Focus on Congress for vote on bailout

The focus remains on the uncertainty surrounding the U.S. bailout package and the details of how exactly the final version will look.

In their speech to the Senate Banking Committee, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson told members of Congress that the U.S. economy and its financial markets face serious risks if the rescue plan for the crippling toxic assets isn't swiftly approved.

Bernanke urged Congress to pass the $700bn bailout plan to "stabilize the situation". He stressed that "global financial markets remain under extraordinary stress" and "if financial conditions fail to improve for a protracted period, the implications for the broader economy could be quite adverse."

Paulson reiterated that further delay in implementing the plan would “threaten American families' financial well-being, the viability of businesses both small and large and the very health of our economy".

Fundamentally, the US Treasury aims to purchase all the toxic assets that are currently clogging the financial system and sell those assets at a profit once markets have improved. The scheme could cost the US taxpayer as much as $1 trillion, increasing the country's national deficit to over $11 trillion.

Earlier gains on the U.S. stock market were reversed as the saga unravelled and oil prices dropped from Monday's peaks, to close last night at around $107 a barrel, boosting the dollar.

The Euro Zone escaped the limelight yesterday due to the focus on U.S. events. Attention in the Euro Zone was on PMI where the index now points to a 0.2% decline in quarterly gross domestic product.

The data provides little evidence that the outlook will improve significantly in the near term and it looks like the third quarter is going to be challenging.

In the UK, British mortgage approvals fell 64% on the year to a record low in August. This seems to suggest there is no imminent end in sight for the country's housing market woes.

The British Bankers Association blamed the drop on uncertainty regarding the government's policy on stamp duty along with the continued affordability pressures and tight lending conditions.

With these poor fundamentals for the housing market it remains uncertain as to whether the recently announced labour government measures to support the housing market will have any significant impact in stabilising activity or prices.

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