- Repeating a pattern seen over the last two sessions, US equity indices have opened lower and climbed toward yesterday's closing levels in early trading. There has been a mixed slate of earnings and data for investors to digest this morning, with the April Empire Manufacturing index hitting its highest level since last September while overall US March Industrial production declined more than expected. In addition, US foreclosures were up 44% m/m in March. Wal-Mart's CEO told a network morning show that he does not see a V shaped recovery for the US economy (marking his first public interview since rotating into the CEO position), and Burger King disclosed that restaurant margins were lower than expected worldwide in Q3 due to a slowdown in traffic in most markets in March. Front-month crude is also repeating its behavior from the last several sessions, popping over $50 during the European session and dropping towards $49. The DOE reported that crude inventories rose by more than 5.5M barrels in the latest week to nearly 367M barrels; a level not seen since the fall of 1990. Copper prices are returning towards 6 month highs after chatter of a second large Chinese stimulus package gains traction ahead tomorrow's Q1 GDP release.

- Government bond prices both in the US and Europe were firmer into the NY morning as stocks looked to open lower. But a notably higher bid-to-cover ratio in the BOE's latest reverse auction of £3.5 2014-2019 Gilts has pushed yields higher on both sides of the Pond. The 10-year Gilt yield is moved up some 7 basis points back above 3.25% while the US benchmark his drifted up 4 basis points back towards 2.8%. Interbank lending rates continue to decline as US 3-month LIBOR slipped to 1.1125%, but flight to safety remains an theme as government T-bill yields continue to drift lower. Reminder yesterday's US bill auction was 5x oversubscribed.

- The Obama Administration appears to be stressing out over the stress tests. Administration officials had earlier insisted that test results would not be made public, out of concerns of fallout for failing banks. But sustained criticism of the testing, from various critics (including FDIC Chairwoman Bair) seems to have hit home. Overnight the press was full of reports indicating the Treasury was considering various ways of releasing results of the stress tests in a way that would minimize the damage to the laggard banks, although it isn't clear precisely what information the government might disclose. Among the proposals supposedly under discussion are aggregating the data for a broad snapshot of the industry's health or some sort of "concept paper" to explain how to interpret the results of the stress tests. In other financial sector news, Citi China reported FY08 Net income that was +95% y/y, with strong growth in yuan-denominated lending. Charles Schwab beat estimates but disclosed some troubling metrics, such as considerably lower q/q ROE. Net charge offs at JP Morgan and Capital One were seen rising by non-trivial amounts on a m/m basis; investors are nervously awaiting American Express's data, which is due any time.

- The auto industry is limping even closer to bankruptcy as a foregone conclusion. Recall that yesterday GM's bondholders said they see an out-of-court scenario as even less likely, noting that their ad hoc committee has not received any new restructuring proposals from the company. During today's European session, Fiat's CEO said he sees only a 50/50 chance of successfully forming a partnership with Chrysler, warning that he will break off merger talks if the company doesn't extract big labor cost cuts by end of April.

- Three big sector leaders reported earnings yesterday and this morning that were positive on the whole, mixed with continued words of caution. Dow component Intel made a mockery of consensus analyst estimates, reporting first-quarter EPS of $0.11 versus expectations of $0.03, and beating on the top line by more than $150M. Intel's forecast for the next quarter was modest however, noting that conditions in Q2 would mirror those in Q1, while Q1 gross margins are down both q/q and y/y. Intel's CEO said he believes PC sales bottomed out and the industry is returning to normal seasonal patterns. CSX is the first big railway to report first-quarter results; its earnings were well ahead of estimates, while revenues were more or less in line. On the conference call CSX's CEO noted that customer activity is down by double digits in nearly every market the company serves, while the Q2 revenue outlook is unfavorable in 9 out of 10 of its markets. Mid-cap pharma Abbott Labs came in ahead of the Street by a bit and missed on revenue by more than a bit (thanks to FX), and offered guidance ranges in line with analysts. Abbott's CEO said that more people are choosing not to fill prescriptions and the company is seeing more changes to managed care plans than expected.

- In currencies, the European session saw more of jockeying between risk aversion and risk appetite ahead of China's GDP data on Thursday. The gradual recovery in European bourses ahead of the NY morning was pinned on hopes that China would launch a second stimulus package, and market participants were sorely disappointed when China only announced an outline of a stimulus plan for the electronics sector, with the measures expected to contribute 0.7% to GDP over three years. The steeper drop in Russia's March Industrial production impacted the energy sector, helping NYMEX crude to surrender its electronic session gains. The recent spat of global data has dampened hopes that the worst of the economic crisis has passed.

- EUR/USD successfully breached 1.3200 level in the Chinese aftermath and complemented by comments by ECB's Weber that the ECB would announce non-conventional measures at its May policy meeting and would be valid for remainder of 2009 and 2010 period. The GBP/USD tested the 1.50 handle for the since Jan 12th and it was met with some stiff speculative selling as it proceeded to fall 100 pips. Dealers noting that some medium term longs were using the 1.5000 handle as a good level to book profits. The US Mar CPI YoY figure posted its first annual decline since August 1955, bring the fear of deflation back to the front burner.

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