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Corzine, 64, who once ran Goldman Sachs before becoming a U.S. senator and then governor of New Jersey, had been trying to turn the more than 200-year-old MF Global into a mini Goldman by taking on more risky trades.

But once regulators forced it to fully disclose the bets on debt issued by countries including Italy, Portugal and Spain, it rapidly unraveled with no buyers willing to step in.

MF Global's meltdown in less than a week made it the biggest U.S. casualty of Europe's debt crisis, and the seventh-largest bankruptcy by assets in U.S. history.

The company's shares plunged last week as its credit ratings were cut to junk. The Chapter 11 bankruptcy filing came after talks to sell a variety of assets to Interactive Brokers Group Inc broke down earlier on Monday, a person familiar with the matter said.

There were also signs that some of its customer accounts that are supposed to be segregated and protected from the rest of the business had suffered what regulators described as "possible deficiencies."

"Early this morning, MF Global informed the regulators that the transaction had not been agreed to and reported possible deficiencies in customer futures segregated accounts held at the firm," the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission said in a joint statement.

A bankruptcy proceeding led by the Securities Investor Protection Corporation would be the "most prudent course of action to protect customer accounts and assets," they said.

The New York Times reported later on Monday that federal regulators had discovered that hundreds of millions of dollars in customer money had gone missing from MF Global.

Less than $700 million was missing by late Monday, down from nearly $1 billion earlier, the paper reported on its website.

Regulators are looking into whether the brokerage used some of the money to support its own trades, the Times reported, citing unnamed sources.

MF Global was not immediately available to comment on the Times' report.

Regulators had expressed "grave concerns" about the viability of MF Global, which filed for bankruptcy only after "no viable alternative was available in the limited time leading up to the regulators' deadline," the company's chief operating officer, Bradley Abelow, said in a court filing.

One of the regulators that pressed MF Global, the CFTC, was unhappy with the brokerage's failure to give it the required data and records.

"(T)o date we don't have the information that we should have," said a source close to the CFTC.

In the end, regulators and markets reacted swiftly to MF Global's troubles, which may have been exacerbated by Corzine's affinity for risk-taking over the course of a career that took him to the top echelons of Wall Street and then into politics.

"They went for what would be a very profitable trade with European sovereign debt that obviously has blown up in their face, and brought the company down," said Dave Westhouse, vice president of Chicago retail broker PTI Securities and Futures.

RIPPLE EFFECTS

The bankruptcy is reminiscent of the collapse of Lehman Brothers in 2008 at the height of the financial crisis. But market participants said the impact from this collapse, far smaller, would likely be contained.

Still, MF Global's 2,870 employees, as well as trading counterparties, were left scrambling and confused on Monday, as MF Global halted its shares but did not file for bankruptcy until well after U.S. markets had opened.

Trading activity in gold, crude oil and grain futures slowed to a crawl as the bankruptcy forced a chaotic scramble to untangle trading positions.

"Ultimately it will have lost all confidence of its investor base," Michael Epstein, a restructuring adviser with CRG Partners, said of MF Global. "I'm not sure what restructuring it actually does. In some respects, it's a baby Lehman, in effect."

There was also uncertainty over Wall Street's exposure.

JPMorgan Chase & Co's exposure for a $1.2 billion syndicated loan to MF Global is less than $100 million, a source at the bank said. Deutsche Bank AG is listed in the court filing as a trustee for bondholders with $1 billion of claims. The banks declined to comment.

The impact on the markets should be smaller and nothing like when Lehman failed and hedge funds had money locked up with the firm for months, said Jeff Carter, an independent futures trader in Chicago.

At the Chicago Board of Trade, three traders wearing MF Global jackets were seen leaving prior to the opening of pit trading, and floor sources told Reuters they had been turned away after their security access cards were denied.

Back outside the Manhattan office, one MF Global employee said all he knew about the bankruptcy was what has been on TV. The company's HR department, meanwhile, was busy making calls withdrawing job offers it made in the past few weeks, according to a person familiar with the situation.

"A sale here is potentially the best outcome for employees because the company will continue to operate as opposed to slowly winding down," said Dan McElhinney, the managing director of corporate restructuring for Epiq Systems.

"I think there will be a lot of effort to tee up the sale pretty quickly here."

The New York Federal Reserve terminated MF Global as one of its primary dealers. CME Group Inc, IntercontinentalExchange Inc, Singapore Exchange Ltd and Singapore's central bank, among others, halted the broker's operations in some form except for liquidations.

European clearinghouse LCH.Clearnet declared MF Global in default.

THE ROAD TO BANKRUPTCY

Corzine was trying to transform MF Global from a brokerage that mainly places customers' trades on exchanges into an investment bank that bets with its own capital.

In the past week, the company posted a quarterly loss and its shares fell by two-thirds as investors focused on the euro zone bets and the effect of low interest rates, which hurt profits from its core brokerage operations.

MF Global scrambled through the weekend and into Monday to find buyers for all or parts of the company, while at the same time hiring restructuring and bankruptcy advisers in case nothing could be done.

In the court filing explaining what went wrong, MF Global pointed a finger at regulators. The bankruptcy was hastened by pressure from the CFTC, SEC and the Financial Industry Regulatory Authority, wrote Abelow, the COO.

FINRA ordered that its U.S. broker-dealer unit, called MFGI, boost net capital, and then reveal a $6.3 billion stake in short-term debt from European sovereigns with "troubled economies," he wrote.

Market concerns over such exposures led to MF Global being downgraded to "junk" status by various credit rating agencies, sparking margin calls that threatened liquidity, he added.

"Concerned about the events of the past week, some of MFGI's principal regulators -- the CFTC and the SEC -- expressed their grave concerns about MFGI's viability."

MF Global in the filing did not elaborate on the regulators' concerns or the reasons behind them.

FINRA declined to comment.

According to a July proxy filing, Corzine would be entitled to $12.1 million in severance, prorated bonus and other benefits upon being terminated without cause. Two other executives would be entitled to more: retail operations chief Randy MacDonald could get $17.9 million and Abelow could get $13.7 million.

However, federal bankruptcy law may limit any possible severance payouts.

First-day hearings in the case were scheduled for Tuesday at 3 p.m. in U.S. Bankruptcy Court in Manhattan. Among other things, MF Global is expected to seek permission from Judge Martin Glenn to use cash collateral to keep operating its business, court papers show.

CLOCK TICKING

By filing for bankruptcy, MF Global freezes the value of its free-falling notes and gives potential suitors a clearer picture of the losses they would be taking on, said Bill Brandt, CEO of Chicago-based turnaround firm Development Specialists Inc.

If a sale is in the offing, he added, the buyer may be a European bank or sovereign government, as such entities would be particularly keen on stopping the slide and maximizing the value of the notes.

"The real question is how many assets will be left to transfer," said Niamh Alexander, an analyst at Keefe, Bruyette & Woods. "Customers might move very quickly and it may be that every hour that passes shrinks the portfolio of assets that could be transferred" to a buyer, she said.

The bankruptcy is the latest flop for finance-focused private equity fund J.C. Flowers, whose other recent investments include nationalized German bank Hypo Real Estate.

After dividends the private equity firm has received for its preferred shares, J.C. Flowers' net exposure to MF Global is $47.8 million, according to a source familiar with the matter. The firm declined to comment.

MF Global hired boutique investment bank Evercore Partners to help find a buyer, separate sources said last week.

The broker's deeply distressed 6.25 percent notes maturing in 2016 fell 4 cents to 46 on the dollar, according to the Trace, which reports bond trades. The price had earlier fallen as low as 15 cents.

MF Global shares remained halted in New York.

(Additional reporting by Paritosh Bansal, Jonathan Stempel, Caroline Humer, Matthew Goldstein, David Sheppard, Jessica Toonkel, Michael Erman, Lynn Adler, David Henry, Dan Wilchins and Lauren LaCapra in NEW YORK, Tom Hals in WILMINGTON, Doris Frankel in CHICAGO, Jessica Hall in PHILADELPHIA, Christopher Doering in WASHINGTON, Narayanan Somasundaram in SYDNEY, and Douwe Miedema and Dominic Lau in LONDON; editing by Erica Billingham, Matthew Lewis, Dave Zimmerman, Andre Grenon, Gary Hill)

Troubled brokerage MF Global Holdings (MF.N) was nearing a deal to file for bankruptcy protection and sell assets to Interactive Brokers Group (IBKR.O), according to reports.

The Institute for Supply Management-New York releases the October index of regional business activity at 8:30 a.m. EDT. In September, the index read 538.0.

At 9:45 a.m. EDT, the Institute of Supply Management Chicago releases October index of manufacturing activity. Economists forecast a reading of 59.0, compared with 60.4 in September.

Amazon (AMZN.O) has added more titles to Prime Instant Video with a new digital video licensing agreement with Disney-ABC television group, giving Prime members more video content for their new Kindle Fire.

The China unit of investment bank JP Morgan (JPM.N) won approval to become a trading member of the Shanghai Gold Exchange, the eighth foreign financial institute to obtain such membership, said the exchange on its website (www.sge.com.cn).

Google Inc (GOOG.O) is making another push to bring its Web savvy to television sets, hoping to tap into a vast new market despite consumers' lukewarm reaction to one of its initial offerings.

Allstate (ALL.N), the largest publicly traded home and auto insurer in the United States, reports quarterly results. Analysts expect its profit to tumble to 8 cents per share from 83 cents a year ago. Other companies announcing results included Anadarko Petroleum (APC.N) and Humana (HUM.N).

Groupon Inc is considering raising its IPO price range as underwriters grow more confident about demand after completing the East Coast leg of a two-week roadshow to woo investors.

European shares .FTEU3 fell 0.8 percent early on Monday, giving back a little of last week's strong gains, with miners hurt by falling metals prices after Japan intervened to stem the rise in its currency against the dollar.

Japan sold the yen for the second time in less than three months after it hit another record high against the dollar, saying it intervened to counter speculative moves that were hurting the economy.

The dollar leapt against the yen by the most in three years, hitting a three-month high after the intervention, while metals prices fell.

U.S. stocks closed out a fourth week of gains in quiet fashion on Friday, edging higher as the market took a breather after rallying 3 percent on Europe's deal to stem its debt crisis.

The Dow Jones industrial average .DJI gained 22.56 points, or 0.18 percent, to 12,231.11. The Standard & Poor's 500 Index .SPX.INX added 0.49 point, or 0.04 percent, to 1,285.08. The Nasdaq Composite Index .IXIC shed 1.48 points, or 0.05 percent, to 2,737.15.

(Reporting by Atul Prakash; Editing by David Holmes)

As per a tentative plan, MF Global's holding company would file for bankruptcy protection and derivatives trader Interactive Brokers would buy the assets, the Wall Street Journal and the Financial Times reported.

Interactive Brokers would likely make an initial bid of about $1 billion during a court supervised auction, the Journal said.

MF Global, the U.S. futures brokerage run by former Goldman Sachs (GS.N) Chief Executive Jon Corzine, has been struggling over the past week in which it posted a quarterly loss, its shares fell by two-thirds and its credit ratings were cut to junk.

The company is suffering because of low interest rates and bets it made on European sovereign debt, making it possibly the most prominent U.S. casualty yet from the eurozone debt crisis.

MF Global was in talks on Sunday with possible buyers, aiming "squarely" to do a deal, though all options remained on the table as the firm hired restructuring and bankruptcy advisers, sources familiar with the situation told Reuters.

The New York Times reported in its electronic edition that by Sunday evening, the talks had narrowed to one bidder, Interactive Brokers.

Sullivan & Cromwell's restructuring and mergers teams have joined the long roster of those advising MF Global, one source familiar with the situation said.

Weil, Gotshal & Manges was also hired to prepare potential restructuring options, a second source familiar with the situation said. The sources could not be identified by name because the talks were not public.

Weil would focus on MF Global's UK subsidiary if it needed to pursue a formal restructuring overseas, the Journal reported in its electronic edition.

The securities company also has hired firms Skadden, Arps, Slate, Meagher & Flom, the newspaper said.

MF Global and Interactive Brokers declined to comment. The law firms could not be reached immediately for comment.

A number of interested parties were considering several possible deals, including buying all or parts of MF Global, said the source, who requested anonymity.

"The goal is squarely for some sort of M&A transaction," the source said, adding the situation was "fluid."

QUARTERLY LOSS

Corzine, who became CEO in March last year after a term as New Jersey's governor, has been trying to transform MF Global from a brokerage that mainly places customers' trades on exchanges into an investment bank that bets with its own capital.

The plunge last week in MF Global's corporate bonds to distressed levels, and in its shares to below $1 at one point on Friday, makes it all the more urgent for the company to come up with some sort of solution before markets open on Monday.

MF Global has given potential buyers limited information about its financials and has not set up a data room for bidders to conduct due diligence, a buyside source earlier said.

The source, who is looking into deals both for the whole company and for its parts, said he was skeptical about the possibility of MF Global striking a deal over this weekend.

The company's positions are big and hard to value, especially the firm's sovereign risk exposure, the source said.

"How do you put a price on that? How do you get a deal done when the right side of the balance sheet keeps moving so dramatically?" the source said.

REACHING OUT TO BANKS

The company hired boutique investment bank Evercore Partners Inc (EVR.N) to help find a buyer, separate sources said this past week.

It reached out to banks including Barclays Plc (BARC.L), Citigroup Inc (C.N), Deutsche Bank (DBKGn.DE), Jefferies Group Inc (JEF.N), JPMorgan Chase & Co (JPM.N), Macquarie Group Ltd (MQG.AX), State Street Corp (STT.N) and Wells Fargo (WFC.N), a source familiar with the situation said on Friday.

Macquarie has shown interest in MF Global, but a source with knowledge of the development said he would be surprised if Macquarie did a deal immediately. The source was not authorized to speak to the media and thus declined to be named.

A Macquarie spokeswoman declined comment.

Private equity firm J.C. Flowers, which has a stake in MF Global, is also in talks about possibly taking it private, the Wall Street Journal reported on Friday.

The investment is the latest to go sour for the financial services-focused buyout shop, founded by ex-Goldman banker J. Christopher Flowers.

Earlier this year, the firm was among investors who failed to block the nationalization of German mortgage bank Hypo Real Estate.

MF Global, which runs a Futures Commission Merchant and a broker-dealer, was scrambling last week to reassure customers about its stability as signs grew that some of them were withdrawing money.

A drop in a broker's credit rating to junk erodes confidence in its creditworthiness and can then restrict its ability to borrow -- the bedrock of any financial institution -- and fund day-to-day operations.

(Additional reporting by Caroline Humer and Nick Brown in NEW YORK, Tom Hals in WILMINGTON, Jessica Hall in PHILADELPHIA and Narayanan Somasundaram in SYDNEY; Editing by Dale Hudson, Vinu Pilakkott and Muralikumar Anantharaman)

The dollar rose more than 4 percent against the yen to above 79 yen, hours after briefly falling to a record low of 75.31 yen. The dollar index .DXY as measured against six major currencies rose 1.3 percent.

Japanese Finance Minister Jun Azumi said Japan intervened unilaterally in the foreign exchange market on Monday to counter speculative moves that did not reflect the health of the Japanese economy.

U.S. crude futures also fell more than $1 as a stronger dollar made commodities priced in the U.S. currency more expensive for investors holding other currencies, thereby reducing demand.

The dollar's rally sent gold down more than 1 percent and silver down more than 2 percent.

The Nikkei .N225 ended down 0.7 percent at 8,988.39, but still logged a monthly gain of 3.3 percent. Investors locked in profits on concerns the yen won't stay down for long.

The yen's persistent strength has raised worries about Japanese companies' earnings. .T

The dollar has come under pressure as investors cautiously returned to riskier assets after Europe laid out a basic framework to tackle its debt crisis last week.

"A weak dollar, short-covering and an overbought market since the beginning of October was enough to trigger a correction (as the dollar spiked)," said Colin Bradbury, Daiwa Capital Markets' regional chief strategist for Asia ex-Japan.

"After rallying strongly to technically overbought territory, the markets were ripe for profit taking," he said.

MSCI's broadest index of Asia Pacific shares outside Japan slid 1.7 percent on Monday, after posting its best week in nearly three years as a long-awaited plan to resolve the European debt crisis sparked a huge relief rally.

Despite the steep falls, the index was set to end October up more than 12 percent for its best monthly gain since May.

Hong Kong's benchmark Hang Seng index .HSI was down 1.14 percent while the mainland's Shanghai Composite .SSEC fell 0.7 percent as investors locked in gains. But both indexes were set for their biggest monthly gains in 2-1/2 years on signs Beijing is selectively relaxing its tightening campaign.

EVENTFUL WEEK

The Singapore dollar and South Korean won fell on Monday as investors covered dollar-short positions with their central banks suspected of intervening, which caused reluctance to buy emerging Asian currencies.

Last week, emerging Asian currencies rose as investors added risk assets after Europe's debt deal. The won breached a technical resistance line to indicate more appreciation in the local currency.

"It became more difficult to short dollar/Asia here, especially after suspected intervention from most of Asia," said a Singapore bank dealer.

Copper also fell on a firmer dollar but was set for its biggest monthly rise since December.

"Investors are taking a wait-and-see attitude ahead of the slew of data this week," said CIFCO Future analyst Zhou Jie. "There wasn't particularly good news out of the euro zone this weekend, nor evidence of the anticipated monetary loosening in China yet."

Events this week include monetary policy meetings by the European Central Bank and the U.S. Federal Reserve, as well as the G-20 summit, with focus on any coordinated efforts to help stabilize global financial markets.

Among key data due this week were China's purchasing managers' index, as well as U.S. ISM manufacturing and jobs data, with investors looking for clues on the state of the economy at the world's two biggest economies.

"The momentum for risk appetite remains intact and the pressure on the dollar is expected to stay while the market shifts its focus from Europe to U.S. data and the Fed," said Junya Tanase, chief strategist at JPMorgan Chase in Tokyo.

"The follow-through buying of equities around the world after the European summit suggests there were other factors supporting sentiment, such as expectations for more U.S. easing, hopes the U.S. economy and corporate earnings will not be too bad," he said.

Tanase said if data this week fails to suggest clear risks of a hard landing in China or a U.S. recession, the risk-taking momentum will continue.

MSCI's all-country world stock index hit its highest level in nearly three months and posted its best week since July 2009 on Friday.

U.S. stocks in October were on track to be the best month since 1974, supported by strong earnings. Merck & Co Inc (MRK.N) and Chevron Corp (CVX.N) both topped expectations with financial results on Friday.

The CBOE Volatility index VIX .VIX -- a 30-day risk forecast of volatility in the S&P 500 -- fell on Friday to its lowest in nearly two months.

EURO NOT OUT OF WOODS

The euro fell 1 percent on Monday as the dollar rallied on Japanese intervention.

The single currency reached a seven-week high around $1.4247 last Thursday, and looked set to end the month up nearly 5 percent for its best monthly performance in just over a year. But uncertainty about a possible interest rate cut on Thursday by the ECB could limit its upside for now. <FRX/>

A weak sale of Italian bonds on Friday also underscored fragility of the euro zone's debt progress. The 10-year yield gap between Italian and German bonds widened after the auction to 378 basis points, about 10 bps wider on the day.

Italy paid record high cost of more than 6 percent to borrow on the debt market.

The head of EFSF, Klaus Regling, in Asia on a tour for potential investors, said on Monday he had been reassured by Japan's top currency official Tokyo would continue to buy its bonds. Last week, he played down hopes for a quick deal with China for its support behind efforts to resolve the crisis.

Asian credit markets weakened, reflecting fragility of risk appetite. The spreads on the iTraxx Asia ex-Japan investment grade index, a gauge for whether investor risk appetite is returning, widened five basis points on Monday.

(Additional reporting by Umesh Desai in Hong Kong; Jongwoo Cheon in Singapore and Carrie Ho in Shanghai; Editing by Kavita Chandran)

Qantas had taken the drastic step to ground all flights on Saturday, disrupting around 70,000 passengers and spurring the government and its labor-market regulator into action to seek an immediate end to hostilities between the airline and unions.

At the government's instigation, Australia's labor tribunal stepped in and ordered Qantas to resume flights and also banned trade unions, which have waged a long and damaging campaign of industrial action, from staging any more strikes.

Qantas CEO Alan Joyce, dubbed a "kamikaze" by a newspaper for effectively staging his own strike against the unions at the weekend, welcomed the tribunal's ruling, which gives both sides 21 days to settle the dispute or submit to binding arbitration.

"That was the only way we could bring that to a head," a bleary-eyed Qantas Chief Executive Alan Joyce told reporters on Monday as shares in the airline jumped 6 percent on the ruling.

Qantas says it has lost almost A$70 million since September from industrial action in its dispute with three trade unions over pay, working conditions and a plan to base more operations in Asia. Joyce had complained of "death by a thousand cuts" and said the future of the 90-year-old airline was at stake.

Qantas said flights were set to resume on Monday afternoon, on a limited schedule and subject to regulatory clearance. The airline hoped to return to normal in 24 hours.

Despite Qantas's share price rebound, the stock has lost more than a third of its value this year and investors worry about longer-term damage to the brand from the grounding, which disrupted the travel plans of some leaders at the end of a summit of Commonwealth nations in the western city of Perth.

"I will never ever even think of flying Qantas in the future. Happy, Alan Joyce?," said Robert Moore in a posting on the airline's Facebook page.

Qantas counters were still deserted at airports on Monday morning, but the mood on the street in downtown Sydney was also that Joyce may have overplayed his hand.

"It's a very Machiavellian move and it'll damage the reputation of Qantas. I don't think it necessarily had got to that stage yet, they could have still worked with the unions to get a better outcome," Michael Williams, a company director, said as he walked through the financial district.

PM FUMING

The government also welcomed the tribunal's ruling, which came in the early hours of Monday.

"We are pleased that after 24 hours of turmoil that common sense will be restored to the aviation and tourism sectors of Australia," Assistant Treasurer Bill Shorten said.

But with 108 aircraft grounded, almost 500 flights canceled and Australia's tourism image tarnished in a single weekend, Prime Minister Julia Gillard was left fuming at Qantas's tactic.

"I believe Qantas took an extreme approach on Saturday," Gillard told Channel Seven TV. "With very little notice to government or passengers, it grounded planes. It did that in circumstances where it had other options."

The dispute has dogged Qantas for months but it escalated recently when it announced plans to cut 1,000 jobs and order $9 billion worth of new aircraft as part of a makeover to salvage its loss-making international business.

The airline made a pre-tax profit of $552 million in the year to June 30.

Union representatives said they would work with Qantas to resume flights as soon as possible but some sought to cast Joyce as a reckless manager prepared to risk the airline.

"The board should immediately sack their out-of-control CEO," said Captain Richard Woodward, vice president of the Australian and International Pilots Association. He described Joyce's behavior as "megalomaniacal."

Qantas carries about a fifth of Australia's international passengers and, according to Joyce, the weekend grounding of the fleet cost the airline about A$20 million each day.

MASSIVE DISRUPTION

The labor tribunal had deliberated for more than 12 hours as lawyers for the airline, union and government questioned executives and advisers made submissions.

Qantas said a series of rolling stoppages by unions had cost the airline almost A$70 million since September and driven down bookings, threatening its survival.

The Qantas dispute is the latest in a tide of industrial unrest as unions press for a greater share of profits amid tight labor markets and high commodity prices.

It had threatened to become the most significant disruption to Australian aviation since a six-month 1989 dispute forced the government to use the airforce to keep flights running. Strikes by engineers cost Qantas around A$130 million in 2008.

Qantas airline, which usually flies more than 60,000 people a day, has been paying for accommodation and expenses for stranded travellers over the weekend and arranging on alternative flights.

Australian rival Virgin Australia said earlier it was adding 3,000 seats on its domestic network on Monday, in addition to 3,500 seats on Sunday.

Virgin Australia's airline partners Abu Dhabi's Etihad Airways and Air New Zealand said they were looking at options to increase capacity to and within Australia.

Qantas' decision left many passengers venting their anger after they were stranded in 22 cities around the globe.

The weekend was one of Australia's busiest for travel, with tens of thousands traveling to the hugely popular Melbourne Cup horse race on Tuesday.

(Additional reporting by Narayanan Somasundaram, Amy Pyett and Ed Davies in SYDNEY and James Grubel in CANBERRA; Editing by Mark Bendeich)

A number of interested parties were considering several possible deals, including buying all or parts of the troubled U.S. futures brokerage run by former Goldman executive Jon Corzine, said the source, who requested anonymity.

"The goal is squarely for some sort of M&A transaction," the source said, adding the situation was "fluid".

The pressure is on the company after a week in which it posted a quarterly loss, its shares fell by two-thirds and its credit ratings were cut to junk. MF Global hired Evercore to help find a buyer, separate sources said this past week.

It was unclear how close the company was to a possible deal as discussions stretched through the weekend. MF Global declined to comment.

Since Corzine became chief executive last year, the brokerage has increasingly used its own capital to trade.

MF Global's problems are now rooted in low interest rates and bets made on European sovereign debt, and it is emerging as one of the hardest-hit U.S. financial firms in the fallout from Europe's economic crisis.

The company has reached out to banks including Barclays Plc, Citigroup Inc, Deutsche Bank, Jefferies Group Inc, JPMorgan Chase & Co, Macquarie Group Ltd, State Street Corp and Wells Fargo, a source familiar with the situation said on Friday.

The plunge last week in MF Global's corporate bonds to distressed levels, and in its shares to below $1 at one point on Friday, makes it all the more urgent for the company to come up with some sort of solution before markets open on Monday.

The company, which runs a Futures Commission Merchant and a broker-dealer, was scrambling last week to reassure customers about its stability as signs grew that some of them were withdrawing money.

A drop in a broker's credit rating to junk erodes confidence in its creditworthiness and can then restrict its ability to borrow -- the bedrock of any financial institution -- and fund day-to-day operations.

Corzine took the reins at MF Global after a term as governor of New Jersey.

(Additional reporting by Paritosh Bansal; Editing by Dale Hudson)

Deep concern persists that European leaders will fall short when they try to flesh out the details of how their rescue fund can tap sufficient resources to backstop Greece and to handle a potential government financing crisis in Italy or Spain.

Europe is looking to emerging economies to provide the extra financial firepower to strengthen the fund four- to five-fold, to about 1 trillion euros, a promise that could materialize at a Group of 20 summit in France on Thursday and Friday.

The response so far from China on strengthening the fund has been very cautious, and market experts want to see a fund with resources twice the size under discussion in Brussels. That has set the stage for possible unsettling disappointment in the days ahead.

"If the absolute amount is not enough, we will be back to the storms. The break in the clouds may only last a few hours," said Ellen Zentner, senior U.S. economist at UBS.

Stronger-than-expected U.S. corporate earnings last week and third-quarter U.S. growth at a solid 2.5 percent, underpinned by surging business investment and a pick-up in consumer spending, have buoyed prospects for the global economy.

The drawdown in inventories in the third quarter also points to solid U.S. growth continuing through the end of the year.

Several Wall Street firms revised up their outlooks. JP Morgan raised its fourth-quarter economic growth forecast to 2.5 percent from 1 percent.

But talk to any economist or market strategist and every positive statement about the economic outlook is heavily hedged with warnings about what could yet go wrong.

The list is long.

Europe probably is already in recession; its politicians could fail to build a strong enough firewall in time to prevent financial contagion; and U.S. consumers are too heavily indebted to support strong growth next year.

Looming in the background are the U.S. budget deficit talks. Risks persist that lawmakers will reach stalemate by the end of the year, which would automatically trigger U.S. fiscal contraction at the start of 2012 if tax cuts and jobless benefits expire.

"The politics are improving in Europe, but the economic data is deteriorating and recession risks are rising. In the United States it is the exact opposite," said Kurt Karl, senior vice president at Swiss Re American Holdings Corp.

Any of these factors could put the brakes on recovery.

FUTURE ACTION

The European Central Bank is widely expected to lay the foundation for an interest rate cut at its meeting on Thursday, citing the economic weakness in the 17-nation currency bloc. Euro zone manufacturing and services data due on Wednesday may confirm the tilt into recession seen in flash PMIs last week.

The ECB probably will also signal it will continue to purchase bonds issued by debt-heavy euro zone countries to promote financial stability, a move that gives leaders more time to finalize details of the debt plan.

Most analysts doubt Italian Mario Draghi will embark on bolder action at his first meeting as ECB president, although there is an outside chance for a rate cut.

Federal Reserve policymakers also are expected to tread cautiously at their meeting on Tuesday and Wednesday.

The improved U.S. data diminish the argument for further monetary easing, though Fed Chairman Ben Bernanke at his news conference on Wednesday is likely to repeat his disappointment at the pace of recovery and explore further options for supporting growth in face of the considerable risks ahead.

Several Fed policymakers have suggested the central bank needs to do more to support housing, the central problem for the U.S. economy.

Employment growth is stuck in a rut and consumers are digging into their savings to spend. As long as the American consumer, who drives 70 percent of all U.S. economic activity, is buried under a mountain of debt -- much of it mortgage debt -- and many houses remain worth less than the mortgage, consumer demand will remain weak and business hiring paltry.

Employment data on Friday is expected to show 95,000 new jobs outside the farm sector were added in October, a slight improvement from the prior month. But payroll growth since April has averaged only 72,000, less than one-third the pace needed to reduce the 9.1 percent jobless rate, and down from a 161,000 average rate in the prior seven months.

Income growth is negative once adjusted for inflation, and household debt loads at 133 percent of disposable income are too high to support much consumption.

"The underlying problem is to find where sustainable spending growth will come from," said David Mann, U.S. economist for Standard Chartered.

Europe in recessionary territory and an impaired U.S. consumer also point to a deceleration in exports from China when its manufacturing index is released on Tuesday, rounding out a picture of a vulnerable world economy.

(Editing by Dan Grebler)

The head of Europe's rescue fund sought to entice China on Saturday to invest in the facility by saying investors may be protected against a fifth of initial losses and that bonds could eventually be sold in yuan if Beijing desires.

Though China has expressed confidence that Europe can survive its crisis, it has made no public offer to buy more European government debt.

Xinhua, in an English-language commentary, said China could not stand by while its largest trading partner foundered.

"Beijing's good-will gesture is a good response to those who see China as a threatening rival to Europe. Despite differences in politics, economy and culture, China and the EU are still good friends and partners," it wrote.

"However, amid such an unprecedented crisis in Europe, China can neither take up the role as a savior to the Europeans, nor provide a 'cure' for the European malaise," Xinhua added.

"Obviously, it is up to the European countries themselves to tackle their financial problems. But China can do within its capacity to help as a friend."

Such commentaries offer an insight into government thinking, even if they do not reflect official policy.

China's pile of $3.2 trillion in foreign exchange reserves, the biggest in the world, keeps growing thanks to trade surpluses and capital inflows.

Analysts estimate that China holds about a quarter of its foreign exchange in euro assets and there are few other places for it to park investments of such a scale.

The government has said it has confidence in the euro and in the European Union's efforts to tackle the crisis. But comments from Chinese economists and in state media have also revealed anxieties about the security of euro assets.

Expanding the European Financial Stability Facility (EFSF) to 1 trillion euros is key to the euro zone's latest anti-crisis plan, put together at a Eurozone summit last week.

Details on how this would be done have yet to be finalized and European leaders are under pressure to show the plan will work.

Xinhua said Europe needed to make "more concerted efforts".

The G20 summit in Cannes next month should accord China the respect it deserves, the commentary added.

"It is advisable that at the summit European leaders take heed of the voices of emerging economies, whose remarkable contribution to world economic recovery and growth deserves better understanding and reciprocal treatment."

(Reporting by Ben Blanchard; Editing by Ron Popeski)

Qantas said it had canceled 447 flights affecting more than 68,000 passengers since grounding over 100 aircraft around the world on Saturday.

The airline is seeking to bring to a head a prolonged and increasingly bitter battle with its unions over pay, working conditions and plans to set up two new airlines in Asia.

Qantas plans to cut 1,000 jobs and order $9 billion of new Airbus aircraft as part of a makeover to salvage its loss-making international business.

The abrupt escalation in the dispute angered the government and came as an embarrassment for Prime Minister Julia Gillard, who was hosting a summit of Commonwealth leaders in the western city of Perth, 17 of them booked to fly out on Sunday with Qantas.

"There is no case for this radical overreaction," Assistant Treasurer and former senior union official Bill Shorten told the Australia Broadcasting Corp.

"Sixty-eight thousand Australians and the tourism industry has been grossly inconvenienced by this high-handed ambush of the passenger."

Gillard, criticized for not intervening earlier in the dispute, said the tribunal hearing in Melbourne was needed to quickly resolve the impasse.

"We took this action because we were concerned about the damage to the economy," she told reporters in Perth.

"The government is arguing for an end to the industrial action," she said, adding that most leaders had made alternate flight plans.

BOLD, UNBELIEVABLE DECISION

Qantas chief executive Alan Joyce estimated the "bold decision, an unbelievable decision" to lock out workers and ground the fleet would cost the company A$20 million ($21.4 million) a day.

He said the special labor tribunal, which reconvened after a late-night meeting on Saturday, would have to terminate all industrial action before the airline could resume flying.

"We're hoping a determination is made today and that will give us certainty about what we can do and start planning to get the airline back in the air," Joyce told Australia's Sky News.

He indicated Qantas could be flying again on Monday if the Fair Work Australia tribunal ordered the termination of industrial action on Sunday.

Qantas and the unions would then have 21 days to negotiate a settlement before binding arbitration would be imposed.

The lockout is the latest in a rising tide of industrial unrest in Australia as unions increase pressure for a greater share of profits amid tight labor markets and a boom in resource prices.

It threatens to become the most significant disruption to Australian aviation since a dispute in 1989 that lasted for six months and had a significant impact on tourism and other business. Industrial action by engineers cost Qantas around A$130 million in 2008.

Qantas faced angry shareholders and workers at a shareholders' meeting on Friday when the company said the labor dispute since September had caused a dive in forward bookings and was costing it A$15 million a week.

The shareholders backed hefty pay rises to senior Qantas executives, including a A$5 million package for Joyce.

The action sparked an angry response from Australia's Transport Minister Anthony Albanese on Saturday.

"I'm extremely disappointed. What's more, I indicated very clearly to Mr Joyce that I was disturbed by the fact that we've had a number of discussions and at no stage has Mr Joyce indicated to me that this was an action under consideration," he said.

Tony Sheldon of the Transport Workers Union said the lockout was cynical and pre-planned.

"It's a company strategy that shareholders should have been told about, that the Australian community should have been told about, not ambushed in the dead of night," he said.

The Australian and International Pilots Association (AIPA) was flabbergasted at the move to ground the fleet, describing it as "brinkmanship in the extreme".

"Alan Joyce is holding a knife to the nation's throat," said Richard Woodward, vice-president of AIPA.

MASSIVE DISRUPTIONS

Qantas check-in desks across Australia were empty on Sunday morning as customers scrambled for alternative travel arrangements. The airline usually flies more than 60,000 people a day.

Australian rival Virgin Blue said it was adding an extra 3,000 seats on its domestic network on Sunday to assist Qantas passengers.

Qantas's decision left many passengers venting their anger after they were stranded in 22 cities around the globe.

"To resolve this at the expense of paying customers on one of the biggest flying days in Australia is quite frankly ... bizarre, unwarranted and unfair to the loyal customers that Australia has," a businessman, who gave his name only as Barry, told Sky TV at Melbourne airport.

This weekend is one of Australia's busiest for travel, with tens of thousands traveling to the hugely popular Melbourne Cup horse race on Tuesday, dubbed "the race that stops the nation".

Shares in the airline have fallen almost 40 percent this year, underperforming the 8 percent fall in the benchmark index.

($1 = 0.933 Australian Dollars)

(Additional reporting by Narayanan Somasundaram and Ed Davies in SYDNEY, Rebekah Kebede and Michael Perry in PERTH, James Grubel in CANBERRA; Writing by Lincoln Feast; Editing by Jonathan Thatcher)

Spanish Prime Minister Jose Luis Rodriguez Zapatero urged the G20 countries least affected by the crisis to provide "urgent stimulus plans" to shield the global economy.

Europe's debt crisis looks set to dominate the summit of Group of 20 leading economies in France from November 3-4.

The gathering in Cannes will take place a week after euro zone leaders reached a deal to recapitalize their banks, boost the firepower of a euro zone rescue fund and impose hefty losses on holders of Greek debt.

"We hope these deals, together with those made by the G20 next weekend ... restore the confidence needed to keep the economy moving," Zapatero told leaders at the Ibero-American summit in Paraguay.

"I hope they will rise to the challenge next week. The United States has a role, the Federal Reserve has a role, all the central banks of big countries have their role -- of course, China, India, Brazil, the Europeans and Japan," he said during a news conference.

"The G20's response has two key elements. Firstly, those of us who have been working to consolidate our fiscal position cannot change course. But those countries that have the margin to incentivize economic activity have to adopt urgent stimulus plans. If not, the global economy will be affected."

In the last 18 months, Zapatero has made cuts and implemented reforms to show Spain is serious about fiscal discipline and to avoid a sell-off in its debt on concerns it would need a Greek-style bailout.

Portuguese Prime Minister Pedro Passos Coelho told leaders gathered in Asuncion the "crisis was not just European."

"This is a global crisis," said. "It's a crisis that calls on all of us, whether in Europe, in Latin America or any other continent."

A source from the Portuguese delegation said Passos Coelho asked Mexican President Felipe Calderon to tell fellow G20 members that Washington should help resolve the crisis "by boosting trade and also with financial help."

"The European Union has already responded to the crisis. It hopes to find in the G20 setting a global response to a crisis that is systemic and global," the source added, speaking on condition of anonymity.

Financial markets rallied strongly this week after European leaders hammered out the crisis deal, although analysts quickly warned that details of the rescue could still take weeks or even months to work out.

But some underperforming investors are being cornered into putting yet more money into U.S. stocks.

The S&P 500 on Friday closed its fourth week of gains and is up more than 13 percent in October alone. But many, including hedge funds, were caught wrong-footed by the rally.

Even though some pullback may be expected next week, the clearer picture after the European deal "should give a green light for many of the funds to get back in risk assets," according to Robert Francello, head trader at hedge fund Apex Capital, which manages about $2 billion in San Francisco.

"Hopefully we'll be able to see some further gains into the year end," he said.

Hedge funds, among the equity market's power players, are on average sitting on losses of 8 percent for the year according to Hedge Fund Research. Meanwhile, the S&P 500 is up for the year, if only a bit more than 2 percent.

A JPMorgan note to clients following Thursday's 3 percent rally on the U.S. benchmark index argues for a "strong foundation for an equity rally into year end," with a 1,400-1,475 target.

That's more than the 8 percent gain hedge funds would need to come out of the red for the year.

"If you're a hedge fund manager and you want to put money to work it feels like it has to be on the long side: buying stocks, buying risky assets," said Nicholas Colas, chief market strategist at the ConvergEx Group in New York.

"For the moment, you've taken away major risk in Europe and you've replaced it with a potential positive in stock valuations and no double-dip."

European leaders reached a long-awaited agreement to boost the region's bailout fund and struck a deal with banks and insurers who will take a 50 percent loss on their Greek bonds.

A more disorderly default from Greece, and the possibility of sovereign defaults spreading in Europe, were part of the reason the S&P 500 closed its worst quarter since 2008 in September.

The market was also relieved after data earlier this week showed the U.S. economy grew at its fastest pace in a year in the third quarter.

A heavy flow of job market data, capped on Friday by the government's monthly report of job payrolls, will be closely watched to confirm the upbeat macroeconomic trend. A Reuters poll of economists shows employers created 95,000 jobs in October.

EARNINGS AND FED TO POWER ON THE RALLY

More than 100 S&P 500 companies will report earnings next week, with Lowes, Pfizer and Kellogg among the highlights.

Among the more than 300 that have already posted earnings for the past quarter, roughly seven out of 10 have reported better numbers than analysts expected.

Some expect the Federal Reserve to announce another round of asset purchases -- similar to the quantitative easing plan set up last year that sparked a year-long rally in stocks.

An equities rally following Fed purchases would most likely be led by commodity-related sectors, said Apex Capital's Francello.

"The Fed is beginning to lay the groundwork for another round of quantitative easing, so that should also put some wind in the back of risk assets," he said.

CHARTS ALSO LOOK BULLISH

The technical picture is also turning bullish, with the S&P moving this week above its 200-day moving average for the first time since early August.

At 1,285 the S&P faces resistance just below 1,300, an RBC Capital Markets note said, but the year-end trend for stocks points higher.

"We're still in a period of high volatility so you can't take anything for granted," said Colas from ConvergEx Group.

"Do you buy the dips? I believe that is the case."

(Reporting by Rodrigo Campos; additional reporting by Svea Herbst; Editing by Kenneth Barry)

But some underperforming investors are being cornered into putting yet more money into U.S. stocks.

The S&P 500 on Friday closed its fourth week of gains and is up more than 13 percent in October alone. But many, including hedge funds, were caught wrong-footed by the rally.

Even though some pullback may be expected next week, the clearer picture after the European deal "should give a green light for many of the funds to get back in risk assets," according to Robert Francello, head trader at hedge fund Apex Capital, which manages about $2 billion in San Francisco.

"Hopefully we'll be able to see some further gains into the year end," he said.

Hedge funds, among the equity market's power players, are on average sitting on losses of 8 percent for the year according to Hedge Fund Research. Meanwhile, the S&P 500 is up for the year, if only a bit more than 2 percent.

A JPMorgan note to clients following Thursday's 3 percent rally on the U.S. benchmark index argues for a "strong foundation for an equity rally into year end," with a 1,400-1,475 target.

That's more than the 8 percent gain hedge funds would need to come out of the red for the year.

"If you're a hedge fund manager and you want to put money to work it feels like it has to be on the long side: buying stocks, buying risky assets," said Nicholas Colas, chief market strategist at the ConvergEx Group in New York.

"For the moment, you've taken away major risk in Europe and you've replaced it with a potential positive in stock valuations and no double-dip."

European leaders reached a long-awaited agreement to boost the region's bailout fund and struck a deal with banks and insurers who will take a 50 percent loss on their Greek bonds.

A more disorderly default from Greece, and the possibility of sovereign defaults spreading in Europe, were part of the reason the S&P 500 closed its worst quarter since 2008 in September.

The market was also relieved after data earlier this week showed the U.S. economy grew at its fastest pace in a year in the third quarter.

A heavy flow of job market data, capped on Friday by the government's monthly report of job payrolls, will be closely watched to confirm the upbeat macroeconomic trend. A Reuters poll of economists shows employers created 95,000 jobs in October.

EARNINGS AND FED TO POWER ON THE RALLY

More than 100 S&P 500 companies will report earnings next week, with Lowes, Pfizer and Kellogg among the highlights.

Among the more than 300 that have already posted earnings for the past quarter, roughly seven out of 10 have reported better numbers than analysts expected.

Some expect the Federal Reserve to announce another round of asset purchases -- similar to the quantitative easing plan set up last year that sparked a year-long rally in stocks.

An equities rally following Fed purchases would most likely be led by commodity-related sectors, said Apex Capital's Francello.

"The Fed is beginning to lay the groundwork for another round of quantitative easing, so that should also put some wind in the back of risk assets," he said.

CHARTS ALSO LOOK BULLISH

The technical picture is also turning bullish, with the S&P moving this week above its 200-day moving average for the first time since early August.

At 1,285 the S&P faces resistance just below 1,300, an RBC Capital Markets note said, but the year-end trend for stocks points higher.

"We're still in a period of high volatility so you can't take anything for granted," said Colas from ConvergEx Group.

"Do you buy the dips? I believe that is the case."

(Wall St Week Ahead runs every Friday)

(Reporting by Rodrigo Campos; additional reporting by Svea Herbst; Editing by Kenneth Barry)

MF Global has reached out to major banks including Barclays PLC, Citigroup Inc, Deutsche Bank, Jefferies Group Inc, JPMorgan Chase & Co, Macquarie Group Ltd, State Street Corp and Wells Fargo, according to the source.

Private equity firm J.C. Flowers, which has a stake in MF Global, is also in talks about possibly taking it private, the Wall Street Journal reported.

"If it gets done, it needs to get done by Monday," the source said. "Whether it gets sold in parts or pieces, they are in good shape to orchestrate this process."

MF Global has declined to comment on its troubles.

Barclays, Citigroup, Deutsche, Jefferies and Wells Fargo also declined to comment, while the other banks and Flowers could not be reached immediately for comment late on Friday.

Pressure mounted on MF Global -- run by former Goldman Sachs Chief Executive Jon Corzine -- to sell after a week in which it posted a quarterly loss, its shares fell by two-thirds and its credit ratings were cut to junk.

The brokerage, which under Corzine increasingly used its own capital to trade, is paying the price for investments made on bonds of countries in the euro zone, and it is emerging as one of the hardest-hit U.S. firms in the fallout from Europe's sovereign debt crisis.

When a broker's credit rating drops to junk, it erodes confidence in its credit worthiness and can then restrict its ability to borrow -- the bedrock of any financial institution -- and fund day-to-day operations.

The firm's position in the repurchase market -- a vital place for short-term funding -- is under intense scrutiny because of the weakness in European debt.

MF Global is now scrambling to reassure sometimes skittish clients about its stability. But it told at least one fund that a number of clients are withdrawing money.

Its troubles become "a self-fulfilling prophecy," said Perry Piazza, director of investment strategies at Contango Capital Advisors in San Francisco. "The end game here is not good," he said.

MF Global stock dropped as much as 31 percent in early trading to 99 cents, its lowest ever, but later rebounded to $1.29. It was the second most actively traded stock on the New York Stock Exchange.

The company's bonds were trading in the mid-40s, which implies a high likelihood of default, after touching a morning low of 38 cents on the dollar. That was down from Thursday when the bonds, maturing in 2016 with a 6.25 percent coupon, were at 70. MF Global had offered the notes at par in August.

SALE PROCESS

The company tapped Evercore Partners Inc to advise it on strategic options including a possible sale, said a source familiar with the situation. A second source, who was briefed on the matter, said the company did not enter the talks with "specific targets and objectives."

"We believe MF could generate proceeds from sale of its customer asset portfolio or Futures Commission Merchant which frees up capital," Keefe Bruyette & Woods analyst Niamh Alexander wrote to clients. "However, we cannot quantify the cost of wind down or exiting broker positions that could offset those proceeds and wipe out equity."

MF Global's history dates back over 200 years, to a sugar broker that started in London. For years, MF Global focused on futures brokerage. In 2005, the company, formerly known as Man Financial, acquired Refco's U.S. futures business after that broker collapsed in an accounting scandal.

The company's futures business is in a cyclical downturn, but when interest rates rise, its income could surge and its clients could help boost another bank's broader sales and trading franchise.

Potential bidders are, however, unlikely to pay up for a business like the Futures Commission Merchant, in part because customers can take their relationships elsewhere, industry sources said.

Some customers are diverting money from the New York-based brokerage, according to hedge funds, rivals and analysts, though the extent of the outflows remained unclear.

A source at one of the firms that MF Global has reached out to said they wouldn't rule out their interest in some sort of a deal, but it would have to be something that involved taking on little risk.

A source at a different firm said it was difficult to buy the business because it is hard to evaluate the company's customers quickly, and the best customers could leave soon.

Some potential buyers said they would look at the business if MF Global offered it for cheap, a third source said.

CORZINE AND EUROPE'S FALLOUT

Corzine, who became CEO in March last year after a term as New Jersey's governor, has been trying to transform MF Global from a brokerage that mainly places customers' trades on exchanges into an investment bank that bets with its own capital.

But its bets on bonds from euro zone countries, including those issued by Italy, Spain, Portugal and Ireland, have gone bad, prompting regulators to press it to boost capital and ratings agencies to issue their warnings.

The loss of its investment grade rating, meanwhile, could hasten the exodus of customers away from MF Global.

"Given the uncertainty around timing of the agencies' next move, management needs to move quickly in order to avoid client defections and either work on strategic options or work with the agencies to get back to stable status," Deutsche Bank analyst Michael Carrier wrote to clients.

MF Global's bank loans were lower Friday amid rumors the company drew down its revolving credit lines, separate sources said. The extended revolver due 2014 is quoted 60-65 on Friday after a large piece of the paper is said to have changed hands on Thursday at 70, the sources said.

European Union leaders struck a deal this week to relieve the continent's sovereign debt crisis -- potentially good news for MF Global -- but many details of the EU deal still need ironing out.

In Asia, the Singapore Exchange said MF Global's unit in the city state is meeting its financial obligations as a clearing member. That echoes assurances Thursday by U.S. clearers CME Group Inc, IntercontinentalExchange Inc and options clearinghouse OCC.

(Reporting by Jonathan Spicer, John Balassi, Philip Scipio, Paritosh Bansal, Dan Wilchins, Richard Leong, Karen Brettell,Jeanine Prezioso, Herb Lash in New York, and Charmian Kok in Singapore; Editing by Matthew Lewis, Phil Berlowitz, Gary Hill)

The company run by former Goldman executive Jon Corzine has shed 63 percent of its market capitalization this week. That could hamper MF Global's dealmaking ability, while at the same present possible buyers with assets at big discounts.

Goldman Sachs Group Inc, State Street Corp and Macquarie are all eyeing MF Global or parts of it, The Wall Street Journal reported.

In the last few days, the brokerage posted a quarterly loss and two ratings agencies cut its debt rating to junk -- underscoring the bad bets MF Global made on bonds of countries in the euro zone, which is now battling a debt crisis.

MF Global stock dropped as much as 31 percent in early trading to 99 cents, its lowest ever, but later rebounded to $1.35. It was the second most actively traded stock on the New York Stock Exchange.

"The MF Global team has no choice but to quickly shrink its balance sheet to raise cash and then to sell the cash into the market to show 'strength'," Brad Hintz, a senior analyst at Bernstein Research, wrote to clients.

"These events play out in days."

The company's bonds were trading at distressed levels in the mid-40s, after touching a morning low of 38 cents on the dollar. That was down from Thursday when the bonds, maturing in 2016 with a 6.25 percent coupon, were at 70.

MF Global, which is emerging as one of the hardest-hit U.S. firms in the fallout from Europe, had offered the notes at par in August.

The company tapped Evercore to advise it on strategic options including a possible sale, said a source familiar with the situation. A second source, who was briefed on the matter, said the company is "focused on doing a smart deal, a fair deal," and that it did not enter the talks with "specific targets and objectives."

"We believe MF could generate proceeds from sale of its customer asset portfolio or Futures Commission Merchant which frees up capital," Keefe Bruyette & Woods analyst Niamh Alexander wrote to clients. "However, we cannot quantify the cost of wind down or exiting broker positions that could offset those proceeds and wipe out equity," she wrote.

MF Global has declined to comment on its troubles.

CORZINE AND EUROPE'S FALLOUT

Some customers are diverting money from the New York-based brokerage, according to hedge funds, rivals and analysts, though the extent of the outflows remained unclear. (Graphic of MF Global's market share among futures commission merchants: link.reuters.com/syz64s )

MF Global's bank loans were lower Friday amid rumors the company drew down its revolving credit lines, separate sources said. The extended revolver due 2014 is quoted 60-65 on Friday after a large piece of the paper is said to have changed hands on Thursday at 70, the sources said.

Corzine, who became CEO in March last year after a term as New Jersey's governor, has been trying to transform MF Global from a brokerage that mainly places customers' trades on exchanges into an investment bank that bets with its own capital.

But its bets on bonds from euro zone countries, including those issued by Italy, Spain, Portugal and Ireland, have gone bad, prompting regulators to press it to boost capital and ratings agencies to issue their warnings.

The loss of its investment grade rating could hasten the exodus of customers away from MF Global.

"Given the uncertainty around timing of the agencies' next move, management needs to move quickly in order to avoid client defections and either work on strategic options or work with the agencies to get back to stable status," Deutsche Bank analyst Michael Carrier wrote to clients.

European Union leaders stuck a deal this week to relieve the continent's sovereign debt crisis -- potentially good news for MF Global -- but many details of the EU deal still need ironing out.

In Asia, the Singapore Exchange said MF Global's unit in the city state is meeting its financial obligations as a clearing member. That echoes assurances Thursday by U.S. clearers CME Group Inc, IntercontinentalExchange Inc and options clearinghouse OCC.

(Reporting by Jonathan Spicer, John Balassi, Philip Scipio, Paritosh Bansal, Jeanine Prezioso and Herb Lash in New York, and Charmian Kok in Singapore; Editing by Matthew Lewis and Phil Berlowitz)

The second largest U.S. bank is likely to allow many customers to avoid the fee by taking measures such as maintaining minimum balances, having paychecks direct deposited, or using Bank of America credit cards, the person said.

Under earlier plans, customers might have needed balances totaling $20,000 across all their Bank of America accounts to avoid the fee.

Bank of Americas unleashed a firestorm of criticism from customers, consumer advocates and politicians last month when it disclosed plans to charge customers $5 per month for using their debit cards, starting sometime next year. The goal was to make up revenue lost to a law that slashes the fees banks charge retailers when consumers swipe their cards.

Some other major banks have quietly pulled back on the charges. After testing a $3 per month fee in two states since February, JPMorgan Chase & Co decided not to charge customers, a person familiar with the situation said on Friday. The test will end next month and will not be extended or expanded, the person added.

Wells Fargo & Co started testing a $3 per-month fee in five states on October 14. The bank has not had time to evaluate results and has not made any changes in the program, Wells spokeswoman Lisa Westermann said.

Charlotte, North Carolina-based Bank of America is not abandoning the fee now and will likely include it in new account types the bank is testing in three states. The bank plans to roll out these packages nationwide next year.

The $5 per-month fee may still remain an option for customers, the person said.

The bank has said the purpose of the new account types is to provide customers with upfront pricing, instead of hitting them with penalties after the fact. Customers can pay monthly fees of between $9 and $20, or avoid the charges by keeping minimum balances, using their credit cards or having a minimum amount deposited to their account.

While some banks have disclosed plans to apply similar fees, many banks and credit unions decided not to institute the charge and have encouraged customers to switch banks.

(Reporting by Rick Rothacker in Charlotte, North Carolina; editing by Andre Grenon)