Italian banks including UniCredit SpA (UCG.MI)

Italian banks including UniCredit SpA (UCG.MI) and Intesa
Sanpaolo SpA (ISP.MI) will take part in a EUR1.6 billion scheme to boost loans
to companies operating in tourism, Premier Silvio Berlusconi said Wednesday.

The plan, which also includes Banco Popolare (BP.MI), Banca Popolare di
Milano (PMI.MI) and Banca Popolare di Sondrio (BPSO.MI), aims to make it easier
for companies operating in tourism to secure credit, Berlusconi said.

The prime minister said the government wants to nearly double the
contribution tourism makes to Italian national output - currently around 10% of
gross domestic product - in the next four years. He said tourism accounts for
18% of Spain's GDP.

The tourism industry contracted around 5% in 2008 as the global economic
downturn hit travel to Italy's cultural and natural sites. The sharp slowdown
in the world economy is expected to lead the Italian economy as a whole to
contract by about 5% in 2009, marking the worst recession since the Second
World War.

Some 14,000 bank branches across Italy will provide low-interest loans of up
to EUR2 million for tourism buildings which need to be renovated or rebuilt,
the premier said in presenting the plan with bank and tourist officials.

In a statement, UniCredit said it would take part in the scheme by putting
forward EUR500 million for small- and medium-sized companies operating in
tourism that want to develop their business. Banco Popolare said it would
contribute with EUR200 million.

Berlusconi told a press conference with his new tourism minister, Michela
Vittoria Brambilla, that he was proud of Italy's banking system and reiterated
that the country's banks are the most solid in Europe.

The EUR1.6 billion in easier credit is available immediately so that
companies can take advantage of the summer season that has just started,
Brambilla said.

EUR set to remain strong for

EUR set to remain strong for at least a month as European players' risk appetite is recovering gradually, helped by recent news IMF to provide EUR20 billion to Romania, says Nomura Trust and Banking senior dealer Hideki Amikura; "that news greatly decreased concerns over the Eastern European economy." Says EUR/USD may target 1.40 in coming weeks, with pair now at 1.3611; adds EUR/JPY may try 138.00 vs 133.05 now. Another Tokyo dealer adds Japan pension funds buying EUR, likely in portfolio adjustment before fiscal year end.

Fed's Yellen

Fed's Yellen says return of growth by yr-end is not assured, though recovery could still happen over next few quarters. A broad policy response is needed to end recession, she says. Yellen points to signs Fed programs are working and says worries about inflation surge are misplaced; deflation risks outweigh. Fed though is still committed to controlling inflation, Yellen says. Jobless rate likely to peak in 2010, she says, adding that housing starts are a tentative ray of hope.

S&P's downgrade for Lithuania Tuesday wasn't a surprise, and may not be the last, says Danske Bank. "We cannot rule out the possibility of further downgrades in the future," Danske says. It is now rated BBB/A-3 from BBB+/A-2, with a negative outlook. Lithuania and its Baltic neighbors could now all face a GDP decline in double figures this year, the bank adds.

The Australian dollar climbed to fresh 10-week highs

The Australian dollar climbed to fresh 10-week highs in Asia Monday as equity markets pepped up on details of a forthcoming U.S. plan to quarantine toxic bank debt.   Government bond prices retreated in line with a weaker close by Treasurys Friday and in response to the gains by regional share markets, including the Australian share market. The S&P/ASX 200 rose by 2.4% over the day.   U.S. Treasury Secretary Timothy Geithner told the Wall Street Journal he planned a three-pronged program that envisages the creation of a series of public-private investments to soak up US$500 billion, and maybe as much as US$1 trillion, in troubled loans and securities at the heart of the financial crisis.   Isolating the so-called toxic debt is considered crucial to unfreeze credit markets and revive growth in the world's biggest economy.   U.S. equity futures lifted on the WSJ report, fueling fresh demand for the Australian dollar, which climbed by close to one U.S. cent through the Asia session of trading.   At 0500 GMT, the Australian dollar was quoted at US$0.6967, up from US$0.6878 late Friday and just below its session high of US$0.6979. Against the Japanese yen, it was at Y66.985, up from Y65.08.   Jonathan Cavenagh, FX strategist at Westpac, said there was an "air of optimism" surrounding the toxic debt plan in the U.S., and markets were cautiously embracing it ahead of more detail from Geithner later today.   However, Amy Auster, FX strategist at ANZ, was more cautious.   "We've got to be a little bit careful about this...We've been disappointed before by Treasury," she said.   "There is a bit of risk for the Aussie if we see buy-the-rumor and then selling of the fact," Auster said.   Investors are also awaiting three speeches by senior Reserve Bank of Australia officials this week, including Governor Glenn Stevens on Wednesday.   Plenty of conjecture surrounds the April 7 policy meeting of the RBA, with financial markets continuing to price in a further interest rate cut of as much as 50 basis points.   Adam Donaldson, the head of research at the Commonwealth Bank of Australia, said the RBA could cut rates in April but it's likely to be a much smaller cut than the 100 basis point moves seen over recent months.   The RBA has cut its official cash rate target by 400 basis points since September 2008, taking it down to a 45-year-low of 3.25%.   Auster said the RBA speeches are mostly not on economic policy, so there is a real chance they will come and go with little fanfare.

Look for TIC data later

Look for TIC data later in the day to show any signs that China is pulling out of US assets. Commerzbank says the USD could come under pressure if this happens. "On the other hand, the USD's potential for a recovery is likely to get bigger if the data points in the opposite direction," the bank notes, adding 1-month risk reversals suggest the speculative market may already be positioned for an easing USD.

Stock market may be rallying

Stock market may be rallying, but Morgan Stanley says things will get worse before they get better, and even then, the outlook is muted. Firm cuts year-end price target for S&P 500 to 825 from 975; before then, MS still sees downside risk to 560-600 as stocks battle "further earnings downgrades and weak economic news flow." S&P 500 closed yesterday just under 751.