- German Government Issues Guarantee on All Private Deposit Accounts: The German government has issued a guarantee on every private deposit account as part of its plan to avert a disastrous outcome from the banking crisis. Speaking to reporters on Sunday, finance ministry spokesperson Torsten Albig said "the state guarantees private deposits in Germany."

- New Deal Struck to Salvage German Lender Hypo Real Estate: A new bailout agreement has been reached to save German lender Hypo Real Estate (HRE). The German government, along with a consortium of banks, has come to a 50 billion euro deal after an earlier plan was aborted. Finance ministry spokesperson Torsten Albig said in an e-mailed statement that financial institutions have guaranteed 15 billion euros on top of the 35 billion already initially promised. The decision comes hours before the opening of German stock markets on Monday and at the opening of Asian markets, which saw the euro hit a 13-month low. Financial groups had originally pulled out of the bailout on Saturday after further financial issues with Hypo Real Estate were revealed.

- BNP Paribas to Take Over Remaining Fortis Assets, Says Belgian Prime Minister: An agreement has been made for French banking group BNP Paribas to buy the remaining assets of financial group Fortis, according to a recent announcement by Belgium Prime Minister Yves Leterme and a report today from Belgian newspaper De Tijd. BNP will trade its own shares with the governments of Belgium and Luxembourg in exchange for a 75 percent claim of Fortis Bank Belgium and a 67 percent stake in Fortis Bank Luxembourg. The Belgian and Luxembourg governments will retain 25 percent and 33 percent of shares, respectively. Prime Minister Yves Leterme told a news conference the governments' shares in BNP Parisbas are worth 8.25 billion euros, making it the biggest shareholder in the French bank.

- Italian Bank UniCredit to Ask Shareholders for 3 Billion Euros: Major Italian bank UniCredit announced plans to increase its capital ratio on Sunday by asking shareholders for 3 billion euros. In a press release following a five-hour meeting, the bank said its Core Tier 1 ratio will reach 6.7% instead of the 6.2% previously envisioned, "as a result of the combined effect of the capital-strengthening actions being announced today, the implementation of a series of cost-cutting measures, and the execution of other extraordinary transactions currently underway or envisaged."

- Europe's Financial System "More Solid" than that of U.S., EU's Juncker Says: Europe's financial system is "more solid" than that of the U.S., Luxembourg Finance Minister and Eurogroup chairman Jean-Claude Juncker said, adding that the situations that both systems face cannot be compared. In an interview with Luxembourg newspaper Wort published on Monday, Juncker also said the European Union's big four economies "agreed that they won't let any of their banks go bankrupt."

- ECB to Loosen Securities Quality Rules, Says Germany's Steinbrueck: The European Central Bank has decided to loosen its securities quality rules to facilitate the bailout of German firm Hypo Real Estate, German Finance Minister Peer Steinbrueck said on Monday. However, "nobody can forecast just yet how much this paper is actually worth," the finance minister noted, adding that the ECB is relaxing its rules in an effort to ease tensions in liquidity markets. The announcement comes shortly after Germany reported a €50 billion emergency loan package to the real estate firm, 70% of which is backstopped by a guarantee issued by both the government and the banking industry.

- IMF's Strauss-Kahn Says Europe Needs "Collective Line of Defence" for Crisis: International Monetary Fund Managing Director Dominique Strauss-Kahn welcomes the measures taken recently by the European governments in response to the current market crisis, adding that the states should not act without consulting with one another. "Europe must prepare to put in place a collective line of defence," Strauss-Kahn said to reporters in Paris, France on Monday.

- U.S. Bailout Plan "An Important Pillar," Says ECB's Nowotny: European Central Bank Governing Council member Ewald Nowotny called the U.S. bailout plan "an important pillar" and believes that it will help the economy and fuel spending. However, Nowotny added that the effects of the plan may take some time to be felt. "I fear that the U.S. economic slowdown has already gained such a dynamic that is not so easy to stop," Nowotny said in an interview with Austria's Der Standard published on Monday. "This may take a year." Nowotny also questioned whether the plan would be enough. Nowotny, also the Governor of the Österreichische Nationalbank, added that all areas of the banking sector need to be regulated and called for a stronger level of co-ordination between supervisor groups.

- ECB's Tumpel-Gugerell Calls on Co-operation Between Gov'ts, Banks, Regulators: European Central Bank Executive Board member Gertrude Tumpel-Gugerell called on banks, regulatory agencies and governments to co-ordinate their efforts and work together. In an interview with Austrian newspaper Oberösterreichischen Nachrichten published on Monday, Tumpel-Gugerell also said that only efforts aimed at strengthening confidence would help to ease tensions in the market sector. However, Tumpel-Gugerell warned against taking any hasty steps.

- Sentix Euro Zone Investor Confidence Continues its Decline: Increasing investor pessimism in the euro zone pushed the Sentix investment confidence indicator down to -27.8 in October, down from both the -27.3 level expected and the -20.2 figure seen in September.

- Danish Industrial Production, Orders Fall Back Down: Danish industrial production, excluding ships, fell back 2.4% month-over-month in August after rebounding 2.3% in July, Statistics Denmark said in a press release on Monday. Meanwhile, July's figure was revised up from an initial estimate of +1.9%. In annualized terms, industrial output rose 1.1%, down 0.3 percentage points from July's yearly gain.

- Tsy to Buy Bad Assets From Fannie & Freddie: Mortgage giants Fannie Mae and Freddie Mac could possibly sell some bad assets to the U.S. Treasury, according to a media report. James Lockhart, director of the Federal Housing Finance Agency (FHFA), which now oversees the two companies, gave a television interview to C-SPAN. In the interview, he guessed about two to four percent of their assets are deficient. The $700 billion bailout plan, which allows the U.S. government to buy bad assets, was officially made law on Friday.

- Wachovia Says Deal With Wells Fargo Still Stands: In a New York appeals court, Wachovia Corp. has succeeded in over-turning the emergency order by Justice Charles Ramos issued yesterday in New York State Supreme Court that gave Citigroup Inc. the sole legal authority to negotiate with the bank. Citi announced last Monday they'd be buying some of Wachovia's assets. Wachovia said a deal made later with Wells Fargo on Friday to purchase the entirety of their assets is still legitimate. Citigroup is going to appeal the ruling. Wachovia's lawyers argued the $700 billion bailout bill passed in Congress contains provisions that allow Wells Fargo to make their own bid if they please.

- New Zealand Treasury's Pre-Election Outlook Report Sees Dour Economic Progress: The economic and fiscal outlook for New Zealand has deteriorated in light of important, severe developments in the global financial crisis and the lull in consumption and the housing sector at home, said a report from the Treasury. The pre-election economic and fiscal update said in the next few years New Zealand will see less tax revenue matched with more government costs, "combined with increases in the costs of some existing policies, these factors lead to sustained operating balance deficits and higher debt-to-GDP ratios," the report read. The report said "there is a long way to go" for the unwinding of imbalances in domestic housing markets, inflation numbers, debt and the large account deficit.

- Rate Cut in Japan "Out of the Question," Says Former Finance Minister: Former Japanese Vice-Finance Minister Makoto Utsumi said that, while looser monetary policy stances might be needed in Europe and the U.S., a cut in Japan is "out of the question." "Each nation is acting according to its own situation and judgment," Utsumi said in an interview in Tokyo on Oct. 3, adding that the impact of the U.S. financial crisis is minimal in Japan and that inflation exceeding 2% already made real interest rates negative. Utsumi also said there is no need for a joint G7 rate cut plan or co-ordinated action between the U.S., Europe and Japan to support the U.S. dollar, at least for the time being.

-Central Bank of the Philippines Keeps Rates Unchanged: As expected, the Central Bank of the Philippines announced on Monday that it would keep its overnight borrowing rate at 6.00% and its overnight lending rate at 8.00%. "At this point, the monetary authorities have the latitude to keep policy settings steady," the central bank said in a press release. "Food and energy prices are retreating from recent highs, and this could indicate lower headline inflation and more flexibility for monetary policy. Furthermore, there is no further evidence of second-round effects in terms of additional wage and transport fare adjustments." The central bank report also noted improvements regarding inflation expectations due to falling energy and commodity prices.

IN THE PRESS:

- Fed Pushes to Resolve Wachovia Deal Dispute: The Wall Street Journal reports that Fed Officials are attempting to negotiate a deal between Citigroup and Wells Fargo, whereby Wachovia would be divided up between both organizations.

- Bank of America in Settlement Worth Over $8 Billion: The Wall Street Journal reports that Bank of America has greed to an $8 billion settlement over risky loans made by newly acquired Countrywide Financial Corp. "The deal will cover nearly 400,000 borrowers, Bank of America announced on Monday," says the article in the WSJ. "It will apply to borrowers who took out subprime loans with adjustable or fixed interest rates as well as those with option adjustable-rate mortgages that are serviced by Countrywide, which was acquired by Bank of America on July 1."

- China Will Test Short Selling, Margin Lending: China is beginning a project which would allow securities firms to embark in short selling and marginal lending operations in efforts to modernize the financial system, the Wall Street Journal reported on Monday.

- Pension Funds Look for Some Payback: The Wall Street Journal reports that certain pension funds are suing Northern Trust Corp. after the firm lost millions in investments. The Journal says the move is likely to be the first of many as the financial crisis worsens.

- Fed Pressed to Step Up Crisis Action: The Financial Times reports that after the passing of the financial bailout package in the United States the Fed is likely to step up its liquidity operation or announce an inter-meeting rate cut possibility in a co-ordinated move with other major central banks.

- Investor Interest Swamps AIG: The Financial Times reports that dozens of firms have approached AIG to buy up operations in Asia after the insurance company said it plans to sell operations across the glob on Friday.

- Crisis Hits Global Banking: Shares of European stock markets are melting after European leaders failed to reach an agreement over the weekend on how to react to the financial system, the Financial Times reported on Monday.

- Fed to Centralize CDSs: CNBC correspondent Charlie Gasparino says the Fed has arranged a meeting for Tuesday with the Chicago Mercantile Exchange and the Intercontinental-Exchange to decide which organization will manage the clearing of credit default swaps.

IN THE MARKETS:

At 7:11 a.m EDT:

The euro was down 1.89 cents to 1.3583 USD.

The U.S. dollar was up 0.27 cents to 1.0854 Canadian Dollars.

The U.S. dollar was down 223.00 cents to 103.09 Yen.

The pound sterling was down 1.45 cents to 1.7570 USD.

The Australian dollar was down 2.88 cents to 0.7452 USD.

The U.S. dollar index was up 94.60 points to 81.26.

The U.S. ten-year note was down 84.4 ticks to 116.84 with yields down 9.6 bps to 3.51%.

The German ten-year bund was up 127.0 ticks to 116.92 with yields down 15.0 bps to 3.77%.

The British ten-year gilt was up 138.0 ticks to 113.89 with yields down 16.5 bps to 4.24%.

The Australian ten-year bond was down 2.0 ticks to 94.86 with yields down 16.7 bps to 5.12%.

The Japanese ten-year government bond was down 2.0 ticks to 138.53 with yields down 7.4 bps to 1.38%.

The Eurostoxx was trading down 144.17 points to 2582.50.

The FTSE 100 was trading down 276.51 points to 4703.74.

The Dax was trading down 325.68 points to 5471.35.

The Nikkei closed down 465.05 points to 10473.09.

The Australian ASX closed down 155.00 points to 4540.40.

The Hang Seng closed down 878.64 points to 16803.76.

The Shanghai Composite closed down 120.05 points to 2173.74.

Dow Jones Futures were down 243.00 points to 10121.00.

S&P 500 Futures were down 29.25 points to 1079.00.

WTI Crude oil is down $ 4.06 to $ 89.82 per barrel.

ECONOMIC DATA:

EU Sentix Investor Confidence October -27.8 vs. Exp: -27.3 Prior: -20.2

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