It was certainly a mixed week for world stock markets last week with Monday’s opening slump almost being cancelled out by Thursday’s strong rally. The S&P 500 just managed to nudge into positive territory for the week, while the FTSE, CAC and DAX could only were firmly in the red. In the US house prices fell by 6.8% in April and existing home sales fell by 3.0% providing further evidence that the housing market is still in decline. The pace of the global meltdown has slowed, but judging by last week’s US unemployment claims increase, any meaningful recovery will be very long and drawn out.  After the frantic days of the first quarter, perhaps a quiet crawl back to growth might be the 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 the 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. Crude oil fared slightly worse, finishing the week just below $70 for the first time in three weeks.

This week’s action starts with the UK’s Nationwide House Price Index on Tuesday and with uncertainty still surrounding the recovery, or otherwise, in the housing market could cause volatility to sterling.  UK current account figures are due at 12.30 GMT and these too could have a similar impact.  The Halifax House Price Index is also scheduled for release next week, although so far the exact date has not been determined.

Australian retails sales are due for release on Wednesday and are expected to show a slight improvement on the previous month. The Australian economy continues to show resilience compared with other western economies.  At 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  just a couple of hours later.

On Wednesday we also have some central bank action from both the BOE (Bank of England) and ECB.  Various MPC members are due to speak and the BOE credit conditions survey is due for release.    These are followed by the ECB press conference.   Meanwhile the US Non Farm payroll is brought forward one day to Thursday owing to a national holiday on Friday.   With so much data we  could see significant volatility in the EUR/ USD on what will, in effect, be the last trading day of the week.  With US markets closed on Friday, Forex markets should be quieter than usual.

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