Gold, Silver Futures Rally as Talks to Ease Credit Crunch Stall

By Pham-Duy Nguyen

Sept. 26 (Bloomberg) -- Gold rose above $900 an ounce, heading for the second straight weekly gain, as talks on the $700 billion U.S. plan to ease the credit crunch stalled. Silver also gained.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, has jumped 18 percent in two weeks. The surge followed the collapse of Lehman Brothers Holdings Inc. and the U.S. takeover of American International Group Inc., Fannie Mae and Freddie Mac.

``Demand for gold will soar as people continue to seek out safe havens,'' said James Turk, the founder of Goldmoney.com, which held $368 million in silver and gold in storage for investors at the end of August. ``Gold is the safest haven of all in a period of financial stress and monetary uncertainty.''

Gold futures for December delivery rose $19.50, or 2.2 percent, to $901.50 an ounce at 10:34 a.m. on the Comex division of the New York Mercantile Exchange. The price is up 4.3 percent this week. Last week, the metal surged 13 percent, the most since October 1999.

Silver futures for December delivery climbed 19.5 cents, or 1.5 percent, to $13.47 an ounce.

Washington Mutual Bank became the latest casualty of the credit crunch last night as the Federal Deposit Insurance Corp. seized the assets and sold some to JPMorgan Chase & Co.

The Dow Jones Industrial Average dropped as much as 1.4 percent, and equities in Europe and Asia fell. The dollar dropped against a weighted basket of six major currencies.

Since the second quarter of 2007, banks worldwide have posted $522.1 billion in writedowns and losses related to investments in subprime mortgages.

``There is no agreement in Congress,'' said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. ``You've got a lot of systemic risk, and what you're seeing today is a renewed flight to quality. Gold is the ultimate quality asset.''

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

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Analysts project Q3 loss for JPMorgan

(Adds Fox-Pitt analyst comments; updates share price)

By Tenzin Pema

BANGALORE, Sept 26 (Reuters) - At least two analysts forecast a third-quarter loss for JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz), citing costs related to its acquisition of Washington Mutual Inc's (WM.N: Quote, Profile, Research, Stock Buzz) banking operations amid challenging credit and capital markets environment.

Credit Suisse analyst Susan Katzke forecast a third-quarter loss of 25 cents a share for JPMorgan, while Goldman Sachs' William Tanona now sees a quarterly loss of 10 cents a share, compared with his prior estimate of a profit of 40 cents a share.

On Thursday, JPMorgan said it bought the banking assets of Washington Mutual for $1.9 billion, after U.S. authorities closed the top U.S. savings and loan bank, whose market value has been virtually wiped out because of soaring mortgage losses.

JPMorgan said it expects to incur $1.5 billion of pre-tax costs, but will realize an equal amount of annual savings, mostly by the end of 2010. It expects the transaction to add to earnings immediately and increase earnings 70 cents per share by 2011.

It also plans to sell $8 billion of stock and take a $31 billion write-down for the loans it bought, representing estimated future credit losses.

"We believe management's assumptions around merger costs, cost saves and future losses on the mortgage portfolio appear to be realistic and/or achievable," Goldman's Tanona said.

Credit Suisse's Katzke also expressed confidence in the achievability of the acquisition-related cost savings that JPMorgan had forecast, but said she was "less confident in the cost of the current credit and capital markets cycle to the bank's existing operations."

Katzke cut her 2008 profit view to $1.65 a share from $2.50, while Tanona cut his 2008 profit view for JPMorgan to $1.60 a share from $2.30.

Tanona, however, raised his 2009 earnings estimates for the bank to $3.95 a share from $3.45, saying he expects the Washington Mutual deal to add to earnings as early as next year.

Separately, an analyst at WestLB said he regards "the resolution of WaMu's fate as a positive for sentiment in both the US and European bank sectors."

WestLB's Neil Smith also said that JPMorgan's acquisition of Washington Mutual's deposits means that only Wachovia remains as "a potential concern" amongst the large U.S. banks.

However, the acquisition and related capital raising also means that JPMorgan is now probably off the list of potential participants in further global banking sector consolidation, Smith added.

Shares of JPMorgan were down about 5 percent at $41.33 in early morning trade on the New York Stock Exchange.

Wachovia shares fell 27 percent to $10 in morning trade on Friday.

BULLISH ON JPMORGAN?

Fox-Pitt Kelton analyst David Trone upgraded JPMorgan to "outperform," partly due to likely upward revisions to consensus earnings estimates as management has factored in conservative revenue or cost savings from the Washington Mutual deal.

"We believe the company has marked its acquired assets from Washington Mutual and Bear Stearns at very conservative levels and thus the current 1.2 times price to book is attractive," Trone wrote in a note to clients.

Financially, JPMorgan is paying $1.9 billion to acquire a business that is likely to contribute $2 billion to $3 billion in net income annually, Trone said.

Credit Suisse's Katzke believes the Washington Mutual deal makes both strategic and financial sense for JPMorgan.

Katzke maintained her "outperform" rating on JPMorgan's stock and said she expects the bank to fundamentally outperform peers based on the strength and stability of its senior management, balance sheet strength and competitive positioning.

"We continue to recommend purchase of JPMorgan as a core financial services holding," she added.

Katzke set a new price target of $55 from a prior range of $50 to $55.

Separately, Citigroup analyst Keith Horowitz said JP Morgan's well managed franchise and strong capital position will allow its management to operate from an advantaged position through the current environment.

Still the outlook for near to intermediate term remains challenged in light of higher credit costs in card and the retail bank, as well as the increasing likelihood of sustained lower revenue from JPMorgan's capital markets business, Horowitz wrote in a note to clients.

He maintained his "hold" rating on the stock. (Editing by Jarshad Kakkrakandy, Anil D'Silva)

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Russian Stocks, Bonds Drop on Moody's `Negative' Banks Outlook

By Denis Maternovsky and William Mauldin

Sept. 26 (Bloomberg) -- Russian stocks slumped, led by financial shares, after Moody's Investors Service assigned a ``negative'' outlook to the country's banking system as it grapples to contain its worst crisis since the 1998 default.

OAO Sberbank, Russia's largest lender, dropped 5 percent to 43.73 rubles, the biggest decline since regulators halted stock trading last week. The cost to protect bonds sold by VTB Group, the second-biggest lender, rose 3 basis points to 740, close to a record of 750, according to credit-default swap prices from CMA Datavision.

Russia suspended trading for two days and pledged more than $100 billion in emergency funding last week as the seizure in capital markets, falling oil and last month's five-day war in Georgia drove away investors. Banks have been slow to restrict lending, adding to ``structural weaknesses'' that may harm their ability to repay debt and attract financing, Moody's analyst Andrey Artyukhin said in the report today.

``Russia was considered a safe haven but now people are realizing it's no safe haven whatsoever,'' said Eugene Belin, head of fixed-income, currencies and commodities for Citigroup Inc. in Moscow.

The Micex Index of 28 companies declined 1.5 percent to 1,079.65 at 5:29 p.m. in Moscow, extending its 2008 retreat to 43 percent. Russian government bonds fell, raising the yield on the benchmark 30-year dollar note by 8 basis points to 6.98 percent.

Investors Flee

Foreign investors pulled $56.7 billion from Russia between Aug. 8 and Sept. 19 as troops entered neighboring Georgia, based on BNP Paribas SA's data.

Markets deteriorated in Moscow after brokerage Kit Finance defaulted on some repurchase agreements, before agreeing to be bought by ZAO Lider, a finance unit of state-run OAO Gazprom. The Finance Ministry attempted to insulate banks by offering 1.13 trillion rubles of budget funds to Sberbank, VTB and Gazprombank for at least three months.

The International Monetary Fund said yesterday that there are ``no systemic risks'' to Russia's banking system and that the authorities are working ``appropriately'' to boost liquidity. Moody's said its view doesn't reflect potential debt rating changes.

International Reserves

Russia's international reserves, the world's third- largest, fell $900 million last week to the lowest in three months after the central bank sold currency to support the ruble.

Russian lenders may be forced to rely on the central bank to refinance some of the $20 billion of bonds and loans that are due by the end of next year, said Mikhail Galkin, a fixed income analyst at MDM Bank in Moscow.

The worsening perception of the sector may make it ``even harder to raise funding,'' Galkin said. ``They would have to shift focus to deposits and use the funding available from the central bank.''

The amount banks must raise to cover debt repayments is ``insignificant'' compared with almost $1 trillion of assets in the Russian banking sector, Galkin added.

Credit-default swaps on Russian government debt climbed 4 basis points to 247, according to CMA Datavision.

Contracts conceived to protect bondholders against default, credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. An increase indicates deterioration in the perception of credit quality. A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

Bank Shares

VTB shares fell 0.7 percent to 5.3 kopeks. The bank's $2 billion of bonds due 2018 fell to 75.4 cents on the dollar, down from 100 cents when the securities were sold in May, prices on Bloomberg show.

The ruble was little changed at 25.0650 per dollar, headed for a 1 percent advance for the week.

Russia's credit outlook was cut to ``stable'' from ``positive'' last week by Standard & Poor's, which said the authorities face pressure to spend the country's oil funds, undermining the nation's credit strength. The New York-based ratings company maintained Russia's rating of BBB+, the third- lowest investment grade ranking.

Crude oil for November delivery fell as much as $3.77, or 3.5 percent, to $104.25 a barrel in electronic trading on the New York Mercantile Exchange today.

The extra yield investors demand to own developing nations' bonds instead of U.S. Treasuries rose 8 basis points to 3.74 percentage points, the highest in a week. The MSCI Emerging Markets Index of stocks dropped 2.1 percent to 820.89, the lowest in a week.

-- With reporting by Emma O'Brien in Moscow. Editor: Gavin Serkin, Bradley Cook

To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@bloomberg.net

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Fortis Options Soar on Concern Shares May Drop More

By Gareth Gore

Sept. 26 (Bloomberg) -- Investors in options increased bets that shares of Fortis will extend declines even after the Belgian-Dutch bank said its solvency is ``solid'' and that the current stock price doesn't reflect the bank's value.

Three-month implied volatility, which gauges the price of options expiring in December, rallied 38 percent to as high as 122.79, a record, and traded at 119.3 as of 12:34 p.m. in Amsterdam as investors bought insurance against a further drop in the lender's shares.

``Investors are very nervous about the company at the moment and there's a feeling it might be in trouble,'' said Xavier Martin, an options trader at Citigroup Inc. in London. ``Implied volatility can easily go higher.''

Trading in the put options, which are used to bet on a slide in shares, outnumbered call options, a wager that an equity will rise, by more than 70 percent today. The most active Fortis options contracts were 4.80-euro puts expiring in March, according to Bloomberg data.

American-style puts such as those traded on Fortis give the buyer the right to sell shares at a pre-agreed price by a specific date. They may also be used to protect against a decline in a stock.

At a current price of 95 cents, the 4.80 euro put contracts will be profitable to the buyer only if Fortis shares decline to below 3.85 euros, according to Bloomberg data. That is 41 percent lower than yesterday's closing price in Amsterdam.

`Flabbergasted'

Chief Executive Officer Herman Verwilst, speaking at a press briefing in Brussels today, said he's ``flabbergasted'' by the stock declines and that the bank's market value doesn't reflect how much its businesses are worth. Solvency is ``solid'' and ``well above'' the regulatory minimum, he said.

Fortis shares have dropped on speculation the company will struggle to raise the 8.3 billion euros ($12.2 billion) it's seeking to bolster capital, and may even need more funds as financial markets deteriorate. Verwilst said Sept. 20 the firm may sell more assets than anticipated as it becomes harder to raise money.

The shares were trading at 5.782 euros today in Amsterdam, 12 percent lower than yesterday's close.

To contact the reporter on this story: Gareth Gore in Madrid ggore1@bloomberg.net

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European Stocks Decline on Bailout Delay; UBS, Fortis Retreat

By Adria Cimino

Sept. 26 (Bloomberg) -- European stocks sank for a fourth day this week after negotiations on the $700 billion financial bailout plan stalled and Washington Mutual Inc. was seized in the biggest U.S. bank failure in history.

UBS AG, the European bank hardest hit by subprime-related losses, slid 3.4 percent and Dexia SA, the world's largest lender to local governments, lost 5.5 percent after Republicans said they wouldn't support the proposed rescue plan. Fortis tumbled 12 percent. Vestas Wind Systems A/S retreated 11 percent after Morgan Stanley cut its recommendation for the biggest wind- turbine producer.

The Dow Jones Stoxx 600 Index decreased 1.9 percent to 265.99 at 2:37 p.m. in London, extending the drop this week to 4.4 percent. The measure is down 27 percent in 2008 as more than $520 billion in writedowns and credit losses at banks worldwide pushed the global economy toward a recession.

``With the bankruptcy of Washington Mutual, the systemic risk has returned,'' said Benoit de Broissia, an equity analyst at Richelieu Finance in Paris, which oversees about $6.2 billion. ``One of the links in the chain has broken so we wonder if the chain is threatened,'' he said in a Bloomberg Television interview.

National benchmark indexes dropped in all 18 western European markets. The U.K.'s FTSE 100 fell 1.9 percent as shares of Old Mutual Plc declined. A retreat in oil prices weighed on energy producers including Total SA, helping push France's CAC 40 down 1.7 percent. Germany's DAX slipped 1.7 percent.

House Republicans

A group of House Republicans led by Eric Cantor of Virginia said they wouldn't support a plan based on the approach outlined by Treasury Secretary Henry Paulson and backed by President George W. Bush and Democratic leaders. The discord sent Paulson back into a late-night meeting on Capitol Hill with lawmakers. Lawmakers are set to meet again this morning.

``There's a lot of hesitation on the plan,'' said Pierre- Yves Gauthier, a founding partner at Alphavalue in Paris. ``This stalling is creating more worries. Politics have taken over.''

Marc Faber, managing director of Marc Faber Ltd. in Hong Kong, said the U.S. government's rescue package for the financial system may require as much as $5 trillion, seven times the amount Paulson has requested.

JPMorgan Chase & Co. bought WaMu's branch network for $1.9 billion after the thrift was seized by regulators. WaMu is the latest casualty of a financial crisis that drove Lehman Brothers Holdings Inc. and IndyMac Bancorp out of business and led to the hastily arranged rescues of Merrill Lynch & Co. and Bear Stearns Cos., which was itself absorbed by JPMorgan.

Growth Forecast

U.S. treasuries advanced today, with two-year notes heading for a fifth week of gains. European government bonds rose, with yields on two-year notes poised for the biggest weekly decline in eight months.

The worsening financial crisis will cause the U.S. economy to contract, JPMorgan said after cutting its growth forecast for the current quarter. The economy will stagnate in the three months through the end of September, the bank's economists wrote in a note, revising an earlier prediction of 0.5 percent growth.

A government report today showed the U.S. economy expanded at an annual rate of 2.8 percent in the second quarter, slower than the estimated 3.3 percent.

UBS shares retreated 3.4 percent to 20.38 Swiss francs. Dexia slid 5.5 percent to 10.29 euros.

Money-market rates rose worldwide after talks on the rescue plan stalled, deepening concern financial institutions will hoard cash and curb lending. The euro interbank offered rate, or Euribor, for three-month bank loans jumped today to the highest level since the debut of the euro in 1999.

Fortis, Vestas

Fortis, Belgium's biggest financial-services firm by assets, sank 12 percent to 5.71 euros as De Telegraaf reported clients of Dutch unit ABN Amro Holding NV may be moving to other banks. The cost of protecting Fortis bonds from default surged to a record.

Chief Executive Officer Herman Verwilst, speaking at a press briefing in Brussels today, said he's ``flabbergasted'' by the decline in the company's stock.

Bradford & Bingley Plc, the U.K.'s largest lender to landlords, plummeted 13 percent to 18.5 pence on concern it won't be able to raise money in capital markets.

Vestas Wind dropped 11 percent to 520 kroner. The company had its recommendation cut to ``underweight'' from ``equal- weight'' at Morgan Stanley, which said the stock looks ``unjustifiably expensive.''

The brokerage also cited ``early signs of softening demand among small developers'' and an increase in raw-material prices.

Rheinmetall AG retreated 4.5 percent, to 40.30 euros after Merrill lowered its recommendation for the supplier of weapons for the U.S. Army's Abrams tank to ``neutral'' from ``buy.''

Insurers, Oil Shares

Insurance stocks will remain ``vulnerable to swings in both the credit and equity markets,'' Merrill wrote in a separate report, downgrading Aviva Plc to ``neutral'' from ``buy.'' The U.K.'s biggest insurer by premiums fell 3.4 percent to 521.5 pence.

ING Groep NV and Old Mutual were lowered to ``underperform'' from ``neutral'' by the bank. ING shares lost 4.6 percent to 17.99 euros, while Old Mutual sank 4.7 percent to 83.7 pence.

Total, Europe's third-biggest oil company, declined 1.5 percent to 43.77 euros. BP Plc, Europe's second-largest oil producer, lost 1.2 percent to 492 pence. Crude oil dropped as much as 3.5 percent to $104.25 in electronic trading on the New York Mercantile Exchange.

SBM Offshore NV slumped 7.7 percent to 15.67 euros after Goldman Sachs Group Inc. downgraded the world's biggest producer of floating oil production platforms to ``sell'' from ``neutral'' and added the stock to its ``conviction sell'' list.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.



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Wachovia Slumps After WaMu's Seizure, Bailout Impasse

By Linda Shen and David Mildenberg

Sept. 26 (Bloomberg) -- Wachovia Corp. and National City Corp. slumped after negotiations on the government's financial bailout stalled and Washington Mutual Inc. was seized by regulators and sold to JPMorgan Chase & Co.

Wachovia dropped $3.70, or 27 percent, to $10 at 9:34 a.m. in New York Stock Exchange composite trading, leading bank stocks lower. Cleveland-based National City fell 20 percent to $4.01. Charlotte, North Carolina-based Wachovia and National City plunged more than 80 percent in the past year.

WaMu was seized by regulators yesterday in the biggest U.S. bank failure after customers of the Seattle-based lender withdrew $16.7 billion from accounts since Sept. 16. The savings and loan was ``unsound,'' the Office of Thrift Supervision said. The collapse came as lawmakers planned to meet again after talks on Treasury Secretary Henry Paulson's bailout reached an impasse.

Wachovia, like WaMu, has ``mortgage problems, especially those that flow from its acquisition a few years ago of Golden West,'' said Bert Ely, president of Ely & Co. in an interview with Bloomberg Television. While Wachovia may be a target for a buyout, ``it's not clear who wants to take them on at this time.''

Wachovia had $122 billion of option adjustable-rate mortgages as of June 30, plus $45 billion in more traditional mortgages. That total of $167 billion ranks second among U.S. lenders behind Bank of America Corp.'s $239 billion, followed by Citigroup Inc.'s $145 billion, according to an Oppenheimer & Co. report on Sept. 23.

Golden West

Wachovia became the largest option ARM seller through its $24 billion acquisition in 2006 of Golden West Financial Corp., an Oakland, California-based lender that popularized the product over the previous 30 years. Wachovia expects cumulative losses of about 11 percent to 12 percent on its option ARM loans.

Merrill Lynch & Co. analyst Edward Najarian expects the losses to be in the 15 percent to 17 percent range, according to a Sept. 9 report. Housing prices in California declined by a record 41 percent in August, the 11th straight monthly decline, the California Association of Realtors said yesterday. Almost half of Wachovia's option ARMs are in California.

``A bailout plan needs to be approved as credit markets have frozen, credit spreads have widened and it's getting more difficult for businesses and consumers to get access to credit,'' said BMO Capital Markets analyst Peter Winter in a note to investors today.

Fifth Third Bancorp, Ohio's second-largest bank after National City, fell 6.4 percent, and Columbus, Ohio-based Huntington Bancshares Inc. dropped 4.9 percent.

To contact the reporters on this story: Linda Shen in New York at lshen21@bloomberg.net; David Mildenberg in Charlotte at dmildenberg@bloomberg.net

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Aracruz, Atacocha, Positivo, Sadia: Latin Equity Preview

By William Freebairn and Alexander Ragir

Sept. 26 (Bloomberg) -- The following companies may have unusual price changes today in Latin America trading. Stock symbols are in parentheses, and share prices are from the previous close. Preferred shares are usually the most-traded class of stock in Brazil.

The MSCI Latin America Index rose 3.8 percent yesterday to 3,450.21.

Argentina

Pampa Energia SA (PAMP AF): Argentina's biggest electricity holding company had its ``buy'' rating and 3.3 peso price estimate reiterated at brokerage Grupo SBS, analyst Mariano Kruskevich wrote in a note to clients yesterday, citing prospects for new expansion projects. Pampa rose 2.9 percent to 1.42 pesos.

Brazil

Aracruz Celulose SA (ARCZ6 BS): The world's biggest eucalyptus-pulp maker said it's assessing the size of losses caused by derivatives investments and a strengthening dollar. Chief Financial Officer Isaac Zagury resigned. Aracruz rose 3.5 percent to 8.50 reais.

Positivo Informatica SA (POSI3 BS): The Brazilian computer maker said controlling shareholders may acquire an additional 2.3 percent stake. The holders may buy as many as 2.01 million shares, Positivo said yesterday in a statement to the Brazilian securities regulator. Positivo rose 0.1 percent to 8.10 reais.

Sadia SA (SDIA4 BS): Brazil's second-largest food company said it lost 760 million reais ($416 million) after it pulled out of a currency investment early because of turmoil in financial markets, the company said yesterday in a statement on the Brazilian securities regulator Web site. Sadia fell 2 percent to 9.30 reais.

Votorantim Celulose e Papel SA (VCPA4 BS) was downgraded to ``neutral'' from ``buy'' by analyst Edmo Chagas at UBS. VCP fell 0.9 percent to 34.90 reais.

Vivo Participacoes SA (VIVO4 BS): Brazil's largest mobile- phone company said it may sell 1 million of Apple Inc.'s iPhones in the country. The company, which began offering the iPhone today, has placed orders for 200,000 handsets, Vivo Chief Executive Officer Roberto Lima told reporters in Sao Paulo. Vivo gained 4.6 percent to 8.25 reais.

Chile

Cia de Telecomunicaciones de Chile SA (CTCA CC): The country's biggest fixed-line carrier known as Telefonica Chile expects to book a profit of 9.5 billion pesos to 11 billion pesos ($17.7 million to $20.5 million) in fourth-quarter results from the sale of a unit. The company gave the estimate in a statement posted on the regulator's Web site yesterday after announcing the sale of the unit, Telefonica Asistencia y Seguridad SA, in a Sept. 22 filing. Telefonica Chile shares were unchanged at 970 pesos.

Mexico

America Movil SAB (AMXL MM): Latin America's biggest mobile-phone company does not expect to have enough of Apple Inc.'s iPhone handsets to meet demand when they go on sale today in Brazil, Reuters reported. Demand is higher than the initial shipments America Movil received from Apple, Brazil unit Chief Executive Joao Cox said on a conference call, the news agency reported yesterday. America Movil rose 5.6 percent to 25.71 pesos.

Peru

Cia. Minera Atacocha SAA (CMA/B PE): Peru's securities regulator asked Atacocha, Peru's fifth-largest zinc producer, to explain recent share moves. The company should clarify whether there have been developments in the talks between shareholders and an unnamed potential buyer, which Atacocha announced Aug. 28, the regulator said in a statement on its Web site yesterday. Atacocha rose 7 percent to 3 soles.

To contact the reporters on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net;

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Agrium, RIM, Sun Life, Teck Cominco: Canada Equity Preview

By John Kipphoff

Sept. 26 (Bloomberg) -- The following companies may have unusual price changes in Canadian trading today. Stock symbols are in parentheses, and share prices are from the previous close in Toronto except where otherwise indicated.

The Standard & Poor's/TSX Composite Index rose 0.3 percent to 12,546.51 yesterday in Toronto. The main Canadian equity benchmark has fallen 2.8 percent in four days and is poised for a third weekly decline this month.

Agrium Inc. (AGU CN), North America's third-biggest fertilizer producer was downgraded to ``hold'' from ``buy'' at Citigroup Inc. The shares fell 3.9 percent to C$77.72.

Corus Entertainment Inc. (CJR/B CN): The owner of Canada's W Network and YTV channels was rated ``overvalued'' in new coverage by analyst Airan Friedman at Accountability Research Corp. The Toronto-based analyst set a 12-month share-price target of C$17. The shares rose 4.2 percent to C$19.25.

Lundin Mining Co. (LUN CN): The industrial metals producer plans to close its Galmoy zinc mine in the Irish midlands in phases by 2011, eliminating around 220 jobs, Irish state broadcaster RTE reported. The shares rose 0.9 percent to C$3.48.

Manulife Financial Corp. (MFC CN): Canada's biggest insurance company said Mark O'Dell, who quit as the Singapore general manager of American International Group Inc.'s life insurance unit last week, has joined Manulife as the head of its Taiwan operations.

Separately, Manulife is considering a bid for the Asian operations of American International, the Globe and Mail reported, citing people familiar with the matter. The shares rose 2.4 percent to C$37.75.

Onex Corp. (OCX CN): Canada's largest buyout firm is considering buying small U.S. banks that have run into financial difficulties, the Globe & Mail reported, citing Gerald Schwartz, chief executive officer of the Toronto-based firm. The shares gained 0.5 percent to C$26.83.

Orleans Energy Ltd. (OEX CN): The company producing natural gas in Alberta was rated ``outperform'' in new coverage by Michael Harvey at RBC Capital Markets. The Calgary-based analyst set a share-price target of C$5. The shares gained 1.5 percent to C$3.10.

Research In Motion Ltd. (RIM CN): The maker of the BlackBerry e-mail phone forecast third-quarter profit that missed analysts' estimates after boosting marketing to ward off Apple Inc.'s new iPhone and introduce handsets.

The stock was downgraded to ``sector perform'' from ``outperform'' by Mike Abramsky at RBC Capital Markets. The Toronto-based analyst cut his share-price target by 45 percent to C$93.06. The shares fell as much as 20 percent in European trading today. The Toronto-traded shares added 0.6 percent to C$101 yesterday before the results were announced.

Sun Life Financial Inc. (SLF CN): Canada's third-largest insurance company plans to record a charge in the third quarter on its bond holdings in Washington Mutual Inc. The amount of the charge will be known following the end of the quarter, which ends Sept. 30, Toronto-based Sun Life said today in a statement. The shares rose 6.7 percent to C$39.49.

Teck Cominco Ltd. (TCK/B CN): Cia. Minera Antamina SA, operator of the world's largest combined copper and zinc mine, may double output at the deposit and extend the mine operations by another 50 years, Peru Energy Minister Juan Valdivia said. Vancouver-based Teck Cominco owns a 22.5 percent stake in Antamina. Teck shares fell 0.4 percent to C$34.65.

Thompson Creek Metals Co. (TCM CN): The world's fifth- largest molybdenum producer plans to buy back as much as 10 percent of its shares after the stock slid 40 percent in the past three months. The shares fell 0.1 percent to C$12.15.

To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.

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U.S. Stocks Tumble as Congress Stalls Bailout, WaMu Is Seized

By Elizabeth Stanton

Sept. 26 (Bloomberg) -- U.S. stocks tumbled, dragging the Dow Jones Industrial Average to its worst weekly retreat in five years, as the government's $700 billion financial rescue plan stalled in Congress and Washington Mutual Inc. collapsed.

Wachovia Corp. sank 27 percent and Morgan Stanley slid 14 percent as a group of House Republicans said they wouldn't support the proposed bailout as outlined by Treasury Secretary Henry Paulson. WaMu, once the biggest U.S. thrift, plunged 91 percent after regulators deemed the company ``unsound.'' All 10 of the main industry groups in the Standard & Poor's 500 Index retreated.

``There's too much focus on the bailout and not enough on what's beyond the bailout,'' said David Baker, chief investment officer at North American Management Corp. in Boston, which oversees $1.4 billion. ``The financial pain and malaise is going to result in economic pain and malaise. We're not optimistic on the market going forward.''

The S&P 500 sank 18.42, or 1.5 percent, to 1,190.76 at 9:42 a.m. in New York. The Dow Jones Industrial Average declined 132.61, or 1.2 percent, to 10,889.45. The Nasdaq Composite Index dropped 38.48, or 1.8 percent, to 2,148.09. About 10 stocks fell for each that gained on the New York Stock Exchange.

Latest Casualty

The S&P 500 erased most of yesterday's advance and extended its weekly decline to 3.7 percent, while the Dow's weekly decline grew to more than 4.4 percent. Stocks climbed for the first time in four days yesterday as speculation grew that Congress would reach agreement on the bank bailout plan.

The S&P 500 lost 24 percent from its October record after global banks racked up more than $520 billion in credit losses and writedowns stemming from the collapse of the subprime mortgage market. WaMu is the latest casualty of the crisis that drove Lehman Brothers Holdings Inc. and IndyMac Bancorp out of business and led to the emergency takeovers of Merrill Lynch & Co. and Bear Stearns Cos.

Marc Faber, managing director of Marc Faber Ltd. in Hong Kong, told Bloomberg Television the U.S. government's rescue package may require as much as $5 trillion, seven times the amount Paulson has requested.

Wachovia tumbled $3.70 to $10. Morgan Stanley, which is transforming into a bank holding company, slid $2.58 to $24.52.

`Perfect Solution' Difficult

The Financial Select Sector SPDR Fund, an exchange traded fund of financial stocks known by its XLF ticker symbol, slumped 4.1 percent to $19.97 and is down 41 percent in the past year. Republicans splintered late yesterday over the proposed $700 billion rescue of the U.S. financial system, imperilling an agreement hours after a bipartisan group of negotiators and the White House said one was near.

``It's difficult to get a perfect solution here,'' said Richard Weiss, who helps oversee more than $53 billion as chief investment officer for City National Bank in Beverly Hills, California. ``The moral hazard is out there as a potential concern, but what choice was there at this point? This is not about rescuing a few companies or a few highly paid executives. This was about shoring up the U.S. and global financial system.''

WaMu `Unsound'

WaMu, which traded for more than $35 a year ago, plunged $1.53 to 16 cents. JPMorgan fell $1.16 to $42.30. Customers of WaMu withdrew $16.7 billion from accounts since Sept. 16, leaving the Seattle-based bank ``unsound,'' the Office of Thrift Supervision said late yesterday. The takeover gives JPMorgan about $900 billion in deposits and 5,400 bank branches nationwide. WaMu rejected JPMorgan's March takeover bid at $4 a share.

Stock-index futures extended declines before the open of U.S. exchanges after the Commerce Department said the economy grew at a 2.8 percent annual rate in the second quarter, trailing economists' average forecast of 3.3 percent growth.

The growth rate probably slowed to 1.2 percent in the current quarter and 0.6 percent in the fourth, according to a Bloomberg surveys of economists. Gross domestic product shrunk at a 0.2 percent rate in last year's fourth quarter, the first negative growth rate since 2001.

S&P yesterday cut the market-value ranges for inclusion in its three main U.S. indexes after this year's bear-market rout wiped $1.8 trillion off the value of U.S. equities.

Consumer Confidence

The turmoil that roiled U.S. financial markets in the past few weeks probably restrained consumer sentiment in September, economists said before a report today that is due at about 10 a.m. Washington time. The Reuters/University of Michigan's final confidence reading dropped to 71 this month from a preliminary estimate of 73.1 issued two weeks ago, according to the median forecast of 61 economists surveyed by Bloomberg News. The measure would still be up from August, reflecting a drop in fuel costs.

Research In Motion Ltd., the maker of the BlackBerry e-mail phone, plunged 22 percent to $75.50 after competition from Apple Inc.'s new iPhone curbed its profit forecast for the second quarter in a row. The company said earnings will be 89 cents to 97 cents a share in the third quarter. Analysts in a Bloomberg survey had predicted earnings of 99 cents on average for the period.

To contact the reporters on this story: Sarah Jones in Copenhagen at sjones35@bloomberg.net; Elizabeth Stanton in New York at estanton@bloomberg.net.



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Daily Forex Technicals | Written by DailyFX | Sep 26 08 14:16 GMT |

Australian And New Zealand Dollars Promise Volatility As Market Awaits US Bailout Risk appetite throughout the financial markets holds carry sensitive pairs up to potential breakouts. However, with weekend liquidity rapidly approaching and an agreement on a US financial market bailout likely to be reached during the off-market hours; direction can take off in dramatically different directions. Read on to see how our DailyFX Analysts are positioning for the event risk: Senior Currency Strategist - Jamie Saettele My picks: AUDNZD short, against .8430, target .81 Expertise: Technical Average Time Frame of Trades: 1 month (this is short term....a few days at most) The AUDUSD is rolling over from its high at .8524 early this week. The decline is probably just a B wave within a larger correction. Still, price likely comes down into the Fibonacci zone of .8076-.8247. The 61.8% is at .8076. Currency Strategist - John Kicklighter My picks: Pending AUDUSD Expertise: Combining Money Management with Fundamental and Technical Analysis Average Time Frame of Trades: 3 days - 1 week The Australian and New Zealand dollar pairs are very dangerous to trade on any short-term basis as the weekend is approaching debate on the US financial bailout plan threatens to derail the market's calm. Trading any of these two currencies (and especially holding any positions over the weekend) would be taking a speculative call on the health of risk appetite as well as direction from either or both of these currencies. Therefore, it is important to have a plan that will be executed without emotion and takes into account both outcomes: the reassurance of workable plan or ongoing debate (perhaps also a plan that will fall well short of the market's needs); and the relief of receiving the massive blank check the Treasury and Fed are asking for. Both AUDUSD and NZDUSD provide excellent technicals in both directions, but the Aussie-backed major has been more attuned to back and forth (as its rate expectations aren't as dire as the kiwi). Should the policy makers received exactly what they are asking for, risk appetite would rebound; and the Aussie dollar would rally in turn. The major 61.8% retracement of the August 2007 to July 2008 rally matches with major former support at 0.85 for a good trigger level. Should a higher time frame candle close above this level, it would be very encouraging for a more engrossing rally. On the other hand, should the plan not get through before fears explode or the details be very disappointing, the recent congestion held up by the 38.2% retracement from the September 17th to 22nd advance at 0.8250 would be the line in the sand for further declines. A higher time frame close below this level will give a good signal for a follow through to the short side. Currency Analyst - David Rodriguez My picks: Short AUD/USD below 0.8500 Expertise: System Trading Average Time Frame of Trades: 2-10 weeks A failure at 0.8500 opens up a continued move to the downside, and as such, I'd like to get short around these levels. The overall medium term trend remains down in the AUDUSD--it's just a matter of waiting for the recent correction to finish. Currency Analyst - Ilya Spivak My picks: Pending Short NZDUSD Expertise: Macro Fundamentals, Classic Technical Analysis Average Time Frame of Trades: 1 week - 6 months Having found a bottom at the 0.65 level, NZDUSD corrected higher to surpass initial resistance at 0.6745, the 23.6% Fibonacci retracement of the 07/15-09/11 decline. Prices have since turned sideways between this and the 38.2% level at 0.6938. The broad trend is still firmly bearish. Should current consolidation see a top, we will look to sell on a daily close below 0.6745. Otherwise, a break higher meets significant resistance in the price congestion area ahead of the 50% level at 0.7096. For more details on NZDUSD and outlook on the other major pairs, please see the latest Fibonacci Weekly Report. Currency Analyst - David Song My picks: Short AUD/NZD Expertise: Fundamentals Combined with Technicals Average Time Frame of Trades: 2 Days - 2 Weeks After peaking to 1.2292 at the beginning of the week, the AUDNZD continues to face heavy selling pressures, and I anticipate the Aussie to weaken further in the weeks ahead. The pair has certainly failed to break above 1.2300 this week, which supports a short-term bearish outlook for the pair. I expect the Aussie-Kiwi to end the day near its lows, and we may see the pair break below 1.2000 next week to test 1.1985 for support on its way to the downside. I predict the underlying downtrend to hold in the near-term, and we may see the pair fall back towards last week's low of 1.1805. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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Euro/Dollar Attempts Short Term Bearish Break

Daily Forex Technicals | Written by DailyFX | Sep 26 08 14:13 GMT |

The EURUSD continues to probe the downside, albeit with significant pullbacks. If a larger decline is underway, then the drop should accelerate today or Monday. EUR/USD Intraday moves have been large. This action is often indicative of at least a short term change in trend. Coming under 1.46 the last 2 days is a sign of weakness and indicates to me that a larger decline is underway, perhaps as an X wave. It is possible that 1.4871 marks the top of wave B within the A-B-C decline that is underway from 1.6040. I do not view this count as probable given the structure in the other USD pairs. A deeper correction of the 1.3877-1.4871 advance is preferred although structure is not clear at the moment (it rarely is during a correction). If the decline extends, then look for support at the short term trendline and 1.4250 (the 61.8% of 1.3877-1.4871). USD/JPY The USDJPY range persists. There is little confidence right now in directionality at this time. That feeling in itself warns of a breakout though. A break above the resistance line that has contained price since the end of August would warrant a bullish breakout play. GBP/USD The advance from 1.7443 is in 3 waves but probably only the first leg of a larger correction. I favor this scenario because the breakdown that led to the decline to 1.7443 was from a triangle. Breaks from triangles often lead to a retracement that brings price back to the center of the triangle (at least). In this case, the center of the triangle is near the 61.8% of the entire decline from 2.1160; at 1.9658. Near term, weakness is favored in an X wave. 1.7904 is the 61.8% of the rally from 1.7443. USD/CHF The USDCHF decline from 1.1422 is in 3 waves and possibly the first wave of a triangle of flat. In either case, the ensuing advance should retrace a good portion of the decline. The 61.8% of the decline is at 1.1135. This is also where the advance from 1.0799 would be equal to the 1.0686-1.0940 advance. USD/CAD The USDCAD bounce from 1.03 may be a small 4th wave within the impulsive drop from 1.0827. Tracing out this 4th and then a 5th wave would confirm my longer term bearish stance. Expect resistance near 1.05 (38.2% Fibo is at 1.0493 and former 4th wave is at 1.0519) if needed. It is also possible that a 4th wave is complete at a triangle. AUD/USD The AUDUSD B wave is underway towards the Fibonacci zone (.8247-.8076). There is a count (not shown), that treats the top at .524 as the end of an expanded flat. Both counts warrant positioning for a decline now, against .8524. NZD/USD To repeat from yesterday... "the NZDUSD may be nearing the end of a 3 wave movement from the low. While this could be the first leg in a triangle or flat, risk is quickly shifting to the downside." It is possible that the NZDUSD turns up from here to complete a ‘5’ (5 waves) from .6435 but the position of the AUDUSD suggests that the small B wave corrections are already underway. As such, expect additional weakness in wave B. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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A Recessionary World isn't Good for Comdols...

Daily Forex Fundamentals | Written by Black Swan Capital | Sep 26 08 14:04 GMT |

Key News Central banks across the world scrambled to meet desperate demand for cash on Friday, with Europe's big three offering billions of one-week dollars for the first time to break a quarter-end money market logjam. (Reuters) Ireland, easily the best performing eurozone economy since the birth of the single currency, on Thursday became the first in the 15-country region to fall into recession. (FT) New Zealand's economy contracted last quarter, confirming the nation is in its first recession in 10 years. (Bloomberg) Singapore will probably slip into a recession this quarter for the first time since 2002. (Bloomberg) US Economic Events (WSJ): 8:30a.m. 2Q Final GDP: Previous: +3.3%. 8:30a.m. 2Q Revised Corporate Profits: Previous: +1%. 10:00a.m. End-Sep Reuters/U Mich Sentiment Index: Expected: 70. Previous: 63. Quotable To-morrow, and to-morrow, and to-morrow, Creeps in this petty pace from day to day, To the last syllable of recorded time; And all our yesterdays have lighted fools The way to dusty death. Out, out, brief candle! Life's but a walking shadow, a poor player, That struts and frets his hour upon the stage, And then is heard no more. It is a tale Told by an idiot, full of sound and fury, Signifying nothing. Macbeth Act 5, scene 5, 19-28 FX Trading - A recessionary world isn't good for Comdols Recession by definition means demand for all kinds of stuff falls. And if demand for stuff falls, the demand by business for raw materials to make said stuff should naturally fall - with the standard lag of course. And unless the government is more efficiently able to suspend the link between supply and demand for real stuff (which is part of what they always seem to do by manipulating money and credit and often explicitly attempt using price controls and "regulation") we believe the price of raw materials i.e. commodities, will fall as more and more countries slide into recession - two noted to be in and one on the way as highlighted above. Therefore, it seems commodity dollars (comdols) would be vulnerable and decent candidates to ride down in a recessionary world. As evidence for this simple view we provide two charts for some perspective... Wishing you a well deserved enjoyable weekend. Black Swan Capital http://www.blackswantrading.com Black Swan Capital's Currency Snapshot is strictly an informational publication and does not provide individual, customized investment advice. The money you allocate to futures or forex should be strictly the money you can afford to risk. Detailed disclaimer can be found at http://www.blackswantrading.com/disclaimer.html

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Daily Forex Fundamentals | Written by Black Swan Capital | Sep 26 08 14:04 GMT |

A Recessionary World isn't Good for Comdols... Key News Central banks across the world scrambled to meet desperate demand for cash on Friday, with Europe's big three offering billions of one-week dollars for the first time to break a quarter-end money market logjam. (Reuters) Ireland, easily the best performing eurozone economy since the birth of the single currency, on Thursday became the first in the 15-country region to fall into recession. (FT) New Zealand's economy contracted last quarter, confirming the nation is in its first recession in 10 years. (Bloomberg) Singapore will probably slip into a recession this quarter for the first time since 2002. (Bloomberg) US Economic Events (WSJ): 8:30a.m. 2Q Final GDP: Previous: +3.3%. 8:30a.m. 2Q Revised Corporate Profits: Previous: +1%. 10:00a.m. End-Sep Reuters/U Mich Sentiment Index: Expected: 70. Previous: 63. Quotable To-morrow, and to-morrow, and to-morrow, Creeps in this petty pace from day to day, To the last syllable of recorded time; And all our yesterdays have lighted fools The way to dusty death. Out, out, brief candle! Life's but a walking shadow, a poor player, That struts and frets his hour upon the stage, And then is heard no more. It is a tale Told by an idiot, full of sound and fury, Signifying nothing. Macbeth Act 5, scene 5, 19-28 FX Trading - A recessionary world isn't good for Comdols Recession by definition means demand for all kinds of stuff falls. And if demand for stuff falls, the demand by business for raw materials to make said stuff should naturally fall - with the standard lag of course. And unless the government is more efficiently able to suspend the link between supply and demand for real stuff (which is part of what they always seem to do by manipulating money and credit and often explicitly attempt using price controls and "regulation") we believe the price of raw materials i.e. commodities, will fall as more and more countries slide into recession - two noted to be in and one on the way as highlighted above. Therefore, it seems commodity dollars (comdols) would be vulnerable and decent candidates to ride down in a recessionary world. As evidence for this simple view we provide two charts for some perspective... Wishing you a well deserved enjoyable weekend. Black Swan Capital http://www.blackswantrading.com Black Swan Capital's Currency Snapshot is strictly an informational publication and does not provide individual, customized investment advice. The money you allocate to futures or forex should be strictly the money you can afford to risk. Detailed disclaimer can be found at http://www.blackswantrading.com/disclaimer.html

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Final Read U.S. Q2 Economic Growth Revised Down

Daily Forex Fundamentals | Written by RBC Financial Group | Sep 26 08 13:28 GMT |

The final estimate of Q2 GDP growth was revised down to 2.8% from the preliminary estimated growth rate of 3.3%. Expectations had been for the growth rate to remain unchanged. The revised growth number does still indicate an improving trend relative to a gain of only 0.9% in the first quarter and a 0.2% decline in the fourth quarter of last year. This upward trend was in part attributable to the tax rebate cheques sent out in the quarter, although this support is clearly showing signs of waning in the third quarter. The downward revision to second-quarter growth was largely a reflection of greater weakness in both consumer spending and net exports. Growth in the former was revised down to 1.2% from the previously estimated 1.7%. The contribution to growth from net exports is still a significant 2.9 percentage points, although that is down from the previously estimated 3.1 percentage points. Some offset was provided from slightly stronger growth in business investment (2.5% from 2.2%) and less of a decline in residential investment (-13.3% from -15.7%). Annualized quarterly growth in the second-quarter core PCE deflator, the key inflation measure in the GDP report, was revised up slightly to 2.2% from the 2.1% contained in the preliminary report. Today's revision still manages to retain the spurt in growth in the second quarter that was in part fuelled by tax rebate cheques that were sent out in the quarter as part of the U.S. government's fiscal stimulus package. However, this package was always viewed as providing only a temporary boost to growth and that any sustained improvement was more contingent on improving financial markets. With that clearly not happening, economic growth is expected to drop back down to around 1% on average during the second half of this year. The urgency to pass the bailout package currently in front of Congress is meant to help turn financial markets around on a sustained basis and prevent this weak economic growth from persisting in 2009. RBC Financial Group http://www.rbc.com The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.

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Daily Forex Technicals | Written by FXTechstrategy | Sep 26 08 13:11 GMT |

Daily Technical Strategist Today's Focus: EURUSD & GBPUSD EURUSD: EUR Prints High Wave Candle, Slides towards The 1.4542/71 Zone. GBPUSD: Struggles With Upside, Continues To Trade Within Its Rising Channel. EURUSD EUR closed marginally higher Thursday struggling between 1.4768 and 1.4561 levels before closing at 1.4665, printing a high wave candle (a sign of confusion).The pair was seen attacking its key support zone at the 1.4542/71 zone (Aug 26'08/Sept 18'08 lows) on the back of the mentioned candle pattern today. That level also harbours its eroded LT rising trendline currently at 1.4528.While this area holds EUR's nearer term corrective recovery started at the 1.3882 level, breaking through this levels will signal a halt in the said uptrend and bring price acceleration towards the 1.4366/10 zone, its Jan'08/Dec'07 lows followed by its Sept 16 low at 1.4073 and then the 1.4015 level, its Oct'07 low. Its YTD low residing at the 1.3882 level will be targeted on breaking these levels. Its daily RSI is bearish and trending lower supporting this view.However, maintaining above the 1.4542/71 zone will suggest a push to the upside aiming the 1.4867 level, its Sept 22'08 high with a penetration of there exposing the 1.4951/67 levels, its Nov'07/Feb'08 congestive highs and next its May/Jun'08 lows at 1.5263/85.On the whole, a decisive cut through the 1.4542/71 zone will leave the pair vulnerable to the downside with signals for the resumption of its broader weakness flashing. Support Comments 1.4542/71 Aug 26'08/Sept 18'08 low 1.4366/10 Jan'08/Dec'07 lows 1.4073 Sept 16 low 1.4015 Oct'07 low Resistance Comment 1.4867 Sept 22'08 1.4951/67 Nov'07/Feb'08 congestive highs 1.5263/85 May/Jun'08 lows GBPUSD As a second day of downside closes was registered on Thursday following the pair's inability to hold on to its gains at 1.8669, GBP continues to struggle with its corrective recovery off the 1.7447 level suggesting a test of its rising channel bottom. While the pair's trend continues to point higher based on its 4 hourly rising channel, break and close below that channel bottom presently at 1.8212 will trigger further decline towards the 1.8128 level (Sept 15'08 high), the 1.7976 level (Sept 08'08 high) and then its YTD low at 1.7447.Its daily RSI remains supportive of this view. Supports are now seen at the 1.8482 level, its .382 Ret ahead of the 1.8641/69 level, its Sept 22 & 25'08 highs. Others are located at the 1.8795/1.8802 levels, marking its Aug 26'08 high/.50 Ret (2.0157-1.7447 decline) and the 1.8836 level, its Nov'06 low or even the 1.9122 level, its .618 Ret. All in all, the pair's rising channel bottom now serves as a trigger to further decline. Support Comments 1.8482 .382 Ret 1.8123 Sept 15'08 high 1.7976 Sept 08'08 high 1.7447 YTD high Resistance Comments 1.8641 Sept 22'08 high 1.8795/1.8802 Aug 21'08 high/.50 Ret (2.0157-1.7447 decline). 1.9122 .618 Ret Mohammed Isah Market Analyst www.fxtechstrategy.com This report is prepared solely for information and data purposes. Opinions, estimates and projections contained herein are the author's own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which the author incur any responsibility. The does not accept any liability whatsoever for any loss arising from any use of this report or its contents. This report is not construed as an offer to sell or solicitation of any offer to buy any of the currencies referred to in this report

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Final US GDP Reading Slower Than Expected - A Harbinger Of Worse To Come?

Daily Forex Fundamentals | Written by DailyFX | Sep 26 08 13:16 GMT |

The Commerce Department's final measure of US growth a disappointment to policy makers and dollar bulls. After the marked, positive revision to the reading from the advanced to preliminary figures (1.9 percent to 3.3 percent), confidence boomed as many perhaps believed such a strong clip of growth could withstand a battering through the second half. However, the final reading on the expansion through the three months ending in June would knock the optimism down a peg by lowering the broad activity gauge to 2.8 percent. This may seem to be a modest revision, but it amplifies the dour forecasts for growth through the second half of the year. With the consumer responding to rising unemployment and fading wage growth by tempering spending habits, exports losing ground with global growth cooling and business investment curbed by a financial crisis and record raw material prices, forecasts for the third quarter are not promising - though the dollar may not be pricing in this prognosis quite yet. Looking at the details of the final 2Q reading, the weight on the indicator would be the most necessary components. Personal consumption was revised down to 1.2 percent from 1.7 percent (many analysts believe we won't see any more growth from this sector again this year). Exports edged down from 13.2 percent to 12.3 percent. On the positive side, private investment didn't suffer as painful a contraction as the preliminary or advanced number had suggested. Business and consumer investment fell 11.5 percent - still the biggest weight on growth. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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FOREX-Yen gains sharply as U.S. bailout talks stall

* Yen gains, dollar falls as US bailout deal stalls

* Major central banks launch cash injections

* WaMu closure, largest U.S. bank failure, hurts dollar

* U.S. Michigan consumer confidence, final Q2 GDP data eyed (Updates prices, adds quotes, changes byline, previous TOKYO)

By Jessica Mortimer

LONDON, Sept 26 (Reuters) - The yen jumped by over one percent against the dollar on Friday as risk aversion grew after negotiations on the $700 billion U.S. financial crisis bailout stalled and following the biggest ever U.S. bank failure.

Investors rushed to buy the safe haven Japanese currency as they tried to reduce exposure to risk. Asian stock markets fell and European shares were trading around 1.5 percent lower.

As negotiations on the bailout deal ended in acrimony on Thursday when a rival Republican plan emerged, authorities shut down Washington Mutual, the largest U.S. savings and loan bank, and sold its assets. (For details please double click on [ID:nSP375703])

"The market is increasingly nervous and the yen has been picking up," said Rob Minikin, currency analyst at Standard Chartered. "As it became clear that the bailout plan would not be agreed ... U.S. equities saw a big downswing and that has been key to the yen revival."

Central banks scrambled on Friday to inject desperately-needed cash into jammed money markets as the rescue plan ran into trouble. [ID:nSP346519].

At 0813 GMT, the dollar fell 1.1 percent against the yen to 105.26 yen, while the euro lost 1.3 percent to 153.49 yen EURJPY. The euro was down a quarter of a percent against the dollar at $1.4585.

Meanwhile, the high-yielding Australian dollar fell over 1 percent against the U.S. dollar and over 1.5 percent against the yen as investors rushed out of risky assets.

MARKET STILL EXPECTS DEAL WILL BE REACHED

Market participants still expect a deal to be agreed in some form, however, and they are unwilling to adopt big positions as a result, analysts said.

"The overwhelming sense is that some deal will be struck," Standard Chartered's Minikin said. "But the general feeling is that because it is ending up as an uneasy compromise. It is likely to be less satisfactory than the clearcut Paulson solution."

News of the Washington Mutual failure further damaged sentiment, although the third-largest U.S. bank JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) said it bought the deposits of the bank, which had seen its stock price virtually wiped out because of massive amounts of bad mortgages. [ID:nLQ348949].

Coming up, the market will be looking to the release of final U.S. second quarter GDP data. The latest University of Michigan consumer confidence survey will be closely eyed for an indication of how the recent financial market turbulence is feeding through into sentiment.

"The Michigan consumer sentiment reading later in the day could present some short term trading opportunities," Gary Thomson, head of sales trading at CMC Markets said in a note to clients.

"Confidence has been improving of late but the landscape has changed dramatically this month. Whether this will be picked up in the September survey remains to be seen but anything that's pointing even marginally lower this time around stands to be amplified significantly in the October reading". (Reporting by Jessica Mortimer, Editing by David Stamp)

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M. Stanley: emerging markets face capital flight risk

HONG KONG, Sept 26 (Reuters) -The bank industry panic that has devastated developed economies could cause capital inflows into emerging markets to fall by a quarter, increasing the risk of a global recession and even a currency crisis, Morgan Stanley strategists said on Friday.

Capital flows to emerging economies could drop to around $550 billion in 2009 from an estimated $730 billion this year, sapping a major source of growth in countries such as Brazil and China, Stephen Jen and Spyros Andreopoulos said in a note.

"A slowdown in the global economic growth rate will undermine capital flows into emerging markets. This, we believe, is a major risk to the emerging market currencies," they said.

Most of the capital that flows into emerging economies has been in the form of loans, not portfolio investments, which only make up 8 percent of the total.

Loans from banks and other institutions altogether make up 57 percent of total net private sector flows, while foreign direct investment accounts for 35 percent.

This means the shockwaves from Wall Street's implosion over the last few weeks that have accelerated a process of risk reduction and froze money markets will likely have a direct impact on emerging market capital inflows.

This will almost certainly hurt growth in emerging economies, one of the main drivers of global growth over the last year. This could slow growth in global gross domestic product below 3 percent -- a level the International Monetary Fund considers a recession.

Capital flows into emerging markets collapsed about a decade ago after the Asian currency crisis and Russian default. However, the damage to emerging markets could be greater this time because the sheer size of the capital flows has grown so much.

"As the global and emerging market economies slow into 2009, we believe that the risks are highly skewed for emerging market currency weakness. The risk of a crisis is still low, but rising, in our view," said Jen and Andreopoulos. (Reporting by Kevin Plumberg; Editing by Tomasz Janowski)

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Two terrorist suspects arrested on plane in Germany

(Adds detail of nationality)

BERLIN, Sept 26 (Reuters) - Police arrested two male terrorist suspects on a KLM aeroplane at Cologne airport in western Germany on Friday, police said.

The men were suspected of wanting to take part in Islamist attacks and farewell letters had been found, a police spokesman told German television.

One of the men was a Somali and the other was a German born in Somalia's capital Mogadishu, the spokesman said, adding they were hauled out of the plane just before take off about 0455 GMT, he said.

No further details were immediately available and no one was immediately available at KLM to comment. (Writing by Madeline Chambers; editing by Keith Weir)

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Money market frozen as bailout stalls, cbanks act

(Adds detail, quotes, central bank action, background)

By Jamie McGeever

LONDON, Sept 26 (Reuters) - Money markets remained paralysed on Friday, despite increased liquidity injections from central banks around the world, as U.S. political wrangling appeared to stall the passing of a $700 billion bailout plan.

Dollar borrowing rates stayed high and premia paid over U.S. government borrowing rates wide, particularly for three month money, as nervous investors awaited to see if the U.S. government plan will be passed, and if so, how it will look.

The money market stress was exacerbated by the looming quarter end is looming. Any three-month lending now will mature over the Christmas period, when markets are either closed or highly illiquid.

"There is no term lending of note between counterparties. Any term funding there is coming from the central banks," said Meyrick Chapman, rates strategist at UBS.

In early London trade on Friday the interbank cost of borrowing dollars for three months was indicated at the upper end of a wide range between 3.7 and 4.8 percent .

Thursday's fixing of three-month London interbank offered rates by the British Bankers Association was 3.76875 percent , and ICAP's three-month dollar New York Funding Rate was 4.2182 percent .

The closely-watched TED spread, or the difference between these market-based dollar rates and three-month U.S. government borrowing rates, was at the upper end of a range between 350 and 400 basis points.

The spread, a gauge of risk aversion and tightness in short-term lending, ballooned last week to almost 500 basis points, the widest in over a quarter of a century.

The bank-to-bank premium for borrowing three-month dollars over anticipated official policy rates or Overnight Index Swaps, known as the Libor/OIS spread, held around 200 basis points. It was a mere 80 basis points at the start of the month.

The three-month sterling Libor/OIS spread held around 155 basis points, and has more than doubled over the month.

These spreads are seen as a key indicator of financial market stress and risk aversion, reflecting the true cost of funding for banks and financial institutions.

Some 60 percent of corporate lending is tied to London interbank offered rates (Libor), according to Credit Suisse.

To help ease the unprecedented strains in money markets, central banks in Asia provided dollar and local currency liquidity, the Federal Reserve expanded its currency swap operations with the European Central Bank and Swiss National Bank, and the Bank of England said it would extend its dollar liquidity provisions.

The ECB said it would provide $35 billion, the BoE offered $30 billion of one-week funds and the SNB said it would inject $9 billion.

For more on liquidity provisions, see [ID:nSP346519] and for more on the bailout talks in Washington see [ID:nSP375703].

In the interest rates swaps market, the two-year dollar swaps spread was around 150 basis points compared to Wednesday's record high of around 162.

That spread had fallen late on Thursday to around 135 basis points on optimism an agreement between Congressional Republicans and Democrats would be reached, only to widen back out again on the gridlock. Swaps spreads are widely seen as an indicator of investor risk aversion and financial market turmoil: the wider the spread, the greater the stress. (Reporting by Jamie McGeever, editing by Mike Peacock)

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