European policy-makers met on the weekend to discuss a U.S.-style bailout but left without an agreement. Countries will instead act independently. German officials led a 50 billion euro rescue of Hypo Real Estate Holdings, the country's second-largest commercial mortgage lender.

"I think the situation has deteriorated so much that the choice now - that investors should contemplate - is between global recession and global depression," wrote Stephen Jen, chief currency economist at Morgan Stanley.

U.S. equity market futures are lower with contracts on the Dow Jones Industrial Average down 181 points to 10183, the S&P 500 down 24 points to 1084 and the Nasdaq down 29 points to 1449.

European stock markets are also lower, with the Eurostoxx down 119 points to 2608, the UK FTSE 100 down 236 points to 4745 and the German DAX down 280 points to 5517.

Asian markets were lower, with the Japanese Nikkei closing down 465 points to 10473 and the Hang Seng Index down 879 points to 16804.

Germany and Denmark provided guarantees to bank savings after similar moves by Ireland and Greece last week. There are fears that depositors will flee to countries that are providing guarantees.

Market watchers continue to fret about the lag between passage of the TARP bill and the four weeks before implementation.

T.J. Marta, fixed income strategist at RBC Capital Markets, said there is "growing concern that the crisis is outrunning policymakers."

Market watchers are eagerly awaiting some sign of good news and rumours of co-ordinated central bank rate cuts are rampant. A story in the Financial Times suggested additional liquidity measures or emergency rate cuts.

The Federal Reserve chose the first option. Officials said it will increase the TAF auction to up to $900 billion by year-end. It will also begin paying interest on banks' required excess reserve balances. The Fed also said it will consult with participants on ways to provide additional support for term unsecured funding markets.

U.S. two-year yields are down 0.9 bps to 1.57%, with five-year yields down 5.7 bps to 2.58%, 10-year yields down 4.5 bps to 3.56% and 30-year yields down 4.5 bps to 4.04%. The Eurodollar March 09 contract is up 23.5 ticks to 97.76. The yield curve is flatter, with the 10/2-year spread down 3.4 bps to 198.46 bps.

Yields on two-year Canadian government bonds are down 13.3 bps to 2.39%, with five-year yields down 12.0 bps to 2.83%, 10-year yields down 8.5 bps to 3.50% and 30-year yields down 4.9 bps to 4.05%. The December 08 BAX contract is up 12.0 ticks to 97.29.

In Germany, returns on two-year German bonds are down 17.9 bps to 3.11%, with five-year yields down 15.2 bps to 3.45%, 10-year yields down 12.5 bps to 3.80% and 30-year yields down 11.6 bps to 4.25%.

Yields on UK two-year bonds are down 24.2 bps to 3.79%, with five-year yields down 18.8 bps to 3.95%, 10-year yields down 14.2 bps to 4.26% and 30-year yields down 10.8 bps to 4.25%.

The Canadian dollar is down 0.0073 to 0.9176 against the U.S. dollar (1.0901 USD/CAD) and down 2.56 to 94.76 against the yen.

The U.S. dollar is down 2.03 to 103.29 against the yen and the Dollar Index is up 0.925 to 81.238.

The euro is down 0.0175 to 1.3597 against the U.S. dollar, down 0.0090 to 1.4821 against the Canadian dollar, down 0.0047 to 0.7730 against the pound sterling and is lower by 4.64 to 140.43 against the yen.

The pound sterling is down 0.0127 to 1.7588 against the U.S. dollar and down 0.0009 to 1.9170 against the Canadian dollar.

WTI crude oil is down $3.87 to $90.01. The front month gold contract at the Chicago Board of Trade is up $30.90 to $862.10 per ounce.

All data taken at 8:50 a.m. EDT.

By Adam Button, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, This email address is being protected from spam bots, you need Javascript enabled to view it

CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca

The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.

A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.