- Equity markets have begun the week in positive territory, helped by declining commodity prices. Oil futures have shed about $4/bbl and gold has fallen this morning as the dollar has firmed. Iran has been making conciliatory noises regarding a package of incentives from the Western powers, while still maintaining it will not give up its nuclear rights. The grains are trading down 4-5% in Chicago led by Wheat while August natural gas is off close to 5% despite the formulation of the season's first hurricane. Financials are impacting markets negatively, led by European banks UBS-4.3% and CS-4.5%; overnight a Swiss newspaper reported that the two banks may need to raise $68B in additional capital to meet new demands from the Swiss government banking supervisor. The report says the banks would likely have to sell equity to raise the capital, thus diluting current shareholders' stake in the companies. Brokerage KBW later raised its ratings on the European banking sector, while Banc of America narrowed UBS's Q2 loss view considerably. CS saw several price cuts, however. MI-7.3% slashed its guidance, stated that it intends to increase its loan and lease loss allowances for the remainder of 2008; the bank suffered a round of price target and ratings cuts overnight. Autos names GM and F are trading up a bit after the Wall Street Journal reported that GM may cut thousands more white collar jobs and sell brands to boost liquidity, while a Chinese newspaper noted that China's Cherry Automobile is considering buying Volvo from Ford. In health care APPX+31% is surging after Fresenius said it would acquire the firm for $23/shr in cash, or $29/shr if certain financial conditions are met. TEVA-7.7% is falling after a Phase III study failed to demonstrate higher efficacy. In tech, AAPL is up nearly four percent after Oppenheimer said AT&T is bullish on the new 3G iPhone. After recent statements to the effect that it would never consider a deal with the firm ever again, MSFT is saying it is interested in buying some or all of YHOO. Carl Icahn announced this morning that he has been speaking with MSFT CEO Ballmer "frequently" over how to do a deal with YHOO. "Steve [Ballmer] made it clear to me that if a new board were elected, he would be interested in discussing a major transaction with Yahoo," said Icahn. YHOO is up more than seven percent on the news. Traders should note that earnings season kicks off tomorrow morning with Alcoa +5%, followed by Dow components GE, MAR, PBG and PGR later in the week.

- The dollar continues to be aided by various factors, as dealers noted a tepid return of risk appetite, even-keeled equity markets and a drop in commodities heading into the G8 meeting. The USD has maintained a firm tone during the New York morning, with EUR/USD at 1.5640, lower by 50 pips from the start of Asian trading. Dealer chatter is circulating regarding pending euro bond redemptions due later in the week. The GBP/USD is consolidating in its lower trading range; the cross is around 140 pips lower 1.9685 following the soft UK industrial production data. USD/CAD is holding steady around the 1.0215 area with falling crude prices aiding the cross. In addition, Canadian May building permits were +1.1%, which was above expectations.