Dow futures are trading down 153 points as overnight news focuses on a possible delay in the TARP bailout. What looked like a done deal yesterday afternoon appears to have degenerated into a serious bunfight. The deal is said to be in “limbo” as brinksmanship and internal Republican Party wrangling takes centre stage. Never underestimate the capacity of politicians to make a dire situation even worse. Read it and weep.

So it could be a rumour-driven day then. It might be a good idea to switch on CNBC if you are playing the markets. With WaMu going wallop (see below), financials will be under severe pressure today. Ahead of any bailout being finalized they will be under severe pressure. My take is that the muted market sell this morning is because it still believes that some deal will be done today. Maybe the fund will be drawn down in tranches (many small deals as part of one big one?) But if we get into the late New York afternoon and the cake still isn’t baked, then it could get very ugly.

Today Market Moving Stories

• Economic numbers were terrible yesterday with a truly awful US durable goods number (implying capital expenditure is about to fall off a cliff) and jobless claims. Looks like Ireland will be joined in the recession club.
• There were more signs of a subtle shift in Bank of England “thinking” overnight. MPC member Kate Barker (who is a “centrist” and a good gauge of when the wind is changing direction) spoke of “increased downside risks.” An easing of policy could be on the cards as early as next month methinks when this is taken along with the dovish speech by Deputy Governor Gieve earlier in the week.
• Central banks around the globe continue to pump VAST amounts of liquidity into the money markets in a (vain) attempt to keep rates spiking even further. One can only imagine what year end is going to be like as capital preservation is the name of the game.
• Bloomberg reports that California’s house prices have fallen 41% on the past year! Wachovia are thought to have a $120 billion exposure to the Californinan property market. Draw your own conclusions.
• Crude oil creeps up to $108.

WaMu go bust
J.P Morgan are getting Thrifty and have announced they are to buy WaMu’s deposits for $1.9bn. However, when this is all over, will there be much left for them to own? In my opinion this is naked asset stripping and will further increase the risk premium banks must now pay to raise term funds. The rest of WaMu has been seized by the FDIC (Federal Deposit Insurance Corporation) and has effectively gone BUST. For the record WaMu represents the biggest banking failure in US history.

This opens a Pandora’s Box. Who will be next? This VERY negative development for banking stocks could spook a few European names this morning. Could Wachovia be the next shoe to drop? US regional banks will be hurt once the implications are understood. Then, just to make sure everyone understands the dire situation we’re in, someone like the lovely Meredith Whitney will go on CNBC and hammer the point home. Be very afraid.

Data Today

Aside from the torturous trickle of newswire headlines and rumours about the progress of the TARP, the market may pay some attention to the University of Michigan’s consumer sentiment survey which is due at 15.00 (71.0 expected).

Earlier at 13.30 we get a look at the latest revision to US GDP (3.3%). The devil will be in the detailed breakdown. There is good and bad GDP! Basically GDP is made up of consumption, investment, government and net exports. If an improved figure is made up of inventory build up and a better trade balance, that is NOT anywhere near as positive for the economy as a rise in personal spending or private sector investment.

Equities

• Belgium’s Fortis bank was in the cross wires yesterday after a rumour that they had sought liquidity from Rabobank. Another story was that BNP had bid for them but at a price WELL below the already depressed current share price.
• HSBC are cutting 1,100 jobs. There had been talk of them buying UBS’s trouble investment banking arm.
• Morgan Stanley, according to the FT, is reported to have lost a third of its prime brokerage clients since the Lehman collapse. I’d say they will be out with their begging bowl looking for more capital injections over the weekend. But after the pound of flesh Warren Buffett (maybe he should now be known as the Merchant of Omaha!) extracted from Goldman’s, this is going to be mighty expensive funding.