Friday's meltdown in U.S. equities lost its significance when the very sector that was allegedly driving it lower closed higher on the day. An index of regional U.S. banks rose as investors took profits, at the same time that other investors took signs of weakness as reason to become more concerned about the duration of recession. Today's onslaught for stocks apparently takes its lead from insufficient strength in the Japanese GDP report, which missed its forecast by two-tenths as growth rebounded on an annual basis at 3.7%. But this appears more of a scapegoat than an underlying cause as more and more analysts realize that the stock market has over played the extent of the recovery.

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To prove the point, the dollar is today continuing the late Friday move higher against the euro, while the Japanese yen feels the benefit of more investor funds being repatriated back home as higher yield once again loses out. Sliding stock markets are weighing heavily on that front.

The euro is declined to $1.4068 against the dollar and to ¥133.02 against the yen. Only the yen today has advanced versus the dollar. Even then the dollar has rebounded to ¥94.55 after the New York Fed's general economic index came in stronger than expected and showed expansion in the north east for the first time since November 2007.

It's hard to believe that the sole reason for Monday's selling pressure is a minor miss in Japanese recovery. After an 11% first quarter decline, a rebound was inevitable, but to take disappointment at the significant manner of growth doesn't do justice to today's sell off. The MSCI Asia Pacific index lost 3.3%, while Shanghai's 5.1% loss continues a decline from last week, which now leaves Chinese stocks at their weakest since the start of June.

Already much of the discussion in the market from mid-week was the state of the U.S. consumer and whether there would be enough ongoing lift from this driving sector of U.S. growth to continue moving the ball set in motion by the Fed's stimulus efforts. The weakness in retail sales and the fact that real incomes are still feeling the pinch detracts from the notion that, beyond the cash-for-clunkers scheme, the consumer can continue government efforts to revitalize the economy in a sustainable manner.

As investors rethink the likely pattern of consumption in the world's leading economy, they are also more skeptical over what it impact that might have on the behavior of the Chinese economy and in turn what impact that might have on commodity prices and demand. We're once again moving away from great sound bites for buying individual sectors or companies in specific areas of the globe that would be set to benefit from recovery, back into a virtuous downwards spiral. Investors are challenging not only the strength of the five-month long surge in equity prices, but also its roots.

Those currencies set to benefit from a revival in global growth are also taking it on the chin today. The Australian dollar buys a penny less against the dollar at 82.04 this morning while the Canadian dollar is also less valuable at 90 cents from Friday's 91 cents. Gold is down sharply with no strong inflation or deflation argument to buffer it either way. One ounce of gold is worth $932 today, while crude oil trades almost two dollars cheaper at $67.66 per barrel.

As risk-appetite gets reined in, we're curious today about the drop in value of the British pound to $1.63 against the dollar. A leading property agent in the U.K. notes that sellers reduced their asking prices by 2.2% in August, making this the largest dip since December. We've been rambling on about this for a while and of the opinion that a recovery in a huge asset bubble such as Britain's housing market can't simply rebound on a dime. As it turns out, fewer home owners dared try to sell their homes thanks to inability to get mortgage financing. That led to fewer homes on the market and prices rebounded. But with the first signs of life back in this market, sellers are finding themselves compromised.

We'd say that this is something that the Bank of England already understands about the economy and is in part behind why it recently expanded its asset purchase program because it also fears that a rebound is more likely built on sand rather than stone.