Wall St drops on euro zone anxiety (Reuters)

NEW YORK (Reuters) – Wall Street dropped for a third day on Friday on worries about the Italian banking sector and Greece's debt crisis, but the S&P 500 managed to hold its 200-day moving average in a sign buyers still see value.

The Dow Jones industrial average dropped 115.42 points, or 0.96 percent, to 11,934.58. The Standard & Poor's 500 Index fell 15.06 points, or 1.17 percent, to 1,268.44. The Nasdaq Composite Index lost 33.86 points, or 1.26 percent, to 2,652.89.

(Reporting by Leah Schnurr)

Instant view: LSE sweetens its offer for TMX Group (Reuters)

TORONTO (Reuters) – The London Stock Exchange has sweetened its friendly offer for the TMX Group with an enhanced dividend, bringing the value to $4.1 billion for the operator of the Toronto Stock Exchange.

LSE added a cash component in the form of C$4 dividend per share to TMX shareholders, while LSE shareholders will receive 84.1 pence per ordinary share, sweetening the bid by C$660 million ($680 million).

CHRIS DAMAS, INDEPENDENT ANALYST, TMX SHAREHOLDER

"The special dividend is a carrot. The TMX's balance sheet was unleveraged before this deal and the deal was going to reduce the LSE's leverage. ... This dividend will now increase the leverage, effectively by paying cash from the TMX's unleveraged balance sheet. ... It's a carrot, but you can't make more value for shareholders by moving the financial shells around.

"To get the dividend you have to hang in there until the day before they complete the merger and it doesn't remove any of the regulatory risk. We are voting on a deal, which will be a done deal, if shareholders vote positively and yet we still have all the regulatory risk.

"What I suggest is cash up front, not cash the day before a hypothetical closing date in the fall.

"These valuations are around 11 to 12 times earnings. And the Deutsche Bourse-NYSE deal, which is being voted on July 7, is more like 13, or 14 times. So these multiples are still pretty low for a stock that has provided a 400 percent return."

ALLISON CROSTHWAIT, DIRECTOR GLOBAL TRADING STRATEGY, INSTINET

"I'm not surprised at all. I expected this. They certainly needed to do this in order to win the vote on the 30th. And I think the price is about right. Probably. They bested the Maple deal by almost a dollar. I see it right now being worth $48.94.

"I don't think the case is made strongly enough for TMX-London -- they sort of rolled over, to some degree. I would just like to see more aggression as to why this is a really good thing -- I mean, you sell me on it. Everybody has gone with this fuzzy feel-good about Canadian control -- what does that mean?

"It's a true sweetener, it was needed, because ultimately shareholders -- they're pecuniary -- they're motivated by their own investment return. ... I think this makes a much stronger case for the LSE and much higher probability it will be accepted on the 30th.

"There's all the regulatory hurdles of course. The shareholders has to make this strange determination without having the regulatory information. So if they believed the regulatory environment is going to favor the Maple deal, that could sway things in favor of the Maple deal. We'll see, but right now everybody's saying it'll be the LSE."

"Any comment that I've seen has said that LSE is more likely from a regulatory perspective. That could shift in two seconds if somebody really influential comes out and says, "no, LSE is not going to pass the net benefit test and this is not a competitive issue", but I think it is a competitive issue.

THOMAS CALDWELL, CHAIRMAN, CALDWELL SECURITIES

"The thing that would impress me more in the longer term is that they are maintaining the same dividend yield basis on this company, so that's a positive.

"Giving back some of our own money, that's also positive - it'll give you some cash, so that means, let's look at the stock and say C$44.20, so I get C$4 back, so it's C$40.20, combined company -- it's probably worth that, I would think.

"There is a speculative premium here and they are trying to match the speculative premium with some cash up front. On the Maple deal, I end up with some cash ... and end up with Maple shares, which is a company controlled by its customers, and therefore, what pricing power do you have? And how are they going to value Alpha when they roll it in there?

"I think Wellington used the phrase at Waterloo that it was a close-run thing, and that phrase is probably going to be applicable here -- this is a close run deal.

"I think the other side are going to come back with something more, something different and something more clarified.

"I believe markets should be neutral. A market should not be controlled by the biggest proprietary traders and the biggest internalizers of their own trades -- that is they take the other side of the client order -- because the most important thing an exchange does is determine the price of a trade, the price discovery."

MATHIEU ROY, VICE PRESIDENT, LOUISBURG INVESTMENTS

"As a TMX shareholder, I'm certainly happy to see the offer being sweetened just before we have to go and vote.

"One part of the equations where I think it's going to be difficult to make up your mind today is that I think the market was valuing the LSE as if the LSE-TMX merger wasn't going to happen.

"So I wasn't really believing that if you took the 2.9 shares and then applied it and that's what TMX would be trading at today.

"With them sweetening the bid and potentially increasing their chances of winning it, or at least getting shareholder approval, I'm curious to see how the LSE will trade when it opens up again, and if it trades off, then even with the $4 dividend, perhaps it still won't be enough to get you to the $48 stated by Maple Group.

I guess my first impression is I'm happy to see a bidding war and I'm open-minded, but I want to see how the LSE trades and I'm still a little more intrigued by the Maple bid.

A look at economic developments around the globe (AP)

A look at economic developments and activity in major stock markets around the world Thursday:

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LONDON — Worries over the U.S. economy piled pressure on stock markets, while oil prices sank after a shock decision by the International Energy Agency to release crude reserves to make up for tight supply.

The FTSE 100 index of leading British shares closed down 1.7 percent, Germany's DAX fell 1.8 percent and the CAC-40 in France ended 2.2 percent lower.

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NEW YORK — The International Energy Agency, which includes the U.S. and 27 other countries, said it would release 60 million barrels of oil from emergency stocks in an effort to ease the strain that high oil prices have put on the global economic recovery.

This marks only the third time in its history that the Paris-based agency has released oil onto the markets. Half of the 60 million barrels will come from the U.S.'s emergency stocks. The oil will be released over the next 30 days.

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BRUSSELS — European Union leaders stepped forcefully into Greece's national politics, urging the leader of the opposition to rally with the government to find a way out of its financial meltdown and protect the euro.

Several EU heads of government directly targeted Greece's opposition leader Antonis Samaras and told him to do his utmost to join ranks and fight the crisis together.

"When it comes to Greece, we call on the opposition to fulfill its historical responsibility," German Chancellor Angela Merkel said.

The plea to a national opposition leader, rare in EU politics, underscored the emergency Greece and the 17 nations using the euro currency face.

Eurozone governments earlier this week delayed a final decision on new aid for Greece until July 3, when they will know whether its parliament has accepted massive new budget cuts, government asset sales and economic reforms. The Greek opposition is threatening to block those budget cuts.

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ATHENS, Greece — Greece's new finance minister said the government has been encouraging Greek banks to participate in a solution to the country's crippling debt crisis, just days ahead of a crucial Parliamentary vote that could stave off a devastating default.

Finance Minister Venizelos also announced a new round of tax hikes on crisis-weary Greeks.

The minister was in discussions with the country's international creditors over critical austerity measures that must be passed by Parliament next week.

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RIGA, Latvia — As Greece's anguish spills into the streets, the three small Baltic countries may offer an example, if not a model, of how to deal with an economic crisis. Latvia, Lithuania and Estonia swallowed the bitter medicine that Greece is being asked to take.

They slashed pensions, welfare benefits and public sector salaries, without triggering large-scale protests. Latvia, which saw the world's deepest recession, even had to close schools and hospitals and sack thousands of teachers.

And the cure worked. The three former Soviet republics are now on a path to recovery, and Latvia's budget-cutting government even won re-election.

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HONG KONG — Booming Asia had more millionaires than Europe for the first time last year and is fast closing in on North America for the top spot, a report said.

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TOKYO — In Asian trading, Japan's Nikkei 225 closed 0.3 percent lower, while Hong Kong's Hang Seng lost 0.5 percent.

China's Shanghai Composite Index rose 1.5 percent to 2,688.25.

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PRAGUE — Britain's Prime Minister David Cameron and his Czech counterpart Petr Necas insisted that only the 17 European countries that use the euro should give Greece any more financial assistance. Britain and the Czech Republic are not part of the currency bloc. They have their own currencies, the British pound and the Czech koruna.

Greece is scrambling to avoid defaulting on its debts. It is likely to feature heavily at a summit of the European Union's 27 leaders in Brussels over the coming two days. Both Cameron and Necas said they will be pushing to make sure that an EU-wide fund, the European Financial Stability Mechanism, is not tapped as part of any second bailout of Greece.

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PARIS — The largest economies in the world agreed to a series of measures to stabilize world food prices after sudden fluctuations caused global instability, especially in poorer countries.

French Agriculture Minister Bruno Le Maire said the G-20 summit of agriculture ministers had agreed to calm the world market by establishing a transparent system to track global supplies, set up emergency food reserves, engage in more research into new wheat strains and create a rapid response mechanism to deal with drought in producer countries.

Non-government organizations working on food issues, however, slammed the accord as too timid, saying it did not address the controversial issue of biofuels, which take up land that could be used to grow food, and doesn't focus enough on building up emergency stocks.

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DUBLIN, Ireland — Ireland's economy grew 1.3 percent in the first quarter as exports helped the bailed-out country post its best quarterly performance since the end of 2007, the Central Statistics Office reported. But consumer demand was weak.

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BRUSSELS — The European Union said is prepared to help debt-saddled Greece by reducing Greek co-financing for EU development aid to 15 percent.

The European Commission has urged EU leaders to help Greece access billions in EU development funds to create jobs and make its businesses more competitive.

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BUDAPEST, Hungary — Known for its work with the homeless, flood victims and alcoholics, one of Hungary's biggest charity organizations has its hands full with another group down on its luck — Hungarians burdened with mortgages and other loans taken out in foreign currencies, mainly Swiss francs.

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HONG KONG — Italian fashion house Prada SpA sold shares in its Hong Kong IPO at a low 39.50 Hong Kong dollars each, underscoring investor wariness of stocks amid a global market slump.

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VIENNA — World opium production decreased sharply last year due to a blight in Afghanistan but is expected to rebound, and coca growing and cocaine production also fell, the United Nations reported.

The United States remained the biggest market for cocaine in the world, and European cocaine demand was rapidly catching up.

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SINGAPORE — Tony Tan, a top executive at wealth fund Government of Singapore Investment Corp., resigned to run for president of the city-state.

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WELLINGTON, New Zealand — New Zealand's government said it will offer to pay thousands of homeowners to leave areas of the country's second-largest city that were hardest hit by recent earthquakes.

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MINSK, Belarus — Belarus said it will sell its remaining stakes in its strategic natural gas pipelines to Russia's Gazprom for $2.5 billion.

The deal will help Gazprom, a Kremlin-controlled gas giant, secure exports to Europe that have been affected by pricing disputes with Belarus and neighboring Ukraine in recent years.

Belarus is suffering the worst economic crisis in its post-Soviet history.

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HAVANA — Cuba said it is receiving more visitors each year, but tourism income has yet to return to what it was before the global financial crisis caused a sharp downturn in the sector.

European stocks, euro rebound on Greece progress (AFP)

LONDON (AFP) – European stocks rebounded and the euro recovered against the dollar on Friday as investors cheered a breakthrough in the eurozone's bid to resolve Greece's debt crisis, analysts said.

World markets had slumped on Thursday as weak US and Chinese data dented confidence in the global economic outlook and as Greece's problems dragged on.

However they swiftly recovered on Friday after Greece, the EU and the IMF agreed on the final details of a 28-billion-euro ($40-billion) savings plan which Athens must implement over five years to obtain cash to pay its immediate debts.

In late morning deals, London's benchmark FTSE 100 index of top shares jumped 1.27 percent to 5,746.33 points. Frankfurt's DAX 30 climbed 1.12 percent to 7,229.37 points and in Paris the CAC 40 gained 0.46 percent to 3,805.30.

The euro climbed to $1.4293 from $1.4257 late on Thursday in New York. The dollar fell to 80.16 yen from 80.52 yen.

Oil prices meanwhile steadied after plunging one day earlier when the International Energy Agency decided to tap emergency crude reserves to make up for lost Libyan supplies.

But in Italy, leading bank shares slumped up to 8.0 percent.

Markets recovered on Friday "after positive sentiment coming out of Europe as EU ministers say they will do 'anything it takes' in relation to Greece," said Spreadex trader Simon Furlong.

"However, we are not out of the woods yet. With disappointing jobs figures in the US, (Federal Reserve chairman) Ben Bernanke downgrading US growth output and a large opposition to austerity measures within Greece's parliament, the light at the end of the tunnel is very dim indeed."

The European Commission said the deal among international backers on the ground in Athens now has to be "translated into concrete legislative measures" by Greece. Prime Minister George Papandreou is hoping that parliament will next week approve his austerity measures.

Meanwhile worries about the global economy were stoked after the US Labor Department on Thursday reported an unexpected increase in initial jobless claims, by 9,000 to 429,000 in the week to June 18. Elsewhere, the Commerce Department said new-home sales fell 2.1 percent in May.

Ahead of the data, Bernanke had on Wednesday warned of economic headwinds that could persist for longer than expected.

US stocks ended mixed on Thursday after steep initial losses spurred by the series of gloomy economic reports from the United States, Europe and China.

Tokyo's benchmark Nikkei-225 index closed up 0.85 percent at 9,678.71 points on Friday.

"The financial markets have stabilised," noted Derek Halpenny, European head of currency research at The Bank of Tokyo-Mitsubishi UFJ.

"Concerns over a number of factors remained elevated however, and next week brings the crucial austerity votes that appear to require not just a win but a win that signifies some degree of unity in Greece in favour of the austerity program."

Oil, world stocks tumble on signs of dismal economy (Reuters)

NEW YORK (Reuters) – Oil prices plunged, global stocks tumbled and the euro shred more than 1.0 percent on Thursday after news of disappointing private sector activity in Europe and China, coupled with a rise in U.S. jobless claims, sent a chill through global financial markets.

Exacerbating fears of slower growth were plans by the International Energy Agency to release 60 million barrels of oil from strategic inventories.

"It could be a signal of the overall the level of concern about a slower global economy," said Omer Esiner, senior market analyst at Commonwealth Foreign Exchange in Washington.

European shares declined further and and government debt prices on both sides of the Atlantic extended gains after initial claims for state unemployment benefits climbed more than expected last week.

Gold fell by almost 2.0 percent to hit its lowest in nearly and the euro hit an all-time low against the Swiss franc as anxiety about Greece and a slowing U.S. economy damped investors' risk appetite and encouraged a bid for safety.

The euro fell 1.3 percent to $1.451, its lowest level in nearly a week and also hit a fresh record low at 1.1873.

"The (U.S. jobless) claims just added fuel to the fire here ... two months now stuck in this range and they just won't budge. That is certainly a disappointment," said Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago.

Compounding concerns, the euro zone private sector grew only modestly, and would have shrunk without the support of Germany and France, while China's factory sector barely expanded even as inflation eased, purchasing managers' indexes (PMIs) showed.

The data come a day after the U.S. Federal Reserve said the pace of the U.S. recovery was proceeding more slowly than it had expected, but pledged no new help for the economy once its bond purchase program expires this month.

"(Chairman Ben) Bernanke's cautious outlook and the persistent headwinds to the U.S. economy that might linger until year-end, including concerns about Greece, have affected market sentiment," said David Watt, senior currency strategist, at RBC Capital Markets in Toronto.

World stocks as measured by MSCI's all-country world stock index were down 1.1 percent, leaving the index flat so far this year.

On Wall Street, the Dow Jones industrial average was down 166.76 points, or 1.38 percent, at 11,942.91. The Standard & Poor's 500 stock index was down 18.01 points, or 1.40 percent, at 1,269.13. The Nasdaq Composite Index was down 35.95 points, or 1.35 percent, at 2,633.24.

Brent and U.S. crude oil futures extended losses in volatile trading after the Labor Department a report showed initial claims climbed 9,000 to a seasonally adjusted 429,000. Economists had expected claims to come in at 415,000.

In London, ICE Brent crude oil for August delivery fell $5.15 to $109.06 a barrel. On the New York Mercantile Exchange, the August contract, fell 4.08 to $91.33 a barrel.

Spot gold fell by as much as 1.99 percent to a session low of $1,518.40 an ounce. Prices later ticked up a bit to $1,524.46.

U.S. Treasuries briefly trimmed an early advance after the IEA announced it would release strategic crude reserves.

The benchmark 10-year U.S. Treasury note was up 16/32 in price to yield 2.92 percent.

German bunds already had gained after signs of a slowing euro zone growth raised fears over the ability of Greece and other countries to battle their debt crises.

Bund futures rallied to a session high of 126.56, up 35 ticks on the day, pushing 10-year yields down to 2.92 percent.

(Additional reporting by Steven C. Johnson and Robert Gibbons in New York; Lucia Mutikani in Washington; Jonathan Cable, Kirsten Donovan and Brian Gorman in London; Writing by Herbert Lash)

Wall Street 'bad boy' talks about NY trial (AP)

NEW YORK – A former investment manager known as Wall Street's "bad boy" may not testify at his securities fraud trial, but that didn't stop him from offering his own running commentary Friday about the case — and himself — outside court.

"I've waited five years to get my day in court to get the truth revealed," Ross Mandell told The Associated Press after the first week of his trial ended in federal court in Manhattan.

Mandell sounded buoyant, despite testimony this week by a former colleague-turned-cooperator who told jurors Mandell helped engineer a $140 million scheme during the dot-com boom of the late 1990s and early 2000s. If convicted, he faces up to 20 years in prison.

"Normally someone in my position would be suffering an anxiety attack," Mandell said with a chuckle. "I feel a wave of relief."

Mandell, 54, has used his rossmandell.com website, Facebook, YouTube and other outlets to ceaselessly promote himself as a recovering alcoholic, family man and once hard-partying, hard-charging businessman who was railroaded.

At trial, the government has portrayed the Brooklyn-born Mandell and a co-defendant as brazen conmen who took advantage of the frenzy over Internet tech stocks in using their broker-dealer operation to solicit private investments in startups.

Prosecutors say that rather than deliver the sure-thing returns promised investors, the defendants used their funds to splurge on vacations, expensive watches and home renovations. The former colleague, Robert Grabowski, has testified that they even used the money to pay for strippers and prostitutes on junkets hosted by Mandell for corrupt brokers.

The defense says Mandell has never lied to his clients and was "crushed" when his brokerage firm went under.

Mandell, who's free on $5 million bond, dismissed Grabowski's testimony on Friday as "nonsense and drivel by a programmed government witness. ... It's just disgusting."

The case is so weak, he said, it's unlikely he'll need to take the stand in his own defense.

"In a perfect world, I'd love to testify," he said. "But I'm not stupid."

Summary Box: Stocks fall for another week (AP)

WEAK TECH: Poor earnings results from Micron Technology and Oracle Corp. helped send lead the broad stock market lower.

ANOTHER DOWN WEEK: The S&P 500 lost 0.2 percent for the week, and the Dow Jones industrial average fell 0.6 percent. The broad stock market has now fallen for seven out of the past eight weeks.

THE INDEXES: The Dow closed down 115 points, or 1 percent, to 11,934.58. The S&P 500 dropped 1.2 percent to 1,268.45 The Nasdaq fell 1.3 percent to 2,652.89.

Antitrust fixes loom as D.Boerse/NYSE vote nears (Reuters)

NEW YORK (Reuters) – Complex antitrust questions hang over Deutsche Boerse AG and NYSE Euronext just weeks before shareholders decide whether to endorse a blockbuster exchange merger, though no significant regulatory fixes are expected.

If investors back the $9 billion deal next month, they will have no further say as the two companies sit down at the bargaining table with European regulators in what are expected to be delicate negotiations through the end of the year.

Based on informal discussions so far in Brussels, the exchange operators do not expect to have to accept "structural remedies" such as divesting businesses to seal the deal, two sources familiar with the transaction said, though less severe "behavioral remedies" -- on pricing, for example -- may be required.

At issue is the strangle-hold Deutsche Boerse and NYSE Euronext would have on Europe's exchange-based futures market and, significantly, on clearing those trades.

Shareholders and analysts say it is very difficult to predict how the European Commission will react to the near-monopoly, what demands it could make, and whether the companies will ultimately be able to create the world's largest market operator as planned.

"We're going to vote for the deal hoping it happens. What we don't know how to handicap is the European regulatory process -- we just can't do that," said Timothy Hoyle, director of research at Pennsylvania-based Haverford Trust Co, which owns 1.2 million shares of NYSE Euronext, parent of the New York Stock exchange.

"In our conversations with the NYSE, they've led us to believe that they believe they'll gain regulatory approval with minimal concessions," he said.

Though merger votes are common before regulators sign off on deals, the stakes are high since antitrust and political concerns thwarted two exchange takeovers this year: Singapore Exchange's $8 billion purchase of Australia's ASX Ltd, and an unsolicited bid for NYSE Euronext from Nasdaq OMX Group and IntercontinentalExchange Inc.

ACCEPTABLE BEHAVIOR

NYSE Euronext shareholders vote on July 7, while Deutsche Boerse shareholders have until July 13 to tender shares to the deal. NYSE needs majority support; Deutsche Boerse needs 75 percent.

The next hurdle is in Brussels, where European Union Competition Commissioner Joaquin Almunia set the stage in March when he promised a "deep" antitrust probe, and later said he was concerned about Deutsche Boerse's "vertical silo" business model, in which it controls trading and clearing of contracts.

Together, Deutsche Boerse's Eurex and NYSE Euronext's Liffe platforms would dominate futures and options on European bonds, shares and rates -- stoking concern among banks and traders over the prospect of monopoly pricing.

Yet the two sources, who requested anonymity because of the sensitivity of the matter, said the companies do not expect to have to make significant concessions.

It is unlikely there is any legal justification for "significant structural remedies," though the exchanges are expecting "possibly some behavioral remedies," said a source involved in the antitrust discussions in Brussels.

Behavioral remedies "would likely revolve around the pricing of products or terms and conditions on which you make products available to customers," the source said.

So far, the informal talks between regulators and the companies have revolved around clarifying the trading and clearing businesses, said the source.

The exchanges, which announced their deal in February, expect to make a formal filing with the EC in the next couple of weeks, the two sources said. That will kick off a likely two-phase process over some six months in which lawsuits and politics could slow things down.

The deal also needs approval from the U.S. Justice Department and national regulators in Europe, but those reviews are seen as less of a threat.

Deutsche Boerse and NYSE Euronext declined to comment.

REPUTATIONS

NYSE Euronext CEO Duncan Niederauer, who would head the combined company, and Deutsche Boerse CEO Reto Francioni, who would be chairman, have in recent weeks been careful not to presuppose any EC demands.

Niederauer, addressing a New York conference alongside Francioni on June 10, said selling off a major business would be a "remote, or very, very unlikely" outcome of the European review.

In the months to come, the CEOs may have to decide whether divestitures or restrictions demanded by regulators amount to a "substantial detriment" to their respective companies. If so, either can back out, according to the merger deal.

"In that situation, you would hope they're responsible managers of the shareholders' capital and would do what's in the best interest of the shareholders," said Chris Allen, analyst at Evercore Partners.

Barclays Capital, in a research note, said regulators could push for a business model in which rivals can more easily launch alternatives or even have better access to Deutsche Boerse-NYSE Euronext's clearinghouse -- outcomes that could crimp the combined company's trading and clearing fees.

Ironically, Chicago-based CME Group Inc's nascent push into European clearing and futures trading could help make the antitrust case for Deutsche Boerse and NYSE Euronext. And CME itself overcame a similar, albeit U.S., regulatory review when it bought the Chicago Board of Trade in 2007.

For now, NYSE Euronext shares are about 3.5 percent lower than the implied value of Deutsche Boerse's offer, suggesting a long but manageable road to completing the deal.

(Reporting by Jonathan Spicer; editing by John Wallace)

Wall Street sinks on Europe's debt misery (Reuters)

NEW YORK (Reuters) – Wall Street dropped for a third day on Friday on worries about the Italian banking sector and Greece's debt crisis, but the S&P 500 managed to hold its 200-day moving average in a sign buyers still see value.

The Dow industrials and the S&P 500 fell for their seventh week in the last eight. The benchmark S&P 500 is down 7 percent from its 2011 closing high at the end of April.

Investors are fearful that Greece's government may fail to pass an austerity plan next week, which could force a default on its debt repayments. The government faces an electorate vehemently opposed to the austerity measures.

"They (politicians) may not believe that financial markets are as sensitive to their decisions as they actually are, and there is a worry that somewhere along the line, some political vote goes against the market," said Nicholas Colas, chief market strategist of the ConvergEx Group in New York.

The S&P 500 remained within striking distance of its 200-day moving average -- a line that has been tested twice in recent trading and has so far acted as a springboard for stocks. The level was at 1,263.47.

"Every time you test a resistance or support level, you make it weaker," Colas said. "It's almost like a piece of metal. Every time you hit it, it grows more fragile and that's why people are really worried the third or fourth time."

Problems in the euro zone appeared to intensify as shares of Italian banks UniCredit SpA (CRDI.MI) and Intesa Sanpaolo (ISP.MI) fell sharply on concerns about their capital positions. Trading in their shares was briefly suspended.

The CBOE Volatility Index (.VIX) or VIX, Wall Street's barometer of investor anxiety, rose 9.4 percent to 21.10. Some analysts say fear needs to rise further before the market reaches a bottom.

The Dow Jones industrial average (.DJI) dropped 115.42 points, or 0.96 percent, to 11,934.58 at the close. The Standard & Poor's 500 Index (.SPX) fell 15.05 points, or 1.17 percent, to 1,268.45. The Nasdaq Composite Index (.IXIC) lost 33.86 points, or 1.26 percent, to 2,652.89.

For the week, the Dow fell 0.58 percent and the S&P 500 shed 0.24 percent, while the Nasdaq gained 1.39 percent.

Bank stocks fell on concerns about the economic outlook. The KBW Banks Index (.BKX) lost 1 percent and the S&P Financial Sector Index (.GSPF) shed 0.7 percent. The sector has been the worst-performing this year, falling around 8 percent.

On Thursday, the market welcomed Greece's agreement to a five-year austerity plan.

The euro declined against the dollar for a third straight session on worries Greece's parliament might not pass austerity measures needed for the country to secure more bailout funds.

In the latest economic data, new orders for long-lasting U.S. manufactured products, known as durable goods, increased 1.9 percent in May after dropping 2.7 percent in April as bookings for transportation equipment rebounded strongly.

Oracle Corp (ORCL.O) fell 4.1 percent percent to $31.14 (.NDX) a day after the world's No. 3 software maker posted disappointing results, especially in hardware sales. Oracle's results sparked concerns about a bigger slowdown in technology spending.

Micron Technology Inc (MU.O) tumbled 14.5 percent to $7.21 after the memory chipmaker recorded results below expectations late Thursday.

About 9.26 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq -- well above the daily average so far this year of around 7.57 billion. Analysts said Friday's volume was much higher than average due in part to the rebalancing of the Russell 2000 Index (.TOY).

Declining stocks outnumbered advancing ones on the New York Stock Exchange by a ratio of 19 to 11. On the Nasdaq, about three stocks fell for every two that rose.

(Reporting by Edward Krudy; Editing by Jan Paschal)

NYSE, D.Boerse to pay dividends, end investor suits (Reuters)

NEW YORK (Reuters) – NYSE Euronext (NYX.N) and Deutsche Boerse AG (DB1Gn.DE) agreed to pay roughly $900 million of dividends to settle U.S. shareholder lawsuits challenging their roughly $10 billion merger to create the world's largest exchange operator.

According to an agreement filed on June 17 with the Delaware Chancery Court, the companies would pay shareholders 2 euros (US$2.85) per share outstanding of the combined holding company after the planned merger is completed.

The agreement requires court approval, and would end shareholder lawsuits in New York and Delaware state courts. It essentially reflects the special dividend that the companies announced on June 7, and which would be paid once a merger closes.

Shareholders had sued NYSE Euronext shortly after that company announced its planned sale to its German counterpart in February. They complained that the takeover price was too low, and that the company should have courted other bidders.

According to the agreement, the exchange operators denied wrongdoing, and the shareholders settled to avoid delays and uncertainties from continued litigation.

The combined company would operate in the United States and across Europe. Shareholders of Deutsche Boerse would own roughly 60 percent.

NYSE Euronext shareholders are scheduled to vote on the merger on July 7. Deutsche Boerse shareholders would have until July 13 to tender their shares. A closing is expected by year end.

The cases are In re: NYSE Euronext Shareholders Litigation, Delaware Chancery Court, No. CA6220; and In re: NYSE Euronext Shareholder Litigation, New York State Supreme Court, New York County, No. 773000/2011.

(1 euro = $1.427)

(Reporting by Jonathan Spicer and Jonathan Stempel, editing by Bernard Orr)

FTSE closes lower on poor US jobs data (AFP)

LONDON (AFP) – Share prices in London closed sharply lower on Thursday on poor US jobs data and continued eurozone debt worries.

The benchmark FTSE 100 index fell 1.71 percent to close ar 5,674.38 points.

Lloyds Banking Group (LBG) was the most widely traded stock, with 158 million shares changing hands, followed by Royal Bank of Scotland (RBS), which saw 125 million units switch ownership.

International Consolidated Airlines was the best blue-chip performer, rising 0.78 percent -- or 1.9 pence -- to finish at 244.4, followed by cruise liner firm Carnival, which rose 0.69 percent -- or 16 pence -- at 2,334.

London-listed mining stocks bore the brunt of the negative sentiment with Vedanta Resources was the biggest faller of the day, shedding 6.86 percent -- or 135 pence -- to close at 1,832.

It was followed by Eurasian Natural Resources, which slipped 5.05 percent -- or 37 pence -- to finish at 695.5

On the currency markets, a pound was worth 1.5986 dollars at 17:03 BST, down from 1.6125 at the same time Wednesday, while it stood at 1.1281 euros, up from 1.1207 over the same period.

LSE bid on knife edge as TMX battle heats up (Reuters)

TORONTO/LONDON (Reuters) – A brace of sweetened offers has failed to sway shareholders in the race to buy the operator of Canada's biggest stock exchange, and time is running out ahead of a June 30 shareholder vote.

Shareholders said the London Stock Exchange must raise its friendly bid for TMX Group significantly before they will back the proposal, which now includes a welcome cash element in the shape of a special dividend.

But antitrust concerns could derail the second offer, a now-sweetened proposal from a consortium of Canadian banks, pension funds and financial services firms.

"From a game perspective or a strategy perspective, they're now basically where they were before," said Alison Crosthwait, director of global trading strategy at Instinet, which runs Canada's second biggest alternative trading system.

She added: "What surprises me is that, increasingly, I'm hearing a little bit of 'Perhaps, neither of the bids will happen...' So there's still risk in this."

With only a week before the vote, shareholders who talked to Reuters mainly favor Maple's home-grown bid, but the outcome is far from certain, particularly on the regulatory front. Some shareholders also say the LSE has not done enough to seal the deal.

The battle for TMX Group is part of a global wave of consolidation by exchanges seeking to expand geographically and in terms of the products they offer.

LSE Chief Executive Xavier Rolet wants to beef up the London exchange to fight off rivals, nimble new market entrants and predators. He says LSE's "merger of equals" with TMX will create a transatlantic powerhouse in mining and energy equities.

NET BENEFIT

The offer, if approved by shareholders from both companies at separate June 30 meetings, must still be approved by Canadian Industry Minister Christian Paradis, who has to decided if the deal is of net benefit to Canada.

The 13-member Maple Group consortium says the LSE proposal would leave a key Canadian asset in foreign hands.

In back-to-back sweeteners on Wednesday, the LSE added a cash component to its all-stock bid in the shape of dividends to shareholders of both exchanges, bringing the bid's value to just under C$49 a share.

Maple responded hours later by raising its cash-and-stock offer to C$50 a share, from C$48.

"I told (the LSE) they'd better bump the price or get off the deck," said Richard Fogler, a large TMX shareholder who said he met with the LSE on Wednesday.

Fogler, president of Kingwest & Company investment firm in Toronto, added: "If the LSE wants to win, they have to change their price."

London's bid value fluctuates along with its share price and analysts note LSE's stock would go down if its bid wins.

ISS, a proxy advisory firm with influential shareholder clients, recommended the LSE proposal and said it would yield cost savings, new issuer listings and beef up the group's global position.

Maple reacted to the ISS recommendation by noting that, despite favoring the LSE bid, the firm recognized Maple's offer provided "greater value than the LSE takeover".

Nevertheless, market experts believe LSE's Rolet has played his last card. Given he has to win two thirds of the Canadian investor vote next week, one banker said the prospects of a successful LSE-TMX deal "did not look good".

"These things are always decided on the basis of price," said Thomas Caldwell, chairman of Caldwell Securities. "Most traders will take one in the hand versus two in the bush."

TMX stock closed up 2.4 percent in Toronto at C$45.30. LSE shares finished at 957.5 pence.

ANTI-TRUST CONCERNS

Maple wants to wrap Alpha, Canada's largest alternative trading platform, and clearing house CDS, both of them largely owned by its members, into the new exchange.

That would give Maple more than 80 percent of Canadian stock trading and make the deal subject to antitrust review.

Analysts said the LSE's special dividend -- 84.1 pence per LSE share and C$4.00 per TMX share -- added a welcome cash element to the bid. But it did not raise the offer and also meant the company would have to borrow to pay for it.

"The LSE dividend has nothing to do with the value of the deal, rather the dividend means only cash for shareholders and a more leveraged business. The tax benefit is the only way the dividend makes the offer more attractive," said Numis Securities analyst James Hamilton.

Chris Damas, an independent analyst and TMX shareholder does not believe the LSE has the firepower in its balance sheet to up the bid again.

"The LSE still has an opportunity to bring in someone with deeper pockets and I really think they want this. They need an external capital at this point," said Damas, but added that it would be hard to find a strategic investor to add capital.

Michael Smedley, a TMX shareholder and chief executive of Morgan Meighen & Associates, said LSE's best strategy might be a bid for time while it regroups.

"It would seem incongruous that there would be a positive vote for the merging on the 30th, because if it were, it would end the process," said Smedley.

A spokeswoman for the LSE declined to comment on the latest developments. Analysts have long said the robust LSE share price reflects market expectations that its bid for TMX will fail, turning the LSE from buyer into takeover target.

For now, market watchers say exchanges considering a move will likely watch how the drama plays out from the sidelines.

"I think it's a low probability that another exchange would want to stick it's nose in there right now. It's complicated with a lot of moving parts and a lot of players involved at the end of the day," said Chris Allen, New York-based exchanges analyst at Evercore Partners.

($1=$0.98 Canadian)

(Writing by Pav Jordan, additional reporting by Solarina Ho and Jonathan Spicer; editing by Janet Guttsman and Rob Wilson)

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Economy fears take shine off global stock outlook: Reuters poll (Reuters)

LONDON (Reuters) – Clear signs the global economy is cooling prompted analysts to trim their outlook for most of the world's major stock markets compared with three months ago, according to a Reuters poll that still pointed to meaty gains from here.

Thursday's quarterly survey of 350 equity strategists from all over the world showed only the U.S., Taiwanese and Russian stock markets escaping downgrades, with Moscow again expected to lead the way with double-digit gains.

While the latest poll lacked the sheer exuberance seen in the March survey, perpetually optimistic equity bulls were again out in force.

They shrugged off the fact that 11 out of the 17 markets covered by the poll are so far deep in the red for 2011, and instead projected strong gains from here for every one of them.

In comparison with oil and commodity markets that have proved hugely volatile this year, and with the fiscal crisis in Greece wreaking havoc on currency and government bond markets, some respondents pointed to stocks as the best alternative.

"Equities still look attractive when compared to other global asset classes," said Angus Campbell, head of sales at London Capital Group.

The search for yield has become difficult for investors. High inflation has eroded cash assets, safe government bond yields are at rock-bottom and gold's heady ascent to record levels leaves it looking expensive to many.

Still, the extent of the slowdown in Western economies is unclear and there has been no solution yet to the Greek sovereign debt crisis. Both could yet tame the bulls and bring out the bears.

European politicians are scrambling to avert a Greek sovereign debt default in mid-July, which if realized has the potential to hurl the financial system in Europe and elsewhere back into systemic chaos.

AMERICAN STOCKS ARISE

The Dow Jones Industrial Average, containing some of the world's most famous companies, was the only index based in an advanced economy to be upgraded compared with the March poll.

Despite dismal labor market data and growing signs the U.S. economy is cooling fast, analysts were very upbeat about the prospects for the Dow and S&P, which have each gained around 90 percent since their nadir during the Great Recession.

There seemed to be little concern among equity bulls about the imminent end of the Federal Reserve's quantitative easing (QE) program that coincided with a sharp rise in asset prices. The poll was conducted before the Fed cut its U.S. growth forecasts on Wednesday, with no hint of any further QE in the pipeline.

"We are still double from where we were two years ago; I think the market is doing great. We are in slowdown and correction but that's following a 30 percent gain from the August lows," said Bob Doll, chief equity strategist at BlackRock in New York.

Economists polled by Reuters last week were less sure of the outlook than equity analysts. They slashed their outlook for major Western economies in the June 15 poll, reacting to a raft of dire jobs and industrial production figures.

There was little cheer on Thursday from unemployment claims data, which showed jobless benefit claims rising last week after employment stumbled in May.

Strategists saw the Dow rising 7.4 percent from its Wednesday close of 12,109.7 to 13,000 by the end of the year -- up from 12,700 seen in March -- and then to 13,700 by around this time next year.

Similarly, the S&P is seen soaring nearly 9 percent to 1,400 by end-2011, from Wednesday's 1,287.1.

The poll once again pointed to stellar returns on Russian shares. Having already rocketed almost 300 percent since the global recession, the Russian RTS looks set to gain another 17 percent from now until the end of the year thanks to a resurgent economy still reveling in strong oil prices.

"This year, the domestic story will be at the forefront. Consumer financials and telecoms will be the drivers for the index," said Peter Westin, economist at Moscow-based Aton bank.

ASIAN ASCENT

Asian stocks have largely endured a torrid time in 2011, with most indexes stuck in the red, since surging inflation in India and China and the subsequent tightening of interest rate policy has rocked share markets in emerging Asia.

But with double-digit gains expected for indexes in Hong Kong, China and India from now until this time next year, the poll suggested Asian shares might have bottomed already.

Japan's Nikkei, 6 percent in the red this year after the March 11 devastating earthquake and tsunami, should likewise start racking up gains soon of over 9 percent between now and the year-end.

"We may see a lull until this summer. But the overall market may rise on expectations for a sharp recovery in corporate earnings after that," said Fumiyuki Takahashi, managing director of equity research at Barclays Capital.

(For data see) (For other stories from the poll, click [ID:nL6E7HN1W1])

(Polling by Bangalore Polling Unit and correspondents in Reuters bureaux in New York, Toronto, Sao Paolo, London, Paris, Frankfurt, Milan, Moscow, Mumbai, Shanghai, Hong Kong, Seoul, Taipei, Tokyo, Sydney, and Johannesburg, Analysis by Sumanta Dey and Jason George in Bangalore; Editing by Ross Finley and Jon Loades-Carter in London)