The dollar has dropped 1.4% against the volatile Australian dollar and has lost 0.4% against sterling and the Canadian dollar, 0.3% against the euro, and 0.2% relative to the Swiss franc. Dollar/yen edged 0.1% higher.

European stocks tumbled further: Dax down 1.4%, Ftse off 1.7%, and Cac40 down 0.9%.

In the Pacific Rim, the Nikkei and Hang Seng firmed 0.3%. Stocks rose 3.3% in India, 4.2% in China, 1.4% in South Korea and 1.3% in Thailand. Stocks also climbed 0.9% in Australia but fell 0.6% in South Africa.

Japan's five-year JGB auction went better than expected. The 10-year JGB yield rose 2.5 bps, however, to 1.265%. Bund and Gilt yields firmed, too.

Oil recovered 2.7% to $38.79 per barrel. Gold rose 0.9% to $827.90 per ounce.

Chinese GDP growth in 2007 was revised up to 13.0% (most since 1993 and the fifth straight year of 10% or more) from 11.9%. A deceleration to 7% or less currently feels like a swing from +4% to -2%.

German real GDP expanded 1.3% in 2008, half as much as in 2007 and implying a non-annualized contraction last quarter of at least 1.5%, worst since 1Q87. When adjusted for variations in working days, GDP increased only 1.0% last year. Domestic demand and inventory building accounted for 1.5 percentage points (ppts) and 0.3 ppts of growth last year, while net foreign demand exerted a drag of 0.3 ppts after augmenting 2007 growth by 1.4 ppts. Private consumption was unchanged last year. Germany's Deputy Economics Minister stated the obvious fact that growth in 1Q09 would also be negative.

Australian housing finance increased 1.3% in November, buoyed by a central bank rate cut.

The Bank of Thailand cut its key one-day repo rate to 2.0% from 2.75%. That 75-basis point reduction was a bit more than expected and follows a 100-bp cut in early December.

Russia's rouble underwent a mini-devaluation against its target basket for the third time in four days and is 19% below its cyclical peak.

Euroland industrial production fell 1.6% in November and by 7.7% from a year earlier. Intermediate goods and consumer durables dropped by 2.8% and 2.4% in the latest month. Steep monthly declines were shared by Portugal (5.8%), Germany (3.3%), The Netherlands (3.2%), Finland (2.7%), France (2.4%), Italy (2.3%) and Spain (2.2%). A 10.2% rise in Irish output bucked the trend. Euroland output in October/November was 3.3% less than the 3Q mean level.

Real plant and equipment orders in Germany plunged 30% in the year to November.

South Korean employment posted the first on-year drop (12,000) since October 2003.

French consumer prices slid 0.3% last month, cutting on-year inflation to 1.2%. Lower-than-assumed inflation in many Euroland members has kindled speculation that the ECB can and will cut rates much more steeply than they implied a month ago. But forecasts for the size of tomorrow's reduction remain centered on 50 basis points to 2.0%. Problem is that would only tie the historic low, and circumstances now justify greater policy ease than in 1999 when the euro was depreciating.

Markets await the release at 13:30 GMT of U.S. import prices and retail sales. Each will be sharply lower.