A wait and see approach?

Current Futures: Dow +7.00, S&P +1.00, NASDAQ +1.50  

European Trade: Asian shares finished the session posting strong gains, while the European markets also opened higher. The overnight markets were bolstered by speculation that President Bush will agree on a temporary loan for the auto-industry. The manufacturers would receive the loan from the financial sector bailout fund.

The situation is somewhat ironic for the current administration. The $700 billion fund was created to save to the financial sector, mainly buying toxic-debt out of taxpayers’ money. However, since it was first announced, nobody really knew how the funds were going to be used. A few weeks later, the Treasury announced the remaining $350 is going to be used for credit card debt, auto loans and to cover student programs, diverging from the initial purpose of the fund.

Now, the Bush administration is expected to announce that another part of the remaining funds will go to the bailout of the auto-industry, further diverging from the original aim of the fund. Among other things, this shows conflict between the administration and the Treasury. In addition, it points out that not even the men who should “save the world’s financial system” know exactly their next step. A wait and see approach might not be the correct approach amid the crisis the economy is facing.

In the overnight session, the Nikkei rose 428.79 points (5.21%) to 8,664.66. The Australian S&P/Asx advanced 81.00 points (2.31%) to 3,591.40. In Europe, the German Dax rose 55 points (1.18%) to 4,718.41, while the U.K. Ftse gained 25.79 points (0.60%) to 4,306.14. Futures on the major U.S. indexes traded mixed in the overnight market.

Crude oil advanced in the last session, helped by the auto-industry bailout. Overnight, Crude oil for January delivery fell $0.45 to $47.30.

Gold broke above Friday’s high during the Asian session. Bullion for immediate delivery gained $1.30 to $829.25.

Previous Asian trade: Asian equity markets are posting strong gains, helped again by speculations that the bailout package for the auto-industry will be approved. Markets advance, despite that one of the most respected reports from Japan plunged more tonight than in the last three decades. 

In Japan, a report gauging the sentiment of the manufacturing industry, also known as the Tankan report, fell the most on record. The read indicates the poor state of the manufacturing sector in Japan, one of the countries main industrial activities. Japan’s economy is based only on the export industry, so a (very) pessimistic mood along the large producers spells trouble ahead.

However, despite the Tankan report, Japanese and Asian markets rose tonight, speculating that President Bush will agree, as a temporary measure, to help the car-industry with funding from the $700 billion fund. This decision will not drastically improve the situation of the U.S. economy, but it will help prevent a terrible scenario, the unemployment rate raising a few percentage points.