US house prices fell by 6.8% in April and existing home sales fell by 3.0%. The US housing market at the epicentre of the credit crunch has stopped cliff diving but prices are still marching downwards. The pace of the global meltdown has slowed, but judging by last week’s US unemployment claims increase, any meaningful recovery will be long and drawn out.

After the frantic days of the first quarter, perhaps a quiet crawl back to growth might be best outcome for the next few years. Indeed, the World Bank dimmed the lights on the nascent global economic recovery after predicting that progress would be subdued and economic output will drop by 3%.

On currency markets, the pound managed to finish the week flat against the dollar, but lost some ground against the euro. The euro also managed to make good gains against the dollar and held firm against the Japanese Yen. Gold recovered well from a mid week dip and closed slightly up on the week. Oil fared slightly worse, finishing the week just below $70 for the first time in three weeks.

Next week’s action starts with the UK’s Nationwide House Price Index on Tuesday. There have been conflicting prices reported by competing sources recently so there is uncertainty over the forecast numbers which could cause some volatility in sterling pairs. UK current account figures at 12.30 GMT could have a similar impact. The Halifax House Price Index is also scheduled for release next week, but the exact date has not been determined.

Australian retails sales are released on Wednesday and are expected to show a slight improvement on the previous month. The Australian economy continues to show reliance compared to other western nations. Around midday we get the warm up to US Non Farm Payrolls with ADP employment data. It could be a volatile period with ISM manufacturing and pending home sales following this just a couple of hours later.

On Wednesday we have some central banking action with a number of MPC members speaking and the BOE credit conditions survey due. These are followed by the ECB press conference. US Non Farm payroll is brought forward one day to Thursday because of the bank holiday. The EUR/ USD exchange rate could be in play given the amount of data released what will be in effect the final trading day of the week. With US markets closed on Friday, Forex markets could be quieter than usual.

Equities recovered well last week after Monday’s slump, but the see saw nature of last week’s action just underlines that there is still considerable uncertainty over the strength of the global recovery. A No Touch trade predicting that the S&P 500 won’t rise and touch 930 in the next 9 days could return 237%.

Economic Calendar for week 29th June – 3rd July

**Note: All times GMT, not DST**

PLEASE NOTE – All times GMT

Monday June 29th:

UK – 08:30 – Net Lending To Individuals M/M.
UK – 08:30 – Mortgage Approvals.
EU – 09:00 – GFK Consumer Confidence.

Tuesday June 30th:

GE -07:55 – German Unemployment Change.
EU – 08:00 – M3 Money Supply Y/Y.
EU – 08:00 – Private Loans Y/Y.
UK – 08:30 – Current Account.
UK – 08:30 – Final GDP Q/Q.
UK – 08:30 – Revised Business Investment Q/Q.
EU – 09:00 – CPI Flash Estimate Y/Y.
US – 13:00 – S&P/CS Composite 20 HPI Y/Y.
US – 13:45 – Chicago PMI.
US – 14:00 – CB Consumer Confidence.

Wednesday July 1st:

EU – 08:00 – Final Manufacturing PMI.
UK – 08:30 – Manufacturing PMI.
UK – 08:30 – Index Of Services 3M/3M.
US – 11:30 – Challenger Job Cuts Y/Y.
US – 12:15 – ADP Non Farm Employment Change.
US – 14:00 – ISM Manufacturing PMI.
US – 14:00 – Pending Home Sales M/M.
US – 14:00 – Construction Spending M/M.
US – 14:30 – ISM Manufacturing Prices.
US – 14:30 – Crude Oil Inventories.

Thursday July 2nd:

UK – 08:30 – BOE Credit Conditions Survey.
UK – 08:30 – Construction PMI.
EU – 09:00 – PMI M/M.
EU – 09:00 – Unemployment Rate.
EU – 11:45 – Minimum Bid Rate.
EU – 12:30 – ECB Press Conference.
US – 12:30 – Non Farm Unemployment Change.
US – 12:30 – Unemployment Rate.
US – 12:30 – Average Hourly Earnings M/M.
US – 12:30 – Unemployment Claims.
US – 14:00 – Factory Orders M/M.
US – 14:30 – Natural Gas Storage.

Friday July 3rd:
US Bank Holiday.

EU – 08:00 – Final Services PMI.
UK – 08:30 – Services PMI.
UK – 08:30 – Housing Equity Withdrawal Q/Q.

EU – Europe wide
FR – France
UK – United Kingdom
US – United States
GE – Germany

This of course isn’t great news for Barclays, as it raises fresh capital adequacy issues. Barclays has been benefitting from an independence premium, rising faster and further than rivals that had to take part in the UK government asset protection scheme. Now that ‘premium’ is being called into question though, Barclays may be better placed to weather the storm now that optimism appears to be creeping back into the global economic psyche. Barclays recovered well in the later part of the week.

There is certainly evidence of confidence returning to markets, with cash allocation falling for most managed funds, as investors pour money back into the stock market. We could be seeing a great unwinding of the extreme flight to safety that happened post Lehman Brothers. Now it appears traders want to pick up where they left off, pushing resources and stocks higher, and betting on higher inflation in the future. Oil is continuing its bull run. It’s remarkable to note that crude prices have doubled in just 75 trading days, from $33.75 to current levels. Gold hit $989, but reversed to close at $954.88 last week and oil pushed to over $70 at one point.

It is no coincidence that the so called BRIC nations have seen their stock markets rally strongly in 2009, with the Russian stock market up 70% this year. Demand from emerging nations such as China fuelled the commodity boom prior to the credit crunch, now it appears they are leading the recovery with oil following in the tail wind.

Three central banks; the MPC, the ECB, and the BOC produced rate statements last week, with all three choosing to keep rates on hold. This was largely predicted in advance, but there were still some big swings on currencies. The biggest move on GBP/ USD was attributed to rumours that Gordon Brown was quitting. Although the rumours are unfounded, cable dropped dramatically around that time, and is yet to recover.

After a very busy week, last week the coming week has less top tier economic announcements. Highlights include UK manufacturing numbers on Wednesday, followed by US retails sales and unemployment claims on Thursday.

Recently Barry Ritholtz summarised the current market sentiment neatly “While many view the decelerating job losses as signalling the end of the recession, they appear to me as signalling the end of the panic period of the credit crisis. We are now in an ordinary, as opposed to historic, recession”.

Despite positive moves last week, further upside could still be limited for world stock markets. A no touch trade predicting that the S&P 500 won’t rise above last week’s highs and touch 961 at any point during the next 9 days could return 109%.

Economic Calendar for week 8th – 12th June

**Note: All times GMT, not DST**

PLEASE NOTE – All times GMT

Monday June 8th:

EU – 08:30 – Sentix Investor Confidence.
GE – 10:00 – German Factory Orders M/M.
US – 16:30 – FOMC Member Tarullo Speaks.
UK – 23:01 – BRC Retail Sales Monitor Y/Y.
UK – 23:01 – RICS House Price Balance.

Tuesday June 9th:

GE – 06:00 – German Trade Balance.
FR – 06:45 – French Trade Balance.
UK – 08:30 – DCLG HPI Y/Y.
GE – 10:00 – German Industrial Production.
US – 14:00 – IBD/TIPP Economic Optimism.
US – 14:00 – Wholesale Inventories M/M.

Wednesday June 10th:

GE – 06:00 – German Final CPI M/M.
FR – 06:45 – French Industrial Production.
UK – 08:30 – Manufacturing Production M/M.
UK – 08:30 – Trade Balance.
UK – 08:30 – Industrial Production M/M.
US – 12:30 – Trade Balance.
US – 14:30 – Crude Oil Inventories.
US – 16:15 – FOMC Member Duke Speaks.
US – 18:00 – Beige Book.
US – 18:00 – Federal Budget Balance.
UK – 23:01 – NIESR GDP Estimate.

Thursday June 11th:

FR – 06:45 – French Final Non-Farm Payrolls Q/Q.
EU – 08:00 – ECB Monthly Bulletin.
UK – 08:30 – Consumer Inflation Expectations.
US – 12:30 – Core Retail Sales M/M.
US – 12:30 – Retail Sales M/M.
US – 12:30 – Unemployment Claims.
US – 14:00 – Business Inventories M/M.
US – 14:30 – Natural Gas Storage.
US – 17:05 – FOMC Member Lockhart Speaks.
UK – 23:01 – BOE Quarterly Bulletin.

Friday June 12th:

GE – 06:00 – German WPI M/M.
FR – 06:45 – French CPI M/M.
FR – 06:45 – French Gov Budget Balance.
EU – 09:00 – Industrial Production M/M.
US – 12:30 – Import Prices M/M.
US – 13:55 – Prelim UoM Inflation Expectations.
US – 13:55 – Prelim UoM Consumer Sentiment.

EU – Europe wide
FR – France
UK – United Kingdom
US – United States
GE – Germany

Barclays was firmer on speculation that Blackrock and The Bank of NewYork Mellon may compete to acquire the BGI unit. Barclays seemed unaffected by reports that the creditors acting on behalf of Lehman Brothers are claiming foul play in the rushed purchase of the former US brokerage unit.

Elsewhere, Goldman’s helped to boost the financial sector in the US with an upgrade to Bank of America. It wasn’t plain sailing all the way for financials though with Lloyds dropping over 25%. Lloyd’s drop was mainly an adjustment in relation to the end of an offer to buy discounted shares. This was a technical adjustment that appears to have been largely accounted for. However, of more worry is the news that Lloyds is under scrutiny from the EU in relation to the government assistance it has received at the depths of the crisis. Lloyds may be forced to sell core assets in order to raise cash to buy the shares back from the government.

At the end of the week, Trader’s had one eye on the long weekend making Friday an unusually quiet day. Markets appear to have got a little too confident that the so called green shoots were leading to a meaningful and sustained economic recovery. What we saw on Wednesday and Thursday was a sudden realisation that we’re not out of the woods yet. US unemployment continues to rise as US consumers, the life blood of the world’s biggest economy, continue to tighten their belt. We had the credit crunch when banks were refusing to lend, now we have the shopping crunch with people refusing to spend.

Next week’s economic announcements of note include US consumer confidence on Tuesday and existing home sales on Wednesday. Thursday is a busy day with UK CBI sales data in the morning, followed by US durable goods orders, unemployment claims and new home sales. Friday’s top announcement is US preliminary GDP data.

The value of US commercial real estate continues to plunge, as the number of high profile shopping malls expected to close in the US this year hits 100. While stock markets slept on Friday, credit and fixed income markets were active, with US treasuries getting slammed on Friday. On Thursday it was UK Gilts that were hit as Moody’s downgraded UK government debt, now traders are speculating that the US government could also lose its AAA rating. The pound was hit, but managed to hold its ground relatively well after the initial shock from the Moody’s announcement. Gold appears to be taking up the slack, as investors hunt for the combination of safety and inflation hedging that gold is perceived to provide.

There have been many false dawns for gold since it hit $1000 in February, but now with inflation creeping back onto the agenda, conditions could be right for a sustained rally.

A One Touch trade predicting that Gold/ USD will hit $1000 in the next 30 days could return 112%.

Economic Calendar for week 25th – 29th May

**Note: All times GMT, not DST**

PLEASE NOTE – All times GMT

Monday May 25th:

Bank Holiday UK, US

GE – 08:00 – German IFO Business Climate.
EU – 10:00 – Buba President Weber Speaks.

Tuesday May 26th:

GE – 06:00 – GfK German Consumer Climate.
GE – 06:00 – German Final GDP Q/Q.
GE – 06:00 – German Import Prices M/M.
FR – 06:45 – French Consumer Spending.
EU – 08:00 – Current Account.
EU – 09:00 – Industrial New Orders M/M.
US – 13:00 – S&P/CS Composite 20 HPI Y/Y.
US – 14:00 – CB Consumer Confidence.
US – 14:00 – Richmond Manufacturing Index.

Wednesday May 27th:

UK – 08:30 – BBA Mortgage Approvals.
US – 14:00 – Existing Home Sales.
US – 14:00 – HPI M/M.

Thursday May 28th:

UK – 01:25 – MPC Member Tucker Speaks.
GE – 07:55 – German Unemployment Change.
EU – 09:00 – Consumer Confidence.
UK – 10:00 – CBI Realised Sales.
US – 12:30 – Core Durable Goods Orders M/M.
US – 12:30 – Unemployment Claims.
US – 12:30 – Durable Goods Orders M/M.
US – 14:00 – New Home Sales.
EU – 14:15 – Buba President Weber Speaks.
US – 15:00 – Crude Oil Inventories.
UK – 23:01 – GfK Consumer Confidence.

Friday May 29th:

GE – 06:00 – German Retail Sales M/M.
EU – 08:00 – M3 Money Supply Y/Y.
EU – 08:00 – Private Loans Y/Y.
EU – 09:00 – CPI Flash Estimate Y/Y.
EU – 09:15 – ECB President Trichet Speaks.
US -12:30 – Prelim GDP Q/Q.
US -12:30 – Prelim GDP Price Index Q/Q.
US – 13:45 – Chicago PMI.
US – 13:55 – Revised UoM Consumer Sentiment.
US – 13:55 – Revised UoM Inflation Expectations.

EU – Europe wide
FR – France
UK – United Kingdom
US – United States
GE – Germany

Trade Of The Day

With there being a risk for oil prices to fall, we can expect the USD/CAD to follow. Therefore, a no touch on the USD/CAD for 14 days with a trigger at the 1.1900 level pays 68% ROI at BetOnMarkets.com

Crude oil is trading just under the 50 dollars per barrel level following gains in U.S. equities, after Treasury Secretary announced that “vast majority” of the nation’s banks passed the capitalization stress test. Crude futures rose as financial shares led U.S. equities higher. Energy prices also increased as the euro climbed against the dollar, bolstering the appeal of commodities as an alternative investment. Oil prices are likely to be quiet today, until the release of the inventory numbers later in the day.

Trade Of The Day

Here is a good value play: A no touch on the USD/JPY for 8 days, with a trigger at 102.00 pays 7% ROI.

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