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The Trading Week: May 23 - May 27

|Includes:SPDR Dow Jones Industrial Average ETF (DIA), EEA, GBB, GOLD, JYN, UDN, USD
May 21, 2011 ( – The main measure of U.S. economic activity and growth, along with consumer and housing market reports from the world’s largest economy, will take the center stage in the week ahead which could bring more market jitters on the uncertainty surrounding the outcome of the Greek debt drama.

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe. 

1.    EUR- Euro-zone Composite Manufacturing and Services PMI- Purchasing Managers Indexes, two leading indicators of economic conditions measuring the activity of purchasing managers in the manufacturing and services sectors, Mon., May 23, 4:00 am, ET. 

Following last week’s Bundesbank bulletin in which the German central bank outlined that the Euro-zone’s largest economy “will probably lose some growth momentum”, the preliminary flash estimate of the Euro-zone Composite PMI could confirm that view with the manufacturing index slowing to 57.5 in May from 58.0 in April, and the services index pulling back slightly to 56.6 from 56.7 in April.

2.    EUR- Germany IFO Institute Business Climate and Expectations Index, a leading indicator of economic conditions and business expectations in the Euro-zone’s largest economy, Tues., May 24, 4:00 am, ET.

After the lower ZEW economic sentiment survey, the German IFO index is expected to follow suit with a reading of 110.0 in May from 110.4 in the previous month.

3.    USD- U.S. New Home Sales, an important gauge of housing market conditions measuring the number of newly constructed homes with a committed sale during the previous month, Tues., May 24, 10:00 am, ET.

In the aftermath of the disappointing housing starts and existing home sales data, it would not be surprising to also see weakness in the U.S. new home sales, although the consensus forecasts expect them to register a small increase by up to 310K in April from 300K in March. 

4.    JPY- Japan Trade Balance of the difference between imports and exports, Tues., May 24, 7:50 pm, ET. 

With Japan officially in its third recession in a decade, the Japanese economy could see a month of shrinking exports with a trade deficit of up to 692.1Bn yen in April, compared with the surplus of 196.5Bn yen in March. 

5.    GBP- U.K. GDP- Gross Domestic Product, the main measure of economic activity and growth, Wed., May 25, 4:30 am, ET.

The revised estimate of the U.K. Q1 GDP should confirm that the U.K. economy returned to growth by 0.5% q/q in the first quarter of 2011 after the 0.5% q/q contraction in Q4 2010. An upward revision could give the British pound a boost on expectations that stronger economic growth may give more confidence to the Bank of England policy makers to raise rates sooner.

6.    USD- U.S. Durable Goods Orders, a leading indicator of economic activity measuring durable goods orders placed with domestic manufacturers, Wed., May 25, 8:30 am, ET.

As the U.S. industrial activity slows, the orders for durable goods are forecast to drop by 1.5% in April from the 4.1% increase in March.

7.    USD- U.S. GDP- Gross Domestic Product, the main measure of economic activity and growth in the world’s largest economy, Thurs., May 26, 8:30 am, ET.

The main spotlight economic event of the week will bring the second estimate of the U.S. Q1 GDP which is forecast to revise the U.S. economic growth higher by 2.1% in the first quarter of 2011, up from the preliminary estimate of 1.8%, but still slower than the 3.1% growth in Q4 2010.

8.    JPY- Japan CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of Japan, Thurs., May 26, 7:30 pm, ET.

It has been a while since Japan has seen inflation above 0% as deflation has posed a major threat to the economy, but in April the Japanese economy could see inflationary pressures rising with the nationwide CPI jumping by 0.6% y/y from the 0.1% y/y decline in March.     

9.     USD- U.S. Personal Income and Outlays, a measure of the income received and purchases made by consumers, released along with the Personal Consumption and Expenditures Price Index- a leading indicator of inflation preferred by the Federal Reserve, Fri., May 27, 8:30 am, ET.   

Consumer spending in the U.S. is forecast to register a smaller increase by 0.5% m/m in April from 0.6% m/m in the previous month, while the Fed’s preferred inflation gauge, the core PCE Index, is expected to continue to show subdued inflationary pressures with a slight increase by 0.2% m/m, compared with 0.1% m/m in March. 

10.     USD- U.S. Consumer Sentiment, the University of Michigan's monthly survey of 500 households on their financial conditions and outlook of the economy, Fri., May 27, 9:55 am, ET. 

Higher fuel and food costs could take their toll on the sentiment of U.S. consumers with forecasts pointing to a downward consumer sentiment index revision to 70.0 in May from the preliminary estimate of 72.4.