[R]4:30PM New York, 10:30PM Frankfurt, 2:00 AM Mumbai[/R]

[R]Market averages in New York for the second day as nvestors covered short positions after a surprise rate cut by the Fed. Oil closed at a record for the fourth day in a row. Gold edged up. European markets closed better than 2%. Asia surged.[/R]

Dow Jones Industrial Average added 76.17 or 0.55% to 13,815.56, Nasdaq increased 14.82 or 0.56% to 2,666.48, and S&P 500 advanced 9.25 or 0.61% to 1,529.03.

FTSE 100 Index in London gained 176.70 or 2.81% to 6,460.00, in Tokyo markets surged to 16,381.54, up 3.67% or 579.74, and in Brazil, iBovespa Index traded higher 1.06% or 597.92 to 57,264.22.

Bond Yields gained on 10-year U.S. bonds to 4.54% and 30-year bond to close at 4.84%.

Crude oil increased $0.42 to close at $81.93 per barrel, fourth record close in a row for a front month contract, natural gas closed down 39 cents to $6.18 per mBtu, and gasoline futures increased 3.31 cents to close at 209.34 cents per gallon.

Gold gained $5.80 in New York trading to close at $729.50 per ounce, silver closed 18 cents higher to close at $13.11 per ounce, and copper for front month delivery in London added $80.00 to $7,618.00 per pound.

Of the 30 stocks in Dow Jones Industrial Average, 9 closed lower, 21 closed higher, and none was unchanged. Merck led the gainers in the index with a rise of 1.9% followed by increases of 1.74% in AT&T, 1.6% in Boeing, and 1.55% in Honeywell. General Motors led the decliners with a loss of 2.2% followed by losses of 1.1% in Hewlett Packard, 1% in Microsoft, and 0.9% in J P Morgan.

Of the stocks in S&P 500, 369 stocks closed higher and 127 fell, 4 closed unchanged. Twenty one stocks closed higher than 3%. Ambac Financial led the gainers in the index with a rise of 5.5% followed by increase of 5.1% in Varian Medical, 5% in Goodyear and Apartment Investment Trust, 4.7% in Coach, and 4% in Macy’s and MGIC. Masco led the decliners with a fall of 5% followed by fall of 4% in Federated Investors, 3.3% in King Pharmaceuticals, and 3% in Bear Stearns and Consol Energy.

In New York trading stocks gained for the second day in a row after a rate cut of 50 basis points. Investors welcomed the falling consumer price index and discounted a decline in new home sales. Euphoria persisted in trading for the second day. Traders on the sideline or with short position were forced to cover their position after a surprise move by the Fed.

Before opening, Morgan Stanley reported earnings decline of 7% and economic data on inflation kept investors buying. Morning rally was also strengthened by a sharp rises in Asian and European markets. Advances in tech stocks continued till the mid-day trading. In the afternoon trading investors focused on the firmness in crude oil price and rising prices of gold and copper. Bonds fell at close but yield hovered for the ten-year bond near 4.5%. Near the close of the market, indexes closed up led by financials, retailers, and tech sectors. European markets closed up between 2% and 3% and indexes in the U.S. added between 0.5% and 0.6%.

Bond insurers gained sharply on Calyon Securities recommendations that losses in the subprime mortgage market are contained. MBIA added 3% and Ambac surged 5.5%.

The Office of Federal Housing Enterprise Oversight will allow Fannie Mae and Freddie Mac to increase their loan portfolios by 2% above the current limit of $1.5 trillion. Ofheo has increased portfolio cap for Freddie and Fannie to $735 billion, in the current quarter and increase by 0.5% and in the fourth quarter by 1.0% but the total cap of 2% will prevail for the year. The move by Bush administration will allow both companies to add $20 billion of mortgages to their portfolios. The Senate Banking Committee Chairman Christopher Dodd had expected near 5% increase and both companies were looking for an increase of 10% in the current cap. Fannie Mae’s portfolio is restricted to $727 billion and Freddie Mac’s is limited to $722 billion.

The largest mortgage for a home purchased by two companies is restricted to $417,000 but a current bill in the Congress wants to increase this to $500,000.

AT&T (T: chart) added nearly 2% after it said the sales of iPhone are getting better after Apple lowered price for the phone.

Morgan Stanley (MS: chart) reported third quarter earnings decline of 7% to $1.47 billion or $1.38 per share on revenue gain of 13%. The earnings a year ago were $1.59 billion or $1.50 per share. Total revenue in the quarter jumped to $7.96 billion. Equity trading revenue increased 16% to $1.8 billion including $480 million loss from quantitative trading strategy group and fixed income trading and fees revenue fell 3% to $2.2 billion. The stock closed 2.2% lower.

Yesterday, Lehman Brothers (LEH: chart) reported third quarter earnings of $1.54 per share, 3% decline on 22% lower revenue. Stock fell 0.6% in trading today.

In Latin Markets trading Argentina led the gainers with a rise of 1.30% followed by increases of 1.1% in Chile and 1.06% in Brazil. Of the 63 stocks in iBovespa index 38 gained, 21 lost, and 4 closed unchanged. Gol Air led the gainers in the index with a rise of 11% followed by increase of 7% in TAM, 6% in Lojas, and 4.5% in B2W Varejo.

[R]3:00PM New York, 6:00PM London, Europe closes higher as index shares in Germany and France trade in positive territory after aggressive rate cut by U.S. Federal Reserve calms volatile credit markets. France 3.27% and Germany closes up 2.3% after a decline in producer-price inflation by 2.3%.[/R]

Europe closed higher for the second day as index shares in Germany and France advanced on news the U.S. Federal Reserve had aggressively cut its interest rates by a half percentage point helps to calm volatile credit markets. Financial stocks also helped spur the rally.

The Federal Statistics Office in Germany announced today that Germany producer price inflation, which shows the price pressures on the economy, declined in August by 2.35 from a year earlier. Prices of goods increased 1% compared to 1.1% in July. The cost of fuel was 1.4% cheaper in the year and 2.2% lower in the month. Germany’s producer prices also climbed 2.6% in August from a year earlier and 0.3% on the month. Furthermore, Germany’s RWI Institute, cut its forecast for 2008 growth to 2.3% from 2.6% projected in June.