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Employers announced 115,730 planned job cuts last month, more than double August's total of 51,114, according to the report from consultants Challenger, Gray & Christmas, Inc.

The figure was the highest since April 2009 when 132,590 layoffs were announced.

September's job cuts were also much higher than the same time a year ago, tripling from the 37,151 job cuts announced in September 2010. For 2011 so far, employers have announced 479,064 cuts, up 16.5 percent from the first nine months of 2010.

"It is important to keep in mind that 80,000 cuts, or nearly 70 percent of last month's total, came from just two organizations: Bank of America and the United States Army," John A. Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement. "Neither of these cuts is directly related to recent softness in the economy."

Bank of America's (BAC.N) 30,000 planned cuts stemmed from continued fallout from the U.S. housing market collapse and restructuring efforts to remake the bank into a smaller, more efficient company, Challenger said.

The 50,000 military cuts were the result of drawing down forces in two wars and cost-cutting efforts in all areas of the federal government. September's cuts followed an announced 17,500 reduction in August, he added.

These military personnel might face tough times finding jobs with companies.

"Perhaps the biggest challenge is taking the often specialized skills and experience gained in the military and translating it to the private sector," Challenger said.

On the hiring front, employers announced plans to add 76,551 workers in September, down from 123,076 a year ago, the firm said.

* At 1215 GMT, Automatic Data Processing (ADP) releases its September employment report. Economists expect 75,000 jobs were created in September.

* The Institute for Supply Management releases at 1400 GMT its September non-manufacturing index. Economists forecast a reading of 52.9 versus 53.3 in August.

* The Mortgage Bankers Association releases at 1100 GMT Weekly Mortgage Market Index for the week ended September 30. The mortgage market index read 767.9 and the refinancing index was 4,239.6 in the previous week.

* At 1130 GMT, Challenger, Gray & Christmas releases its report on job cuts for September. Challenger reported 51,114 layoffs in August.

* The U.S. Environmental Protection Agency is expected to ease a new air pollution rule that would require power plants in 27 states to slash emissions, The Wall Street Journal reported, citing people familiar with the matter.

* Sprint Nextel said it will sell the next version of Apple's iPhone, ending months of speculation about whether it would become the third U.S. operator to sell the popular device.

* Asian smartphone makers have a chance to exploit a rare letdown from Apple after the new iPhone 4S failed to wow fans and investors, leaving Android rivals better placed to grab market share.

* EU regulators will formally object this week to the planned merger of Deutsche Boerse and NYSE Euronext, two sources with knowledge of the case said, which may force the companies to offer concessions to ease competition concerns.

* Oil and gas firm Anadarko Petroleum Corp said the resource potential in the Offshore Area 1 of Mozambique's Rovuma Basin had increased.

* Bank of New York Mellon was sued on Tuesday by New York federal and state prosecutors who accused the bank of cheating clients in foreign exchange transactions.

* European shares rose in early trade, led by banks after European finance ministers agreed to safeguard the region's lenders. The FTSEurofirst 300 index of top European shares was up 1.3 percent.

* Japanese stocks gave up early gains and ended lower, with the broad Topix index hitting its lowest level since the March earthquake. The Nikkei average fell 0.9 percent.

* Investors rushed in to buy U.S. technology and other beaten-down sectors as the S&P 500 dipped in and out of a bear market on Tuesday, before a late rally drove the index to its largest gain in more than a week.

* The Dow Jones industrial average gained 153.41 points, or 1.44 percent, to 10,808.71. The S&P 500 gained 24.72 points, or 2.25 percent, to 1,123.95. The Nasdaq Composite gained 68.99 points, or 2.95 percent, to close at 2,404.82.

(Reporting by Atul Prakash; Editing by David Holmes)

Citing anemic employment, depressed confidence, and financial risks from Europe, Bernanke urged lawmakers not to cut spending too quickly in the short term even as they grapple with trimming the long-run budget deficit.

He made clear that the U.S. central bank's policy committee considers inflationary pressures well under control and given high unemployment, would be ready to ease monetary conditions further following the launch of a new stimulus measure in September.

"The Committee will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in the context of price stability," Bernanke told the Joint Economic Committee of Congress.

His language was firmer than the policy-setting Federal Open Market Committee's statement less than two weeks ago, when the Fed said it would monitor the outlook and was "prepared to employ its tools as appropriate."

Since then, uncertainty about the outcome of the euro zone's sovereign debt crisis has undermined U.S. business and consumer confidence and helped to slow economic growth. The business cycle monitoring group ECRI last Friday said that the U.S. economy is tipping into a new recession.

Asked whether another round of bond purchases, known as quantitative easing, was in store, Bernanke was noncommittal.

"We never take anything off the table because we don't know where the economy is going to go. We have no immediate plans to do anything like that," he said.

The prospect of further Fed support for the economy lifted U.S. stocks though, after the market saw selling early in the day, pushing the S&P 500 briefly dipping into bear market territory.

Andrew Tilton, economist at Goldman Sachs, said contagion from the European crisis is a serious risk, threatening to tighten credit availability in the United States and weaken exports to the region. "This impact is likely to slow the U.S. economy to the edge of recession by early 2012," he said.

Recent U.S. economic data has been mixed after a dismal August, with a key manufacturing survey showing an unexpected improvement, but the slightly better tone has not been sufficient to dispel fears of another downturn.

Fresh clarity on the state of the economy will come on Friday, when the Labor Department releases monthly employment figures. Economists in a Reuters poll forecast a paltry gain of 60,000 jobs for September, and Bernanke in his testimony offered little hope for much improvement.

"Recent indicators, including new claims for unemployment insurance and surveys of hiring plans, point to the likelihood of more sluggish job growth in the period ahead," he told the Joint Economic Committee of Congress.

FISCAL WARNING

Bernanke said government belt-tightening was likely to prove a significant drag on the world's largest economy, which averaged less than 1.0 percent annualized growth in the first half of the year.

"An important objective is to avoid fiscal actions that could impede the ongoing economic recovery," he said,

Stressing that higher inflation earlier in the year had not become ingrained in the economy, Bernanke argued price pressures will remain subdued for the foreseeable future.

That backdrop made it easier for the Fed to launch its latest monetary easing effort in September, when it announced it would be selling $400 billion in short-term Treasuries and using the proceeds to buy longer-dated ones.

Bernanke estimated the new policy would lower long-term interest rates by about 0.20 percentage point which he said was roughly equivalent to a half percentage point reduction in the benchmark federal funds rate. Already 10-year Treasury note yields are at multi-year lows of 1.83 percent, helping keep mortgage and corporate borrowing costs extraordinarily cheap.

"We think this is a meaningful but not an enormous support to the economy. I think it provides some additional monetary accommodation, it should help somewhat on job creation and growth. It's particularly important now the economy is close -- the recovery is close -- to faltering," Bernanke said.

"We need to make sure that the recovery continues and doesn't drop back and the unemployment rate continues to fall downward."

INFLATION VS JOBS

Republican lawmakers pressed Bernanke on whether the Fed's dual mandate for full employment and price stability meant that it had to make compromises on inflation. On the 2012 presidential campaign trail, Republican candidate, Texas Governor Rick Perry earlier said it would be "treasonous" for the Fed to add further money to the economy.

Bernanke was categorical in defending the Fed's record of price stability in recent decades. He noted inflation has averaged 2.0 percent during his tenure and blamed regulatory failures, not excessively low rates, for the financial crisis.

Some economists believe the central bank could announce more concrete targets for policy goals, by linking the path of rates directly to unemployment and or inflation.

In response to the financial crisis and recession of 2008-2009, the Fed slashed interest rates to effectively zero and more than tripled the size of its balance sheet to a record $2.9 trillion, buying bonds off banks balance sheets. Bernanke said this was not bailing out Wall Street, but was part of its mandate to provide price and financial stability.

Doubts also grew over the sustainability of a rise in U.S. stocks Tuesday after Federal Reserve Chairman Ben Bernanke promised more economic stimulus if needed, easing concerns over the damage to the U.S. economy from a possible Greek default.

"The market in Asia is testing Bernanke's resolve to be able to provide stimulus," said Jonathan Barratt, managing director of Commodity Broking Services.

"What the market wants to see is something definite, and it is losing faith in what Bernanke can deliver."

In credit markets, which have been showing increasing signs of strain in recent week, the iTraxx Asia ex-Japan investment grade index was steady, after a sharp widening earlier this week.

In the latest blow to be dealt to investor confidence by Europe's intractable crisis, Moody's lowered its rating on Italy's bonds by three notches Tuesday, saying it saw a "material increase" in funding risks for euro zone countries.

"They have to be continuously seen to be working on the problem," said Barratt, adding that European policymakers needed to show concrete action to convince the markets.

MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS rose 0.3 percent, after rising as much as 0.9 percent earlier. It hit a two-year low the day before.

But Japanese and Korean shares were down, turning negative after an initial gain. The Nikkei .N225 fell 0.8 percent, after opening up 0.4 percent, as investors cautiously gauged the progress in Europe. .T

"There are now hopes that a worst-case scenario in Europe will be avoided, but because this plan is still under consideration and is not formally decided yet, plenty of risks remain," said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities.

EURO FALTERS

As the euro slipped from highs, gold's rise was capped, while other commodities such as oil and copper struggled to extend gains on lingering concerns over global demand.

Brent crude was up 1.71 percent, but off an intraday high of $102.10 a barrel, as tighter U.S. crude stocks and promises by the Fed to launch new stimulus measures if necessary helped halt a sharp three-day sell-off.

U.S. crude traded up $2 at $77.67 a barrel. <O/R>

The euro eased 0.4 percent against the dollar, faltering after a brief rally that had lifted the single currency from a near nine-month trough against the dollar and a decade low versus the yen Tuesday. <USD/>

European finance ministers agreed Tuesday to safeguard their banks as doubts grew about whether a planned second bailout package for debt-laden Greece would go ahead.

A sense of urgency appeared to be heightening in Europe as French-Belgian municipal lender Dexia SA (DEXI.BR) became the first European bank to have to be bailed out due to the euro zone's sovereign debt crisis.

Tensions remained, however, as euro zone finance ministers postponed a crucial aid payment to Greece until mid-November, while European Union ministers said they were reviewing the size of private-sector involvement in a second bailout package for Athens.

Japan Wednesday offered its share of help, saying it would consider continuing its purchases of bonds issued by Europe's bailout fund.

(Additional reporting by Lisa Twaronite; Editing by Alex Richardson)

The agency downgraded Italy to A2 from Aa2, a lower rating than it holds on Estonia and on a par with Malta and kept a negative outlook on the rating.

The euro pared gains against the dollar and Japanese yen immediately following the announcement which comes after Moody's rival Standard and Poor's cut its rating on Italy by one notch to A/A-1 on September 19.

The cuts underline growing investor concern about the euro zone's third largest economy, which is now firmly at the center of the debt crisis and dependent on help from the European Central Bank to keep its borrowing costs under control.

"The negative outlook reflects ongoing economic and financial risks in Italy and in the euro area," Moody's said in a statement.

"The uncertain market environment and the risk of further deterioration in investor sentiment could constrain the country's access to the public debt markets," it said.

It added that Italy's rating could "transition to substantially lower rating levels" if there were long term uncertainty over the availability of external sources of liquidity support.

Italy's mix of chronically low growth, a public debt mountain amounting to 120 percent of gross domestic product and a struggling government coalition has caused mounting alarm in financial markets.

Moody's decision came as little surprise after the agency said on September 17 that it would finish a review for possible downgrade of its rating on Italy within a month.

But it highlights the growing vulnerability of the euro zone, which is already struggling to contain the crisis in the far smaller Greek economy and which would be overwhelmed by a crisis of a similar scale in Italy.

"It's not that unexpected but it doesn't help the situation at all," said Robbert Van Batenburg, Head of Equity Research at Louis Capital in New York.

"They have already traded as if there was somewhat of a downgrade in the works, so it will probably force Italian policymakers to embark on more austerity programs. It will put another fiscal strait-jacket on them."

VULNERABILITY

Moody's said the likelihood of a default by Italy was "remote" but it said the overall shift in sentiment on the euro area funding market implied a greater vulnerability to a loss of market access at affordable rates.

Italy's relatively modest budget deficit, conservative financial system and high level of private savings had kept it on the sidelines of the euro zone crisis while countries like Greece and Ireland were sucked down.

"Italy is being punished not because its finances suddenly deteriorated, but because investors have become more sensitive to its long-standing weaknesses," said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London.

He said markets appeared to be focusing on the weakened center-right government's lack of progress in stimulating the stagnant economy, which many analysts expect to stall or even slip into recession next year.

"The bond markets are more concerned about Italy's ability to grow than its commitment to reducing a fiscal deficit that is already one of the smallest in the euro zone," he said.

Prime Minister Silvio Berlusconi shrugged off the downgrade immediately, saying the Moody's announcement had been expected and the government was committed to its public finance target, which sees the budget being balanced by 2013.

The government last month pushed through a 60 billion euro austerity package -- bringing forward its original balanced budget target by one year -- in return for support for its battered government bonds from the ECB.

Berlusconi's center-right coalition has been deeply divided over policy and personal issues and further distracted by an array of scandals surrounding the prime minister.

Opposition leaders have called repeatedly for the government to resign over its handling of the economy and there is widespread speculation that Berlusconi could be forced out of office before his term expires in 2013.

Italy's borrowing costs have soared over the past three months and have only been kept under control by the ECB support but in recent weeks they have begin to climb back to potentially dangerous levels.

An auction of long term bonds last month saw yields on 10 year BTPs rise to 5.86 percent, their highest level since the introduction of the euro more than a decade ago.

The center-right government has been under heavy pressure over its handling of the escalating crisis and recently cut its growth forecasts through 2013.

It is now expecting the economy to expand by just 0.6 percent next year, down from a previous projection of 1.3 percent.