After a 5-week bull run, investors took a breather and stayed on the sidelines ahead of some US Bank earnings this week. Profit taking took place as oil slid and the GM saga continued. It seems that the auto maker is running out of time to restructure and is being herded into Ã¢â‚¬ËœtemporaryÃ¢â‚¬â„¢ bankruptcy by the US government on or before June 1st. It looks like this Ã¢â‚¬Ëœarchaic behemothÃ¢â‚¬â„¢ will be surgically carved into a Ã¢â‚¬Ëœgood and badÃ¢â‚¬â„¢ company. No wonder the greenback came under pressure yesterday and Capital Markets still cannot measure the potential fallout.

The US$ is stronger in the O/N trading session. Currently it is higher against 12 of the 16 most actively traded currencies, in a Ã¢â‚¬ËœwhippyÃ¢â‚¬â„¢ trading range.

GS came, delivered, surprised and the market has taken a positive stance on their Ã¢â‚¬ËœhigherÃ¢â‚¬â„¢ than expected earnings. Even Citi has advanced 10% in the O/N session. Good bank results will only help the risk sentiment. Of course all of this depends on the accounting procedures and results, the whitewash effect, can we believe them? Will the stress tests inform us that Obama will have to go Ã¢â‚¬Ëœcap in handÃ¢â‚¬â„¢ once again to seek more money to prop up the undercapitalized? However, if we take the US financial results at face value, it looks like the banking sector has tentatively recovered and the worst may be over for the financials. We of course expect other sectors to follow, but they will obviously lag, as company results continue to give a mixed picture. This morning US retail sales and Fed buy-back program will dominate proceedings. With markets back at full strength, we will have depth again. YesterdayÃ¢â‚¬â„¢s lack of liquidity had the market gyrating in all directions for little reason.

The USD$ currently is higher against the EUR -0.65%, CHF -0.81% and lower against GBP +0.15% and JPY +0.39%. The commodity currencies are weaker this morning, CAD -0.28% and AUD -0.68%. All the North American markets had to chew on yesterday was the BOC outlook survey. There were very few surprises to be had. The 1st Q survey showed some improvement in major indicators as expected, but business sentiment remains negative and close to record low levels. Borrowers reported that credit conditions continued to tight over the last little while, and the countryÃ¢â‚¬â„¢s output gap widened as sales growth, business investment (machinery and equipment), employment expectations and capacity pressures remain weak, leading many firms to expect a slowdown in input price growth, with some even expecting an outright decline over the next year despite higher energy prices. Despite this, the loonie remains vulnerable as oil fell yesterday. The volatile trading range was aided by the Easter Monday holiday in Europe and Asia. Initially the CAD found support on the back of investors wanting to increase their risk and yield exposure. But, with oil collapsing close to 4%, on USD pull backs expect investors to want to sell the currency. It is anticipated that BOC Governor Carney will announce next week a plan that would Ã¢â‚¬Ëœflood banks with cash to halt the hoarding of capital and expand lendingÃ¢â‚¬â„¢. A quantitative easing method has seen currencies depreciate significantly when their governments started the program (BOE, BOJ, and Fed). For now look to buy USD on pull backs.

The AUD has retreated from its 6-month high as it was deemed that the recent 3-day rally was a tad excessive. Couple this with both Japanese and US equities declining and convincing investors to reduce their demand for higher yielding assets. For now, look for investors to sell on upticks, of course this depends on how both commodities and investor risk appetite shapes up this morning after US sales data (0.7284).

Crude was lower in the O/N session ($49.86 down -19c). Crude has started the week under pressure after an IEA report for this year shows that total global demand may fall to its lowest level in 5-years. They expect consumption to fall -2.4m barrels a day to +83.4m, thatÃ¢â‚¬â„¢s a decline of +2.8% as worldwide GDP falls by -1.4%. Last week we witnessed prices advancing as the market once again put the Ã¢â‚¬Ëœdonkey ahead of the cartÃ¢â‚¬â„¢ believing that global equities meteoric rise since the beginning of Mar. had investors believing that economies are stabilizing and by default increase demand for the black stuff. The EIA report from last week showed a smaller inventory gain than the earlier API industry report. Inventories increased +1.65m barrels to +361.1m, while the API report said that stockpiles jumped +6.94m barrels (the highest in 20-years). The bullish report provided temporary market support but with inventories approaching record levels once again has investors thinking twice about investing. It was the 24th gain in 28-weeks. Until we see inventories decline substantially and sustainable demand destruction, there will not be a sustainable price gain. Industrial reports continue to show that rising oil inventories and falling demand signal that the worst of the recession may not be over. With US equities under pressure and gold unable to break its support level, investors were happy to own some of the Ã¢â‚¬Ëœyellow metalÃ¢â‚¬â„¢ as an alternative investment. However, some vocal analysts are starting to shy away from the commodity as the IMF will be required to offload some of its enormous position to raise capital for various projects and they are encouraging investors to sell on upticks ($896).

The Nikkei closed 8,842 down -81. The DAX index in Europe was at 4,536 up +46; the FTSE (UK) currently is 4,019 up +35. The 10-year TreasuryÃ¢â‚¬â„¢s eased 7bp yesterday (2.85%) and are little changed in the O/N session. Despite it being a lethargic trading session, Treasuries rallied as investors and traders continue to speculate that certain banks will require additional cash infusion after the US government completes its stress tests. Also, the Fed continues its buy-back program until Wednesday this week to try and keep rates low to promote growth. Expect traders to make the government pay up for off-the-run issues.

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