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China braces for second day of downbeat economic data. Fear of faltering demand from China's two biggest foreign customers - the European Union and United States - had seen economists peg back their consensus call for annual export growth to a three-month low of 8.6 percent in a Reuters poll last week, but even that could be too optimistic. "I think there is substantial downside risk given that China's industrial production surprised on the downside already," Zhang Zhiwei, chief China economist at Nomura in Hong Kong, told Reuters. "Even to our estimate of 5.5 percent growth, which is well below the market consensus, there's a risk of downside," Zhang added, citing huge slides in July export data from Taiwan and South Korea in recent days as key to his cautionary call. Taiwan on Monday posted a fifth straight month of decline in exports in July, dragged down by double-digit drops in shipments to China, Europe and the United States, while South Korea's July exports were the worst in nearly three years. Data on Thursday meanwhile showed annual growth in China's factory output slowed to its weakest in more than three years in July, missing market forecasts and increasing expectations that Beijing will take further policy steps to support an economy that has seen growth sliding for six straight quarters. Those numbers cast a darker shadow over China's total trade performance in July, with imports also at risk of falling short of forecast growth of 7.2 percent given that much of the country's imports are destined for production lines that ultimately feed exports. The result could see China's trade surplus surge to $34.3 billion in July, marking its highest since January 2009. Economists had forecast a rebound in imports in July versus June on the basis that factories may be rebuilding inventories as surveys of purchasing managers across China had signaled a stabilization of output and that the world's second-biggest economy had passed its cyclical low point. GET TO THE PUNCH Alistair Thornton, China economist at IHS Global Insight in Beijing, reckons even though the inventory de-stocking might be close to an end, the amount of drag still evident in the economy means any rebound in growth will be shallow and volatile - and needing more government policy action to ensure it arrives. "The government needs to transform its current stimulus push into a stimulus punch," he wrote in a note to clients. Beijing has refused to describe its pro-growth policy tweaks since the autumn of last year as stimulus, calling it a process of "fine-tuning" - albeit one that has cut interest rates twice, freed an estimated 1.2 trillion yuan ($190 billion) for bank lending and fast-tracked state-funded infrastructure projects. Fine-tuning has so far failed to convincingly arrest a slide in growth that has persisted for six successive quarters and which is likely this year to see China chalk up its slowest full year of growth since 1999, at 8 percent according to the latest Reuters poll. "The government might not want to pile on debt and revert to grand state-led stimulus, but it increasingly appears that there are few other choices," Thornton wrote. Stronger-than-expected import growth, however, would be a sign that government support measures unveiled so far are gaining traction and bolstering growth. China's Commerce Ministry said last month that it was confident of achieving the government target of 10 percent growth in total trade this year, though Commerce Minister Chen Deming said earlier trade would hit the target only "if lucky". China's top leaders pledged last week to take steps to diversify export markets in the second half of the year to support an economy that saw its slowest pace of growth in more than three years in the second quarter. China's economic growth in the first half of 2012 was fuelled mainly by domestic consumption and capital spending with exports a net drag on performance. (Editing by Alex Richardson )

Canada June trade deficit widens, imports hit record high. Imports grew 2.3 percent to hit a second-straight record high, led by the machinery and equipment sector. Exports edged up 0.2 percent, as a strong gain in exports of car products offset declines in five out of seven sectors. Following are the seasonally adjusted figures in billions of Canadian dollars: Merchandise trade June May(rev) change pct May(prev) Balance -1.806 -0.954 n.a -0.793 Exports 39.097 39.027 +0.2 38.875 Imports 40.903 39.981 +2.3 39.668 (Reporting by Alex Paterson; Editing by David Ljunggren )

JPMorgan says bank regulators force capital recalculation. The revisions reduced the bank's Basel I Tier 1 common ratio to 9.9 percent from 10.3 percent at the end of June, JPMorgan said in a filing with the U.S. Securities and Exchange Commission. The revisions came after the bank was informed on Wednesday by the U.S. Office of Comptroller of the Currency and the Federal Reserve Bank of New York that changes were needed. The changes reflect "regulatory guidance regarding a limited number of market risk models" used for positions in the first half of the year, including some at the company's Chief Investment Office, the bank said. The Chief Investment Office is the site of the bank's nearly $6 billion of losses from the so-called London Whale derivatives trades. (Reporting by David Henry in New York; Editing by Gerald E. McCormick)

S&P 500 extends rally to day five with slim gain. While the S&P 500 has chalked up three-month highs every day this week, the index has climbed only 0.6 percent over the past three sessions - an indication that investors aren't prepared to make aggressive bets despite better-than-expected jobless claims and U.S. trade data. The Nasdaq outperformed the other two major U.S. stock indexes, led by Cisco Systems Inc after Goldman Sachs added the company to its conviction buy list and Piper Jaffray upgraded it to "overweight." Cisco rose 3.2 percent to $17.70 and was the Dow's biggest percentage gainer. Material stocks also advanced after James River Coal Co said the market for power-generating coal was showing signs of a recovery following massive industry-wide cutbacks in production. The stock surged 13 percent to $2.52 while peer company Arch Coal Inc jumped 7.1 percent to $7.42. An S&P materials index rose 0.5 percent. The three major U.S. stock indexes seesawed throughout the morning, with the S&P 500 mostly hovering above 1,400 in light trade as investors bet central banks would soon act to support a global recovery that has shown signs of stalling. "It's almost eerie how flat the market has been. But while there's a risk of our becoming overbought, I don't see why we'd see a decline of any magnitude until we hear what central banks will do," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. The Dow Jones industrial average slipped 10.45 points, or 0.08 percent, to 13,165.19 at the close. But the Standard & Poor's 500 Index inched up 0.58 of a point, or 0.04 percent, to 1,402.80. The Nasdaq Composite Index gained 7.39 points, or 0.25 percent, to close at 3,018.64. Markets held on despite a raft of weak Chinese economic data. Annual growth in factory output slowed to its lowest in more than three years in July while annual consumer price inflation hit a 30-month low. "This news is disappointing, but it only emboldens investors that we'll be rescued by central banks somewhere," said Luschini, who helps oversee $54 billion in assets. Data showed the number of Americans filing new claims for jobless benefits fell last week while the U.S. trade deficit in June was the smallest in 1-1/2 years, hopeful signs for the struggling economy. Beauty products maker Elizabeth Arden forecast 2013 profit above estimates on stronger sales and its shares jumped 13 percent to $44.02. Of the 445 companies in the S&P 500 that have reported second-quarter earnings through Thursday morning, 68 percent have reported earnings above analysts' expectations, in line with the average over the last four quarters. Shares of Robbins & Myers soared 27.4 percent to $59.63 after National Oilwell Varco said it would buy the company for $2.54 billion in cash. Varco shares added 0.8 percent to $76.98. E*Trade Financial Corp gained 6.9 percent to $8.57 after it replaced its chief executive officer, Steven Freiberg, and said its board had formed a committee to find a permanent replacement. Volume was light, with about 5.41 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below last year's daily average of 7.84 billion. About 52.5 percent of companies traded on the New York Stock Exchange closed higher, while 53 percent of Nasdaq-listed shares gained for the day. (Editing by Jan Paschal )

Weekly jobless claims unexpectedly fall last week. Initial claims for state unemployment benefits slipped 6,000 to a seasonally adjusted 361,000, the Labor Department said. The prior week's figure was revised up to 367,000 from the previously reported 365,000. Economists polled by Reuters had forecast claims rising to 370,000 last week. The four-week moving average for new claims, a better measure of labor market trends, rose 2,250 to 368,250. A Labor Department official said there was nothing unusual in the state-level data and no state had been estimated. Problems anticipating the timing of temporary plant shutdowns by automakers for annual retooling caused wide swings in claims in July, making it difficult to get a clean read of the jobs market. Last week's report was the first in several weeks not affected by auto plant shutdowns, and the drop in new applications offered a hopeful sign for the labor market. Nonfarm payrolls increased 163,000 in July, the most in five months, after three months of gains below 100,000. But the unemployment rate rose by a tenth of a percentage point to 8.3 percent. Worries of deep government spending cuts and higher taxes scheduled to kick in at the turn of the year and Europe's on-going debt crisis were making companies cautious about hiring new workers, economists say. The number of people still receiving benefits under regular state programs after an initial week of aid rose 53,000 to 3.33 million in the week ended July 28, the claims report showed. A total of 5.75 million Americans were receiving unemployment benefits under all programs in the week ended July 21, down 214,367 from the prior week. (Reporting By Lucia Mutikani ; Editing by Andrea Ricci )

Peregrine CEO used company funds to buy life insurance: lawyer. Peregrine, commonly known as PFGBest, filed for bankruptcy protection on July 10, one day after CEO Russell Wasendorf attempted suicide and left a note describing how he had stolen more than $100 million from customers' accounts over nearly 20 years. Trustee Ira Bodenstein, whose job is to oversee the liquidation of Peregrine and return money to customers and creditors, has seen checks confirming Wasendorf used company money to pay for life insurance premiums, the trustee's lawyer Robert Fishman told reporters after a court hearing. Wasendorf obtained the policy with a face value of $4.5 million eight years ago, according to a receiver appointed for Wasendorf's assets in the firm's bankruptcy. Customer money may have been used to pay for the insurance, an attorney for the receiver said. The receiver, whose court-appointed job is tracking down and selling Wasendorf's assets at the highest price, on Wednesday won approval from a federal judge to cash in the insurance policy for $1.3 million. The money will be held in a newly created segregated account for the receiver and distributed to customers and creditors upon order from the court. A second life insurance policy, obtained by Wasendorf 14 months ago with a face amount of almost $2.2 million, will be allowed to lapse because it has no cash value. As for other assets, the receiver plans to abandon or surrender a private jet owned by Wasendorf to a lender. Its value was recently assessed at $3.2 million and Wasendorf owed $4.3 million on it, the receiver's lawyer said. The public defender representing Wasendorf, who is in jail, has declined to comment. Wasendorf was arrested last month for lying to federal regulators, and prosecutors have said they intend to file more charges. A grand jury is considering the case in Iowa, where Peregrine had its headquarters. (This story has been corrected to show in headline, first bullet point, and first and third paragraphs of August 8 story that company funds, not client funds, were used.) (Editing by Bob Burgdorfer )

China to subsidies appliances to lift consumption. Shoppers buying home appliances including microwave ovens, electric cookers, electric fans and extraction fans will be subsidized by as much as 10 percent of the sales price, the China Household Electrical Appliances Association said. "The scheme is aimed at benefitting consumers and stimulating market demand," a statement published on the association's website (www.cheaa.org) said on Thursday. The subsidies will come from funds set up by producers and retailers of kitchen appliances, and will be reviewed in 40 days, the statement said. GOME Electrical Appliances ( 0493.HK ) and Dazhong Electronics are among companies involved in the scheme. The industry body did not say how much the pilot scheme would cost or where it would be implemented. The private-sector plan mirrors one run by the government, which has earmarked 26.5 billion yuan ($4.17 billion) in subsidies for energy-saving home appliances. In the aftermath of the global financial crisis in late 2008, Beijing rolled out policies to boost home appliance sales. Those schemes ended in 2011, denting sales and creating a buildup in inventory of air conditioners. Growth in the world's second-largest economy was driven by domestic spending in the first-half of the year. But retail spending was still not strong enough, leaving China's economic growth at a three-year low of 7.6 percent in the second quarter. (Reporting By Xiaoyi Shao and Koh Gui Qing; Editing by Jeremy Laurence )

JPMorgan stymied in push to get beyond 'Whale' trades. Dimon, CEO of JPMorgan Chase & Co ( JPM.N ), has had to postpone new repurchases of the bank's stock, and on Wednesday regulators forced his company to reduce its calculation of its capital cushion against losses, all because of derivatives losses related to a trader known as the "London Whale." In a filing on Thursday with the Securities and Exchange Commission, JPMorgan said it now hopes to restart its stock buyback program in the first quarter of 2013, roughly three months later than the goal Dimon set in a meeting with institutional investors and stock analysts in July. The company also disclosed in the filing that regulators had forced the bank to recalculate capital levels to reflect their views on risk models the company used for some of its positions, including some at its Chief Investment Office, which racked up the derivatives losses. JPMorgan changed a key risk model in the CIO and lost control over the accuracy of its financial reporting in the first quarter as the office built up a massive credit derivatives portfolio that had trading losses of nearly $6 billion. JPMorgan, whose $2.29 billion of assets make it the biggest U.S.-based bank, said it was informed on Wednesday by the U.S. Office of Comptroller of the Currency and the Federal Reserve Bank of New York that changes were needed in its capital calculations. Former CIO trader Bruno Iksil became known in the derivatives market as the "London Whale" for the size of the positions he took. The name has stuck to the affair even as the bank has said others were involved. The losses, a major embarrassment for Dimon, also led JPMorgan on Thursday to formally restate its first-quarter results, as it previously said it would. Though the losses were never seen as big enough to threaten JPMorgan's position as one of the strongest U.S. banks, the company suspended stock repurchases in May to rebuild capital it had lost. Dimon said in April that he wanted to buy back shares when they were cheap to increase the value of the remaining shares outstanding. He suggested then that the shares were a bargain for the company at less than about $45. The shares traded Thursday morning at $36.99, down 0.5 percent for the day and 9 percent lower than before the derivatives problem was disclosed by the company on May 10. For JPMorgan to resume stock repurchases, it must win approval from the Federal Reserve after another annual stress test of its balance sheet, and the company's board of directors must complete their own investigation of the CIO, according to the Thursday filing. (Reporting by David Henry in New York; Editing by Gerald E. McCormick and John Wallace)

Labor Dept inadvertently published jobless claims data early. Some banks, funds and researchers noticed the early release of the data but traders said the market impact was limited. The incident happened at a time when the department is tightening procedures governing the handling of its embargoed economic data by the media, including the closely watched employment and inflation reports, to protect against data leaks. It said the jobless claims report, which is normally published at 8:30 a.m. (1230 GMT) every Thursday, was placed in an automated software system on Wednesday in preparation for Web postings. "A test of the automated system that was conducted on August 8 inadvertently triggered the release of the unemployment claims report. The data were posted on the department's Employment and Training Administration website at 5:10 p.m. on August 8," the Labor Department said in a statement. "ETA is conducting a comprehensive internal review of new testing procedures and has notified the department's Office of Inspector General." (Reporting by Lucia Mutikani ; Editing by James Dalgleish )

Standard Chartered begins fightback on Iran allegations. That's the key question being asked about New York banking regulator Benjamin Lawsky after his explosive charge that London's Standard Chartered bank abetted $250 billion of money-laundering transactions with Iran. Standard Chartered won help Wednesday from Britain's central bank governor, who portrayed Lawsky as marching to his own tune, and marching out of step with federal regulators in Washington. "One regulator, but not the others, has gone public while the investigation is still going on," the Bank of England's Mervyn King said at a news conference in London. The U.S. Treasury Department, in a letter responding to a request for clarification from British authorities, said it takes sanctions violations seriously. The British bank lost over a quarter of its market value in 24 hours after Lawsky, the head of New York State's Department of Financial Services, threatened Monday to cancel Standard Chartered's state banking license, which is critical for dealing in dollars. Lawsky called Standard Chartered a "rogue institution" for breaking U.S. sanctions against Iran. Standard Chartered shares bounced 7.1 percent on Wednesday to close in London at 13.15 pounds, up from a three-year low of 10.92 hit on Tuesday. They were still down 18 percent since the regulator's threat, which Chief Executive Peters Sands said was "disproportionate" and came as a "complete surprise." Meanwhile, Reuters Breakingviews reported that the U.S. Federal Reserve has asked Standard Chartered's New York office to report in every few hours on its liquidity position, according to people familiar with the situation. The concern is that the possibility of Standard Chartered losing its New York license could spook trading counterparties or depositors, although there is no suggestion that this is happening, Breakingviews said. The bank's top executives, some like Sands scrambling back from summer vacations, worked on a defense strategy. So far, the executives have contested the regulator's figures and his interpretation of the law, but they have given little further detail. The bank says only a tiny proportion of its Iran-related deals - less than $14 million - was questionable under U.S. sanctions rules. Sources told Reuters that federal banking regulators in Washington, who had been probing Standard Chartered's Iran-related deals for more than two years, were surprised by the timing of Lawsky's charges and the stridency of his language. Lawsky's Department of Financial Services had come to the conclusion the case was getting old and that it wanted to move forward, a person with knowledge of the situation said. The department told other agencies at a meeting in April that it planned to move forward with the case, the person said. Members of Lawsky's office met representatives of Standard Chartered around May but did not inform the bank it planned to issue an order against it, the person said. "This is a case about Iran, money laundering, and national security," Lawsky said in a statement on Wednesday. "We will continue to work closely with our law enforcement partners, both federal and state, in this effort. No bank, big or small, foreign or domestic, is above the law." In Washington, Adam Szubin, director of the Treasury Department's Office of Foreign Assets Control, said in a letter to British authorities that his office is investigating Standard Chartered for "potential Iran-related violations as well as a broader set of potential sanctions violations." The letter, which was dated Wednesday and obtained by Reuters, came in response to a British request for clarification of U.S. sanctions laws. Although much of the letter focused on so-called U-turn transactions, which are at the center of New York's allegations, the letter said it was not a comment on Lawsky's action. The alleged U-turn transactions refer to money moved for Iranian clients among banks in the United Kingdom and Middle East and cleared through Standard Chartered's New York branch, but which neither started nor ended in Iran. In London, King drew unfavorable comparisons between the handling of this case and other U.S. actions against British banks, such as the investigation of interest rate manipulation at Barclays PLC. In the Barclays case, he said, all regulators in Britain and the United States produced coordinated reports after the investigation was complete. "I think all the UK authorities would ask is that the various regulatory bodies that are investigating the particular case try to work together and refrain from making too many public statements until the investigation is completed," King said. Standard Chartered's Sands, in his first public comments since the crisis arose, offered no major new information on the allegations, which the bank has been reviewing with authorities for the past two years. "(We) fundamentally reject the overall picture and believe there are no grounds for them to take this action," he told reporters. The threat to cancel the bank's license to operate in New York would be "wholly disproportionate," he said. Although Standard Chartered's business is concentrated in emerging markets, which has helped insulate it from the global financial crisis, it needs to be able to operate in New York so it can offer dealings around the world in U.S. dollars. Also on Wednesday, Deloitte LLP, which was accused in Lawsky's order of wrongdoing in its role as an outside consultant to Standard Chartered, denied any misconduct. Deloitte was hired by Standard Chartered after U.S. authorities reprimanded the bank for similar lapses on transactions in 2004. "Deloitte had no knowledge of any alleged misconduct by any Standard Chartered Bank employees and categorically denies that it aided in any way any violation of law by the bank," the firm said in a statement. Specifically, Deloitte said it "absolutely did not delete" references to transactions from a report, contrary to an allegation in Lawsky's order. CURSING THE AMERICANS On Monday, Lawsky had reproduced what he said were quotes from an unidentified Standard Chartered executive director in a conversation in 2006 that demonstrated the bank's "obvious contempt" for U.S. banking regulations. "You f---ing Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians?" the quote was rendered in documents released by the regulators. People familiar with the situation said the bank's group finance director, Richard Meddings, one of five executive directors at the time, was the unnamed man. Ray Ferguson, a bank executive who attended that meeting, told Reuters that while Meddings had used the expletive in a heated exchange, he did not, to his recollection, say the second part of the quote attributed to him about U.S. sanctions. Meddings did not respond to repeated requests for comment. Asked for the bank's view on the quote, Sands said: "We don't believe it's accurate." He defended the ethics of the bank, which he has run for six years: "I don't think there is anything wrong with the culture at Standard Chartered," Calling the allegations "very damaging", he said he would address "mistakes" that had been "clearly wrong", but said: "There were no systematic attempts to circumvent sanctions." The BoE's King said he did not share the view held by some that the move in New York was part of a concerted U.S. effort to undermine London as a financial center, following the Barclays probe and a U.S. Senate panel report that criticized HSBC Holding's efforts to police suspect transactions. One British lawmaker, however, said the affair was part of a "political onslaught" in the United States against British banks. "I think it's a concerted effort that's been organized at the top of the U.S. government. I think this is Washington trying to win a commercial battle to have trading from London shifted to New York," said John Mann, a member of parliament's finance committee, who also called for a parliamentary inquiry. (Additional reporting by Nate Raymond , Patrick Temple-West , Sinead Cruise , Kelvin Soh, Anjuli Davies and Sarah White; Writing by Eddie Evans ; Editing by Leslie Adler)

Surprise industrial slump adds to India's economic woes. The manufacturing-led slump provided further ammunition to the slew of private economists who downgraded their growth outlook for India this week, citing the impact of a worsening drought on farming and political hurdles to economic reform. Chidambaram called the numbers "disappointing," and said there was a need to remove supply bottlenecks and raise production across the economy. "We intend to find practical solutions to the problems that impede higher production or output in the coal, mining, petroleum, power, road transport, railway and port sectors," Chidambaram said in a statement responding to the data. Industrial output shrank 1.8 percent, dragged down by a deep dip in manufacturing, the data released on Thursday showed. The number was lower than a forecast of 1 percent growth in a Reuters poll and sharply lower than 9.5 percent growth a year earlier. "Data will pile pressure on the new finance minister to jump start the reform process and revive investment interest, which is likely to be a key drag on overall growth heading into H2," said Radhika Rao, an economist at Forecast PTE in Singapore. Capital goods, a key investment indicator that has shown growth only once in the past 10 months, slumped 27.9 percent in June, the data showed. India shares edged lower on Thursday after the industrial output data with the 30-share BSE index .BSESN down 0.23 percent. India's interest rates are among the highest in major economies and the contraction renewed calls for the Reserve Bank of India (RBI) to lower them at a September 17 policy meeting, setting up a potential clash as the central bank has been clear a rate cut will only happen if inflation eases. "There is a strong case for the RBI to cut interest rates further at least by 50 basis points immediately so as to encourage investments," said R.V. Kanoria, president of the Federation of Indian Chambers of Commerce and Industry. GDP growth faltered to a nine-year low of 5.3 percent in the quarter ended in March, with corporate investors deterred by the high interest rates and a policy gridlock. GDP data for the quarter ended June is due to be released on August 31. DROUGHT WORRIES Several economists this week cut their full-year growth forecast for India to around 5.5 percent -- which would be the slowest rate in 10 years. On Monday, Chidambaram promised a stable and fair tax regime to regain investors' confidence, but skeptics said it would not be easy to put the economy back on a high growth path and stabilize government finances. Economic reforms are stalled on fears of a political backlash to steps such as allowing foreign supermarkets into India, while a drought in some parts of the country makes it harder to cut fuel subsidies blamed for a widening fiscal deficit. Manufacturing, which constitutes about 76 percent of industrial production, shrank an annual 3.2 percent from a year earlier. The sector has been knocked by shrinking exports to recession-hit Europe and slowing U.S. economy. Auto, industrial machinery, electrical and electronic equipment and sugar production led the slowdown in manufacturing, according to the data. India's exports fell 5.45 percent to $25.1 billion in June, after recording strong growth for much of the last year. On Tuesday the government said it was considering lifting import taxes on sugar, a step that could reduce inflationary pressures that keep lending rates by commercial banks at more than 10 percent for a majority customers. But analysts said rising food prices would limit space for monetary easing. The RBI remains a hawkish outlier among central banks -- China, Brazil and South Korea have eased monetary policy in recent weeks to bolster flagging economies. India's industrial output data is volatile but is considered a barometer of GDP growth. May's figure was revised to 2.5 percent from 2.4 percent, the data showed. The HSBC manufacturing Purchasing Managers' Index (PMI), which gauges business activity at India's factories but not utilities, fell to 52.9 in July, from 55.0 in June - its biggest one-month drop since September last year.. (Additional reporting by Rafael Nam ; Editing by Frank Jack Daniel , Jacqueline Wong and Ed Lane)

Barclays hires City grandee David Walker as chairman. The British bank said on Thursday that Walker, a City grandee and corporate governance expert with extensive banking and investment banking experience, would become a non-executive director on September 1 and succeed Marcus Agius as chairman two months later. Barclays was fined $453 million in June for manipulating Libor interbank lending rates in a scandal which unearthed deep problems in its relations with regulators, who have accused the bank of frequently being too aggressive. It is also seeking a new chief executive after Bob Diamond resigned under pressure from the Financial Services Authority (FSA) and the Bank of England, which moved in response to a public and political outcry over the scandal. Walker is currently a senior adviser to U.S. investment bank Morgan Stanley, having previously been chairman of its international operations based in London. In addition to stints at Britain's Treasury and Bank of England he is also a former deputy chairman of Lloyds and vice chairman of insurer Legal & General. Since 2007, Walker has completed two independent reports and made recommendations regarding the private equity industry and corporate governance at financial institutions. He also co-led the independent review of the report that the Financial Services Authority (FSA) produced into the failure of Royal Bank of Scotland. In a letter to Barclays staff Agius said Walker would join in the process to find a new CEO for the bank. Shares in Barclays, which have lost 12 percent of their value over the last three months, closed at 179 pence, valuing the business at about 21.9 billion pounds ($34.2 billion). (Reporting by James Davey and Steve Slater; Editing by Alexander Smith )

Investors question Standard Chartered's defense. StanChart, which has cherished its image as one of the cleanest names in global finance, lost more than a quarter of its market value in 24 hours after New York's banking regulator accused it on Monday of assisting $250 billion of money-laundering transactions over nearly 10 years. Despite StanChart's protests that just $14 million of deals flouted the U.S. rules, its shares are still around 15 percent below levels before the New York State Department of Financial Services (DFS) branded it a "rogue institution". "Even if it is only $14 million, they have still committed a crime, and they are still guilty," one of the 10 biggest institutional investors in the bank told Reuters, explaining why the shares remained depressed. "And if this is hot air and they are just bluffing, then they are playing a very dangerous game," the investor said, putting the risk of either chief executive Peter Sands or Chief Financial Officer Richard Meddings quitting the bank at "5-8 percent and rising". The bank could face a huge fine and even its state banking license is under threat, a punishment that would paralyze its U.S. operations and relegate the London-listed institution to the second tier of global banks. The accusations could end up harming StanChart's 'AA-' credit rating, Fitch Ratings said. Speculation that StanChart could sue the New York regulator for injury to its reputation and stock price were adding to worries about the potential loss of U.S. business, one of the 25 biggest investors in the bank said. "I think the phrase 'Don't fight the Fed' applies in more ways than just one. Who knows what else the regulator could unearth if they really wanted a fight?" he said. "(StanChart) tend to have a chippy approach which doesn't always win friends, and they need to be careful ... I would rather see them settle and leave this whole sorry saga behind them." London lawyers echoed the warning. "It's very difficult to say whether Standard Chartered believe they have a case without knowing all the details ... but I think history tells us that it is extremely tough to take on the U.S. regulators and win," Tom Hibbert, head of the banking litigation group at City of London law firm RPC. OVERVALUED? Standard Chartered's stock was already ripe for a sell-off even before its high-profile tussle with U.S. regulators came to light, analysts at Canaccord Genuity said. Low exposure to the euro zone's troubles, healthy capital reserves and a halo burnished by steering clear of the interest rate manipulation scandal tainting other banks have given it a trading premium so wide that returns could only be reached through "near flawless execution of ambitious consensus estimates". "To our mind the stock is priced for everything to go right, and nothing to go wrong," the analysts said, maintaining their advice to sell the stock. The bank's woes offer a timely reminder of the risks investors face by supporting lenders with deep roots in emerging markets, said Jeff Yeh, Chief Investment Officer at Capital Investment Trust in Taipei, with about $5 billion in assets. "I think the events of the past few days really drove home that point, and I think a growing number of funds may not be as comfortable with these large banks as they used to be." While quick to deny the money laundering allegations in the press, some say StanChart's lack of direct communication with shareholders is limiting its share price recovery. "They haven't been in touch with us, which surprises me, because when they had rights issue one, two and three, they were in touch well in advance, but this time, not a tweet," the top 10 investor said. "We have been proactive in reaching out to all our investors, both shareholders and debtholders, and the process is ongoing," a spokesman for Standard Chartered said. It will not want to lose the goodwill of those such as Hugh Young, managing director of top-five StanChart shareholder Aberdeen Asset Management Asia, who is giving it the benefit of the doubt for now. "It's something to worry about, although I noticed a lot of emotive and sensational language which slightly diminishes the allegation ... The StanChart we recognize is not the rogue bank portrayed in the allegation," he said. (Reporting by Sinead Cruise, additional reporting by Sarah White, Sudip Kargupta, Kelvin Soh and Denny Thomas ; Editing by Will Waterman and Matthew Tostevin )

UBS traders offered deal by U.S. in interest rate probe: WSJ. Citing two people close to the probe, the paper also said a few UBS employees under investigation for interest-rate manipulation still work at the Swiss bank, which has fired or suspended about 20 traders and managers during the four-year investigation. Justice Department officials could not be reached immediately for comment. It isn't immediately clear which UBS executives prosecutors are targeting, the paper said. The deals also don't signal a settlement by UBS or impending arrests. U.S. antitrust officials have been investigating alleged collusion between at least 16 banks to manipulate interest rates, including the London interbank offered rate, or Libor. UBS is one of the main targets of those regulators, the paper said, citing people close to the investigation. UBS has disclosed in filings that it received leniency deals from the antitrust regulators in the United States, Switzerland and Canada, the paper said. However, the bank still faces potential enforcement action by the U.S. Justice Department's fraud section, the U.S. Commodity Futures Trading Commission and Britain's Financial Services Authority. (Reporting by Joseph A. Giannone in New York; Editing by Paul Tait )

Knight Capital held $7 billion of stocks due to glitch: WSJ. Knight tried to minimize its losses arising from a huge trading shortfall by paring the total position to about $4.6 billion by the end of the trading day, the Journal said. The position led to a $440 million loss that forced Knight to secure a $400 million bailout from a group of independent investors in exchange for a 73 percent stake. The exposure would have prevented the brokerage from opening for business the next day due to lack of capital required by regulators to offset risks from holding the stocks, the newspaper reported. Additional safeguards have been put in place in recent days to guard against more trades going off-course, according to a note sent to clients sent by Chief Executive Thomas Joyce, the Journal said. "We are in discussions with external advisers in an effort to effectively assess the situation, in addition to our internal review," Joyce wrote in the email sent late Tuesday, according to the newspaper. A spokeswoman for Knight also said that the brokerage had not reached a decision yet on an outside firm coming in to review the technology problem that drove the wayward trading, the Journal reported. Knight Capital could not immediately be reached for comment. (Reporting by Juhi Arora in Bangalore; Editing by Chris Gallagher )

Komen founder to leave CEO role but stay on in management. Komen, in announcing the move on Wednesday, also said that President Liz Thompson would leave the Dallas-based organization in September and board members Brenda Lauderback and Linda Law would step down. The shakeup comes after the world's biggest breast cancer charity provoked uproar earlier this year over its decision to cut funding for Planned Parenthood, a provider of birth control, abortion and other women's health services. Komen, which supports Planned Parenthood's efforts to provide access to breast-cancer screening, reversed that decision within days and said it would restore the funding. The initial move to cut Planned Parenthood's funding became public in late January, prompting some Komen supporters to complain the group was bowing to political pressure from anti-abortion groups. "Our mission is clear and consistent, and will never change, regardless of the controversy earlier this year," Brinker said. "We are doing everything in our power to ensure that women have access to quality cancer care and the support that they need, as we seek answers through cutting-edge research. Following the controversy, a few of Komen's flagship "Race for the Cure" fundraising events failed to meet targets, and several of the group's leaders stepped down earlier this year. Brinker, who founded the organization in 1982, two years after her sister, Susan G. Komen, died of breast cancer, will "move to a new management role focusing on revenue creation, strategy and global growth," the group said in a statement. The statement said Brinker, whose dying sister had asked her to promise to end breast cancer, would assume that role once a search for a new senior executive was completed. Brinker has been the face of the organization and became CEO in 2009. "Three years into that role, and 32 years after my promise to my sister to end breast cancer, I want now to focus on Susan G. Komen's global mission and raising resources to bring our promise to women all around the world," Brinker said. She will be chairwoman of the Komen Board Executive Committee. PRIOR RESIGNATIONS Some of Komen's members had previously called for Brinker's resignation. Among the Komen leaders resigning earlier this year was Karen Handel, a senior executive charged with spearheading the decision to cut funding for Planned Parenthood. Handel, a Republican who once ran for governor of Georgia on a platform calling for the defunding of Planned Parenthood, said at the time that she had become too much of a focal point and was stepping aside to allow Komen to refocus on its mission. Thompson, whose departure was among those announced on Wednesday, joined Komen in 2008 as head of research and scientific programs and has been president since 2010. "Komen today is on an excellent path to recovery, with the most dynamic scientific and community health programs of any breast cancer organization, a strong affiliate network, and committed leadership in all of these areas," Thompson said. Planned Parenthood Federation of America responded to the shakeup by saying it was pleased with its partnership with Komen, and that Brinker, Thompson and the Komen foundation had helped elevate the importance of breast cancer detection and prevention. "We are proud to continue this work together," Planned Parenthood President Cecile Richards said. In the past 30 years, Komen has spent more than $740 million on breast cancer research and $1.3 billion on community programs to fund screenings, education and support for breast cancer patients, Komen said. "It is truly unbelievable that Komen, a group that until this year had been considered America's sweetheart charity, has suffered such financial and personnel upheaval in the wake of making what ended up being a temporary decision to loose ties with the nation's largest abortion provider," Jeanne Monahan, director of the Center for Human Dignity at the conservative Christian Family Research Council, said of Wednesday's move. "Sadly, the greatest victims of this Planned Parenthood shakedown are women suffering from breast cancer," Monahan said. (Additional reporting by Tom Brown in Miami; Editing by Cynthia Johnston and Lisa Shumaker )

Carlyle near deal with SocGen on TCW: sources. A deal, which would also involve TCW's management, could be announced as early as Thursday, the people said. TCW's management and employees are set to increase their ownership of the asset manager to a substantial minority position, one of the sources added. Societe Generale and Carlyle declined to comment. (Reporting by Greg Roumeliotis and Jennifer Ablan in New York; Editing by Gerald E. McCormick)

Knight losses estimated at $270 million after taxes: CEO letter. The brokerage has suffered from a decline in customer confidence following last week's debacle, which resulted in the trading losses and a $400 million weekend deal for a consortium of financial firms to take a more than 70 percent stake in the firm for a heavily discounted $1.50 a share. "We are grateful for the support of the industry, and sincerely appreciate our clients' loyalty in standing by us during this period," Joyce said in the letter, dated Tuesday. A copy of the letter was obtained by Reuters. The post-tax losses compare with previously disclosed pre-tax losses of $440 million. Joyce said in the letter that the firm is reviewing what went wrong that morning with outside advisers, and conducting its own internal review. He wrote that the trading software that caused the 45 minutes of chaos and steep losses has been removed from the company's systems. "We have taken measures to enhance our processes designed to prevent another similar situation from arising," he wrote. Knight, based in Jersey City, New Jersey, remains in good standing with the Depository Trust & Clearing Corp and the Options Clearing Corp, Joyce wrote, while its broker-dealer subsidiaries, Knight Capital Americas LLC and Knight Capital Europe Limited, have maintained capital levels above the minimum required and consistent with historical levels. (Reporting By Ashley Lau in New York; editing by John Wallace)

U.S. Postal Service loses $5.2 billion, warns of low cash. The Postal Service, which relies on the sale of stamps and other products rather than taxpayer funding, has been struggling for years as Americans increasingly communicate online and as payments for future retiree health benefits and other obligations drain its cash. A week after its first-ever default on a legally required payment to the federal government, officials called on Congress to pass postal legislation that would overhaul the mail agency's business model and offer some relief from its dire financial situation. Lawmakers, who have said they are committed to helping the Postal Service become profitable, left last week for a month-long recess without reaching an agreement on postal legislation. "Congress needs to act responsibly and get on with things so that we can get these things in our rearview mirror," Postmaster General Patrick Donahoe said on Thursday. While postal officials insist it is unlikely Congress would allow the Postal Service's financial straits to get so dismal as to impede mail delivery, the agency has said it needs a significant restructuring to get back on sound footing. The mail agency defaulted last week on a legally required $5.5 billion payment for future retiree health benefits, and its inspector general said the Postal Service could face a $100 million cash shortfall in mid-October. Much of the net loss of $5.2 billion in the third quarter, compared to $3.1 billion for the same period in 2011, came from funds the agency must set aside for the retiree benefits payment. Even though the Postal Service defaulted and expects to skip a second payment due next month, it still must account for the payments in its financial statements. Even without the payments, a postal official told the agency's Board of Governors on Thursday that the Postal Service lost about $1 billion on normal operations as Americans' ongoing shift to email strangled mail volume. The USPS has made a number of cost-cutting moves, slashing operating hours at small post offices, offering buyouts to thousands of workers and launching a plan to consolidate operations at 140 processing sites by February. Still, the service projects a net loss of about $15 billion for the fiscal year, which goes through September, said Stephen Masse, acting chief financial officer for the agency. Postal officials said Congress needs to step in. They want authority to end Saturday mail, pull employees out of federal health plans and run their own instead, stop making the payments for future retiree benefits and make other changes. The Senate passed a bill in April that would let the agency end Saturday mail and tap into a surplus in a federal retirement fund to offer retirement incentives to workers. Leaders in the House of Representatives have said that bill does not go far enough, but they left last week for a recess until after the September 3 Labor Day holiday without bringing their version of the postal reform bill up for a vote. "I can only hope that as members of Congress are back in their districts meeting with their constituents over the next month, they will hear these concerns about the future of the Postal Service and be persuaded that they cannot continue to postpone passing comprehensive postal reform legislation," said Senator Tom Carper, one of four authors of the Senate bill. SHORT ON CASH Shipping services and package delivery were a bright spot, growing 9 percent in revenue compared to the same quarter a year earlier. Email and online bill payments have hurt letter mail volumes, but the USPS's shipping business has benefited from online shopping and sites like eBay.com. But mail volume fell 3.6 percent to 38.5 billion pieces, the agency said. Operating revenue during the quarter was $15.6 billion, a decrease of less than 1 percent from a year earlier. Postal officials said the agency will face low cash levels in October, when a $1.4 billion payment for workers compensation comes due. Masse said officials believe extra revenue from election-related mail could get the agency through the tight period. The cash crisis should improve during the holiday mailing season, typically the best time of year for the Postal Service. He also said the agency would prioritize paying suppliers and employees over making obligations to the federal government, but he did not say what payments the USPS might skip or delay. Last summer, the Postal Service temporarily halted payments into a retirement system that has surplus funds. The agency's inspector general has said the USPS could do the same this year. (Reporting By Emily Stephenson; Editing by Vicki Allen and Sofina Mirza-Reid)

Nestle takes food price rises in its stride. The world's biggest food group on Thursday beat forecasts with a 6.6 percent rise in underlying first-half sales as volume growth ticked up, unlike many of its rivals. Global food prices are near record highs, in part because of soaring grain futures. But many of Nestle's most important ingredients, such as coffee, sugar and dairy products, are less affected than cereals. Nestle's sales growth was driven by strong demand from emerging markets and price increases, as the company managed to pass on the cost of its raw materials to consumers. The Vevey-based company also reported solid performance in Europe, despite its weak economy, as it sold more affordable goods like its Nescafe 3-in-1 soluble coffee, KitKat chocolate bars and new peelable banana ice cream. Analysts had on average forecast 6.3 percent sales growth. "A very solid set of numbers for what is a class act in the space," said Jon Cox, analyst at Kepler Capital Markets. Nestle said the rising cost of its ingredients resulted in an increase of 0.5 percent in the cost of goods sold. The worst U.S. drought in over half a century has pushed up grain prices sharply. The United Nations food agency said on Thursday world food prices surged in July and could rise further. EUROPE HOLDS UP Nestle said it expected price rises for its ingredients of only in the low to mid-single digits for the rest of the year, in line with its earlier forecasts and keeping it on track for its target of underlying sales growth of 5-6 percent this year. While cocoa prices are surging, coffee prices are well below two-year highs on expectations of a good harvest in top producer Brazil. Sugar prices are also down on expectations of a good harvest and milk prices have been falling. Nestle's first-half sales grew 12.9 percent in emerging markets, compared with just 2.6 percent in developed markets. Volume growth in Europe was practically flat although the company still saw some expansion in the continent's troubled southern nations. Strong emerging markets also helped Unilever ( ULVR.L ) ( UNc.AS ) avoid the recent profit warnings by its French and U.S. peers Danone ( DANO.PA ) and Procter & Gamble ( PG.N ), although it did warn of tougher times ahead due to difficult economies and volatile input costs. Nestle shares rose 3.3 percent to 61.16 francs by 9:19 a.m. EDT (1319 GMT), compared with a 1.2 percent increase for the European food and beverage index .SX3P. Analysts contrasted Nestle's performance in Europe, where it saw 2.4 percent organic growth, with Unilever's fall in sales in the region of 2.2 percent in the second quarter. "All businesses/regions beat expectations but perhaps most impressive was the growth seen in Europe in-line with Q1 despite the current economic woes," said Bernstein analyst Andrew Wood. Growth in Europe came despite a slow start to summer sales for ice cream and bottled water due to poor weather. Net profit rose 8.9 percent to 5.1 billion Swiss francs ($5.25 billion) on sales of 44.1 billion francs, up 7.5 percent year-on-year, with 3.7 percentage points of the rise in underlying sales coming from price increases. Analysts surveyed by Reuters had forecast on average a net profit of 4.9 billion francs and sales of 43.8 billion francs. (Reporting by Emma Thomasson; Additional reporting by Katharina Bart, and David Brough in London.; Editing by Erica Billingham)

Retailers press forward on $7.2 billion card fee settlement. The plaintiffs do not expect to make any changes to the proposed settlement when it is submitted for preliminary approval by an October 19 deadline, said co-lead counsel Craig Wildfang following a hearing in Brooklyn federal court. "We're going as fast as we can - not as fast as we'd like, but we're making progress," he told U.S. Magistrate Judge James Orenstein during the hearing, referring to supporting documents for the settlement. The settlement would be the largest antitrust settlement in U.S. history. It would resolve a seven-year-old lawsuit accusing the two credit card companies of conspiring with major banks to artificially inflate interchange fees, the amount paid to process electronic transactions involving credit and debit cards. The settlement requires approval by U.S. District Judge John Gleeson, who oversaw retailers' previous $3 billion swipe-fee settlement with Visa and Mastercard in 2003. As part of the new pact, the credit card companies have offered to pay $6 billion and temporarily reduce interchange fees, also known as swipe fees, to save stores approximately $1.2 billion over an eight-month period, according to court papers. Despite support from Visa and Mastercard, which would pay the bulk of the $6 billion, the settlement has received a frosty reception from several trade associations and some big retailers, including Wal-Mart Stores Inc and Target Corp. The National Association of Convenience Stores publicly rejected the settlement, and trade groups representing grocers and pharmacies, among others, have since voiced objections. The settlement would allow stores to charge customers extra if they pay with credit cards, although that ability would be limited by state law and stores' agreements with other card companies, such as American Express Co, according to court papers. The settlement would also give merchants the right to negotiate collectively over swipe fees, and includes broad releases shielding Visa and Mastercard from future litigation over similar swipe-fee issues, court papers showed. The objectors have said the settlement does not offer meaningful reforms to swipe-fee structures. Some merchants have said they either will not or cannot impose credit card surcharges on customer payments, and others have objected to the releases barring future swipe fee suits. If enough stores opt out of the proposal -- representing at least 25 percent of annual U.S. retail volume collectively --Visa and Mastercard have the option to withdraw from the deal, according to court papers. Several of the main objectors are being represented by lawyer Jeffrey Shinder. His law firm, Constantine Cannon, served as lead counsel on the 2003 settlement with Visa and Mastercard, although Constantine Cannon is not among the three firms designated as lead counsel for the current litigation. Objections will likely be taken up with the court after the settlement is formally submitted for approval, according to Shinder. "There are fundamental problems with this deal that the court absolutely needs to address before it gives its preliminary approval," he said after the hearing. Wal-Mart and Target did not immediately have additional comment beyond their earlier concerns about the settlement, according to spokespeople for both companies. The case is In re Payment Interchange Fee and Merchant Discount Antitrust Litigation, in the U.S. District Court for the Eastern District of New York, No. 05-1720. (Reporting by Jessica Dye; Editing by Martha Graybow , Steve Orlofsky)

Troubled U.S. battery makers recharge with overseas investors. Six months later, he faces that very real possibility for the U.S. car battery industry, a once-high flying sector buttressed by generous federal grants, but struggling with a green car market that has fallen far short of expectations. A123 Systems Inc AONE.O on Wednesday became the second U.S. government-backed battery maker this year to go overseas for a lifeline - and it turned to China. Auto parts supplier Wanxiang Group will take a controlling interest and invest $450 million in the Massachusetts-based battery maker, which faced running out of cash by the year-end. Earlier this year, Ener1 Inc HEVVQ.PK, another battery maker that received a government green technology grant, emerged from Chapter 11 bankruptcy under the control of Russian investor Boris Zingarevich. New York-based Ener1 is also a joint-venture partner in China with a Wanxiang subsidiary. In the past three years, U.S. battery makers, anticipating consumer demand for green cars that never materialized, have over built production capacity, often with government funding. Electric vehicle and hybrid sales for the first seven months of the year totaled 270,000, representing only 3 percent of total U.S. car sales, according to the green-car website Hybridcars.com. As part of the 2009 American Recovery and Reinvestment Act's Electric Drive Vehicle Battery and Component Manufacturing Initiative, A123 was awarded a grant of $249.1 million. Ener1 subsidiary EnerDel was awarded $118.5 million to manufacture advanced lithium-ion batteries for electric and hybrid vehicles. A123 promised to create 38,000 U.S. jobs, including 5,900 at its own plants. A123 said on Thursday it has 1,300 workers. Theodore O'Neill, a former equities analyst with Wunderlich Securities, said A123 "built a factory that's big enough to meet demand that's probably not going to materialize until 2020 ... They built it much larger than the market turned out to need." FINDING 'PARTNER' FOR U.S. JOBS That kind of underperformance provides new fodder for Obama's opponents in the Republican Party with just three months until election day. Obama has spent months battling critics of the administration's green-tech initiative in the wake of the high-profile bankruptcy of solar-panel maker Solyndra. "It's not going to be a smooth, easy ride ... Some companies will fail," he said in his State of the Union speech in January. But tempering expectations has done little to quiet the critics in Washington, who ramped up their attacks on Thursday with the added accusation of putting technology in Chinese hands. "Once again it appears the Department of Energy and the Obama administration have failed to secure sensitive taxpayer-funded intellectual property from being transferred to a foreign adversary, which raises serious national security issues," said Rep. Cliff Stearns. Stearns is a Florida Republican and chairman of the House Energy and Commerce Committee's Subcommittee on Oversight and Investigations. A123 spokesman Dan Borgasano said on Thursday that, with Wanxiang's bid to take control of the battery company, "our intention is to continue to build in the United States and reach certain job levels. We think we found a partner to help us do that ... I don't think we'll necessarily be making hard and fast job projections." After it received the DOE grant, Ener1 said in early 2010 that it planned to create 1,400 jobs at its Indianapolis battery plant. Today, the plant employs around 250. The plant was designed to produce battery packs for up to 600,000 hybrid vehicles. The companies' struggles with over capacity are typical of an industry whose fortunes are tied directly to those of electric and hybrid vehicle manufacturers. "There was a bit of a rush to put in capacity that really wasn't justified by the events as they turned out," said Tom Gage, president of EV Grid, an infrastructure company based in Palo Alto, California. "In retrospect (the industry) was over-optimistic in terms of projecting the rate of growth for demand for car batteries." Charles Ebinger, head of the energy security initiative at the Brookings Institution, said controversies surrounding government-backed companies such as A123 will make lawmakers hesitant to support expanded funding of clean energy, especially with federal budget battles looming. "I think it's going to slow down," Ebinger said. "It's going to be increasingly difficult to argue for subsidies for any sector." (Reporting by Deepa Seetharaman in Detroit and Ayesha Rascoe in Washington; writing by Paul Lienert; editing by Mary Milliken and Andre Grenon )

Manchester United IPO values club at $2.3 billion, less than expected. The team priced 16.7 million shares, as planned, and raised $233.2 million, about $100 million less than it had hoped. While that still makes it the largest sports-team IPO on record, the value is much below the up to $3.3 billion the club and its owners, the Glazer family, were expecting. That would mean the club, which has been trying to reduce its debt after its 2005 leveraged buyout by the Glazer family, would get less money to do so. The Glazers, whose holdings include shopping centers and the Tampa Bay Buccaneers football team, will also take in less money from the share sale. The company expected to price shares in a range of $16 to $20. The deal would have raised $333 million if it had priced at the high end of its range. The Glazers are selling half the shares, while the team is selling the rest. Manchester United, which claims to be the most popular soccer team in the world with more than 650 million fans, has said it wanted to use the proceeds to pay down its significant debt load, which stood in excess of 437 million pounds ($682 million) as of June 30. Some fans of the team have protested the IPO, criticizing the Glazers for only using half of the deal's proceeds to pay down debt. They argue that this hefty debt load has led to reduced financial flexibility, at the expense of investment in players and the team's performance. (Reporting by Olivia Oran; Editing by Gary Hill and Steve Orlofsky)

Greece says will get aid tranche after review in mid-September. Cash-strapped and behind targets agreed as conditions of the 130 billion euro bailout deal, Greece could run out of money within weeks if it does not receive its next aid installment. To cover this month's cash squeeze and to pay a 3.2 billion euro government bond that matures later in August, Greece plans to issue additional treasury bills, enabling it to access up to an extra 4 billion euros of funds. Deputy Finance Minister Christos Staikouras told Greek TV the so-called troika of EU, ECB and IMF inspectors would return to Athens in early September and complete their review by the middle of the month. "If that happens and the process is completed by September 14 - this is the framework we're working within, that's what we've agreed to - then obviously the tranche, if the review is positive as we expect it to be, will come immediately after," Staikouras said. Asked if he expected the tranche to be disbursed by the end of September, Staikouras replied: "Immediately after means that if the review is positive, this will open the path for the next tranche." Staikouras has repeatedly sounded alarm bells on how Athens would pay public service wages, pensions and other every day expenses, saying Greece's cash reserves are almost empty. (Reporting by Karolina Tagaris; Editing by Catherine Evans )

JPMorgan files formal first-quarter restatement. The filing took the form of an amended form 10-Q submitted to the U.S. Securities and Exchange Commission. The filing, like the company's July 13 announcement, said first-quarter net income was $4.92 billion, or $459 million less than originally reported. The reduction reflected a pre-tax loss of nearly $6 billion this year that JPMorgan has disclosed from so-called "London Whale" trades in the company's Chief Investment Office. (Reporting by David Henry in New York; Editing by Gerald E. McCormick)

Analysis: Weidmann tries to muffle not spike Draghi's ECB guns. Weidmann is worried a plan ECB President Mario Draghi has hatched for the central bank to buy the sovereign bonds of Spain and Italy to lower their crippling borrowing costs would ease the pressure on those countries to put their finances right. Such a plan also risks dragging the ECB into the business of financing governments, in which it is supposed to play no part. Weidmann, who took the Bundesbank helm last year after his predecessor quit over a previous round of ECB bond buying, is acutely aware that he must uphold Germans' faith in the Bundesbank and the ECB, or else lose their support for the euro. With Berlin pledging billions of euros in taxpayers' money to bail out debt-ridden euro zone countries, German voters expect the Bundesbank to act as their economic rock - and for Weidmann to play the role of "stability anchor" at the ECB. But it is unlikely he could scupper Draghi's plan, given the German central bank is only one of 17 constituents at the ECB, albeit the first among equals. Nor is it clear he would want to if the euro zone was pushed back to the edge of a precipice. Break-up of the currency bloc would be hugely costly to Germany and the Bundesbank. Rather, Weidmann wants to keep the heat on indebted euro zone countries to reform and to pin as much of the burden as possible for dealing with the bloc's crisis on governments. "His current opposition to bond-buying does not prevent the ECB from doing it, but it does signal to member states that they are still on the hook for crisis management. If the crisis were to take a turn for the worse, Weidmann would not block a greater role for the ECB provided this was done in concert with government action," said Mujtaba Rahman, analyst at political risk consultancy Eurasia Group. One senior central banker told Reuters there was a "game of chicken" between the ECB and governments over who carries the burden for tackling the crisis, with the central bank ultimately ready to step in rather than see the currency union fall apart. But just how far the ECB steps in is crucial. "We could do something, with the ESM (bailout fund)," said another senior ECB policymaker, who expressed sympathy for Weidmann's position and was similarly reluctant to be drawn into a major bond-buying operation. One of Weidmann's goals is to erect enough hurdles to any fresh bond buying in order to give him cover at home, where he faces pressure from Bundesbankers past and present and from academics led by Hans-Werner Sinn, head of the renowned Ifo research institute. These conservative voices regularly paint any ECB action beyond inflation targeting as misadventure and a threat to the Bundesbank's role as guardian against the 1920s experience of hyperinflation that still scars the German national psyche. Otmar Issing, one of the founding fathers of the euro and a former ECB chief economist, said on Thursday the latest plan would drag it into the political realm. "This ultimately makes the central bank a prisoner of politics," Issing said. "This is a process that is very difficult to stop, because where do you set the limit?" As well as retaining the public's trust, Weidmann must deal with conservative elements within the Bundesbank -- still employer to almost 10,000 people compared to 1,600 at the ECB -- who think they know better than their peers across town. As one senior euro zone official put it: "If Weidmann can drag the Bundesbank into the euro zone era during his presidency, he will have done well." SOFTLY, SOFTLY Back in the 1990s, any one of the Bundesbank's board members could move global markets. Now Weidmann must use his guile - and leverage the domestic pressure he faces - to push his agenda. The softly spoken 44-year-old has had some success. After pledging on July 26 "to do whatever it takes to preserve the euro", Draghi a week later stopped short of the 'shock and awe' response markets were looking for and instead tasked three committees with exploring ideas the bank's policymakers could then decide to pursue. In the interim, Weidmann had met Draghi one-on-one and again at last Thursday's meeting of the ECB's Governing Council, after which Draghi larded his plan with caveats and conditions. The ECB was issuing "guidance" rather than taking a firm decision at this stage, Draghi said. It "may" undertake outright open market operations, but only if governments activated the euro zone bailout funds to buy bonds first - and even if the funds did so, ECB action would not follow automatically. Draghi singled out Weidmann at his news conference last Thursday: "It's clear and it's known that Mr. Weidmann and the Bundesbank ... have their reservations about programs programs that envisage buying bonds." What could have been construed as a hostile act, probably helped Weidmann show his domestic audience that he is holding back the ECB. One person who attended the policy meeting said: "My feeling is they had agreed with Weidmann on how he (Draghi) does it." The conditions built in allowed Weidmann to express reservations rather than opposing the plan. The Bundesbank chief has remained silent since. This is crucial to the success of any ECB plan to intervene in markets. Any signal Weidmann might send opposing the plan would blunt its impact - as happened when his predecessor, Axel Weber, undermined the ECB's previous bond-buy plan by opposing it from the outset. AT ODDS WITH MERKEL In contrast to Weidmann, the German government appears to have few reservations about Draghi's intervention. The leaders of Germany and France swung in behind him a day after his "whatever it takes" declaration with their own vow to do all in their power to protect the euro. Georg Streiter, deputy spokesman for the German government, said Chancellor Angela Merkel was not worried about possible threats to the independence of the ECB. "You can assume that the government approves of everything that is currently taking place," Streiter said. Analysts at Citigroup said the mini-standoff suited Berlin. "They welcome the fact that the ECB is helping in the heavy lifting in order to support periphery countries, while at the same time they want to see that the ECB and the Bundesbank are keeping the German population relaxed about fears of inflation," they said. A former top economics adviser to Merkel, Weidmann has distanced himself from her since returning last year to the Bundesbank - where he worked before moving to Berlin - to stress his central banking independence. Even if he is in the minority, Weidmann is ready to take the time to explain his views to other policymakers on the ECB's Governing Council, rather than resign as Weber did last year in protest at the SMP. "In my view, Weidmann is absolutely clear and strict factually, but engaging in style," said Manfred Neumann, a monetary theorist who was Weidmann's doctoral adviser and remains close to him and compares him favorably to Weber. Weidmann projects a more modern demeanor than his predecessors. He speaks fluent English and French, held an internship with the National Bank of Rwanda, and spent a big chunk of his career away from the Bundesbank. But his earlier years at the Bundesbank and his economics background, honed by a spell at the International Monetary Fund, ensured the German central bank's thinking is ingrained in his DNA. "Of course Weidmann doesn't want to go down in history as the man who bust the euro," said David Marsh, author of 'The Euro: The Politics of the New Global Currency' and co-chairman of think tank OMFIF. "But he will take his cue from (former Bundesbank chief Helmut) Schlesinger, with two powerful principles: if in doubt, go for 'stability first'; if under pressure, get German public opinion on your side, and use this as a lever over governments at home and abroad." In a highly symbolic move, Weidmann conducted a joint interview with Schlesinger that the Bundesbank released on the eve of the ECB's meeting last week and which features prominently on its website. Governments expect too much of the ECB, Weidmann said in the interview, adding: "If a central bank also has to work against public opinion, things get difficult." Weidmann wants to serve out his full Bundesbank term, preferring to stay in the ECB's policymaking room and try to win over others rather than quit. A solid performance as Bundesbank chief would put him in contention to succeed Draghi. When Juergen Stark, another German, followed Weber and resigned last year as the ECB's chief economist in protest at the bank's policies, Weidmann was only more determined to carry on in his role. "I see no reason to follow Stark," Weidmann said. "I feel this has strengthened my conviction in the ECB to work towards monetary stability and independence of the central bank." (Additional reporting by Eva Kuehnen , Paul Taylor and Noah Barkin , editing by Mike Peacock)

PepsiCo reaches deal to sell drinks in Myanmar. Under the terms of the agreement, Diamond Star -- one of the largest packaged-goods distributors in Myanmar -- has exclusive rights to import, sell and distribute Pepsi-Cola, 7-Up and Mirinda. The company is buying and importing the drinks from PepsiCo's Vietnam operations. PepsiCo also said it plans to evaluate other opportunities in Myanmar, including the potential for local manufacturing and investing in agricultural development. Myanmar, once known as Burma, began emerging last year from decades of isolation when its long-time military dictator stepped aside and a quasi-civilian government took over. The new government has started overhauling the economy, easing media censorship, legalizing trade unions and protests and freeing political prisoners. The United States has responded by easing some sanctions, starting with a decision last month to allow U.S. companies to invest in Myanmar and provide financial services there. PepsiCo, which last did business there in 1997, said its drinks are now available to consumers in parts of Myanmar and that availability will increase in the coming weeks. Rival Coca-Cola Co ( KO.N ) said in June that it planned to operate in Myanmar as soon as the U.S. government allowed it. (Reporting by Martinne Geller in New York; Editing by Gerald E. McCormick and Dale Hudson )

Wall Street falls for sixth day. A weak German bond sale sparked fears the debt crisis was even beginning to threaten Berlin, with the leaders of France and Germany still at odds over a longer-term structural solution. The poor demand for German government bonds showed that investors viewed investing in the euro zone as being too risky. Debt problems plaguing Europe and the United States have pressured markets, knocking the S&P 500 down more than 7 percent over the last six sessions. World stocks hit their lowest in six weeks on Wednesday. "A poor auction of German bonds added to recent worries that the risks from the debt mess are spreading to the core of the euro zone," said WhatsTrading.com options strategist Frederick Ruffy. All 10 S&P 500 sectors were negative, with financials among the biggest decliners over concerns about exposure to European debt. JPMorgan Chase & Co ( JPM.N ) dropped 3.5 percent to $28.38 and Citigroup Inc ( C.N ) lost 3.9 percent to $23.51. Economically sensitive stocks such as energy and commodity-related issues also slid. The PHLX oil service sector index .OSX dropped 3.7 percent and the S&P materials sector .GSPM fell 2.8 percent. Schlumberger Ltd ( SLB.N ) lost 3.6 percent to $66.50 and DuPont and Co ( DD.N ) shed 2.9 percent to $44.08. The Dow Jones industrial average .DJI sank 236.17 points, or 2.05 percent, to 11,257.55 at the close. The Standard & Poor's 500 Index .SPX dropped 26.25 points, or 2.21 percent, to 1,161.79. The Nasdaq Composite Index .IXIC lost 61.20 points, or 2.43 percent, to 2,460.08. The S&P 500's six-day decline is the longest such streak since a seven-day slide that ended August 2. Reflecting heightened fears in the market, the CBOE Volatility Index, or VIX .VIX, Wall Street's so-called fear gauge, jumped 6.3 percent. Volume was light ahead of the U.S. Thanksgiving holiday, when markets are closed. About 6.9 billion shares changed hands on the New York Stock Exchange, NYSE Amex and Nasdaq, below the current daily average of 8 billion shares. "There is no buying demand, but this does not mean that there is a really strong offer, either. It just means that we might be working off the 'oversold-ness' with this choppy action, 1160-1180 on the S&P," said Joseph Cusick, senior market analyst at OptionsXpress Holdings Inc in Chicago. One of the few bright spots was Deere & Co ( DE.N ), which climbed 3.9 percent to $74.72 after quarterly earnings beat expectations and sales shot up 20 percent. Adding to market worries, data showed Chinese manufacturing shrank the most in 32 months in November, intensifying concerns about a global economic slowdown. U.S. crude oil fell 1.8 percent on fears of reduced demand from China, the world's No. 2 economy. U.S. data painted a mixed picture and showed little reason for optimism. New jobless claims rose last week and consumer spending barely increased in October, while another report showed new orders for durable goods, which include long-lasting manufactured items such as refrigerators, rose. (Reporting by Angela Moon; Editing by Jan Paschal )

ECB cannot be lender of last resort: Gonzalez-Paramo. Pressure on the ECB to act is rising fast with many in both political and financial circles arguing it is the only institution that can realistically see off the crisis. It has already spent close to 200 billion euros ($267 billion) buying distressed countries' bonds, but Europe's statutes, its jealously guarded independence and desire to keep pressure on governments to clean up their finances have seen it maintain a firm stance against open-throttle bond buying. "Euro area governments cannot expect the ECB to finance public deficits," Jose Manuel Gonzalez-Paramo, one of the ECB's six Executive Board members, said according to the text of a speech given at an event organized by the Oxford University European Affairs Society. "It is not the fiscal lender of last resort to sovereigns." France has been the leading protagonist over recent weeks in calling for the ECB to pull out the stops to calm bond markets, with Germany in the opposite camp. The two states agreed on Thursday to stop arguing in public over the ECB's role. Gonzalez-Paramo said the debt crisis was one of the greatest challenges Europe had faced and called for countries to move toward a fiscal union to complement the euro monetary union. He said the constraints of having a joint currency meant countries could not inflate away their debts, meaning they had to be more disciplined with spending. "Private debts denominated in euros cannot be 'inflated away'," he said. "This is a consequence of the ECB's legal obligation to maintain price stability in the euro area - defined as an inflation rate of below, but close to, 2 percent over the medium term." Amid the intense focus on the euro zone's woes, Gonzalez-Paramo said financial markets had overlooked some of the major progress made in troubled parts of the bloc, such as putting safety nets in place, new, more responsible governments coming into power and regionwide rules to avoid future crises. "Each of these measures, seen individually, may not represent the 'shock-and-awe' or 'big bazooka' that some commentators and markets participants call for. But... they are very significant developments," he said. (Reporting by Jessica Mortimer ; writing by Marc Jones in Frankfurt; Editing by John Stonestreet)

India opens door to foreign supermarket chains. The world's largest retail group, Wal-Mart Stores Inc ( WMT.N ), and its rivals see India's retail sector as one of the last frontier markets, where a burgeoning middle-class still shops at local, family-owned merchants. Allowing foreign retailers to take stakes of up to 51 percent in supermarkets would attract much-needed capital from abroad and ultimately help unclog supply bottlenecks that have kept inflation stubbornly close to a double-digit clip. "I think it will have a very deep and long-lasting impact on the Indian landscape," Raj Jain, CEO of Wal-Mart India, told CNBC TV18. "I think it will redefine the way consumers shop in India, but more importantly the way supply chains in India run." Under fire for a slow pace of reform, Prime Minister Manmohan Singh's embattled government appears to be slowly shaking off a string of corruption scandals to focus on policy changes long desired by investors. "This is a very bold move and the economic reforms process is back on track." Rajan Mittal, vice chairman of India's Bharti Enterprises, which is Wal-Mart's partner, told reporters. Millions of small retail traders vigorously oppose competing with foreign giants, potentially providing a lightning rod for criticism of the ruling Congress party ahead of crucial state elections next year. Food Minister K.V. Thomas said the government will allow foreign direct investment of up to 51 percent in multi-brand retail - as supermarkets are known in India. It will also raise the cap on foreign investment in single-brand retailing to 100 percent from 51 percent, he added. The new rules may commit supermarkets to strict local sourcing requirements and minimum investment levels aimed at protecting jobs, according to local media. A heavyweight member of Singh's coalition government warned on Thursday it totally opposed opening the sector. The move is politically risky. Fears of potential job losses could heighten popular anger at the Congress party ahead of key state polls next year that will set the stage for the 2014 general election. But slowing growth and investment in India, with the rupee currency around historical lows and government finances worsening, may have spurred the government into action. "Manmohan Singh, after all the scams and the impression of government paralysis, has realized it's time to take some bold steps. This is a very bold step that will please the middle class," said political analyst Amulya Ganguli. POLITICAL OPPOSITION India previously allowed 51 percent foreign investment in single-brand retailers and 100 percent for wholesale operations, a policy Wal-Mart and rival Carrefour, among others, had long lobbied to free up further. "For international retailers, it will open up a $1.6 trillion market growing at 8-9 percent so it's a big business opportunity for all of them," said Thomas Varghese, CEO of Aditya Birla Retail, an Indian supermarket chain. Indian retailers have operated supermarket chains in India for years, but their expansion has been hampered by a lack of funding and expertise as well as poor infrastructure which makes the cold storage of food transported around the country practically impossible. Political opponents of the proposal, with an eye to the ballot box, argue an influx of foreign players - which could include Carrefour ( CARR.PA ) and Tesco Plc ( TSCO.L ) - will throw millions of small traders out of work in a sector that is the largest source of employment in India after agriculture. India's biggest listed company, Reliance Industries ( RELI.NS ), was forced to backtrack on plans in 2007 to open Western-style supermarkets in the state of Uttar Pradesh after huge protests from small traders and political parties. The main opposition Bharatiya Janata Party (BJP) opposes opening up the retail sector, arguing that letting in "foreign players with deep pockets" would bring job losses in both the manufacturing and service sectors. "Fragmented markets give larger options to the consumers. Consolidated markets make the consumer captive," the BJP's leaders of the upper and lower houses of parliament said in a statement before the decision. "International retail does not create additional markets, it merely displaces (the) existing market." (Additional reporting by Nigam Prusty and Krittivas Mukherjee ; Editing by John Chalmers )

HIghlights: Sarkozy, Merkel, Monti discuss ECB, EU treaty change. PRESIDENT NICOLAS SARKOZY "We wanted to note, Germany and France, our confidence in the Italian government... We are, all three, determined to work in the same direction to support the euro. "We are working on proposals (for treaty modifications) which have advanced a great deal. We will present them before the December 9 meeting. "We all stated our confidence in the European Central Bank and its leaders and stated that in respect of the independence of this essential institution we must refrain from making positive or negative demands of it. "Obviously, if the sovereign debt crisis were to keep getting worse, that would be a problem for everyone and not just for France. That's precisely why we were working on the issue. "Germany has a history, a tradition and a culture. France has another. We're trying to understand and converge toward the same point... Mrs Merkel explains her worries to me, sometimes at length, and I tell her mine, and then, given the weight of history between our countries, we converge. I try to understand Germany's red lines and France's red lines. "For example on institutions like the ECB our history is not the same and that's a reality. There's no point in denying it, we must try to understand and find the meeting point." CHANCELLOR ANGELA MERKEL "When we take a first step toward fiscal union, for example by reinforcing the Stability and Growth Pact via automatic sanctions, it will be a step forwards but it won't be grounds for me to change the opinion I expressed yesterday." PRIME MINISTER MARIO MONTI "The object of balancing the budget by 2013 is not in discussion. "There does exist a more general question which apples to the global economy and certainly for the European economy, and that is: what happens if you enter a phase of recession that is greater than expected, if, and by how much and how, public finances need to be adjusted to take account of variations in the cycle." "Each country has its budget but it is about the ones who do not respect the Stability Pact and can in future be called to account, because we have had 60 violations of the Stability and Growth Pact, including by Germany, and these German violations were not punished, and we are paying a high prices for this now. "This has nothing to do with my position on euro bonds. I believe they are not necessary. "The Commission made a lot of proposals yesterday about budget discipline and we largely agree on that. I just think that euro bonds, or stability bonds, whatever you want to call them, produce a leveling of the different competitive situations which are expressed via interest rates, which gives the wrong signal, as different interest rates are an indication of where work still needs to be done. "Regarding automatic sanctions, I think they can only be imposed via treaty changes." (Reporting by Daniel Flynn , Catherine Bremer , Brian Love and Giselda Vagnoni )

France, Germany, Italy won't make demands on ECB. "We all stated our confidence in the European Central Bank and its leaders and stated that in respect of the independence of this essential institution we must refrain from making positive or negative demands of it," Sarkozy told a news conference after meeting his German and Italian counterparts in the eastern French city of Strasbourg. Sarkozy, who has been pressuring Berlin to let the ECB act more decisively to halt a rush out of euro zone bonds, said that proposals to modify EU treaties, being seen as a trade-off for a stronger ECB role, would be presented ahead of a December 9 EU summit. The modifications would seek to improve euro zone governance and ramp up economic policy convergence, he said. Sarkozy said that Italy's new Prime Minister Mario Monti had invited him and Merkel to continue their three-way talks in Rome in the near future, and they had accepted. (Reporting by Daniel Flynn ; Writing by Catherine Bremer )

Analysts view: No quick fix for D.Telekom's T-Mobile USA deal. Here are some views from analysts on the withdrawal: STEFAN BORSCHEID, ANALYST AT LBBW, STUTTGART: "This is clearly negative news for Deutsche Telekom and further lowers the likelihood that the deal will be approved." "In view of the ongoing contract subscriber losses and relatively low margins at T-Mobile USA, time is not playing in favor of Deutsche Telekom, in our view." ADRIAN PEHL, ANALYST AT EQUINET, FRANKFURT: "Assuming the DoJ would approve the deal, the FCC review will call again for more patience and the merger should probably not happen in the time frame until the second quarter of 2012." "After the DoJ had already halted the transaction, we lowered our pro-merger probability from 60 percent to 20 percent. Now, the likelihood falls probably further to 5 percent." LAWRENCE SUGARMAN, ANALYST AT RBS, LONDON: "The news this morning doesn't come as a big surprise given that the FCC had earlier this week indicated that they would be submitting the deal for an administrative review." "We see it as a positive that AT&T is now providing for the break-up fee as it de-risks the scenario that Deutsche Telekom walks away from the situation completely empty-handed." (Compiled by Maria Sheahan and Christoph Steitz)

Merkel: Fiscal union won't change ECB, eurobond stance. "When we take a first step toward fiscal union, for example by reinforcing the Stability and Growth Pact via automatic sanctions, it will be a step forwards but it won't be grounds for me to change the opinion I expressed yesterday," Merkel said. She told parliament a day earlier it was "extraordinarily inappropriate" for the European Commission to make proposals for joint bond issuance at this stage and that she remained "firmly convinced" the ECB's mandate could not be changed. At a joint news conference with France's Nicolas Sarkozy and Italy's Mario Monti after their meeting in Strasbourg, Merkel reiterated her belief that joint bonds would remove incentives for individual states to improve their fiscal discipline. (Reporting by Eva Kuehnen and Stephen Brown in Berlin; Writing by Stephen Brown)

Brazil suspends Chevron's drilling rights. The decision on Wednesday came as the head of Chevron's Brazilian unit testified before Brazil's Congress, where he apologized for the November 8 spill that leaked about 2,400 barrels of oil into the ocean off the coast of Rio de Janeiro. Brazil's National Petroleum Agency said it decided to halt Chevron's drilling rights after determining there was evidence that the company had been "negligent" in its study of data needed to drill and in contingency planning for abandoning the well in the event of accident. The agency, known as ANP, also rejected a request from Chevron made before the leak to drill wells in the deeper subsalt areas in the Frade field where the spill occurred. The field is located in the oil-rich Campos Basin and is the only block in Brazil where Chevron produces oil as the operator. The Campos Basin is currently the source of more than 80 percent of Brazil's oil output. While Chevron said late on Wednesday it had not received formal notice of the drilling halt, the company announced an indefinite voluntary suspension of all current and future drilling off Brazil, apart from plug and abandonment work. "Chevron acknowledges, however, that ANP has posted a notice of suspension to its website," the company added. The only rig working for Chevron off Brazil is Transocean Ltd's Sedco 706, which drilled the well that leaked. The spill is an ominous reminder of the risks involved in offshore drilling, cooling the euphoria over vast subsalt oil reserves that Brazil found in 2007 up to 7 km (4.4 miles) below the seabed. The country is banking on those reserves of up to 100 billion barrels to speed its development. Chevron has previously drilled for subsalt depth targets in the field, which is also owned by Brazil's state-controlled energy giant Petrobras and Frade Japao, a Japanese consortium. Chevron owns 52 percent of Frade, whereas Petrobras owns 30 percent and Frade Japao 18 percent. Chevron, the second-largest U.S. oil company, has been fined $28 million by Brazil's environmental agency for the spill, an amount that is sure to rise when ANP and Rio's state government slap fines on the company, as they have pledged to do. Chevron had already halted all of its local drilling operations after the leak occurred, before ANP's announced suspension. ANP said the suspension will remain in place until Chevron fully restores safety conditions in the field. Chevron's CEO in Brazil, George Buck, told Brazilian lawmakers that the company "acted as rapidly and safely as possible" and "used all resources" to contain and stop the flow of oil from the well. "We controlled the source in four days. We worked with transparency and cooperation with the authorities of Brazil," Buck said. INVESTIGATIONS, RECRIMINATIONS Chevron initially attributed the "sheen" on the sea surface to naturally occurring seepage from the seabed. The company is being investigated by the Federal Police, which noted discrepancies between Chevron's account of the spill and the government's. The Frade leak, while small, is likely to provide more ammunition for the growing worldwide opposition to offshore drilling in the wake of the estimated 4-million-barrel BP Deepwater Horizon spill in the Gulf of Mexico in 2010. The Frade oil flow has been staunched except for residual droplets still bubbling up from a fissure in the sea floor, but this is expected to cease in a few days. Chevron said the oil "stain" on the sea surface now equated to about a barrel. Most oil has been mechanically dispersed, while 350 cubic meters of oily water has been recovered and will undergo processing. Addressing a crowded congressional commission through an interpreter, Buck said Chevron still did not understand how the crude rose 567 feet up to the seabed after rock "parted" while drilling in the 8.5 inch-wide column. "We have an ongoing investigation. We will share the lessons learned with the people of Brazil to ensure that this never happens here or anywhere else in the world," Buck said. Lawmakers, some calling the spill a "crime," also turned their ire on ANP in the four-hour hearing and which they said had proven ill-equipped and ill-prepared, even as Brazil pursues its ambitions to rapidly increase oil output. Production is unaffected at Frade, which produces 79,000 barrels per day of oil, or 4 percent of the country's output. Chevron, with a share of Frade production that amounts to just over 1 percent of its worldwide output, had originally targeted peak capacity of about 72,000 barrels per day from the field. Petrobras has so far dodged the criticism Chevron has faced despite having approved the development plans for Frade field. Chevron, based in San Ramon, California, is also a 30 percent partner in the nearby $5.2 billion Papa-Terra project, which is operated by Petrobras. Petrobras and Chevron expect to produce 140,000 bpd oil and equivalent gas from Papa-Terra in 2013. (Additional reporting by Jeb Blount in Rio de Janeiro and Braden Reddall in San Francisco; Writing by Todd Benson and Reese Ewing ; Editing by Bob Burgdorfer , Gary Hill and Matt Driskill)

M&S brings comfy knickers and curry back to Paris. The veteran British store opened a flagship store on Paris's Champs-Elysees Thursday after a decade's absence from French soil, bringing the taste and feel of the British Isles to a city that sees itself as a world capital of food and fashion. Britain's biggest clothing retailer, known too for its home goods and upmarket food, sparked howls of protest in 2001 when it shut up shop in France to stem losses in mainland Western Europe and focus on its home turf, leaving British expatriates and anglophile Parisians bereft. The return to France is part of a new international strategy to open stores and websites in a handful of countries, rather than the scattergun approach of the past. Goods at the Paris store will be priced around 10 percent higher than in Britain, but M&S said they would be competitive for the French market. "I am impatiently waiting for the reopening," said Karine, a French TV producer and blogger who preferred not to give her last name. "For me, it's a little like Proust and his madeleine." While underwear is at the top of the list for many a female M&S shopper -- "They're the only ones to do super comfy underwear," said Karine -- food is also a major draw. Karine's list of remembered favorite foods from the 127-year-old retailer included "crumpets, scones, pies, chutney, Indian food" -- foodstuffs rarely seen elsewhere in France. Clothes, lingerie and food are the things M&S Chief Executive Marc Bolland said French shoppers were after as they lobbied the retailer to open once more in Paris. "We don't only want expats," Bolland told reporters during a store walkthrough Wednesday evening. "It's the French who are asking us for scones." Veronique Turban, another Parisian shopper who spoke to Reuters before the M&S opening, said she had missed the retailer's smoked salmon sandwiches, and expressly cited its trousers made in three different lengths -- long, regular and short -- a true example of British practicality. "My husband has really short legs, so it's ideal," she said. The opening came as the Financial Times reported that the head of M&S's clothing and homewares business was in talks to take a senior job at online fashion retailer ASOS ( ASOS.L ). M&S declined to comment. MENSWEAR, FOOD ITEMS LACKING M&S posted a 10 percent drop in first-half earnings this month as Britons curbed their spending amid a gloomy economic environment. With British retail in a rut, analysts say expansion abroad makes sense and believe a flagship M&S store on the Champs-Elysees will be a big draw. Paris newspapers have been abuzz for months over the store's opening on the tree-lined avenue, a grandiose commercial hub that crawls with tourists all year round and where U.S. clothing chain Abercrombie & Fitch ( ANF.N ) recently opened a store. However, some shoppers may be disappointed by the small, 1,400 square meter Paris store, which devotes most its space to fashion and does not run to men's clothing. Washable cashmere sweaters, classic short black dresses and trendy accessories like faux-fur hats and purses fill two levels, leaving less space for lingerie and food. The food area, crammed into only about 100 square meters, includes such British stalwarts as multi-flavored crisps, biscuits, white bread, Scotch Eggs and bacon. Sandwiches are prepared and packaged each morning in Britain before being shipped over the Channel, Bolland said. While salad cream and Christmas puddings are also on offer -- as is M&S's chicken tikka masala portions for 4.99 euros a piece -- the food section size and selection appears to be geared more to busy office workers on the go than true foodies hankering for British cuisine. A bigger selection in food and clothing will be available after M&S opens three more stores in Paris in larger formats, said Bolland. A store pegged to open in early 2013 near the Eiffel Tower, for example, will be about 4,500 square meters. M&S is also looking for Paris venues for its Simply Food chain. A French Marks & Spencer website is already up and running and has received 200,000 visits in five weeks, said Bolland, although he did not reveal how many purchases that included. "It's a little difficult to introduce food to France, but we're making an effort," said Bolland. (Additional reporting by James Davey and Mark Potter ; Editing by Catherine Bremer and Will Waterman)

AT&T braces for T-Mobile deal collapse. The U.S. telecommunications group and T-Mobile owner Deutsche Telekom, said they would continue to pursue anti-trust approval for the $39 billion takeover from the U.S. Department of Justice, but withdrew applications to the industry regulator, for now at least. "AT&T Inc and Deutsche Telekom AG are continuing to pursue the sale of Deutsche Telekom's U.S. wireless assets to AT&T," they said in a statement on Thursday, the Thanksgiving Day holiday in the United States. The $4 billion sum includes $3 billion in cash and a book value of $1 billion for spectrum access. Both the DOJ and telecoms watchdog the U.S. Federal Communications Commission oppose the deal, which would reduce the number of national mobile carriers to three. A senior FCC official said on Thursday afternoon, "The record clearly shows that - in no uncertain terms - this merger would result in a massive loss of U.S. jobs and investment." Withdrawal of the application is subject to approval by the FCC, which has the right to determine whether and how the companies could resubmit an amended application in the future. In any event, FCC approval would be meaningless if the DOJ blocked the transaction, and AT&T and Deutsche Telekom said they would return to the FCC process if they secured approval from the DOJ. The collapse of the merger would be a blow to AT&T Chief Executive Randall Stephenson who offered a massive break-up fee to Deutsche Telekom as a sign of confidence the deal, announced in March, would be approved. Analysts said the merger, badly needed by sub-scale T-Mobile USA - the smallest of the four U.S. mobile operators - looked less likely than ever to succeed. Espirito Santo analysts said AT&T's decision to take the $4 billion charge this quarter showed that the company's own assessment of the chances of success had fallen. "It tells us something about timing too - suggesting that AT&T may decide to walk away at the first opportunity (March 20, 2012) rather than waiting for the ultimate September 20, 2012 deadline," they wrote in a note to clients. Deutsche Telekom shares finished the day down 0.6 percent at 8.69 euros. The companies' advisers stand to lose a total of $150 million in fees. T-Mobile's advisers Deutsche Bank, Credit Suisse, Morgan Stanley and Citigroup, and AT&T's banks Greenhill & Co, Evercore Partners and JPMorgan Chase were on course to earn between $18 million and $36 million apiece, according to earlier estimates from Thomson Reuters/Freeman Consulting. JOB SITUATION Thursday's decision follows a blow earlier this week when the FCC said it would try to send the deal to an administrative law judge for review. The DOJ has also said it would lead to higher wireless prices for consumers and businesses. The DOJ has gone to court to block the deal and a trial in that case is due to begin on February 13. Any administrative hearing at the FCC, which is charged with evaluating the public-interest merits of the proposal, would begin after the anti-trust trial. AllianceBernstein analysts said in a note that a pretrial settlement with the DOJ was not a "likely" prospect. AT&T has 260,000 employees, mostly in the United States. Deutsche Telekom employs 36,000 at its U.S. unit. AT&T argued that the T-Mobile merger could actually create tens of thousands of jobs during integration and network upgrades, and has pledged to bring back 5,000 jobs that it moved overseas -- but many observers are skeptical. The break-up package includes $3 billion in cash as well as a commitment to give T-Mobile USA spectrum and let its customers roam on the AT&T network. Some sources have valued the total break-up package at $6 billion but AT&T has never confirmed this number. NO 'PLAN B' Acquiring T-Mobile would vault No. 2-ranked AT&T into the leading position in the U.S. wireless market, overtaking Verizon Wireless, a venture of Verizon Communications Inc and Vodafone Group Plc. It would also solve a years-long problem for Deutsche Telekom, whose U.S. unit has long ceased being a source of growth and is in urgent need of investment. At least one analyst suggested that AT&T might instead end up trying to restructure its agreement with T-Mobile USA in the hope of appeasing regulators. It could limit its purchase to T-Mobile USA's spectrum licenses and its network so that the Deutsche Telekom unit could keep its customer base and rent space on the AT&T network, Citi analyst Michael Rollins said in a research note after the FCC announced its plan on Tuesday. Credit rating agency Moody's said it believed Deutsche Telekom would rather exit the U.S. market than go it alone. However, the ratings agency believes that Deutsche Telekom will fight aggressively alongside AT&T to salvage the sale process to improve its weak position in the United States. A failure would throw Deutsche Telekom Chief Executive Rene Obermann's strategy into disarray and may force him to throw money at a business he thought he was rid of. Deutsche Telekom may be forced to sell assets closer to home and take a knife to its cost base, bankers told Reuters. The company faces a long delay at best and may be driven back into the arms of No. 3 U.S. carrier Sprint Nextel -- a less suitable partner for whom T-Mobile USA would not be worth nearly as much now as it was to AT&T in March. While according to sources, Sprint had also been courting T-Mobile USA before AT&T stole its thunder, there are huge questions about whether it could afford a T-Mobile USA purchase. Sprint, which has been losing customers, recently tapped debt markets for $4 billion to help refinance maturing debts as it looks to pay for a $7 billion network upgrade of its own in the next two years and a $15.5 billion iPhone agreement with Apple Inc that spans four years. (Additional reporting by Chris Steitz and Maria Sheahan in Frankfurt and Sinead Carew , Phil Wahba in New York and Roberta Rampton in Washington; Editing by Chris Wickham , Maureen Bavdek and Bernard Orr )

Instant view: India opens supermarket sector to foreign players. The government has allowed 51 percent foreign direct investment in the multi-brand retail sector. It also decided to raise the cap on foreign investment in single-brand retailing to 100 percent from 51 percent. The decision will be cheered by global retail giants such as Wal-Mart ( WMT.N ) that have long been eyeing India's lucrative retail sector worth an estimated $450 billion a year. India until now allowed 51 percent foreign investment in single-brand retail and 100 percent in wholesale operations. COMMENTARY: THOMAS VARGHESE, CEO, ADITYA BIRLA RETAIL, MUMBAI: "For all domestic retailers in the country, this will make available capital apart from domain knowledge. For international retailers, it will open up a $1.6 trillion market growing at 8-9 percent so it's a big business opportunity for all of them as growth has slowed down for all of them. "From the farmers' point of view this will help to improve realizations and expand yields through contract farming. We as a company haven't been in active discussions with any foreign investor. We will take things as they come." ANAND MAHINDRA, VICE CHAIRMAN, MAHINDRA GROUP: "The real fight on food price inflation begins today, FDI in multi brand retails is cleared." RAJAN MITTAL, VICE CHAIRMAN AND MANAGING DIRECTOR BHARTI ENTERPRISES: "This is a very bold move and the economic reforms process is back on track." JAY SHANKAR, CHIEF ECONOMIST, RELIGARE CAPITAL MARKETS, MUMBAI: "I am not a firm believer in the job loss argument about FDI in retail. I am sure the government would have put in riders safeguarding the interests of local retailers. "I think foreign chains can also bring in humongous logistical benefits and capital. There would be stupendous benefits from this move in terms of upgrading infrastructure, cold storage and it would eliminate layers of middlemen. "It will give good prices to farmers and make it affordable for consumers, ease out supply chain bottlenecks and reduce inflation." N.BHANUMURTHY, ECONOMIST, NATIONAL INSTITUTE OF PUBLIC FINANCE AND POLICY: "There could be some short-term job losses but it's not a big issue because in the long run, the decision is expected to result in net economic gain. "The move to open up foreign investment in the sector will help to ease out supply side constraints. It will have a substantial positive impact on inflation. It will help farmers by smoothening out the volatility in the prices of farm producers." B MUTHURAMAN, PRESIDENT, CONFEDERATION OF INDIAN INDUSTRY: "CII strongly supports the introduction of FDI in multi-brand retail recognizing that it would benefit the consumers, producers (farmers) and small and medium enterprises ("SMEs") and generate significant employment. "This would open up enormous opportunities in India for expansion of organized retail and allow substantial investment in backend infrastructure like cold chains, warehousing, logistics and expansion of contract farming. "India with a 8-9 percent growth in GDP is a consumer driven economy and modern retail has to step up to be able to meet up consumer aspiration not only in metro cities and towns but across the Indian sub-continent." CHANDRAJIT BANERJEE, DIRECTOR GENERAL, CONFEDERATION OF INDIAN INDUSTRY: "The biggest beneficiary of this announcement of FDI in retail would be the small farmers who will be able to improve their productivity and realization by selling directly to large organized players and therefore dis-intermediate the current value chain. "The farmers will not only be able to increase their output but will also get better rewards in terms of realization by supplying directly to organized players and assured market for their products by tying up long-term contracts with them. "This move is expected to substantially benefit consumers also by making available farm produce at much lower prices. This would also lead to growth, evolution and innovation in the un-organized retail sector." PINAKIRANJAN MISHRA, NATIONAL LEADER, RETAIL, ERNST&YOUNG, MUMBAI: "This move will make way for inflow of knowledge from international experts which can give boost to the overall growth of the industry. Capability building apart from financial investments is extremely important for the industry. "We will also see investment in infrastructure from the retail players...and (this) will ensure that the farming community will have a new support group with a common interest which is expected to give a great push to productivity." BACKGROUND -- The retail sector in the nation of 1.2 billion people is estimated to have annual sales of $450 billion, with nearly 90 percent of the market controlled by tiny family-run shops. -- Organized retail, or large chains, makes up less than 10 percent of the market but is expanding percent a year. This is driven by the emergence of shopping centers and malls, and a middle class of close to 300 million people that is growing at nearly 2 percent a year. -- India currently only allows FDI in cash-and-carry, or wholesale, ventures. There are restrictions on foreign investment in retail because of opposition from millions of small shopkeepers who are valuable vote banks during elections. (Reporting by Nandita Bose in MUMBAI, Abhijit Neogy and Matthias Williams in NEW DELHI; Editing by Aradhana Aravindan)

Dexia gets cash lifeline, deal seen in "days". A French Finance Ministry source said on Thursday an interim agreement to guarantee Dexia's financing would be signed "within days" and would be based on the deal reached in October. That echoed comments by Belgian Finance Minister Didier Reynders, who said on Wednesday he hoped to reach an agreement with the European Commission about Dexia's restructuring plan in the coming days. Belgium, which is expected to be liable for 60.5 percent of the 90 billion euros ($120 billion) in guarantees that it, France and junior partner Luxembourg said last month they would provide, has now been hit by the euro zone debt crisis. With national debt totaling 100 percent of GDP and without a formal government since elections almost 18 months ago, Belgium saw the risk premium on its bonds over 10-year German Bunds reach its highest level since the introduction of the euro on Thursday. France, which is due to provide 36.5 percent of the guarantees, leaving Luxembourg with the remaining 3 percent, has its own concerns on debt, with credit rating agency Fitch saying on Wednesday that the country would have limited room to absorb any new shocks to its public finances without endangering its AAA status. While it continues to wait for the guarantees to be finalized Dexia is making use of the Emergency Liquidity Assistance (ELA) facilities "from the Belgian national bank and other national banks (within the euro zone)," the banking source said on Thursday. An analyst with a major European bank said the fact Dexia was tapping national central banks for liquidity via the European Central Bank network showed how bad the situation had become, amid a more general freezing up of liquidity in the interbank lending market. "The emergency window of the ECB ... is very expensive, so it shows that the liquidity situation is very dramatic," he said, asking not to be named. "At some point you run out of unencumbered assets to post at the ECB and then the only way to fund yourself is via the ELA, which is clearly not a good sign," he said. Facing the threat of collapse, Dexia agreed in October to the nationalization of its Belgian banking division and the 90 billion euros in state guarantees offered by France, Belgium and Luxembourg after intense through-the-night negotiations. But the details of the guarantee agreement have not been finalized, giving rise to renewed pressure on Dexia this week. The European Commission needs to approve any state support to companies under EU competition and state-aid rules. Dexia's share price rose by as much as 34 percent on Thursday to a high of 0.36 euros, but that is far below its year high of 3.4 euros. ($1 = 0.7490 euros) (Additional reporting by Dan Flynn and; Jean-Baptiste Vey in Paris; Editing by Will Waterman and Greg Mahlich)

Banks step up efforts to sell Versatel loan: sources. Banks are offering several institutional investors deeper discounts to get rid of lingering exposure at a loss. KKR announced in May it was buying Versatel's shares for 246 million euros from Apax Partners, Cyrte and United Internet ( UTDI.DE ). Arranging banks Commerzbank, Credit Agricole, Deutsche Bank and HSBC have increased the interest margin on a 350 million euro term loan B by 50 basis points (bps) to 500 bps over EURIBOR, with an Original Issue Discount (OID) of around 92 to 93 being discussed, investors close to the deal said. Banks have stepped up efforts to sell a 5 billion euro backlog of 'hung' leveraged loans and bridge loans to high-yield bonds which could not be issued after the market turned in August. Banks' willingness to take a bigger loss to clear their books before the end of the year is attracting investors including credit funds, CLOs and other banks to buy the paper, which offers good yields. Standard & Poor's Ratings Services in July lowered its long-term corporate credit rating on Versatel to 'B' from 'B+', but the company's performance has improved since then. "Versatel's recent trading has been OK. Given the lack of primary deals in the market and the fact that investors have cash to spend, it's a relatively good time to get the deal out there and sell it," one investor said. Versatel's loan was originally launched in June but the syndication process faced delays due to difficult macro-economic conditions. The company has deleveraged since the loan was launched in June. The deal was launched with net debt to adjusted 2011 EBITDA of 2.5 times, which has dropped to 2.25 times due to improved performance and cash levels. Another investor said: "There is a flight to quality and if we can get the right yields we definitely have the money to put to work." (Reporting by Claire Ruckin; editing by Tessa Walsh and Helen Massy-Beresford)

Euro zone periphery faces years of struggle: Reuters poll. The survey of around 30 economists, taken over the past week, painted a bleak outlook for the debt-ridden states have threatened the existence of the common currency bloc. Growth forecasts for next year and 2013 were slashed as unemployment rates across the four countries show little sign of falling to around the bloc average until 2014 at the earliest. In many cases, the Reuters consensus is far below official government forecasts for growth. Ireland and Spain are expected to fare best of the four countries in 2012, with 0.7 percent growth, and nothing at all for Madrid. Greece and Portugal are each expected to shrink by about 3 percent, digging an even deeper hole in their state finances. "The intensifying debt crisis and the likelihood of further austerity measures are going to take a heavy toll on domestic spending and there is little sign that the external sector will be able to take up the slack," said Ben May at Capital Economics. "These economies are likely to fall back." There are concerns the debt crisis has spiraled out of control and the euro zone is struggling to design a fired-up bailout fund capable of protecting Italy and Spain nearly a month after European leaders agreed on a plan. Greece, Ireland and Portugal have already received support from the European Union and the International Monetary Fund. Italy and Spain together need to raise 570 billion euros next year in short and long-term financing, according to ABN Amro. Rating agency Fitch downgraded Portugal's rating to junk status on Thursday, citing large fiscal imbalances, high debts and the risks to its EU-mandated austerity program from a worsening economic outlook. And a failed German government bond auction on Wednesday deemed a "disaster" sparked fears that even the safe-haven status of Europe's biggest economy could be under threat. The euro zone is unlikely to survive in its current form, according to a separate Reuters poll of leading economists and former policymakers published on Wednesday, which said a new "core" euro zone with fewer members was a possible solution. Below are detailed findings from the poll, by country: GREECE Greece's economy is going through its longest recession since the Second World War. GDP is expected to contract for a fifth consecutive year in 2012, by 3 percent, having shrunk by about 15 percent from its peak. Virtually no growth is expected in 2013 either. The unemployment rate is hitting record highs and could exceed 18 percent next year and is much higher for youth, at almost 44 percent. Greece's spectacular economic decline is mainly the result of huge wage and pension cuts in the public sector, job losses in the private sector, and tax hikes imposed as part of two international bailouts. EU leaders agreed last month to cut the country's debt owed to private bondholders by 50 percent -- an unprecedented move in euro zone history. A new government of national unity, led by former ECB Vice President Lucas Papademos, was sworn in earlier this month, with a mandate to see through the debt deal and call elections early next year. But political uncertainty remains high because the conservative New Democracy party, the front-runners to win the poll, have said they would try to renegotiate the austerity policies when in power, even though they say they subscribe to its broad budget targets. IRELAND Ireland's prospects have improved since it was forced into a humiliating bailout this time last year and it is expected to grow 1.6 percent this year, followed by just 0.7 percent next and 2.0 percent in 2013. Dublin is far more optimistic. It sees GDP growth averaging around 2.8 percent per annum from 2013 to 2015 compared to three percent previously. Ireland needs medium term growth of around 2.5 percent to ensure its debt, set to peak at 118 percent of GDP in 2013, is sustainable. Ireland's banks, at the root of the country's crisis, have been recapitalized at a cost of 70 billion euros and are being radically downsized. A new fiscally-conservative government with a record parliamentary majority has replaced a previous administration riven with in-fighting. Dublin is meeting its budget targets without the sort of social unrest that has plagued Greece and crucially Ireland also won a 9 billion euros reduction in the cost of its European rescue loans over the summer. But there are serious headwinds which could thwart Prime Minister Enda Kenny's ambition of exiting the 85 billion euros rescue package in 2013 and returning to market funding that year. So far, it has relied on exports, which on a gross basis account for more than 100 percent of GDP, to pull it through but fears of renewed recession in the euro zone could throw it off course. The domestic economy is still mired in the legacy of a debt-fueled property crash and it needs to be revived if strong medium-term growth is to be attained. With the government only mid-way through an eight-year cycle of austerity, that looks a tall order. PORTUGAL Portugal is headed for its worst recession since the 1970s next year as sweeping austerity measures imposed by the terms of the country's 78-billion-euro bailout hits the country hard. The Reuters poll showed expectations for a 1.6 percent economic contraction this year and 2.9 percent next, in line with government forecasts. The poll sees a further 0.9 percent contraction in 2013. Confidence is at rock-bottom, with unemployment at 12.4 percent -- its highest since the 1980s -- and credit contracting fast as banks cut lending to boost their capital ratios. The only sector holding up is exports, but that could be fragile as the euro zone crisis spreads to bigger economies like neighboring Spain, a key export market. Austerity measures will sharply cut disposable incomes as taxes rise across the board and civil servants face the effective elimination of two months' pay next year as the government suspends holiday and year-end bonuses. Some economists say the government may still have to adopt more austerity measures if there is slippage on fiscal targets, something that could undermine the economy further in 2012. The Reuters poll predicts a budget deficit of 4.7 percent of GDP in 2012 and 3.5 percent in 2013, slightly more pessimistic than government forecasts of 4.5 percent and 3 percent. SPAIN People's Party leader Mariano Rajoy will face a tough task when he takes office next month after winning an absolute majority at Sunday's parliamentary election. Economists expect a feeble 0.7 percent expansion this year, in line with recent revised government forecasts for 0.8 percent. But the Reuters poll calls for no growth at all in Spain for 2012. That assessment is well below an as yet unchanged government forecast of 2.3 percent, and will mean harsh austerity measures will have to be taken to stand any chance of meeting ambitious deficit targets. The growth picture is looking slightly better for 2013, with a consensus for 1.2 percent. But the unemployment rate is expected to stay above 20 percent until then. The poll showed the government deficit hitting 6.5 percent of GDP this year, half a percentage point above the government's target, but missing it by a wider margin in 2012 and 2013. Spain's government faces a daunting task in rebalancing an economy that has yet to finish a restructuring of its banking system, and in which many citizens are burdened by debt. (Polling by Sumanta Dey and Ashrith Doddi; Additional reporting by Harry Papachristou in Athens, Carmel Crimmins in Dublin, Axel Bugge in Lisbon, Nigel Davies in Madrid; Editing by Ross Finley )

Fitch cuts Portugal rating on high debts, worse outlook. The ratings agency cut Portugal to BB+ from BBB-, which is still one notch higher than Moody's rating of Ba2. S&P still rates Portugal investment grade. Fitch said a deepening recession makes it "much more challenging" for the government to cut the budget deficit but it still expects fiscal goals to be met both this year and next. "However, the risk of slippage - either from worse macroeconomic outturns or insufficient expenditure controls - is large," Fitch said. The challenging economic environment was clear in a Reuters poll on Thursday, where economists forecast Portugal's economy will contract by 2.9 percent next year, the deepest recession since the 1970s, and 1.6 percent this year, in line with the government's estimates. Portugal's 10-year bond prices plunged, sending yields surging more than 100 basis points to 13.85 percent -- the second highest level in the euro zone after Greece. The spread to German Bunds also rose more than 100 basis points to 1,168. The downgrade of Portugal came after the dramatic deterioration of the euro zone crisis in recent weeks as it spread to bigger countries like Italy and Spain. "The worsening regional outlook helped inform the downgrade (of Portugal)," Rabobank said in an analyst note. "This, in turn, underlines the mounting risk of systemic downgrades." Portugal sought a 78-billion-euro bailout from the European Union and IMF earlier this year and has adopted sweeping austerity measures to bring public accounts under controls. Under the loan program Portugal must cut the budget deficit to 5.9 percent of gross domestic product this year from around 10 percent in 2010. Next year it must cut the deficit further to 4.5 percent. STATE COMPANIES A RISK Fitch said the state-owned "enterprise sector is another key source of fiscal risk" and has caused a number of upward revisions to the country's debt and budget deficit figures this year. The government has said there was an unexpected fiscal shortfall of about 3 billion euros this year. "Given these downside risks, Fitch sees a significant likelihood that further consolidation measures will be needed through the course of 2012," Fitch said. It sees Portugal total debt peaking at 116 percent of GDP in 2013 from 93.3 percent at the end of last year. Filipe Garcia, an economist at Informacao de Mercados Financeiros, said that while the downgrade does not change the government's financing conditions as it is under a bailout, it could worsen the situation for companies. "Where (the downgrade) has an impact is on companies, such as banks and other issuers like EDP or Brisa, whose ratings are greatly influenced by the sovereign rating, leaving them in a more difficult situation," said Garcia. The agency said Portugal's debt crisis poses big risks for the country's banks. "Recapitalisation and increased emergency liquidity provision from the ECB to Portugal's banks will, in Fitch's view, be needed and provided," it said. Under Portugal's bailout, 12 billion euros has been set aside for funding banks if necessary. Fitch said a worsening fiscal or economic situation could lead to further downgrades. "Furthermore, although Portugal is funded to end-2013, sovereign liquidity risk may increase materially toward the end of the program if adverse market conditions persist," Fitch said. The government hopes to return raising debt in financial markets at the end of 2013. (Additional reporting by Patricia Rua; Editing by Toby Chopra/Anna Willard)

James Turley to retire as Ernst & Young CEO. Turley told the firm's worldwide partners in a November 10 communication that he would retire at age 58, on June 30, 2013, Ernst & Young said in a statement. A replacement will be named by April 2012, it added. "He's gotten them through some ugly litigation," Jonathan Hamilton, editor of the Accounting News Report, said. Many feared that the lawsuits stemming from the firm's audits of hospital operator HealthSouth Corp would cripple Ernst & Young, he added. Turley headed the firm during some of its stormiest times, beginning as chairman just before the Enron and Worldcom accounting scandals sparked congressional hearings on the profession and led to tough oversight under a new watchdog. More recently, it has faced a lawsuit by the New York attorney general alleging it helped Lehman Brothers engage in a massive fraud before its 2008 bankruptcy. Ernst & Young has said it acted properly in that case. The firm's revenue has grown about 130 percent since Turley took over, said Arvind Hickman, editor of the International Accounting Bulletin. Ernst & Young's growth over the last decade stands up to its rivals, setting aside Deloitte, he said. Turley started at Ernst & Young in 1977. He was named chairman in 2001 and chief executive in 2003. He was nominated to President Barack Obama's Export Council in 2010. Ernst & Young, present in 140 countries, reported about $23 billion in revenue for the fiscal year ended June 30. (Reporting by Dena Aubin ; Editing by Viraj Nair)

Sarkozy, Merkel agree to stop sniping on ECB crisis. President Nicolas Sarkozy and Chancellor Angela Merkel said after talks with Italian Prime Minister Mario Monti that they trusted the independent central bank and would not touch its inflation-fighting mandate when they propose changes of the European Union's treaty to achieve closer fiscal union. They also demonstrated their backing for Monti, an unelected technocrat, to surmount Italy's daunting economic challenges, in contrast to the barely concealed disdain they showed for his predecessor, media billionaire Silvio Berlusconi. "We all stated our confidence in the ECB and its leaders and stated that in respect of the independence of this essential institution we must refrain from making positive or negative demands of it," Sarkozy told a joint news conference in the eastern French city of Strasbourg. French ministers have called for the central bank to intervene massively to counter a market stampede out of euro zone government bonds, while Merkel and her ministers have said the EU treaty bars it from acting as a lender of last resort. The Netherlands however moved closer to endorsing the ECB as lender of last resort, apparently breaking ranks with Germany. Finance Minister Jan Kees de Jager said he would prefer that the European Financial Stability Facility, the euro zone bailout fund, should be strengthened. But if the EFSF did not succeed, other measures would have to be considered. "In a crisis one should never exclude anything beforehand. In the end, something has to happen," he said. Sarkozy said Paris and Berlin would circulate joint proposals before a December 9 EU summit for treaty amendments to entrench tougher budget discipline in the 17-nation euro area. Merkel said the proposals for more intrusive powers to enforce EU budget rules, including the right to take delinquent governments to the European Court of Justice, were a first step toward deeper fiscal union. But she said they would not modify the statute and mission of the central bank, nor soften her opposition to issuing joint euro zone bonds, except perhaps at the end of a long process of fiscal integration. Some French and EU officials hoped Berlin would soften its resistance to a bigger crisis-fighting role for the ECB after Germany itself suffered a failed bond auction on Wednesday, showing how investors are wary even of Europe's safest haven. "There is urgency (for ECB intervention)," Foreign Minister Alain Juppe told France Inter radio before the meeting. Sarkozy took a step toward Merkel this week by agreeing to amend the treaty to insert powers to override national budgets in euro area states that go off the rails. But there was no sign of a German concession on euro zone bonds or the ECB's role. "This is not about give and take," Merkel said. Only when European countries reformed their economies and cut their deficits would borrowing costs converge. "To try to achieve this by compulsion would weaken us all." With contagion spreading fast, a majority of 20 leading economists polled by Reuters predicted that the euro zone was unlikely to survive the crisis in its current form, with some envisaging a "core" group that would exclude Greece. Analysts believe that sense of crisis will in the end force dramatic action. "I think we are moving closer to a policy response probably, which could be either more aggressive ECB action or the idea of euro bonds could gain some traction," said Rainer Guntermann, strategist at Commerzbank. RESISTANCE In signs of public resistance to austerity in two southern states under EU/IMF bailout programs, riot police clashed with workers at Greece's biggest power producer protesting against a new property tax, and Portuguese workers staged a 24-hour general strike. Credit ratings agency Fitch downgraded Portugal's rating to junk status, saying a deepening recession made it "much more challenging" for the government to cut the budget deficit, highlighting a vicious circle facing Europe's debtors. German bonds fell to their lowest level in nearly a month after Wednesday's auction, in which the German debt agency found no buyers for half of a 6 billion euro 10-year bond offering at a record low 2.0 percent interest rate. The shortage of bids drove Germany's cost of borrowing over 10 years to 2.2 percent, above the 1.88 percent markets charge the United States and the 2.18 percent that heavily indebted Britain has to pay. Bond investors are effectively on strike in the euro zone, interbank lending to euro area banks is freezing up, ever more banks are dependent on the ECB for funding, and depositors are withdrawing increasing amounts from southern European banks. "It's quite telling that there has been upward pressure on yields in Germany - it might begin to change perceptions in Germany," Standard and Poor's head of sovereign ratings, David Beers, told an economic conference in Dublin. In one possible response, people familiar with the matter said the ECB is looking at extending the term of loans it offers banks to two or even three years to try to prevent a credit crunch that chokes the bloc's economy. Monti repeated Italy's goal of achieving a balanced budget by 2013 but said there was room for a broader discussion about how fiscal targets could be adjusted in a worse-than-expected recession. Italian bond yields' jumped this month to levels above 7 percent widely seen as unbearable in the long term, despite stop-go intervention by the ECB to buy limited quantities, triggering Berlusconi's fall. Keeping Italy solvent and able to borrow on capital markets is vital to the sustainability of the euro zone. Key Italian bond auctions early next week will test market confidence. GERMAN EXPOSURE German officials said the failed auction did not mean the government had refinancing problems and several analysts said Berlin just needed to offer a more attractive yield. But it was a sign that, as the bloc's paymaster, Germany may face creeping pressure as the crisis deepens that may cause it to re-examine its refusal to embrace a broader solution. Economy Minister Philipp Roesler of the Free Democratic junior coalition partner called for parliament to reject euro zone bonds "because we don't want German interest rates to rise dramatically." But some market analysts are convinced joint debt issuance will eventually have to be part of a political solution to hold the euro zone together. "Although it is not easy to see how the region will get to a fiscal union with Eurobonds, we believe that this is the path that will be chosen," JP Morgan economist David Mackie said in a research note. With time running out for politicians to forge a crisis plan that is seen as credible by the markets, the European Commission presented a study on Wednesday of joint euro zone bonds as a medium-term way to stabilize debt markets alongside tougher fiscal rules for member states. The borrowing costs of almost all euro zone states, even those previously seen as safe such as France, Austria and the Netherlands, have spiked in the last two weeks as panicky investors dumped paper no longer seen as risk-free. (Reporting by Stephen Brown , Noah Barkin , Natalia Drozdiak, Veronica Ek, Eva Kuehnen , Ana Nicolaci da Costa , Giselda Vagnoni , Padraic Halpin ; Writing by Paul Taylor, editing by Mike Peacock/Janet McBride/Giles Elgood)

Quebec hearing lifts Maple's hopes on TMX takeover. In an appearance before regulators in the French-speaking province of Quebec, Maple Group defended its proposal to buy TMX Group against criticism it would create a monopoly and squash competition. Maple is comprised of 13 of Canada's most powerful financial institutions. "There was nothing there that was troubling for us, they were completely understandable questions. I think we answered well ... and can go ahead with our project on this basis," Luc Bertrand, chief representative of Maple Group and vice-chairman of National Bank Financial ( NA.TO ), told reporters after the session. National Bank, based in Montreal, is a Maple member. TMX operates the Toronto Stock Exchange, the Montreal Exchange derivatives market, and the TSX Venture exchange for small-capitalization companies, among others. Maple's proposal would put TMX-owned exchanges, plus some clearance and settlement bodies that it runs, under the wing of the country's securities dealers, also owned by the big banks. Such an arrangement is similar to a model used at Germany's Deutsche Borse, Brazil's Bovespa and others. That has raised concerns about conflict of interest and the creation of an entity so dominant that it would raise costs for customers and hinder competition. Shares of TMX rose 0.22 percent to C$44.75 on Thursday in Toronto, hovering about 10 percent below Maple's C$50-a-share bid price. The shares were not traded on the New York Stock Exchange, which was closed for U.S. Thanksgiving Day. MONTREAL'S STATUS Mario Albert, president of the provincial regulator Autorite des marches financiers (AMF), grilled both Maple and TMX chiefs about how their new board of directors would represent the interests off small investors. He also sought assurances the deal would protect Montreal as a respected center of derivatives trading and expertise. Critics in the province fear a flight of business and from Montreal to Toronto, the country's traditional financial hub. Bertrand, speaking on behalf of Maple, and Tom Kloet, chief executive of TMX, argued that the merger of several market platforms would help reduce administrative costs, attract investment and make the TMX more competitive vis-a-vis exchanges in the United States and elsewhere. "It's all about making our marketplace as efficient as we can and also making us a stronger institution to build our global reach as well," said Kloet. A wave of global exchange consolidation leaves Canada at a disadvantage if it does not follow suit, they said. DECISION WEEKS AWAY The tone of the exchange between the AMF and business officials was collegial, and the hearing hall was only half-full with about 50 audience members. Quebec will take several weeks to make a decision in the case, an AMF spokesman said. The two-day Montreal session will be followed by a similar session December 1-2 in Toronto before the Ontario Securities Commission, Canada's major securities regulator. Two other provinces, Alberta and British Columbia, must also audit the proposal before ruling on it. In addition, the deal will have to pass muster with the federal Competition Bureau. RISKS VS SYNERGIES Anticompetition concerns arise from plans to unite TMX's exchanges with Alpha Group, Canada's biggest alternative trading system, to control more than 80 percent of all stock trading. Another key concern AMF spent a big chunk of time on was Maple's plan to bring into its fold the country's not-for-profit national clearing and settlement shop, the Canadian Depository for Securities. CDS currently operates under a "cost-recovery" model, meaning any money it generates helps defray costs for users. Under the Maple deal, the clearing house would become a for-profit entity that could result in higher fees for customers, critics say. Kloet said that the combination of CDS with the clearing house now operated by the Montreal Exchange, the Canadian Derivatives Clearing Corp. (CDCC), would help that derivatives market grow while keeping that business in Montreal. "I think it helps our derivative market business significantly. ... I think it will push us to the next level in that, and I'm very excited about it and excited about what it'll mean for our business here in Quebec." Answering queries about oversight of the consolidated market infrastructure, Bertrand said the model would make it easier for regulators to supervise activity across a broader swath of the market and identify risky behavior. ($1=$1.05 Canadian)

KKR-led group has deal to buy Samson for $7.2 billion. The deal is the second-largest global private equity transaction of the year, and its structure underscores how challenging debt markets are leading buyers to find partners to fund larger equity transactions. KKR has a 60 percent participation in the consortium, people familiar with the matter previously told Reuters. The group includes Japanese trading house Itochu Corp ( 8001.T ), which will invest $1 billion to take a 25 percent stake, as well as two smaller private equity houses. Natural resources assets are a way for investors to beat the commodities cycle as commodity exchange-traded funds have generally underperformed spot commodity prices. Samson, founded by the late Charles Schusterman in 1971, offers its new owners rich pickings for their natural resources portfolio. It has interests in more than 10,000 wells, including in oil-abundant areas such as the Bakken and Powder River. COMING HOME KKR co-founder and Chief Executive Henry Kravis sealed the deal in his native Tulsa, Oklahoma. "For Samson, Tulsa is home. It has always been a Tulsa company and it will remain a Tulsa company," Kravis, who leads KKR together with co-founder George Roberts, said in a statement. Some areas in which Samson is active are estimated to hold vast quantities of oil and gas locked in shale or other underground formations. These spots are also more expensive to tap than traditional oil and gas fields. Itochu said the deal would help it achieve its goal to double its oil rights volume to 70,000 barrels per day by 2015, up from its current 34,000 barrels. The deal ranks as the second-largest global private equity transaction of the year, behind Blackstone Group's ( BX.N ) $9.4 billion agreement to buy nearly 600 shopping malls from Australia's Centro Properties CNP.AX. The deal excludes Samson's onshore Gulf Coast and offshore deepwater Gulf of Mexico assets, which carry more risk to develop and will remain with the Schusterman family. Samson Chief Operating Officer David Adams will be promoted to chief executive. KKR's group will splash out some $4 billion in equity since a $2.35 billion asset-based loan arranged for the deal is not expected to be drawn down in its entirety, financing sources said. There is also $2.25 billion of high-yield bonds arranged, these sources added. The agreement, subject to regulatory approval, is expected to be completed by the end of the fourth quarter, the consortium said in the statement. Jefferies & Company and Jones Day advised Samson while Mizuho and Evercore Partners advised Itochu alongside Simpson Thacher & Bartlett LLP. Tudor, Pickering, Holt & Co. LLC advised KKR. (Reporting by Greg Roumeliotis in New York; Additional reporting by Michelle Sierra and Smita Madhur in New York and Mayumi Negishi in Tokyo; Editing by John Wallace, Steve Orlofsky Bernard Orr and Edwina Gibbs )

European shares fall on Merkel comments. The market trimmed gains after the comments by Merkel about the ECB as well as remarks that she remained opposed to the use of jointly issued euro bonds to combat the region's debt crisis. "The comments about the ECB were a clear message to the market not to expect anything in the short-term," Veronika Pechlaner, a fund manager on the Ashburton European equity fund, said. "The market is looking toward the ECB as it only has the firepower necessary to help the situation. The question is how much systemic risk do you get before something is done." Banks .SX7P, which have been in focus due to their exposure to the region's sovereign debt, pared earlier gains. But after a sell-off of 10 percent over the past five days many banking stocks were in "oversold" territory after the .SX7P Relative Strength Index (RSI) came close to 30 on Wednesday and technical factors kept the .SX7P up 1 percent. The RSI is a technical momentum indicator comparing the magnitude of recent rises with recent falls to determine "oversold" or "overbought" conditions. A reading of 30 or below is considered "oversold," while 70 and above is "overbought." The main mover in the banking sector was Belgian lender Dexia ( DEXI.BR ), up 27.9 percent, after a French Finance Ministry source said an agreement to guarantee the troubled bank's financing would be reached within days. Dexia's RSI fell into oversold territory at the beginning of October and is down 65.9 percent since October 4 after it emerged it would need state aid from France and Belgium. On Wednesday Dexia's RSI was at 22.8, but had risen to 34.8 on Thursday. Portuguese banks featured heavily on the downside in the banking sector after Fitch downgraded Portugal's credit rating to junk status because of its large fiscal imbalances, high debt and concerns about its austerity programme. A Reuters poll showed that economists have slashed growth forecasts for the periphery countries from next year and 2013 and expect it will be years before the debt ridden countries recover from the crisis. Portugal's PSI 20 .PSI20 was down 0.9 percent underperforming the pan-European FTSEurofirst 300 .FTEU3 index of top shares which closed down 0.3 percent at 899.50 points in choppy trade, having been up as much as 913.13 and down as low as 894.37. Volume on the FTSEurofirst 300 index was low at 76.8 percent of its 90-day daily average due to a public holiday in the United States. FUND MANAGERS CAUTIOUS Fund managers were wary about investing in banks because they were "oversold." "Banks are not investable in the euro zone at the moment. Clearly there are people trading the banks shares, but there is no clarity on the quality of the balance sheets," David Coombs, fund manager at Rathbone Brothers, which has $24.2 billion under management, said. (Reporting by Joanne Frearson, Editing by Helen Massy-Beresford)

Fearful European bankers see little to be thankful for. While the United States turns its back on global gloom for a long holiday weekend, a failed German bond auction has finally brought home to Europeans the realization that nowhere is safe. "It's as grim as hell. The only good thing is now everyone knows it's as grim as hell," one pale commuter was overheard telling a disheveled-looking colleague on their early-morning Tube ride into London's Canary Wharf financial hub. Until this week Germany -- Europe's largest economy, with a hard line on austerity -- had been seen as the euro zone's last refuge and a source of comfort for the army of bankers, fund managers and traders caught in Europe's deepest financial crisis since World War Two. Then came Wednesday's bond auction, in which Berlin found no buyers for almost half of a 6 billion euro 10-year bond offering at a record low 2.0 percent interest rate. "Yesterday's German bund auction was a clear example that things they thought were on the periphery are now in the core... it's time to do something," said Thomas Becket, chief investment officer at funds firm Psigma Investment Management. Bond investors have fled, interbank lending is drying up again and questions are being asked about the stability of the region's banking sector: while Americans tuck into turkeys, Europeans are finding life more frightening than festive. One senior European banker, who declined to be named, said many of his colleagues had been "crisis-deniers" and were given false hope of a rapid return to big bonuses and job security by the significant economic rally in 2009. "What they are realizing now, and it's even more brutal for them, is that this is in fact the new normal, that the industry is going back to what it was in the early 2000s," the banker said, adding that the recent round of layoffs had cut much deeper than the last, because no bank was hiring. WORSE THAN LEHMAN? The quarter following the September 2008 collapse of U.S. investment bank Lehman Brothers has long since served as the benchmark for the lowest ebb of banker morale in living memory, but consensus is quickly shifting. At a capital markets conference hosted by IFR at the Thomson Reuters' London headquarters on Thursday, bankers and investors exchanged sober greetings like "How are you holding up?" and "are you surviving ok?." When an attendee expressed surprise at seeing an acquaintance at the event, the fellow delegate drily replied: "It is not like any of us have much to do at the moment." Depression and stress are sweeping the financial sector, industry sources say, as working weeks gobble up weekends and bankers and traders nervously accept they don't know whether they will still be employed in the New Year. "You can spend more time on pitching and marketing but sometimes you have to stop and say, 'there is nothing we can do.' And you see people just leave (to go home)," one debt capital markets banker said. This rock-bottom sentiment can be observed right across the financial sector. Money men once cynically described as the "Masters of the Universe" are feeling powerless to influence, much less prevent a potential unraveling of Europe's monetary union -- a calamity that would define their generation, possibly even the century. "You have to think that eventually the penny will drop and they'll have to do something. But...quite sensible people were sitting around in 1914 and saying Europe's not going to tear itself apart over some arch duke being shot by a Serbian fanatic, is it?," said Rob Burgeman, a director at British investment manager Brewin Dolphin. (Additional reporting by Chris Vellacott, Tommy Wilkes, Kylie Maclellan and Sarah White; Editing by Sophie Walker)

China sees factory growth slowing slightly in 2012. Annual industrial output in the world's second-largest economy is expected to grow 14 percent this year but activity at home and abroad is cooling as tight domestic monetary conditions and weak U.S. and European economies weigh on orders. Many economists believe that if China's factory output grows by between 11-13 percent a year, it would be enough to avoid a "hard landing" and keep the economy growing at around 8-9 percent, the level at which China will be creating enough jobs to stem any public unrest. Fears that China may be set for a sharp slowdown flared again on Wednesday after HSBC's flash PMI survey showed the factory sector shrank the most in 32 months in November on signs of domestic economic weakness. The results amplified concerns that the global economy may tip into recession. "The industrial production growth rate will show some moderation next year, judging from the domestic and external environment," Huang Libin, a senior official with the Ministry of Industry and Information Technology, said at an online briefing. He predicted factory output growth in 2012 would be 1-2 percentage points lower than this year, but did not elaborate. The official Xinhua news agency later cited Huang as predicting industrial production would grow 14 percent this year. In October, the ministry forecast factory growth of 11 percent for this year and 2012 -- a long-standing outlook. Growth in factory output hit its weakest pace in a year in October, even though expansion in the first 10 months of 2011 averaged 14.1 percent. The purchasing managers' (PMI) survey implied annual industrial output growth in China will moderate in coming months to an annual rate of 11-12 percent, a pace not seen since 2009 when China was pulling out of the global financial crisis. In addition to weakness in its key Western export markets and worries about the deepening euro zone debt crisis, China is also seeing a slowdown in its once red-hot real estate sector, with falling home prices and sales. "The economy faces relatively big downside risks but we haven't seen any signs of a hard landing. So conditions for an across-the-board policy easing are not ripe yet," said Qiao Yongyuan, an economist at CEBM in Shanghai. He expects annual growth in factory output to ease to 12.5 percent in 2012 from this year's 13.7 percent. The government would continue to rein in sectors with outdated technology and those that consume too much energy, Huang said. The ministry expects China's economy to grow an annual 9.2 percent this year, and the pace could slow modestly in 2012. China's economy grew 10.4 percent in 2010. (Reporting by Kevin Yao; Editing by Jacqueline Wong & Kim Coghill)

France nominates Coeure for ECB executive. Bini Smaghi resigned from his post on the ECB's six-member executive board earlier this month after coming under heavy political pressure to step down and make way for a Frenchman. France was left without a seat on the board when Jean-Claude Trichet stood down as ECB president last month and was replaced by another Italian, Mario Draghi. Viewed as a pragmatist by colleagues, Coeure is also deputy head of the Treasury. The author of numerous books on economics and fluent in English and Japanese, he has played a key role during France's year-long presidency of the Group of 20 economic powers that ended this month. "He has demonstrated the extent of his abilities and personal qualities, which he will use to the benefit of the ECB's board if he is appointed," the Finance Ministry said in a statement. Coeure's appointment to the board would bring a second monetary policy pragmatist to the executive board with Germany's Deputy Finance Minister Joerg Asmussen replacing the more hawkish Juergen Stark on the board. In the French tradition of central banking, Coeure is said to see monetary policy as subservient to the needs of the economy. He is also believed to be open to more unconventional measures to keep the channels of monetary policy open. TENSIONS OVER INDEPENDENCE After his nomination, it is up to France to propose Coeure candidacy to the Eurogroup of euro zone finance ministers, which could back him as soon as its next meeting on Tuesday. If approved by them, the backing of EU finances ministers, the European Parliament and the ECB is likely to quickly follow before it is up to EU leaders to take a final decision. Born in 1969, a former student of the prestigious Ecole Polytechnique and National School of Statistics and Economic Administration (ENSAE), Coeure is an expert on the European economy. He also co-chaired the Paris Club of creditor nations and is a former head of France's AFT debt management agency, giving him a close understanding of the dynamics of bond markets. If confirmed, Coeure's arrival on the ECB's board would end a period of tension in which the central bank's independence has been called into question due to pressure on Bini Smaghi to resign. France has called on the ECB to help stop the euro zone's debt crisis from spreading by playing the role of lender of last resort in the face of entrenched opposition from the bank itself and from Germany. French President Nicolas Sarkozy and German Chancellor Angela Merkel agreed earlier on Thursday to stop sniping in public about whether the ECB should do more to stop the crisis. Moments before Coeure was nominated to the executive board, French Finance Minister Francois Baroin said that France, like Germany, placed great value on the ECB's independence. (Additional reporting Jean-Baptiste Vey and Daniel Flynn; Editing by John Stonestreet and Maureen Bavdek)

Thanksgiving kicks off fight for holiday sales. The shopping period has been underway for some time as retailers such as Wal-Mart Stores Inc and Toys R Us started early by offering layaway programs. But shoppers are looking for major bargains and retail executives are predicting a more competitive season than 2010. An Old Navy store in Watchung, New Jersey, was teeming with shoppers on Thursday morning, while a line outside a Best Buy in Union, N.J., included shoppers who had pitched a tent to stay warm until the store's midnight opening, according to Charles O'Shea, a Moody's senior retail analyst. O'Shea said he was visiting various retailers to gauge consumer traffic. The big draws are deals, like t-shirts for $6, down from $12. Bargains like those will be a fixture for the season, he said. "There is no question that the shopper is looking for deals," O'Shea said. "Nobody wants to feel like they're leaving money on the table, especially when they have less money now." Millions of Americans will head out to shop once they are done with their turkey dinners, getting a jump-start on "Black Friday" - the single biggest shopping day of the year, which sets the tone for the entire season. Still, many others will be watching their pennies. Paula Taero, a 58 year-old housekeeper from Queens, New York who was shopping on Thursday at a Kmart in Manhattan, said she is cutting back this year on her Christmas shopping. "Santa will buy for others. I don't have so much money this year." Wal-Mart, Old Navy, which is part of Gap Inc and KMart, owned by Sears Holdings', are among the few retailers open on Thanksgiving. Toys R Us opens Thursday evening. To narrow the gap in store hours with rivals, discounter Target Corp, electronics chain Best Buy and department store chains Macy's Inc and Kohl's Corp will open at midnight - their earliest starts ever. Others, including J.C. Penney Co Inc, are opening early Friday morning as they did last year. The National Retail Federation expects sales in November and December to be up 2.8 percent over last year, but below 2010's 5.2 percent gain. So retailers, online and offline, see little margin for error. BARGAINS OR BUST Wal-Mart starts its Black Friday "doorbuster" deals on Thursday at 10 p.m. at its stores. Amazon.com Inc, not to be outdone, will offer its deals online at 9 p.m. Newspaper inserts on Thursday morning were boasting of the usual "Black Friday" bargains to get people into stores. For example, Staples Inc was offering an ink jet printer for 60 percent off, while Target was offering 46-inch, high-definition televisions for about 45 percent off. The knock-down-drag-out fight comes as the rebound in sales cooled in October, when many top chains like Macy's and Saks reported disappointing sales. It will be even tougher for chains that have struggled with sales declines lately, like Gap and Penney. The NRF expects 152 million people to hit stores this weekend, up 10.1 percent from last year. But much of that traffic will be fueled by bargain hunting, analysts said, with the real test coming after the weekend when retailers see if spending happens only if there are big bargains on the table. Last year, after a strong Black Friday weekend, shoppers sat on their hands until closer to Christmas. This year, those looking for steals beyond the requisite "Black Friday" specials may be disappointed. In a research note on Tuesday, Wells Fargo economist Mark Vitner said: "Bargain hunters may have a tougher time finding those markdowns this year, as retailers are keeping a sharper eye on profit margins." Either way, middle class shoppers are also more frugal now, taking a page from their lower income counterparts, Andrew Stein, vice president of marketing planning at Sears Holdings told Reuters. "The Kmart customer has always been a value shopper. The rest of the country is behaving like the Kmart shopper now," he said, noting that there were a lot of people at Kmart's layaway lines on Thursday. (Reporting by Phil Wahba in New York, additional reporting by Dhanya Skariachan; Editing by Bernard Orr )

Euro zone no closer to "bazooka-style" rescue fund. Finance ministers are expected to finalize details on how to extend the lending reach of the European Financial Stability Facility (EFSF) to as much as 1 trillion euros ($1.6 trillion) when they meet in Brussels next Tuesday, but the fund itself may not be operational for several weeks more. "It is difficult to say today when the fund will be ready," said a senior euro zone official with direct knowledge of the negotiations. "Before Christmas would be an optimistic target from a technical point of view." Another official said the leveraged fund should be working from January. "We need to take into account what investors want and what the politicians want," the official said. January may already be too late, with evidence growing by the day of the crisis seeping into the heart of the euro zone. France's bond market is under pressure and Germany on Wednesday failed to sell a large chunk of 10-year bonds at an auction. Euro zone leaders agreed on October 27 that the EFSF, set up in May 2010, should be leveraged to raise its firepower, focusing on a two-pronged scheme to provide bond insurance and attract outside funds to invest in euro zone bonds. With Germany rigidly opposed to the idea of the European Central Bank providing liquidity to the EFSF or acting as a lender of last resort, the euro zone needs a way of calming markets, where yields on Spanish, Italian and French government benchmark bonds have all been pushed to euro lifetime highs. Once fully leveraged and operational, it is hoped the EFSF will be sufficiently large to provide emergency loans to Italy and Spain, should they find themselves unable to raise funds in the market, as others have done. The EFSF currently has a capacity of 440 billion euros, but it is already committed to providing assistance to Ireland, Portugal and Greece, and needs to set aside money in case it needs to help recapitalize European banks as well. As a result, it only has about 250 billion euros available, not enough to help Italy and Spain, which together need to raise 570 billion euros next year in short and long term financing, according to ABN Amro. Even as policymakers work to design a way of bolstering the EFSF, the crisis is worsening, making it ever harder to get on top of the problem. As problems expand, the probability that one of the euro zone's 17 member states will be forced to default on its debts increases. That in turn is likely to increase the demand from investors for EFSF guarantees on euro zone bonds. The head of the fund, Klaus Regling, has already warned that the EFSF may not reach the 1 trillion euro level and skepticism is growing about the ability to achieve the leverage. "No one's coming out and say 'let's abandon this' but I don't think at this point there are many investors who think this stuff is going to fly," said Malcolm Barr, an economist at JP Morgan in London. "The failures of these mechanisms leaves the ECB as the last man standing and it is highly likely that the pressure will come on for the bank to do more to stabilize the situation." "INCOMPREHENSIBLE" At the same time, the EU is trying to convince investors from outside Europe to put money into co-investment vehicles that would buy euro zone bonds. Largely because of legal issues, that process is slow and complex. Russia's central bank chairman, Sergei Ignatyev, said this month that the co-investment idea was "incomprehensible" and said he would not invest until things were clearer. Reserves-rich China has shown little more enthusiasm. The EFSF must decide if each co-investment fund is to be dedicated to buy bonds of a single euro zone country, or whether it could service several countries. It must then build the fund, decide where to register it, and draft documents to comply with local regulations. The fund must also decide how to design the bond insurance scheme without playing into the hands of speculators. The current idea is to provide 'first-loss' insurance on a portion, possibly 20-30 percent, of new primary debt issuance. The debt would be sold with an insurance certificate attached, but the certificate could be detached and traded separately. "We need to create a certificate that would provide a guarantee that is eventually detachable and negotiable in the market," the euro zone official said. "But we want the owner of the certificate to own the bonds. This has to be engineered, it is not so obvious." The International Monetary Fund, which can only lend to governments and is not directly involved in the leveraging, is anxious that too much time is elapsing and says the crisis threatens the global economy. ECB President Mario Draghi has also urged the EFSF to get its plan operational quickly. "They need to act to prevent the euro crisis from spinning out of control," said Luc Everaert, the International Monetary Fund's assistant director for the euro area and EU policies. "It's clear they need to have enough real money available to inspire confidence in the markets," he told Reuters. (Writing by Robin Emmott, editing by Mike Peacock)

France says ECB independence very important. "Germany attaches a very high price to the independence of the German (central) bank and the (European) Central Bank and we attach great importance to the independence of this central bank," Baroin told Europe 1 radio. France and Germany have had diverging views over the ECB's role in the euro zone's debt crisis, with Paris urging the central bank to be a lender of last resort in a proposal that has made Berlin uneasy. (Reporting by Vicky Buffery and Leigh Thomas )

Exclusive: ECB mulls ultra-long loans to help banks. The ECB is examining this unprecedented possibility as intensifying fears about the euro zone succumbing to its debt crisis hurt the interbank money market, with banks scaling down the list of peers to which they are ready to lend. The central bank is looking into offering banks liquidity over a 2-year or even 3-year horizon, the sources said, aiming to free up the increasingly blocked interbank money market and give banks more leeway to buy and hold sovereign bonds. To date, the longest term it has offered funds is one year. As the sovereign debt crisis has worsened, the ECB has been coming under increasing pressure to intervene on a larger scale by buying state bonds but is reluctant to make such a commitment. It does, however, have the freedom to lend banks trillions of euros and could use this firepower to indirectly support governments trying to issue debt. The ECB has flagged the possibility of longer-term loans to banks, sources familiar with the matter told Reuters, in a move that could be aimed at gauging their interest ahead of a launch. The possibility of lending over a longer time horizon was raised at a meeting last week between the ECB and a group of banks including Goldman Sachs, Barclays Capital and Morgan Stanley, according to one person familiar with the matter. "What was said was that they would be prepared to offer two or three years LTRO (lending operations)," that person said. "The question (for the ECB) is whether banks would be interested in it. It could be seen as a stigma if a bank was using 2 or 3-year financing with the ECB. It might not get enough take-up to make a difference." Another source said the ECB was looking at the possibility of providing liquidity over a similar time horizon but by giving a series of shorter-term loans with the pledge to keep this line of credit open for up to three years. A third official familiar with the matter said: "It's being discussed ... But there is no decision yet." The ECB first introduced extra-long 12-month liquidity tenders in June 2009. Last month, it rewewed offers to lend banks one-year funding in two operations this year -- a 12-month longer-term refinancing operation (LTRO) in October and a 13-month operation in December. There has, however, only been lukewarm interest, suggesting that more ECB cash may not be the answer to a creeping credit freeze. Interbank markets remain tight, with banks worried about the health of their peers and also holding back cash as they face the prospect of having to set aside funds to cover potential losses on their sovereign debt holdings. International demands that they raise their capital base have exacerbated the problem. This nervousness was highlighted on Tuesday when euro zone banks' demand for ECB funding surged to a two-year high, as fast spreading sovereign debt worries left lending markets virtually frozen and the ECB as the only source of funding for many institutions. ECB Governing Council member Luc Coene said earlier this week regulators must ensure banks take account of the riskiness of government bonds they own, adding to pressure on banks to set aside more capital to cover such losses. By offering banks liquidity for an ultra-long period of two or three years, the ECB could help to reinforce confidence in banks and also do the same for rocky sovereign debt markets. "To the extent that you are improving the situation for banks, you are improving the situation for a major potential purchaser for sovereign debt," said one banker. "They will know that they can refinance with the bank (ECB)." One senior executive from a European bank, speaking anonymously, said he favored an extension of the terms under which the ECB lends to banks. "Now, it's 13 months and if we could go to 24 months, that would be better. Thirty six months would be better still but then we are at the point of medium-term financing." (Editing by Mike Peacock)

Olympus ex-CEO Woodford faces tense showdown. Michael Woodford, still an Olympus director despite being fired as CEO and blowing the whistle over the scandal, plans to attend the firm's scheduled board meeting in Tokyo, his first return to the boardroom since it unanimously dumped him on October 14. Backed by some big shareholders, he says he is willing to reclaim the top job and clean up the once-proud maker of cameras and endoscopes. "I want to take the opportunity to look the directors in the eye and tell them what I think is best for the company," Woodford told reporters on the eve of the meeting, having flown back to Japan from a month of self-exile in his native Britain. Woodford, who says he was sacked for questioning a string of unusual payments to obscure firms, had fled Japan immediately after his dismissal, citing fears for his safety amid speculation the scandal could somehow involve organized crime. But this week he returned to the eye of the storm, flying back to meet police, prosecutors and regulators investigating the scandal, which has wiped out more than half of Olympus's market value and raised the prospect that it could be delisted from the Tokyo stock market and forced to sell core businesses. Olympus initially denied any wrongdoing after sacking Woodford, a rare foreign CEO in Japan, but later admitted it had hidden investment losses from investors for two decades and used some of $1.3 billion in M&A payments to aid the cover-up. Late on Thursday, three directors blamed for the concealment quit their directorships, including former President and Chairman Tsuyoshi Kikukawa, which promised to ease at least some of the worst boardroom tension Woodford could face on Friday. But the CEO-turned-whistleblower still wants the rest of the board to go, including the new president, Shuichi Takayama, who has said that the current management team is ready to quit only once "the path to Olympus's revival became clear." Some major foreign shareholders have called for Woodford to be immediately reinstated as CEO, but the 51-year-old himself says he does not believe that will happen at Friday's meeting. "I just hope they understand the game is up and do the decent thing, stop damaging the company. Don't look for self-interest, look for the 45,000 people (who work for Olympus)," Woodford told reporters on Thursday. "Have some shame, have some dignity, that's what I want to tell them." Olympus has until December 14 to straighten out its accounts and report its half-year results to the stock market. If it misses that deadline, it will be automatically delisted. (Writing by Mark Bendeich ; Editing by Edmund Klamann)

JP Morgan buys more sway in LME takeover battle. JP Morgan Chase now has stronger input into any changes proposed by suitors while making a tidy profit from any sale, but retains the option to team up with others to block a takeover, analysts and industry sources said. The U.S. investment bank won a bidding process to buy a 4.7 percent stake in the LME, the world's dominant market for industrial metals trading, held by defunct broker MF Global Holdings MFGLQ.PK. J.P. Morgan was not immediately available to comment on the reasons for its purchase. The sale gives JP Morgan a stake of 1.4 million shares or 10.9 percent, jumping ahead of the former dominant shareholder, Goldman Sachs ( GS.N ), which owns 9.5 percent. The No. 3 shareholder Metdist has 9.4 percent, followed by UBS AG ( UBSN.VX ) with 4.3 percent. The LME, one of the last bastions of open outcry trading, has said at least 10 parties have expressed interest in buying the exchange and it is due to open its data room next month. Any change in ownership needs approval from members holding 75 percent of ordinary shares. "It's a win-win situation...I think in a way, it is a hedge against all those uncertain events," said analyst Robin Bhar at Credit Agricole in London. "They may also be taking a view that it could be a quick and profitable investment." HEADING OFF GOLDMAN? KPMG, the administrators of MF Global, said there was a great deal of interest in the shares and some industry sources said one motivation for JP Morgan to put in a strong bid was to keep rival Goldman Sachs from increasing its stake even further. "I'm sure Goldman Sachs would have been interested in building their stake further, others like that who would have been trying to gain a bigger seat at the table for when it comes to make decision," said a high-level source at another LME member with a shareholding. A takeover by another exchange -- such as the CME Group ( CME.O ) or IntercontinentalExchange ( ICE.N ) -- could mean big changes for the LME, which has kept fees low for its members who also own the business. Members like JP Morgan, one of 11 LME members allowed to trade in the ring, could be hit by an increase in running costs if a new owner decides to boost profits at the exchange by hiking fees. In that case, members would have to weigh if a one-off profit from selling their stakes at a sharp premium compensates for higher costs in the longer term. Another issue is whether floor trading would continue at the LME under a new owner. "If one of the other exchanges, which are all electronic succeed with a bid, then the days of the floor could be numbered. JP being a floor member might try and say "No, we want to keep it open'," Bhar said. Goldman Sachs is not a ring-dealing member. Both JP Morgan and Goldman Sachs have acquired warehousing companies in recent years, sparking controversy from critics who have said there is a conflict of interest. They could have an interest in heading off stricter rules that may be imposed by a new owner regarding LME trading members that also own warehouses, industry sources said. "The fact that JP Morgan and Goldman Sachs are involved in all the aspects of the LME, brokerage, warehousing and now as shareholders, clearly that throws up some challenges with regards to how the exchange wants to manage that in terms of its conflicts," said the source at another LME member. KMPG did not say how much JP Morgan paid for the LME stake, but sources familiar with the situation pegged the price at 25 million pounds, which would imply a total value for the exchange at around 530 million pounds. The price works out at 41.67 pounds per share, a premium of nearly ninefold from the last traded price of LME ordinary shares, 4.925 pounds, in July. "In terms of value, personally it is where I would have thought value would be. Puts total value around say $750 million, sounds like enough money. So to me they don't sound cheap," said an executive at another ring-dealing member. Some industry players have forecast that a bidding battle could further boost the price of the LME to 1 billion pounds. (Additional reporting by Melanie Burton)

Ex-Olympus CEO Woodford: No surprise if crime link to scandal. Woodford also told an audience of business executives in Tokyo that he had a "dream team" at Olympus he could employ to run the company if he returned as chief executive. Olympus fired Woodford as CEO on October 14, saying he did not understand Japanese culture. Woodford said his dismissal was due to questioning dubious M&A payments. Woodford spent Thursday in the Japanese capital talking to prosecutors, securities regulators and police investigating the scandal at the camera and endoscope maker. Olympus has admitted to using funds from M&A deals to hide losses dating back to the 1990s. The firm's new president has blamed three executives, including his predecessor Tsuyoshi Kikukawa, for the scam. (Reporting by Tim Kelly, Editing by Ian Geoghegan)

Dutch consider role for ECB in solving crisis. Dutch Finance Minister Jan Kees de Jager told a parliamentary hearing the Netherlands would prefer that the European Financial Stability Facility (EFSF), the euro zone bailout fund, should be strengthened. But he said that if the EFSF did not succeed, other measures would have to be considered. "In a crisis one should never exclude anything beforehand. In the end, something has to happen," he said, Dutch newswire ANP reported. The Netherlands, Germany and Finland will meet on Friday to talk about Greece and the next aid tranche Athens is scheduled to get. "Regarding the ECB, our position is very close to or the same as Germany's. If you consider the ECB to be independent, politicians should restrain themselves in what they say about the ECB," De Jager said. "I don't want to suggest that I'm pro or con," any action from the ECB, he told the hearing, adding that the European Central Bank should remain neutral and independent. "The ECB should stay independent, so no vetos on what they should or should not do," he said. But De Jager said there was not much political support in some countries for raising the EFSF's financial firepower. "As long as we are working on strengthening the EFSF -- which has my clear preference - we should put maximum effort on that," he told the hearing. (Reporting By Bouke Bergsma; Writing by Sara Webb )

Australia approves $11 billion Foster's sale to SABMiller. The government approval is the final regulatory condition to be cleared ahead of the Foster's shareholders vote set for December 1, which is expected to pass the deal. Treasurer Wayne Swan, who also approved acquisition of the remaining 50 percent of Pacific Beverages now owned by Coca-Cola Amatil, said SABMiller must keep management of the iconic Australian beer brand in Australia. SABMiller must also continue to invest in Foster's, the maker of Victoria Bitter, Carlton Draught and Pure Blonde, and not shift any of Foster's existing brewing facilities offshore to produce beer for the Australian domestic market, he said. "SABMiller has agreed to a number of undertakings which recognize the significance of Foster's to our economy and to our community, and support Australian jobs," Swan said in a statement. SABMiller last week raised its cash takeover offer for Foster's to A$5.40 a share to make up for the loss of a 30 cents capital return after a tax ruling from Australian authorities. The move made no difference to the total enterprise value of the deal, including debt. The takeover requires approval of 75 percent of votes the December 1 meeting and has wide support from institutional investors. SABMiller said the undertakings it had agreed with the Australian government on the takeover of Foster's were consistent with its plans for the business. "Given the local nature of Foster's brewing business and its focus on Australian customers, these undertakings are consistent with our current intentions for the business, and will not affect our ability to integrate Foster's and PacBev or to compete effectively in Australia," the UK-based brewer said in a statement. SABMiller expects its biggest ever takeover deal to close by the end of the year and put it at the head of the Australian beer market with a near-50 percent share. Growth in sales is expected to slow in 2011-12 as competition intensifies and the battle for market share depresses prices and margins. Traditional brewers are also under increasing competition from smaller craft brewers in a local alcohol market expected to be worth around A$30 billion by 2016. The Fosters deal is part of SABMiller's strategy of creating an attractive global spread of businesses to add to operations largely in the emerging markets of Africa, Latin America, Asia and Eastern Europe, but also in the United States. The London-based brewer of Peroni, Miller Lite and Grolsch launched its initial bid for Foster's at A$4.90 a share, on June 21 and then went hostile by taking the offer direct to shareholders at the same price on Aug 17, but Foster's rejected both as being too low. Peace broke out in the acrimonious battle after SABMiller offered to raise its cash bid to A$5.10, and Foster's shareholders would get the capital return and keep Foster's final dividend of 13.25 cents. Foster's has been struggling with declining volumes as demand for traditional beers falls, and its market share has fallen to 50 percent from 55 percent. Foster's has retreated back into Australia, giving up its global beer empire and split its wine business in May, paving the way for a sale of the beer business that boasts one of the industry's highest profit margins. Shares in Foster's traded at A$5.38, reflecting expectations the deal will complete before year end. ($1 = 1.0290 Australian dollars) (Reporting by Rob Taylor ; Additional reporting by Victoria Thieberger in Melbourne; Editing by Lincoln Feast )

After MF Global, futures industry rethinks bailout fund. The collapse last month of MF Global Holdings Inc, and hundreds of millions of dollars of still-missing customer money, is forcing a rethink of that 25-year-old decision. Executives at the National Futures Association have been talking with senior management at CME Group Inc and other market participants about how best to safeguard customer funds in future broker bankruptcies, Dan Driscoll, NFA's chief operating officer, told Reuters in an interview. Under discussion is the feasibility of a government-sponsored insurance fund modeled after the Securities Investors Protection Corporation (SIPC). Another option is an industry-sponsored bailout fund, Driscoll said. Neither response would prevent a broker's misuse of customer funds, as CME has said happened with MF Global, but some type of insurance could help restore shattered faith in the industry, helping allay growing fears that money parked at futures brokerages simply is not safe. "In the past, one reason there hasn't been a SIPC is there hasn't been a clearing firm that went bankrupt and lost customer funds," Driscoll said. "Now there is. It's a big amount of money, and it really has an impact on customer confidence." But questions about how to pay for such insurance hang over the debate. Both schemes could make trading more expensive, forcing brokers -- many of whom have seen profit margins shrivel -- to push more costs down to customers. MF Global was one of the biggest U.S. futures brokerages until it filed for bankruptcy protection on Oct 31, after revelations it had made a bad $6.3 billion bet on European sovereign debt, sparked a liquidity crunch. Customers are still struggling to get their frozen funds back, and the bankruptcy trustee estimates that as much as $1.2 billion in customer funds has simply disappeared. CME, which puts the estimate of lost money significantly lower, has offered $50 million to repay customers stuck with losses after the final accounting. A CME spokeswoman declined to comment on whether CME would support an industry-wide bailout fund for customers. "Could there be a SIPC-type approach for futures? Yes," said Don Horwitz, of Oyster Consulting in Chicago. "It's not as if they could just overlay it, there are some costs, but this will be one of the things I'd think would be considered." After the collapse of the Bernie Madoff ponzi scheme in late 2008, SIPC raised its broker assessments from a flat $150 per firm per year to a quarter of a percent of yearly operating revenues, costing bigger firms hundreds of thousands of dollars, Horwitz said. All told SIPC collected $410 million last year. Talks among industry leaders so far have been one-on-one, Driscoll said, but in "coming days" there would be an effort to bring participants around a table to hash out a formal set of proposals. TOW TRUCK? Adopting an insurance scheme, particularly one modeled after that used to backstop securities markets, would be an about face for the futures industry, which has long said its customer funds are safer and its markets more reliable and transparent than the highly regulated world of stock trading. Created in 1970 to help restore confidence to the securities markets, SIPC has authority to use its funds to pay back securities customers up to $500,000 per account when brokerages fail. The insurance, which is funded by member brokers, does not cover futures accounts. The futures industry seeks to protect customers by requiring brokers to wall off customer accounts from their own funds. The system is an important selling point for CME, which touts the stringency of fund segregation in materials aimed at winning business from fund managers. The safety of customer fund segregation was also among the reasons that NFA cited when it recommended against adopting a bailout fund 25 years ago, in the wake of the collapse of Volume Investors, a brokerage on New York's Commodity Exchange. With $13.7 million in customer funds, it was one of the largest futures brokerage failures of its time. By contrast, MF Global had about $5.5 billion in funds when it went under. COMEX -- which is now owned by CME -- in the end spent $3.6 million repaying traders who lost money in the bankruptcy. The payout equaled about 12 percent of the average customer funds held by a futures broker at the time. Futures trading has skyrocketed since then; an equivalent payout today would come to $170 million, based on the latest figures on futures customer funds published by the Commodity Futures Trading Commission. In a 122-page report entitled "Customer Account Protection Study," dated November 20, 1986, the NFA concluded that insolvencies were so rare and fund segregation and other protections so strong that "it does not appear that even retail customers would require a public commitment to account insurance to maintain participation in the futures industry." Post MF Global, that argument no longer passes muster. Trader anger at the brokerage and its regulators is mounting, and many smaller market participants are pulling or threatening to pull their money from futures markets. Volume Investors' 1985 failure affected fewer than 100 traders. MF Global had tens of thousands. Industry executives say that if industry does not come up with its own solutions, change will be foisted on it. "I don't think they'll get off without a fix," Horwitz said. Not all market participants support the idea. John Roe, a Chicago broker and former MF Global customer, said he fears an insurance scheme would only encourage risk taking by assuring traders there will always be a savior ready to pick up the pieces should something go wrong. "When there's a car wreck, do you look for a better tow truck?" Roe asked. "Let's build a better car." (Reporting by Ann Saphir; Editing by Alden Bentley )

German bonds fall; stocks, euro vulnerable. Ten-year German government bond yields rose as high as 2.14 percent compared with economy. The euro remained vulnerable near a 7-week low against the dollar as investors eyed a meeting of leaders from France, Germany and Italy for any signs of cracks in Berlin's resistance to more concerted action to end the two-year-old crisis. Repercussions from the auction, in which Germany found no buyers for almost half of the 6 billion euros on offer, extended into a second day, with Bund futures just 1.724 percent earlier this month. That is higher than the equivalent U.S. Treasury yield of around 1.88 percent and Japan's 1 percent, although the difference also reflects the higher benchmark interest rate set by the European Central Bank. "I think we are moving closer to a policy response probably, which could be either more aggressive ECB action or the idea of euro bonds could gain some traction," said Rainer Guntermann, strategist at Commerzbank. "In either case the credit of the core countries could be increasingly diluted, including also German Bunds especially when it comes to euro bonds." German, U.S. and UK 10-year real yields -- benchmark government bond yields minus consumer prices inflation rate -- are in negative territory, with Japan boasting the highest real yield among the four of around 1 percent. The MSCI world equity index was up 0.15 percent. The index has fallen 15 percent since January. European stocks rose 0.6 percent on the day while emerging stocks also added 0.6 percent. Wall Street is closed for the Thanksgiving Day holiday. U.S. crude oil rose half a percent to $96.60 a barrel. The euro was up 0.3 percent at $1.3379, having fallen as low as $1.3318 Wednesday. "It is a case of two steps down and one step up for the euro," said Carl Hammer, currency strategist at Nordea in Stockholm. "The Bund auction got people wondering about how big German debt is and it coincided with (European Commission President Jose Manuel) Barroso talking about euro bonds. Funding stresses for European banks escalated, with the cost to swap euros into dollars in the currency swap market rising to fresh three-year highs of 148 basis points. The premium investors demand to hold Portuguese government bonds rather than benchmark German Bunds rose after Fitch downgraded Portugal's rating to junk status. Citing large fiscal imbalances, high debts and large fiscal imbalances, Fitch cut Portugal to BB+ from BBB-, still one notch higher than Moody's rating of Ba2. S&P still rates Portugal at investment grade. The dollar fell a quarter percent against a basket of major currencies. (Editing by Patrick Graham , John Stonestreet)

Coming events in the euro zone debt crisis. EUROPEAN UNION: November 29 - Meeting of euro zone finance ministers in Brussels to try to finalize plans to leverage the euro zone rescue fund to provide first-loss insurance on troubled states' government bonds and attract foreign investors to buy euro zone debt. November 30 - Meeting of EU finance ministers in Brussels. Discussions expected to include bank recapitalization plans. December 7-8 - Congress of center-right European People's Party, the largest grouping in the European Parliament, to be held in Marseille, France. Expected to be attended by German Chancellor Angela Merkel and French President Nicolas Sarkozy, among other party leaders. December 8 - ECB Governing Council meeting to consider whether to cut interest rates again from 1.25 percent, and whether to take bolder action to stabilize the euro zone bond market. December 9 - Summit of EU heads of state and government in Brussels. 2012 March 1-2 - Summit of EU heads of state and government in Brussels. May 25 - Summit of EU heads of state and government in Brussels. GREECE: POLITICS: -- Greece is awaiting the disbursement of an 8 billion euro tranche under its first bailout as it faces bond redemptions by the middle of December. -- Private and public sector unions GSEE and ADEDY, representing about half the country's 4 million workforce, will strike against austerity, on December 1. GOVERNMENT DEBT SUPPLY: -- Greece's debt agency needs to roll over a total of 4.0 billion euros of T-bills in December: 2 billion euros of 6-month paper mature on December 16 and 2 billion in 3-month T-bills mature on December 23. -- Greece also has 2.7 billion euros of bonds maturing in December: 1.17 billion due on December 19, 980 million on December 22, and 715 million on December 30. DATA: -- November 29 - PPI for October -- November 30 - Retail sales for September ITALY: -- Prime Minister Mario Monti, who has outlined a broad raft of policy priorities, will be trying to quickly translate them into concrete reform proposals with one eye on Italy's perilously high bond yields. -- Monti has already met with European Council President Herman Van Rompuy, EU Commission President Jose Manuel Barroso and German and French leaders Angela Merkel and Nicolas Sarkozy. -- He reiterated Italy's commitment to balancing its budget in 2013 and made clear that Italy wants to be an active player in the eventual creation of a European fiscal union. -- Italy is firmly at the heart of the escalating euro zone debt crisis and it is already clear that the exit of former Prime Minister Silvio Berlusconi was no quick fix to the country's woes. -- Ten-year bond yields rose back above 7 percent on Thursday, a level generally seen as untenable, while the spread against safer German bunds climbed back above 500 basis points. POLITICS: -- Pensions, job protection rules and taxes are among areas where Monti will be working on reform, but his first task will probably be to adopt new deficit cutting steps to respond to Italy's rising borrowing costs and flagging economic growth. DEBT ISSUES: November 28 - Treasury to hold auction of bonds linked to euro zone inflation (BTPEIs). November 29 - Treasury to auction three-year and 10-year fixed rate bonds (BTPs) GERMANY: POLITICS: -- Nov 25-27 - KIEL - German opposition party Greens hold annual party conference. -- December 4-6 - BERLIN - German opposition party Social Democrats (SPD) holds annual party conference. -- December 8 - FRANKFURT- ECB Governing Council meeting, followed by interest rate announcement and news conference. DEBT: -- December 5 - Six-month Bubill -- December 7 - Bobl top-up. -- December 14 - Schatz top up. SPAIN: -- Popular Party (PP) leader Mariano Rajoy is due to formally take office between December 16-20 as the country's next Prime Minister after winning a parliamentary election with an absolute majority on November 20. REFORM: -- Labour market and financial sector reforms are expected to be high on the agenda after Rajoy is sworn in. -- Spanish banks would need to raise 26 billion euros of capital by the end of June to shore up their balance sheets, EU politicians said at the end of October. DATA RELEASES November 29 - Retail sales, October November 29 - Nov inflation data, flash. December 2 - Nov jobless figures from Labour Ministry. December 5 - Oct industrial production. December 14 - Nov final inflation data. December 14 - ECB lending to Spanish banks from Bank of Spain DEBT ISSUES: December 1 - New three-year bond. Details TBA. December 1 - Treasury set to announce bond auction plans for December. December 13 - 12-, 18-month T-bills. IRELAND: -- Ireland, as of October 2011, had drawn down just over 40 percent of the 67.5 billion euros in loans it is taking from the EU and the IMF as part of its 85 billion euro bailout package. It has received 8.9 billion euros from the IMF and 18.1 billion from Europe's bailout funds. -- Officials from the ECB, European Commission and IMF completed the latest quarterly review of Ireland's bailout on October 20 and said Dublin was meeting all its targets. -- Dublin has recapitalized the country's four remaining lenders to meet its target under the EU/IMF bailout. It has poured nearly 17 billion euros of state funds into its four remaining lenders, bringing the total amount of capital provided by the government to nearly 63 billion euros. GOALS TO BE MET UNDER EU/IMF PACKAGE: December 6 - The government will propose a budget for 2012 with a budget adjustment of 3.8 billion euros. End Q4 2011 - The Irish authorities will implement the strategy to underpin the solvency and viability of the credit union sectors. End Q4 2011 - The government will propose a draft programme for the disposal of state assets and discuss it with EU/IMF. DATA DUE FOR RELEASE: November 28 - October retail sales. November 30 - Credit and deposit statistics for October. November 30 - Live Register for November. December 1 - Government to outline spending ceilings for its own departments for 2012-2015. December 2 - Exchequer data for November. December 6 - 2012 budget. PORTUGAL: -- Portugal, bailed out to the tune of 78 billion euros, has admitted its accounts fell short of expectations in the first half of the year but said it would meet this year's target agreed with its lenders using extraordinary, one-off measures. -- The troika of lenders said on November 16 it was satisfied with Portugal's performance under the bailout, but told it to avoid relying on one-off measures in the future and to deliver on structural reforms. -- Portugal's economy is expected to contract sharply this year and next, only returning to growth in 2013 as the government enacts tough spending cuts and across-the-board tax hikes. POLITICS: November 28 - European Commission President Jose Manuel Barroso visits, to speak at a conference alongside Prime Minister Pedro Passos Coelho. November 30 - Final vote on 2012 budget. Government has a solid majority in parliament. GOVERNMENT DEBT SUPPLY: December 7 - IGCP debt agency auctions between 750 million and 1.25 billion euros in 3-month T-bills. December 21 - IGCP debt agency auction 750 million to 1.5 billion euros in three-month T-bills. Source: Reuters bureaux (Reporting by David Cutler , London Editorial Reference Unit; Editing by Catherine Evans )

German coalition may be open to euro zone bonds: report. The report was quickly rejected as wrong by several officials in Merkel's center-right coalition. The normally well-informed daily quoted parliamentary sources in the ruling coalition saying various scenarios are being discussed that could make German backing necessary for the common bonds the government has firmly rejected until now. "The German government could, for example, be forced to come up with something in return for a tightening of the euro Stability Pact," Bild wrote in the advance on Wednesday, indirectly quoting parliamentary sources in the coalition. Merkel and her government have repeatedly rejected the issuance of joint euro zone bonds. In a speech in parliament on Wednesday she called a joint euro zone bond issuance "extraordinarily inappropriate." In a Reuters story on November 18, aides to Merkel said she might permit bolder measures to fight the euro zone sovereign debt crisis if European Union partners would agree to treaty changes that Germany has been seeking to impose intrusive fiscal discipline. Several officials rejected the Bild report on Wednesday evening. A spokesman for Merkel declined any further comment as Merkel has already spoken out against euro bonds. "Euro bonds are interest rate socialism and socialism is always the wrong way to go," said Rainer Bruederle, parliamentary floor leader of the Free Democrats (FDP) that share power with Merkel's conservatives (CDU/CSU). Another leader in the FDP said: "We would never let that pass anyhow. But it isn't even necessary to block (it) because the CDU/CSU doesn't also doesn't want euro bonds in any form." A spokesperson for the CDU/CSU parliamentary group added: "There's nothing at all moving there." (Reporting By Erik Kirschbaum ; Editing by Leslie Adler)

Labor unrest taking shine off Colombia's oil boom. The government says oil can help lift Colombia out of poverty but workers complain of depressed wages and of police and army complicity in thwarting attempts to organize unions. "They think we're just a bunch of Indians," said Carlos Rodriguez, an activist in Union Sindical Obrera (USO), which has led protests at Campo Rubiales, a partnership between Canada's Pacific Rubiales ( PRE.TO )PRU.CN and Colombian state oil company Ecopetrol ECO.CN( EC.N ). "We proudly have indigenous ancestry but we're not a bunch of bare-asses with sandals and arrows like when the Spanish arrived. We're civilized." When Ecopetrol's chief executive, Javier Gutierrez, visited New York in September, in the middle of the protests that shut down the Rubiales field, he described them as "growing pains." "When you grow this fast, it is natural to face some resistance," he told reporters at the Plaza Hotel before spending the rest of the day with investors and analysts. Pacific Rubiales declined to comment. Rodriguez's anger is shared by many of the workers of Puerto Gaitan, a product of living in company camps while on 21-day contracts and the grinding poverty of the town, where social services remain depressed despite receiving $50 million a year in oil royalties. What should be Colombia's boom town has become a place, workers say, where dreams of economic security come to die. Puerto Gaitan, population 20,000, lies roughly 200 miles from Bogota in the plains below the eastern slope of the Andes. As the nearest town to Campo Rubiales, Colombia's largest oil field about 100 miles away, it is ground zero in the fight to share Colombia's oil wealth, the place where workers gather before and after their 21-day stints. They are paid about $550 for that time plus nine days off, and say they often have little guarantee when they will be invited back. Of some 12,000 workers at Campos Rubiales, about 1,500 form part of the permanent workforce. The rest are hired on temporary contracts. USO says it represents about 3,000 workers in both categories, and rival labor union UTEM claims 1,400. Workers complain they are hired temporarily to perform core functions of the oil business, which denies them benefits and lowers company labor costs. The hiring is done through intermediaries such as cooperatives or service companies. USO says the practice violates a side agreement on labor rights that is part of Colombia's free-trade agreement with the United States. Democrats in the U.S. Congress only approved the pact last month after the labor deal was negotiated. Rhett Doumitt, a representative of the U.S. labor federation AFL-CIO who is monitoring compliance with the free-trade agreement in Puerto Gaitan, said companies are violating Article 63 of Law 1429, the side agreement, through their repeated use of contract workers, denying workers the rights they would enjoy as full-time hires. "It's a matter of principle. They don't want to relinquish the subcontracting because it's so profitable, not just for oil industry but for every industry in Colombia," Doumitt said. Ecopetrol did not answer questions about the labor law. Pacific Rubiales did not respond to any queries. Colombia produces nearly 1 million barrels per day (bpd), nearly double the amount from 2005, and Campo Rubiales is on track to account for 25 percent of the national total by 2012. Production is expected to keep climbing. From an oil prospector's point of view, Colombia is largely unexplored. 'CLEAN BARRELS' On his trip to New York, Javier Gutierrez made a pledge. "We want clean barrels without accidents, without environmental incidents, with normal labor relations," the CEO said, adding Ecopetrol also aims to ramp up output to 1.3 million bpd by 2020 and maintain a 17 percent profit margin. Ecopetrol recently posted quarterly net profit of $2.2 billion, the highest in its history and good for a 29.8 percent profit margin. During a period of calm in the labor conflict last month, Gutierrez, Pacific Rubiales CEO Ronald Pantin and Energy Minister Mauricio Cardenas flew with a host of dignitaries and journalists to the private airstrip at Campo Rubiales, which was guarded by army and police forces. "This is the best chance we have to become a developed country," Cardenas said. "Colombia is going to be an example, showing the world it's possible to firmly develop its energy resources while the entire population prospers." Pantin went further, telling workers, "Pacific Rubiales's intent is not to make money, it's to leave a mark on society." A reporter asked Pantin if he had the same message for shareholders. "My intent is to make money," he responded, "but these days any responsible company in the world has to have social responsibility and environmental responsibility. I think my shareholders would be the first to agree." Clearly labor peace is good for profits. Ecopetrol cannot meet its production goals if protesters shut down oil fields. "The problem with workers is the more you give them the more they want. And the more successful you get, the more they want again. They can read headlines when you make $200 million in a quarter," said Rupert Stebbings, country manager in Colombia for the Latin American brokerage Celfin Capital. Pacific Rubiales made a net profit of $194 million in the third quarter, and Stebbings said it would still break even if oil were at $30 a barrel. Benchmark Brent crude traded at around $107 on Wednesday. "In the grand scheme of things, labor is relatively little with regard to the operating costs," said Matt Portillo, an associate at merchant bank Tudor, Pickering, Holt & Co. Oil workers around the world are often paid a premium to travel to remote locations in high-risk jobs. Oil workers at Campo Rubiales are guaranteed around $550 per month, roughly twice the country's minimum wage. Workers characterized the wage as "miserable". They complain of worker tents where 100 or more men sleep on cots and the nearest bathrooms are 100 meters away. "The workers are assigned to concentration camps," said Sebastian Bedoya, 60, a pipeline worker who said his temporary contract was not renewed after the company discovered his union activism. "You have to get up at 3 in the morning if you want to get a shower. Otherwise the line is too long and you can't make it to breakfast at 5. "You know what's the worst? The company calls us to start work on a certain day, and when we arrive they make us wait another three or four days before we can start." So they wait in Puerto Gaitan, crashing in cheap motels, their anger building as they question where the $50 million in royalties are being spent. "This conflict is polluting all of Colombia," said Jaiber Alfonso Mendez, 30. "This situation will have repercussions throughout the country. This is going to spread." (Additional reporting by Julia Symmes Cobb; Editing by Kieran Murray )

Analysis: Asia funding markets feel pain, worse to come. The impact so far of the euro zone's messy debt crisis has been in the weakest points in Asia: India and South Korea, whose banks rely heavily on foreign funding; Indonesia, where foreigners hold a large chunk of high-yielding bonds; and wholesale syndicated loan markets, where borrowers are looking to raise long-term funds from risk-averse investors. Yet tell-tale signs of how much more pain is in store are there, both anecdotally in credit markets as well as in the steadily rising swap spreads, reduced volumes, higher currency forwards and heavier central bank interventions. "We're in the first innings as far as European bank deleveraging goes," said Krishna Hegde, credit strategist at Barclays Capital. European banks traditionally have been active in syndicated loans and trade finance in Asia, he said, adding "those banks which were typically buyers of assets have turned sellers." "Depending on how the European sovereign situation evolves, we could see more pressure going forward. The amount of assets that need to be worked down is potentially very large," said Hegde. With an estimated $1.6 trillion of exposure to Asia, not including lending in money markets, a full-scale retreat by banks from continental Europe could lead to a liquidity squeeze like that seen in late 2008. Access to much-sought-after dollar funding has been tight. Even relatively healthy banks, such as those in Australia, have seen costs rise as investors everywhere become reluctant to lend to any institution except at penurious rates. For instance, the cost of swapping the yen for dollars via basis swaps now hovering near the highest levels since the global financial crisis. One explanation for that sort of pressure in an otherwise extremely liquid Japanese money market is that European banks and borrowers are seeking dollar funds in markets beyond their shores, and cheaply. The 1-year dollar/yen cross currency basis swaps widened to minus 77 basis points at one point last week, the widest since October 2008, and were near minus 74 basis points on Thursday. The Indian rupee has been driven to record lows by worry that the volatile portfolio flows funding the economy's massive current account deficit will evaporate swiftly. Indian banks are borrowing huge amounts each day from a central bank repo window. Indonesia's central bank has offered dollars in exchange for its rupiah bonds, just to prevent a rush from its market into a safe-haven asset. COUNTING SHIPS So far, the pullback has not been anything as disorderly as in the last global financial crisis. True, exporters are having to pay as much as 100-200 basis points more for trade finance, a traditional stronghold of the European banks. But the money hasn't dried up, nor has there been any unusual decrease in shipping or freight activity, as was the case immediately after Lehman collapsed in 2008. Data from the Bank of Korea on Wednesday showed short-term external debt fell 10 percent in the third quarter alone, to $138.5 billion. Most of the drop came from foreign bank branches in the country, leading analysts to suspect this is owing to deleveraging by Europe. Two of Australia's biggest banks have postponed plans to launch bond issues because the costs were too great, even though the bonds were of a type normally considered super-safe. That has fed concerns that rising funding costs could prompt the banks to nudge up rates for domestic borrowers. A borrower in Hong Kong, IFC Development -- a joint venture between blue chips Sun Hung Properties ( 0016.HK ), Henderson Land Development Co ( 0012.HK ) and Hong Kong & China Gas Co -- initially planned on raising a HK$17 billion loan. That was cut to HK$10 billion in August and then halved last month. Pricing was increased to 175 basis points over the Hong Kong interbank rate from 140-150 basis points. There have also been signs European lenders are retreating from Australia's A$65 billion syndicated loan market. Names such as BNP Paribas ( BNPP.PA ), Societe Generale ( SOGN.PA ), Banco Santander ( SAN.MC ) and BBVA ( BBVA.MC ), have offered loans for sale, say sources. The banks were mainly selling project finance loans, such as Bank of Ireland's sale of its A$300 million portfolio earlier this month. Then again, Australian banks have been only too happy to relieve the Europeans of their loans, an opportunity likely to be taken by many of the healthier banks in the Asia region. China's ICBC ( 601398.SS ), the world's largest bank, is eyeing assets that some European lenders are looking to shed. "We are in a position to take on some of these assets," Han Ruixiang, head of ICBC Australia, told a business lunch in Melbourne. ICBC entered Australia in 2008 and built its asset base partly by snapping up assets from European banks that were exiting the market during the global financial crisis. "We came at the time when they decided to leave, so we had a good time of cherry-picking in 2009 and 2010," Han said. WHAT'S NEXT? European banks had $1.6 trillion total exposure to Asia ex-Japan as of June, according to Morgan Stanley calculations based on data reported by banks to the Bank for International Settlements (BIS). Of that, $1.4 trillion related to on-balance sheet exposures, the rest was due to off-balance sheet exposures that include derivatives, guarantees and credit commitments. Quite possibly, judging from the relatively tranquil markets, a lot of that money hasn't left Asia. It's also not unreasonable to assume that Europe's crisis will run deep, and that its banks will have to slowly deleverage: i.e. exit trade finance, sell their syndicated loans, and ultimately sell lease assets or parts of their business. The first to be recalled would be deposits placed with banks in Asia, and portfolio investments. That renders Asia's financial centers Singapore and Hong Kong, and even South Korea, vulnerable, exposing their banks to a larger loan book than is prudent. Indonesia, where foreigners own more than 30 percent of the rupiah bond market, is another weak spot. The withdrawal of European cash could stretch those who need to fund current account deficits -- the likes of India -- while pushing up the cost of capital across the board. Ultimately, credit analysts suspect, the European entities could even be forced to offload stakes they hold in lenders such as South Korea's Shinhan ( 055550.KS ) or India's Yes Bank ( YESB.NS ). (Additional reporting by Denny Thomas and Prakash Chakravarti in HONG KONG, Saeed Azhar, Masayuki Kitano and Ramya Venugopal in SINGAPORE; Editing by Ian Geoghegan )

Fitch says new shocks could threaten France's AAA. In a special report on French public finances, Fitch said France's debt and deficit were consistent with a AAA rating but said shocks such as a further economic slowing or provisions for banking sector support could put the rating in peril. The report kept upward pressure on French borrowing costs after Moody's warned on Monday that a sustained rise in yields coupled with weaker growth could harm France's ratings outlook. "Similar to the situation of other major 'AAA' sovereigns, the increase in government debt has largely exhausted the fiscal space to absorb further adverse shocks without undermining their 'AAA' status," Fitch said. "The principal concern with respect to France is that the intensification of the euro zone crisis will generate contingent liabilities that will be crystallized onto the sovereign balance sheet." The Fitch analysis followed reports, denied by France and Belgium, that a restructuring deal for Franco-Belgian bank Dexia may have to be renegotiated, with Brussels pressing Paris for more funding guarantees. French 10-year bond yields were little changed on the Fitch note, having already risen as high as 3.73 percent earlier in the day on the Dexia report, following several days when traders have pushed French yield premiums over German Bunds to new highs. Fitch did not hint at putting France on a negative outlook, saying: "France's public finance metrics remain consistent with retaining its AAA status." But it added: "Under a stress scenario in which the euro zone crisis intensifies with adverse consequences for growth and crystallization of substantial contingent liabilities from its exposure to the peripheral nations, France's AAA rating would be at risk." It said the threat of bigger liabilities over financial support for the banking sector was a particular concern. FALTERING ECONOMY WEIGHS The head of France's AMF securities markets regulator acknowledged the market was focusing on the country's AAA rating, but he said other top-rated euro zone countries were also in the same position. "It is for reasons which seem irrational to me because the fundamentals have not varied more here since the spring than they have in United Kingdom or the United States," Jean-Pierre Jouyet told Les Echos newspaper. "France's AAA is a European bet because it shapes the stability of the EFSF (euro zone bailout fund)," he said. France's maximum exposure through the EFSF is 158.5 billion euros ($214 billion), equivalent to 8 percent of gross domestic product, and if all that had to be used, France would have little fiscal space left to absorb other liabilities, Fitch said. "France has lost its status of safe haven in the euro zone," said Diego Iscaro, senior economist with IHS Global Insight. "At the moment it is not that worrying. Yields are still relatively low. The problem is ... will this deteriorate?" Stress scenarios aside, Fitch sees France's debt peaking at 90 percent of GDP, similar to Britain and less than in the United States, and it praised France's commitment to debt reduction. Faltering growth has, however, prompted President Nicolas Sarkozy to announce two waves of cost-cutting measures. Further measures would be politically difficult with a presidential election in April. The government recently cut its 2012 growth forecast to 1 percent from 1.75 percent, a level many economists still see as optimistic. Given the likelihood of France entering a recession next year, many investors have already discounted a rating downgrade for the No. 2 euro zone economy. Fitch saw France's public deficit at 4 percent of GDP in 2013 and said the country's 3 percent goal for that year would require additional fiscal measures. The head of France's debt management agency, Philippe Mills, said in an interview with the daily Les Echos on Wednesday that a rating downgrade would be costly and could take years to repair. ($1 = 0.7410 euros) (Reporting by Catherine Bremer , additional reporting by Geert De Clercq; Editing by Ruth Pitchford)

Olympus shares jump more than 11 percent, delisting fears fade. The scandal-hit company said on Monday a third-party panel investigating an accounting scandal found no evidence of funds from M&A deals flowing to organized crime syndicates. Olympus was trading 8 percent higher at 941 yen after earlier jumping more than 11 percent in morning trade. The stock was the heaviest-traded share by turnover on the main board. Former Olympus Corp ( 7733.T ) CEO turned whistle-blower Michael Woodford touched down back in Tokyo on Wednesday for a meeting with investigators probing one of Japan's biggest accounting scandals and a showdown with the board that threw him out. (Reporting by Mari Saito ; Editing by Edwina Gibbs )

Analysis: Poor German auction spells tough times for euro. As Italian, Spanish and even French yield spreads have blown out to record levels in recent weeks, the trend has been for portfolio flows to switch into German Bunds, resulting in no foreign exchange outflows from the euro zone. Those flows, combined with talk of repatriation of capital by euro zone banks desperate to shore up their balance sheets as money markets seize up, have been cited as reasons behind the euro's recent resilience around $1.34. But that appears to be changing and on Thursday the euro slid to a 7-week low at $1.3316 on trading platform EBS. Germany sold barely half the bonds it put up for auction on Wednesday, when a buyers' strike against the low yields on offer was fueled by fears that Berlin could not remain immune from the crisis engulfing its heavily indebted euro partners. In a sign that investors are cutting exposure to the euro zone as a whole, 10-year Bund yields converged with UK gilts for the first time in 2-1/2 years. Normally, positive yield differentials would be considered a reason to buy the euro. But analysts said investors are now more likely to sell the shared currency because of fears that Germany may be forced to underwrite the fiscal excesses of weaker euro zone economies. Those worries could push the euro to $1.25 or lower by early next year, some analysts say. "Some people are now saying if you cannot sell the Bund (at auction) you cannot sell anything. Traders will see German yields higher and the euro falling and say that is not a good sign. The euro zone crisis is just getting going," said Geoff Kendrick, FX strategist at Nomura. Analysts described the recent widening of differentials between benchmark Bund yields and returns on the bonds of weaker economies as asymmetric. Earlier in the crisis, when peripheral bond yields rose German yields tended to fall. "When German Bund yields no longer drop while the other side is widening, we have liquidation of these peripheral bonds as well as simultaneously a flight out of the euro. This means the euro is much more vulnerable to widening of the spreads," said Hans Redeker, global head of FX strategy at Morgan Stanley. At 2.15 percent, 10-year German yields are still roughly a third below levels seen earlier this year, and investors are unlikely to dump Bunds as they dumped Italian and Spanish debt. But Stephen Gallo, head of market analysis at Schneider Foreign Exchange, said if weak demand for German debt escalates into an outright Bund sell-off, a huge proportion of flows that have remained within the euro zone would desert the bloc. "We may get to a point where Germany starts to get pressured, capital is going to be drying up and then the euro could drop quite low, to $1.25 or less in a matter of days," Gallo said. INFLOWS SLOWING In a scenario in which Germany comes under pressure, analysts said the portfolio flows could dry up fast. The latest European Central Bank data showed 20.7 billion euros of net portfolio investment flowed into the euro zone in September, at a slower pace than August when 31.9 billion euros came in. The data supports the view that appetite for euro zone debt is waning with repatriation of capital by European banks acting as a buffer for the time being. Analysts expect foreign investors to speed up liquidation of euro zone bond holdings while repatriation inflows are likely to wane in coming months. Deutsche Bank estimates the stock of foreign portfolio investments in the euro area exceeds the stock of euro area investment abroad by close to 3 trillion euros - a mismatch that is likely to send the euro lower in coming months. Data from Japanese bank Nomura shows domestic investors in France, the euro zone's second largest economy, has already repatriated investment from abroad for four consecutive months, to a total of 123 billion euros. Although the data does not differentiate between repatriation from other euro zone countries and the rest of the world, it supports evidence that French banks, which have particularly high exposure to Greek debt, are trying to improve capital ratios to reduce vulnerability to a Greek default. Nomura data also showed Japanese investors led the selling of euro zone assets mainly from Italy and Belgium in August and September, and that trend is expected to continue. Deutsche Bank strategist Alan Ruskin said as the crisis threatened core euro zone countries, foreigners had a significantly smaller pool of assets to buy from. He forecast the single currency could hit $1.25 in the first quarter of 2012. "It does feel like Europe has jumped the gun and there's a mismatch in terms of repatriation. Foreigners hold a lot more European assets than Europeans hold foreign assets. There's more to liquidate in a full-blooded, 'everyone goes home' situation." (Editing by Ruth Pitchford)

German calls for bolder steps mount after bond bust. German newspapers uniformly interpreted the country's worst debt sale since the launch of the euro in 1999 as evidence the crisis had finally arrived in the "hard core" of the single-currency bloc. Some said this should force Merkel to reconsider her approach. So far her government has loudly rejected the two solutions that many experts feel may be needed to hold the 17-nation euro zone together -- allowing the European Central Bank to act as a lender of last resort and issuing joint euro zone bonds. "The buyer's strike at the German bond auction is a first, quiet wake-up call from investors, who are telling the government to take action and no longer play for time. One has to hope that it is heard." said Andrea Cuennen in a commentary for leading business daily Handelsblatt. Cuennen said opponents of euro bonds and bolder ECB action were likely to use the poor bond sale to justify their stance, but argued this would be the wrong conclusion to draw from it. "In the short-term the ECB is the only lender that can keep euro zone bond yields down. And in the longer-term, there is no way around a fiscal union that is at least partly financed by euro bonds." The Financial Times Deutschland (FTD), in a riff on comments by a leading Merkel ally last week that all of Europe was now adopting German fiscal discipline, said "The crisis speaks German now" next to a picture of a German eagle crashing into the ground. Conservative daily Die Welt noted that while Merkel was publicly denouncing the idea of euro bonds in a speech to the German parliament on Wednesday, the Dutch finance minister appeared to open the door to them if weak countries on Europe's periphery agreed to strict oversight of their budget policy. Both the FTD and top-selling tabloid Bild reported on Thursday that euro bonds were no longer seen as taboo by some members of the German government, despite repeated public denials. SAFE HAVEN RISK The bond sale was not the first in which Germany failed to raise as much money as hoped. In fact it was the ninth auction this year to fall short of target. The difference was that previous shortfalls were capped at around 500 million euros. On Wednesday, it was well over 2 billion. German bonds traded in the open market slumped on the result, which some analysts described as a disaster. They continued their fall on Thursday, dipping to their lowest level in a month, in a sign Germany was no longer seen as a rock-solid "safe haven" in a bloc with ever more problem countries. Merkel's government has made two main arguments in opposing joint euro bonds. The first is that they would lead to higher borrowing costs for Germany - a phenomenon that Wednesday's bond sale suggests is already taking hold. The second is that they would remove, in one fell swoop, the incentive for countries like Greece and Italy to keep their finances in order as they would no longer have to fear a spike in rates. Were Germany to succeed in its push to have tighter budget oversight enshrined in the European Union's Lisbon Treaty, then these concerns might be allayed. But that is likely to take months or years, time the euro zone may not be able to afford. (Reporting by Noah Barkin; editing by Andrew Roche )

Analysis: Crisis casts doubt on China rebalancing plans. But Beijing may not have time to administer its ideal medicine -- a project to spur domestic demand. Instead, policymakers may be spurred to action by a sharp weakening in the domestic picture -- and the measures they choose are likely to err on the side of growth at any cost, rather than much-needed restructuring. "My concern is that when we look at the numbers they are very reminiscent of early 2008 and that was not a good scene," said Arthur Kroeber of economics consultancy Dragonomics. He asserts that weaknesses in steel demand and construction are signs that all is not well in China. "They see things slowing down so they will do what they can, which means all rebalancing will be kicked down the road," Kroeber said. "They are more interested in retaining growth through the channels they have." Or, as China's vice premier Wang Qishan put it this week: "An unbalanced recovery would be better than a balanced recession." Already, bank lending is reviving, after months of a credit crunch that starved China's private sector -- the most productive in terms of jobs and taxes -- forcing more and more companies to turn to underground banking and loan sharks for funds. This week, China confirmed it is pressing ahead with a vast spending plan for so-called "strategic sectors." Other measures by which China might stimulate growth include a pilot VAT tax reform and some reduction of fees to smaller firms -- both of which should help the private sector which had been left out in the cold during the past three years of emphasis on big, state-owned firms. There are voices calling for serious structural reform -- sometimes from surprising quarters. Prominent newspapers carried an editorial from an Agricultural Bank of China economist saying that a stronger yuan would help China transform its economic model, and another editorial from a vice minister of industry saying that the overseas crises would force Chinese industry to raise its competitiveness. Long Yongtu, the man who negotiated China's entry to the World Trade Organization, told Reuters that provincial leaders support a greater opening of the economy. LOOK TO YOUR OWN HOUSE FIRST Internationally, the financial crises roiling the West are expected to hit China's export sector, which still accounts for about 15 percent of GDP and employs millions in the coastal regions. But worryingly, the latest HSBC purchasing managers' index showed that while new orders for exports held their ground, overall orders had their biggest drop in a year and a half -- implying that domestic demand is as much a concern as exports. China's factory sector shrank the most in nearly three years in November, data released on Wednesday showed [ID:nL4E7MN0EA]. China has long said it wants to reorient the economy toward more sustainable, consumer-led growth. But the huge stimulus it launched to stave off a slowdown during the global financial crisis of 2008 -- a program totaling about $650 billion -- had the opposite effect. It transferred more of the nation's assets to the less productive state sector. Return on investment in China is falling fast, in yet another sign that deferring restructuring can only eke out a few more years of rapid growth. "I think it will take another 3-5 years before we see a real rebalancing. At the moment, growth is very much driven by investment," said Kevin Lai, senior economist at Daiwa Capital Markets in Hong Kong. "If you talk about investment ratio close to 50 percent, that's too high." But driving demand is a long-term project. Among other things, it would require structural changes to give more space to the private sector, and would include better welfare and health programs so that China's savers are willing to spend more of their cash. "The bottleneck for GDP growth is not supply. The Chinese economy is oversupplied with goods. The shortage is demand," Li Daokui, an advisor to China's central bank, said at a conference last week. This time around, China has confirmed it wants to see a staggering 10 trillion yuan ($1.57 trillion) put into strategic industries over the next five years, most of that through corporate spending and bank lending rather than direct government stimulus. TARGETED SECTORS The targeted sectors include alternative energy, biotechnology, new-generation information technology, high-end equipment manufacturing, advanced materials, alternative-fuel cars and energy-saving and environmentally friendly technologies -- all buzzwords for the new, more sustainable Chinese economy. But the details of where exactly the money would be spent remain foggy. Some of the likely big ticket items include nuclear power and rail investment, but the latter has been scaled back due to the Railway Ministry's high debt levels and a fatal crash. Even China's most ambitious nuclear investment scenario would not require that much spending. Arguably, what China's high-tech sector needs is more competition and protection for intellectual property advances, not companies with connections being force-fed cash. Past experiences provide a sober lesson. A few years ago, China eagerly promoted its solar power sector as a sign of its commitment to new energy and jobs at home. But what actually happened is that most of the panels produced headed overseas due to lack of domestic incentives for solar power. Now that overseas markets have weakened, the solar power sector is reeling from overcapacity and plummeting prices. ($1 = 6.3608 Chinese yuan) (Additional reporting by Nick Edwards and Kevin Yao in BEIJING; Editing by Don Durfee and Richard Borsuk)

Barclays optimistic will win ABN battle: Diamond. "We went into this transaction expecting to be able to execute and we are still quite confident that we can," said Bob Diamond, head of Barclays's investment bank arm and president of the group. Barclays has agreed an all-share takeover of ABN worth about 63 billion euros ($84.6 billion), but a consortium led by Royal Bank of Scotland ( RBS.L ) has made a mostly cash offer worth 71 billion euros. Either deal would rank as the biggest ever bank takeover. But the consortium's rival offer is conditional on it also buying ABN's U.S. arm LaSalle Bank, which ABN has agreed to sell to Bank of America ( BAC.N ). A Dutch court is due to rule in early July on whether that deal should be allowed, which Diamond said clarify the situation. He said he expected the deal to be allowed. "Looking from the outside it is a bid of $21 billion in cash. That is about 20 times earnings, so it looks like a pretty viable transaction to us," he said in an interview on CNBC. Diamond said Barclays management continue to meet ABN shareholders and unions to promote their offer and had a good response to its plans to create the world's fifth biggest bank. But he added: "We also went into this transaction coming off four years of record earnings ... and we have a great management team and great organic growth plan so if for some reason we were not able to execute we'd go back to business." ($1=0.7449 euro)

Cable tries to shed bad-service reputation. Top cable operators such as Comcast Corp. and Time Warner Cable Inc. are expanding their customer service operations to make common complaints -- like waiting all day for the cable guy -- a thing of the past. But analysts say it won't be easy. Cable's service shortcomings are one of the reasons satellite television providers are adding more new customers than cable, even with cable's success in offering competitively priced combined TV, Internet and phone packages. "Satellite leads because they place so much emphasis on customer care," said Tuna Amobi, an analyst at Standard & Poor's. Cable operators have done a much better job in recent years, but they still have a ways to go, he added. Comcast, the No. 1 U.S. cable operator, said it plans to hire nearly 6,000 new customer service staff and field technicians this year, after hiring around 6,500 in 2006. The expansion is a drive to keep up with rapid growth. Comcast sold more than 5 million new services to customers last year and expects to sell 6.5 million in 2007. Time Warner Cable, the second-largest U.S. cable operator, said it is also expanding its customer service, in line with a similar rate of growth in products being sold to customers. Annual surveys by J.D. Power and Associates show satellite TV service providers DirecTV Group Inc. and EchoStar Communications Corp. have a significant lead over cable providers in overall customer satisfaction. Improving customer service has become increasingly important for cable operators as phone rivals Verizon Communications Inc. and AT&T Inc. have become more aggressive in trying to win over TV customers. AT&T's new chief executive, Randall Stephenson, said he hopes to improve service over time. "Right now the installation time line is very similar to the cable experience," he told Reuters in a recent interview. "All of our technicians are brand new hires, so they're going up the learning curve." Publicly, cable companies say customer service has moved higher on their agenda. For example, Comcast and Time Warner Cable say they have cut things like all-day appointment windows to an average of between two and four hours. But privately, cable operators say customer service is a difficult thing to get right because half the challenge is with perception. They say that while 99 percent of customers get serviced without any problems, it is the ones who have a bad experience who call the media or write to their congressmen. One of the most viewed video clips on YouTube last summer was of a Comcast technician caught sleeping on a customer's couch as he waited more than an hour for his office to verify the installation. Cable operators are emphasizing new services to help improve their image. Comcast has introduced a service called "Dynamic Dispatch," which uses mobile devices and GPS systems to enable up-to-the-minute communications between customer centers and technicians. "Do we want to strive to get better? Absolutely. Are we doing a lot to get better? Absolutely," said Comcast Senior Vice President of Customer Care Suzanne Keenan. As for Time Warner Cable, it offers a Call-To-Meet service in most of its regions: A customer receives a call when a technician is en route, reducing the time customers waste waiting at home. "I would say that over time we have continued to put increasing emphasis on customer care," said Tom Kinney, senior vice president corporate customer care at Time Warner Cable. (Additional reporting by Ritsuko Ando )

China to become world's No.2 gold producer: miner. China plans to raise its gold production by 8.3 percent to 260 tonnes in 2007 amid strong international prices. Gold prices XAU= hit a 25-year high last year. Domestic demand was seen in line with production at 260 tonnes this year, supported by the jewelry sector, Wu Junyun, vice general manager of the international trading arm of the China National Gold Group Corp., told reporters on the sidelines of a conference in Shanghai. China's gold output rose 14 percent in the first four months of this year to 77.75 tonnes, extending a 7 percent increase in 2006 when it hit a record of 240 tonnes, data from the China Gold Association showed. The World Gold Council has put China's gold consumption at about 240 tonnes in 2006. The state-owned China National Gold Group, one of the country's leading gold producers, produces about 20 percent of the country's total. Wu said the company was interested in gold mining in neighboring countries, including Myanmar and Vietnam as well as in Russia and other central Asian countries, although he gave no details.

Corrected: Indexes open up slightly after trade data. NEW YORK (Reuters) - U.S. stocks edged higher at the opening on Friday as data showing the U.S. trade gap narrowed more than expected in April offset concerns about rising interest rates. The Dow Jones industrial average .DJI was up 27.23 points, or 0.21 percent, at 13,293.96. The Standard & Poor's 500 Index .SPX was up 1.67 points, or 0.11 percent, at 1,492.39. The Nasdaq Composite Index .IXIC was up 4.56 points, or 0.18 percent, at 2,545.94.

Bonds recover mildly but rate worries linger. The market's mild recovery followed a plunge on Thursday, but analysts and traders said a cross-section of players including fund managers, central banks and mortgage companies continued to liquidate long positions and rebalance their books. "For now, the sell-off has abated. People are taking a shot at (getting) long," said Michael Pond, Treasury strategist at Barclays Capital in New York. Benchmark 10-year notes were traded up 4/32 in price for a yield of 5.12 percent, down 2 basis points from late Thursday. The 10-year yield peaked at 5.25 percent, matching the Federal Reserve's overnight lending target. The benchmark yield posted its biggest one-week rise since March 2005. Shorter-dated debt fared better than their longer-dated counterparts. Two-year notes were up 1/32 for a 5.01 percent yield, down 3 basis points from late Thursday but up 3 basis points from a week ago. "The market has been completely overdone it. It's like catching a falling knife," said Carley Garner, an analyst at Alaron Trading in Chicago. INFLATION VS GROWTH DEBATE Two opposing views have emerged in the wake of Thursday's market collapse. One group of traders and analysts blamed rising price pressure in forcing central banks to raise interest rates and changing expectations that the U.S. Federal Reserve would cut rates later this year. "The Fed is not going to lower rates until we defeat inflation," said Scott Armiger, portfolio manager at Christiana Bank & Trust Co. in Greenville, Delaware. Chicago Fed President Michael Moskow underscored central bankers' inflation concerns. Moskow told CNBC television on Friday that while the Fed's 5.25 percent interest rate is "appropriate" for now, he would like to see inflation lower. According to another camp, bond yields are simply adjusting to higher levels in the face of faster-than-expected growth, rather than an acceleration in inflation. "I don't see where inflation is coming from," said Lou Brien, market strategist at DRW Trading in Chicago. All over Wall Street analysts appeared to be having a change of heart, with HSBC the latest major bank to reverse its call for the Fed to cut interest rates this year. Some of them also bumped up their U.S. growth forecast by a quarter to half a percentage point from earlier estimates. Much of the recent U.S. data have beat Wall Street forecasts such as the smaller-than-expected $58.5 billion trade deficit in April reported on Friday. In addition to strong data, heavy selling by mortgage players, spotty Treasuries buying by Asian central banks and stock market that until recently was booming have contributed to the weakness in bonds, analysts said. Regardless of whether it is due to faster growth or higher inflation, the Treasury market is still vulnerable after it broke a series of major long-term chart supports. "Technically, there's not a lot to hold this market up," said Alaron's Garner. Next week's economic calendar, which includes retail sales and the Consumer Price Index, offers critical evidence in dictating Treasuries' near-term fortunes, analysts said. In other cash trading, five-year notes were up 4/32 in price for a yield of 5.06 percent, down 3 basis points from late Thursday but up 13 basis points on the week. The long bond ended up 5/32 in price for a 5.22 percent yield, off 1 basis point from late Thursday but up 16 basis points from a week earlier. In derivatives trading, swap spreads widened despite lower yields with 10-year spreads growing to 60.75 basis points, out 3.25 basis points on the week.

Dell to sell notebook PCs at U.S. Sam's Club stores. Dell said last month it would start selling desktop computers for less than $700 apiece in more than 3,000 Wal-Mart stores in North America, breaking from its 23-year-old direct- to-consumer sales model as it tries to rekindle growth. Friday's announcement extends Dell's retail push to consumer notebook computers, which are typically more expensive and more profitable than low-end desktops. Round Rock, Texas- based Dell is the world's second-largest PC maker by unit shipments, after Hewlett-Packard Co. ( HPQ.N ). The Dell Inspiron 1501 notebooks sold at Sam's Club will have dual-core processors from Advanced Micro Devices Inc. ( AMD.N ), two gigabytes of memory and 120-gigabyte hard-disk drives, Dell spokesman David Frink said. They will feature Microsoft Corp.'s ( MSFT.O ) Vista Home Premium operating system. Dell also will start selling notebooks at an unspecified number of Wal-Mart stores later in the summer, Dell spokesman Bob Kaufman said. Kaufman said he did not have details on which models would be offered. Dell shares closed up 35 cents, or 1.3 percent, at $27.34. Wal-Mart closed up 0.6 percent at $50.08, and Advanced Micro Devices Inc. ( AMD.N ) added 2.9 percent to close at $14.07. The move into retail stores is part of founder Michael Dell's strategy to turn the company around after growth slowed under former Chief Executive Kevin Rollins, whom Michael Dell replaced in January. Dell last year lost the top-selling PC spot to HP, which sold more notebook computers in stores and expanded in consumer PCs, markets in which Dell has lagged. Wal-Mart said separately it will begin selling Dell E521 Dimension desktops with 19-inch flat-panel displays on June 10 for $698 each at all its U.S. stores. It also will offer the same computer without the display for $498 at 3,000 stores. Wal-Mart, the world's largest retailer, and Dell announced last month the sale of the desktops, which will have a gigabyte of memory and Windows Vista Home Premium operating systems. Wal-Mart also will sell a Dimension E521 multimedia desktop with two gigabytes of memory, a 320-gigabyte disk drive and a graphics chip from Nvidia Corp. ( NVDA.O ) RETHINKING TELEVISIONS As Dell branches out in PCs, it is rethinking its strategy for other consumer devices such as Dell-branded liquid-crystal display televisions, which it began selling in 2003. The company in February said it would begin selling Sony Corp. ( 6758.T ) TVs alongside its own models and planned to offer other manufacturers' TVs soon. Michael Dell, in an interview to be published on Saturday in Switzerland's Neue Zuercher Zeitung, said the company had decided to stop making its own televisions. "But that doesn't mean that we won't later get back in" to making TVs, he said, according to a preprint of the article. He added that, in the long term, the company would consider selling additional consumer electronics gadgets, including "anything that involves pictures, music, video, or games." Dell spokesman Frink declined to comment on the interview or on Dell's TV plans.

U.S. bans some cellphone imports in Qualcomm case. The International Trade Commission's ban, which is being appealed, exempts models already being sold. The ITC said the Qualcomm chips infringed a patent owned by Broadcom Corp. ( BRCM.O ). Qualcomm and Verizon Wireless, the No.2 U.S. mobile service provider, said they planned to ask the Bush administration to invalidate the order, and Qualcomm said it would seek an emergency stay from the U.S. Federal Circuit Court of Appeals, which specializes in patent cases. Shares of Qualcomm rose as much as 2.4 percent after the news as some investors had feared an even tougher ban that would include existing as well as future phones. Paul Jacobs, chief executive of Qualcomm, said the ITC had overstepped its authority with a ban he said would stop the sale of "tens of millions" of phones in the future. "This remedy decision by the ITC was wrong," Jacobs said on a conference call with analysts. "While there is no short-term disruption to Qualcomm, this decision immediately affects third parties," he said, referring to consumers, service providers and phone manufacturers. Qualcomm executives said they would look at ways to create designs that would avoid infringing the Broadcom patents but said this would take time as manufacturers and service providers would have to approve the changes. Besides Qualcomm, the ban on new phone models with its chips would hurt Sprint Nextel Corp. ( S.N ), the No.3. mobile provider, as well as Verizon Wireless. The carriers depend on having the latest phones to keep customers and win new ones. Oppenheimer analyst Lawrence Harris said the ban would hurt Samsung Electronics Co. Ltd. ( 005930.KS ) and LG Electronics ( 066570.KS ), both big users of Qualcomm chips. Sales at Motorola Inc. MOT.N, the No.1 cellphone maker for the U.S. market, could also be reduced, he said. For example, the ban may prevent phone makers from importing advanced new phone models in time to compete with the iPhone, Apple Inc.'s ( AAPL.O ) widely anticipated first mobile phone, expected to go on sale at AT&T Inc. ( T.N ) on June 29. Investors may not understand the full implications of the decision, according to Stifel Nicolaus analyst Cody Acree. "It's a bigger deal than the market is making it out to be," he said. "We think it's a significant hit to Qualcomm and the carriers." INNOVATION FREEZE The ITC said banning all devices containing the infringing chips would "adversely affect the public interest" and be too burdensome on operators and other third parties. But it also said a remedy not affecting any of them would be inadequate. The ITC is an independent federal agency that determines whether imported products infringe U.S. patents, trademarks or copyrights. Four out of six ITC commissioners voted for the remedy, with two arguing for a less stringent penalty. Under U.S. law, the White House can invalidate an ITC order within 60 days if it sees the order as bad public policy. A spokeswoman for the U.S. Trade Representative said the administration "will be engaging in our normal internal and inter-agency procedures governing policy review of the order." The Broadcom patent at issue covers technology used to extend the battery life of cellphones when they are outside network coverage. Broadcom said it was pleased with the ruling and was open to discussing possible licensing of the patent. Verizon Wireless, owned by Verizon Communications ( VZ.N ) and Vodafone Group Plc. ( VOD.L ), criticized the ruling. "It's a bad order that essentially attempts to freeze innovation in cellphones, and it obviously won't stand through the process," said spokesman James Gerace. Sprint said it expects sales in 2007 of phones carrying the patent-infringing Qualcomm chips to be 5 million despite the ban. Sprint said it will work with suppliers to avoid disruptions. The case involves phones based on two types of high-speed wireless technology, EV-DO -- for which Qualcomm is the dominant chip supplier -- and W-CDMA. Sprint and Verizon Wireless base their most advanced services on EV-DO. The ban would have a smaller impact on W-CDMA user AT&T, the biggest U.S. mobile provider. Qualcomm supplies chips and technology licenses for W-CDMA phones but does not have a majority chip share in this market, led by Texas Instruments Inc. TXN.N. Former ITC attorney Lyle Vander Schaaf said it is extremely rare for a president to invalidate an ITC order, but more conceivable in a case where two commissioners had dissented. He said it was rare for the appeals court to stay an ITC order while an appeal is pending.

Gap Band singer sues EMI, Heineken over commercial. Singer Charlie Wilson filed suit against Capitol Records, the American label of EMI, and the American division of Dutch brewer Heineken Inc. in federal court in Manhattan for using the song "Beautiful" in an advertising campaign for Heineken Premium Light Beer. Portions of the recording of "Beautiful" featuring vocal performances by Wilson and rapper Pharrell Williams were licensed by Capitol Records for the commercial without permission, the suit said. The advertisement had been shown on American television and on the website www.heinekenlight.com, the suit said. Wilson also charged EMI had not paid out hundreds of thousands of dollars in profits gained for "Beautiful" and for another song "You've Got What I Want," which Wilson recorded with rappers Snoop Dogg, Jelly Roll, Ludacris and Goldie Loc.

Funds seek expert advice for millisecond advantage. They are increasingly likely to hire lawyers and other experts to instantly interpret a decision in a court case or government hearing, or even just the direction of a hearing. In a world where financial information is available instantaneously and where algorithmic trading systems automatically weigh and make buy and sell decisions in milliseconds, they don't just want to know what has been said or decided in a court or legislative body. To get a trading edge, they want an immediate call on how a decision or hearing affects the company or businesses involved. Law firms and other consultants are happy to help. The booming alternative investment community has fragmented, creating demand for services that may once have been handled in-house at larger investment houses. "Our clients utilize services that range from having a patent litigator sitting through an intellectual property trial to providing insight about a particular legislative matter on Capitol Hill," said Drew Chapman, who chairs the fund services group at Sonnenschein Nath & Rosenthal LLP. "Many, if not a majority, of large high-end funds are utilizing some kinds of these services." The move comes as hedge funds crowd into markets in record numbers. Assets under management topped $1.5 trillion in the first quarter of 2007, with $60 billion of new inflows, up from $16 billion during the same period last year, according to Hedge Fund Research, Inc. Hedge funds, which now number over 9,500, according to HFR, have growing access to comprehensive market or company data -- whether compiled by vendors or available for free online. "All these tools are so widely available that it is harder and harder to differentiate yourself using traditional financial data," said David Teten, who founded the Nitron Circle of Experts to connect funds, banks and others with industry experts. Reuters Plc RTR.L RTRSY.O is building a similar service through its Anian research unit. "CAN'T GET ELSEWHERE" "The No. 1 reason is the increasing commoditization of traditional financial analysis," said Teten, whose firm was recently acquired by consultant Evalueserve, describing growth in demand from hedge funds. "We are providing information that they can't get elsewhere." Mike McNamara, who chairs the public law and policy strategies practice at Sonnenschein, said: "Information is so widely available now that someone in North Dakota has as much access as someone on Wall or K Street," the Washington area famously associated with insiders like lobbyists and advocacy groups. "With this level of access it's important to have someone on the ground to filter that information and lend a seasoned perspective about what it all really means," he said. Asbestos litigation or bankruptcy in the airline sector are the types of regulatory and legislative matters that clients have an interest in, said McNamara. Hedge funds are also using accountants and lawyers for forensic analyses of company accounts. They want a professional assessment of whether a business may be hiding potential problems through accounting legerdemain. But using lawyers and other professionals as consultants raises concerns. "One service we provide is information about the status of a lawsuit," said Edward Black, co-head of the intellectual property group at Ropes & Gray LLP. "But we only do this work if we clear conflicts against both parties in the litigation." Conflicts often preclude a firm from the work, said Black, causing the business to be spread out among multiple firms. RISK Material nonpublic information is also a risk when industry professionals act as consultants, says Sonnenschein's Chapman. "There is a question as to how far you can actually go and what information you can actually get," he said. "Obviously we are very careful to counsel clients to keep away from that line and out of any gray area." In January the Wall Street Journal reported that the New York Attorney General's office had subpoenaed firms Vista Research and Gerson Lehrman Group in an investigation over whether consultants discussed material nonpublic information with investors. A spokesman for Vista, a unit of McGraw-Hill Cos. MHP.N, confirmed his firm was complying with the subpoena. A spokesman for Gerson Lehrman declined to comment and the attorney general's office did not return calls for comment. Still, Black of Ropes & Gray says the volume of consulting at his firm has grown from "negligible to being a routine part of the practice." And, he added, it's not cheap. "The most effective provider of these services is someone with established knowledge and expertise who can hear the ruling, read the order and assimilate it and report on it extremely quickly," Black said. "Those are our top people." Nitron's Teten says compensation for experts, ranging from scientists and academics to accountants and lawyers, is typically between $100 and $500 an hour when consulting for clients like hedge funds -- but can be as high as $1,000 an hour. The funds are happy to pay the price. "The market is only getting more efficient," said Teten. "More and more players are under tremendous financial pressure to go out there and find this data."

Fed's Moskow says inflation still biggest risk. The overnight federal funds rate that the Federal Reserve has maintained at 5.25 percent for the past year is "appropriate" for now, Moskow told CNBC Television. Moskow is a voting member of the monetary policy-setting Federal Open Market Committee this year but is scheduled to retire at the end of August. Moskow said in an interview he would still like to see inflation lower, and that the U.S. central bank has "a way to go" to get inflation at levels he is comfortable with. For now, though, inflation expectations seem well contained, he said. Moskow said payrolls growth remains stronger than expected, and that the tight supply of workers in some industries has resulted in "labor hoarding" and less layoffs than would have been expected given recent weak economic growth. Turning to the recent slump in U.S. share prices and spike in interest rates, Moskow said that higher bond yields did not necessarily make the Fed's job on monetary policy easier. Markets have a lot of day-to-day "noise" and while the Fed does not respond to short-term fluctuations it is aware that a possible longer-term drop in asset prices could have a negative "wealth effect," he said.

April trade gap shrinks more than expected. The trade gap narrowed 6.2 percent from a downwardly revised estimate for March. The April tally fell below the $60 billion to $66.9 billion range of estimates made by analysts surveyed before the report. The Commerce Department also revised its estimate of the 2006 trade deficit to $758.5 billion, from a previously reported $765.3 billion. U.S. exports rose slightly to a record $129.5 billion. The 0.2 percent increase partly reflected a $3 billion upward revision in March exports to $129.2 billion. Exports of both goods and services set records, and several categories such as foods, feeds and beverages, industrial supplies and materials and consumer goods also hit all-time highs. A 1.9 percent drop in overall imports also helped rein in the trade deficit, despite a jump in the average price of imported oil to $57.28 per barrel that boosted the dollar value of oil imports to the highest since September. Imports of consumer goods dropped $1.5 billion in April while autos and auto parts fell by $1 billion. Other categories, such as capital goods and foods, feeds and beverages, also showed a decline. Imports from China increased 6.6 percent in April to $24.2 billion, while U.S. exports to that country fell 11.5 percent to $4.8 billion. As a result, the closely watched trade gap with China swelled 12.3 percent to $19.4 billion.

China Money: Minor flows to bonds as stocks cool. But if it becomes clear the stock market has temporarily stalled, some traders estimate mutual funds, which control about 700 billion yuan ($92 billion), could divert as much as 10 percent of that amount into government bonds by the end of 2007. Insurers could also step up investment in longer-term bonds, while banks could have more funds to put into bonds as disillusioned stock investors returned some of their money to longer-term savings deposits. A plunge of as much as 21 percent in Shanghai's main stock index .SSEC since early last week suggests the biggest equities bull market in China's history, which nearly quadrupled the index over 18 months, may be over for now. So far, the positive impact for bonds has not been enough to outweigh concern about rising inflation and further increases in interest rates. "Some liquidity has been diverted into bonds from stocks, but not a lot," says Shi Lei, analyst at Bank of China. "Fund flows may increase if the stock index doesn't rebound sharply. But bond yields may still not fall because May CPI is expected to be high, fuelling worries over another interest rate hike." The government triggered the stock market's tumble by lifting the stock trading tax to cool speculation. Many analysts believe the index, which closed on Thursday at 3,890 points, may now stay in a range of roughly 3,500-4,000 for weeks or months. SHORT-TERM ATTRACTION? A total inflow of 60 billion yuan into government bonds would cover roughly two months of fresh supply -- enough to have an impact on prices by the end of the year. "Quite a few government bonds maturing in around one year now have a yield of around 3 percent, higher than real returns from one-year bank deposits," says bond analyst Zhang Yong at Guotai Junan Securities. "That means short-term bonds may be attractive to money which is leaving the unstable stock market." One such bond is the three-year Treasury due to mature in August 2008, listed on the stock exchange. Its yield of 2.7427 percent exceeds the tax-adjusted one-year deposit rate of about 2.45 percent. As most bond prices have continued sliding in the past week, the August 2008 bond has stayed stable while turnover has hit a six-week high -- indicating fresh buying interest. Overall flows into bonds remain minor, however, partly because the government has done a good job of signaling to investors that while it wants the stock market to cool, it doesn't want a crash. In the past few days, turnover in Shanghai A shares has been around 175 billion yuan -- compared with more than 200 billion at the height of the bull market last month, but still above levels seen early this year. Similarly, the number of A-share investment accounts opened on Wednesday was 206,000, below levels exceeding 300,000 in past weeks but still high compared to last year. This implies many retail investors are not putting money back into bank deposits. INFLATION CONCERN The equities pull-back has occurred while inflation worries are growing. Economists believe May consumer prices, due next Tuesday, rose around 3.4 percent from a year earlier, the strongest annual pace in more than two years. That could mean another 0.27 percentage point hike in the nominal one-year deposit rate, now 3.06 percent, as the central bank prevents real rates from turning sharply negative. Goldman Sachs believes rising food prices could push annual inflation up to 4 percent in coming months -- which would require a full percentage point in hikes to avoid negative real rates. Many analysts think hefty flows into bonds will not happen unless inflation stabilizes for several months, or unless stocks show clearer signs of cooling -- perhaps through a further drop of at least 30 percent in turnover and new investment accounts. Duan Yunfei, analyst at China Merchants Bank, said that since the share trading tax hike, there had been significant flows out of stocks into the short-term money market, but not into longer-term bonds because of their vulnerability to inflation. "If May CPI is poor, the stock index could fall to 3,500. This would certainly help funds flow from stocks, and banks would buy central bank bills below one year with the liquidity. But bonds would not benefit much," he said. ($1 = 7.65 Yuan)

Rising rates bring first clouds to merger boom. Low interest rates around the world have led to an explosion in buyouts by private equity firms such as Kohlberg Kravis Roberts KKR.UL and Blackstone Group BG.UL in recent years. They have been able to take on more ambitious deals seemingly by the day, such as the record European buyout of pharmacy chain owner Alliance Boots AB.L, as funding costs hit the sweet spot: relatively cheap from a borrower's point of view, but relatively high from a lender's perspective. But as hopes of U.S. interest-rate cuts fade with the Fed focused on inflation, government bond yields have surged higher, pushing up funding costs for buyers and making less risky debt a more attractive prospect for bond investors. Ten-year U.S. Treasury yields broke the psychological 5 percent barrier to hit a high of 5.25 percent on Friday, up 28 basis points from Wednesday, before retreating to 5.14 percent. The turmoil that sharp move has created forced retailer Edgars Consolidated Stores, bought by Bain Capital in South Africa's largest ever LBO, to pay 125 basis points more than initially planned on one segment of its bond financing and to scrap a fixed-rate bond sale. So is the LBO rush, which has helped support stock market valuations, drawing to an end? "We are aware that markets are very toppy, and this can't go on forever," said Guy Eastman, the European investment director for private equity investor SVG Capital Advisers ( SVI.L ). "We are expecting things to get tougher." But he said he wasn't certain the recent fears of global interest rate hikes would mark the peak of the LBO boom, and said it could just as easily be a geopolitical event as an economic one that turns the market. "It's a very micro question as to what does a percentage point rise in interest rates mean to investors, but the impression we pick up from the markets is there are some deals out there that have been very finely priced and a rise in rates may not be brilliant for them," Eastman said. NOT CHANGING THE EQUATION Martin Thorneycroft, head of European high-yield capital markets at Morgan Stanley, said it was too early to tell whether the sharp rise in yields would have a long- or medium-term impact on the attractiveness of private equity buyouts. "If government yields stay where they are or rise further, it will have an impact on the cost of financing for non-investment-grade borrowers, including LBOs," Thorneycroft said. "But at the moment we're still talking basis points: a 50-basis-point increase in yields on 1 billion euros of LBO debt is worth 5 million euros a year in additional interest cost. It's meaningful, but I don't think it's enough at this point to change the equation." And there is one significant factor that hasn't changed; the need for private equity firms to put money to work. They are expected by analysts to raise another $500 billion of funds this year. "There was almost 200 billion euros of fresh cash raised by the European private equity community in the last two years," Tom Attwood, managing director at Intermediate Capital Group ( ICP.L ), a specialist lender to buyout firms, said in comments published on the firm's Web site this week. "That's by no means all spent. There's this huge cash overhang. So ... we don't see it stopping in the near term." And while underlying rates like Treasury yields and Euribor are rising, high-yield bond spreads remain tight, according to data from Merrill Lynch indexes, at 190 basis points over government bonds on June 6. In June 2005, they stood at 414 basis points. A survey of investment-grade credit investors by JP Morgan ( JPM.N ) published on Friday also found that 36 percent of respondents see central bank rates as the greatest risk to credit market performance for the rest of the year. But the survey also showed that 34 percent see private equity as the biggest risk for credit -- suggesting that they fear the LBO bandwagon is set to roll on.

FCC formally opens XM-Sirius merger review. The Federal Communications Commission said it formally opened its review of the deal for public comment, a move that starts a 180-day review clock. The FCC has a 180-day target for completing merger reviews, although the target is not binding and the agency sometimes takes longer to evaluate major transactions. Sirius plans to buy XM in a deal that would combine the only two providers of satellite radio service in the United States and has sparked concerns among some U.S. lawmakers and consumer groups. The deal is currently being reviewed by both the Justice Department and the FCC, which issued both satellite radio licenses in 1997 on the condition the two companies would never merge.

Stocks rally on lower oil, bond yields. A flurry of encouraging corporate news, including a strong monthly sales report from McDonald's Corp. ( MCD.N ) lent support. National Semiconductor Corp. ( NSM.N ) shares rose 15 percent after the analog chip maker reported higher-than-expected profit, adding to optimism about technology spending and helping lift the Nasdaq more than 1 percent. Even with Friday's gains, stocks finished the week with their heaviest losses since the week ended March 2 as bond yields soared on concerns that global growth will boost inflation. Rising yields can cut into corporate profits and make takeovers more expensive as borrowing costs rise. Stocks also got a lift from falling oil prices after a storm that threatened Mideast supplies petered out. "After having been spooked by the rapidity with which long rates were rising, the market is regaining its footing, which makes some sense, seeing as the fundamentals haven't changed at all," said Michael Darda, chief economist at MKM Partners LLC in Greenwich, Connecticut. "What we essentially had was a bond market that was absurdly valued, priced for several rate cuts, and we found out that those assumptions were as wrong as wrong could be. I see weakness in stocks as a buying opportunity." The Dow Jones industrial average .DJI shot up 157.66 points, or 1.19 percent, to end at 13,424.39. The Standard & Poor's 500 Index .SPX jumped 16.95 points, or 1.14 percent, to finish at 1,507.67. The Nasdaq Composite Index .IXIC climbed 32.16 points, or 1.27 percent, to close at 2,573.54. For the week, the Dow ended down 1.78 percent, the S&P 500 fell 1.87 percent and the Nasdaq lost 1.54 percent. The benchmark 10-year U.S. Treasury note US10YT=RR was up 6/32, with the yield retreating to 5.114 percent, after peaking at 5.25 percent in earlier overseas trading. Utility stocks, battered in the sell-off, climbed higher as the 10-year note's yield retreated. Utilities and other large-dividend payers had become less attractive to investors as bond yields soared earlier this week. Shares of utility Constellation Energy Group CEG.N gained 1.2 percent to $83.92 on the New York Stock Exchange. Entergy Corp. ( ETR.N ) shares rose 2.4 percent to $106.80. Shares of industrial conglomerates, particularly sensitive to increases in oil prices, rose as U.S. crude oil futures fell more than $2 a barrel. Alcoa ( AA.N ), the world's biggest aluminum company, advanced 1.9 percent to $39.66 and helped lift the Dow. United Technologies Corp. ( UTX.N ) climbed 2 percent to $70.23, while Boeing Co. ( BA.N ) added 1.4 percent to $98.19 -- and together, they ranked as the Dow's biggest gainers. McDonald's stock rose 2.4 percent to $51.41 on the NYSE after the world's biggest restaurant chain posted its largest monthly comparable sales increase in more than three years. Tyco International Ltd.'s ( TYC.N ) shares jumped 3.6 percent to $33.80, after the conglomerate's board late on Thursday formally approved its separation into three publicly traded companies through a divided distribution to shareholders. Semiconductor shares helped boost the Nasdaq Composite Index, with National Semi shares climbing to $29.58 on the NYSE. The Philadelphia Stock Exchange index of semiconductors.SOXX rose 3.1 percent. Shares of Qualcomm Inc. ( QCOM.O ) gained 2.1 percent to $41.87 on the Nasdaq after the company said demand for wireless chips is better than expected. Trading was moderate on the NYSE, with about 1.57 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 1.95 billion shares traded, also below last year's daily average of 2.02 billion. Advancing stocks outnumbered declining ones by a ratio of more than 2 to 1 on the NYSE and on the Nasdaq.

Sam's Club says to sell Dell notebook PCs for $899. The Dell Inspiron E1501 notebooks will feature dual-core processors from Advanced Micro Devices Inc. <AMD.N, two gigabytes of memory, and 120-gigabyte hard-disk drives. Separately, Dell said the PCs will feature Microsoft Corp.'s ( MSFT.O ) Vista Home Premium operating system and 15.4-inch displays.

Qualcomm says current quarter better than expected. "The underlying business in this quarter is going very well, a bit stronger than I had expected at the outset," Qualcomm Chief Financial Officer Bill Keitel said on an analyst call set up to discuss a U.S. government ban on the U.S. sale of some high-speed wireless phones with Qualcomm chips. Keitel said that while the quarter was not yet over, firm orders and reports from licensees were very strong. Qualcomm's fiscal third quarter ends this month. Banc of America analyst Tim Long said in a note to clients that the company could issue a statement increasing its guidance for the quarter in the next two weeks. On April 25, Qualcomm forecast third-quarter net earnings per share of 43 cents to 45 cents on revenue of $2.2 billion to $2.3 billion. Qualcomm is the dominant maker of chips for phones based on CDMA, the mostly widely used mobile phone technology in the United States. It also makes chips and sells technology licenses for phones based on W-CDMA, a wireless standard popular in Europe and other parts of the world.

Deere says to acquire tractor manufacturer in China. Financial details of the acquisition, expected to close later this year, were not disclosed. Deere currently builds tractors in the 60 to 120 horsepower range at its current China joint venture tractor factory, located in Tianjin, while Benye mainly builds tractors in the 20 to 50 horsepower range, the world's largest maker of agricultural equipment said in a statement.

MasterCard wins court ruling against Visa fee. Judge Barbara Jones agreed with a special master that the fee, which related to a 2003 class-action settlement of antitrust claims against the card associations by Wal-Mart Stores Inc. ( WMT.N ) and other retailers, was anti-competitive. "It appears to be a major win for MasterCard's domestic debit business, which trails Visa by a significant margin, but has now been presented with a golden opportunity to capture some of Visa's top customers," wrote Calyon Securities analyst Craig Maurer. He rates MasterCard "add." Visa had been charging "settlement service fee" to any of its 100 largest debit issuers that moved its portfolio to MasterCard. The fee was to represent the issuer's share of Visa's remaining obligations under the settlement. Visa had settled for $2 billion and MasterCard for $1 billion. "Because banks make the brand-switching decision 'at the margin,' the settlement service fee is large enough in relation to MasterCard's incentive package to effectively prevent a bank from switching," Jones wrote. The judge also required Visa to allow any issuer that agreed to the fee to terminate its agreement, so long as the issuer entered into an agreement to issue MasterCard debit cards. "This is a significant win," MasterCard General Counsel Noah Hanft said in a statement. "With this roadblock out of the way, financial institutions (can) make decisions based on their best judgment about quality of service, strength of brand and other competitive factors." Visa Vice President Rosetta Jones said her card association is studying the ruling and may appeal. The 2003 settlement related to claims that retailers incurred billions of dollars of processing costs to meet card association requirements that they accept signature-verified debit cards. MasterCard is based in Purchase, New York, and Visa in San Francisco. MasterCard conducted its initial public offering in May 2006. Visa last October said it planned to go public within 12 to 18 months. Shares of MasterCard, which had been up 2 percent, rose an additional 3.5 percent after the company issued an afternoon statement about the ruling. They closed up $4.17, or 3 percent, at $143.58 on the New York Stock Exchange.

Bank of America appeals "shocking" ABN ruling. In its appeal to the Dutch Supreme Court, the second-largest U.S. bank contended that the Enterprise Chamber, a Dutch commercial court, overstepped its authority in freezing the acquisition so that it could put to a shareholder vote. "The decision by the Enterprise Chamber is legally incorrect, at least incomprehensible and not supported by the grounds required by law," Charlotte, North Carolina-based Bank of America said in its 24-page appeal. Reuters obtained a copy of the May 15 appeal. Bank of America confirmed the document's contents. The Financial Times reported some of the contents earlier Friday, and said formal statements of appeal must be filed by Monday. Bank of America's purchase of Chicago-based LaSalle was announced on April 23, when ABN backed a roughly 63 billion euro ($84 billion) takeover bid from Britain's Barclays Plc ( BARC.L ). ABN is now also weighing a roughly 71 billion euro ($95 billion) unsolicited takeover bid from Royal Bank of Scotland Group Plc ( RBS.L ), Spain's Banco Santander Central Hispano ( SAN.MC ) and Dutch-Belgian group Fortis FOR.BR. Barclays' offer is conditional on a sale of LaSalle, while the consortium's offer assumes no spinoff. The Enterprise Chamber on May 3 ruled in favor of a petition by VEB, a group representing some one-fifth of ABN investors, to halt the LaSalle transaction. VEB had argued that the transaction made it impossible for shareholders to consider offers to buy all of ABN. But Bank of America argued in its appeal that the delays will harm LaSalle. "Its market position will be weakened, its customers will be wooed by the competition more aggressively and the uncertainty further fuels the risk that key employees will leave," Bank of America said. The bank added: "It strikes Bank of America as shocking that an injunction such as the one ordered, with the effect as described, is possible after an expedited hearing on (April 28), one day after the initiating request had been filed." The Dutch Supreme Court is expected to rule in late June or early July on whether ABN may proceed with the LaSalle sale. On June 5, ABN Chief Executive Rijkman Groenink told employees it was "too early" to say whether the Barclays offer or the consortium's offer was better. Adding LaSalle would let Bank of America fill a hole in its 5,737-branch network, by far the nation's largest. Bank of America would become Chicago's largest bank, and gain its first branches in Michigan. When the transaction with Bank of America was announced, LaSalle had roughly 411 branches, 1.4 million retail and 17,000 commercial customers, and $113 billion of assets.

Marriott to pay $220 mln in tax settlement. The payments, which reflect taxes and interest charges, will result in an after-tax charge totaling about $54 million, or 13 cents per share. The charge was not included in Marriott's second-quarter earnings guidance, the company said. In April, the top U.S. hotel company had forecast second-quarter earnings, excluding its synthetic fuel operations, of 51 cents to 55 cents per share. No penalties were assessed in connection with settlement, the company said. In addition, Marriott said it had fully resolved all issues pertaining to the audits of the company's 2000, 2001, and 2002 federal tax returns. The company said in March it received a notice from the Internal Revenue Service challenging most of the company's income tax deductions related to its employee stock ownership plan. "We are pleased to reach this compromise, bringing this dispute to a swift and final resolution," Chief Financial Officer Arne Sorenson said in a statement.

Rate concerns could cool down M&A boom. Announced global M&A volume slowed to roughly $75 billion this week, compared with weekly volume of between $100 billion and $285 billion for most of April and May, according to research firm Dealogic. Accommodating debt markets helped spur M&A to record levels in the past year, with more than $4 trillion of deals in 2006 alone. Any increase in the cost of borrowing can make some deals, especially leveraged buyouts led by private equity firms, less affordable. So far this year, LBOs account for more than a third of all deals in the United States. "The private equity-led part of the corporate activity cycle will find it more difficult," said Andrew Milligan, head of global strategy at Standard Life Investments, which manages assets of $270 billion. Borrowing costs are already rising in the junk bond market. Average yields have risen by about 0.25 percentage point since the middle of May, to about 7.66 percent, according to Merrill Lynch data. That means it costs an additional $2.5 million in annual interest payments for every $1 billion borrowed. Hub International Holdings trimmed the size of a two-part junk bond sale on Friday and boosted yields to attract buyers. Originally expected to be a $790 million issue, it was cut to $700 million, according to a market source familiar with the sale. STILL STRONG The European Central Bank raised interest rates by a quarter point to 4.0 percent on Wednesday, marking a doubling of euro-zone borrowing costs in the past 18 months. Global bond and share prices have tumbled since the ECB move, as markets fear tighter monetary policy worldwide. However, experts were quick to point out that M&A is not about to grind to a halt. Many deals, big and small, will still be done. For the year to date, global leveraged buyout volume is $499.5 billion, more than double the volume of a year earlier, according to Dealogic. Private equity deals currently make up about 20 percent of global M&A, up from 11 percent four years ago. In the United States, LBOs make up 35 percent of deal volume so far this year. "My view is that rates are much less important than the magnitude of leverage that can be brought to bear," said Glenn Gurtcheff, managing director with M&A advisory firm Harris Williams & Co. But Gurtcheff added, "Over time, certainly if there is a sharp move either upward or downward in rates, it has an effect. It makes transactions either more affordable or less affordable." Standard Life Investments' Milligan, too, stressed that interest rates are just one part of the equation for M&A. He said higher rates would be seen as a positive signal for some companies, a negative signal for others, and irrelevant for some. "It will be positive for some corporates because they are saying the fact that bond yields are rising means the world is getting better," Milligan said. "It will be more difficult for some who will be saying the cost of funding has just made that deal not worthwhile. And for some people, they are going to be saying that from a structural viewpoint we need to take the following positions ... and the cost of debt is completely irrelevant." (Additional reporting by Dena Aubin and Michael Flaherty )

Qualcomm aims to seek stay of U.S. ban. Lupin said Qualcomm would file as soon as possible for an emergency stay of the ban at the U.S. Federal Circuit Court of Appeals, which specializes in patent cases. "I would expect we'd file Monday or Tuesday, early next week at the latest," he said in an interview with Reuters. Lupin also said that U.S. Customs officials could take as much as two weeks to implement the ban. "As a practical matter customs isn't likely to be ready to enforce this order for a week or two weeks," he said. "That's what I'm told is the typical experience," The U.S. International Trade Commission said late Thursday it was banning the U.S. sale of some new high-speed cell phones that include Qualcomm chips it said infringed a patent owned by Broadcom Corp ( BRCM.O ).

Disney ramping up push into games market: CFO. "We are ramping up our investment in video games ... It is a market where there is real opportunity," Disney's CFO Tom Staggs told journalists during a briefing in London. Part of the entertainment company's strategy centers on making sure hit products sell strongly across the business, irrespective of whether they start as a film, product or game. Disney spent around $100 million on gaming development last year and will spend $130 million this year. "Over the next five years or so we are ramping up to about a pace of $350 million per year in video game investment, principally consoles and handhelds," Staggs said. Market researcher Screen Digest forecasts the particularly cyclical global gaming software market will be worth $21.3 billion in 2009, compared with $20.2 billion last year. However, a particularly fast-growing area is so-called massively multiple player online gaming (MMOG), which is expected to see subscription revenues jump from $875 million last year to $1.4 billion in 2009. "The potential to make profits in that space if you have a hit game is significant," said Screen Digest gaming analyst Piers Harding-Rolls. Staggs said Disney created a "Pirates of the Caribbean" game to coincide with the release of the latest film, which became a hit across gaming platforms in the UK, France and Germany. Later this year, Disney plans to launch a multi-player online Pirates game in the U.S., then in the UK. "We are early on in the process of developing a video gaming capability," Staggs said. Three months ago, Disney launched "Spectrobes", a role-playing game for Nintendo's 7974.OS hand-held DS player produced by the company's Interactive Studios arm that has shipped about 700,000 units, Staggs said. The galactic action adventure game was developed for Disney by Japan-based Jupiter Corp. "I am comfortable that it warrants a sequel in the games business. We would like to see video games become a vibrant creative venture," Staggs said. Disney has been positioning itself more aggressively in the gaming market over the past year, and late last year launched a games studio to focus on creating new and Disney-inspired titles for Nintendo's DS player and Wii console. Staggs said around 70 percent of development spend in video games in the near future would be on established content franchises, with the rest in areas where Disney hopes to create intellectual property it can exploit across the business. Mobile gaming applications were part of this, though this area was primarily being pursued "quite aggressively" within the company's Internet business, he said. Staggs said 90 percent of Disney's development efforts across gaming, including mobile, fall under the Disney brand. However, this is traditionally done on a license basis. "It is not that we have no position in the market, it is that as a developer and publisher our activities have been very limited. But to the extent that we are successful in creating games as a publisher ... there is substantially more economic upside to the company," Staggs said. The CFO said Disney's gaming aspirations did not imply the company wanted to "go flying into the teeth" of competitors. Leading players in this area include Electronic Arts ERTS.O, the world's largest video game publisher, and Ubisoft ( UBIP.PA ), Europe's second-largest video games publisher. "What we are doing is trying very deliberately to develop our core capabilities in video games content development, leveraging what already exists in the Disney brand," said Staggs. Disney already has a licensing partnership in its ESPN sports network with Electronic Arts to create video gaming sports titles. "In the Disney-branded titles we thought we could maximize our success going it alone," Staggs said. Staggs said Disney was also exploring opportunities for gaming initiatives in virtual worlds such as Second Life. "We can serve a real consumer desire to delve deeper into the worlds we create," he said, adding that such segments can play an important role in keeping users engaged in particular franchises over a sustained period of time.

Rate concerns cast cloud on global M&A boom. Accommodating debt markets helped spur M&A to record levels in the past year, with more than $4 trillion of deals in 2006 alone. Any increase in the cost of borrowing can make some deals, especially leveraged buyouts (LBOs) led by private equity firms, less affordable. Low interest rates around the world led to an explosion in buyouts by private equity firms such as Kohlberg Kravis Roberts and Blackstone Group in recent years. So far in 2007, LBOs have accounted for more than a third of all deals in the United States -- but higher borrowing costs would test the strength of that buyout boom. "The private equity-led part of the corporate activity cycle will find it more difficult," said Andrew Milligan, head of global strategy at Standard Life Investments, which manages assets of $270 billion. Borrowing costs are already rising in the junk bond market. Average yields have risen by about 0.25 percentage point since the middle of May, to about 7.66 percent, according to Merrill Lynch data. That means it costs an additional $2.5 million in annual interest payments for every $1 billion borrowed. Hub International Holdings trimmed the size of a two-part junk bond sale on Friday and boosted yields to attract buyers. Originally expected to be a $790 million issue, it was cut to $700 million, according to a market source familiar with the sale. The European Central Bank raised interest rates by a quarter point to 4.0 percent on Wednesday, marking a doubling of euro-zone borrowing costs in the past 18 months. Global bond and share prices have wobbled since the ECB move, as markets fear tighter monetary policy worldwide. With hopes of any U.S. interest-rate cuts fading and the Federal Reserve focusing on inflation, government bond yields have surged higher, pushing up funding costs for buyers. On Thursday, the 10-year U.S. Treasury yield broke the psychological 5 percent barrier for the first time since August 2006. The turmoil that followed forced retailer Edgars Consolidated Stores, bought by Bain Capital in South Africa's largest ever LBO, to pay 1.25 percentage points more than initially planned on one segment of its bond financing and to scrap a fixed-rate bond sale. DON'T PANIC Announced global M&A volume slowed to roughly $75 billion this week, from between $100 billion and $285 billion for most of April and May, according to research firm Dealogic. However, experts were quick to point out that M&A is not about to grind to a halt. Many deals, big and small, will still be done. For the year to date, global leveraged buyout volume is $499.5 billion, more than double the volume of a year earlier, according to Dealogic. Private equity deals make up about 20 percent of global M&A, up from 11 percent four years ago. In the United States, LBOs make up 35 percent of deal volume so far this year. "My view is that rates are much less important than the magnitude of leverage that can be brought to bear," said Glenn Gurtcheff, managing director with M&A advisory firm Harris Williams & Co. But Gurtcheff added, "Over time, certainly if there is a sharp move either upward or downward in rates, it has an effect. It makes transactions either more affordable or less affordable." Standard Life Investments' Milligan, too, stressed that interest rates are just one part of the equation for M&A. He said higher rates would be seen as a positive signal for some companies, a negative signal for others, and irrelevant for some. "It will be positive for some corporates because they are saying the fact that bond yields are rising means the world is getting better," Milligan said. "It will be more difficult for some who will be saying the cost of funding has just made that deal not worthwhile. And for some people, they are going to be saying that from a structural viewpoint we need to take the following positions ... and the cost of debt is completely irrelevant." Another significant factor is the need for private equity firms to put money to work. They are expected by analysts to raise another $500 billion of funds this year. "We can't get panicked by a particularly bad or good day in the stock or bond markets," said Steven Rattner, the head of Credit Suisse affiliate and private equity firm, DLJ Merchant Banking Partners. "We have been talking about a correction in the markets and it's something we've factored into our models and to the companies we own."

Other possible Dow Jones bidders surface. Ownership Associates founder Christopher Mackin, who is helping the union find alternative bids, said the entrepreneur and the group made contact with him. He declined to give their names. The news comes after the head of the company that owns Philadelphia's leading daily newspapers said he would be interested in mounting a counter bid against News Corp. and its chairman and chief executive, Rupert Murdoch. Philadelphia Media Holdings Chief Executive Brian Tierney also indicated he is willing to pay at least as much as Murdoch is offering. "We don't believe News Corp. is overpaying," Tierney said in an e-mailed statement. "This is one of the greatest journalistic enterprises ever created." Tierney said he is interested in bidding with partners, but did not identify any. "If there is a process for the sale of the business we would be inclined to participate in partnership with others," he said in the brief statement. A former public relations executive, Tierney last year led the investor group that bought the Philadelphia Inquirer and Daily News from McClatchy Co. ( MNI.N ). Tierney then cut 68 newsroom jobs, or 17 percent of the Inquirer's editorial staff, in a bid to bolster financial performances. He also tried to expand their reach into the Philadelphia suburbs to attract more readers. The Independent Association of Publishers' Employees has approached up to 10 wealthy people about bidding for Dow Jones, but did not approach Tierney, union President Steven Yount said. "He is not my guy. We did not recruit him," Yount said. The union, which represents about 2,000 Dow Jones workers, has approached billionaire investors Warren Buffett and Ron Burkle. "I'm looking for half-a-dozen billionaires with some interest in preserving the independence and integrity of The Wall Street Journal," Yount said. Burkle's firm, Yucaipa Cos., is working with the union, but "has not committed to funding or financing," Mackin said. News Corp. submitted an unsolicited bid to buy Dow Jones for $60 a share, representing a 65 percent premium to the stock's price when the offer was disclosed last month. The high price was meant to ward off rival bidders, analysts said. Dow Jones' controlling Bancroft family, which initially rejected the proposal, met Murdoch for the first time last week to entertain a possible deal. Meanwhile, Dow Jones said in a regulatory filing on Thursday that it has bolstered its severance program for senior executives, saying it will help alleviate any worries they might have about their jobs or pay if a sale goes through. The move, which would also make it slightly more expensive for whoever might acquire the publisher, includes adding another 135 senior management staff to those eligible for severance pay. It also set a minimum severance pay period of 12 weeks. Analysts have said that Murdoch, head of a global media empire, is likely to be better placed than other bidders to handle the pressures facing Dow Jones and the newspaper industry, which is fighting the Internet for readers and advertising dollars. "As rich as Mr. Burkle is, he doesn't have that much. He could probably borrow it, but it would create an awful lot of financial pressure," said newspaper analyst John Morton. On the New York Stock Exchange, Dow Jones shares fell 16 cents to close at $60, and News Corp slipped 30 cents to $22. (Additional reporting by Paul Thomasch )

SEC begins formal probe into Activision: filing. Activision, whose hit titles includes "Guitar Hero 2" and "Spider-Man 3," learned this month that the Securities and Exchange Commission had issued a formal order of nonpublic investigation, which allows the agency to subpoena witnesses and require the production of documents, according to the filing on Thursday. The Santa Monica, California-based company said it was cooperating with the investigation, and its representatives had met with SEC staff on several occasions. A representative of the U.S. Department of Justice has attended some of these meetings and requested copies of documents, Activision said. Activision shares were up 14 cents at $18.60 in early trade on Nasdaq. Last month, Activision posted a loss for the fourth quarter ended on March 31 and gave a first-quarter profit forecast that lagged expectations due mainly to acquisition costs and legal fees from its investigation into stock option accounting practices. In March, Activision said an internal review of its stock options grant practices had cleared Chief Executive Robert Kotick and three other top executives and board members of intentional wrongdoing. Activision is among more than 170 companies involved in internal or federal regulatory or criminal investigations into manipulations of stock option grants to lock in gains.

DaimlerChrysler recalls 1,443 sedans in China. The cars were produced between March 21 and May 29, the General Administration of Quality Supervision, Inspection and Quarantine said on its Web site. Imported Chrysler 300C cars were not affected, it added. It did not say whether any accidents or personal injuries had been linked to the defect. DaimlerChrysler's Chinese joint venture in Beijing began limited production of the 300C in 2005.

Chicago is "greatest trading city": survey. The magazine, which is aimed at professional traders and hedge fund managers, ranked 50 cities in an effort to find the ultimate place to live and trade. The rise of electronic markets had theoretically leveled the global playing field, making it possible to fire off winning trades while enjoying a poolside cocktail in Tahiti. Still, Chicago, hog butcher to the world and stacker of wheat, beat out the glamorous, the glitzy, the exotic and the tax havens to take the top prize. London, New York, Dubai and Miami rounded out the top five, in that order. The magazine said it rated a mixture of work and lifestyle factors, from trading infrastructure, taxes and access to capital to weather, nightlife and time zone. The latter apparently helped knock Sydney, the jewel of the South Pacific, to No. 26 on the list, below Philadelphia and only two notches above Minneapolis. Chicago was praised for its enduring position on the commodities world's front lines. Trading is "in the city's blood," the magazine said. The two largest U.S. futures marts and the largest U.S. options exchange all reside in the Windy City, and face-to-face trading endures alongside the electronic markets. Affordable real estate -- "practically youth-hostel rates compared to London" -- also boosted Chicago while knocking down its two nearest competitors. New York was also rapped for a "deadly tax trifecta:" federal, New York state and New York City taxes. Bringing up the rear at No. 50, Stockholm was cited for beautiful people, ice-fishing -- "and not much else." Trader Monthly's survey will hit newsstands on Tuesday.

SocGen seen mulling linkup with rival BNP. Les Echos said SocGen head Daniel Bouton had asked two investment banks to advise on a tie-up with BNP which could create a combined group ranking first in France by market value and third in Europe as a whole. The deal could shield SocGen from any unwanted approach from other European suitors but would threaten extensive job cuts due to the overlapping branch networks of the two lenders, making it potentially politically controversial. It would also mark a further advance in the rapid consolidation of Europe's hitherto fragmented banking industry, coming just weeks after Italy's UniCredit, with which Societe Generale has been linked in the past, moved to merge with domestic rival Capitalia. In the same sector, Dutch ABN AMRO agreed a deal with Barclays but also faces a rival offer by a consortium of Royal Bank of Scotland, Fortis and Santander. A senior trader at a large French bank said he doubted the Les Echos story was true but believed the information served another goal. "It's a smokescreen. The idea is to play up the enormous social costs of such a deal in order to discredit a scenario of BNP emerging as white knight in the case of a foreign bid for SocGen," he said. Les Echos said both a friendly deal and hostile bid were being examined but Societe Generale's management was divided over the idea. It named one of the adviser banks as Morgan Stanley. "We do not comment on rumours," a Societe Generale spokeswoman said. The bank recently said a major operation was "neither necessary nor urgent". EXECUTION RISKS Analysts said if a deal materialized it would highlight the impetus for consolidation of the sector in France. "It would show that the pressure is larger than we thought and that Societe Generale believes it should act swiftly," said analyst Jean Sassus of Raymond James Euro Equities. Another analyst noted the report "shows that there is a real consideration of a rapid movement." BNP shares traded 0.9 percent up at 86.69 euros at 1019 GMT, after earlier gaining more than 3 percent, and Societe Generale was flat at 139.5 euros. Rumours of a possible merger have resurfaced regularly ever since BNP made a failed takeover attempt on SocGen in 1999, after which it managed to absorb Paribas. But BNP Chief Executive Baudouin Prot said on May 15 his bank was not interested in a deal with Societe Generale, telling shareholders such a link would carry "huge execution risks". BNP is larger than SocGen with a market capitalization of around 80 billion euros compared with SocGen's 64 billion. At the moment, HSBC is the biggest European bank by market value, followed by Royal Bank of Scotland and Banco Santander. BNP is number 4 and SocGen ranks 9 by market capitalization, and the combination would be third. The CGT union said in May Bouton had said he had identified eight banks with whom SocGen could strike a possible merger deal, including Italian bank UniCredit but not including BNP. Analysts at Keefe, Bruyette & Woods said after the CGT report that SocGen was increasingly unlikely to pursue a standalone strategy. It said Intesa/SPI, Citigroup, UniCredit, HSBC and JP Morgan Chase were likely bidders for the bank. But Royal Bank of Scotland, Barclays, BNP, Deutsche Bank and Santander were seen as unlikely candidates. Societe Generale board member Luc Vandevelde told Reuters earlier this month the bank needed to become a European leader in the current consolidation round. "There is a new era and if you want to stay in the first league of banks in the world you need to be leader ... on at least a regional level, so that means Europe for us," he said on the sidelines of a conference in Venice. (Writing by Marcel Michelson , additional reporting by Nick Antonovics and Jo Winterbottom)