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The FTSE is currently indicating a flat open, as everyone is waiting for the release of the UK retail sales. Consumers are going through a rough time, with high oil prices and falling home values there is not much left for the customer to tap into to keep up with their spending habits. Sadly the Bank of England has announced that they will tolerate the lower standard of living UK citizens will go through while Mervyn King tries to reign in the number one problem:  inflation. A strong Retail Sales number will help the FTSE stocks into positive gains.  

Dollar weakness has given new life to the precious metal market, as gold has bounced from the 870 area now trading near the 900 dollar level.  While the outlook on the US dollar has not changed, more and more traders are forgetting the threat that Mr. Bernanke made a few weeks back regarding a strong dollar intervention which spooked the FX market.

The FTSE is currently indicating a lower open, as traders are awaiting the release of the Bank of England minutes from its last meeting.  After seeing any hopes for a rate cut dashed yesterday, everyone will be interested to see if there is any indication of a rate hike for the next meeting. While a rate hike would be welcomed by the GBP/USD, it would be a punch in the gut to the FTSE, which already has been dealing with record oil prices and a squeeze in the credit markets.

Oil continues its losing way, bringing the count to four consecutive trading days. The main culprit is the slow down in economic growth, which translates into lower demand for the black gold. Helping push the price lower is the rumoured increase in output by the worlds largest oil producer Saudi Arabia. There may be  a glut of oil in US, as slowing demand and increasing output will result in a fall for the price per barrel.

After a rather turbulent week markets ended on a positive note. US markets benefited from a better than expected inflation outlook, following Fridays CPI numbers. The majority of inflation increases were due directly and indirectly to energy costs, so markets were thankful for the fact that oil didnt finish the week on a new record high.
The Energy heavy FTSE trudged behind its European peers and US markets, as oil stocks took a back seat, and domestic inflation fears dampened the buyers enthusiasm. Rumours hit the newswires that UK inflation will be double the expected rate. This news will make it easy for the BOE to make the decision to raise interest rates at the next central bank meeting. This is yet another piece of negative news for the FTSE, which has spent most of the year in the red. The CPI number released next week could add further negative pressure on the UK benchmark index.
Underwriters of the HBOS rights issue breathed a huge sigh of relief as the bank rose above the discount level, which would have caused them to step in and take up the issue at a bad price. The UK banking stocks finished down on the week, but managed to close significantly above the lows as bargain hunters entered the market. At one stage Barclays dipped below £3.00 a share for the first time in a decade before closing the week at £3.23.
Oil dropped slightly at the end of the week as comments from Saudi Arabia reassured investors that supply would be increased. However, this pullback has to be put into the perspective of the rapid price advance over the last few weeks. Just a few weeks ago $133 a barrel would have set headlines blazing; now it is a welcome pullback, with oil still well within the $130 to $139 trading range of the last few days.
On the currency markets, the Euro finished the week well down against the Pound and the Dollar. Sellers were out in force after Irish voters rejected the EU reform treaty by a narrow margin. The Lisbon treaty has to be ratified by every country before coming into effect. Every other country elected to allow their national governments to ratify the treaty, but Irelands democratic vote has thrown the treaty and potentially further EU integration into disarray. With increasing divisions within the Eurozone over rates policy, the single currencies detractors were out in force.
Next week starts off with some heavy data on both sides of the Atlantic, but ends on a quiet note with little data released on Friday. Monday sees the release of Core EU CPI, which could impact on the Euros recent declines. Around midday the US release of TIC net long term transactions will also impact on global currency markets. Tuesday sees the release of a raft of upper and middle tier US data. Top of the list is the Housing Starts and PPI data. On Wednesday we have the release of the minutes from the last MPC meeting. Considering recent developments, these minutes may be slightly obsolete, but will still be scoured for hints of future policy directions. Thursday brings UK retail sales and US unemployment claims.
Although markets ended the week on a positive note, European indices still ended well down. US inflation is still sky high. Everything from hospital services to education is costing more. To make matters worse, recent US home foreclosure data has indicated that one in every 483 US households experienced a foreclosure filing during the Month of May. In some parts of California, this figure stands at an incredible 1 in 66 houses. ECB president Trichet recently commented that much depends on the trajectory of the US housing market. If he is correct then the feared global depression may be more real than people are prepared to believe.
The FTSEs high from last year was 6754; roughly 200 points shy of its peak in 1999. It could be argued that it will be a long time before these levels are seen again. A No Touch bet on the FTSE not to touch 6800 at any time during the next 6 months (180 days) could return 18%.

The FTSE is currently indicating a flat open, mostly because there are no economic news out today in UK. Most traders will be waiting for the US advanced retail sales before deciding the tone for the trading day. A lot has been said over the last few days about the state of the US consumer, and this will be the first inside look into just how the consumer is doing. There is talk that the number will be weaker then expected, which should hurt the US dollar, especially versus the British Pound. Look for the GBP/USD to touch 1.9750 after the number comes out at 12.30pm GMT.

Gold made a small comeback yesterday after weakness in the US dollar. Lately most commodities have abandoned fundamentals and have been trading based on how the US dollar been doing that day. Oil crept back to above 135 dollars per barrel after US inventories fell another week. This started some concerns that the US stockpiles may be strained during the summer driving season

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Contents This Week:
Economic calendar for week  9th - 13th June 2008.
Commentary: The week ahead.
Economic Calendar for week 9th - 13th June 2008

PLEASE NOTE - All times GMT not BST. BST is +1 Hr.

Monday June 9th:

 GE - 06:00 - Trade Balance.
 EU - 08:30 - Sentix Investor Confidence.
 UK - 08:30 - PPI Input M/M.
 UK - 08:30 - PPI Output M/M.
 US - 14:00 - Pending Home Sales M/M.
 UK - 23:01 - RICS House Price Balance.
 UK - 23:01 - BRC Retail Sales Monitor Y/Y.

 Tuesday June 10th:

 FR - 06:45 - Industrial Production M/M.
 UK - 08:30 - Industrial Production M/M.
 UK - 08:30 - Manufacturing Production M/M.
 US - 08:30 - DCLG House Price Index Y/Y.
 US - 12:30 - Trade Balance.
 UK - 14:00 - IBD/TIPP Economic Optimism.
 UK - 23:01 - NIESR GDP Estimate.

 Wednesday June 11th:

 FR - 06:45 - CPI M/M.
 UK - 08:30 - Claimant Count Change.
 UK - 08:30 - Average Earnings Index +Bonus Q/Y.
 UK - 08:30 - Trade Balance.
 UK - 08:30 - Unemployment Rate.
 US - 14:30 - Crude Oil Inventories.
 US - 18:00 - Beige Book.

Thursday June 12th:

 FR - 06:45 - Final Employment Change Q/Q.
 EU - 09:00 - ECB Bulletin.
 EU - 09:00 - Industrial Production M/M.
 US - 12:30 - Core Retail Sales M/M.
 US - 12:30 - Retail Sales M/M.
 US - 12:30 - Import Price Index M/M.
 US - 12:30 - Unemployment Claims.
 US - 14:00 - Business Inventories M/M.
 US - 14:30 - Natural Gas Storage.

Friday June 13th:

 GE - 06:00 - CPI M/M.
 EU - 09:00 - Labor Cost Index Y/Y.
 EU - 10:00 - Employment Change Q/Q.
 US - 12:30 - Core CPI M/M.
 US - 12:30 - CPI M/M.
 US - 13:55 - Prelim Michigan Sentiment.

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

The week ahead.
 

Three percent may seem an inauspicious number, but it certainly caused some headaches last week. Firstly, UK inflation is running at 3%, over the Bank Of England target of 2% and obliging the Governor of the Bank of England to write a letter of explanation to the Government.
Secondly, on Friday, US markets in unison fell by over 3% as panic once more swept through financial markets. The week ended how it had began with some faltering rallies in between. The main catalyst for the capitulation was the U.S. payrolls decline. The jobless rate of 5.5% was the biggest increase since 1986 and the fifth consecutive month that the US had lost jobs. The no recession consensus that had been building is now under considerable pressure on both sides of the Atlantic.
 The final nail in the coffin was the price of oil awaking from its temporary slumber. Crude prices surged over $15 Dollars in the final two days of the week, adding $11.31 on Friday alone to close at a new record high of $139.12. Fears of war in the Middle East and a US recession created the perfect Storm.
Even before equity markets opened for the week June had already started badly for domestic markets. In early trading, the Pound fell sharply against the Dollar on weak manufacturing data. Then equity markets opened to an all out blood bath on shares in Bradford and Bingley. News had already leaked over the weekend that the Bank was in trouble, and so it proved with shares pushed down to 60 pence at one stage. The bank has now fallen an incredible 87% since its peak in 2006. Barclays Bank has fallen less in percentage terms since its peak, but the size of the bank has made its collapse all the more damaging. Last week Barclays closed the week at its lowest level since March 2003 on capital adequacy concerns.
 
 Recently there were signs of a slowing but not capitulating UK economy, now things are looking graver. As house prices inch lower, consumers feel poorer than six months ago. This in itself is not too dramatic, but combined with oil prices not far off record highs and food inflation on the up, consumers not only feel poorer, they actually are.
There was no surprise from the MPC with its rates decision last week, but the ECB ruffled some feathers by indicating that they may have to raise rates as soon as July. The DAX and CAC have lagged behind other markets, as the prospect of higher rates proves unpopular with equity investors. Bernanke dropped some large hints that the Feds bias was moving towards tightening rates after an easing cycle, but the recent payrolls data shows that the Fed like many other central banks, is stuck between a recessionary rock and a inflationary hard place.
Next week has the potential to pour more misery on an already depressed market. The week starts with UK PPI data, and the latest House price balance from RICS. Tuesday sees the release of UK industrial production figures and the US trade balance. The weeks hottest ticket is potentially the US retail sales data on Thursday. If the US consumer starts to seriously tighten their wallet, there could be wide reaching international consequences.
Bespoke Investments have some interesting data on the performance of the Dow Jones following capitulations such as Friday. The average change following a 3% drop has been 0.11% the following day and 0.28% the following week. Over the last decade, the average performance the next day has been 0.63%. In addition when the market rises 1.5% one day then drops 1.5% the next day (as the Dow did on Thursday and Friday), then the following day is up on average 0.14% and 0.56% over the following week. There are certainly wide variations in the making of this average and one must be mindful of Nassim Talebs advice to never cross a river because it is on average 4 feet deep. However, there is at least the potential for upside that may not be currently priced in. The Dow Jones closed on Friday at 12209.81. A 0.5% rise over a week would bring it to 12271.05. Setting a bull bet predicting that The Dow Jones (Wall Street) will be higher than 12271 in 10 days time could return 126%.