Economic Calendar for week 25th - 29th February 2008.

All times GMT

Monday Feb 25th:

GE - 07:00 - Import Price Index M/M.
UK - 09:30 - BBA Mortgage Approvals.
US - 15:00 - Existing Home Sales.

Tuesday Feb 26th:

GE - 07:00 - GDP Q/Q.
EU - 09:00 - Consumption Indicator.
GE - 09:00 - Ifo Business Climate Index.
GE - 09:00 - Ifo Business Expectations Index.
UK - 09:30 - Business Investment Q/Q.
UK - 11:00 - CBI Distributive Trades Realised.
US - 13:30 - PPI & Core PPI M/M.
US - 15:00 - Consumer Confidence.
US - 15:00 - National HPI Composite-20 Y/Y.
US - 15:00 - House Price Index Q/Q.
US - 15:00 - Richmond Fed Index.

Wednesday Feb 27th:

GE - 07:00 - Consumer Confidence.
EU - 09:30 - M3 Money Supply Y/Y.
UK - 09:30 - GDP Q/Q.
UK - 09:30 - Index of Services Q/Q.
US - 13:30 - Durable & Core Durable Goods Orders M/M.
US - 15:00 - Fed Chairman Bernanke Speaks.
US - 15:00 - New Home Sales.
US - 15:30 - Crude Oil Inventories.

Thursday Feb 28th:

GE - 08:55 - Manufacturing PMI.
EU - 09:00 - Manufacturing PMI.
US - 13:30 - Preliminary GDP Annualised Q/Q.
US - 13:30 - Preliminary GDP Deflator Annualised Q/Q.
US - 13:30 - Unemployment Claims.
US - 15:00 - Fed Chairman Bernanke Speaks.

Friday Feb 29th:

GE - 07:00 - CPI M/M.
UK - 09:30 - BSA Mortgage Approvals.
UK - 09:30 - Net Lending to Individuals.
EU - 10:00 - CPI Y/Y.
EU - 10:00 - Consumer Confidence.
UK - 10:30 - Consumer Confidence.
US - 13:30 - Core PCE Price Index M/M..
US - 13:30 - Personal Spending M/M.
US - 13:30 - Personal Income M/M.
US - 14:45 - Chicago PMI.
US - 15:00 - Consumer Sentiment.

EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany

The week ahead.

US equity markets closed the week in positive territory after flurry of buying in the final 30 minutes of trading, but for most of the week traders made heavy weather of making significant moves in either direction. The FTSE failed to break through the psychologically important 6000 level twice , while the CAC and the DAX gave up earlier gains to close the week largely flat.

Recession, inflation and stagflation may not make for pleasant dinner topics, but they have certainly been at the forefront of analysts thoughts on the global economy. Oil prices hit a record $101.32 a barrel on Wednesday, and the US Consumer Price Index showed a rise of 4.3% over the last 12 months. In addition, the Fed raised its inflation forecast, while cutting its economic outlook for the rest of 2008.

Many are now talking about a return to 1970s style stagflation. Stagflation refers to a situation, in which living costs keep rising, but income growth flatlines or reverses. This means that while headline economic activity may not go into recession, the ability of the consumer to maintain their standard of living is eroded because prices increase faster than earnings. Food and energy costs have risen sharply in the last 12 months, while there are indications that headline economic activity in the US is reversing. The Philly Fed Index, a key measure of US manufacturing activity, came in at -24, which is the lowest reading since February 2001. Readings this low have coincided with the six US recessions since 1968. Gold, a key inflation hedge for many traders, reached a new record high of $958.40 last week.

However, with interest rates and inflation levels still well below their 1970s peaks in the high teens, there may still be room for manoeuvre. "This is nothing like the 1970's, which was a pretty dismal period and not just because of polyester and disco." was a choice quote from Fusion IQ director Barry Ritholtz. Despite the late buying on Friday, things are still very much in the balance. Next weeks top tier economic announcements could therefore have a significant impact on markets, as traders weigh up the risk of inflation against the possibility of further US rate cuts.

Monday sees the release of US existing home sales data followed by PPI and consumer confidence figures on Tuesday. On Wednesday core durable goods and new home sales are announced, followed by annualised GDP figures on Thursday. The most significant announcements of the week could be Fed chairman Bernake speaking in front of congress on Wednesday and Thursday. There are many upper tier European announcements next week, but top of the pile is the UK GDP data on Wednesday. In short, it will be a busy week for global markets.

Much has been made of the consolidation patterns being formed by the FTSE and S&P 500, which imply that a break out is due. With so much heavy data due next week it is difficult to say in advance which direction this break out is likely to go. With a potential break out on the cards, an expiry miss could be an interesting trade for next week. An expiry miss on the Dow JonesWall Street) with the levels set to 12097 and 12410 could return 11% over 14 days. This means that if the Dow is above 12410 or below 12097 on expiry you win, i.e. you want the Dow to be beyond this range in 14 days
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David Evans

Chamonix Seasons

The weather in the Chamonix valley is similar to that of all mountainous regions…always varied, always exciting and always awe-inspiring. Read our month by month guide on what to expect throughout a typical year, along with some fun suggestions as to how to make the most of it…come rain or shine!

December: Another year has passed and winter returns again. Unpack your skis ready for the first lifts, as the cold begins in earnest with the first flurries of good quality snow. Outside of the Christmas and New Year weeks there are few people on the mountain, so this is a perfect time to enjoy a relaxed Alpine experience.

January: The valleys and peaks are carpeted in white… now is the time to enjoy the first of the powder kept fresh and crisp by the season's cold air. January's consistently chilly temperatures often mean some of the best quality snow of the year, conveniently at a time when accommodation is very reasonable.

February: A bustling time, coinciding with English and French school holidays, why not book an invigorating family break to shake off all of that work lethargy as the snow reaches its maximum depth.

March: The excellent snow depth coincides with good weather to provide wonderful holiday experiences savouring lazy lunches on the slopes and enjoying the fabulous views.

April: You only have a few more weeks of skiing, so grab your sunglasses and sunscreen and come out to play while you still can. 'April showers' in the lowlands mean snow-fall higher up, at a time in the season when it can snow all night and be sunny all day.

May: Skiing is still on the agenda for the first two weeks of this month after which the spring sunshine melts the remaining snow and brings the first scatterings of crocuses. Unpack your hiking boots and start to explore the footpaths at a slower and more relaxed pace.

June: The days grow longer and it is the perfect time to light the barbeque and relax with friends late into the evening. Walking, mountain biking, climbing, golf and tennis are fantastic pursuits to enjoy while the weather is mild.

July: Summer in the Alps is a vibrant and exhilarating time offering a multitude of activities you can try in an effort to stay cool, like rafting, hydro speeding, canoeing, and canyoning on white-water rivers.

August: As the season reaches its hottest and most intense, you might be lucky enough to catch an incredible lightening display from the cosiness of your chalet balcony after a delicious dinner of local delicacies.

September: A lovely time to sight-see with a variety of interesting places to visit. Annecy, known as the 'Venice of the Alps', and the bustling Geneva are both only a short journey away and offer great shopping opportunities.

October: A quiet and relaxed time of year, ideally suited for meandering through town stopping occasionally for a freshly cooked crepe and a good French coffee.

November: An autumnal chill seeps into the valley and the rolling deciduous forests turn rusty shades of browns, oranges, and reds…delicately crusted in frost and the first flakes of snow.

Amtrak to Unveil New Security Measures Including Random Bag Screening

Amtrak will start randomly screening passengers' carry-on bags this week in a new security push that includes officers with automatic weapons and bomb-sniffing dogs patrolling platforms and trains.

The initiative, to be announced by the railroad on Tuesday, is a significant shift for Amtrak. Unlike the airlines, it has had relatively little visible increase in security since the 2001 terrorist attacks, a distinction that has enabled it to attract passengers eager to avoid airport hassles.

Amtrak officials insist their new procedures won't hold up the flow of passengers.

"On-time performance is a key element of Amtrak service. We are fully mindful of that. This is not about train delays," Bill Rooney, the railroad's vice president for security strategy and special operations, told The Associated Press.

Nor will the moves require passengers to arrive at stations far in advance, officials said. Passengers who are selected randomly for the screening will be delayed no more than a couple of minutes, Amtrak chief executive Alex Kummant said.

"We're very conscious of the fact that you're in an environment where commuters have minutes to go from train to train," he said.

Concern about Amtrak security has been mounting since the 2004 bombings of commuter trains in Madrid that killed 191 people. Trains also have been bombed in London, where 52 people were killed in a series of blasts in 2005, most of them on subway trains, and in Mumbai, India, where 200 people were killed in 2006 on commuter trains. Russia also has had several bombings on subway, commuter and long-distance trains.

The new procedures draw heavily on measures being used in the New York City subways, Rooney said. That model has been upheld in court challenges, he noted.

Amtrak plans to roll out the new "mobile security teams" first on the Northeast Corridor between Washington and Boston, the railroad's most heavily used route, before expanding them to the rest of the country.

The teams will show up unannounced at stations and set up baggage screening areas in front of boarding gates. Officers will randomly pull people out of line and wipe their bags with a special swab that is then put through a machine that detects explosives. If the machine detects anything, officers will open the bag for visual inspection.

Anybody who is selected for screening and refuses will not be allowed to board and their ticket will be refunded.

In addition to the screening, counterterrorism officers with bomb-sniffing dogs will patrol platforms and walk through trains, and sometimes will ride the trains, officials said.

Tim Connors, director of the Center for Policing Terrorism at the Manhattan Institute, said rail systems require a completely different approach to security from the one used in aviation.

"Rail moves a lot more people than air does," he said. "It's designed to be an open system that can move a lot of people fast."

One of Congress' biggest advocates for passenger rail, Sen. Charles Schumer, D-N.Y., said the security initiative makes sense as long as it doesn't cause delays.

"Given that terrorists have chosen passenger rail as one of their targets of choice, provided this doesn't slow things down or require additional longer lines and waits, this plan is certainly worth trying," he said in a statement.

Connors said random screening could be effective.

"A random approach is actually more effective than a constant one," he said, adding that when procedures don't change, it's easier for would-be terrorists to find weak spots.

Amtrak hopes the new force can serve as a powerful deterrent to would-be terrorists.

"What we are trying to do is make sure the bad guys know we're out there but don't know where we'll be, or when," Rooney said.

Amtrak did not provide figures for the program's cost, but said its total security budget -- including police, security strategy and emergency preparedness -- is about $60 million. The railroad has about 400 security personnel, including about 300 sworn police officers, Kummant said.

Amtrak's previous passenger screening consisted of sporadic identification checks by train conductors, which the railroad says it plans to continue. Passengers also are required to show ID when buying tickets from station agents, though there is no such requirement from passengers buying tickets from self-serve kiosks.

The Transportation Security Administration is also expected to continue sporadic deployments to stations around the country.

Amtrak has received a number of federal grants aimed at boosting security, but officials said there was no specific mandate to implement the changes.

"There is no new or different specific threat," Kummant said. "This is just the correct step to take."

Amtrak: http://www.amtrak.com/

Economic Calendar for week 18th - 22nd February 2008

All times GMT

Monday Feb 18th:

US - 00:01 - Rightmove House Price Index M/M.
US - ALL - Stock markets closed for Washington's Birthday (President's Day).

Tuesday Feb 19th:

US - 18:00 - NAHB Housing Market Index.

Wednesday Feb 20th:

GE - 07:00 - PPI M/M.
UK - 09:30 - MPC Meeting Minutes.
UK - 09:30 - M4 Money Supply M/M.
UK - 09:30 - Public Sector Net Borrowing.
UK - 11:00 - CBI Industrial Trends Orders.
UK - 13:30 - CPI & Core CPI M/M.
US - 13:30 - Building Permits.
US - 13:30 - Housing Starts
US - 19:00 - FOMC Meeting Minutes.

Thursday Feb 21st:

FR - 07:45 - CPI M/M.
EU - 09:00 - Current Account.
UK - 09:30 - Retail Sales M/M.
US - 13:30 - Trade Balance.
US - 13:30 - Unemployment Claims.
US - 15:00 - Philadelphia Fed Manufacturing Index.
US - 15:00 - Leading Index M/M.
US - 15:30 - Crude Oil Inventories.

Friday Feb 22nd:

FR - 07:45 - Nonfarm Employment Q/Q.
EU - 09:00 - Manufacturing PMI.
EU - 09:00 - Services PMI.
EU - 10:00 - Industrial New Orders M/M.


EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany

The week ahead.

Credit and liquidity were again the main drivers of events last week. US stocks reversed on Thursday, as Fed chairman Ben Bernake warned that a scarcity of credit would restrain economic growth. Former Fed chairman, Alan Greenspan intimated that the US economy was on the edge of a recession. House prices in the US continued to plunge further than analysts had expected despite the recent round of interest rate cuts. It is perhaps too early for the Feds recent 1.25% rate cuts to filter down.

According to data from Merill Lynch & Co, US companies are paying more to borrow now, than before the Fed reduced its benchmark rate in January. Banks have been accused of hiking fees and charges in order to recover losses on overly risky credit related trading. Reducing interest rates on loans may not be enough to encourage US consumers to resume their free spending, especially as they are now faced with negative equity on their homes.

Commodities had a mixed week, with wheat pulling back from its recent explosive highs. However, the inflationary benefits of this were nullified as oil rose strongly again past the $95 marker. The Euro regained half the ground lost against the Dollar in the previous week following hawkish comments from the ECB, which poured cold water on speculation that they would be ready to cut rates as early as their next meeting. Sterling strengthened against the Dollar, as the $1.95 level again supports cable.

Next week starts slowly as US markets are closed for Presidents day on Monday. The top tier announcements dont really hit until Wednesday with the release of the previous MPC and FOMC meeting minutes. The MPC minutes will have more of an impact due to the greater uncertainty over the central banks next move. Following this, US CPI will provide insight into the possible inflationary effects of the recent rate cuts. Thursdays retail sales will give further clues as to the strength of the UK economy and the likelihood of a domestic slowdown.

Sentiment is negative, but is now reaching extreme levels. This month, US money managers turned underweight in equities for the first time since March 2003. This was of course actually turned out to be the low of the last bear market. Several investor sentiment readings including the AAII survey have now reached levels of extreme bearishness. In addition, Fridays Michigan consumer confidence survey dropped below 70 for the first time since 1992. At these levels, such pessimism is historically a good contrarian indicator.

There are therefore some good indications that sentiment could reverse over the coming weeks, but one could also argue that after a mildly positive week we are not oversold enough on a short term basis. A heavy sell off could point to an exhaustion low which triggers a rebound. With the US markets closed on Monday, the FTSE could be rudderless and Mondays early housing data may point to housing slowing in the UK. If this report comes in as worse than expected, a one touch trade around 50 points below the opening low could be the best value next week. Based on Fridays close for example, a one touch trade for the FTSE to hit 5725 in 16 days could return 13%.

David Evans

Nascar’s Screech and Slam? It’s All Aerodynamics

DAYTONA BEACH, Fla. — When Junior Johnson entered the Daytona 500 in 1960, he’d already achieved fame in two careers — first as a moonshiner who kept outrunning federal agents, then by applying those skills to win stock-car races.

INTUITIVE PHYSICIST Juan Pablo Montoya’s Dodge in a practice run at Daytona.“Cars of Tomorrow” go through wind tunnels and computer simulations.

Now he was ready for a new career as an “intuitive physicist,” a term borrowed from Diandra Leslie-Pelecky, who teaches nonintuitive physics at the University of Nebraska.

Johnson was stuck driving an old Chevrolet that was slower than the Pontiacs at Daytona that year. But in practice he discovered that he could keep up with a Pontiac if he stayed close to its rear bumper. He suspected, as he put it, that “the air was creating a situation, a slipstream type of thing.”

His hypothesis was confirmed near the end of the race, when that situation produced such a low-pressure area behind the leading car that the glass in its rear window popped out, allowing Johnson to win the race.

It was a revolutionary discovery, this trailing technique known as drafting, but in retrospect it seems quaintly simple. For the 50th running of the Daytona 500 this Sunday — billed with characteristic stock car understatement as “the Most Anticipated Event in Racing History” — nobody would dream of sending a driver out there with just his intuition.

To prepare the drivers for the “Car of Tomorrow” being introduced at Daytona, the racing teams’ engineers have spent the winter testing their versions of the new car in wind tunnels and running huge computer simulations called C.F.D.’s (for computational fluid dynamics). To understand what is happening on the track and in the garage here at Daytona, you need either a crash course in aerodynamics or the guidance of Dr. Leslie-Pelecky and her new book, “The Physics of Nascar.”

Dr. Leslie-Pelecky did not have any interest in Nascar until one evening a couple of years ago. While taking a break from her research on magnetic nanomaterials, she was channel surfing and saw a chain reaction of stock cars gone wild.

“It started when six cars were going around the turn, and one of them suddenly started wiggling and went into the wall for no apparent reason,” she recalled. “It was like spontaneous combustion. As a scientist, you look at that and say, ‘There has to be a reason.’ It drove me nuts because I couldn’t explain it. I felt as if I was in a different universe.”

She started investigating Nascar’s universe partly out of curiosity and partly because it jibed with another project of hers, to enliven the science curriculum in elementary and secondary schools. It occurred to her that students would be more interested in, say, the difference between the coefficients of static friction and kinetic friction if the kinetic example involved tires skidding on a turn at Daytona. (Her stock-car science quiz is at nytimes.com/tierneylab/)

“So many kids lose interest in science because we’ve been teaching them that it’s all about memorizing facts,” she said. “What you do in school that’s called a lab experiment is not really an experiment, because you already know the answer. When you listen to a driver and his crew chief trying to figure out how to give the car more grip in Turn 2, that’s the scientific method in action. They’re asking questions about load transfer and downforce, and they don’t know the answers until they’ve done the experiment.”

In her book, Dr. Leslie-Pelecky explains everything from the mechanics of racing engines to the molecular properties of the drivers’ fire-retardant suits, paying special attention to the endless battle against that great evil force, drag.

Junior Johnson and his successors discovered that drafting could help not just the trailing car, but also the leading car by reducing the amount of turbulence at its rear. Two cars drafting together can go 3 to 5 miles an hour faster than a solo car, and extra trailing cars add a little more speed, which is why the drivers spend so much time in single-file bumper-to-bumper traffic.

The drivers and their engineers also learned that they could add speed — and make fans happy — if the trailing car nudged the leading car. That enabled the trailing car, which could go faster than the leading car because it faced less air resistance, to transfer its extra momentum to the leader through a technique called “bump drafting.” That evolved into “slam drafting” as the drivers became bolder and their crews added steel plates to the bumpers.

Meanwhile, the math grew more elaborate as engineers combined a classical technique for describing the movement of fluids, the Navier-Stokes differential equations, with computers that could calculate the air flow as the car moved under different conditions. Racing teams could figure out precisely how to reshape their car to suit each track. A car built to minimize drag on Daytona’s long straightaways and sharply banked curves had to be reconfigured for a smaller track so that there was enough downforce to keep it from spinning out of control on a tight corner.

Reshaping cars for each race became so expensive and grueling that Nascar ordered everyone this season, starting at Daytona, to use the same chassis and body (that Car of Tomorrow) at every track. The engineers can tinker with just two major aerodynamic features, a new wing atop the rear of the car and an adjustable shelf protruding from the front end called a splitter because it diverts air under or over the car.

These new limitations, of course, haven’t stopped the aerodynamics arms race. It is has become more refined, as Dr. Leslie-Pelecky kept hearing this past week in the garage at Daytona from fellow Ph.D.’s like Eric Warren, an aeronautical engineer who is the technical director of Michael Waltrip Racing. To prepare his drivers for the new car, Dr. Warren relied on C.F.D. simulations calculating the airflow at 100 million points on the vehicle.

“The smaller the gains are to find, the more scientific the approach has to be,” he said. “To pass a car, you need to know precisely where the minimum drag is for you and the maximum drag is for him. With the picture of airflow we get from the C.F.D., we can tell the driver that the ideal passing maneuver is a certain sequence of positions.”

Dr. Warren wasn’t about to reveal that sequence before Sunday’s race, but he did elaborate slightly about the knack for finding good air when you are behind or alongside another car. “Less than a one-foot difference between cars is where a lot of the interactions are,” he said.

Less than a foot? Well, that’s the kind of experiment that Nascar fans will be watching for and, maybe, as Dr. Leslie-Pelecky hopes, it will also inspire some future scientists. I don’t recall growing too excited about the old textbook problems involving locomotives lumbering at different velocities out of cities A and B. But I would have paid attention to two cars traveling 200 miles an hour separated by inches.

Top Officials See Bleaker Outlook for the Economy

WASHINGTON — With the credit markets once again deteriorating, the nation’s two top economic policy makers acknowledged Thursday that the outlook for the economy had worsened, as both came under criticism for being overtaken by events and failing to act boldly enough.

In testimony to Congress, Ben S. Bernanke, the chairman of the Federal Reserve, signaled that the Fed was ready to reduce interest rates yet again, pointing out that problems in housing and mortgage-related markets had spread more widely and proved more intractable than he predicted three months ago.

His sobering assessment was echoed by Treasury Secretary Henry M. Paulson Jr., who appeared with him. Both continued to avoid predicting a recession but said they were scaling back the more optimistic forecasts they had issued in November.

Ethan S. Harris, chief United States economist for Lehman Brothers, said that both policy makers had “come clean” about the economy’s problems but that investors were not impressed.

Stock prices, which normally rally when the Fed hints it will lower borrowing costs, tumbled instead. The Dow Jones industrial average dropped 175 points, or 1.4 percent; broader stock indexes dropped by similar amounts.

Anxiety is escalating among institutional lenders and major borrowers, as the panic over soaring default rates on subprime mortgages that began last summer continues to spread, freezing up credit for municipalities, hospitals, student loans and even investment funds holding the most conservative bonds.

On Capitol Hill, the economic policy makers found themselves in the line of fire. Senator Robert Menendez, Democrat of New Jersey, accused both Mr. Bernanke and Mr. Paulson of having “hit the snooze button.”

Senator Christopher J. Dodd of Connecticut, chairman of the Banking Committee, told reporters after the hearing that “it just seems as if they aren’t as concerned about the magnitude of the problem.”

Testifying before the committee, Mr. Bernanke said he still expected the economy to grow at a “sluggish” pace over the next few months and to pick up speed later in the year. But he said “the downside risks to growth have increased,” noting that spiraling losses in home mortgages have dragged down the credit markets and shaken the broader economy.

While trying to be optimistic, Mr. Paulson said that the administration’s forecast “would be less, but I do believe we’ll keep growing.”

Many Wall Street economic forecasters, however, are already estimating that the risks of a recession are at least 50-50, and a growing number of analysts contend that an economic contraction may have already begun.

Fed policy makers will release their newest forecasts on Wednesday, and Mr. Bernanke said they would be more in line with those of private-sector economists.

The Fed has reduced its benchmark interest rate, called the federal funds rate, five times since September, including two cuts within eight days last month. The rate has fallen to 3 percent; as recently as late summer of last year it was 5.25 percent.

Mr. Bernanke assured lawmakers that the Fed would “provide adequate insurance” against a downturn in the form of cheaper money.

But neither investors nor politicians have responded particularly favorably to Washington’s moves. Yields on asset-backed securities that hold mortgages and other debt have risen to levels almost as high as they were last August, when financial markets first seized up in response to soaring default rates on subprime mortgages.

The Fed’s rate cuts have led to a more modest decline in mortgage rates for borrowers with good credit, but they have done little to ease the broader credit squeeze.

Mr. Bernanke agreed that banks and other lenders have been pulling back, both because of increased aversion to risk and because they have been forced to book huge losses from soured loans and to repurchase troubled mortgages and loans they had sold to investors.

The unexpected losses and growing pressures, he continued, have prompted banks to become more restrictive in their lending and more “protective of their liquidity.”

Mr. Bernanke said the economy would grow slowly but pick up speed later in response to both the Fed’s lower interest rates and the $168 billion economic stimulus package that President Bush signed Wednesday.

“At present, my baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year,” he told lawmakers. But in cautioning that his outlook could turn out to be wrong, the Fed chairman left the door open to additional rate reductions.

Mr. Paulson tried to sound less downbeat. “I believe we are going to continue to grow, albeit at a slower rate,” he told the Banking Committee, insisting that the plunge in housing and credit markets was a correction rather than a crisis.

Mr. Bernanke said a wide variety of economic indicators had declined in recent months, as the meltdown in the housing and mortgage markets rippled through the broader economy.

The Fed chairman said the job market had worsened, noting employment fell by 17,000 jobs in January, according to the Labor Department. That was down from an average rise of 95,000 jobs a month in the final three months of 2007. Unemployment, though still comparatively low, at 4.9 percent, has edged up from 4.7 percent a few months ago.

Nationwide, housing prices have declined and show no signs of having hit bottom, while the stock markets have fallen sharply from their highs late last year.

Mr. Dodd has proposed legislation to create an agency to bail out many homeowners by buying up and restructuring troubled mortgages. He painted a particularly bleak picture.

“The current economic situation is more than merely a ‘slowdown’ or a ’downturn,’ ” he said. “It is a crisis of confidence among consumers and investors.”

Mr. Paulson and other administration officials staunchly oppose a government buyout program, arguing that the tax rebates and business tax cuts in the new stimulus package should keep the nation out of a recession.

But Senator Richard C. Shelby of Alabama, ranking Republican on the Banking Committee, predicted the bill’s tax rebates and temporary tax cuts for business would have a negligible impact.

“I have equated it to pouring a glass of water in the ocean and expecting it to make a difference,” Mr. Shelby said.

Though lawmakers welcomed the Fed’s willingness to lower interest rates, investors had already been assuming that events would force the Fed’s hand.

Prices in the federal funds futures market, which allows investors to bet on the coming course of rates, indicate investors expect the central bank to reduce its benchmark overnight rate another full percentage point, to 2 percent, by the end of June.

Sony Ericsson's Slick Windows Mobile Slider

With its three-inch VGA touch screen, curved slider design, and speedy network access, the Xperia X1 is one of the hottest Windows Mobile smartphone I've ever laid eyes on.Just unveiled at the World Mobile Congress extravaganza in Barcelona, the Xperia represents Sony Ericsson's first crack at a Windows Mobile phone (until now, all of Sony Ericsson's smartphones have been powered by the Symbian OS). Let's talk about the basic specs first: it's a quad-band GSM phone (good for making calls on worldwide GSM networks), and it supports 3.5G HSDPA and HSUPA for speedy Web surfing, video streaming, and file uploading. Wi-Fi is on board, as well as a 3.2-megapixel camera and aGPS (or GPS assisted by cell-tower triangulation). Pretty nice, especially given that AT&T just announced that it's about to roll out HSUPA here in the States.

Of course, the centerpiece of the X1 is its three-inch WVGA screen—that's 800 by 480 pixels, compared to 480 by 320 pixels for the iPhone's 3.5-inch screen. The touch-sensitive screen will feature a series of Xpreria "panels" that'll give you quick access to Web sites, music, events, and the like; running underneath will be Windows Mobile 6. (It's not clear whether the phone will use the professional or pared-down standard version of Windows Mobile, but more details are expected to emerge later today.)

Also cool is the "arc-slider" design of the X1, which slides open to reveal a full-QWERTY keypad. Meanwhile, beneath the three-inch screen is a four-way navigational keypad, "Talk" and "End" buttons, a pair of soft keys, and a Windows button for calling up the Start menu. There's no stylus, interestingly enough, which leads me to believe that we're talking about the "standard" version of Windows Mobile (found on phones such as the BlackJack II).

The Xperia X1 is slated for release in the second half of the year; no details on pricing or carriers just yet, although the phone looks like a prime candidate for AT&T's lineup.

Crude Oil Prices Fall to Near $95 Per Barrel After Previous Session's Rise of More Than $2

Oil prices dropped Friday after rising more than $2 a barrel in the previous session as new U.S. trade deficit figures spurred hopes that the U.S. economy might escape a serious downturn.

The U.S. Commerce Department said Thursday the trade deficit fell in December and for 2007 as a whole -- an indication the U.S. is exporting more goods. This led investors to think U.S. energy demand would not be as weak as feared.

U.S. Federal Reserve Chairman Ben Bernanke's suggestion that the central bank is prepared to again cut interest rates also helped boost light, sweet crude to settle at $95.46 a barrel Thursday, an increase of $2.19 on the New York Mercantile Exchange.

That was its highest close since Jan. 9. The contract has risen in 4 of the past 5 sessions, adding more than $6 in a little over a week.

On Friday, the March contract lost 36 cents to $95.10 a barrel in Asian electronic trading by midafternoon in Singapore.

Bernanke said the Fed is ready to act again in response to deteriorating economic conditions. Interest rate cuts support oil prices because they tend to weaken the dollar. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

Energy investors were also buying after a federal judge's decision Wednesday to confirm an earlier ruling freezing $300 million in a bank account owned by the Venezuelan state oil company.

Exxon Mobil is challenging Venezuela's nationalization of an oil project. A British court's earlier decision to temporarily freeze up to $12 billion in Venezuelan oil assets drew threats from President Hugo Chavez to cut off all oil sales to the U.S.

Weighing on oil prices were forecasts this week from the Energy Department and the International Energy Agency, an energy policy adviser to the industrialized world, that call for slower demand growth this year due to weakening economies.

Heating oil futures dropped 1.08 cents to $2.6558 a gallon while gasoline prices declined 0.83 cent to $2.4678 a gallon.

Natural gas futures lost 0.7 cents to $8.765 per 1,000 cubic feet.

Brent crude futures fell 38 cents to $94.78 a barrel on the ICE Futures exchange in London.

China Says January Trade Surplus Expands 22.7 Percent to $19.5 Billion, State News Reports

China's global trade surplus in January rose 22.7 percent compared with the year-earlier period to $19.5 billion, a state news agency reported Friday.

The figure, reported by the Xinhua News Agency, appeared likely to fuel foreign criticism of Beijing's swollen surpluses and calls by some American lawmakers for punitive tariffs on Chinese imports.

The January trade gap was well below October's record monthly high of $27 billion. It was the first month since last April that China's trade gap was below $20 billion.

Yahoo's Rebuff of Microsoft's Multibillion-Dollar Bid Leaves Investors Guessing

Yahoo Inc.'s rejection of Microsoft Corp.'s unsolicited takeover bid left investors guessing the next move in a tense mating dance that may hatch a more imposing challenger to Google Inc. or disintegrate into a bruising brawl.

The rebuff, formally announced early Monday, wasn't a surprise because Yahoo had leaked its intention over the weekend.

As expected, Yahoo's board unanimously decided to spurn Microsoft after concluding the offer -- originally worth $44.6 billion or $31 per share -- "substantially undervalues" one of the Internet's prized franchises. The cash-and stock deal is now valued at about $40 billion, or $28.91 per share, because of a drop in Microsoft's market value.

But Yahoo didn't raise antitrust concerns about the proposed deal and included language that seemed to invite a higher offer from Microsoft, the world's largest software maker.

"The board of directors is continually evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for all stockholders," Yahoo said in a statement.

Microsoft, though, didn't seem inclined to raise the bid Monday, releasing a statement describing its current bid as "full and fair."

Calling Yahoo's decision "unfortunate," Microsoft didn't back off from its quest either. "Based on conversations with stakeholders of both companies, we are confident that moving forward promptly to consummate a transaction is in the best interests of all parties," the Redmond, Wash.-based company said.

Microsoft also emphasized it's prepared to "pursue all necessary steps" to get the deal done, raising the prospect that it could take the bid directly to Yahoo shareholders with a so-called "exchange offer" or escalate the acrimony even further by trying to oust Yahoo's 10-member board later this year.

While assessing its response to Microsoft, Yahoo's board also examined a wide range of alternatives that included forging an ad partnership with Google, which paid nearly $5 billion in marketing commissions to thousands of Web sites last year.

Without identifying its sources, the Times of London also reported Yahoo is exploring a merger with Time Warner Inc.'s AOL, another popular Internet property that has been struggling in recent years. A Yahoo spokesman declined to comment on the report.

Investors appear convinced Microsoft's bid remains Yahoo's best bet, given the Sunnyvale-based company's profits have been steadily declining despite a management shake up eight months ago and repeated promises of a turnaround extending back to 2006.

Reflecting Wall Street's belief that Microsoft will raise its bid, Yahoo shares climbed 67 cents Monday to close at $29.87. On the flip side, Microsoft's shares dropped 35 cents to finish at $28.21 as its shareholders continued to fret that a Yahoo acquisition could turn into more trouble than its worth.

Microsoft's advisers are believed to be working behind the scenes to rally support among Yahoo shareholders and determine how much more the bid needs to be increased to force Yahoo's board to negotiate a friendly deal.

"You would assume that their first offer isn't the best and final offer," said Morton Pierce, an attorney who advises on mergers and acquisitions for the law firm Dewey & LeBouef. "The question now is how do you get to the end game?"

To further complicate matters, some of Yahoo's major shareholders might not want Microsoft to bid much more because they also own large stakes in Microsoft. The overlapping holdings mean any gain that these big shareholders might realize from a sweetened Microsoft offer might be erased if a higher bid diminishes Microsoft's market value, which has already slid about $40 billion, or 13 percent, since the takeover saga began.

Capital Research & Management Co., Barclays Global Investors, Vanguard Group Inc. and State Street Global Advisers rank among the five largest shareholders for both Yahoo and Microsoft, according to FactSet Research Systems Inc.

Most analysts still seem to think Microsoft will raise its bid because it needs to buy Yahoo quickly to close Google's widening lead in the lucrative online search and advertising markets that are rapidly reshaping the technology and media industries.

Meanwhile, Yahoo finds itself in a bind because its stock was near a four-year low before the Microsoft bid surfaced and its management already has said things are unlikely to get significantly better until 2009.

"Both companies seem to have limited options to achieve their goals, so it appears they really do need each other," said Stanford Group Co. analyst Clayton Moran.

Although its profits have been dwindling during the past two years, Yahoo still possesses one of the Internet's biggest audiences and largest ad networks.

Still, those assets haven't been compelling enough to persuade other potential suits to counter Microsoft's bid, despite Yahoo's best efforts to drum up interest in the past week.

That could lessen the incentive for Microsoft to raise its bid. But Yahoo wouldn't have had any chance of extracting more money unless its board spurned the initial offer.

"This was a logical move by Yahoo's board, but I still think this deal is going to get done," said Ryan Jacob, a money manager who owns Yahoo shares in an Internet investment fund bearing his name. "I think most shareholders will be ready to accept if the bid is raised to the mid-$30 (per share)."

Yahoo's stock price had dropped by more than 40 percent in the three months leading up to Microsoft's bid, which was announced Feb. 1. The offer was 62 percent above Yahoo's market value at the time.

Microsoft was prepared to pay at least $40 per share for Yahoo a year ago, according to a person familiar with the earlier talks between the two companies. Yahoo wasn't interested then because it was confident in its own strategy, said the person, who didn't want to be identified because Microsoft's 2007 offer was never publicly disclosed.

If Microsoft doesn't want to pay more money, it will probably have to assume a more hostile stance that risks creating hard feelings at Yahoo and making it more difficult to cobble the two businesses together if a deal is consummated.

Analysts doubt either side wants to become locked into a divisive struggle that could distract both management teams for months while Google tried to capitalize on the impasse.

If Yahoo isn't sold, Chief Executive Jerry Yang assured employees in a Monday e-mail that the company is poised to rebound on its own and become a "must buy" in the $45 billion online advertising market.

"We have accomplished a great deal in a very short time," wrote Yang, a company co-founder and board member who promised better times after he became CEO eight months ago. "Yahoo is a faster-moving, better organized, more nimble company well on its way to transforming the experiences of its users, advertisers, publishers and developers."

Just two days before Microsoft made its bid, Yang warned Yahoo faced "headwinds" in 2008 and laid out plans to eliminate 1,000 jobs, or about 7 percent of the company's work force, to boost profits.

AP Technology Writer Jessica Mintz in Seattle contributed to this story.

Economic Calendar for week 11th - 15th February 2008

All times GMT

Monday Feb 11th:

FR - 07:45 - Industrial Production M/M.
UK - 09:30 - PPI Input M/M.
UK - 09:30 - Trade Balance.
UK - 09:30 - DCLG House Price Index Y/Y.
UK - 09:30 - PPI Output M/M.

Tuesday Feb 12th:

UK - 00:01 - BRC Retail Sales Monitor Y/Y.
UK - 09:00 - CPI & Core CPI Y/Y.
UK - 09:30 - RPI Y/Y.
GE - 10:00 - ZEW Economic Sentiment.
EU - 10:00 - ZEW Economic Sentiment.

Wednesday Feb 13th:

UK - 00:01 - RICS House Price Balance.
GE - 07:00 - German WPI M/M.
FR - 10:30 - Government Budget Balance.
UK - 09:30 - Average Earnings Index +Bonus Q/Y.
UK - 09:30 - Claimant Count Change.
UK - 09:30 - Unemployment Rate.
EU - 10:00 - Industrial Production M/M.
UK - 10:30 - BOE Inflation Report.
US - 13:30 - Retail Sales & Core Retail Sales M/M.
US - 15:00 - Business Inventories M/M.
US - 15:30 - Crude Oil Inventories.

Thursday Feb 14th:

GE - 07:00 - GDP Q/Q.
FR - 07:45 - GDP Q/Q.
EU - 09:00 - ECB Monthly Bulletin.
EU - 10:00 - GDP Q/Q.
US - 13:30 - Trade Balance.
US - 13:30 - Unemployment Claims.
US - 15:00 - Fed Chairman Bernanke Speaks.
EU - 17:30 - ECB President Trichet Speaks.

Friday Feb 15th:

FR - 07:45 - Nonfarm Employment Q/Q.
EU - 10:00 - Trade Balance.
US - 13:30 - Empire State Business Conditions Index.
US - 13:30 - Import Price Index M/M.
US - 14:00 - TIC Net Long-Term Transactions.
US - 14:15 - Capacity Utilization Rate.
US - 14:15 - Industrial Production M/M.
US - 14:45 - IECB President Trichet Speaks.
US - 15:00 - Consumer Sentiment.
US - 18:15 - Fed Governor Mishkin Speaks.


EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany

The week ahead.

After registering their best weekly gains in five years, it was almost inevitable that US markets would not be able to replicate this feat again, especially in the current trading environment. Unfortunately, markets provided almost a mirror opposite of last weeks rally, erasing all or most of the gains from the previous week. Not enough was the general cry from traders as the FTSE sold off on the back of the MPCs 0.25% interest rate cut on Thursday. Calls from the BCC for the Bank of England to cut rates to 5% in March helped stocks finish off their lows, but poor results from BT, Yell and Roll Royce had done enough damage.

The UK Government has now quasi nationalized Northern Rock, meaning that if a takeover deal isnt struck, �90.70 billion could be added to national debt. This combined with the prospect of further rate cuts hit the pound hard against the Dollar. The Euro also fell back hard against the Greenback as The ECB softened its inflation fighting rhetoric. Traders interpreted Trichets comments on Thursday as indications that the ECB would also have to succumb to rate cuts in the coming year. The Euro fell 2.4% against the dollar on the week while the pound has now fallen 8% since its hitting $2.1 to the pound in November.

It wasnt a complete wash out for the week as the US congress approved Bushs economic stimulus package and strong results were reported from US consumer stocks like Pepsico. This ensured that markets finished off their lows, but not by much.

Oil spiked higher to end the week above $90 a barrel, while Gold also held above the key $900 per ounce level. Agricultural commodities such as wheat and Soya beans extended their recent gains even further. Food prices and other inflationary factors continue to be the sticking point for European central banks in terms of rate cut plans.

The top tier announcement next week for the UK is the BOE inflation report on Wednesday. Inflationary commodities such as such as foods will impact the MPCs ability to cut rates further as traders are clamouring for. On the same day, we receive US core retail sales, which will provide an insight into the health of the lifeblood of the US economy, the consumer. Consumer sentiment readings on Friday will compound the effect of any worsening in retail sales. Any signs that these figures are not as bad as expected could lift markets towards the end of next week.

Last week pending home sales in the US plummeted by 25%, a further indication that the subprime mess isnt over yet. http://bigpicture.typepad.com/ summarises a study which compares the current US economy with major declines in Japan and other Western nations. In short, the US could consider itself quite fortunately if its downturn is a relatively short and mild one.

A retest of the January lows could very well be on the cards, but from there a short term snap bounce is very possible. Therefore an Up or Down trade could be a good option for next week. An up or down trade on the S&P 500 with the two barriers set to 1380 and 1270 could yield 16% over the next 16 days.

David Evans

Wall Street Gives Up Early Gains After Fed Official Says Inflation Remains a Worry

Wall Street pulled back for the third straight day Wednesday as investors still uneasy about the economy sold off after a Federal Reserve official suggested rising inflation could prevent the central bank from making further interest rate cuts.

Although the economic slowdown is a big concern, "we must not lose sight of the other part of the Fed's dual mandate -- which is price stability," Federal Reserve Bank of Philadelphia President Charles Plosser said, according to Dow Jones Newswires. The economy has been weakening but costs remain high, leading some economists to believe that the United States is headed for a troubling predicament known as stagflation.

Plosser's comments were not surprising, particularly since he is known for being more apt to argue against a rate cut than other Fed members. Nonetheless, the speech -- along with a dismal sales report from Macy's -- cut short a rebound from Tuesday's plunge that gave the Dow Jones industrials their biggest percentage drop since Feb. 27,2007.

The reminder about inflation also sapped some of Wall Street's relief over better-than-expected fourth-quarter productivity and labor cost data and profit results from Walt Disney Co.

"It just shows you the market's really skittish and temperamental," said Jim Herrick, director of equity trading at Baird & Co. "I really believe the market is driven by emotion, that there's this want to test the lows again."

"There's no smoking gun here; we get one bad number, one good number. .... We're probably going to chop around here until investors get a better feel on this recession-or-no-recession question," said Phil Orlando, chief equity market strategist at Federated Investors.

The Dow fell 65.03, or 0.53 percent, to 12,200.10, after rising more than 100 points in earlier trading.

On Tuesday, the blue-chip index dropped 370 points, or 2.93 percent, after the Institute for Supply Management reported a surprising January contraction in the U.S. service sector -- news that bolstered the argument that the nation is in recession.

The Dow also lost 108 points on Monday, but because it rallied so strongly last week, it remains above the 15-month low it sank to in late January.

Broader stock indicators also gave up gains Wednesday. The Standard & Poor's 500 index fell 10.19, or 0.76 percent, to 1,326.45, and the Nasdaq composite index fell 30.82, or 1.33 percent, to 2,278.75.

Government bond prices remained lower on the stronger-than-anticipated economic data. The yield on the 10-year Treasury note, which moves opposite its price, rose to 3.60 percent from 3.56 percent late Tuesday.

Stocks have been extremely volatile lately, given the uncertainty in the market about whether a recession is here, how long it might last, how deep it might be and how it may affect corporate profits.

"You'll find pockets of differentiation in the economy, but the overarching theme is that things are slowing down," said John O'Donoghue, co-head of equities at Cowen & Co.

Macy's Inc. on Wednesday afternoon said sales at stores open at least a year fell 7.1 percent in January compared to the same month a year ago, worse than expected. The department store operator also said it is cutting 2,550 jobs. Macy's fell $1.16, or 4.6 percent, to $23.94.

Corporate profits for the fourth quarter have been all over the map, but generally, they have been decent outside the financial and consumer discretionary sectors.

Walt Disney posted a 26 percent decline in profit late Tuesday, but the results beat expectations. The company -- one of the 30 companies that make up the Dow Jones industrials -- reported a 9 percent rise in revenue, thanks in part to successful brands such as ESPN, "High School Musical" and "Hannah Montana." Disney shares rose $1.43, or 4.8 percent, to $31.50.

Time Warner Inc. on Wednesday posted a profit decline in its fourth quarter. But excluding the effect of a year-ago gain from the sale of AOL's online access business in Europe, profit rose due to better results at the media conglomerate's cable TV and movie operations. Time Warner rose 31 cents, or 2 percent, to $15.71.

And late Tuesday, JDS Uniphase Corp., which makes communications test and fiber-optic network equipment, said its fiscal second-quarter earnings of fell slightly year-over-year but widely surpassed Wall Street estimates. JDS Uniphase shot up $2.64, or 26 percent, to $12.80.

The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude oil dropped $1.27 to $87.14 a barrel on the New York Mercantile Exchange.

The Russell 2000 index of smaller companies fell 9.09, or 1.30 percent, to 692.49.

Declining issues outnumbered advancers by about 5 to 3 on the New York Stock Exchange, where consolidated volume came to 3.89 billion shares, down from 4.18 billion on Tuesday.

Overseas stocks were mixed. Japan's Nikkei stock average dropped 4.7 percent and Hong Kong's Hang Seng index fell 5.4 percent. In Europe, Britain's FTSE 100 rose 0.13 percent, Germany's DAX index rose 1.22 percent, and France's CAC-40 rose 0.83 percent.

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

Economic Calendar for week 4th - 8th February 2008

All times GMT

Monday Feb 4th:

EU - 09:30 - Sentix Investor Confidence.
UK - 09:30 - Construction PMI.
EU - 10:00 - PPI M/M.
US - 15:00 - Factory Orders M/M.

Tuesday Feb 5th:

GE - 08:55 - Services PMI.
EU - 09:00 - Services PMI.
UK - 09:30 - Services PMI.
US - 15:00 - ISM Non-Manufacturing Index.
US - 15:00 - ISM Non-Manufacturing Prices.

Wednesday Feb 6th:

UK - 00:01 - Consumer Confidence Index.
UK - 10:30 - BRC Shop Price Index Y/Y.
US - 13:30 - Nonfarm Productivity Q/Q.
US - 13:30 - Unit Labor Costs Q/Q.
US - 15:30 - Leading Index M/M.
US - 19:15 - Crude Oil Inventories.

Thursday Feb 7th:

FR - 07:45 - French Trade Balance.
UK - 09:30 - Industrial Production M/M.
UK - 09:30 - Manufacturing Production M/M.
GE - 11:00 - German Factory Orders M/M.
UK - 12:00 - Interest Rate Statement.
EU - 12:45 - Interest Rate Announcement.
EU - 13:30 - ECB President Trichet Speaks.
US - 13:30 - Unemployment Claims.
US - 15:00 - Pending Home Sales M/M.
US - 14:45 - Chicago PMI.

Friday Feb 8th:

UK - 00:01 - NIESR GDP Estimate.
GE - 09:00 - Trade Balance
EU - 11:00 - Composite Leading Indicators M/M.
GE - 11:00 - Industrial Production M/M.
US - 13:30 - Unemployment Claims.
US - 15:00 - Wholesale Inventories M/M.

EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany

The week ahead.

The markets got the shot in the arm theyd been clamouring for last week, as the US Federal reserve slashed interest rates down to 3%, as well as taking another 0.5% off the discount rate. Fading the Fed was the trade to make last week, as traders aggressively sold the initial rally in equities that greeted the Feds decision. Contributing to the sell off on Wednesday was a downgrade of the Monoline insurer FGICs credit rating from AAA to AA.

Monoline insurers have come to the forefront recently, with a rumoured rescue package contributing to recent rallies. Monolines are so called because they operate in one line of business, which is to insure as much as $2.5 trillion of debt globally. The Monoline bond insurers rely on their AAA credit rating because this has a knock on effect on the credit rating of the insured assets themselves. This could be potentially devastating to an already shaking credit market. Markets rallied on Thursday, partly on the back of news that Monoline insurer MBIA will keep its AAA credit rating. According to some analysts, ratings agencies are under considerable pressure to hold off downgrading ratings of the two largest Monolines, until the rescue package has been achieved.

The catalyst for rally on Friday was for once not directly related to the credit market. Microsofts $44.6 billion dollar takeover proposal of Yahoo caused Yahoos share price to surge to over 50%, and US futures markets to turn around early sluggish trading. The proposed takeover price represents a hefty 60% premium to Yahoos previous closing price. Markets were buoyed by the news on speculation that tech stocks are undervalued in general, and that the merger and acquisitions train is back on the rails. The news marked a turn around for tech stocks after Google and Apple had disappointed with earnings reports.

US markets managed their biggest weekly gain in five years as the S&P500 rose 4.9% and the Dow 4.4%. The Nasdaq still lagged behind with a gain of 2.8%. The gains came despite poor jobs data and a record drop in year on year new home sales in the US.

The top announcements next week in Europe are the MPC and ECB interest rate announcements on Thursday. Analysts speculate that the two could move in different directions, after it was announced that the Eurozones inflation level remained 1% above the target rate of 2%, and UK manufacturing growth slowed to its lowest level since August 2005. The poor manufacturing figures could open up the door for a quarter point cut in the UK, while the ECBs commitment to fighting inflation could result in a quarter point raise next week.

After rising so far from the market lows it is arguable that we are now overbought in a bear market. Economists estimates for the probability of a recession vary from 50-80%. According to Econoday.com, the yearly Nonfarm Payroll yearly % change is now in negative territory after starting to decline in Q1 2006. While there may be some more upside potential, it is arguable that the route may not be as direct as it was over the last week. A no touch higher returns a profit if a certain level isnt touched before the trade expires. A trade predicting the S&P 500 not to touch 1508 in the next 25 days could return 14% over the next 25 days.

David Evans

Google Rips Microsoft's Proposed Takeover of Yahoo, Saying It Would Stifle Internet Innovation

Google Inc. raised the specter of Microsoft Corp. using its proposed $42 billion acquisition of Yahoo Inc. to gain illegal control over the Internet, underscoring the online search leader's queasiness about its two biggest rivals teaming up.

The critical remarks, posted online Sunday by Google's top lawyer, represented the Mountain View-based company's first public reaction to Microsoft's unsolicited bid for Yahoo since the offer was announced Friday.

"Microsoft's hostile bid for Yahoo raises troubling questions," David Drummond, Google's chief legal officer, wrote. "This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the Internet: openness and innovation."

Google's opposition isn't a surprise, given that Microsoft views Yahoo as a crucial weapon in its battle to gain ground on Google in the Internet's booming search and advertising markets.

Redmond, Wash.-based Microsoft has been trying to depict a Yahoo takeover as a boon for both advertisers and consumers because the two companies together would be able to compete against Google more effectively.

But Google is painting a starkly different picture, asserting that Microsoft will be able to stifle innovation and leverage its dominating Windows operating system to set up personal computers so consumers are automatically steered to online services, such as e-mail and instant messaging, controlled by the world's largest software maker.

In a move that illustrates just how badly Google wants to torpedo the deal, Google Chief Executive Officer Eric Schmidt called Yahoo CEO Jerry Yang Friday to offer his help in repelling Microsoft, according to a report Sunday on The Wall Street Journal's Web site, which cited anonymous people familiar with the matter.

The assistance didn't include a counterbid, but may have included supporting other potential suitors, or a revenue guarantee in exchange for an ad partnership with Yahoo, the people said, according the newspaper.

AT&T Inc., Time Warner Inc. and News Corp. aren't planning to enter the bidding, the Journal said, citing the people familiar.

To help make its point, Google pointed to the way Microsoft previously used Windows to help extend the reach of its Web browser and other applications -- a strategy that triggered a U.S. Justice Department lawsuit alleging the software maker illegally used its operating system to stifle competition. The dispute ended with a 2002 settlement that required Microsoft to abandon some of its past practices.

"Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?" Drummond wrote.

Brad Smith, Microsoft's general counsel, said preventing Microsoft from buying Yahoo would undermine competition by allowing Google to become even more dominant than it already is on the Internet

"Microsoft is committed to openness, innovation, and the protection of privacy on the Internet," Smith said. "We believe that the combination of Microsoft and Yahoo! will advance these goals."

If they get together, Microsoft and Yahoo would have about 16 percent of the worldwide Internet search market -- still far behind Google's 62 percent share, according to comScore Media Metrix. But Microsoft and Yahoo already are far bigger in than Google in e-mail and instant messaging, and conceivably would be in a better position to squash rival services if they combined.

Illustrating the enormous stakes involved in a deal that could reshape the technology and media industries, Google and Microsoft are already debating the pros and cons before Yahoo has responded to the offer.

Yahoo so far has little to say except that its board will carefully examine Microsoft's bid -- a process that "can take quite a bit of time," according to a message posted on the Sunnyvale-based company's Web site.

The review "will include evaluating all of the company's strategic alternatives, including maintaining Yahoo as an independent company," Yahoo said on its Web site.

Most analysts believe Yahoo will have little choice but to sell to Microsoft, with its stock price near a four-year low at the time of the bid and its profits falling since late 2006. When it was first announced, Microsoft's offer was 62 percent above Yahoo's market value -- a premium analysts doubt any other suitor will be able to top.

If Yahoo accepts, antitrust regulators in both the United States and Europe are expected to begin an exhaustive review that some experts think could last a year. Microsoft believes it could get the necessary approvals to take over Yahoo late this year.

If nothing else, Google probably will try to raise enough alarms about the Microsoft-Yahoo deal to delay its approval for as long as possible. By doing so, Google would have more time to draw up plans to counteract the combination.

Google also is borrowing a page from Microsoft's book by urging antitrust regulators to take a hard look at the proposed marriage between its two rivals.

Just days after Google struck a $3.1 billion deal to buy online ad service DoubleClick Inc. last year, Microsoft began lobbying regulators to block the transaction. U.S. regulators blessed Google's DoubleClick acquisition late last year after an eight-month review, but the antitrust inquiry in Europe remains open.