FINANCIALS
The December Treasury Bonds and December Treasury Notes are rallying sharply higher in a flight-to-quality rally. Global turmoil is putting downside pressure on stock markets worldwide. Although the U.S. took the first step on Friday to shore up its financial markets, the world is realizing that the credit crisis is not just a U.S. issue as toxic debt is infecting banks throughout the world. Over the week-end Germany agreed to bailout Hypo Real Estate and BNP Paribas SA is taking control of Fortis. These two events sent the initial shock waves through the markets as traders now expect the situation to worsen. It looks as if some form of global intervention or across the globe interest rate cuts are necessary to prevent the entire collapse of the global financial system.

EQUITIES
Global equity markets are plunging overnight as a bailout of Hypo Real Estate and a takeover of BNP Paribas SA sent signs throughout the globe that the financial crisis is spreading. Traders are realizing that the financial markets as well as future earnings are being threatened. The talk is that the Fed, along with other central banks, will join together in declaring an across the board cut in interest rates in an effort to stop the financial crisis from spiraling downward further. Because of the passage of the U.S. banking rescue plan, U.S. financial institutions are expected to have a little more protection than their European counter-parts. The world is beginning to realize that without a bailout plan of its own, they face substantial downside risks from Europe to Asia. Look for some dramatic action today by central banks to try to stabilize the markets.

CURRENCIES
The Dollar is putting pressure on most of the majors this morning as currency traders are seeking the safety and stability of the U.S. Dollar. Traders are expecting the global financial situation to continue to worsen thus increasing the demand for U.S. Dollars. The strong buying of the Dollar is an indication that there are going to be more financial institution bailouts in the near future. The downside pressure is on the Euro and British Pound because of the possibility of additional financial institution failures. The Yen is down on the weakness in the stock market. Canadian Dollars are trading mixed to slightly better. Lower crude oil and commodity prices are putting the pressure on the Canadian Dollar, but there is some flight-to-quality buying. The Swiss Franc is up on flight-to-quality buying as it is often considered a safe haven during a financial crisis.

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