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WASHINGTON (Reuters) � The Justice Department sued American Express Co on Monday for allegedly violating antitrust law over credit card acceptance rules, and settled with Visa and MasterCard on the same issue.

The Justice Department, in a filing with the U.S. District Court for the Eastern District of New York, said the case was focused on credit card companies' efforts to stop merchants from steering customers to credit cards with lower fees imposed on the merchant.

In a proposed final judgment, Visa Inc and MasterCard Inc must allow merchants to offer discounts to customers who use cards that charge the stores less.

But American Express said the Justice Department action would hurt consumers by damaging their ability to use their preferred credit card.

"We have no intention of settling the case," Kenneth Chenault, chairman and chief executive officer of American Express, said in a statement.

"We will defend the rights of our cardmembers at the point of sale and our own ability to negotiate freely with merchants," said Chenault. "We are confident that the courts will recognize the perverse anti-competitive nature of the government's case."

MasterCard acknowledged the settlement, which had been reported earlier by the Wall Street Journal. "The terms of the settlement will be announced later today," said Jim Issokson of MasterCard.

Visa had no immediate comment.

"Credit cards cost phenomenally more in the U.S. than abroad and the DOJ action will help open the market," said David Balto, a former policy director at the Federal Trade Commission's competition office.

Connecticut, Iowa, Maryland, Michigan, Missouri, Ohio and Texas joined the Justice Department in the lawsuit.

(By Diane Bartz; Additional reporting by Maria Aspan in New York; Editing by Tim Dobbyn)

WASHINGTON (Reuters) � The head of the U.S. Commodity Futures Trading Commission on Monday urged a regulatory panel to consider making recommendations on price and volume limits for brokered trades.

Gary Gensler, the chairman of the CFTC, said a commission of experts that will advise the Securities and Exchange Commission and the CFTC should consider new obligations for brokers to avoid trades from clients that could disrupt the market -- such as a large order on May 6 which helped spark the stock market flash crash.

"One key lesson is that, under stressed market conditions, the interaction between the automated execution of a large sell order and trading algorithms can quickly erode liquidity and result in disorderly markets, especially if algorithms use volume as a proxy for liquidity," Gensler said remarks prepared for a conference on swap execution facilities.

"The events of May 6 demonstrate that, in volatile markets, high trading volume is not necessarily a reliable indicator of market liquidity," Gensler said.

The CFTC and SEC on Friday said a computer-driven sale worth $4.1 billion by a single trader helped trigger the flash crash, sending the Dow Jones industrial average plunging some 700 points in minutes.

The report did not name the trader, identified in May by Reuters as the money manager Waddell & Reed Financial Inc.

In his speech, Gensler said the trade order that helped spark flash crash was "on auto-pilot."

Gensler said regulators' experience with the flash crash will help inform them as they write detailed regulations to implement the Wall Street reform law.

He told the conference the CFTC estimates about 30 to 40 companies will register to trade swaps either as swap exchange facilities (SEFs) or exchanges.

The CFTC and SEC plan to unveil proposed rules for SEFs by the end of the year. (Additional reporting by Jonathan Spicer; Editing by Alden Bentley)

WASHINGTON (Reuters) � Pending sales of previously owned homes rose to a four-month high in August, implying the housing market was regaining some stability after recent steep declines following the end of a home-buyer tax credit.

Another report on Monday showed new orders received by domestic factories fell 0.5 percent in August as demand for transportation equipment fell sharply. Analysts had forecast a drop of 0.4 percent in August.

However, excluding the transportation segment, factory orders rose 0.9 percent.

The data offered few fresh clues on whether the Federal Reserve would embark on a new round of monetary policy easing next month, as widely anticipated by financial markets.

"Sales have stabilized at very, very low levels after the expiration of the federal tax credits. At these low levels, you could see some good percentage increases in sales, but it doesn't show any sustainable uptrend in housing conditions," said Ryan Wang, an economist at HSBC Securities in New York.

The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in August, increased 4.3 percent to 82.3 from July.

Economists polled by Reuters forecast the index, which leads existing home sales by a month or two, rising 3 percent in August from July. Compared to the August last year, pending home sales were down 20.1 percent.

Major U.S. stock indexes were trading flat to marginally lower as a ratings downgrade weighed on Microsoft Corp and new Swiss banking rules raised fears of smaller bank profits. Prices for U.S. government debt were mostly up, while the dollar rose against the euro.

"It's fair to say the market is mainly trading on expectations of what the Fed will do regarding easing," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.

The U.S. central bank last month signaled it was ready to inject more money into the economy to shore up a sluggish recovery from the worst downturn since the 1930s and prevent a damaging phase of deflation.

The Fed, which has already injected $1.7 trillion into the economy by purchasing mortgage-related and government bonds, next meets on November 2-3.

Home sales and building activity are stabilizing after a downward spiral following the end in April of a popular tax credit for home buyers. But high unemployment and a glut of homes on the market imply recovery will be very weak.

"Households are simply unable to, or do not want to, buy a home," said Paul Dales, a U.S. economist at Capital Economics in Toronto.

"The problem is not the level of borrowing costs, meaning that more quantitative easing by the Fed is unlikely to make much difference. The upshot is that housing activity will remain weak for a number of years yet."

Total factory orders for July were upwardly revised to a 0.5 percent increase.

A 10.2 percent decline in the volatile transportation equipment segment, with the motor vehicle-related orders off 3.6 percent and nondefense aircraft down 40.2 percent, weighed down factory orders in August.

Orders for machinery rose 5.2 percent in August, while orders for computers and electronic products rose 3.7 percent.

(Reporting by Lucia Mutikani and David Lawder; Editing by Neil Stempleman)

NEW YORK (Reuter) � U.S. stock index futures pointed to a lower open on Wall Street on Monday, with futures for the S&P 500 down 0.54 percent, Dow Jones futures down 0.45 percent and Nasdaq 100 futures down 0.68 percent at 3:55 a.m. ET.

* Genzyme (GENZ.O) will be in focus after French drugmaker Sanofi-Aventis (SASY.PA) launched a hostile bid for the biotech firm at $69 per share, or $18.5 billion, setting off what could be a protracted battle for control of the U.S. biotech company. The move comes a month after Genzyme rebuffed an approach from Sanofi at the same price. Sanofi has been in discussions with Genzyme shareholders and stated repeatedly that it would go no higher.

* Switzerland has set out to further tighten the reins on global banks UBS (UBSN.VX) and Credit Suisse (CSGN.VX), requiring them to hold capital well in excess of new international standards.

* The Federal Reserve must not launch a new round of asset purchases without setting out what it wants to achieve through the policy, the Financial Times quoted Philadelphia Fed President Charles Plosser as saying.

* U.S. 10-year Treasuries edged higher in Asia on Monday in the wake of hints from Federal Reserve officials that they would support the central bank buying more bonds to bolster the sluggish economy.

* European stocks were down 0.7 percent in morning trade, losing ground for the sixth session in a row, with big banks such as Societe Generale (SOGN.PA) and BBVA (BBVA.MC) featuring among the top losers, while Japan's Nikkei fell 0.3 percent on Monday, taking its cue from the currency markets ahead of a Bank of Japan policy decision the next day with the market expecting further easing, albeit a minor move.

* The dollar surged higher on Monday in a short-covering rally against the yen, which retreated against other currencies as investors unwound some long yen positions ahead of a Bank of Japan policy meeting this week.

* On the data front, investors awaited monthly factory orders, due at 10 a.m. ET, as well as pending home sales, also due at 10 a.m. ET.

* Wall Street extended the rally on Friday, led by gains in resource stocks after data in China showed a pick-up in manufacturing activity.

* The Dow Jones industrial average (.DJI) rose 41.63 points, or 0.39 percent, to end at 10,829.68. The Standard & Poor's 500 Index (.SPX) advanced 5.04 points, or 0.44 percent, to 1,146.24. The Nasdaq Composite Index (.IXIC) edged up 2.13 points, or 0.09 percent, to close at 2,370.75.

(Reporting by Blaise Robinson; Editing by Mike Nesbit)

SINGAPORE (Reuters) � The Federal Reserve must not launch a new round of asset purchases without setting out what it wants to achieve through the policy, the Financial Times quoted Philadelphia Fed President Charles Plosser as saying.

His comments contrast with those of New York Fed chief William Dudley and Chicago Fed President Charles Evans, who in the clearest calls yet said on Friday that more easing was needed unless the economic outlook improves.

Expectations that the Fed might ease policy as soon as its next meeting on November 2-3 have put downward pressure on the dollar and supported U.S. Treasuries.

But Plosser reiterated his concerns over further easing.

"I think that before we engage (in further quantitative easing) we need to be very clear about what it is we're trying to do, how we're going to go about doing it, how we're going to measure whether we're effective at it or not, and how we're going to communicate that," he told the FT in an interview published on Monday.

The FT did not say when the interview was conducted.

Plosser has been outspoken in expressing concern about the massive expansion of the Fed's balance sheet, which has doubled from pre-crisis levels as a result of recession-fighting efforts.

(Reporting by Kazunori Takada; Editing by Neil Fullick)