Geopolitical developments and monetary policy actions have aggravated the wobbly nature of the global economic recovery, and we had a taste of this in ample measure in the second quarter. Manufacturing activity across the globe experienced a setback, shaking a strong pillar that has been supporting the current recovery in a big way. Adding fuel to fire, central banks in Europe and some developing nations, which are experiencing red hot growth and a concomitant rise in inflationary pressures, began tightening policy rates - a move many see as capable of applying brakes to the flailing recovery.

Last week, China released inflation figures for June, which showed a spike in inflationary pressures to a 3-year high. The European Central Bank ignored the sovereign debt crisis that has come to plague some peripheral nations and is also threatening contagion effects and promptly raised interest rates last Thursday.

Against this backdrop, recent economic indicators have been grossly worrisome. The U.S. non-farm payrolls report released last Friday showed that the economy added merely 18,000 jobs, the smallest job growth since September 2010. Private payrolls rose a modest 57,000, primarily on the support lent by the service sector, which added 53,000 jobs. Temporary help-often considered a leading indicator for jobs trend, fell 12,000.

Meanwhile, the Institute for Supply Management's service sector survey released last week showed that its non-manufacturing index fell a worse than expected 1.3 points to 53.3 in June. The business activity index edged down 0.2 points to 53.4 and the new orders index slipped a steeper 3.2 points to 53.6. The order backlogs index fell into the contraction zone, as it slid 6.5 points to 48.5. Meanwhile, the employment index remained almost unchanged at 54.1 in June.

The Commerce Department reported that factory goods orders rose by a less than expected 0.8 percent. Meanwhile, the previous month's drop was upwardly revised to 0.9 percent from the 1.2 percent decline estimated earlier.

The Federal Reserve's consumer credit report showed that the outstanding consumer credit rose by $5.08 billion or 2.5 percent in May, with revolving and non-revolving credit rising 5.1 percent and 1.3 percent, respectively.

The Commerce Department reported that wholesale inventories rose 1.8 percent month-over-month in May. T he previous month's inventory growth was upwardly revised by 0.3 percentage points to 1.1 percent. The increase was fueled by auto inventories, as sales sagged. Wholesale sales fell 0.2 percent and therefore, the wholesale inventories to sales ratio rose to 1.16 in May from 1.15 in the year-ago period.

The manufacturing sector, consumers, inflation and Fed speeches are likely to be in the spotlight in the unfolding, as the markets gear up to receive a spate of economic readings against the backdrop of softening of growth. The Commerce Department's retail sales report for June, the Reuters/University of Michigan's consumer sentiment survey for July, the Empire state manufacturing survey for July, the Federal Reserve's industrial production report for June and the weekly jobless claims report are among the closely watched reports/surveys for the week.

Traders may also pay attention to Federal Reserve Chairman Ben Bernanke's semi-annual monetary policy testimony to Congress and a few other Fed speeches scheduled for the week. The Commerce Department's trade balance report for May, the Labor Department's export and import prices report for June, the Labor Department's inflation reports for June, the Commerce Department's wholesales inventories report, the Treasury Budget for June and the Treasury auctions of 3-year and 10-year notes and 30-year bonds round up the economic calendar of the week.

Retail sales may have remained stagnant in June, as strong chain store sales performance may have offset softness in auto sales and a likely drop in gasoline sales. Meanwhile, the muted recovery exhibited by the labor market does not bode well for consumer spending in the coming months.

Industrial output is expected to have seen modest strength, as auto production rebounds following recent weakness triggered by parts shortage. Additionally, the June number may have benefited from strength in utilities output.

In his semi-annual testimony before the Congress, Bernanke is unlikely to deviate much from the central bank's recent stance, given the continuing the inflow of soft data, which has increased the uncertainty around the economic outlook. Danske Bank said it does not expect Bernanke to signal that the Fed will stop re-investing its portfolio of Treasuries and mortgages.

RTTNews