Oil soars as global financial turmoil continues

 Oil prices have jumped more than $25 a barrel to record their biggest ever one-day gain as US stocks took another beating amid the continuing global financial turmoil.  Uncertainty about what the US government's proposed $700bn bail-out will look like drove traders away from the shaky stock market and into tangible assets such as oil and gold on Monday, causing commodities prices to surge.  Light, sweet crude for October delivery spiked as much as $25.45 to $130 a barrel on the New York Mercantile Exchange before falling back to settle at $120.92, up $16.37.  An expiring crude contract that commonly causes prices to jump, added fuel to the frenzied spike in prices.  Still, the rally, which shattered crude's previous one-day price jump of $10.75, set on June 6, showed the intensity of emotion in the market.

The severity of the price move shocked veteran market participants and prompted the US Commodity Futures Trading Commission to launch an investigation into whether illegal manipulation was to blame.

Crude has gained about $30 in a dramatic four-day rally that has at least temporarily halted oil's steep two-month slide from a record $147.27 in July to below $100.  Gold prices also shot up, gaining more than $44.30 to settle at $909 an ounce and other commodities deemed safe rallied as well, underscoring investors' uncertainly about the direction of the economy and their fear of more turmoil ahead.  The Dow Jones industrial index fell sharply on Monday, closing down more than 370 points, wiping out most of the gains made on Friday.

Bail-out uncertainty: George Bush, the US president, said negotiators had made "good headway" on the government's $700bn bail-out plan but also warned that "failure to act would have broad consequences far beyond Wall Street".  Al-Jazeera's John Terrett, reporting from New York City, said investors, however, were no convinced that the plan was big enough or that the proposal would be approved in time or would work.  Investors fear that the government will have to dramatically ramp up borrowing to pay for the mammoth rescue effort, an inflationary move that could further devalue the dollar and trigger another surge in commodities prices.  Matt Zeman, the head trader at LaSalle Futures in Chicago, explained that the government is "going to have to continue auctioning off a whole lot of treasuries to finance these projects, so the dollar is going to suffer".  "Right now it's fear and anxiety driving people who want tangible assets," he told The Associated Press.  US congressional leaders have endorsed the plan's main thrust, saying passage might occur in a matter of days.  But they also want independent oversight, protections for homeowners and constraints on excessive executive compensation, Nancy Pelosi, the speaker of the house, said on Sunday. 

Changing landscape:  Henry Paulson, the treasury secretary, has been pushing legislators to approve the proposal as soon as possible.  Monday's volatility came as the face of Wall Street continued to undergo sweeping changes, with Goldman Sachs and Morgan Stanley getting Federal Reserve approval to change their status. Goldman Sachs and Morgan Stanley were the last surviving of the "big five" investment banks that shaped 20 years of Wall Street history after Lehman Brothers and Bear Stearns collapsed and Merrill Lynch was bought by Bank of America.  The move to become bank holding companies will allow the two to gain greater access to central bank funds and to open commercial banking subsidiaries or buy retail banks, meaning people can deposit money with them, greatly bolstering their resources.