With news flow out of north America and Europe drying up this week, it was hard to see how stocks were going to be able to keep up their momentum, so a retrenchment to start the new week comes as no surprise. On Friday, European indices spiked on the hope that after six months of all talk and little to no action that the ECB may get serious about stimulus in a month or so (or maybe not who knows). Does this sound to anyone like the basis for a sustainable rally? Meanwhile, the stock market reaction to nonfarm payrolls was fairly limited considering how strong the data really was, which suggested that the huge rally of the last nearly two months had already priced in strong data and was nearing exhaustion. At this point, indices in North America and Europe look exhausted and vulnerable to falling under their own weight without new news demand to push them higher and the potential for new supply from profit-taking. Adding to the potential weakness was the poor economic news we saw from Asia overnight, reminding traders that outside of North America and the UK, most of the major world economies are struggling. Japan’s GDP has dropped off even faster than previously thought heading into an election next weekend. Interestingly, JPY is rebounding on this news, likely on short covering which suggests last week’s collapse may have finally washed out the weak hands and pressure on JPY for now. Although China’s headline number looked great, the underlying numbers were terrible and one has to wonder which was worse, the big miss on exports meaning lower demand from its customers, or the big drop in imports meaning that China’s demand for resources has dropped. The import figure clearly has had a big impact on commodity trading. Crude oil is down another 2% on fears the supply glut could expand with producers too busy fighting over market share to respond to falling demand. Many resource currencies have tumbled as well off the China news particularly NZD. CAD is down the least, holding steady with the greenback as Canada’s sensitivity to the strong US economy attracts attention. Corporate News There is no major corporate news out today so far. Economic News Economic reports released overnight and this morning include: China trade balance $54.4B vs street $43.9B China exports 4.7% vs street 8.0% China imports (6.7%) vs street 3.8% Japan GDP (0.5%) vs street (0.1%) Japan GDP annualized (1.9%) vs street (0.5%) Germany industrial production 0.8% vs street 0.9% Canada housing starts 195K vs street 192K Economic reports due later today include: FOMC member Lockhart speaking