The U.S. retailer of clothing American Eagle Outfitters Ne forecast third-quarter profit will be as low as 31 cents a share, below analysts’ estimates.

The Wall Street Journal reported that Temasek Holdings expects to hold a 13%-14% stake Merrill Lynch & Co. Inc after receiving U.S. government approval for its latest purchase of shares in the bank.

The global miner Rio Tinto Plc reported first-half net profit more than doubled on strong revenue growth in its iron ore and aluminum business units, as commodity prices rose.

The pharmaceutical Elan Corporation plc and its partner Biogen Idec Inc. (BIIB) are working on revisions to prescribing information for the multiple sclerosis drug Tysabri to show that a rare brain infection may occur in patients taking the medicine as a sole therapy.

The Aug 5 discussion shows increased concerns about inflation and soft labor mkts, and interaction of credit mkt problems with the real economy. Sole dissenter Fisher wanted an immediate hike because he saw businesses passing through higher costs. Not much new here.

The dollar rose to a six-month high against the euro on speculation the greenback will be the main beneficiary of a global economic slowdown as German business confidence dropped in August more than forecast.
The U.S. currency was headed for the biggest monthly gain since the 15-nation euro debuted in 1999. British sterling declined to the weakest level versus the dollar in two years as mortgage approvals held last month near a decade low.
``The dollar is leaning heavily on bad news elsewhere,'' said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. ``The market is coming around to the view that the extremely high level in the euro-dollar is not justified.''
The greenback has risen against all of the other major currencies this month. The dollar has climbed 6.4 percent against the euro, the biggest monthly gain since the European currency began trading.
The ICE futures exchange's Dollar Index, which compares the greenback against the currencies of six U.S. trading partners, rose to 77.619 today, its highest level since Dec. 26.
The Ifo institute's German business confidence index declined this month to 94.8, the lowest level in three years, from 97.5 in July. The median forecast of economists was for a decrease to 97.2.
``The combination of incremental weakness in the European economy and moderating oil prices should keep the pressure on the euro,'' said Manuel Oliveri, a currency strategist at UBS in Zurich.

"The supply of new homes is controlled by home builders and is not subject to the direct influence of foreclosures, which explains why the supply of new homes is falling sharply and the supply of older homes is continuing to rise."

"Consumer assessments of current employment prospects point to continued payroll declines, and perhaps larger ones, and a continued rise in the unemployment rate in the next few months."

Still decent flows in the pair as it chops around $1.4625 area, a trader says, noting the pair is not correlating well with crude oil this afternoon as that contract reacts to long-range forecasts regarding Hurricane Gustav. Bids eyed at $1.4565/70 area.

- Domestic demand weaker than expected, expect slow EMU recovery after weak phase.
- M-T inflation risks have risen.
- ECB is focussed on price stability above all.

Wall Street rallied despite one report that showed home prices tumbled more than 15% in the second quarter and a government report that showed the number of new homes sold in July was still more than 30% behind the same month last year.
Investors are still waiting for a number of economic reports due late in the day on Tuesday.
the Commerce Department said sales of new one-family houses were at a seasonally adjusted annual rate of 515,000 in July, up 2.4% from the June rate of 503,000, which had been revised lower. While the July reading ticked up from the prior month, the measure still stands 35.5% below the same month a year ago.
The Conference Board said that its reading on consumer confidence increased again in August, after making modest gains in July. The index stood at 56.9, which was higher than the reading of 53 that economists had forecast.
: Crude futures for October delivery rose $2.02 to nearly $117.13 a barrel in early trading on a stronger dollar after gaining on Monday to settle at $115.11 a barrel.
In the bond market, government Treasurys fell slightly, raising the yield on the 10-year benchmark note to 3.81%. Bond prices and yields move in opposite directions.
COMEX gold for December delivery rose $27.80 to $853.50 an ounce.

"Consumer conf rise was due to improvement in the expectations component (which in turn was probably due to the recent drop in gasoline prices)... Despite back-to-back improvements, if confidence stays around this level, real consumer spending and economic growth will slow even more, perhaps sharply."

The major indices spike to session highs, and then meet some resistance. The current advance is modest.
The move higher is led by the financial sector (+1.2%), which is rebounding following the previous session's 3% decline.
Government sponsored enterprises Fannie Mae (+0.91) and Freddie Mac (+0.79) are standouts this morning. Goldman Sachs said anxiety over a bailout of FNM and FRE is unwarranted and that a bailout would be entirely manageable, according to Dow Jones.
All ten economic sectors are now in positive territory.

Bounce off the earlier US lows under Y160.00 extends above the European breakdown point at Y160.80 as euro-yen becomes unplayable on the day. Little seen on the near-term orderboard now, with small offers noted around the overnight high at Y161.35/40 and little else.

Economist Ian Shepherdson at HFE says July new home sales at +2.4% to 515K was "a bit disappointing" but good news "is that inventory fell sharply to 10.1 months from 10.7, reaching the lowest level since February. This was the result of a huge slowing in the gross inflow of homes onto the market."

"The economy remains stuck in neutral" because this remains low by historical standards. Present Situation 63.2 vs 65.8; Expectations 52.8 vs 42.7. Jobs Hard to Get 32% vs 30.2%; Jobns Plentiful 13.1% vs 13.6%, so labor mkt weakened. Altantic, South, and Mountain regions gained. Buying plans were up in all areas. 1y inflation expectations were 6.7% vs 7.5% in July, a second improvement that probably reflects lower gasoline prices.

Stocks get off to a slightly lower start as investors weigh a rebound in oil prices and slightly better-than-expected housing data.
Oil prices are up 1.3% to $116.20 per barrel after recovering from a 2.4% loss. There does not appear to be a specific catalyst for the rebound, although news reports indicate that traders are showing increased concern regarding a hurricane threat in the Gulf of Mexico.

"We're at a 1% decline, indistinguishable from the consensus expectation of -0.9%. These don't get the boost from foreclosure sales that existing home sales do, which helps keep them a bit lower.

Stock market futures slipped to session lows in the past half hour as crude prices (-0.6%, $114.30) pare some losses. S&P futures vs fair value: -1.6. Nasdaq futures vs fair value: +0.2.

The euro fell to the lowest level in more than six months against the dollar after a report showed German business confidence worsened more than forecast in August.
The currency also dropped for a second day versus the yen on bets credit-market losses and slowing exports will deter the European Central Bank from raising interest rates this year. The yen rose against the Australian and New Zealand dollars as a drop in Asian stocks prompted investors to pare holdings of higher- yielding assets funded in the Japanese currency.
The Ifo institute's German business confidence index declined to 94.8, the lowest level in three years, from 97.5 in July. Economists expected a drop to 97.2.
The pound declined to $1.8345, its lowest level since July 2006, from $1.8532 yesterday. Data this week may show U.K. home prices fell by the most in almost two decades.
The yen declined against the dollar on speculation Japanese pension funds and institutional investors sold the currency to increase their holdings of Treasuries.

EUR/USD fell to the bids zone $1.4570/65 before retrited a bit. Bids $1.4575/65, $1.4550, stops below, bids $1.4530/20

Offers $1.4600 and $1.4620/25.

Gains in the dollar may be limited today on speculation U.S. new home sales declined, dropping 0.9 percent to an annual rate of 525,000 in July from 530,000 in June. New home sales fell to a 17-year low of 513,000 in March. The Commerce Department releases the data at 1400GMT.

The main focus will be on FOMC’s minutes today. FOMC’s minutes today may anchor Bernanke’s pessimism last week, when he said the decline in oil prices would support the US economy and ease inflation pressure. It strengthens concerns about Fed won’t raise rates this year. In Aug Fed’s fund rate was held unchanged at 2.0%.

NewEdge says FOMC Minutes should show "that the debate on the downside risks related to financial instabilities are still too high to think that an early removal of the accommodation would be the best possible option."

Demand placed between $1.4575/65 contains the atest downside pressure around $1.4570, with rate currently holding back around $1.4585. Traders earlier reported that take profit demand is now placed down to $1/4550, with further interest noted at $1.4530 ahead of $1.4510/00, with demand in this latter area seen linked to protection of a $1.4500 option barrier. Offers $1.4600/10, more between $1.4620/25.

``The combination of incremental weakness in the European economy and moderating oil prices should keep the pressure on the euro,'' said Manuel Oliveri, a currency strategist in Zurich at UBS AG, the world's second-biggest currency trader. ``We remain short euros''

The euro fell to the lowest level in more than six months against the dollar after a report showed German business confidence worsened more than forecast in August.
The currency also dropped for a second day versus the yen on bets credit-market losses and slowing exports will deter the European Central Bank from raising interest rates this year. The yen rose against the Australian and New Zealand dollars as a drop in Asian stocks prompted investors to pare holdings of higher- yielding assets funded in the Japanese currency.
``The former powerhouse of the European economy, Germany, has started to weaken pretty quickly,'' said Paul Robson, a London-based currency strategist at the Royal Bank of Scotland Group Plc. ``It looks like the whole region will remain very weak and that's going to weigh on the euro.''
The Ifo institute's German business confidence index declined to 94.8, the lowest level in three years, from 97.5 in July. Economists expected a drop to 97.2.
``The combination of incremental weakness in the European economy and moderating oil prices should keep the pressure on the euro,'' said Manuel Oliveri, a currency strategist in Zurich at UBS AG, the world's second-biggest currency trader. ``We remain short euros''
The pound declined to $1.8345, its lowest level since July 2006, from $1.8532 yesterday. Data this week may show U.K. home prices fell by the most in almost two decades.
The yen declined against the dollar on speculation Japanese pension funds and institutional investors sold the currency to increase their holdings of Treasuries.
Gains in the dollar may be limited today on speculation U.S. new home sales declined, dropping 0.9 percent to an annual rate of 525,000 in July from 530,000 in June. New home sales fell to a 17-year low of 513,000 in March. The Commerce Department releases the data at 1400GMT.

Resistance 3: Y111.80
Resistance 2: Y110.70
Resistance 1: Y110.30
Current price: Y109.77
Support 1: Y109.00
Support 2: Y108.10
Support 3: Y106.40

Comments: USD/JPY retreated from 7-months highs Monday and today tries to recover those losses. Resistance is near yesterday’s highs on Y110.30, with a break above will target Aug 15 highs on Y110.70. Strong resistance comes at highs 2008 on Y111.80/90. Strong support comes near Monday’s lows on Y109.00 with a break under opens the way to Y108.10 (last Thursday’s low). Key support is near channel line from Jul 16 at Y106.40/50.

Resistance 3: Chf1.1260
Resistance 2: Chf1.1200
Resistance 1: Chf1.1080
Current price: Chf1.0068
Support 1: Chf1.0950
Support 2: Chf1.0900
Support 3: Chf1.0820

Comments: The nearest resistance zone comes at yesterday’s highs on Chf1.1080. Above the key level remains at channel line coming today at Chf1.1200. Next band of resistance is around Chf1.1260. Support mentioned near Chf1.0950 (session low). Under the correction may dip down to Chf1.0900 and Chf1.0820 (channel support line).

Resistance 3: $1.8760
Resistance 2: $1.8600
Resistance 1: $1.8520
Current price: $1.8369
Support 1: $1.8360
Support 2: $1.8310
Support 3: $1.8280

Comments: GBP/USD retreats Tuesday after the impressive rise yesterday. There is no key UK economic reports today with sterling probably will follow euro and general mode on the dollar. Key support is around $1.8400 (yesterday’s lows). Break under will accelerate pound’s decline to $1.8360/70 (Jul 23 2006 lows). Stronger support comes at 38.2% Fibo on $1.8280/90 ($1.3690 - $2.1130 rise). Minor resistance is near session highs on $1.8520/30 with a break above will target $1.8600 (50% Fibo of the $1.8800 - $1.8400 decline). Strong level is around 23.6% Fibo at $1.8760 ($1.9930 - $1.8400 decline).

Resistance 3:$1.4960

Resistance 2: $1.4880
Resistance 1: $1.4800
Current price: $1.4588
Support 1: $1.4570
Support 2: $1.4550
Support 3: $1.4420

Comments: the euro weakens in the wake of weaker than expected Ifo institute's confidence index. Support comes at session low on $1.4580. Below losses may widen to $1.4550/40. Key support is around channel line from Jul 22 on $1.4420. Minor resistance is near yesterday’s high on $1.4800, with a break above opens the way to Friday’s high on $1.4880/90. Stronger resistance comes on 23.6% Fibo level at $1.4960 ($1.6030 - $1.4630 decline).

Dollar strenth, concerns about global demand and reports that BP has resumed loadings at Turkey pipeline terminal. WTI Nymex crude oil is now at 113.85, down $1.74 on session.

EUR/USD: $1.4760, $1.4800
USD/JPY: Y110.00, Y109.50, Y109.15
AUS/USD: Y96.10
USD/CAD: C$1.0570

Crude oil prices are lower on demand destruction fears after German Ifo survey outweighed fears over Hurricane Gustav impact in the Gulf of Mexico. Traders say it it is too early to predict whether Gustav will hurt oil production. WTI Nymex crude oil is at $114.20, down 91 cents.

EUR
Bids: $1.4600/90
Offers: $1.4745, $1.4760

JPY
Bids: Y109.15/00, Y108.40/30
Offers: Y110.00, Y110.30/50, Y111.00

GBP
Bids: $1.8385/80, $1.8350, $1.8330/20
Offers: $1.8465/75, $1.8510

AUSSIE
Bids: $0.8550, $0.8515
Offers: $0.8600/10

The euro fell for a third day against the dollar after a report today showed business confidence in Germany slumped.
The currency also declined for a second day versus the yen on concern credit-market losses and slowing exports will stop the European Central Bank from raising interest rates this year. The yen rose against the Australian and New Zealand dollars as a drop in Asian stocks prompted investors to pare holdings of higher-yielding assets funded in the Japanese currency.

EUR/USD fell from $1.4760 to $1.4600 after the report.
GBP/USD tested lows on $1.8360/70.
USD/JPY rose from Y109.30 to Y109.80.

ThemainfocuswillbeonFOMC’sminutestoday. FOMC’s minutes today may anchor Bernanke’s pessimism last week, when he said the decline in oil prices would support the US economy and ease inflation pressure. It strengthens concerns about Fed won’t raise rates this year. In Aug Fed’s fund rate was held unchanged at 2.0%.

Japan's benchmark stock indices ended Tuesday's session lower, although off the session's worst levels. The benchmark Nikkei 225 was down 99.95 points, or 0.78%, to stand at 12778.71. The broader-based TOPIX was down 9.90 points at 1229.35.

Stock market fixing:

Nikkei +212.62 +1.70% 12,878.66
Topix +22.83 ,+1.90% 1,239.25
CAC -44.58 -1.01% 4,355.87
DAX -44.27 -0.70% 6,296.95
DOW 241.81 -2.08% 11,386.25
NASDAQ 49.12 -2.03% 2,365.59
S&P 500 25.35 -1.96% 1,266.85
10yr Note -0.7600 -0.198% 3.791%
NYMEX Crude Oil -0.34 -0.28% 115.11
Gold -7.70 -0.92% 825.70

Japanese shares rose for the first time in a week after crude oil dropped, relieving inflationary pressure, and as credit-market concerns eased amid speculation Lehman Brothers Holdings Inc. will receive an investment.
Bridgestone Corp., the world's largest tiremaker by sales, surged 4.1% after oil fell more than $6 a barrel and Federal Reserve Chairman Ben S. Bernanke said inflation should slow. Mitsubishi UFJ Financial Group Inc., Japan's largest publicly traded bank, jumped 4.8% after a report Korea Development Bank might invest in Lehman.

European stocks declined, led by banks and builders, as concern grew that credit losses will spread and the economic slowdown will deepen. Natixis SA, the French bank planning a 3.7 billion-euro ($5.5 billion) rights offer to replenish capital, dropped 4.1%, and KBC Group NV, Belgium's second-biggest financial- services firm, lost 3.2%. Vinci SA, the world's largest builder, slipped 1.5% on reports the International Monetary Fund lowered its forecast for euro-area economic growth.
The IMF cut the region's growth outlook this year to 1.4% from 1.7%.

U.S. stocks fell for the first time in four days as a Kansas bank's failure and speculation American International Group Inc. will post a loss heightened concern that credit writedowns will keep rattling the financial system.
AIG, the world's largest insurer, tumbled 5% after Credit Suisse Group said the company may lose $2.41 billion this quarter on mortgage-related writedowns. Washington Mutual Inc. and Huntington Bancshares Inc. each dropped more than 4% after Columbian Bank & Trust Co. became the ninth U.S. bank to collapse this year. Lehman Brothers Holdings Inc. slumped 7% on concern a Korean bank will abandon a potential investment in the fourth-biggest U.S. securities firm.

Stocks fell even after a report showed sales of previously owned homes in the U.S. rose in July from a 10-year low as declining prices helped stabilize demand.
Morgan Stanley cut its year-end forecast for the S&P 500 on concern banks will report more credit-related writedowns and the global economic slowdown will curb profits at technology and industrial companies.
The KBW Bank Index retreated 2.7%. Washington Mutual lost 21 cents to $3.62. Huntington Bancshares retreated 48 cents to $7.03. SunTrust Banks Inc., the largest bank based in Georgia, fell 5.6% to $40.34 after Citigroup Inc. began covering it with a ``sell'' rating.

The yen and Swiss franc rose against most of the other major currencies on bets credit market losses will widen, prompting investors to sell holdings of higher- yielding assets and pay back loans in Japan and Switzerland.
The yen gained the most in more than a week versus the euro on speculation American International Group Inc. will post a quarterly loss and as Columbian Bank & Trust Co. became the ninth U.S. bank to collapse this year. South Korea's won fell to the lowest against the dollar in almost four years as overseas investors stepped up sales of the nation's shares.
The dollar briefly pared its loss against the yen as an industry report showed U.S. home resales rose last month more than economists forecast.
Resales rose to a 5 million annual rate in July, the National Association of Realtors reported. The median forecast of economists was for an increase to 4.91 million.

EUR/USDprintedhighson$1.4795 beforeslidingto$1.4700. Bids managed to support euro and rate rebounded to $1.4741.
GBP/USD fell from $1.8530 to $1.8400 before recovered to $1.8460.
USD/JPY tested Y110.30 before rebounded to Y109.80.

The Ifo institute's business confidence index in Germany will probably show a decline to 97.2 in August, the lowest since September 2005, from 97.5 the previous month, according to the median forecast of economists. The report is due tomorrow.

Resistance 3: Y111.80
Resistance 2: Y110.70
Resistance 1: Y110.30
Current price: Y109.78
Support 1: Y109.00
Support 2: Y108.10
Support 3: Y106.40
Comments: USD/JPY retreated from 7-months highs Monday and today tries to recover those losses. Resistance is near yesterday’s highs on Y110.30, with a break above will target Aug 15 highs on Y110.70. Strong resistance comes at highs 2008 on Y111.80/90. Strong support comes near Monday’s lows on Y109.00 with a break under opens the way to Y108.10 (last Thursday’s low). Key support is near channel line from Jul 16 at Y106.40/50.

Resistance 3: Chf1.1260
Resistance 2: Chf1.1200
Resistance 1: Chf1.1040
Current price: Chf1.0008
Support 1: Chf1.0950
Support 2: Chf1.0900
Support 3: Chf1.0820
Comments: USD/CHF holds within the upward channel from Jul 16. But gains in the dollar may be limited by speculation FOMC’s minutes today will anchor Bernanke’s pessimism last week, when he said the decline in oil prices would support the US economy and ease inflation pressure. It strengthens concerns about Fed won’t raise rates this year. In Aug Fed’s fund rate was held unchanged at 2.0%. Strong resistance zone comes between last week’s and yesterday’s highs on Chf1.1030/40. Above the key level remains at channel line coming today at Chf1.1200. Next band of resistance is around Chf1.1260. Support mentioned near Chf1.0950 (session low). Under the correction may dip down to Chf1.0900 and Chf1.0820 (channel support line).

Resistance 3: $1.8760
Resistance 2: $1.8600
Resistance 1: $1.8520
Current price: $1.8429
Support 1: $1.8400
Support 2: $1.8360
Support 3: $1.8280
Comments: GBP/USD retreats Tuesday after the impressive rise yesterday. There is no key UK economic reports today with sterling probably will follow euro and general mode on the dollar. Key support is around $1.8400 (yesterday’s lows). Break under will accelerate pound’s decline to $1.8360/70 (Jul 23 2006 lows). Stronger support comes at 38.2% Fibo on $1.8280/90 ($1.3690 - $2.1130 rise). Minor resistance is near session highs on $1.8520/30 with a break above will target $1.8600 (50% Fibo of the $1.8800 - $1.8400 decline). Strong level is around 23.6% Fibo at $1.8760 ($1.9930 - $1.8400 decline).

Resistance 3:$1.4960
Resistance 2: $1.4880
Resistance 1: $1.4800
Current price: $1.4688
Support 1: $1.4630
Support 2: $1.4680
Support 3: $1.4420
Comments: Techs on EUR/USD hasn’t changed. Today the euro weakens on speculation a survey that may show business confidence in Germany, Europe's largest economy, slid to the lowest in almost three years. The Ifo institute's confidence index probably fell to 97.2 in August, the lowest since September 2005, from 97.5 month earlier, according to the median estimate of economists. Moreover. Germany 2Q GDP report is due to come today with analysts predict growth contracted 0.5% in the second quarter after 1.3% rise three months before. Support comes at Aug 19 lows at $1.4630/40. Key support is around channel line from Jul 22 on $1.4420. Minor resistance is near yesterday’s high on $1.4800, with a break above opens the way to Friday’s high on $1.4880/90. Stronger resistance comes on 23.6% Fibo level at $1.4960 ($1.6030 - $1.4630 decline).

High Low Close
EUR/USD 1.4806 1.4695 1.4752
USD/JPY 110.28 109.00 109.29
GBP/USD 1.8590 1.8401 1.8525
USD/CHF 1.1031 1.0921 1.0953

EUR/JPY 162.76 161.11 161.26
EUR/GBP 0.8002 0.7957 0.7961
GBP/JPY 203.77 202.33 202.50
GBP/CHF 2.0348 2.0266 2.0296

Change % Change Last
Nikkei +212.62 +1.70% 12,878.66
Topix +22.83 ,+1.90% 1,239.25
CAC -44.58 -1.01% 4,355.87
DAX -44.27 -0.70% 6,296.95
DOW 241.81 -2.08% 11,386.25
NASDAQ 49.12 -2.03% 2,365.59
S&P 500 25.35 -1.96% 1,266.85
10yr Note -0.7600 -0.198% 3.791%
NYMEX Crude Oil -0.34 -0.28% 115.11
Gold -7.70 -0.92% 825.70

06:00 Germany GDP (Q2) -0.5% 1.3%
06:00 Germany GDP (Q2) Y/Y adjusted 1.7% 2.6%
06:00 Germany GDP (Q2) Y/Y unadjusted 3.1% 1.8%
08:00 Germany IFO business climate index (August) 97.2 97.5
12:55 USA Redbook (23.08)
14:00 USA Consumer confidence (August) 53.0 51.9
14:00 USA New home sales (July) 528K 530K
18:00 USA FOMC meeting minutes (05.08)