The focus early this week is on the shaky footing of the global recovery. With concerns increasing about the pace of global growth and increasing concerns about financial system stability, investors fled from risky assets and higher yielding currencies into safe haven currencies like the Dollar and Yen.

Update 10:30AM: The risk aversion from overnight carried over into US stocks as the Dow Jones fell below the 10K level, posting a 230 point loss (-2.34%) in early NY trading. The Nasdaq and S&P500 were off 3.2% and 2.75% respectively. Oil prices slid 3.5% to $75.50. Treasury yields continued to decline as investors fled to the safety of bonds with stocks faring so poorly.

There are concerns about the ECB having to refinance a €442 billion funding program on Thursday as its 1-year refi operations matures. The ECB has phased out its long-term refi operations over the last several month in an effort to wean European banks off of central bank life support. However, following the sovereign debt crisis the ECB brought back its 3-month fixed rate refis with full allotment. In other words, a one-year lending facility is being replaced with a three-month lending facility.

However the main impetus behind today's risk aversion seems to be growing fears of a double dip recession as we are seeing weaker fundamental data and the G20 made cutting budget deficits the main priority following their meeting over the weekend.

Overnight, Japanese data showed household spending down 0.7% y/y in May when forecasts called for a 0.3% gain. The unemplo9yment rate unexpectedly increased to 5.2% and industrial production slid 0.1% in May following a 1.3% increase in April. The three pieces of data are a bad cocktail for the Japanese recovery and added to the overall bearish concerns. The US data is expected to be fairly weak this week, with the monthly jobs report expected to show negative job growth for June.

The Euro took the brunt of investors worries, as it extended its slide from yesterday against its main rivals - the Pound, Swiss Franc, US Dollar and Yen.


The Euro hit its weakest since late 2008 against the Pound.


And set fresh record lows against the Swiss Franc, as well as hitting its lowest level in more than eight years against the Yen.


Commodity currencies were sold off today was well with the USD/CAD pair jumping from the 1.0240 area to start global trading to trade near 1.05 in early NY trading. The AUD/USD slid from the .8720 region to trade near 0.8560, a 160-pip move.


The flight from risk was apparent in most asset classes as equities were down, and US Treasuries were yielding below 3% for the first time in a year. A weakening yield is shrinking the spread between US bonds and comparable Japanese bonds, which is putting downward pressure on the USD/JPY which slid down to a low of 88.50 - a seven-week low for the pair. Japanese investors are seeing less payoff for investing in US Treasuries and are likely repatriating their funds.