HFE's Ian Shepherdson - "Food prices continue to trend strongly upwards, with a 0.6% Sep gain. But with global food prices having dropped sharply in recent weeks, there should be some relief over the next few months...Inflation has peaked; huge declines coming in the headline and slower core too. Negative y/y headline looks likely mid-09."

"the data due for release over the next two to three weekscovering the housing market, consumer spending, industrial activity, and the job market - are apt to reinforce the weakness in US economic activity, as already suggested by he beige book and retail sales report. Given this backdrop, we remain comfortable with our view that the FOMC will decide to cut its federal funds rate target by another 50 basis points on October 29, absent a striking improvement in financial conditions."

The major indices continue to chop along. The session has traded with a generally negative bias.
Dow Jones reports that Microsoft (MSFT 22.50, -0.16) has no interest in acquiring Yahoo! (YHOO 12.83, +1.08) and there are no discussions. When reports surfaced earlier that Microsoft thought a purchase of Yahoo sill made sense, shares of YHOO spiked higher. Despite the response by Microsoft, shares of YHOO remain elevated.
The broader tech sector (-1.0%) is back in the negative. It has traded between a gain of 1.9% and a loss of 4.7%.

The Dow and S&P 500 have been unable to hold gains. The Nasdaq, though still in positive ground, is retreating.
Despite broad declines, airline stocks are flying higher. In addition to sharply lower oil prices (69.95, -4.59), Southwest Airlines (LUV 12.30, +0.74) and Continental Airlines (CAL 15.04, +2.20) both announced third quarter earnings per share results that bested expectations. Their positive earnings surprise has spread to other carriers, helping to lift the Amex Airline Index more than 12%.
The industry's relative strength this session has also helped small-cap carriers like UAL (UAUA 8.84, +1.49) and US Airways (LCC 6.28, +0.99) surge. Their movement is helping the Russell 2000 (+1.0%) outperform the larger indices.

Stocks continue to trade with a generally negative bias. Decliners in the S&P 500 outnumber advancers by 3-to-2.
Financial stocks continue to show weakness. The sector is down 3.9% as the life and health insurance industry trades 10.5% lower.
Showing strength in the sector is residential REITs (+2.3%) and retail REITs (+0.9%).

BONY analyst Michael Woolfolk says "Core CPI has been at or above 2.0% y/y since August 2004, but is no longer considered a problem given the rapid decline in commodity prices and expected slowdown in demand. The latest CPI and PPI data should not get in the way of further rate cuts."

Stocks made a concerted advance into positive territory recently. The Dow and the S&P 500 are now oscillating near the neutral line. The Nasdaq, however, is showing relative strength.
The tech-heavy Nasdaq is being lead by Cisco (CSCO 17.14, +0.57) and Yahoo! (YHOO 13.36, +1.61). Yahoo is growing after Microsoft (MSFT 22.81, +0.15) made statements that a deal with the search company could still make sense. As a result, Google (GOOG 325.59, -13.58) is showing considerable weakness.

The dollar rose against the euro for a second day as a sell-off in global stocks prompted investors to buy the greenback as a haven. The U.S. currency extended its gain as crude oil fell below $70 a barrel for the first time since August 2007.
Gold losses extending to below $790 now as liquidations continue.
``The flight to liquidity and safety is supporting the dollar,'' said Matthew Strauss, senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada's biggest bank by assets.
Crude oil for November delivery fell as much as 7.2 percent to a 13-month low of $69.15 a barrel after a U.S. government report showed a bigger-than-forecast increase in inventories. The euro-dollar exchange rate and oil have had a correlation of 0.8 in the past year, according to Bloomberg calculations. A reading of 1 would mean they moved in lockstep.
The dollar pared its gain versus the yen after the Philadelphia Fed reported that its factory index dropped to minus 37.5 this month, the lowest reading since October 1990, from 3.8 in September. Negative readings signal contraction. The index averaged 5.1 last year.
U.S. stocks retreated after Citigroup Inc. said loss rates on credit cards and mortgages may climb to records and the manufacturing data spurred concern the economic slump is getting worse. The S&P 500 Index dropped 3.7 percent after plunging 9 percent yesterday.

JPM's Mike Krauss looks at the amazing crash and burn following Monday's plus almost 1000 points and concludes- "Implies deeper retest of Friday's 839 capitulative low, which exactly held a 50% retrace of the 1982 bull market! Break seeks 789 Mar '03 low, 769 Oct '02 trough. Favor volatile basing action. BUT, not a new bull market, given sharp downside momentum. Odds say retest/lower-lows in 4Q or 1Q, to create bullish divergences...Day support 884, then 861."

Stocks have pulled up from their session lows, when the S&P 500 was down 4.6%. Losses remain deep, however, with all ten of the major economic sectors trading with losses in excess of 1%.
Sporting the least significan decline is the consumer staples sector. It is down 1.4% as companies like Archer Daniels (ADM 16.53, +0.44) and Hershey (HSY 33.72, +0.75) provide leadership. Gains in HSY come despite news the company fell short of the consensus earnings per share estimate in the latest quarter.

The major indices remain in negative territory as participants continue their selling efforts. The uncertainty guiding traders' hands has pushed volatility to new highs. The Volatility Index, or VIX, which is often referred to as the Fear Index, is currently at 79; it has never been higher.
Losses around the world are also deep. The Dow Jones World Index, excluding the U.S., is down 7.0%. Japan's Nikkei shed 11.4% and China's Hang Seng fell 4.8%. The FTSE is off 4.4% and the DAX is currently down 3.6%.
Weekly crude inventories had a build of 5.61 million, which is more than double the consensus forecast. Oil is now near $71 per barrel, down 4%.

They est ISM fell to 39.0 in October from 47.9 in Sept based on Philly.

Stocks have fallen into the red, reversing early gains and extending the prior session's massive downturn. The losses experienced by the S&P 500 during the prior session were the worst since the crash of 1987.
Stocks in the S&P 500 are now down 0.4% week-to-date. Recall, though, that the S&P 500 surged 11.6% this past Monday.
Weakness in the current session is largely owed to the financial sector (-4.1%). However, it is still up 1.7% week-to-date, thanks to heavy gains earlier in the week.

HSBC economist Ryan Wang says "Nearly all of this decline in IP is attributable to hurricanes and a Boeing-related strike, but the breadth of softness suggests a more fundamental slowdown."

prices paid 7.2, new orders -30.5, and employment -18.0.

Drops back to $1.7200, after failing to make an impression on reported resistance/offers placed toward $1.7300. Support noted between $1.7200/1.7190. A break below this latter area to open a deeper move toward $1.7150/35.

Says initial unemploy claims are lower for a second week but "Signaling that the labor market remains weak, continuing claims rose for the fourth consecutive week."

A mixed start is now indicated by stock futures.

Fed said hurricanes and aircraft strike "severely curtailed output." Durables were -2.5% but drops were widespread. Cap-U was 76.4%, down 2.3 pts.

EUR/USD: $1.3520, $1.3595
USD/JPY: Y100.00, Y101.00, Y98.00, Y102.00
EUR/GBP: stg0.7700

The yen declined against the euro and dollar as U.S. stock-index futures rose, prompting investors to curb sales of higher-yielding assets funded in Japan.
The yen reversed gains from a three-year low against the euro as futures on the Standard & Poor's 500 Index advanced following its biggest plunge since the 1987 stock-market crash. The dollar rose toward its strongest level in more than a year versus the euro on speculation turmoil in financial markets, sparked by the global credit crisis, will encourage investors to buy U.S. Treasuries.
``The yen's very closely following global equities,'' said Lee Hardman, a London-based currency strategist for Bank of Tokyo-Mitsubishi. ``The moves we've seen in the yen over the last month have been extreme and in the near term there is a potential for the currency to weaken.''
The Japanese currency fell against the euro as S&P 500 futures expiring in December added 0.5 percent. The yen weakened on speculation that investors will slow carry-trade reversals.
A carry trade is a strategy in which an investor obtains funds in a country with low borrowing costs and buys assets where returns are higher.
``People are buying safe-haven assets such as Treasuries because of fears over the financial-markets turmoil,'' said Lee Wai Tuck, a currency strategist at Forecast Pte Ltd. in Singapore. ``It's positive for the dollar.''
Foreign investors increased their purchases of U.S. assets in August to $30 billion, from $6.1 billion in July, according to survey of economists. The Treasury Department will release the data at 1400 GMT in Washington.

EUR/USD: having got support at $1.3350 bounsed back above $1.3500. Offers spotted at $1.3520 may stall further gains. More supply at $1.3550/60. Bids lokated at $1.3410/00, stronger at $1.3350.

The rate is back above $1.3500, after seeing lows in late Europe of $1.3420. If euro-dollar can build seen opening a move on toward offers noted at $1.3520. More on approach to $1.3550/60. Bids at $1.3410/00, $1.3350.

- Banking system starting to work again
- Problems with equity markets to continue
- Won't comment on daily equity market moves

- Petrol prices need to fall further to reflect oil

The yen declined against the euro and dollar as U.S. stock-index futures rose, prompting investors to curb sales of higher-yielding assets funded in Japan.
The yen reversed gains from a three-year low against the euro as futures on the Standard & Poor's 500 Index advanced following its biggest plunge since the 1987 stock-market crash. The dollar rose toward its strongest level in more than a year versus the euro on speculation turmoil in financial markets, sparked by the global credit crisis, will encourage investors to buy U.S. Treasuries.
``The yen's very closely following global equities,'' said Lee Hardman, a London-based currency strategist for Bank of Tokyo-Mitsubishi. ``The moves we've seen in the yen over the last month have been extreme and in the near term there is a potential for the currency to weaken.''
The Japanese currency fell against the euro as S&P 500 futures expiring in December added 0.5 percent. The yen weakened on speculation that investors will slow carry-trade reversals.
A carry trade is a strategy in which an investor obtains funds in a country with low borrowing costs and buys assets where returns are higher.
``People are buying safe-haven assets such as Treasuries because of fears over the financial-markets turmoil,'' said Lee Wai Tuck, a currency strategist at Forecast Pte Ltd. in Singapore. ``It's positive for the dollar.''
Foreign investors increased their purchases of U.S. assets in August to $30 billion, from $6.1 billion in July, according to survey of economists. The Treasury Department will release the data at 1400 GMT in Washington.

Resistance 3: Y103.05
Resistance 2: Y101.60
Resistance 1: Y100.80
Current price: Y100.20
Support 1: Y99.20
Support 2: Y98.60
Support 3: Y97.90
Comments: TThe pair has updated a session ршпр, but essential changes of a tech haven't occured. Intermediate support is located on Y99,20 (76,4 % FIBO of growth Y97,90-Y103,05 and also a session low). Overcoming of the given mark will open road to Y98,60 and further to seven-mouth low on Y97,90. Resistance is the session high on Y100,45, above is possible growth to Y101,60 (61,8% FIBO of decrease Y103.05-Y99.20) and further to Tuesday's high on Y103,05.

Resistance 3: Chf1.1730
Resistance 2: Chf1.1600
Resistance 1: Chf1.1500
Current price: Chf1.1345
Support 1: Chf1.1305
Support 2: Chf1.1185
Support 3: Chf1.1090
Comments:The rate could not overcome strong area of resistance on Chf1,1500 (Oct 6 high) then has decreased. Support is located on Chf1,1305 (23,6 % FIBO of growth Chf1,0680-Chf1,1500). Overcoming of the given mark will open road to Chf1,185 (38,2 %) and further to Chf1,090 (50,0 %). Above Chf1.1500 there is a probability growth to Chf1,1600 (area of maxima of November, 2007) and further to Chf1,1730 (the top border of the ascending channel from July, 17th).

Resistance 3: $1.7630
Resistance 2: $1.7420
Resistance 1: $1.7360
Current price: $1.7220
Support 1: $1.7130
Support 2: $1.7020
Support 3: $1.6790
Comments: The pair remains near former levels. The nearest support is located in a session low on $1,7130, below on $1,7020 is located the level 76,4% FIBO of growth $1,6790-$ 1,7630. Overcoming of the given level will open road to Oct 10 low on $1,6790. The nearest resistance - area of a session high on $1,7360. Overcoming of the given mark will open road to $1,7420 (61,8% FIBO of falling $1,7600-$ 1,7130). As strong resistance acts area $1,7630/55 (area of Oct 7,8 and 14 highs).

Resistance 3:$1.3770
Resistance 2: $1.3690
Resistance 1: $1.3525
Current price: $1.3470
Support 1: $1.3340
Support 2: $1.3255
Support 3: $1.3050
Comments: Tech on euro hasn't changedю. The nearest support is located in a session low on $1,3340. Further is possible decrease to Oct 10 low on $1,3255. Below there is a probability of falling to Feb 2007 low on $1,3050. In case of restoration by the nearest resistance there will be an area of a session high on $1,3525. Above is possible growth to Wednesday and Tuesday on $1,3690 and on $1,3770 accordingly.

EUR/USD $1.3520
USD/JPY Y100.00, Y101.00, Y98.00, Y102.00
EUR/GBP stg0.7700

Recovery breaks above earlier recovery highs around $1.3445 but seen meeting resistance around $1.3470. One trader notes offers seen placed between $1.3470/80 adding that the 76.4% retracement level of the move down from $1.3518 to $1.3346 overnight comers in around $1.3477. Above here and rate can move back toward that mention overnight high at
$1.3518.

The yen rose, nearing a three-year high versus the euro, as a stocks rout prompted investors to sell higher-yielding assets including Europe's single currency.
Japan's currency also climbed the most in a week against the Australian dollar as the outlook for slowing global economic growth caused commodities prices to tumble. The dollar rose toward its strongest level in more than a year versus the euro on speculation turmoil in financial markets, sparked by a credit crisis, will encourage investors to buy Treasuries.
The yen was bolstered by speculation investors will pare carry trades, in which they get funds in a country with low borrowing costs and buy assets where returns are higher.
The dollar rose against the euro and the yen today on speculation a Treasury Department report will show international investors increased purchases of U.S. assets in August.
Foreign investors increased their purchases of U.S. assets in August to $30 billion in August from $6.1 billion in July, according to a Bloomberg News survey of economists. The Treasury Department will release the data at 9 a.m. in Washington.

EUR/USD having opened in area $1,3460, the pair has established a session high on $1,3520 then has decreased in area $1,3350.
GBP/USD having established sessionhigh on $1,7360, the rate continues to be corrected after yesterday's falling.
USD/JPY having established a session low on Y99,23 the pair has receded above level Y100,00.

US data starts at 1230GMT with the weekly jobless claims and CPI data. Jobless claims are expected to fall 8,000 to 470,000 in the October 11 week after slipping back in the previous week, while analysts expect September CPI to rise only 0.1% as pump prices fell even further, but food prices are expected to be up. Data continues with the 1300GMT release of the Treasury International Capital System data for August and the 1315GMT release of industrial production and capacity utilization for September. Industrial production is expected to fall 0.7% in September after the August plunge on a decline in vehicle production.

Japanese stock indices ended the day sharply lower, with the Nikkei 225 recording the biggest one-day percentage fall since 1987. The Nikkei was down 1089.02 points, or 11.41%, lower at 8458.45. The broader-based TOPIX was down 90.99 points at 864.52.

Japan's Nikkei 225 Stock Average rose, reversing an early decline, as investors sought companies whose earnings are resilient against an economic slowdown.
Takeda Pharmaceutical Co., the nation's largest drugmaker, advanced 6.2 percent, while Japan Tobacco Inc., the world's third-largest listed cigarette maker, gained 8.5 percent. Nippon Yusen K.K., the nation's biggest shipping line, dropped 6 percent after transport fees for commodities fell to a three-year low and UBS AG cut its share-price target.
The Nikkei 225 climbed 99.90, or 1.1 percent, to 9,547.47, reversing from a 1.9 percent decline. The broader Topix index slipped 0.79, or 0.1 percent, to 955.51 after earlier dropping 3 percent. About eight stocks climbed for every seven that retreated on the Topix.
Japan's Ministry of Finance today reported the nation's biggest-ever trade deficit as soaring energy costs drove up the nation's import bill by 20 percent in August from a year earlier, while exports inched up 0.9 percent.
Mizuho Financial Group Inc., Japan's second-largest publicly traded bank, rose 3.4 percent to 393,000 yen, while bigger rival Mitsubishi UFJ Financial Group Inc. gained 1.4 percent to 821 yen. The Topix Banks Index recovered from a 3 percent decline today, closing up 0.4 percent.
Tokyo Gas Co., Japan's largest natural gas distributor, surged 8 percent to 391 yen, its steepest gain since December 1999. Tohoku Electric Power Co. rose 6.7 percent to 2,150 yen.

European stocks fell for the first time in three days after U.S. retail sales tumbled and U.K. unemployment climbed to the highest in almost two years, heightening concern economies are slipping into recession.
BHP Billiton Ltd. dropped 15 percent and Xstrata Plc plunged 20 percent as copper retreated and concern deepened $2 trillion in funds for banks won't be enough to stave off a global economic contraction. Vedanta Resources Plc tumbled 17 percent as the global credit crisis threatened the purchase of Asarco LLC. KBC Group NV slumped 19 percent after reporting a net loss in the third quarter.
Copper, lead, tin and nickel prices slid on the London Metals Exchange.
Rio Tinto Group, battling a $86 billion takeover bid from BHP Billiton, may delay the planned sale this year of $10 billion of assets because of the global financial crisis. The shares lost 17 percent to 2,357 pence.
Vedanta fell 17 percent to 746 pence. Lawyers said the $2.6 billion purchase of bankrupt copper producer Asarco by Sterlite Industries (India) Ltd., a unit of London-based Vedanta, won't be completed after Sterlite told Asarco to cut its asking price.
The credit crisis has increased borrowing costs as declining metal prices hurt the outlook for earnings, thwarting acquisitions and expansions.
Total, Europe's third largest oil producer, lost 6.9 percent to 36.56 euros as crude fell as much as $4.06, or 5.2 percent, to $74.57 a barrel on the New York Mercantile Exchange.

U.S. stocks slumped for a second day, hammered by the biggest drop in retail sales in three years and growing doubt that plans to bail out banks will keep the nation out of a prolonged recession.
Exxon Mobil Corp. and Chevron Corp. tumbled more than 8 percent as commodity prices declined on concern the slowing economy will hurt demand. Wal-Mart Stores Inc. retreated 5.8 percent after the Commerce Department said purchases at chain stores decreased 1.2 percent last month. Morgan Stanley lost 15 percent after Oppenheimer & Co. analyst Meredith Whitney said the government's bank rescue is not a ``panacea'' solution.
The retreat over the past two days erased more than half of the gains in the S&P 500 and Dow on Oct. 13, when the market rallied the most since the 1930s on speculation the government's plan to shore up banks will ease the credit crisis. Efforts to calm financial markets and stem the credit crisis probably won't result in an immediate economic rebound, Federal Reserve Chairman Ben S. Bernanke told the Economic Club of New York.
All 10 S&P 500 industries fell more than 2.5 percent today. The declines came after the drop in retail sales was almost twice economists' estimates, sending Office Depot Inc., Target Corp. and Best Buy Co. down more than 6 percent. The Federal Reserve's index of New York manufacturing slumped to minus-24.6, a record low. The data overshadowed a retreat in money-market rates and better-than-estimated earnings reports from JPMorgan Chase & Co., Coca-Cola Co. and Intel Corp.

Resistance 3: Y103.05
Resistance 2: Y101.60
Resistance 1: Y100.45
Current price: Y100.22
Support 1: Y99.20
Support 2: Y98.60
Support 3: Y97.90
Comments: The yen rose as a drop in stocks prompted investors to sell higher-yielding asset. Intermediate support is located on Y99,20 (76,4 % FIBO of growth Y97,90-Y103,05 and also a session low). Overcoming of the given mark will open road to Y98,60 and further to seven-mouth low on Y97,90. Resistance is the session high on Y100,45, above is possible growth to Y101,60 (61,8% FIBO of decrease Y103.05-Y99.20) and further to Tuesday's high on Y103,05.

Resistance 3: Chf1.1730
Resistance 2: Chf1.1600
Resistance 1: Chf1.1500
Current price: Chf1.1435
Support 1: Chf1.1305
Support 2: Chf1.1185
Support 3: Chf1.1090
Comments:The pair comes nearer to strong area of resistance Chf1,1500 (Oct 6 high). Overcoming of the given mark will open road to Chf1,1600 (area of Nov 2007 high). Above there is an opportunity of growth to Chf1,1730 (the top border of the ascending channel from July 17). Support is located on Chf1,1305 (23,6% FIBO of growth Chf1,0680-Chf1,1500). Overcoming of the given mark will open road to Chf1,1185 (38,2 %) and further to Chf1,090 (50,0 %).

Resistance 3: $1.7630
Resistance 2: $1.7420
Resistance 1: $1.7360
Current price: $1.7240
Support 1: $1.7130
Support 2: $1.7020
Support 3: $1.6790
Comments: The pound has continued to sustain losses against dollar. At present the pair is corrected after yesterday's decrease. The nearest support is located in a session low on $1,7130, below on $1,7020 is located the level 76,4% FIBO of growth $1,6790-$ 1,7630. Overcoming of the given level will open road to Oct 10 low on $1,6790. The nearest resistance - area of a session high on $1,7360. Overcoming of the given mark will open road to $1,7420 (61,8% FIBO of falling $1,7600-$ 1,7130). As strong resistance acts area $1,7630/55 (area of Oct 7,8 and 14 highs).

Resistance 3:$1.3770
Resistance 2: $1.3690
Resistance 1: $1.3525
Current price: $1.3391
Support 1: $1.3340
Support 2: $1.3255
Support 3: $1.3050
Comments: The nearest support is located in a session low on $1,3340. Further is possible decrease to Oct 10 low on $1,3255. Below there is a probability of falling to Feb 2007 low on $1,3050. In case of restoration by the nearest resistance there will be an area of a session high on $1,3525. Above is possible growth to Wednesday and Tuesday on $1,3690 and on $1,3770 accordingly.

High Low Close
EUR/USD 1.3686 1.3446 1.3459
USD/JPY 102.16 99.52 99.87
GBP/USD 1.7602 1.7131 1.7140
USD/CHF 1.1406 1.1295 1.1317

EUR/JPY 134.98 133.56 134.09
EUR/GBP 0.7859 0.7733 0.7850
GBP/JPY 178.71 170.78 171.22
GBP/CHF 1.9931 1.9388 1.9400

Change % Change Last
Nikkei +99.90 +1.06% 9,547.47
Topix -0.79 -0.10% 955.5
FTSE -314.62 -7.16% 4,079.59
DAX -337.56 -6.49% 4,861.63
CAC -247.45 -6.82% 3,381.07
Dow -733.08 -7.87% 8,577.91
NASDAQ -150.68 -8.47% 1,628.33
S&P -90.18 -9.04% 907.83
10yr Note -0.1200 -0.030% 4.011%
NYMEX Crude Oil -2.83 -3.60% 75.80
Gold -0.50 -0.06% 839.00

06:00 Germany Wholesale prices (September), YoY 7.4%
06:00 Germany Wholesale prices (September) -1.8%
12:30 USA CPI excluding food and energy (September), YoY 2,5%
12:30 USA CPI excluding food and energy (September) 0,2% 0,2%
12:30 USA CPI (September), YoY 5,4%
12:30 USA CPI (September) 0,1% -0,1%
12:30 USA Jobless claims (week to 11.10) 475К 478К
13:00 USA TICS long-term (August), bln 6,1
13:00 USA TICS (August), bln -74,8
13:15 USA Capacity utilisation (September) 77,8 78,7
13:15 USA Industrial production (September) -0,8% -1,1%
14:00 USA Philadelphia Fed index (October) -10,0 3,8
20:30 USA M2 money supply (06.10), bln -4,0
23:50 Japan Tertiary activity index (August) 1.2%