Sweden raids local Nasdaq bourse in competition probe (Reuters)

STOCKHOLM, July 14 – Swedish regulators have raided U.S.-owned bourse operator Nasdaq OMX Group in a competition probe likely to raise questions over exchanges' efforts to woo controversial high-frequency traders.

The raid, carried out last month, was prompted by a complaint by new Nordic marketplace Burgundy.

Burgundy said it was denied space for its computers alongside those of clients, such as banks, in a data center owned by U.S. telecoms company Verizon.

That put it at a disadvantage to larger rival Nasdaq OMX, Burgundy said, which had got space in the data center near clients enabling the exchange to execute super-fast trades.

Physical closeness of a trader's computers to those of a stock exchange -- a practice known as co-location -- can shave fractions of seconds off client orders, giving the super-fast trader an edge over those that are further away.

"It was only a matter of time before the regulators began to look at how people have access to markets in terms of co-location because how close you are to the box can make a vital difference," said Herbie Skeete, managing director at exchange consultants Mondo Visione.

Established stock exchanges, under pressure from alternative venues such as Burgundy, are increasingly relying on the revenues and liquidity provided by hedge funds and proprietary firms that use algorithms to execute lightning-fast trades.

Burgundy Chief Executive Olof Neiglick told Reuters his company had agreed in 2010 to house its servers in the Verizon center, but the U.S. firm later canceled the deal and it had to move to a location 5 kilometers away.

Nasdaq OMX and Verizon said on Thursday they were cooperating with authorities.

Court documents showed the Swedish competition authority had been authorized to raid both Nasdaq and Verizon's Swedish business. A spokeswoman for the regulator confirmed a raid had taken place.

APPLYING PRESSURE

The court documents said KKV, the competition authority, wanted to investigate whether OMX had applied pressure on Verizon or threatened to punish Verizon if the telecoms company made an agreement with one of its competitors.

"According to the KKV, OMX and Verizon's actions mean that Burgundy risks being shut of the market in bourse trade with Nordic securities," the document said, adding there was reason to believe that "OMX's actions amount to a violation of rules on abuse of a dominant position."

The competition authority was allowed to look for evidence such as e-mails, notes, letters, faxes and meeting minutes.

Competition between exchanges has become intense, with this year seeing a flurry of cross-border deal attempts by bourses eager to cut costs and diversify in the face of fast-eroding market shares in their traditional businesses.

Burgundy was launched in 2009 by its owners, a consortium of Nordic banks and brokers, to pressure OMX to keep trading fees low. Larger so-called multi-lateral trading facilities (MTFs) such as BATS and Chi-X also compete in Europe.

Mondo Visione's Skeete said other smaller players were also likely to challenge the practices of their bigger rivals.

"If you are a small player ... and you think the incumbent is not making it easy for you then you are going to look at any angle you can to level the playing field," he said.

Burgundy's average daily turnover in June was 147 million euros for a total monthly trade of just over 3 billion euros, while equity trading on Nasdaq OMX's Nordic market in June, including over-the-counter business, came to 50.9 billion euros for average daily turnover of 2.6 billion euros.

The Vienna Stock Exchange told Reuters on Wednesday that it was looking to boost lagging volumes by attracting high-frequency trading firms.

But global regulators said earlier this month that high-frequency traders needed to be reined in to avoid a repeat of last year's "flash crash" that briefly sent U.S. blue chips into freefall, sending shivers down the spines of investors.

High-frequency derived volumes now account for half or more of trading on exchanges such as the London Stock Exchange and U.S. trading platforms. Proponents of the sector say the funds provide liquidity that otherwise wouldn't be there.

(Additional reporting by Mia Shanley in Stockholm, Kylie MacLellan and Karolina Tagaris in London, Blaise Robinson in Paris, Jonathan Spicer in New York; Writing by Kylie MacLellan, Editing by Dan Lalor and Erica Billingham)

TMX's hostile bidder would prefer its consent (Reuters)

TORONTO (Reuters) – A Canadian consortium would rather woo TMX Group then press forward with its hostile takeover bid, but it says it will do whatever it takes should talks with the Toronto Stock Exchange operator break down.

Maple Group Acquisition Corp says it would like to strike a friendly deal with TMX and believes its C$3.8 billion ($3.96 billion) offer in cash and stock is compelling.

The 13-member consortium says it has no plans to change its $50-a-share bid while it pursues a three-track strategy of engaging TMX management, soliciting shareholders and working with competition authorities to win their approval.

"There haven't been formal, sit-down negotiations across the table from the (TMX) board, but there's been information exchanged. There's been informal discussions through advisers and others," said Maple spokesman Peter Block.

"We are open to working with the TMX and we hope to complete a transaction with TMX support, while being fully committed to following through on our offer," Block said, who added that talks with investors have gone well.

The TMX takeover battle took a decisive turn late last month when the London Stock Exchange Group abandoned a friendly proposal to combine the two companies because of insufficient shareholder support.

The LSE deal was announced in February, around the same time Germany's Deutsche Boerse AG unveiled its $9.7 billion bid to take over NYSE Euronext, operator of the New York Stock Exchange. Shareholders approved that deal on Thursday, taking a big step toward the creation of the world's largest exchange operator.

It was the first of a series of proposed takeovers involving exchange operators that made it that far, though the deal must still clear formidable antitrust hurdles on both sides of the Atlantic.

AUGUST DEADLINE

Maple, comprised of 13 Canadian financial institutions, will need 70 percent of shareholders to tender their shares by August 8. But it could extend that deadline, Block said.

Shareholders may have little option but to vote in favor of the deal. Analysts have questioned whether the participation of four of Canada's top six banks in Maple Group may scare off potential white knights.

RBC Capital Markets analyst Geoffrey Kwan said in a research note this week that he saw few global exchange targets that would make strategic sense for TMX.

But independent analyst Chris Damas says a dark-horse bidder could emerge if Maple fails to win sufficient support.

Still, analysts say shareholders may find it difficult to resist the premium over the current stock price that Maple is offering. TMX was trading at C$43.75 on Thursday afternoon, compared with the C$50 bid price.

Perhaps the biggest hurdle for Maple is getting past Canadian competition authorities. The deal envisions the integration of the Toronto exchange with its largest competition, the Alpha Group.

The Competition Bureau does not tend to block deals outright, extracting concessions instead.

Some worry that a TMX-Alpha combination would give the exchange's biggest users too much control of the Canadian stock market.

(Editing by Frank McGurty)

Summary Box: Stocks fall as stimulus talk fades (AP)

BERNANKE SPARKS SLIDE: Remarks by Federal Reserve Chairman Ben Bernanke that dimmed hopes for a third round of bond-buying pushed stocks lower. Bernanke told lawmakers the Fed expects the economy to improve, and would only step in if there is a significant downturn in the economy.

A CLARIFICATION: Bernanke was clarifying statements he made Wednesday that left the door open to new economic stimulus measures. Investors reacted to those earlier remarks by sending stocks sharply higher.

DEBT CEILING FEARS: Ratings agency Moody's issued a warning on the U.S. debt rating as a stalemate continued in Washington over raising the government's borrowing limit.

Investors rush out of stock mutual funds in June (AP)

By MARK JEWELL, AP Personal Finance Writer Mark Jewell, Ap Personal Finance Writer – Thu?Jul?14, 12:41?pm?ET

BOSTON – Mutual fund investors last month made their biggest retreat from stocks since the bull market began more than two years ago.

A net $17.3 billion was withdrawn from stock funds in June, while bond funds attracted new cash for the fifth consecutive month, industry consultant Strategic Insight said on Thursday.

It was the biggest monthly flow out of stock funds since March 2009, when stocks hit bottom after the financial crisis. Net withdrawals totaled more than $20 billion that month.

Last month's withdrawals came as the Standard & Poor's 500 stock index fell 1.7 percent amid a spate of disappointing jobs and manufacturing news suggesting the economic recovery may be stalling. Stocks fell sharply at the beginning of June, then rallied in the final week to recover most of the earlier loss.

June was the second consecutive month when investors withdrew more than they deposited into stock funds. Stock funds attracted net deposits for the first four months of the year, and the year-to-date flow total remains positive, with net deposits of $22.5 billion.

But in June, investors apparently didn't have the stomach for volatility, which was fueled by fears of a Greek debt default, as well as the slowdown in the U.S. economic recovery.

"U.S. investor confidence is clearly fragile, and will remain so for the foreseeable future," said Avi Nachmany, research director with Strategic Insight.

Other details of how investors moved their money in June:

‧ Foreign stock funds: Investors added a net $2.3 billion into funds that buy foreign stocks. Flows into this category have been positive for 13 consecutive months.

‧ Bond funds: Investors added a net $12.6 billion. Bond fund flows have been positive each month since February, as investors have returned to the play-it-safe strategy they adopted after the stock market meltdown of 2008. Over the next two years, investors deposited about $700 billion into bond funds, while consistently withdrawing from stock funds. Year-to-date, bond funds have attracted $68 billion in net deposits.

Taxable bonds, a category that includes corporate bonds, accounted for the bulk of last month's flow into bond funds, with $11.7 billion in net deposits. Municipal bonds, which buy the debt of state and local governments, attracted net deposits of $900 million. That was significant because it marked the first month of positive flows for muni bonds since October. The next month, investors began exiting muni bond funds, fearing that states and cities were in critically poor financial shape. But the surge out of muni bonds eased in the spring, along with worries about state and municipal fiscal health. So the slightly positive flow in June wasn't a big surprise.

‧ Exchange-traded funds: A net $10.6 billion was deposited into U.S. ETFs, which bundle together investments in a particular market index. Unlike mutual funds, they can be traded during daily sessions just like stocks. June's net deposit total was more than twice as big as May's $4.5 billion figure. ETFs continue to grow fast. Strategic Insight says ETFs are on pace for their fifth consecutive year with net deposits of $100 billion or more. Year-to-date, $58 billion has flowed in.

Stocks muted ahead of EU bank stress test (AP)

LONDON – Global shares traded in narrow ranges Friday as investors braced for the results of stress tests on European banks intended to show how they would weather another sharp recession.

The tests will reveal the banks' exposure to shaky government bonds, currently a big source of uncertainty for markets as Greece looks increasingly likely to default on its debt.

The EU hopes the transparency will build confidence in stronger banks and push weaker ones to raise new capital, merge or restructure.

But traders were cautious, since the results won't be released until after European markets close for the weekend.

Analysts predicted that no matter what the data show, investors are unlikely to be heartened: Too many failures will spook markets. But figures that are too rosy will call into question the tests' credibility, as they did in the last round, when banks that passed collapsed just weeks later.

"The inevitable no-win situation is likely to get people talking, but, as has been the case in the past, the markets may have a somewhat muted response no matter what the results," said James Hughes, an analyst with Alpari.

By contrast, Italy, which has dragged down markets recently amid fears it could be engulfed in the debt crisis, could provide a boost. The government is expected to pass cost-cutting measures late in the day.

In Europe, shares were easing down. The FTSE index of leading British shares was down 0.1 percent at 5,840, while Germany's DAX lost 0.3 percent to 7,195. France's CAC-40 fell 0.5 percent to 3,734.

Wall Street was poised to open slightly higher. Dow futures were up 0.2 percent at 12,401 while S&P futures are 0.1 percent higher at 1,308.40.

Investors seemed unmoved so far by a Standard & Poor's warning that it might downgrade its U.S. credit rating. President Barack Obama is locked in a battle with Congress over raising the debt ceiling — necessary if Washington is going to meet its obligations.

After days of falling against the euro, the dollar was flat, and the yields, or interest rates, on 10-year U.S. treasuries barely budged.

"The Treasury market is positively 'Teflon' when it comes to the debt mountain in the U.S.," said Jane Foley of Rabobank. "Even if the treasury market remains immune to what is a potential debt crisis in the U.S., it is clear that there is little left in the public purse to stimulate growth and jobs creation."

The Dow fell Thursday after remarks from Federal Reserve Chairman Ben Bernanke dimmed hopes for a third round of monetary stimulus.

Concerns about the U.S. economy may have abated slightly this week after better than expected jobless numbers. Now markets will be looking to a raft of U.S. economic data later in the day for any signs that the recovery is getting back on track. Predictions are that industrial production and price inflation numbers will be down.

Oil prices fell to near $95 a barrel after Bernanke's comments.

But benchmark oil for August delivery was up 12 cents to $95.81 a barrel in electronic trading on the New York Mercantile Exchange.

Trading earlier in Asia was also muted. Japan's Nikkei 225 stock average gained 0.4 percent to close at 9,974.47, recovering slight losses with investors largely on the sidelines. Monday is a national holiday in Japan.

Hong Kong's Hang Seng lost 0.3 percent to 21,875.38 while South Korea's Kospi rose 0.7 percent to 2,145.20. The Shanghai Composite Index added 0.4 percent to 2,820.17.

In currencies, the euro was virtually unchanged for the day at $1.4148.

Wall St up slightly after bank stress-test results (Reuters)

NEW YORK (Reuters) – Stocks advanced slightly in volatile trading on Friday after results from the European banks' stress tests came out slightly better than expected.

Wall Street started off higher, boosted by strong earnings from Google and Citigroup but soon gave up gains on concerns over the European banks' stress tests.

"Basically, all the relatively big banks passed, so that calmed (the market) but I guess the next item to discuss would be: 'Were the tests strong enough?'" said Kevin Kruzenski, head of listed trading at KeyBanc Capital Markets in Cleveland.

The European Banking Authority (EBA) said that out of the 90 European banks, eight of them failed stress tests -- far fewer than what the market was anticipating.

The Dow Jones industrial average (.DJI) was up 3.82 points, or 0.03 percent, at 12,440.94. The Standard & Poor's 500 Index (.SPX) was up 2.76 points, or 0.21 percent, at 1,311.63. The Nasdaq Composite Index (.IXIC) was up 18.95 points, or 0.69 percent, at 2,781.62.

But the CBOE Volatility Index (.VIX), Wall Street's fear gauge, still hovered above 20, even though it was down 1.6 percent for the day.

"With the European banks' stress test out of the way, the market has stabilized a bit. But we still have a lot to be nervous about, mainly the U.S. debt ceiling issue," said Randy Frederick, director of trading and derivatives at the Schwab Center for Financial Research in Austin, Texas.

Energy and tech shares led the day's gains. The S&P energy sector index (.GSPE) rose 2 percent and the S&P info technology sector index (.GSPT) gained 1.2 percent.

Consumer discretionary stocks were among the biggest drags after a report showed U.S. consumer sentiment slipped in July to its lowest level since March 2009, according to the Thomson Reuters/University of Michigan survey.

Home Depot (HD.N) fell 0.8 percent to $35.68, while the S&P 500's discretionary index (.GSPD) shed 0.4 percent.

Google Inc's (GOOG.O) earnings beat the most bullish forecasts late on Thursday, driving its stock up 12.8 percent to $596.60, and lifting the Nasdaq.

Citigroup Inc (C.N) posted higher net income, helped by falling credit losses. But the stock dropped 1.4 percent to $38.47 in afternoon trading after being in positive territory in the morning

Two large merger offers also improved investor sentiment. BHP Billiton's (BLT.L) $12 billion offer to purchase Petrohawk (HK.N) lifted shares in the energy sector, and investor Carl Icahn's offer to buy Clorox Co (CLX.N) for $10.2 billion pushed the consumer products company's stock up 7.7 percent to $73.70.

BHP Billiton's bid for Petrohawk, which jumped 62.5 percent to $38.18, drove up shares in the energy sector as investors speculated that more deals are ahead. Chesapeake Energy (CHK.N) rose 6.7 percent to $32.24, while the Select Sector Energy SPDR Fund (XLE.P), an exchange-traded fund, rose 2.3 percent to $76.62.

As deadlock in Washington's budget talks sets in, ratings agency Standard & Poor's warned there was a 1-in-2 chance it could cut the United States' top rating if a deal to raise the government debt ceiling is not reached soon.

(Reporting by Angela Moon; Editing by Jan Paschal)

Why Wall Street doesn't seem worried about default (AP)

By BERNARD CONDON and MATTHEW CRAFT, AP Business Writers Bernard Condon And Matthew Craft, Ap Business Writers – Thu?Jul?14, 5:19?pm?ET

NEW YORK – The CEO of a big bank says a U.S. default could be catastrophic for the economy. The head of the Federal Reserve warns of chaos. And a credit rating agency threatens to take away the country's coveted triple-A status.

The response on Wall Street: So what?

In Washington, the fight over whether to raise the federal debt limit has grown uglier by the day. The White House says the limit must be raised by Aug. 2 or the government won't be able to pay its bills, possibly including U.S. bonds held around the world.

But as the deadline nears, stocks and bonds have barely flinched.

The Dow Jones industrial average fell just 54 points Thursday and stands about where it did at the start of the month. The yield on the 10-year Treasury bond, which usually rises when investors see it as a riskier bet, is considerably lower than earlier this year.

It may seem an odd, even reckless, reaction by investors. But it isn't completely crazy.

Take the ho-hum reaction from the bond market. In theory, investors in U.S. Treasury bonds should demand higher interest payments when there's a greater risk they won't get their money back — in this case, in the event of a default next month.

Instead, the yield on the 10-year Treasury note rose only slightly Thursday, to 2.95 percent. In February, when the U.S. economic recovery seemed stronger and the debt limit was a distant threat, it was 3.74 percent.

But in this market, as in the schoolyard, size wins. The U.S. has $14 trillion in outstanding Treasury bonds. That dwarfs government bonds of any other nation. U.S. debt is held more widely and traded more often than any other government's IOU.

That matters because pensions, private investment funds and central banks the world over want to know that they can buy and sell these holdings fast — what investors call liquidity. During the credit crisis of 2008, investors bought U.S. Treasurys because they were perceived as not only safe but liquid.

"It's very nice that Switzerland is a safe place," says Avi Tiomkin, a hedge fund consultant who holds Treasurys. "But if you're the Russian or Chinese central bank, it's just too small."

Steve Ricchiuto, chief economist at Mizuho Securities, points to another reason the markets are calm: The U.S. may seem a more dangerous place to park your money given its rising debt, but much of the rest of the world isn't faring well, either.

He notes that Europe is trying to contain a debt crisis. Yields on bonds of various countries there have gone up recently. "The U.S. is the best in a bad world," he says, so people have no choice but to invest here.

As for stocks, there's plenty of news — some very good — to distract investors from Washington's problems. U.S. companies are issuing their financial results for the latest quarter, and they're expected to post big profits — up 15 percent, according to a survey by data provider FactSet.

JPMorgan Chase reported profits up 13 percent Thursday, higher than analysts had expected. The stock rose sharply on the news. Earlier in the day, it was that bank's CEO, James Dimon, who warned that a failure by Congress to agree to raise the debt ceiling could mean "catastrophe."

On Wednesday, Moody's Investors Services warned it might take away the United States' top-notch credit rating if it missed even one interest payment on its bonds. In testimony before Congress on Thursday, Federal Reserve Chairman Ben Bernanke said a U.S. default could throw the financial system into "chaos."

The Dow Jones industrial average closed at 12,437, down 0.4 percent. The S&P 500 closed at 1,308, down 0.7 percent.

The United States hit its current $14.3 trillion debt ceiling in May. For a new debt ceiling to last to the end of 2012 would require raising it by about $2.4 trillion.

A default would drive up the cost of government borrowing for years to come. That would translate into higher interest rates for everybody else, making it more expensive for corporations to finance spending projects and for Americans to take out mortgages or other loans.

The bigger fear is that a default could freeze the short-term lending markets that keep money moving throughout the global financial system. Treasurys and other government-backed debt are the most widely used collateral for loans in these markets.

A default and a downgrade of U.S. debt would lower the value of that collateral. Lenders might respond by forcing borrowers to sell other assets to post more collateral. The fallout could resemble what happened when Lehman Brothers collapsed in 2008.

The prospect of such terrible consequences may be exactly the reason investors aren't all that worried.

"There's just too much at stake politically and economically for a deal not to get done," says John Briggs, Treasury strategist at the Royal Bank of Scotland. "It seems hard to believe that any politician would want their name attached to a default of U.S. debt."

Many other investors are assuming the same thing. Tony Crescenzi, market strategist at money manager Pimco, says Wall Street has been expecting a deadline-beating deal since the debt-limit became a subject of debate earlier this year.

No one knows how close Washington can get to the deadline without triggering a sell-off. Sam Yake, an stock analyst at BGB Securities, is confident a deal will be struck. But he says that if enough investors start to worry, the fear could feed on itself.

"In financial markets, you're playing with people's confidence," he says. "If enough people start thinking it's a catastrophe, it could become so."

Ontario official says TMX in talks with Maple Group: report (Reuters)

TORONTO (Reuters) – TMX Group is now in talks with a Canadian consortium whose hostile bid for the operator of the Toronto Stock Exchange scuppered a friendly combination with the London Stock Exchange, a government official said on Wednesday.

Ontario Finance Minister Dwight Duncan told Canada's Financial Post newspaper that discussions between TMX and Maple Group Acquisition Corp were underway. He said he did not know the nature of the talks or whether any progress had been made.

Duncan had been a vocal critic of the LSE proposal. Like other opponents, he raised concerns over London gaining control over Canadian capital markets and the prospect of Toronto losing its status as a financial center.

Maple Group became the only bidder late last month after the LSE's proposal collapsed because it could not secure the backing of two-thirds of TMX shareholders.

Maple, whose 13 members include four of Canada's six biggest banks and five pension funds, needs 70 percent of TMX investors to tender their shares by August 8 for its C$3.8 billion ($3.94 billion) offer to go ahead.

Luc Bertrand, chief representative of Maple and vice-chairman of National Bank of Canada, had indicated that Maple believes its bid will carry the day as it stands.

"This is as strong a bid as you can possibly imagine, so we're very comfortable with our proposal and we think it's fair to shareholders," he told Reuters in an exclusive interview last week.

Representatives of TMX and Maple could not be reached immediately for comment on the Financial Post story.

(Reporting by Frank McGurty; editing by Carol Bishopric)

FTSE slides before stress test results (AFP)

LONDON (AFP) – London equities fell in opening trade on Friday, ahead of publication of crucial results of stress tests on the eurozone's troubled banking sector.

The FTSE 100 index of leading companies dipped 0.66 percent to 5,808.85 points, in early deals.

Later on Friday, at 1600 GMT, the EU's London-based banking regulator will publish the outcome of its assessments on 91 European banks which together represent 65 percent of the sector.

SEC settlement reached by insider trading convict (AP)

NEW YORK – A woman who admitted her role in a massive insider trading case has agreed to pay $540,000 to settle civil charges in New York brought by the Securities and Exchange Commission.

Hedge fund manager Danielle Chiesi (kee-AY'-zee) will be sentenced next week after pleading guilty in what prosecutors have said was the biggest hedge fund insider trading probe in history.

The court record Tuesday showed that 45-year-old Chiesi will pay $540,534 to satisfy civil charges. Chiesi pleaded guilty to criminal insider trading charges in January. She was heard on audio tapes played at the trial of one-time billionaire Raj Rajaratnam, who was convicted in May of insider trading.

Prosecutors said the probe resulted in more than $50 million in illegal profits. More than two dozen people were convicted.

Deutsche Boerse approves NYSE Euronext merger (AFP)

FRANKFURT, Germany (AFP) – Shareholders controlling more than 80 percent of German stock market operator Deutsche Boerse approved Thursday a merger with NYSE Euronext to create the world's biggest stock exchange.

The result surpassed a minimum level of 75 percent needed to approve the deal, Deutsche Boerse said in a statement.

A detailed figure is to be published on Friday but the offer is also to be extended by two weeks to allow hold-outs to exchange their Deutsche Boerse shares for ones in a new Dutch-based holding company.

Shareholder approval was one of the the last major obstacles to the merger plan as NYSE Euronext shareholders had approved the deal on Thursday.

It still requires the approval of competition authorities, however, since the new group covers Amsterdam, Brussels, Frankfurt, New York, Lisbon and Paris and will have a quasi-monopoly on areas such as European derivatives trading.

The European Commission is studying the deal and is to give its opinion by August 4, while the partners aim to finalise the merger by the end of the year.

The new company is valued at $25 billion (17.6 billion euros) and the deal has sparked controversy in the United States because it would hand over the 221-year-old New York Stock Exchange to foreign owners.

NYSE Euronext chief executive Duncan Niederaurer admitted last week that NYSE Euronext and Deutsche Boerse would need to make some concessions to regulators but insisted that the merged company would not spin off any of its European derivatives exchanges.

"It would be unprecedented for us to divest one of the derivative exchanges. That's a huge part of the value creation opportunity," Niederaurer said.

Under the terms of their February 15 merger proposal, Deutsche Boerse shareholders will own 60 percent of the new combined, Netherlands-incorporated firm, and the German company will dominate the new board.

If the merger is finalised, the new company will be headquartered in both Frankfurt and New York.

"This is the first step in creating a total, complete, global exchange that offers transparency, connectivity and a suite of product offerings that will define and shape the future of investing," said Kenneth Polcari, a floor trader at the New York Stock Exchange.

Deutsche Boerse and NYSE Euronext expect to make annual cost savings of 400 million euros from 2012 and forecast increased earnings.

As for the name of the new company, it was not expected to be revealed "for a few months," a source close to the matter said.

'Dramatic' sales drop for top Australian retailer (AFP)

SYDNEY (AFP) – Australian retail stocks plunged Thursday after top-end department store David Jones sharply downgraded profit forecasts following a "dramatic" fall in sales to increasingly grim consumers.

David Jones shares slumped 18.16 percent to Aus$3.20 after it warned that trading conditions "deteriorated significantly" in April-June, the final quarter of fiscal 2010, with key mid-year clearance sales failing to deliver.

Profit in the final six months of the year -- January-June -- would be about 20 percent lower than the same period in 2010, the retailer added.

Full-year profit would be between 0.5 percent and two percent lower than the year to June 2010, at around Aus$167.7 million-Aus$169.7 million (US$180.6 million-US$182.8 million), the company said.

"The dramatic and rapid deterioration in trading conditions in 4Q11 has been unprecedented," said David Jones CEO Paul Zahra.

"As a result we are taking a cautious approach to 1H12 and have planned and forecast trading conditions to continue to be challenging, with expected negative sales," he added.

The announcement, which follows extremely weak consumer sentiment data, sent jitters through the retail sector, with rival department store Myer losing 6.42 percent to $2.48 and electronics giant Harvey Norman down 4.56 percent to $2.30.

It also battered media stocks, with newspaper group Fairfax dropping 4.21 percent to a two-year low of 91 cents due to fears about lost advertising from David Jones, a major client.

Zahra noted the 8.3 percent plunge in consumer confidence this month to levels usually associated with a recession and last seen during the global financial crisis, with the drop most marked among higher income earners.

"That is actually the David Jones customer base," he said.

National incomes are surging and the Australian dollar is strong due to an Asia-driven mining boom, but growth is uneven and interest rates remain at a relatively high 4.75 percent.

Debt fears in Europe are also dampening confidence, along with cost of living worries associated with Canberra's new pollution tax on Australia's top 500 carbon emitters, despite promises of household compensation.

How the major stock indexes fared Thursday (AP)

Remarks by Federal Reserve Chairman Ben Bernanke that dimmed hopes for a third round of bond-buying pushed stocks lower Thursday.

In a second day of testimony, Bernanke told lawmakers the Fed expects the economy to improve. He said the central bank would only step in with more economic stimulus if there is a significant downturn in the economy. Stocks turned immediately lower after the remarks and fell for much of the day.

The Dow Jones industrial average fell 54.49, or 0.4 percent, to 12,437.12.

The Standard & Poor's 500 index fell 8.85 points, or 0.7 percent, to 1,308.87.

The Nasdaq composite fell 34.25, or 1.2 percent, to 2,762.67.

For the week to date:

The Dow is down 220.08, or 1.7 percent.

The S&P is down 34.93, or 2.6 percent.

The Nasdaq is down 97.14, or 3.4 percent.

For the year to date:

The Dow is up 859.61, or 7.4 percent.

The S&P is up 51.23 or 4.1 percent.

The Nasdaq is up 109.8, or 4.1 percent.

China to sell pork from stockpiles to dampen price (AP)

BEIJING – China's government will sell pork from stockpiles to dampen inflation that pushed up the price of its staple meat by 57 percent last month, the Commerce Ministry said Friday.

Beijing will release both frozen pork and live pigs into the market, said a ministry spokesman, Yao Jian. He gave no details but said some local governments began to sell their own stockpiles last month.

"We will release both central and local reserves into the market in due time," Yao said at a regular ministry briefing.

Economists blame China's inflation spike on higher demand driven by rising incomes that is outstripping food supplies and a flood of bank lending that was part of Beijing's response to the 2008 global economic crisis.

Inflation is politically dangerous for the ruling communists because it undermines the public's economic gains and might fuel unrest.

China is expected to produce about 51.5 million tons of pork this year, up 3 percent from 2010, according to the U.S. Department of Agriculture.

Food inflation has been boosted in recent weeks by summer floods that damaged crops in China's south and east.

Yao said the jump in pork prices has been driven by higher grain costs, fewer pigs being raised and higher labor costs.

China's top economic official, Premier Wen Jiabao, ordered local leaders last weekend to take steps to ensure adequate pork supplies and hold down prices, according to a Cabinet statement.

Wen said ensuring stable pork prices is the government's "unavoidable responsibility."

FTSE slips 0.06% ahead of stress test results (AFP)

LONDON (AFP) – London's benchmark FTSE 100 index slipped just 0.06 percent on Friday to close at 5,843.66 points, as investors waited for key bank stress test results.

As trading ended just ahead of the announcement, fashion label Burberry had made the biggest gains of the day, rising 4.16 percent (63 pence) to close at 1,577, followed by Tullow Oil, which rose 1.97 percent (25 pence) to close at 1,294.

Broadcaster BSkyB also made strong gains after days of uncertainty, rising 1.94 percent (13.5 pence) to finish at 709.5. Rebekah Brooks, the embattled chief executive of Rupert Murdoch's British newspaper arm, announced her resignation earlier on Friday amidst a storm over alleged phone-hacking. Murdoch has scrapped a plan to buy out BSkyB amid the scandal.

Mobile satellite firm Inmarsat was the worst blue-chip performer, falling 3.25 percent (18 pence) to close at 535. It was finished by carmaker Rolls-Royce, which was down 2.5 percent (16.5 pence) to finish at 642.5.

At 1703 BST, a pound was worth 1.6156 dollars or 1.1398 euros.

Deutsche Boerse owners back $9.7 billion NYSE merger (Reuters)

FRANKFURT/CHICAGO (Reuters) – Germany's Deutsche Boerse AG looked set to pull off its $9.7 billion takeover of the New York Stock Exchange group on Thursday after its shareholders backed the deal to create the world's largest exchange operator.

Shareholders in NYSE Euronext approved the deal last week but it still faces formidable anti-trust hurdles on both sides of the Atlantic, analysts say.

It is expected to take until the end of the year before the politically-charged deal gets regulatory approval.

More than 80 percent of Deutsche Boerse shareholders tendered their stock as part of the deal, the company said in a regulatory statement on Thursday based on a preliminary count.

Final results of the tender offer are due on Friday.

Shares in NYSE Euronext were up 0.5 percent at $34.04 by 1753 GMT, while Deutsche Boerse was off 0.5 percent at 53 euros.

The deal -- packaged and sold as a merger of equals -- accelerates a wave of tie-ups in the increasingly competitive and global exchange world, where companies are banding together and pushing into derivatives to survive and grow.

Deutsche Boerse shareholders will control 60 percent of the new company and 10 of 17 board seats. Still there are suspicions in Germany that NYSE management will be in the driver's seat, in addition to concerns in the United States that the New York Stock Exchange will lose influence and independence.

The new company will combine the operator of stock exchanges in New York, Paris, Amsterdam, Brussels and Lisbon with the company that runs the Frankfurt Stock Exchange and the Eurex derivatives platform.

The merged entity will have more than $20 trillion in annual trading volume, and operations spanning the United States, Germany, France, Britain, the Netherlands, Portugal and Belgium.

"This is important for future deals," said Richard Repetto, an exchanges analyst at Sandler O'Neill in New York.

"The global exchange consolidation movement has faced some headwinds. If this deal didn't pass the shareholder test, global consolidation would have come to a screeching halt."

The deal was first announced in February amid a flurry of cross-border deal attempts by exchanges eager to cut costs and diversify in the face of fast-eroding market shares in their traditional stock-trading businesses.

Key hurdles remain in the form of the Hessian Ministry of Economics, which needs to approve the takeover, and the European Commission which needs to scrutinize the proposed combination on anti-trust grounds.

Alex Kramm, analyst for UBS in New York, said: "This is not going to get the quick go-ahead green light, it will get a real thorough review. This is an unprecedented merger proposal but we do think that this should go through with limited remedies."

Executives at the NYSE and Deutsche Boerse have said the deal will put the merged company in a strong position to do deals elsewhere, even though other ambitious deals have collapsed.

The London Stock Exchange Group Plc and Canada's TMX Group Inc headed into negotiations, as did the Singapore Exchange Ltd and Australia's ASX Ltd.

One by one, however, those and other deals collapsed, shattered by political and nationalistic resistance.

NYSE Euronext itself was the target of an unsolicited counter-bid in April from archrival Nasdaq OMX Group Inc and its commodities partner, IntercontinentalExchange Inc. The pursuers retreated in May after being rejected by the U.S. Department of Justice over antitrust concerns.

GLOBAL VIEW

In the Deutsche Boerse-NYSE Euronext combination, stakeholders and politicians on both sides of the Atlantic fear that the other party will gain the upper hand.

The exchanges have promoted the deal as a merger of equals -- in part because of a dual headquarters agreement between Frankfurt and New York.

"Bit by bit, the world capital market is thinking less and less of the American capital market," said Thomas Caldwell, Chief Executive of Toronto-based Caldwell Asset Management, which owns shares in NYSE Euronext.

The larger Frankfurt-based bourse, however, will control 10 of 17 board positions, while its shareholders will own roughly 60 percent of a yet-to-be-named Netherlands-based holding company.

Labour representatives in Frankfurt have warned, however, the deal amounts to a "reverse takeover," in which the interests of Deutsche Boerse shareholders were not given sufficient consideration.

(Additional reporting by Jonathan Spicer; Editing by Greg Mahlich)

World's biggest diamond hub suffers hit in Mumbai blasts (Reuters)

(Reuters) – One of this week's deadly Mumbai blasts scattered diamonds, possibly worth millions of dollars, onto the street but has not convinced traders to abandon their hub in the heart of the city for a purpose-built diamond bourse in the suburbs.

About 60 percent of the world's diamond processing passes through the Opera House area in south Mumbai, site of the most powerful of the three coordinated blasts, which killed 18 people and injured 133 others.

Generations of merchants, mostly from the Gujarati community that also dominates Mumbai stockbroking, have developed a unique culture of security over the years, using the area's dense crowds to their advantage.

"Diamonds move from office to office unseen. People carrying them are not identified and there is security in the anonymity," said Rajiv Popley, director of Popley Group, which has a store in the main building and a retail network in India and Dubai.

Traders carry the diamonds in their pockets, often rolled in tissue paper. They dress casually, blending with the thousands of commuters that pass through the nearby rail station.

Mumbai's diamond trade began about 40 years ago in what is now the main building, Panchratna, which means five gems in Hindi. The bourse has since expanded into about 10 buildings, with up to 4,500 stores. All vaults are housed in Panchratna.

Traders from Belgium and Israel are often seen in the small shops with metallic shutters set along a cobblestone street.

The new Bharat Diamond Bourse complex, which opened in October, is spread over 20 million square feet in the Bandra-Kurla complex in suburban Mumbai, home to global banks and other multinationals, and nearly deserted after dark.

India's newer and larger National Stock Exchange is also housed in Bandra-Kurla; the Bombay Stock Exchange, Asia's oldest, remains in south Mumbai's traditional trading district.

Shaped like a diamond, the new bourse has 2,500 offices and formal security, including armed guards, a feature absent in the Opera House area, where merchants carry their diamonds every evening to the vaults at Panchratna, which close at 7 p.m.

"The new site will not allow such things moving in and out for security reasons, and that will hinder the security of the people if they have to declare they are carrying diamonds. Also, it is not a crowded area and anyone entering or leaving can be a target for robbery," Popley said.

Wednesday's blast came just as most merchants were carrying their diamonds to the vaults. The site was sealed after the blast, and the fate of the diamonds is not known, traders said.

Diamonds are big business in India.

In the year through March 2010, India imported 150 million carats of rough diamonds and exported 59.9 million of cut and polished diamonds valued at $18.24 billion.

India processes 7 in 10 of the world's diamonds, with 90 percent of those sold in the Opera House area.

Most traders live in south Mumbai and don't want to make the longer commute, often with their diamonds, to Bandra-Kurla.

"We don't have formal security here, but there is intelligence, and that is more valuable than armed guards. We know who is going in and out with what, but outsiders don't have to know," said Akshay Doshi, who owns a store in the Opera House area and does not want to move.

"The blast happened outside the bourse. Not inside."

(Editing by Tony Munroe and Sugita Katyal)

American Apparel receives non-compliance letter (Reuters)

(Reuters) – American Apparel Inc (APP.A) said it received a letter from NYSE Amex that the composition of the clothing chain's audit committee and board of directors was not in compliance with the exchange's guidelines.

The letter said that American Apparel has time till its next annual stockholders' meeting or July 1, 2012, whichever is earlier, to regain compliance with the exchange's standards.

The retailer, known for racy advertising and its founder's legal problems, said the non-compliance arose from the resignation of certain directors, which was disclosed earlier.

The company, which has faced problems ranging from covenant breaches to immigration probes of its workers to shareholder litigation, had said in April it may file for bankruptcy.

American Apparel said it intends to fill the vacancy on the audit committee and realign its board in accordance with the exchange's standards as soon as possible.

Shares of the company closed at $1.13 on Wednesday on the American Stock Exchange.

(Reporting by Arpita Mukherjee in Bangalore; Editing by Joyjeet Das)

Stocks edge higher, S&P 500 trims its weekly loss (AP)

U.S. stocks indexes inched higher Friday, trimming their losses for the week. The gains were held back by a budget deadlock in Washington and worries that Europe's debt crisis could spread.

The stock market was headed for one of its worst weeks this year. Indexes have fallen four of the past five days after Italy appeared to be the next European country headed for a fiscal calamity.

Those concerns ebbed after Europe's banking authority said only eight banks failed the latest round of tests designed to show how well they would stand up under severe financial strain. A total of 90 banks were subject to the tests.

The market opened higher after Google Inc., Mattel Inc. and Citigroup Inc. all reported strong quarterly earnings. Buyout offers for Clorox Co. and Petrohawk Energy Corp. also lifted stock prices.

The Standard & Poor's 500 index rose 3 points, or 0.3 percent, to 1,312 in afternoon trading. The Dow Jones industrial average rose 14, or 0.1 percent, to 12,451. The Nasdaq composite index rose 18, or 0.7 percent, to 2,781.

In Washington, lawmakers and President Barack Obama made little visible progress in negotiations over raising the nation's borrowing limit ahead of an Aug. 2 deadline. Credit rating agency Standard & Poor's said Thursday there is a 50 percent chance it will downgrade the government's credit rating within three months because of the impasse. A day earlier, Moody's Investor Service said it is reviewing America's bond rating for a possible downgrade.

Many analysts believe that a default by the U.S. is unlikely and would be corrected quickly. But concerns about Europe and a weak data on U.S. factory output continued to weigh on stocks, as they have since early this spring.

Those worries have kept traders' expectations and stock prices relatively low, said Ryan Detrick, senior technical strategist Schaeffer's Investment Research. If corporate earnings remain strong and Europe stabilizes, he said, stocks might rally in the second half of the year. That happened last year, after fears about Europe held the stock market back all summer.

"With all the talk about European debt and the U.S. issues, the fact that earnings are coming in pretty strong is a good sign," Detrick said. "Once those issues work their way through the system, long-term growth is going to come from earnings."

The government said early Friday that U.S. factories produced fewer autos in June and overall factory output was flat. It was third straight weak month for manufacturers. Auto production declined in all three months because automakers were unable to obtain parts after the earthquake and tsunami disaster in Japan.

Major indices are down for the week following two weeks of gains. The S&P 500 is down 2.4 percent, the Dow 1.7 percent. Traders hoped to extend recent gains after an eight-week slump fed by Europe's worsening debt troubles.

Mattel shares rose 2 percent after the company said its net income jumped 56 percent in the second quarter, helped by strong demand for Barbie and "Cars 2" toys.

Google jumped 13 percent, the most in the S&P 500 index, after the company said its income increased 36 percent from the year-ago quarter and revenue hit an all-time high. Google reported after the markets closed Thursday.

Clorox Co. shares surged 8 percent after billionaire investor Carl Icahn offered to take the company private in a deal that values the household products company at $10.2 billion. He offered 12 percent more for shares than they were worth at Thursday's close.

U.S. oil and gas producers rose after Australian natural-resource giant BHP Billiton Ltd. said it would buy Petrohawk Energy Corp. for $12.1 billion, feeding speculation about which company might be the next takeover target. BHP was attracted to the long-term value of Petrohawk's U.S. natural gas reserves.

Petrohawk shares soared 63 percent, lifting other companies with natural gas holdings. Among the strongest gainers: Range Resources Corp. rose 10 percent, Cabot Oil & Gas Corp. rose 9 percent and Pioneer Natural Resources Co. and Southwestern Energy Co. rose 8 percent.

Wall Street jumps 1 percent (Reuters)

NEW YORK (Reuters) – Stocks rallied on Thursday, with the Nasdaq up for an eighth straight day and all three major U.S. indexes rising 1 percent or more, as strong labor market and retail sales data lifted optimism a day before the U.S. employment report for June.

The Dow Jones industrial average (.DJI) gained 125.98 points, or 1.00 percent, to 12,752.00. The Standard & Poor's 500 Index (.SPX) gained 17.06 points, or 1.27 percent, to 1,356.28. The Nasdaq Composite Index (.IXIC) gained 44.61 points, or 1.57 percent, to 2,878.63.

(Reporting by Edward Krudy; Editing by Jan Paschal)

NYSE shareholders vote for Deutsche Boerse merger (AP)

NEW YORK – NYSE Euronext's shareholders have approved its merger with the German exchange operator Deutsche Boerse.

The New York exchange held a special shareholders' meeting Thursday morning, where 96 percent voted in favor of the deal. The votes represent 66 percent of NYSE Euronext's total shares.

The deal must still be approved by 75 percent of Deutsche Boerse's shareholders by July 13.

Deutsche Boerse AG said in February that it would buy the parent company of the New York Stock Exchange for $10 billion, creating the world's largest exchange operator. Deutsche Boerse runs the Frankfurt Stock Exchange, while NYSE Euronext owns bourses in Paris, Lisbon, Brussels and Amsterdam, in addition to New York Stock Exchange.

European stocks close higher (AFP)

LONDON (AFP) – European stock markets closed higher on Thursday, with London's benchmark FTSE 100 index of top shares up 0.86 percent at 6,054.55 points.

In Frankfurt, the DAX rose 0.54 percent to 7,471.44 points and in Paris the CAC 40 gained 0.47 percent to 3,979.96 points.

A look at economic developments around the globe (AP)

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

___

LONDON — The European Central Bank raised its key interest rate and hinted at more to come, the latest sign that it will not be derailed by the debt crisis in its mission to fight inflation.

The quarter-point hike, to 1.5 percent, was the second this year and widely expected by markets despite a global slowdown and the debt crisis, which almost caused Greece to default this month.

The bank also agreed to extend emergency liquidity to Portuguese banks, as it has done with Greece and Ireland, even though one of the major ratings agencies downgraded the country's bonds to junk status.

___

LONDON — Stronger than expected U.S. jobs figures pushed European stocks higher and helped investors brush off interest rate increases in China and Europe.

The hope in the markets is that the recent soft patch in the U.S. economic dataflow may have come to an end, providing the global economy with further impetus.

Germany's DAX closed up 0.5 percent, the CAC-40 in France rose 0.5 percent and the FTSE 100 of leading British shares was up 0.9 percent.

___

TOKYO — Earlier in Asia, stocks were mixed. Japan's Nikkei 225 dropped 0.1 percent, China's Shanghai Composite Index lost 0.6 percent, Hong Kong's Hang Seng index closed marginally up while South Korea's Kospi was 0.4 percent higher.

___

MADRID — Spain had to pay sharply higher interest rates in two bond auctions, reflecting renewed market tension over the country's ability to handle its debt.

___

BERLIN — Eurogroup chief Jean-Claude Juncker called for "more responsible behavior" from rating agencies in the wake of a much-criticized downgrade for Portugal.

European officials have been scathing about the downgrade by Moody's this week, just as a newly elected Portuguese government pushes through austerity plans.

___

ROME — Rising sugar prices pushed up global food prices once again in June after a brief lull. The U.N.'s Food and Agriculture Organization said its food price index rose 1 percent. Food prices are 4 percent below the all-time high recorded in February.

___

WASHINGTON — House and Senate trade leaders said they were looking at a compromise solution to extend a worker assistance program that has become the primary obstacle to congressional approval of free trade agreements with South Korea, Colombia and Panama.

___

NEW DELHI — Boeing forecast a $150 billion market for passenger airplanes in India over the next 20 years driven by a booming economy.

Indian airlines will need to buy around 1,320 new airplanes to meet the demand of an expanding aviation sector, Boeing India President Dinesh Keskar said.

___

LONDON — The Bank of England kept its key interest rate at an all-time low of 0.5 percent as the tepid economic recovery in Britain continues to outweigh concerns over inflation.

___

SINGAPORE — Singapore's state investment company Temasek said its investments hit a record high as Asian companies reaped solid profits.

___

LONDON — British manufacturing production rose by 1.8 percent in May, reversing a drop a month earlier.

___

NEW DELHI — An Indian government minister offered to resign after investigators said they were probing his alleged involvement in a telecommunications scandal, media reports said.

The allegations against Dayanidhi Maran further tarnished the government of Prime Minister Manmohan Singh, which has been battered by a second telecoms scandal and other high-profile corruption cases.

___

TALLINN, Estonia — Consumer prices in June were 4.9 percent higher than a year ago. It's the highest rate in the 17-member eurozone.

___

COPENHAGEN — Denmark's central bank raised its key lending rate by a quarter of a percentage point to 1.55 percent to follow a similar move by the European Central Bank.

Denmark is a member of the European Union but is not one of the 17 countries that use the euro.

How the major stock indexes fared Wednesday (AP)

Stock indexes managed slight gains Wednesday as investors shrugged off slower growth in the U.S. service sector.

The Institute for Supply Management reported Wednesday that business growth slowed at U.S. service providers in June. Financial companies and health care providers reported the weakest results. On the positive side, June marked the 19th consecutive month of growth at service companies, which employ the majority of American workers.

Major banks fell sharply after Moody's lowered Portugal's credit rating to "junk" status late Tuesday.

The Dow Jones industrial average rose 56.15, or 0.4 percent, to close at 12,626.02.

The Standard & Poor's 500 rose 1.34, or less than 0.1 percent, to 1,339.22.

The Nasdaq composite index rose 8.25, or 0.3 percent, to 2,834.02.

For the week:

The Dow is up 43.25, or 0.3 percent.

The S&P is down 0.45, or 0.03 percent.

The Nasdaq is up 17.99 points, or 0.6 percent.

For the year to date:

The Dow is up 1,048.15, or 9.1 percent.

The S&P is up 81.58, or 6.5 percent.

The Nasdaq is up 181.15 points, or 6.8 percent.

FTSE 100 stocks in the red (AFP)

LONDON (AFP) – Shares in London pushed lower on Wednesday as the banking sector took hits in reaction to the eurozone's deepening debt crisis.

The benchmark FTSE 100 index lost 0.35 percent at 6,002.92 points.

The Royal Bank of Scotland (RBS) was the most traded stock, seeing 121 million shares changed hands, followed by Lloyds Banking Group (LBG), which saw 120 million switch owners.

Serco ended the day as the top blue-chip riser, gaining 3.86 percent -- or 121 pence -- to 565.

ARM Holdings, which added 2.41 percent -- or 14.50 pence -- to end at 616.

Barclays was the worst blue-chip performer, dropping 3.76 percent -- or 9.75 penc3 -- to finish at 249.75, followed by RBS, which slipped 3.42 percent -- or 1.34 pence -- to end at 37.85.

On the currency markets, a pound was worth $1.5998 at 17:03 BST, down from 1.6061 at around the same time on Tuesday, while it stood at 1.1166 euros, up from 1.1131 over the same period.

Euro steady ahead of ECB, China stocks climb (Reuters)

SINGAPORE (Reuters) – The euro steadied on Thursday with a widely expected rate hike from the European Central Bank later being offset by a spreading sovereign debt crisis, while China's bank stocks bounced on hopes of a near-term pause in policy tightening.

The risks of sovereign debt default were still very much on the radar of global investors, though Wall Street finished higher overnight, as many looked beyond the latest bout of nervousness over the euro zone debt crisis after Moody's slash in Portugal's ratings sparked a selloff in peripheral bonds.

The sharp drop in the bonds of Portugal and Greece came just a week after Greece passed tough austerity measures needed to win a near-term bailout, thereby avoiding a default.

Greece and Portugal have raised the stakes for ECB President Jean-Claude Trichet and keep exposing the euro's biggest vulnerability. The central bank will probably lift rates for a second time this year to 1.5 percent but then pause for a few months as it battles a debt crisis and struggles to avoid an outright default.

"On a relative basis, Europe is going to be suffering with a strong currency, higher interest rates, budget problems, austerity budgets, higher taxation. So you're going to have low growth in Europe," said Davis Hall, global head of FX and precious metals advisory at Credit Agricole Suisse's private client business.

"Europe is going to need a weaker currency at some point... Which is why we think the euro is vulnerable and we are staying away," said Hall, who is bearish on the euro versus the Swiss franc and U.S. dollar.

SAMSUNG UNLEASHES TECH SECTOR BEARS

The MSCI index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was up 0.4 percent, near a one-month high reached on Monday that has been difficult to retest since then.

Gains were spread evenly across the financials, industrials and consumer-oriented stocks, while the technology sector was the only one in the red, pulled down by a 2 percent fall in shares of Samsung Electronics (005930.KS).

Quarterly profit at Samsung, the world's largest maker of memory chips and televisions and a big favorite of foreign fund managers wanting exposure to the Asian tech sector, fell 26 percent, hurt by weak earnings at its flat screen unit.

Bank and insurer shares helped lead gains in Hong Kong as investors judged that the People's Bank of China is getting closer to taking a break from its multiple increases in policy rates and bank reserve requirements as the economy shows signs of losing steam.

"For a speculative play you could say that Chinese banks have been beaten down on various concerns ... but I don't think those banks will go bust," Yonghao Pu, chief strategist of UBS Wealth Management in Hong Kong, told Reuters Television.

"Sentiment (on Chinese bank stocks) is very bad, but for the short term I think you can speculate and buy some."

The Hang Seng index (.HSI) rose 0.5 percent, while the Hang Seng China Enterprises index of mainland stocks listed in Hong Kong was up 0.7 percent (.HSCE).

Japan's Nikkei average (.N225) closed down 0.1 percent, ending a 7-day rally that pushed the index back to where it was right after March's devastating earthquake and tsunami. (.T)

OPTIONS TO AVERT U.S. DEFAULT

The euro was trading at $1.4315, smack in the middle of a range held over the past two months. It could be vulnerable should the ECB strike a dovish note later after a policy meeting or if the debt crisis brings countries such as Greece and Portugal closer to default.

However, with Congress still not close to agreeing to lift the ceiling on government borrowing, the possibility of a U.S. debt default has loomed over the dollar as well and helped to keep the euro in a relatively tight trading range against the dollar for the past few months.

Reflecting how critical the issue of U.S. debt ceiling has become, top Treasury officials have been secretly exploring ways to prevent a financial meltdown that would be triggered if Washington was unable to pay its bills on time, sources told Reuters.

The Australian dollar climbed 0.3 percent against the dollar at $1.0732 after data showed a robust increase in June employment showed the economy was holding up well despite recent reports showing households becoming more cautious on spending.

Gold prices were little changed at $1,532.60 an ounce, while U.S. crude oil was up 68 cents to $97.33 a barrel.

(Additional reporting by Hideyuki Sano in TOKYO and Masayuki Kitano in SINGAPORE; Editing by Richard Borsuk)

European stocks close higher on US jobs data (AFP)

LONDON (AFP) – European stock markets closed higher Thursday as better-than-expected US jobs data helped offset persistent concerns over how and when the eurozone debt crisis can be resolved.

Dealers said there was a muted response to the European Central Bank's hike in its key interest rate by 0.25 points to 1.50 percent and the Bank of England's decision to sit tight at 0.50 percent, with both moves as expected.

However, an ADP survey showing that the US private sector created 157,000 jobs in June, after a gain of 36,000 in May, gave Wall Street a solid boost, helping European markets move higher in the afternoon.

A fall in new US jobless claims was also welcome after recent weak data, with analysts now suggesting the economy could be over a soft patch sparked by the massive Japanese earthquake in March which disrupted international supply chains.

The euro was slightly firmer, supported by the ECB rate hike after sharp falls following a drastic Moody's ratings downgrade to junk status for Portugal on Tuesday which stoked fears the eurozone debt crisis still has a long way to go.

In London, the benchmark FTSE 100 index of top shares closed up 0.86 percent at 6,054.55 points. In Frankfurt, the DAX rose 0.54 percent to 7,471.44 points and in Paris the CAC 40 gained 0.47 percent to 3,979.96 points.

Other European markets were firmer but Madrid and Milan slipped, reflecting investor nervousness over the state of Spanish and Italian public finances.

"It's all about interest rate decisions," said Capital Spreads analyst Simon Denham.

In late London trade, the euro was higher at $1.4360 from $1.4314 late Wednesday in New York while the dollar rose to 81.23 yen from 80.88 yen.

Dealers said the markets took positively remarks by ECB head Jean-Claude Trichet on the need to avoid a Greek default at all costs and its decision to ensure Portuguese banks have access to funding.

Trichet was critical of the credit ratings agencies, criticising the dominance of the major firms -- Fitch, Moody's and Standard and Poor's.

Michael Hewson at CMC Markets said the ECB move on the Portuguese banks effectively ratcheted "up the war between the ratings agencies and European policymakers."

Kathleen Brooks at Forex.com said the ECB's reasoning on its rake hike suggested "that if inflation remains elevated, it will continue its policy of interest rate normalisation, even if peripheral (eurozone country) concerns continue to rage on."

In New York, the US jobs data gave stocks a strong start, with the blue-chip Dow Jones Industrial Average up 0.72 percent at around 1615 GMT while the tech-heavy Nasdaq Composite put on 1.32 percent.

"Today's reports on weekly jobless claims and ADP payrolls data could provide additional fuel for the bulls, who seem willing to rally on any upbeat news," said Sarah Wasserman, an analyst with Schaeffer's Investment Research.

The figures set up the markets for the US government's own employment report due Friday, one of the most closely watched indicators for the world's largest economy, with dealers hoping for more good news.

In Asian trade earlier Thursday, Tokyo fell 0.11 percent, Shanghai was flat and Hong Kong rose 0.52 percent.

European stocks rise at open, before ECB rate call (AFP)

LONDON (AFP) – Europe's main stock markets rose at the start of trading on Thursday, as markets waited to see if the European Central Bank will decide to raise interest rates to tackle high inflation.

London's FTSE 100 index climbed 0.45 percent to 6,029.93 points, Frankfurt's DAX 30 advanced 0.49 percent to 7,467.82 points and in Paris the CAC 40 gained 0.58 percent to stand at 3,981.79.

The European Central Bank is widely expected to announce its second interest rate increase since April on Thursday, probably to 1.50 percent, owing to dogged eurozone inflation currently running at 2.7 percent, analysts said.

In London, the Bank of England is on Thursday set to keep its key interest rate at a record-low level of 0.50 percent and maintain the status quo into next year due to Britain's flagging recovery, according to economists.

Summary Box: Stocks shrug off weak services report (AP)

SERVICES: The Institute for Supply Management said growth slowed at U.S. service providers in June. On the positive side, June marked the 19th consecutive month of growth at service companies, which employ the majority of American workers.

EUROPE'S DEBT: Financial companies fell following Moody's move to lower Portugal's rating to "junk" late Tuesday. That renewed concerns about big banks' exposure the European financial system.

THE INDEXES: The Dow Jones industrial average rose 56 points, or 0.4 percent, to close at 12,626. The S&P 500 index rose 1 point to 1,339. The Nasdaq added 8 points, or 0.3 percent, to 2,834.

Jobs reports push stocks higher; Retailers rise (AP)

NEW YORK – Better news on jobs drove stocks higher Thursday. Target, Gap and other large retailers jumped after reporting stronger sales.

The government reported that the number of people who made first-time claims for unemployment benefits dropped to 418,000 last week, the lowest level in seven weeks. That's a sign that employers are laying off fewer workers.

Separately, payroll processor Automatic Data Processing said companies added 157,000 employees in June. The bulk of the hiring came from small businesses. The tally is more than double the number economists had forecast and far more than the 36,000 added the previous month.

Warm weather and deep discounts resulted in the best June sales figures for U.S. retailers since 1999. Kohl's Corp. rose 6.6 percent, the most of any stock in the S&P 500 index. Target Corp. was close behind with a gain of 6.4 percent. Both reported strong sales for June.

Investors have been concerned that high gas prices would constrain consumer spending as people made fewer shopping trips and looked for ways to save money. The higher sales figures reassured markets that consumers were becoming more willing to spend again.

"The closest thing to an unadulterated barometer of our progress is same-store sales," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago "Everything is tied to it: Sales drives profits, profits drive hiring and hiring drives sales. It's a neat, virtuous circle."

The news comes a day before the Labor Department releases its closely-watched monthly employment report. Economists estimate the unemployment rate will remain at 9.1 percent and that employers added only 90,000 jobs last month.

In early afternoon trading, the Dow Jones industrial average rose 79 points, or 0.6 percent, to 12,705. The S&P 500 index gained 11, or 0.8 percent, to 1,350. The Nasdaq composite index rose 34, or 1.2 percent, to 2,868.

Sales at Kohl's increased by more than double what analysts expected. Kohl's credited warmer weather in the Midwest and Northeast with pushing customers to shop for summer clothing.

The three major U.S. stock indexes are now up 2 percent of more so far this month. A string of good news gave stocks their best week in two years last week and allayed fears that the global economy was sinking into another recession. U.S. manufacturing rebounded and Greece's parliament approved budget-cutting measures needed before it receives another round of emergency loans.

Trading has been very light in the stock market this week. Markets were closed in the U.S. on Monday for the July 4th holiday. No major corporate earnings came out this week. Aluminum maker Alcoa Inc. becomes the first major U.S. company to report second-quarter earnings on Monday.

SEC looks to outsource leases after botched deal (Reuters)

WASHINGTON (Reuters) – The Securities and Exchange Commission is in talks to largely hand off its leasing activities after being accused of bungling a real estate deal priced at more than half a billion dollars.

SEC Chairman Mary Schapiro said she is negotiating with the General Services Administration, which manages real estate for the federal government, to take over the responsibilities.

The handoff would come after an SEC inspector general report found in May that the SEC faces a $94 million claim after it made numerous mistakes in securing a 10-year, $556.8 million leasing deal for additional space in Washington.

The SEC anticipated it would need room for additional employees to implement the Dodd-Frank financial oversight law, but congressional budget wrangling forced it to try to back out of the lease.

Schapiro said in testimony prepared for a congressional hearing on Wednesday that she is "ultimately responsible for the actions of the agency" and that she is urgently working to lessen the financial fallout from the leasing deal.

Part of the longer-term solution is to outsource leasing, Schapiro said.

"Leasing is not part of the Commission's core mission and we cannot allow it to impede that mission," Schapiro said.

The SEC's leasing woes have been of great interest to lawmakers, and has provided ammunition to some Republicans seeking to deny extra money for the SEC to carry out Dodd-Frank.

(Reporting by Emily Stephenson; writing by Karey Wutkowski; editing by Tim Dobbyn)

Stocks up on strong US employment data (AP)

LONDON – Stronger than expected U.S. jobs figures helped stocks rally Thursday and helped investors brush off interest rate increases in China and Europe.

The euro, meanwhile, was helped by the European Central Bank's indication that it would increase its key rate again this year after its widely expected move to lift the rate by a quarter point to 1.5 percent.

The main driver in stock markets was a forecast-busting U.S. jobs report and a decline in the number of weekly jobless claims. In combination, they have eased fears about Friday's government figures, which often set the tone in markets for a week or two after their release.

Private payrolls firm ADP reported that employers added 157,000 jobs in June, more than double estimates of around 70,000. Weekly jobless figures were also encouraging, with unemployment claims down 14,000 to 418,000.

"A solid 150,000 job gain in tomorrow's payrolls report now seems to be in the cards," said Robert Kavcic, an analyst at BMO Capital Markets.

The hope in the markets is that the recent soft patch in the U.S. economic dataflow may have come to an end, providing the global economy with further impetus. Since stocks are a leading indicator of economic activity in the months ahead, there are many in the markets hoping that the second half of the year could see widespread gains.

In Europe, Germany's DAX was 0.9 percent higher at 7,496 while the CAC-40 in France rose 1.1 percent to 4,005. The FTSE 100 of leading British shares was up 1 percent at 6,065 after the Bank of England kept its main interest rate unchanged at a record low of 0.5 percent.

On Wall Street, the Dow Jones industrial average was up 0.6 percent at 12,708 while the broader Standard & Poor's 500 index rose 0.9 percent to 1,351.

Friday's payrolls figures could also potentially have a big impact in the currency market.

Ahead of their release, trading has been fairly lackluster though the euro garnered some support on continuing ECB rate hike expectations. While the ECB is carrying on raising rates, its peers, such as the U.S. Federal Reserve and the Bank of Japan, are showing few signs of lifting their super-low borrowing costs anytime soon.

"The ECB stands apart from its major counterparts ... in taking pre-emptive action to avert possible second round inflation effects from high energy and food prices," said Michael Woolfolk, an analyst at the Bank of New York Mellon.

Trichet said the bank was "monitoring very closely" price developments — that's code in the markets that the tightening cycle was not over but that rates would not rise next month, or possibly the month after.

Regarding Europe's debt crisis, Trichet repeated the bank's insistence that Greece could not be allowed to default. The bank has significant exposure to Greek debt since it accepts Athens' bonds as collateral for loans that help keep the economy afloat.

The ECB has repeatedly insisted that a default on those obligations is out of the question.

By Thursday afternoon, the euro was more or less flat at $1.4325, having traded as much 0.6 percent lower before the upbeat U.S. data and the ECB rate verdict.

Earlier in Asia, stocks eked out modest gains despite the People's Bank of China's decision Wednesday to raise interest rates once again as it tries to put a lid on inflation. However, the decision has not prompted many analysts to think that China's economy will slow down sharply. That's important as China, the world's second biggest economy, has been a major prop to the global recovery over the past couple of years.

Mainland Chinese shares were mixed. The benchmark Shanghai Composite Index lost 0.6 percent to finish at 2,794.27 while the Shenzhen Composite Index edged up 0.1 percent to 1,202.32.

Hong Kong's Hang Seng index closed marginally up at 22,530.18 while South Korea's Kospi was 0.4 percent higher to 2,180.59. Japan's Nikkei 225 dropped 0.1 percent to close at 10,071.14, a day after hitting its highest level since the country was battered by an earthquake and tsunami on March 11 that killed tens of thousands of people and sent the economy reeling.

Oil prices motored higher too. Benchmark oil for August delivery was up $1.77 at $98.42 a barrel in electronic trading on the New York Mercantile Exchange.

US stocks rise, reversing early losses (AFP)

NEW YORK (AFP) – US stocks rose on Wednesday, rebounding from early losses and shaking off news of a Chinese interest rate hike and fresh eurozone debt worries to close higher by the end of the day.

The Dow Jones Industrial Average gained 56.15 points (0.45 percent) to close at 12,626.02.

The broader S&P 500 rose 1.34 points (0.10 percent) to 1,339.22, while the tech-heavy Nasdaq Composite was up 8.25 points (0.29 percent) to stand at 2,834.02.

Stocks fell in early trading after China's interest rate move raised expectations of slowing growth in the world's second-largest economy and as worries mounted about Europe's debt crisis.

European Union officials lashed out at the Moody's ratings agency a day after its downgrade of Portugal, while anxious bond investors drove up yields for Spanish and Portuguese government debt.

On Wall Street, blue-chip industrial stocks performed well, with Caterpillar and DuPont leading the Dow with gains of 1.5 percent and 1.4 percent, respectively.

"It's a flight to safety that you are seeing. That is helping the Dow, that has a lot of defensive stocks," said Marc Pado, US market strategist for Cantor Fitzgerald.

Financial stocks were battered, with Bank of America tumbling 2.3 percent, Citigroup falling 1.3 percent and Wells Fargo down 1.1 percent.

Separately, a monthly report showed the US services sector grew in June but not as much as expected, in yet another sign of the sluggishness of the US economic recovery.

The Institute for Supply Management said that its index of non-manufacturing activity was 53.3 in June, down from 54.6 in May. Analysts had forecast that the index would fall to 54.0. Any number above 50 indicates growth.

Investors are avoiding any big moves until Friday's release of the official US employment figure for June, one of the most closely-watched indicators of the health of the US economy, analysts said.

"We get the job number on Friday, that is going to hold back any trading. There is no point in rushing in front of that type of big news," said Pado.

Bond prices rose on Wednesday. The yield on the 10-year US Treasury note fell to 3.10 percent from 3.14 percent late Tuesday, while that on the 30-year bond dropped to 4.35 percent from 4.39 percent.

Bond prices and yields move in opposite directions.

Fact sheet: 2011 Acura TSX Sports Wagon (AP)

2011 Acura TSX Sport Wagon Tech

BASE PRICE: $30,960 for base model; $34,610 with technology package.

AS TESTED: $35,495.

TYPE: Front-engine, front-wheel-drive, five-passenger, small wagon.

ENGINE: 2.4-liter, double overhead cam, inline four cylinder with i-VTEC.

MILEAGE: 22 mpg (city), 30 mpg (highway).

TOP SPEED: NA.

LENGTH: 189.2 inches.

WHEELBASE: 106.4 inches.

CURB WEIGHT: 3,599 pounds.

BUILT AT: Japan.

OPTIONS: None.

DESTINATION CHARGE: $885.

NYSE shareholders back D.Boerse deal (Reuters)

NEW YORK/CHICAGO (Reuters) – NYSE Euronext (NYX.N) shareholders approved a $9.6 billion takeover of the American exchange operator by Germany's Deutsche Boerse AG (DB1Gn.DE) on Thursday, moving the focus across the Atlantic where the deal faces its toughest battles.

The deal now needs approval from 75 percent of Deutsche Boerse shareholders by Wednesday, and then must survive a thorny European Commission antitrust review that is likely to run through the rest of the year.

NYSE Chief Executive Duncan Niederauer said the German vote had a high hurdle to clear but so far the tendering process was a little ahead of what he had expected it to be.

About 25 percent of shareholders are common to the two companies, and those investors had not yet tendered their shares, he said.

"I have not met a single Deutsche Boerse shareholder who is not supportive of the transaction," Niederauer said at the shareholder meeting in New York.

About 96 percent of NYSE shareholders who voted backed the deal, representing some 65.6 percent of all shares outstanding, preliminary results showed. The final vote results are expected on Friday.

The exchanges have promoted the deal as a merger of equals -- in part because it allows Niederauer to run the combined entity. The larger Frankfurt-based bourse, however, will control 10 of 17 board positions, while its shareholders will own roughly 60 percent of a yet-to-be-named Netherlands-based holding company.

While Deutsche Boerse's management was quick to welcome the outcome of the vote in New York, labor representatives remained steadfastly opposed and recommended that shareholders reject the deal on the grounds that it "penalized" the German company.

The deal amounted to a "reverse takeover," where the interests of Deutsche Boerse shareholders were not given sufficient consideration, Deutsche Boerse's works council said.

The tie-up between NYSE and the German exchange was announced in February amid a flurry of cross-border deal attempts by exchanges eager to cut costs and diversify in the face of fast-eroding market shares in their traditional stock-trading businesses.

The London Stock Exchange Group Plc (LSE.L) and Canada's TMX Group Inc (X.TO) headed into negotiations, as did the Singapore Exchange Ltd (SGXL.SI) and Australia's ASX Ltd (ASX.AX). One by one, however, those and other deals collapsed, shattered by political and nationalistic resistance.

NYSE Euronext itself was the target of an unsolicited counter-bid in April from archrival Nasdaq OMX Group Inc (NDAQ.O) and its commodities partner, IntercontinentalExchange Inc (ICE.N), in April. The pursuers retreated in May after being rejected by the U.S. Department of Justice over antitrust concerns.

Competitive concerns may take center stage in Europe in coming months.

EU antitrust regulators are likely to complete the first stage of their review by the end of July or early August, Niederauer said. He said he expects to learn the focus of any regulator concerns near the end of that process, which will be followed by a second review.

But he suggested regulators will likely not require any major divestitures before approving the deal, noting that any such conditions would be "unprecedented."

Niederauer said he still expects the deal to close by the end of the year, likely in December.

A NYSE-Deutsche Boerse combination would produce a behemoth that offers trades in virtually every U.S. and European asset class, with annual trading volume exceeding $20 trillion.

It also explains why European antitrust regulators are expected to take a close look at the near lock the company would have on exchange-traded derivatives -- and possibly demand some divestitures or other concessions.

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.

There have been few public critics of the deal in the United States, despite the NYSE's symbolism as a bastion of American capitalism. The exchange was founded in 1792 when share trading began under a buttonwood tree on a block now designated as Wall Street.

To woo votes, Niederauer and his Deutsche Boerse counterpart, Reto Francioni, have been telling shareholders they expect to achieve cost savings from the combination of at least 500 million euros ($715 million), ramped up from an initial projection of 300 million euros ($429 million). They also have promised a special dividend of 2 euros per share ($2.86 per share) after the deal closes.

Under the terms of the deal, Francioni would be chairman of the combined entity.

NYSE shares were up 2.8 percent to $35.33 after the vote results were announced. Deutsche Boerse shares rose 2.5 percent to 54.56 euros.

(Additional reporting by Jonathan Spicer)

(Editing by Jed Horowitz, Andre Grenon, Dave Zimmerman)

US stocks rally on jobs data (AFP)

NEW YORK (AFP) – US stocks surged as markets opened Thursday following a pair of reports on employment in the United States that beat economists' expectations.

The Dow Jones Industrial Average jumped 66.49 points (0.53 percent) to 12,692.51 in the first 20 minutes of trading.

The broader S&P 500 rallied 9.87 points (0.74 percent) to 1,349.09, while the tech-heavy Nasdaq Composite rose 21.70 points (0.77 percent) to 2,855.72.

Stocks jumped after the publication of the monthly ADP National Employment Report, which showed that private non-farm businesses added 157,000 jobs from May to June, a solid jump after the 36,000 increase from April to May.

Meanwhile the US Labor Department said unemployment claims fell slightly to 418,000 in the week to July 2 from 432,000 a week earlier.

"Today's reports on weekly jobless claims and ADP payrolls data could provide additional fuel for the bulls, who seem willing to rally on any upbeat news," said Sarah Wasserman, an analyst with Schaeffer's Investment Research.

Investors are also eagerly awaiting Friday's release of the official US unemployment figure, one of the most closely watched barometers of the strength of the world's largest economy.

Shares of NYSE Euronext gained 2.1 percent after the company's shareholders approved a merger with Deutsche Boerse to form the biggest stock exchange operator in the world.

On the Nasdaq, Chinese social-networking site Renren surged 10.7 percent in early trading, rebounding after its shares were battered in recent weeks by fallout from accounting scandals at other Chinese companies.

Bond prices fell in the wake of an increase of the key euro interest rate by the European Central Bank. The yield on the 10-year US Treasury note rose to 3.16 percent from 3.10 percent late Wednesday, while that on the 30-year bond climbed to 4.39 percent from 4.35 percent.

Bond prices and yields move in opposite directions.

NYSE Euronext investors back Deutsche Boerse merger (AFP)

PARIS (AFP) – NYSE Euronext shareholders approved Thursday a merger with Deutsche Boerse to form the biggest stock exchange operator in the world valued at some $25 billion.

A merged Deutsche Boerse and New York Stock Exchange Euronext will own bourses in New York, Frankfurt, Paris, Lisbon, Amsterdam and Brussels.

"It's an important step in our merger project," said NYSE Euronext Chief Executive Duncan L. Niederauer after 65.6 percent of shareholders voted in favour of the deal.

In Germany, Deutsche Boerse Chief Executive Reto Francioni hailed the vote, saying shareholders had clearly approved the new group's growth prospects and potential for value.

Deutsche Boerse shareholders will vote separately on July 13, with the tie-up expected to produce annual savings of 300 million euros ($430 million).

Under the terms of their February 15 merger proposal, Deutsche Boerse shareholders will own 60 percent of the combined, Netherlands-incorporated firm, and the German company will dominate the new board.

The new entity will control nearly 90 percent of the markets for derivative investment instruments in Europe.

If Deutsche Boerse shareholders approve the deal, regulators will weigh-in next -- European antitrust authorities launched their examination of the merger last week with a preliminary probe due to close by August 4.

Brussels must decide whether to authorise the operation, possibly with conditions attached to it, or launch a deeper investigation that could last several months. The longer option is more likely, observers said.

In March, European competition commissioner Joaquin Almunia said that the deal required a detailed study while the number two at NYSE Euronext, Dominique Cerutti, said that the company was expecting an in-depth look from regulators.

The deal was threatened earlier this year when Nasdaq OMX and the IntercontinentalExchange (ICE) launched a hostile, $11.3 billion bid for NYSE Euronext but the two firms walked away in May after US antitrust officials opposed the plan.

Jefferies analyst Daniel Fannon said Thursday's vote was pretty much guaranteed once Nasdaq OMX/ICE had thrown-in the towel, and especially after analysts in the United States generally backed the deal.

The NASDAQ/ICE bid would have kept Wall Street's fabled exchange under US ownership but NYSE Euronext repeatedly spurned their offer.

In 2008, Deutsche Boerse and NYSE Euronext held talks on a merger but failed to reach an agreement and two years previously, the NYSE won over the then separate Euronext as the German company tried to do a deal.

If the merger goes through to completion, the new company will be headquartered in both Frankfurt and New York, with NYSE Euronext leaving Paris.

In afternoon trade, NYSE Euronext shaers were up 2.59 percent with Deutsche Boerse gaining 2.33 percent.

NYSE chief confident of merger approval (AFP)

NEW YORK (AFP) – The head of NYSE Euronext voiced confidence on Thursday that Deutsche Boerse shareholders would approve the merger of the two companies, creating the largest stock-exchange operator in the world.

The deal, which would forge a company valued at $25 billion, was approved early Thursday by NYSE Euronext shareholders and now faces scrutiny from Deutsche Boerse shareholders, who must vote by July 13.

"It's going to be a hurdle. Seventy-five percent is a big number," said NYSE Euronext chief executive Duncan Niederauer, referring to the proportion of Deutsche Boerse shareholders needed to approve the merger.

"We had 11 percent as of last night, that isn't surprising. We didn't really expect it to accelerate until our vote this morning," Niederauer said on CNBC television.

In Thursday's vote, 65.6 percent of NYSE Euronext shareholders approved the merger, which has sparked controversy in the United States because it would hand over the 221-year-old New York Stock Exchange to foreign owners.

A merged Deutsche Boerse and NYSE Euronext would own exchanges in New York, Frankfurt, Paris, Lisbon, Amsterdam and Brussels and would control nearly 90 percent of the markets for derivatives in Europe.

The merger must also be approved by European regulators, with EU antitrust officials due to close a preliminary probe by August 4.

Niederaurer admitted that NYSE Euronext and Deutsche Boerse would need to make some concessions to regulators, but insisted that the merged company would not spin off any of its European derivatives exchanges.

"For us to sit and to say the deal will be approved without any concession is somewhat delusional," Niederauer said.

However, he added: "It would be unprecedented for us to divest one of the derivative exchanges. That's a huge part of the value creation opportunity."

Under the terms of their February 15 merger proposal, Deutsche Boerse shareholders will own 60 percent of the combined, Netherlands-incorporated firm, and the German company will dominate the new board.

If the merger goes through to completion, the new company will be headquartered in both Frankfurt and New York, with NYSE Euronext leaving Paris.

Rally could spell pullback for stocks (Reuters)

NEW YORK (Reuters) – A pullback could be on the table next week for stocks after their best weekly performance in two years, especially if a raft of data headlined by the June jobs report doesn't bolster the argument of a strengthening economy.

Stocks rose for five straight days as the fog of the Greek debt crisis appeared to once again be lifted while better-than-anticipated economic numbers such as Friday's manufacturing data gave weight to the belief the U.S. economy was starting to recover from a soft patch.

"What we are looking at is a market that is going to focus on the economic numbers," said Peter Cardillo, chief market economist at Avalon Partners in New York.

"We had real good gains toward the end of the quarter so it wouldn't surprise me to see a little bit of profit taking before we get those numbers out during the course of the week."

Data expected for next week includes factory orders for May, the ISM services index and several indicators on the labor market, including Friday's report.

"It is a little bit early to declare victory over the mid-cycle slowdown we've had," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.

"On Friday, you have payrolls, unemployment rate -- the big Kahuna -- and there might be some trepidation going into it, especially with the market having already rebounded sharply here over several days."

Even with the economic data on the docket for next week, volume is expected to remain light due to the market holiday on July 4th, which could exacerbate swings in the market.

Aside from the additional spike in volume brought about by the final reconstitution of Russell Investments by its indexes on June 24, average weekly volume has been among the lowest of the year for several weeks.

BULLS AND THE BUDGET DEFICIT

The light volume may prove to be an advantage for the bulls, however, especially after the S&P 500 (.SPX) successfully bounced off the 200-day moving average, a key technical support level, and jumped back over the 50-day moving average, which represented a resistance point.

"The mindset is an opportunistic 'risk on' trade and it is giving a lift to the market in spite of the fact that most people are scratching their heads. But that is what happens, particularly when there is very light volume, momentum dictates trend, and that is what we find ourselves in," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.

For the week, the Dow Jones industrial average (.DJI) rose 5.4 percent, the S&P 500 gained 5.6 percent and the Nasdaq Composite Index (.IXIC) climbed 6.2 percent -- marking their biggest weekly percentage gains since July 2009.

With Greece and the European debt crisis once again pushed to the back burner in the minds of investors, the focus has shifted to the rapidly approaching deadline for Congress to reach an agreement on the debt limit, presenting another headwind for stocks.

The U.S. Treasury on Friday kept up the pressure on Congress to strike a deal to raise the debt ceiling and prevent a default, repeating that it would run out of legal room to borrow on August 2.

"The big thing on the horizon is now back to the U.S. deficit issues," said Rick Meckler, president of LibertyView Capital Management in New York.

"The Greek (debt) situation was an appetizer for that, and I think you're going to see a lot of back and forth as people wonder how much brinkmanship is actually going to be played with the budget deficit."

Another overhang could be evident in the preannouncement of corporate profits before earnings season begins with Alcoa Inc's (AA.N) earnings on July 11. The global slowdown in the second quarter may result in some disappointing outlooks.

"We have had a soft patch in the economy here due to higher commodity prices, a little bit of weakness in the manufacturing side, because of Japan, Europe, China and various things. All that can really impact Q2 earnings and we may see some negative preannouncements, and that might really have a broader impact on the overall market," Ghriskey said.

(Reporting by Chuck Mikolajczak; Additional reporting by Edward Krudy; Editing by Jan Paschal)

A look at economic developments around the globe (AP)

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

___

GENEVA — The World Trade Organization ruled that China was unfairly protecting its domestic manufacturers by limiting the export of nine raw materials that are used widely in the steel, aluminum and chemical industries.

A WTO panel sided with the United States, European Union and Mexico, which had each filed complaints saying China was driving up the prices they pay for raw materials such as coke, bauxite and zinc by setting export duties and quotas on them.

___

LONDON — Retail sales in the 17 euro countries dropped 1.1 percent during May, a further sign that the eurozone economy is slowing sharply.

European stocks traded in narrow ranges. Germany's DAX fell less than 0.1 percent, the CAC-40 in France was 0.6 percent lower while the FTSE 100 index of leading British shares closed up 0.1 percent.

___

BERLIN — German Chancellor Angela Merkel warned against putting too much weight on rating agencies' assessments of new bailout proposals for Greece that would have private creditors share part of the burden.

Merkel told reporters that the troika of institutions lending money to Greece — the International Monetary Fund, the European Central Bank and the EU Commission — should make their own assessment regardless of what the credit rating agencies say.

Her comments came a day after Standard & Poor's said the current French proposal to have banks rollover their Greek debt holdings "would likely amount to a default."

___

KARLSRUHE, Germany — Germany's finance minister defended the rescue packages for Greece and other eurozone countries at a supreme court hearing. Opponents argued that the bailouts violated both German and European law.

___

TOKYO — Japan's embattled government received a fresh blow when the new disaster reconstruction minister resigned a week after his appointment because of criticism he was rude to officials on a trip to the tsunami-ravaged coast.

Japan's Nikkei 225 index rose less than 0.1 percent. In other Asian trading, South Korea's Kospi rose 0.8 percent while Hong Kong's Hang Seng slipped 0.1 percent to 22,747.95. China's Shanghai Composite Index gained 0.1 percent.

___

STOCKHOLM — The Swedish central bank raised its key interest rate by a quarter of a percentage point to 2 percent to keep inflation in check as the Swedish economy grows.

___

GENEVA — The United Nations said world food production must increase by up to 100 percent by 2050 and focus on greener methods to sustain a global population expected to reach 9 billion.

The U.N.'s annual World Economic and Social Survey recommended that governments help small-scale farms.

___

MILAN — Premier Silvio Berlusconi withdrew a controversial measure buried in Italy's euro47 billion ($68 billion) austerity plan that would have allowed his family investment company to avoid paying a heavy fine, at least temporarily.

US stocks launch 2nd half with fireworks (AFP)

NEW YORK (AFP) – US stocks jumped sharply higher Friday, closing out the best week in two years and starting the second half on a solid positive note.

In thin trade ahead of the long July 4 holiday weekend, the Dow Jones Industrial Average leaped 168.43 points (1.36 percent) to 12,582.77.

The broader S&P 500 gained 19.03 (1.44 percent) to 1,339.67, while the tech-heavy Nasdaq Composite was up 42.51 points (1.53 percent) at 2,816.03.

All 30 Dow blue chips were up, led by a 2.8 percent climb by Alcoa and a 2.2 percent jump by JP Morgan Chase.

On the Nasdaq, Apple added 2.2 percent and Yahoo 2.8 percent.

The markets got a boost from the release of the ISM purchasing managers index for the manufacturing sector for June, which climbed 1.8 percent from May, much better than economists had forecast.

But that came after a sharp seven-percent drop in May from April, and the June index remained far below the level achieved in the first four months of the year.

The ISM's new orders index rose just 0.6 percent in June, a suggestion of continuing fragility in the sector.

There was also good news from the three big automakers, which all turned in solid June sales numbers: Chrysler sales jumped 30 percent, Ford 14 percent and General Motors 10 percent.

Ford shares rose 1.7 percent while GM jumped 0.7 percent. Chrysler is not publicly traded.

Specialty truck maker Oshkosh Corp soared 13.9 percent on news that raider Carl Icahn had accumulated a 9.5 percent stake in the company and reportedly plans to pressure management to deliver more to shareholders.

Microsoft and Apple were up 0.1 percent and 2.3 percent respectively after their consortium paid $4.5 billion to beat out rivals Google and Intel for the valuable patent assets of bankrupt Nortel.

Google was no worse for wear; its shares rose 2.9 percent, while Intel's rose 1.7 percent.

Bond prices fell. The yield on the 10-year US Treasury note rose to 3.20 percent from 3.16 percent late Thursday while that on the 30-year bond edged upwards to 4.40 percent from 4.38 percent.

Bond prices and yields move in opposite directions.