Auto, steel workers split over S. Korea trade pact (AP)

LANSING, Mich. – Many manufacturers and agribusinesses support a new trade deal with South Korea, one reason President Barack Obama and his counterpart from that nation are heading to suburban Detroit on Friday to tour a General Motors plant where cars are being built with South Korean parts.

But the pact also will make it easier for South Korea to undercut some U.S. companies, leaving many workers leery of the deal — especially in economically struggling areas.

The trade deal Congress passed Wednesday has the support of the United Auto Workers and the United Food and Commercial Workers. Both say it will create jobs in the U.S. by increasing auto and beef exports. Textile and steel workers say it will cost jobs, and even the U.S. International Trade Commission acknowledges the textile industry is likely to be hard hit.

For its part, the Obama administration estimates that the trade deal will generate $11 billion in annual U.S. exports and 70,000 jobs. The Economic Policy Institute projects 159,000 U.S. workers will lose their jobs in the first seven years of the South Korea pact, including those in high-wage manufacturing, while the U.S. trade deficit will increase by $16.7 billion.

"America's families need a new way forward on trade, one that promotes the export of U.S. goods rather than jobs," said Richard Trumka, president of the AFL-CIO, whose 56 unions have a combined 12.2 million members. He made the statement as Congress was passing agreements with South Korea, Panama and Columbia this week.

United Steelworkers International President Leo Gerard warned that even if autoworkers benefit, the overall impact on U.S. workers will be negative. He fears South Korea will outsource auto parts manufacturing to China and then sell the parts more easily in the U.S. under the trade pact.

"There are more USW-member jobs in the auto-supply chain than jobs in the entire auto assembly sector," Gerard said, adding that the trade deal's weak limits on how much of a vehicle's parts may come from foreign countries "will cause that U.S. job sector great harm."

Autoworkers like the fact that the deal will give U.S. carmakers much better access to the South Korean market, immediately allowing 75,000 American cars into the country. The UAW opposed the agreement until the Obama administration made changes to benefit the U.S. auto industry, including protecting against "surges" of South Korean vehicles into the U.S. market and phasing out tariffs on its cars and trucks instead of eliminating them immediately.

Obama and South Korean President Lee Myung-bak will tour General Motors Co.'s Orion assembly plant about 30 miles north of Detroit Friday. Workers there are excited about the visit, said UAW bargaining chairman Mike Dunn.

The plant shows the good that can come from free trade, he said, because it's where the Chevrolet Sonic subcompact is being built with Korean parts. GM began building the Sonic a few weeks ago, helped by an agreement with the UAW under which some workers are paid lower wages that are more competitive with those in GM's foreign plants. The Sonic's predecessor, the Chevrolet Aveo, was built in South Korea.

Bill Jasper, president of the National Council of Textile Organizations, sees the pact as a threat.

"This is a dangerous agreement which threatens 40,000 textile and related industry jobs," he said after the group delivered petitions last week signed by textile workers from more than 400 companies urging Congress to vote against the trade deal.

Although a federal jury last month awarded $919.9 million in damages to the DuPont Co. in a trade-secrets lawsuit filed against South Korean textile competitor Kolon Industries, Jasper said Kolon will get better access into the U.S. market for its products than U.S. textile makers will get into South Korea.

That could hurt markets for products such as DuPont's Kevlar and cost jobs in states such as South Carolina, where the company manufacturers the high-tech material often used in body armor.

"The Korea trade deal is the largest offshoring deal of its kind since NAFTA," Lori Wallach, director of Public Citizen's Global Trade Watch, writes on the group's website. "Even the official U.S. government study on the Korea pact says that it would increase our trade deficit, and it hits the `jobs of the future' sectors hardest — solar, high-speed trains, computers."

Despite the heat he's taking from some workers, Obama's counting on the promise of more jobs to improve his standing with voters. His Michigan visit comes just weeks after Republican Gov. Rick Snyder returned from South Korea, where the state hopes to sell not only more cars and chemicals but agricultural products such as soybeans, cheese and dried cherries and blueberries.

South Korea currently charges a 42 percent tariff on dried cherries, according to Michigan agriculture director Keith Creagh. He said two-thirds of the agricultural tariffs will be gone immediately under the pact, while "the rest will go away over time."

South Korean customers bought an average of $626 million worth of goods from Michigan businesses between 2008 and 2010, an amount Snyder now expects to grow.

"As more foreign consumers see what Michigan has to offer, demand for our products will continue to climb," he said in a statement.

The pact with South Korea, which still requires approval from that nation's legislature, is the biggest U.S. free-trade agreement since the 1994 North American Free Trade Agreement with Canada and Mexico. South Korea is the world's 12th largest economy, and U.S.-South Korea trade amounted to $90.2 billion last year.

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AP Auto Writer Dee-Ann Durbin in Detroit contributed to this report.

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Kathy Barks Hoffman can be reached at http://twitter.com/kathybhoffman.

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BRIC countries in talks to boost IMF: report (Reuters)

LONDON (Reuters) – Brazil, Russia, India and China are working on ways to contribute money rapidly to expand the effective funds of the International Monetary Fund, the Financial Times reported on Friday, citing people familiar with talks among the countries.

Discussions involving the so-called BRIC countries are aimed at producing a confidence-boosting announcement at the G20 summit next month, the FT reported.

The newspaper also said the countries are discussing ways to increase the role of emerging economic nations in combating the eurozone sovereign debt crisis.

The FT cited the sources as saying governments are considering either funding an IMF-run special purpose vehicle or lending to the IMF by buying special bonds.

The FT said the increased funds could be used to finance new IMF credit lines to prevent contagion from the eurozone crisis.

An unnamed European official cited by the FT conveyed the view that the eurozone crisis is too big a problem for Europe to solve on its own.

(Reporting by Stephen Mangan; Editing by Richard Chang)

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Uniqlo starts U.S. expansion, eyes 200 stores (Reuters)

NEW YORK (Reuters) – Fast Retailing Co Ltd's (9983.T) Uniqlo is launching its U.S. expansion this week with the opening of a flagship store in Manhattan that will anchor a global push to rely less on its home market of Japan.

In addition to the Fifth Avenue location, opening on Friday, Uniqlo is also opening a store in New York's Herald Square next week, bringing its U.S. total to three locations. The new stores will be the chain's two biggest.

The retailer's goal is to eventually have 200 stores in the United States and U.S. sales of $10 billion by 2020.

Uniqlo, run by Japanese billionaire Tadashi Yanai, is directly challenging rivals such as Spain's Inditex SA (ITX.MC), Sweden's Hennes & Mauritz AB (HMb.ST) and U.S.-based Gap Inc (GPS.N) with stores a stone's throw away from theirs on Manhattan's major shopping strips.

All these chains are trying to tap the growing market for fashionable clothes, such as cashmere sweaters and lightweight down jackets, at lower prices among U.S. consumers who are likely to have a reduced purchasing power for some time.

"Even people who don't have much money have the same desire to wear something nice," Yanai told Reuters on Thursday through an interpreter.

Its rivals are well established in the United States. H&M opened its first U.S. location in 2000 and now has more than 100. In 2010, it had U.S. sales of some $1.3 billion. Zara has 49 stores here, including seven in New York. Uniqlo has had a single U.S. store, in New York's SoHo district, since 2006.

But H&M appeals to younger shoppers who change their wardrobe more quickly, while Zara's shoppers are a bit older, leaving room for Uniqlo, an industry analyst said.

"Uniqlo brings in a broader customer base and is a bit more classic and tailored," said NPD Group Chief Industry Analyst Marshal Cohen. "They will appeal to a slightly more affluent shopper."

But the U.S. expansion is modest compared with Uniqlo's plans for Asia, especially China, Southeast Asia and South Korea. Of the 4,000 stores it hopes to operate by 2020, up from 1,000 now, some 70 percent will be in those countries.

Sales in Japan, which account for three quarters of Fast Retailing's sales, fell 6 percent in the last business year. Uniqlo has 843 stores in Japan.

"The (Asian) middle class will grow," Yanai said. "It's a gold rush."

The New York stores, which will attract U.S. and foreign tourists, as well as taste-makers, are central to its global strategy.

"This is our showcase for the world," Yanai added.

(Reporting by Phil Wahba; editing by Andre Grenon)

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Analysis: Wall Street banks profit from their weakness (Reuters)

NEW YORK (Reuters) – The tempestuous bond markets of the third quarter could result in surprising gains for U.S. banks, but investors are unlikely to be impressed.

JPMorgan Chase & Co (JPM.N) said on Thursday that about one-fourth of its profit in the quarter resulted from an accounting oddity known as debt valuation adjustments, or DVAs. They are paper gains that occur when investors price more risk into a company's bonds, leading to a reduction in liabilities.

Investors, dismayed that so much of JPMorgan's profit came from an accounting quirk rather than cash-generating business, sent the bank's shares 4.8 percent lower. Its Wall Street rivals are likely to report similar results, analysts said.

"We're likely to see these DVA gains across all of the big capital markets players," said Shannon Stemm, a financial stock analyst at Edward Jones.

Before JPMorgan's results, analysts had forecast DVA gains of $1 billion for Morgan Stanley, (MS.N) and $300 million for Goldman Sachs Group Inc (GS.N).

But because the two banks faced more severe bond-market stress than JPMorgan during the third quarter, they may report even larger DVA figures, analysts said. Those gains could be the only profits the two banks have to show for the quarter.

The rule that pertains to DVA, known as FAS 159, is part of rulemakers' efforts to make balance sheets more transparent by forcing companies to record changes in the market values of some assets and liabilities.

But the rules can make a company's financial statements more confusing, too, as when Lehman Brothers recorded a DVA gain of $1.4 billion just days before it filed for bankruptcy.

As the European debt crisis intensified in the third quarter, most U.S. bank debt weakened as investors grew jittery about the exposure of U.S. financial institutions. Morgan Stanley's debt was among the worst performing of the major banks, indicating that it may record the biggest gain, analysts said.

But experts cautioned that forecasting DVAs is difficult, because every bank funds its operations with a different combination of debt, and companies have some leeway for valuing the liabilities, particularly when they trade infrequently.

"It drives me crazy as an analyst," said Jack Kaplan, of Carret Asset Management, which has $1.4 billion in assets under management and holds JPMorgan shares and some Morgan Stanley debt. "It's nearly impossible to predict and you don't know if the rest of the market is factoring it in or not."

HARD TO PREDICT

Morgan Stanley, in particular, has seen enormous paper gains and losses that were difficult to forecast.

The bank reported a DVA gain of $1.4 billion in the third quarter of 2008 as the credit crisis reached its pinnacle, only to post a DVA loss of $6 billion the following period after the U.S. government stepped in with a multibillion-dollar bailout.

Analysts on average are forecasting a profit of 30 cents per share for Morgan Stanley, according to Thomson Reuters I/B/E/S. But it looks as though the only reason analysts see the bank in the black is a big DVA gain they are factoring in.

Half of the 24 analysts who cover Goldman believe the company will report its second loss in 50 quarters as a public company, according to Thomson Reuters I/B/E/S. The average estimate is a profit of 15 cents per share.

The estimates would be lower if not for hundreds of millions of dollars' worth of expected DVA gains.

Of course, none of that means investors or analysts view DVA as a good thing, nor do they equate changes in debt value as the same kind of income banks earn from fees or changes in asset values.

"People consider DVAs accounting noise," said Matthew Morris, director of corporate advisory services in the Dallas office of RGL Forensics. "It's counter to common sense because as the company weakens this is somehow a net positive thing"

(Editing by Dan Wilchins and Steve Orlofsky)

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Weather gives boost to oil plans for stricken ship (AP)

TAURANGA, New Zealand – The calmest weather in days has given salvage crews hope they will be able on Friday to resume pumping the remaining fuel from a cargo ship stuck on a New Zealand reef.

The ship Rena has already spilled hundreds of tons of oil and crews are in a race against nature to try and remove the remaining fuel before waves break up the vessel, which has begun to crack apart and is leaning on a 22-degree tilt.

Last week crews removed about 10 tons of oil before the weather forced them to postpone salvage attempts.

Environmentalists have warned of a disaster for wildlife if all the ship's 1,870 tons (1,700 metric tons) of oil and 220 tons (200 metric tons) of diesel is allowed to spill into the ocean.

Nick Bohm, a spokesman for Maritime New Zealand which is managing the emergency response, told The Associated Press Friday that crews are "relatively positive" they can proceed with plans to board the vessel and begin pumping oil to a nearby barge. He said pumping should begin Friday afternoon in an operation that could last several days.

Bohm said there are stronger winds forecast for the weekend which may hamper the operation.

Meanwhile, several of the 88 containers that have fallen off its deck had washed ashore by Friday, and authorities confirmed one container that toppled overboard contained a hazardous substance. However, an official said it should not pose a major threat.

Heavy seas had kept salvage crews away from the 775-foot (236-meter) Liberian-flagged Rena for days, but better weather Thursday allowed crews to board the vessel for about six hours to check systems. The Rena ran aground Oct. 5 on Astrolabe Reef, 14 miles (22 kilometers) from Tauranga Harbour on New Zealand's North Island.

Ewart Barnsley, another spokesman for Maritime New Zealand, said the salvage crew found oil hoses and pumps for transferring fuel largely undamaged aboard the ship. They also concluded that the ship was safe to work from. Barnsley said a barge was moored nearby to receive oil.

Marine New Zealand salvage manager Bruce Anderson said the vessel has appeared to have stopped moving, which was necessary before pumping operations can resume.

"While this is good news, we shouldn't get too excited," Anderson told reporters. "We already had a complex project to start with; it's even harder now that we've sustained damage aboard this vessel," he said, referring to recent structural cracking.

A vertical crack in the ship runs around the entire vessel — meaning the ship is now only held together by its internal components, said Steve Jones, another spokesman for Maritime New Zealand.

"The reality is the vessel could break up at any point," Jones told The Associated Press.

Six vessels have been mobilized to intercept the drifting containers and other debris in the water.

There were 1,368 containers on board, 11 of which contained hazardous substances, Maritime New Zealand said. One of the hazardous containers is among those that have fallen overboard, Jones said.

Bohm said the container held alkyl sulfonic acid, which can be harmful in its original state, but becomes less toxic when diluted with water. The whereabouts of that container are unknown.

Some of the contents of containers that had washed ashore were strewn across the coastline this week, including thousands of meat patties that littered the sand.

The ship's 44-year-old Filipino captain was charged Wednesday with operating a vessel in a manner causing unnecessary danger or risk and was released on bail Wednesday at Tauranga District Court.

The ship's second officer appeared in the same court Thursday on the same charge. Judge Robert Wolff made orders suppressing publication of the defendants' names for the sake of their personal safety.

If convicted, each could face a fine of up to 10,000 New Zealand dollars ($7,800) and 12 months in prison. Their next court appearance is Oct. 19, when authorities say more charges are likely.

The government has demanded to know why the ship crashed into the well-charted reef in calm weather, but the vessel's owner, Greece-based Costamare Inc., has given no explanation.

Costamare released a statement this week apologizing for the incident and said it was investigating how the ship could have run aground.

"Our Captain is an experienced Master and has an exemplary record," Costamare managing director Diamantis Manos said in the statement. "The ship was fully certified and had recently been inspected ... They found no problems. Obviously something went very wrong and we will cooperate with the Transport Accident Investigation Commission of New Zealand (TAIC) to find the answer."

Maritime New Zealand estimates that at least 390 tons (350 metric tons) of heavy fuel oil have spilled from the hull, leading New Zealand's environment minister, Nick Smith, to call it the country's biggest maritime environmental disaster.

Clumps of oil have washed up on pristine beaches near Tauranga. Maritime New Zealand said hundreds of oiled birds had been found dead and 51 others were being cleaned at a wildlife emergency center. Three seals were also being treated.

Several miles (kilometers) of coastline have been closed to the public, and some beaches were beginning to experience severe oiling, Jones said.

"I was down there," this week Jones said. "It was just black coming in — just black, black, black."

Witnesses said dead fish were also washing ashore as local volunteers with plastic gloves and buckets worked to clean the oily clots from the white sand.

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Carrefour warns on profit as Europeans cut back (Reuters)

PARIS (Reuters) – Carrefour, Europe's biggest retailer, issued its fourth profit warning in as many months on Thursday, adding to signs cash-strapped shoppers are cutting back and increasing doubts about its turnaround plan.

The French group, battling to reverse years of underperformance in its main western European markets, said it expected 2011 operating profit to fall by up to 20 percent, compared with about 15 percent previously.

Its shares, already down around 40 percent this year, were off 5 percent by 1025 GMT.

The warning, coming after several strategy U-turns, is a fresh blow to the credibility of chief executive Lars Olofsson, who so far has retained the backing of the group's powerful top shareholder Blue Capital -- an alliance between French luxury tycoon Bernard Arnault and U.S. investor Colony Capital.

A Blue capital spokesman would not comment on recent speculation that Olofsson may be running out of time.

A source close to the matter said the alliance understood the turnaround, notably in France, could not succeed overnight.

In a call with analysts, new finance chief Pierre-Jean Sivignon blamed the warning mainly on worsening trading conditions in Europe, although he also flagged a drop in discretionary spending in China.

European retailers are struggling in their home markets as shoppers are hit by higher prices, subdued wage growth and government austerity measures.

On Wednesday, smaller French retailer Casino also reported slower growth in France but offset that with a strong performance in emerging markets.

Carrefour is suffering more than most because it makes the bulk of its sales in hypermarkets, which are losing out to specialist stores in mature western European markets.

It has also admitted mistakes, such as raising prices in France before rivals such as E Leclerc and Intermarche. In August it announced a new drive to cut prices.

Analysts said the latest warning raised question marks over the chances of a swift recovery next year.

"Despite the significant issues facing the business in France, consensus is forecasting a 17 percent bounce-back in (2012) EBIT (earnings before interest and tax)," Espirito Santo analysts said. "We are more cautious on 5 percent."

FRENCH HYPERMARKET WOES

Carrefour, the world's second-biggest retailer by sales after U.S. group Wal-Mart, said third-quarter sales edged up 0.3 percent to 22.8 billion euros ($31 billion), in line with forecasts as robust growth in Latin America barely offset weak sales in France and western Europe.

Sales at French hypermarkets open at least a year dropped 4.6 percent excluding fuel, deteriorating from a 1.7 percent decline in the second quarter.

That included a 9.6 percent plunge in underlying sales of discretionary non-food goods, highlighting the extent to which shoppers are cutting back on non-essential purchases.

Carrefour, which makes about 40 percent of its sales in France, tied part of the decline to the initial impact of a new action plan it launched that entailed fewer promotions and more longer-term price cuts.

Sivignon told analysts it was taking time for shoppers to "assimilate" the change and that process could take 18 months.

Carrefour reduced its price gap with fierce rival Leclerc by one percentage point in France in the quarter, Sivignon added.

Elsewhere in Europe, austerity and economic uncertainty weighed on consumer sentiment in Spain and Italy, while Belgium confirmed its rebound.

Emerging markets remained sources of growth, with sales in Latin America rising 10.2 percent at constant exchange rates.

But China was disappointing with an 11.2 percent drop in non-food sales, which reflected the effect of inflation on discretionary spending, new regulation prohibiting markdowns and a strong comparable basis, Sivignon said.

JP Morgan Cazenove analysts said the group's performance in countries like China and Brazil was lagging rivals like Tesco and Casino respectively.

Recognizing the challenges for its hypermarkets, Carrefour set out an ambitious plan to reinvent the format last year with new "Carrefour Planet" stores that drop the commitment to sell everything under one roof in favor of a smaller number of specialist areas like fresh food and baby foods.

Carrefour said the roll-out was on track, but did not give an update on the first few stores, which Citi analysts said raised suspicions they were not trading as well as hoped.

"If this is the case, we would see the fact that they are persisting with the rollout as concerning," they said.

($1=0.725 Euros)

(Editing by Mark Potter and Mike Nesbit)

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JPMorgan Q3 net falls; bank eyes expenses (Reuters)

(Reuters) – JPMorgan Chase & Co's quarterly earnings fell 25 percent, excluding an accounting gain, as European financial turmoil reduced demand for securities underwriting and acquisition advice.

The results are the first for the third quarter from a major U.S. bank and underscore how market turmoil has clobbered underwriting and merger advisory fees. JPMorgan shares closed down 4.8 percent on Thursday, pulling down other big bank stocks and weighing on the wider market.

"There were some very strong headwinds for JPMorgan," said Marshall Front, chairman of Front Barnett Associates LLC.

JPMorgan Chief Executive Jamie Dimon said the company will cut 1,000 jobs in its investment bank over the next 18 months. Banks globally are laying off staff as new regulations squeeze potential profits and as stock and corporate credit markets weaken. But Dimon said JPMorgan's cuts are mainly due to increased use of automation.

The bank did post 1 percent loan growth, which Dimon said was a positive for the economy and showed that the rest of the bank is generally on an even keel compared with the chronically volatile investment banking business. Mid-sized companies and small businesses, in particular, are borrowing more, he said.

The bank's return on equity, a measure of profitability, was 9 percent, close to the 10 percent that some analysts view as a likely long-term average for major banks under new regulations and capital rules.

JPMorgan posted quarterly earnings of $4.3 billion, or $1.02 per share, down from $4.4 billion, or $1.01 per share, in the same quarter last year.

The results were muddied by adjustments for the market value of the bank's debt, which gave it a $1.9 billion pre-tax gain. When the bank's debt weakens relative to U.S. Treasuries, it can record an accounting gain because it could profit from buying back debt.

The bank reported a private equity loss of $347 million on lower market values and appraisals for its investments. A year ago, private equity investments added $344 million to profit.

FALLING FEES

Despite the weak environment in investment banking, JPMorgan bought back $4.4 billion of its stock during the quarter, reducing its diluted outstanding shares by 3 percent.

"We have a tremendous amount of capital," Dimon said in a conference call with reporters.

Said David Dietze, chief investment strategist at Point View Wealth Management in Summit, New Jersey, "They are putting their money where their mouth is.

"(The buyback) shows a degree of confidence. They don't see a cash crunch. The takeaway here is to be more optimistic about regional bank results but not be jumping up and down about the prospects of Morgan Stanley and Goldman Sachs."

Dimon has complained publicly and in private meetings with regulators that capital surcharges for the biggest banks are unfair and will stymie lending and economic growth.

Shares of Bank of America Corp, Citigroup Inc and Morgan Stanley closed down about 5 percent, while Goldman Sachs Group Inc lost almost 3 percent. All are due to report third-quarter results next week.

JPMorgan took a valuation adjustment for its widening bond spreads that amounted to 29 cents a share after taxes in the third quarter. Given the company's share count, that amounts to $1.1 billion. Excluding that from the quarterly earnings, profit declined about 25 percent from a year earlier.

Further complicating the calculation, the bank generated losses from this same item in last year's third quarter.

The third quarter was rough for investment banks, as the U.S. stock market, as measured by the S&P 500 index, dropped 14 percent. Investment-grade corporate bond spreads widened by more than 50 percent, according to Bank of America Merrill Lynch indexes, an eye-popping move.

With markets gyrating that much, many companies are reluctant to acquire rivals or issue securities. JPMorgan said its quarterly fees for underwriting and merger advisory fell 31 percent from a year earlier to $1 billion. Revenue from stock and bond trading was down 14 percent, not counting the accounting gain.

"Obviously, the worse Europe gets, the worse it is for us, but we think it is something we can handle, just like we handled 2008," Dimon said.

In a change from recent quarters, the bank did not significantly draw down its reserves for bad loans. Some analysts wondered if JPMorgan expects a new round of defaults, but Dimon insisted the bank was just "being conservative."

Staffing in the investment bank fell to 26,615 in the third quarter from 27,716 in the second quarter. Dimon said many of the coming job cuts would made through attrition.

Compensation expense in the investment bank was $1.85 billion, an usually low 29 percent of revenue. Dimon told analysts that for the full year, he expects the ratio to be in the bank's usual range of 35 percent to 40 percent.

The bank recorded $1 billion of litigation expense, mainly for mortgage-related items, down from $1.3 billion last year.

The report from JPMorgan comes as the industry struggles to hold onto recent profits after losing tens of billions of dollars in the financial crisis.

Dimon said JPMorgan is examining expenses in light of new regulations threatening its profitability, and it may cut back on plans to add to its 5,300 branches. Some branches may not be viable now that the government has limited how much banks can charge merchants for debit card transactions, he said.

Asked in a conference call with reporters about an Occupy Wall Street march this week to his New York City home, Dimon said, "When people talk about major issues that are important to the country, you should try to listen and not just have a knee-jerk reaction.

"If you tell me that jobs are all critical, I agree. The important part is to get policy right so that we get this country going again."

Shares of JPMorgan have fallen with other bank stocks, losing 25.5 percent of their value this year through Thursday, compared with a 3.8 percent drop in the S&P 500.

(Reporting by David Henry in New York; additional reporting by Clare Baldwin, Lauren Tara LaCapra and Dan Wilchins in New York and Rick Rothacker in Charlotte, N.C.; editing by John Wallace)

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56 Percent: The Most Troubling Number About Occupy Wall Street (ContributorNetwork)

A recent poll has shown that far more people are in agreement with the Occupy Wall Street movement than are opposed to it, even though it remains, going into its fourth week on October 14, a vaguely unfocused and amorphous demonstration against a number of things wrong with America and its government. In fact, according to the Time poll, the protest movement has a favorable rating of 54 percent (as opposed to a 23 percent unfavorable rating). However, even though a majority of Americans agree with those holding signs saying "We Are The 99%" and many of its positions -- such as prosecuting corporate executives responsible for the financial meltdown and raising taxes on millionaires -- 56 percent of the poll's respondents said they believe that the demonstrations will have little impact on American politics in general.

In short, most believe that, although the movement is viewed primarily as a positive entity, its impact will be marginal at best. The government -- and Wall Street -- will continue unabated, as it were. As they were.

That should be even more reason for those who are part of the 99 percent -- ostensibly, those whose income is less than a million dollars per year and the greater part of Occupy Wall Street -- to stand with those that are already demonstrating. The status quo remains static due to inaction and continued silence, and a populist movement is only as powerful as the sum of its individual components and their message. The organizers of Occupy Wall Street are fully aware of this -- as are their opposers.

Since its inception in late September, Occupy Wall Street has grown from a small protest in New York to a nationwide movement, with other "Occupy" protests springing up from Boston to Dallas, Tampa to San Francisco. And as the movement's message of being fed up with government inactivity that favors the rich and powerful, a stagnant economy with a limited jobs market, and a top-down economic system that has exaggerated the gap between the haves and the have-nots over the past couple decades, resonated with more and more individuals, the idea has developed to take the message global on October 15.

At the same time, most corporate controlled media ignored the small protest at first, but as the number of protesters grew (as did their list of grievances) and the demonstrations spread across the country, not only did major media begin covering their individual and collective stories, but those opposed to their message began to sound off as well. Fox News Channel, which had been instrumental in the national organization and rapid dissemination of the (so-called grassroots) tea party's conservative message, painted Occupy Wall Street as a disorganized bunch of anti-capitalists and author Ann Coulter compared them to "Nazis." Rush Limbaugh called them "commies," a White House-driven liberal conspiracy. Even Eric Cantor, Republican House Majority Leader, echoed the Fox New charge and called the protesters a "mob."

Needless to say, Fox News (whose shows are produced, owned, and operated by millionaires) and Limbaugh (a multi-millionaire world unto himself) and Cantor (a multi-millionaire representative from the state of Virginia) see the status quo as a good thing. They are part of the 1 percent that Occupy Wall Street sees as holding too much money and power at the expense of the other 99 percent of the people.

The truth of the matter is: The demands of the protesters would do little to affect the lives of the 1 percent, even if they managed to have a major impact on future legislation solving wage disparities and social inequalities. In the end, the demands are being made to alter the system that relegates the 99 percent to forever being 99 percent or living an existence just a couple of paychecks short of being homeless or without the basic necessities of life. The rich will remain rich, regardless. In the nation with perhaps the highest standard of living in the world, the fact that so many are out of work or working underpaying jobs or working two or three jobs to make ends meet is a shame unto itself. That so many feel the need to rise up and say something about is indicative that laws, regulations, and conditions will have to improve to make the plight and the number of opportunities for upward mobility of the 99 percent improve as well.

But resistance to those improvements is guaranteed. Unfortunately, so is the idea that all the efforts of the protesters will go for naught, the status quo unshaken. And the most troubling aspect of it all: The idea that millions of individuals working in popular concert attempting to eliminate the socioeconomic and sociopolitical disparities that now exist within the American way of life will have little effect.

That 56 percent of Americans believe that the movement will have little impact is a sad testament to how ingrained the the idea of the intractableness of the government and inertia within prevailing socioeconomic systems have become. And if that number does not add resolve to the populist movement to endure until they effect positive change in the lives of the millions of people who comprise the 1 percent, then that same 56 percent will assuredly be correct about the impact of the 99 percent.

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AP Interview: Walesa backs Wall Street protesters (AP)

WARSAW, Poland – Poland's former President Lech Walesa says he supports the Occupy Wall Street movement in New York that protests corporate greed.

The Nobel Peace laureate told The Associated Press that he is planning either a visit or a letter to the protesters.

"I am weighing now how and when to best support them, without doing any harm," Walesa said Thursday.

Since mid-September, the protesters have besieged a park near Wall Street to rally against corporate greed, saying that is the main cause for the U.S.'s failing economy. Similar protests are planned across Europe this weekend, including in Poland's capital, Warsaw.

The 68-year-old Walesa said the global economic crisis has made people aware that "we need to change, reform the capitalist system" because we need "more justice, more people's interests, and less money for money's sake."

"We cannot accept a situation when capitalism is making huge money and then does not know what to do with it," Walesa told the AP. "It should invest in new jobs."

"People are most important," he said.

The legendary freedom leader said employees, employers and representatives of state and local governments should get together to work out solutions that would best serve the people and the societies.

"For now, capitalism is working to produce more money but does not see the people," Walesa said. "This problem is getting worse across the world."

Walesa led Poland's anti-communist Solidarity movement that eventually brought democracy and a market economy to the country in 1989. Between 1990-95, he served as the country's first popularly elected president and he now campaigns across the world for global democracy and human rights.

Since communism's fall, Poland has developed into a market economy with a European social safety net. Its economy has grown steadily since joining the European Union in 2004 and it even avoided a recession during the global downturn of 2008-2009 — the only EU country to do so.

However, Poland remains plagued by legacies of communism — like high unemployment of almost 12 percent and low wages — and problems brought by capitalism, like a growing gap between the country's rich and poor.

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JPMorgan drags blue chips down; Google up late (Reuters)

NEW YORK (Reuters) – The Dow and S&P 500 slipped on Thursday after JPMorgan's earnings and China's soft trade data revived worries about the impact of slower growth on profits.

The declines put an end to three straight days of gains that capped off a 12 percent increase in the S&P 500 since hitting a low on October 4. The Nasdaq stayed in positive territory, helped by semiconductor shares.

Some analysts said a pause was in store for the market, given the S&P 500's recent advance. The benchmark S&P 500 has had its largest seven-day rise since March 2009 on growing optimism that European leaders will find a way to contain the region's debt problems.

JPMorgan Chase & Co (JPM.N), the second-largest U.S. bank, slid 4.8 percent to $31.60 and was the biggest drag on the Dow after reporting a drop in its third-quarter net profit. The news followed disappointing results from Alcoa (AA.N) on Tuesday.

"It's early, but it seems like after having a series of great corporate earnings in the face of not-such-great macro numbers, now maybe we're seeing a little bit less robust corporate earnings," said Eric Kuby, chief investment officer of North Star Investment Management Corp. in Chicago.

Healthy U.S. profits have been among the biggest drivers for stocks since their March 2009 lows.

The Dow Jones industrial average (.DJI) fell 40.72 points, or 0.35 percent, to end at 11,478.13. The Standard & Poor's 500 Index (.SPX) shed 3.59 points, or 0.30 percent, to 1,203.66. But the Nasdaq Composite Index (.IXIC) gained 15.51 points, or 0.60 percent, to close at 2,620.24.

GOOGLE FLIES

After the bell, shares of Google (GOOG.O) rose 6 percent to $592.43 after it reported revenue that exceeded Wall Street's expectations.

"Christmas came early for Google shareholders," said Colin Gillis, an analyst at BGC Partners. "The digital economy is still strong. Google is capturing all the economics from this, and we are moving into the sweet spot when investors want to own Google."

China's trade surplus narrowed for a second straight month in September as both imports and exports were lower than expected, pointing to cooling domestic and global economic demand.

In U.S. economic data, new claims for jobless benefits were little changed last week and the trade deficit narrowed marginally in August, indicating a modest improvement in the economy.

According to a Reuters poll, analysts have reined in their expectations for U.S. economic growth, though it is still expected to pick up a notch by year-end.

JPMorgan, the first major U.S. bank to report earnings, said profits were hurt as the European debt crisis pushed investment banking clients to the sidelines. The KBW Bank index (.BKX) shed 2.9 percent while Bank of America Corp (BAC.N) lost 5.5 percent to $6.22.

Boosting the Nasdaq, Vertex Pharmaceuticals Inc (VRTX.O) climbed 9.1 percent to $43.88 after IMS Health said it was revising estimates of the number of prescriptions written in late September for Vertex's hepatitis C drug.

An index of semiconductors (.SOX) rose 2 percent.

About 7 billion shares were traded on the New York Stock Exchange, NYSE Amex and Nasdaq for the day, below the year's daily average so far of about 8 billion.

Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 3 to 2, and on the Nasdaq, decliners slightly outpaced advancers.

(Reporting by Caroline Valetkevitch; Additional reporting by

Poornima Gupta; Editing by Jan Paschal)

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Google's Q3 eases fears over ad market, costs (Reuters)

SAN FRANCISCO (Reuters) – Google Inc's results trounced Wall Street expectations with the help of strong advertising sales and deft cost controls, driving its shares roughly 6 percent higher.

The Internet search and advertising leader, benefiting from a growing online ad market and sharper research focus, increased its profit by 26 percent and revenue by 37 percent in the third quarter.

A darkening economic outlook -- particularly in Europe, had stoked worries about advertising growth. But Google's revenue and paid-clicks performance boded well for the fourth quarter, analysts said.

"These guys continue to show that they are not immune to the market but that they are going to perform better than traditional players," said Macquarie Research analyst Ben Schachter.

Robust demand from advertisers in emerging markets, such as in Asia, as well as strength in its mobile and display advertising businesses, juiced Google's financial results during the third quarter, he said.

"They are beginning to see some softness in Western Europe but it's being more than made up for by the broader distribution of their products in mobile and the fact that emerging markets are becoming more and more important," said Schachter.

Shares of Google rose to $594.01 in extended trade after closing 1.91 percent higher on Nasdaq. The stock is off nearly 8 percent from its 52-week high of $642.96 on concerns about the growing regulatory scrutiny facing the company as well as fears that spending would spiral out of control as Google steps up competition with Apple Inc and Facebook.

"The real interesting thing here is the expenses that weren't as high as the Street was anticipating. R&D was less than we were expecting," said UBS analyst Brian Pitz. "This is the fourth quarter in a row the company has accelerated their revenue on top line."

Chief Executive Larry Page, who assumed the top job in April, told analysts on a conference call that he was whittling down Google's sprawling portfolio of projects and diverting resources to businesses with higher potential returns.

"We have to make tough decisions about what to focus on, or we end up doing things that don't have the impact that we strive for," Page said. "Since we last spoke we've begun the process of shutting over 20 different products.

The company is plowing money into its fast-growing mobile business which competes with iPhone-maker Apple. Google's Android mobile software, already the world's most-used smartphone platform, is gaining momentum. It powers 190 million devices, up from 135 million in mid-July.

GOING MOBILE - IN A BIG WAY?

Page said the revenue run rate for Google's mobile business is more than $2.5 billion, a significant leap from $1 billion just a year ago.

In August, Google announced plans to acquire Motorola Mobility Holdings for $12.5 billion. The deal, which Google expects to close this year or early 2012, will give it one of the wireless industry's largest patent libraries, as well as hardware manufacturing operations that will allow Google to develop its own line of smartphones.

But analysts and investors worry that Google is entering a low-margin business in which it has no experience. A move to build its own phones could also jeopardize support for Google's free Android mobile software from other phone manufacturers such as Samsung Electronics and HTC Corp.

Google executives on Thursday's conference call did not address plans for Motorola, which Google has said it plans to run as a separate business. But Page took a jab at Microsoft Corp for waging a legal battle against companies that sell Android devices.

"They continue resorting to legal measures to hassle their own customers," Page said, referring to recent licensing deals between Microsoft and companies such as Samsung, HTC and Acer, many of which are also Microsoft customers.

"We see Android going gangbusters and we don't see anything that's going to stop that," he added.

Google said its net income in the three months ended September 30 grew to $2.73 billion from $2.17 billion in the year-ago period.

Excluding certain items, Google said it earned $9.72 per share in the third quarter. Analysts polled by Thomson Reuters I/B/E/S were expecting adjusted EPS of $8.74.

"A lot of people were expecting spending to be out of control, but they had good control," said Herman Leung, an analyst with Susquehanna Financial Group.

Google's recently launched social networking service, Google+, is also on investor radars. Its effort to challenge Facebook's dominance in the red-hot social networking market got off to a fast start in June, collecting 10 million users in the first two weeks.

On Thursday, it said it had signed up more than 40 million users for its recently launched Google+ social network. Page also said that more than 3.4 billion photos have been uploaded to Google+ by users of the service.

Its third-quarter net revenue, which excludes fees that the company shares with partner websites, increased 37 percent year-on-year to $7.51 billion. Analysts were looking for $7.22 billion in net revenue.

(Reporting by Alexei Oreskovic and Edwin Chan; Editing by Richard Chang)

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Fitch cuts ratings on European banks (AP)

LONDON – Concerns that governments are less likely to come to the rescue of financial institutions prompted Fitch credit ratings agency to downgrade its outlook for Britain's Royal Bank of Scotland Group PLC, Lloyds Banking Group and Swiss lender UBS AG on Thursday.

Fitch also said it is reviewing the ratings of a host of European lenders, citing ongoing exposure to sovereign-debt in peripheral Europe and sluggish economic growth prospects. The costs of additional bank regulation and political pressure to reduce state support for banks continue to pose challenges to lenders, Fitch said.

Fitch is the second major credit rating agency in less than a week to slash its ratings of Royal Bank of Scotland and Lloyds. Last week, Moody's cut its ratings on the two U.K. banks for the same reason.

"The banking system is not only very large relative to the U.K. economy, but there is also more advanced political will to reduce the implicit support for the country's banks," Fitch said in a statement explaining its downgrade of the British lenders.

It lowered its long-term ratings for the two large bailed-out banks by two notches to A from AA-.

The credit rating agency dropped Swiss lender UBS one notch to A from A+ and Germany's Landesbank one notch to A+ from AA-.

The moves follow similar actions taken against Italian lenders

Fitch also put Barclays on notice for a possible downgrade, but the British arms of HSBC PLC and Spain's Banco Santander SA were unaffected.

France's BNP Paribas and Societe Generale were also put on negative ratings watches, along with Credit Suisse, Deutsche Bank and Rabobank.

U.S.-based Morgan Stanley and Goldman Sachs rounded out the banks put on negative ratings watch.

Fitch said it expects to make a decision on possible ratings downgrades "within a short time frame and take corresponding rating actions where warranted."

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U.S. judge says Samsung tablets infringe Apple patents (Reuters)

SAN JOSE, California (Reuters) – A U.S. judge said Samsung Electronic's Galaxy tablets infringe Apple Inc's iPad patents, but also that Apple has a problem establishing the validity of its patents.

The comments from U.S. District Judge Lucy Koh came on Thursday in a court hearing on Apple's request to bar some Galaxy products from being sold in the United States.

Apple and Samsung are engaged in a bruising legal battle that includes more than 20 cases in 10 countries as the two jostle for the top spot in the smartphone and tablet markets.

Earlier on Thursday, an Australian court slapped a temporary ban on the sale of Samsung's latest computer tablet in that country.

Apple sued Samsung in the United States in April, saying the South Korean company's Galaxy line of mobile phones and tablets "slavishly" copies the iPhone and iPad.

Apple then filed a request in July to bar some Samsung products from U.S. sale, including the Galaxy S 4G smartphone and the Galaxy Tab 10.1 tablet.

Mobile providers Verizon Wireless and T-Mobile USA have opposed Apple's request, arguing that a ban on Galaxy products would cut into holiday sales.

Apple must show that Samsung infringed its patents and that its patents are valid under the law.

Samsung attorney Kathleen Sullivan argued that in order to defeat an injunction bid, Samsung need only show that it has raised strong enough questions about the validity of Apple's patents.

"We think we've clearly raised substantial questions," Sullivan said at the hearing on Thursday in a San Jose, California federal court.

Apple attorney Harold McElhinny said Apple's product design is far superior to previous tablets, so Apple's patents should not be invalidated by designs that came before.

"It was the design that made the difference," McElhinny said.

Koh frequently remarked on the similarity between each company's tablets. At one point during the hearing, she held one black glass tablet in each hand above her head, and asked Sullivan if she could identify which company produced which.

"Not at this distance your honor," said Sullivan, who stood at a podium roughly ten feet away.

"Can any of Samsung's lawyers tell me which one is Samsung and which one is Apple?" Koh asked. A moment later, one of the lawyers supplied the right answer.

Additionally, at the hearing Koh said she would deny Apple's request for an injunction based on one of Apple's so-called "utility" patents.

She did not say whether she would grant the injunction based on three other Apple "design" patents.

Koh characterized her thoughts on the utility patent as "tentative" but said she would issue a formal order "fairly promptly."

"It took a long time to make that distinction," Koh said.

After the hearing, Samsung spokesman Kim Titus said Apple's injunction request is "groundless."

Apple spokeswoman Kristen Huguet said, "It's no coincidence that Samsung's latest products look a lot like the iPhone and iPad ... This kind of blatant copying is wrong, and we need to protect Apple's intellectual property when companies steal our ideas."

The case in U.S. District Court, Northern District of California is Apple Inc v. Samsung Electronics Co Ltd et al, 11-1846.

(Editing by Tim Dobbyn, Steve Orlofsky and Richard Chang)

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Ivy League professors speak to anti-Wall Street protesters (Reuters)

BOSTON (Reuters) – Ivy League professors dropped by anti-Wall Street protest camps in Boston and New York on Friday to school the demonstrators on theories that bolster their demands to end inequality in the American economy.

Part of the Occupy Boston site was temporarily renamed "Free School University" as the crowd gathered at the feet of Brown University international political economy professor Mark Blyth and Boston University international relations professor Kevin Gallagher.

Standing on a wooden crate, they discussed with a crowd of about 50 people the misdeeds of Wall Street and Washington. Future forums were scheduled to address anarchism, psychology and law and privacy rights.

"People have every right to be angry," Blyth said about the Wall Street bailout in 2008, which left banks enjoying huge profits while average Americans suffered under high unemployment and job insecurity with little help from the federal government.

In New York later on Friday, a Columbia University professor was slated to talk to protesters about activism in Greece.

Organizers, who have pledged to stay in the tent village in Boston's financial district indefinitely and possibly into the winter, said they were kicking off what they hoped would become a regular forum for education and discussion.

The crowd was mixed with people versed in economic policies and others struggling to understand how the country will climb out of the financial crisis.

People picking up lunch at nearby food trucks gazed at the protesters, some snapped photos, while others meandered through the camp with their take-out meals.

Stephen Jerome, 50, from Lawrence, Massachusetts came by with his checkbook, donating $500 to the cause.

"These people are here with their hearts and brains and compassion," he said.

Aaron Cohen has been passing by on his lunch hour to show support.

The 61-year-old epidemiologist said he too is worried about his own financial security and that of his three daughters and grandchildren.

"They are starting out farther behind even with our support than when we were at their age," Cohen said. Despite being employed as teachers, student loans leave his daughters, in their 30s, wondering if and when they will be able to buy homes.

Christine and Robert Gerzon, who traveled from Concord, Massachusetts, intend to organize their neighbors to donate supplies to the Boston demonstrators.

The Occupy Wall Street movement that began in New York last month with a few people has expanded to protests across the country with marches and camps taking shape from Tampa, Florida to Portland, Oregan, and Los Angeles to Philadelphia.

Protesters' messages range from anti-corporate sentiments to frustration with the financial system and politicians.

Three weeks after protesters first hunkered down in New York City, the city has spent more than $1.9 million in overtime to dispatch police for crowd control during protests, Police Commissioner Raymond Kelly said on Friday.

While the ranks of protesters in New York have swelled into the thousands at times, most demonstrations elsewhere have numbered in the hundreds.

An Occupy San Antonio march on Friday attracted about two dozen supporters. Roughly the same number gathered in Washington D.C.'s McPherson Square.

(Additional reporting by Lily Kuo in Washington, D.C. and Jim Forsyth in San Antonio; Editing by Greg McCune)

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Retailers report solid gains for September (AP)

NEW YORK – September offered the latest sign that Americans will shop, but only when they think they're getting a deal.

The International Council of Shopping Centers said Thursday that revenue rose 5.5 percent in September, with several retailers including Target, Limited Brands and Kohl's posting strong gains as consumers snagged discounted merchandise.

The revenue increases, which beat Wall Street estimates, leave uncertainty about whether retailers will have to offer more bargains to lure consumers to buy during the winter holiday shopping season. Retailers can make up to 40 percent of their revenue during the period, which runs from November through December.

"This past month shows consumers are rewarding retailers who are matching great merchandise with great deals - a clear signal to expect more and earlier promotions as we enter the holiday season, " said Sherif Mityas, a partner in the retail practice at A.T. Kearney, a global management consulting firm.

The revenue gains at stores open at least a year — a key indicator of a retailer's health — come as merchants look for a sign of how consumers will spend during the winter holiday season. Though many retailers reported better-than-expected results in September, concerns linger that shoppers who are fretting about high unemployment, a weak housing market and turbulent stock markets, will continue to seek out bargains that could significantly eat away at retailers' profits.

For the holiday shopping period, The National Retail Federation, the nation's largest retail trade group, expects sales to rise 2.8 percent to $465.6 billion. That would be smaller than the 5.2 percent increase during last year's winter holidays, but slightly higher than the average increase of 2.6 percent for November and December over the past 10 years.

If September is any indication of what lies ahead for the winter holidays, though, retailers will likely have to offer a smorgasbord of deals in order to get Americans to buy. During the month, shoppers for the most part stuck to the frugal shopping habits they adopted during the Great Recession. And retailers offered huge discounts: The Gap chain cut the price of women's pants from 40 percent to 60 percent, for example, while teen retailer Abercrombie & Fitch marked down sweat pants by 40 percent.

Kohl's Corp., which suffered a sales decline in August, bounced back with a better-than-expected 4.1 percent gain in revenue at stores opened at least a year, in part because it stepped up discounting to lure shoppers. The mid-brow department store also credited the sales bounce in part to its merchandising launch with celebrities Jennifer Lopez and Marc Anthony, the largest in its history.

Meanwhile, cheap chic discounter Target Corp. reported a 5.3 percent revenue increase in September at stores open at least a year, marking the biggest increase monthly — excluding Easter month — since November 2007 when it recorded a 10.8 percent gain. Target said shoppers spent more in stores and more browsers were converted into buyers.

Results were buoyed by strong sales of groceries, beauty products and clothing. But Target also likely benefited from a surge in sales from its exclusive limited-time only Missoni by Target line of clothing, home furnishings and other doodads made by Italian designer Missoni. The exclusive version featured a variety of items from stationery to clothing and furniture at a fraction of the price of the original collection.

"We experienced strong sales results throughout the month and across a broad array of merchandise categories," said Gregg Steinhafel, Target's CEO, in a statement.

Limited Brands Inc. said revenue at stores open at least a year rose 11 percent in September, due to strength at its Victoria's Secret and Bath and Body Works mall stores.

But the retailer worked hard to draw shoppers with various promotions, from shipping offers to discounts, at the expense of lower profit margins from last year. The company said during a pre-recorded conference call Thursday that profit margins at it Victoria's Secret stores and its Victoria's Secret catalog were down in part because of strong consumer response to discounts and its shipping offers.

Wealthy shoppers seem to the only ones who were paying full price. Saks Inc. reported a 9.3 percent increase in September, better than the 6.5 percent gain expected by analysts. And Nordstrom Inc. posted a 10.7 percent surge last month, which exceeded the 5.2 percent analysts were predicting.

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Consumer borrowing dropped $9.5 billion in August (AP)

WASHINGTON – Consumers slashed their borrowing in August by the most in 16 months. The drop suggests many worried about taking on new debt while the economy slumped and the stock market fluctuated wildly.

Fewer people used their credit cards. And a measure of demand for auto and student loans fell.

Total borrowing dropped $9.5 billion in August, the Federal Reserve said Friday. In July, borrowing increase $11.9 billion.

Americans have been struggling all year with high unemployment, meager pay raises and pricier goods and gas. That has depressed consumer spending, which fuels 70 percent of economic growth.

In August, consumer confidence tumbled to a two-year low, and retail sales were flat. The weak economy, along with gridlock in Washington and heightened concerns over Europe's debt crisis, rattled financial markets.

The August drop in borrowing was the largest since April 2010. Prior to that, consumers had increased their borrowing for 10 straight months.

Borrowing for auto and student loans plunged $7.2 billion in August. A category that includes credit cards fell $2.3 billion.

The overall decline lowered total borrowing to a seasonally adjusted $2.44 trillion. Borrowing is just 2.1 percent higher than the recent low hit in September of last year.

The August decline came as a surprise to economists who had been expecting a solid increase for the month. Some analysts said they believed the figure overstated the weakness in borrowing and reflected trouble the government has with seasonally adjusting the borrowing figures.

Troy Davig, an economist at Barclays Capital, said he expected borrowing to continue rising at a modest pace in coming months, reflecting his expectation that consumers will keep borrowing cautiously.

"We are looking for consumer borrowing to keep rising slowly at a pace that will not get ahead of income growth," Davig said.

Households began borrowing less and saving more when the country fell into recession and unemployment surged.

While economists believe borrowing will gradually increase in coming months, they don't expect consumers to load up on debt the way they did during the housing boom. Americans felt wealthier then and were more willing to take on added debt because of the soaring value of their homes.

The Federal Reserve's borrowing report covers auto loans, student loans and credit cards. It excludes mortgages, home equity loans and other loans tied to real estate.

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Earnings on deck as Europe eyed (Reuters)

NEW YORK (Reuters) – Investors tiring of the euro zone's debt crisis dragging the market all over the place are hoping to focus on something else next week -- earnings.

But will third-quarter results be enough to drive the S&P 500 higher? Or will Europe's woes get in the way?

The unofficial start of earnings season begins on Tuesday, when Dow component Alcoa Inc (AA.N) reports third-quarter results after the close of trading.

The earnings and guidance that may follow could give investors some clues on the health of the global economy, including any impact the euro-zone debt crisis has had and might continue to have on profits.

But even if earnings paint a rosier picture than anticipated, stocks may face a stiff test in climbing much further, as analysts pointed to the declining 50-day moving average as a key resistance point that could limit gains. That level now sits around 1,178.

This week's sharp gains were built on improved hopes that European officials will get a handle on the euro-zone debt crisis. That fed a massive bout of short-covering as those betting against stocks were forced to buy shares to avoid losing money.

The benchmark S&P 500 index (.SPX)(.INX) rose 2.1 percent for the week, buoyed by a 6 percent jump mid-week, as it appeared plans in the euro zone to get a grip on the debt crisis were moving forward. The region remains a wild card, which could cause any gains to quickly vanish.

"For the next three weeks, in this country, earnings will be the focus and the subplot is going to be Europe -- Europe is always going to be just under the surface," said Ken Polcari, managing director at ICAP Equities in New York.

"But if all of a sudden in the middle of next week, some catastrophe happens in Europe, the focus is immediately going to be headline driven and goes back to Europe."

Other companies expected to post quarterly results next week include PepsiCo Inc (PEP.N), tech giant Google Inc (GOOG.O), JPMorgan Chase & Co (JPM.N) and toy maker Mattel Inc (MAT.O).

KEEPING THE BAR LOW

Clouding the picture for profits is the fact that many earnings estimates have been trimmed by analysts in light of the turmoil in Europe, a staggering global economy and other events which resulted in a more cautious forecast.

"You've got to remember what was going on in July with the debt-ceiling crisis, credit default -- companies were not willing to go out on a limb and make any big expectations," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. in San Francisco.

"So they were conservative going in, and we have not seen a whole lot of downward revisions, which suggests companies are probably going to be able to make those numbers."

The economic calendar for next week includes the FOMC minutes from the two-day meeting in late September, along with import prices and retail sales for September, in addition to the preliminary reading on October consumer sentiment from the Thomson Reuters/University of Michigan surveys.

Economic data of late has been better than expected, helping to quell fears that the economy was headed for a double-dip recession. Once again, that leaves the euro-zone crisis as a potential land mine to disrupt a slow move higher.

"The reason we have lifted in the past week is the rhetoric has improved and we are seeing progress, not necessarily a plan, but you are getting countries to admit to the problem, and that is a step in the right direction -- you have to seek help before you can get help," Pado said.

"That is all we really need in order to get beyond this, and start focusing on the future and focusing on our own data. We have plenty of data that suggests slow growth, but nothing that suggests waving the red flag like a crazy person saying, 'How can you not see this?'"

(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)

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France, Belgium, Luxembourg agree Dexia rescue (Reuters)

BRUSSELS (Reuters) – France, Belgium and Luxembourg agreed a rescue plan for Dexia SA on Sunday ahead of a planned board meeting expected to decide on a break-up of the first lender to fall victim to the euro zone crisis.

French Prime Minister Francois Fillon, his Belgian counterpart Yves Leterme and Luc Frieden, the finance minister of Luxembourg, where Dexia has a large presence, had found a solution for the stricken Franco-Belgian bank, Leterme's office said early Sunday afternoon.

"The governments ... have reaffirmed their solidarity in finding a solution to secure the future of Dexia," it said in a statement after two hours of talks at Egmont Palace in Brussels -- also the site of talks on a previous Dexia rescue bid in 2008.

"The suggested solution, which is also the result of intense consultations with all partners involved, will be submitted to Dexia's board of directors for approval," Leterme's office said without providing details of the rescue plan.

Dexia's board was due to meet from 3 p.m. (1300 GMT) in Brussels. It was forced to seek government help this week after a liquidity crunch hobbled the lender and sent its shares down 42 percent over the past week.

At stake in the talks is how much each government will have to contribute to help wind down Dexia, a thorny subject given that Belgium and France are already struggling to contain large deficits.

The need to recapitalize banks is emerging as another strain for European governments whose budgets are already stretched. Belgium had a debt-to-gross domestic product ratio of 96.2 percent last year, lower only than Greece and Italy among euro zone members and on a par with bailout recipient Ireland.

The burden of bailing out Dexia led ratings agency Moody's to warn Belgium late on Friday that its Aa1 government bond ratings may fall.

The negotiations to dismantle Dexia, which has global credit risk exposure of $700 billion -- more than twice Greece's GDP -- are being watched closely for signs that Europe might be capable of decisive action to resolve its banking crisis.

"I am convinced that it is possible ... by tomorrow morning to have an agreement in which Belgium resolves the issue without pushing up the debt level of our country too high," Leterme told Belgian television before the talks began on Sunday.

Dexia, which used short-term funding to finance long-term lendings, has found credit drying up as the euro zone debt crisis worsened. This problem has been exacerbated by the bank's

heavy exposure to Greece.

Dexia's near collapse stoked investors' anxieties about the strength of European banks and coincided with growing talk about coordinated EU action to recapitalize banks across the continent.

French President Nicolas Sarkozy was due to meet German Chancellor Angela Merkel on Sunday in Berlin to thrash out differences on how to use the euro zone's financial firepower to salve a sovereign debt crisis that threatens the global economy.

Germany and France have so far been split over how to recapitalize shaky European banks. Paris wants to tap the euro zone's 440 billion euro ($594 billion) European Financial Stability Facility (EFSF) to recapitalize French banks, while Berlin is insisting the fund should be used as a last resort.

Dexia's overhaul will likely see its French municipal financing arm split from the group and merged with French state bank Caisse des Depots and Banque Postale, the French post office's banking arm.

The Belgian government wants to nationalize Dexia's largely retail banking business in Belgium.

Healthy units, such as Denizbank in Turkey, will be sold.

A 'bad bank' supported by state guarantees will hold 95 billion euros in bonds, including 12 billion euros of sovereign debt of weaker euro zone periphery nations.

Including 7 billion euros of securities linked to U.S. mortgages, France and Belgium may need to provide guarantees to cover up to 200 billion euros of assets, which would be more than 55 percent of Belgian GDP.

The key issues for Sunday's talks will be how to divide up the 'bad bank' assets, how much Belgium should pay to nationalize Dexia's Belgian banking business and whether others, such as Belgium's regions, would be involved in its purchase.

Dexia's shares have been suspended since Thursday afternoon.

($1 = 0.741 Euros)

(Writing by Marie Maitre, Christian Plumb and Philip Blenkinsop; Editing by Hans-Juergen Peters and Sebastian Moffett)

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Merkel, Sarkozy tackle differences over euro crisis (Reuters)

BERLIN (Reuters) – German Chancellor Angela Merkel will thrash out differences with French President Nicolas Sarkozy on Sunday over how to use the euro zone's financial firepower to counter a sovereign debt crisis threatening the global economy.

With the turmoil threatening to spiral into financial meltdown as the value of banks' sovereign bond holdings slide, Merkel and Sarkozy are likely to discuss in Berlin both how to manage Greece, prevent contagion and strengthen lenders.

The implosion of Belgian lender Dexia, the first victim of the crisis, has added a sense of urgency to the talks. The prime ministers of France and Belgium and the finance minister of Luxembourg agreed a rescue plan for Dexia on Sunday ahead of the stricken Franco-Belgian bank.

"Dexia will be among the topics that will be discussed but the main topic is Greece and the euro zone, as banks are only a consequence" of the crisis, a source at the French finance ministry told Reuters.

Sarkozy is due to arrive in Berlin late on Sunday afternoon and hold a meeting with Merkel followed by a working dinner. A news conference will take place at 1530 GMT.

Talks are continuing over a vital aid tranche for Greece, which could run out of cash as soon as mid-November. European finance ministers are considering making banks take bigger losses on Greek debt -- an issue that could be discussed at the Merkel-Sarkozy meeting.

"It is possible that we assumed in July a level of debt reduction that was too low," German Finance Minister Wolfgang Schaeuble was cited as saying by a newspaper on Sunday.

Separately, European Commission head Jose Manuel Barroso told Bild a Greek default would have unforeseeable consequences and may cause the crisis to spread.

"This is new territory for us and we are discussing solutions which have not really been tested before," he said.

BOLSTERING BANKS

Germany and France have so far been split over how to recapitalize Europe's banks, which Ireland estimated on Saturday may need more than 100 billion euros ($135 billion) to withstand the sovereign debt crisis, while the International Monetary Fund (IMF) has said the banks need 200 billion in additional funds.

Paris wants to tap the euro zone's 440 billion European Financial Stability Facility (EFSF) to recapitalize its own banks, while Berlin is insisting the fund should be used as a last resort.

Qatar is being cited by some media as a potential savior for European banks yet analysts believe tiny Gulf Arab state is an unlikely white knight, as Europe's needs are too great.

Top French banks BNP Paribas and Societe Generale denied a report on Sunday that they could seek to raise a combined 11 billion euros as part of a broader European bank recapitalization plan.

Another key dispute is how to use the EFSF to buy sovereign debt to prevent contagion of the crisis, particularly crucial if Greece fails to secure its next aid tranche.

France does not want to set guidelines for the EFSF on the matter, whereas Germany wants to limit the sum used for each member state and set a time limit for bond purchasing.

"Given that the EFSF is limited overall, it makes sense also to limit the purchases on the secondary market for each country," Michael Meister, deputy parliamentary leader of Merkel's conservatives, told Reuters.

There was a danger, otherwise, the funds could be quickly used up, he said.

Berlin could be prepared to allow a more flexible use of the EFSF to prop up states and banks if Paris agrees to a broad haircut on Greek debt, a German paper wrote on Sunday.

But a government source told Reuters: "There is no such agreement." Furthermore, Merkel warned last Tuesday that the threat of contagion from a euro zone country rescheduling its debt would be huge, and it only made sense once it had achieved a primary surplus again.

The two euro zone heavyweights have come under pressure worldwide to resolve Europe's crisis which is roiling markets. U.S. President Barack Obama on Thursday urged Europe to "act fast," calling the common currency bloc's crisis the largest obstacle to the United States' own recovery.

World Bank President Robert Zoellick told Wirtschaftswoche magazine there was a "total lack" of vision in Europe and Germany in particular needed to show more leadership.

Merkel will visit Vietnam and Mongolia this coming week.

(Additional reporting by Andreas Rinke in Berlin, Regan Doherty in Doha and Christian Plumb and Lionel Laurent in Paris, Editing by Hans-Juergen Peters)

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European stocks rise ahead of U.S. jobs data (Reuters)

LONDON (Reuters) – European stocks rose on Friday and the euro clung to gains from a 2-cent rally after euro zone policymakers moved to shore up struggling banks and fend off a financial crisis, while markets positioned for U.S. employment data due later.

The European Central Bank (ECB) announced aggressive liquidity measures on Thursday, throwing a lifeline to lenders whose wholesale funding has dried up as market confidence ebbed, and the European Union said it would present a plan for a coordinated recapitalization of banks by member states.

Gold, oil, copper and equities were all on course to post weekly gains on hopes that Europe's leaders may finally be getting to grips with a two-year-old sovereign debt crisis, although the scale of the task meant caution remained high.

"European stock indexes as well as shares in a number of sectors such as banking, insurance, oil, utilities and telecoms seem to be stabilizing," Cholet Dupont strategist Vincent Guenzi said.

"This stabilization may be a sign of a strong rebound to come if we get significant progress in the resolution of the euro zone debt crisis."

Fears that the European crisis is heading inexorably toward a default by Greece -- and possibly others -- that could trigger turmoil in the banking system have caused a sharp sell-off in riskier assets since late July.

The FTSEurofirst 300 (.FTEU3) index of top European shares was up 0.5 percent at 945.63 points.

Royal Bank of Scotland (RBS.L) and Lloyds Banking Group (LLOY.L) fell 3.5 and 4 percent respectively after Moody's Investors Service downgraded the credit ratings of the two banks.

S&P 500 index futures were steady, indicating some caution ahead of the non-farm payrolls report due at 1330 GMT, always closely watched for clues on the state of the U.S. economy.

RETURN OF RISK

In a further boost to euro zone market sentiment, European Commission President Manuel Barroso said the EU's executive arm was proposing coordinated action to cleanse banks of toxic assets.

The euro, which has fallen back from a 2011 peak near $1.50 in May, was up slightly around $1.3457, after jumping from a low of $1.3240 on Thursday.

Many market players put the euros rally down to short-covering -- when traders buy back into a currency to realize gains on an earlier bet it would fall -- and believe the shared currency's downtrend remains intact.

"Some of the euro/dollar shorts have been squeezed as the market seems to be taken the positive aspects from the ECB measures and hopes of recapitalization of European banks," said Paul Robson, currency strategist at RBS Global Banking.

"Going into the U.S. jobs data, a very weak number could see the euro drop while a consensus to marginally weak number could help."

German Bund futures rose after a sharp sell-off in the previous session, as investors looked to U.S. jobs data for fresh insight into the health of the world's largest economy.

While some investors were disappointed the ECB did not also cut interest rates, riskier assets such as equities, commodities and currencies linked to commodity markets, such as the Australian dollar, rallied.

Gold rose 0.6 percent to around $1,659 an ounce, on course for its first week of gains after four straight weeks of declines that saw it shift from a negative to a positive correlation with riskier assets as investors seeking safety turned instead to U.S. Treasuries and the dollar.

Brent crude eased slightly to $105.33 a barrel and U.S. crude was little changed at $82.62, on course for its biggest weekly gain in seven months.

(Additional reporting by Cecile Lefort in Sydney and Lisa Twaronite and Hideyuki Sano in Tokyo; Editing by Kavita Chandran/Ruth Pitchford)

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Amid anti-tax mood, Ark. cities raising taxes (AP)

CARLISLE, Ark. – Like many residents in the central Arkansas town of Carlisle, James Dowdy doesn't like taxes. The 70-year-old retired farm equipment salesman complains about "tax and spend" government and said he vowed to never vote for a local tax increase after the last one he supported more than 25 years ago. But that was before cracks and potholes started eating away the town's streets and mold evicted the police from their station downtown.

So he grudgingly voted yes this month to raise local sales taxes to pay for improvements. "We need a jail, and we need good roads," he said, with resignation.

A funny thing is happening in the midst of the most powerful anti-tax climate in years: towns are raising taxes. In Arkansas, 16 communities have brought sales tax proposals to their voters so far this year, and 14 have passed. Several other cities have tax hikes in the works. That's more proposals and a better success rate and anyone can remember in a long time.

The hikes have been approved in rural towns like Carlisle, population 2,300. They've been approved in traditionally Democratic areas such as Wynne and Republican strongholds like Berryville. One just passed in Little Rock, the state's capital and biggest city, the first increase there since 1994. The measures have gone to pay for police salaries, a new fire station, parks and community centers. Little Rock city leaders even sold the idea of a new $6 million fund to recruit businesses.

Some local officials are almost surprised by the overwhelming response. "It's a real anti-tax environment," said Carlisle Mayor Ray Glover, who won 58 percent approval for a 7/8 percent sales tax increase. "It's the worst time I've seen in my lifetime."

Voters, regardless of their politics, seem to have accepted the basic deal in most communities, said Arkansas Municipal League Executive Director Don Zimmerman. "If they're going to have those services, then they're going to have to find a way to pay for them," he said.

Whether voters elsewhere are as accommodating isn't known. The National League of Cities reported last week that more than half of cities surveyed reported being less able to meet fiscal needs now than in 2010. It wasn't known how many would try to hike taxes to make up the difference.

But the trend here appears to send a message to state officials who are encountering strong opposition to tax measures for their services. At very least, states have to do a better job of showing voters exactly what they will get for their money, according to some tax experts. And, beyond that, officials may have to get creative about funding, including perhaps paying for more at the local level where voters are more accepting.

"If you inform the people and they decide this is a benefit they want, they understand they have to pay for it," said Arkansas House Speaker Robert Moore. "I think that's what the cities have done essentially, and they've done a good job of it."

Several states, including Virginia, are now moving to pay more of their highway costs with novel kinds of road tolls. Also sales taxes, especially temporary ones, may now be less objectionable to voters than income and property taxes, although that method has its flaws.

But right now, the gap in voter attitudes is clear.

While voting for local increases, Arkansas residents showed a strong antipathy to state taxes, and politicians responded. Gov. Mike Beebe signed a $35 million tax cut package that included another reduction in the state's sales tax on groceries. Since he took office in 2007, that tax has been cut from 6 percent to 1.5 percent.

Though cities could upgrade streets, a proposed state diesel tax hike to fix deteriorating highways was scrapped after polling showed how unpopular it was. In the Legislature, both Republicans and Democrats tried to outdo each other with anti-tax rhetoric and proposals.

In towns suffering from the sour economy, residents heard a different message from their local officials. Little Rock Mayor Mark Stodola declared that higher taxes were needed to deal with an expected budget shortfall of $8 million. Without the money, he said, "It's going to be a much different city that what you envision today," with options including closing parks, cutting bus lines, losing 40 police officers and allowing longer response times to crimes.

Residents agreed to pay. Proposals to raise an estimated $50 million a year won with 54 percent of the vote.

"I'd rather give a few cents to help bring up the infrastructure and other services than see what happens if we don't," said Jack Privitt, 67, who voted for the increase.

Part of the money will go into a fund to help the city attract businesses, an ambitious new enterprise.

In Carlisle, Glover said he didn't like asking people to pay more when times are so tough. The state's unemployment rate of 8.3 percent is the highest in 24 years. But the town needed the tax revenue.

Since mold forced the closing of the city's police station in 2009, some officers have been working out of an old bank vault in town. With no jail to operate, layoffs were likely. "If you don't have a jail, you don't need certain people," Glover said.

The tax measure, which should raise about $200,000 a year, takes effect in January. But Dowdy says he hopes he never has to vote yes again.

"I'm a tough sell because I don't like taxes at my age," he said.

___

DeMillo can be reached at www.twitter.com/ademillo

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For Greeks, future is a void (AP)

ATHENS, Greece – To find symbolism in the Greek financial crisis, just go to the source. The national image on the two-euro coin in Greece depicts an ancient myth about the abduction of Europa, a Phoenician princess, by Zeus, the king of the gods in the form of a bull.

The saga known as the "Rape of Europa," whose protagonist rides the bull's back in an image reproduced by artists over the centuries, mirrors the turbulent journey of Greece and the rest of Europe, hitched together in an agonizing spiral that seems to go on and on and on.

The crude parallel ends there, however — Zeus turned into a human, had his way with Europa, and she bore him children. The last chapter in modern Greece, meanwhile, is still blank. Will there be a debt default, with its ominous implications for the global economy? How long will Greeks endure the erosion of what was a good life?

The future is a void, and anger and helplessness dig deep in the Greek psyche. Joblessness is climbing and essential services such as health care and policing are losing resources.

The crisis may pale beside the bloody conflict or poverty in Libya or Afghanistan, but the hardship is as much psychological as economic. It is the shock of undercut expectations, the loss of benefits and prospects once taken for granted as part of the European contract.

The mood now resembles the plot of "Groundhog Day," a 1993 movie about a man who wakes up to the same day over and over again.

"We don't see how we can escape from this problem," said Kostas Theofanides, engineering manager for British Petroleum in Greece. He spoke Thursday evening at a resort hotel on the Athenian coast, where Greek and German business executives, nametags on their suits, mingled during a forum that hummed with talk of investing in a country on the edge.

Greeks, whose previous governments were accused of hiding the extent of the country's ballooning budget deficit, now talk with withering honesty about their problems. Even at investment forums. Theofanides said his compatriots are angry, unsafe and depressed, and wonder how long they have to put up their daily stew of taxes, austerity, unemployment and general uncertainty.

He ticked off the possibilities: Two years? Three years? Ten years, 25 years? Who knows.

But there is plenty of blame to go around, and nobody is exempt — from free-spending Greeks, to the politicians they elected, to Germany and the international lenders with their dire prescriptions of cuts and then more cuts.

With a sly smile, Dimitrios Gardikiotis, director at an information technology company, suggested Germany had been plotting Greece's downfall for the past 20 years, luring its junior economic partner into dissolute ways so that it could barge in and buy assets on the cheap.

'"I'm preparing your economic death. Then I will buy you and your wife and your children,'" said Gardikiotis, imagining what he thought might be a German viewpoint. He said it in such a disarming manner that it was hard to tell what he really thought.

"Greeks actually point their fingers at others, not at themselves," Gardikiotis said. "Of course, there are certain mistakes, and everybody has to recognize their responsibility."

History is to blame as well, in some Greek quarters.

Its students point to centuries of Ottoman rule that ended in independence in 1829, giving other European nations a headstart in building democracy. Then bouts of civil strife stunted progress. The king and the prime minister sparred during the National Schism in the early 20th century, the Western-backed government fought the communists in the late 1940s, and a military junta ruled between 1967 and 1974.

For a few resentful Greeks, there are always the Nazis, who occupied Greece during World War II. On Thursday, several people in uniforms, including a man doing his best to impersonate Adolf Hitler, turned up with a Nazi flag and other insignia outside the German Embassy.

"The Germans owe us millions in war reparations, let them pay what they owe us," said 75-year-old Demetris Kollatos, a fixture on the protest circuit who vaguely recalled the German occupation of Athens during his childhood. "In their greed to get everything, they'll lose everything."

Mostly, there is grim confusion and numbing fatigue. Greece is struggling to meet the terms of a euro110 billion ($146 billion) international bailout from other eurozone countries and the International Monetary Fund, but there is growing doubt about whether it can dodge a default. The country is in a third year of recession, with another on the way.

The government is tightening up on tax evaders, but some edicts, including those about what receipts taxpayers need to save in order to avoid penalties, have changed several times. A columnist in the English-language Athens News, who draws on historical figures for his alias, Alcibiades Ouranos, predicted a looming deluge of bureaucracy:

"Thing A should be dealt like that, but we acknowledge that B, C and D are unfairly hurt by that legislation, so we declare that B should do that, C should do something else and D should do that, but only if they do not fall into category E, have F blahblahblah. So bring us statements from agency G, H and I who monitor such things, to establish that you are indeed a B and not an A."

Some Greeks think they are venturing onto new psychological terrain after nearly two years in which the concept of crisis, which should be exceptional by definition, is as banal as the protests and strikes that convulse Athens from time to time.

Despoina Ergenidou is director of the Numismatic Museum, a monument to the coins and currency of ancient Greece that is housed in the mansion where Heinrich Schliemann, the German archaeologist who excavated Troy, lived in the late 19th century.

"It's not just the economy. It's ethical values," she said in an interview in her office, flanked by a garden in downtown Athens. "They are losing what they believe. I don't mean religion. We were working for something better, we believed in things, people, good ideas. We were working for those ideas. It's not like that anymore."

In ancient times, Ergenidou said, there were no banks, so people hoarded coins in hiding places, in pots or pouches, behind walls and under floors. Many families survived war and other hardships through their domestic economies, a garden to grow vegetables or some farm animals.

Those were truly hard times. They were also glorious times, when hundreds of cities and kings minted coins in different denominations and metals. There were tetradrachms and staters and obols, gold and silver and brass, and coins with images of turtles, foals and owls.

It is tempting to find relevance in the words of ancient Greek philosophers to Greece's modern predicament, in which avarice played a star role. Aristotle recognized the value of money as a tool for the interchange of goods, beyond barter, but warned of its artifice and the imbalances generated by seeking cash without restraint.

"It appears necessary that there should be a limit to all riches, yet in actual fact we observe that the opposite takes place; for all men engaged in wealth-getting try to increase their money to an unlimited amount," he wrote.

___

Menelaos Hadjicostis contributed to this report.

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Metro CEO Cordes says not seeking contract renewal (Reuters)

FRANKFURT (Reuters) – Eckhard Cordes, chief executive of German retailer Metro (MEOG.DE), said he no longer wishes to renew his contract, just weeks after winning support from the group's top shareholder.

Cordes had seemed in danger of losing his job last month after reports that he had fallen out of favor with some supervisory board members, who were due to vote later in the autumn on whether his contract would be extended past October 2012.

However, he battled for support among other members of the board and in a rare public statement, the Haniel family, which owns 34.24 percent of Metro, said they were in favor of a contract extension for Cordes.

Cordes, who informed the supervisory board and major shareholders of his decision on Sunday, criticized the public debate over his contract, saying it threatened to harm the company, its principal shareholders and himself.

"Due to the incidents of the recent weeks and months I have come to the conclusion that the trustful basis to stay on as the head of Metro's top management does not anymore exist," he said in a statement on Sunday.

Cordes, a turnaround specialist and former Daimler (DAIGn.DE) manager, had come under fire for failing to find buyers for department store chain Kaufhof and hypermarkets unit Real, and a program of job cuts had been criticized by labor representatives.

The Metro share price has also slumped 38 percent this year on fears of lackluster consumer spending and as sales dropped at one-time star performer MediaMarkt-Saturn, the chain of consumer electronics stores majority owned by the group.

A source close to the company said Cordes would not leave Metro straight away and would stay on until a succession process had been decided.

A separate source also close to the company said that Cordes was likely to leave over the European winter and that current Chief Financial Officer Olaf Koch might take the helm on an interim basis until a new chief executive were found.

The Haniel family, which holds the Metro stake via the Franz Haniel & Cie investment company, said in a statement that Cordes' decision merited "our recognition and respect."

The Schmidt-Ruthenbeck family, who own around 16 percent of Metro and were also in favor of a contract extension for Cordes, said on Sunday they regretted Cordes' decision.

"We believe Cordes staying would have been best for the further development of Metro. Therefore we would like him if possible to stay until his contract expires," said Peter Kuepfer, who represents the family on the Metro supervisory board.

(Additional reporting by Jonathan Gould; Editing by Hans-Juergen Peters)

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European bank bill well over $133.8 billion: Ireland (Reuters)

DUBLIN (Reuters) – There is general agreement that European banks will need fresh capital well in excess of 100 billion euros ($133.8 billion) and it will likely come from a variety of sources, including the euro zone rescue fund, Ireland's finance minister said on Saturday.

Germany and France are split ahead of key talks on Sunday over how to strengthen shaky European banks. Paris is keen to tap the euro zone's 400 billion rescue fund, the EFSF, to recapitalize its own banks and Berlin is insisting the fund should be used as a last resort.

The International Monetary Fund (IMF) has said European banks need 200 billion euros in additional funds.

"I think there is general agreement that it will be significantly in excess of 100 billion (euros)," Michael Noonan told reporters on the sidelines of an economic forum in Dublin.

"I know that some of the big German banks that I was talking to personally intend raising money on the market so it will be private funding. Other banks would like to avail of the EFSF fund. Other banks will rely on their sovereign governments to provide the capital so there is going to be a range of ways of doing it."

"I think the principle should be that sovereign governments are responsible for their banking system on the advice of the European Central Bank."

"If banks can't capitalize themselves, either by issuing equity to the market or by getting exchequer funds then obviously they would have the option of requesting EFSF funding. When we recapitalized our banks here we went the EFSF option."

Noonan said recent credit rating downgrades of Spain and Italy reflected frustration at Europe's failure to solve a long-running sovereign debt crisis.

"There is certainly an impatience that Europe should resolve the problems of the euro zone and do it pretty quickly," he said.

Ireland's banks were at the heart of its financial crisis and subsequent EU-IMF bailout and earlier this year Dublin put a 70 billion euros bill on recapitalizing its lenders.

Noonan is currently looking at ways to try and restructure nearly 31 billion euros worth of promissory notes, a form of IOU, used to recapitalize shuttered lenders Anglo Irish Bank and Irish Nationwide Building Society.

The notes carry an interest bill of 17 billion euros, spread out over 20 years and Noonan would like to tap the EFSF to pay off the remaining amount outstanding, nearly 44 billion euros, and then repay that money to the EFSF over a longer timeframe and at a lower interest rate.

"We are moving on it with colleagues in Europe and they have given no commitment but they are prepared to proceed on the basis of joint policy papers, which we have just commenced to draft now."

"I want to position ourselves in a changing European situation so that Ireland's interests are studied carefully and taken into account in any wider solution that goes forward in the next month."

(Reporting by Carmel Crimmins; Editing by Alison Birrane)

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