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05:54 ET Oil Action: Oil prices are higher on speculation that China may need to increase diesel purchases for its power plants, after State Grid Corp. of Chine said 0.5% of China's total power capacity remains shut after the earthquake on May 12. June Nymex futures are currently up 117 cents at $125.26, after trading in a range of $124.04 and $125.70.

05:51 ET Gold Action: Bullion traded on a firmer footing in relatively quiet trade. Prices firmed up to $886.30 early on in the European session after starting the session at $881.00. A slightly easier dollar tone added a modicum of support, but there has been a general lack of momentum as most participants look for the dollar to hold on to a supportive tone after a recent improvement in sentiment. Overall, gold maintains its broad $850-$890 trading range and only a move outside of these parameters would mark a significant change in sentiment.

05:19 ET FX Action: JPY consolidated in quiet European trade. USD-JPY extended Thursday's losses to record 104.16 lows following a stronger than expected Japanese GDP release and then regained its upside momentum on carry trade interest. The USD-JPY rally extended to 104.73 European session highs and EUR-JPY moved up to 162.40. The bulk of the flows came through the crosses, with good demand noted through EUR-JPY and GBP-JPY. AUD-JPY and NZD-JPY also extended overnight gains, largely in line with the USD-JPY rally rather than seen flows of their own. Japanese retail accounts have been noted on the move higher and there has been evidence of speculative activity. In the absence of key data, equity markets should dominate price action.

05:16 ET The eurozone posted a March seasonally adjusted trade deficit of EUR 2.4 bln, after a surplus of EUR 1.6 bln in February. March data meant the sa trade balance posted a deficit of EUR 2.1 bln in Q1, versus a surplus of EUR 0.8 bln in Q4 last year. This is nominal data, that is impacted by exchange rate developments, but the numbers nevertheless indicate that net exports detracted from growth in the first quarter of the year, with the rising EUR and slowing growth likely to have an impact on export demand. Indeed, unadjusted data showed that exports to the US grew a very meagre 1% y/y in the first two months of the year.

04:54 ET The Scandinavian central banks have entered a swap agreement with the Icelandic central bank to safeguard macroeconomic and financial stability according to the Swedish Riksbank. The swap facility agreement gives Iceland the right to buy euros against Icelandic crowns up to Eur 500 mln. The Icelandic economy is facing huge stress as it is dealing with its national banks having taking on large debts, while inflation is running high and the Icelandic crown has depreciated sharply (around 30% against the Euro since the beginning of the year, after carry traders unwound contracts).

04:41 ET ECB's Constancio sees no risk of recession in Europe. However, he added, that some forecasts show a slowdown in Europe and Germany, and warned that Europe is not immune to the U.S. financial crisis. Constancio also warned that inflatio has accelerated worldwide. Meanwhile fellow council member Mersch repeated that the current level of interest rates will contribute to reaching the ECB's medium term objective for price stability. He also said that while risks to growth "are on the downside" risks to inflation "are still on the upside". Nothing new in the comments, which are in line with a neutral stance on rates.

04:23 ET The BoE says it won't speculate on liquidity scheme size, after a report in the FT today on a possible bank demand for Gbp 80-90 bln. The BoE says it stands by its initial estimate of offering Gbp 50 bln to financial institutions to swap high quality mortgage-backed securities for government debt but reiterated that "there will be no arbitrary limit on the size of the scheme".

04:09 ET FX Action: CHF firmed up as market reduced risk in quiet European trade. EUR-CHF traded back in to the 1.6300 area, while USD-CHF consolidated ahead of 1.0500 after losing upside momentum around 1.0570. The CHF did not show much reaction to Swiss March retail sales, which registered a 2.5% y/y fall after rising 7.6% y/y in February. However, the data was reportedly distorted by the early Easter holiday. On the wholem retail spending has held up in Q1, but there are expectations for a slow down in the remainder of the year. The CHF has been focused on risk for a considerable period of time, with economic fundamentals holding up domestically. The SNB are expected to hold rates steady throughout the year, which will see influences like equity markets and the U.S. economic outlook driving price action.

03:42 ET Early Gilt Action: Gilt futures followed Bunds higher in opening trade, continuing the corrective move started yesterday afternoon. Meanwhile, stock markets have opened higher and the local agenda is lean. The June 10-year Gilt future is up +37 ticks to 107.48 and the 10-year cash yield is down -5 bp to 4.79%. FTSE-100 opened +0.38% higher.

03:34 ET ECB's Trichet repeated that there is no place for complacency on inflation, adding that price stability has to be ensured, even though CPI may deviate from the ECB goal due to shocks. He repeated that so far inflation expectations remain anchored, but warned that he sees the risk of second round effects from oil and good prices and stressed that the ECB is paying close attention to wage negotiations. Trichet also pointed out that the ECB has always taken firm and timely action. Nothing new in the comments so far, which confirm the central bank's neutral stance.

03:29 ET FX Action: EUR continued to trade inside familiar trading ranges. EUR-USD struggled to sustain the 1.5500 handle and early attention was on the downside as fund names and CTAs forced the pair down to 1.5467. Good support continues to come from sovereign names and European corporates, but upside momentum is lacking as the technical picture turns sour after a number topside failures. Intra-day shorts eye a move back into the 1.5440 region, which was the overnight low and then a challenge of the 1.5400 support below. Some negative headwind could come from the crosses, with EUR-JPY and EUR-CHF both losing their shine amid a reduction in risk appetite. ECB President Trichet was on the wires, but comments did not deviate from recent remarks. He said price stability has to be permanently ensured because credibility is not a given. He said it was obvious that eurozone unemployment was too high.

03:25 ET Swiss March retail sales fell -2.5% y/y after rising 7.6% y/y in February. However, data is likely to have been distorted by the early Easter holiday this year and indeed when adjusted for the number of shopping days, retail sales rose 9.7% y/y, versus 3.3% in February, suggesting that retail spending still held up well in Q1. The outlook for the rest of the year is more subdued, however. Yesterday's consumer confidence data showed a sharp drop and the labour market has started to show early signs of slackening, suggesting consumer spending will suffer this year.

03:00 ET French Q1 employment growth slowed to 0.2% q/q, from 0.4% in Q4 last year. Total employment was up 1.5 y/y, down from 2.0% y/y in the previous quarter. Interestingly, the construction sector continues to be the main driver of employment growth, which indicates that so far the impact of a slowing housing sector on the labour market has been limited. However, the mild weather over the winter months is likely to have played a role. Meanwhile wages rose 1.1% q/q in the first quarter of the year, and were up 2.7% y/y, versus a quarterly growth rate of just 0.3% q/q in Q4 last year. So signs that wage growth is accelerating despite a cooling labour market, which is not good news for the ECB.

02:59 ET Japan April consumer confidence declined to 35.2 NSA from 36.1 in March, lowest in 5 years. The index reflects anxiety surrounding fall-out from the global economic uncertainties, paralleling sentiment measures elsewhere around the world, and consistent with some loss of momentum in the Japanese economic expansion. It is likely facing additional pressure from the latest run-up in food & energy prices. Individual components for overall livelihood, employment, willingness to buy durables, and income, all declined to multi-year lows. Deressed confidence is a reminder that despite the better-than-expected GDP growth reported for Q1, the outlook for the Japanese economy remains clouded, leaving BoJ policy on hold indefinitely.

02:50 ET FX Action: GBP maintained its soft tone, with early selling noted from speculative accounts and interbank names. The early focus for traders is news that the chief economist of Ernst & Young Item Club has called for the U.K. to abandon its 2% CPI target. Peter Spencer said the U.K. Treasury must consider re-writing the BoE's mandate or the U.K. could face a unnecessarily deep and painful economic slump. Elsewhere, The U.K. biggest banks are looking to swap GBP 80-90 bln in mortgage backed securities for U.K. Treasury Bills. Cable made an early run into 1.9450, but bids into this level kept the pair at 1.9456 lows. Stops are reportedly located at 1.9510 from weak shorts, while recent longs will be forced to bail out of positions below 1.9400 and 1.9350. Elsewhere, EUR-GBP continues to trade on a supportive footing around 0.7945 after early sterling weakness saw the cross rally out of 0.7928 lows.

02:33 ET European FX Outlook: The USD has failed to build on gains made in the previous few weeks. Better than expected growth data out of Germany and the eurozone on Thursday saw the eurozone over U.S. yield spread extend to wider levels, correcting some of the recent narrowing and helping support EUR-USD. With U.S. real interest rates well in sub-zero territory it was always difficult to envisage a sustained dollar rebound, so perhaps it is not too surprising that EUR-USD looks to be finishing the week near the mid-way point of the range that has been seen this week. The calendar is quiet today. In Europe, the eurozone March trade balance is due, while U.S. markets have April housing starts and preliminary May consumer sentiment from the University of Michigan. We expect further erosion in housing while the consumer sentiment index should also remain little changed and mired at a depressed 63.0 level. Treasury Secretary Paulson will speak on the housing and credit markets.

02:31 ET European stock index futures are higher, following gains in the U.S. and Asia. Futures for the DJ Euro Stoxx 50, a benchmark for the eurozone, are up +24, while DAX futures are up +33.50. In the U.K. the FTSE 100 may rise 6, according to betting firm Cantor Index.

02:27 ET Bund early Action: Bund futures have opened higher, in what is likely a corrective mode, after three days of sharp losses. Stock market futures are higher and positive market sentiment could put renewed pressure on Bunds during the day. As of 6:24 GMT, the June 10-year Bund future is up +20 ticks at 113.38, while the 2-year Schatz future is up +1 tick at 103.39. In the money markets the June 3- months Euribor future is down -0.005 at 95.145, while back months futures are down up to the Mar '09 contract and higher further out.

02:23 ET U.K. banks are looking to swap around Gbp 80-90 bln in mortgage-backed securities in the BoE's liquidity scheme, according to the FT. The scheme, revealed on April 21, would allow financial institutions to swap high rated asset backed securities for government bonds. The BoE introduced the plan as a Gbp 50 bln offer but also stated that more funds would be available should there we excess demand. According to the FT, bond market participants believe that banks are now looking to repackage Gbp 80-90 bln of mortgages into securities that would be eligible to be swapped under liquidity scheme, suggesting there is plenty of demand for the Bank's swap offer. The plan has helped to ease some tension in money markets over the past few weeks, although the 3-month Sterling Libor rate has risen over the past three sessions due to changing rate expectations.

02:06 ET Eurozone April car registrations rose 10.8% y/y, much stronger than the merely 0.2% y/y average in the first four months of the year. However, this is unadjusted data, which means it is affected by the early timing of the Easter holidays, which meant March data understated real developments and April will overstate the trend, as there were more working days this year than last. So while April data looks very good on paper it is unlikely to be a true reflection of underlying trends and a correction in May is likely.

02:05 ET Singapore April non-oil domestic exports (NoDX) rose 1.6% m/m SA to +5.4% y/y from -5.9% y/y in March, somewhat better than the median forecast for +2.3% y/y. Electronics exports narrowed to -0.5% y/y from -8.5% y/y, and pharmaceuticals narrowed to -11.7%y/y from -34.1% y/y in March, though both remained negative y/y in April. The overall increase was boosted by petrochemicals +12.8% y/y. The March figure left NoDX within its SA range for the past year, fluctuating on month-to-month swings in categories such as pharmaceuticals, more a reflection of production schedules, rather than demand, which remains on upward trajectory in that sector. Demand is more uncertain for electronics, vulnerable to widespread fears of a more serious slowing in global demand. Thus far, however, the jury is still out, with exports apparently sustaining positive growth after annual NoDX growth moderated to 2.3% y/y in 2007 from 8.5% y/y in 2006. The y/y growth would be notably stronger if expressed ini USD, rather than SGD.

02:05 ET European Fixed Income Outlook: Bund futures opened higher, continuing to recover losses accumulated over the past three sessions. Today's local calendar is relatively quiet and features the eurozone March trade balance, which after the release of Q1 GDP adds further detail, but will not change the growth outlook. We are looking for a drop in the sa trade surplus to EUR 0.5 bln, down from EUR 2.1 bln in February. There is also ECB speak from Constancio.

02:04 ET Asia FX Update: The USD majors were fairly subdued, but there were signs of improving risk appetite among some currency movements and moves in other markets. This was partly reflected by U.S. Treasuries, which gave back some of the gains seen in Thursday's regular session in overnight trade in Asian hours. Gains in AUD-JPY and AUD-CHF were also reflective of this theme. Better than expected Japanese Q1 GDP data, which followed unexpected strength in German and eurozone growth data yesterday, helped offset Thursday's string of mostly tepid data releases out of the U.S., while global equity markets have mostly moved higher following the recent capping out in oil prices. See the FX Trader page.

00:58 ET Japan March industrial production revised to -3.4% m/m SA from prelim -3.1% SA, the steepest m/m plunge in production in seven years, following +1.6%. Shipments declined an unrevised -3.9% m/m after +1.2%, which together with inventory edging up +0.1% m/m SA (revised from 0.2%), left inventory ratio soaring m/m, though remaining within manageable range. The soft patch in the manufacturing sector had also been reflected in the dip in the coincident index below the neutral 50 level to 30.0 in March and the PMI slipping further below the neutral level to 48.6 in April, lowest in 5 years. It highlights some faltering in Japanese economic growth after the better-than-expected 0.6% (3.3% SAAR) GDP growth reported for Q1, and leaves the BoJ on hold indefinitely amid global uncertainties.

00:52 ET RBA Assistant Governor Debelle said that "The sub-prime market is markedly smaller in Australia than it is in the US. Moreover, a number of features of the US sub-prime market which have contributed to its current problems are not present in Australia including large teaser rates, a marked decline in lending standards and an originate and distribute model where the originator has a reduced incentive to care about the quality of the loan written. As a result, arrears rates are significantly different in the two countries. While the Australian financial system has had minimal direct exposure to the US sub-prime market, it has been affected by the global credit turmoil, particularly in the form of higher borrowing costs. However, the strength of the Australian banking system relative to those in a number of other countries, particularly the US, and the strength of the domestic economy more generally, has meant that the impact of the global turmoil has been relatively muted."

00:49 ET U.S. Treasury Action: yields have risen during Asian trade, particularly at the short end of the curve, eroding gains made overnight. Even though doubts are growing that the Fed could raise rates this year given the ongoing tepid economic data coming out of the U.S, yields are moving higher as riskier assets have stabilized and their appeal has grown. Stocks have made strong gains globally this week, while MBS indices have stabilized and swap spreads continue to narrow, all beckoning funds away from safe-haven Treasuries. The 2-year T-note yield had eased nearly 8 bp yesterday but has since moved up 5 bp to 2.489%, narrowing the 2-10s to 135 bp as the 10-year T-note yield edged up 2 bp to 3.841%. Jun T-bond futures have barely moved, only down 1 tick to 115-8.

00:20 ET Asian equity markets have moved higher as the USD has stabilized versus the JPY, oil prices came off record levels on profit-taking and resource-oriented shares and shipping stocks moved higher on tight supplies and record shipping rates. Japan's Nikkei is up 0.2% on the better-than-expected Jan-Mar GDP, extending gains for a fifth day, with exporters doing likewise on the weaker yen. Financial shares were upbeat after Mizuho Financial said it will buy back shares, and in spite a $2.9 bln quarterly loss on subprime investments it forecast a rebound in profits. Hong Kong has rebounded 0.8% on shipping stocks as cargo rates for raw materials surged to record highs, and Shanghai shares are slightly lower, -0.1%, dragged down by the end of the lock-up period for new shares by Bank of Communications. Australian stocks rose for a third day, now +1.2% to close in on 6,000, not touched in 3 months, with BHP Billiton leading the way on talk of a Chinese company interest, while other resource and financial shares also rose. Taiwan made a new 2008 high of 9241, +0.9% before easing off to +0.6% on gains in construction and transport stocks, all higher on hopes for better business ties with China after Mr. Ma becomes president next Tuesday.