Stock Market Update - Wednesday, September 29, 2010 Dollar Declines Gold Breaks Records

Stock Market Update
Wednesday, September 29, 2010

Latest US News Headlines:

Dow Jones	10,835.28	-22.86	(-0.21%)
S&P 500	1,144.72	-2.98	(-0.26%)
Nasdaq	2,376.56	-3.03	(-0.13%)

US Commodities:
Crude Oil     77.83     + 2.17%
Natural Gas     3.95     -
Gasoline     2.00     + 2.57%
Heating Oil     2.19     + 3.02%
Gold     1310.01     + 0.06%
Silver     21.94     + 0.92%
Copper     3.66     + 0.72%
Quotes delayed 15 min.


US STOCKS OPEN LOWER - EDGE HIGHER THEN CLOSE DOWN

Stocks sank deeper into the red in late trading Wednesday, as financial stocks more than offset a boost in oil prices and energy stocks.

The Dow Jones Industrial Average lost 22 points, or 0.21%, to 10835, while the Standard & Poor's 500-stock index shed almost three points to 1144 and the Nasdaq Composite dropped three points to 2376.

Stocks rallied a little as we approach the end of the third quarter, but fund managers may be supporting prices to window-dress their balance sheets. Expect a mid-October retracement.

Stocks were little changed on Wednesday as investors grappled with mixed technical signals near the end of one of the best months for stocks in 20 years.

The S&P 500 has climbed 9 percent in September, traditionally a bad month for stocks, as concerns the economy may contract again eased, and more recently on hopes the Federal Reserve would take extra steps to lift the economy.

"Normally traders would be trying to short this market against the (recent rally)," said John Schlitz, chief U.S. market technician at Instinet in New York.

"It feels too overbought to go long short-term, but bad (economic) news yesterday took the market up anyway so traders are not too comfortable shorting either," he said.

The S&P 500's relative momentum index, which measures upward and downward changes, moved last Friday above 70, a level that indicates an overbought condition. It currently stands at 72.1.

The Dow Jones industrial average .DJI edged up 1.93 points, or 0.02 percent, to 10,860.07. The Standard & Poor's 500 Index .SPX shed 0.11 points, or 0.01 percent, to 1,147.59. The Nasdaq Composite Index .IXIC gained 0.01 points, or 0.00 percent, to 2,379.60.

The S&P 500 .SPX is on track to close the quarter up more than 11 percent after falling 11.9 percent in the second quarter. If the S&P ends September up more than 9 percent, it would be the fourth month it has done so since 1990.

Advancing stocks outnumbered declining ones on the New York Stock Exchange by a ratio of about 7-to-5, while on the Nasdaq, about 13 stocks rose for every 11 that fell.

Mid Day Index Report

DJ Indus       10862.90      4.76      0.04     +4.17    Intraday
Nasdaq          2377.85     -1.74     -0.07     +4.79    Intraday
NYSE Comp       7311.15      0.83      0.01     +1.76    Intraday
S&P 500         1146.40     -1.30     -0.11     +2.81    Intraday
 Russell 2000     677.19      1.76      0.26     +8.28    Intraday
 DJ TSM         12013.97     14.51      0.12     +4.49    Intraday


U.S. stocks erased their morning losses, moving briefly into positive territory Wednesday as a sharp drop in oil inventories helped boost oil prices and energy stocks.

The Dow Jones Industrial Average was down 15 points, or 0.1%, to 10845 in early afternoon trading, while the Standard & Poor's 500-stock index shed two points to 1146 and the Nasdaq Composite edged down four points to 2376.

The blue-chip index was able to erase most of the morning's losses after the Department of Energy said crude-oil stockpiles fell by 475,000 barrels to 357.9 million barrels, more than an expected 300,000-barrel decline. The steep drop, which comes after a summer marked by unusually high levels of stockpiling, helped oil prices jump to $77.60 a barrel after falling as low as $75.60 a barrel earlier in the morning.

Energy stocks led the S&P sectors as Sunoco rose 3.7%, Hess gained 1.7% and Chevron added 0.6%. Exxon Mobil remained lower, off 0.6%.

U.S. stocks traded in a tight range on Wednesday, edging down modestly while gold added to its record highs as pressure continued to mount on the dollar. Energy stocks benefited from a sharp drop in oil inventories.

The Dow Jones Industrial Average fell 43 points, or 0.4%, to 10815 in morning trading, while the Standard & Poor's 500-stock index shed 6 points to 1142 and the Nasdaq Composite edged down 10 points to 2370.

Leading the blue-chip index's declines was Cisco Systems, off 1.1%, after International Business Machines purchased a maker of Ethernet switches, putting the two tech giants in more direct competition.



US DOLLAR DECLINES 
US Stock Futures Steady;Gold Rises, Dollar Drops

The Dow Jones Industrial Average (DJIA) is headed for an opening gain of about 8 points, while the S&P 500 Index (SPX) is set to fall nearly 2 points. Wall Street is treading cautiously this morning amid concerns about the falling US dollar.

The U.S. dollar extended its steep decline on Wednesday, clocking losses of more than five percent for the month, as investors prepared for the Federal Reserve to print more money to lift the weakening U.S. economy. The U.S. recession sent the dollar to a five-month low against the euro and a two-year trough against the Australian dollar.

The latest leg of the dollar decline was fueled by Tuesday's data that U.S. consumer confidence fell to its lowest in seven months. With gold XAU hitting a fresh record high of $1,313.20, and silver XAG setting its highest in 30 years Wednesday's market open looks exciting.

The U.S. dollar extended its steep decline on Wednesday, clocking losses of more than five percent for the month, as investors prepared for the Federal Reserve to print more money to lift the weakening U.S. economy.

US Dollar Futures Index DXY, Day's Range: 78.62 - 79.00, Now 78.71 -0.31  (-0.39%)
The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, traded at its lowest level since January.


CRUDE OIL AND PETROLEUM PRODUCTS:
OIL FUTURES:Crude Moves Higher On Drops In US Stockpiles

Department of Energy Report:
US Crude Oil Stocks -0.475M Bbl In Wk; Seen -0.3M Bbl
US Refineries Ran At 85.8% Vs 87.8% Week Ago
US Gasoline Stocks -3.469M Bbl In Wk; Seen +0.6M Bbl
US Distillate Stocks -1.265 Mln Bbl At 173.589 Mln Bbl


OIL FUTURES: Nymex Crude Turns Higher As Stockpiles Decline

Crude futures rebounded from early losses to move higher Wednesday after the U.S. Energy Department reported surprise draws in crude oil and fuel products.Nymex Crude Settles Up $1.68 At $77.86/Bbl


The department's Energy Information Administration reported U.S. crude oil stockpiles fell by 500,000 barrels in the week ended Sept. 24. Gasoline stocks dropped by 3.5 million barrels and stocks of distillates, which include heating oil and diesel, fell by 1.3 million barrels.

The size of the draw in crude was larger than analysts expected, according to a survey by Dow Jones Newswires. And drops in gasoline and distillates surprised analysts who had expected inventory increases.

Light, sweet crude for November delivery recently traded 13 cents higher at $76.31 a barrel on the New York Mercantile Exchange after trading as high as $76.49 after the report was released. Brent crude on the ICE futures exchange traded 38 cents higher at $79.09 a barrel.

After two-straight sessions of mostly sideways price movements in crude, the latest U.S. inventory data offered some optimistic signal on the oil fundamentals.

But it remains to be seen which primary driver of the oil market--the dollar, the equity markets or the oil data--will take the lead for the rest of the session as oil inventories remain above five-year averages.

"A lot of people still feel that the dollar has a lot to do with the price movement," said Tony Rosado, a broker with GA Global Markets. Oil investors have turned their attention to foreign exchange markets in recent days as worries grow about countries' attempts to lower the value of their currencies. The euro was recently up 0.3% against the dollar, helping oil prices by making crude cheaper for buyers in other currencies.


The American Petroleum Institute, an industry trade group, reported late Tuesday a 2.4-million-barrel draw in crude oil inventories, setting the stage for the more-closely watched EIA data.

 The U.S. Energy Information Administration's inventory report is due at 10:30 a.m. EDT on Wednesday.

U.S. crude oil futures prices edged up on Wednesday, supported by the weak dollar and positive data on China's manufacturing sector ahead of government inventory data.

Also supportive to oil prices was a late-Tuesday report from the industry group American Petroleum Institute that said U.S. crude oil stocks fell 2.4 million barrels.

The API also said gasoline stocks rose 3.0 million barrels, while distillate inventories fell 2.8 million barrels. Ahead of weekly reports, total distillate stocks were expected to have risen 400,000 barrels in the week to Sept. 24, with gasoline stocks up 500,000 barrels, a Reuters analyst survey showed.

Crude oil stockpiles were forecast to have fallen only 300,000 barrels on lower imports as seasonal refinery maintenance slowed demand.



HOW TO KEEP THE AMERICAN PUBLIC FROM GETTING TAX BREAKS -

PATENT INFRINGEMENT

Consumer and taxpayer organizations urged Congress on Wednesday to ban the patenting of tax strategies, saying they "pose a significant threat to American families and businesses."

U.S. law allows for the patenting of a system or method for reducing or deferring taxes. The number of tax-strategy patents has grown to 117 issued and 151 pending, according to a coalition of 18 taxpayer and consumer groups including the American Institute of Certified Public Accountants and the U.S. federation of state Public Interest Research Groups. The coalition said it fears an "even greater explosion in both applications and patents issued over the next several years."

Such patents may creating a monopoly for patent holders to determine who can and cannot take advantage of parts of the tax code, the groups said. Meanwhile, tax advisors, who are generally not patent experts, have the burden of being aware of such patents and face potential lawsuits for violating them.

The coalition urged lawmakers to include the ban in a tax bill or other piece of legislation Congress must attend to before adjourning.



BEFORE THE BELL:
US Stock Futures Lower, Gold Hits New High

US Stocks Open Lower; DJIA Off 24 As Cisco Lags


U.S. stock-market futures slipped Wednesday after gold hit another all-time high and pressure continued to mount on the dollar. Futures on the Dow Jones Industrial Average  fell 17 points to 10771.

Dow component Hewlett-Packard Co. (HPQ) gained in premarket trade after the world's biggest computer manufacturer offered a better-than-expected forecast for fiscal 2011. S&P 500 futures dropped 2.10 points to 1139.6, and Nasdaq 100 futures  shed 1.5 points to 2007.

In other corporate developments, BP PLC (BP)  has shown the door to the head of its exploration and production business.

US Dollar VS Yen

With little in the economic diary Wednesday, the dollar dropped 0.3% to 83.63 Japanese yen.  The dollar index, which measures the greenback against a basket of six currencies, also hit its lowest level in eight months.

"It seems that the equity markets remain unfazed by weaker data as long as yields decline in step," said Kenneth Broux, senior market economist at Lloyds TSB.  "So while yesterday's consumer-confidence data and the recent weak tone to the regional Fed indices should underline the slowdown risks, the prospect of quantitative easing in response continues to favor dollar weakness," he added in a note to clients.


US CREDIT CARD CHARGE-OFFS RISE IN AUGUST

Moody's says the charge-off rate for U.S. credit cards rose sequentially in August, consistent with seasonal patterns, but the rise doesn't change the ratings service's view that credit-card performance will continue to improve.



GOLD SHINES AGAIN - NEW RECORD SEEN - $1,314 AN OUNCE

Gold futures hit another high as the dollar weakened, with the December contract touching $1,314.80 an ounce on Globex before giving up most of its gains.

Gold futures settled at a new record above $1,310 for the second-consecutive session Wednesday. 
The most-actively traded gold contract, for December delivery, rose $2, or 0.2%, to settle at $1,310.30 a troy ounce on the Comex division of the New York Mercantile Exchange, marking the metal's 10th record settlement in the last 12 sessions. The contract hit a record intraday high of $1,314.80 in electronic activity overnight.
Other precious metals traded in New York also gained, with December silver rising 1.1%, January platinum adding 1% and December palladium adding 1.2%.

Settlements (ranges include open-outcry and electronic trading):
London PM Gold Fix: $1,307.50; previous PM $1,294.00
Spot gold at 1:30 p.m. ET: $1,308.80, up $1.20; Range: $1,305.20-$1,313.45
Dec gold $1,310.30, up $2.00; Range $1,306.10-$1,314.80
Dec silver $21.952, up 24.5 cents; Range $21.710-$22.075
Jan platinum $1,656.60, $15.90; $1,639.90-$1,658.00
Dec palladium $567.30, up $6.85; Range $563.15-$572.75
Engelhard Corp's base price for industrial gold bullion was $1310.37 per troy ounce, up $13.52 from previous. It's selling price for gold in fabricated form was $1408.65, up $14.54.

Handy & Harman's base price for gold was $1307.50 per troy ounce, up $13.50. The fabricated form price was $1412.10, up $14.58.

Gold is now $1,310, Silver is $21.97 an ounce

Canadian Market:

Toronto Stocks Higher

Canadian stocks soared to new heights Wednesday, riding commodity prices to their highest level in two years as the country’s main index became the first North American benchmark to retrace its April highs.

The Toronto Stock Exchange was at its highest level in two years Wednesday as oil prices rose, along with  precious metals, copper and the country's biggest technology company got some buy-ins after some selling a day earlier.

The S&P/TSX composite index has outperformed its U.S. counterpart this week, as gold and oil prices rally higher and investors grow more confident about the economic recovery of Canada.

The stock market was also higher at midday Wednesday with technology and energy stocks lending support.

At 11:45 a.m. EDT (1545 GMT), the S&P/TSX Composite Index was up 34.51 points, or 0.28%, at 12313.39 and advances led declines 722 to 613. Trading volume was 196.10 million shares. The S&P/TSX 60 Index was up 2.03 points, or 0.29%, to 712.32 points.

Canada Dollar Holds Its Ground

The Canadian dollar held its ground Wednesday in its ongoing tug-of-war with the greenback.

The U.S. dollar was at C$1.0315 at 3:10 p.m. EDT (1910 GMT), from C$1.0275 at 8:00 a.m. EDT (1200 GMT) and C$1.0306 late Tuesday, according to CQG. About 70% of Canada's exports go to the U.S.

The Canadian dollar and its U.S. counterpart have been battling in a tight range this month, and are beginning to "wear a hole in the carpet of its recent trading range," TD Securities said Wednesday.

Thursday could bring a more deliberate move in the U.S. dollar-Canadian dollar pair, with July gross domestic product data expected to reflect a slowing in the economy, and Bank of Canada Governor Mark Carney speaking in Windsor, Ontario.

The gross domestic product report for July is due at 8:30 a.m. EDT. The market is bracing for a weaker print and a decline of 0.1%.

In June, the Bank of Canada became the first central bank in the Group of Seven nations to raise interest rates since the beginning of the global financial crisis. It has raised the overnight target rate three times since, by 25 basis points at each move. The rate now stands at 1.0%.

The market has deeply lowered its expectations of another 25-basis-point move when the Bank meets next on Oct. 19, as it eyes the slowdown in the U.S. economy and the effects it could have at home.

Exchange rates at 3:10 p.m. EDT (1910 GMT), 8:00 a.m. EDT (1200 GMT), and late Tuesday.

            USD/CAD   1.0315  1.0275  1.0306
            EUR/CAD   1.4064  1.3980  1.3991
            CAD/JPY    81.10   81.36   81.45




Toronto Indexes, Volume; 2 PM EDT Composite Up 60.13

 S&P/TSX Composite   12339.01  up   60.13  or 0.5%
 S&P/TSX 60 Index      713.63  up    3.34  or 0.5%
 Financials            176.18  up    0.34  or 0.2%
 Materials             396.49  up    0.33  or 0.1%
 Energy                279.59  up    3.42  or 1.2%
 Industrials           104.60  up    0.76  or 0.7%
 IT                     28.34  up    0.54  or 1.9%

   Volume           Wednesday    Tuesday
   1-2                 44.1M       46.6M
   9:30-2             308.5M      333.3M


Toronto Most Actives At 11:15 AM EDT

iShares Cdn S&P/TSX 60          4,537,526  17.81  up   0.01
RS Technologies                 4,327,952   0.02  unchanged
Western Coal                    3,392,873   5.69  off  0.04
Horizons NYMEX Natural Gas Bull 2,736,310   3.80  off  0.07
Katanga Mining                  2,536,138  14.78  up   0.12
Yamana Gold                     2,518,391  11.81  off  0.02
Osisko Mining                   2,481,304  14.79  up   0.13
Kinross Gold                    2,332,482  19.59  off  0.06
Suncor Energy                   2,050,804  32.58  up   0.07
Eastern Platinum                2,018,780   1.43  up   0.03




South American Markets:

CHILE:

4.9 EARTHQUAKE WARNING
4.9-Magnitude Earthquake Shakes Central Chile

A earthquake with a magnitude of 4.9 rocked central Chile midday Wednesday, the U.S. Geological Survey reported. The quake's epicenter was located 70 kilometers west-southwest of the city of Rancagua.

The South American nation has felt a series of minor quakes in recent weeks, which are thought to be aftershocks of the massive 8.8-magnitude quake that hit the country late February.



Chile Peso Closes Flat After Failing To Break Key Resistance

For a second straight session, the Chilean peso ended flat against the dollar Wednesday -- near a 27-month high -- as the currency failed to break a key resistance level.

The peso came back off its earlier highs to end unchanged at CLP485.50 to the dollar. It traded in a tight range of CLP484.60 to CLP486.00.

Chile's currency rose early in the session as international copper prices hit a 25-month high. Because Chile produces over a third of global copper, the peso often takes cues from the metal's international prices.
the peso lost momentum during the session as the euro fell from its five-month high against the dollar. Because Europe is one of Chile's main trade partners, the peso often moves in the same direction as the euro does against the dollar.




BRAZIL:

Brazil Government Spends More than Income - Surplus Declines

Brazil's public sector posted a primary budget surplus which was lower than analysts had expected, as government spending continues to outweigh record tax take.

The central bank reported the surplus rose to 5.22 billion reals ($3.1 billion), which was lower than the median BRL6 billion which the market had expected.

Brazil's 12-month primary surplus widened slightly in August to BRL68.82 billion, although as a percentage of gross domestic product it slipped slightly to 2.01%, from BRL68.64 billion, or 2.03% of GDP in July.

Under the impact of the August results, the country's 12-month nominal public sector deficit, which includes the effect of interest payments on debt, widened to BRL115.8 billion, or the equivalent of 3.38% of GDP, from BRL113.5 billion, or 3.34% of GDP.

The country's net public sector debt, meanwhile, was broadly stable in August at BRL1.42 trillion, or the equivalent of 41.4% of GDP, from BRL1.41 trillion or 41.7% of GDP the previous month.

Brazil's government has set a year-end target for the consolidated public sector primary surplus equivalent to 3.3% of GDP as part of a long-term effort to reduce public sector debt.


Brazil Bank Workers Begin Strike
Brazilian bank workers on Wednesday began an indefinite strike calling for higher wages. The Sao Paulo, Osasco and Region Bankworkers' Union said some 16,000 workers, or about 3.5% of Brazil's banking union members nationwide, had joined the strike, to demand an 11% pay increase and other benefits.

In a statement, the union said some 358 bank buildings were affected, of which eight were administrative centers and 350 were bank branches.



Brazil's Rousseff Slips In Poll, Still Expected To Win
Dilma Rousseff, the candidate backed by Brazil's current president, is still on track for a big win in Sunday's election.

A poll by the Sensus organization showed Rousseff slipping to 47.5% of voter intentions from 50.5% in mid-September. But elimination of so-called "blank" votes, a form of abstention under Brazil's voting system, means she will likely receive 54.7% of valid votes, burying any chance of a two-person run-off four weeks later.

The loser in the latest Sensus scenario is chief opposition candidate Jose Serra, of the Social Democratic Party. The Sensus poll showed Serra declining to 25.6% from 26.4% at mid-month. Third-party choice Marina Silva, of the Green Party, picked up the slack, rising to 11.6% from 8.9%.

Meanwhile, in a separate poll Wednesday, the Public Opinion Research Institute also showed Rousseff with a solid lead and a first-round win. The institute gave Rousseff 50% of voter intentions, unchanged from mid-September. Serra scored 27%, down from 28% at mid-month. The Green Party's Silva received 13%, up from 12%.

Rousseff is the nominee of the left-of-center Workers' Party, or PT. If elected, she will become Brazil's first woman president.



PERU:

Peru Central Bank Intervenes In Foreign Exchange Market, Buys $120M

The Central Reserve Bank of Peru intervened in the foreign exchange market Wednesday to purchase $120 million at an average of PEN2.788 per U.S. dollar. On Wednesday, the sol ended unchanged at PEN2.789 per dollar.

The central bank has been purchasing dollars regularly since June 18, intervening to smooth out volatility in the exchange market. Peru's sol has been on an appreciating trend recently due in part to strong inflows of capital.

On Monday the central bank bought $139 million, followed by a purchase of $12 million on Tuesday.




ARGENTINA:

Argentina's August Supermarket Sales Rise 18.2% On Year

Argentina's supermarket sales volumes rose 18.2% year-on-year in August as a booming economy and high inflation fueled consumer spending. Sales rose 1.7% from the previous month, the national statistics institute, Indec, reported Wednesday.

The Central Bank of Argentina has forecast economic growth of up to 9.5% this year, on the back of government spending, strong consumer demand and a surge in exports to Brazil.

In peso terms, supermarket sales totaled ARS5.4 billion ($1.36 billion) last month, up 27% from August 2009, but 2.1% lower than July.






European Markets:

European Stocks End Lower

European stock markets finished lower Wednesday, as concerns about the fiscal health of euro-zone countries such as Ireland and Spain continued to rattle sentiment, pushing gold to another record high.

Persisting concerns about periphery euro-zone sovereign debt curbed investor enthusiasm. In Ireland, the government is expected to release a statement as early as Thursday detailing its latest plans for fixing Anglo Irish Bank. Banks overall in Europe were lower, with the Stoxx Europe 600 banks index down 1.5% to 211.08

The Stoxx Europe 600 index ended down 0.5% to 261.02, while the U.K.'s FTSE 100 index lost 0.1% to 5569.27. France's CAC-40 index declined 0.7% to 3737.12, and Germany's DAX was off 0.5% to 6246.92.

Sovereign-debt concerns also overshadowed a monthly survey of confidence around the euro-zone area, which showed the Economic Sentiment Index rose to 103.2 in September from 102.3 in August, a figure that was revised up from 101.8. 



London     FTSE 100        5569.27     -9.17     -0.16     +2.89    Close
                  FTSE 250       10562.53     10.12      0.10    +13.49    Close
Frankfurt  Xetra DAX       6246.92    -29.17     -0.46     +4.86    Close
Paris         CAC40           3737.12    -25.23     -0.67     -5.06    Close


European shares extend losses on recovery fears.The rising euro's impact on European exporters and further jitters over the stability of the region's government debt markets offset the upbeat economic data and knocked European stocks back 0.5 percent. European banks were down 1.3 percent. 

Deutsche Bank, Societe Generale and Commerzbank slipped 1.8 to 2.8 percent.  The VDAX-NEW volatility index .V1XI, one of Europe's main barometers of investor anxiety, rose 2.8 percent.

"It's like, if people are bracing for the bad news, that will trigger a pull-back," says David Thebault, head of quantitative sales trading at Global Equities.

European debt markets were buffeted by the Irish situation and concern about a vote of confidence in Italy's government later on Wednesday, a concern for its budget tightening process and one which sent Italian government debt premia briefly to their costliest since June.

Debt spreads steadied as the core German government bond yield bounced back later, following data showing European banks took less cash than expected from the European Central Bank at its latest tender.


MAJOR EUROPEAN PROTESTS

European cities hit by anti-austerity protests.

Thousands of protesters from across Europe are taking part in a mass demonstration in Brussels against spending cuts by some EU governments. In Spain, protesters clashed with police outside Madrid's main bus depot. Other protests against austerity measures are being held in Greece, Italy, Ireland and Latvia.

A general strike is also taking place in Spain, hitting transport and other public services. Trade unions say EU workers may become the biggest victims of a financial crisis set off by bankers and traders.

Many governments across the 27-member bloc have imposed punishing cuts in wages, pensions and employment to deal with spiraling debts.

In Greece and the Republic of Ireland unemployment figures are at their highest level in 10 years, while Spain's unemployment has doubled in just three years.

In Britain the government is planning to slash spending by up to 25% in some areas, while France has seen angry protests against a planned increase in the minimum retirement age.

The European Trade Union Confederation (Etuc) said it hoped that about 100,000 people would march on EU institution buildings in the Belgian capital.

As the march got under way under a sea of banners, police sealed off the EU headquarters and barricaded banks and shops. The protest in Brussels has been described by unions as a day of action under the slogan "No to austerity, priority to jobs and growth". Labor unions in Spain began a general strike by marching through the capital, Madrid, in an effort to shut down the city.

There were mass protests outside bus and metro stations, and few buses were running. Many high-speed trains were canceled, and only about a quarter of commuter trains were running. Groups of strikers have been seen in Madrid going into shops and banks trying to force them to close.

The airline Iberia said it expected to operate only 35% of scheduled flights, and there were also protests in Barcelona.

In Ireland, a man drove a cement mixer covered with anti-bank slogans into the gates of the parliament in Dublin, in an apparent protest at the country's expensive bank bailout.

Etuc says the protesters are marching to voice their anger over budget-slashing plans and cuts which "could lead Europe into a recession". "We didn't cause this crisis. The bill has to be paid by banks, not by workers," Etuc said.

Instead, the organization urges governments to guarantee workers stable jobs, strong social protection and better pensions. Workers in many EU countries are frustrated that they are paying for the mistakes of the banks and the financial sector, the BBC's Christian Fraser in Brussels reports.

The recovery is still fragile. In some countries it has not even begun, and many fear the cuts could provoke further trouble, our correspondent says. He adds that in short, it is a debate on austerity versus stimulus, cuts or spending, and the opinions are deeply and bitterly divided.


IRELAND:

Irish Govt Struggles As It Tackles Its Economy

The Irish government is facing mounting challenges in the banking system, the economy at large, and the international bond markets, Ireland's government faces a struggle for its own survival when parliament reconvenes Wednesday after a 12-week summer break.

Sentiment weakened after the Irish Times reported the final cost of winding down Anglo Irish Bank over a 15-year period may rise well above 30 billion euros ($40.4 billion) under a worst case or "stress scenario".

The spread between the yields on 10-year government bonds issued by the German and Irish governments widened to a fresh high of 4.5 percentage points Tuesday, indicating that investors believe there is an increasing risk that the government will be unable to repay its debts.

While struggling to retain the confidence of bond investors, the government will in the days to come receive the Central Bank of Ireland's most recent estimate of the cost of restructuring nationalized Anglo Irish Bank Corp.


FRANCE:

France Unveils Toughest Budget In 50 Years
Amid public unrest and mass protest, France has taked a radically new line on its public finances Wednesday, unveiling the toughest spending cuts in 50 years to bolster its position as a key player in the eurozone and balance its books.

President Nicolas Sarkozy's government announced a budget that imposes unprecedented cuts to curb soaring overspending and saves billions by closing tax loopholes, with the economy predicted to grow by 1.5 percent this year.

The measures are aimed at reining in a public deficit that is predicted to hit a record 7.7 percent of gross domestic product in 2010, far above the 3.0-percent limit laid down by European Union rules.

The central government's budget deficit will hit 152 billion euros (207 billion dollars), falling to 92 billion euros in 2011. The overall public deficit reflects spending by the central government, local authorities and social welfare bodies.

It is subject to EU regulations and is closely watched by money markets and by France's partners in the EU and the 16-nation eurozone. Finance Minister Christine Lagarde will increase revenue by closing tax loopholes worth 9.4 billion euros and has vowed to cut spending by allowing 31,638 government employees to retire without being replaced.

Some of the extra cash will come from de-facto tax increases on previously favoured categories of worker and on some insurance and property investments. Over one billion euros will come from raising VAT on domestic Internet, television and telephone connections.

Despite criticism from the Socialist opposition, the government insists the budget is not an austerity measure, arguing that France's predicament is different from that of such troubled European economies as Greece and Spain. "We want to break with a tradition that makes our country the European champion of public spending," Budget Minister Francois Baroin told Le Monde daily.

"In this sense the budget is historic. Never in the last 50 years have we seen a two-percent reduction in the public deficit in a year. The effort will continue until public finance is balanced."

Paris has promised the European Commission and fellow EU members that the overall public deficit will be reduced to six percent next year, cut down to the three percent limit by 2013 and then to two percent in 2014. Such a reduction so quickly is widely regarded as a huge undertaking, and a correction on this scale has never been achieved in modern French history. If the massive strikes and street protests that greeted Sarkozy's pension reforms plan are a guide, it will face stiff opposition.

While France seeks to reduce its overall deficit, its annual debt is set to remain high until at least 2012. Next year's interest payments on debt will approach the cost of the entire education budget, the biggest item in the central government budget. By 2012, interest payments will overtake education.

In France, the social security budgets are separate from, and bigger than, the central government budget. From 2011, EU nations' budgets must first be submitted to the European Commission before going to their national parliaments, with Brussels on Wednesday suggested fining lax eurozone nations.




Asian Pacific Markets:
The Nikkei 225 Average closed up 0.7%, while the Hong Kong market added 1.2%.


7.2 EARTHQUAKE WARNING
Magnitude 7.2 Earthquake Hits Indonesia

A magnitude 7.2 earthquake hit near the southern coast of Papua in Indonesia early Thursday morning, the U.S. Geological Survey said in an alert.

The quake struck at a depth of 7.6 miles (12.3 kilometers). Its epicenter was located 68 miles (109 kilometers) north-northwest of Dobo, Indonesia.

A second major earthquake, measuring magnitude 7.2, struck within a minute of the first near the southern coast of Papua, Indonesia early Thursday at 17:11 GMT, the U.S. Geological Survey reported.

The temblor occurred at a shallow depth of 7.6 miles (12.3 kilometers) and was centered 65 miles north-northwest of Dobo, Indonesia, and 1850 miles east of the capital Jakarta.

The earlier quake, measuring magnitude 6.6, was centered in the same area, but at almost twice the depth. It struck at 17:10 GMT.

Indonesia issued a tsunami alert following the quakes, according to the national meteorological and geophysics agency. The Pacific Tsunami Warning Center cautioned that the quake could trigger local, and possibly destructive, tsunamis.  
Link to alert: http://earthquake.usgs.gov/earthquakes/recenteqsww/Quakes/us2010bubm.php 




US AND JAPAN MONEY PRINTING

"The backdrop for the dollar continues to deteriorate," JPMorgan said, advising clients to seize any bounce in the dollar as a chance to sell. "The increased focus on QE (quantitative easing) and the break of several key dollar support levels maintained the overall bearish bias."

In Asia, where the Bank of Japan's yen sales are also akin to money printing, Japanese government bond futures hit a seven-year high while the U.S. Treasury yield curve moved on Tuesday to its flattest since early September on expectations of further monetary easing by both central banks.

Stock markets there found support in the rise in HSBC's China Purchasing Managers' index to a five-month high as it indicated rising momentum in China's vast industrial sector.

Asian stocks outside Japan rose 0.6 percent, poised for their biggest monthly gain since July 2009, up 11.8 percent, in what is historically one of the worst months for stocks.

Japan's Nikkei .N225 closed up 0.7 percent, helped by quarter-end window dressing and expectations that the BOJ will respond to the worsened outlook from Japanese manufacturers by further easing its policy when it meets on Oct. 4-5.


JAPAN:
Japanese Stocks Boosted by a better-than-expected Business Sentiment Survey.

The HSBC China Manufacturing Purchasing Managers Index, a gauge of nationwide manufacturing activity, rose to a five-month high in September, likely reassuring markets China isn't facing a rapid slowdown.

In Tokyo, the market got a leg-up from a better-than-expected outcome from the Bank of Japan's September Tankan survey, which showed sentiment among the country's big manufacturers picked up for the sixth-consecutive quarter, and at a faster pace than expected.



CHINA:

China Wins WTO Backing In Poultry Dispute With U.S.

China won a rare victory at the World Trade Organization against the United States on Wednesday after an arbitration panel ruled that U.S. restrictions on Chinese poultry imports are illegal.

Arbitration panels typically call on offending parties to lift the illegal measure, however, in this case, the panel said that it would not make any recommendation as the U.S. restrictions have since expired.



AUSTRALIA:
Australia GDP To Grow 3%-3.5% In 2010

The International Monetary Fund on Wednesday forecast Australia's A$1.3 trillion economy will grow by 3.0% to 3.5% this year and in 2011 as the country's terms of trade recover to historic highs.

Australia was one of few developed nations to escape a recession in 2009, buoyed by strong demand from China for its vast natural resources, a significant monetary and fiscal policy response to the financial crisis, flexible exchange rate and healthy banking sector, the IMF said in its annual Article IV report on the country.

Private investment in mining and commodity exports are "leading the way," the IMF said, while warning that if the recovery unfolds as expected, monetary policy will need to tighten further to contain inflation pressures generated by the mining boom.

The report, based on a study done in July, was published ahead of a closely watched rate decision next week. The Reserve Bank of Australia is widely expected to resume raising interest rates, after pausing since May, in a bid to curb inflation as the economy booms.

The IMF projects inflation will hover around 3.0% over the next three years--at the top end of the central bank's target band. That means the central bank must "guard against inflation expectations becoming anchored at too high a level," it said.

In determining the magnitude of any additional tightening, the RBA will need to consider the high level of household indebtedness, which makes domestic demand more responsive to interest rates than it has been in the past, the IMF said.

If, on the other hand, global markets come under severe stress because of concerns over European sovereign debt or faltering world growth, the RBA is well-positioned to respond, the IMF said. "There is ample scope to cut the policy rate and provide liquidity support for banks, which proved effective in the recent crisis."

The RBA led the world with 150 basis points in rate increases from October to May, while other central banks waited with rates close to zero. Since then, the RBA has been assessing the impact of its aggressive rate hikes, but financial markets have moved swiftly in recent days to price in an Oct. 5 hike, following a string of upbeat economic data.

According to the IMF, the main risks to Australia would be a stalling global recovery and a decline in Chinese demand for commodities. Concerns about fiscal sustainability also could disrupt global financial markets and push up the cost of capital for Australian borrowers, it said.

Any fall in house prices could hit consumer confidence and slow the recovery, while the mining boom may have a "larger-than-expected impact on output and inflation," the report said.

A flexible exchange rate for the Australian dollar provides a "helpful buffer" against commodity-price fluctuations, stabilizing export impacts, while hedging has minimized any negative impact on corporate or bank balance sheets from the global downturn, the IMF said.

The Washington-based lender said the Australian dollar was "mildly overvalued," but that was likely temporary and would ease with the eventual normalization of interest rates in the U.S. and other advanced economies.

The Australian dollar has surged more than 7% since the end of July to hit a string of 26-month highs.

On fiscal policy, the IMF said the center-left Labor government's pace of withdrawal of fiscal stimulus is "appropriate." With the budget forecast to return to surplus in the year starting July 1, 2012, the IMF said: "This is faster than past consolidations in Australia and plans in most other advanced economies."

Australian Treasurer Wayne Swan said the report "underscores that the government's strict spending discipline is contributing to a rapid return to surplus and a fiscal consolidation which is faster than that of most other countries."

Further out, however, the IMF said fiscal policy "needs to help manage vulnerabilities from greater integration with emerging Asia." It said faster-than-expected Asian growth can quickly place "significant capacity pressures" on the Australian economy.

Allowing larger cyclical increases in the fiscal balance than has occurred historically could help moderate inflation pressures, it said.

The IMF also urged Australian policymakers to prepare downside scenarios for commodity prices, where the terms of trade return quickly to the long-run average.


Australian Central Banker Sees Faster Growth in 2011
Australia's economy will likely accelerate in 2011, spurred on by China, said the Reserve Bank of Australia board member Jillian Broadbent.

Commodities
Crude Oil	76.30	+ 0.16%
Natural Gas	3.95	-
Gasoline	1.95	-
Heating Oil	2.13	-
Gold	1309.42	+ 0.02%
Silver	21.83	+ 0.41%
Copper	3.65	+ 0.39%
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World Markets Snapshot:

Shanghai	2,610.68	-0.68 (-0.03%)
Nikkei 225	9,559.38	+63.62 (0.67%)
Hang Seng Index	22,378.67	+268.72 (1.22%)
TSEC	8,240.89	+51.45 (0.63%)
FTSE 100	5,585.01	+6.57 (0.12%)
DJ EURO STOXX 50	2,780.07	+5.45 (0.20%)
CAC 40	3,776.92	+14.57 (0.39%)
S&P TSX	12,278.88	+88.28 (0.72%)
S&P/ASX 200	4,645.00	-24.80 (-0.53%)
BSE Sensex	19,956.34	-148.52 (-0.74%)

 

World Forex Currencies Snapshot:

EUR/USD	1.3603	+0.0038 (0.28%)
USD/JPY	83.6600	-0.2700 (-0.32%)
GBP/USD	1.5794	+0.0004 (0.03%)
CAD/USD	0.9731	+0.0032 (0.33%)
USD/HKD	7.7575	-0.0007 (-0.01%)
USD/CNY	6.6869	-0.0035 (-0.05%)
AUD/USD	0.9712	+0.0047 (0.49%)

Wednesday's US Economic Calendar:

7:00 a.m.
Sept. 24 MBA Weekly Mortgage Applications Survey, Market Composite Index (previous 790.6), Market Composite Index Cur Chg (previous -1.4%), Purchase Index (S.A.) (previous 177.6), Purchase Index (S.A.) Cur Chg (previous -3.3%), Refinance Index (previous 4357.4), Refinance Index Cur Chg (previous -0.9%)

10:15 a.m.
Minneapolis Fed Pres Kocherlakota speaks in London

10:30 a.m.
Sept. 24 EIA Weekly Petroleum Status Report, Crude Oil Stocks (previous 358.34M), Crude Oil Stocks (Net Change) (expected -100K), Gasoline Stocks (previous 226.06M), Gasoline Stocks (Net Change) (expected +1.1M), Distillate Stocks (previous 174.85M), Distillate Stocks (Net Change) (expected +400K), Refinery Usage (expected 87.4%)

12:20 p.m.
Philadelphia Fed Pres Plosser speech on the economy

1:15 p.m.
Boston Fed Pres Rosengren speaks in New York

3:00 p.m.
Sept. Agricultural Prices

US Market Summary, Tuesday, Sept. 28, 2010:

Stocks:

The dollar fell broadly Tuesday causing U.S. stocks to rise while readings on consumer confidence, private sector employment outlook and manufacturing fell.Chief executives from some of the largest U.S. companies lowered their expectations for job growth over the next six months.U.S. home prices reportedly rose in July from a month earlier, according to the S&P Case-Shiller home-price index.Pfizer was the Dow Jones Industrial Average's best performer with a climb of 1.2% while J.P. Morgan kept the gain in check with a 1.1% drop. Areas of perceived safety, including health care and consumer staples, led to the upside. The health-care sector was boosted by a report of strong growth in sales and volumes of prescription drugs from Walgreen. Shares of the drugstore operator jumped 11%.


Treasurys:

Treasurys rallied for a second straight session Tuesday as weak consumer confidence and manufacturing data fueled bets that a weakening economy may spur further supportive measures from the Federal Reserve. Such wagers boosted demand for a $35 billion, five-year notes auction which were sold at a record low yield of 1.26%. The U.S. government continues to borrow at historically low interest rates to finance its budget shortfall of more than $1 trillion.


Forex:

The dollar fell Tuesday. Weakness in the U.S. economy is the market's driving force, propelling the euro almost 12% against the dollar since June, to trade at around $1.35 Tuesday.

The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, dropped to its lowest level since February as investors ditched the dollar in favor of its rivals, including the euro, which rose to its highest level since April. The dollar also fell against the yen, dropping to its lowest level against the Japanese currency since Japan's massive mid-September intervention in currency markets to stem yen strength.