After being rejected by the House on Monday, and following Senate approval of amendments on Wednesday, the House of Representatives voted in favour of the Emergency Economic Stabilization Act of 2008. Passing with 91 votes from Republicans and 172 votes from Democrats, the bill allows for the deployment of up to $700 billion to purchase illiquid assets from financial entities.

The amended bill includes billions of dollars in tax breaks for both taxpayers and businesses, and provides additional powers to the Federal Deposit Insurance Corporation, which will allow it to insure deposits of up to $250k compared to the current $100k.

Though many breathed a sigh of relief at the passing, the market reaction was less than favourable. Equity markets sold off sharply on the announcement. The S&P 500 fell 4.5% from the time voting on the bill began to the market close. From its highs, the Dow Jones Industrial Average fell 482 points to the lowest level since October 2005.

Federal Reserve Chairman Ben Bernanke said the legislation was a critical step towards stabilizing markets. "We will continue to use all of the powers at our disposal to mitigate credit market disruptions and to foster a strong, vibrant economy," said Bernanke.

Sean Murphy, bond trader at RBC Capital Markets, said Bernanke's comments were responsible for the Treasury rally. "He just told us there could be a rate cut on Monday," he said.

Treasury Secretary Henry Paulson said he was grateful for the bill and that he would be working on the plan's details presently.

President Bush acknowledged concerns about the legislation and said government intervention should occur "only when necessary."

"By coming together on this legislation, we have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country," he said. "We have shown the world that the United States of America will stabilize our financial markets and maintain a leading role in the global economy."

In data releases, the day started off on a sour note with the release of U.S. nonfarm payrolls figures for September. The BLS report showed a loss of 159k jobs in the month, more than the -105k expected and the biggest monthly decline in nine months of job losses. The unemployment rate remained at 6.1% (6.125%), as expected. In 2008 so far, total net job losses are now -760k. Revisions were insignificant, adding 4k in the past two months.

"The soft underbelly of the U.S. labour market has been exposed for some time, and this report only serves to confirm the view that the conditions for U.S. workers are worsening at a fairly fast pace," said Millan Mulraine, economics strategist from TD Securities. "Indeed, with this report it is becoming more obvious that the U.S. economy may be heading into a period of sustained weakness, and perhaps a recession in the U.S. economy appears to be a distinct possibility."

The next release was slightly more optimistic, as the services sector in the U.S. managed to remain in marginal growth-mode in September. The ISM Non-Manufacturing Index (NMI) came in at 50.2, slightly above consensus expectations for a neutral 50.0 reading.

Charmaine Buskas, senior economics strategist at TD Securities, said the ISM components "did not reveal any massive deterioration, which was in contrast to what we saw earlier in the week with the ISM manufacturing index." Given the global economic slowdown, she said the "lacklustre tone" in the survey is about as good as it gets in economic reports these days.

The employment component, however, fell to 44.2 from 45.4, marking the fifth straight month of slowdown.

Meanwhile, Wells Fargo made a surprise bid for Wachovia, trumping the previous government-approved offer from Citigroup, which had agreed to buy assets from the troubled bank last week. The Wells Fargo bid is an all-stock $15.1 billion deal that takes over all of Wachovia's businesses. The earlier Citi agreement acquired all of Wachovia's commercial banking operations but left it as a public company that maintained its brokerage, AG Edwards and Evergreen. The unexpected bid from Wells Fargo comes after the close of an auction process that was supported by the U.S. Federal Deposit Insurance Corporation.

"Since the close of our bidding process, Wells has apparently re-assessed its position and come forth with this new offer that does not require FDIC assistance," said FDIC Chairman Sheila Bair in a statement. She said the FDIC would be reviewing all proposals to pursue a resolution that serves the public interest.

Elsewhere, the Bank of Canada announced it is pouring more liquidity into Canadian lending markets. The BOC said it will provide weekly Purchase and Resale Agreements through the rest of the calendar year. Since Sept. 19, the central bank has already extended $8 billion in PRAs and will increase that amount to $20 billion as of Nov. 6, with the first $4 billion auction scheduled for Oct. 7.

Canada's international reserves increased by US$386 million to $42.98 billion in September, the Department of Finance announced Friday. Securities made up the bulk of the reserves, at just over $40 billion, while gold holdings were unchanged at $96 million.

In Europe, the Dutch government bought Fortis for 16.8 billion euros (C$25.1 billion) on Friday just days after a government cash injection into the bank.

Data released overnight included euro zone retail sales, which rose 0.3% in August month-over-month, triple the 0.1% gain expected, Eurostat reported. Meanwhile, July's figure was revised up from an initial estimate of -0.4%.

The UK services purchasing managers index fell to a record low 46.0 in September, down from both the 48.0 reading expected and the 49.2 figure seen in August, Markit Economics reported.

European Central Bank Governing Council member John Hurley said that pressures on the banking system are "acute" and that money markets are becoming increasingly impaired. Hurley was unable to speculate as to how long the financial crisis would last, but did say banks in Ireland are "seriously threatened" and that a high level of "contagion" is seen.

By Patrick McGee, This email address is being protected from spam bots, you need Javascript enabled to view it and Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Adam Button, This email address is being protected from spam bots, you need Javascript enabled to view it , Geoff Matthews, This email address is being protected from spam bots, you need Javascript enabled to view it , Todd Wailoo, This email address is being protected from spam bots, you need Javascript enabled to view it , and Erik Kevin Franco, 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

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