By James Langton

(September 28 – 09:00 ET) – Golds will set the pace for the North American markets today, even moreso in Canada. The metal was holding firm as the stock markets prepared to open, rising a further 4.5%, or US$12.42, in New York to US$294.32.

Canadian markets may hold on a little better if the golds continue to rally. But most markets seem to be saying they overbought yesterday. Europe is slipping and S&P futures were pointing slightly lower as well.

In Europe, some of yesterday’s merger mania has dissipated, even though it now appears that Royal Bank of Scotland will trump Bank of Scotland’s US$33 billion bid for NatWest with a US$41 billion bid. Other possible suitors, including ING and Deutsche, are believed to be contemplating the firm too.

Nevertheless, London’s FTSE 100 is down 45 points so far. The DAX is sliding more heavily, off almost 75 points in Frankfurt, and the French CAC 40 is down about 35 points.

Despite the cooling of the euphoria around possible mergers, Europeans are still doing some deals. Alcatel SA is announcing it will acquire Genesys Telecommunications Laboratories Inc. for about US$1.5 billion in stock. Alcatel is Europe’s second-biggest phone equipment maker.

Alcan’s merger with Pechiney and Algroup is also in the news. It is being delayed by U.S. regulators who are examining the deal. The companies remain confident the deal will ultimately go forth.

In Japan, traders picked up on the possibility of a move on monetary policy, knocking the yen back to a one-week low against the US$ and moving stock markets up. The Nikkei had a strong rally, bidding up 505 points on optimism over the yen. The Hang Seng clung on to the rally, closing up 85 points.

A couple of big financial sector deals are in the headlines this morning. Chase Manhattan Corp., perennially tagged as a buyer for Merrill Lynch & Co., is instead planning to fill its appetite for a stronger investment banking business by buying tech-focused brokerage Hambrecht & Quist for US$1.35 billion in cash, or US$50 a share.

Meanwhile, the Japanese government is selling the failed Long-Term Credit Bank of Japan to Ripplewood Holdings, a U.S. investment firm, for US$1.14 billion. Ripplewood will be joined in the deal by ABN AMRO, Deutsche Bank AG, or Bank of Nova Scotia and Paine-Webber.