ML Economist David Rosenberg says monthly data show US GDP peaked in January "and actually has fallen at a 4% annual rate since then. That coupled with four months in a row of negative payrolls and a 5% annualized decline in real retail sales since last October seals the deal on the recession call. This means that we are as early in this phase as we were in the spring of 2001, the summer of 1990 or the fall of 1981."

The S&P 500 is posting a modest gain. Meanwhile, the Nasdaq is outperforming thanks to strength within the tech sector (+1.2%). Treasures are out of favor, especially at the long end of the yield curve. The 10-year note is down 17 ticks while the 30-year bond is down a full point.
Shares of General Motors (GM 17.13, -0.47) are trading at their lowest level in more than 25 years after being downgraded to Hold from Buy at Citigroup. Citi cited GM's reduced earnings power and cash burn risk, noting that GM is a less attractive risk-reward proposition relative to American Axle (AXL 18.67, +0.23).

The yen fell to a one-month low against the euro and dropped versus the dollar as investors added to holdings of higher-yielding assets funded in Japan's currency.
The yen's decline against the Australian and New Zealand dollars, two favorites of so-called carry trades, began earlier as Asian stocks rallied. Australia's dollar traded close to a 25-year high versus its U.S. counterpart, while the kiwi dollar gained a sixth straight day. The U.S. dollar extended gains versus the yen and euro as new-home sales in the U.S. unexpectedly rose in April.
The euro reversed gains versus the dollar after reports showed German consumer confidence fell more than economists forecast and French business confidence declined to the weakest in more than two years in May.
``We see weakness developing in many aspects and that's why we are seeing a retreat'' from the euro, said Hans-Guenter Redeker, global head of currency strategy in London at BNP Paribas SA, France's biggest bank.
Consumer prices in the euro region rose 3.5 percent in May, faster than the 3.3 percent gain the previous month, according to a Bloomberg News survey. The statistics office will release the figure on May 30.
The dollar extended gains as new-home sales in the U.S. rose 3.3 percent to an annual pace of 526,000 from a 509,000 rate the prior month that was the lowest in 17 years, Commerce Department data showed. A separate report today showed home prices dropped last quarter by the most in at least 20 years.
Confidence among U.S. consumers fell to the lowest level in more than 15 years. The Conference Board's confidence index declined more than forecast to 57.2, the lowest level since October 1992, from a revised 62.8 in April, the New York-based research group said.
The dollar has traded between about 102 yen and about 106 yen since mid-April. The dollar may break out of this range this week as double-no-touch options expire, said Shinichi Takasaka, manager of foreign exchange and financial products trading at Mitsubishi UFJ Trust & Banking Corp. in Tokyo.

"We are currently watching for some uplift from tax rebates, but the positive influence of the tax rebates is being curtailed by soaring gasoline prices. Retailers are reporting no uptick in sales, but that lack of upside masks another picture--no major drop off from soaring gasoline prices. Tax rebates and gasoline prices are two major, opposing forces weighing on the consumer sector."

"I consider the current level of monetary accommodation to be appropriate. That, together with the fiscal package, should be sufficient to promote a step up to moderate economic growth later this year. Likewise, I would expect that inflation will moderate in coming quarters, as more slack in labor and product markets emerges and as commodity prices level off. Of course, we will continue to monitor developments and act as needed." She worries about commodities infl but says weak econ should check prices. Says "the single most important determinant of the level and change in subprime delinquency rates has been the pace of house price changes," and Fed ease and liquidity operations "are having a beneficial effect on financial markets."

Stocks have taken a tumble and have lost most of the session's gains. The downturn is broad-based with the most noticeable decline in financials (+0.1%), which was up 1.2% at its session high.
Large-cap tech continues to outperform on a relative basis. The Nasdaq 100 is up nearly 0.7%, helped by Apple (AAPL 183.15, +1.98) and Google (GOOG 552.93, +8.31). Earlier today, telecom operator TeliaSoneria announced it has agreed to bring Apple's iPhone to Nordic and Baltic markets.

Stocks are making their way off the earlier lull and moving higher. Though shy of the session's best levels, stocks continue to sport solid gains.
Various sources are indicating Belgian brewer InBev may initiate takeover talks with Anheuser-Busch (BUD 56.60, -0.01) today. Shares of BUD opened the session higher on the news, but are currently trading along the unchanged line.
In other buyout news, Blackstone Group (BX 18.91, +0.37) and Apollo Management LP are in talks to acquire chemical company Chemura (CEM 8.44, +0.64), while South Korea's LG Electronics is taking a closer look at General Electric's (GE 30.53, +0.10) appliance unit, according to The Wall Street Journal. Hitachi (HIT 72.32, +2.78) has no interest in pursuing GE's unit, according to Reuters.

AUS/USD holding steady around $0.9600 with the bids in the $0.9580 area and stops at $0.9570/50. Offers placed around last week's highs from $0.9650 to $0.9675.

GBP/USD holds near $1.9745 with minor resistance noted between $1.9750/55. A break above to open a move back toward earlier recovery highs/offers at $1.9780/85. Bids remain in place from around the earlier lows of $1.9717, with interest extending toward $1.9700.

USD/CHF holds a bit below session highs on Chf1.0320. Stronger offers come near Chf1.0330/50. Bids are back at Chf1.0220 with stops below and further demand noted in the Chf1.0180 area.

EUR/USD: $1.5800
USD/JPY: Y104.00, Y101.00

U.S. stocks were set to open lower Tuesday following the holiday weekend, as high oil prices and uncertainty about the economic outlook kept investors on edge.
Crude prices rose 95 cents to $133.14 a barrel, supported by supply concerns and worries about the health of the U.S. economy.
Investors were also awaiting a pair of readings on consumer confidence and new home sales. Economists forecast that the Conference Board's index of consumer confidence edged lower to 60 in May from 62.3. New home sales in April are expected to have slowed to an annual pace of 522,000 from 526,000.
Companies to watch include Borders Group: the bookseller, which has said it may put itself up for sale, is due to report quarterly results after the market close.
Mobile phone operator Vodafone said its CEO Arun Sarin is stepping down. The surprise announcement came after the company reported swinging to a profit for the full year. Vodafone shares rallied 1%.

USD/CAD gets close to stops placed on a break below C$0.9860, with bids noted on approach to this level. A break below to open a move on toward C$0.9835/30 ahead of C$0.9815/00. Offers C$0.9940/50. Rate currently trades around C$0.9875.

1.Interest rate cut is wishful
2.Would act immediately if expectations unhinged
3.Must keep an open option of raising interest rates
4.Expect Staff Forecasts from growth/inflation to be hiked

The following data were issued
06:00GermanyGDP (Q1) preliminary 1.5% 1.5% 0.3%
06:00GermanyGDP (Q1) preliminary Y/Y adjusted 2.6% 2.6% 1.8%
06:00GermanyGDP (Q1) preliminary Y/Y unadjusted 1.8% 1.8% 1.6%
06:45FranceBusiness confidence (May) 102.0 105.0 106.0
07:30ItalyBusiness confidence (May) 89.6 87.0 87.6 (86.9)

The yen fell to a one-month low against the euro as a rally in Asian stocks encouraged investors to add to holdings of higher-yielding assets funded in the Japanese currency.
The euro reversed gains versus the dollar after reports showed German consumer confidence fell more than economists forecast and French business confidence declined to the weakest in more than two years in May. The GfK consumer confidence indicator fell to 4.9 points in June compared with 5.6 points in May and against analysts' forecasts for an improvement to 5.8. In France, the Insee business confidence dropped to 102 in May from 106 in April, beyond estimates for a more modest fall to 104.

EUR/USD opened around $1.5815. Rate printed high above $1.5800 before retreating to $1.5728 after triggering stops on $1.5760. Bids $1.5730/20, $1.5690/80, stops below, offers $1.5780/85.
GBP/USD opened at $1.9843. Triggered stops through $1.9750 added further weight, taking cable to $1.9717 before recovering up to $1.9770. Cable bids $1.9720-00, $1.9680-60/50. Offers $1.9780/85, $1.9815/25.
USD/JPY rose from Y103.20 to Y103.90/00. Later rate set stable near Y103.75. Dlr-yen offers Y104.20, Y104.40, barrier Y104.50, stops above. Bids Y103.10/00, Y102.70, barrier Y102.50.

Meanwhile, the US consumer confidence is expected to have dipped to 60.0 in May from 62.3 in April; new home sales are forecast to have fallen to an annualised 522,000 unit rate in April following a 526,000 unit rate in the previous month.

EUR/USD: $1.5800
USD/JPY: Y104.00, Y101.00

From Citi: “The economic outlook has been taken hostage by the relentless surge in oil prices, heightening for now chances that the economic stall will continue alongside elevated inflation. The effective stance of monetary policy as transmitted through financial conditions is not conducive to accelerating inflation and a setting of low income growth creates a zero-sum problem for pricing and activity away from energy. An easing in energy price pressures would leave housing woes as the major obstacle to growth. However, the resulting lift to investor sentiment would likely hasten recovery across the board.”

AUS/USD holds near $0.9608 after printing lows around $0.9580. Offers mentioned around session highs on $0.9640, stronger supply then coming in at $0.9650/70.

Tomoko Fujii, senior currency strategist at Bank of America- "There is no fresh incentive to drive the currency market except for the housing data in the U.S. There is no sign yet of a bottoming out in the housing sector which may weaken the dollar."

Kazuya Ito, fund manager at Daiwa SB Investments- "The market sentiment has turned towards an interest rate increase by the Fed."

The euro softened after data showed confidence in the economy weakened more than expected in both Germany and France, the heart of the euro zone's economy. The GfK consumer confidence indicator fell to 4.9 points in June compared with 5.6 points in May and against analysts' forecasts for an improvement to 5.8. In France, the Insee business confidence dropped to 102 in May from 106 in April, beyond estimates for a more modest fall to 104.
The releases pushed the euro lower against other major currencies, but analysts warn these losses are likely to be short-lived ahead of key German inflation data, which is expected to hit a record high. German CPI inflation is forecast to rise to 3.6 percent in May, matching March's historical high.
The persistently high oil prices will also feed into this speculation, as the longer commodity prices remain high, the more likely the price pressures in the euro zone will keep the ECB from loosening monetary policy to help the economy.
Meanwhile, the US consumer confidence is expected to have dipped to 60.0 in May from 62.3 in April; new home sales are forecast to have fallen to an annualised 522,000 unit rate in April following a 526,000 unit rate in the previous month.

1.Stable inflation expectations is highest priority
2.Weak dollar, oil prices both impact EMU economy
3.Price stability remains the policy of ECB
4.U.S. will have weak growth in 2008
5.No need for economic pessimism in Europe
6.Sees inflation above 3.00% for rest of year
7.Sees inflation "just over 2.00% in 2009

Resistance 3: Y105.50
Resistance 2: Y105.00
Resistance 1: Y104.40
Current price: Y103.90
Support 1: Y103.00
Support 2: Y102.20
Support 3: Y101.60
Comments: Techs is steady. The nearest support is Friday's lows at Y103.00. Below losses may widen to Y102.20 and Y101.60. Resistance comes near Thursday’s high on Y104.40. Above Y105.00 there is a room for a rise to May 14 high on Y105.50.

Resistance 3: Chf1.0570
Resistance 2: Chf1.0400
Resistance 1: Chf1.0300
Current price: Chf1.0257
Support 1: Chf1.0220
Support 2: Chf1.0140
Support 3: Chf1.0080
Comments: Dollar remains under pressure after it failed to break above Chf1.0290/00 resistance. Next resistance comes at Chf1.0400 and then – near Chf1.0570 (May 19 high). Strong support comes at session lows on Chf1.0220 with a break under will point to Chf1.0140 and then – to Chf1.0080.

Resistance 3: $1.9960
Resistance 2: $1.9900Resistance 1: $1.9840
Current price: $1.9770
Support 1: $1.9710
Support 2: $1.9680
Support 3: $1.9580
Comments: Cable rebounds. Below session low at $1.9710 (strong support) correction may widen to $1.9680 and then – to 50% Fibo from May 19 at $1.9580/90.The nearest resistance is session high near $1.9840, with a break above will extend the rise to $1.9900 (May 02 high) and $1.9960.

Resistance 3:$1.6020
Resistance 2: $1.5920
Resistance 1: $1.5820
Current price: $1.5762
Support 1: $1.56720
Support 2: $1.5660
Support 3: $1.5540
Comments: Euro tries to rebound, holding within the daily range, limited with strong support/resistance at $1.5720/$1.5820 respectively. Below $1.5720 correction may widen to $1.5660 and then - to $1.5540. Above $1.5820 there is a room for a rise up to Mar highs on $1.5900/20. Stronger resistance is around life-time high on $1.6015/20.

EUR/USD edges back above $1.5760 after printing lows around $1.5723. If rate can build on the current move seen opening a push toward $1.5780/85.Bids were noted from the lows.