Boosted by a new record high in oil ($126.38 in WTI crude), Toronto's S&P/TSX index surged to a new all-time high of 14691.91, breaking though the previous 14625.76 recorded on July 19, 2007. This is the sixth consecutive session that crude oil has reached a new record high. WTI crude closed down $2.01 at $123.95 and the S&P/TSX closed at 1466.07.

The U.S. Treasury on Monday released its monthly figures for government spending, receipts and the monthly deficit. Monthly receipts totalled $403.751 billion and spending came in at $244.469 billion, resulting in a surplus of $159.282 billion, a 10.4% decline from the prior year.

U.S. GDP growth will remain relatively sluggish but should see improvement in the second half of the year, with a return to potential in 2009, said Chicago Fed President Charles Evans on Monday. Fed policy has been accommodative and appropriate, balancing the dual mandate between growth and inflation, Evans said, adding that growth risks remain to the downside while inflation risks remain to the upside.

In the Q&A, Evans said consumers are under "a lot of stress" and the retail market may not receive a large boost from the fiscal stimulus package, though its effects should be "noticeable" in the broader economy. Moreover, there's not enough time to initiate another effective second stimulus package, he added.

Keeping inflation contained is "very favourable" to the U.S. economy and the Fed continues to monitor foreign exchange impacts on those pressures, Evans said. Currently, inflation is "above what many of us" prefer, he said, adding that energy prices are creating headwinds that are holding back the economy.

Canadian Finance Minister Jim Flaherty says the federal government will continue to focus on debt reduction rather than massive new spending as it works to help the country through its current economic challenges. In a speech to the Economic Club of Toronto on Monday morning, Flaherty said cutting the debt and reducing taxes are cornerstones of the government's philosophy.

He also said he will likely talk to his provincial counterparts about creating a single national securities regulator, the lack of which probably cost Canada a deal with the U.S.-based SEC on so-called securities free trade. The SEC inked such a deal recently with Australia instead of Canada. The minister said Canada has not suffered as badly as the U.S. from the economic problems that began with last summer's global financial market turmoil. "Although our economy is closely tied to the United States, we are not the United States," he added.

The growth of new housing prices in Canada slowed in March on both a monthly and annual basis, Statistics Canada reported Monday. The slowdown continued a trend that began in September 2006 and was mainly the result of a softening market in Alberta, the statistical agency reported. Nationally, prices rose in March, in line with economists' expectations of a 0.2% gain over the previous month. February's monthly increase was a tick higher at 0.3%. On an annual basis, prices rose 6.1% across Canada between March 2007 and March 2008, a slightly slower pace than the 6.2% year-over-year increase seen in February.

It is essential that monetary policy-makers focus on maintaining price stability in the present environment where globalization contributes to upward price pressures, European Central Bank President Jean-Claude Trichet said while attending a conference on globalization at Bocconi University in Milan on Monday. Trichet also stressed that inflation expectations needed to be anchored.

"Medium-term price stability can be delivered by preserving the firm anchoring of inflation expectations and by ensuring the absence of second-round effects," Trichet said. While the ECB president emphasized that the current monetary policy would help to stabilize CPI, he also acknowledged that price shocks affected monetary policy by limiting its impact.

European Central Bank Executive Board member José Manuel González-Páramo spoke at the Escuela de Finanzas Aplicadas in Madrid on Monday and said that price stability was essential and was the focus of monetary policy-makers in the euro area.

"Price stability is the fundamental mandate of the central bank and anchoring inflation expectations underpins all our decisions," González-Páramo said. He also stated that he saw a "crucial moment" in markets and that the rise in Euribor rates has not been exaggerated. The ECB is constantly on alert regarding the evolution of prices, González-Páramo stated, adding that the ECB must maintain its inflation fighting stance.

Earlier on Monday, numerous components of UK's April producer prices data series rose to record highs, according to figures published on Monday by the Office for National Statistics (ONS). The ONS said producers' input prices rose 2.4% in April from 1.7% in March, well above market forecasts for a 2.0% increase in seasonally adjusted terms. Year-over-year, April input prices rose 23.1%; the highest increase since records began in 1986. It follows a 20.5% rise in March and forecasts for a 21.7% increase.

China's consumer price inflation for April came in close to a 12-year high in April on the back of continually rising pork prices, the country's National Bureau of Statistics (NBS) said in a data release on Monday. Annual inflation rose to 8.5% from 8.3% in March, just below a record high of 8.7% last seen in February. Food costs rose 22.1% in April in year-over-year terms, the NBS said.

Shortly after, the People's Bank of China rose the reserve ratio to 16.5%, 50 bps above the previous 16.0% level.

According to the U.S. Geological Survey, China's Sichuan province was hit by a magnitude 7.8 earthquake on Monday morning. According to local news agency Xinhua, the death toll has topped the 7,500 mark.

The Japanese economic outlook is uncertain, said Bank of Japan Governor Maasaki Shirakawa at a luncheon of the Japanese Press Club on Monday morning.

Although a slowdown in the economy is expected, Japan should return to a moderate path of positive GDP, he said, citing low interest rates in the country. Shirakawa added that the BOJ was also monitoring the inflation situation and downside risks to growth, adding that the Board was not committing to a predetermined monetary policy path.

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