Economists at Caylon said, "Asian markets will digest the House approval of the US bailout plan this week but this is unlikely to result in a major rally in markets. It appears that the passing of the bill was the minimum that could have been done and as seen from the fall in US equities despite the passage of the bill, negative sentiment is far more deep rooted."

News of extent of the global financial crisis continued today in Europe with BNP Parisbas' purchase of a majority of shares in Fortis. News of trouble within Italian financial firm UniCredit and German lender Hypo Real Estate flooded the wires as well. In the U.S., Citigroup and Wells Fargo continued battling over the purchase of Wachovia.

The Aussie dollar is down against all majors as markets await the Reserve Bank of Australia's cash target decision tomorrow.

Economists at Caylon said, "The AUD is set to remain under pressure amidst ongoing de-leveraging but may gain a little relief if the RBA opts for 25bp rather than 50bp of easing."

Nevertheless, a consensus forecast is calling for the RBA to go ahead and cut by 50 basis points.

Economists at Westpac agreed, saying that up until last week 25 basis points would have been enough, but now credit conditions have turned "decidedly uglier." In light of the Wachovia battle and the collapse of Washington Mutual banks are becoming less and less willing to trust one another, they said. They said banks are "restricting funding to overnight funds. US dollar funding is at a premium" and in light of these changes they believe the RBA will cut by 50 basis points.

The yen is benefiting from risk aversion as per usual, up against the greenback and the euro.

Economists at Calyon said the yen will be the "key beneficiary" of risk aversion, saying aversion "remains very high and shows no discernible easing following the house vote."

Tomorrow, markets will receive the Bank of Japan rate decision as well as Japan's leading index.

While a consensus forecast has a unanimous call for no change to the bank's 0.50% target rate, markets will pay close attention to the Bank's rhetoric in their press conference and report.

Bruce Kasman, chief economist with JPMorgan said, "though there is little chance of policy action, it will be important to listen to Governor Shirakawa's press conference after the board meeting. Although we still believe that the BoJ will try to stay on hold, officials are likely to have shifted their risk bias to the downside."

Asia-Pacific fixed income markets are gaining and equities are lower with yields on Australian 10-year bonds down 11.7 bps to 5.17 % and Japanese 10-year government bonds down 6.5 bps to 1.39 %.

Sydney's S&P ASX 200 is down 161.10 points to 4534.297.

The Japanese Nikkei is down 393.81 points to 10544.33 and the Hang Seng down 526.16 points to 17156.24.

Yields on three-year Australian bonds were down 7.8 bps to 6.03 and the Australian 90-day March 09 contract was up 10.0 ticks to 94.17 .

The Euroyen March 09 contract was up 5.5 ticks to 99.29 .

The Australian dollar was down 1.54 cents to 0.7587 against the USD and down 1.31 cents to 0.8249 against the Canadian dollar.

Against the yen, the U.S. dollar was down 0.97 points to 104.35 and the Canadian dollar was down 1.35 points to 95.96 .

The euro was down 1.30 cents to 1.3647 USD.

All data taken at 10:48 p.m. EDT.

By Megan Ainscow, This email address is being protected from spam bots, you need Javascript enabled to view it

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