Stock markets have had a relatively quiet few weeks, though the trend has remained biased the upside. It has been credit and currency markets that have seen most of the action of the last couple of weeks. The dollar is being punished, with the dollar index falling over 1.5% on Friday alone. This is partly down to concerns over the US budget deficit, and fears that the Fed is trying to monetise their rising debt mountain. Another explanation for the slump is a returning appetite for risk from global investors. During the height of the crisis, the dollar, and US treasury bonds were seen as a safe haven. Now with confidence easing back into the system, this flight to safety appears to be rapidly unwinding. Bonds were massacred last week, while the dollar fell heavily against a basket of currencies including Sterling and the Euro.

Funds are flowing out of ‘safe’ assets into riskier, more inflation resistant assets, such as equities, gold and oil. Oil and Gold in particular are in demand with oil touching $66.46 on Friday, and gold surging to $980. It is interesting to note that oil is now 45% below its peak in 2007, while the Dow Jones is down 60%. Oil fell further, but has recovered quicker.

UK banking shares managed a positive week, with Barclays once again leading the pack. There was a midweek wobble on the release of the FSA’s stress test methodology, which many have interpreted as not being stressful enough. The market appears to have priced in more adverse test conditions, causing many traders to re-asses their assumptions about the UK banking sector’s ability to weather a sustained economic downturn.

The coming week starts with a bank holiday across most of Europe. UK manufacturing PMI and US ISM manufacturing data are the standout economic releases for the day. Tuesday brings more US housing data with the release of pending home sales. Wednesday brings ADP non farm employment changed and Fed chairman Bernanke testifying. Thursday is extremely busy with rate statements due from the ECB and MPC and Bank of Canada. Friday closes an already busy week with Non Farm payroll numbers.

In the US, it seems to be the case that jobless claims data is setting a new record every week. Continuing claims are showing no signs of retreating, and it is no coincidence that mortgage delinquencies reached a record high of 9.12%. There was some positive news with new home sales rising month on month, but the down trend remains very much in place for the time being.

The resilience of the rally in equities is all the more impressive considering the onslaught of negative economic data, and the massive GM bankruptcy running in the background. However, lest we get ahead of ourselves, there is still a long way to go for both the stock market and the global economy.

A barrier range trade biased to the upside could be the best way to play this. A barrier range trade predicting that the Dow Jones (wall Street) won’t touch 7750 or 9250 in the next 60 days could return 110%.

Economic Calendar for week 1st – 5th June

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

PLEASE NOTE – All times GMT

Monday June 1st:

Bank Holiday FR, GE

EU – 08:00 – Final Manufacturing PMI.
UK – 08:30 – Manufacturing PMI.
US – 12:30 – Core PCE Price Index M/M.
US – 12:30 – Personal Spending M/M.
US – 12:30 – Personal Income M/M.
US – 14:00 – ISM Manufacturing PMI.
US – 14:00 – Construction Spending M/M.
US – 14:00 – ISM Manufacturing Prices.

Tuesday June 2nd:

UK – 08:30 – Construction PMI.
UK – 08:30 – Net Lending To Individuals M/M.
UK – 08:30 – Mortgage Approvals.
EU – 09:00 – Unemployment Rate.
US – 14:00 – Pending Home Sales M/M.
UK – 23:01 – Nationwide Consumer Confidence.

Wednesday June 3rd:

EU – 08:00 – Final Services PMI.
UK – 08:30 – Services PMI.
EU – 09:00 – PMI M/M.
EU – 09:00 – Revised GDP Q/Q.
US – 11:30 – ADP Non-Farm Employment Change.
US – 14:00 – Fed Chairman Bernanke Testifies.
US – 14:00 – ISM Non-Manufacturing PMI.
US – 14:00 – Factory Orders.
US – 14:30 – Crude Oil Inventories.

Thursday June 4th:

EU – 09:00 – Retail Sales M/M.
UK – 11:00 – Official Bank Rate.
EU – 11:45 – Minimum Bid Rate.
US – 12:00 – FOMC Member Dudley Speaks.
EU – 12:30 – ECB Press Conference.
US – 12:30 – Unemployment Claims
US – 12:30 – Revised Non-Farm Activity Q/Q.
US – 12:30 – Revised Unit Labour Costs Q/Q.
US – 12:45 – Fed Chairman Bernanke Speaks.
US – 14:30 – Natural Gas Storage.

Friday June 5th:

EU – 07:50 – ECB President Trichet Speaks.
UK – 08:30 – PPI Input.
UK – 08:30 – PPI Output M/M.
US – 12:30 – Non-Farm Employment Change.
US – 12:30 – Unemployment Rate.
US – 12:30 – Average Hourly Earnings M/M.
US – 18:15 – FOMC Member Kohn Speaks.
US – 19:00 – Consumer Credit M/M.

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