Full of sound and fury, the weekend's gathering of political leaders, finance ministers, and central bankers from the G20 has managed to disappoint both the critics and the optimists. Washington summit produced neither more specific regulation that was feared as potentially stifling nor any concrete plans of additional stimulus, all in spite of the overwhelming consensus and explicit commitment to act in coordinated fashion coming out of the event. G20 statement did make general references to reform accounting rules, review executive compensation practices, work on greater cooperation between national regulators, and even reconsider free-trade talks as spelled out in Doha round, however equity investors looking for relief from activist resolutions were likely to be disillusioned. The next round of talks will be held on April 30, 2009 - 101 days into Obama presidency - and should produce a more timely assessment of the global economy and the impact of recent coordinated easing and stimulus actions. US President-elect was not in attendance but did send emissaries, issuing a statement supportive of global cooperation in months to come.

Over in Tokyo, markets were stunned by Q3 GDP data coming in short of estimates and showing a 0.1% contraction. Second consecutive quarter of economic decline pins Japan's economy with a technical definition of recession, prompting verbal response from cabinet officials. Economics minister Yosano confirmed severity of economic conditions and saw the downtrend as likely to persist, while pleading continued public sector efforts to shore up the economy. In turn, PM Aso's spokesman Kawamura reiterated government commitment to maintain focus on the economic outlook.

Nikkei shares opened the new week with a selloff but subsequently reversed initial losses on bargain- hunting, breaking into positive territory by mid-session break. Among the notables, Mitsubishi UFJ Financials announced plans to sell 390 billion yen of shares to 7 investors and Sharp looked to reduce production at Kameyama plant by more than 10% due to decreasing demand. Japan's auto sector continues to mirror high-profile malaise of the auto industry in the US.
Toyota Motor said it will look to cut Lexus production at its domestic plants to reflect decreasing demand just as its AAA rating was placed on watch negative at Fitch. Honda Motor's Fitch rating was also revised from Positive to Stable in response to weak operating performance due to currency appreciation and higher material costs amid sinking consumer demand. Meanwhile, Sony cheered the opening US weekend of "Quantum of Solace" - the latest James Bond epic - delivering $70.4M in sales of what was said to be best ever debut of a Bond film for the franchise. South Korea's Kospi and Hong Kong's Hang Seng also reversed initial weakness, trading within a percentage point of prior close.

Australia's S&P/ASX was notably unable to recover from session opening selloff, giving up over 2.5% just prior to close. Aussie retail sales data soured investor sentiment, coming in well short of estimates of 0.4% at 0.1% for the third quarter.
Australia's slumping housing sector is seen as having as substantial impact on the economy in months to come with Aussie financial institutions hurting from sharp declines in lending activity. James Hardie Building (JHX.AU) shed over 5% after reporting a 26% decline in earnings and suspension of dividend. CSR - largest Aussie maker of building products - was also a big loser on the session, giving up over 4% on announcement of share dilution as it looks to strengthen its balance sheet with a A$482M public offering. Elsewhere, St George merger with Westpac was formally approved by a federal court, while mining giant BHP lost over 3% on customer deferrals of iron ore shipments.

Front month contract for US S&P500 index is seen largely treading water in mid-Asian session, mirroring equity markets in Japan by reversing initial declines while posting 0.3% bounce. Healthcare products giant Covidien (COV), home-improvement staple Lowes (LOW), and mid-tier retailer Target (TGT) are on tap to deliver earnings pre-US open on Monday.

In currencies, initial risk aversion seen in equities and subsequent reversal were tracked by USD and JPY majors. EUR/USD gapped down toward 1.25 but bounced back to prior close just under 1.26, USD/CHF rally was contained by 1.20 resistance put in late last week, and GBP/USD oscillated between 1.4650 and 1.4770. USD/JPY briefly dipped below 96.00 before rallying back above 97.00 handle, EUR/JPY decline was contained by 120.00 figure prior to rebound to Friday's close just under 122.00, while GBP/JPY also returned to last week's final 142.70's print after a gap down to 140.00 and reversal just above 144.00. AUD/USD traded as low as 0.6370 but came just short of November low at 0.6340, maintaining potentially bullish inverse head and shoulders formation, while USD/CAD failed to take out 1.2450 November high in spite of initial weakness in oil prices.

Following the G20 meeting and the group's failure to specify how it will deal with the financial crisis, commodities are broadly weaker as the US is firmer against the European majors and the commodities currencies. Crude oil is lower by (%), while spot gold is declining by (%). In terms of the oil demand picture, China's CNPC noted on today's session that the credit crunch has had a significant impact on China's oil demand. The cautious comments out of CNPC follow reports that one of China's largest refiners, Sinopec, may lower its output in Nov by 10% due to lower demand. The decline in oil demand in China and other countries is one of the reasons that OPEC is mulling a production cut in November, as on today's session it was reported that Kuwait plans to go along with any OPEC output cut.