- US equity markets have received a sizable boost from lower energy prices after preliminary reports from the Gulf indicate only minimal damage from hurricane Gustav. October crude traded with a 105 handle briefly in the overnight session before climbing back above $109. Front-month natural gas ticked below $7.25 before recovering somewhat. Commodity markets were also weighed down by fresh one-year lows in the Euro and two-year lows in Cable. The effects of lower oil prices in stocks are evident by the strength in most consumer related names as well as the outperformance in the Dow Jones Transportation average. Bids in the airlines, truckers, railroads, and bellwether freight names pushed the Transportation average up as much as 3%. Shares of Google are higher after reports of an upcoming launch of a new web browser to compete with Microsoft. On the downside lower commodity prices are weighing on the oil patch as well as mining stocks. The OIH is trading back below $180 while XOM, CVX, and AA are the only Dow components in the red. Arcelor Mittal's South African unit announced several price cuts over the weekend while a WSJ article highlighted multiple factors leading to margin compression in the production of nickel and zinc. US Treasury prices began lower with the 10-year note future off nearly half a point at the open, but markets have recouped all their losses as equities have given retreated to session lows. The 10-year now trades up close to a quarter of a point with its yield falling back below 3.8%.

- In currencies, the USD continued to benefit from the lower oil prices. Dealers are keeping a wary eye on a number of potential storms are brewing in the Atlantic region. The greenback ended the morning off its best levels as dealers noted some covering of intra-day shorts in pair following the ISM employment component. Dealers are noting that the main focus will be now directed toward the ECB meeting on Thursday and the US employment report on Friday.

- The GBP was the weakest currency pair as concerns deepen about the UK economy and impacted the value of the pound. The GBP/USD cross tested below the 1.78 handle during the New York morning. UK Treasury raised its stamp duty threshold on house purchases to £175K from £125K. UK Exchequer Darling noted that the housing package is a significant aid for the market and remained positive that the UK will overcome the economic slowdown despite the unprecedented economic challenges. Darling noted that sterling has been declining over a year and that FX rates do continuously fluctuate.

- The AUD probed below the 0.83 level in the aftermath of the RBA's first interest rate cut in seven years. Dealers are concerned that RBA ease might not be as aggressive as hoped for.