- Fed's Hoenig Will Want to Raise Rates When Possible: The Federal Reserve's Thomas Hoenig said he will be more anxious than others to raise rates when feasible. Speaking at a bank-sponsored forum in Nebraska. Hoenig said inflation in the U.S. at 5.5% is too high, and will have a long-run impact on the economy. High commodity prices have put pressure on finished goods prices, he said. He said the Fed's huge injections of liquidity are not inflationary for now, but "if we fail to remove liquidity in a timely fashion, inflation could bubble."

- Overnight USD LIBOR Soars: In the largest rise on record, the British Banker's Association's overnight dollar LIBOR rose from 2.57% on Monday to 6.88% on Tuesday morning

- U.S. Has Special Responsibility, Says EU Commission: Calling the rejection of the proposed U.S. bailout plan "disappointing", European Commission spokesperson Johannes Laitenberger still held out hope that the bill would eventually pass, adding that the U.S. has a special responsibility in this situation. "The U.S. must take its responsibility in this situation, must show statesmanship for the sake of their own country and for the sake of the world," Laitenberger was quoted as saying. Turning to the recent bailouts of banks within the euro zone, the EU Commission spokesperson said those actions demonstrate that European authorities are doing what is needed to help stabilize the markets.

- UK Economy Stagnates in Q2: As expected, UK GDP stagnated in the second quarter of 2008 compared to the first quarter, according to final estimates published by the Office for National Statistics (ONS). Q2's flat rate follows Q1's 0.3% gain. In annualized terms, the economy grew 1.5%, up from the 1.4% rate expected, but down from the previous quarter's 2.3% increase.

- UK Consumer Confidence Moves Up: The GfK Group UK consumer confidence indicator stood at -32 in September, well above expectations. Economists had expected a decline to -40 after the indicator fell to -36 in August. The index rating the economic situation over the last 12 months rose to -62 from -69, while the index for the next 12 months also rose, from -46 to -40.

- Uk Current Account Deficit Widens: The UK current account deficit grow by more than expected in the second quarter of 2008 to £11.0 billion, the Office for National Statistics reported, up from both the £5.5 billion deficit level seen in the previous quarter and £9.7 billion deficit figure expected. Meanwhile, Q1's figure was revised down from a deficit reading of £8.4 billion. The ONS also reported that the capital account surplus fell to £1.054 billion in Q2, down from the previous quarter's £1.069 billion level. Over the same period, the trade in goods showed a slightly diminished deficit of £23.14 billion in Q2, while the trade in services saw its surplus rise to £11.1 billion.

- German Unemployment Rate Falls to 7.6%: The German unemployment rate fell 0.1 percentage points to the expected level of 7.6% in September, unchanged from August's seasonally adjusted, pre-revised rate, which was later revised up to 7.7%, the Bundesbank said in a report The German central bank also reported that the number of individuals who are activity searching for work and consider Germany their primary place of residence fell by 29,000 from August to September, overshooting the expected decline by 14,000 individuals. August had seen 39,000 individuals leave the ranks of the unemployed, revised down from an initial estimate of 40,000.

- German ILO Unemployment Rate Falls: German unemployment, as measured by the International Labour Organization (ILO), unexpectedly fell to 7.2% in August, down 0.1 percentage points from July's level, the Federal Statistical Office (Destatis) reported. Economists had expected no change to the ILO jobless figure for the month.

- Inflation in the euro zone expectedly slowed to an annualized rate of 3.6% in September, according to preliminary estimates from Eurostat published on Tuesday.

- French PPI Coming Down: French producer price inflation slowed to 6.9% year-over-year in August from July's 7.7% rate, according to the National Institute for Statistics and Economic Studies. Economists had expected a more pronounced deceleration to 6.8% over the same period. Meanwhile, July's figure was revised up from an initial reading of +7.3%.On a monthly basis, producer prices in France contracted 0.5% in August, overshooting the expected fall by 0.1 percentage points. August's decline follows July's 0.7% gain.

- French Housing Starts Decline: French housing starts surprised to the downside in August, falling 13.1% in the three months to August compared to the same period one year ago, according to the French Housing Ministry. The consensus forecast had only anticipated a 9.8% decline after the three months to July had seen a fall of 11.8%.

- Italian CPI Falling: Surprising to the downside in September, Italian inflation slowed to 3.8% in annualized terms, according to preliminary estimates from the National Institute of Statistics, down from both the 4.0% level expected and the previous period's 4.2% rate. Month-over-month, the consumer price index in Italy contracted 0.3% in September following the 0.1% increase seen in August. Economists expected a flat reading for the month. In EU harmonized terms, Italian inflation came in at 3.7%, notably lower than the 4.2% print seen in August and overshooting the 0.5 percentage point decline in CPI growth expected. However, HICP growth did accelerate on a monthly basis, rising to 0.3% in September after coming in flat in August.

- Italian PPI Declining: On Tuesday, ISTAT also reported on Italian producer price inflation and noted that the rate had slowed to 8.2% in the 12 months to August from July's 8.7% level. However, economists had expected an even more pronounced deceleration to 7.7%. Meanwhile, July's figure was revised up from +8.3%.On a monthly basis, producer prices in Italy contracted 0.2% after rising 0.8% in July. Economists had forecast a decline of 0.5%, while July's figure was revised up from an initial estimate of +0.8%.

- Finnish Industrial Production Contracts: Finnish industrial output fell 1.1% in the 12 months to August, Statistics Finland said in a press release on Tuesday. August's decline follows July's 1.4% decline. In monthly terms, industrial production levels in August saw no change following July's 0.1% gain, revised down from an initial estimate of 0.2%.

- Spanish Current Account Deficit Widens: The Spanish current account deficit fell to €7.4 billion in July, according to a report published by the Bank of Spain, from €8.3 billion in the previous period. Meanwhile, June's figure was revised down from a deficit figure of €8.5 billion. According to the Spanish central bank, Spain saw a trade deficit of €7.2 billion, as well as an income deficit of €3.43 billion. Conversely, services reported a surplus of €3.6 billion, while the capital account saw a surplus of €318.4 million.

- Slovenian Inflation Slows Further: Against expectations of a 5.8% figure, Slovenian inflation slowed to 5.5% on a yearly basis in September, down 0.5 percentage points from August's figure, the Statistical Office of the Republic of Slovenia said on Tuesday. Month-over-month, the consumer price index level remained unchanged following August's 0.6% decline. Economists had expected a rebound and had called for an increase of 0.2% in the month.

- ECB's González-Páramo Says Turmoil Not Over: The turmoil in financial markets has not yet ended, European Central Bank Executive Board member José Manuel González-Páramo said during a key note speech at the 2nd Spanish Capital Markets Forum Madrid, Spain. "In fact, it has intensified over the past few weeks, prompting central banks to step up their efforts to inject liquidity in global money markets in order to keep short-term money market rates in line with their policy rates and to guarantee the smooth functioning of money markets, thereby contributing to preserving financial stability," González-Páramo added.

- ECB's Noyer Says Bailout Rejection Bad News: European Central Bank Governing Council member Christian Noyer called the rejection of U.S. Treasury Secretary Henry Paulson's bailout plan by U.S. Congress late on Monday "bad news", but remained confident that the U.S. would find a "good solution" to the current financial market crisis. In an interview with French radio station RTL, Christian Noyer, also the Governor of the Bank of France added that French banks are 'well-capitalized' and are "not overloaded with bad assets". The central banker also said the government has the resources to sustain the financial system in France, should the need arise.

- ECB's Nowotny Says Financial Crisis Under Control: While concerned about the financial turmoil's impact on economic growth, European Central Bank Governing Council member Ewald Nowotny said the financial crisis in Europe is under control.

- Danish GDP Rebounds in Q2: The Danish economy rebounded 0.4% in the second quarter of 2008, according to a GDP report published by Statistics Denmark on Tuesday, following Q1's 0.6% decline. Economists, however, had been more optimistic and had expected an economic growth rate of 0.6%, in line with preliminary estimates. In annualized terms, the economy grew 0.9% in Q2, down from the 1.2% gain expected, but up from the previous period's 0.8% decline. Meanwhile, Q1's figure was revised down from an initial estimate of +1.2%

- Swedish Retail Sales Jump in August: Swedish retail sales jumped 2.9% on an annualized basis in August, overshadowing both the 1.7% gain expected and the 1.5% increase seen in July, Statistics Sweden reported. At the same time, July's retail sales growth rate was revised up from an initial estimate of 1.3%.

- Japanese Manufacturing PMI Slides: According to a report from NTC Research, the seasonally adjusted Japanese Nomura/JMMA manufacturing PMI slid to a reading of 44.3 in September from 46.9 in August, the lowest reading since February 2002.

- Japanese Unemployment Rate Rises: The Japanese seasonally adjusted unemployment rate increased to 4.2% in August despite expectations for an increase to 4.1% from 4.0% in July. The job-to-applicant ratio declined to 0.86 from 0.89 in July, against expectations for a fall to 0.88. The participation rate rose to 60.4% from 60.3% in July.

- Japanese Household Spending Falls Further: Real household spending decreased more than expected in Japan, with the annualized rate in August coming in at -4.0% compared to the previous month's -0.5% level, the government's statistics bureau reported on Monday. The fall represents the sharpest decline seen this year. The consensus had been looking for a 1.3% year-over-year decline.

- Japanese Industrial Output Contracts: Japanese preliminary industrial output decreased 6.9% in August on an annualized basis, down from the consensus estimate of -6.0% and down from July's +2.4% growth rate, the Ministry of Economy, Trade and Industry said in a report Tuesday. The fall is the sharpest decline seen in 2008.

- Japanese Vehicle Production Contracts: According to the Japanese Automobile Manufacturers Association on Tuesday, vehicle production contracted a sharp 10.9% year-over-year in August, reversing the previous month's 24.1% gain.

- Annual Japanese Housing Starts Soar in August: Annualized housing starts in Japan declined to 1.130 million in August compared to forecasts for a 1.092 million and the previous month's 1.144 million level, the Ministry of Land, Infrastructure and Transport reported. In year-over-year terms, starts soared 53.6% despite expectations for a 49.8% increase and the previous month's 19.0% increase, but monthly starts declined 1.2%, reversing a 1.2% increase in July.

- Japanese Construction Orders Fall Sharply: According to the Ministry of Land, Infrastructure and Transport, construction orders in Japan contracted 0.3% year-over-year despite a 42.3% increase in July.

- According to a survey by Shoko Chukin Bank on Tuesday, small business confidence in Japan failed to post the expected 0.1 point rise to 41.5 in September, by declining to 41.4.

- Aussie Credit Contracts as Expected: Credit from Australian financial intermediaries decreased as expected by 0.5% for the month of August, up from last month's upwardly revised 0.6% figure, the Reserve Bank of Australia reporteded. On an annual basis, private sector credit rose 10.5%, higher than the 10.3% forecast but lower than the prior month's upwardly revised 11.3% figure.

- Australian Building Approvals Fall: Australian seasonally adjusted building approvals totalled 12, 095 in August compared to 12,620 in July, according to the Australian Bureau of Statistics. This represents a 3.7% month-over-month contraction for the month against expectations for a 1.0% decrease. Last month's decrease was downwardly revised to -2.4% from -2.3%.

Annually, building approvals decreased by 8.6% against last month's downwardly revised 4.6 decline.

- Aussie Retail Sales Rise: Australian retail sales trend increased by 0.3% in August, amounting to a 3.2% year-over-year increase and matching July's upwardly revised 0.3% month-over-month rise, according to the Australian Bureau of Statistics. The seasonally adjusted retail sales figure in August rose by 0.6% month-over-month, against July's upwardly revised 1.6% increase.

- New Zealand Building Approvals Contract: New Zealand's new building approvals fell by 7.9% month-over-month in August, against July's -1.7% reading, which was downwardly revised from +4.7%. The news comes from a report released today by Statistics New Zealand. A total of 1,328 new permits were given in August.

- Kiwi Business Outlook Turns Positive: The National Bank of New Zealand's business outlook turned positive for September for the first time since May 2002, according to a report released Tuesday. The index was up 1.6% from August's -20.5% figure. The report from the bank said 2% of respondents expect the general economic environment to improve, while optimists accounts for 31% of respondents and pessimists just under 30%.

- BOJ Injects ¥3 Trillion: In an effort to maintain stability, the Bank of Japan injected ¥3 trillion in open market operations.

IN THE PRESS:

- Hope for New Plan Rallies Stock Futures: After epic declines in North American equity indexes on Monday, renewed hopes for the bailout legislation to make a comeback and speculation that major central banks will be forced to cut rates have equity indexes across the globe looking mixed and U.S. equity futures in positive territory, according to an article from the Wall Street Journal.

- Citi, U.S. Rescue Wachovia: The Wall Street Journal reports that the Citigroup takeover of Wachovia was precipitated by a rapid deterioration of conditions for the financial institution which caused authorities concerns over a backlash to the financial system.

- Dexia receives €6.4bn capital injection: After bailing out Fortis Bank on Monday, the Belgian government once again interceded, granting Dexia Bank a €6.4 billion cash injection, the Financial Times reported on Tuesday. CEO Axel Miller and Chairman Pierre Richard will step down as soon as replacements can be found.

- Ireland Guarantees all Bank Deposits: In an effort to calm the banking system. The Irish government pledged €400 billion (more than double its GDP) to insure bank deposits in the country, Reuters reported on Tuesday.

IN THE MARKETS

At 7:38 a.m. EDT:

The euro was down 0.95 cents to 1.4342 USD.

The U.S. dollar was up 0.20 cents to 1.0477 Canadian Dollars.

The U.S. dollar was up 97.00 cents to 105.15 Yen.

The pound sterling was down 0.58 cents to 1.8029 USD.

The Australian dollar was up 0.29 cents to 0.8075 USD.

The U.S. dollar index was up 67.10 points to 78.14.

The U.S. ten-year note was up 50.0 ticks to 116.08 with yields up 5.2 bps to 3.63%.

The German ten-year bund was down 12.0 ticks to 115.37 with yields up 1.2 bps to 3.98%.

The British ten-year gilt was down 23.0 ticks to 112.47 with yields up 2.7 bps to 4.41%.

The Australian ten-year bond was down 3.5 ticks to 94.58 with yields down 26.8 bps to 5.40%.

The Japanese ten-year government bond was down 25.0 ticks to 137.29 with yields down 2.2 bps to 1.47%.

The Eurostoxx was trading flat at 2588.72.

The FTSE 100 was trading up 28.79 points to 4847.56.

The Dax was trading down 44.16 points to 5762.92.

The Nikkei closed down 483.75 points to 11259.86.

The Australian ASX closed down 206.90 points to 4600.50.

The Hang Seng closed up 135.53 points to 18016.21.

The Shanghai Composite closed down 3.72 points to 2293.78.

Dow Jones Futures were up 193.00 points to 10667.00.

S&P 500 Futures were up 28.75 points to 1147.50.

WTI Crude oil is up $ 2.38 to $ 98.75 per barrel.

ECONOMIC DATA:

NZ Building Permits (M/M) August -7.9% vs. Revised: -1.7% Prior: +4.7%

JP Nomura/JMMA Manufacturing PMI September +44.3 vs. Prior: +46.9

JP Jobless Rate August 4.2% vs. Exp: 4.1% Prior: 4.0%

JP Job-To-Applicant Ratio August 0.86 vs. Exp: 0.88 Prior: 0.89

JP Household Spending (Y/Y) August -4.0% vs. Exp: -1.3% Prior: -0.5%

JP Industrial Production (M/M) August Preliminary -3.5% vs. Exp: -2.4% Prior: +1.3%

JP Industrial Production (Y/Y) August Preliminary -6.9% vs. Exp: -6.0% Prior: +2.4%

AU Private Sector Credit (M/M) August +0.5% vs. Exp: +0.5% Revised: +0.6% Prior: +0.5%

AU Private Sector Credit (Y/Y) August +10.5% vs. Exp: +10.3% Revised: +11.3% Prior: +11.2%

AU Building Approvals (M/M) August -3.7% vs. Exp: -1.0% Revised: -2.4% Prior: -2.3%

AU Retail Sales Trend (M/M) August +0.3% vs. Exp: +0.1% Revised: +0.3% Prior: +0.1%

AU Retail Sales S.A. (M/M) +0.6% vs. Revised: +1.6% Prior: +1.4%

AU Building Approvals (Y/Y) August -8.6% vs. Exp: -4.5% Revised: -4.6% Prior: -3.7%

NZ NBNZ Business Confidence September +1.6 vs. Prior: -20.5

JP Vehicle Production (Y/Y) August -10.9% vs. Prior: +24.1%

JP Housing Starts (Y/Y) August +53.6% vs. Exp: +49.8% Prior: +19.0%

JP Annualized Housing Starts August +1.130M vs. Exp: +1.092M Prior: +1.144M

JP Construction Orders (Y/Y) August -0.3% vs. Prior: +42.3%

JP Small Business Confidence September +40.2 vs. Exp: +41.5 Prior: +41.4

DE ILO Unemployment Rate August 7.2% vs. Exp: 7.3% Prior: 7.3%

FR Producer Prices (M/M) August -0.5% vs. Exp: -0.4% Prior: +0.7%

FR Producer Prices (Y/Y) August +6.9% vs. Exp: +6.8% Prior: +7.3%

FR Housing Starts 3-Month (Y/Y)% Change August -13.1% vs. Exp: -9.8% Prior: -11.8%

FR Housing Permits 3-Month (Y/Y)% Change August -19.6% vs. Exp: -17.2% Prior: -16.6%

DE Unemployment Change (000's) September -29K vs. Exp: -15K Revised: -39K Prior -40K

DE Unemployment Rate (SA) September +7.6% vs. Exp: +7.6% Revised: +7.7% Prior: +7.6%

IT Producer Price Index (M/M) August -0.2% vs. Exp: -0.5% Revised: +0.8% Prior: +0.5%

IT Producer Price Index (Y/Y) August +8.2% vs. Exp: +7.7% Revised: +8.7% Prior: +8.3%

GB GDP (Q/Q) Q2 Final 0.0% vs. Exp: 0.0% Prior: 0.0%

GB GDP (Y/Y) Q2 Final +1.5% vs. Exp: +1.4% Prior: +1.4%

GB Current Account Q2 -£11.0B vs. Exp: -£9.7B Revised: -£5.5B Prior: -£8.4B

GB Total Business Investment (Q/Q) Q2 Final -1.0% vs. Exp: -1.9% Prior: -1.9%

GB Total Business Investment(Y/Y) Q2 Final +1.2% vs. Exp: +1.9% Prior: +1.9%

IT Consumer Price Index (NIC incl. tobacco) (M/M) September Preliminary -0.3% vs. Exp: 0.0% Prior: +0.1%

IT Consumer Price Index (NIC incl. tobacco) (Y/Y) September Preliminary +3.8% vs. Exp: +4.0% Prior: +4.1%

IT Consumer Price Index - EU Harmonized (M/M) September Preliminary +0.3% vs. Exp: +0.7% Prior: 0.0%

IT Consumer Price Index - EU Harmonized (Y/Y) September Preliminary +3.7% Exp: +4.1% Prior: +4.2%

EU Euro Zone Consumer Price Index Estimate (Y/Y) September +3.6% vs. Exp: +3.6% Prior: +3.8%

By Erik Kevin Franco, This email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Megan Ainscow, 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 , edited by Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it

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