-WSJ & CNBC: Citigroup is reportedly considering a merger with financial institutions Goldman Sachs or Morgan Stanley, according to CNBC and Wall Street Journal reports.

-The Bank of Japan held its target rate at 0.30%, as was widely expected, and said the Japanese economy has slowed down significantly, and that these conditions will last for several quarters. Furthermore, the bank said the outlook for the economy is highly uncertain.

-Bank of Japan Governor Masaaki Shirakawa said the BOJ is mindful about cutting rates further, adding that the risk of deflation is not very high. He also noted that the financial system in Japan is stable.

-Global stocks are higher after a sharp meltdown on Thursday which has the S&P 500 down another 6.71%. The Nikkei closed higher by 2.7% and the Hang Seng closed up 2.93%. Meanwhile, the Eurostoxx is higher by 1.26% and the FTSE 100 is up 0.65%. S&P 500 futures are up 3.33%.

-On Thursday, Mortgage finance giants Fannie Mae and Freddie Mac revealed a suspension on foreclosures starting Nov. 26, 2008 until Jan. 9, 2009.

-Crude oil continues to head south, with NYMEX crude trading at an intraday low of $48.25 and WTI crude oil trading at an intraday low of $48.31. Both contracts are near session lows.

-Former Federal Reserve Chairman Paul Volcker said the U.S. economy will take longer to recover than is commonly believed.

-German Manufacturing PMI fell to a record low of 36.7 in November from 42.9 despite expectations for a reading of 42.0.

-The German services PMI dropped to a four and a half year low of 46.2 from 48.3 versus forecasts for a decline to 47.5

-The euro zone PMI fell to a record low in November, coming in at 36.2, down from both the 40.5 print expected and October's 41.1 level. The services index fell to an all-time low of 36.2.

-ECB's Axel Weber said that, with the "remarkable decline" in inflation pressures and the "rapidly" worsening economic outlook for the euro zone, the ECB has room to make further cuts to its main refinancing rate.

-ECB's Yves Mersch said "nothing is ruled out" regarding rates going down again, echoing similar statements from a number of ECB members.

-ECB's Ewald Nowotny said the central bank has room to cut rates, and sees no prospects for deflation.

-ECB's Jose Manuel Gonzalez Paramo said the financial turmoil limits the impact of monetary policy.

-Guardian: UK Chancellor Darling may force banks to resume lending to businesses on Thursday.

-BBG: The RBA intervened to support the Australian dollar as it approached a five year-low against the greenback. AUD/USD traded at an intraday low of 1.593 and is currently down 3.88 cents at 1.5992.

-Japanese Finance Minister Nakagawa said the government is looking into ways to support stock markets.

-Japanese Economy Minister Yosano said Japan cannot escape the global slowdown.

-Australian Treasurer Wayne Swan said the government and the RBA are ready to take any action necessary to support the economy including the adjustment to guarantees on bank deposits if needed.

-SEC Chairman Chris Cox called for a meeting of the International Organization of Securities Commissions to discuss the financial crisis and regulation.

-St. Louis Federal Reserve President James Bullard (non-voter) said the Fed may start to rely less on the interest rate target, and more on increasing liquidity to solve the country's economic woes, and that the Fed "absolutely" still has policy firepower.

-The FDIC is considering excluding loans maturing in 30 days or less from a $1.4 trillion debt insurance program to reduce interest rate volatility.

-WSJ: Firm directors are quitting over frustration with the financial crisis.

-The Basel Committee is attempting to impose structured rules on capital requirements and borrowing limits.

-Canadian inflation fell 0.5% month-over-month in October compared to forecasts for a 0.6% fall and a previous 0.1% gain, bringing the inflation rate to 2.6% from 3.4% previously. Core inflation was flat in October, in line with expectations and below the previous 0.4% gain. The annual core inflation rate remained at 1.7% despite expectations for an increase to 1.9%

-Overnight USD libor spiked 15 bps to 0.70%, while the three-month libor gained 1 bps to 2.16% on Friday morning. The Ted spread remained virtually unchanged at 213 bps and the OIS/Libor spread narrowed 3 bps to 213 bps.

Friday's Outlook:

-In the absence of any major macroeconomic data on Friday, central bankers take the spotlight with comments from ECB President jean-Claude Trichet (8 a.m. EST), FOMC voting member Charles Plosser (12:15 p.m. EST), and non-voters Jeffrey Lacker (8:15 a.m. EST) and Charles Evans (12:40 p.m. EST). Also scheduled to speak is Bank of England MPC member Charles Bean (4:45 p.m. EST).

Market Snapshot:

At 7:11 a.m. EST:

Euro/USD up 1.20 cents to 1.2574.

USD/CAD down 1.77 cents to 1.2793.

USD/Yen up 1.13 points to 94.85.

GBP/USD up 2.50 cents to 1.4978.

Aussie/USD up 1.10 cents to 0.6218.

US ten-year note futures down 19.5 ticks to 120.04.

German 10-year Bund futures down 29.0 ticks to 120.54.

UK ten-year Gilt futures up 17.0 ticks to 116.73.

Eurostoxx down 1.87 points to 1954.12.

UK FTSE 100 up 25.04 points to 3900.03.

German Dax down 16.85 points to 4203.35.

Japanese Nikkei up 207.75 points to 7910.79.

Hong Kong Hang Seng up 360.64 points to 12659.20.

Shanghai Composite down 14.37 points to 1969.39.

Dow Futures up 213.00 points to 7700.00.

S&P 500 Futures up 20.50 points to 768.75.

WTI Crude up $0.74 to $50.16 per barrel.

Economic Data Snapshot:

NZ Visitor Arrivals October +0.7% vs. Prior: -6.0%

NZ Card Spending (M/M) October +0.5% vs. Prior: 0.0%

NZ Credit Card Spending (Y/Y) October +1.1% vs. Revised: +2.4% Prior: +2.7%

JP Bank of Japan Interest Rate Decision 0.30% vs. Exp: 0.30% Prior: 0.30%

FR Consumer Spending (M/M) October -0.4% vs. Exp: -0.5% Revised: +0.5% Prior: +0.6%

FR Consumer Spending (Y/Y) October +0.7% vs. Exp: +0.9% Revised: +1.4% Prior: +1.5%

FR PMI Manufacturing November Preliminary +37.9 vs. Exp: +40 Prior: +40.6

FR PMI Services November Preliminary +46.6 vs. Exp: +47.0 Prior: +47.5

DE PMI Manufacturing November Advance +36.7 vs. Exp: +42 Prior: +42.9

DE PMI Services November Advance +46.2 vs. Exp: +47.5 Prior: +48.3

IT Retail Sales (M/M) (SA) September 0.0% vs. Exp: -0.2% Prior: -0.5%

IT Retail Sales (Y/Y) September +0.5% Exp: -0.7% Prior: -1.3%

EU PMI Manufacturing November Advance +36.2 vs. Exp: +40.5 Prior: +41.1

EU PMI Services November Advance +43.3 vs. Exp: +45 Prior: +45.8

EU PMI Composite November Advance +39.2 vs. Exp: +42.8 Prior: + 43.6

Friday's Events:

8:00 EU ECB President Jean Claude Trichet will Speak in Frankfurt

8:15 US Richmond Fed President Jeffrey Lacker speaks on financial conditions at an event in Maryland

12:15 US Philly Fed President Charles Plosser speaks on the financial crisis at an event in Philadelphia

12:40 US Chicago Fed President Charles Evans speaks to economists at an event in Indianapolis

By 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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