Although the ECB may map out details of its bond-buying scheme as early as its September 6 policy meeting, it may not intervene before it is satisfied that the euro zone's permanent rescue fund is operational.

Spain, faced with snowballing regional debts which were threatening the sovereign financing and fuelling speculation the country may need to seek a bailout, has ruled out such an option

until aid conditions are made clear.

As Europe struggles on its way to fiscal consolidation, a German newspaper reported that the European Commission plans to give the ECB oversight of all banks in the euro zone, a move that could help break the "vicious" link between the euro zone's debt crisis and struggling banks.

Oil steadied, with U.S. crude and Brent both up 0.1 percent to $94.72 and $112.73 a barrel respectively.

Asian credit markets were subdued, with the spread on the iTraxx Asia ex-Japan investment-grade index wider by 1 basis point.