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Stocks slumped Friday, with investors abandoning a recovery attempt, as the worst retail sales on record ignited fears of a long recession.

The Dow Jones industrial average (INDU) fell 338 points, or 3.8%. Earlier, the blue-chip indicator had lost as much as 363 points and gained as much as 88 points.

The Standard & Poor’s 500 (SPX) index skidded 4.1% and the Nasdaq composite (COMP) shed 5%.

All three major gauges slid on the week as well, with the Dow losing 5%, the S&P down 6.2% and the Nasdaq down 7.9%.

Stocks crumbled through the early afternoon as investors considered the bleak outlook for consumer spending amid the weak retail sales report. Selling pressure eased up in the middle of the afternoon and then returned near the close.

"The recession has been mild up to this point, but I think we’re in for a much uglier one in the fourth quarter," said Scott Anderson, senior economist at Wells Fargo. "The retail sales report demonstrates that."

U.S. sales in October posted the worst monthly decline since the Commerce Department initiated the current measurement standard in 1992.

The corporate news Friday was just as bad. Freddie Mac posted a big quarterly loss. Sun Microsystems announced massive job cuts and Citigroup is reportedly getting ready to announce layoffs.

"Fundamentally the economy is very weak," said Robert Brusca, chief economist at FAO Economics. "The Freddie Mac losses are a reminder of that."

Stocks rallied Thursday, with the Dow gaining 552 points, its third-best single-session point gain ever, as the market bounced back from levels not seen since 2003. Some analysts said that the recovery was significant in helping to establish a bear market bottom.

However, after such a rally, stocks were vulnerable to a pullback Friday, particularly after the retail sales report.

Market breadth was negative. On the New York Stock Exchange, losers beat winners by almost four to one on volume of 1.45 billion shares. On the Nasdaq, decliners topped advancers by more than three to one on volume of 2.31 billion shares.

After the close, Fidelity said it was cutting an additional 1,700 jobs in the first quarter of 2009 as part of an ongoing cost-cutting effort. A week ago the company said it was cutting 1,300 jobs

Retail sales: Retail sales fell 2.8% in October versus a revised 1.3% drop in September. Sales excluding volatile autos fell 2.2% in October, versus a revised 0.5% drop in September. Both results were worse than expected, according to a survey of economists by Briefing.com. (Full story)

"Sales were pretty awful across the board," Anderson said, noting that sales plunged pretty much everywhere other than at grocery stores and on health care. "With consumers only spending on the essentials, that’s pretty dire."

Also on Friday, retailers J.C. Penney (JCP, Fortune 500) and Abercrombie & Fitch (ANF) both reported lower quarterly earnings and issued bleak forecasts for the critical fourth quarter.

A separate report showed a slight improvement in consumer sentiment, according to the latest survey from the University of Michigan. Sentiment rose to 57.9 in November from 57.6 in late October, versus forecasts for a decline to 57.

Investors were also gearing up for the Group of 20 meeting in Washington, which gathers leaders from around the world to address the global financial crisis. It kicks off with a White House dinner Friday. (Full story)

The European economy is officially in a recession, EU leaders said Friday. Germany has already said it is in a recession. Hong Kong is in a recession. And many economists think the U.S. is in a recession, despite a lack of official declaration creditscore.

Recession is generally defined as two consecutive quarters of shrinking economic growth. In the U.S. a recession is officially declared by the National Bureau of Economic Research.

Speaking early Friday, Federal Reserve Chairman Ben Bernanke said that financial markets remain under severe strain. He pledged to continue working with central banks around the world and seemed to indicate the U.S. federal reserve could cut interest rates again at the December meeting. (full story)

Company news: Troubled mortgage giant Freddie Mac (FRE, Fortune 500) reported a steep $25 billion quarterly loss and said it will start chipping away at the $100 billion in taxpayer funds set aside for its bailout. (Full story)

Sun Microsystems (JAVA, Fortune 500) said Friday it will cut up to 6,000 jobs, or 18% of its workforce, as a cost-cutting measure. The software and computer networking company also said it was restructuring its software business operations.

Citigroup (C, Fortune 500) is reportedly getting ready to lay off another 10,000 people on top of the 23,000 it has already let go, according to a Wall Street Journal story Friday. The company is also expected to boost credit card rates, the report said.

Nokia (NOK) said fourth-quarter sales for the broad mobile handset industry will decline. The phone maker said worse credit conditions and the weak economy were to blame.

Hartford Financial Group (HIG, Fortune 500), the troubled insurer, said it has purchased a small bank, making it eligible to receive up to $3.4 billion in funds from the government’s bailout plan.

Investors again pulled money out of equity mutual funds last week, following the first week in months in which investors added money to funds.

In the week ended Nov. 12, investors pulled roughly $31.8 billion out of equity mutual funds, according to tracking firm Trim Tabs. In the previous week, investors added roughly $2.2 billion to funds. However, that one week was an anomaly, with investors cashing out of funds in 15 of the last 16 weeks amid the stock market selloff.

Other markets: Asian and European markets rallied in response to the U.S. advance Thursday.

The dollar gained against the euro, but fell versus the yen.

COMEX gold for December delivery rallied $42.50 to settle at $742.50 an ounce.

U.S. light crude oil for December delivery fell $1.20 to settle at $57.04 a barrel on the New York Mercantile Exchange.

Gasoline prices dipped another 2.6 cents to a national average of $2.152 a gallon, according to a survey of credit-card activity released Friday by motorist group AAA. The decline marks the 58th consecutive day that prices have decreased. During that time, prices dropped by $1.70 a gallon, or 44.2%.

Lending rates: The cost of borrowing rose modestly Friday, but remained near recently improved levels.

The 3-month Libor rose to 2.24% from 2.15% Thursday, according to Bloomberg.com. Overnight Libor rose to 0.56% from 0.4% Thursday, and up modestly from an all-time low of 0.32% last week. Libor is a key interbank lending rate.

The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, fell to 0.11% from 0.19% Thursday, with investors preferring to take a small return on their money than risk the stock market. In September, the 3-month yield reached a 68-year low around 0% as investor panic peaked.

Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.72% from 3.86% Thursday. Treasury prices and yields move in opposite directions. 

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The dollar resumed its climb against other major currencies for a second day in a row Tuesday as recession fears took center stage.

The U.S. currency also got a boost against the 15-nation euro on bets that the European Central Bank will have to cut rates again before the year ends.

"The markets are actually pricing in a 50 basis point cut in December," said Kathy Lien director of currency research at Global Forex Trading in New York. "The euro-zone economy is still in a lot of trouble," she added.

The ECB, which currently has its key interest rate at 3.25%, is scheduled to meet on Dec. 20 to make a decision on interest rates.

The euro, which initially rallied following some upbeat news about German economic sentiment, fell 2.3 cents to $1.252 by the end of trading in New York Tuesday.

The dollar also rose against the British pound, which fell 2.3 cents to $1.538. But the greenback lost ground against the Japanese yen, falling ¥0.35 to ¥97.65.

"Right now the dollar is not trading on U.S. fundamentals, it’s trading on risk aversion," said Lien.

Over the past several weeks, investors have been looking to the equities markets, which are considered forward-looking indicators, for guidance on the state of the global economy and the possibility of a deep recession.

World markets: Investors sought safety as economic instability continued to rumble through global equities. In the United States, the Dow Jones industrial average fell nearly 3% as U.S. automakers floundered, overshadowed by the possibility of a government intervention short-term cash loans.

Markets in Asia and Europe also weakened, with indexes falling more than 3% in the U.K. and Japan, and more than 4% in France, Germany and Hong Kong.

While an index of German business sentiment showed a modest recovery, the reading is still negative and well below it’s historic norm.

"The oncoming global recession is too large," said John Kicklighter, currency strategist with Forex Capital Markets. "The overall [negative] sentiment is too strong," he added.

Chinese stimulus: Meanwhile enthusiasm over the $586 billion Chinese stimulus package announced Sunday faded as investors began to reassess how quickly the plan will have an impact.

"People are still kind of skeptical over what will happen," said Kicklighter.

Unlike the stimulus plan enacted by the U.S., which focused on tax rebates, the Chinese plan focuses on job creation and building infrastructure such as roads and bridges, which may take longer to implement.

Investors were initially encouraged by the Chinese plan, but then began to re-examine its impact since it will be rolled out gradually till 2010, according to Kicklighter.

"It will have a little effect, but it’s like trying to stop an oncoming train with a car," he said.

The export-driven Chinese economy continued to show weakness as well, as exports slowed, according to a report from Beijing. 

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DETROIT (AP) — General Motors Corp. and Chrysler LLC have held preliminary talks about a merger or an acquisition of Chrysler by GM, according to published reports Saturday.

The Wall Street Journal, citing people it described as familiar with the discussions, said Cerberus Capital Management, the private equity firm that owns 80.1 percent of Chrysler and 51 percent of GMAC Financial Services, proposed trading Chrysler’s automotive operations to GM. The Journal said Cerberus would receive GM’s remaining 49 percent stake in GMAC.

The New York Times, also citing people familiar with the talks, said the automakers were discussing a merger. The Times did not mention GMAC, a traditional auto lender hit hard by the housing market downturn.

The talks have stalled because of the recent turmoil in the financial markets, according to the Journal. Its sources said negotiations could resume if markets stabilize because both GM and Cerberus want to quickly divest the assets under discussion.

The negotiations between 100-year-old GM and 83-year-old Chrysler began more than a month ago, according to the Times. Its sources said the chances of a merger were "50-50" as of Friday and likely would take weeks to complete.

Both newspapers posted their stories on their Web sites late Friday.

"Without referencing this specific rumor, as we’ve often said, GM officials routinely discuss issues of mutual interest with other automakers," GM spokesman Tony Cervone said.

Chrysler spokeswoman Shawn Morgan declined comment.

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Japan's wages dropped for the first time this year in August, indicating that households will keep cutting spending.

Monthly wages, including overtime and bonuses, fell 0.3 percent to 283,473 yen ($2,699) from a year earlier, after a 0.3 percent gain in July, the Labor Ministry said in Tokyo today.

Sentiment among large manufacturers fell to a five-year low last month, a central bank survey showed today, worsening prospects for wages and hiring. Factory output fell, export growth slowed and household spending dropped in August, signs the world's second-largest economy may already be in a recession.

“Given that the economy is in a recession, the priority for companies is to save costs, not to hire workers or increase wages,'' said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “I don't see any drivers of growth for Japan's economy at least until next year.''

The slump in production prompted manufacturers to reduce overtime working hours by 6.9 percent from a year earlier, the steepest decline since March 2002, today's report showed paydayloans.com. Households are the most pessimistic they've ever been and are cutting spending as falling wages and a rising jobless rate dims their prospects.

Wages fell in the month because summer bonuses declined 9.8 percent and overtime hours were reduced, said Akira Motokawa, head of the Labor Ministry's statistics division.

Consumer wealth is being also being eroded by the declining stock market. Japan's shares plunged to the lowest in almost four years yesterday, cutting into the value of assets of households who are already trying to cope with the fastest inflation in a decade. The Nikkei 225 Stock Average has lost 26 percent this year.

“Households are under siege,'' said Kyohei Morita, chief Japan economist at Barclays Capital in Tokyo. “It's only natural that consumer spending will stall.''

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European inflation slowed for a second month in September, easing to the lowest rate since April as oil prices extended declines from a record.

The inflation rate in the euro area fell to 3.6 percent from 3.8 percent in August, the European Union statistics office in Luxembourg said today. That matched the median estimate of 39 economists in a Bloomberg News survey.

Oil prices have dropped by more than one-third from their all-time high in the last three months, cutting the cost of gasoline and heating oil. At the same time, stagnating economic growth is reducing the capacity of companies to increase prices. The European Central Bank will probably keep its key interest rate at 4.25 percent on Oct. 2 as it remains “uneasy about inflation,'' according to governing council member Axel Weber.

“The fall in consumer-price inflation shows that price pressures in the region are finally receding,'' said Jennifer McKeown, an economist at Capital Economics in London. “But the ECB has been concerned that core inflation might pick up sharply if wage growth reacts to the still high level of inflation and the previous strength of the labor market.''

Crude oil extended declines today after falling the most in almost seven years yesterday as U.S. lawmakers rejected a $700 billion financial rescue plan. Crude was at $98.34 a barrel at 12:15 p.m. in London, compared with it July 11 record of $147.27.

Wheat, Cotton

In addition to oil, commodities including wheat, cotton and corn have fallen in recent months, dragging the Reuters/Jefferies CRB Index of 19 commodities around 28 percent from its record in July.

The euro fell for a second day against the dollar today, dropping 0.6 percent to $1.4345 as France and Belgium led a state-backed rescue of Dexia SA, the world's biggest lender to local governments.

Companies and consumers have scaled back their predictions for price growth in the euro area as oil prices have declined. A gauge of company selling-price expectations fell to 12 in September from 17 in August, reaching the lowest in 10 months, according to a monthly European Commission survey cash advance. Consumers' outlook for prices dropped to 17 from 22.

A decline in headline inflation next year “is likely to be partly offset by rising core inflation, but this should no longer be an issue from 2010,'' said Nick Kounis, an economist at Fortis Bank in Amsterdam. “Indeed, downside risks to the growth outlook and the implications of weaker growth for the medium-term inflation outlook is likely to increasingly be the focus of the ECB's attention in the coming months.''

`Magic Away'

The ECB aims to keep inflation close to but below 2 percent. In Germany, Europe's largest economy, inflation slowed less than economists forecast this month, according to national data published Sept. 26. Prices rose 3 percent from a year earlier, compared with economists' forecasts for 2.9 percent.

While the ECB is “aware'' that the economy is in a “phase of weakening,'' the economic slowdown “won't magic away the inflation problem,'' Weber said on Sept. 23.

Still, as consumer-price growth eases and growth cools, economists at banks including Societe Generale and BNP have revised their predictions for ECB interest rates.

James Nixon, an economist at Societe Generale in London, on Sept. 26 forecast three quarter-percentage-point cuts in 2009, revising a previous forecast for rates to remain unchanged throughout next year.

Wattret at BNP also forecast three rate cuts next year in a note this month, having earlier predicted no change. Both see the benchmark rate being lowered to 3.5 percent in 2009.

The figures published today are an estimate. The statistics office will publish a detailed breakdown of the data and the core rate on Oct. 15.

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Capitol Hill negotiators spent Friday working on details of a $700 billion financial rescue plan while President Bush and leading lawmakers offered assurances that Congress and the administration would get a deal done.

"I believe great progress is being made. We won’t leave until we have legislation signed by the president," said House Speaker Nancy Pelosi, D-Calif., told reporters late Friday afternoon.

President Bush, a few minutes after the U.S. stock markets opened on Friday, said he was certain a bill would get finished. "The legislative process isn’t pretty, but we are going to get a rescue package passed," he said.

Bush summoned lawmakers and the presidential candidates to the White House on Thursday to rally consensus behind his plan. Instead, the meeting revealed a deep split between Democrats and House Republicans. Late-night talks between lawmakers and Treasury Secretary Henry Paulson failed to result in an agreement.

On Friday morning, Republican presidential nominee John McCain, R-Ariz., was in talks with House and Senate Republican leaders to see if an agreement could be reached. Some in the GOP were pushing a hybrid plan that contained elements from the administration’s proposal to buy toxic assets from banks and principles laid out by House Republicans.

House Republicans say they want Wall Street to pay for its mistakes in a "workout" - not a bailout by taxpayers.

Meanwhile, Senate Democratic leaders were angry that the debate had gotten entangled by presidential politics. They said they had come close to working out an agreement with House Democrats, Senate Republicans and one leading House Republican, Spencer Bachus, R-Ala.

"It’s fair to say we’re making progress," said Senate Majority Leader Harry Reid, D-Nev., on Friday morning. "The time is now for House Republicans to come to the negotiating table and for presidential politics to leave the negotiating table. Insertion of presidential politics has … been harmful."

Late Friday morning, House minority leader Rep. John Boehner, R-Ohio said he was sending a House Republican to the bipartisan discussions on the Hill.

House and Senate leaders say they want the bill to gain bipartisan support because it represents such a big policy effort for the U.S. government. They also lack the necessary votes to pass it without Republicans on board, Pelosi said. Some members still object to the fact that the bill lacks provisions that would allow the government to recover the rescue’s costs or allow bankruptcy judges to modify the primary residence mortgages of filers, she explained.

Late Friday afternoon, House Financial Services Chairman Barney Frank, D-Mass., told reporters that the staffs of both parties from the House and Senate were negotiating the legislation.

The core of the bill, he said, was the proposal put forth by Paulson that would allow the Treasury to buy up to $700 billion in troubled mortgage assets from financial institutions to free them up to start lending again.

House Republicans had rejected that core on Thursday, calling instead for the government to insure financial institution’s mortgage-backed securities and for those institutions to fund the insurance through premiums.

Frank said that adding an insurance provision "has been an option payday loan low fee. But there would be no point in participating [in Friday’s negotiations] if you didn’t accept the premise of the Paulson plan."

A call for comment from House Minority Whip Roy Blunt, R-Mo., who is representing House Republicans in the negotiations, was not immediately returned.

Many other elements of the legislation were agreed to in principle by negotiators on Friday, Frank said. They include the need for curbs on executive compensation, the need for significant oversight, the right to seek warrants for equity stakes in the companies that sell troubled assets to Uncle Sam, and restrictions on how the $700 billion would be made available to Treasury.

A Democrat close to the negotiations told CNN that while it seems likely the Senate might not vote on any bailout bill ’till Wednesday, a Sunday night vote is still possible. The timing of any House vote is unclear.

This same source says there’s no reason the final deal can’t include language that allows Treasury Secretary Henry Paulson to put some money into an insurance program - as House Republican have proposed.

The Democrat says Congress will not authorize the full $700 billion expenditure at once, instead it will authorized in phases. Other Democratic members say the amount of the initial allotment continues to change.

Staff level negotiations are ongoing and could continue through the night. The principal negotiators will meet again Saturday.

CNN’s Jessica Yellin contributed to this report. 

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Japan's government said the world's second-largest economy is “weakening,'' language it introduced last month for the first time since the country was in a recession seven years ago.

“The economy has been weakening recently,'' the Cabinet Office said in a statement in Tokyo today. The government cut its assessment of capital spending and imports and said it's watching how global financial-market turmoil might affect Japan.

The economy's longest postwar expansion may be over as rising commodity costs discourage spending at home and the world slowdown reduces demand for exports. The Bank of Japan and central banks in North America and Europe yesterday agreed to pump $180 billion into the global financial system to revive confidence in markets battered by the U.S. banking crisis.

“This uncertainty in financial markets will naturally have an impact on the Japanese economy, which depends on foreign demand,'' Economic and Fiscal Policy Minister Kaoru Yosano told reporters in Tokyo. “The economy will remain weak for a while.''

The Bank of Japan agreed to swap currencies with the Federal Reserve, supplying dollars for the first time after the cost of borrowing in the currency soared to a seven-year high following Lehman Brothers Holdings Inc.'s bankruptcy and the U.S quick payday loans. government's takeover of American International Group Inc.

Central bank Governor Masaaki Shirakawa today said there's no end in sight to the market tumult, even as global shares rallied after the U.S. government said it's planning new laws to halt the credit-market meltdown. Shirakawa this week said risks for Japan's economy have intensified since the crisis deepened.

“Attention should be given to further downside risks that stem from growing financial uncertainty in the U.S. and movement of the stock and foreign-exchange markets,'' the government said in today's report.

The Cabinet Office removed the word “recovery'' from its evaluation of the global economy for the first time since June 2002 and downgraded its view of Europe.

Last month was the first time since May 2001 that the government described Japan's economy as weakening.

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The lights in Feld Chevrolet Co.’s Bridgeton showroom were on Thursday morning. Flags with the Chevrolet symbol waved outside in the air, and music blasted through outside stereos across the parking lot.

But the dealership’s lot and showroom floor were empty.

Feld Chevrolet, a longtime name in the St. Louis area, has closed its doors and faces legal action from GMAC LLC, the financing company allied with General Motors Corp. It’s uncertain why the dealership closed, and its president, Andrew S. Wolfson, could not be reached.

However, according to two lawsuits filed this week by GMAC in St. Louis County Circuit Court, problems surfaced after Wolfson shuttered the operations about a week ago. Feld was at 11200 St. Charles Rock Road.

Under security agreements between Feld Chevrolet and GMAC, the dealership can’t sell, transfer or dispose of vehicles and parts "other than in the ordinary course" of business. In a petition filed Monday, GMAC said Feld Chevrolet has closed its business and is selling the vehicles in ways that violate the agreements. GMAC said it has the right to the vehicles, which it valued at $8 million.

The filing listed 188 new vehicles — including many 2008 Chevy Equinox crossovers and 2008 Chevy Silverado pickups — as belonging to GMAC. It also said its owns 111 used vehicles that were on the dealership’s lot as of last Friday.

On Tuesday, GMAC received permission from the court to take possession of those vehicles. The lending arm’s attorney, Nelson Mitten of Clayton-based Riezman Berger P.C., would not say how many vehicles GMAC took back.

Mitten wouldn’t comment on the petition filed Monday, nor on a second lawsuit the GMAC filed Wednesday.

The second lawsuit against Feld Chevrolet also names as co-defendants Feld Investment Group L.C., Robert Tieman and Tieman’s South County Auto Center, 5745 Westwood Drive in Weldon Spring.

According to the petition, Feld Chevrolet sold 53 vehicles to Tieman or his dealership and did not give GMAC the money from the deals.

The filing also alleged that GMAC asked Tieman to surrender the vehicles, worth about $532,000, but that Tieman and his dealership "refused to comply with the demands."

Tieman did not return calls seeking comment.

GMAC spokesman Mike Stoller said the lending arm does not comment on dealer operations.

The Better Business Bureau of eastern Missouri and southern Illinois said on its website that the dealership’s membership was suspended last Friday because "the company appears to be out of business."

The Feld brand is well-known in the St freecreditreport. Louis business community.

Bridgeton Mayor Conrad Bowers said Feld Chevrolet has been "a great commercial citizen of Bridgeton" and has been up-to-date with its business-license fees and sales taxes. He could not say how much the dealership pays in sales taxes but said Feld Chevrolet’s business license fee is $50,000 per year — the maximum a business in the city can pay.

"We hate to see a business leave but, again, I would just assume the oversupply of cars" caused the closure, Bowers said. He said that, to his knowledge, Feld Chevrolet had not notified the city about the closure.

Last month the dealership laid off 20 mechanics, a representative of the union for those employees — the International Association of Machinists District 9 — told the Post-Dispatch on Aug. 15.

A month later, the dealership’s lot sits empty and padlocked. Calls made this week to the sales, parts and service phone numbers listed on Feld Chevrolet’s website were not answered.

Chuck Robinson went to Feld Chevrolet on Thursday to collect gum ball machines he owns and operates at the dealership, only to find the machines were locked inside the building. Robinson said his candy machines fund Heart 2 Heart Inc., a St. Louis nonprofit he runs.

When he collected money from the machines last week, "nobody said anything" about an imminent closing, he said.

atablac@post-dispatch.com | 314-340-8140

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Central banks in Japan and Australia pumped some $113 billion into money markets this week, holding down borrowing costs to revive confidence among banks.

The Bank of Japan pumped 2 trillion yen ($19 billion) today, for a total of 10 trillion yen this week, the biggest since at least the start of 2007. The Reserve Bank of Australia added A$1 billion ($824 million) and has injected more than A$12 billion this week, the most in almost 13 months.

“Funding pressures globally have intensified following the turmoil and fear that we could be in for another bout of asset price depreciations,'' said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., part of the world's largest inter-bank broker. “Financial institutions are hoarding cash and shoring up their balance sheets.''

Central banks injected more than $220 billion globally this week as credit markets seized up after the failure of Lehman Brothers Holdings Inc. and the U.S. government takeover of American International Group. The cost to protect against defaults on Asia-Pacific bonds fell by the most in more than five months and Japanese and Australian funding costs were unchanged.

U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke said they are working on a plan requiring legislation aimed at alleviating market turmoil.

The two regulators are seeking support for a plan to help financial institutions remove from their balance sheets illiquid mortgage-related assets at the root of the credit crisis.

Borrowing Costs Drop

Hong Kong's interbank loan rates declined from the highest in 11 months after the Hong Kong Monetary Authority injected HK$1.556 billion ($200 million) yesterday. The one-month Hong Kong interbank offered rate fell to 3.69 percent from 4.83 percent yesterday when it more than doubled.

The Fed yesterday agreed swap facilities with five other central banks that will increase the amount of U.S. currency available overseas by $180 billion to $247 billion. It doubled the limit of dollars it will provide the European Central Bank and Swiss National Bank to $137 billion, and authorized $110 billion of swap facilities with Japan, the U.K. and Canada.

The cost of borrowing in dollars overnight tumbled after the coordinated action was announced. The London interbank offered rate, or Libor, for overnight loans fell 1.19 percentage points to 3.84 percent yesterday.

Swap Dollars

The Bank of Japan said it will use its $60 billion swap arrangement to supply dollars to local and foreign financial institutions as required by market conditions. It will choose participants tomorrow.

“They will keep liquidity in the system because their goal is to revive the short-term liquidity in the dollar, which is the oil in the global financial system,'' said Sebastien Barbe, a Hong Kong-based strategist at Calyon, the investment banking unit of France's Credit Agricole SA free credit report instantly.

Japan's overnight loan rate fell to 0.4 percent after the BOJ's second injection today at 12:50 p.m. in Tokyo added another 1 trillion yen. The rate was as high as 0.585 percent before today's first injection of 2 trillion yen. The central bank's target overnight lending rate is 0.5 percent.

BOJ Governor Masaaki Shirakawa yesterday said the agreement with the Fed is aimed at providing dollars to foreign banks and brokerages. The Bank of Japan “doesn't have any particular concern'' about Japanese financial institutions' borrowing of dollars, Shirakawa said.

Foreign banks are paying more than Japanese banks to borrow cash because counterparties are less willing to lend to them. Japanese banks borrowed overnight funds at interest rates between 0.4 percent and 0.5 percent today, while foreign banks had to pay between 0.6 percent and 0.7 percent, according to Tokyo Tanshi, a Japanese money market brokerage.

Australia Banks

Australian banks' borrowing costs were stable today, according to a gauge that measures the availability of funds in the market. The difference between the rate banks charge each other for one-month loans and the overnight indexed swap rate was unchanged at 50.5 basis points at 2:12 p.m. in Sydney, after widening 13.5 points yesterday in the biggest jump since July 24, Bloomberg data show. The average spread for the past year was 23 basis points.

New Zealand's central bank will accept bank bills in its daily market operations to ease pressure on liquidity in the financial system.

The difference between the rate New Zealand banks charge each other for one-month loans and the overnight indexed swap rate widened to 59 basis points at 4:21 p.m. in Wellington, from 53.5 points yesterday, Bloomberg data show.

Default protection costs for bonds from Australia and Asia outside Japan declined, according to traders of credit-default swaps.

The Markit iTraxx Australia index fell 34 basis points to 171 as of 1:11 p.m. in Sydney, Citigroup Inc. prices show. The benchmark, tied to the debt of 25 companies including Qantas Airways Ltd. and BHP Billiton Ltd., declines as perceptions of credit quality improve. Japan's benchmark of credit risk stood at 150, down from 175, according to Credit Suisse Group data.

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Prices surged by as much as 20 cents a gallon at some Houston-area gas stations as Hurricane Ike bore down on the Gulf coast.

"There are clearly some service stations in the Houston area that have hiked prices by 15 to 20 cents a gallon, there’s no question about that," said AAA spokesman Dan Ronan. "But I think there are a lot of service stations that are being very responsible."

The majority of gas stations in Texas showed only moderate increases, or even decreases, according to the AAA fuel gauge, which bases its data on credit card swipes at some 100,000 gas stations nationwide.

Gasoline prices rose Friday for the third straight day, according to the nationwide survey, as Hurricane Ike’s approach to the Texas Gulf Coast shut oil drilling and refining in the region. The average price of regular unleaded gasoline edged up 0.4 cent to $3.675 a gallon from $3.671 a day earlier, AAA said.

In Texas, where the storm is expected to make landfall late Friday or early Saturday, the average price rose 0.9 cent to $3.546 a gallon.

In three coastal areas that could be affected by the storm, the average price rose 4.4 cents in the Houston area, but was only up 0.2 cent in Galveston and down 0.5 cent in Corpus Christi.

Ronan, who is based in Irving near Dallas, said that Houston-based AAA staffers have reported the 20 cent increases at some gas stations, but they’re in the minority. Likewise, he said the reports of stations running low on gas in coastal Texas are scattered and isolated.

"There have been anecdotal reports about service stations running low on fuel and that’s to be expected," said Ronan guaranteed approval cash advance loans. "The good thing is that it seems as though the state and delivery systems have gotten a lot better since Katrina."

Prices have trended higher in the Midwest and Southeast partly due to production delays caused by Hurricane Gustav, said Tom Kloza from Oil Price Information Service, which provides the data for AAA. He noted that prices are expected to continue rising as Hurricane Ike churns through the Gulf of Mexico.

Nationwide, Alaska and Hawaii remained the two states with gas prices still tracking above $4 a gallon; Alaska at $4.393 and Hawaii at $4.336, AAA said. The cheapest gas continues to be found in New Jersey, where prices averaged $3.40 a gallon.

Gas remains about 10.7%, or 43.9 cents, below the record high average of $4.114 that AAA reported July 17. It’s down 11.2 cents in the past month, but up 86.7 cents from a year ago.

Going forward, Kloza said Friday would be a "wild day" for gas prices, since some refineries - not just in coastal Texas but also inland Louisiana - have shut down in preparation for Hurricane Ike.

He said the nationwide average for gas prices could break the July 17 record as a result of the hurricane, but even if that happens, they would stabilize by October.

Oil prices rose Friday on concern about the storm. Thursday’s $100.87 settlement was the lowest since March 24. 

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