Bears tore into the remains of the carcass of Wednesday's rally in equities to reveal the rotten bones beneath as it became abundantly clear that Chinese deficit spending would be designed around an objective of creating the 8% growth rate the nation has been accustomed to. Earlier many traders had inaccurately pinned hopes on a Chinese-led recovery. The dollar continues to benefit from safe haven status and takes away a sweetener today from consecutive cuts in interest rates at the Bank of England and the European Central Bank. The euro fell towards $1.25 while the pound dropped back towards $1.4000.

We note today that the reversal of positive sentiment is drumming both Canadian and Australian dollars to the floor. Higher commodity prices just yesterday had increased optimism that an export-led recovery to satisfy Chinese infrastructure projects would raise the appeal of both units. Today the Aussie is facing the reality of a fourth quarter contraction of GDP - news that on Wednesday was usurped by the China story. The Aussie is back to 63.85 cents per U.S. dollar and is down over a whole penny on the session. The Canadian dollar is also lower by one-and-a-half cents to $1.2866.

Slowly but surely, nations around the world are falling into line with the swift action taken by the Federal Reserve as it slashed rates to the bone in recognition of the severity of the problem. While everyone recognizes that fresh bad news creates further urgency to finding a solution, the dollar retains its appeal because yields cannot fall any further. Indeed, investors can still pick up a 3% yield by investing in U.S. government debt, while the debate over which global government's debt will perform best under a period of dire stress and strain rages on.

The fact is that the dollar can't be bashed further on a yield front, which is hard to say about currencies that do offer a yield. Note the demise of the euro following the fact that the ECB was once again resigned to cut rates by half-of-one-percent to 1.5%. While the data demands the move, the reality is that the council would rather not ease policy for fear of creating future problems.

In the last 24 hours more and more bad news has heaped up on our desks. The incredible share price pressure on General Electric continues to draw investor and media attention. More analysts and doubting Thomases point to obfuscation by management at the company, question diminishing shareholder equity and raise question marks over cash flow. None of this is good news while corporate denial appears a wasted effort given its track record clearly showing repeated occasions when the company has gone back on its words. The latest being the cut in the dividend, which has now led to a class action shareholder lawsuit by one investor stating that management misled her by essentially inflating its share price. That'll be an interesting tussle.

General Motors officially showed off its statement of going concern from its auditor - a traditional passage of rights as companies head towards bankruptcy, while rising sales at WalMart confirm consumers are having a hard time of it. Although the company raised its dividend today, it's swimming against the tide with far more companies having announced or more likely to announce a cut in theirs.

As the S&P 500 index eradicates Wednesday's gains, the dollar will likely strengthen throughout Thursday. As more economists are scratching forecasts for Friday's employment report and trading them up the ladder for an 8% unemployment rate, one wonders how markets will react. Will a huge number be met with optimism that the pace of change can't get much worse? Or will a lower than expected reading be met with a sigh of relief that things could have been worse? Stay tuned for that result.