UBS post TARP is calling for the Oct FOMC to ease 50bp, to 1.5% and says there're 25% odds of an intermeeting ease before the meeting. UBS sees Dec FOMC easing to 1.25% and Jan FOMC to 1.0 %, where funds should remain until end-Q2:09.

A knee-jerk selling effort has followed the announcement that the House of Representatives approved the ammended asset purchase plan. That reaction erased more than 300 points from the Dow Jones Industrial Average. The Dow actually fell all the way into the red, though only for a moment. It quickly pulled back into positive ground.
The concerted selling effort follows the build up that led up to the House vote. That build up had each of the major indices sporting gains of at least 3.0%.
Advancing issues in the S&P 500 are now relatively in balance with declining stocks. There had been an overwhelmingly bullish tone early on.

The dollar headed for its biggest weekly gain ever against the euro on a surge in demand for U.S. currency funding amid a worldwide credit crunch.
The greenback advanced versus the yen on speculation the U.S. House of Representatives will approve a $700 billion financial bailout after rejecting the plan Sept. 29. The government's payroll report showed the U.S. lost the most jobs in five years last month.
``Very strong demand for dollars is still evident,'' said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York. Traders waited until after the payroll data to buy dollars against the euro because they wanted to ``clear the event risk,'' he said.
The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars increased to 4.33 percent, the most since January, the British Bankers' Association said. The Libor-OIS spread, a gauge of cash scarcity among banks, widened to a record.
By a vote of 223-205, the U.S. House prevented members from offering amendments that could snarl passage of the bailout. The tally signaled the plan has enough support to clear Congress and be sent to President George W. Bush to be signed into law.
At least 12 House members said they will drop their opposition to the plan and support it. The measure failed by a dozen votes earlier this week. The Senate voted 74-25 on Oct. 1 in favor of legislation that links the rescue to an increase in bank-deposit insurance limits and tax breaks.
``The scarcity of the dollar in the market is keeping it supported,'' said Samarjit Shankar, director of strategy for the global markets group in Boston at Bank of New York Mellon, the world's largest custodial bank, with more than $23 trillion in assets under administration. ``The bailout plan could take the dollar further up.''
The dollar also benefited from a ``relief rally'' today, according to Andrew Busch, a currency strategist at BMO Capital Markets in Chicago. He said the payroll data was not as bad as some people thought after last month's bankruptcy of Lehman Brothers Holdings Inc. sent the financial market into turmoil.
U.S. payrolls shrank by 159,000 last month, following a revised decline of 73,000 in August, the Labor Department said today in Washington. It's the biggest loss since 2003. The jobless rate stayed at 6.1 percent.
``It's not doing any good for money markets and liquidity given the real economy is starting to freeze up,'' said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. ``The market is short of dollar liquidity, so the dollar remains bid.''
The euro was headed for a record weekly drop against the dollar after European Central Bank President Jean-Claude Trichet said yesterday policy makers discussed cutting the main refinancing rate. European economies face ``increasing downside risks,'' he said at a press conference following the decision to keep the benchmark at a seven-year high of 4.25 percent.
Five European banks including Dexia SA, the world's biggest lender to local governments, and Fortis, Belgium's largest financial-services firm, accepted government-backed bailouts this week.
Futures on the Chicago Board of Trade showed an 84 percent chance that the Federal Reserve will cut the 2 percent target lending rate for overnight lending between banks by a half- percentage point at its Oct. 29 meeting, with the balance of bets on a reduction of 0.75 percentage point. Futures showed no chance of lower borrowing costs a month ago.

Stocks continue to move lower, but have recently pulled upward. There is no news item immediately related to the moves.
Though the decline has pulled the S&P 500 off its session high, where it sported a gain of 3.2%, its gain is still strong at 2.0%.
Most influential in the advance of the S&P 500 is Exxon-Mobil (XOM 80.01, +2.51). Shares of Exxon Mobil and other integrated oil and gas players (+3.2%) are gaining attention after being sent lower in previous sessions. A rise in oil prices has also helped.
Oil is currently up just 0.5% to $94.40 per barrel. It was up 2.2% earlier.

Economist Steven Ricchiuto at Mizuho says "The details of the latest factory orders report came in decidedly weak" and the 4% drop was broad based. He now ests Q3 GDP growth will be negative.

"The pace of deterioration in labor market conditions appears to be accelerating as the economy rapidly loses momentum. As a result, we believe that the Fed will announce an intermeeting 50 bp cut in the official fed funds target rate at some point in the coming days. However, it is worth noting that the Fed has already engineered a steal ease since the effective average funds rate has averaged 1.32% over the past two weeks.

Stocks have fluctuated in recent minutes as Republican leaders from the U.S. House of Representatives sounded optimistic about their progress in discussions related to the federal asset purchase plan. However, they remain noncommittal.
The gains in the financial sector have eased, but remain impressive. The sector is up 2.6% currently.
According to a CNBC spokesman, Citigroup (C 20.20, -2.30) is considering a lawsuit against Wachovia Bank (WB 6.81, +2.90). Citi planned to acquire Wachovia's banking operations in a deal brokered by the FDIC. Wells Fargo (WFC 37.12, +1.96) emerged to make a stock-for-stock transaction with Wachovia, in which it will acquire all of Wachovia without the help of a government agency. Although, Wells Fargo will issue $20 billion in securities to help maintain its capital position.

Economist Ryan Wang at HSBC says ISM non-manufacturing at 50.2 shows an above average gap to Mfg ISM at 6.7 pts, showing divergence. He says details were "solid."

"10 non-manufacturing industries reported growth in September. Respondents' comments are positive about the reduction in fuel and commodity costs; however, they remain concerned about overall market conditions and the economy."

Stocks start the session with strong gains. The advance is the most pronounced in the financial sector, which is up 3.5%.
Participants are pushing shares of financial companies higher since the sector will be the most immediate beneficiary of a federal plan to acquire distressed assets, particularly difficult to trade mortgage-backed securities. The plan proposes to fund the purchases with $700 billion and is currently up for vote in the House of Representatives.
Though the plan would help create a market for many of the distressed assets that are driving losses at financial institutions, threats to the broader economy loom.
September nonfarm payrolls declined 159,000, exceeding the consensus forecast of a 105,000 decline. The decline was the largest since early 2003. Losses continue in construction, manufacturing, and retail. The unemployment rate remains at 6.1%.

Mizuho economist Steven Ricchiuto says details of employment report were as weak as the headline of -159,000 jobs. He says "the job losses were broad based" and "the only reason the jobless rate did not rise was a downward adjustment in the number of worker counted as in the labor force. The monthly jobs data imply a another month of disappointing industrial production, capacity utilization, and personal income."

Stock futures continue to trade in front of fair value. S&P futures vs fair value: +11.50. Nasdaq futures vs fair value: +14.00.

Nonfarm payrolls fell 159,000 in September, marking the ninth consecutive month of declines. Economists, on average, were looking for a loss of 105,000 jobs. The unemployment rate continues to stand at 6.1%. The unemployment rate of 6.1% remains the highest since 2003. The change in nonfarm payrolls for August was revised upward to reflect a loss of 73,000 jobs. Though the data are rather disappointing, traders are keeping a watchful eye on the House of Representatives vote for the the asset purchase plan.
Wells Fargo (WFC) is merging with Wachovia Bank (WB) in a stock-for-stock transaction. Wachovia had been looking to combine its banking business with Citigroup (C) in a deal facilitated by the FDIC. The transaction between Wells Fargo and Wachovia does not require any assistance from a government agency, and has been approved unanimously by the boards of both companies. The transaction is valued at $15.1 billion, or $7.00 per WB share. Just a day after announcing it expected to earn a modest profit in its latest quarter, UBS (UBS) announced it is cutting 2,000 investment banking jobs, according to Reuters.

Ian Shepherdson, Chief U.S. Economist at HFE, says employ data mean "The U.S. economy is shrinking, and there will be many more awful reports like this. Payrolls were weak everywhere except govt and education; big change is in services, down a huge 2K, way below the -15K prior trend. Note that the core unadjusted numbers even worse than the headline; the seasonal was 80K better than Sep last year. Q4 should see much more adverse seasonals which, together with the deteriorating trend, implies payrolls similar or worse than Sep. Fed has more to do, 50bp ease Oct 29 or sooner."

Below Y104.80 support losses widen to Y104.50 and then may reach Y104.20/10 and Y103.80/60. Offers Y105.50. Resistance is around Tuesday’s high on Y106.50, then – at Y107.00 should recovery extend.

Pressed back under $1.7700 on reaction to the US data. The pair comes to $1.7650 at time of writing. Bids seen at $1.7630 and $1.7610/00, with a break below exposing Thursday's base at $1.7550.

The dollar fell against the yen, headed for a third weekly loss, before a government report that will probably show the deepening credit crunch contributed to the biggest drop in employment in more than five years.
The currency also fell against the euro on speculation the U.S. economy will weaken regardless of whether lawmakers pass a bill to buy troubled assets from banks in a vote today. The dollar retreated from the highest in more than a year against the currencies of the U.S.'s six major trading partners.
``The risk is that the jobs data will come in below market consensus,'' said Adam Cole, head of global currency strategy in London at Royal Bank of Canada. ``That will put pressure on the dollar in the near term.''
U.S. employers probably eliminated 105,000 jobs last month, after slashing 84,000 in August, according to the median forecast of economists surveyed by Bloomberg News. The Labor Department's report is due at 8:30 a.m. in Washington. The unemployment rate held at a five-year high of 6.1 percent, according to a separate survey.
``There's a high chance the dollar falls against the yen,'' Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland in Tokyo and a former Bank of Japan currency trader, wrote in a research note today. ``The market is likely to price in bad jobs numbers and the chance of a Fed rate cut. We're in the middle of a string of disappointing economic data.''
Futures on the Chicago Board of Trade yesterday showed a 94 percent chance the Fed will cut its 2 percent target rate for overnight lending between banks by a half-percentage point on Oct. 29, with the balance of bets on a quarter-point reduction. Futures showed no chance of lower rates a month ago.
The U.S. House of Representatives will vote on the latest version of a $700 billion bank rescue plan at about 12:30 p.m. in Washington. The Senate voted 74-25 on Oct. 1 in favor of legislation that links the rescue of the financial industry to an increase in bank-deposit insurance limits and tax breaks after the House rejected an earlier version of the bill.
The euro was still set for a record weekly drop against the dollar after European Central Bank President Jean-Claude Trichet said yesterday policy makers discussed cutting the benchmark interest rate before holding it at 4.25 percent. The 15-nation currency declined 5.1 percent versus the dollar, the biggest weekly drop since its debut in January 1999. It fell 5.8 percent against the yen, the biggest weekly decline since March 2000.
Investors should sell the euro at 145 yen with a target of 135 yen after the ECB signaled it may lower borrowing costs for the first time in five years, Morgan Stanley said.
``Growth prospects in the eurozone are dimming quickly and may force the ECB's easing hand sooner rather than later,'' New York-based Sophia Drossos and Yilin Nie, strategists at Morgan Stanley, wrote in a research note yesterday.
US data sees the 1230GMT release of non-farm payrolls, which are expected to fall 100,000 in September, as the impact of Hurricanes Gustav and Ike impacted work conditions in the affected regions. Educational workers should return to work in the September data, though seasonal factors should anticipate this jump. Manufacturing payrolls are expected to fall 40,000 in September. The unemployment rate is expected to stay at 6.1%. Hourly earnings are forecast to rise 0.3% in the month, while the factory workweek is expected to stay at 33.7. Later US data sees the 1400GMT release of the ISM's non-manufacturing index, which is forecast to fall to a reading of 49.7 in September after nching above 50 in August.

"The official payroll numbers have tended to be rather weaker than ADP (-8k); the spread is typically about 60K, suggesting we should look for headline payrolls closer to -70K than our -100K forecast."

Joining Citigroup and JPMorgan economists are also Royal Bank of Scotland, Barclays Capital and BNP Paribas, who have also changed their ECB rate call. RBS & BarCap are now going for a November rate cut vs December previous, whilst BNP look for a rate cut in Q4 2008 vs pervious forecast of a cut in Q1 2009.

The dollar fell against the yen, headed for a third weekly loss, before a government report that will probably show the deepening credit crunch contributed to the biggest drop in employment in more than five years.
The currency also fell against the euro on speculation the U.S. economy will weaken regardless of whether lawmakers pass a bill to buy troubled assets from banks in a vote today. The dollar retreated from the highest in more than a year against the currencies of the U.S.'s six major trading partners.
``The risk is that the jobs data will come in below market consensus,'' said Adam Cole, head of global currency strategy in London at Royal Bank of Canada. ``That will put pressure on the dollar in the near term.''
U.S. employers probably eliminated 105,000 jobs last month, after slashing 84,000 in August, according to the median forecast of economists surveyed by Bloomberg News. The Labor Department's report is due at 8:30 a.m. in Washington. The unemployment rate held at a five-year high of 6.1 percent, according to a separate survey.
``There's a high chance the dollar falls against the yen,'' Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland in Tokyo and a former Bank of Japan currency trader, wrote in a research note today. ``The market is likely to price in bad jobs numbers and the chance of a Fed rate cut. We're in the middle of a string of disappointing economic data.''
Futures on the Chicago Board of Trade yesterday showed a 94 percent chance the Fed will cut its 2 percent target rate for overnight lending between banks by a half-percentage point on Oct. 29, with the balance of bets on a quarter-point reduction. Futures showed no chance of lower rates a month ago.
The U.S. House of Representatives will vote on the latest version of a $700 billion bank rescue plan at about 12:30 p.m. in Washington. The Senate voted 74-25 on Oct. 1 in favor of legislation that links the rescue of the financial industry to an increase in bank-deposit insurance limits and tax breaks after the House rejected an earlier version of the bill.
The euro was still set for a record weekly drop against the dollar after European Central Bank President Jean-Claude Trichet said yesterday policy makers discussed cutting the benchmark interest rate before holding it at 4.25 percent. The 15-nation currency declined 5.1 percent versus the dollar, the biggest weekly drop since its debut in January 1999. It fell 5.8 percent against the yen, the biggest weekly decline since March 2000.
Investors should sell the euro at 145 yen with a target of 135 yen after the ECB signaled it may lower borrowing costs for the first time in five years, Morgan Stanley said.
``Growth prospects in the eurozone are dimming quickly and may force the ECB's easing hand sooner rather than later,'' New York-based Sophia Drossos and Yilin Nie, strategists at Morgan Stanley, wrote in a research note yesterday.

-- Wells Fargo to pay 0.1991/share for each Wachovia share.

Resistance 3: Y108.00
Resistance 2: Y107.00
Resistance 1: Y106.50
Current price: Y105.06
Support 1: Y105.00
Support 2: Y104.50
Support 3: Y103.50
Comments: the dollar headed for a third weekly decline against the yen. The dollar fell for the third day against the yen on speculation the U.S. economy will weaken regardless of whether lawmakers pass a bill to buy troubled assets from banks in a vote today. For the week, theUSD/JPY fell 1%. Support is around Y104.80/Y105.00. Below losses may widen to Y104.50 and then – to Tuesday’s low on Y104.50. Resistance is around Tuesday’s high on Y106.50, then – at Y107.00.

Resistance 3: Chf1.1580
Resistance 2: Chf1.1420
Resistance 1: Chf1.1380
Current price: Chf1.1307
Support 1: Chf1.1275
Support 2: Chf1.1180
Support 3: Chf1.1120
Comments: The dollar is under pressure after yesterday’s rise before a government report that may show U.S. companies reduced workers for a ninth month amid the worst financial market meltdown since the Great Depression. U.S. employers probably eliminated 105,000 jobs last month, after slashing 84,000 in August, according to the median forecast of economists. The Labor Department's report is due at 12:30 GMT. The unemployment rate held at a five-year high of 6.1%, according to a survey. Futures on the Chicago Board of Trade yesterday showed a 94% chance the Fed would cut its 2% rate for overnight lending between banks by a half-percentage point on Oct. 29. Futures showed no chance of lower rates a month ago. Support comes atFibo level on Chf1.1275/80 (23.6% of the Chf1.0820 – Chf1.1420 upmove), Break under will point to further losses to Chf1.1180 and then – to Chf1.1120. Strong resistance is around yesterday’s high on Chf1.1420. Next band of resistance is near Dec’07 highs on Chf1.1580/00.

Resistance 3: $1.7880
Resistance 2: $1.7820
Resistance 1: $1.7720
Current price: $1.7696
Support 1: $1.7600
Support 2: $1.7550
Support 3: $1.7440
Comments: GBP/USD slowly recovers following the EUR/USD. Minor support is around session low on $1.7600 with stronger level is around yesterday’s low on $1.7550. Resistance mentioned at $1.7720, stronger – at $1.7820 (23.6% of the $1.8670 - $1.7550 decline). Above the target comes at yesterday’s high on $1.7880.

-- BoE taking action in "extraordinary market condition".

EUR/USD $1.3850
USD/JPY Y105.40, Y105.45, Y105.50
USD/CAD C$1.0600, C$1.0800

Resistance 3:$1.3960
Resistance 2: $1.3900
Resistance 1: $1.3840
Current price: $1.3875
Support 1: $1.3740
Support 2: $1.3680
Support 3: $1.3550
Comments: The euro headed for its largest ever weekly decline versus the greenback after European Central Bank President Jean- Claude Trichet said yesterday policy makers discussed cutting the benchmark interest rate before holding it at 4.25%. The euro declined 5.3% versus the dollar for the week. Currently EUR/USD challenges resistance at Fibo level on $1.3840 (23.6% of $1.4170 - $1.3743 decline from Oct 01 to Oct 02). Above there is a chance for recover up to $1.3900/10 (38.2%) and $1.3960 (50%). Strong support is around $1.3740 (yesterday’s low) with a break under will widen losses to $1.5680 and stronger level on Sep 02 of 2007 low on $1.3540/50.

High Low Close
EUR/USD 1.4023 1.3742 1.3799
USD/JPY 106.28 105.08 105.34
GBP/USD 1.7727 1.7550 1.7623
USD/CHF 1.1412 1.1248 1.1371

EUR/JPY 148.67 144.85 145.36
EUR/GBP 0.7919 0.7821 0.7828
GBP/JPY 188.09 184.69 185.66
GBP/CHF 2.0091 1.9904 2.0039

Change % Change Last
Nikkei -213.50 -1.88% 11,154.76
Topix -24.16 -2.20% 1,076.97
FTSE -89.25 -1.80% 4,870.34
DAX -145.70 -2.51% 5,660.63
CAC -91.26 -2.25% 3,963.28
Dow -348.22 -3.22% 10,482.85
NASDAQ -92.68 -4.48% 1,976.72
S&P -46.78 -4.03% 1,114.28
10yr Note -1.2200 -0.324% 3.646%
NYMEX Crude Oil -4.56 -4.63% 93.97
Gold -43.00 -4.85% 844.30

05:45 Swiss Consumer Price Index (Sep) -0,3%
05:45 Swiss Consumer Price Index (YoY) (Sep) 2.9%
08:00 Е15 PMI services (September) 48.2 48.5
08:30 UK CIPS services index (September) 48.0 49.2
09:00 Е15 Retail sales (August) adjusted -0.4%
09:00 Е15 Retail sales (August) adjusted Y/Y -2.8%
12:30 USA Nonfarm payrolls (September) -84К
12:30 USA Unemployment rate (September) 6.1%
12:30 USA Average hourly earnings (September) 0.4%
12:30 USA Average workweek (September) 33.7
14:00 USA ISM Non-mfg composite index (September) 50.6