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Economy barely expands in fourth quarter, brighter days ahead. The Commerce Department said on Thursday the economy expanded at a 0.1 percent annual rate in the last three months of 2012, scratching an earlier estimate that had showed a small decline. The growth rate was the slowest since the first quarter of 2011 and fell short of the 0.5 percent economists had expected. But consumer spending, while not stellar, was comparatively robust and economists see signs the factors that restrained growth late last year are already reversing in the first quarter. A month ago, the government had said the economy contracted at a 0.1 percent pace. "The details of the report bode well for the beginning of this year," said Harm Bandholz, an economist at UniCredit in New York. Indeed, other reports on Thursday showed a drop in new claims for jobless benefits last week and a sharp rise in factory activity in the Midwest, adding to a string of recent data that suggests the economy improved early this year. The GDP report showed consumer spending expanded at a 2.1 percent annual rate in the fourth quarter. That suggests modest underlying momentum in the economy as it entered the first quarter, when a significant tightening of fiscal policy began. Inventories subtracted 1.6 percentage points from the GDP growth rate during the fourth quarter, while defense spending plunged 22 percent, shaving 1.3 points off growth. Many economists expect both of those categories to add to growth in the first three months of the year. The drag from inventories was actually greater late last year than initially estimated, suggesting an even sharper rebound is due in the first quarter. Data on retail sales and on housing have suggested a tax hike enacted in January did not deal a big blow to households, and most economists think growth will pick up later this year despite a wave of federal spending cuts due to begin on Friday. POCKETS OF STRENGTH There were some relatively bright spots in the GDP data. Imports fell 4.5 percent during the period, which added to the overall growth rate because it was a larger drop than in the third quarter. Buying goods from foreigners bleeds money from the economy, subtracting from economic growth. At the same time, exports did not fall as much as the government had thought when it released its earlier estimate. Exports have been hampered by a recession in Europe, a cooling Chinese economy and storm-related port disruptions. Excluding the volatile inventories component, GDP rose at a revised 1.7 percent rate, in line with expectations. These final sales of goods and services had been previously estimated to have increased at a 1.1 percent pace. Business spending was revised to show more growth during the period than initially thought, adding about a percentage point to the growth rate. Growth in home building was revised slightly higher to a 17.5 percent annual rate. Residential construction is one of the brighter spots in the economy and is benefiting from the Federal Reserve's ultra-easy monetary policy stance, which has driven mortgage rates to record lows. JOBLESS CLAIMS FALL A separate report showed the number of Americans filing new claims for unemployment benefits fell more than expected last week, suggesting some traction in the labor market recovery. Initial claims for state jobless benefits dropped 22,000 to a seasonally adjusted 344,000, the Labor Department said. Economists polled by Reuters had expected first-time applications to fall to 360,000. While the level of jobless claims is near where it was in the early days of the 2007-09 recession, hiring has remained quite lackluster. Job gains have averaged 177,000 per month over the past six months. High unemployment prompted the U.S. central bank last year to launch an open-ended bond buying program that it said it would keep up until it saw a substantial improvement in the outlook for the labor market. In a separate report, the Institute for Supply Management-Chicago said the pace of business activity in the U.S. Midwest rose to its highest level in nearly a year in February as new orders increased. (Additional reporting by Lucia Mutikani in Washington and Leah Schnurr in New York; Editing by Andrea Ricci and Tim Ahmann )

Caterpillar plans to cut 1,400 jobs in Belgium. The cuts will come at the Gosselies site just outside of Charleroi, one of the largest Caterpillar facilities in Europe, where the group makes hydraulic excavators, loading vehicles and engine parts. The site employs 3,700 people. "Though they are painful, these measures are indispensable to allow us to be competitive and give a chance of survival to our factory," said Nicolas Polutnik, CEO of Caterpillar Belgium. The job cuts at Caterpillar are the latest in a string of large-scale layoffs in Belgium. The world's largest steelmaker, ArcelorMittal ( ISPA.AS ), said in January it planned to shut facilities at its site in Liege, with the likely loss of around 1,300 jobs, while Ford Motor Co ( F.N ) announced last October it would close its plant in Genk, affecting 4,000 workers. "The numbers we have received are a catastrophe, and that in a region like Charleroi...," a spokeswoman for the socialist FGTB union said. About one in five people in Charleroi are unemployed, double Belgium's national average. Apart from the economic slowdown in Europe and increased competition, Caterpillar said its products faced different environmental rules in different parts of the world, which made its production process more complicated. Caterpillar said costs were so high at present that it would be cheaper to import machines from elsewhere than produce them at the Belgian plant. Caterpillar has invested 210 million euros ($275.3 million)in the site in the past five years. ($1 = 0.7628 euros) (Reporting by Robert-Jan Bartunek, additional reporting by Ben Deighton; Editing by Philip Blenkinsop )

UBS sued by two traders fired in Singapore over rate scandal. In separate lawsuits filed at Singapore's High Court on Wednesday, Mukesh Kumar Chhaganlal and Prashan Parmeshwar Sunny Miripuri said UBS ( UBSN.VX ) never gave them full details of what they were alleged to have done wrong. UBS declined to comment. UBS was fined $1.5 billion in December last year for its role in a multi-year scheme to manipulate the London interbank offered rate (Libor) and other benchmark interest rates. "It appears to the plaintiff that his summary termination was effected in order to mitigate the defendant's (UBS) role in the growing scandal related to alleged fixing of reference rates in the Singapore market," papers in Kumar's case say. Kumar, who was the former co-head of Macro Trading, Emerging Markets Asia, and Miripuri, who ran UBS's South East Asian Desk for NDF trading, were both fired on February 7 having been suspended since last year. Both men said in the papers that UBS never gave them full details of why they were being suspended and subsequently fired. According to the court documents, the two former UBS traders were given letters by the bank on February 7 that said they were being terminated "on the ground of gross misconduct" with no further explanation. "They were not presented with any evidence showing they fixed rates," said Daniel Chia, a director at Stamford Law Corp., which is representing the traders. "UBS cannot pinpoint what they did wrong." A spokeswoman for UBS in Singapore said the bank is declining to comment on the case as the investigations into the alleged manipulation of reference rates are still ongoing. She added that the bank is co-operating fully with the authorities. Kumar did not comment beyond what he said in the court documents when Reuters spoke to him via telephone. Miripuri could not be immediately reached for comment. Kumar is seeking damages including shares which would have been due to him under the bank's equity ownership plan worth S$2.41 million ($1.95 million) at the time he was dismissed, as well as three months of salary in lieu of notice totaling S$150,000, according to the court papers. Miripuri is claiming three months of salary, the balance of his performance incentive for 2012 that he said he was promised when he joined UBS at the start of that year which comes to S$484,966, and shares worth more than S$700,000 at the time of his dismissal, the documents he filed to the court show. RATE FIXING The Monetary Authority of Singapore (MAS) ordered banks that help set local interbank lending rates and NDF rates to review the fixing process last year as U.S. and British regulators cracked down on manipulation of Libor, a benchmark used to set interest rates for around $600 trillion worth of securities. Kumar said in his suit that he voiced concerns about the regulation of reference rate setting in Singapore to his UBS manager Bala Venkatesan, the MAS, and the Association of Banks in Singapore (ABS) before the bank reviews began. "The plaintiff felt there were insufficient checks and balances concerning the setting of reference rates by various international banks operating in Singapore," his papers say. During 2012, Kumar saw increasingly unrealistic rates for the Indonesian rupiah against the dollar being set in the market and brought this to Venkatesan's attention "as evidence of the lack of regulation in the NDF market," the papers say. He said Venkatesan responded there was no way to "control the market or how people set the rates on the market." Vankatesan, who was head of Fixed Income, Commodities and Currencies for UBS in Asia but has since left the bank, declined to comment when contacted by Reuters. An MAS spokesman told Reuters that it is not able to comment on ongoing legal proceedings, while ABS did not respond to requests for comment from Reuters. NDFs are derivatives that let companies and investors hedge or speculate on emerging market currencies when exchange controls make it difficult for foreigners to participate directly in the spot market. Spot reference rates submitted by lenders in Singapore to ABS are used to determine the settlement prices of NDF contracts in the Indonesian rupiah, Malaysian ringgit and Vietnamese dong. Thomson Reuters, parent company of Reuters News, calculates and distributes the spot reference rates for the rupiah, ringgit and dong NDF markets on behalf of the ABS, as well as other interbank lending and currency rates. The biggest banks in the Asian NDF markets include UBS, JPMorgan Chase & Co ( JPM.N ), DBS Group Holdings Ltd ( DBSM.SI ) and HSBC Holdings Plc ( HSBA.L ). ($1 = 1.2377 Singapore dollars) (Reporting by Rachel Armstrong; Editing by Ryan Woo)

Opel revamp deal expected this week: German union. "We are just about to reach an agreement," said a spokesman for IG Metall on Thursday. The negotiations, which started in June and were supposed to complete by the end of October, could be concluded on Thursday but may need an extra day, according to the union spokesman. Opel could not be reached immediately for comment. The deal is expected to extend job guarantees by another two years to 2016 for all four German plants, which together employ around 20,000 workers. At the start of 2017 at the latest, however, assembly lines at the Bochum car plant will cease running and only some components and warehousing jobs will remain under the deal. A union source involved in the negotiations told Reuters labor leaders were not willing to agree on further wage concessions and job cuts in Bochum. Workers fear GM wants to "hollow out" Opel, where labor has had certain rights under German law ever since it became a joint stock company in 2010. Operating assets outside of Germany once owned by the company were being successively regrouped directly under parent GM, triggering union suspicions that Detroit wanted to undermine union influence in product, investment and strategy decisions. Unions want to avoid further decisions such as the one taken a year ago to build the Opel Antara SUV in South Korea, taken by parent GM above the heads of Opel management and its supervisory board, in which unions have a seat at the table. GM's second-largest brand behind only Chevrolet, Opel has lost billions in recent years as Europe's car market has plumbed near 20 year lows, despite repeated bouts of job cuts that included closing a car plant in Belgium at the end of 2010. (Editing by David Holmes )

Italy's inconclusive vote makes ECB bond-buying more likely: poll. The huge protest vote by Italians against economic hardship sent European financial markets reeling this week as the result left a power vacuum in the euro zone's third-largest economy and one of its most vulnerable. Forty-four out of 55 economists polled this week said the result made it more likely the ECB will activate its bond purchase program, called Outright Monetary Transactions (OMTs), designed to cut borrowing costs for crisis-hit euro zone countries. The remaining 11 said it would not. Underlining how the problems of individual countries resonate through the currency union, Spain - not Italy - remains seen as the most likely to seek ECB help through the OMTs. "The potential for contagion as a result of uncertainty and volatility, and a further widening of spreads, has increased the probability that Spain may trigger it," said economist Azad Zangana at Schroders, an asset management company in London. Twenty-two economists thought Spain would probably access the OMT program this year, and 18 said Italy. A handful, including Schroders' Zangana, said Portugal and Ireland. Spanish Economy Minister Luis de Guindos said on Tuesday Madrid was no closer to seeking bond-buying help than it was before Italy's election. Forecasts in the poll for the timing of an OMT request were spread across this year. A growing minority of respondents - 22 out of 76, compared with 18 last month - also expect that, eventually, the ECB will cut its main refinancing rate from 0.75 percent to a new record low of 0.5 percent. Complicating the outlook are an ambiguous set of economic data over the last month. Euro zone consumer and investor confidence has been rising steadily since the start of the year, but that hasn't so far translated into an improvement in business surveys. Still, given that the economic malaise is unlikely to end soon, Italy's political stalemate now tops the list of risks to the euro zone's financial stability. Even days after the election, markets have demonstrated the importance of the ECB's backstops. The central bank's promise to buy bonds from struggling states, if needed, helped Italian government bonds pare losses on Thursday. Bond strategists say it will continue to do so. <GVD/EUR> FAR FROM THE EXIT ECB President Mario Draghi said late on Wednesday the central bank is not about to remove the crisis measures it deployed to help the ailing euro zone economy, saying he is "far from having an exit in mind". Indeed the poll's consensus suggested the ECB would keep its main refinancing interest rate on hold at 0.75 percent deep into next year at the earliest, although there were the growing expectations for a rate cut to 0.5 percent. Juergen Michels, economist at Citi and one of the most bearish forecasters on the euro zone, expects a rate cut next quarter to 0.5 percent, citing the weak economy and upwards pressure on the euro. "We expect another cut to 0.25 percent by the year end, probably joined by a cut in the deposit rate to minus 0.25 percent," he said. The poll put a median 90 percent chance there will be no change in interest rates at next Thursday's meeting. The ECB's staff also publishes their quarterly outlook for the euro zone economy next week. Thirty-four out of 52 analysts think they will issue a gloomier projection for 2013 compared with December's forecasts. Economists polled by Reuters earlier this month reckoned the euro zone economy might pull itself out of recession this quarter, but no-one saw any prospect of a major upturn thereafter. <ECB/INT> (Polling by Shaloo Shrivastava. Editing by Jeremy Gaunt.)

ANA puts Dreamliner fleet architect in charge of airline business. The management reshuffle comes as the airline juggles its schedules and cancels flights with its 17 Dreamliners parked at airports in Japan until U.S. and Japanese regulators allow the aircraft to fly again. All 50 of the technologically advanced 787s in service industry-wide have been grounded since mid-January after a battery fire on a Japan Airlines Co Ltd ( 9201.T ) 787 at Boston airport and a second battery incident on an ANA flight in Japan. ANA's current CEO and president, Shinichiro Ito, who has managed the carrier since 2009, will still be Shinobe's boss as head of the holding company, which will also oversee ANA's other businesses, including airport services and its trading company. Shinobe, who joined ANA in 1976, has served as senior executive vice president since April of last year. Shinobe and Ito will hold a news conference in Tokyo on Friday at 10:00 a.m. (0100 GMT). (Reporting by Tim Kelly; Editing by Edmund Klamann)

Italy vote arms critics of Berlin's austerity mantra. While the outcome will not persuade Germany to abandon its demands for budgetary rigor altogether, it makes it more likely debt-laden euro zone states will receive some leniency from Berlin, paymaster of the European Union, as long as they show real efforts on reform. Early beneficiaries of that indulgence will be France, which in coming weeks expects to win a year's grace from the European Union to achieve deficit targets, and Cyprus, which Berlin now acknowledges must be offered an aid package next month. "THE SOUTH IS COMING," Panos Kammenos, head of the fiercely anti-austerity and anti-German Independent Greeks party tweeted in response to the Italian election, which he saw as a backlash against the rigor imposed on southern states such as Greece, Portugal and Spain. While the poll deadlock in Rome owes much to Italy's chaotic politics, it showed a huge popular protest against austerity measures and underlined the north-south split dividing Europe into debt sinners and self-appointed fiscal disciplinarians. Stirring up animosities dating back to World War Two, the debt crisis has turned Angela Merkel, the unassuming daughter of an East German pastor, into Europe's most divisive leader since Britain's Tony Blair split the continent in two by backing the 2003 U.S.-led Iraq war. Lampooned in banners on Irish soccer terraces and in Spanish and Greek cartoons, Merkel has become the embodiment of austerity and is among the tiny band of European politicians who stir genuine passions across the continent. "Mrs Merkel cannot lead Europe alone," France's left-wing Industry Minister Arnaud Montebourg said this week in a rare breach of French policy not to criticize the conservative German leader in public. NO DIKTAT? French Finance Minister Pierre Moscovici, more senior to Montebourg in the government, declined to join such attacks in an interview for the Reuters Euro Zone Summit this week. But he stated: "The message from Italy is: 'Be careful, when you are in a situation in which you ask populations to make sacrifices for long periods ... There needs to be another perspective - which is 'growth again'." While Paris accepts that the might of the German economy has thrust Berlin into a crisis leadership role, officials complain in private that Germany has yet to work out how it can perform that role without raising the hackles of others. German opposition chancellor candidate Peer Steinbrueck found himself on the wrong side of that dilemma on Wednesday - and in the process talked himself out of dinner with Italy's president - by describing ex-premier Silvio Berlusconi and comic-turned-politician Beppe Grillo, who both scored well in the election thanks to protest voters, as "clowns". German leaders bristle at the accusation they are trying to browbeat Europe into their mould, with President Joachim Gauck - the largely ceremonial head of state - insisting last week that Berlin did not want to rule the continent by "German diktat". "We don't want to intimidate others, nor force our ideas upon them. But we do stand by our experiences and want to share them," Gauck said in a speech, noting Germany's economy had been written off as unreformable less than a decade ago. The hands of Merkel and Steinbrueck are tied; neither can expect to win a September election if they relent too much on a path of budgetary rigor that is as popular with German voters as it is poisonous to electorates in southern Europe. But Germany's austerity push is not as monolithic as many opponents would have it. SOURCE OF PAIN Berlin already agreed last year to give Spain and Greece more time to seek budget cuts and, in a move intended as an attempt to boost growth and help the competitive edge of other euro economies, has let its domestic wage levels tick higher. Finance Minister Wolfgang Schaeuble told the Reuters summit that stable finances remained a condition for growth, and warned against a repetition of the joint Franco-German push a decade ago to water down EU budget rules. But he also showed a conciliatory line on France's admission last week that it will miss a 2013 deficit target of 3 percent of output. "France is not saying it will flout the rules," he told the Stuttgarter Zeitung newspaper, adding it was time to look with the European Commission at what the admission meant for the EU stability pact governing deficit targets. That gels with the Commission view that a postponement of deficit targets for countries on the brink of recession is possible if they are trying their hardest to secure reform. Even the Netherlands, which for years played hardball on the need for southern countries to accept budget cuts, may now fall into that category after conceding on Thursday it will miss its own deficit target this year. But European Commission President Jose Manuel Barroso rejected the idea that the Italian vote would mean countries around the zone simply being let off the hook. "We never said it would be easy ... But I insist for this kind of policy we need leadership, democratic leadership that has the courage to resist short-term considerations and the capability to explain to the public what is at stake," he told Reuters. As always with politics, form is as important as substance. Clemens Fuest, incoming president of Germany's ZEW centre for economic research, said that for Europe's leaders to keep selling austerity policies to their voters, they must also convince them they have a plan to kickstart the region's economies by highlighting efforts to prop up banks and private investors. "They have to come up with a credible story that will tell voters there is some silver lining on the horizon," Fuest said. "There has to be some sort of growth story." That is something on which, according to a conservative ally of Merkel, the German leader is already reflecting. "If the economic situation in southern Europe gets worse, if unemployment continues to rise, that doesn't help her," said the ally, who requested anonymity. "She wants to see growth. She has no interest in being seen as the source of the pain." (Additional reporting by Reuters Euro Summit team; Nicholas Vinocur in Paris; Noah Barkin in Berlin; Deepa Babington in Athens; Fiona Ortiz and Manuel Maria Ruiz in Madrid; Padraic Halpin and Conor Humphries in Dublin; Gilbert Kreijger in Amsterdam; Editing by Will Waterman)

Sodexo bets on new services and emerging markets. Sodexo, which manages canteens and facilities for office workers, armed forces, schools, hospitals and prisons, also sells vouchers for meals and gifts. Its clients range from the Royal Ascot Racecourse to the U.S. Marine Corps. The world's No.2 catering services company behind British group Compass ( CPG.L ) plans to expand mostly without acquisitions, but could target small to mid-sized deals in facilities management and vouchers, its chief executive said on Thursday. "These two big levers (diversification and emerging markets) allow us to be relatively, even very confident for the future," Michel Landel told Reuters in an interview. Sodexo, which operates in 80 countries and has a market value of 11 billion euros ($14.42 billion), has forecast "modest" revenue and profit growth in the year ending August 31, due to a slow growing European market. "Short-term we have said growth would be limited but we are well positioned for the medium and long-term. We will continue to invest despite a difficult economic climate," Landel said. With cash of over one billion euros and a debt to equity ratio of 21 percent, Sodexo has "the means to fund its expansion", Landel said. Catering contributes 70 percent of Sodexo's turnover, but companies and governments seeking to cut costs by outsourcing services like equipment maintenance and prisoner training have helped fuel growth at its facilities management busness, which contributes 26 percent of sales and is now Sodexo's fastest growing business. That growth could see the business contribute between 35 percent and 40 percent of sales within 3-4 years, Landel said. Emerging markets contribute 20 percent of Sodexo's sales. It has market leading positions in Latin America, notably in Brazil, and is also strong in India and China. More recently it started investing in Thailand, Vietnam, and Indonesia. It has made a few acquisitions in recent years, buying Brazil's facilities management group Puras do Brasil, Mexican meal-voucher company Servi-Bonos and Indian facilities management company MacLellan India, though most expansion has been internal. Other moves the company has taken to counter weak European markets include announcing in November plans to cut costs and cut jobs to help achieve a 6.3 percent operating margin by the end of FY 2014/15, compared with 5.4 percent for 2011/12, and average annual revenue growth of 7 percent. ($1 = 0.7628 euros) (Reporting by Dominique Vidalon; Editing by Elaine Hardcastle)

US Airways flight attendants ratify contract. The present US Airways, which has about 6,700 flight attendants, was formed from a 2005 merger with America West Airlines. Flight attendants at US Airways have been working under separate contracts for years as their union negotiated to reach a joint agreement. The new contract would apply to flight attendants of the premerger US Airways and of the former America West. The Association of Flight Attendants-CWA said the agreement boded well for US Airways flight attendants, as US Airways has announced plans to merge with AMR Corp's ( AAMRQ.PK ) American Airlines, a tie-up that would form the world's biggest air carrier. The pact requires discussions with management from American and US Air as well as the Association of Professional Flight Attendants union that represents American's flight attendants to develop a framework for integrating the two carriers' workers. (Reporting by Karen Jacobs ; Editing by Gerald E. McCormick)

Boeing says proposed 787 fix is long-term, not interim step. Boeing Commercial Airplanes CEO Ray Conner told reporters after meeting Japan's Transport Minister Akihiro Ota the proposed solution was a long-term plan, not an interim fix. (Reporting by James Topham and Mari Saito )

Wal-Mart's U.S. administrative chief to step down. Wal-Mart on Thursday confirmed a report from the Wall Street Journal on Mars' plan to step down on March 13. The world's largest retailer declined to provide more details, saying it does not comment on personnel matters. As the retailer's general counsel from 2002 to 2009, Mars was involved in an investigation into bribery allegations regarding a Wal-Mart store built near the Mexican pyramids, according to company emails released in January by members of Congress. The full emails, mentioned in the New York Times' April report on the matter, demonstrate the extent to which senior Wal-Mart lawyers briefed current Chief Executive Mike Duke and other top executives about the Mexican allegations in 2005. One email from Mars in October 2005, for example, provided Duke with a memo summarizing the allegations with a note saying: "You'll want to read this. I'm available to discuss next steps." Separately, U.S. shopping center operator Kimco Realty Corp ( KIM.N ) said on Wednesday that it had received a subpoena from the Securities and Exchange Commission over an investigation involving Wal-Mart Stores and possible violations of the Foreign Corrupt Practices Act. (Reporting by Sakthi Prasad in Bangalore, additional reporting by Jessica Wohl in Chicago; Editing by Stephen Coates and Nick Zieminski)

Walmart says price cuts helped shoppers save billions on produce. Walmart U.S., the largest division of Wal-Mart Stores Inc ( WMT.N ), also said it has exceeded its goal of reducing the amount of sugar in some products. Walmart said in January 2011 that it wanted to improve the nutritional value of the food it sells, make healthier fare less expensive and make it easier for Americans to access such goods. Walmart's customers are struggling to put healthful food on the table, especially with higher gasoline prices and payroll taxes. "They've repeatedly told us that while they want to feed their families healthier food, they don't always know how to do that and they worry that it is simply too expensive," said Leslie Dach, Walmart's executive vice president of corporate affairs. Grocers, restaurants and food makers are under pressure from consumers and public health officials to sell more healthful food in an effort to address the nation's obesity crisis. More than two-thirds of U.S. adults and nearly one-third of youth aged 2 to 19 are overweight or obese. Food is a huge business for the world's largest retailer, which has been lowering prices, along with its healthier makeover, to boost sales. Groceries, including goods such as paper towels, account for roughly 55 percent of Walmart's sales. Walmart said its shoppers saved $1.2 billion on fresh fruits and vegetables in 2012 and $1.1 billion in 2011, based on third-party verified pricing comparisons between its stores and those of unidentified rivals. Efforts such as buying more local produce and cutting supply chain costs have helped it keep a lid on prices. In 2011, Walmart and other chains publicly committed to opening stores in designated rural and urban "food deserts" where access to groceries is limited. In Walmart's case, some of those urban areas include markets where it has faced resistance to its large stores. Walmart has opened 86 such food stores since 2011 and aims to open a total of 275 to 300 by the end of 2016. First Lady Michelle Obama traveled to one of Walmart's "food desert" stores in Springfield, Missouri, to tout the company's progress in selling healthy products. "You've opened these stores, including this one, in underserved communities," said Obama, who published an opinion piece in The Wall Street Journal on Thursday focusing on the need for companies to help make changes so Americans can find and eat healthier foods. "You're building closer relationships to your customers and stronger communities. ... The changes you've made are good for Walmart's top line and bottom line going forward." SODIUM IN BREAD, SUGAR IN SALSA Walmart said it has exceeded its goal of cutting sugars by 10 percent in categories such as dairy, sauces and fruit drinks. It has reduced the level of sodium by 9 percent in categories such as luncheon meats, dressings and frozen meals, and aims for a 25 percent reduction by the end of 2015. Sodium and sugar are often hidden in some packaged foods. "Bread is the No. 1 source of sodium in the American diet," said Andrea Thomas, Walmart's senior vice president of sustainability. Walmart's push has cut the sodium in products sold in the bread aisle by 13 percent, the equivalent of removing 1.5 million pounds of salt from its shoppers' diets, Thomas said. Several products are starting to carry a "Great For You" icon, aimed to designate more healthful foods and drinks. Walmart announced the icon a year ago, and national brands will soon be able to add it to their packaging as well. Fresh fruits and vegetables qualify for the icon, as do lean cuts of meat, whole grain cereal and pasta, and low-fat milk. Some products are changing to meet the criteria. Walmart's Great Value salsa had too much sugar to qualify, but a reformulated version can carry the icon, Thomas said. (Reporting by Jessica Wohl in Chicago; additional reporting by Deborah Charles in Springfield, Missouri; Editing by Dan Grebler and Leslie Adler)

Regulators looking at a Heinz derivatives deal in London: NY Times. Industry watchdogs, including the U.S. Securities and Exchange Commission (SEC) and the FBI, are investigating unusual trading activity a day before Berkshire Hathaway ( BRKa.N ) and Brazil's 3G Capital agreed to buy Heinz for $23 billion in cash earlier this month. The SEC has obtained an emergency order to freeze assets in a Goldman Sachs Group Inc ( GS.N ) Swiss account linked to suspicious trades in call options. The SEC is now examining a product known as a contract-for-difference, a derivative that allows investors to trade on stock price changes without owning the shares, the New York Times said. Such contracts are not regulated in the United States but are popular in Britain, it said. ( r.reuters.com/fav36t ) The Financial Industry Regulatory Authority (FINRA), Wall Street's self-regulator, has also recently referred suspicious stock trades to the SEC, the paper quoted one person as saying. FINRA and the SEC declined to comment to the New York Times. Spokespersons at Heinz and FINRA could not be immediately reached by Reuters for comment outside of regular business hours. (Reporting by Aman Shah in Bangalore; Editing by Richard Pullin )

J.C. Penney CEO Johnson seen having six months to fix troubles. The once-vaunted CEO, the man who built up Apple Inc's ( AAPL.O ) retail chain, conceded on Wednesday he made major mistakes in the first year of the turnaround, above all getting rid of the sales and coupons that Penney shoppers want. In the first year of his plan, Penney's sales fell almost 25 percent and the company posted huge losses, including Wednesday's announcement of a dismal holiday season. Penney shares ended down 17 percent at $17.57 on Thursday on fears Johnson won't be able to stanch the bleeding anytime soon. Analysts predicted he will have until after the "back-to-school" season in August, the second most important time of year for Penney, to prove his ideas. Otherwise the board, investors and even vendors could press for change before Christmas. "That's when the rubber hits the road," said Dan Hess, chief executive of Merchant Forecast, which provides retail financial research. "It'd be the last chance to make a change that would have a meaningful impact on the holiday period." It would also give stakeholders a chance to see whether the return of regular sales events and coupons brings back shoppers, and whether the new home goods boutiques Penney is rolling this spring are finding favor. Johnson's plan has been to turn Penney's stores into collections of dozens of trendy, branded boutiques; Levi's, Izod and Liz Claiborne have been among the first batch and shown strong initial results. Next month, Canada's hip, colorful Joe Fresh fashion brand will open its boutiques as well. ACKMAN STILL BEHIND HIM William Ackman, whose Pershing Square Capital Management hedge fund is Penney's top shareholder, has repeatedly offered support for Johnson and said the turnaround will take years. Ackman, who sits on the Penney board, kept a low profile on Thursday. He did not immediately return emails and calls for comment on Penney's 31.7 percent same-store sales decline last quarter, even though he usually responds to questions about Penney. Two weeks ago, at an investment conference, Ackman suggested he too may have limited patience. Overhauling stores, improving up selection of goods for the home and adding Joe Fresh will change the outlook for the company, calling them a "tipping point," he said. "If it doesn't work, the company will stop, take a breath and figure out what to do next," Ackman said. On a conference call Wednesday to discuss Vornado Realty Trust's ( VNO.N ) quarterly results, Chairman Steven Roth - who also sits on Penney's board - said it was inappropriate for him to talk about Vornado's plans regarding its Penney shares. Vornado and Pershing control nearly 40 percent of Penney shares together, giving Johnson some protection so long as they continue to support him. Both investors are losing money on Penney on paper. The retailer is the fifth-largest holding for Pershing Square Capital Management. The $12 billion fund owns 39 million shares, which it started buying in August 2010 at around $20 a share, spending as much as $29 per share in October 2010. Vornado owns 18.6 million shares and started buying its stake at roughly the same time as Pershing Square. EVEN MORE DISCOUNTS, COUPONS Penney began bringing back sales events and giving out coupons in January, and on Wednesday Johnson said the retailer would be holding sales every week now, essentially reversing himself on his previous adamant stand against sales and coupons. The company held a sale on Valentine's Day that lifted jewelry sales 36 percent, he said. Merchant Forecast's Hess said his firm's research showed much more muted declines in January than in December. He also said February has shown the most improvement since the turnaround plan. But at the same time, Penney has angered many long-time shoppers - more typically a mother on a budget than a fashionista - and analysts called for a more aggressive diet of sales events, discounts and coupons to bring them back in. "He should do what Macy's is doing: banging away once, twice a week with sales events," said retail industry veteran Walter Loeb, who has been a senior merchant at Macy's and an analyst at Morgan Stanley. Loeb, who also predicted Johnson has six months to show he's on the right track, questioned whether Penney was going too far down the road of trendy lines. Its new fashion boutiques include Nanette Lepore and a line by Marchesa. "A lot of the products are irrelevant to the typical Penney customer," Loeb said. Loeb and Hess, among others, predicted Penney, with or without Johnson, would settle on a hybrid model, keeping the store-in-stores but also an abundant array of discounted items that Penney shoppers have long come to expect. Either way, the clock is ticking for Johnson. "After reporting another beyond-worst case scenario quarterly result, our concern that (J.C. Penney) will not be able to stabilize the business has increased yet again," Credit Suisse analyst Michael Exstein wrote in a note to clients. (Reporting By Phil Wahba; Additional reporting by Ilaina Jonas ; Editing by Kenneth Barry)

Jobless claims hint at improving labor market. Initial claims for state unemployment benefits dropped 22,000 to a seasonally adjusted 344,000, the Labor Department said on Thursday. The prior week's claims figure was revised to show 4,000 more applications received than previously reported. Economists polled by Reuters had expected first-time applications to fall to 360,000. Claims have seen large swings in recent months because of difficulties smoothing the data for seasonal fluctuations, making it hard to get a clear pulse of the labor market's health. But economists say not all the improvement in claims can be attributed to seasonal factors, suggesting some pick-up in the labor market recovery. Last week's decline left claims at the lower end of the their range for this year. The four-week moving average for new claims, a better measure of labor market trends, fell 6,750 to 355,000. A Labor Department analyst said no states were estimated. Job gains have averaged 177,000 per month over the past six months. At least 250,000 jobs per month over a sustained period are needed to significantly reduce the ranks of unemployed, economists say. The unemployment rate rose 0.1 percentage point to 7.9 percent in January. Federal Reserve Chairman Ben Bernanke said on Wednesday the jobless rate was unlikely to reach more normal levels for several years. High unemployment prompted the U.S. central bank last year to launch an open-ended bond buying program that it said it would keep up until it saw a substantial improvement in the outlook for the labor market. The number of people still receiving benefits under regular state programs after an initial week of aid fell 91,000 to 3.07 million in the week ended February 16, the lowest level since June 2008. The household survey from which the unemployment rate is derived was also conducted during the week ended Feb 16. (Reporting By Lucia Mutikani ; Editing by Neil Stempleman )

Chances rising the Bank of England will start buying assets again in March: poll. The poll of 64 economists, taken Feb 26-28, gave a median 40 percent probability the central bank would inject another wave of cash into the money supply next week, on top of the 375 billion pounds ($567.5 billion) of new money it has already pumped in. That is higher than the 35 percent probability in a snap poll taken a week ago after minutes from the February meeting showed three of the nine Monetary Policy Committee (MPC) members - including outgoing Governor Mervyn King - voted for 25 billion pounds of additional bond purchases. Even if March is not the trigger, there is a 60 percent chance they will unleash a fresh wave of cash - known as quantitative easing (QE) - before the year is out, up from 51 percent in last week's poll. "It will depend on the itsy bitsy stuff (the data) and whether the pound goes up or down in the last few days so I am quite agnostic over the exact month but I think they will go soon," said Michael Saunders at Citi. He predicted the MPC will eventually pump in 450 billion pounds. Sarah Hewin, economist at Standard Chartered, agreed. "It is a close call, but we think that there will be a majority in support of QE in the coming months, and sooner rather than later," she said. King and Paul Fisher, the Bank's executive director for markets, joined long-standing dove David Miles this month in arguing for an increase in bond purchases to 400 billion pounds from 375 billion pounds. Deputy Governor Charles Bean said on Wednesday the Bank stood "ready to take further such action should it be warranted", a day after Fisher suggested the bank should buy more government bonds and over a longer period. February marks the fourth time King has been in a minority since he became governor in 2003. The last time was in June last year - when there was a 5-4 split. The following month, a majority backed a 50 billion pound increase in asset purchases. The BoE's QE program has been on ice since then. "Past experience suggests that when more than one MPC member pushes for additional QE, the committee tends to deliver. For that reason, it does look likely that we will see additional asset purchases," said Peter Dixon at Commerzbank. But he was highly skeptical it would do any good. "Whilst this issue looks set to run and run, I am increasingly reminded of Einstein's definition of insanity - repeating the same process over and over again in the expectation of different results." Britain's economy has broadly flat-lined over the last two years. After contracting by 0.3 percent in the dying months of 2012, if it shrinks again in the current quarter it would again meet the traditional definition of recession. The poll suggested the Bank will only buy another 25 billion pounds, for 400 billion total, to support an economy that has suffered through two recessions in four years. The pound slumped to a two-and-a-half year low against the dollar on Monday after ratings agency Moody's stripped the UK of one of its prized triple-A ratings and is down nearly 7 percent this year, lending support to exporters. As in most recent polls the BoE is not seen shifting rates from the record low of 0.5 percent it chopped them to back in March 2009 until at least October next year - the end of the forecast horizon. Indeed, only seven of the 64 economists polled see any movement in rates before then. There has, in the meantime, been a sudden flowering of new ideas at the Bank of England, with everything from negative interest rates to a long-term commitment to bond-buying said to be up for discussion. (Polling by Ashrith Rao Doddi and Sarmista Sen. Editing by Jeremy Gaunt.)

Monte Paschi says receives state bailout. The bailout had become a political hot potato for the outgoing caretaker government led by Mario Monti in the run-up to this week's elections, following a scandal on loss-making derivative trades carried out by the bank's previous management. The derivatives are now at the heart of a high-profile judicial probe into possible fraud and bribery by the bank's former executives, who are also accused of misleading regulators over the 2007 acquisition of smaller peer Antonveneta. In a statement, Monte dei Paschi said it had sold 4.07 billion euros of special bonds to the treasury a day before a March 1 deadline for the bailout to come into force. These include 2 billion euros of new bonds and 1.9 billion euros of bonds that will replace existing state loans. The final amount also includes a 171 million euro coupon the bank will pay to the treasury on those existing state loans for 2012. The coupon on the loans is 9 percent, rising by 0.5 percentage points every two years up to a maximum of 15 percent. From this year, if Monte dei Paschi is not able to pay the coupon in cash, it will have to issue shares to the treasury for an equivalent amount - paving the way for partial nationalization. Monte dei Paschi requested the state aid in June after failing to meet tougher capital requirements set by European regulators. The shares extended gains after Monte dei Paschi's statement and were up 2.2 percent at 0.21 euros by 1402 GMT. However, the bailout still faces a legal challenge by consumer watchdog Codacons, which wants it halted. Codacons said on Wednesday it had appealed against a court ruling in which the government was given the green light to grant the aid. A decision by the appeals court is due on March 22. ($1 = 0.7628 euros) (Writing by Silvia Aloisi ; editing by Keith Weir )

Chinese owners give Nexen oil unit freedom to run operations. The deal, which boosts CNOOC's global oil and gas production by 20 percent and reserves by 30 percent, closed on Monday after clearing the final hurdle, sign-off by U.S. regulators. "This is a big deal. Nexen is a big organization. We'll fully empower the management team here to get the operation right, to prioritize the strategy for the future," Li Fanrong, chief executive of CNOOC, told reporters at Nexen's Calgary head office. CNOOC and Nexen executives refused to give details of what they had to do to satisfy the Committee on Foreign Investment in the United States following its extended review. The deal needed U.S. approval because of Nexen's Gulf of Mexico operations. Kevin Reinhart, who was interim CEO of Nexen for the past year, is now heading up CNOOC's North and Central American operations, which adds about $8 billion of assets to Nexen's holdings. The transaction was China's biggest foreign takeover. CNOOC will not initially look to add to Nexen's assets through further acquisitions, Li said. With the contentious deal done, CNOOC gets control of Canadian oil sands and shale gas assets as well as exploration and production holdings in the Gulf of Mexico, North Sea and offshore West Africa. It also takes on 3,000 employees, including 1,700 in Canada. As part of its undertakings to satisfy the Canadian government that the deal would have a net benefit to the country, it has pledged to keep all the staff. Li and Reinhart hosted a town hall meeting for the employees on Wednesday, partly to calm nerves. They told the staff it will be business as usual, despite the months of uncertainty. Reinhart said there had been little staff turnover since the announcement, which shook up Canada's oil patch and raised fears about foreign control over the oil sands. However, he said some incentive programs had been tied to the deal being closed, so it is not clear how many could still cash out and leave. "It's possible that we're going to see some people make some of those decisions. That comes out of every transaction," he said. "But the whole intent is to go in with compensation programs that make it attractive for people to stay here ... you don't want them to go over to another job where they're going to be financially better off." Ottawa approved the deal in December, saying that it would not be detrimental to the Canadian economy after CNOOC made commitments on employment, spending and other areas. In its wake, however, Prime Minister Stephen Harper essentially closed the door on future majority acquisitions of Canadian oil sands assets by foreign state-owned enterprises. CNOOC's undertakings for Ottawa will only go so far as being beneficial to the company and economy, Reinhart said. "CNOOC wasn't prepared to make uncommercial commitments and the government wasn't asking for uncommercial commitments," he said. "A lot of time was spent so that we could explain our business in sufficient detail so they understood what would be commercial and what wouldn't be commercial. "Taken to an extreme example, producing product at below its fair value is not in the best interests of Canadians." For future investments in Canada, the executive said they were still evaluating how best to develop Nexen's extensive northeastern British Columbia shale gas assets. Nexen and its partners, a group led by Japan's Inpex Corp ( 1605.T ), have discussed the possibility of joining the rush to build liquefied natural gas plants on Canada's West Coast to help boost the value of the gas from the Horn River and Liard regions. There is no deadline for a decision. Another commitment is a listing of CNOOC shares on the Toronto Stock Exchange. Executives said they will now go through the approval process with Canadian regulators and do not yet have a timing for the listing. Nexen shares are due to be delisted shortly. They closed at C$28.18 in Toronto on Wednesday. (Editing by Bob Burgdorfer )

JPMorgan says London Whale didn't cause Lehman bankruptcy. According to a Wednesday filing in Manhattan bankruptcy court, JPMorgan believes that Lehman's own documentation showed that the trader, Bruno Iksil, had nothing to do with alleged mismarked derivative trades that are part of the dispute. JPMorgan said Lehman and its unsecured creditors committee, which also seeks Iksil's testimony, pointed to nothing that shows the bank's Chief Investment Office had any role in collateral requests at the center of Lehman's lawsuit. Getting Iksil involved now would waste time and money, JPMorgan said, particularly in light of statements by former U.S. Treasury Secretaries Timothy Geithner and Henry Paulson that the collateral requests did not cause Lehman to fail. "It is readily apparent that the only real reason for plaintiffs interest in taking Mr. Iksil's deposition is that he has been in the news," JPMorgan said. Andy Rossman, a partner at Quinn Emanuel Urquhart & Sullivan representing Lehman, in a statement on Thursday said Iksil's mismarked trades "resulted in improper demands for hundreds of millions of dollars of collateral. JPMorgan's extraordinary effort to block that testimony is revealing." A hearing on Lehman's request is scheduled for March 13. Iksil gained notoriety after his activities were linked to $6.2 billion of trading losses at JPMorgan's Chief Investment Office. The French national had worked in London for the New York-based bank. Lehman employed JPMorgan as its main clearing bank, handling third-party dealings, prior to its September 15, 2008, bankruptcy. It accuses JPMorgan of hastening its collapse by using what it learned in that role to extract $8.6 billion of collateral in the four business days ahead of the Chapter 11 filing. Citing Iksil's "practice of intentional mismarking," Lehman said it wanted to review trades that led to an "unjustified" $273.3 million collateral call on September 9, 2008, which JPMorgan reversed the next day. A September 10, 2008 internal JPMorgan email linked Iksil to two trades by the Chief Investment Office in London that were then "significantly contributing" to a dispute with Lehman. In addition, Lehman said it wanted to question Iksil over how the Chief Investment Office managed JPMorgan's exposure to what was once Wall Street's fourth-largest investment bank. According to Lehman, Iksil's lawyers have indicated he will not cooperate without an official request through international channels. Lehman has asked U.S. Bankruptcy Judge James Peck in Manhattan for permission to start that process. In a February 13 court filing, Lehman said it also wants to question other people who worked in JPMorgan's Chief Investment Office around the time of the bankruptcy. Last April, Peck narrowed but refused to dismiss Lehman's lawsuit, saying the company could pursue claims that JPMorgan had acted in a "commercially unreasonable" manner. Lehman emerged from Chapter 11 last March. It has said it hopes to repay creditors about $65 billion. That process is expected to take several years. The JPMorgan case is Lehman Brothers Holdings Inc et al v. JPMorgan Chase Bank NA, U.S. Bankruptcy Court, Southern District of New York, No. 10-ap-03266. The main bankruptcy case is In re: Lehman Brothers Holdings Inc in the same court, No. 08-13555. (Reporting by Jonathan Stempel in New York; Editing by Lisa Von Ahn and Kenneth Barry)

Peregrine boss Wasendorf starts 50-year jail term. Wasendorf, who turned 65 on Monday, arrived on Wednesday at the U.S. Penitentiary in Terre Haute, Indiana, according to the Federal Bureau of Prisons. It is the same facility at which Oklahoma City bomber Timothy McVeigh was executed in 2001. Now known as Inmate #12191-029, Wasendorf had been locked in a county jail in Cedar Rapids, Iowa, since he confessed in July to stealing from tens of thousands of clients over a period of two decades. A federal judge in January sentenced Wasendorf, who had tried to kill himself just before the fraud was uncovered last year, to 50 years behind bars, the maximum allowed by law. Federal marshals transferred Wasendorf to Indiana on a private plane, according to the U.S. Marshals Service, giving him a last taste of the high-flying life he previously enjoyed. He pleaded guilty in September to embezzling more than $100 million, used to fund a life of luxury that included a private jet, extensive wine collection and lakefront condo in Chicago. Prosecutors said the amount stolen was more than $215 million. The jail is a "good selection" by prison officials because it is close enough to allow visits from Wasendorf's brother in Iowa, said the former CEO's pastor, Linda Livingston. The brothers had been estranged before Wasendorf's downfall. However, Wasendorf is not a high security risk, said Livingston, one of the few people who has had regular contact with him. "It will be better than where he has been," she said about the federal prison, noting that Wasendorf ached for more human contact after being held in isolation in the county jail. "He would be delighted to be able to be involved in growing a garden or cooking food in a prison setting," she said. Livingston said she last saw Wasendorf, a former restaurateur, on his birthday in the county jail and sang to him. She arrived at the jail for a visit on Wednesday and was told he was no longer there. NO 'CLUB FED' Wasendorf will need to watch his back in federal jail because his fellow inmates will be tough, said Larry Levine, the founder of Wall Street Prison Consultants, a firm that advises prisoners and their families. "He's going to be rubbing shoulders with people doing life sentences, violent offenders," said Levine, who said he spent time in federal prisons for securities fraud and drug trafficking. "He's not in a Club Fed." Other prisoners at Terre Haute include Ahmed Sala Ali Burale, a Somali who in 2011 was sentenced to life in jail after participating in a pirate attack that resulted in the death of four Americans. Prison officials considered the severity of Wasendorf's crimes, the length of his sentence, and geography when they assigned him to the prison in Indiana, said Chris Burke, a spokesman for the Federal Bureau of Prisons. Inmates with longer sentences are often jailed at high-security facilities because they are thought to present a greater risk for escape, he said. JAILHOUSE JOB The government also tries to place convicts in prisons within 500 miles of the facilities in which they were previously held. Wasendorf's life behind bars is tightly controlled. Upon arrival, he was assigned khaki-colored pants, a khaki-colored button-up shirt, gym shoes and underwear. He will be expected to work, with potential jobs ranging from cooking in the kitchen to sweeping floors, Burke said. "A high-security facility is just that. It's a high-security facility," he said. An administrator at the federal prison did not return a call seeking details about Wasendorf's living conditions. The conditions may be harsher than those faced by Wall Street con man Bernard Madoff. Madoff, who pleaded guilty in 2009 to running a multibillion-dollar Ponzi scheme, is serving a 150-year sentence in a medium-security North Carolina federal prison. As regulators closed in on his fraud last year, Wasendorf made a botched suicide attempt outside his $24 million headquarters in Cedar Falls, Iowa, which investigators say was financed with money siphoned from customers. Peregrine Financial, known as PFGBest, quickly collapsed, and 24,000 former customers are still missing most of the money they had invested with the firm. (Reporting by Tom Polansek in Chicago; editing by Andrew Hay and Matthew Lewis )

Wall Street ends flat after late fade; S&P up for fourth month. The S&P 500 still managed to close out February with a fourth straight month of gains. JC Penney Co Inc ( JCP.N ) was the day's biggest loser, falling 17 percent to $17.57 after the department store operator reported a steep drop in sales. The U.S. economy grew slightly in the fourth quarter, a turnaround from an earlier estimate showing contraction, and a drop in new claims for unemployment benefits last week added to a batch of data suggesting the economy continues its sluggish improvement. The Dow was within striking distance of its record high after a year-to-date advance of more than 7 percent. The Dow's record closing high, set on October 9, 2007, stands at 14,164.53, while the Dow's intraday record high, set on October 11, 2007, stands at 14,198.10. The Dow Jones Transportation Average .DJT, seen as a bet on future growth, is up 12.9 percent this year, and the 20-stock index hit a record intraday high earlier on Thursday. "To push through to new highs, you would have to see consistent positive economic data in the U.S. and have Europe stabilize - those are two pretty big requirements," said Jeff Morris, head of U.S. equities at Standard Life Investments in Boston. "It wouldn't surprise me to see us bounce around as we have the past couple of weeks," Morris added. Volume was low for most of the session until quarterly index-rebalancing activity hit the tape at the very close of trading. After a strong January with gains of more than 5 percent, both the Dow and the S&P 500 found gains tougher to come by in February. Minutes from the Federal Reserve's January meeting sparked concerns that the central bank may pull back on its stimulus measures sooner than expected, while looming U.S. budget cuts and turbulent Italian elections tempered investors' aggressiveness. But concerns about Fed policy were eased by testimony from Fed Chairman Ben Bernanke before a congressional committee earlier this week, as he defended the policy of buying bonds to keep interest rates low to boost growth, despite worries some have about possible inflation. The Dow Jones industrial average .DJI shed 20.88 points, or 0.15 percent, to 14,054.49 at the close. The Standard & Poor's 500 Index .SPX lost 1.31 points, or 0.09 percent, to 1,514.68. The Nasdaq Composite Index .IXIC fell 2.07 points, or 0.07 percent, to end at 3,160.19. For the month, the Dow rose 1.4 percent, the S&P 500 gained 1.1 percent and the Nasdaq advanced 0.6 percent. Limited Brands ( LTD.N ) and Netflix ( NFLX.O ) ranked among the best-performing consumer stocks. Shares of Limited Brands, the parent of retailers Victoria's Secret and Bath & Body Works, gained 2.3 percent to $45.52. The stock of video streaming service Netflix climbed 2 percent to $$188.08. In contrast, shares of Groupon Inc ( GRPN.O ) fell on weak revenue, with the daily deals company's tumbling 24.3 percent to $4.53. Cablevision ( CVC.N ) slumped 9.6 percent to $13.99 after the cable provider took a $100 million hit on costs related to Superstorm Sandy and posted deeper video customer losses than expected. On a positive note, Mylan Inc ( MYL.O ) gained 3.6 percent to $29.61 after the generic drugmaker posted a 25 percent rise in fourth-quarter profit and said it will buy a unit of India's Strides Arcolab Ltd. Investors were keeping an eye on the debate in Washington over U.S. government budget cuts that will take effect starting Friday if lawmakers fail to reach agreement on spending and taxes. President Barack Obama and Republican congressional leaders arranged last-ditch talks to prevent the cuts, but expectations were low that any deal would emerge. Volume was modest with about 6.81 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, slightly above the daily average of 6.46 billion. Advancing stocks slightly outnumbered declining ones on the NYSE by 1,518 to 1,446. On the Nasdaq, the decliners had a slight edge, with 1,247 shares falling and 1,201 stocks rising. (Reporting by Chuck Mikolajczak; Editing by Jan Paschal )

Blame game gets louder with budget cuts looking inevitable. Absent a highly unlikely last-ditch deal, the $85 billion in cuts across federal government agencies start on Friday. While Democrats and Republicans disagree about how severe the damage will be to public services like air traffic control and law enforcement, the IMF said the economic recovery would likely be harmed by the automatic spending cuts known as "sequestration." "We will see what happens on Friday, but everybody is assuming that sequestration is going to take effect," IMF spokesman William Murray said. "What it means is that we are going to have to reevaluate our growth forecasts for the United States and other forecasts," he added. The full brunt of the automatic cuts will be borne over seven months and Congress can stop them at any time if the two parties agree on how to do so. That makes it difficult to say how the belt tightening will hit ordinary Americans. President Barack Obama's administration is warning that Navy ships could lie idle and children would lose out on vaccinations if the cuts are not halted. The IMF likely would shave at least 0.5 percentage point off its 2013 U.S. economic growth forecast of 2 percent if sequestration is fully implemented. Put into law in 2011 as part of a bipartisan solution to an earlier fiscal emergency, sequestration is unloved by both parties because of the economic pain it will cause. Few believed two years ago that the cuts would come into force but, unable to agree on any other way to reduce the budget deficit, political leaders are pointing fingers at each other now that the spending reductions appear inevitable. "It is the president's sequester. It was his team that insisted upon it," Republican House of Representatives Speaker John Boehner said. White House spokesman Jay Carney said Republicans' refusal to compromise by agreeing to close tax loopholes on the wealthy was one reason why the cuts might be unavoidable. "Compromise represents willingness to accept policies that aren't 100 percent of what you want. The president has done that again and again. Unfortunately, Republicans seem to be unwilling to do that when it comes to the sequester, so the sequester may take place," he told reporters. Obama wants to end tax breaks for oil and gas companies and the lower "carried interest" tax rate enjoyed by hedge funds. Carney said both sides had agreed to the spending cuts, half of which will come from the defense budget and half from non-defense domestic programs. "It was designed as policy that would never come into effect. Because it was so onerous for both sides, it would compel Congress to reach a compromise," Carney said. SOME AMERICANS WELCOME CUTS Obama will meet congressional leaders in the White House on Friday for last-minute budget talks but hopes were low for a deal. "Tomorrow I will bring together leaders from both parties to discuss a path forward. As a nation, we can't keep lurching from one manufactured crisis to another. Middle-class families can't keep paying the price for dysfunction in Washington," Obama said in a statement. While Washington politicians have tried to disown any responsibility for the cuts, recent polls show that many Americans welcome lower government spending. An NBC/Wall Street Journal poll released on Wednesday showed 53 percent of Americans preferred the planned cuts or even greater spending cuts than no cuts at all. Neil Whitman, 62, who runs Dunhill Staffing, an employment company based in Mt. Pleasant, South Carolina, said Washington had just authorized spending of around $60 billion in relief for Superstorm Sandy. "We spent that in a blink of an eye," he said. "You take $85 billion from somewhere else. So what?" Whitman said he doubted the horror stories emerging from Washington of public services decimated by sequestration. "To me, it's political," he said. "I think we need to control spending, but we need to stop telling the American people, 'I don't know if we can guarantee your safety on the airplanes.'" But U.S. government workers normally unfazed by political gridlock are angry that they will be disproportionately hurt. "It's like a bull's eye," said Jay Matthews, who works in the chief counsel's office at the Internal Revenue Service in Washington. "They target us because they think we make too much money. And they target us because they think we're lazy." The cuts threaten to puncture the affluence of the U.S. capital and its suburbs, where incomes and house prices have benefited from secure government jobs with good salaries. The area is home to 375,000 federal workers. Debate over the run-up to sequestration is at the root of a dispute between the White House and famed Washington journalist Bob Woodward, who is known for his groundbreaking reporting of the Watergate scandal in the 1970s. Woodward this week accused one of Obama's senior economic officials, Gene Sperling, of threatening him in an email for reporting that the White House was "moving the goal posts" in the budget talks. The Senate voted on Thursday against plans by both Democrats and Republicans to replace the cuts. The Republican plan would have let the cuts go into effect on Friday, but required Obama to submit an alternative $85 billion spending reduction plan to Congress by March 15, thus allowing more flexibility on how the cuts would be carried out. The Democratic proposal would have replaced the across-the-board cuts mainly with tax increases on the rich coupled with spending cuts. Some of those would be achieved by eliminating crop subsidies for large agricultural companies. More savings would be through minor defense cuts in later years. (Additional reporting by Ian Simpson and Anna Yukhananov in Washington and by Samuel P. Jacobs in New York, Writing by Alistair Bell; Editing by Jim Loney )

SEC subpoenas Kimco in Wal-Mart probe. In a filing with the Securities and Exchange Commission (SEC), the biggest operator of shopping malls in the United States said it had received the subpoena on January 28 from the SEC's Enforcement Division. The FCPA, a 1970s-era law, bars U.S. companies and others from paying bribes to officials of foreign governments in exchange for business. Kimco said it would fully cooperate with the SEC. It also said the Department of Justice was conducting a "parallel investigation" with the SEC. The Hyde Park-based company did not provide further details about that probe, but said it would cooperate. It is not clear if the SEC's subpoena is related to bribery allegations involving Wal-Mart in Mexico, which surfaced last year when the New York Times reported that the company had stifled an internal probe into suspicions that Wal-Mart de Mexico had paid bribes to help build stores there. U.S. authorities have stepped up enforcement of the FCPA in recent years, extracting hundreds of millions of dollars in fines from Siemens, Alcatel-Lucent, KBR Inc and others. Wal-Mart is one of the main tenants in Kimco's shopping center properties. (Reporting by Sakthi Prasad in Bangalore; Editing by Stephen Coates)

U.S. firms in China set for greater competition ahead: survey. An annual survey by the American Chamber of Commerce in Shanghai showed a majority of firms believed that competition had intensified, while the number who said they were profitable in 2012 dropped to 73 percent from 78 percent in 2011. This reflects the challenge for global firms looking to boost profits in faster-growing economies such as China, and underlines the impact of China's slowdown in 2012, where GDP grew at its slowest pace in 13 years. The 420 U.S. firms surveyed identified rising costs, human resources constraints and heightened domestic competition as the main business challenges, said the report. "We accept these are going to be the rule rather than the exception in the years to come," said Brenda Foster, president of the chamber at the report's Shanghai launch on Thursday. Seventy-one percent of firms said revenue had increased versus last year, down from 80 percent in 2011, while those who reported operating margin growth edged down to 48 percent from 51 percent. As the Chinese boom years of 10 percent-plus GDP growth recede, international firms are preparing themselves for a 'new normal' in China - one less reliant on exports and investment, and more tied to the domestic Chinese market, the survey said. This meant retail and service sector firms scored higher on the survey's Shanghai Business Confidence Index, measuring confidence in future business opportunities. The survey also said many U.S. firms feel China has not done enough to level the playing field for foreign firms, with 54 percent of respondents saying a lack of transparency favored domestic companies, up from 46 percent in 2011. But despite the challenges of setting up and operating in China, U.S. businesses are still keen to be on the inside of China's growing domestic market, set to grow 9 percent a year through 2030, according to estimates from consulting firm McKinsey & Co. The survey data shows that firms making over 10 percent of total global revenue from China rose to 45.5 percent from 41.2 percent, while nearly three-quarters of respondents said they plan to increase investment over 2013, a three-year high. Intellectual property rights - a topic flagged dramatically by a recent U.S. report linking the Chinese government to international hacking of private information - remained high on the agenda. Around 70 percent of firms said IPR was "critically important" or "very important" to their business in 2012, up from 68 percent in 2011. (Reporting by Adam Jourdan; Editing by Sanjeev Miglani )

Analysis: Italy election punches hole in ECB's euro defenses. This week's election leaves slim prospects for a durable, reform-minded government in Rome and exposes a flaw in the bond-buying defense plan the ECB put together last September - a weakness that could see the euro zone crisis roar back to life. After vowing to do "whatever it takes" to save the euro, the ECB's Italian chief Mario Draghi launched a plan - dubbed Outright Monetary Transactions (OMT) - in September which promised potentially unlimited buying of a struggling country's bonds. Market pressure on the euro zone's high debtors has subsided ever since, to the extent that even the most cautious policymakers have declared the worst to be over. The catch is Draghi is ready to do whatever it takes "within our mandate". To satisfy this caveat, the scheme requires a country whose bonds the ECB buys to sign up to a European aid program with debt-cutting conditions attached. But Italians overwhelmingly rejected Prime Minister Mario Monti's austerity policies in a February 24-25 election that gave no party a parliamentary majority and threatens prolonged political instability in the euro zone's third largest economy. Markets are unnerved. Italian borrowing costs have risen sharply and jitters have spread to Spain. But fear could turn to greed if investors sense Italy is unprotected. The ECB, which has yet to activate the OMT, is sticking to its principles and refusing to become fixated by short-term fluctuations of sovereign bond yields. "If yields go up because of political events, there is not much the ECB can do, that's not related to monetary policy whatsoever," ECB Executive Board member Benoit Coeure said at a Reuters summit on the euro zone's future this week. When Draghi began forming the OMT plan last July, yields on Italian benchmark bonds were well above 6 percent and heading for 7. Now they are trading around 4.7 percent after flirting with 5 percent just after the inconclusive election. Sources close to the ECB are conscious of the risk of contagion from Italy to Spain, but insist it will not intervene to help Italy if it does not have a credible government capable of the reforms required for support in the debt market. SPAIN VULNERABLE TOO In his first public comments since the election in his homeland, Draghi stressed in a speech in Munich on Wednesday that the ECB's mandate only stretches so far. The subtext was clear: Italy will have to front up and reform. "We do not act to help governments. We act to help maintain the flow of credit to real firms and households," Draghi said. "Governments need to address the structural problems in their economies." Germany is aware of the risks of inaction. Finance Minister Wolfgang Schaeuble told Reuters on Wednesday that Italy's inconclusive election had raised the risk of market turmoil spreading to other euro countries and urged Italian politicians to form a stable government quickly. A Reuters poll of economists found 44 of 55 thought Italy's turmoil made it more likely the ECB would deploy its bond-buying artillery but with Spain - caught up in Italy's backwash - the more likely recipient. Spanish Economy Minister Luis de Guindos told the Reuters euro zone summit Madrid was no closer to seeking bond-buying help than it was before Italy's election. But UBS analysts expect Spain to ask for European aid to allow ECB intervention in the second half of this year. CONUNDRUM With Italy showing no appetite for the reforms that are a pre-condition for OMT support, a sustained attack on its sovereign bond market could throw the euro zone back into the depths of crisis and land the ECB with a new policy conundrum. "I think that could happen," Clemens Fuest, the incoming chief of Germany's ZEW economic institute, told Reuters. "The OMT program in a way was the creation of a safety net and a step forward, but in another way it was also a step back ... the Achilles' heel was a situation like this where one systemically important country rejects austerity." Under its previous bond plan, the Securities Markets Programme (SMP), the ECB could intervene without necessarily attaching conditions. In the event of a market onslaught and no reform commitment from Italy, one option for the ECB now would be to sit back and hope the increase in borrowing costs pushed Rome into action. "Another option, if things go very bad, would be to just intervene in the market and take the risk that the Italian government will do nothing and wait," said Fuest. But do that and the Bundesbank, German lawmakers and others would throw their hands up in horror at the ECB ripping up its rule book, potentially undermining the entire safety net. The ECB has already been caught out once by Italy. In 2011, the bank bought Italian and Spanish bonds under the SMP only for Italy's then prime minister, Silvio Berlusconi, to go back on reform promises he had made to get the ECB to step in. That experience led the ECB to attach conditions to the OMT plan. But even if an Italian government did commit to reforms, German lawmakers could veto aid. Berlusconi's strong showing in this week's election will surely give policymakers pause for thought. Germany's Bundesbank, the biggest stakeholder in the ECB, would certainly disapprove of bond buying. Even with strict conditions, Bundesbank chief Jens Weidmann regards ECB bond buys as "tantamount to financing governments by printing banknotes". So the option of sacrificing ECB principles would infuriate the bank's most important constituent and risk a schism at the heart of the euro zone's most credible institution. Berenberg Bank's Christian Schulz, a former ECB economist, did not expect such a scenario to materialize. "They will only intervene if a country reforms," he said. "Effectively, Italy has voted away the safety net that was in place before and they don't have a safety net any more." In other words, Italy is defenseless. No wonder European leaders are crossing their fingers and insisting a strong government in Rome can still result. (Editing by Mike Peacock)

Two charged with stealing source code from NY trading firm. Jason Vuu, 26, a former trader at Flow Traders LLC in Manhattan, was charged with emailing himself trading strategies, valuation algorithms and proprietary code from the firm and sharing the code with another man, Simon Lu, 25, according to criminal complaints filed by the office of Manhattan District Attorney Cyrus Vance. Another former trader at Flow Traders, Glen Cressman, 26, was charged with copying files containing trading strategies and valuation algorithms without permission, the complaints said. Paul Shechtman, a lawyer for Lu, and Jeremy Saland, a lawyer for Vuu, did not immediately respond to requests for comment on Monday. Charles Ross, who represents Cressman, said his client was innocent. "He was a fine employee, and when everything about the case is aired, it will be clear he did nothing wrong," Ross said. A lawyer for Flow Traders, which according to its website is an international proprietary trading house headquartered in Amsterdam, could not be reached immediately for comment. The three men were arraigned on the charges two weeks ago and are due back in court on November 18, when they could face grand jury indictments. Lu currently resides in Pittsburgh, Vuu in California, and Cressman in Fort Lauderdale, Florida, according to prosecutors. The arrests came a year after Vance's office charged former Goldman Sachs Group Inc. ( GS.N ) programmer Sergey Aleynikov with stealing secret trading code. Aleynikov had been previously been convicted in federal court for the same actions, but his conviction was thrown out in February 2012 by an appeals court, which said federal espionage laws did not cover his alleged theft. Vance then charged Aleynikov under New York state law. Earlier this year, a judge denied Aleynikov's attempt to have the state charges dismissed on double jeopardy grounds. Aleynikov, who pleaded not guilty, is free on bail. Both Vance and the U.S. attorney for Manhattan, Preet Bharara, whose office brought the initial case against Aleynikov, have made combating computer crime and corporate espionage a top priority. Lu, Vuu and Cressman all face multiple counts of unlawful duplication of computer-related material and unauthorized use of secret scientific material, the same charges Aleynikov is facing. The charges carry sentences of up to four years in prison. Vuu sent copies of files from his work email account to his personal email address 10 times from August 2011 to August 2012, the complaint said. He also shared source code with Lu via the file-hosting service Dropbox after Lu suggested the code could help them start their own firm, according to the complaint. Cressman's personal email account received copied files containing trading strategies and valuation algorithms twice in December 2012, according to the complaint. The charges were first reported by The Wall Street Journal. (Reporting by Joseph Ax; editing by Noeleen Walder, Dan Grebler and Leslie Adler)

UBS agrees to pay $4.6 million in settlement over sales assistants. U.S.-based UBS Financial Services Inc also did not properly supervise its sales assistants, known to the firm as "client services associates," according to a news release by New Jersey Acting Attorney General John J. Hoffman. "UBS is pleased to have resolved this legacy registration issue which involved unsolicited orders," a UBS spokesman said in a statement. The firm neither admitted nor denied the regulators' findings, according to a consent order dated August 20. Sales assistants can be of vital importance to boosting brokers' incomes. Their responsibilities often extend far beyond clerical work, covering everything from putting through orders to opening accounts. That typically leaves brokers more time to develop client relationships, say securities industry professionals. The settlement is the result of a multi-state investigation launched by regulators in 2010. The problem, which occurred between 2004 and 2010, stemmed from a flaw in UBS' system allowing unregistered assistants to enter client orders, according to the consent order. UBS employed about 2800 sales assistants per year during the period, according to the consent order. The firm requires them to become properly registered in states where they do business. The multi-state investigation, however, revealed that the sales assistants were not always properly registered. The $4.6 million settlement pool will be shared by the 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. (Reporting by Suzanne Barlyn; Editing by Bernard Orr )

Belarus investigators say intend to seize Uralkali assets: RIA. Belarus detained the head of Russia's Uralkali, drawing a fierce rebuke from Moscow, and investigators said that Uralkali had incurred $100 million in damages to Belarussian interests. "Evaluating the documents received by investigators, a decision will be reached to seize the property and assets of Uralkali," RIA reported the investigators as saying. (Reporting by Thomas Grove , Editing by Megan Davies)

Daimler's Mercedes-Benz to outline strategic plan for China. The plan, a key component of Mercedes' broader "2020 initiative", aims to boost sales of Mercedes-Benz cars in China by a third to more than 300,000 cars a year by 2015, according to two individuals familiar with the matter. Daimler's new China chief, Hubertus Troska, and his management team are expected to unveil details of the plan, which also includes expanding manufacturing capacity and the sales network, in Beijing and Chengdu this week. If the sales target were achieved it would make China the brand's biggest market globally, said the sources, who spoke on condition of anonymity. Last year Mercedes-Benz sold slightly more than 200,000 cars in China, currently its No. 3 market behind Germany and the United States. Troska's turnaround initiative will kick off with the China launch of a significantly redesigned E-class sedan on Friday at an auto show in the southwestern city of Chengdu. That will be followed quickly by a China launch of the overhauled flagship S-class sedan during the third quarter of this year, as well as a more affordable small sport-utility vehicle (SUV) called the GLA next year. STRUGGLING FOR TRACTION Mercedes-Benz has struggled in China since the start of 2012, when overall demand for luxury cars began weakening amid an economic slowdown in the world's second-largest economy that affected luxury car brands in general. Mercedes fared worse than most because of a dearth of new or redesigned models and what industry insiders and key operators of Mercedes-Benz dealers described as a short-sighted volume grab that hit the brand's profitability. Mercedes-Benz's sales rose just 4 percent to 206,150 cars, last year. By contrast, sales of Audi ( VOWG_p.DE ) cars rose 32 percent to 407,738 cars, while BMW's volume increased 41 percent to 313,638 cars, according to consulting firm LMC Automotive. BMW and Audi posted impressive gains, but they were also accused by dealers and analysts of boosting sales through heavy discounts and other costly incentives. With China's economy still slowing compared with the breakneck pace of expansion over the past 15 years, there remains some doubt over whether Mercedes-Benz is going to be able to boost its sales by a third by 2015. But Yale Zhang, head of Shanghai-based consulting firm Automotive Foresight, said he believed the objective was "doable", partly due to the array of "strong new products they are planning to put in play over the next year". Aside from the slew of new products, Troska aims to make Mercedes-Benz cars more affordable by producing significantly more of what it sells in China. The turnaround plan envisages seven out of 10 cars it sells in China will be made in the country by 2015 - up from around half now - a move that would allow the company to avoid the high tariffs and taxes levied on imported cars. The primary lever to boost in-China production is the new compact GLA SUV that the German carmaker plans to produce at its factory complex in Beijing, which is jointly run with state-owned auto group Beijing Automotive Group, the sources said. The GLA, which is intended to be a more affordable luxury car, is due for a launch in China next year. GERMAN PRECISION, MADE IN CHINA "The days when Chinese consumers thought Mercedes is Mercedes only when they are made in Germany are long gone," a Mercedes-Benz official told Reuters. "If you can deliver German precision and quality in products you produce here, Chinese buyers have no problem at all with them and consider them genuine Mercedes." It was not immediately clear whether the move to cut prices by boosting local production was in any way a response to a wave of Chinese government investigations into possible anti-competitive violations in the way that global companies, including car makers, price their products in China. Mercedes-Benz hopes to respond more quickly to changing consumer preferences, which often lead to swings in demand for different types of vehicles, by producing more cars locally. Cutting prices "is not a bad idea given China's economic growth slowdown", said Jeff Chung, a Hong Kong-based auto-sector analyst for Japanese brokerage Daiwa Securities. Nonetheless, demand for luxury cars in China is likely to reach 2.7 million vehicles a year by 2020, displacing the United States as the world's biggest luxury car market. As the economy slows, "even wealthy consumers are likely to shift to more affordable luxury cars, most of which are produced locally in China rather than being imported", Chung said. That's how Volkswagen AG's Audi, the No. 1 luxury brand by volume in China, stays ahead of its German rivals that together dominate China's top-end market. Audi produces more than nine out of 10 cars it sells in China, according to Daiwa's Chung. (Additional reporting by Samuel Shen in Shanghai; Editing by Alex Richardson )

JPMorgan liable to billionaire Blavatnik over mortgage losses. In a decision made public on Monday, New York State Supreme Court Justice Melvin Schweitzer ordered the largest U.S. bank to pay $42.5 million on the breach of contract claim, plus 5 percent annual interest starting in May 2008. The Manhattan judge also found JPMorgan was not liable for negligence. His decision was dated August 21, and came about seven months after a three-week, non-jury trial. Blavatnik had sued JPMorgan in 2009 to recover more than $100 million that he said the New York-based bank lost on a roughly $1 billion investment by CMMF LLC, a fund created by his firm, Access Industries Group. The decision comes as JPMorgan faces a swirl of other litigation and investigations, including into its handling of mortgage-related businesses during the financial crisis. According to Blavatnik, JPMorgan Investment Management (JPMIM) promised that it would invest Access' money conservatively after opening the account in 2006. Instead, the bank allegedly breached a 20 percent limit set for mortgage-backed securities by misclassifying securities backed by a pool of subprime loans, known as ABS-home equity loans, as asset-backed rather than mortgage-backed securities. Access also accused JPMorgan of continuing to hold the troubled securities despite knowing they were inappropriate for the portfolio. CMMF closed the account in May 2008. In finding JPMorgan liable for exceeding the 20 percent cap, Schweitzer rejected the bank's argument that "industry practice" was to classify the home equity loans separately from mortgage securities because they carried different risks. "Not only was the ostensible 'industry practice' to which JPMIM repeatedly refers unknown to CMMF, JPMIM itself frequently defined securities backed by subprime mortgages as 'mortgage securities' and not as asset-backed securities - and did so in some of its most important documents used with regulators, ... clients, ... shareholders ... and internally," he wrote. "RIGHT THING TO DO" In ruling for JPMorgan on the negligence claim, Schweitzer said the mortgage securities were considered "relatively safe and desirable" when they were bought, and that JPMorgan acted reasonably in light of current conditions when it advised CMMF to "wait out the storm" rather than sell at depressed prices. JPMorgan spokesman Doug Morris said: "We are pleased that the court rejected CMMF's negligence claims, and found that our investment professionals lived up to their responsibilities. We respectfully disagree with the court's interpretation of our agreement with CMMF, and we are considering our options regarding that finding." David Elsberg, a partner at Quinn Emanuel Urquhart & Sullivan representing Blavatnik, said in an interview: "Hopefully it signals that banks need to live up to their obligations to clients, and as the court makes clear, not hide behind what they often try to refer to as 'industry practice.'" Blavatnik also welcomed the decision. "There are a lot of people out there who, I understand, feel they have been wronged by JPMorgan but cannot afford to take on a huge bank. They shouldn't have to," he said in a statement. "JPMorgan should do the right thing because it is the right thing to do." Blavatnik is worth about $16 billion, making him the world's 44th richest person, Forbes magazine said in March. The case is CMMF LLC v. JPMorgan Investment Management Inc, New York State Supreme Court, New York County, No. 601924/2009. (Reporting by Jonathan Stempel in New York; Editing by Gary Hill and Ken Wills )

Telefonica wins Slim over with sweetened German deal. Mexican billionaire Carlos Slim's America Movil, which owns almost 30 percent of KPN, said it backed Telefonica's new offer for KPN's E-Plus unit. Shares of America Movil rose 1 percent in morning trade. Earlier this month, America Movil launched a bid for the shares of KPN it did not already own, a challenge to the Spanish telecoms group's original deal to buy the E-Plus unit. America Movil said on Monday it would press ahead with its plan to buy the rest of the Dutch firm. But its bid faces challenges from antitrust regulators, unions and a foundation with power to block a takeover of KPN. Analysts also said some KPN shareholders, including hedge funds who have bought shares recently, could pressure America Movil to raise its offer. The agreement moves Telefonica closer to its goal of stepping up its challenge in Germany to market leaders Deutsche Telekom and Vodafone. It also offers a better deal for America Movil, Telefonica's arch-rival in Latin America which on paper has racked up huge losses on its European investments since buying minority stakes in KPN and Telekom Austria. The new offer hands KPN 5 billion euros in cash and also increases its stake in the future combined German business to 20.5 percent from 17.6 percent under the terms of the previous offer. Investors are cautious about America Movil's European expansion efforts. Its shares remain down more than 20 percent since it announced it would offer 7.2 billion euros for KPN. Stefan Astheimer, vice president of strategy at investment manager Howe & Rusling in Rochester, New York, said Monday's news was mixed for the Mexican company. "On the one hand, they are losing the opportunity to gain direct entry to the German market which was an important part of their strategy," said Astheimer, whose firm has a small equity and debt position in America Movil. "On the other hand, the deal will inject cash into KPN and allow America Movil to focus on the Dutch and Belgian markets, while giving them a larger stake in Telefonica Germany, which should appreciate in value," he added. "I think it was prudent of America Movil to allow Telefonica to acquire E-Plus rather than getting bogged down in a potentially expensive or ugly conflict which would not reflect well on their efforts to allay the concerns of the KPN Foundation and others," Astheimer added. BPI analyst Pedro Oliveira said the deal showed Carlos Slim and Telefonica boss Cesar Alierta could overcome their differences. "Their business sense is becoming stronger than the rivalry between Telefonica and America Movil," he said. Telefonica still needs support from antitrust regulators for a deal that will reduce the number of players from four to three in Germany, a market with 112 million subscribers. Many European telecoms firms are looking to consolidate to cope with saturated markets, recession-hit consumers, tough regulation and expensive network upgrades. However, regulators are wary that reduced competition could lead to higher prices for consumers and mobile profit margins in Germany are already much higher than in Britain and France. "Politicians seem to be more favorable to protecting telecoms companies ... but this is an operation that will have a lot of scrutiny from the regulators," BPI's Oliveira said. DUTCH CHARM OFFENSIVE An independent foundation with power to block a takeover of KPN has expressed concern about America Movil's bid to pay 2.4 euros for each share it does not own. "There will be a tussle for control of KPN - the question is will shareholders allow America Movil to take control of KPN via the tender offer at such a low price?" said Bernstein Research analyst Robin Bienenstock. America Movil executives will meet the Dutch Minister for Economic Affairs, along with KPN union representatives on Wednesday to discuss its plans for the Dutch telecoms group, sources told Reuters. "The Minister wants to be informed given the importance of KPN for the Dutch economy," said one of the sources. KPN's largest union Abvakabo FNV also has concerns. "What are you investing in the cooperation with KPN and what will that mean for jobs in the Netherlands? That's what I want to get an answer to," said a union spokesman. America Movil bought into KPN in June 2012 at roughly 8 euros per share. It paid a much lower price in February to raise its stake. KPN's shares closed up 3 percent at 2.33 euros, while Telefonica's rose slightly to 10.78 euros, with shares in its German unit up 2.88 percent at 5.22 euros. TACTICS Telefonica has shed 10 billion euros of debt since June 2012 and plans more asset disposals, so it can afford the deal. "The increased amount is not big enough to put pressure on the rating," said Carlos Winzer, analyst at Moody's, which rates Telefonica at Baa2, two notches above junk territory. Under the revised terms, Telefonica will sign an option to buy back 2.9 percent of its German subsidiary after a year at a price of 510 million euros. The Spanish group sees the German deal generating up to 5.5 billion euros in cost savings. Last month, experts told Reuters that Telefonica was likely to try to win over antitrust regulators by offering to give up some spectrum and by giving greater access to its networks to new "virtual" operators. To make its bid more attractive in the Netherlands, America Movil said on Monday it would maintain KPN's headquarters in that country and keep its stock market listing in Amsterdam, as well as its commercial brands. Walter Samuels, a spokesman for the KPN Foundation, declined to comment on Monday's announcements, other than saying: "We're still following developments." ($1 = 0.7461 euros) (Additional reporting by Julien Toyer in Madrid, Elinor Comlay in Mexico City and Leila Abboud in Paris; Writing by Leila Abboud; Editing by Louise Heavens, Mark Potter , Simon Gardner , Andrew Hay and David Gregorio )

Regulators, Bitcoin group discuss digital currency. Jennifer Shasky-Calvery, director of the Financial Crimes Enforcement Network (FinCEN), said her unit hosted a presentation by members of the Bitcoin Foundation, an advocacy group of Bitcoin-related businesses. "This is part of our ongoing dialogue aimed at enhancing communication with our regulated financial industries," Shasky-Calvery said in a statement. She also noted that virtual currency exchanges must register with regulators and face requirements similar to those imposed on other financial firms. FinCEN is the Treasury Department's anti-money laundering unit. Bitcoins, which have been around since 2008, are a form of electronic money that can be exchanged without using traditional banking or money transfer systems. Bitcoins are the most prominent of these new currencies, which have come under scrutiny from regulators and law enforcement officials. Representatives of the Bitcoin Foundation did not immediately respond to requests for comment. The group's website says it aims to make the currency more respected and to improve and protect its integrity. The currency first came under scrutiny by law enforcement officials in mid-2011 after media reports surfaced linking the digital currency to the Silk Road online marketplace where marijuana, heroin, LSD and other illicit drugs are sold. In recent months, the U.S. government has taken steps to rein in the currency and more regulatory action is expected. Tokyo-based Mt. Gox, the world's largest exchanger of U.S. dollars with Bitcoins, had two accounts held by its U.S. subsidiary seized this year by agents from the Department of Homeland Security on the grounds that it was operating a money transmitting business without a license. The Federal Bureau of Investigation reported last year that Bitcoin was used by criminals to move money around the world, and the U.S. Treasury said in March that digital currency firms are money transmitters and must comply with rules that combat money laundering. The Senate Committee on Homeland Security and Government Affairs launched an inquiry into Bitcoin and other virtual currencies earlier this month, asking a range of regulators to list what safeguards are in place to prevent criminal activity. (Reporting by Brett Wolf. Editing by Andre Grenon)

Insight: Trades from 1990s come back to haunt Wall Street. For more than a decade, the lenders purchased life insurance policies, known as "bank-owned life insurance," on employees in bulk. These policies were unusual: banks chose how the premium would be invested; and were on the hook for investment losses or gains over time, unlike typical policies where the insurer invests the premium. Banks loved the tax benefits of these products, but hated being exposed to market swings. JPMorgan's derivatives professionals found a solution: a product called a "stable-value wrap," which, for a fee, transferred much of the risk of losses to JPMorgan, often for the next 30 years or more, depending on the term of the policy. That "wrap" amounted to a long-term derivatives contract, which is causing the pain now. Tough new international rules are forcing banks to use more capital for long-term trades, which means bank profits are being hit by derivatives tied to bank-owned life insurance and a host of other products. From the 1990s through the beginning of the financial crisis in 2008, banks including JPMorgan, Morgan Stanley, Bank of America Corp and Citigroup Inc routinely traded swaps that lasted for 30 years or more. Customers asked for them: If a utility built a power plant, for example, it probably used a long-term derivative as part of its financing package to protect itself from risks such as steep increases in interest rates. Similarly, when housing finance giants Fannie Mae and Freddie Mac needed to reduce their exposure to interest rates, they used long-term derivatives. So did pension funds or governments that needed to better match the cash flows of their assets with their expected liabilities. These positions are hard to unwind. The companies, governments, or pensions that entered long-term trades with banks still need those derivatives to help reduce their risk. And a bank cannot usually transfer its exposure to another dealer, because its rivals have the same capital constraints under global rules. "Times have changed: There are a lot of long-term derivatives on financial institutions' balance sheets that have become very costly today, and will stay that way," said Martin Zorn, who was an executive in the corporate banking and capital markets unit of Wachovia Bank in the 1990s and is now chief operating officer at risk-management firm Kamakura Corp. The lingering pain from these trades underscores how long it will take banks to move past the excesses of the years leading up to the credit crunch. Many investors are eager for liabilities from the crisis to disappear. But that process could still take years as regulatory investigations continue, new rules come on line, and banks work through their bad assets, bank executives said. To be sure, longer-term trades are likely only a small percentage of banks' fixed-income books. At Morgan Stanley, for example, trades going back to the 1990's represent less than 1 percent of the bank's book of derivatives that trade off exchanges, a person familiar with the matter said. The bank is trying to shrink its assets for fixed-income, currency, and commodities by at least 51 percent by 2016, and has exceeded its targets so far despite these trades. But long-term positions still consume disproportionate amount of Morgan Stanley's capital, rankling executives. At the bank's annual meeting in May, Morgan Stanley Chief Executive James Gorman called the positions "dead money," and noted that some trades stem back to the 1990's. JPMorgan likely has the biggest holdings of long-dated swaps because it is the biggest swaps trader on Wall Street, responsible for about 30 percent of the market by some measures, traders at rival firms said. A JPMorgan spokesman declined to comment. CAPITAL RULES Generally, banks offloaded the interest-rate risk from these positions and hedged other kinds of exposure, so the pain from these swaps comes not from market movements, but from regulatory changes. Under new international capital rules known as Basel III, longer-dated derivatives trades need to be supported by more capital than short-term positions. The amount of capital the bank must hold depends on a swap's market value, the trading partner's creditworthiness and the possible losses the bank might suffer over the trade's lifetime - so the longer the trade, the more capital required. Prior rules limited the amount of capital required for derivatives that do not trade on exchanges, but Basel III ends that limit, meaning that banks can be required to hold more capital than some trades are worth. Many of these derivative trades are custom-made, instead of being standardized contracts, so it is difficult to transfer them to a clearinghouse. In addition, for more complicated over-the-counter derivatives trades, margin requirements will be 200 percent higher than they used to be under new regulations, said James Malick, a partner at The Boston Consulting Group who advises financial firms. Banks are trying to find ways to reduce the exposure to long-term trades, and have even set up desks whose sole purpose is to reduce these positions, traders said. Dealers' pullback from long-term swaps is evident, said Nancy Davis, a managing partner at the hedge fund Quadratic Capital, who previously held senior derivatives trading positions at JPMorgan and Goldman Sachs. The bulk of new activity happens in derivatives with durations of less than five years, according to the Depository Trust & Clearing Corporation, which clears such trades. In the 1990s, insurers with high credit ratings would often trade long-dated swaps from their derivatives subsidiaries. Other players, such as asset managers and pension funds with big balance sheets, may eventually step in to provide liquidity where banks won't, Davis said. "It's not the best use of a bank's capital at this point to be locking it up in a long-term swap - they'd rather spend their money elsewhere," Davis said. (Reporting by Dan Wilchins and Lauren Tara LaCapra; Editing by Leslie Gevirtz )

Fukushima operator to seek foreign advice on toxic water. Visiting the plant crippled by an earthquake and tsunami in March 2011, Toshimitsu Motegi, the trade and industry minister, said on Monday he would set up a taskforce to take charge of the clean-up, and send officials to Fukushima to oversee operations. "I strongly feel that the government should get fully involved," he told reporters after touring the Fukushima Daiichi facility, which is 220 km (137 miles) north of Tokyo. Motegi ordered Tokyo Electric Power, or Tepco, to replace storage tanks that are at risk of leaking radioactive water. Tepco acknowledged last week that hundreds of tons of highly radioactive water had leaked from one of around 350 tanks that were assembled quickly after the 2011 nuclear meltdowns at the site. The tanks are used to store water pumped through the reactors to keep fuel in the melted cores from overheating. Motegi said Tepco should have more frequent patrols around the tanks and better documentation of inspections. He said the utility should replace weaker bolted tanks with sturdier welded storage units. Tepco said it was setting up its own group of experts to oversee toxic water and storage tanks at the Fukushima site. "For measures that require sophisticated technology, we will appropriately implement them as the government while collaborating with authorities on fiscal measures, including the use of a reserve fund," Motegi said. Earlier on Monday, Chief Cabinet Secretary Yoshihide Suga said the situation at Fukushima was "deplorable", and signaled the government could use some of the 350 billion yen set aside in this year's budget as a reserve for natural disasters and other emergencies. Tepco's revelation of the toxic leaks is the most serious problem in a series of recent mishaps, including power outages, contaminated workers and other leaks. Tepco also said last month - after repeated denials - that the Fukushima plant was leaking contaminated water into the Pacific Ocean from trenches between the reactor buildings and the shoreline. Japan's Nuclear Regulation Authority said last week it feared the disaster was "in some respects" beyond Tepco's ability to cope. The latest crisis comes as Prime Minister Shinzo Abe has been touting Japan's nuclear technology abroad to countries like Turkey, promising that its nuclear reactor makers have learned vital safety lessons from the disaster. Tepco shares ended down 6.9 percent on Monday after falling as much as 10 percent to their lowest level in 12 weeks. CHERNOBYL LESSONS Foreign Minister Fumio Kishida on Sunday visited Chernobyl in Ukraine, the site of the 1986 nuclear disaster, and said he hoped to apply lessons learned there to Fukushima. "I directly saw that the battle to contain the accident still continues 27 years after the disaster. Ukraine's experience and knowledge serve as a useful reference for workers coping with the Fukushima nuclear crisis," Kyodo news agency quoted Kishida as telling reporters. China on Sunday said it was paying close attention to developments at Fukushima, noting it has the right to request entry into waters near the facility to conduct checks and assess the impact of the nuclear accident on the Western Pacific. The country's State Oceanic Administration said it hadn't found any evidence of a "direct impact" from radiation on Chinese waters, but will closely monitor developments. Public distrust towards Tepco's handling of the Fukushima plant clean-up has also intensified, with a Mainichi newspaper poll finding 91 percent of respondents saying the government should take a more active role in the contaminated water issue. ($1 = 98.47 Japanese yen) (Additional reporting by David Stanway in Beijing, and Leng Cheng, Tetsushi Kajimoto and Mari Saito in Tokyo.; Editing by Linda Sieg , Aaron Sheldrick and Ian Geoghegan )

Key JPMorgan lawyer leaves for smaller bank. Michael Coyne, who has been associate general counsel and co-head of litigation at JPMorgan, is becoming general counsel of Union Bank and its holding company, UnionBanCal Corp, according to a statement that Union Bank issued on Monday. Coyne had been at JPMorgan for 21 years and in 2010 became responsible for litigation and government investigation matters worldwide, according to the statement. A JPMorgan spokesman said Jill Centella, co-head of litigation, remains at the bank. The spokesman declined further comment. Coyne's departure comes as JPMorgan is spending $5 billion a year on litigation and government investigations into a wide range of allegations over issues including reporting of losses from its "London Whale" derivatives trades, sales of mortgage securities, commodities trading and credit card debt collections. San Francisco-based UnionBanCal Corp has assets of $102 billion, operates 422 branches and is owned by Mitsubishi UFJ Financial Group Inc ( 8306.T ) of Tokyo. JPMorgan, based in New York, has $2.44 trillion of assets, which ranks it the biggest United States bank. (Reporting by David Henry in New York; Editing by Gerald E. McCormick)

BATS, Direct Edge merge as stock trading decline catches up. The exchange operators, both backed by big banks and originally set up to undermine the dominance of NYSE Euronext NYX.N and Nasdaq OMX Group Inc ( NDAQ.O ), were feeling the same headwinds as their larger rivals. Already razor-thin, profit margins were under further pressure amid a three-yearlong decline in stock trading as economic uncertainty relegated retail investors to the sidelines and low market volatility also hit volumes. The solution was to combine to gain scale, cut costs and use the expanded platform and data to generate new streams of revenue. On Monday, BATS and Direct Edge said they would merge. The deal will create the second-largest U.S. stock exchange, catapulting over Nasdaq and landing right behind New York Stock Exchange parent NYSE Euronext in terms of equity trading volumes. The deal, financial terms of which were not disclosed, will bring four exchanges under the same umbrella. "We have four books today. We have a like-minded approach to competition. We both started for some of the same kinds of reasons." Ratterman said in an interview. "Individually, our market data may not be as deep or broad as Nasdaq or NYSE's current offerings, but together, we would have a much broader and much deeper coverage." Ratterman and other sources familiar with the deal said the two exchange operators were merging, instead of one buying the other. He declined to reveal the terms of the share exchange. Still, for now BATS seems to have the upper hand. Ratterman will become the CEO of the combined company, which will be called BATS Global Markets and be headquartered in the Kansas City area, where BATS is currently based. O'Brien will be president. The deal is expected to close in the first half of 2014, subject to regulatory approvals. In the past, sources familiar with the situation said Direct Edge and BATS could not agree on price. A source said last year that Direct Edge was also in talks to sell itself to TMX Group Inc, the operator of the Toronto Stock Exchange, for around $500 million. The merger comes after a series of similar consolidation attempts in the exchange sector over the past few years, many of which failed due to regulatory opposition. Most recently, NYSE Euronext decided to sell itself to IntercontinentalExchange ( ICE.N ) in a deal currently valued at around $10.6 billion. That deal, which looks set to go through, will cut NYSE's reliance on stock trading, as it would make it a bigger player in the derivatives market, where ICE competes with CME Group Inc ( CME.O ). The latest round of consolidation, however, leaves Nasdaq as the odd man out. Monday's deal comes just days after a three-hour-long blackout of the stock exchange market last week that left CEO Robert Greifeld with yet another black eye after a high-profile glitch around Facebook Inc's ( FB.O ) initial public offering last year. Although Nasdaq has diversified away from stock trading and into technology and other corporate services to the point where it gets only about a quarter of its revenues from equities trading, the deal could still create fresh headaches for Greifeld. Ratterman said that the combined company would consider entering the listings business, allowing companies to list their shares on its exchange, and also compete with Nasdaq and NYSE on market data offerings. NYSE, Nasdaq and Direct Edge had already been charging fees for their proprietary trading data, which provides a steadier source of income than trading fees. Traders use the data, such as bids for shares and other market information, to create market strategies. About 15 percent of NYSE's $2.3 billion in revenues last year came from market data. About 21 percent of Nasdaq's $1.7 billion in revenue was derived from its data products. BATS only began charging its U.S. clients for access to its proprietary market data as of July 1. Ratterman also said the combined platform would give traders a cheaper venue to trade. That would further eat into the profit margins for all stock exchange operators. ICE CEO Jeff Sprecher has been critical of a practice by U.S. stock exchanges of giving large rebates on trading fees to attract order flow, calling the practice "ridiculous." He has said he wants to end the practice at NYSE after the takeover. Direct Edge has been one of the most successful stock exchanges in attracting retail order flow through its discounting programs. Ratterman said he has no plans to change that. "Jeff can talk all he wants about how he thinks the equity markets ought to change, and I hope he makes some of those crazy changes he's thinking about to NYSE, because that will accrue to our customers big time," Ratterman said. "I think he should try it." TECHNOLOGY PROBLEMS The future of BATS - former called Better Alternative Trading System and known for its technology - has been in question ever since it tried to go public on its own exchange last March under the symbol "BATS" BATS.Z. A technical glitch led to the IPO being pulled. Ratterman said there were no near-term plans to try to go public again. Earlier this month, the company's largest U.S. exchange, BZX, had an outage that lasted nearly an hour due to an internal network problem. The same day, in an unrelated glitch, Direct Edge was also forced to briefly stop accepting orders on its EDGX exchange for a small range of stocks. The new company will switch all four stock exchanges - BATS and Direct Edge operate two each- on to BATS' technology platform, in a move that is also expected to save costs and reduce complexity for customers. BATS also runs a U.S. equity options market, as well as BATS Chi-X Europe, which is the largest pan-European equities exchange by market share and value traded. Ratterman said BATS is looking at possible expansions in Canada and Japan. Jersey City, New Jersey-based Direct Edge has already said it plans to expand into Brazil. BATS' investors include Citigroup Inc ( C.N ), Credit Suisse Group AG ( CSGN.VX ), trading firm KCG Holdings Inc ( KCG.N ), and private equity firms Spectrum Equity and TA Associates. Direct Edge is owned by a consortium, with International Securities Exchange (ISE), owned by Germany-based Deutsche Boerse AG ( DB1Gn.DE ), holding a 31.5 percent stake, and KCG, Citadel, and Goldman Sachs Group Inc ( GS.N ) each holding 19.9 percent stakes. JPMorgan Chase & Co ( JPM.N ) also has a position. (Reporting by John McCrank; Editing by Paritosh Bansal , Gerald E. McCormick, Lisa Von Ahn and Leslie Gevirtz )

Goldman puts four on leave after fallout from trading glitch: report. Last Tuesday, an upgrade of an internal system affected options on stocks and some exchange-traded funds with listing symbols beginning with the letters H through L. The Financial Times said about 80 percent of the mistaken contracts sent to the New York Stock Exchange were cancelled, limiting losses for Goldman. But the glitch "provoked a strong reaction" within the bank, which takes pride in a reputation for risk management, the paper said.( link.reuters.com/jeg62v ) The system, called a "trading axis", monitors the Wall Street bank's inventory to determine whether it should be a more aggressive buyer or seller in the market. But a technical error misinterpreted non-binding indications of interest, or IOIs, as firm bids and offers, leading to some trades that were vastly out of line with where market prices were, Reuters reported previously, citing a source familiar with the matter. Goldman Sachs was not available for comment outside of regular business hours. (Reporting by Krithika Krishnamurthy in Bangalore; Editing by Chris Gallagher )

Heineken controlling families to up stake in Heineken Holding. The grouping of the Heineken and Hoyer families, L'Arche Green N.V., holds 51.083 percent of shares in Heineken Holding, which in turn owns 50.005 percent of Heineken, the world's third largest brewer. L'Arche Green, itself 88.67 percent owned by the Heineken family and 11.33 percent by the Hoyer family, said it had mandated a bank to purchase the shares in the open market between September 9 this year and July 9 in 2014. The family carried out two similar purchases in 2010 and 2011 for a combined total of 100 million euros. (Reporting By Philip Blenkinsop)

Russia slashes economic growth forecasts, second time this year. The Economy Ministry slashed its forecasts for 2013 and 2014 after growth in the second quarter of this year was the slowest since the slump of 2009, documents obtained by Reuters on Monday showed. The news broke as the president made one of his many tours to key industrial regions - this time to Kemorovo in the Kuzbass coalfields - to demand greater urgency in developing Russia's vast resource base. The lower growth forecast reflects home-grown problems of weak industrial output - now expected to barely grow this year - slowing investment and a waning of the feel-good factor that helped Putin win a third term as president in March 2012. Not even oil prices at a historically-high $110 per barrel have been enough to avert the slowdown in the world's top energy producer - even if Russia's external surpluses and low debts do shield it from the current turmoil in other emerging markets. "To grow this time it will not be enough to stimulate private consumption," said Vladimir Miklashevsky, an economist at Danske Bank. Miklashevsky was referring to Putin's past reliance on distributing windfall energy revenues to boost living standards and drive average annual gross domestic product (GDP) growth rates of 7 percent during his first two presidential terms from 2004-08. The Economy Ministry cut its 2013 forecast to 1.8 percent from 2.4 percent, also hit by weaker exports and consumption growth. The forecast was below median expectations of 2.5 percent growth in a regular Reuters poll of economists. It downgraded the 2014 outlook to a range of 2.8-3.2 percent from 3.7 percent. REALITY CHECK Economy Minister Alexei Ulyukayev has warned that Russia's $2 trillion economy could stagnate, but played down risks of a recession, even though some economists estimate that real growth has now contracted for two consecutive quarters. Weaker growth will put pressure on Finance Minister Anton Siluanov's budget, which is due to go before parliament soon and which foresees a modest deficit next year. Economists see next year's forecast as over-optimistic. "Growth may accelerate next year only if the government increases expenditure substantially," said Natalia Orlova, chief economist at Alfa-Bank. The government has already broken Putin's pre-election pledge to balance the books by 2015, proposing measures that would only increase Russia's reliance on commodities. The government has been considering various stimulus measures, unveiling a $13 billion investment plan to build new roads and railways by tapping a rainy-day fund. Officials and bankers have been pressing, meanwhile, for easier monetary policy to lift growth towards the government target of 5 percent. The central bank, now led by Elvira Nabiullina, Putin's former economic adviser, kept interest rates on hold in August. It has said it will start cutting rates when inflation is inside its target corridor of 5-6 percent, expected in the second half of 2013. The economy ministry kept its inflation forecast for the end of 2013 unchanged at 5-6 percent, but raised its 2014 estimate by half a percentage point to 4.5-5.5 percent. "The central bank will not cut rates. The global environment is setting higher rates in the world economy and we should not ignore it," said Orlova. The rouble fell to its lowest in four years against the dollar-euro basket the central bank tracks, hit by capital outflows as emerging market investors expect the U.S. Federal Reserve to wind down its money-pumping measures. (Writing and additional reporting by Maya Dyakina; Editing by Douglas Busvine , Ruth Pitchford)

Peregrine accountant barred from working for firms overseen by CFTC. Peregrine's longtime auditor Veraja-Snelling, who ran her tiny accounting firm from a Chicago suburb, lacked the expertise to audit a futures brokerage, the Commodity Futures Trading Commission said in an order. "There is no place ... for below-standard audits or auditors who do not have a sufficient understanding of the futures industry," David Meister, the CFTC's top enforcement official, said in a statement. Former Peregrine head Russell Wasendorf Sr. is serving a 50-year prison sentence for embezzling $215 million from clients in a fraud he hid for nearly 20 years, using the money to fund a lavish lifestyle. Veraja-Snelling performed the 2011 audit herself, using software that was not tailored to the business, and failed to identify that Wasendorf had exclusive control over accounts containing customer money, the CFTC said. She also sent bank confirmation forms in return envelopes provided by Peregrine's accounting staff to a post office box secretly controlled by Wasendorf, who then responded himself, forging bank employee signatures, the agency said. As a result, Peregrine's 2011 statement that Veraja-Snelling had certified were fraudulently overstated by more than $215 million. She settled the CFTC's charges without denying or admitting the findings in the order. She also agreed not to be paid the $72,925 she had initially charged for the 2011 audit. Veraja-Snelling did not immediately respond to a request for comment. Reuters reported in July 2012 that the CFTC was investigating Veraja-Snelling. Experts said the use of such a small auditor for a brokerage with more than $500 million in assets should have been a red flag to regulators. In June, the CFTC launched the first lawsuit against a bank tied to Peregrine's blowup, alleging that U.S. Bancorp ( USB.N ) knowingly let Wasendorf - dubbed the "Midwest Madoff" - use customer money held at the bank. The bank denied the allegations and said the lawsuit is without merit. The demise of Peregrine followed on the heels of the collapse of futures brokerage MF Global, which went under after markets lost confidence that the company was viable after it bet heavily on European sovereign debt. (Reporting by Douwe Miedema; Editing by Phil Berlowitz)

U.S. judge tosses BofA suit vs FDIC over $1.7 billion investor losses. The lawsuit concerned the FDIC's role as receiver for an banking unit of Alabama's Colonial BancGroup Inc and the implosion of Taylor, Bean & Whitaker Mortgage Corp, home to what federal prosecutors called a $2.9 billion mortgage fraud. Bank of America, as trustee for notes issued by Taylor Bean's Ocala Funding LLC unit, had contended that the FDIC wrongly denied claims by Ocala noteholders to recover from Colonial Bank. Among the buyers of Ocala's notes were Deutsche Bank AG ( DBKGn.DE ) and France's BNP Paribas SA ( BNPP.PA ). Last December, U.S. District Judge Barbara Rothstein in Washington, D.C. dismissed some of Bank of America's claims but let the Charlotte, North Carolina-based lender pursue claims on behalf of itself, Deutsche Bank and BNP Paribas. But on Monday, she dismissed those claims as well, saying the FDIC determination that there were not enough assets in Colonial's estate to pay general unsecured creditors deprived her of jurisdiction. "The No-Value Determination is a final agency action that is binding on this court and is preclusive as to whether there are now or ever will be assets sufficient to satisfy general unsecured claims against the Colonial receivership," she wrote. Rothstein said the only way for Bank of America to challenge this determination is under the Administrative Procedures Act, not through individual lawsuits against the FDIC. She dismissed the lawsuit with prejudice, meaning it cannot be brought again. Bank of America spokesman Bill Halldin declined immediate comment. The case arose from a scheme in which Taylor Bean sold fake loans to Colonial Bank and diverted money from Ocala, and gave Bank of America false collateral lists that misrepresented the status of loans in which Ocala supposedly had an interest. Former Taylor Bean Chairman Lee Farkas is serving a 30-year prison term following his April 2011 conviction on 14 counts of bank fraud, securities fraud, wire fraud and conspiracy. Prosecutors accused him of masterminding the $2.9 billion fraud, which they said occurred from 2002 to 2009. Taylor Bean was based in Ocala, Florida, and Colonial in Montgomery, Alabama. Colonial had $25 billion of assets when it collapsed in August 2009 and was the largest U.S. lender to fail that year. The case is Bank of America NA v. FDIC, U.S. District Court, District of Columbia, No. 10-01681. (Reporting by Jonathan Stempel in New York; Editing by David Gregorio )

Analysis: Spending on cars, homes threatens apparel sales as holidays approach. Many consumers are taking advantage of still-low interest rates, purchasing cars and houses, but at the same time they are holding back on shirts, dresses and shoes, which doesn't bode well for many retailers in the run-up to the year-end holiday season. "People are putting their money into things that will last," said Jill Puleri, IBM's global industry leader for retail. "If you look at appliances, if you look at jewelry, these are not necessarily small purchases. They're rewarding each other ... They're putting money where things are more stable." IBM expects U.S. appliance sales to rise 6 percent in the current third quarter, with sales of other home goods up 1.67 percent. For the holiday season, it expects appliance sales to rise 2.13 percent and sales of home goods to rise 1.98 percent, while anticipating the steepest decline, 3.62 percent, in men's apparel. That's good news for companies such as home improvement chains Home Depot Inc ( HD.N ) and Lowe's Cos Inc ( LOW.N ), which reported strong quarterly results and raised their fiscal year forecasts as people spruced up their homes. In contrast, Macy's, Kohl's Corp ( KSS.N ), Wal-Mart Stores Inc ( WMT.N ), Target Corp ( TGT.N ) and even luxury chains such as Saks Inc SKS.N and Nordstrom Inc ( JWN.N ) posted disappointing second-quarter sales in recent weeks, and many aren't hopeful about the holidays. "As people are spending more money on their cars and homes, they are cutting back elsewhere, such as their spending on items like clothes and shoes," Sears Holdings Corp ( SHLD.O ) Chairman and Chief Executive Edward Lampert told Reuters in an interview. Macy's, which gets about 80 percent of sales from clothing, lowered its sales forecast for the year after it noticed spending shifting away from what department store chains offer. "The problem now is that there is no fashion, and if there is no newness, clothing becomes a commodity," said Patty Edwards, chief investment officer of Trutina Financial, which sold Nordstrom earlier this year, but owns Michael Kors Holdings Ltd ( KORS.N ), PVH Corp ( PVH.N ) and Nike Inc ( NKE.N ). "Beyond a select few, I'd think twice about getting into apparel and retail stocks." Some of the biggest hedge funds are shifting out of the sector. An analysis of holdings in the most recent quarter of the top 30 hedge funds by Thomson Reuters shows consumer discretionary stocks suffered the third biggest decline in the period, falling 2.15 percent. Only energy and materials had larger declines, at 5.25 and 11.59, respectively. The research shows that money shifted into healthcare, telecoms and technology stocks. POTENTIALLY WEAK HOLIDAY SALES While interest rates have risen sharply in the last few months, they remain low by historical standards, and many consumers are opting to buy now ahead of any potential increase. "Consumers recognize that financed purchases will be more expensive with rising rates, and thus are prioritizing them in the current economy," said Erich Patten, portfolio manager at Cutler Investment Group LLC in Seattle. "Demand for soft goods will return as interest rates rise and purchasing patterns normalize." Since early May, mortgage rates for 30-year loans have risen more than a percentage point. U.S. home resales jumped in July to their highest level in over three years, and some of that surge may reflect buyers rushing to lock in rates before they rise further. Still, data showed that sales of new, single-family homes plunged to their lowest level in nine months last month, casting a shadow over the U.S. housing recovery. Auto sales to U.S. consumers beat expectations in July and major automakers reported low inventories for many hot-selling models, suggesting sales would strengthen further. The near-term spending in housing and automotive sectors "is crowding out other spending," Target Corp ( TGT.N ) Chairman and CEO Gregg Steinhafel said on an August 21 call. He said that his chain sees "a mix of signals in which emerging optimism is balanced with continuing challenges." Consumers are also feeling the pinch of payroll taxes that are 2 percentage points higher this year, as well as slightly higher gas prices, leading them to cut back on discretionary items. "You can't get out of paying your taxes and you have to have gas to go to work and school. Those are real numbers that really do impact real Americans, and I think that's where other discretionary spend takes a hit," said Alison Paul, vice chairman and U.S. retail and distribution leader at Deloitte LLP. According to a poll of 1,100 U.S. consumers by Ipsos for Reuters this month, 26 percent plan to spend less on clothing this holiday season, while only 12 percent say they expect to spend more. A few retailers, including Ann Inc ( ANN.N ), posted a rise in quarterly comparable store sales this week. "We're not saying run away from apparel," said Shawn Kravetz, president of Esplanade Capital. "We're saying you have to make sure it really looks good on you. Investors just have to be choosier than ever because it has gotten very messy and very challenging very quickly." (Reporting by Jessica Wohl in Chicago and Phil Wahba in New York. Additional reporting by Jason Lange in Washington, Dhanya Skariachan in New York; Editing by Jilian Mincer and Ken Wills )

Cargill sets September 30 for last purchases of Zilmax-fed cattle. Zilmax became the focus of attention in the livestock industry after Tyson Foods Inc said on August 7 that it will stop buying Zilmax-fed cattle for slaughter beginning next month. Tyson, the biggest U.S. meat processor, said it was concerned about Zilmax potentially causing health or behavioral problems for some cattle. Merck's Animal Health unit announced on August 16 that it would halt U.S. and Canadian sales of Zilmax, pending additional company research and review. "While Cargill has not linked Zilmax to any specific incidents involving animal well-being, the company does believe more research is necessary to answer recently raised questions regarding the use of this product," the company said in a statement posted on its website. Zilmax is part of a family of drugs called beta-agonists, a class of non-hormone growth promoters that have been deemed safe for animals and humans by the U.S. Food and Drug Administration. Such products are fed to cattle in the weeks prior to slaughter to increase weight by as much as 30 pounds of lean meat. (Reporting By P.J. Huffstutter; editing by Andrew Hay)

India's fiscal deficit target getting more challenging: Fitch. The rating agency is also monitoring India's growth, inflation, public finances and the current account deficit and its funding, analyst Art Woo said in a teleconference on Monday. Fitch has a stable outlook on the 'BBB-' sovereign credit ratings. BBB- is the last rung on the ratings ladder above the so-called "junk" status that mainstream investors tend to avoid. Last week, Fitch said India and Indonesia are not at immediate risk of credit rating downgrades, but warned it could act if the governments of these countries fail to calm current financial market tensions. (Reporting by Suvashree Dey Choudhury and Neha Dasgupta; Editing by Prateek Chatterjee)

Schulze plans to start selling Best Buy shares later this year. "The stock sales ... are part of his personal long-term strategy for asset diversification and liquidity," Schulze told Best Buy, according to the filing. Schulze rejoined the company earlier this year as chairman emeritus and added two of his former colleagues to the board after failing to take the company private. As chairman emeritus, Schulze has no formal role on the retailers' board. Schulze, who has a 20 percent stake in Best Buy, adopted a pre-arranged plan to sell the shares starting October 1. The plan, scheduled to expire in March 2014, does not give him control over the timing of the stock sales. A Best Buy spokesman had no comment on Monday's filing. (Reporting by Dhanya Skariachan ; Editing by Phil Berlowitz)

Wall Street ends lower after Kerry blasts Syria on chemical weapons. In a kneejerk reaction to Kerry's strong words against Syria, major U.S. stock indexes gave up their gains and turned negative in the last hour of trading. Stocks had traded higher for most of the session, as sharply weaker orders for long-lasting manufactured goods eased investors' worries of a cutback in the Federal Reserve's economic stimulus. "The turnaround (in stocks) is probably a reaction to Secretary of State Kerry's comments. We are seeing signs of escalation here and geopolitical concerns are trumping," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York. Kerry said on Monday that the evidence of a massive deadly chemical attack last week was "undeniable" and accused the Syrian government of trying to cover it up, signaling the U.S. was edging closer to a possible military response. After the bell, shares of J.C. Penney ( JCP.N ) fell more than 2 percent on news that hedge fund manager William Ackman, the single biggest shareholder in the retailer, is selling his stake. Ackman's $11 billion Pershing Square Capital Management is offering its roughly 39.1 million shares for sale and used Citigroup as the bookrunner for the deal, a person familiar with the deal said. J.C. Penney also issued a regulatory filing. The move comes two weeks after the 47-year-old billionaire left the retailer's board after a fight over top management's direction. Ackman built his stake in J.C. Penney three years ago and has lost hundreds of millions on the investment as an ambitious makeover of the store failed. The Dow Jones industrial average .DJI ended down 64.05 points, or 0.43 percent, at 14,946.46. The Standard & Poor's 500 Index .SPX was down 6.72 points, or 0.40 percent, at 1,656.78. The Nasdaq Composite Index .IXIC was down 0.22 points, or 0.01 percent, at 3,657.57. Amgen Inc ( AMGN.O ) was among the biggest gainers both on the S&P 500 and Nasdaq 100 .NDX indexes after it struck a deal to buy cancer drug maker Onyx Pharmaceuticals Inc ONXX.O for about $10.4 billion, sweetening its original offer made in June. Onyx shares rose 5.6 percent to $123.49 and Amgen jumped 7.7 percent to $113.75. Earlier, data showed U.S. durable goods orders dropped 7.3 percent in July, the biggest decline in nearly a year. In addition, a gauge of planned business spending on capital goods tumbled, casting a shadow over the economy early in the third quarter. Trading volume was light at only around 4 billion on the New York Stock Exchange, NYSE MKT and Nasdaq, below the year's daily average of 6.31 billion shares. Declines pulled ahead of advances on the NYSE by 1,763 to 1,241. On the Nasdaq, declines beat advances 1,361 to 1,135. (Reporting by Angela Moon; Editing by Kenneth Barry and Dan Grebler)

Germany's GSW sees some merit in Deutsche Wohnen tie-up. Deutsche Wohnen made the all-share offer for GSW last week to expand in Berlin's booming rental market and tap nascent interest from international investors. The bidder plans to publish full offer documents after its extraordinary shareholder meeting scheduled for September 30, which will vote in the issue of new shares to fund the takeover. The tie-up would increase Deutsche Wohnen's portfolio of flats by around 63 percent to more than 147,000, pushing it into second place behind market leader Deutsche Annington ( ANNGn.DE ) with 179,000 apartments. "A combination of GSW and Deutsche Wohnen could make sense from an operational and an industry point of view," GSW said on Monday. GSW, which is scrambling to rebuild its leadership after a shareholder rebellion forced out the chairman and chief executive last month, said the all-share nature of the bid required a particularly detailed assessment. Some analysts have said Deutsche Wohnen may struggle to win GSW investors' support for a non-cash offer. "GSW will thoroughly analyze the bidder's strategy and intentions, which have not yet been made public but which will need to be set out in the bidder's offer document," GSW said. Deutsche Wohnen and GSW traded 0.1 percent lower at 0732 GMT. GSW has added 5.2 percent since the offer was made public, while Deutsche Wohnen has fallen 5.3 percent. GSW said it hired Goldman Sachs ( GS.N ), Citigroup ( C.N ) and Dutch bank Kempen & Co to advise on the offer. The company appointed its remaining executive board members Joerg Schwagenscheidt and Andreas Segal as co-CEOs on Friday. ($1 = 0.7493 euros) (Writing by Ludwig Burger ; Editing by Erica Billingham)

U.S. Air Force adds vendors to huge computer deal after protest. The change came after a protest filed with the Government Accountability Office by some of the companies that had lost out in the initial contract announcement, dated April 19, according to the Pentagon's daily digest of major contracts. After re-evaluating proposals following the protests, the Air Force said it decided to add potential suppliers to the Network Centric Solutions-2 (NETCENTS-2) contract rather than reopen the bidding or amend the terms of the competition. The competition was aimed at procuring commercially available products such as servers, networking equipment and biometric hardware to support the Internet Protocol Network. On Monday, the Air Force announced that eight additional companies were eligible to receive work orders for netcentric equipment under what is know as the firm-fixed-price, multiple-award, indefinite-delivery/indefinite-quantity (ID/IQ) contract. Those companies were immix Technology Inc; M2 Technology; Blue Tech, Inc; Unicom Government Inc; Global Technology Resources, Inc; Micro Tech; Red River Computer Co; and Integration Technologies Group. They join the eight companies included in the initial contract award, dated April 19: General Dynamics Corp ( GD.N ); Ace Technology Partners LLC; CDW Government LLC; CounterTrade Products Inc; FedStore Corp; Intelligent Decisions Inc; Iron Bow Technologies LLC; and World Wide Technology Inc. Under the contract, any of the companies can be tapped over the next six years to provide commercially available off-the-shelf products to support the Internet Protocol Network, including software, multimedia, and storage equipment. (Reporting by Andrea Shalal-Esa ; Editing by Ken Wills )

Weak U.S. durable goods data dims growth outlook. The report on Monday added to other data for July on industrial production, housing starts and new home sales that have suggested economic growth this quarter will probably not accelerate as much as economists had hoped. "So far, things aren't looking that great," said Millan Mulraine, senior macro strategist at TD Securities in New York. "We are expecting a bounce in growth, it can still come, but it may not necessarily be in the first month of the quarter." The Commerce Department said durable goods orders dropped 7.3 percent as demand for items ranging from aircraft to computers and defense equipment fell. It was the biggest decline since last August and snapped three consecutive months of gains. Orders for durable goods - items from toasters to aircraft that are meant to last three years or more - had increased 3.9 percent in June. Economists had expected orders to fall 4.0 percent last month. Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, fell 3.3 percent, breaking four straight months of gains. It was the biggest drop since February. Orders for these so-called core capital goods increased 1.3 percent in June. Economists had expected this category to rise 0.5 percent in July. The decline in demand suggested the manufacturing sector, which hit a speed bump early in the year, will probably not bounce back as quickly as many economists had anticipated. The report was at odds with a survey from the Institute for Supply Management released earlier this month that showed new orders at their highest level in more than two years in July. Still, it was the latest sign that economic growth might not accelerate much from the second quarter's 1.7 percent annual pace. Industrial output was flat in July, while residential construction increased less than expected and new home sales tumbled last month. SHIPMENTS FALL Troublingly, the durable goods report showed that shipments of core capital goods, which are used to calculate equipment and software spending in the government's measure of gross domestic product, fell 1.5 percent in July. Shipments had dropped 0.8 percent in June. While shipments tend to decline in July because not all components in this category are seasonally adjusted, economists noted the drop last month was the largest since 2008. Forecasting firm Macroeconomic Advisers lowered its third-quarter GDP growth estimate by two tenths of a percentage point to a 1.8 percent rate. Barclays cut its GDP growth forecast to a 1.9 percent rate from 2.1 percent. Economists said while the drop in core capital goods orders could attract the attention of some Federal Reserve officials, it was unlikely the U.S. central bank would step away from a plan to start reducing its monthly bond purchases before the end of the year. Some blamed the weak July data on a recent spike in interest rates in anticipation of a reduction in the Fed's bond buying, which many think will come at its next meeting on September 17-18. "When looking for signs that interest rate increases are too much for the economy to handle, durable goods, like housing, are a leading indicator of weakness in the broader economy," said Chris Low, chief economist at FTN Financial in New York. "We expect the Fed is determined to start reducing the size of asset purchases regardless, in part because the market has already begun to reverse some of the recent rate pressure without the Fed's help." U.S. Treasury debt prices rose on the data, pushing yields lower, while the dollar fell against the yen. U.S. stocks were up marginally. Durable goods orders in July were held down by a 19.4 percent plunge in bookings for transportation equipment. That reflected a 52.3 percent drop in orders for civilian aircraft. Boeing received orders for 90 aircraft in July, down from 287 aircraft the prior month, according to information posted on its website. Orders for motor vehicles gained 0.5 percent after rising 0.2 percent the prior month. Even excluding transportation, demand for long-lasting manufactured goods was weak almost across the board. There were declines in orders for computers and electronic products, and demand for electrical equipment, appliances and components also fell. Orders for machinery and primary metals were flat. Orders for defense capital goods plummeted 21.7 percent in July after hefty gains in the prior months. (Reporting By Lucia Mutikani; Editing by Andrea Ricci )

Swiss government to decide soon whether to keep seeking US tax deal: top diplomat. The Swiss government is keen to reach a deal that satisfies U.S. demands for data to help catch tax cheats and end a long-running dispute that has seen a handful of Swiss banks come under U.S. investigation, while dozens more firms could find themselves in the spotlight for similar transgressions. But there is a risk the talks could fall through, if Switzerland refuses to accept what sources told Reuters are further U.S. demands, after Swiss lawmakers in June voted down a law that would have eased the transfer of client data for the entire industry. That would prolong a scandal that has already cost the Swiss banking sector billions of francs in withdrawals and raise fears in Switzerland of further indictments like the one that felled Wegelin, the country's oldest bank, earlier this year. "A decision will be made shortly," Michael Ambuehl, Switzerland's top negotiator on tax matters, said on the sidelines of his last press conference on Monday. "Both sides are trying to reach a deal soon." The 62-year-old Ambuehl, who is leaving the civil service to become a university lecturer on conflict management at the end of this month, didn't elaborate except to say Switzerland would not enforce any emergency law to reach a deal or change its secrecy laws retroactively. Ambuehl's departure comes as Switzerland moves away from a "cherry-picking" strategy of striking individual deals, such as ones with Great Britain and Austria, in favor of broader ones. For example, the Swiss government will work with other nations in developing an international standard for sharing data on foreign depositors, a move which would lift the last vestige of its tradition of banking secrecy. Current talks with U.S. officials centre on roughly a dozen banks under investigation, including Credit Suisse ( CSGN.VX ), Julius Baer ( BAER.VX ), the Swiss arm of Britain's HSBC ( HSBA.L ), privately held Pictet and state-backed regional banks Zuercher Kantonalbank and Basler Kantonalbank ( BSKP.S ). The Swiss government has said it will grant these banks permission to hand over data to the United States that will allow them to avoid charges as they cut individual deals. While the two governments wrangle over the terms of an overarching accord, Swiss banks not yet under investigation find themselves in legal limbo. They are keen to cooperate with U.S. prosecutors to avoid an indictment, such as that which led to Wegelin's demise, but they are unsure what information they can hand over. A source at one bank targeted told Reuters last week that talks between the banks under investigation and the U.S. Department of Justice are at a standstill because the DoJ cannot conclude an agreement without a legal framework for the entire Swiss banking industry. UBS ( UBSN.VX ) paid a fine of $780 million in 2009 and delivered the names of more than 4,000 clients to avoid indictment, giving the U.S. authorities the information that has enabled them to pursue other Swiss banks. (Reporting By Katharina Bart and Oliver Hirt; Editing by Hugh Lawson )

Bonds rally on weak U.S. data; Wall St ends lower. Global equity markets, including U.S. stocks, had been relatively calm throughout the day. But they turned lower after U.S. Secretary of State John Kerry said all nations must stand up for accountability on the use of chemical weapons in Syria, adding an element of geopolitical uncertainty to markets. Investors were also cautious over Italy, where the risk of a new government crisis sent shares and bonds tumbling. In the United States, orders for long-lasting manufactured goods fell the most in nearly a year last month and a gauge of planned business spending on capital goods tumbled. The weak data boosted prices in the U.S. bond market, where the benchmark 10-year U.S. Treasury note was up 8/32, its yield at 2.7871 percent. The durable goods report was the latest in a series of data points that have kept expectations for the Federal Reserve's next step muddled. Economists largely expect the Fed will start to reduce its $85 billion in monthly purchases of debt, but some uncertainty over this remains. "If there is anything that is driving the markets today, it is that the durable goods numbers were weaker than expected and that raises the question whether the Federal Reserve might not begin to taper," said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC in Albany, New York. The debate over the Fed's plans and its impact on emerging economies has dominated markets in recent weeks. The Dow Jones industrial average .DJI ended down 64.05 points, or 0.43 percent, at 14,946.46. The Standard & Poor's 500 Index .SPX was down 6.72 points, or 0.40 percent, at 1,656.78. The Nasdaq Composite Index .IXIC was down 0.22 points, or 0.01 percent, at 3,657.57. "The numbers were disappointing this morning, but maybe we've returned to one of those odd situations where bad news is good for the market in terms of the Fed tapering," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois. In Italy, members of Silvio Berlusconi's center-right People of Freedom party said on Sunday they would force early elections if their center-left coalition allies voted next month to expel the former Italian premier over a tax fraud conviction. Italian shares .FTMIB ended down 2.1 percent, but the broader euro zone stock market .STOXX50E was down just 0.2 percent. Italy's bonds fell, taking Spanish and Portuguese bonds down with them. <GVD/EUR> Investors are worried that Italy's plans to mend its finances will fall apart if the coalition crumbles and that being without a government could make it tricky for the European Central Bank to shield it from market pressure. "If you have new elections now there is a high risk you would not have a majority government, so that is why we are seeing a widening of spreads in the periphery," said ING rate strategist Alessandro Giansanti. He noted the timing is poor, given Italy is set to sell bonds this week. EMERGING LULL After the turmoil of last week .MSCIEF, share indexes in India gained ground, though there were modest falls in Indonesia and both countries' currencies weakened again against the dollar. <EMRG/FRX> Investors are expecting improving returns from advanced economies while India, Indonesia and Brazil have all scrambled in recent weeks to try to stem destabilizing outflows that have crippled their currencies. The Indian rupee weakened on Monday, tracking offshore rates, while month-end dollar demand from importers also dragged the currency lower. The country's central bank stepped in to sell dollars to try to restrain the decline, which has taken the rupee to record lows. Against the yen, the dollar traded at 98.42 off Friday's peak of 99.15, while the euro bought $1.3369, having climbed as high as $1.3410. Spot gold, which as an inflation hedge has benefited from the global flood of liquidity, popped above $1,400 an ounce for the first time since early June, extending Friday's 1.5 percent rally. It last traded up 0.4 percent. U.S. crude slipped 0.1 percent to $106.28 a barrel, while Brent was up slightly at $111.13. (Additional reporting by Chuck Mikolajczak , editing by Dan Grebler)

U.S. to sell Indonesia Apache attack helicopters in $500 million deal. "We are working on further details of the delivery and training time line now," the official said on condition of anonymity. The sale of Boeing's ( BA.N ) AH-64E Apache helicopters was announced during a visit by U.S. Defense Secretary Chuck Hagel to Jakarta, his second stop on a week-long four-nation trip to Southeast Asia that began in Malaysia on Saturday. "Providing Indonesia these world-class helicopters is an example of our commitment to help build Indonesia's military capability," Hagel told reporters. (Reporting by Phil Stewart , editing by Jonathan Thatcher)

ING's Asia exit plan nears end as MBK agrees to buy South Korea unit. Under the agreement announced on Monday, the bailed-out Dutch insurer will retain about a 10 percent stake in the South Korean unit and allow MBK to use the ING brand for up to five years. The sale of the South Korean unit will leave ING with its Japan insurance unit left to sell, bringing it closer to fulfilling its agreement with European regulators to offload more than 50 percent of its Asian operations by the end of 2013. Since its rescue in 2008, ING has dismantled its once-fashionable banking and insurance model and announced thousands of job cuts and other cost savings. ING has raised about 23 billion euros ($31 billion) in total from divesting insurance, investment management and other assets to repay state aid. ING will own a 120 billion won stake in the South Korean unit, confirming an earlier Reuters story. "I am convinced that with the support of MBK Partners, ING Life Korea will continue to grow its customer offering and build on its position as the fifth-largest insurance company in the Korean market," Jan Hommen, CEO of ING Group, said in a statement. "Through its 10 percent stake, ING will be able to benefit from that growth potential," he added. The deal values ING Life Korea, the nation's biggest foreign insurer, at 9.2 times fiscal year 2012 earnings and 0.73 times book value as of March 31, 2013, the statement added. South Korean life insurers on average trade at a price-to-book ratio of 0.83, according to Thomson Reuters data. But ING will take an after-tax loss of about 950 million euros ($1.3 billion) to be booked in the third quarter of 2013. The transaction is subject to regulatory approval and is expected to close in the fourth quarter of 2013. ING shares were down 0.2 percent in early trade, while the benchmark Amsterdam index .AEX was flat. LARGEST S.KOREA INSURANCE M&A Established in 1987, ING Life Korea is South Korea's largest foreign life insurer, with about 1.3 million customers, more than 1,000 employees and approximately 6,800 tied agents. MBK, which is seeking about $2.6 billion in a new private equity fund, will fund the deal with a 1 trillion won syndicated loan, Basis Point reported last week. It is the largest private equity firm in South Korea, with more than $8 billion in capital under management. If completed, it will be South Korea's largest insurance M&A deal, surpassing the $1 billion purchase of a 24 percent stake in Kyobo Life Insurance Co last year by a consortium led by private equity firm Affinity Equity. MBK recently entered exclusive talks for the controlling stake after the insurance unit attracted a total of four bids in May, including from Tong Yang Life Insurance Co Ltd ( 082640.KS ), Hanwha Life Insurance Co Ltd ( 088350.KS ) and Kyobo Life Insurance Co Ltd, sources previously told Reuters. But the sale of the South Korean unit had never been a smooth process. In December last year, KB Financial Group Inc ( 105560.KS ) walked away from a $2.1 billion bid to buy the unit. In June, a Tong Yang-Vogo Fund consortium also dropped out after entering exclusive talks to buy the unit, South Korean media reported. ING's Japanese insurance unit stopped selling variable annuities in 2009 and it was unclear when ING would reach an agreement on its sale. The Japanese financial regulator is reluctant to let a private equity firm own that business, sources previously reported. ING is also seeking buyers for its stake in Thailand TMB Bank TMB.BK, Reuters previously reported. Last year, ING sold its Hong Kong, Macau and Southeast Asian insurance operations for a combined $3.87 billion in an auction that generated strong bidding. A spokesman for MBK declined to comment. ING was advised by Goldman Sachs ( GS.N ) and J.P. Morgan ( JPM.N ), while Barclays ( BARC.L ) was the financial adviser to MBK, sources told Reuters. (Additional reporting by Clare Baldwin and Stephen Aldred in HONG KONG and Sara Webb in AMSTERDAM; Reporting by Joyce Lee in SEOUL and Denny Thomas in HONG KONG; Editing by Stephen Coates and Chris Gallagher )

Nasdaq trading halt exposes communication gaps when crisis hits. Trading in about 3,200 Nasdaq-listed stocks, including Apple Inc, Google Inc and Facebook Inc, ground to a halt on Thursday after an unexplained "connectivity issue" with the system that disseminates last sale prices and stock quotes. Nasdaq, a unit of Nasdaq OMX Group Inc, began sending alerts to trading desks when trading was halted shortly after noon, though some people in the market question whether the exchange released enough information. Nasdaq Chief Executive Robert Greifeld said in an interview on Friday with television station CNBC that the exchange was in touch with regulatory officials, other exchanges and the Securities Industry and Financial Markets Association, a trade organization representing brokers and asset managers. "Greifeld obviously was trying very hard to get this right and to communicate appropriately a difficult situation," said Jim McCaughan, president of global asset management at Principal Financial Group Inc in Des Moines, Iowa. "But I think he's mistaken to think by talking to the inside circle he's communicating enough." Millions of people own shares of companies listed on Nasdaq and they were never adequately informed as to why Nasdaq was shut down, said McCaughan, who helps oversee $290 billion in assets at Principal. A Nasdaq OMX spokesperson declined to comment, citing the exchange's policy of not discussing details of conversations with customers. The outage was among the most serious in a series of recent technological failures to hit the U.S. securities business. Last week's trading halt, the May 2010 Flash Crash, Nasdaq's botched handling of Facebook's IPO and trading glitches at Knight Trading last year and at Goldman Sachs last week have rattled public confidence in the market. "It seems like there is little consistency in how these things are dealt with," said Stephen Massocca, a managing director at brokerage Wedbush Equity Management LLC in San Francisco. "I don't think there is a single methodology for dealing with these things, that quite frankly are going to continue to happen." Nasdaq faced similar criticism last year when Facebook debuted its share offering. An open conference call held on the morning of that IPO in May 2012 went silent during a critical period, when market-makers wanted to know why trading was not occurring. An explanation was not forthcoming for several hours. "Those events contribute to the fact that retail investors, to the extent they hear about them, are extremely suspicious" of the market, McCaughan said. "There is also a broader issue that I don't think gets enough coverage, which is the public interest in stock markets." A set of procedures on how to disseminate information about technical failures must be established, Massocca said. Nasdaq put Thomas Wittman, a senior vice president who is in charge of U.S. options at Nasdaq, on separate calls with regulators and exchange officials, brokerages and SIFMA members. Wittman was "extremely helpful," a market source said. Even though Nasdaq posted updates on its Web site and held the Sifma call, it was impossible for many brokers to talk directly to the exchange, said an executive at a major U.S. trading firm who spoke on condition of anonymity. "One of the biggest issues from our perspective was that the amount of information that was coming out made it difficult to really assess when and how they were going to come back up again," the trading firm executive said. The Sifma call, which the executive said was "OK," indicated the need for a better venue or means to communicate. "There were a lot of questions that came up that would have been good to have a dialogue about. Also, just so that we could risk manage - if we have trades we have to take down off of the tape, that has risk management implications," the executive said. "The only thing you would get was just a periodic update on the Web site. We need, as an industry, a better way to communicate during these kinds of situations." (Additional reporting by Chuck Mikolajczak , Angela Moon and John McCrank ; Editing by Dan Grebler)

Japan prices to keep rising in July, output rebound eyed. Household spending is expected to have edged up and the jobless rate held steady at its lowest in nearly five years, according to the poll, as growing optimism prompts companies to pay higher summer bonuses and increase hiring. Friday's slew of data for July could strengthen the case for the government to go ahead with a scheduled two-stage hike in the sales tax from next year, despite some concerns that it may weaken the economic recovery before it is fully entrenched. Most analysts say the tax increase is needed to rein in Japan's burgeoning public debt, although some concede there is merit to the argument the rise should be more moderate or even delayed. "Many companies are holding off on capital spending now because they want to see what happens to the economy after the tax hike," said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo. The government will hold meetings about the tax hikes with executives and academics through this week. Prime Minister Shinzo Abe is expected to make a decision before an APEC summit on October 7, Economics Minister Akira Amari said on Sunday. BOJ GOAL STILL DISTANT The nationwide core consumer price index, which excludes volatile fresh food prices but includes fuel costs, is forecast to have risen 0.6 percent in July from a year earlier. That would follow a 0.4 percent increase in June and mark the biggest increase since a 1.0 percent gain in November 2008. The rise would be driven mostly by gasoline and electricity prices, although analysts say robust consumer spending means more firms are more willing to pass on the rising costs. That bodes well for the Bank of Japan's battle to end deflation, although analysts still doubt whether inflation will accelerate enough to meet the central bank's target of a 2 percent rate in two years. "Consumer inflation will probably hit 1 percent early next year. After that, the tax hikes may slow the pace of price rises by weighing on the economy," Minami said. Factory output is forecast to have risen 3.7 percent in July after falling 3.1 percent in June, the poll showed, as domestic demand makes up for some of the weakness in shipments to China and other emerging economies. The jobless rate is set to stay flat at 3.9 percent in July, while household spending will edge up 0.3 percent from a year earlier, partly as the summer heat boosts sales of air conditioners, according to the poll. Japan's economy grew an annualized 2.6 percent in April-June to mark the third straight quarter of expansion as a pick-up in exports added to sustained strength in personal consumption, although the growth was slower than market expectations. (Editing by John Mair )

India's ONGC to buy $2.64-billion stake in Anadarko Mozambique gas block. The purchase of U.S. oil company Anadarko's ( APC.N ) stake is the latest in a handful of overseas assets that ONGC Videsh, the overseas business unit of state-controlled ONGC, has bought in the last couple of years to boost India's energy needs. In June, ONGC and state-run Oil India Ltd ( OILI.NS ) signed a deal to buy a 10 percent stake in a Mozambique gas field from Videocon Group ( VEDI.NS ) for $2.48 billion. "There is a lot of energy demand and whatever volumes of gas we are able to bring to the country are of utmost significance," A. K. Srinivasan, ONGC's group general manager for finance, told Reuters. "Mozambique will be a big LNG hub for the future." Anadarko said it would remain the operator of Area 1, with a working interest of 26.5 percent in the block, which is located in Mozambique's deepwater Rovuma Basin. Recent discoveries have turned the Rovuma field into a major draw for global energy producers and boosted Mozambique's natural gas reserves to around 150 trillion cubic feet or enough to supply Japan, the world's top LNG importer, for 35 years. Rovuma has the potential to become one of the world's largest liquefied natural gas (LNG) producing hubs by 2018, and is strategically located to supply gas to India at competitive prices. SEEN CLOSING BY MARCH 2014 ONGC, which expects the cash transaction to close by March 2014, is likely to finance the deal through internal cash balance and fresh borrowings, Srinivasan said, adding that financing details would be finalized over the next few months. The company's bonds were trading at marginally wider spreads on Monday, underperforming tightness in the market, and shares fell as much as 3.8 percent in the Mumbai market .NSEI that was trading flat, on worries about its higher debt levels. Analysts expect ONGC's two recent acquisitions to lead to higher debt levels, although a credit downgrade is unlikely. "Given current market conditions and uncertainty about India, financing may be a challenge and we think most of it will come from the bank market. That said, a potential bond activity cannot be ruled out," a U.S. bank said in a note. STARVING FOR GAS ONGC, which has struggled to maintain output from its ageing wells off India's west coast, will be interested in buying more overseas assets to feed the energy needs of Asia's third-largest economy, Srinivasan said, but declined to give details. "The country is starving for gas, for our power development and any other development," he said. Demand for gas in India far outstrips consumption, but prices have been kept low for strategic industries, deterring investment in the sector. India has few energy resources other than coal and is the world's fourth-biggest importer of fuel. After Anadarko, which has been looking to focus more on its domestic assets, Japan's Mitsui & Co Ltd is the second-biggest holder in Mozambique's offshore Area 1 block, with a stake of 20 percent. Indian state refiner Bharat Petroleum Corp ( BPCL.NS ) owns 10 percent while Thai state oil company PTT Exploration and Production PCL PTTE.BK has an 8.5 percent interest and Mozambique's state-owned ENH 15 percent. Outbound announced deals involving Indian companies so far this year stand at $35.8 billion, compared to $62 billion last year and a record $70.3 billion in 2008, Thomson Reuters data shows. Bank of America Merrill Lynch ( BAC.N ) advised ONGC Videsh and Citigroup ( C.N ) advised Anadarko on the transaction. (Reporting by Sumeet Chatterjee and Michael Erman ; Additional reporting by Umesh Desai and Denny Thomas in HONG KONG; Editing by G Crosse and Clarence Fernandez)

Greece could return to debt market in late 2014, Stournaras says. "That would be a great success which would allow us to test the market with a new bond issue in the second half of 2014," Yannis Stournaras told business daily Handelsblatt. "Initially with a small amount, to test the market." Asked if it could be in the range of three to five billion euros, the minister answered: "Perhaps even less." Stournaras said Greece did not need a second debt haircut because it could reduce its debt burden by other means such as easier terms on its current international rescue packages. (Reporting by Stephen Brown and Gernot Heller )

Landmark Chinese copper deal with Afghanistan at risk. It said China Metallurgical Group (MCC) CNMET.UL and Jiangxi Copper JXPROM.UL want new terms that would cut their royalties to the government, release them from building a power plant and copper smelter, and postpone the laying of a railway. "The Afghan government is trying its best ... to negotiate with the company but contract conditions are clear and previously both sides have agreed about it," a spokesman for the ministry said. An independent anti-corruption monitor, Integrity Watch Afghanistan (IWA), said the Chinese venture also wanted to delay the start of production by five years to 2019. A spokesman in China for the consortium declined to comment immediately. The copper deposit is among the world's largest but is situated in a dangerous province and the site has often come under attack by insurgents, who have succeed in halting work on the mine by forcing workers to flee. Donors hope the largest foreign investment project in Afghan history will help wean it off international aid, which is expected to fall short of the amount needed to pay for its security forces and sustain economic growth. IWA said that renegotiating the deal, which was agreed in 2007, would dramatically reduce the benefit to Afghanistan and set a bad precedent for others seeking to invest in the already unpredictable country. "The terms of the contract they want to renegotiate were the terms that made them the winners in the bidding process," said Javed Noorani of IWA. Noorani said the Chinese investors were seeking to cut royalty payments to the government by almost half to 10 percent as well as delay production to 2019. The Afghan president is expected to travel to China with the minister of mines to discuss salvaging the project. The government was split between accommodating Chinese demands and cancelling the contract. "Others for strategic reasons want it to happen... so China remains committed to helping Afghanistan when the money dries up in this country," Noorani continued. Once production starts, the mine will generate a quarter of a billion dollars a year and create around 75,000 jobs, according to a "low-impact" scenario by the World Bank. (Additional reporting by Mirwais Harooni; Editing by John Chalmers and William Hardy)

Analysis: New Microsoft CEO faces big choices post-Ballmer. Ballmer's grand design - unveiled just six weeks before Friday's surprise announcement that he would retire within a year - calls for 'One Microsoft' to pull together and forge a future based on hardware and cloud-based services. But poor sales of the new Surface tablet, on top of Microsoft's years-long failure to make money out of online search or smartphones, have cast doubt on that approach. For years, investors have called on Microsoft to redirect cash spent on money-losing or peripheral projects to shareholders, while limiting its focus to the vastly profitable Windows, Office and server franchises. Activist investor ValueAct Capital Management LP, whose recent lobbying of the company may have played a role in Ballmer's decision to retire earlier than he planned, is thought to favor such an approach. In the last two years alone, Microsoft has lost almost $3 billion on its Bing search engine and other Internet projects, not counting a $6 billion write-off for its failed purchase of online advertising agency aQuantive. It took a $900 million charge for its poor-selling Surface tablet last quarter. For now at least, Microsoft seems intent on pursuing Ballmer's vision. John Thompson, Microsoft's lead independent director who is also heading the committee to appoint a new CEO, said on Friday the board is "committed" to Ballmer's transformation plan. The eventual choice of that committee - which has given itself a year to do its work - should provide a clue to how committed the board really is, and how open to outside advice. "Taking an internal candidate like Satya Nadella - the guy nurturing servers - or some of the other people on the Windows team, that makes sense to keep a steady hand through this reorganization and strategic shift," said Norman Young, an analyst at Morningstar. "But a strong case could be made that the company needs a breath of fresh air, someone who can execute on the strategy but also bring an outsider perspective," he added. That could mean selling the Xbox and abandoning Bing, or cutting short efforts to make tablets or other computers. SHAREHOLDERS CLAMOUR FOR MONEY, BALLMER'S HEAD Throughout the last decade, as Microsoft's share price has remained flat, shareholders have called for bigger dividends and share buybacks to beef up their returns. Microsoft obliged with a one-time $3 a share special dividend in 2004 and has trebled its quarterly dividend to 23 cents since then. But shareholders still want a bigger slice of Microsoft's $77 billion cash hoard, $70 billion of which is held overseas. Rick Sherlund, an analyst at Nomura, believes that if the retirement of Ballmer means the company is listening to ValueAct and its supporters, then action on the dividend and share buyback could perhaps happen as early as September 19, when Microsoft hosts its annual get-together with analysts and is expected announce its latest dividend. "The momentum of shareholder activism is well underway and likely to benefit shareholders even though the process of how this unfolds is not certain," said Sherlund. The lackluster performance of Microsoft's stock has long been the stick that shareholders beat Ballmer with, and it has looked all the worse compared with the staggering gains made by Apple Inc under Steve Jobs. Yet Ballmer - who owns just under 4 percent of the company - never showed any doubts about his intention to stay in the job. His old friend and ally Bill Gates, who still owns 4.8 percent of the company, never wavered in his public support. The first public signs of dissent on Microsoft's board came in 2010, when Ballmer's bonus was trimmed explicitly for the flop of the infamous Kin 'social' phone and a failure to match Apple's iPad, according to regulatory filings. It was around that time, though not necessarily connected, that the board started considering how it would manage a succession, according to a source familiar with the matter. Ballmer and the board began talking to both internal and external candidates. About 18 months to two years ago, Ballmer started thinking seriously about a succession plan, the internal source said. The time since was not marked with glory for Ballmer, with a tepid launch of Windows 8, the disappointment of the Surface tablet, and a $731 million fine by European regulators for forgetting to offer a choice of browsers to Windows users. Two to three months ago, Ballmer started thinking seriously about his retirement and concluded it was the "right time to start the process," the source said. That was shortly after ValueAct took a $2 billion stake in Microsoft. July's gloomy earnings, which offered no immediate hope of quick improvement, may have sealed the decision. Ballmer said Friday he made the choice in the few days prior, and informed the board on Wednesday. Whether the board urged Ballmer to leave is not known. The impending exit of Ballmer leaves a difficult and perhaps impossible choice to his successor - pushing a large and insular behemoth through a highly risky transformation to the mobile world, or clinging to an island of profitable but PC-centric businesses. "I'm not sure there is someone who can do Steve's (Ballmer's) job 'better'. It's an incredibly difficult job, perhaps intractable," said Brad Silverberg, a former senior Windows executive and co-founder of Seattle venture capital firm Ignition Partners. "Perhaps the way the job is defined needs to change, and this is the harbinger of bigger changes to come." (Additional reporting by Liana Baker in NEW YORK; Editing by Jonathan Weber and Miral Fahmy.)

Supreme Court dismisses shareholder case against UBS. The high court had been due to rule on the case in the term starting in October and running until June 2014. The justices instead dismissed the case because of a separate ruling on July 9 by a U.S. District Court judge in Puerto Rico. In that decision, the judge noted that the plaintiffs had sold their shares, meaning they no longer had standing to pursue the claims at issue in the Supreme Court case. The judge therefore dismissed the original lawsuit. In the lawsuit, the investors, Union de Empleados de Muelles de Puerto Rico PRSSA Welfare Plan and Union de Empleados de Muelles de Puerto Rico AP Welfare Plan, sued on behalf of the funds. They claimed that the fund directors and the subsidiary of UBS AG ( UBSN.VX ) had, among other things, violated securities laws when purchasing approximately $757 million worth of bonds issued by the Employee Retirement System of the Government of Puerto Rico. The bonds were underwritten by another unit of UBS. In the case the Supreme Court had agreed to hear, a federal judge initially dismissed the lawsuit. But in a January 4, 2013, ruling, the 1st U.S. Circuit Court of Appeals in Boston said the investors had shown that a pre-lawsuit demand to the directors would have been futile. The Supreme Court had agreed to hear UBS' appeal from that ruling. UBS's lawyer, Paul Lockwood, declined to comment. Jay Eisenhofer, who represents the shareholders, could not immediately be reached. The Supreme Court's public information office said the case was dismissed in accordance with court rules. It did not elaborate. The case is UBS Financial Services Inc v. Union de Empleados de Muelles de Puerto Rico, U.S. Supreme Court, No. 12-1208. (Reporting by Lawrence Hurley; Editing by Howard Goller and David Gregorio )

Exclusive: United Tech, Pentagon in $1 billion-plus deal for F-35 engines. The agreement - which Pratt had expected to reach over a month ago - is valued at more than $1 billion, said the sources, who were not authorized to speak publicly. The Pentagon agreed on the terms of a contract for the sixth and seventh orders of F-35s with Lockheed Martin Corp, which builds the jets, in late July. The government buys the engines separately from Pratt & Whitney, which is the sole producer of engines for the radar-evading warplane. The negotiations between Pratt and the Pentagon's F-35 program office had focused only on engines for the sixth batch, with separate discussions planned for a seventh batch of F135 engines. Pratt President Dave Hess had told Reuters in June that he expected to reach a deal with the Pentagon within 30 days on the next engine contract, reflecting a cost reduction of less than 10 percent. No further details were immediately available about the new agreement in principle, which the sources said was reached by Pratt and government officials last week but which has yet to be announced. Officials at Pratt and the Pentagon's F-35 program office had no immediate comment on the deal, whose terms will now be finalized in coming weeks and months. Pratt has said the cost of the F135 engine it builds for the F-35 fighters is down about 40 percent from 2001, when the program began. The company finalized a $1 billion deal for a fifth batch of 35 engines with the Pentagon in May. The sixth engine contract includes 39 engines - 36 for F-35 planes and three spares, according to Pratt & Whitney. Hess told Reuters in June that F-35 engine sales would account for more than 50 percent of the company's military engine revenue in coming years, when production ramps up, reaching $2 billion by around 2018. Hess said that last year, military engine revenue accounted for about $4 billion of Pratt's total revenue of $14 billion. Shares of United Technologies were up 0.6 percent at $103.41 on Monday morning on the New York Stock Exchange. (Editing by Gerald E. McCormick and Matthew Lewis )

Weidmann urges governments not to rely on ECB to solve crisis. Weidmann, who is also the president of the Bundesbank, also called for a cap on banks' sovereign bond holdings and a sufficient capital backing to help disentangle the close relationship between states and banks. Speaking at an ambassadors' meeting in Berlin, Weidmann said the crisis could not be solved with monetary policy, reiterating his opposition to the ECB's government bond purchase program - Outright Monetary Transactions (OMT) - that has yet to be used. "It is not a secret that I see specifically the government bond purchase programs in a critical fashion," Weidmann said in the text of a speech. The euro zone central banks would distribute risks stemming from unsound budgetary policy across all euro countries if they bought individual countries' sovereign bonds with poor credit worthiness, he said. "That way monetary policy weakens the principle of individual responsibility and engages in a kind of redistribution that should be decided by governments," he said. The central bank's best contribution to solving the crisis was therefore to focus on its mandate to preserve price stability, Weidmann said. (Reporting by Annika Breidthardt , writing by Eva Taylor)

Bradway's patient dealmaking brings Onyx to Amgen. In doing so, he managed to avoid falling into traps that an inexperienced CEO might make with the stakes so high, while potentially quieting some criticism over the choice of a former banker to lead the world's largest biotechnology company. "Because of his experience as an investment banker, he was able to avoid a lot of the mistakes that a lot of rookie CEOs make in acquisitions," said a source familiar with the sale process, who wished to remain anonymous because he is not permitted to speak to the media. "He was very disciplined and was willing to wait effectively two months for the process to play out," the person added. The deal gives Amgen an immediate new revenue stream, bolsters its drug development pipeline and places Amgen much more solidly into the oncology space, which features among the most high priced and highly sought after medicines in the healthcare industry. Bradway, 50, who was a healthcare investment banker at Morgan Stanley ( MS.N ) prior to joining Amgen in 2006, replaced long-time CEO Kevin Sharer in May of 2012, after stints as vice president of operations strategy and chief financial officer. Since taking the helm of Amgen, Bradway has engineered a handful of small deals to add to Amgen's experimental drug pipeline - the largest, a $1.16 billion acquisition of Micromet - but had primarily placated shareholders with share buybacks and increasing dividend payments. While Amgen shares are up more than 60 percent on Bradway's watch - including a nearly 8 percent rise on Monday - many of the company's key products are mature or declining and likely to face competition from cheaper rivals over the next few years. Those who viewed Amgen as a growth company were clamoring for a big move. Several of Amgen's current drugs offer supportive care for cancer patients, such as to treat anemia (Aranesp) or decreases in white blood cells caused by chemotherapy (Neupogen and Neulasta). Another of its newer medicines, Xgeva, helps prevent fractures in cancer that has spread to the bone. It's one product that actually treats cancer, the colon cancer drug Vectibix, has largely been a disappointment. "This is a bit of a bold stroke," Christopher Raymond, analyst at Robert W. Baird and Co, said of the Onyx purchase, which gives Amgen full rights to the new multiple myeloma drug Kyprolis as well as other assets. "I credit them for doing something ... they need growth." Sven Borho, a founding general partner of OrbiMed Advisors LLC, which holds a substantial position in both companies, was pleased by the deal from both sides. "Healthcare shareholders are relieved that Amgen management is doing something. Just paying a dividend and buying back your shares is not enough," Borho said. "Finally they're seeing the light that you have to generate value for your shareholders not just by financial engineering but by creating future revenues. This was long, long overdue," Borho said. OrbiMed owns about 2.6 million Amgen shares and nearly 1.2 million Onyx shares, according to Thomson Reuters data. "Of all of the assets out there, Onyx was the quality oncology asset," said Borho. Leerink Swann analyst Howard Liang agreed. "There are not that many opportunities where you can buy a fully-owned asset that moves the needle for Amgen," Liang said Amgen had been criticized by some industry analysts for choosing an investment banker to run a company where science should be a priority. "He's a real quick study ... takes a lot of interest in the science side of the business," one former Amgen executive, who asked that his name not be used, said of Bradway. "He understands that the basis of Amgen is innovation and science." But the Bradway's investment banking background appears to have served him well as he oversaw the Onyx purchase process that began in June with Amgen's unsolicited takeover offer of $120 per share, which was rejected as too low. After Onyx sought competing bids, the deal eventually got done at $125 per share. Some new CEOs may have just agreed to up their offer and overpay to make the deal happen quickly or walk away entirely, but Bradway did neither, said the person familiar with the deal. "We had the benefit of spending considerable time with the Onyx team, coming to know and understand in particular Kyprolis very well through that process," Bradway told analysts on a conference call on Monday. "We reviewed the data that are available to us and our confidence is reflected in the price that we've moved forward the transaction with," said Bradway, adding that Amgen will still be able to generate strong cash flow and have the flexibility to do smaller bolt-on deals in the United States, with even more flexibility outside the U.S. OrbiMed's Borho said it was a big win that Amgen got the prize it sought without being forced to drive up its initial offer by too much. "They played it quite well looking from the outside in," he said. "Investment bankers on both sides tried to spread rumors either to hold back the price or ratchet the bids up, and in the end Amgen was able to get the deal done without overpaying." He said biotech merger and acquisition activity has been a boon to the acquirers and shareholders, citing Bristol-Myers Squibb's ( BMY.N ) purchase of Medarex and its melanoma drugs, and Gilead Sciences' acquisition of Pharmasset to gain its highly promising hepatitis medicines, as potentially company transforming moves. "Big companies so many times are so worried about making a mistake acquiring assets too early. But the ones that work can generate so much shareholder value and that's what all the healthcare dedicated investors want them to do," Borho explained. "Take a risk. At least step up to the plate and take a swing and get some assets to grow your company," he added. (Additional reporting by Jessica Toonkel in New York; Deena Beasley in Los Angeles and Susan Kelly in Chicago; Editing by Carol Bishopric)

Exclusive: T. Rowe bans some American Air employees from fund trading. About 800 additional employees have received warning letters about their trading patterns, according to sources at the airline and at JPMorgan Chase & Co, administrator of the retirement plan. The ban, confirmed by the airline and the fund company in response to a Reuters inquiry, follows a period of several years in which T. Rowe Price imposed a series of temporary trading restrictions on some subscribers to the EZTracker LLC newsletter for American Airlines employees. The newsletter suggests monthly mutual fund trades to more than 2,000 subscribers who invest in the company's defined contribution plan known as $uper $aver 401(k). The plan has more than 80,000 participants. When large numbers of investors trade mutual funds in lockstep, it can force fund managers to buy and sell securities at inopportune times. They may have to find securities to buy in a hurry if the pack invests all at once, and may have to sell quickly to pay off sellers who cash out together. T. Rowe Price spokesman Bill Benintende said collective trading can disrupt portfolio managers' strategies and raise costs for long-term investors. "In limited situations" the company's funds restrict investors who significantly alter their holdings on the advice of a newsletter, he wrote in an emailed statement confirming the ban. He declined to name the newsletter or discuss other specifics. Investment newsletter veterans said a permanent ban is highly unusual, and raises questions about why a giant like T. Rowe Price, which manages $614 billion, would single out activities of a small group of people. The controversy comes as workers' anxiety about managing their own retirement investments grows, while employers close company-paid and professionally managed pension plans. "It's like taking a chainsaw to an ingrown toenail," said Dan Wiener, publisher of "Independent Advisor," a newsletter for investors in Vanguard Group funds. Wiener said he knew of no similar cases. PILOT COMPLAINTS The publishers of EZTracker's newsletter for American Airlines employees said many of its subscribers were banned. They did not know if other airline employees were also affected. An American Airlines spokesman said the company in its role as plan sponsor has acted appropriately. Despite the ban, all plan participants still can put new payroll deductions into T. Rowe Price's funds or cash out of them, he emphasized. They cannot trade among the four T. Rowe Price funds in the plan, which has about 26 other investment choices. Still, the restriction is rankling employees at a sensitive time. Two weeks ago, the U.S. Justice Department sued to block the merger of American Airlines' bankrupt parent AMR Corp with U.S. Airways Group. Last month, American distributed about $3.5 billion to pilots from a company-funded, professionally managed pension plan it had shuttered. To avoid tax penalties, most pilots are reinvesting the money in 401(k) plans and other retirement vehicles. "They have kept me from some of the better performing funds," William Simons, an American Airlines pilot wrote to Reuters in an e-mail. "We thought we were doing everything legally, yet we were punished." HIGH-YIELD TRIGGER? T. Rowe Price covered itself by amending the prospectuses of its funds in the American plan in 2010, according to some lawyers who declined to be named because they work with the firm. The new language permits each fund at its discretion to reject trades that "could dilute the value of the fund's shares, including trading by shareholders acting collectively (e.g., following the advice of a newsletter)." EZTracker's co-publishers Paul Burger and former American Airlines captain Michael DiBerardino call the restrictions anti-competitive and vague. "We are being held to a standard that's not being applied to other newsletters, publications or investment advisers," Burger said. The permanent ban was probably triggered by EZTracker's April 1 suggestion that employees sell T. Rowe's High Yield Fund, which it had suggested buying five months earlier, he said in an interview. EZTracker has recommended exiting T. Rowe Price funds in American's 401(k) plan six times since mid-2010 after a holding period of less than a year, Burger said. The recommendations trigger a rush of buys and sells in the days following the end-of-month release of the newsletter, Burger acknowledges. He voiced doubts that those would be significant enough to affect the performance of such large funds. The other funds in the plan are T. Rowe's Science & Technology, MidCap Growth and New Horizons funds. Since 2010, T. Rowe Price has sent a series of warning letters and outright one-year trading bans to several subscribers, some of whom complained to EZTracker. SEC COMPLAINT In May 2012, EZTracker filed a complaint with the U.S. Securities and Exchange Commission, saying that the then-temporary restrictions were "discriminatory and anti- competitive." It said it had received complaints from hundreds of subscribers, claiming they were injured by the bans. SEC spokesman John Nester declined to comment on the status of the complaint. The T. Rowe Price letters were sent through JPMorgan, which also markets a managed account service called JPMorgan Personal Asset Manager to participants in many of the plans it administers. EZTracker charges $84.95 a year for its newsletter while JPMorgan charges an asset management fee that can result in charges of $945 for a $250,000 account. Unlike the newsletter, which simply advises subscribers who make their own trades, the JPMorgan program makes trades on behalf of participants. Burger said he suspected JPMorgan helped orchestrate the trading bans to further its own advisory services among highly compensated airline employees. The complaint to the SEC said the bank's willingness to enforce the bans is "self-serving." "I'm sure they would like to manage the 401(k) plans of all our subscribers," Burger wrote in an email. The bank dismissed the claims. "JPMorgan in its role as a plan service provider and financial intermediary for the funds has acted appropriately and as directed by the plan sponsor and the fund provider," bank spokeswoman Kristen Chambers wrote in an email. "All communication to participants is plan-sanctioned, including any mention of the managed account feature." (Reporting by Jed Horowitz; Editing by Paritosh Bansal , Andrew Hay and Jeffrey Benkoe)

China economy showing clear signs of stabilization: statistics bureau. The issue of local government debt also remained under control, the National Bureau of Statistics said at a briefing organized by the foreign ministry that may have been aimed at allaying global concern about China's slowdown. "We are confident that the economy is sustaining the positive momentum in the second half and confident of meeting the economic growth target," said Sheng Laiyun, the NBS's spokesman. "The economy is showing some positive changes. Signs of growth stabilization are becoming more obvious," he said. A private factory survey last week reinforced signs of stabilizing in the economy in the third quarter after the government took supportive measures, including scrapping taxes for small firms and accelerating investment in urban infrastructure and railways. That followed a raft of July data which saw factory output grew at its fastest pace since the start of the year, and surprisingly strong trade data. China's annual economic growth slowed to 7.5 percent in the second quarter, down from 7.7 percent in the three months ending March 31 - the ninth such deceleration in the past 10 quarters. Beijing has said it is willing tolerate slower growth as it pushes reforms designed to reduce pollution, social inequity and an economic growth model which has an over-reliance on debt-financed construction and exports. Sheng said it was very difficult for China to maintain a fast growth rate due to structural adjustments and declining surplus labor, but rising consumption, increasing urbanization and catch-up growth in less developed regions will be long-term economic drivers. The government has launched a series of targeted measures recently to support the economy, including scrapping taxes for small firms, offering more help for ailing exporters and accelerating investment in urban infrastructure and railways. But rapidly slowing growth has also been putting pressure on China's heavily indebted companies and provincial governments, raising concerns that the country's explosion in credit since 2008 may be on the verge of a meltdown. Credit in China's economy almost doubled between 2008 and last year, pushing investment to 46 percent of GDP, much of that into infrastructure and property. The China Banking Regulatory Commission has recently begun working with China's securities regulator to encourage the securitization of loans to help lenders sell problematic loans and is developing a platform to help banks sell such loans to investors. That follows a move last year to let provincial governments set up their own debt-purchasing companies. "The central government is attaching great importance to developments in the debt issue," Sheng said. (Reporting by Kevin Yao; Editing by Paul Tait & Kim Coghill)

Starbucks won't cut worker benefits ahead of Obamacare: CEO. "Other companies have announced that they won't provide coverage for spouses; others are lobbying for the cut-off to be at 40 hours. But Starbucks will continue maintaining benefits for partners and won't use the new law as excuse to cut benefits or lower benefits for its workers," Schultz said in a telephone interview. The 2010 healthcare reform law, often called Obamacare, requires companies with more than 50 employees to offer health insurance for employees who work 30 hours a week or more. Starbucks currently provides healthcare to part-timers who work 20 hours a week or more. Last week, United Parcel Service Inc ( UPS.N ) told non-union employees that their spouses would no longer qualify for company-sponsored health insurance if they could get coverage through their own jobs. According to a survey released in March by consultant Towers Watson ( TW.N ) and the National Business Group on Health, 4 percent of large employers excluded spouses from their health plan in 2013 if they could buy coverage where they work, and 8 percent more planned to do so for 2014. Last week, Reuters reported that some businesses are keeping staffing numbers below 50 or cutting the work week to less than 30 hours to avoid providing employee health insurance. (Reporting By Atossa Araxia Abrahamian; Editing by David Gregorio )

Goldman losses from options glitch in tens of millions: source. Last Tuesday, an upgrade of Goldman's internal system affected options on stocks and some exchange-traded funds with symbols beginning with the letters H through L, leading to trades vastly out of line with market prices. Roughly 80 percent of the erroneous option-market contracts traded on NYSE Euronext's two option platforms NYSE Arca Options and NYSE Amex options were cancelled, according to a second source close to the situation. The two platforms have collectively handled about 23 percent of equity and index options trading in August, according to data from OCC, formerly known as the Options Clearing Corp, which clears all U.S.-listed options. NYSE Euronext NYX.N said it completed a review and appeals process last week but declined to give further details. The options trading snafu was the first of what was a rough week for trading last week, as it was followed by a three-hour shutdown of the Nasdaq Stock Market due to connectivity issues on Thursday. Earlier, the Financial Times reported that Goldman Sachs put four senior technology specialists on administrative leave as a result of the trading mishap. The report cited people familiar with the situation. Goldman Sachs said in a statement on August 20 that it did not face material loss or risk from the problem, but declined to comment further. Exchange operator CBOE Holdings Inc ( CBOE.O ), which has the largest market share in combined single-stock and index options at 29 percent so far in August, completed its review process last week, but it did not comment on the number of trades affected. A spokeswoman for the International Securities Exchange, confirmed that a majority of the trades under review at ISE were adjusted and not canceled. ISE, which is owned by Germany's Deutsche Boerse AG ( DB1Gn.DE ), did not disclose any other details. Nasdaq OMX Group Inc's ( NDAQ.O ) which operates three option venues, declined to comment. (Reporting by Lauren Tara LaCapra in New York and Doris Frankel in Chicago; Editing by David Gregorio )

Gasoline fuels comeback for China's electric car maker BYD. Its car sales jumped 25 percent to more than 250,000 units in the first six months of this year, outpacing China's overall auto market growth rate of 11 percent. The vast majority of those were gasoline-powered, not electric. The recovery in gasoline car sales, which account for half of BYD's revenues, has raised investors' hopes that the company is once again starting to live up to the promise that attracted big-name backers such as Buffett. Profits from those gasoline cars, as well as from selling batteries for mobile phones and other handheld devices, can be funneled into expensive research and development of electric cars, solar panels and other futuristic green technologies. Shenzhen-based BYD said on Sunday its first-half net profit rose to 426.9 million yuan ($69.74 million), well ahead of the 16.3 million yuan it earned in the same period a year earlier, helped by strong auto sales and an improvement in its solar cell business. To be sure, it is too early to tell if the latest results mark the start of a sustained recovery. But BYD shares have more than doubled in the past year on investor enthusiasm over the company's improving profitability and hopes that BYD could one day become China's answer to Tesla Motors Inc ( TSLA.O ), the popular California electric vehicle marker whose shares have quadrupled this year. BYD's fortunes took a turn for the worse in 2010, when its car sales began tanking amid a series of quality issues and a slowing economy. Last year, a much-publicized deadly fire involving one of its electric taxis hurt its share price, although an investigation found BYD's battery was not at fault. Wang responded to the sales slump by slowing expansion and restructuring the company, including streamlining its distribution system and slashing the number of dealers by a third to 800. "In the past, BYD made almost everything by itself, include windshield wipers and paint. That was the root of many quality issues," said Yang Zao, analyst at KGI Securities. "Now, BYD has started to outsource and buy auto parts from suppliers, while focusing instead on making key components such as engines." NEW GREEN CARS As the traditional car business stabilizes, BYD is ramping up development of new energy vehicles. One green-car area BYD is focusing on is gasoline-electric cars. People close to BYD, who are privy to BYD management's thinking, told Reuters earlier this year that the company might phase out the gasoline car business over the next several years to embrace hybrid and other electrified cars. As part of this refocus, BYD plans to launch "Qin," a gas-electric hybrid, in the fourth quarter, the company said in an emailed statement to Reuters. It plans to export the model to European markets including France and Belgium, BYD said. BYD is also gearing up to produce and sell Denza electric vehicles as part of a joint-venture with Daimler AG ( DAIGn.DE ) aimed at appealing to wealthy Chinese. Most of BYD's electric vehicles are currently used as taxis and public transport. Its B9 electric buses are still a tiny portion of the company's total sales, but BYD has signed several contracts this year, including one to supply the U.S. cities of Los Angeles and Long Beach, and to Amsterdam's Schiphol airport. Some analysts, however, are skeptical of BYD's continued ability to post positive results. "While BYD has relatively mature technology to make both pure and hybrid EVs, we believe near-term the market will be small," Citi analyst Paul Gong said, adding that it takes time for the consumer market to embrace electric vehicles. Gong expects BYD to deliver 2,100 pure electric vehicles in 2013, one-tenth of Tesla's guidance of 21,000 units. ($1 = 6.1210 Chinese yuan) (This version of the story corrects the Reuters stock code for BYD's Hong Kong-listed shares.) (Editing by Norihiko Shirouzu and Emily Kaiser )

Muriel Siebert, first woman to buy seat on NYSE, dies at 80. The founder and president of Muriel Siebert & Co. Inc, Siebert purchased her seat on the exchange in 1967, nearly a decade before the next woman would join her there. Despite credentials including partnerships at two leading brokerages and the founding of her namesake firm, Siebert's initial attempt to gain a seat on exchange was met with sharp opposition and even ridicule by much of its all-male membership, according to her official biography on her company's website. She eventually prevailed. Known as "Mickie," Siebert made another bold move in 1975, transforming her firm to into a discount brokerage on the first day that New York Stock Exchange members were allowed to negotiate their commissions. "Mickie was a pioneer and recognized as a leader throughout the financial services industry and beyond," Joseph Ramos, Siebert Financial's chief operating officer, said in a statement. "She was respected as a strong voice of integrity, reason and sound business practices." Siebert later became the first woman to serve as Superintendent of Banking for the State of New York, accepting the appointment by Governor Hugh Carey in 1977. An outspoken champion of women and minorities in industry and government, Siebert made an unsuccessful run for the U.S. Senate in 1982, losing in the Republican primary to state lawmaker Florence Sullivan. Sullivan went on to lose to Daniel Patrick Moynihan. (Additional reporting by Jonathan Kaminsky. Editing by Christopher Wilson)

Onyx deal expected to give Amgen a big boost. Amgen shares rose 9 percent in midday trade on news of the acquisition, the biggest biotech deal since Gilead Sciences Inc's $11 billion purchase of Pharmasset in 2012. The main prize in the acquisition is Onyx's blood cancer drug Kyprolis. Piper Jaffray analyst Ian Somaiya upgraded Amgen shares to "overweight" from "neutral" and raised his price target on the stock to $140 from $120, saying Kyprolis could generate sales of more than $3 billion by 2025. Brean Capital analyst Gene Mack said Kyprolis and Oprozomib, another blood cancer drug in development at Onyx, could produce combined sales of more than $4 billion. Kyprolis is used to treat multiple myeloma, the second most commonly diagnosed blood cancer. The disease attacks antibody-producing plasma cells, which are derived from a type of white blood cell. More than 20,000 Americans are expected to be diagnosed with multiple myeloma this year, according to the Leukemia and Lymphoma Society. Kyprolis competes with the Celgene Corp drug Revlimid. Celgene also has a new myeloma treatment, Pomalyst. "Given our view of the overall myeloma market and the growth we see over the next 3-5 years, we are not surprised by the interest in Onyx since it is our view that both Onyx and Celgene will be the primary beneficiaries of that growth," Mack said in a note to clients. Kyprolis has been on the U.S. market for about a year and its sales have been climbing steadily, reaching $61 million in the second quarter. Onyx previously said plans were in place for a Kyprolis launch in Europe in the second half of 2014. Onyx also sells Nexavar, a treatment for liver and kidney cancer. Amgen has been looking for new ways to boost its product pipeline as sales of its flagship anemia drugs Aranesp and Epogen have been in decline for years because of usage restrictions and safety concerns. On a conference call with analysts on Monday, Amgen executives said they plan to file the tender offer for Onyx this week, with the deal expected to close as early as the week of September 30. Amgen Chief Executive Officer Bob Bradway, who took the helm of the Thousand Oaks, California-based company just over a year ago, has been able to keep investors happy with dividend increases and share repurchases. On the conference call, he said Amgen remained committed to raising its dividend over time after it completes the Onyx acquisition. He also said investors should not expect any significant share repurchases in 2014 or 2015. In the acquisition, announced on Sunday, Amgen will pay $125 a share for Onyx, a 4.2 percent increase from the $120 a share it offered in June. Shares of Amgen rose 9 percent to $115.05 in midday trading, while Onyx shares climbed 5.7 percent to $123.65. (Reporting by Susan Kelly in Chicago; Editing by John Wallace)

Fiat Industrial says Tobin to be CNH Industrial CEO after merger. The appointment, which was widely expected, completes top management appointments at the new group which is expected to be created at the end of September. "Rich will be assuming the position of Chief Executive of CNH Industrial upon completion of the merger," Fiat Industrial and CNH Chairman Sergio Marchionne said in a statement. Tobin, CFO at Switzerland's SGS Group in Geneva before joining CNH in 2010, is currently also CNH's CEO. Fiat Industrial and CNH also said in a joint statement that Massimiliano Chiara will take over as chief financial officer of the new company from Pablo Di Si, who was leaving the group. After the merger Fiat Industrial will move its corporate headquarters to the Netherlands. The new CNH Industrial group will have a primary stock listing in the U.S. Marchionne, who is also CEO of Fiat ( FIA.MI ), has previously said the Fiat Industrial-CNH merger "is one of the technical blueprints" for a future Fiat-Chrysler marriage". The Turin-based Fiat, Italy's biggest private employer, is in talks with Chrysler's minority shareholder VEBA to buy the 41.5 percent stake it does not already own. (Reporting by Silvia Aloisi and Stephen Jewkes ; Editing by Louise Heavens)