- Markets are off their best levels in early trading as traders give up some of the gains from yesterday's rally. Crude has reversed course several times this morning: oil was up after Iran test fired medium- and long-range missles, aiding a rebound from three-week lows, but the complex has since given some back discarding generally bullish weekly inventory data. Natural gas is off another 2% approaching levels not seen in nearly a month. Commodity stocks in general are seeing a snap back from yesterday's misery: NUE +7%, X +12%, MT +3% and PCU +4%. Merrill Lynch is lower once again after Fitch noted that it may cut the firm's senior debt rating. Several names within the tech sector are indicating the group is beginning to feel the effects of the slowing economy. A UBS analyst said CSCO-3% May sales would be flat and decline further in Q4 as US spending continues to slow, adding that enterprise spending remains weak. CSCO's CEO commented after the close yesterday that customers see economic recovery early next year, rather than later in 2008. Broadband developer ARRS-19% is hurting after it slashed guidance after the close, blaming "maturing demand" for certain products. MTSN-10% also cut its forecast yesterday, citing continued weakness in the memory market and lower production levels among customers. QLGC is one bright spot in the group trading up 10% after guiding Q2 results higher for the second time. Potash names are rebounding after several initiations at Canaccord Adams. The season's initial eps reports have not been received particularly well: AA is trading well off pre-market highs after an inline report yesterday; the company received a mixed bag of analyst reactions despite the generally dour expectations heading in. ZZ-20% after missing on revenue (and beating on EPS thanks to an accounting change). WWW-5% is off despite beating estimates and guiding in line. ISCA-4% after missing and lowering its full-year revenue outlook.

- In currencies, the USD was broadly softer during the New York morning, partly due to crude's turnabout. For the most part, the dollar remains within recent price ranges against the majors. The EUR/USD continues to consolidate in a 1.5610 to 1.5730 post ECB rate decision range. CHF was initially firmer following the launch of a missile test out of Iran, with USD/CHF is testing 1.0280 before recovering back above the 1.0330 level. Carry-related pairs are higher as European equities rebound from yesterday's initial weakness, generally aided by lower oil prices. The EUR/JPY is back above 168, while EUR/CHF was probing the 1.62 handle. Financial sector concerns remain on the radar, as the iTraxx Crossover Index remains around the 530bps level. In addition, the CAD strengthened throughout the New York morning as dealers noted CTAs and model type of trading programs purchasing CAD as its traded below the 1.0150 area. Verbal intervention in currencies remains in force as the G8 meeting concludes in Tokyo. The French Finance Minister said that the recent ECB rate decision is weighing on the euro's strength, adding that the USD/JPY and USD/CNY crosses are undervalued compared to euro crosses. The ECB's Ordonez repeated his stance that the ECB must prevent CPI risks from coming into effect while noting that risks from inflation are multiplying. He also reiterated that Germany's GDP could contract in Q2 in a technical rebound.