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Analysis: U.S. credit rating could again take hit in 2013. The battle over avoiding the so-called fiscal cliff is the first of a likely series of partisan confrontations in Washington in the coming year that, if not resolved, could cause more downgrades of the U.S. credit rating. "The rating is in the hands of policymakers," said John Chambers, chairman of Standard & Poor's sovereign rating committee, the agency that downgraded the United States in August 2011. In interviews with Reuters since the November 6 election, all three major rating agencies said cutting the U.S. debt rating - still among the world's strongest - is highly likely if next year's budget process replays 2011's debt ceiling debacle or if the seemingly simple goal of cutting deficits goes unmet. Should that happen, it could have a detrimental effect on the country's cost of borrowing and could also shift some investment away from the United States, though the country's big markets and attractiveness as a safe haven are likely to limit those effects. In the absence of a sustainable, coherent medium-term vision for the U.S. federal budget, which has produced deficits above $1 trillion in each of the last four years, the rating will fall. The fiscal cliff is one step in that process, but the possibility of a downgrade will still loom over Washington throughout the year. "If no budget deal is reached in the early part of next year and the debt trajectory just continues to rise ... then we'd be looking at a downgrade of a notch to Aa1," said Bart Oosterveld, managing director at Moody's sovereign risk group. Automatic spending cuts in January coupled with significant tax increases could take an estimated $600 billion out of the U.S. economy and push it into recession, according to the non-partisan Congressional Budget Office's assessment of the fiscal cliff. The effects will be gradual, but significant, with the unemployment rate possibly rising to 9 percent. If Congress goes over the cliff, Moody's said it will watch how the economy deals with the abrupt shock and will maintain the current negative outlook it holds on the United States. Ultimately, if Congress and the president can't reach a deal to stabilize and eventually reduce the debt, now at $16 trillion, Moody's will probably cut the United States' current Aaa rating. Fitch, meanwhile, said even a deal to avert the cliff might not be enough to save the country's AAA rating. Temporary measures to stave off the budget shock without a credible strategy for the years beyond could earn the country a downgrade, said David Riley, managing director for sovereign ratings at Fitch. "We're going to find out over the coming months if that (a compromise) will be the case or not," Riley said. "There isn't that much time." The country needs a combination of increased revenue and reduced spending, Riley said. That plan needs to be bipartisan and credible over the medium-term, he added, calling a cliff-induced recession "wholly unnecessary." Rating agencies will also be watching talks on raising the debt ceiling next year. S&P cut the United States to AA-plus from AAA on August 5, 2011, blaming bitter debt debates that threatened to plunge the country into default and Republican obstruction during a process that was for years a formality. If the same happens this time, Riley said, Fitch could slash its rating during the first half of the year. That could cause more turmoil for uncertain markets. "The last time we faced this and the politicians played shenanigans with the debt ceiling and we were downgraded, it mattered in the sense that it led to a lot of volatility and a loss of confidence," said Julia Coronado, chief North America economist at BNP Paribas in New York. BEST OF A BAD LOT? When S&P cut the United States last year, markets reacted badly. The benchmark S&P 500 index .SPX slumped the Monday following, falling 6.7 percent to an 11-month low. Paradoxically, U.S. Treasury yields plunged as spooked investors stampeded to safe havens. The yield on the benchmark 10-year note fell to 2.32 percent on August 8 from 2.56 percent on August 5 - and is now around 1.6 percent. That same knee-jerk response could be repeated. "Investors need to hold billions and billions of dollars," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. "Where else are they going to go? Noise out of a rating agency is not going to change that." That's particularly the case with the euro zone in continued turmoil. The area's three-years-and-counting debt crisis is still far from resolution. "Certainly the dollar has no challenger as the key international reserve currency," Chambers said. S&P, having cut the rating last year, now could wait until the end of 2014 for another cut, Chambers said. Investors will likely have plenty of time to digest a downgrade. Notably, countries that lose their AAA status typically take years to claw their way back to the top rating. S&P downgraded Australia in December 1986, and it took until February 2003 for its triple-A to be restored. Canada took from 1992 to 2002. Denmark was cut to AA-plus in 1983 and didn't get upgraded back to AAA until 2001. There's because sovereign cuts at the AAA level are relatively rare, coming on issues that take years to resolve. "It's not really about the downgrade," said Jeff Rosenberg, BlackRock's chief market strategist for fixed income. It's about "what's occurring in the environment around that time period that's creating the momentum for the analysts to downgrade." Still, there's a reason why countries lose top ratings only with difficulty. If the United States does indeed hold onto its AAA from Fitch and its Aaa from Moody's - and its one-notch lower rating of AA-plus from S&P - it could happen because the world's biggest economy proves its resilience once again. "When you're looking at the U.S. from this side of the Atlantic, you say the outlook looks quite good compared to the UK and the rest of Europe," Fitch's Riley said. U.S. gross domestic product is expected to rise at a 2.2 percent annual rate in 2013, compared with 0.3 percent annual growth in the euro zone and 1.1 percent in the United Kingdom, according to Thomson Reuters. "If you can resolve this gridlock in Congress and provide some clarity, there's probably upside to the U.S. economy," Riley added. (Editing by David Gaffen , Mary Milliken and Steve Orlofsky)

Best Buy CEO sets goals; Wall St begs for more details. The aggressive new targets come as Best Buy faces cutthroat competition from online and discount retailers like Wal-Mart Stores Inc ( WMT.N ) and Amazon.com Inc ( AMZN.O ). CEO Hubert Joly got a difficult reception at an investor day in New York, as people questioned whether management was focusing too much on wringing higher sales out of existing customers rather than attracting new ones. Joly was named CEO on August 20. "I still think I am a little bit mixed on digesting the take-aways of the presentation. I think they said a lot of good things, but I think people were looking for a little bit more of a playbook and the next steps," said John Tomlinson, an analyst with ITG Investment Research, in New York. "There's a lot of pieces to the fixing story that seemed a little opaque and vague." Best Buy's stock closed nearly 1 percent lower at $15.70 on Tuesday, continuing a slide that has knocked off a third of the company's market capitalization this year. The stock touched a 10-year low of $14.39 a week ago. Dimitri van Toren, senior portfolio manager at Dutch asset manager Syntrus Achmea, which holds about 200,000 Best Buy shares, said he was worried about structural issues and a "management vacuum" at the retailer, but that he would stay in the stock despite concerns about the upcoming holiday season. The meeting took place against the backdrop of a potential buyout offer from founder and former CEO Richard Schulze, who is expected to make an offer as soon as next month. "I spend no time worrying about what our corporate structure will be," Joly told reporters after the event. "I tend to focus on decisions I can influence rather than decisions I can't influence." A representative for Schulze did not immediately respond to a request seeking his thoughts on Joly's plan. Joly said "it would have been ridiculous" to offer more concrete details after only a few weeks on the job. He said this meeting was more about setting the record straight and reassuring investors about the company's future. "The perception was that Best Buy was dying," Joly said. MARGIN TARGETS In a statement on Tuesday, the company said its short-term goal will be "to stabilize and then begin increasing its comparable-store sales and operating margin." Over time, it is aiming for a return on invested capital of 13 percent to 15 percent, in addition to a 5 percent to 6 percent adjusted operating margin target. On a comparable basis, its operating margin in the last fiscal year was 4.7 percent. Over the past four quarters, the margin was 4.2 percent. Joly said a mixture of excessive costs and price competition hurt margins, and that the retailer would turn to a wider variety of higher-margin, private-label products to boost results. One example is the company's own Insignia-brand electronics. Best Buy has been struggling to combat a phenomenon known as "showrooming," where people visit its stores to look at products and then buy them online for less. Joly acknowledged the company has suffered from a "price perception issue" among customers that it needed to address, as well as weakness in its online operations. The head of the company's digital business said its online conversion rate - which measures how successfully Best Buy translates customer visits into actual sales - was only about half of what it should be. "Many of these problems are a result of our own making," Joly said during the investor presentation. HOLIDAYS COMING Best Buy also said on Tuesday that it would pursue a plan to "optimize its store footprint on an ongoing basis," which suggested the company may look at ways to shrink or close stores, as some other big-box retailers have done. In late March, the company said it would close 50 large U.S. stores. Joly warned that merely closing stores would not boost operating income, as most of the big-box stores are already profitable. Relocation to smaller space may be an option, however; he said 71 percent of the large-format stores have leases expiring within the next six years. The details of Joly's long-awaited plan came roughly a week before the unofficial start of the year's biggest selling season. The retailer, which has posted declines in same-store sales in eight of the last nine quarters, warned last month it expected earnings and same-store sales to fall again in the third quarter. "I am already sick and tired of negative comps," Joly said, referring to same-store sales figures. The CEO also admitted a number of past investments have not paid off and promised the new leadership would be "prudent" about that in the future, a nod to Wall Street's lingering concerns about spending by past management. (The story corrects paragraphs 1, 12, 13 to fix comparison after company said forecast was for adjusted and not GAAP margin) (Reporting by Dhanya Skariachan in New York; Writing by Ben Berkowitz ; Editing by Maureen Bavdek, Phil Berlowitz, Matthew Lewis and Jan Paschal )

Man United cuts debt, confident of hitting financial goals. United, English champions a record 19 times, said they had cut debt to 360 million pounds ($572 million), down 17 percent from a year earlier, after a listing on the New York Stock Exchange in August that left the American Glazer family firmly in control of the club. A vocal section of United supporters have argued that the cost of servicing debts following the Glazers' 790 million pounds leveraged buyout of the club in 2005 have hampered its ability to compete with rival clubs at home and abroad. "We have been very pleased at how the year has started both on and off the pitch," executive vice chairman Ed Woodward told analysts on a conference call. "Based on our first-quarter results and current visibility we remain confident that we can achieve our previously stated targets for fiscal 2013 -- revenue between 350 and 360 million pounds and adjusted EBITDA of 107-110 million pounds," he added. United, reinforced by the summer hiring of Japan's Shinji Kagawa and Dutchman Robin Van Persie, lead the English Premier League after finishing second behind local rivals Manchester City last season. United have also already qualified for the knockout stages of the Champions League after a costly early exit last season from Europe's most lucrative club competition. NEW SPONSORS SIGNED UP United shares traded 12 cents lower at $12.86 in New York shortly after the opening on Wednesday. They floated at $14 in a listing that valued the club at $2.3 billion. Investors have generally been wary of sporting franchises, concerned that their financial fortunes are too tightly linked to sporting success. United argue that their global fan base and a buoyant TV rights market for the English Premier League give them sound financial underpinnings. For the three months to end-September, a reduction in broadcast revenue pushed underlying core earnings (EBITDA) 15 percent lower. However, United said most of the decline was down to the scheduling of matches -- the club played only one Champions League game in the period -- and would be recouped. United, who claim to have 659 million followers worldwide, signed 10 new sponsorship deals in the first quarter, the most eye-catching being a $559 million agreement with General Motors to have the Chevrolet brand on the club's famous red shirts from 2014. The presence of Kagawa in their ranks has also led to a number of deals with Japanese firms. A 24 percent rise in revenues from all its commercial deals helped to push total revenues up 3 percent to 76 million pounds. Profit from continuing operations was up to 20.5 million pounds against a loss of 5 million pounds a year earlier, a figure that was boosted by a tax credit which the club said related to it moving to certain U.S. tax bases. Chelsea, who won the Champions League in May, said last week they had made a profit in 2011-12, returning to the black for the first time since Russian oligarch Roman Abramovich bought the club in 2003. ($1 = 0.6293 British pounds) (Editing by Mike Nesbit)

Amplats makes new offer to miners: strike leader. Amplats, a unit of global mining giant Anglo American ( AAL.L ), gave the strikers workers until today to return to work or face sacking. "Yesterday we has a meeting with the management and today we are giving the miners feedback. There is a new offer," Evans Ramokga, a labor leader at Amplats, told Reuters. He could not disclose the details of the new offer, saying it had to be communicated to the workers first. The strikers had rejected Amplats' previous offer that included a 4,500 rand ($510) one-off payment and a pledge to start wage talks ahead of the expiry of current agreements next year. Amplats spokeswoman Mpumi Sithole said she had yet to get the details of the outcome of the meeting between the management and miners. South Africa's gold and platinum sectors have been rocked by months of illegal and often violent strikes that have resulted in over 50 deaths, mostly at the hands of police. Most of the affected gold operations are back to work. (Reporting by Olivia Kumwenda; editing by David Dolan )

Abercrombie & Fitch posts higher profit, shares jump. Shares of the company, which hired Goldman Sachs Group Inc ( GS.N ) in September to help ward off pressure from investors, jumped 21 percent to $37.75 in trading before the bell. Abercrombie & Fitch closed at $31.18 on Tuesday on the New York Stock Exchange. The retailer expects to make about $2.85-$3.00 a share for the full year. Analysts, on average, were expecting the company to earn $2.48 a share, according to Thomson Reuters I/B/E/S. Over the past year, Abercrombie & Fitch sales fell as the chain's style lost favor in a segment dominated by so-called fast-fashion retailers. Rivals such as Forever21 offer more-affordable clothes for more fashion seasons, while peers such as American Eagle Outfitters ( AEO.N ) and Gap Inc ( GPS.N ) have done a better job of turning over inventory and styles. The company has also taken steps to stop the sales drain, from increasing sourcing from the United States and Central America to delaying expansion in troubled European markets. Same store sales, or sales at established stores open for at least a year, fell 3 percent in the third quarter, an improvement over the 10 percent drop in the second quarter. They are expected to drop into the mid-single digit percentage in the fourth quarter. For the third quarter ended October 27, Abercrombie earned $71.5 million, or 87 cents a share, compared with $50.9 million, or 57 cents a share, in the same quarter last year. Analysts were expecting earnings of 59 cents a share. Sales rose 9 percent to $1.17 billion, led by a 37 percent rise in international markets. (Reporting by Nivedita Bhattacharjee in Chicago; Editing by Jeffrey Benkoe and Grant McCool )

Toyota to recall 2.77 million cars over steering glitch. Toyota will recall 13 models sold in Japan between August 2000 and January 2012, it said in a filing with Japan's transport ministry. Some 1.5 million of the recalls are of cars sold in Japan. The announcement comes a month after Toyota recalled more than 7.4 million vehicles worldwide for faulty power window switches that are a potential fire hazard, the biggest single recall since Ford pulled 8 million vehicles off the road in 1996. (Reporting by Yoko Kubota and Kentaro Sugiyama; Editing by Daniel Magnowski )

Kodak keeps control of bankruptcy through February 28. Judge Alan Gropper approved the extension at a hearing in a U.S. Bankruptcy Court in Manhattan, allowing Kodak to move forward with its plan without creditors pushing competing proposals. The plan would outline how to repay creditors and exit bankruptcy. Absent the extension, the exclusivity period slated to end on October 15 would have already lapsed. The extension was supported by most creditors, but was opposed by one group of bondholders, some of whom had made an unsuccessful effort to finance Kodak's emergence from Chapter 11. Kodak announced on Monday it chose a $793 million loan package from Centerbridge Partners, GSO Capital Partners, UBS ( UBSN.VX ) and JPMorgan Chase & Co ( JPM.N ). The deal, which would need court approval, would require Kodak to receive at least $500 million for the sale of its patents. Kodak filed for bankruptcy in January, hoping for a relatively speedy emergence fueled by the sale of its intellectual property. But bids have come in lower than expected, which Gropper acknowledged in approving the exclusivity extension. "I think everyone would agree that there have been several disappointing aspects of this case," he said. "But I haven't heard that this is the result of anything other than the market." A Kodak spokeswoman said in a statement on Wednesday that the company has made progress reducing costs through asset sales and streamlining its organizational structure. "Kodak has stabilized its global cash position, its core commercial imaging business is performing well, and Kodak anticipates being global operating cash flow positive upon emergence from Chapter 11," spokeswoman Stefanie Goodsell said. Kodak hopes to emerge from bankruptcy in the first half of 2013, its chief executive, Antonio Perez, said in announcing the financing deal on Monday. Kodak will likely be a different company when it exits bankruptcy. In addition to selling its patent portfolio, it must sell all or part of its document imaging and personalized imaging businesses in order to convert the bondholders' loan package into post-bankruptcy financing. That would mean a restructured Kodak would largely be out of the consumer business, focused instead on commercial imaging. Kodak remains in talks for a patent sale with potential buyers, including Apple Inc ( AAPL.O ) and Google Inc ( GOOG.O ). It said on Monday it is "confident" the patents will fetch the $500 million required under terms of the loan. Kodak said it hopes to gain court approval of the plan in December, but no hearing date has been set. (Editing by Matthew Lewis )

Goldman names 70 partners to 2012 class. Goldman's partner naming, a relic from its past as a private investment bank, occurs every two years and is a closely watched event on Wall Street. The prior partner class in 2010 included 110 people. Goldman has been cutting staff since last year as it looks to cut costs in a weak revenue environment and the smaller partner number is reflective of that. The investment bank tries to keep its partner pool at around 1 percent of the overall workforce, which stood at 32,600 at September 30. Among the new partners are Russell Horwitz, who is Chief Executive Lloyd Blankfein's chief of staff; Kent Clark, an executive in the hedge fund products group of Goldman's asset management division; and Huw Pill, Goldman's chief European economist. As of November 2, Goldman had 407 partners, according to a regulatory filing. (Reporting By Lauren Tara LaCapra ; Editing by Mauren Bavdek and Andre Grenon )

Autos drag on retail sales, price pressure subdued. Other data on Wednesday showed wholesale prices falling last month for the first time since May, giving the Federal Reserve latitude to maintain its ultra-easy monetary policy stance. Retail sales dipped 0.3 percent after a 1.3 percent increase in September, the Commerce Department said. Economists had expected sales to fall 0.2 percent. "Sandy was a drag, but I expect we will see a gain in sales in November," said Gus Faucher, a senior economist at PNC Financial Services Group in Pittsburgh. Part of the drop in sales was payback after two straight months of solid gains. It could also be a sign of hesitation among consumers facing the prospect of higher taxes next year. Even excluding autos, retail sales were flat last month. Automatic tax hikes and government spending cuts will siphon about $600 billion from the economy next year if Congress fails to act to avert them. This so-called fiscal cliff has already eroded business confidence. "It's imperative that policymakers address the looming fiscal cliff now to give consumers some certainty heading into the holiday shopping season," said Matthew Shay, president of the National Retail Federation. STORM CITED Car makers blamed Sandy, the monster storm that lashed the densely populated East Coast and caused up to $50 billion in damage, for the abrupt pullback in sales last month. Automakers said traffic at East Coast dealerships slowed as residents began to brace for the storm, which hit at the end of the month. Sales tend to build up late in the month, which likely amplified the impact. Ford Motor Corp estimated the industry lost sales of 20,000 to 25,000 vehicles, while Toyota put the loss at 30,000. The Commerce Department said it had received indications from companies that the storm had both positive and negative effects on retail sales overall, but was unable to quantify them. Motor vehicle sales declined 1.5 percent, the largest fall since August last year, after increasing 1.7 percent in September. Excluding autos, retail sales were unchanged last month after advancing 1.2 percent in September. The storm also likely dented sales at clothing stores, but probably boosted receipts at food and beverage stores. Economists expect the storm could shave as much as half a percentage point from economic growth in the fourth quarter. However, any lost activity should be made up early next year. "That will come back in the first quarter. Spending on rebuilding will filter into growth numbers gradually over a number of quarters," said Julia Coronado, chief North America economist at BNP Paribas in New York. Separately, the Labor Department said its producer price index slipped 0.2 percent last month, the first decline since May. The index had increased 1.1 percent in September. Economists had expected prices received by farms, factories and refineries to increase 0.2 percent last month. Excluding volatile food and energy costs, wholesale prices also fell 0.2 percent, the largest drop since October 2010. The fall in this core gauge was tied to the introduction of new motor vehicle models, which can skew the data. Excluding autos, the core PPI was flat, consistent with a benign inflation environment, which should suit the Fed's accommodative policy. Minutes of the U.S. central bank's October 23-24 meeting showed a number of officials thought the Fed should step up asset purchases next year to support the economy through low borrowing costs. U.S. financial markets were little moved by the economic reports. Stocks on Wall Street were down as investors fretted about the fiscal cliff and Europe's ongoing problems. U.S. Treasury debt prices were mostly up, while the dollar fell against the euro. BROAD WEAKNESS BEYOND STORM Even accounting for Sandy's impact, the retail sales report highlighted the sluggishness of domestic demand. So-called core retail sales, which exclude autos, gasoline and building materials and which correspond most closely with the consumer spending component of GDP, fell 0.1 percent. They had increased 0.9 percent in September. The drop suggested consumer spending slowed early this quarter after ending the July-September period on a solid footing. Building materials and garden equipment sales fell 1.9 percent, while sales of electronics and appliances fell 1.0 percent, unwinding some of the prior month's boost from purchases of Apple's iPhone 5. Receipts at gasoline stations surprisingly rose 1.4 percent last month, despite pump prices falling almost 10 cents. (Editing by Andrea Ricci , Tim Ahmann and James Dalgleish )

BofA tallies $15.8 billion in mortgage aid to struggling borrowers. Bank of America, which acquired troubled lender Countywide Financial in 2008, owes the most out of five banks that agreed in February to a $25 billion deal to help struggling borrowers to settle accusations they pursued faulty foreclosures and misled borrowers who sought loan modifications. The five banks are filing quarterly reports on Wednesday to the settlement's monitor, former North Carolina state banking commissioner Joseph Smith, who will later file a report compiling the data. Smith's first report in August showed Bank of America lagging rivals in reducing loan balances for first-lien mortgage customers. It owes $11.8 billion in consumer relief and other payments. Through September, the No. 2 U.S. bank by assets said it had approved or completed $4.75 billion in principal reduction for first-lien mortgage customers, provided $2.5 billion in home-equity loan relief and completed $7.4 billion in short sales or deeds-in-lieu of foreclosure. It provided $847 million more in relief through other programs. Of the 30,000 homeowners who have been approved for first-lien modifications, about 5,800 have made their required three monthly trial payments and have converted to a completed modification, the bank said. The Charlotte, North Carolina-based bank showed less progress in reducing interest rates for customers who are making on-time payments but have little or no equity in their homes, saying it focused first on customers more at risk of foreclosure. Through September, the bank has assisted 1,000 customers with $250 million in unpaid balances through this program, but said it has ramped up activity in the program since then. Banks only get partial credit for some types of relief such as short sales, so Bank of America has not yet fulfilled its requirements. On a conference call with reporters, Bank of America Senior Vice President Eric Telljohann said the bank is on track to meet the terms of the three-year agreement within the first year. Under the first-lien mortgage modification program, Telljohann said about 40 percent of the loans came from the bank's own portfolio, while the rest were owned by investors who had given the bank permission to modify their loans. The other banks in the settlement are JPMorgan Chase & Co ( JPM.N ), Wells Fargo & Co ( WFC.N ), Citigroup Inc ( C.N ) and Ally Financial Inc. (Reporting By Rick Rothacker in Charlotte, North Carolina; Editing by Grant McCool )

U.S. Congress panel blames Corzine for MF Global fall. Evidence unearthed by the House Financial Services Subcommittee on Oversight puts the blame squarely on Corzine, the panel's chairman, Rep. Randy Neugebauer, said in a preview of the report that will be released on Thursday. "The responsibility for failing to maintain the systems and controls necessary to protect customer funds rests with Corzine," the report says. "This failure represents a dereliction of his duty as MF Global's chairman and CEO." Corzine, a former co-chairman of Goldman Sachs who also served as a U.S. senator and as governor of New Jersey, has denied any wrongdoing. A Corzine spokesman on Wednesday said: "While we have not yet been able to review the whole report, it is worth noting that ... the House Subcommittee apparently did not find any evidence that Mr. Corzine acted in bad faith or engaged in any intentional wrongdoing." MF Global filed for bankruptcy more than a year ago, as investors scrambled to pull out funds after revelations the firm bet heavily on European sovereign debt and after credit downgrades. Regulators, prosecutors and lawmakers have been looking into the estimated $1.6 billion in customer funds missing after the firm's collapse. The House subcommittee said it has held three hearings, interviewed more than 50 witnesses and reviewed thousands of documents from MF Global, its regulators and other sources. The report will show that risks were exacerbated by an atmosphere at the firm in which no one could question Corzine's decisions, the subcommittee said. Corzine's spokesman said MF Global's significant business decisions were all subject to review by its board. Corzine also kept his own trading activities out of the firm's risk management review process, the subcommittee said. The group said it also found that regulatory agencies had not shared crucial information with each other, and other problems. A trustee liquidating the company's broker-dealer unit released a critical report in June that said that in his attempt to build the firm into a global investment powerhouse, Corzine failed to address growing liquidity needs. (Reporting by Karey Wutkowski , Sarah N. Lynch, Emily Stephenson and Aruna Viswanatha ; Editing by John Wallace, David Gregorio and Dan Grebler)

Panasonic prepares for "garage sale", to axe 10,000 jobs. Hideaki Kawai said the country's biggest commercial employer will axe another 10,000 jobs by end-March as it pares its costs and looks to return to profit. Panasonic shed 36,000 jobs last business year, some through the sale of businesses. "Our new boss has said businesses must achieve at least a 5 percent operating profit target within three years," Kawai said, referring to Kazuhiro Tsuga, who took over as company president in June. "But we won't wait that long to tackle units that need to be dealt with." Sell-offs and business closures will start as early as next year, he told Reuters at Panasonic's headquarters in Kadoma, near Osaka in western Japan. Kawai said Panasonic aims to earn group operating profit of at least 200 billion yen ($2.52 billion) in the year to end-March 2014 - in line with forecasts by analysts polled by Thomson Reuters StarMine. Panasonic warned last month it will lose close to $10 billion in the year to March as it writes off billions of yen in tax-deferred assets and goodwill related to its mobile phone, solar panel and small lithium battery businesses. It also put aside money to cover the lay-offs and other restructuring measures. Panasonic plans to offload assets worth 110 billion yen before the end of March, mainly land and buildings in Japan, Kawai said. More assets sales will follow from next business year if needed to bolster cash flow. Panasonic's 'garage sale' comes ahead of a turnaround plan that Tsuga has promised to unveil by end-March, which will be the start-line to offload underperforming businesses. As financial chief overseeing hundreds of accountants spread across a sprawling conglomerate, Kawai plays a key role in helping Tsuga identify which businesses to close, sell or merge. Selling businesses and offloading other assets should boost Panasonic's cashflow and help pay for the latest restructuring at a company that began in 1918 making electrical socket extensions and bicycle lamps, and now employs 300,000 workers. Panasonic shares, already trading near multi-decade lows, slumped by almost a fifth on November 1 on the loss forecast, and Standard & Poor's has cut its credit rating to close to junk. The stock closed up 0.8 percent on Wednesday, ending a four-session losing streak. Ahead of its earnings revision, Panasonic won $7.6 billion in loan commitments in October from banks including Sumitomo Mitsui Financial Group ( 8316.T ) and Mitsubishi UFJ Financial Group ( 8306.T ), a funding backstop it says will help it avoid having to seek capital from credit markets. "Panasonic's debt holders are concerned and it is critical for us to improve our finances," Kawai said. Panasonic this year aims to cut net debt to 770 billion yen from 1.08 trillion yen and will look for another 200 billion yen improvement next business year. Japan's big banks have also provided TV rival Sharp Corp ( 6753.T ) with $4.6 billion in emergency loans, though the maker of Aquos TVs warned this month it may not survive alone as it expects a $5.6 billion net loss this business year. Japan's other ailing consumer electronics brand Sony Corp ( 6758.T ), inventor of the personal music player, lowered its target for its handheld PSP and Vita games consoles, TVs and digital cameras, but did maintain its annual forecast, helped by the sale of a chemicals business. (Editing by Ian Geoghegan )

POSCO consortium eyes $1 billion stake in ArcelorMittal Canada mine: report. The bidding group seeks to acquire about a 10 percent stake in ArcelorMittal Mines Canada, with POSCO looking to invest $200-300 million and the rest coming from its partners, Money Today said citing unidentified sources in the merger and acquisition industry. Morgan Stanley ( MS.N ) is advising POSCO, it said. A POSCO spokeswoman said the company was studying the possibility of buying a stake in the operator, but nothing had been decided yet. POSCO is seeking to secure iron ore and coking coal resources, which are key steel-making ingredients, as the world's fourth-biggest steelmaker aims to double raw material self-sufficiency to 50 percent by 2014 from 2010 levels. ArcelorMittal, the world's largest steelmaker, is exploring the sale of a minority stake in its Canadian iron ore business, sources familiar with the situation had said in October. ArcelorMittal has retained RBC Capital Markets and Goldman Sachs to assist in the process, which has been ongoing for a few months, said one of the sources, adding that a deal is likely to be announced before the end of the year. (Reporting by Joyce Lee; Editing by Jeremy Laurence )

Fed officials see need to replace "Twist" in 2013. The minutes of the U.S. central bank's policy meeting last month also showed that officials looked favorably on the idea of adopting unemployment and inflation "thresholds" to guide expectations about when they would eventually raise interest rates, but felt this needed more work. Under the program dubbed Operation Twist, the Fed has been selling short-term securities to buy $45 billion in longer-term debt every month to push down long-term borrowing costs. The program is slated to expire at year end. "A number of participants indicated that additional asset purchases would likely be appropriate next year after the conclusion of the maturity extension program in order to achieve a substantial improvement in the labor market," the Fed said in the minutes of the October 23-24 policy meeting. Wall Street traders had already expected the central bank to replace Operation Twist in 2013, and analysts said the minutes simply provided another reason to expect a decision to do so at the Fed's next meeting, on December 11-12. "This reference underscores the dovish bias at the Fed, and it reinforces our base-case expectation for the Fed to continue its current Operation Twist Treasury purchase profile beyond December," Millan Mulraine, senior U.S. macro strategist at TD Securities in New York, wrote in a note to clients. HAWKS NOT SILENT In addition to Operation Twist, the Fed is purchasing $40 billion in mortgage-backed securities each month in its third and latest round of quantitative easing, dubbed QE3. Unlike Twist, which swaps short-term debt with long-term debt, QE 3 expands the Fed's balance sheet. Most analysts expect any Twist replacement would do the same. The Fed has turned to asset purchases and balance sheet management techniques to try to give the U.S. recovery an extra push since its main tool for influencing the economy -- the overnight federal funds rate -- was dropped to near zero in 2008. With the jobless rate at a lofty 7.9 percent, the Fed has said it would employ its tools until the labor market improves substantially, and it has pledged to keep an easy policy in place even after the recovery gains traction. Fed Vice Chair on Tuesday delivered a reminder of the central bank's pro-growth tilt, saying that an optimal path for policy indicated rates remaining near zero until early 2016. At the Fed's October meeting, the chief of the Richmond Federal Reserve Bank, Jeffrey Lacker, was the only policymaker to vote against the decision to continue with monthly purchases of mortgage-related debt. But the minutes made clear he was not the only official worried about the Fed's aggressive actions. "Several participants questioned the effectiveness of the current purchases or whether a continuation of them would be warranted if the recent moderate pace of economic recovery were sustained," the minutes said. THRESHOLDS The Fed has said it expects to hold rates near zero until at least mid-2015, but several officials have suggested replacing this calendar commitment with a set of economic variables, or thresholds, that would signal when the time to raise rates was drawing near. "Many participants were of the view that adopting quantitative thresholds could, under the right conditions, help the committee more clearly communicate its thinking about how the likely timing of an eventual increase in the federal funds rate would shift in response to unanticipated changes in economic conditions and the outlook," the Fed said. However, it said a number of other officials believed a qualitative description of what was driving the Fed's thinking could be even more informative. Yellen, in her speech on Tuesday, said she strongly supported the idea of coming up with numerical guidelines. While her influential backing showed the seriousness with which the Fed was pursuing the idea, the minutes made plain that more work was needed. "Participants generally agreed that the (policy) committee would need to resolve a number of practical issues before deciding whether to adopt quantitative thresholds," the minutes said. Fed Chairman Ben Bernanke told staff to do more work on the proposal. (Reporting by Alister Bull; Editing by Neil Stempleman , Tim Ahmann , James Dalgleish and Leslie Adler)

Analysis: Amazon faces new obstacles in fight for holiday dollars. The country's biggest brick-and-mortar retailers, from Wal-Mart Stores Inc ( WMT.N ) and Target Corp ( TGT.N ) to Toys "R" Us TOYS.UL, are gunning for Amazon, competing more aggressively on price and offering speedier delivery through spruced-up websites and stores that double as distribution warehouses. The onslaught comes as Amazon's price advantage over physical retailers is being whittled down. The company began collecting more sales taxes this year, in Texas, Pennsylvania and California, probably raising prices unless Amazon swallows the increase. "These drivers are definitely placing added pressure on Amazon this year, more so than in the past," said Eric Best, chief executive of Mercent, which helps merchants sell online. The final quarter of each year, encompassing Thanksgiving and Christmas, is vital for retailers because that's when they generate the most revenue and a big chunk of their profits. Amazon, through lower overhead, efficient inventory management, and better product selection and search, has dominated online purchases during the season. Now Amazon itself appears to acknowledge the threat to its holiday crown, or at least the uncertainty engendered by resurgent competition. During a recent conference call with analysts, it forecast fourth-quarter operating results ranging from a loss of $490 million to a profit of $310 million - far wider than last year, when it predicted a result that ranged from a loss of $200 million to a profit of $250 million. Amazon ended up making $260 million in the fourth quarter of 2011. "There's increased competition from mass merchants and big-box retailers embedded in that guidance," said RJ Hottovy of Morningstar. "You could see margins somewhat challenged this season. I'm not expecting blow-out numbers from Amazon in the fourth quarter." An Amazon spokesman did not respond to a request for comment. To be sure, these rival efforts may only dent Amazon's online holiday preeminence. The company has cost advantages over physical stores and it sells off inventory quicker. This is a crucial edge in the retail business, because unsold inventory is effectively stagnant money that could be used to generate more revenue and profit elsewhere. Amazon's Prime shipping service is a magnet that will draw in holiday shoppers again this year. The company is spending heavily on new fulfillment centers nearer to big urban centers, speeding up delivery times to make the service more attractive. But 2012 could turn out to be the year when retailers slow Amazon down. "The competitive headwinds are certainly blowing," said Colin Sebastian, an analyst at R.W. Baird. "We expect Amazon's top-line growth rate to moderate a bit." RETAILERS IMPROVE Matt Nemer, an analyst at Wells Fargo, said big retailers have made lots of small improvements such as better product search, faster website speeds and slicker mobile sites. "The big retailers are in a much better space than they were last year," Nemer said. Wal-Mart, the world's largest retailer, has probably made the most progress online, the analyst added. It launched a new search engine for Walmart.com this year that has led to shoppers being 10 to 15 percent more likely to purchase after searching for products on the site, according to Wal-Mart. Wal-Mart also recently started same-day delivery tests in San Francisco, San Jose, Northern Virginia, Philadelphia and Minneapolis, using some of its 4,000 stores as distribution centers for quicker shipping of online orders. In the spring the retailer started a Pay with Cash program that lets shoppers without credit cards order online and pick up in stores. "The biggest impact on Amazon is going to be retailers that have truly figured out how to combine the best of digital and physical worlds," said Darrell Rigby, head of Bain & Company's Global Retail Practice. PRICE WARS ONLINE Hottovy said programs from companies such as Target, Best Buy Co ( BBY.N ) and eBay Inc's ( EBAY.O ) PayPal to match online pricing could squeeze industry profit margins, including those of Amazon. Most analysts see these programs more as a marketing strategy to attract shoppers into stores and stop them going to Amazon.com. But behind the marketing blitz, retailers are arming themselves to compete better against Amazon on price. Wal-Mart developed technology this year that lets the company regularly monitor competitors' online prices for every product it sells. Other retailers are using similar technology, known as dynamic pricing, offered by third-party companies including Mercent, which lets them change online prices many times a day. Mercent's Best estimates industry adoption of dynamic pricing is growing at about 75 percent a year. He declined to say which retailers are using the service. Retailers used to change prices once every one or two weeks, but during the 2010 holiday season prices began changing daily for the first time, according to Best. By 2011's holiday season, hourly price changes became more common. "We are seeing pressure from customers to change prices more frequently than an hour. There is so much riding on this holiday season," Best said during a recent conference call with analysts. Online pricing tools like this are "the basic building blocks to being competitive," Nemer said. Meanwhile, Amazon's collection of sales tax in some big states brings its price advantage over physical stores down to roughly 3 percent to 5 percent from 5 to 10 percent, according to Hottovy. Amazon was pushed into collecting more sales tax as cash-strapped state governments seek additional revenue. But in return it can now build new fulfillment centers in those states, speeding up deliveries and reducing shipping costs. A recent online survey of more than 400 Amazon shoppers in California, conducted by SurveyMonkey, found that 36 percent said they would shop there less because the retailer started collecting sales tax. Most of those shoppers said they would shop at other online retailers that do not collect California sales tax. More than a quarter said they would shop at retail stores instead, according to the survey. STORES AS WAREHOUSES Retailers are also competing more with Amazon Prime, which offers free two-day shipping in the United States as part of a $79 a year, or $7.99 a month, subscription. Prime customers often go to Amazon.com first to buy gifts for the holidays to make sure they are getting the most out of their subscription. In Wal-Mart's same-day delivery test this holiday, shoppers pay a $10 flat fee to have online purchases of televisions, toys and other general merchandise sent to them from nearby stores. EBay is testing same-day delivery of online orders from stores of retailers including Target, Best Buy and Toys "R" Us in San Francisco this holiday. Most Toys "R" Us stores are also part of the company's "Ship from Store" program, which taps in-store inventory to fulfill online orders. Retailers may get a profit margin boost if they can route online orders to stores that have a lot of a particular product in stock. This could help them avoid costly mark-downs by re-balancing store inventory, Nemer explained. "Fulfilling online orders from the store is the most important thing that will change physical retailers over the next five years," Nemer said. (Reporting by Alistair Barr; editing by Prudence Crowther)

Groupon names Raman chief operating officer. Raman joined the company in April and was previously Senior Vice President, Global Sales and Operations. As COO, he will continue to report to Chief Executive Andrew Mason and oversee the company's global sales and operations, Groupon said. Groupon lost two COOs when the company was growing at a ferocious pace leading up to its initial public offering late last year. Since then, growth has slowed to the point where many on Wall Street and beyond question the company's business model. Groupon shares have lost more than three quarters of their value since the IPO. The stock hit record lows in recent days after the company reported disappointing third-quarter results as it struggled to turn around its European business. Raman has been leading the re-organization efforts in Europe. "We are already seeing progress in Europe and Kal will be instrumental in leading our company as we deploy tools and technologies that will help us continue to grow," Mason said. Groupon shares gained 3.8 percent to $2.73 on Wednesday. (Reporting By Alistair Barr; Editing by Gary Hill , Marguerita Choy and Tim Dobbyn )

Microsoft shares fall after departure of key executive. The shares were down 2.8 percent in afternoon at $27.21. Microsoft on Monday night announced the departure of Steve Sinofsky, a 23-year veteran of the company and head of its flagship Windows unit, just two weeks after launching the Windows 8 operating system. Analysts fear that Chief Executive Steve Ballmer is driving out talent just as the company needs it most. "Sinofsky may have ruled the kingdom with an iron fist, but he performed amazingly well in rescuing Windows following Vista," Wells Fargo analysts said in a research note on Tuesday, referring to Microsoft's previous operating system. "While we think Windows 8 and Surface have promise, there is still a ton of work ahead to catch iOS and Android." Apple AAPL.o and Google ( GOOG.O ) are seen as holding the lead for systems for mobile computing, a huge growth driver. Ballmer has replaced the heads of Microsoft's five main operating units in the past four years. Colin Gillis, an analyst at BGC Financial, said that while he generally has applauded bringing in new blood, "in this case I don't applaud it. "This is a negative. If I was the CEO, I would have kept him," he added. Ballmer may have been unhappy with Sinofsky's ability to work with other business units, or the pace of progress under him, analysts said. Sinofsky's abrasive management style may also have contributed to his departure, analysts said. Microsoft on Monday named two executives who are relatively unknown outside of technology circles to assume Sinofsky's responsibilities, something that analysts said could also be dragging on the stock. Julie Larson-Green will head the Windows hardware and software division, while Tami Reller will remain chief financial officer of the Windows unit and assume responsibility for the business of Windows. In a statement issued Monday night, Ballmer said it was "imperative that we continue to drive alignment across all Microsoft teams, and have more integrated and rapid development cycles for our offerings." (Reporting By Sarah McBride; Editing by Leslie Adler)

Facebook stock jumps 12.6 percent as share lockup expires. "While the lockup is expiring, there is nothing requiring anybody to sell," said Tim Ghriskey, chief investment officer at Solaris Group in Bedford Hills, New York. "Given the low price, these long-term holders are deciding to hold the stock, and that is lifting it here as the fear of the expiration subsides." Roughly 800 million Facebook shares were eligible for sale on Wednesday after restrictions on insider selling were lifted on the biggest block since Facebook's May initial public offering. The lockup expiration greatly expands the 921-million-share "float" available for trading on the market until now. "We've seen this before with other lockups. People sell them leading up to the lockup period expiring, and then they have a bit of a relief rally," said Ryan Jacob, chief executive of the Jacob Funds, which does not own Facebook shares. In August, shares of the online reviews website Yelp Inc surged by more than 20 percent on the day that insider trading restrictions expired. That stock's rally was boosted as short-sellers scrambled to cover their positions when the expected flood of selling failed to materialize, say analysts. Facebook shares finished Wednesday's regular trading session up 12.6 percent at $22.36 on the Nasdaq, with trading volume for the stock more than four times the average during the past 50 days. The world's No. 1 online social network became the only U.S. company to debut with a market value of more than $100 billion. But its value has dropped nearly 50 percent since the IPO on concerns about money-making prospects over the long term. Insider trading lockup provisions started to expire in August, and the rolling expirations have added to the pressure on the stock. Restrictions on insider selling have expired in waves. A limitation on more than 200 million shares expired on October 29. COST OF SHORTING Pivotal Research Group analyst Brian Wieser said he did not expect Facebook insiders to sell all of their shares as the lockups expired. "I would expect heavy volumes over the next few weeks, but not undigestible volumes," said Wieser. By his estimate, roughly 486 million of the nearly 800 million newly freed Facebook shares will be sold. There is some evidence the heavy interest in "shorting" the stock was dissipating, given the poor performance since it first sold shares in May. Investors who believe a stock will fall can bet against it by shorting the stock - that is, borrowing it and selling it in the hopes it will decline. According to Markit, a financial information services company, about 28 percent of the shares available for short-selling were being borrowed for that purpose, down from a high of more than 80 percent in early August. Similarly, SunGard's Astec Analytics, which also tracks interest in shorting, noted that the cost of borrowing Facebook shares is down more than 50 percent since the beginning of the month. "Everything would seem to indicate the market is losing its appetite to short Facebook," wrote Karl Loomes, market analyst at Astec. The cost of shorting Facebook has declined to 0.18 percent on an annualized basis, Astec said on Wednesday. By contrast, shortly after the IPO, the cost to short the stock ranged from 40 percent to 50 percent annually. "It's become somewhat of a controversial stock. It always adds fuel to the fire if you have a sizable short position," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco. "But the unlock is not new news. It doesn't mean everyone is going to sell, and it doesn't mean every order is going to come in today." Facebook, with roughly 1 billion users, has faced a tough reception on Wall Street amid concerns about its slowing revenue growth and nascent advertising efforts on mobile devices. But the company delivered better-than-expected third-quarter results on October 23 and revealed that 14 percent of its advertising revenue is now from mobile ads, reassuring some investors it was beginning to figure out how to earn money from smartphone and tablet users. "They had a pretty good quarter. I think a lot of investors, though, are waiting to see some consistency in the results," said Jacob. Several members of Facebook's senior management have sold millions of dollars' worth of shares in recent weeks through pre-arranged stock trading plans as lockup restrictions expired. Chief Operating Officer Sheryl Sandberg has sold roughly 530,000 shares this month, netting just over $11 million, though she still owns roughly 20 million vested shares in Facebook. In August, Facebook board member Peter Thiel sold roughly $400 million worth of Facebook stock, the majority of his stake, when an earlier phase of lockup restrictions expired. Facebook's 28-year-old chief executive, Mark Zuckerberg, has pledged not to sell any shares before September 2013. "I'm sure we're seeing some selling from guys whose shares are unlocking, but the supply is not nearly as much as everybody expected," said Arvind Bhatia, an analyst with Sterne, Agee & Leach. (Editing by Jeffrey Benkoe, David Gregorio and Matthew Lewis )

BHP aims to push up iron ore capacity by a fifth. Uncertainty over iron ore prices due to stuttering demand for the steel making ingredient from China has prompted a rethink of expansion plans by most iron ore miners, including top global iron ore miner Vale ( VALE5.SA ). BHP has slowed its growth plans, like Australia's no.3 iron ore miner Fortescue Metals Group ( FMG.AX ), while their bigger rival Rio Tinto ( RIO.AX ) is pressing ahead with an expansion that will give it at least a third more capacity than BHP and more than double Fortescue's capacity. "Looking forward, things are not as rosy as they were in the past. The imperative to grow as aggressively as we were in the past has diminished slightly," Wilson said at a conference. Caught out by escalating costs, a sharp slide in iron ore prices and a persistently strong Australian dollar, BHP shelved plans in August to build a $20 billion iron ore harbor at Port Hedland in Western Australia that would have eventually doubled its iron ore capacity to 440 million tonnes. BHP is focusing instead on milking as much out of its existing inner harbor, rail line and mines, increasing its capacity in smaller steps without huge capital outlays. The company now expects to reach 260 million tonnes, or 40 million tonnes more than the current target that it will reach with the nearly completed expansion of its inner harbor at Port Hedland and the opening of the Jimblebar mine. "The aspiration would be, just by squeezing our existing infrastructure with modest capital investments across our business, to be able to achieve around the 260 million tonne mark," Wilson told reporters on the sidelines of the conference. He gave no timeframe or cost for achieving the higher target after it reaches 220 million tonnes a year in 2014. Analysts said BHP's and Fortescue's deferral of growth plans reflected more on lower cash flows rather than longer term pessimism about China's growth and demand for iron ore. "This is more about conserving capital in the current environment than concern over weaker markets," said Fat Prophets mining analyst David Lennox. BHP's shares closed down just 0.06 percent at 33.730 in Australia. They fell almost 1 percent in London by 1225 GMT compared to a half percent fall for the FTSE 100 index as a whole. RIVALS DELAYED Fortescue plans to review in December whether to push ahead with tripling its iron ore capacity, a plan it deferred in September when iron ore prices slid to a three-year low. The company had expected iron ore prices to hold around $120 a tonne, but when prices slumped to $87 in September it slammed the brakes on plans to lift its annual capacity to 155 million tonnes by digging the Kings mine. Iron ore prices have since rebounded to around $120 and Fortescue said this has given the company more confidence to try to revive the Kings development. "We've spent the vast amount of the capital there, so we are very keen to restart that as soon as we possibly can...It's looking very promising," Nev Power, Fortescue's chief executive, told reporters after its annual general meeting on Wednesday. Still uncertainties over China remain. Iron ore prices may drop nearly 10 percent over the next three years as China's economic growth shifts to a slower gear, a Reuters poll in late October showed. Australian mining magnate Gina Rinehart's $10 billion Roy Hill iron ore project is also running behind plan, now expecting to start shipping iron ore by September 2015 if it secures debt financing by mid-2013 as hoped. "We were planning to put the first ore on ship towards the end of 2014. Now we've revised it to mid-to-September 2015," said Tad Watroba, an executive director at Rinehart's Hancock Prospecting, which owns 70 percent of the project. The Roy Hill project has run into delays lining up around $7 billion in debt funding, as potential lenders, including export credit agencies in Japan and South Korea, have become extra cautious following the global financial crisis. The partners hope to secure the funding by mid-2013 so they can begin construction on the mine, rail and port project that aim to produce 55 million tonnes a year. The partners have already spent or committed $2 billion on the project. Watroba said the project expects to launch the financing process shortly, with draft term sheets approved by the board, and said it hopes lenders will approve the term sheets within three to four months. Roy Hill is 30 percent owned by a consortium led by South Korean steel giant POSCO ( 005490.KS ), Japan's Marubeni Corp ( 8002.T ), South Korea's STX Corp ( 011810.KS ) and Taiwan's China Steel Corp ( 2002.TW ). (Additional reporting by Rebekah Kebede in PERTH, James Regan in SYDNEY and Manolo Serapio in SINGAPORE; Editing by Ed Davies )

Weak rates tip Overseas Shipholding into bankruptcy. The company has also suffered as the United States and other industrialized economies shift toward domestic oil supplies and away from imports, sending rates for transporting crude oil plummeting. Many shipping companies have been forced to restructure, including Norway-listed Frontline ( FRO.OL ), Italy's Deiulemar Shipping, Indonesia's Berlian Laju Tanker ( BLTA.JK ) and Sanko Steamship in Japan. "The tanker market has been absolutely miserable for the last eight months," Overseas Holding Chief Executive Morten Arntzen told Reuters. He said the company was bigger than other shippers that had restructured, the bankruptcy could be more complex and the board would consider legitimate offers for its businesses. "We do have some attractive assets." Overseas Shipholding said it had enough cash to continue operating as usual and did not require debtor-in-possession financing. However, the company's disclosure last month that it might have to re-state results for at least three years "severely limited any access to the capital and credit markets," according to documents filed with Delaware's Bankruptcy Court. Overseas Shipholding said in October it had uncovered a tax reporting problem stemming from the fact that it is domiciled in the United States but has substantial international operations. Allen Andreas, a director and member of the audit committee, resigned in September over the issue. The company made the tax disclosure as it was negotiating with lenders over a $1.5 billion credit facility which matures in February. Arntzen said he did not have a time frame for resolving the tax problem, which was being investigated by an outside expert. The company has reported a loss for 13 straight quarters. It listed total assets of $4.15 billion and liabilities of $2.67 billion as of June 30. It is the third-biggest U.S. bankruptcy this year by assets, behind Residential Capital LLC, with assets of $15.68 billion, and Eastman Kodak Co, with $6.24 billion, according to Bankruptcydata.com. LEASES AT RISK The company, which employs 3,600, said in a court filing it determined it needed a fundamental overhaul of its finances and operations to recapitalize the business. Overseas Shipholding has been struggling to plug a looming cash shortfall of up to $600 million. Its $1.5 billion revolving credit facility matures in February and the company had arranged a replacement credit facility, but it only provides $900 million. The operator of about 112 vessels is likely to use the breathing space of bankruptcy to end uneconomical vessel leases, its main fixed cost, according to an attorney with experience in maritime restructuring. "The $64,000 question is how does your fleet compare to the competition in terms of efficiency and how does it compare to your needs?" said Ken Rosen of Lowenstein Sandler. Wells Fargo Securities shipping analyst Michael Webber said above-market leases with ship owner Capital Product Partners LP ( CPLP.O ) could be at risk. About 35 percent of Overseas Shipholding's fleet is leased from companies including Wilbur Ross-backed Diamond S Shipping and DHT Holdings Inc ( DHT.N ). Oslo-based American Shipping Co ASA ( AMSCA.OL ) has leased 10 tankers to Overseas Shipholding and said it did not expect charter cancellations. These companies have already written down the value of their contracts with the company, or have begun to look for new customers for their vessels. Shares of Frontline Ltd, the world's largest independent oil tanker operator, shot up 17 percent on news of Overseas Shipholding's bankruptcy filing. "People probably think that OSG's bankruptcy will remove capacity from the market, thus helping surviving players like Frontline," said Evercore Partners analyst Jonathan Chappell. However, Chappell said that even if Overseas Shipholding cut the number of ships it operated, the vessels would likely be remain in service with another operator. The case is In re: Overseas Shipholding Group Inc, U.S. Bankruptcy Court, District of Delaware, No:12-20000 (Reporting by Swetha Gopinath in Bangalore; Editing by Don Sebastian, Ted Kerr , Tim Dobbyn , Gary Hill )

Toyota agrees to $25.5 million U.S. investor lawsuit settlement. The proposed cash settlement was detailed in documents filed by the plaintiffs in the U.S. District Court in Los Angeles. The settlement must be approved by U.S. District Judge Dale Fischer in Los Angeles. If approved, the settlement would resolve a major lawsuit that had dogged Toyota since reports of its vehicle recalls stole headlines two years ago. Mike Michaels, a spokesman for Toyota, said in a statement the settlement contained no admission of wrongdoing. The company agreed to the accord to "to avoid the expense, distraction and uncertainty of further proceedings," he said. "We are pleased to be turning the page on this legacy legal issue, pending court approval, and believe this is a reasonable outcome," Michaels said. Plaintiffs counsel Blair Nicholas declined comment. Toyota investors began suing Toyota for securities fraud in February 2010 amid reports of accidents related to unintended acceleration by Toyota vehicles. Toyota subsequently recalled up to 10 million Toyota or Lexus vehicles at a cost of $5 billion. Investors led by the Maryland State Retirement and Pension System claimed Toyota concealed problems in its vehicles. The misconduct resulted in a $30 billion drop in the company's stock market value. In July 2011, Judge Fischer pared down the case substantially by holding that investors who had bought Toyota common stock couldn't sue under Japan's Financial Instruments and Exchange Act. The ruling limited the case to covering claims just of investors in Toyota's American Depository Shares. A motion to certify the class had been fully briefed at the time of the settlement. In the court papers on Tuesday, the Maryland pension fund said it estimated the maximum amount of net damages investors could obtain at trial would be $124 million. Court documents state that the plaintiffs lawyers will apply to the court for approval of a contingency fee of up to 12 percent, or $3.06 million, plus up to $2 million in expenses. The law firm Bernstein Litowitz Berger & Grossman acted as lead counsel for the plaintiffs. The case is In Re Toyota Motor Corporation Securities Litigation, U.S. District Court, Central District of California, No. 10-cv-00922. (Reporting By Nate Raymond in New York; Editing by Muralikumar Anantharaman)

Starbucks buying Teavana, eyes repeat of coffee success. Teavana has about 300 shopping mall stores that sell loose-leaf, exotic teas. In addition to opening stand-alone Teavana stores in the United States and abroad, Starbucks will add tea bars that serve prepared drinks in existing Teavana stores, Starbucks Chief Executive Howard Schultz told Reuters. Starbucks opened its first coffee bar inside a store in 1987, when it had 11 stores selling only whole bean coffee. "We will do something very similar over time with Teavana," said Schultz, who now oversees about 18,000 Starbucks stores around the world. "We will do for tea what we did for coffee." The world's largest coffee shop operator said it will pay $15.50 per share in cash for Teavana, a 54 percent premium to the company's closing price on the New York Stock Exchange on Tuesday. Shares of Atlanta-based Teavana jumped 52.5 percent to close at $15.45 on the New York Stock Exchange. This is not the first tea venture for Starbucks, which also has made a handful of complementary acquisitions this year. Starbucks bought Tazo tea for $8.1 million in 1999. That business now brings in more than $1 billion in annual sales of products such as tea bags and bottled tea drinks through its own shops and the grocery aisles of many retailers. On Friday, Starbucks will open its first Tazo tea store in Seattle. That store will act as a "laboratory" for Teavana, Schultz said. "The two brands will co-exist," Schultz said of Tazo and Teavana. He said Starbucks will develop a line of Teavana branded packaged goods, but declined to say how he would position each brand. Schultz said the acquisition takes advantage of Starbucks' existing strengths and assets. "There's no incremental expense other than building new stores and new tea bars," he said. The Teavana deal comes on the heels of the company's acquisitions of juice company Evolution Fresh and sandwich maker La Boulange Bakery. Starbucks bought Evolution Fresh for $30 million in November 2011, and announced a deal for the bakery in June. "It's a natural fit with Starbucks' evolving brand portfolio," Morningstar analyst RJ Hottovy said. News of the Teavana deal was first reported by the Atlanta Business Chronicle. Teavana investors holding about 70 percent of its outstanding shares of common stock have approved the merger agreement, Starbucks and Teavana said in a statement. Starbucks said it expects the deal to close by the end of the year and to add 1 cent per share in earnings in fiscal 2013. Starbucks shares fell 2.9 percent to $48.84 on Nasdaq. (Additional Reporting Brad Dorfman in Chicago; editing by John Wallace and Leslie Adler)

Retail sales sag on autos, wholesale prices subdued. Other data on Wednesday showed little inflation, with wholesale prices falling in October for the first time since May, giving the Federal Reserve latitude to maintain its ultra easy monetary policy stance to nurse the economy back to health. Retail sales dipped 0.3 percent last month after a 1.3 percent increase in September, the Commerce Department said. Economists had expected sales to fall 0.2 percent. The retail sales report offered an early read on the storm's impact on the economy. Its full impact will likely be felt in the November data. Analysts estimate that the storm, which lashed the densely populated East Coast and caused up to $50 billion in damage, could shave as much as half a percentage point from fourth-quarter GDP. They expect the economy to make up for any lost activity early next year. "That will come back in the first quarter. Spending on rebuilding will filter into growth numbers gradually over a number of quarters," said Julia Coronado, chief North America economist at BNP Paribas in New York. But much will depend on whether automatic tax hikes and government spending cuts that will suck about $600 billion out of the economy next year if Congress fails to act can be avoided. The so-called "fiscal cliff" has eroded business confidence. The Commerce Department said it had received indications from companies that the storm had both positive and negative effects on October's sales data. U.S. financial markets were little moved by the data. Stocks on Wall Street rose at the open as strong earnings from technology bellwether Cisco boosted sentiment. U.S. Treasury debt prices dipped, while the dollar hit a session high against the yen. AUTO SALES DECLINE Motor vehicle sales declined 1.5 percent, the largest fall since August last year, after increasing 1.7 percent in September. Auto manufacturers have blamed the storm for the drop in sales and expect a rebound in November. Excluding autos, retail sales were unchanged last month after advancing 1.2 percent in September. The storm also likely dented sales at clothing stores, which dipped 0.1 percent after rising 0.4 percent the prior month. Building material sales surprisingly fell 1.9 percent, defying expectations of a boost from pre-storm purchases. Building materials and garden equipment sales has increased 2.1 percent in September. Receipts at gasoline stations surprisingly rose 1.4 percent last month. Gasoline sales had been expected to show some weakness because of a decline in gasoline prices during the month. Excluding gasoline, sales recorded their largest drop since May 2010. Separately, the Labor Department said its seasonally adjusted producer price index slipped 0.2 percent last month, the first decline since May, after increasing 1.1 percent in September. Economists had expected prices at farms, factories and refineries to increase 0.2 percent last month. Wholesale prices excluding volatile food and energy costs also fell 0.2 percent, the largest fall since October 2010, after being flat in September. Economists had expected core PPI to rise 0.1 percent. The benign tone of the producer price inflation report should give the Fed room to keep its low interest rate environment. Consumer inflation is currently hovering around the Fed's 2 percent target. The U.S. central bank in September launched a third round of asset purchases, committing to buy $40 billion worth of mortgage-backed securities every month until there is a sustained improvement in the labor market. It hopes the purchases will drive down borrowing costs. Aside from superstorm Sandy, the retail sales report highlighted the sluggishness of domestic demand. Sales of electronics and appliances fell 1.0 percent, unwinding some of the prior month's boost from purchases of Apple's iPhone 5. Furniture sales fell 0.6 percent after dropping 0.2 percent in September. So-called core retail sales, which exclude autos, gasoline and building materials, fell 0.1 percent after increasing 0.9 percent in September. Core sales correspond most closely with the consumer spending component of the government's gross domestic product report. Last month's fall suggested consumer spending slowed early this quarter after ending the July-September period on a solid footing. "The picture of the US consumer appears to be one of continued stable and moderate spending," said Coronado. (Editing by Andrea Ricci )

CME gets more time in U.S. compliance spat with regulator. The CME is suing the markets watchdog, seeking to prevent the enforcement of rules that require it to report swaps transaction data to a third party and which were due to go into effect on Tuesday. The CME wants to rely on its own data warehouse, or Swaps Data Repository, instead, and is seeking permission from the CFTC to operate one. The CFTC has now granted the CME until December 4 to comply with the rules but it remains unclear whether this extension means it is likely to gain permission for its own data warehouse. The CME's lawsuit is one of growing number of challenges to the 2010 Dodd-Frank law that is designed to avoid a repeat of the global financial crisis. One of the law's aims is to shed greater light on the commercially lucrative derivatives industry. A letter obtained by Reuters and confirmed by the CFTC as authentic said the regulator "has determined to further extend the period of no-action relief, and will not recommend that the Commission commence an enforcement action against CME Clearing". A CME spokesman would not say if the exchange operator would drop its lawsuit now that the CFTC had granted it a reprieve. Swaps -- a catch-all phrase for many kinds of often highly complex and lightly regulated financial instruments -- will need to be traded on exchange-like platforms in what is expected to lead to an overhaul of the lucrative business. They will in large part also need to be cleared and transaction data will need to be centrally stored in data warehouses. A CME competitor, the Depository Trust and Clearing Corporation, on Monday filed a motion with the U.S. District Court in Washington, saying the CME's lawsuit against the regulator could disrupt the regulatory regime mandated by the Dodd-Frank Act and was against the public interest. The DTCC already operates its CFTC-approved data warehouse, and the CME wanted to avoid having to hand over the transaction data to its rival. The Intercontinental Exchange also has a license to operate a data warehouse. The number of operators is expected to stay low. The International Swaps and Derivatives Association lobby group has also distanced itself from the CME, warning that a proliferation of data warehouses is likely to harm transparency. (Editing by Edwina Gibbs )

Lockheed options spike before CEO news unexplained so far. The remarkable spike in trading of bearish positions about two hours before Friday's closing bell - many times the volume typically traded in the defense company's options - is likely to raise red flags with regulators. "To have such an extremely high day of put volume immediately in front of significant news is unusual and worth a closer look by security regulators," said Henry Schwartz, president of options analytics firm Trade Alert. Jennifer Whitlow, spokeswoman for Lockheed Martin, said the company had "no knowledge of the reasons for the options trading activity that occurred on Friday, or who made the trades." Christopher Kubasik, who had been scheduled to take the reins as Lockheed's CEO in January, resigned after admitting to an affair with a subordinate. Marillyn Hewson was named in Kubasik's place. When the heavy trading took place, at around 2 pm ET on Friday, "Mr. Kubasik's resignation had not been tendered," Whitlow told Reuters in an email. A total of 58,000 puts and 1,224 calls traded on Lockheed shares on Friday, 20 times the daily average, according to Trade Alert. It was the highest put volume in the defense contractor in more than two years, data from Livevol, another analytics firm, showed. "This is either a one-in-a-thousand random event or suspicious options trading ahead of the announcement," said Ophir Gottlieb, managing director of Livevol. Out-of-the-money put options are bearish positions that become profitable if the stock in question falls. Lockheed's Whitlow said the company was committed to "upholding the highest level of ethical behavior at all times." Its policies prohibit employees from sharing material non public information or trading on the basis or material non public information, she said. Gail Osten, spokeswoman for the Chicago Board Options Exchange, the largest U.S. equity options mart, declined comment on whether it was looking into the matter. "CBOE takes its regulatory responsibility very seriously and does investigate unusual trading activity. However, we do not comment on individual investigations," Osten told Reuters. The U.S. Securities and Exchange Commission, which looks into unusual stock and options activity, declined to comment. Heavy trading just before such a significant event for the company highlights the fine line between innocuous speculation that sometimes fuels action in the options market, and trading by sources knowledgeable about coming news. Lockheed shares closed at $89.98 on that Friday and on Monday, the stock ended at $89.81. It is trading at $89.30 as of Wednesday afternoon, hovering not far from four-month lows. The stock had fallen sharply in the days following the re-election of President Barack Obama, which caused a bit of a negative reaction in defense-oriented stocks. Most of the trading in the puts, contracts that allow investors to sell the stock at a fixed price by a certain date, was dominated by a January spread.. The trade was still made in expectation of a fall in shares, but with some apparent hedging. "The majority of the put flow involved a complex bearish spread in the January 2013 term, which suggests that the trader may not have had such a strong conviction on the timing and severity of the news," Schwartz said. One trader on Friday bought a January $75-$80-$85 put butterfly on the stock for 57.5 cents, which traded 10,000 times, said WhatsTrading.com options strategist Frederic Ruffy. Combined turnover for those three strikes was 53,000 contracts. Unusual options trading is often seen ahead of acquisition announcements. For example, large, well-timed bullish bets in the options of Canadian oil producer Nexen were made ahead of a takeover deal announced in July this year, which raised eyebrows among some options market watchers. In February 2010, U.S. securities regulators probed the unusual activity in Airgas Inc call options before a $5.1 billion offer for the industrial gas company was announced, a person familiar with the probe said. The SEC, another source said, investigated in November 2009, any potential misconduct and was looking at a big jump in 3Com Corp's shares and call options activity before Hewlett-Packard Co announced a $2.7 billion offer for the network equipment maker. (Reporting By Doris Frankel in Chicago and Andrea Shelal-Esa in Washington; editing by Ros Krasny , David Gaffen and M.D. Golan)

GM to recall 15,575 cars to fix safety flaws. The recalls, posted Wednesday by the National Highway Traffic Safety Administration, involve 2,949 2012-model Buick Verano, Chevrolet Cruze and Chevrolet Sonic compacts with driver-side air bags that might not deploy in a crash, and 12,626 2013-model Cadillac XTS sedans with rear-seat head restraints that might not lock in position. The problems could increase the risk of injury to occupants, NHTSA said. GM said it will replace the steering-wheel air-bag coil on the compact cars and replace the head restraints on the Cadillac sedans. GM dealers will provide the repairs free of charge. (Reporting By Paul Lienert in Detroit; editing by John Wallace)

Toyota to recall 2.8 million vehicles for steering glitch. The defects, which Toyota said had caused no accidents and could each be fixed in an hour or so, could cost hundreds of millions of dollars to repair, according Deutsche Securities autos analyst Kurt Sanger. While the recall is widespread, the flaws are less serious and any damage to Toyota's reputation would likely be limited compared with massive recalls in 2009 to 2011 when unintended acceleration problems in Toyota vehicles were the suspected cause of fatal crashes in the United States. Toyota this year recaptured the crown of the world's top automaker after last year's natural disasters, which temporarily disrupted production in Japan and Thailand, had knocked it from the top spot in 2011. Toyota is recalling 2.76 million vehicles worldwide to fix a steering component that could be damaged by wear and tear, and 630,000 gasoline-electric hybrid vehicles to replace water pumps, company spokesman Joichi Tachikawa said. Many vehicles are targeted by both recalls, resulting in overlap. Deutsche Securities analyst Sanger said the extent of the recall suggested a more aggressive stance by the company to address defects after its recall crisis a few years ago. "They seem to continue to be obsessively monitoring these things and looking for potential problems before they arise," Sanger said. Toyota gave no indication of the likely cost of the latest recall, but Sanger estimated that, including parts and labor, it could amount to 30 billion to 40 billion yen ($380-500 million). "That's a decent range of financial impact, we assume. There doesn't seem to be much brand risk around this, given that there haven't been injuries and excessive complaining leading up to the product action and recall." IMAGE PROBLEMS Toyota has faced a long battle to restore its image since problems with unintended acceleration in its vehicles led to a series of recalls of more than 10 million vehicles worldwide from 2009 to 2011, damaging its reputation for quality. Discussion of the company's quality issues re-emerged with last month's recall of more than 7.4 million vehicles to fix power window switches, the industry's biggest single recall since Ford Motor Co ( F.N ) took 8 million vehicles off the road in 1996. Two weeks later, Tokai Rika ( 6995.T ), a supplier of auto parts to Toyota, booked an extraordinary loss of 15 billion yen to pay for problematic parts connected with a recall. Shares in Toyota ended down 0.8 percent at 3,060 yen on Wednesday, underperforming the Nikkei benchmark index .N225 , which ended flat. More than half of the vehicles in the latest recall, or 1.5 million, are in Japan, making this Toyota's biggest single recall in its home market. It is also recalling 670,000 vehicles in the United States and 496,000 in Europe. The recall covers certain Corolla compact models made from 2000 to 2006 and second-generation Prius cars made between 2004 and 2011. Toyota has sold about 3.3 million Prius hybrid vehicles globally since the car went on sale in December 1997. Analysts have cited Toyota's recovery from its 2009 recall fiasco and last year's natural disasters as signs of resilience. It has also been hit by a plunge in car sales in China since September, when anti-Japanese protests erupted during a territorial spat between Tokyo and Beijing, but nevertheless raised its full-year net profit forecast this month to $9.7 billion as overall sales remained solid. ($1 = 79.4400 Japanese yen) (Additional reporting by Kentaro Sugiyama; Editing by Edmund Klamann)

New body must help markets prepare for storms: CFTC's Chilton. The financial industry was "reckless" in being poorly prepared for Sandy which ravaged the U.S. East Coast in late October, Commodity Futures Trading Commission (CFTC) Commissioner Bart Chilton told a conference on Tuesday. "Given the problems we saw with Sandy, we need (an) organization, with a specific mandate, to make sure we don't have this kind of floundering in an emergency again," Chilton said in his speech for a business audience. He called for a body similar to the Financial and Banking Information Infrastructure Committee (FBIIC) or the Financial Services Sector Coordinating Council (FSSCC). In the immediate aftermath of the storm, it appeared that market participants had not properly tested contingency plans and in many cases were unclear whether they should redirect trades themselves, or whether that exchange operators would do that for them. This had in turn led to anxiety to even use the back-up facilities, according to Chilton, a Democrat. Sandy forced U.S. equities markets to shut down for two days. "Major firms should have people at a high enough level, with necessary training and skills, living and working sufficiently distanced from the main entity site," he said. (Reporting by Douwe Miedema; Editing by Tim Dobbyn )

Congress, Obama face dynamite in "fiscal cliff": CEOs. With a heated election season in the rear-view mirror, executives are calling on the White House and congressional leaders to head off a self-imposed deadline that could bring $600 billion in spending cuts and higher taxes early in 2013 if they are unable to reach a deal on cutting the federal budget deficit. The Business Roundtable on Tuesday kicked off a print, radio and online ad campaign on which it plans to spend hundreds of thousands of dollars featuring the chiefs of Honeywell International Inc ( HON.N ), Xerox Corp ( XRX.N ) and United Parcel Service Inc ( UPS.N ) calling on lawmakers to resolve the issue. In an opinion piece published on Tuesday evening on the Wall Street Journal's website, Goldman Sachs Chief Executive Officer Lloyd Blankfein urged the business community and the Obama administration to compromise and reconcile so as not to derail the fragile recovery. One of the more dramatic warnings of the consequences of allowing the U.S. economy to go over the fiscal cliff came from Honeywell CEO David Cote. "If the last debt ceiling discussion was playing with fire, this time they're playing with nitroglycerin," Cote said in an interview. "If they go off the cliff, I think it would spark a recession that's a lot bigger than economists think. Some think it would just be a small fire. I think it could turn into a conflagration." The nonpartisan Congressional Budget Office (CBO) estimates that the U.S. economy would contract 0.5 percent in 2013 if the government fails to stop the budget cuts and tax increases - far below the 2 percent growth economists currently forecast. A failure in Washington to solve the crisis by the year's end could prompt major companies to curtail investment plans, said Duncan Niederauer, CEO of NYSE Euronext NYX.N, operator of the New York Stock Exchange. "We simply won't be investing in the United States. We will be investing elsewhere where we have more certainty of the outcome," Niederauer said in an interview. About a dozen top U.S. CEOs, including General Electric Co's ( GE.N ) Jeff Immelt, Aetna Inc's ( AET.N ) Mark Bertolini, American Express Co's ( AXP.N ) Ken Chenault and Dow Chemical Co's ( DOW.N ) Andrew Liveris are scheduled to meet with President Barack Obama on Wednesday to discuss the issue. The four are members of "Fix the Debt," an ad-hoc lobbying organization that this week launched an advertising campaign that advocates long-term debt reduction. UNCERTAINTY FACTOR Bank of America Corp ( BAC.N ) CEO Brian Moynihan said on Tuesday that worries about the cliff have companies holding off on spending. "That uncertainty continues to hold back the recovery," Moynihan said, speaking at an investor conference in New York. Sandy Cutler, CEO of manufacturer Eaton Corp ( ETN.N ), shared his concern. "Until we solve the fiscal issues (in the United States and Europe), you're not going to get back to normal GDP growth," Cutler told investors on Tuesday. CEOs are not alone in this worry. The CBO report warned that failure to reach a deal could push the U.S. unemployment rate up to 9.1 percent, the highest since July 1991. It is currently 7.9 percent. Obama and the Republican leadership of the House of Representatives have signaled a more conciliatory tone since last week's election, when Obama soundly defeated Republican challenger Mitt Romney, whose party retained a majority in the House. Wilbur Ross, an investor known for taking stakes in distressed companies, is bracing for higher tax rates in 2013. "We, like many people, have been trying to utilize gains this year. It does seem that the probability is that rates will go up," Ross said in an interview with Reuters Insider. "We don't have a "for sale" sign on anything. But we are mindful that there is a benefit to concluding things this year rather than next. NO SIGNS OF PANIC Concerns about the cliff have not prompted customers to cancel orders, though they have added to an overall level of uneasiness that has companies wary of making large capital purchases or hiring significant numbers of new workers. "We haven't seen the panicking, like, 'I'm not going to order something because of the fiscal cliff,'" said Steve Shawley, chief financial officer of heating and cooling systems maker Ingersoll Rand Plc ( IR.N ). "Customers are being very judicious with their orders." Likewise, JPMorgan Chase & Co ( JPM.N ) CEO Jamie Dimon last month told investors he did not expect the negotiations to hurt lending in the fourth quarter. "The fiscal cliff isn't going to change us," Dimon said, referring to JPMorgan's commercial bank, which loans money to businesses. The bank's investment banking side could be more vulnerable if the debate makes investors jittery, he allowed. WEAPONS, MEDICINES IN THE CROSS-HAIRS The defense and healthcare sectors are the most vulnerable to the fiscal cliff, as they face the threat of sequestration -- automatic, across-the-board cuts to their funding. Makers of weapons systems note that they have long been preparing for declining sales as the United States winds down two long wars in Iraq and Afghanistan. The industry has already shed tens of thousands of jobs and closed facilities. Lockheed Martin Corp's ( LMT.N ) new president and chief operating officer, Marillyn Hewson, told analysts on Monday her company had been preparing for tighter defense budgets for years, even before the sequestration deal. "We aren't going to see a major change," said Hewson. "We've been very proactive as a leadership team in taking actions in recent years to address our cost structure, to look at how we can make our product more affordable." Automatic cuts to the federal budget could reduce federal health spending by $21.5 billion in 2013, potentially affecting everything from Medicare to the Food and Drug Administration, according to an analysis by PwC's Health Research Institute. Vincent Forlenza, the CEO of Becton Dickinson & Co ( BDX.N ), said the labs he supplies have held off on buying new instruments because of the threat of spending cuts. "If we don't get to a deal we will have another year of paralysis and putting off research," Forlenza said. "The impact of uncertainty on the (National Institutes of Health) budget is causing our research customers to put off research." (The story corrects spelling of company name in penultimate paragraph to "Becton Dickinson" instead of "Beckton Dickinson") (Additional reporting by John McCrank , Nick Zieminski, Caroline Humer , Jed Horowitz, Sharon Begley and Daniel Wilchins in New York, Rick Rothacker in Charlotte, North Carolina, Nichola Groom in Los Angeles, Andrea Shalal-Esa in Washington, Debra Sherman in Chicago and Anna Driver in Houston; Editing by Patricia Kranz and Steve Orlofsky and Carol Bishopric)

Exclusive: Astenbeck, Clive funds slide as fiscal cliff hits oil. Weighed down earlier in the year by Europe's debt crisis, oil now faces economic uncertainty from the so-called U.S. "fiscal cliff" -- a convergence of urgent tax and spending issues in 2013 that, if mishandled by opposing lawmakers in Congress, could plunge the economy into another recession. On the positive side, crude prices have been supported by Iran's controversial nuclear program and unyielding violence in Syria, which has started to affect some of its neighbors in the oil-producing Middle East. These have led to whipsaw volatility in London's Brent and U.S. crude futures, with fund managers often at a loss on whether to short the market on economic concerns or go long on worries about supply disruption. Brent, the more important benchmark of the two, is trading almost flat for the year at just above $108 a barrel. U.S. crude, meanwhile, is down nearly 14 percent, hovering at $85. Hall, one of the market's most famous bulls, says he's confident prices will rise over the long run on seasonal supply-demand. But he's not sure about the near term, particularly the next six weeks. "IMPOSSIBLE TO FORECAST" "Geopolitical risks remain high, although it is impossible to forecast how events will unfold," the billionaire oil trader told Astenbeck's investors in his monthly letter for November, a copy of which was obtained by Reuters. Astenbeck and Clive had taken opposite sides of the market earlier this year, resulting in contrasting fortunes for their investors. But their performances have converged of late. Losses at the two funds are also small enough to allow them to rebound if their managers read the market correctly. The largely oil-focused Astenbeck -- based in Westport, Connecticut, and managing $4.6 billion -- is down 2 percent for the year through October, according to confidential performance and other data on the company obtained by Reuters. Last year, the fund finished down nearly 4 percent -- handing Hall his first ever annual loss as a trader. This year, Astenbeck emerged from a bruising second quarter -- it lost 14 percent in May in its worst month ever as Europe's crisis worsened -- to post three months of profit through September. But it stumbled again last month as crude prices slipped on fears about global growth. In Clive's case, the London-based hedge fund with $3.3 billion under management is down about 3 percent for the year, said investors in the fund, who asked not to be identified. Last year, it lost almost 10 percent. Other energy hedge funds haven't been doing too well either. As of Tuesday, HFN Indices, a database run by New York's eVestment Alliance, reported that 11 of the 36 funds on its energy sector index were up by just 1 percent on the average through October. NOT SHY TO SHORT Levett, previously a star commodities trader at Louis Bacon's Moore Capital, founded Clive in 2007, running it with partner Richard Boland. Unlike Hall, who's almost perpetually bullish about oil, the 42-year-old Levett is not shy about shorting the market when he thinks there is little upside to the price, say investors familiar with his trading style. As a fund, they said, Clive also appeared less energy-centric than Astenbeck -- investing in natural gas and metals such as copper, tin and lead -- although some of its biggest positions have been in oil. Exact bets taken by the two funds, as well as how much exposure they had particularly to oil, was not known. Hedge funds typically do not speak about their performance or operations to the media, and both Astenbeck and Clive did not comment for this story. Investors said Clive gained about 7 percent, some $230 million, in May -- versus Astenbeck's 14 percent loss -- after betting correctly on the tumble in oil prices that month. But in July, it fell 3 percent, or nearly $100 million, as the market went against Levett's short positions. Data this week from the IntercontinentalExchange, which trades in Brent crude oil, showed speculators, including hedge funds, trimming their net long positions for a third straight week. But figures from the U.S. Commodity Futures Trading Commission showed a rise in net longs of both combined futures and options of Brent and U.S. crude. BET THE RANCH? Astenbeck, named after a century-old castle in Germany owned by Hall, was launched in 2008 after Hall's decade-long storied career as a Citigroup ( C.N ) oil trader who earned controversial bonuses worth hundreds of millions of dollars. Aside from the hedge fund, the 61-year-old Hall also runs Phibro Trading, a commodity trading firm largely owned by Occidental Petroleum Corp ( OXY.N ). "If you're in oil, now isn't the time to bet the ranch. But Andy Hall might just be the guy to do that," said Charles Gradante, co-founder of New York's Hennessy Group, which invests in commodity hedge funds, although not with Astenbeck and Clive. "I know some managers are paring their oil positions because they fear politicians will allow the market to be seized up by the fiscal cliff, before a solution comes. If you have billions in capital and you're down just 2 percent, you could load up in this less-crowded market. But you're also less nimble than the smaller guy and less likely to get out quickly in a crash." (Reporting By Barani Krishnan; Editing by Bob Burgdorfer )

Japan government to downgrade economic assessment in November: sources. That would mark the fourth consecutive month of downgrades, the longest since the aftermath of the collapse of U.S. investment bank Lehman Brothers. The weakening outlook increases the pressure on the government and the Bank of Japan to bolster the economy and could make some lawmakers reluctant to follow through with a plan to raise the sales tax next year. The government is scheduled to release its monthly assessment of the economy on November 16. Last month, the government said the economy was weak but showing signs of bottoming out. Declining exports and a drop-off in consumer spending following the expiration of subsidies on energy-efficient cars are the main reasons the government is considering a downgrade, the Nikkei newspaper reported earlier on Wednesday without citing sources. The government has said that it will compile some stimulus measures by the end of this month, but the worst public debt burden among major economies limits the government's ability to pump-prime the economy. The BOJ eased monetary policy for the second straight month in October as slowing global demand and fallout from a territorial row with China weighs on Japan's exports. Japan's economy shrank in the September quarter for the first time since last year, adding to signs that slowing global growth and tensions with China are nudging the world's third-largest economy towards recession. (Reporting by Stanley White; Editing by Chris Gallagher and Eric Meijer)

CME Group wins anti-trust regulators' approval to buy KCBT. Regulators determined ahead of the end of a 30-day review period that the transaction was not anti-competitive and that they would not object, a spokesman for the Federal Trade Commission said on Wednesday. The decision was first made public in an FTC report on Tuesday. CME, which owns the Chicago Board of Trade, agreed in October to buy the Kansas City Board of Trade for $126 million in cash, beating out several rivals before clinching the deal. The purchase cements CME's dominance in world grain futures markets and keeps rival IntercontinentalExchange ( ICE.N ) from gaining an important foothold in agriculture. CME dominates agricultural futures with its benchmark grain and soy contracts. The Kansas City Board of Trade trades a variety of bread wheat known as hard red winter wheat. ICE challenged CME earlier this year by launching five look-alike U.S. grain and soy futures contracts. CME said in a statement that the deal with KCBT is expected to close before the end of the year, "pending approval by KCBT shareholders and regulators, and completion of customary closing conditions." A spokesman declined to comment further. KCBT's board of directors has already approved the transaction. A KCBT spokeswoman said she could not discuss when shareholders will act. (Reporting by Tom Polansek; Editing by Marguerita Choy)

Best Buy CEO sets goals; Wall Street begs for more details. The aggressive new targets come as Best Buy faces cut-throat competition from online and discount retailers like Wal-Mart Stores Inc ( WMT.N ) and Amazon.com Inc ( AMZN.O ). CEO Hubert Joly got a difficult reception at an investor day in New York, as people questioned whether management was focusing too much on wringing higher sales out of existing customers rather than attracting new ones. Joly was named CEO on August 20. "I still think I am a little bit mixed on digesting the take-aways of the presentation. I think they said a lot of good things, but I think people were looking for a little bit more of a playbook and the next steps," said John Tomlinson, an analyst with ITG Investment Research, in New York. "There's a lot of pieces to the fixing story that seemed a little opaque and vague." Best Buy's stock closed nearly 1 percent lower at $15.70 on Tuesday, continuing a slide that has knocked off a third of the company's market capitalization this year. The stock touched a 10-year low of $14.39 a week ago. Dimitri van Toren, senior portfolio manager at Dutch asset manager Syntrus Achmea, which holds about 200,000 Best Buy shares, said he was worried about structural issues and a "management vacuum" at the retailer, but that he would stay in the stock despite concerns about the upcoming holiday season. The meeting took place against the backdrop of a potential buyout offer from founder and former CEO Richard Schulze, who is expected to make an offer as soon as next month. "I spend no time worrying about what our corporate structure will be," Joly told reporters after the event. "I tend to focus on decisions I can influence rather than decisions I can't influence." A representative for Schulze did not immediately respond to a request seeking his thoughts on Joly's plan. Joly said "it would have been ridiculous" to offer more concrete details after only a few weeks on the job. He said this meeting was more about setting the record straight and reassuring investors about the company's future. "The perception was that Best Buy was dying," Joly said. MARGIN TARGETS In a statement on Tuesday, the company said its short-term goal will be "to stabilize and then begin increasing its comparable-store sales and operating margin." Over time, it is aiming for a return on invested capital of 13 percent to 15 percent, in addition to a 5 percent to 6 percent operating margin target. In the last fiscal year, Best Buy had an operating margin of about 2.1 percent. The last time that margin exceeded 5 percent was in the fiscal year that ended in early 2008. Joly said a mixture of excessive costs and price competition hurt margins, and that the retailer would turn to a wider variety of higher-margin, private-label products to boost results. One example is the company's own Insignia-brand electronics. Best Buy has been struggling to combat a phenomenon known as "showrooming," where people visit its stores to look at products and then buy them online for less. Joly acknowledged the company has suffered from a "price perception issue" among customers that it needed to address, as well as weakness in its online operations. The head of the company's digital business said its online conversion rate - which measures how successfully Best Buy translates customer visits into actual sales - was only about half of what it should be. "Many of these problems are a result of our own making," Joly said during the investor presentation. HOLIDAYS COMING Best Buy also said on Tuesday that it would pursue a plan to "optimize its store footprint on an ongoing basis," which suggested the company may look at ways to shrink or close stores, as some other big-box retailers have done. In late March, the company said it would close 50 large U.S. stores. Joly warned that merely closing stores would not boost operating income, as most of the big-box stores are already profitable. Relocation to smaller space may be an option, however; he said 71 percent of the large-format stores have leases expiring within the next six years. The details of Joly's long-awaited plan came roughly a week before the unofficial start of the year's biggest selling season. The retailer, which has posted declines in same-store sales in eight of the last nine quarters, warned last month it expected earnings and same-store sales to fall again in the third quarter. "I am already sick and tired of negative comps," Joly said, referring to same-store sales figures. The CEO also admitted a number of past investments have not paid off and promised the new leadership would be "prudent" about that in the future, a nod to Wall Street's lingering concerns about spending by past management. (Reporting by Dhanya Skariachan in New York; Writing by Ben Berkowitz ; Editing by Maureen Bavdek, Phil Berlowitz, Matthew Lewis and Jan Paschal )

Twilight for Twinkies? Hostess says it may close. Wednesday's announcement escalates a bitter dispute between the 82-year-old company and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, whose members constitute about one-third of Hostess' nearly 18,000 employees. A union spokeswoman said the union would have no immediate comment. Workers at Hostess plants across the country had gone on strike or refused to cross picket lines on November 9 to protest pay cuts that Hostess had in bankruptcy court won the right to impose. That prompted the company at the time to raise the specter of liquidation in case of a widespread strike. On Wednesday, Hostess said that if enough striking workers did not return to work by 5 p.m. EST (2200 GMT) the next day, the company would on Friday ask U.S. Bankruptcy Judge Robert Drain in White Plains, New York, who oversees its Chapter 11 reorganization, for permission to shut down and sell assets. "We simply do not have the financial resources to survive an ongoing national strike," Hostess Chief Executive Gregory Rayburn said in a statement. The Irving, Texas-based company had previously reached agreement on pay and benefit cuts with the International Brotherhood of Teamsters, its largest union. Hostess said if it wins permission to liquidate, it will begin to close all operations as soon as November 20, two days before Thanksgiving, and fire all plant workers except those needed to prepare its facilities for sale. Earlier this week, Hostess said the strike forced it to permanently close three of its 36 bakeries, costing 627 jobs. The company said it has 565 distribution centers and 570 bakery outlet stores, as well as the 33 other bakeries. Hostess filed for protection from creditors on January 11, its second bankruptcy filing in less than three years, after failing to win concessions on pension and health benefits. The company had about $860 million of debt at the time. The case is In re: Hostess Brands Inc, U.S. Bankruptcy Court, Southern District of New York, No. 12-22052. (Reporting by Phil Wahba and Jonathan Stempel in New York; Editing by Andre Grenon and Phil Berlowitz)

Omnicom more positive on 2013 ad market outlook. Chief Executive John Wren declined to say how much he expects the ad market or Omnicom to grow next year, saying staffers at his agencies would be in talks in the coming 4-5 weeks with major corporations to determine their ad budgets. "It's too early to make a clear prediction," he said at the Morgan Stanley TMT conference on Wednesday. "People expect a lower growth environment across the globe, but that isn't a disaster. I am increasingly positive on 2013, especially the latter part. I'm not hearing any horrible, scary things from clients we talk to." Advertising spending generally tracks economic growth, so slowdowns in world markets tend to have a knock-on effect for ad agencies. Economic effects are being amplified by changes to the way corporations spread the word about their products. An increased focus on the Internet means ad budgets can be tweaked in an instant, rather than the weeks it used to take to craft a magazine or newspaper campaign. Omnicom, home to advertising, media and public relations agencies such as BBDO Worldwide, DDB Worldwide, TBWA Worldwide and Fleishman-Hillard, posted organic growth in the third quarter of 3.5 percent. It outpaced rivals WPP ( WPP.L ) and Publicis ( PUBP.PA ), which saw 1.9 percent and 2 percent organic growth respectively in the quarter. Most major agencies noted a steep slowdown in customers' spending on ads in September, although Publicis said its organic growth rebounded in October to 7 percent. WPP said on Monday that its October organic growth would be similar to the first quarter, when it reached 2 percent. Wren cautioned against looking too closely at month-to-month changes in the market and declined to give details of Omnicom's performance in October or how the fourth quarter was progressing. "We initially thought this year would come in around 3.5-4 percent organic growth, and it will probably end up in that range," he added. (Editing by James Regan )

Instant View: Retail sales hit by storm, producer prices down. Producer prices unexpectedly fell last month as the cost of energy and motor vehicles tumbled, according to a separate government report on Wednesday that showed little inflation pressures in the economy. COMMENTS: TERRY SHEEHAN, ECONOMIC ANALYST, STONE & MCCARTHY RESEARCH ASSOCIATES, PRINCETON, NEW JERSEY: "Retail sales came in pretty much as expected. There was a decline in service station sales which might be related to slower sales of gasoline later in the month due to superstorm Sandy disruptions. We were surprised there wasn't more gain in the electronics category because of the release of the IPhone 5 in September and the Ipad in October. But that did not show up. Overall, these were not horrible numbers especially considering the disruptions in October and we think there's potential for an upward revision to third-quarter GDP because we got an upward revision to September retail sales. Third-quarter GDP will probably come in around 2 percent. I think we can expect some rebound in retail sales in the November numbers related to the storm. We can look for that in building materials and motor vehicles are likely to benefit from people replacing their automobiles after storm damage." JOHN BRADY, MANAGING DIRECTOR AT R.J. O'BRIEN & ASSOCIATES IN CHICAGO "There was no deviation in PPI numbers from the storm, but we did see some of that in the retail sales. But the market doesn't really care about that, especially since we can expect retail sales to rebound next month as people buy supplies to rebuild after Sandy. For the moment markets are more focused on the events in Washington." (Americas Economics and Markets Desk; +1-646 223-6300)

AT&T sees $1 billion opportunity in company cybersecurity. Attacks on AT&T networks have doubled in the past four months and now tend to be more targeted to evade detection, Frank Jules, president of AT&T's global enterprise unit, said at the Morgan Stanley TMT conference. "We see them on a daily basis and they are now getting smaller instead of coming in huge waves, which were easier for us to detect," he said. "Every chief information officer at major corporations that I meet wants to talk about security. I think this will be a $40 billion market one day." Jules said AT&T's strategy for its global business solutions unit was to accompany big multinationals as they expand overseas to provide them not just with connectivity but new products and services like security and machine-to-machine technology, which puts mobile SIM cards into everything from cars to vending machines. AT&T said in early November it would boost capital spending on its U.S. network by about 16 percent to $22 billion a year for the next three years to upgrade its wireless and wireline networks. The announcement came after two consolidation deals this autumn look set to change the competitive landscape in the U.S. telecom market in which Verizon and AT&T are leaders and Sprint Nextel Corp and Deutsche Telekom's T-Mobile are trying to keep up with their network and marketing firepower. Japanese mobile operator Softbank Corp announced in mid-October it would buy about 70 percent of Sprint for $20.1 billion, which some have predicting will give Sprint the capital to expand its network and potentially buy peers. Deutsche Telekom is also seeking to merge its T-Mobile USA unit with smaller rival MetroPCS in an effort to keep up with larger operators in the United States. Competition regulators scuppered a plan for AT&T to buy T-Mobile last year over concern it would lead to higher prices for consumers and a worse service. Asked to comment on the Softbank deal, Jules said it was too early to see how newly-strengthened Sprint would impact the market. "We wish we were able to buy T-Mobile, but we weren't permitted to do that. This new Sprint will be a competitor that we'll watch very closely," he said. (Reporting by Leila Abboud ; Editing by Mark Potter )

Abercrombie shares soar as inventory issues wane. The company got a handle on excess inventories that had sparked a round of discounting that worried investors. It also had pockets of sales strength in places like Scandinavia and China that helped revenue exceed expectations. Even troubled markets like Spain were not as bad as expected. Abercrombie & Fitch was "being highly disciplined" with inventory management, and was working to ensure sales growth outpaced that of inventory, Chief Executive Mike Jeffries said on a call with analysts Wednesday. The company ended the quarter with total inventory that was 21 percent lower than a year ago. Shares of the company, which hired Goldman Sachs Group Inc ( GS.N ) in September to help ward off pressure from investors, were up 28 percent at $40 in afternoon trading on the New York Stock Exchange. The stock has lost about a third of its value since hitting $57.56 a year ago. Roxanne Meyer, an analyst at UBS Securities, said the rally in the stock was due to covering of short positions by traders. According to Markit's Data Explorers, about 28 percent of the shares available for short-selling were being borrowed for this purpose. That's more than the market average of about 8 percent, though it is down from a peak of more than 70 percent in mid-August. Not all shares of a company's stock are available for shorting, so a high rate of utilization suggests heavy interest among short-sellers. Investors who believe a stock is going to fall sometimes bet on this by borrowing the stock and selling it, also known as "shorting." Aeropostale Inc ( ARO.N ) shares also benefited, rising 6 percent at $13.82 Wednesday morning on the New York Stock Exchange. Aeropostale competes on price with Hollister stores, which are also owned by Abercrombie. Meyer said Wall Street "will assume Abercrombie's cleaner inventory gives Aeropostale more breathing room from Hollister's discounting." But she said that despite the encouraging trends in Abercrombie's comparable sales and margins, she was "neutral" on the stock as it seeks clarity in improving fashion. Inventory management, or balancing orders with demand, has been a major concern for Abercrombie. In recent quarters, it has been compelled to offer discounts to its teenaged clientele who had held back on purchases. In the third quarter, Abercrombie sales grew 9 percent to $1.17 billion. Markets like Asia, Scandinavia, Spain and Belgium did well, or not as bad as expected, resulting in a 37 percent rise in international sales. CEO Jeffries attributed the pick up in sales to inventory flow "getting back on track." "I think that international stores benefited, as did U.S. stores, from flowing new product. That was really our problem in the second quarter when we were in the defensive posture and did not flow product appropriately," Jeffries said. The fact that the company was able to rein in excess merchandise bolstered confidence that Abercrombie will be able to keep up the cost benefits it saw this quarter, said Rahul Sharma, founder and managing director of retail consultancy Neev Capital. Bloated inventories encourage price discounts, eroding profit margins. CEO Jeffries also said the company was working on shortening the lead time between placing orders to manufacturers and getting them in stores, and would focus on current street and runway trends for its merchandise line. Over the past year, sales at Abercrombie & Fitch have dropped in a segment dominated by so-called fast-fashion retailers - rivals with a quicker turnover of inventory and styles, such as American Eagle Outfitters ( AEO.N ) and Gap Inc ( GPS.N ), or Forever21, which offers affordable clothing for more seasons. Abercrombie has moved to curb dwindling sales by boosting sourcing from the United States and Central America, and delaying expansion in troubled European markets. The retailer expects to earn $2.85-$3.00 a share for the full year. Analysts, on average, expected the company to earn $2.48 a share, according to Thomson Reuters I/B/E/S. Same-store sales for the third quarter, or sales at established stores open at least a year, fell 3 percent, an improvement over the 10 percent drop in the second quarter. The company forecast a mid-single-digit drop in same-store sales in the fourth quarter. The relatively improved performance doesn't signal the end of Abercrombie's troubles, analyst Brian Sozzi of NBG Productions said. "I don't believe Abercrombie is suddenly the share winner in teen apparel land ... (and I) wonder about sustainability of the story and whether they can become trends," he said, noting that globally, the comparable sales at Abercrombie's flagship locations were "quite poor." For the third quarter ended October 27, Abercrombie earned $71.5 million, or 87 cents a share, compared with $50.9 million, or 57 cents a share, in the same quarter last year. Analysts were expecting earnings of 59 cents a share. (Reporting by Nivedita Bhattacharjee in Chicago and David Gaffen in New York; Editing by Bernadette Baum and David Gregorio )

Texas Instruments to cut 1,700 jobs to reduce costs. The Dallas, Texas based chipmaker had said in September that it would halt costly investments in its OMAP mobile application chip business, which supports features like video, for tablet computers and smartphones. TI has been under pressure in wireless, where it has lost ground to rival Qualcomm Inc and the world's biggest smartphone makers Apple Inc and Samsung Electronics Co Ltd who have been developing their own chips instead of buying them from a supplier like TI. Instead of pursuing the phone market TI is trying to sell OMAP in a broader market that requires less investments and includes industrial clients like carmakers. TI said on it expects to take charges of about $325 million related to the job cuts and other cost reduction measures, most of which will be accounted for in the current quarter. Its previously announced financial targets for the fourth quarter do not include these costs, TI said. The company, which has 35,000 employees around the world, expects annualized savings of about $450 million by the end of 2013 from the action. TI shares rose to $29 in late trade after closing down 2 percent at $28.76 in the regular Nasdaq session. (Reporting By Sinead Carew)

Cost controls help Staples beat profit forecasts, shares rise. Shares of the company, which also reiterated its full-year profit and sales forecasts, rose 4.5 percent in early trading. Staples outlined plans in September to close 30 stores in North America and 45 stores in Europe. "These results indicate that Staples' restructuring plans are stemming the declines in the business," J.P. Morgan Securities analyst Christopher Horvers wrote in a client note. Results from smaller rivals Office Depot Inc ( ODP.N ) and OfficeMax Inc OMX.N last week also showed how they relied on tight cost controls to offset weaker-than-expected sales in the third quarter. Office supply chains are considered a good gauge of economic health because demand for their products is closely tied to white-collar employment rates. Staples, whose shares were down 20 percent this year up to Tuesday, plans to tweak its product offering to boost sales as U.S. shoppers are increasingly choosing mobile computing devices such as tablets and e-readers over traditional computers. "Customers that once only needed paper, ink and toner now need tablets and smartphones and technology accessories. (They) also want the convenience of mobile shopping and fast delivery," CEO Ronald Sargent said on a post-earnings conference call. The company is building its online sales and mobile commerce businesses as it tries to fend off competition from online chains such as Amazon.com Inc ( AMZN.O ). Sales at Staples have suffered as corporate customers and other shoppers cut back on discretionary spending in the weak global economy, forcing the chain to keep a tight lid on costs. But Staples reported North American delivery sales rose 1 percent in the third quarter even as retail sales remained flat. Overall sales fell about 2 percent to $6.35 billion. Analysts on average were looking for revenue of $6.45 billion, according to Thomson Reuters I/B/E/S. Staples' adjusted profit of 46 cents per share beat estimates by 1 cent per share, although restructuring costs took it to a net loss. The company incurred impairment and restructuring charges of about $840 million in the quarter. The company posted a net loss of $596.3 million, or 89 cents per share, compared with a profit of $326.4 million, or 47 cents per share, a year earlier. (Reporting by Ranjita Ganesan, Chris Peters in Bangalore and Dhanya Skariachan in New York; Editing by Don Sebastian, Rodney Joyce and Ted Kerr )

Goldman's Blankfein wants Obama, business to work together: WSJ. In the 1930s there was "extreme bitterness between the business community and the Roosevelt administration," Blankfein wrote. Corporate executives deplored President Franklin Roosevelt's policies. Roosevelt, in turn, said he welcomed their hatred. Yet, the two sides eventually worked together, spurring a colossal increase in industrial production that lifted the U.S. out of the Great Depression and crushed its enemies. Blankfein sees a similar opportunity now, and wants the Obama administration and the corporate community to compromise and reconcile so as not to derail the fragile recovery. "There is more than a trillion dollars of cash that is sitting on the balance sheets of U.S. nonfinancial companies," Blankfein wrote. "With certainty about tax rates, companies will increase their capital expenditures (currently at anemic levels), contributing to a virtuous cycle of jobs and growth." "Broadening the personal income-tax base by closing loopholes will generate substantial additional revenue while minimizing increases in marginal rates that could stifle risk-taking and robust growth." Blankfein also stressed the importance of restoring confidence in public finance by implementing spending cuts, entitlement reform and revenue increases. He also wrote that tax increases, especially for the wealthiest, are appropriate so long as they are accompanied by serious cuts in government spending and entitlements. He also pointed out that developing domestic energy resources enables the country's businesses to take advantage of lower energy costs, making them more competitive in the global economy. Effective trade and immigration policies are also a high priority, Blankfein said. "We are all ready to roll up our sleeves and work with the Obama administration and Congress to help fulfill America's enduring promise," he said. (Reporting by Michelle Conlin; Editing by Phil Berlowitz)

Wall Street drops on deficit, Middle East concerns. Obama, in his first press conference since re-election, held to his position that marginal tax rates will have to rise to tackle the nation's deficits. With talks over solving the U.S. "fiscal cliff" in early stages, investors are reacting to the uncertainty by shedding positions. "I think we will have a last-minute cliffhanger solution," said Michael Cheah, portfolio manager at SunAmerica Asset Management in Jersey City, New Jersey, about a deal to avoid the so-called cliff. "In the meantime, the market is going to get punched every day." Without a deal, a series of mandated tax hikes and spending cuts will start to take effect early next year that could push the U.S. economy into a recession. Taxes on capital gains and dividends could rise as part of the negotiations, pushing investors to sell this year and pay lower taxes on their gains. Adding to the selling pressure, Israel launched a major offensive against Palestinian militants in Gaza, killing the military commander of Hamas in an air strike and threatening an invasion of the enclave. Egypt said it recalled its ambassador from Israel in response. "We know Europe's in trouble, China's slowing down ... and now you've got the Middle East flaring up again. It's all hitting at once, and obviously, the market is taking a 'sell first, ask questions later' approach," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati. Industrial shares led the decline, dragged lower in part by a 1 percent spike in crude prices after the Israeli offensive on Gaza. The S&P industrial sector index .GSPI fell 2.5 percent. Wall Street had opened higher after Dow component Cisco Systems Inc ( CSCO.O ) reported first-quarter earnings and revenue late Tuesday that beat expectations, driving its stock up 4.8 percent to $17.66. But the positive momentum was short-lived. The Dow Jones industrial average .DJI fell 185.23 points, or 1.45 percent, to 12,570.95 at the close. The S&P 500 .SPX dropped 19.04 points, or 1.39 percent, to 1,355.49. The Nasdaq Composite .IXIC lost 37.08 points, or 1.29 percent, to 2,846.81. Both the Dow industrials and the Nasdaq ended at their lowest levels since late June. The S&P 500 has fallen 5.1 percent in the six sessions since election night. Wednesday marked the benchmark index's lowest close since July 25. The Russell 2000 .RUT tumbled 2 percent. The Dow Jones Transportation average .DJT slid 2.6 percent. FedEx Corp ( FDX.N ) shares dropped 3.7 percent to $87.12. Bank of America ( BAC.N ) shares lost 3.6 percent to $8.99. In contrast, Facebook ( FB.O ) shares jumped 12.6 percent to $22.36 as investors were relieved that expiring trading restrictions on a huge block of shares did not trigger an immediate wave of insider selling. Teen clothing retailer Abercrombie & Fitch Co ( ANF.N ) jumped 34.4 percent to $41.92 after the company reported unexpectedly improved third-quarter results and a full-year outlook that exceeded Wall Street's forecasts. About 7.53 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, more than the daily average so far this year of about 6.51 billion shares. On the NYSE, decliners outnumbered advancers by a ratio of almost 9 to 1. On the Nasdaq, about four stocks fell for every one that rose. (Reporting by Rodrigo Campos; Additional reporting by Steven C. Johnson and Leah Schnurr ; Editing by Jan Paschal )

Apple iPhone buyers gush as iWait ends. Here are quotes from some of the first buyers and others waiting in line in front of Apple stores from as early as Tuesday to buy the iPhone, which went on sale at 6 p.m. in each U.S. time zone. NEW YORK Grant Johnson, 41, an accountant from Brooklyn, managed to buy three after the girl in front of him in line bought him an extra one, as she only wanted one. "I'm keeping one and selling the other two. I'm trying to get $1,200 for them," said Johnson, who had queued up for 25 hours. "I haven't slept in a day and a half. I need a nice hot shower and a bath." Courtney Crangi, 34, runs a jewelry company in Manhattan which she has hooked up with Apple products. "I'm totally embarrassed I've been waiting for this device, but I've wanted it from the day they announced it -- before that," Crangi said. "Now I have to hide it," she said, worrying about getting mugged. CHICAGO: Albert Livingstone got a room at the Allerton Hotel across the street to help ease the waiting process. "If you're camping out, that's the way to camp out," Livingstone said. "It's the newest toy. I'm 62 -- I don't have much time left to buy toys." Nicholas Haubrich, 25, secured the number-one place in line at the Chicago store on Thursday afternoon. "I've had couples come by and offer to buy me breakfast. The city has been great," Haubrich said. SAN FRANCISCO: Dale Larson, 38, works for DonorDigital, a consultant to non-profit organizations: "For me, it's work-related: It's staying on top of the latest technology. I'm working from line." Todd Laguardia, 19, from San Diego, is a student at Stanford University: "You don't have to hold all these different things in your pocket. IPhone captures everything in one device." LOS ANGELES: Samantha Hirsch, an 18-year-old student, beamed after buying her iPhone at posh Hollywood shopping center The Grove: "I expected it to be a very lightweight phone. It is everything I wanted and more. They have created the picture-perfect phone," Hirsch said. Phil Jaffe, 38 and one of the oldest people on line at the Hollywood store, got in line after getting off work at 4 a.m. "I am kind of an Apple freak," Jaffe said. "I have been waiting for this phone for probably two years before Apple even admitted they were making it." (Reporting by Robert MacMillan , Sinead Carew and Franklin Paul in New York; Regan Doherty in Chicago; Eric Auchard in San Francisco; Dana Ford in Hollywood)

Teachers group wins C$52 bln race for Canada's BCE. BCE said its board recommended that shareholders accept the C$42.75 a share offer from the consortium, which includes the pension plan's investment arm, Teachers Private Capital, as well as Providence Equity Partners Inc. and Madison Dearborn Partners, LLC. The buyers will take BCE private, changing the ownership structure of a blue chip corporation described as an investment for widows and orphans because of generous dividend payments. "This represents very, very substantial value for our shareholders," Chief Executive Michael Sabia told a conference call announcing the deal. He described the price as "compelling" and said it was a good deal for private and institutional investors. The group including Teachers Private Capital was one of several competing for BCE, which is known for its Bell Canada phone services and for media interests grouped in CTVglobemedia, part owners of the national Globe and Mail newspaper. Boutique investment bank Catalyst Asset Management, which put in a bid spurned by the BCE board, urged shareholders to vote for its proposal, which it said was worth between C$42.50 and C$52 per BCE share. LARGEST SINGLE STAKEHOLDER Teachers was already BCE's largest single shareholder, with a stake of some 6 percent. BCE said Teachers Private Capital would own 52 percent of the company if the deal goes through, meeting Canadian rules that telecommunications firms are majority-owned by Canadian firms. Providence would hold 32 percent, Madison Dearborn 9 percent and other Canadian investors would hold 7 percent, a BCE company statement said. Telecommunications group Telus Corp., one of BCE's main Canadian rivals, had also expressed interest in the auction, but pulled out this week, complaining about bidding rules. BCE executives insisted that the bidding had been fair and transparent, although they admitted there had been unique issues in dealing with a direct competitor like Telus, including working out how to share confidential information. Talks with the three bidders ran through Friday night, with the deal sealed at around 6 a.m. on Saturday, Sabia said. He said the Teachers' offer would leave Canadian consumers with a more competitive landscape than would have been the case if BCE merged with Telus. But he admitted Telus might yet come back with its own, sweeter bid. "Our board has ... obligations to continue to be open to a superior proposal, should a superior proposal arise," he said. Sabia said the Teachers' offer was a 40 percent premium over the share price before BCE put itself up for sale, and he expected the deal to close in the first quarter of 2008. BCE shares closed at C$40.34 in Toronto on Friday. "The all-cash transaction is valued at C$51.7 billion, including C$16.9 billion of debt, preferred equity and minority interests," BCE said. The transaction, which must still be approved by regulators and by BCE shareholders, includes a break fee of C$800 million payable by BCE in certain circumstances if the deal falls through, and a reverse break-up fee of C$1 billion that would be payable by the buyers.

Thousands of tech faithful snap up first iPhones. Crowds lined up at some of Apple's outlets cheered as their doors opened at 6 p.m. local time, while smaller groups waited outside AT&T stores. AT&T Inc. is the phone's exclusive wireless carrier for the first two years, which many early reviewers cited as the phone's biggest drawback. "I haven't slept in a day and a half," said Grant Johnson, 41, an accountant from Brooklyn who was one of the first to walk out of Apple's Fifth Avenue outlet clutching the prize. "I need a nice hot shower and a bath." Early hitches included a hiccup in AT&T's retail computer system that delayed some East Coast sales for 45 minutes, and a sluggish response from Apple's online store shortly after it began offering iPhones. The iPhone melds a phone, Web browser and media player, and costs $500 to $600, depending on memory capacity. Technology gurus praised it as a "breakthrough" device, but questioned whether users would be unhappy with shortcomings such as its lack of a hardware keyboard and pokey Internet link. The light, svelte gadget is a gamble by Apple Inc. co-founder and Chief Executive Steve Jobs to build upon his company's best-selling iPod music player and expand the market for its software and media services. "They want to extend the dominance they have in terms of their ability to create really elegant hardware and software integration," said Mark McGuire, analyst with research firm Gartner. "This is the next big business unit for them." Apple aims to sell 10 million iPhones in 2008, which would amount to a 1 percent share of the global market. It has not given a sales goal for the launch, but some analysts said it could sell up to 400,000 units in the first few days. What is less clear is whether sales will hold up once the initial excitement has waned. Piper Jaffray said this month Apple could sell 45 million iPhones in 2009, which would put it on par in terms of revenue with its two key businesses, the Mac computer and the iPod. Many analysts say Apple's share price could rise 30 percent in the coming year if the phone catches on, but some cautioned that the shares are already richly valued. "Apple shares have already benefited from a powerful hype cycle," Cowen & Co. analyst Arnie Berman wrote in a report. Shares of Apple rose 1.2 percent to $122.04 on Friday and have gained more than 30 percent since Jobs unveiled the phone in January. AT&T shares rose 1.9 percent to $41.50. SHAKING UP THE INDUSTRY Talk of the iPhone rippled through the wireless industry before even a single unit had sold. Ed Colligan, chief executive of rival Palm Inc., told Reuters on Thursday that sales of its Treo smartphone could "stall" in the short term as people try out the iPhone. Apple is due to sell it in Europe in the run up to this year's holiday season. It has not disclosed the price or carrier, but speculation has mounted it may reach a deal with Vodafone Group Plc. Asian sales are expected in 2008. Friday's launch, which whipped tech lovers into the sort of frenzy usually associated with a new video game console, was seen as a test of wider U.S. demand for the sort of advanced phones that are already popular in parts of Asia and Europe. Judging by its first customers, the iPhone seemed to draw an older generation of gadget geeks rather than young fans who may have been put off by the price. "The phones out there are just garbage. I've gone through several phones, even the expensive ones. This is different," said Albert Livingstone in Chicago. "It's the newest toy. I'm 62 -- I don't have much time left to buy toys." Although a service contract costing at least $1,400 over two years was widely thought to be mandatory, AT&T revealed to Reuters late on Friday that buyers with bad credit can obtain prepaid service, meaning they pay up front for call time. Some early buyers aimed to make a profit on the iPhone by selling it or getting paid to wait. At an Apple store in downtown San Francisco where about 500 people had gathered, one young man walked out with a phone and began shouting a price: "Fifteen-hundred, fifteen-hundred!" Many made good on their plans to try to flip the gadgets online, but easy profits appeared out of reach for most. Of the hundreds of phones listed on auction site eBay, the vast majority had failed to attract a single bid or were still well below the retail price. In Hollywood, the event took on shades of another recent headline-grabbing phenomenon as Apple Vice President Greg Jozwiak emerged from a store to show off the device and was mobbed by the eager crowd. "I now feel like Paris Hilton," Jozwiak joked. (Additional reporting by Franklin Paul , Robert MacMillan and Kenneth Li in New York, Regan E. Doherty in Chicago, Eric Auchard in San Francisco)

Early iPhone buyers strain to resell them online. Auction Web site eBay had more than 400 listings for iPhones just two hours after the combination cell phone, Web browser and music and video player went on sale on the U.S. East Coast. But the vast majority of offers failed to attract even a single bid, and many of those that had were not yet above the list prices. A handful of offers did draw enthusiastic bidding. One eBay auction had attracted 35 bids and a leading offer of $1,520. Another was up to $960 with 25 bids. The iPhone is available at Apple and AT&T stores in two models costing $500 and $600 depending on whether it has 4 or 8 gigabytes of memory. It requires a service contract from AT&T Inc. that runs at least $1,400 over two years. Online classifieds site Craigslist had 404 iPhone listings for New York City, with most seeking about $1,000 and one optimist wanting $10,000 from "collectors only".

NETeller founder pleads guilty in gambling case. Stephen Lawrence, 47, during a hearing before U.S. District Judge P. Kevin Castel in Manhattan, also agreed to cooperate with the government. Lawrence, who is also a former chairman of the company, faces a maximum sentence of five years on the conspiracy charge for his role in the operation of the payment processor. NETeller co-founder and former President John Lefebvre was also charged in January. The case against him is still pending, the U.S. Attorney's office in Manhattan said in a statement. "Mr. Lawrence is very glad to have this episode over and looks forward to moving on to the next stage of his life," attorney Peter Neiman said after the hearing. Castel allowed Lawrence to travel within the United States as well as to Canada and the Bahamas. He set a sentencing date for October 29. NETeller, which was started in 1999, quit the United States in January, abandoning two-thirds of its business after authorities arrested the two founders. The legality of Internet gambling in the United States was ambiguous for many years but it was effectively banned last October, when President George W. Bush signed legislation outlawing gaming financial transactions. A crackdown on Internet gambling by U.S. authorities began last July with the arrest of BETonSPORTS Chief Executive David Carruthers during a layover at a Texas airport. Last month BETonSPORTS pleaded guilty to U.S. racketeering charges and agreed to spill the beans in cases against founder Gary Kaplan and other co-defendants, including Carruthers. Kaplan pleaded not guilty last month. Carruthers and seven others have also pleaded not guilty to the charges. In March Sportingbet brokered a deal with the state of Louisiana to have charges of "gambling by computer" dropped against its former chairman, Peter Dicks.

FACTBOX-Key developments for U.S. cell phone market. Here are some key developments in the U.S. cell phone market: * 1947, Bell Laboratories engineers Douglas H. Ring and W. Rae Young propose the idea of mobile communication through signals sent from hexagonal cells located on the corner of cell towers * 1968, Bell Labs and AT&T propose a cellular system to the Federal Communications Commission featuring small broadcast towers covering a radius of a few miles. Collectively, the towers would cover a larger area and would pass calls along as a caller traveled * 1973, Motorola Inc.'s Martin Cooper makes the first mobile phone call. The phone was 10 inches tall, three inches deep and an inch-and-a-half wide * 1978, public trials of a cellular system devised by Bell Labs and AT&T start in Chicago * 1982, the FCC allows the use of commercial cellular service in the United States. At that time, commercial service had been established in Japan and several European countries * 1987, the number of mobile phone users exceeds 1 million. The first handheld mobile phone by Ericsson makes its debut * 1999, Canadian firm Research In Motion rolls out the Blackberry, a two-way e-mail pager * 2001, basic Web sites specially designed for mobile phones start appearing on U.S. green screen phones * 2002, U.S. wireless service providers start to add more capacity to their networks to speed up mobile Web surfing * Late 2004, Motorola debuts the sleek Razr mobile phone to much fanfare at Cingular, now part of AT&T Inc. * In 2007, some gadget enthusiasts wait in line for days for the iPhone, the first phone from Apple, better known for its iPod music players and Mac computers. The device, with service offered exclusively by AT&T, has a Web browser and a music and video player. Sources: www.inventors.about.com, www.library.thinkquest.org, Technology Review and Telephony

U.S. family tries living without China. In "A Year Without 'Made in China,"' (Wiley, $24.95) Bongiorni tells how she and her family found that such formerly simple acts as finding new shoes, buying a birthday toy and fixing a drawer became ordeals without the Asian giant. Bongiorni takes pains to say she does not have a protectionist agenda and, despite the occasional worry about the loss of U.S. jobs to overseas factories, she has nothing against China. Her goal was simply to make Americans aware of how deeply tied they are to the international trading system. "I wanted our story to be a friendly, nonjudgmental look at the ways ordinary people are connected to the global economy," she said in an interview before the book appears in July. As a business journalist in Baton Rouge, Louisiana, Bongiorni wrote about international trade for a decade. "I used to see the Commerce Department trade statistics, the billions of dollars, and think it had nothing to do with me," she said. The reality was far different. As the year unfolded, "the boycott made me rethink the distance between China and me. In pushing China out of our lives, I got an eye-popping view of how far China had pushed in," she wrote. About 15 percent of the $1.7 trillion in goods the United States imported in 2006 came from China, economist Joel Naroff writes in the foreword. Much of that is the manufactured stuff that fills Wal-Mart and other retailers -- the necessities and frivolities sought by lower- and middle-income Americans. Lower prices have been one benefit of Beijing's rise and make it very hard for consumers to forswear Chinese imports. LEGOS, LAMPS And hard it was. For all of 2005, minor purchases required dogged detective work as Bongiorni scoured catalogues and read labels. She repeatedly struck out trying to buy inexpensive shoes for her son, and even the chic local boutique that sold fancy European labels had gone out of business. So she shelled out $68 for Italian sneakers from a catalogue. Broken appliances gathered dust because the spare parts came from China. And, with the Asian country having a near lock on the toy aisles, her 4-year-old son grew tired of taking Danish-made Legos to birthday parties as gifts. The family resorted to snapping mouse traps when the gentler catch and release kind came from, you guessed it, China. Bongiorni got a lesson in the global economy after products advertised as Made in USA turned out to have Chinese parts. She decided to keep a lamp with just this problem after speaking to the manufacturer and learning how China is "eating the lunch" of the few U.S lamp producers left. Since the boycott's end, Bongiorni has chosen a middle ground. Her family seeks alternatives but accepts Chinese products when most practical. But one habit from the boycott remains: It required her to think hard about what she buys. "Shopping became meaningful," she said.

Agility in $50 billion U.S. deal, stock up. Agility shares rallied 6.6 percent after the news. Agility said in a statement on the Kuwait bourse Web site it would provide various logistics, supply and warehousing services as part of the deal. The contract would run 10 years, of which 9 were optional, and would have a value of $50 billion for the whole period, it added. The deal, which included food and oil supply services, would be worth $5 billion for each year. Agility, which is diversifying its business and expanding abroad, said it could not currently determine its exact share of the deal. The total deal also includes U.S. firms KBR ( KBR.N ), a former unit of Halliburton Co. ( HAL.N ), and Fluor Corp ( FLR.N ) with a combined potential value of up to $150 billion to provide services to the U.S. military in the Middle East. EXPANSION Agility said on June 16 the U.S. military had renewed a 5-year deal worth $1.5 billion, extending the deal to its third consecutive year. The contract is up for yearly renewal. The U.S. government said on June 1 it had awarded Agility another supply and food deal worth up to $2.8 billion. Agility has said it was expanding in the Middle East, Africa or Eastern Europe to diversify its business and lower its exposure to U.S. military deals, a key source of income. Agility, previously known as Public Warehousing Co., has bought at least seven smaller rivals this year including New Zealand-based LEP International and Chinese freight company Guangzhou Runtang International Transport Company Limited.

Boeing gets $2 bln U.S. Air Force contract. Work is to be wrapped up by September 2018, the Pentagon said in its daily contract summary. Chicago-based Boeing said the program calls for the replacement wing sets to be delivered in parts and kits for easy installation. "We are pleased that the Air Force has recognized that Boeing has the skilled expertise, engineering know-how and the affordable solution to address the needs of the A-10 program," Charles Robertson, a vice president of Boeing Support Systems, said in a statement. The A-10, introduced in 1976, is a single-seat, twin-engine jet that can be used against all ground targets, including tanks and other armored vehicles.

Most iPhone owners gush but some have glitches. Of 11 iPhone owners contacted by Reuters on Saturday, nine reported little or no trouble setting up their handsets, a combined cell phone, music player and Web browser. "It's awesome, it's the best thing I ever saw in my life," said New York private detective Jerry Gregory. "Once people see this phone they are going to want one. Everybody I show this phone wants one, even people who were anti-iPhone." But Brad Bargman of Ft. Lauderdale, Florida, who waited in line 9 hours on Friday to buy his phone, said excitement turned to dismay when the device stubbornly refused to activate, meaning it can't be used. "It's a real buzz kill," said Bargman, adding that repeated calls to AT&T failed to get the device to work. "Now I'm soured on it a little bit." David Clayman, the third person in line at Apple's flagship Manhattan store, said he was still unable to activate his iPhone a day later, probably because he couldn't update the Apple software on his computer needed to start the process The iPhone, which costs $500 or $600 depending on memory capacity, is activated through a process handled by AT&T Inc., the phone's exclusive carrier for two years, in Apple's iTunes online music store. In a sign of strong initial demand, AT&T said it had sold almost all its phones within hours of the device going on sale at its 1,800 stores. The company did not say how many units it had sold. Asked about problems some buyers were having, AT&T spokesman Mark Siegel said the "vast majority" of customers were able to use their phones within minutes. "There are some whose activation process is being delayed and that's something that can happen in a launch like this and we're resolving those on a case-by-case basis," Siegel said. Apple spokeswoman Jennifer Bowcock declined to comment on the number of iPhones sold at its 162 outlets, saying only: "So far we've seen a lot of excitement and buzz." Apple aims to sell 10 million units in 2008, giving it 1 percent of the global mobile phone market. The company is banking that the iPhone will become its third pillar product alongside its popular iPod music players and Mac computers. By mid-afternoon on Saturday, Apple's store in downtown San Francisco was crowded with shoppers interested in the iPhone display. The store was sold out of the $600 models and about 10 $500 models were visible on shelves. Indeed, the iPhone's inclusion of so many features into a sleek package triggered a sort of nerd rapture among enthralled gadget freaks. "It's not like it's a computer, it's not like it's a phone, it's like a living sculpture in my hands," said Dale Larson, a mobile business consultant in San Francisco. Buyers cited the large screen, full-blown Internet browser, ability to play music and video, and camera quality as among the phone's best features. Two of the top concerns raised prior to the phone's launch -- the on-screen keyboard and quality of AT&T's network -- were annoying to some people, but no one said they regretted buying the device. "At first I tried to use my thumbs to type but it didn't work so well. But if I use my finger it's okay," said software developer Tim Brown.

Xerox to buy Global Imaging Systems for $1.5 bln. The acquisition will be Xerox's third and largest in the past 12 months as the copy machine maker tries to boost growth in equipment revenue, a sore point in its fiscal third-quarter financial report. "Our biggest barrier to growth was distribution," Xerox Chairman and Chief Executive Anne Mulcahy said on a morning conference call with analysts. Global Imaging sells printers and copiers to small and mid-size businesses, and it will start selling Xerox document-management products following the acquisition. Xerox, the world's largest provider of office printers, copiers and related services, said it would pay $29 for each share of Global Imaging, a premium of almost 50 percent to its Friday closing price of $19.50. The price is equivalent to 11 times Global Imaging's earnings before interest and tax (EBIT), according to one analyst. Global Imaging's own deals to buy smaller independent distributors were valued on average at five to eight times trailing 12 month adjusted EBIT, according to Global Imaging investor relations representative Earle Brown. Global Imaging shares rose 46.9 percent, or $9.15, to $28.65. Xerox shares edged up 9 cents to $16.98. BOOSTING DISTRIBUTION The purchase will expand Xerox's distribution by 50 percent in the estimated $16 billion small to mid-sized business market. The deal is expected to close in May. Stamford, Connecticut-based Xerox said it expects the acquisition to boost 2007 earnings. "They don't overlap much," Soleil Cross Research analyst Shannon Cross said of the deal. "It makes a lot of sense from that standpoint ... To me this represents Xerox management's willingness to think outside the box, to be more entrepreneurial, to be more aggressive." The acquisition will add about 200,000 new customers. Global Imaging generates about $1 billion in annual sales, the company said. Founded in 1994, Global Imaging operates 21 regional companies and is the product of about 80 acquisitions. Xerox executives said Global, which will operate as a wholly owned subsidiary, will continue to seek purchase opportunities. "This is not a fixer upper," Mulcahy said on the call. "It's a really well run, high-performing company." The transaction has been structured as a two-step acquisition including a cash tender offer for all outstanding shares of Global common stock followed by a cash merger in which Xerox will acquire any remaining outstanding shares. (Additional reporting by Euan Rocha in New York and Ankur Relia in Bangalore)

FACTBOX: Expected impact of U.S. trade deal on South Korea. Following are how key South Korean industries are likely to be affected. AUTO MAKERS Lower tariffs could help improve returns at auto makers such as Hyundai Motor Co. and Kia Motors Corp.KS> from the key U.S. market, with auto parts makers such as Hyundai Autonet also expected to benefit. However, auto makers could face increased competition from U.S. imports, as well as U.S.-made cars by Japanese auto makers. TECHNOLOGY SECTOR No major impact is expected given that memory chip makers such as Samsung Electronics Co. Ltd. have not suffered excessively from U.S. duties while running overseas plants for exports. But TV set, mobile phone and parts makers could gain from lower taxes, while firms reliant on imports of U.S.-made parts, non-memory chips and machinery could also benefit. PHARMACEUTICAL SECTOR Smaller drug makers such as Daewoong Pharmaceutical Co. that rely on sales of generic drugs are expected to see the bigger impact from opening up the domestic market, with bigger pharmaceuticals firms such as Dong-ah Pharmaceutical Co. seen less hit. But over the long-term, restructuring and consolidation in reaction to U.S. imports could help raise competitiveness. -- FINANCIAL SECTOR The FTA deal is not expected to have a big impact because the sector, including insurance, has already been opened to foreign competition to a great extent, while ownership ceilings in certain areas apply to both foreign and domestic participants. - AGRICULTURE The free trade pact with the United States is expected to cause South Korean agricultural output to fall by 1-2 trillion won a year, according to the Korea Rural Economic Institute. The total output of South Korea's agricultural sector stands at 35-36 trillion won a year. The institute had said the free trade would result in beef production looses of less than 220 billion won a year when the 40 percent import duties on beef are scrapped in 15 years.

Tribune employees to pay takeover bill for Zell. Tribune, publisher of the Los Angeles Times and Chicago Tribune and television broadcaster, would become privately held with an employee stock ownership plan (ESOP) owning most of the company. Zell would contribute $315 million. "If in fact this is going to be a real partnership, then it could be a really good thing for the Tribune Co. If, however, it's just an investment vehicle, the employees need to be very, very cautious going forward," said Linda Foley, president of The Newspaper Guild-Communications Workers of America union. Including debt, the deal is valued at $13.2 billion. Tribune said it would sell the Chicago Cubs baseball team and the company's 25 percent interest in Comcast SportsNet Chicago to help pare debt. "My first thought was have I just co-signed a loan for $12 billion," Bill Salganik, president of the Washington-Baltimore Newspaper Guild, and a health business reporter for Baltimore's Sun newspaper. Tribune and other U.S. newspaper publishers have suffered as advertising revenue and circulation have dipped. More people, particularly younger people, now get their news and entertainment from the Internet. The company had been considering a buyout or the spin-off of various divisions after its largest shareholder, the Chandler Trusts, publicly aired their anger with the decline in its stock price last year. "The industry, in general, can use some new approaches -- and something that gives a real employee voice could be what we need," Salganik said. The ESOP gives Zell a creative way to fund the deal and several tax benefits compared with a traditional leveraged buyout financed by debt. Under the plan, instead of contributing to employees' 401K plans, Tribune would put money in the ESOP, which would invest in shares of the privately held company. The stock would be dispersed to eligible employees. Contributions to the ESOP would be treated as paying off principal. As a result, both the principal and the interest could be deducted from the company's taxes, rather than just interest. POTENTIAL BENEFITS, RISKS "The positive for employees here is the possibility that the value of the stock will increase enormously if they can change the culture of the company and get engaged in improving its performance," said Joseph Blasi, professor at Rutgers University's graduate school of management and labor relations. "The downside is that for many employees, a lot of their retirement assets will be tied up in the stock of one company," he said. The success of ESOPs, which have been used at other newspaper companies and several airlines, has been mixed. In 1994, pilots, machinists and managers of UAL Corp.'s United Airlines gained a 55-percent stake in the airline in exchange for cuts in wages and benefits. Employees lost control in 2003. United faltered, in part, due to its traditional, hierarchical structure, Rosen said. At the Peoria Journal-Star newspaper in Illinois, the ESOP plan proved so successful that the company's stock surged and many employees started putting in for early retirement. The ESOP lacked enough funds to buy out the shares of the retirees, which threatened the company's solvency. The level of success seen at ESOP-related companies often depends on the degree to which the employees really get treated like owners, said Corey Rosen, executive director of the National Center for Employee Ownership. "Unless the employees get all excited about running the company, they won't be," said John Morton, an independent newspaper analyst and head of Morton Research Inc. "Obviously the employees have voting power that they might not have had before; (but) generally they wind up not having a profound influence on how the company is run," Morton said. Some Tribune employees are skeptical about what amounts to investing in the company's current management. "They are very top-down, they are very authoritarian and hierarchical, all of which are bad ways to run newspapers," said Michael Hill, a reporter with the Baltimore Sun.

FACTBOX-Key details on Digital Rights Management. * DRM is software which entertainment companies use to prevent illegal copying or distribution of digital media files such as songs and movies. * Apple Inc's proprietary Fairplay protection technology is one of the most commonly used to protect songs, TV shows and movies. Microsoft Corp. has its own Windows Media-based protection technology. * DRM protection of a song or movie can be used to prevent it from playing on a non-compatible digital media player or software. For example, Apple's Fairplay format will only work within Apple's iPod player and iTunes system. * The most popular digital song format, an unprotected MP3, does not have any DRM protection. * More than 1 billion digital songs in MP3 format are traded illegally every month on peer-to-peer networks such as Limewire, according to Web consultants Big Champagne.

S.Korea to phase out U.S. beef import tariffs. Washington had demanded the immediate removal of all import tariffs on its beef. "Import tariffs on U.S. beef will be eliminated over the next 15 years, step by step," Minister for Trade Kim Hyun-Chong told a news conference. "South Korea will also begin review of beef imports after OIE decision in May on U.S. beef." The World Organization for Animal Health (OIE) said on Friday in a preliminary ruling that the United States is a "controlled risk" country for mad cow disease. A final decision from the OIE is expected in May. Seoul had rejected entire shipments of U.S. beef after finding bone chips as small as coffee beans, since it announced in September it would reopen its market to U.S. beef. Once the No. 3 export market for U.S. beef, South Korea agreed to accept boneless beef from cattle less than 30 months of age if packers removed the brains, spinal cords and nervous tissue most likely to carry the infective agent for mad cow disease. "The loss from the free trade pact would be less than we had expected as South Korea has 15 years to scrap its tariff on U.S. beef, far longer than the period sought by Washington," said Choi Sei-kyun, senior director of the Korea Rural Economic Institute. Last year, the institute had expected the free trade pact would result in beef production losses of around 220 billion won a year if the 40 percent import duties on beef were scrapped in 5 years. "The South Korean beef industry would be the biggest loser from the pact. But lifting the tariff on U.S. beef imports would not cause a collapse of the market for local beef," Choi said.

Fed's Poole favors rate hike if inflation stays up. "If the inflation rate stays up at the current rate and is not converging down toward 2 (percent), then it would be a high hurdle for me to be cutting rates if the economy is only marginally on the weak side," he said in response to a question after a speech to a U.S. economists' group. "I won't be leading the pack in cutting rates" in that situation, he said. The Fed has left interest rates steady for the past six meetings. Poole is a voting member of the Fed's rate-setting committee this year.

AT&T, America Movil seek Telecom Italia deal. A potential deal will allow AT&T to expand its international business to offset a decline in its traditional phone subscriptions. It will also help to clear clouds over the future of Telecom Italia, Italy's main carrier, which locked horns with the center-left government of Prime Minister Romano Prodi last year over its restructuring plans. AT&T and American Movil, owned by billionaire Carlos Slim, plan to buy a third of Olimpia, a holding company and Telecom Italia's top shareholder with around 18 percent of the firm, Europe's No. 5 telecoms group. The offers value Telecom Italia shares held by Olimpia at 2.82 euros each, minus Olimpia's debt, AT&T said in a statement. The companies did not give a total value for their proposed investments, but AT&T said Telecom Italia's market capitalization is about 40 billion euros ($53.4 billion). That value would make Olimpia's 18 percent stake worth around 7.2 billion euro. Should AT&T and America Movil succeed in the purchase, their stakes would be worth around 2.4 billion ($3.2 billion) each. Olimpia and Italian company Pirelli-- which holds 80 percent of Olimpia -- said there would be exclusive negotiations until April 30. Talks between Pirelli and a group of Italian banks for the sale of its Telecom Italia stake have been bogged down over price. Pirelli has booked the holding at 3 euros per share against a market price nearer 2.14 euros. Italy's communications minister, Paolo Gentiloni, said there was "great concern" about the developments, which he said the government would "follow with keen attention". Disagreements with the government last year triggered the resignation of its chairman, Marco Tronchetti Provera. Tronchetti is still chairman of Pirelli. AT&T spokesman Michael Coe said the investment would help boost its enterprise segment, or its business of serving corporate customers -- many of which are doing business abroad. "We need strong assets and relationships in key areas, Europe being one," he said. "By establishing a stronger, closer relationship with Telecom Italia we will be able to exchange best practices. We'll be able to do joint product and technology development." Investment bank Mediobanca ( MDBI.MI ) and insurer Generali ( GASI.MI ), which have joined forces with Olimpia as key investors in Telecom Italia, have first refusal on the Olimpia stake. If they take up those rights, AT&T and America Movil will each get an indemnification equal to 16 million euros. AT&T and America Movil have also said they would offer a put option to Pirelli and Sintonia on their remaining Olimpia stake and their Telecom Italia holdings for a year after any deal.

U.S.-based Airtran raises offer for Midwest Air. The hostile takeover bid now consists of $9 in cash and 0.5842 shares of AirTran common stock for each Midwest share. The total equity value of the exchange offer is $389 million. The offer represents a premium of 83 percent over the 30-day average closing price of Midwest common stock prior to AirTran's initial proposal. AirTran's first offer to acquire all of Midwest's common stock was priced at $11.25 per share on October 20, 2006. The offer also represents an approximately 65 percent premium over the closing price of Midwest stock on December 12, 2006, the day before AirTran disclosed its initial October 20 offer. As a result of this increase, the expiration date of the tender has been extended to terminate on May 16, 2007. "We firmly believe in the underlying value and benefits of combining these companies, and we are committed to bringing together these two airlines to create a truly national airline well-positioned for success in an increasingly competitive environment," said Joe Leonard, AirTran chairman and chief executive officer. "We are presenting this substantially enhanced offer now in order to give their board and management time to consider it and enter into discussions with us prior to Midwest's May 23, 2007, annual meeting," he said in a statement.

EMI and Apple agree to music catalog deal. "The new higher quality DRM-free music will complement EMI's existing range of standard DRM-protected downloads already available," EMI said in a statement as the company began a joint press conference in central London with Apple Chief Executive Steve Jobs.

Tankan sentiment dips slightly, BOJ seen on hold. The closely watched March tankan survey did little to change the widespread view that the central bank will be slow in raising interest rates, with many traders expecting the next rate hike to come sometime after upper house elections in July. The dollar edged a tad higher against the yen right after the tankan release but held mostly steady just below 118 yen. Investors in the Japanese government bond and stock markets largely shrugged off the survey. The headline sentiment index for big manufacturers was plus 23, meaning those firms who think business conditions are favorable outnumbered those who think they are negative by 23 percentage points. This was down from plus 25 in December and slightly below economists' forecasts of plus 24. It was also the lowest level since June 2006 and the first time in a year for the headline index to worsen. The diffusion index (DI) for June was seen at plus 20, showing big manufacturers, a key driver of Japan's economy, are less upbeat about conditions over the next three months. Economists said firms have seemingly become more wary about a likely slowdown in the economy of the United States, Japan's biggest export destination, along with global stock market upheaval at the end of February and a slight rise in the yen. "The decline in the headline figure reflects uncertainties in the outlook for the U.S. economy, foreign exchange rates and oil prices, despite firm domestic demand," said Takumi Tsunoda, an economist with Shinkin Central Bank Research Institute. Broad weakness in the yen has helped Japanese exporters over the past year, keeping corporate profits at high levels. But volatility in global equities markets since late February had triggered some correction in the yen's declines. CAPEX STILL SOLID But overall, the tankan survey, conducted from February 23 to March 30, underscored that Japan's corporate sector remains healthy, adding to Friday's data showing firm household spending and smaller-than-expected declines in industrial output. "The tankan was generally within expectations. The DI is already at a high level, so unless the big manufacturers' DI fell below plus 20 it won't have much impact on the markets," said Makoto Yamashita, chief JGB strategist at Lehman Brothers. Chief Cabinet Secretary Yasuhisa Shiozaki said the government maintains the view that the world's second-largest economy is expanding moderately, with corporate sector activity firm. Among non-manufacturers, whose overall sentiment index was unchanged from three months earlier, real estate firms who think business conditions are favorable outnumbered those who think they are negative by 53 percentage points, the highest level since February 1991. The strength in the real estate market is one of many factors the BOJ is watching closely, but regardless of the tankan outcome, many had already expected the central bank to stay put when it holds the next policy board meeting on April 9-10. "No one expects the Bank of Japan to hike interest rates in the next couple of months," said Jan Lambregts, head of Asia research at Rabobank in Hong Kong. "One reason is elections coming up, and we know the BOJ is sensitive to political pressure. The other reason is that consumer prices have dipped back into negative territory, so it will be hard to sell a rate hike." Political consideration aside, a lack of inflationary pressure, including a 0.1 percent fall in consumer prices in February from a year earlier, led traders to believe that the BOJ would not boost rates any time soon. The tankan, meaning "short-term economic outlook", showed big firms expect their capital spending to rise 2.9 percent in the new financial year started on April 1, higher than the median market forecast of a 1.7 percent rise but below 11.9 percent growth in the last business year. But analysts say firms traditionally take a conservative view of capital spending plans ahead of the start of a business year and tend to upgrade later in the year. Indeed, the 2.9 percent rise was the biggest expansion planned as of a March tankan survey since fiscal 1990/91. The BOJ conducted regular revisions to sample enterprises in the tankan in early March and some of the December tankan figures have been revised. The survey covered 10,958 companies, of which 2,479 were classified as large. (Additional reporting by Tetsushi Kajimoto , Leika Kihara , Hideyuki Sano and Yuzo Saeki )

Del Monte sees 2 cents share charge to '07 earnings. Cash flow will be negatively impacted by about $6 million, the food producer said. Under the arbitration ruling, Del Monte will be required to reimburse Pacer Global Logistics, the company's former logistics services provider, for line haul and fuel charge costs incurred on behalf of Del Monte from May 1, 2005 to April 30, 2006 above contractually-set benchmarked rates, plus interest. Del Monte said the impact was not included in a forecast given last month of fiscal 2007 earnings per share to range between 50 cents and 53 cents and cash flow between $150 million and $170 million. Shares of Del Monte closed at $11.28 on the New York Stock Exchange.

Bank of Montreal eyes LaSalle Bank assets: analyst. LaSalle is owned by Dutch bank ABN AMRO AAH.AS, which is expected to become the target of a takeover bid by British bank Barclays ( BARC.L ). There has been speculation that LaSalle may be sold to help finance the deal. BMO's interest in LaSalle was noted on Monday by UBS analyst Jason Bilodeau in a research report to clients. Bilodeau recently accompanied BMO Chief Financial Officer Karen Maidment to a series of meeting with institutional investors in Europe. BMO spokesman Ralph Marranca declined to comment on the report but said: "We have said in the past that we look at everything that comes on the market and this would be no different." Bilodeau wrote that he doubted that BMO would be keen on, nor could it afford, all of LaSalle. "However, management was clear in expressing their interest in the Chicago-based retail business, which would be a very attractive asset to combine with Harris," Bilodeau said. Based in Chicago, Harris Bank is BMO's personal and commercial banking operation in the United States. BMO, Canada's fourth biggest bank, has often said it would like to expand its presence in the U.S. Midwest. Bilodeau estimates LaSalle's Chicago assets could be worth roughly between $10 billion and $12 billion, a "large" transaction for BMO although he believes a joint venture structure "could be workable." "Pricing would be an issue given BMO's discipline, but it may be too important for them to pass by should an opportunity present itself," Bilodeau wrote. However, Bilodeau believes it is more likely that LaSalle will emerge as a stronger competitor to Harris Bank than as a partner. "If an ABN AMRO deal occurs, a new management could reinvigorate a platform that has suffered from inconsistent focus at times under the current structure, potentially giving rise to a pick-up in competition in the Chicago land market," he said. Another option is that LaSalle is bought by another competitor. UBS believes several banks, including Citigroup ( C.N ), Bank of America ( BAC.N ), Fifth Third ( FITB.O ) and National City NCC.N are possible purchasers. BMO's shares rose 26 Canadian cents to C$69.98 on the Toronto Stock Exchange on Monday. ($1=$1.16 Canadian)

Tribune to sell storied losing Cubs team this year. The publisher of leading U.S. newspapers including the Los Angeles Times and Chicago Tribune on Monday announced the sale along with its 25-percent stake in the Comcast SportsNet Chicago sports cable network. The Cubs' sale, which analysts said could attract bids topping $700 million, will occur after the 2007 season and likely close in the fourth quarter, Tribune said. "In our last season of ownership, the team has one mission, and that is to win for our great fans," Tribune Chief Executive Dennis FitzSimons said in a statement on Monday, which marks the team's season opening day game. Plans for the Cubs' spin-off come as Tribune Co., long on the auction block, accepted a bid from Chicago real estate magnate Sam Zell to take the company private. "The Cubs are going to attract a huge bidding process," said Richard Walden, a managing director at JPMorgan's Private Bank, which advises people buying sports teams. "People are going to come out of the woodwork." The Cubs are an icon due to their national TV exposure and a storied history that includes the "Billy Goat Curse" and several well-known misses on the field. BILLY GOAT CURSE According to legend, a Cubs fan with a pet goat was ejected from a 1945 World Series game at Wrigley Field, and put a curse on the team to never win another championship. The Cubs lost the 1945 title to the Detroit Tigers and have not returned to baseball's championship. Cubs fans lament the team's collapse in 1969 to the New York Mets, which won the title that year. Shortfalls in other years have occurred. In 2003, they lost the National League Championship to the Florida Marlins after leading Game Six at home 3-0 in the top of the eighth inning. A Cubs fan reached for a foul ball, preventing Cubs outfielder Moises Alou from catching what would have been the second out. They lost the game and the series. Analysts said the Cubs' history likely won't scare off potential buyers and the team could fetch more than $700 million. That was the price paid by an investor group, including debt, in 2002 for the Boston Red Sox and a majority stake in a regional sports cable network. Among the names linked to the Cubs as potential owners have been real estate developer and former Illinois state Sen. William Marovitz, who is also the husband of Playboy Enterprises Inc. CEO Christie Hefner; Michael Krasny, billionaire founder of computer retailer CDW Corp.; and restaurateur Larry Levy, whose company handles the food concessions at many U.S. stadiums. Tribune purchased the Cubs and historic Wrigley Field, known for its "friendly confines" and ivy-covered outfield walls, in 1981 for $20.5 million. The team's annual attendance has topped 3 million the last three seasons. Cubs fans, who celebrated the club's outlay of more than $300 million in the off-season to sign new manager Lou Piniella and such star players as outfielder Alfonso Soriano, can rest easy as club executives assured the pending sale will not affect the team's performance. Of course, the Cubs are coming off a season in which they lost almost 100 games.

FACTBOX-Projects backed by Russia's investment fund. The fund, which introduced the concept of public-private partnerships to Russia, received $2.7 billion of budget funds in 2006 and will get about $12 billion in 2007-09, according to Economy Ministry figures. It took about 50 applications from investors in 2006 and has so far approved 12 projects worth a combined $50 billion. Below is the list of approved projects. - Infrastructure development around Boguchanskaya hydropower plant on the Angara river in eastern Siberia: Total cost $13.8 billion. State contribution: $1.32 billion. - Transport infrastructure for metals deposits in Chita region in Siberia: Total cost $5.5 billion. State contribution: $1.57 billion. - Oil refinery infrastructure in Tatarstan republic: Total cost $5.0 billion. State contribution: $633 million. - Toll road in the Caucasus region in southern Russia: Total cost $4.3 billion. State contribution: $2.30 billion. - Toll road in Russia's second city of St. Petersburg. Total cost: $3.8 billion. State contribution: $1.23 billion. - Railroad to Elegest coal deposit on the border with Mongolia: Total cost: $2.9 billion. State contribution: $2 billion. - 43-km stretch of Moscow-St. Petersburg highway: Total cost: $2.1 billion. State contribution: $990 million. - Tunnel under the Neva river in St. Petersburg: Total cost: $1.2 billion. State contribution: $395 million. - Reconstruction of the M4 highway linking Moscow with Russia's south: Total cost: $767 million. State contribution: $6.5 million to cover project documentation costs plus long-term lease of some parts of the road. - Sewage and water supply system in Rostov region in southern Russia: Total cost: $767 million. State contribution: $197 million. - 14-km highway leading west of Moscow: Total cost: $652 million. State contribution: $384 million. - Sea port terminal near St.Petersburg: Total cost: $307 million. State contribution: $80.55 million.

New Century 'somber' as fired employees head home. Hours later, she was asked to leave herself. Sitting on the curb outside New Century's glitzy headquarters, clutching a manila envelope, the woman declined to identify herself but admitted to being one of the 3,200 employees laid off as the company known for risky loans filed for bankruptcy on Monday morning. New Century Financial Corp. had been the largest independent U.S. provider of "subprime" mortgages, or home loans to people with poor credit histories, and its demise came less than two months after it first disclosed problems with delinquent loans. During the morning, a trickle of people left the company's new office building, which is nestled among palm trees, fountains and birds of paradise plants. One man carrying a box of belongings was asked whether he worked for New Century. "Not any more," he said. Orange County, where New Century is based, is a center of the sector of the mortgage industry focused on such risky loans, and the company is the biggest mortgage lender to collapse in the slumping U.S. market. Some analysts expect the problems in the industry to keep spreading. New Century filed for Chapter 11 bankruptcy protection in Delaware and fired 54 percent of its workforce. It plans to sell most of its assets within 45 days. Outside company headquarters, a few people exchanged hugs and said goodbye to one another. None wanted to give their names, but one departing employee described the mood on the top floors of the building in a single word: "somber."

FACTBOX: Trade between South Korea and the U.S.. Following are some details about the economic relationship between South Korea and the United States. ECONOMIC SIZE AND TRADE VOLUME Two-way goods trade totaled more than $71.5 billion in 2005, with South Korea having a surplus of more than $16 billion. The United States was South Korea's third-largest trading partner in 2005 after China and Japan. South Korea was the seventh-largest U.S. trading partner. TRADE IN GOODS The largest sector for two-way trade in 2005 was automobiles. South Korea exported 709,000 vehicles and imported 5,500. Nearly a third of South Korea's car exports go to the United States, the Korea International Trade Association said. South Korea's next largest export was mobile phones and other wireless communications devices, followed by semiconductors. The largest sector for U.S. exports was semiconductors valued at $5.7 billion, followed by airplane parts. TARIFFS South Korea's average trade weighted tariff is 7.2 percent, far higher than the U.S. level of 1.4 percent. South Korea has an average duty on farm products of 52 percent. AGRICULTURE South Korea had a $1.92 billion deficit in agricultural trade with the United States in 2005, importing U.S. farm products worth $2.8 billion. The imports included corn, soybeans, processed foods, cotton, citrus and nuts. U.S. agricultural exports to South Korea could more than double under a free trade agreement, resulting in the loss of up to 130,000 jobs, a Korea Rural Economic Institute report said. Sources: World Bank, Korea International Trade Association, South Korea's Ministry of Foreign Affairs and Trade, Ministry of Agriculture, Korea Institute for International Economic Policy, Korea Rural Economic Institute, State Department.

LSI Logic completes Agere deal, eyes savings. The company, which will be renamed LSI Corp., also estimated savings from combining product development operations and the ability to buy materials in greater bulk. "Obviously we will look across all dimensions from where we have some redundancies from a multiple functions and skills standpoint, where we have redundancy or possible opportunities to consolidate facilities," LSI Logic President and Chief Executive Abhi Talwalkar said in an interview with Reuters, without giving details. "The $125 million will be made up of many different elements," he said, also citing savings on investments in the latest manufacturing and design technologies that both companies would have had to do separately. LSI Corp. will have 9,100 employees, including about 4,300 engineers, and will operate in more than 20 countries. Talwalkar said the company was already seeing signs it can win new business as a result of the deal. "We've been having a number of "what if?" discussions with our customers and some of our largest customers," he said, citing talks about expanding supply agreements at strong LSI or Agere customers to include the other's products. "We are already seeing the right indications that this will result in new business," he said without giving numbers. Talwalkar said he was confident LSI would achieve savings targets it had outlined in December. It had forecast 2008 savings of at least $125 million through improvements in manufacturing efficiency and management of operating expenses. It had also said in December that the deal would reduce LSI's earnings per share slightly in 2007 and add to them "meaningfully" in 2008. On March 29, shareholders of both Agere and LSI had approved a December 4 agreement for Agere shareholders to receive 2.16 shares of LSI for each Agere share held.

Google interested in DoubleClick purchase: report. Microsoft has appeared less likely to win the bidding as the potential price for the company surpassed $2 billion, people familiar with the situation said in the Journal. Yahoo Inc. ( YHOO.O ) and Time Warner Inc.'s ( TWX.N ) AOL online unit also have talked to DoubleClick -- which is majority-owned by San Francisco private-equity firm Hellman & Friedman -- though it is unclear whether AOL is still in the race, these people said in the Journal. DoubleClick is using investment bank Morgan Stanley to help explore its options, including a possible stock market listing, the Journal reported last week. Hellman & Freidman has reportedly set a price tag of at least $2 billion for the advertising company. Such a price tag could amount to a hefty return for the private equity firm, which took DoubleClick private in mid-2005 in a deal worth $1.1 billion. Representatives from Google were not immediately available for comment.

No kickbacks: a theory headache as Russia invests. "For the third time today I understand that I do not understand you," Gref snapped at his deputy, Kirill Androsov, at a meeting of officials overseeing the disbursal of the country's oil wealth for infrastructure projects. Their meeting was, unusually, held in public, in an attempt to boost transparency on the public investment decisions which should improve the daily lives of ordinary Russians and build infrastructure fit for a modern economy. Besides battling widespread allegations of corruption, the officials are taking on the maths of investment theory. The government plans to plow $12 billion into an investment fund over the next three years, introducing the concept of public-private partnerships to Russia under which outside investors must at least match state commitments. Figuring out the net present value or internal rate of return (IRR) of a project may be a headache for Gref and other state officials on the investment fund's supervisory panel, including the finance and transport ministers, and the cartel office head. But for a new generation of Russian officials, such as Gref's 34-year-old deputy Androsov, a bespectacled graduate of Chicago University Business School, it is the future. "This is the economic theory," Androsov tried to explain in response to Gref's complaint, adding hopefully: "UBS was an adviser on this project." Investors, ranging from state firms to startups, are seeking advice from international investment banks to give their projects more clout in the eyes of officials like Androsov, who oversees the initial selection. "Transparency and foreign advisers should reduce the risk of corruption, but in Russia one should always take this risk into account," said Peter Westin, an economist at MDM Bank in Moscow. State investment has so far been a major source of corruption with President Vladimir Putin's economic adviser Arkady Dvorkovich, another U.S.-educated official, estimating average kickbacks at 30 percent of public contracts. NOTORIOUS OBSTACLE The $12 billion for investment is a fraction of the government's $100 billion budget stabilization fund, which has gathered windfall oil revenues since 2004 and is designed to insure against a possible oil market crash. Corruption is one reason why Russia prefers to keep its oil wealth under lock and key, rather than spend it. But fiscal prudence is hard to sell in a country where roads are bad, power cuts are common and monthly pensions average $80. Helped by high prices for oil, the economy is booming and capital investment is growing at an annual rate of 20 percent. However, few private investors want to upgrade infrastructure that has crumbled since the 1991 collapse of the Soviet Union. Roads have throughout Russia's history been an obstacle to development: it does not have single paved road linking European Russia with the Far East. "As long as the projects focus on infrastructure, they are likely to be a success," Westin said, noting that private investment in roads without government help does not work. The fund took about 50 applications from private investors last year and has so far approved 12 projects worth a combined $50 billion. Most are new roads. One of the projects already approved, a 14-kilometre highway heading west of Moscow, will provide easier access to a fashionable suburban area favored by officials and Russia's new super-rich elite. At a recent committee meeting, three projects -- a sewage system in southern Russia, a sea port terminal and a railroad in a remote far eastern region worth a combined $4 billion -- were bidding for over $2 billion of state funds. Private investor Igor Rusu told the panel about the future benefits of the terminal near St. Petersburg, which should make it easier for Russia to import new foreign cars, bypassing Finland and the Baltic states. Rusu, director of Ust-Luga which will build and operate the terminal, produced a draft showing where the land and infrastructure remain state property, while the mooring berths will go to the investor. "If I were investing my own money, I wish I could swap seats with you," said Gref, graduate of a law school in a little-known university in Siberia. Gref asked if a long-term lease was acceptable instead. "Otherwise it looks as if we built a road to a toll gate, someone else has paved the last meter and gets the right to collect the fee," Gref said before reporters were ushered out of the room. Behind closed doors, all three applications won the panel's approval.

Zell wins bid for Tribune, Cubs on block. The $34-per-share offer is structured as an employee stock ownership plan, with Zell investing only $315 million and the rest funded by debt. The per-share price was the same as a bid by Los Angeles billionaires Eli Broad and Ron Burkle. The board can consider other proposals until shareholders approve the deal, said Tribune. The company's roster of properties includes television stations and leading U.S. newspapers such as the Los Angeles Times, Chicago Tribune and The Sun in Baltimore. Breaking the Zell deal would cost Tribune $25 million -- a low fee that raises the possibility of a counterbid by Broad and Burkle. Their representatives were not available for comment. The outcome is the result of Tribune's six-month attempt to find a buyer after its largest shareholder, the Chandler Trusts, pressed for a sale to boost flagging share prices. But erosion in newspaper ad sales and falling circulation brought on by the Internet, as well as U.S. rules prohibiting one company from owning too many properties in particular markets, kept some potential buyers away. The Zell offer was somewhat lower than what analysts initially thought Tribune could fetch. "It turns out this is a little lower than I would have thought, but times are what they are. It's like selling your house. Last week it was worth 'X' -- this week it's not," said Benchmark Co. analyst Ed Atorino. The price is about 6.5 times Tribune's forecast 2007 earnings before interest, taxes, depreciation and amortization, according to Reuters Estimates. By comparison, Gannett Co. Inc. ( GCI.N ), the largest U.S. publisher, is trading at a multiple of nearly six times. The Chandlers, which own about 15 percent of the Chicago-based company, support the Zell deal, a spokesman said. Ariel Capital Management, Tribune's fourth-largest shareholder with a 6 percent stake, also supports the deal. "These are clearly challenging times for all newspaper companies, but we are very pleased by today's announcement and plan to support the proposed transaction," said Ariel Capital Vice Chairman Charlie Bobrinskoy. What remains unclear is Zell's motivation in investing in a struggling -- some say dying -- industry. Zell is known as "the grave dancer" after snapping up property at a time when the U.S. commercial real estate market was on its knees, suffering from rampant foreclosures and a lending drought. He has said his interest is in the economics of Tribune, not journalism. Zell has refused repeated requests for an interview. TWO-STAGE DEAL Under the deal, Tribune would be privately held with an employee stock ownership plan (ESOP) holding all outstanding common stock, and Zell holding a subordinated note and a warrant entitling him to buy 40 percent of Tribune's common stock. The two-stage transaction first includes a cash tender offer for about 126 million shares at $34 apiece, funded by borrowings, and a $250 million investment from Zell to be completed in the second quarter of 2007. The second stage would cover the remaining publicly held shares and an additional $65 million investment by Zell, which Tribune expects to close in the fourth quarter. Any successful buyer would have to deal with the roughly $5 billion in debt that Tribune has on its balance sheet, according to its annual report filed on February 26. Tribune said it plans to sell the Chicago Cubs and the company's 25 percent interest in Comcast SportsNet Chicago to help pay down debt. The sale of the Cubs, which analysts have said could attract bids topping $700 million, is subject to the approval of Major League Baseball. The deal is expected to be completed in the fourth quarter, Tribune said. Zell would become chairman, Tribune said. Tribune Chairman, President and Chief Executive Dennis FitzSimons would remain a member of the board, along with at least five independent directors and an additional director affiliated with Zell. In afternoon trading, Tribune was up 74 cents or 2.3 percent at $32.85. (Additional reporting by Yinka Adegoke , Ilaina Jonas and Tiffany Wu in New York and Jessica Hall in Philadelphia)

L.A. Times staff uncertain about new owner. The Times' corporate parent, Tribune Co., announced it had accepted Zell's bid for $34 per share to take the newspaper and broadcasting giant private under an employee stock ownership (ESOP) plan entitling him to buy 40 percent of Tribune's common stock. The estimated $8.2 billion bid includes a $350 million investment by Zell, with the remainder essentially being financed by money the Tribune would otherwise have contributed to employees' retirement plans. "There is definitely trepidation and uncertainty," reporter Andrew Blankstein told Reuters. "The employees are going to be taking on a lot of the risk of the deal. But they could also get rewards. The question in a struggling industry is which way do we go?" The Times, the nation's fourth-largest newspaper and crown jewel of a media conglomerate that owns numerous TV stations and several major newspapers, has come under mounting pressure from its corporate parent to cut costs -- and jobs. Former editor Dean Baquet, widely admired inside the paper, quit in November after resisting management demands for further staff reductions. "MAKE IT A BETTER NEWSPAPER" Some staffers expressed qualms that Zell lacks previous newspaper experience and that the 65-year-old Chicagoan has described his Tribune bid strictly as a financial investment. Others said they would wait to learn more about his intentions before forming an opinion. "What we're looking for is an owner who wants to build the company and make it a better newspaper and recognizes that we have a public service role," veteran legal affairs reporter Henry Weinstein. He added: "I'm not passing any judgments until we hear something from (Zell) about what he's going to do with the newspaper." Times media critic Tim Rutten said, "I think there's a great deal of uncertainty ... because it's a very ambiguous kind of agreement, whose implications for the journalism of the Tribune papers are pretty uncertain." Many Times staffers were widely known to have been rooting for a rival Tribune bid from two Los Angeles billionaires -- philanthropist Eli Broad and supermarket magnate Ron Burkle -- that would have returned the newspaper to local ownership. Hollywood music mogul David Geffen has made a separate bid for the newspaper alone. Since it was acquired by Chicago-based Tribune in 2000, the Times often has found itself at odds with its corporate parent. "There's been no love lost between L.A. and Chicago, and the fact that (Zell) is a real estate guy from Chicago just kind of reinforces this idea that once again we're going to be the ones who are on the outs," one Times reporter, who spoke on condition of anonymity, said. Ambivalence about the prospect of Zell's ownership was reflected in a lengthy story published by the Times on Monday on the front page of its business section, outlining his record as a real estate investor. Since becoming the largest mobile-home landlord in the United States, according to the Times, a Zell-led company has enlisted teams of lawyers to challenge local rent-control laws and raise rents in cities across the country. The story said Zell has nicknamed himself the Grave Dancer because of his knack for turning a profit through investments in financially distressed properties.

Merck gains on U.S. approval for combo diabetes pill. Merck was up 74 cents, or 1.7 percent, to $44.91, in midday trade on the New York Stock Exchange, amid slight gains for the drug sector. Janumet, by combining Januvia and metformin into a single product, is meant to help patients with Type 2 diabetes better control their blood sugar. That most common form of diabetes is highly linked with obesity. Metformin, a member of the biguanide class of oral treatments, is the most widely used-diabetic drug in the United States. It was introduced more than a decade ago by Bristol-Myers Squibb Co. ( BMY.N ) under the brand name Glucophage, but is now sold by many generic drugmakers. The U.S. Food and Drug Administration in October approved use of Januvia either by itself or alongside metformin or another class of medicines called thiazolidinediones (TZDs) to treat type 2 diabetes. Analysts have predicted Januvia, a member of a new class of drugs called DPP-4 inhibitors, would become a blockbuster medicine with annual sales of more than $1 billion. "Over time, we wouldn't be surprised if Janumet overtakes Januvia as the preferred drug in its class as potency on the combined agent is superior to the single-agent pill," Morgan Stanley analyst Jami Rubin said in a research note. She said combined annual sales of Januvia and Janumet are likely to reach $2.8 billion by 2011.

KKR to bid $25.6 billion for First Data: source. KKR is in late stage discussions with the company about the proposal, which at $34 per share in cash represents a 26 percent premium to Friday's closing price of $26.90 per share. A deal could be announced as early as Monday, the source said. KKR declined to comment. A First Data spokeswoman did not return a call or email seeking comment. With private equity firms competing hard for large buyout targets, a deal with First Data would put KKR the firm behind the top three largest leveraged buyouts. KKR and Texas Pacific Group reached a deal in February to buy Texas Utility TXU Corp. for nearly $32 billion in cash. KKR bought RJR Nabisco for $25.1 billion in 1988.

EMI unlocks anti-piracy software on music. Digital Rights Management or DRM was introduced to contain piracy by preventing users from making multiple copies, but its critics say it restricts consumers and therefore hinders the growth of legal downloading. With all music companies struggling from a drop in the sale of physical albums, EMI, home to Robbie Williams, Coldplay and Pink Floyd, announced its first deal with Apple Inc. and the iTunes online music store. Under the deal, iTunes will offer a higher price of $1.29, 1.29 euros or 99 pence for every track of EMI's catalog available online in a higher-quality format without DRM. EMI albums sold on iTunes will automatically be sold without the software and at the higher sound quality for the same price. The new higher quality DRM-free music will be in addition to EMI's existing range of standard DRM-protected downloads, which will still be available, EMI said at a press conference in central London with Apple Chief Executive Steve Jobs. "We believe that offering consumers the opportunity to buy higher quality tracks and listen to them on the device or platform of their choice will boost sales of digital music," said EMI Chief Executive Eric Nicoli. The industry is likely to watch closely. Warner Music Group has said it sees no logic to dropping DRM but is still testing music without it, while Vivendi's Universal Music has said it, too, is still testing tracks without DRM. Earlier this year, Jobs called on the world's four major record companies, including EMI, to start selling songs online without DRM copy-protection software. Jobs argued that there appeared to be no benefit for the record companies in selling more than 90 percent of their music without DRM on compact discs, while selling the remaining small percentage of music online encumbered with DRM. "Selling digital music DRM-free is the right step forward for the music industry," Jobs said on Monday. "We expect to offer more than half of the songs on iTunes in DRM-free versions by the end of the year. MORE CHOICE EMI said retailers would be offered downloads of tracks and albums in the DRM-free audio format from today. Apple said the EMI Music catalog would be available from May. Consumers who have already bought standard tracks or albums with DRM will be able to upgrade for 30 cents (dollars and euros) and 20 pence per track. EMI music videos will be available via iTunes DRM-free with no change in price. "Since you're not lifting your DRM on everything, you'll have a mixed library, which will also be a challenge," said Shannon Cross, a U.S.-based analyst with Soleil Cross Research who follows Apple. "It's a first step in a very long process." Executives at several rival record companies said they had expected EMI to drop DRM but questioned whether EMI had done sufficient market research to justify the move. "It's problematic," said one executive. "EMI haven't tested it enough, so they don't know what the market reaction is going to be" "The issues are will (unprotected) MP3s help expand the market, and how will it affect piracy? We just don't know," the executive said. EMI's biggest market test was with Norah Jones's single "Thinking About You" in January, while Sony BMG tested the market with Jessica Simpson's "A Public Affair" last summer. There was no formal announcement regarding a Beatles deal, as some followers anticipated when EMI announced on Sunday that it would hold a press conference with Apple. "We are working on it," Nicol said, without giving a time frame. EMI has acted as the distributor for the Beatles since the early 1960s, but the Fab Four's music holding company Apple Corps Ltd. has been a high-profile hold-out from Internet music services like Apple's iTunes. EMI's shares closed up 0.3 percent at 228-1/4 pence, and shares in Apple Inc were up 0.8 percent at $93.63 at 1615 GMT. (Additional reporting by Eric Auchard , Duncan Martell and Michael Kahn in San Francisco, Kenneth Li in New York and Gavin Haycock in London)

FACTBOX: Key points of U.S., South Korea trade deal. Following are key points from the agreement. OVERALL TARIFF CUTS - Tariffs on more than 90 percent of trade in manufactured products and fisheries goods will be eliminated immediately. AUTOMOBILES - Tariffs on South Korean cars with engine size of less than 3,000 cc exported to the United States will be eliminated immediately. The same treatment will be given to South Korean auto parts shipped to the United States. - South Korean cars with engines bigger than 3,000 cc will become duty free within three years. - South Korea will eliminate some non-tariff trade barriers to U.S. autos, including simplifying its auto tax structure and reducing auto tax to 5 percent in three years. AGRICULTURE - South Korean tariff on U.S. beef, which now stands at 40 percent, will be eliminated over 15 years. - Tariff on U.S. pork will be eliminated over 10 years, and on oranges will be maintained during South Korea's harvest season. - South Korea will keep safeguard measures to prevent U.S. beer, pork, chili peppers, and garlic from flooding its market and threatening farmers' incomes. TEXTILES - The United States will immediately eliminate tariffs on South Korean textiles. Measures will be put in place to prevent third country textile products from entering the U.S. market through South Korea. NORTH KOREA - The United States in principle agreed to afford special tariff treatment on goods made in North Korea, such as the Kaesong industrial park. - The treatment will be conditional on further progress in international efforts to end the North's nuclear weapons program and approval by a joint committee. SERVICES - Opening of South Korea's education and medical services will be postponed. - Protection of South Korea's movie industries against U.S. motion pictures will be maintained at the current level. (Source: South Korean Foreign Ministry)

Veda Advantage board agrees to buyout offer. Veda's biggest shareholder Allco Equity Partners Ltd. AEP.AX, which has a 17.3 percent stake, has agreed to support the deal subject to a significant change in market conditions and in the absence of a superior offer. Still, concerns may loom over the eventual success of the transaction with several institutional shareholders protesting a raft of recent private equity buyouts. "There has been a stronger resolve on the side of the institutions not to giving away companies cheaply," said Neil Boyd-Clark, a portfolio manager with ABN AMRO Asset Management, which owns about 6.2 percent stake in Veda. A Macquarie Bank Ltd. MBL.AX-led bid group are facing opposition to a $8.7 billion offer for Qantas Airways Ltd. ( QAN.AX ) while Archer Capital last month narrowly escaped not being turned down by shareholders in an effort to take control of Rebel Sport Ltd. REB.AX. Veda shares rose as much as 7.6 percent to A$3.53, in a lower overall market .AXJO, but were still trading below the offer price of A$3.61 suggesting investors were not expecting a higher offer or a rival bid. "We are pleased to see that an offer is being made at price higher than initially mooted. We will have a look at our position," Neil Boyd-Clarke said. "It's at a sort of level that we would think is reasonable," he added. The consortium, comprising Pacific Equity Partners and Merrill Lynch Global Private Equity MER.N, raised the offer price by 1.7 percent to A$3.61 each, valuing Veda at A$963 million on an enterprise value basis, Veda said in a statement. The enterprise value includes a net debt of A$149.2 million. Veda's price-to-earnings (PE) ratio at the offered price works out to 23.2, far above the average of the 200 companies in the benchmark S&P/AXJ 200 Index .AXJO which is about 14.5. The independent directors of Veda unanimously endorsed the proposal and recommended that Veda shareholders vote in favor of the transaction. The offer price is A$0.06 more than the consortium's indicative offer of A$3.55 in January. Both the indicative price and the recommended offer price exclude an interim dividend offered last month. Pacific Equity Partners Managing Director, Anthony Kerwick, said the due diligence process had reinforced the consortium's view that Veda Advantage is a high quality business that would perform well under private equity ownership. Veda last year changed its name from Baycorp Advantage. The group was created in 2001 by the merger of New Zealand's Baycorp and Australia's Data Advantage. The Baycorp brand was sold last year along with the Baycorp Advantage Collections Services debt collection business to Trans-Tasman Collections, a consortium including Allco Equity Partners and DB Capital Partners in June last year. Allco would reap a profit after a tax of over A$40 million from its two-year investment in Veda if the deal goes through, Allco said in a statement. ($1=A$1.24)

Summary-BOJ tankan shows Japan sentiment worsens slightly. The headline diffusion index (DI) for big manufacturers' sentiment was at plus 23, slightly lower than a two-year-high reading of plus 25 in the December survey and just short of the market's median forecast of plus 24. The DI is calculated by subtracting the percentage of unfavorable responses from favorable ones. A positive number means optimists outnumber pessimists. The BOJ conducted regular revisions to sample enterprises in the tankan in early March and some of December tankan figures have been revised. Following is a summary of details of the survey from a briefing by a central bank official. -- The index for big manufacturers worsened for the first time in a year and its level was the lowest since last June, when it stood at plus 21. -- The index for small manufacturers worsened for the first time in two quarters and the reading of plus 8 was the lowest since September 2006. The index for small non-manufacturers, minus 6, was also the lowest level since September 2006. -- Large firms in all categories plan to increase capital spending for fiscal 2007/08 by 2.9 percent. That is the biggest rise planned as of a March tankan survey since fiscal 1990/91, when firms had forecast a 5.0 percent increase in spending. -- The employment index for big manufacturers at minus 7 was the lowest since February 1992 and that for small non-manufacturers, minus 13, was the lowest since February 1993, suggesting work-force shortages. The employment index is the percentage of firms that say they have excess workers minus those who say they do not have enough workers. -- The production capacity index for big manufacturers stood at zero, the first time since December 2005 it was not in minus territory, suggesting less demand for capital spending. The output capacity index is the percentage of firms that say they have sufficient output capacity minus those who say they do not have enough capacity. -- The interest rate loan index for big firms was at plus 44, the highest level since September 2000, suggesting that more companies feel their cost of borrowing has risen. The index measures the percentage of firms that say interest rates for their loans have risen minus those who say they have fallen. -- The business conditions index for real estate firms, plus 53, was the highest level since February 1991, when it stood at plus 60.

AirTran Airways raises offer for Midwest Air. It is the second time AirTran has increased its bid for Midwest, which has said it prefers to remain independent. AirTran originally offered to buy Midwest for $11.25 per share. A spokeswoman for Midwest said the airline would consider the new offer. The bid now consists of $9 in cash and 0.5842 shares of AirTran common stock for each Midwest share. "We firmly believe in the underlying value and benefits of combining these companies," AirTran Chief Executive Joe Leonard said in a statement. "We are presenting this substantially enhanced offer now in order to give their board and management time to consider it and enter into discussions with us prior to Midwest's May 23, 2007, annual meeting," he said. The offer represents a premium of 83 percent over the 30-day average closing price of Midwest common stock prior to AirTran's initial proposal. The offer is about 65 percent higher than the closing price of Midwest stock on December 12, the day before AirTran disclosed its initial proposal. The original bid was made on October 20 but not disclosed until December 13. AirTran said its new offer will expire May 16. "The board will evaluate the new offer with the help of its advisers and investment bankers and make a recommendation to shareholders," said Midwest spokeswoman Carol Skornicka. She said the board will make its recommendation by April 13 and requests that shareholders not take action before then. The airline industry is recovering from a slump of several years that pushed some carriers into bankruptcy. Experts had predicted airline mergers, but many now say consolidation is unlikely if carriers can survive without it. Shares of AirTran were down 4 cents at $10.23 in midday trade on the New York Stock Exchange. Midwest shares were up 89 cents at $14.40 on the American Stock Exchange.

Shares end higher. First Data, a credit-card and payment processor, said it had agreed to a buyout bid by private equity firm Kohlberg Kravis Roberts & Co. Its stock was the top percentage gainer, up 20.6 percent, on the New York Stock Exchange. The Institute for Supply Management said factory activity grew in March, but less than forecast. The data also showed rising price pressures that could help dissuade the Federal Reserve from cutting interest rates soon even as growth slows. "Stocks, having pulled back from highs in the past week, are on better footing to withstand some of the news," said Steve Goldman, market strategist, Weeden & Co. in Greenwich, Connecticut. Mergers are "shrinking the capital base, so that helps." Shares of Altria Inc. ( MO.N ), parent of cigarette maker Philip Morris, jumped 3.5 percent in the stock's first day of trading after the company spun off its interest in Kraft Foods Inc. The Dow Jones industrial average was up 27.95 points, or 0.23 percent, at 12,382.30. The Standard & Poor's 500 Index was up 3.69 points, or 0.26 percent, at 1,424.55. The Nasdaq Composite Index was up 0.62 point, or 0.03 percent, at 2,422.26. First Data shares rose $5.55 to $32.45. The deal, when including debt and other securities, totals $29 billion. Weakness in software and semiconductor shares, which are sensitive to growth concerns, limited gains on Nasdaq, as well as a downgrade of computer maker Sun Microsystems Inc.. Financial stocks fell after subprime mortgage lender New Century Financial Corp. filed for bankruptcy protection. The Philadelphia Keefe Bruyette & Woods index of bank stocks .BKX fell 1.5 percent and had its sharpest decline in nearly three weeks. The sell-off in banking shares also followed a profit warning from M&T Bank Corp., whose stock dropped 8.5 percent, or $9.88, to $105.95, after it said late on Friday that problems in mortgages with limited income documentation would hurt results. Shares of Altria gained $2.32 to end at $68.22, while Kraft shares fell 2.6 percent, or 81 cents, to $30.85, both on the NYSE. Altria shareholders received 0.692024 of a share of Kraft for each share held, Altria said in a statement. Sun Microsystems shares declined 3.5 percent, or 21 cents, to $5.80 after Sanford C. Bernstein lowered its rating on the company's stock, saying fiscal third-quarter results could be disappointing. Software maker Microsoft Corp., a tech bellwether, fell 0.5 percent, or 13 cents, to $27.74. Among other takeover-related news, U.S. phone company AT&T Inc. said it and Mexican cell phone operator America Movil were in talks to buy stakes in the company that controls Telecom Italia for about $6.4 billion. AT&T shares ended up 3 cents at $39.46. Trading was moderate, with many participants out this week for the Passover or Easter holidays, with about 1.51 billion shares changing hands on the NYSE, below last year's estimated daily average of 1.84 billion. On Nasdaq, about 1.77 billion shares traded, below last year's daily average of 2.02 billion. Advancing stocks outnumbered declining ones by a ratio of about 5 to 3 on the NYSE, while advancers equaled decliners on the Nasdaq.

March manufacturing growth weaker than Feb: ISM. The Institute for Supply Management said its index of national factory activity eased to 50.9 from 52.3 in February. The median forecast of economists polled by Reuters was for slightly less of a slip, to 51.1. A reading above 50 indicates growth in the sector. U.S. stocks slipped into negative territory after the weaker-than-expected data, while bond prices rose slightly. "I have to characterize this as a very soft report as a whole, said Richard DeKaser, chief economist at National City Corp. in Cleveland, adding "the verdict here is not very good, but we still have modest expansion." The prices paid index, which measures inflationary pressures in the manufacturing sector, climbed to 65.5 in March, its highest since August, from 59.0 in February. New orders, a gauge of future growth, eased to 51.6 from 54.9, while the employment index fell to 48.7 from 51.1. The dip below 50 in the employment component had some investors questioning whether Friday's reading on U.S. March non-farm payrolls will be all that strong. "The employment (gauge) is not favorable for the payroll report later this week," DeKaser said. Analysts think about 120,000 jobs were created last month, up from 97,000 in February.

TXU says it does not expect superior takeover bid. TXU said it had not received any competing offers and that its financial adviser, Lazard Ltd. ( LAZ.N ), had told the independent board committee reviewing the takeover that it did not believe the company would receive a superior proposal to the KKR and TPG bid. The investor group said it would pay $69.25 per share for TXU, which owns a utility, power generation and electricity transmission and distribution assets. In morning New York Stock Exchange trade, TXU shares were down 25 cents at $63.85. The power company said it had contacted more than 70 potential buyers as part of a 50-day "go-shop" agreement with its buyers, which allows it to pursue alternative transactions. The go-shop expires on April 16. TXU said it had signed confidentiality agreements with nine groups of potential buyers in addition to KKR and TPG, but had received no formal offer yet. It said there was no indication that these groups were preparing a bid that would be higher or more likely to close than the agreed-upon offer. There has been some uncertainty about the deal's closing as local politicians, citing concerns about rising retail power prices, have fought for more oversight of the sales process. Texas regulators have proposed a six-month period to review power company sales and mergers, which could push the TXU deal's close to late in the year. The Texas Senate has already passed a bill to give the Public Utility Commission expanded authority to review the transaction, and a similar bill is under consideration in the Texas House of Representatives. Under current rules, an acquiring company is not required to report a sale to the PUC until 30 days after the deal closes. KKR officials told Texas legislators they planned to file the required notice by April 25, well before the second half of the year, when they expect the deal to close, to try to dissuade lawmakers from giving the PUC expanded authority. STILL OPEN FOR OFFERS The company said it was still open to competing proposals and would continue to work with its advisers to determine if there are possible superior offers. The deal with KKR-Texas Pacific has a $375 million break-up fee if TXU accepts a competing bid before April 16. After that, the fee rises to $1 billion. TXU said it had solicited interest from domestic and foreign utilities, other energy companies, private equity investors and infrastructure funds. A source familiar with the situation has said that a team of investors that includes private equity firms Blackstone Group, Carlyle Group and Riverstone Holdings was mulling a rival offer for the company. Despite the low break-up fee and a decision by TXU management to remain free for other buyers by not signing employment contracts with KKR or TPG, sources familiar with the deal have said since it was announced that mounting a competing bid would be difficult. Among the hurdles they cited were the size of the financing for the deal, which is worth about $44 billion including debt, and that KKR and Texas Pacific had laid the groundwork with the environmentalists, promising to scale back to three coal-based power plants from a total of 11.

U.S. airline February on-time record worst in 6 years. The data released on Monday by the Transportation Department's statistics bureau raised fresh questions about industry problems with customer service ahead of the summer travel season, historically the busiest for airlines. A report from the department earlier this year found that consumer complaints were up in 2006 as U.S. airlines mishandled more than 4 million bags and had other operational problems, despite improved finances. In February, consumer complaints rose by more than half. The number of mishandled bags increased by more than 100,000 over the February 2006 number. Mishandled bags include luggage that was lost, damaged or placed on the wrong flight. "The stress in the airline system is across the board. Passengers, airline staff, airline corporations are as stretched as we have ever seen them," said Brent Bowen, dean of the aviation institute at the University of Nebraska-Omaha who co-authors an annual airline quality survey, which also on Monday cited an overall drop in service. "Seeing declines in industry performance isn't surprising in this environment, and it will be difficult to change the trends we have seen," Bowen said. Multiple industry performance setbacks have drawn the attention of Congress as well. On Monday, the Senate Commerce Committee said it would hold a hearing on April 11 to review complaints and weigh legislation to force carriers to improve service, especially when facing weather-related delays. With just 67.2 percent of flights on time in February, airlines posted one of their lowest rankings for performance since the transportation agency started comparable record keeping in the mid-1990s. Industry on-time performance fared worse on four previous occasions -- twice in 2000 and twice in 1996. The biggest U.S. airlines and affiliates carried nearly 50 million people in February. It is usually one of the quieter months for air travel but can be one of the worst for weather delays in the Midwest and congested Northeast. Although airports in the Northeast were hit hard by a mid-month ice storm, especially New York's John F. Kennedy airport where JetBlue is based, Chicago's O'Hare was the worst for late arrivals. JetBlue, ranked first for complaints received for the month, canceled more than 1,100 flights over several days beginning on February 14, at one point stranding passengers on planes in New York. JetBlue blamed all of its cancellations for the period on bad weather, according to data it submitted for the government's operating report, which is analyzed by policymakers, consumers and others to judge performance. But JetBlue has said publicly that a large number of cancellations in the days after the storm were related to company decisions -- not bad weather -- that made the problem worse. For instance, planes and crews were out of position, making it harder for the carrier to return to normal service. "We take full responsibility for what followed," JetBlue spokeswoman Alison Eshelman said of the airline's struggle to restart its operations after the storm.

EU charges record companies, Apple on record sales. European Commission spokesman said agreements between Apple and the record companies violate the European Union's rules that prohibit restrictive business practices. "Consumers can only buy music from the iTunes online stores in their country of residence and are therefore restricted in their choice of where to buy music, and consequently what music is available and at what price," said Jonathan Todd, European Commission spokesman. Apple said it wanted to offer a pan-European store but was hemmed in by the music companies' demands. "Apple has always tried to operate a single pan-European iTunes stores accessible by anyone from any member state. But we were advised by the music labels and publishers that there were certain legal limits to the rights they could grant us," its statement said. The Commission's probe grow out of a 2005 complaint by the British consumer group Which?, which said that iTunes purchasers in France and Germany need pay only 99 euro cents ($1.32) for each song they download, compared with the higher 79 British pence ($1.56) paid by those living in Great Britain. The European Commission said it has sent a Statement of Objections in the past week to Apple and unidentified major record companies. The world's four major record companies are Vivendi's Universal Music Group, Sony BMG Music Entertainment, EMI Group and Warner Music Group. The move by the Commission is unrelated to a deal announced on Monday, under which EMI agreed to make its music available online without anti-piracy protection, becoming the first major music group to take the risk in a bid to increase digital sales. It is partnering with Apple's iTunes on the initiative but said it will also work with other digital stores. The European Commission's Todd said that the Commission does not allege that Apple has a dominant market position, nor does it dispute Apple's right to use digital rights management (DRM) in its downloads. Several consumer officials in the 30-country European Economic Area, including from Norway and France, have raised questions about Apple's use of DRM and its incompatibility with other formats. However, competition officials have shied away from raising such concerns. DRM makes Apple downloads generally incompatible with MP3 downloads from competing formats.

First Data agrees to be sold to KKR for $29 bln. The deal is the latest in a string of high-profile leveraged buyouts of U.S. corporations in an era of easily accessible financing, ranking only behind KKR's and Texas Pacific Group's ongoing takeover of TXU Corp. TXU.N in terms of size. Under the agreement, First Data shareholders would be paid $34 for each share of the company they own, a 26 percent premium to where the shares closed on March 30. Based on the 775.1 million shares outstanding the company had in February, the deal has an equity value of $26.4 billion. Neither company was available for immediate comment. The deal includes a "go-shop" provision that allows First Data to solicit proposals from other suitors for the next 50 days. The company said it plans to actively do so with the strategic review committee and its advisers. At $34 per share, KKR is paying 27 times estimated 2007 earnings of $1.24 per share. Based on the $26.4 billion equity value, KKR is paying nearly 14 times estimated 2007 earnings before interest, taxes, depreciation and amortization of $1.9 billion, according to Reuters Estimates. First Data said it was a great time to maximize the company's value and deliver cash to shareholders. The agreement was unanimously approved by the First Data board of directors based upon the recommendation of the strategic review committee made up of three independent directors. The deal is expected to close by the end of the third quarter, subject to shareholder and regulatory approvals. First Data intends to tender for all of its outstanding bonds in conjunction with closing. The move comes about six months after First Data spun off Western Union ( WU.N ), the payment processing company that built the first transcontinental telegraph line. U.S. merger activity surged 21 percent in value in the first quarter, according to figures from research firm Dealogic last week, as private equity firms and corporate buyers shrugged off stock market volatility and poured money into sectors such as energy, real estate and financial institutions such as First Data. Merger activity has soared because of the overall health of the U.S. economy and the availability of money at favorable rates, bankers have said. With private equity firms competing hard for large buyout targets, the First Data deal makes KKR the firm behind the top three largest leveraged buyouts. KKR and Texas Pacific Group reached a deal in February to buy Texas Utility TXU Corp. for nearly $32 billion in cash. KKR bought RJR Nabisco for $25.1 billion in 1988. Citigroup, Credit Suisse, Deutsche Bank, HSBC, Lehman Brothers, Goldman Sachs and Merrill Lynch have committed to provide debt financing for the deal and are advising KKR. Morgan Stanley is advising First Data and Evercore Group the board's strategic review committee.

New Century files for Chapter 11 bankruptcy. The Irvine, California-based company fired 3,200 employees, or 54 percent of its work force. It plans to sell most of its assets within 45 days through the Chapter 11 process. New Century was the largest independent U.S. provider of "subprime" mortgages, or home loans to people with poor credit histories. More than 30 rivals have sold or closed similar operations in the past year. The demise of New Century came less than two months after the company first disclosed problems with delinquent and defaulted loans. It stopped making loans last month, after having made nearly $60 billion in 2006. "We are only at the very beginning of the problems facing subprime," said Sanford C. Bernstein & Co. analyst Brad Hintz. "This liquidity crisis is continuing." New Century filed for protection from creditors with the U.S. bankruptcy court in Wilmington, Delaware. It said it agreed to sell its loan servicing business to hedge fund Carrington Capital Management LLC for $139 million, and some loans and other assets to Royal Bank of Scotland Plc's Greenwich Capital Financial Products Inc. unit for $50 million. "Without a prompt sale of the debtors' mortgage loan servicing business and loan origination platform, those businesses will not be viable and the value will be destroyed," New Century said in a court filing. New Century also lined up $150 million of financing from CIT Group Inc. and Greenwich Capital to keep it operating while in bankruptcy. In a statement, Chief Executive Brad Morrice said selling assets is "a very hard step for me personally and clearly not the outcome I would have preferred." He said it was necessary "given the sudden and significant challenges facing our industry and New Century specifically." Accredited Home Lenders Holding Co., Fremont General Corp. and NovaStar Financial Inc. are among other subprime lenders struggling with rising defaults. LAX STANDARDS U.S. homeowner delinquencies and defaults surged after many subprime lenders eased their lending standards too far. Some of the lenders offered low initial rates, which later jumped beyond what customers could afford, or even made loans that customers could not afford in the first place. New Century was founded in 1995 by Morrice and two others who had helped found Option One Mortgage Corp., a subprime lender that H&R Block Inc. is now trying to sell. After surviving a subprime industry shakeout in the late 1990s, New Century's business mushroomed as home prices rose, especially in its home state, and borrowing costs stayed low. Its slide began in earnest after the company on February 7 said rising defaults would lead to a fourth-quarter loss and force a restatement of results for the three prior quarters. Three weeks later, New Century said federal prosecutors had begun a criminal probe of accounting errors and securities trading. Lenders that had provided it the financing to make loans began cutting the company off. New Century stopped making loans, and at least 17 states told it to stop lending. The company said it has about 100,000 creditors. Larger creditors include Bank of America Corp., Citigroup Inc., Countrywide Financial Corp., Goldman Sachs Group Inc. and Morgan Stanley, among others, court filings show. Lazard Freres & Co., AlixPartners LLP and the law firm O'Melveny & Myers LLP are advising New Century. The company's shares fell 14.5 cents to 91.5 cents on the Pink Sheets, but will probably be worthless following the reorganization. Morrice said subprime loans remain a viable product. "These loans have helped millions of Americans, many who might not otherwise have been able to access credit or to realize the benefits of home ownership," he said. "The non-prime sector will remain an important part of the American economy." New Century won't be part of it. (Additional reporting by Mark McSherry , Christian Plumb and Dan Wilchins )

Wesfarmers in raid for stake in Coles: report. Macquarie Bank MBL.AX, acting on Wesfarmers behalf, picked up about 3.3 percent of Coles in two trades at A$16.47 after the market close, the Sydney Morning Herald newspaper reported citing market sources. "The Herald understands it has agreements with institutional shareholders to lock up 10 percent of the company," it said. The paper said Wesfarmers was positioning itself for a potential A$20 billion hostile bid for Coles, which put itself up for sale in February, alongside private equity group Pacific Equity Partners. The Australian Financial Review paper, in an unsourced report, said the consortium also consisted of Macquarie Bank Ltd. MBL.AX and European buyout fund Permira. "Wesfarmers is likely to use the stake to get its hands on Coles' specialty office products division, the A$1.1 billion Officeworks chain," the Review reported. It added that Melbourne millionaire Solomon Lew, who controls the Premier Investments vehicle which held a 5.8 percent stake in Coles, was believed to have sold shares in the raid. "There was speculation last night that Mr Lew might have negotiated a deal to extract the Target stores from the group in exchange for selling his shares," the Herald said. ($1=A$1.22)

Mortgage woes seen holding US growth "below trend". The sluggish growth will help clear the way for the Federal Reserve to ease monetary policy at the end of the second quarter despite a historically low 4.5 percent unemployment rate, the economic forecasting unit said in its report. Citing Fed Chairman Ben Bernanke's recent comments about the link between inflation and employment levels appearing "looser" than in past decades, the unit projected three cuts to the Fed Funds rate by the end of the year, taking it to 4.5 percent from 5.25 percent currently. "Given the level of unemployment such a move would be unprecedented, but we believe that the Fed is rethinking the role of unemployment in the inflation process," the report said. "Thus we suspect that once the Fed accepts the notion that inflationary pressure has peaked and the housing market has started another leg down, policy will be eased." Housing data will be key, said David Shulman, the economist who wrote the report: "If they see the housing numbers coming in as ugly as we do, we think they will ease pretty quickly." ALL EYES ON HOUSING The housing sector, already suffering from a fat backlog of homes for sale, lukewarm demand and flat to falling prices, is poised for a blow from increasing defaults by subprime mortgage borrowers, Shulman told Reuters. "Housing is subtracting a whole point from gross domestic product," he said. "That is going to continue until we hit the fourth quarter." GDP will grow by 2.1 percent in the first quarter, 1.7 percent in the second quarter, and 2.5 percent in the third quarter, resulting in six consecutive quarters of below-trend growth, Shulman said. Economic growth will then rise to 3.1 percent in the fourth quarter to average 2.2 percent for the year, followed by growth of 3.1 percent in 2008 and 3.4 percent in 2009, Shulman said. "The days of wine and roses for the mortgage market are over," he said. HOME FINANCE FALLOUT Borrowers with spotty credit serviced by subprime lenders snapped up adjustable-rate mortgages with low initial interest rates, but are now being hit with swelling mortgage payments as their loans reset at higher rates. A wave of defaults on the loans has swamped subprime lenders, shaking financial markets in recent weeks and prompting many analysts to suspect borrowers with better credit and adjustable-rate mortgages may also soon be strapped with ballooning mortgage payments after rates on their loans reset. "We're in the second inning of this," Shulman said. "For a lot of folks the numbers just don't work out at market rates." Rising defaults already suggest the inventory of unsold homes will grow, pressuring beleaguered home builders and further paring their contribution to economic and job growth. Shulman sees 5 percent unemployment in the second half of 2007 and has lowered his outlook for housing starts this year. He had initially expected a bottom of about 1.4 million to 1.5 million units, but now sees a bottom of about 1.2 million to 1.3 million units with "risks still on the down side." Homeowners will also be stung by mortgage troubles as lenders tighten loan standards, creating a credit crunch hitting hardest at first-time buyers. Depending on the area, prices of homes for sale this year will fall 5 percent to 10 percent from peaks of recent years, Shulman said. (For more stories on the subprime sector, please click on <ID:nN16195443>)

FACTBOX: New Century creditors named in bankruptcy filing. Company/Parent: Goldman Sachs Mortgage Co./Goldman Sachs Group Inc. Nature of claim: warehouse and repurchase obligation Company: Credit Suisse First Boston Mortgage Capital LLC/Credit Suisse Group Nature of claim: warehouse and repurchase obligation Company/Parent: Credit-Based Asset Servicing and Securitization LLC Nature of claim: repurchase obligation Company/Parent: Morgan Stanley Mortgage Capital Inc./Morgan Stanley Nature of claim: warehouse and repurchase obligation Company/Parent: DB Structured Products/Deutsche Bank Nature of claim: warehouse and repurchase obligation Company/Parent: Deutsche Bank Nature of claim: repurchase obligation Company/Parent: Bank of America Corp. Nature of claim: warehouse and repurchase obligation Company/Parent: UBS Real Estate Securities Inc./UBS Nature of claim: warehouse and repurchase obligation Company/Parent: Lehman Brothers Bank FSB/Lehman Brothers Nature of claim: repurchase obligation Company/Parent: Countrywide Financial Corp. Nature of claim: repurchase obligation Company/Parent: Citigroup Global Markets Realty Corp./Citigroup Inc. Nature of claim: warehouse and repurchase obligation Company/Parent: Residential Funding Corporation/General Motors Acceptance Corporation (GMAC), the financial services subsidiary of General Motors Corp. Nature of claim: repurchase obligation Company/Parent: SG Mortgage Finance Corp./ Societe Generale Nature of claim: repurchase obligation Company/Parent: IXIS Real Estate Capital, Inc./IXIS Corporate & Investment Bank Nature of claim: warehouse and repurchase obligation Company/Parent: Barclays Bank PLC Nature of claim: warehouse and repurchase obligation Spokesperson: "As we said recently, the vast majority of our exposure to all U.S. subprime lenders is fully collateralized and short term, pending distribution. We do not anticipate any material losses to arise from our exposure to the sector." Company/Parent: Indymac Bank FSB/IndyMac Bancorp Inc. Nature of claim: repurchase obligation Company/Parent: Carrington Securities, LP Nature of claim: repurchase obligation Company/Parent: Washington Mutual Bank Nature of claim: repurchase obligation Company/Parent: Alaska Seaboard Partners Limited Partnership Nature of claim: Repurchase obligation Company/Parent: JPMorgan Chase Bank Nature of claim: secondary sale adjustment Amount of claim: $2,458,872.81

South Korea, U.S. seal trade deal at last minute. In one major surprise, South Korea said the United States agreed to give, at least in principle, preferential treatment to South Korean products made in North Korea. The deal to cut tariffs and remove trade barriers follows nine months of talks, and sometimes violent protests in South Korea, mostly over fears that heavily subsidized farmers could not survive a flood of cheaper U.S. farm products. "We expect the ... (agreement) would provide a stepping stone that would catapult Korea into an advanced economy," a press official quoted President Roh Moo-Hyun as saying. U.S. negotiators were equally enthusiastic. "In the agricultural sector, you're going to see substantial new market access for America's agricultural producers in a fast growing, wealthy market ... it's a great deal for America's farmers and ranchers as well," Deputy U.S. Trade Representative Karan Bhatia told a small group of reporters including Reuters'. Seoul agreed in the end to phase out its 40 percent tariff on U.S. beef over 15 years, but did not budge on the most sensitive, and heavily protected, farm product -- rice, something Bhatia said he wished had been included. On another major sticking point, the two agreed to open their markets more to each other's autos. But early reaction suggested the deal could face difficulties in the U.S. Congress. Sen. Max Baucus, a Democrat from the cattle state of Montana who chairs the Senate Finance Committee, threatened to block the deal, which he called an "entirely unacceptable outcome." He wants Korea to accept U.S. beef imports that have been blocked in a dispute that, while not formally part of the trade deal, has cast a long shadow. ASIA'S THIRD LARGEST ECONOMY Bhatia said the struggling U.S. auto industry would be helped by the deal. "We have in this agreement an unprecedented set of provisions to help ensure that American automobile manufacturers ... will gain a level playing field that will allow them to do so," he said. The accord between the United States and Asia's third-largest economy was struck just minutes before time ran out for the White House to use legislation allowing it to present a deal to Congress that can be rejected or accepted, but not changed. Some estimates say an agreement could add $20 billion to the already more than $70 billion of two-way trade each year. In the talks' big surprise, the United States agreed in principle to give certain products from North Korea preferential treatment, South Korean officials said. That was a concession to South Korea, which wanted the goods it makes in an industrial park just inside North Korea to be treated the same as those made at home. The agreement does come with conditions, including progress in talks to end North Korea's nuclear weapons program. "Not only Kaesong but all parts of North Korea will benefit from this," Roh later said in nationally televised remarks. Bhatia rejected the notion that North Korean goods would now be able to enter the United States. "I can tell you there's no contemplation on the United States' part right now to allow goods from North Korea into the U.S. somehow through the FTA. That won't happen," he said. President Bush, in a letter to Congress released by the White House, said the agreement would bring export opportunities for a range of U.S. businesses, promote economic growth and provide jobs. "(It) will also further enhance the strong United States-Korea partnership, which has served as a force for stability and prosperity in Asia," he said. LAST-MINUTE HAGGLING Much of the final bargaining focused on whether the parties could concede enough to each other on farm goods and cars, with both sides seeking lower tariffs and other barriers to auto imports. Both agreed to open up their markets to each other's autos, a move auto analysts say will largely benefit South Korea. Expectations the two sides would strike a deal helped boost South Korea's stock market to a five-week high, especially auto stocks. Negotiators had seemed on the verge of a deal after Bush and Roh agreed last week to instruct negotiators to be flexible. But last-minute haggling meant missing two self-imposed deadlines over the weekend. The trade agreement had to be with Congress by the end of Sunday Washington time (0400 GMT) if it was to meet the 90-day required notice period. If they had missed that, talks would likely have dragged on for years. (Additional reporting by Jessica Kim, Rafael Nam , Rhee So-eui and Kim Yeon-hee in Seoul and Missy Ryan in Washington)

FACTBOX: Free trade deals the U.S. is still negotiating. Here is an overview of other deals in negotiation in Asia and around the world. MALAYSIA: - In February 2007 Malaysia and the United States ended their fifth round of faltering talks on a deal which could double their $44 billion flow of two-way trade. - Neither side has much hope of a speedy solution given Washington's desire for Malaysia to open up government contracts to U.S. firms -- a move which would contravene its politically sensitive affirmative action policies. THAILAND: - Talks that began in 2004 are likely to remain suspended because of Thailand's September 2006 coup. In November 2006, Assistant U.S. Trade Representative Barbara Weisel said talks would not resume until a democratic government was in place. - The United States is Thailand's second-biggest source of direct foreign investment, with $21 billion invested by more than 600 companies. ANDEAN: - Three Andean nations -- Colombia, Peru, and Ecuador -- began negotiations with the United States in May 2004. Deals were completed with Peru in April 2006, and Colombia in November 2006. - No date has been set for resuming March 2006 negotiations with Ecuador; and the November 2006 presidential election, won by Rafael Correa with pledges to limit foreign debt payments, challenge the political oligarchy, and oppose the U.S. free trade deal, could slow progress. UNITED ARAB EMIRATES (UAE): - Formal free trade negotiations began on March 12, 2005, but fell off track in 2006, damaged by a furor over state-owned Dubai Ports World's purchase of certain U.S. port operations. - Trade between the UAE and the United States amounted to $10 billion in 2005, making the UAE the third-largest U.S. trading partner in the Middle East behind Israel and Saudi Arabia. FTAA: - A proposed Free Trade Area of the Americas (FTAA), taking in 34 democracies, has stalled since being mooted in December 1994. - The plan would have united most of North, Central and South America into the world's largest trade bloc, but Latin American countries like Chile, Peru and Colombia are now gaining access to U.S. markets through bilateral agreements. SOUTH AFRICAN CUSTOMS UNION: - Little progress has been made since the five member countries of the Southern African Customs Union (SACU) -- Botswana, Lesotho, Namibia, South Africa and Swaziland -- launched FTA negotiations with the United States on June 2, 2003. - SACU says it cannot meet intellectual property, government procurement and investment criteria. It has called for greater flexibility given the different economic and development levels of the five member countries, a concession the U.S. has rejected. Source: Reuters, U.S. Government Export Portal: Free Trade Deals Currently in Negotiation (www.export.gov/fta/negotiation/UAE/index.asp?dName=negotiation)

Starwood Hotels ousts chief executive. "While the board appreciates the good work Steve Heyer has done to position Starwood for the future, issues with regard to his management style have led us to lose confidence in his leadership," said Stephen Quazzo, chairman of the governance and nominating committee. Chairman Bruce Duncan will be interim CEO while the board searches for a permanent replacement. The hotel operator's stock has fallen almost 7 percent from a nearly 19-year high of $69.65 reached on February 15. It closed at $64.85 on Friday on the New York Stock Exchange. "Starwood is performing extremely well, and I am confident it will enjoy continued success in the future," Heyer said in a statement. The company wasn't immediately available to comment further. Starwood forecast strong profit and revenues for the current quarter and for full-year 2007 when it announced results at the beginning of February, beating Wall Street's expectations. The company reaffirmed its full-year and first-quarter earnings targets on Monday. On February 1, the company forecast earnings before special items of 38 cents per share for the first quarter and $2.50 per share for the full year. Analysts, on average, expect Starwood to post earnings of 39 cents a share in the first quarter and $2.52 a share in 2007, according to Reuters Estimates. "The board is confident in Starwood's prospects and focused on continuing to build shareholder value," Duncan said in a statement. The White Plains, New York-based company, along with most of the U.S. lodging industry, has been enjoying strong travel demand and limited growth in the supply of rooms, allowing for steady increases in rates. It has also been selling hotels and retaining management contracts as well as franchising its brands -- a strategy that helps free up cash. (Additional reporting by Mark Porter )

Zell wins bidding for Tribune: WSJ. A deal with Zell could freeze out Los Angeles billionaire philanthropist Eli Broad and his partner, billionaire grocery store investor Ron Burkle, who had also bid for Tribune. Tribune, owner of leading U.S. newspapers including the Los Angeles Times, Chicago Tribune, Newsday and The Baltimore Sun, has been pushing Zell to raise his bid, which had been close to $34 a share, the New York Times said on Sunday. Tribune shares rose 2.8 percent to $33 in premarket trading from Friday's close of $32.11. Broad and Burkle last week made a bid of $34 per share including $500 million in cash, a source said. That offer was worth about $8.21 billion, based on Tribune's 241.4 million shares outstanding as of December 31. Representatives for Tribune, Zell, Broad and Burkle were not immediately available for comment. The Journal said the exact terms of Zell's offer should be disclosed on Monday morning, including a low break-up fee that could encourage Broad and Burkle to make a higher offer. Media reports have said Zell's plan included $300 million of his own cash and was structured as an employee stock ownership plan, as is Broad's and Burke's bid. AUCTION PROCESS Tribune, which is also a major TV broadcaster and owns the Chicago Cubs baseball team, has been fielding several offers for a buyout or the spinoff of various divisions after its largest shareholder, the Chandler Trusts, publicly aired their anger with the decline in the company's stock price last year. The Chicago-based company has been considering a spinoff of its television operations as well as the Cubs, leaving it as a newspaper publisher, according to reports. Tribune started soliciting offers last fall, but was unimpressed with what it received. It said in January that it would consider options that it could achieve on its own. "Tribune is one of the biggest companies in the business so I think it was difficult for another media company (to bid), plus there were complications with the cross-ownership issues ... but it looks like they found a buyer," said Benchmark Co. analyst Ed Atorino. "I think it's good news for the shareholders, maybe good news for the group." Like most U.S. newspaper publishers, Tribune has seen advertising revenue and circulation fall at its papers as more people use the Internet to get news and entertainment. The company has stakes in online ventures, including jobs site Careerbuilder.com and local news search service Topix.net. It co-owns those companies with fellow publishers Gannett Co. Inc. and McClatchy Co. A special board committee met over the weekend to decide which option it preferred, with Tribune having said earlier that it would make a decision by March 31. Any successful bidder would have to deal with the approximately $5 billion in debt that Tribune has on its balance sheet, according to its annual report filed on February 26.

Fed's Poole says main concern is inflation. He said, however, that he expected inflation to moderate gradually and that the economic outlook could be stronger or weaker than the current outlook. "Inflation is a major concern and if inflation were to head up in a convincing way from the current level, I could be in favor of a rate increase at some point," he told the New York chapter of the National Association for Business Economics, after a speech on inflation. He reiterated in his speech that his personal inflation objective would be 1.5 percent, plus or minus 0.5 percent, as measured by the nonfood, non-energy price index for personal consumption expenditures. Core PCE, minus food and energy, was 2.4 percent higher in March than a year earlier. "The speech is slightly hawkish in reiterating his preference for a 1-1/2 percent centerpoint of a target range for core inflation," said economists in a research note by Goldman Sachs. The Fed has left benchmark overnight interest rates unchanged for the past six meetings after 17 consecutive quarter-percentage-point increases up until June 2006. Poole is a voting member of the Fed's rate-setting committee this year. Poole said in the speech that the economy was fundamentally sound, but later said recent softness in business investment was something of a puzzle and a surprise. "My concern is capital spending may be an indication of some reduced optimism about demand going forward," he said. However, Poole said data released on Monday showing sluggish factory activity was still consistent with the current U.S. growth outlook of about 3 percent. The Institute of Supply Management said factory activity barely grew in March and came in at a slower rate than in February. It was also a little below analysts' forecasts. "It's not evidence of gangbusters growth nor that growth is falling out of bed," he said. "It's consistent with GDP growth of about 3 percent," a reference to gross domestic product. POLICY RULES In his speech, Poole said a clear monetary policy rule provides a central bank with a powerful tool in its quest for sustainable growth and low unemployment. "Focus on monetary policy regimes and policy rules as the instrument of policy, not the near-term choice of the federal funds rate target," he said. "If the (Federal Open Market) Committee communicates its objectives and strategy in a transparent and credible fashion, the bond market and other forward-looking financial markets will amplify the Committee's near-term decisions and thereby do a good deal of its work for it," he said. Poole repeated his preference for adopting an inflation target. The Fed is pondering whether it should adopt a target, as part of a wider assessment of its communication strategy. Poole declined to say how the talks were progressing. The Fed left the benchmark overnight federal funds rate unchanged at 5.25 percent at its last policy meeting in March. But it removed from its policy statement an explicit reference to additional firming of rates, creating flexibility for a rate cut if U.S. economic growth weakened unexpectedly. However, the Fed also left its anti-inflation policy bias intact by stressing inflation remained its predominant concern -- a sign that borrowing costs were not heading down soon. Noting the difficulty of crafting a clear statement, Poole said that Fed Chairman Ben Bernanke was perhaps more clear-cut than his predecessor. "Chairman Greenspan often wrote with the expectation that people would read between the lines," he said. "Chairman Bernanke is trying very hard to have people read the lines and not draw implications from reading between the lines." (Additional reporting by Alister Bull in Washington)

INSTANT VIEW 6-BOJ tankan shows optimism declines. The survey's results did little to alter expectations in the financial markets that the central bank will not move to tighten credit at least until July-September after a rate hike in February. The headline diffusion index (DI) for big manufacturers' sentiment was at plus 23, slightly lower than a two-year-high reading of plus 25 in the December survey and falling short of the market's median forecast of plus 24. KEY POINTS: - The June DI for big manufacturers was seen at plus 20, showing those firms expect conditions to slightly worsen over the next three months. - Big firms expect their capital spending to rise 2.9 percent in the new fiscal year that started on April 1, compared with the market's median forecast for a 1.7 percent rise. - The BOJ conducted regular revisions to sample enterprises in the tankan in early March, and some of the December tankan figures have been revised. COMMENTARY: YOSHIKI SHINKE, ECONOMIST, DAI-ICHI LIFE RESEARCH INSTITUTE "Overall, the figures were in line with expectations. "This tankan confirms that economic growth somewhat slowed down in January-March. "The capital spending outlook for the 2007 fiscal year looks similar to the 2006 fiscal year, when spending was brisk ... so relatively strong capital outlays are likely to be seen this business year again. "I don't think this tankan would affect the BOJ's policy since it was in line with expectations." JAN LAMBREGTS, HEAD OF ASIA RESEARCH, RABOBANK, HONG KONG "The headline sentiment was a bit weaker than expected, but this is not disconcerting. The services sector is holding up well. "Overall, against a backdrop of mixed figures, the survey confirms that the recovery is on track. "No one expects the Bank of Japan to hike interest rates in the next couple of months. One reason is elections coming up, and we know the BOJ is sensitive to political pressure. The other reason is that consumer prices have dipped back into negative territory, so it will be hard to sell a rate hike." MAKOTO YAMASHITA, CHIEF JGB STRATEGIST, LEHMAN BROTHERS "The tankan was generally within expectations. The DI is already at a high level, so unless the big manufacturers' DI fell below plus 20 it wouldn't have much impact on the markets. "Capital spending remains solid, and while corporate profit forecasts are slightly weaker for big manufacturers, they are based on a projection of a higher yen. "The survey doesn't point to risks of economic slowdown." HIROSHI SHIRAISHI, ECONOMIST, LEHMAN BROTHERS JAPAN "It's within the range of expectations, and there's nothing particularly surprising. Basically, sentiment of large firms is holding up at high levels. "The expectations index normally points downward when the index is as high as it is now. The fact that expectations pointed downward is not surprising. "The data on the smaller firms looks a little bit softer. But if you look at the capex plans for this financial year, it's fairly solid. The employment indexes were also positive, suggesting corporates are finding the size of the labor force small. "It doesn't change the picture too much. The Japanese economy is on a medium-term upward trend, but there could be some cyclical weakness in coming quarters. But fundamentally, the corporate sector is fairly healthy." MARKET REACTION: - The yen JPY= edged a tad weaker against the dollar right after the data but later recovered to stand near 117.65 from around 117.75 just before tankan's release. - The Nikkei share average .N225 opens up 0.34 percent at 17,346.25 after the softer tankan. - Benchmark September euroyen futures JEYv1 ticked up to 99.225 after the tankan from 99.220 before the data was released. LINK: - To view the full tables, please go to the home page of the Bank of Japan at: www.boj.or.jp/en/index.htm BACKGROUND - The diffusion index is calculated by subtracting the percentage of companies that consider conditions to be unfavourable from those that consider them to be favorable. A positive number means optimists outnumber pessimists. - Market traders were watching the data for clues on the timing of the BOJ's next interest rate hike, although many expect the central bank to stay put when it holds the next policy board meeting on April 9-10. - The central bank lifted its key overnight call rate target by a quarter percentage point to a decade-high 0.5 percent in February, after having raised rates in July for the first time in six years. It kept rates on hold at subsequent meeting in March. - Japan's economy is experiencing its longest growth cycle in the postwar era, albeit at much slower pace than previous booms. It expanded an annualized 5.5 percent in October-December thanks to brisk capital spending and an upturn in personal consumption.

Stocks feel bear's breath, jobs data ahead. At Friday's closing bell, it looked like there was little relief in sight from runaway oil prices and the lack of reassurances from bank about their already gloomy outlooks. Investors will face a blitz of economic data in the holiday-shortened week, with the marquee number coming in Thursday's payrolls report for June. Recession fears are rising with crude oil's dizzying spiral to a succession of record highs and the relentless stream of forecasts for more bank write-downs. When the second quarter ends on Monday, the U.S. market may finish June with its worst monthly percentage decline since September 2002. "The combination of a banking system that is on its knees and high commodity prices is just making investors nervous," said Ray Rund, managing director and head of research at Shaker Investments in Cleveland, Ohio. "Even though we are not technically in a recession, it certainly feels that way." U.S. oil futures shot up to a record high just a penny shy of $143 a barrel on Friday -- wrapping up a week when the president of OPEC predicted that oil prices could rise as high as $170 in the coming months. Gold hit a one-month high. The Dow Jones industrial average .DJI finished the week down 4.2 percent, while the Standard & Poor's 500 Index .SPX slid 3 percent, and the Nasdaq Composite Index .IXIC dropped 3.8 percent. It was the worst week for the Dow and the Nasdaq since February 10. SHRINKING PAYROLLS, SLOWER FACTORIES The outlook for the U.S. job market is grim, based on forecasts for Thursday's payrolls report. Economists polled by Reuters expect a loss of 60,000 jobs in June, compared with a decline of 49,000 in May. The U.S. unemployment rate, however, is predicted at 5.4 percent, a slight improvement from May's 5.5 percent, which was the highest since October 2004. Thursday's data will include the Institute for Supply Management's June reading on the vast services sector -- a day before the market closes for the Independence Day holiday on Friday. The ISM service-sector index is pegged at 51.0 in June, compared with 51.7 in May, the Reuters poll showed. On Tuesday, two reports will get scrutiny: the ISM's June index on the U.S. manufacturing sector and U.S. car sales. The ISM manufacturing index is forecast at 48.6 in June, down from May's 49.6, with a reading under 50.0 signaling contraction, the Reuters poll showed. Gasoline prices at $4 a gallon are slashing the demand for gas-guzzling sport utility vehicles. This week, the stock of Dow component General Motors Corp ( GM.N ) plummeted to a 53-year low after Goldman Sachs cut its rating on GM to "sell" and warned it would have to raise capital. Domestic car sales probably declined in June to an annualized pace of 5.29 million units from May's rate of 5.36 million, while domestic truck sales are predicted to have slowed to an annualized rate of 4.92 million in June from May's 5.12 million, the Reuters poll showed. The ADP National Employment Report, a private employment survey, is due out on Wednesday, along with a report on May factory orders. In contrast, earnings reports will be sparse. Any data that shows some life in the economy will help relieve some concerns for investors, analysts said. But the market is eager to see that the impact of the credit crisis on banks is abating before there can be any meaningful rebound in stocks. MORE MAALOX MOMENTS? Adding to investors' queasiness is the Federal Reserve's decision this week to take a break from cutting interest rates as the threat of inflation becomes more ominous. To analysts, the Fed's growing discomfort with inflation suggests that it may choose to put its worries about growth on the back burner and focus instead on price stability. The Fed on Wednesday left its benchmark fed funds rate at 2 percent, breaking a cycle of cutting its target rate for overnight bank loans by 3.25 percentage points since mid-September 2007. "My personal opinion is that we could test 11,100 on the Dow in the next couple of days," said Victor Pugliese, director of listed equity trading at Broadpoint Securities in San Francisco. "I think the market still trends down and if we can hold at the 11,000 or 11,100 mark, somewhere in there, there's a chance we can get a bear market rally for a few days." During Friday's session, the Dow briefly tipped below the threshold that market technicians define as a bear market, falling more than 20 percent from its record closing high set last October. A bear market is marked by a prolonged period of falling stock prices. It is not considered official unless there is a market close of 20 percent below the most recent closing high. The Dow Jones industrial average .DJI hit its lowest daily close in 21 months on Friday -- less than 15 points away from ending 20 percent below its record finish on October 9, 2007. "Considering that the Dow is at its lowest since 2006, the question is whether the S&P, Nasdaq and the Russell 2000 will follow the Dow in breaking March and January lows," said Peter Boockvar, equity strategist at Miller Tabak & Co in New York. "The path of least resistance is down and those indices will follow the Dow down in breaking those levels. Whether this happens next week, or the following or even next month, I don't know. I don't know when it's going to happen. I just know it's going to happen." Notable earnings reports next week among S&P 500 companies will come from tax preparer H&R Block Inc ( HRB.N ) on Monday, for-profit education company Apollo Group Inc ( APOL.O ) on Tuesday and super-discounter Family Dollar Stores Inc ( FDO.N ) on Wednesday. Also set to command attention next week are speeches on the economy by two key Fed officials: Federal Reserve Bank of Atlanta President Dennis Lockhart is scheduled to give brief remarks at an event on Tuesday evening in Washington, D.C., while Federal Reserve Board Governor Frederic Mishkin speaks on Wednesday in Israel. (Wall St Week Ahead runs weekly. Questions or comments on this one can be e-mailed to: ellis.mnyandu(at)thomsonreuters.com ) (Additional reporting by Walker Simon ; Editing by Jan Paschal )

Market ends lower, Dow on cusp of bear market. Friday's decline built on Thursday's rout in which the Dow fell about 360 points, and rounded out its worst week since February 10. While the blue-chip Dow average briefly dipped into bear market territory, it managed to close above that level, thus narrowly avoiding the official onset of a bear market, or a 20 percent drop from its all-time high. As the price of oil crossed $142 for the first time, shares of companies that sell everything from fast food to soap slid as fears mounted that consumers will need to cut back. Procter & Gamble ( PG.N ) shares lost almost 3 percent. Financial stocks were the top drag on the S&P 500. Merrill Lynch's MER.N shares fell after Lehman Brothers forecast Merrill would write down another $5.4 billion in the second quarter. In addition, Moody's Investors Service said it may cut Morgan Stanley's ( MS.N ) credit ratings. "We are already in a bear market. You see fundamentally sound companies being punished for the overall performance of indexes," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey. "Even the good ships get stranded on the beach when the tide goes out," The Dow Jones industrial average .DJI dropped 106.91 points, or 0.93 percent, to end at 11,346.51. During the session, the Dow dropped below 11,331.62, or more than 20 percent below its October 9 closing high. The Standard & Poor's 500 Index .SPX fell 4.77 points, or 0.37 percent, to close at 1,278.38, while the Nasdaq Composite Index .IXIC slipped 5.74 points, or 0.25 percent, to 2,315.63. For the week, the Dow fell 4.2 percent, the S&P 500 fell 3 percent for its worst weekly decline since June 6, and the Nasdaq fell 3.8 percent, its biggest weekly drop since February 10. Merck & Co ( MRK.N ) shares, which rose after a positive study on its experimental migraine treatment, as well as a gain in oil companies' shares helped keep the losses in check. Merck's stock rose 2.2 percent to $36.98 after it said a late-stage study showed its treatment provided similar pain relief to AstraZeneca PLC's ( AZN.L ) Zomig treatment, but was better tolerated. U.S. crude climbed to a record for a second straight day, jumping as high as $142.99 a barrel, as a weak dollar and slumping equities made oil and other commodities an attractive investment alternative. Exxon Mobil shares gave the biggest boost to the S&P 500, even though they rose a mere 0.2 percent to $86.55. Companies whose fortunes are closely tied to the cost of fuel also fell. U.S. plane maker Boeing's ( BA.N ) shares fell 1.9 percent to $66.92. United Technologies ( UTX.N ) shares dropped 2.6 percent to $61.15 and weighed heavily on the Dow. Among financials, Merrill shares fell 1.1 percent to $32.70, while Morgan Stanley shares dipped 0.3 percent to $36.71. JPMorgan Chase ( JPM.N ) shares fell 3.5 percent to $35.05 and were among the top drags on the S&P 500, while Citigroup ( C.N ) shed 2.4 percent to $17.25. Citigroup's decline also weighed on the S&P. American International Group Inc ( AIG.N ) shares fell 1.2 percent to $27.75. AIG said it planned to absorb up to $5 billion in losses on sales of investments from a dozen insurance units hit by the subprime meltdown, Bloomberg News reported. BlackBerry maker Research In Motion Ltd RIMM.ORIM.TO fell 2 percent to $120.98, adding to the previous day's steep losses sparked by the disappointing profit outlook the company gave late Wednesday. RIM was the top drag on the Nasdaq. Home builders' shares tumbled after KB Home ( KBH.N ), the No. 5 U.S. home builder, posted a wider-than-expected quarterly loss. The stock fell 2.3 percent to $17.72 onthe NYSE. Early in the session, Commerce Department data showed U.S. personal spending rose by a greater-than-expected 0.8 percent in May, while a key gauge of inflation remained muted. Some economists said the stronger spending would double the pace of U.S. growth in the second quarter from what they had been predicting before the data. However, there is a big question mark over whether this will be sustainable. These concerns were reinforced a short while later by the Reuters/University of Michigan Surveys of Consumers, which hit another 28-year low in June of 56.4 from May's 59.8 reading. It also showed elevated household expectations for inflation. Trading was active on the New York Stock Exchange, with about 2.29 billion shares changing hands, above last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 3.36 billion shares traded, also above last year's daily average of 2.17 billion. Declining stocks outnumbered advancing ones by a ratio of about 2 to 1 on the NYSE and by 3 to 2 on Nasdaq. (Editing by Jan Paschal )

Goldman's senior metals trader Evans leaves bank: sources. His exit comes almost three years after he was hired to set up the bank's physical base metals trading desk. The foray into physical trading was part of the bank's efforts to offset tighter regulation after being forced to close its proprietary metals derivatives operation. A spokesman for the bank declined to comment. Copper trader David Freeland quit the bank's London desk last month and is moving to commodity trading house Noble ( NOBG.SI ), sources said. Noble declined to comment. The departure of a founding member of the desk is another sign that Wall Street's No. 1 bank for commodities is struggling to expand into the capital-intensive and high-risk business dominated by commodity merchants Glencore ( GLEN.L ) and Trafigura TRAFG.UL. Last year, commodity revenues at the bank, one of the world's largest traders of metal derivatives, sank by more than 60 percent year-on-year to just $575 million. Banks have also faced increased competition from new entrants, such as energy-focused merchants, including Vitol and Mercuria, that have swooped into the metals space spying better returns than in oil. Evans joined from Mitsubishi in the summer of 2010 just months after the bank bought warehousing company Metro for about half a billion dollars. Peter Goertzen in London, who also was hired from Mitsubishi in 2010, and Jeff Romanek in New York are the two remaining traders. (Additional reporting by Melanie Burton Reporting by Josephine Mason,; Editing by Gary Hill and Himani Sarkar)

Ex-SEC chief Schapiro to join private consultancy firm. Consulting firm Promontory Financial Group LLC spokeswoman Debra Cope on Tuesday confirmed an earlier report by the Wall Street Journal. Schapiro stepped down as SEC chairman in December. When Schapiro took over in 2009, the agency was under fire for regulatory blindspots that critics said helped to fuel the financial crisis. It was also lambasted for failing to catch now-convicted Ponzi schemer Bernard Madoff, whose fraud cost investors an estimated $65 billion. In addition to shoring up the agency's name, Schapiro had to fight numerous other fires - from the 2010 "flash crash" that sent the Dow Jones industrial average tumbling 700 points within minutes to high-profile court losses. In an interview with the Wall Street Journal, Schapiro said she wouldn't go back to government. "After spending 28 of the last 32 years as a regulator, now was the right time to do something different," she said. ( link.reuters.com/tuq96t ) Promontory is a strategy, risk management, regulatory, and compliance consulting firm founded in 2001 by Eugene Ludwig, who served as U.S. Comptroller of the Currency under President Clinton. (Reporting by Mridhula Raghavan in Bangalore; Editing by Mark Potter )