The S&P 500 posts a loss of more than 2%.
Oil futures continue to rally. Oil for October deliver, which expires today, rose as much as 24%. It is up 19.6% to $124.20 per barrel. Oil for November deliver, however, is up 7.1% to $110.31 per barrel.
Commodities as whole are up 3.3%, with gold posting a 4.7% gain at $901.00 per ounce.

JPM says prior to MBS purchase plan they had looked for a $650b budget deficit for FY09; with the $700b MBS buy, raise that figure to $1.35 trillion. "The risk of a more aggressive Treasury GSE MBS purchase schedule, or general downside risks to the economic outlook, could easily take that figure to $1.5 trillion, or about 10% of GDP, a deficit figure not seen since WWII."

The major indices post steep losses, but have halted their recent decline.
Oil prices climb to a gain of 12.8% at $118.80 per barrel in very volatile trade. Energy stocks are up 1.7%.
The gains in oil prices are weighing on airline stocks (-9.7%) and transports (-3.6%) in general. Retailers are down 4.2%.

Nov is up a more modest $6.90 at $109.66.

But keep in mind today is the last trading date for that contract so settlement issues may be distorting. Nov contract trades at $109.30, up $6.55.

Stocks establish fresh session lows as crude oil prices continues to rally. Prices are now up 9.6% to $114.54 per barrel -- marking the largest one-day percent gain since February 1996. Oil prices have posted a gain during the last four sessions.
The dollar extends its decline, falling 1.8% against a basket of world currencies. The dollar is down 2.7% against the euro.
Moody's said the United States' Aaa rating is not presently threatened by the current challenging environment, noting the robust levels of economic and financial resilience of the U.S.

there are now 18 primary dealers.

Crude trading at $111.78, up $7.23 ahead of expiry today.

The dollar dropped more than 2 cents to a three-week low against the euro and fell versus the yen on concern a U.S. proposal to buy $700 billion of troubled assets from financial firms will deepen the budget deficit.
The U.S. currency weakened for a fourth day against the euro in its longest stretch of decline since June before reports this week forecast to show decreases in home sales and durable goods orders in August.
``The massive increase in the deficit is starting to make people rethink the shape of all sorts of things, including the dollar,'' said Alan Ruskin, head of international currency strategy for North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. ``We have shifted from the mode of buying dollars on dips to selling the dollar on upticks.''
The dollar fell 1.6 percent to $1.4700 per euro in New York, from $1.4466 on Sept. 19. The dollar may slide to $1.50 in the next several weeks, according to Ruskin.

Spot Gold is challenging the 200-day moving average -- currently valued at $893.24. A break and close above here today is seen improving outlook further and seen extending extending gains to $928.79, which is the 76.4% of the July to September downmove.

The major indices fall to session lows, with the S&P 500 down more than 2%. The recent downturn has been broad-based.
At the same time, crude (+4.4%, $109.16) and gold (+4.3%) prices rally to session highs. Oil prices are up 14% during the past five sessions.

Extending losses on a Chf1.08 handle and now dipping below Fibonacci support highlighted by MNI Techs at Chf1.0883. Bids in the Chf1.0850/40 area are coming closer into play, with stops reported under Chf1.0830/25.

Break above $1.4630 now favours further upside gains with very little resistance noted until $1.4660/65 and $1.4710 -- 38.2% retracement of decline from $1.6040. The hourly studies are turning higher and support the bullish tone of the daily oscillators. Support remains at $1.4560/50, a break below to open a deeper move toward $1.4520/10.

- Inflation still unacceptable; ECB to stick to mandate
- ECB position currently one of steady hand

The stock market extends its losses in mostly broad-based weakness. Nine of the ten sectors are posting a loss.
The financial sector is posting the largest decline, down 4.7%. The thrifts & mortgage group is down 8.8%, diversified banks are down 8.3% and regional banks are down 7.6%.
News of the possible bailout of financial instutions sparked a stock market rally on Thursday and Friday last week, but the plan is also prompting buying interest in commodities.
Crude oil prices are up 3.3% to $108.05 per barrel this session, and are up 13% since the low on Thursday. Gold is up 2.1% today, and is up 6% since its low on Thursday and commodities as a whole are up 1.3% today and are up 4% since the low on Thursday.
Conversely, the dollar has come under selling interest. The Dollar Index is down 1.0% today, and is down 2.0% since its high on Thursday.

Futures ( S&P futures vs fair value: -8.90. Nasdaq futures vs fair value: -7.80. ) climb to session highs, although a lower start is still indicated. Hewlett-Packard (HPQ) authorized an additional $8 billion for share repurchases. Hewlett-Packard had $3 billion of repurchase authorization remaining from its previous $8 billion program authorized in November 2007. Nike (NKE) announced a four-year $5 billion share repurchase program, which will start upon the completion of the company's current $3 billion program.
Microsoft announced an additional $40 billion share repurchase program and raised its quarterly dividend by 18% to $0.13 per share. MSFT is up 5.3% in premarket trading. Morgan Stanley (MS) is up 14% after Tokyo-based Mitsubishi UFJ Financial Group said it plans to buy between 10% and 20% of MS common stock, according to Reuters.

- Inflation going down, but still above price stability.
- In 2009 all of Europe to suffer lower growth

FTSE +18.17 +0.34% 5,329.47
DAX +29.14 +0.47% 6,218.67
CAC +13.49 +0.31% 4,338.36

- July retail sales ex-autos +0.4% m/m

The yen rose against the dollar and the euro on speculation the U.S. government's plan to rescue banks will fail to avert a global economic slowdown, prompting investors to sell higher-yielding assets financed in Japan.
The dollar dropped against the euro for a fourth day, the longest sequence of declines since June, on concern a U.S. proposal to buy $700 billion of troubled assets from banks will widen the country's budget deficit. The U.S. currency also fell against the Swiss franc as two-year Treasury yields declined for the first time in three days on bets the Federal Reserve will cut interest rates to revive the economy.
Treasury Secretary Henry Paulson's plan, sent to Congress Sept. 20, would mark an unprecedented government intrusion into markets and increase the nation's debt ceiling by 6.6 percent to $11.315 trillion. Officials may also provide $400 billion of guarantees for money-market funds.
The dollar fell before reports this week that will probably show tighter lending rules contributed to a drop in U.S. home sales and durable goods orders.
The bailout may end a dollar rally that began in June and drove the U.S. currency up 10 percent versus the euro, 2 percent against the yen and almost 13 percent compared with Brazil's real, strategists at Barclays and UBS AG said.
The dollar also fell as two-year Treasury yields dropped 7 basis points to 2.12 percent on speculation the Fed will cut interest rates as soon as next month. Paulson and Bernanke are due to testify before the Senate tomorrow about the banking crisis.
The yen typically rises when demand for higher-yielding currencies declines as investors reduce so-called carry trades. In such transactions, traders get funds in a country with low borrowing costs and invest in another with higher interest rates, earning the spread between the two. The risk is that currency market moves can erase those profits.

EUR/USD A dip back to $1.4560 met with semi-official demand, with euro-dollar breaking back above $1.4600 and on to fresh highs for the day into early US trade. Offers $1.4620/25, $1.4640/50, stops above, bids $1.4560.
GBP/USD Strong Asian demand emerged in Europe, lifting rate to a high of $1.8473, with euro-sterling able to ease below stg0.7900. Cable pared gains into late Europe, easing to $1.8380, while euro-sterling nudged to stg0.7915/20. Cable back at $1.8420 into NY.
USD/JPY A decent recovery stretched back to Y106.50, though dollar-yen was back under pressure late morning around Y106.15. Bids Y105.90, Y105.50/40, offers Y106.50/60, Y107.20/25.

At 12:30 GMT Canadian Retail Sales ex Autos (Jul) will be released.

UK is facing real economic problems
BOE believes inflation will peak soon and fall

The yen rose against the dollar and the euro on speculation the U.S. government's plan to rescue banks will fail to avert a global economic slowdown, prompting investors to sell higher-yielding assets financed in Japan.
The dollar dropped against the euro for a fourth day, the longest sequence of declines since June, on concern a U.S. proposal to buy $700 billion of troubled assets from banks will widen the country's budget deficit. The U.S. currency also fell against the Swiss franc as two-year Treasury yields declined for the first time in three days on bets the Federal Reserve will cut interest rates to revive the economy.
``Even with a plan, the likelihood there will be a very severe slowdown in the U.S. and elsewhere has increased,'' said Simon Derrick, chief currency strategist in London at Bank of New York Mellon Corp. ``I don't think people will return to the same old risk-taking world.''
Treasury Secretary Henry Paulson's plan, sent to Congress Sept. 20, would mark an unprecedented government intrusion into markets and increase the nation's debt ceiling by 6.6 percent to $11.315 trillion. Officials may also provide $400 billion of guarantees for money-market funds.
The dollar fell before reports this week that will probably show tighter lending rules contributed to a drop in U.S. home sales and durable goods orders.
The bailout may end a dollar rally that began in June and drove the U.S. currency up 10 percent versus the euro, 2 percent against the yen and almost 13 percent compared with Brazil's real, strategists at Barclays and UBS AG said.
``Problems with the U.S. deficit will haunt the dollar,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``Spending such a large amount on this rescue package will remind traders that the fiscal health of the U.S. is set to worsen.''
The dollar also fell as two-year Treasury yields dropped 7 basis points to 2.12 percent on speculation the Fed will cut interest rates as soon as next month. Paulson and Bernanke are due to testify before the Senate tomorrow about the banking crisis.
The yen typically rises when demand for higher-yielding currencies declines as investors reduce so-called carry trades. In such transactions, traders get funds in a country with low borrowing costs and invest in another with higher interest rates, earning the spread between the two. The risk is that currency market moves can erase those profits.
``The yen may be bought back,'' said Takeshi Iba, vice president of foreign exchange in Tokyo at BBH Investment Services Inc., a unit of Brown Brothers Harriman. ``We still don't know how Congress will deal with this rescue package and how well this plan will work.''

Economist Joe Carson at Alliance-Bernstein says "more extraordinary policy actions are likely, including another cut in official rates. But an end to the panic will only come when investors begin to realize that the economic reality is not as bad as what is priced into financial markets."

Resistance 3: Y110.60
Resistance 2: Y109.00
Resistance 1: Y108.00
Current price: Y106.35
Support 1: Y106.30
Support 2: Y105.00
Support 3: Y103.40
Comments: Tech on USD/JPY hasn't change. Above the target comes at Y109.00 with stronger – on Y110.60 (Aug 15 highs). Support is around session low on Y105.90. Below losses may widen to Thursday’s low on Y105.00 and then – to stronger support at Y103.40 (trend line from Mar 17).

Resistance 3: Chf1.1340
Resistance 2: Chf1.1260
Resistance 1: Chf1.1045
Current price: Chf1.0956
Support 1: Chf1.0880
Support 2: Chf1.0840
Support 3: Chf1.0720
Comments: USD/CHF decreases. The nearest support is located on Chf1.0880 (38.2 % FIBO of growth Chf1.0012-Chf1.1422). Overcoming of the given level will open road to Chf1.0840 (22 Aug low) and further to Chf1.0720 (50 % FIBO). The nearest resistance - area of session high on Chf1,1045, above - Chf1.1260 (a maximum on September, 16th), then a strong level is Chf1.1340 (the channel line of support punched earlier since July, 16th).

Resistance 3: $1.8790
Resistance 2: $1.8600
Resistance 1: $1.8460
Current price: $1.8432
Support 1: $1.8440
Support 2: $1.8260
Support 3: $1.8100
Comments: The dollar remains under pressure. Key resistance remains in the field of $1,8460/70 (38.2 % FIBO of decrease $2,0132-$ 1.7640). Further the pair can will become stronger in area $1,8600 (25 Aug high). Above is located the level $1,8790. The nearest support is located in 23,6 % FIBO from growth $1,7915-$ 1,8470 on $1,8440. Further - the sessional low on $1.8260, decrease below the given level will open road to $1.8100.

Resistance 3:$1.4900
Resistance 2: $1.4800
Resistance 1: $1.4600
Current price: $1.4573
Support 1: $1.4500
Support 2: $1.4430
Support 3: $1.4325
Comments: The dollar has continued to sustain losses against euro. The nearest resistance is located in a sessional high $1,4600. Above growth is probable to 28 Aug high on $1,4800 and further to $1,4900 (22 Aug high). In case of renewal of decrease by the nearest support there will be an area $1,4490 / $1,4500 (23,6% FIBO of growth $1,4150-$ 1,4600). Further follows $1,4430 (23,6 % FIBO of growth $1,3880-$ 1,4600). Below loss of a rate can reach $1,4325 (38,2 % FIBO, and also area of closing of the last week).

EUR/USD $1.4400, $1.4110
USD/JPY Y107.05, Y104.90
EUR/JPY Y156.50
GBP/USD $1.8300

EUR/USD
Offers$1.4595/1.4600, $1.4620/25

GBP/USD
Offers $1.8475/80, $1.8490/00.

EUR/GBP
Bids stg0.7890/85, stg0.7865/60
Offers stg0.7925/30.

The dollar dropped against the yen for the first time in three days on concern a U.S. government plan to buy $700 billion of troubled assets from banks will widen the country's budget deficit.
The currency reached a three-week low against the euro before reports this week that will probably show tighter lending rules contributed to a drop in U.S. home sales and durable goods orders. The greenback also fell against the Swiss franc as two- year Treasury yields declined for the first time in three days on bets the Federal Reserve will cut interest rates.
Treasury Secretary Henry Paulson's plan, sent to Congress Sept. 20, would mark an unprecedented government intrusion into markets and increase the nation's debt ceiling by 6.6 percent to $11.315 trillion. Officials may also provide $400 billion of guarantees for money-market funds.
The dollar also fell as two-year Treasury yields dropped 7 basis points to 2.12 percent on speculation the Fed will cut rates as soon as next month. Paulson and Bernanke are due to testify before the Senate tomorrow about the banking crisis.
Home resales declined to 4.94 million from 5 million in July, according to a Bloomberg News survey before the National Association of Realtors' report on Sept. 24. A day later, the Commerce Department is forecast to report sales of new houses dropped to 510,000 from 515,000 in July, according to a separate survey. Orders for durable goods fell 1.8 percent in August from a 1.3 percent rise in the previous month, another survey shows. The data are due Sept. 25.
The yen rose against the Australian dollar and gained versus the New Zealand dollar as the U.S. bailout plan failed to ease concern about a global economic slump, prompting traders to pare holdings of higher-yielding assets funded with the Japanese currency.

EUR/USD reversed on reported Asian demand, lifting it back to $1.4563.
GBP/USD Opened in Asia around $1.8340 before edging to an early high of $1.8363
USD/JPY slipped to a Y106 handle in what traders described as a relatively orderly market when compared to recent starts to the week, demand then coming in for the Tokyo fix before a major NY name pushed the pair down to lows at Y106.32

The Nikkei 225 opened higher following the gains in US stocks on Friday and extended gains to 1.98% by the close of the morning session. Afternoon trade was fairly steady and the index closed higher by 169.73 points, or 1.42% at 12,090.59

U.S. stocks surged in the biggest two-day global rally in history as the government announced plans to purge banks of bad assets and crack down on speculators who drove down shares of financial companies.
The Standard & Poor's 500 Index rose as much as 4.9 percent, its steepest gain in six years. The Dow Jones Industrial Average added almost 1,000 points from yesterday's low and markets from the U.K. to China advanced the most ever. U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke ignited the rally by proposing to shore up banks' balance sheets and guaranteeing money-market mutual funds, while the Securities and Exchange Commission banned short sales of financial firms.
Wachovia Corp. and Morgan Stanley jumped more than 30 percent, while General Electric Co. increased 10 percent.
``What the government and its regulatory agencies have tried to do here is restore some confidence and remove some fear,'' Robert Doll, chief investment officer of global equities at New York-based BlackRock Inc., which manages $436 billion in stocks, told Bloomberg Television. ``That will work in the short run and improve psychology.''
The S&P 500 advanced 45.15 points to 1,251.66 at 3 p.m. in New York, sending it to the biggest two-day rally since the aftermath of the 1987 crash. Eleven companies, all financial, rose more than 20 percent, and 26 other companies climbed at least 10 percent. The Dow Jones Industrial Average surged 356.46, or 3.2 percent, to 11,376.15. Five stocks advanced for each that fell on the New York Stock Exchange.
The MSCI World Index of 23 developed nations increased 65.87, or 5.4 percent, to 1,282.64 and gained as much as 8.3 percent over the past two days, the steepest advance since records began in 1970. Europe's benchmark index climbed a record 8.3 percent and Asia's added 5.5 percent.
The S&P 500 nearly erased its decline for the week. The benchmark index for U.S. equities tumbled 4.7 percent twice in the past five days after Lehman Brothers Holdings Inc. filed for bankruptcy, the U.S. government seized control of American International Group Inc. and Merrill Lynch & Co. was forced to sell itself to Bank of America Corp.
The main benchmark for U.S. equities is still down 15 percent this year, on pace for its first annual decline since 2002. Until today, financial companies led the retreat as losses stemming from the first nationwide drop in home prices since the 1930s surpassed $500 billion.

The dollar rose the most against the yen since August after the U.S. government announced a plan to rescue banks and revive financial markets.

The yen was headed for a weekly drop against the euro on speculation investors will resume carry trades after the U.S. Treasury and the Federal Reserve proposed cleaning up financial firms' balance sheets. Japan's currency dropped today the most against the Australian dollar since August 1993, while Brazil's real rallied on renewed demand for emerging-market assets.

``There's a good chance that these extraordinary measures the authorities are taking will gradually bring confidence back,'' said Jens Nordvig, a senior currency strategist in New York at Goldman Sachs Group Inc. ``That makes it possible for risky currencies, such as the Australian dollar and some emerging-market currencies, to recover after a large setback.''

The dollar rose 1.5 percent to 107.02 yen at 3:01 p.m. in New York, from 105.44 yesterday. It was the biggest increase since Aug. 22. The U.S. currency dropped 0.8 percent to $1.4469 per euro, from $1.4348 yesterday. The euro advanced 2.3 percent to 154.82 yen, from 151.28, after touching 155.34, the highest level since Sept. 8.

Treasury Secretary Henry Paulson told reporters today that the U.S. government will spend ``hundreds of billions of dollars'' to cleanse banks of troubled assets and halt an exodus of investors from money markets. Congressional leaders said they intend to pass legislation within days.

Covering Bets

Investors sold the U.S. dollar and bought back high- yielding currencies including the euro to cover their bets against them, said Scott Ainsbury, a portfolio manager who helps manage about $12 billion in currencies at New York-based currency trader FX Concepts Inc.

Brazil's real strengthened, increasing 3.6 percent to 1.8280 per dollar, after touching a one-year low of 1.9606 yesterday. Mexico's peso advanced 1 percent to 10.6365. Colombia's peso gained 6.3 percent to 2050.90 per dollar, the most since the currency started trading freely in 1992.

The ICE's Dollar Index, a gauge measuring the greenback against the currencies of six U.S. trading partners, fell 1.7 percent this week to 77.642.

The yield on the two-year U.S. Treasury note rose 44 basis points, or 0.44 percentage point, to 2.14 percent, the biggest increase since February 1985. The Standard & Poor's 500 Index climbed 3.7 percent, while Europe's Dow Jones Stoxx 600 Index surged 8.3 percent, the most since it was inaugurated in 1987.

Weaker Yen

The yen dropped 4.9 percent to 88.90 versus Australia's dollar and 3.1 percent to 73.51 against New Zealand's dollar on revived demand for trades in which investors get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.5 percent target lending rate compares with 7 percent in Australia and 7.5 percent in New Zealand.

Japan's currency has decreased 0.9 percent against the euro and advanced 0.9 percent versus the dollar this week. The U.S. currency has slid 1.7 percent against the euro.

Eisuke Sakakibara, 67, a professor at Tokyo's Waseda University who was dubbed ``Mr. Yen'' because of his ability to influence the foreign-exchange market during his 1997-1999 tenure at Japan's Finance Ministry, said in an interview on Bloomberg Television that there's ``no quick fix'' for credit turmoil. He said the yen may gain to 100 per dollar this year.

Foreign central banks may reduce dollar reserves as the U.S. bailout causes the budget deficit to swell, according to John Brynjolfsson, chief investment officer of Armored Wolf LLC, a hedge fund in Aliso Viejo, California.

``I can't imagine they wouldn't be having high-level discussions about the appropriateness of dollar-concentrated reserve strategies going forward,'' said Brynjolfsson, who formerly managed $80 billion at Newport Beach, California based Pacific Investment Management Co.

Resistance 3: Y110.60
Resistance 2: Y109.00
Resistance 1: Y108.00
Current price: Y106.35
Support 1: Y106.30
Support 2: Y105.00
Support 3: Y103.40
Comments: The dollar dropped against the yen for the first time in three days. Resistance is around Friday’s high on Y108.00. Above the target comes at Y109.00 with stronger – on Y110.60 (Aug 15 highs). Support is around session low on Y106.30. Below losses may widen to Thursday’s low on Y105.00 and then – to stronger support at Y103.40 (trend line from Mar 17).

Resistance 3: Chf1.1410
Resistance 2: Chf1.1340
Resistance 1: Chf1.1260
Current price: Chf1.1023
Support 1: Chf1.0880
Support 2: Chf1.0840
Support 3: Chf1.0720
Comments: On Monday, USD/CHF dropped on concern a U.S. government plan to buy $700 billion of troubled assets from banks will widen the country's budget deficit. The greenback was also near a one-month low against the Swiss franc as Treasury yields fell for the first time in three days on increased bets the Federal Reserve will lower interest rates. Support is around Chf1.0880 support (38.2% of Chf1.0012 – Chf1.1422 rally). Break under Chf1.0880 will widen losses to Aug 21 lows on Chf1.0840 and then – to Chf1.0720 (50% Fibo). Resistance is near Sep 16 high on Chf1.1260 with stronger level comes on Chf1.1340 (earlier broken channel support line from Jul 16). Above the target is around Sep 11 high on Chf1.1410/20.

Resistance 3: $1.8790
Resistance 2: $1.8460
Resistance 1: $1.8330
Current price: $1.8320
Support 1: $1.8260
Support 2: $1.8100
Support 3: $1.7980
Comments: GBP/USD set stable Monday with resistance is around Friday’s high on $1.8380. Key resistance comes at 38.2% Fibo of $2.0132 - $1.7640 decline on $1.8460/70. Support comes at session low on $1.8260 with a break under opens the way to $1.8100 and then – to 11-days channel line on $1.7980

Resistance 3:$1.4900
Resistance 2: $1.4800
Resistance 1: $1.4540
Current price: $1.4473
Support 1: $1.4400
Support 2: $1.4220
Support 3: $1.4070
Comments: The dollar sustains losses against euro. ЕВРО/USD tests resistance on $1,4540 (last week high). Above growth is probable to 28 Aug high on $1,4800 and further to $1,4900 (22 Aug high). In case of renewal of decrease by the nearest support there will be an area $1,4400 (23,6 % FIBO of growth $1,3880-$ 1,4566). Below loss of a rate can reach $1,4220 (50 % FIBO, and also area of closing of the last week) and further to $1,4070 (16 Seplow).

High Low Close
EUR/USD 1.4492 1.4150 1.4472
USD/JPY 108.03 105.37 107.26
GBP/USD 1.8388 1.7913 1.8353
USD/CHF 1.1279 1.1006 1.1026

EUR/JPY 155.31 150.84 155.25
EUR/GBP 0.7930 0.7845 0.7882
GBP/JPY 197.06 191.35 196.87
GBP/CHF 2.0335 2.0058 2.0237

Change % Change Last
Nikkei 225 +397.53 +3.46% 11,883.83
Topix +51.44 +4.69% 1149.12
FTSE +431.30 +8.84% 5,311.30
DAX +326.11 +5.56% 6,189.53
CAC +367.01 +9.27% 4,324.87
Dow +368.75 +3.35% 11,388.44
NASDAQ +74.80 +3.40% 2,273.90
S&P +48.57 +4.03% 1,255.08
10yr Note +3.3200 +0.966%3.769%
NYMEX Crude Oil +6.67 +6.38% 104.55
Gold -32.30 -3.74% 864.70

07:15 Е15 ECB Trichet's Speech
12:30 Canada Retail Sales (MoM) (Jul) 0.5%
12:30 Canada Retail Sales ex Autos (MoM) (Jul) 1.4%