British rate hike hint boosts sterling, Iraq unrest drives up oil

Escalating violence in class="mandelbrot_refrag">Iraq drove oil higher and sent class="mandelbrot_refrag">stocks lower on Friday, putting a global equity index on track for its first weekly loss in five weeks.

Wall Street was little changed, but U.S. averages were set for their first loss in four weeks, while European shares .FTEU3 were set to interrupt eight weeks of gains. The MSCI All World Index fell 0.2 percent and is down 0.5 percent for the week.

Despite the decline in riskier assets, benchmark U.S. bond prices fell, pushing yields slightly higher. Sterling surged on Friday after the Bank of England hinted at an interest rate rise this year.

 
 
 

Financial class="mandelbrot_refrag">markets' focus was on the violence in class="mandelbrot_refrag">Iraq where Sunni Islamist militants have surged out of the north this week to menace Baghdad and want to establish their own state in Iraq and Syria. President class="mandelbrot_refrag">Barack Obama on Thursday threatened U.S. military strikes in Iraq against the insurgents.

"The market was looking for an excuse to take profits after a rally to new highs and tensions in Iraq gave investors an opportunity to trim their positions," said Philippe Gijsels, head of research at BNP Paribas Fortis Global class="mandelbrot_refrag">Markets in Brussels.

Oil rose, with Brent crude at one point touching a nine-month high of $114.69. It was last up just a few cents to $113.05. class="mandelbrot_refrag">U.S. crude CLc1 touched an intraday high of $107.68 before pulling back, up 19 cents to $106.71. The benchmark is up about 4 percent this week.

"There was a big market reaction and then the IEA (International Energy Agency) said it did not see a risk to supplies so the volatility is reflecting this," said Olivier Jakob at Petromatrix consultancy.

The IEA played down fears over the possible sudden loss of oil exports from Iraq in its monthly oil market report.

The S&P 500 .SPX gained 1.59 points or 0.08 percent, to 1,931.7 and the Nasdaq Composite .IXIC added 10.38 points or 0.24 percent, to 4,308.01.

Bank of England Governor Mark Carney said late Thursday British interest rates could rise sooner than markets expect. Markets had previously been expecting a rate hike in the first quarter of 2015, and the FTSE 100 was down nearly 1 percent.

It would make the BoE the first of the four major central banks to raise interest rates. Sterling GBP=D4 neared a five-year high against the dollar at $1.6951 on Carney's comments and hit a 1-1/2 year high of 1.2525 euros. The gap between 2-year UK and German yields ballooned to its widest in four years.

(Additional reporting by Anirban Nag, Julia Payne and Christopher Johnson; Editing by Nick Zieminski)

Suzuki chairman says unclear when court may rule on row with Volkswagen

Suzuki Motor Corp Chairman Osamu Suzuki said it was unclear when an international arbitration court will rule on its 2-1/2 year dispute with Volkswagen AG over their failed partnership.

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Japan's No.4 automaker by global sales volume filed for international arbitration in November 2011, after Volkswagen refused to sell back a 19.9 percent stake in Suzuki it acquired in January 2010 for 1.7 billion euros ($2.3 billion).

Earlier this month, sources familiar with the matter told Reuters that a London-based arbitration court had wrapped up witness hearings and was expected to issue a ruling before the end of the year.

 
 
 

"It's unclear," the 84-year-old chief executive told reporters in Tokyo when asked about the likely timing of a ruling. Pressed on whether the two companies could reach a settlement, he said repeatedly: "We are the ones that took this to court."

The two automakers agreed on a tie-up in December 2009, vowing to work together on technologies in areas such as hybrid and electric vehicles, and on expanding in emerging economies.

Suzuki later accused its German partner of withholding hybrid technology it had promised to share and demanded the return of the 19.9 percent stake. Volkswagen for its part complained about Suzuki's purchase of diesel engines from Fiat SpA.

(Reporting by Yoko Kubota; Editing by Edmund Klamann and David Holmes)

BMW and Tesla executives meet to discuss electric cars

Executives from German carmaker BMW and U.S.-based class="mandelbrot_refrag">Tesla Motors Inc met this week in a move which could lead to the creation of charging stations usable for different types of electric cars.

BMW and electric carmaker Tesla are seeking ways to raise the popularity of battery-powered vehicles, which consumers have shunned due to their limited operating range, the scarcity of charging stations and the time it takes to recharge them.

"Both companies are strongly committed to the success of electro-mobility and discussed how to further strengthen the development of electro-mobility on an international level," a BMW spokesman said in a statement on Friday.

 
 
 

BMW said the meeting had taken place on Wednesday but declined to comment in detail about the nature of the talks, or about which BMW executives had met with Tesla.

In a conference call on Thursday, Tesla Chief Executive Elon Musk said there had been talks with BMW about how to promote the use of electric vehicles and how to make better use of Tesla's network of charging stations.

Carmakers including General Motors, class="mandelbrot_refrag">Ford, Chrysler, BMW, Daimler, Volkswagen, Audi and Porsche have committed to adopting a common SAE combo standard for fast-charging connectors.

Fast-charging stations allow electric vehicle owners to recharge batteries up to 80 percent in less than 20 minutes.

Today, the Chevrolet Spark and the BMW i3 for example can use the same battery recharging stations.

Tesla has, however, developed its own network of high-speed charging stations including along key autobahn routes in class="mandelbrot_refrag">Germany in an effort to make electric cars viable for long-distance commuting.

Tesla's charger system can be fitted with an adapter that allows its cars, including the Tesla Model S, to be recharged on both the SAE chargers and its own system.

SHARING PATENTS

Tesla also said on Thursday that it would allow others to make use of its class="mandelbrot_refrag">intellectual property in the hope of speeding up development of electric cars by all manufacturers.

Musk said this included all of Tesla's patents, including several hundred current ones and several thousand in the future.

German premium auto makers have been keen to collaborate with Tesla.

In January, Daimler Chief Executive Dieter Zetsche said the German maker of Mercedes-Benz cars was open to deepening its partnership with the U.S. firm.

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Daimler holds a 4.3 percent stake in Tesla, which is already supplying it with electric motors and batteries for its Smart Fortwo electric vehicle (EV) and the new Mercedes-Benz B-Class EV.

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(Editing by Jonathan Gould and Mark Heinrich)

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BNP got high-level 2006 warnings on sanctions busting: report

French bank BNP Paribas was warned in 2006 by a high-ranking U.S. Treasury official and in three reports by legal experts that it risked being penalized for breaking U.S. sanctions, according to Le Monde newspaper.

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Since France's biggest bank flagged the risk of a big fine in February this year, sources close to the affair have said it ignored early warnings of the risks it faced. They pointed out that the alleged offending transactions being investigated by U.S. authorities continued until 2009.

The French newspaper's report, written as talks accelerate towards a possible $10 billion fine and other penalties, said Stuart Levey, then the U.S. Treasury Under Secretary for Terrorism and Financial Intelligence, made a visit to Paris in September 2006.

 
 
 

The paper, drawing on the findings of its own investigation, said Levey met the bank's top officials, including Baudoin Prot, who has since become chairman, in its boardroom.

Levey was there not to talk about the legal risks, but to warn the bank to be vigilant, citing the names of a number of blacklisted Iranian class="mandelbrot_refrag">banks, the Le Monde report said.

U.S. President George Bush had called class="mandelbrot_refrag">Iran part of an "Axis of Evil" and wanted European class="mandelbrot_refrag">banks to stop working there. Levey took the same "clear" message to other European banks, Le Monde reported.

A second set of warnings also came in 2006, the report said, this time from legal experts, after ABN Amro was fined $40 million for breaking sanctions against class="mandelbrot_refrag">Iran and class="mandelbrot_refrag">Libya in January of that year.

Until that point, lawyers Cleary Gottlieb had assured BNP Paribas it was not at risk as long as it operated outside U.S. territory, Le Monde said. However the ABN Amro fine was a first - covering transactions done outside the United States. After it, Cleary Gottlieb changed its advice to say there was a risk in certain cases. Two other expert reports commissioned by the bank came to a similar conclusion.

BNP Paribas was not immediately available to comment on the Le Monde report.

The bank has said publicly only that it is in discussions with U.S. authorities about "certain U.S. dollar payments involving countries, persons and entities that could have been subject to economic sanctions".

It has set aside $1.1 billion for the fine but told shareholders it could be far higher than that. Last month it also said it had improved control processes to ensure such mistakes did not occur again.

The suggestion that Prot had a personal warning from the U.S. Treasury puts a new focus of attention on him after the bank announced the departure of chief operating officer Georges Chodron de Courcel on Thursday.

U.S. authorities - five of them in all including the New York financial regulator - are investigating whether BNP evaded U.S. sanctions between 2002 and 2009. Sources familiar with the matter say they are trying to establish whether the bank stripped out identifying information from wire transfers so they could pass through the U.S. financial system without raising red flags.

(Reporting by Andrew Callus and Matthieu Protard; editing by Tom Pfeiffer)

Drug-linked payouts: complex fix for Pfizer's next Astra bid?

The world's biggest would-be drugs merger hit a wall last month but speculation about smart ways that Pfizer could yet seal a deal with AstraZeneca remains intense.

Even as talks fell apart last month, some in Pfizer's camp remained optimistic the transaction could be revived - and certain AstraZeneca advisers have not ruled out renewed talks. Under British takeover law, the UK firm can approach Pfizer at the end of August to discuss a sweetened bid, or Pfizer can try again in November.

While the most obvious method for Pfizer to win AstraZeneca around might seem to be more cash, some class="mandelbrot_refrag">hedge funds think the U.S. firm could structure payouts by tying them to the performance of key AstraZeneca drugs.

 
 
 

A so-called contingent value right, or CVR, was a winning formula for class="mandelbrot_refrag">Sanofi in its 2011 battle for Genzyme and the tradeable product - promising additional payouts once future benchmarks are hit - has been used in several other drug industry deals when the two sides could not agree on price.

"An enriched cash:equity mix as well as a CVR component to bridge the ... valuation gap between the two management teams may see the deal agreed upon on a friendly basis," said analysts at Jefferies this week, predicting an 80 percent probability of AstraZeneca inviting Pfizer back after an enforced cooling-off period ends in late August.

UNWIELDY OPTION?

Where CVRs have worked before, they have typically been tied to one particular drug upon which buyers and sellers could not agree a price - such as Genzyme's multiple sclerosis drug Lemtrada.

Applying a CVR to AstraZeneca, then, could be tough, given the number of new drugs in its pipeline and the time needed to prove their value: Debate about the UK company's valuation centres on a wide range of experimental drugs in cancer, respiratory disease and other areas, for which it has made sales forecasts stretching as far as 2023.

“Who wants to own a CVR for 10 years?" said Dan Mahony, a fund manager at Polar Capital, who built up his stake in AstraZeneca last year and doubts the idea would be attractive to investors.

“I’m not sure a CVR would necessarily work in this situation. You’d end up with something that is a really long-dated option - and anything that is illiquid and doesn’t really trade is always a bit of a pain in the neck."

In order to cover itself against the risk of a new drug not working out, Pfizer would have to construct any CVR around a number of very different assets ranging from new cancer drugs like MEDI4736 and AZD9291 to benralizumab for asthma to diabetes and heart drugs, suggested Mark Clark, an analyst at Deutsche Bank - a nice idea, but "probably too unwieldy."

"If Pfizer was cash-strapped then it might be a sensible way to work through the difficulties – but it’s not cash-strapped and it seems overly complex," Clark said.

MORE CASH

It would be far simpler for Pfizer instead to bump up the cash element in its 55 pounds-a-share offer - rejected as inadequate - and meet the 58.85 pounds that AstraZeneca has indicated is the minimum at which it might recommend a deal.

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Many healthcare bankers not involved in the bid predict Pfizer will be back - not least because no other target both complements the U.S. company's product range and offers the same potential for tax and cost benefits.

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Pfizer Chief Financial Officer Frank D'Amelio suggested as much this week - and pushed AstraZeneca shares higher - when he told a Goldman Sachs healthcare conference that talks about a deal had fallen down simply over price.

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"In a word it was price," D’Amelio said. "Any other issues that were raised during the negotiations, during the conversations, I think we were able to adequately, effectively address those."

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Since AstraZeneca also raised deep-seated concerns about execution risks and British politicians whipped up a storm over job cuts, D'Amelio's comments were taken as a sign that Pfizer sees such problems as manageable. D'Amelio stressed that he could not speculate on whether Pfizer would return or not.

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UK takeover rules prohibit any re-engagement for three months from May 26 - and what happens after that will depend on how AstraZeneca's drug research fares in the meantime and what happens to its shares - a strong run on the stock could push it out of Pfizer's reach.

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So far, the newsflow for AstraZeneca has been good, with promising data on new cancer drugs and no competition yet to its blockbuster heartburn medicine Nexium in the U.S. market due to problems at generic supplier Ranbaxy - a factor that could allow it to beat its current targets for 2014 class="mandelbrot_refrag">earnings.

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(Editing by Sophie Walker)

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U.S. futures imply weak open, S&P on track for down week

U.S. stock index class="mandelbrot_refrag">futures pointed to a slightly lower on Friday as some positive corporate news supported markets, though ongoing violence in Iraq gave investors pause.

* While both the Dow and S&P hit record highs this week, Wall Street has lately been pressured by concerns of slowing global growth and violence in Iraq, which has taken oil prices to their highest since September. The Dow and S&P 500 are on track for their first weekly decline after three consecutive weeks of gains.

* The S&P has fallen for three straight days, its longest streak of declines since early April. However, it has dropped just 1.1 percent over that period, and many view the market's recent trend upward as intact.

 
 
 

* class="mandelbrot_refrag">Intel Corp shares jumped 4.7 percent to $29.27 in heavy premarket trading a day after the Dow component raised its full-year revenue outlook, citing stronger-than-expected demand for personal class="mandelbrot_refrag">computers used by businesses.

* OpenTable Inc jumped 46 percent to $103.10 in heavy premarket trading after Priceline Group Inc said it would buy the company for $2.6 billion. Priceline shares rose 0.7 percent to $1,235 before the bell. Among other Internet names, Yelp Inc jumped 11 percent to $73.01 and GrubHub Inc rose 7.7 percent to $36.25.

* S&P 500 class="mandelbrot_refrag">futures fell 2.5 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, class="mandelbrot_refrag">dividends and time to expiration on the contract. Dow Jones industrial average futures fell 27 points and Nasdaq 100 futures slid 1.5 points. * For the week, the Dow is down 1.1 percent, the S&P is down 1 percent, and the Nasdaq is down 0.6 percent. The Dow and S&P have risen for three straight weeks; Nasdaq has risen for four.

* The CBOE Volatility index is up 10.2 percent on the week, its first weekly rise following eight weeks of declines. Despite the spike, the so-called 'fear index' remains well below its historical average.

* Oil rose 0.2 percent to $106.78 per barrel. While the price of oil has spiked 2.3 percent over the past three days, most analysts said it would need to be sharply above $115 per barrel for a protracted period before it becomes a major headwind to economic growth. Still, energy companies may attract more action as prices fluctuate.

* In Iraq, Islamist rebel fighters captured two more towns overnight as they moved toward Baghdad. U.S. President class="mandelbrot_refrag">Barack Obama responded by threatening military strikes, adding to the market's geopolitical concern; selling accelerated on Thursday after his comments.

* class="mandelbrot_refrag">Finisar Corp plunged 22 percent to $19.74 in premarket trading a day after forecasting weaker-than-expected class="mandelbrot_refrag">earnings, citing higher capital expenditure in China.

(Editing by Bernadette Baum and Nick Zieminski)

Weak U.S. producer prices point to tame inflation pressures

U.S. producer prices fell in May after two month of solid gains, but the decline was not enough to change perceptions that inflation pressures are steadily creeping up.

The Labor Department said on Friday its producer price index for final demand slipped 0.2 percent after advancing in April by 0.6 percent, which was the largest gain in 1-1/2 years.

Economists, who had expected producer prices to edge up, saw the decline as a correction after gains in March and April, and said it did not change their view that prices were firming.

 
 
 

"The net result is a pick-up. The net strengthening makes the modest acceleration in the more important consumer inflation measures more credible," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York.

The government revamped the PPI series at the start of the year to include services and class="mandelbrot_refrag">construction. Big swings in prices received for trade services have injected volatility into the series, making it hard to get a good read on inflation.

The overall inflation backdrop remains generally tame, with the main gauge watched by the Federal Reserve continuing to run below the U.S. central bank's 2 percent target.

Still, key consumer inflation measures pushed up in April and are expected to continue edging higher as the labor market tightens and the economy regains momentum. That should position the Fed to raise interest rates in the second half of 2015.

MOVING TOWARDS TARGET

The U.S. central bank, which is already scaling back the amount of money it is injecting into the economy through monthly bond purchases, has kept overnight lending rates near zero since December 2008. Fed officials meet on Tuesday and Wednesday to assess the economy's health and their monetary policy stance.

"They will probably say inflation is trending toward its 2 percent goal," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

A separate report showed consumer sentiment slipped slightly in early June. The Thomson Reuters/University of Michigan's consumer sentiment index was at 81.2 from 81.9 in May.

The report offered a mixed reading on the outlook for prices. Households' prediction of inflation a year out fell to a six month low of 3.0 percent from 3.3 percent in June, but the five-year projection ticked up to 2.9 percent from 2.8 percent.

Producer inflation in May was depressed by broad price declines at the factory gate, while wholesale food prices snapped four consecutive months of increases.

There were also declines in the prices of trade services, a gauge of retailers' and wholesalers' margins.

And while wholesale gasoline prices fell last month, economists cautioned increases were in the cards because of the unrest in Iraq.

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A recent spike in the price of oil "should filter through to the economy over the next several months, especially if the sectarian violence (in Iraq) continues," said Jay Morelock, an economist at FTN Financial in New York.

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In the 12 months through May, prices received by the nation's farms, factories and refineries rose 2.0 percent, moderating from April's 2.1 percent gain.

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Producer prices excluding food, energy and trade services were flat after advancing 0.3 percent the prior month.

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(Reporting By Lucia Mutikani; Additional reporting by Richard Leong in New York; Editing by Andrea Ricci and Meredith Mazzilli)

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U.S. consumer sentiment slips in June

U.S. consumer sentiment fell in June as views by consumers with the lowest incomes soured, a survey released on Friday showed.

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The Thomson Reuters/University of Michigan's preliminary June reading on the overall index on consumer sentiment came in at 81.2, down from 81.9 the month before.

It was below the median forecast of 83.0 among economists polled by Reuters.

 
 
 

"The change from May was too small to indicate a

significant loss in sentiment," survey director Richard Curtin said in a statement.

"The small month-to-month variations aside, the main finding from the recent surveys is that consumers have maintained their expectations at reasonably favorable levels for the past six months."

The survey's barometer of current economic conditions rose to 95.4 from 94.5 and was below a forecast of 95.7.

The survey's gauge of consumer expectations slipped to 72.2 from 73.7, and missed an expected 74.6.

The survey's one-year inflation expectation was at 3.0 percent down from 3.3 percent, while the survey's five-to-10-year inflation outlook was at 2.9 percent compared with 2.8 percent.

(Reporting by Rodrigo Campos; Editing by Chizu Nomiyama)

OECD sees U.S. growth accelerating through 2015


Fiat Chrysler CEO confirms targets despite difficult Brazil

Fiat Chrysler Automobiles will meet its 2014 targets even though the Brazilian car market is set to remain difficult and Europe is showing no sign of improvement, Chief Executive Sergio Marchionne said on Friday.

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"At the group level, we'll achieve them. This is not a problem," Marchionne told reporters on the sidelines of an event in Venice.

Asked about a possible stabilisation of the situation in class="mandelbrot_refrag">Brazil, he said: "Fiat will maintain its market share in the ups and downs. We expected it to be a difficult year. We see a difficult year until the elections."

 
 
 

"The World Cup is distracting everyone but elections are the real problem," he added.

A sluggish class="mandelbrot_refrag">economy, expiring tax breaks and weak exports have put the brakes on Brazil's car industry, stoking fears of lay-offs in an election year.

Marchionne said he saw no sign of changes in the European car market, which this year would remain "more or less in line" with 2013. "Its not a healthy growth," he said.

Asked whether Fiat would be able to reduce losses in Europe in spite of higher investments, he said it would depend on the performance of its luxury brand Maserati given that costs in its mass-market segment had been cut to the bone.

On press reports of talks with Mitsubishi for a venture in pick-ups, Marchionne said: "We continue to talk with everyone including Mitsubishi."

(Reporting by Danilo Masoni; editing by Lisa Jucca and Tom Pfeiffer)

Recapitalizing Fannie, Freddie not viable: Treasury official

A senior U.S. Treasury official on Friday rejected calls to recapitalize class="mandelbrot_refrag">Fannie Mae and class="mandelbrot_refrag">Freddie Mac, saying it would take at least 20 years to make sure they were adequately funded and that in the meantime taxpayers would be on the hook.

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In remarks to a housing conference, Treasury Undersecretary Mary Miller repeated the Obama administration's call that the two so-called government-sponsored enterprises be wound down.

"Critics of reform would suggest that we can simply recapitalize the GSEs and avoid difficult decisions around creating a new system," she said. "Even if truly rehabilitating the GSEs were possible, recapitalizing them adequately would take at least 20 years."

 
 
 

"During these 20 years, the taxpayer would remain at risk of having to bail out the GSEs during another downturn," Miller added

class="mandelbrot_refrag">Fannie Mae and class="mandelbrot_refrag">Freddie Mac, which buy mortgages from lenders and repackage them into securities they sell to investors with a guarantee, were seized by the government in 2008 as loan losses threatened their solvency.

They were propped up with $187.5 billion in taxpayer aid, but they have since returned to profitability and have paid more in class="mandelbrot_refrag">dividends to the government than they received in support.

Efforts to wind down the two entities, the largest sources of mortgage class="mandelbrot_refrag">finance, have foundered on Capitol Hill, spurring the hopes of investors who would like to see them reprivatized.

Miller noted that their recent profits have been driven largely by one-time, tax-related adjustments and legal settlements. She also noted they are required to shrink their loan portfolios, which are also helping drive income, by 15 percent a year.

"The GSEs will not be able to replicate the levels of revenue they achieved over the past two years," she said.

In her remarks, Miller also called for a greater effort to ensure financing was available for affordable rental housing, noting that the financial crisis and recession had led many Americans to choose renting over buying.

She repeated the administration's call on Congress to allow Ginnie Mae, another GSE, to securitize loans made under a program in which the Federal Housing Administration, a government mortgage insurer, shares risks with state and local housing class="mandelbrot_refrag">finance agencies or other qualified lenders.

But Miller said the administration was not waiting for congressional action. Instead, it was exploring whether funding might be available from other governmental sources for loans already guaranteed through FHA's risk-sharing program, she said.

"This could present a viable interim solution and we hope to say more in the near future," Miller said.

(Reporting by Timothy Ahmann; Editing by Chizu Nomiyama, Steve Orlofsky and Jonathan Oatis)

Wall St. edged higher, S&P set to close week lower

U.S. stocks edged higher on Friday, boosted by bullish corporate news from the tech sector, though major indexes remained on track to snap a multi-week string of weekly gains.

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While the market's recent trend upward was considered intact, broader gains were hard to come by with major indexes within striking distance of record levels amid ongoing violence in class="mandelbrot_refrag">Iraq, which has taken oil prices to their highest since September.

Intel Corp was both the class="mandelbrot_refrag">S&P 500's biggest gainer and the Nasdaq's most active name, jumping 6.2 percent to $29.70 a day after the class="mandelbrot_refrag">Dow component raised its full-year revenue outlook, citing stronger-than-expected demand for personal computers used by businesses.

 
 
 

"The market isn't cheap, but it isn't crazy expensive and the sectors that are looking better are cyclical in nature," said Michael Mullaney, chief investment officer at Fiduciary Trust Co in Boston. "Tech has been doing well from a price return standpoint, and that should continue."

OpenTable Inc popped 47 percent to $103.42 in heavy trading after Priceline Group Inc said it would buy the company for $2.6 billion. Priceline fell 1 percent to $1,213.75.

Among other Internet names, Yelp Inc jumped 14 percent to $74.79 and GrubHub Inc rose 9 percent to $36.67.

The class="mandelbrot_refrag">Dow Jones industrial average rose 27.03 points, or 0.16 percent, to 16,761.22, the class="mandelbrot_refrag">S&P 500 gained 3.55 points, or 0.18 percent, to 1,933.66 and the class="mandelbrot_refrag">Nasdaq Composite added 8.50 points, or 0.2 percent, to 4,306.13.

For the week, the Dow is down 1 percent, the class="mandelbrot_refrag">S&P is down 0.8 percent and the class="mandelbrot_refrag">Nasdaq is down 0.3 percent.

The VIX volatility index is up 7.7 percent on the week. Despite the spike, the so-called 'fear index' remains well below its historical average.

Oil rose 0.1 percent to $106.66 per barrel but continues to be in focus amid the tense situation in class="mandelbrot_refrag">Iraq, where Islamist rebel fighters captured two more towns overnight as they moved toward Baghdad. U.S. President Barack Obama responded by threatening military strikes. (Full Story)

"Obama saying he will do whatever is necessary to right the situation is what a lot of people want to see," said Mullaney, who helps oversee $11.3 billion in assets. "Most people would prefer to see us as the world’s policemen rather than sitting out on the sidelines being isolationist."

U.S. consumer sentiment unexpectedly fell in June as views by consumers with the lowest incomes soured, according to the preliminary June read from the Thomson Reuters/University of Michigan's index on consumer sentiment.

Finisar Corp plunged 22 percent to $19.74 a day after forecasting weaker-than-expected earnings, citing higher capital expenditure in China.

(Editing by Bernadette Baum and Nick Zieminski)

GM issues another ignition switch recall, for Chevy Camaros

In a product recall that echoes the one that has plunged General Motors Co GM.N into a safety crisis, the automaker on Friday said it will recall 511,528 current model Chevrolet Camaro cars, mainly in North America, to correct an issue with the ignition switch.

GM said a driver's knee can bump the key fob and move the ignition switch out of the "run" position, causing the engine to shut off.

Earlier this year, GM recalled 2.6 million small cars worldwide because of an ignition switch failure in which a bump of the key fob can turn off the engine, disabling power steering and airbags. That defect was not reported to consumers for years and has been linked to at least 13 deaths and caused a re-examination led by Chief Executive Mary Barra of how the company handles safety recalls.

 
 
 

But GM said the new recall, affecting Camaros of model years 2010 to 2014, is not like the one involving older-model Chevrolet Cobalt and Saturn Ion cars.

"It's not at all related to the Cobalt," GM safety spokesman Alan Adler said in an interview. "The condition here is a switchblade key" in which a key pops out of the key fob when a small button is depressed.

While the switches in the Camaro are different from those in the Cobalt and Ion, some of the issues are similar: When the key fob is bumped and the switch is moved out of the run position, the engine can turn off, causing loss of power steering and failure of airbags to deploy in a crash.

GM said it is aware of three crashes causing four minor injuries linked to the issue in Camaro, a sporty two-door car.

Adler said the air bags did not deploy in any of the three rashes. He said he did not know when the crashes occurred or the details of them.

The U.S. National Highway Traffic Safety Administration, which is responsible for overseeing safety defects and recalls, had not posted an official Camaro recall notice as of mid-morning Friday, but the agency has received and posted several complaints from consumers.

A complaint dated May 6 on the 2014 Camaro noted "knee bumped key, engine turned off at 60 mph." There were no injuries or deaths reported in that incident.

"The Camaro ignition system meets all GM class="mandelbrot_refrag">engineering specifications and is unrelated to the ignition system used in Chevrolet Cobalts and other small cars included in the ignition switch recall," GM said in a statement.

Adler said GM discovered the issue in the Camaro as it was testing a wide range of its models after the widely publicized small-car ignition switch recall.

Jeff Boyer, appointed to the new position of vice president for GM global safety earlier this year in response to the small-car ignition switch recall, said the Camaro recall was a quick action that is "the new norm for product safety at GM," according to the press statement.

Barra is to appear before Congress next Wednesday, her second trip to Congress on the small-car ignition switch recall.

GM said it will send letters to owners shortly advising them to visit dealers to get a new key made.

(Reporting by Bernie Woodall in Detroit; Editing by Meredith Mazzilli)

Priceline to buy OpenTable for $2.6 bln

Travel website owner Priceline Group Inc will buy restaurant reservation website operator class="mandelbrot_refrag">OpenTable Inc for $2.6 billion, aiming to broaden its offerings in an increasingly competitive online travel industry.

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Priceline's offer of $103 per share for the owner of class="mandelbrot_refrag">OpenTable.com represents a premium of 46 percent to OpenTable's Thursday close.

OpenTable's shares inched past the offer price to trade at $104.19 on the Nasdaq, suggesting that some investors expect a higher bid. Priceline's shares were down 1.6 percent at $1,205.50.

 
 
 

With online travel companies having little room to expand, many are looking outside the industry to boost revenue.

Travel review website TripAdvisor Inc bought online restaurant booking platform Lafourchette last month to enter the restaurant-booking industry.

As of Thursday, OpenTable's shares were trading at about 33.5 times 12-month estimated forward earnings, far below the 498.7 times of competitor Yelp Inc, according to Thomson Reuters StarMine.

"I think (the deal) creates urgency for larger players to acquire the leading local platforms," Telsey Advisory Group analyst James Cakmak told Reuters.

The deal is expected to close in the third quarter.

OpenTable, which is facing increasing competition from Yelp and others, posted its first quarterly loss in five years for the period ended March 31 as it spent more on marketing to stem the slowdown in the number of restaurants signing up for its services.

The number of North American restaurants using OpenTable's platform rose 19 percent to 23,862 in the quarter, but growth was slower than in the previous two quarters.

The number of restaurants using its service outside the United States fell.

OpenTable, which gets $1.00 from a restaurant if a diner reserves a table through its website or app, will continue to operate as an independent business led by its current management, Priceline said.

Up to Thursday's close, OpenTable's stock had fallen about 11 percent this year.

Yelp's shares rose 13.3 percent to $74.65 in early trading, having fallen 5 percent this year to Thursday's close.

(Reporting by Sagarika Jaisinghani, Lehar Mann and Rohit T. K.; Editing by Maju Samuel and Ted Kerr)

Massive Picasso at New York's Four Seasons to move to a museum

A massive Pablo Picasso theater curtain that has graced the hallway of New York City's landmark Four Seasons Restaurant for more than 50 years will be moved to a museum, the artwork's owner said Thursday.

"Le Tricorne," a 19-foot (5.8-meter) tall canvas completed in 1919 for the Ballet Russes, will find a new home at the New York Historical Society in coming months, said Peg Breen, president of the New York Landmarks Conservancy.

A staple of the Four Season's decor since 1959, "Le Tricorne" was at risk of losing its display space after the owner of Seagram Building, in which the restaurant is located, said the artwork could no longer be accommodated.

 
 
 

"We are deeply grateful to the New York Historical for having stepped forward to help safeguard this cultural treasure," Breen said. "Our goal was to keep it in New York and keep it in a public place."

The piece was donated to the Landmarks Conservancy in 2005 by French entertainment company Vivendi Universal.

The fate of the artwork had even made its way to court, with Seagram Building owner Aby Rosen arguing the canvas could no longer keep its prominent position greeting rich and powerful diners because the wall behind it was crumbling.

With the offer from the New York Historical Society to house and display the curtain, Rosen has agreed to pay for removing the curtain, conservation work and relocation, Breen said.

"It's going to be a complicated and tricky move," she said.

The artwork is expected to be in place on the second story of the Historical Society in coming months.

"Le Tricorne" depicts a crowd watching a bullfight and was one part of a larger curtain that hung over a Paris ballet production by the same name.

(Reporting by Victoria Cavaliere; Editing by Eric Beech)

Apple to make 3-5 million smartwatches monthly, sales begin October: report

class="mandelbrot_refrag">Apple Inc is preparing to sell its first wearable device this October, aiming to produce 3 million to 5 million smartwatches a month in its initial run, the class="mandelbrot_refrag">Nikkei reported on Friday, citing an unidentified parts supplier and sources familiar with the matter.

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Specifications are still being finalized, but the devices are likely to sport curved OLED (organic light-emitting diode) displays and sensors that collect health data from blood glucose and calorie consumption to sleep activity, the Japanese news service cited industry sources as saying.

The industry has long expected Apple to unveil some sort of smartwatch, following the release of Samsung Electronics' Galaxy Gear watches.

 
 
 

Wall Street is hoping to see a new Apple product this year to galvanize the former stock market darling's share price and end a years-long drought of ground-breaking devices. CEO Tim Cook has promised "new product categories" in 2014.

Apple declined to comment.

(Reporting by San Francisco newsroom. Editing by Andre Grenon)

Accused Seattle gunman suffers severe mental illness, his lawyer says

The man accused of killing one person and wounding two others in a shooting spree at a small Christian college in Seattle suffers from "significant and long-standing mental health issues" that were a factor in the tragedy, his lawyer said on Friday.

Speaking to reporters after a court hearing in which a judge ordered the suspect, Aaron Ybarra, 26, held without bail on suspicion of first-degree murder and assault, defense attorney Ramona Brandes also said her client had been involuntarily committed in the past because of mental illness.

She added that Ybarra was sorry for the victims' pain.

 
 
 

The probable-cause statement filed in court by prosecutors said Ybarra confessed to police detectives that he was the gunman in Thursday's incident, that he had been planning a mass shooting and wanted to kill as many people as possible before killing himself.

Local media reports citing unidentified police sources have said Ybarra, who is not a student at the college, was fascinated with mass shootings at other schools, including the 1999 Columbine High School massacre in Colorado.

Police offered no public explanation for why the suspect might have singled out Seattle Pacific University, a Methodist liberal arts college of some 4,000 students.

Ybarra is accused of walking into an academic building on the campus armed with a shotgun and opening fire on three people before pausing to reload his weapon.

At that point, police said, a student building monitor doused the gunman with pepper spray and tackled him. Several bystanders jumped in to help, seizing his gun. He was arrested minutes later by police, who said the suspect also was carrying a hunting knife and at least 50 rounds of shotgun ammunition.

In a statement read to reporters on Friday, Brandes said: "Mr. Ybarra suffers from significant and long-standing mental health issues, including delusions, that were in play during yesterday's tragedy.

"I do not know at this point in time why Mr. Ybarra's illness brought him to Seattle Pacific University, but I can tell you that he recognizes the suffering of the victims and their families. He is sorry for their pain," she said.

Brandes said she did not know the circumstances of his prior involuntary commitment.

'NO EASY ANSWERS'

One man who was shot during the rampage died a short time later, while a badly wounded woman remained hospitalized on Friday in serious condition in the intensive care unit, although she was conscious and breathing on her own.

A second man was in satisfactory condition with pellet wounds. A third man was treated for minor injuries suffered in the scuffle with the suspect, police said. All four were in their 20s. The bloodshed in Seattle marked the latest in a series of mass shootings at schools and other public places across the United States in recent years that have renewed a national debate over gun safety and mental illness.

    "When something like this occurs in our midst, it reminds us that we live in a world that is broken, and there are not easy answers," Bob Zurinsky, assistant director of university ministries, told hundreds of mourners gathered on Friday at a Methodist church near campus for a special prayer service.

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(Additional reporting by Jimmy Lovaas and Bryan Cohen in Seattle; Writing by Steve Gorman and Eric M. Johnson; Editing by Sandra Maler and Peter Cooney)

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Americans split on prisoner swap of Taliban for U.S. soldier

Americans are deeply divided over whether the Obama administration did the right thing by swapping five Taliban leaders to win the freedom of class="mandelbrot_refrag">Afghanistan prisoner of war Bowe Bergdahl, according to Reuters/Ipsos survey released on Friday.

Americans strongly agree the United States should make every effort to free prisoners of war like Bergdahl, an Army Sergeant who was captured in eastern class="mandelbrot_refrag">Afghanistan in 2009. But they also think the prisoner swap deal set a dangerous precedent.

The Reuters/Ipsos poll of 958 Americans interviewed online found that 44 percent disagreed with the statement that trading Taliban prisoners for Bergdahl was "the right thing to do," with 26 percent of them strongly disagreeing.

 
 
 

Twenty-nine percent of those polled said they thought the prisoner swap was the right thing to do and 27 percent said they were not sure, the poll found.

Bergdahl was handed over to U.S. special operations forces in Afghanistan last Saturday after the Obama administration agreed to send five Taliban leaders held at Guantanamo prison to Qatar, where they must remain for a year.

After an initial wave of euphoria over the release, the deal triggered a backlash among U.S. lawmakers angry because they were not given 30 days notice before the transfer of the Guantanamo prisoners, as required by law. Some of Bergdahl's former Army comrades said they believe he deserted his post.

White House counselor John Podesta on Friday told a Christian Science Monitor breakfast that President class="mandelbrot_refrag">Barack Obama knew the prisoner swap would be a “controversial decision.”

The president said he acted quickly because he was faced with a "delicate situation that required no publicity" and that he had no regrets about the action.

"This is something that I would do again and I will continue to do wherever I have an opportunity, if I have a member of our military who's in captivity," he told NBC Nightly News.  "We're going to try to get 'em out."

Obama decided to personally announce the exchange in the White House Rose Garden, accompanied by Bergdahl's parents, in order to explain to the public the reasons behind the decision, Podesta told a breakfast meeting.

The uproar over the prisoner swap has left Americans with conflicted views of the events, the Reuters/Ipsos poll showed.

Asked whether they thought Bergdahl was a patriot or a traitor/deserter, 65 percent said they did not know. Only 13 percent said they viewed Bergdahl as a patriot and 22 percent saw him as a traitor/deserter.

The respondents overwhelmingly agreed the United States should make every effort to recover prisoners of war, with 78 percent agreeing with that statement, including 48 percent strongly agreeing.

At the same time, they also thought trading five Taliban leaders for Bergdahl set a "dangerous precedent for future kidnapping or hostage-taking," with 66 percent agreeing with the statement, including 43 percent strongly agreeing.

The poll has a credibility interval of plus or minus 3.6 percentage points.

White House officials have said they were concerned about Bergdahl's health and felt they had to move secretly and quickly to secure his release once the exchange was decided.

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Bergdahl was taken to a U.S. military hospital in class="mandelbrot_refrag">Germany, where he was in stable condition and continuing to improve daily, according to an update by his doctors on Friday.

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A U.S. official, speaking on condition of anonymity, said Bergdahl still had not called his parents "because he hasn't chosen to yet."

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The official said Bergdahl had no physical issues preventing him from traveling but that there was no imminent plan to move the Idaho native back to the United States. Officials have declined to discuss his health issues, citing privacy concerns.

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(Additional reporting by Laura Zuckerman in Idaho, Roberta Rampton in Paris, and Mark Felsenthal; Editing by David Storey, Grant McCool and Diane Craft)

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Apple to make 3-5 million smartwatches monthly, sales begin October: report

class="mandelbrot_refrag">Apple Inc is preparing to sell its first wearable device this October, aiming to produce 3 million to 5 million smartwatches a month in its initial run, the class="mandelbrot_refrag">Nikkei reported on Friday, citing an unidentified parts supplier and sources familiar with the matter.

_0">

Specifications are still being finalized, but the devices are likely to sport curved OLED (organic light-emitting diode) displays and sensors that collect health data from blood glucose and calorie consumption to sleep activity, the Japanese news service cited industry sources as saying.

The industry has long expected Apple to unveil some sort of smartwatch, following the release of Samsung Electronics' Galaxy Gear watches.

 
 
 

Wall Street is hoping to see a new Apple product this year to galvanize the former stock market darling's share price and end a years-long drought of ground-breaking devices. CEO Tim Cook has promised "new product categories" in 2014.

Apple declined to comment.

(Reporting by San Francisco newsroom. Editing by Andre Grenon)

Federal judge strikes down Wisconsin ban on gay marriage

A federal judge deemed Wisconsin's ban on same-sex marriage unconstitutional on Friday to the delight of gay couples who immediately began rushing to county offices to wed as word of the ruling spread.

The ruling marked the latest in a string of decisions by federal judges who have struck down gay marriage bans in a number of states, although the Wisconsin ruling sparked some confusion over whether such marriages could now legally go ahead.

Clerks in two counties issued marriage licenses to same-sex couples on Friday night, and in response Wisconsin's attorney general filed an emergency motion asking the judge to stay her ruling.

 
 
 

U.S. District Judge Barbara Crabb ruled that a state constitutional amendment banning gay marriage, which Wisconsin adopted in 2006, violates gay couples' fundamental right to marry and their equal protection rights under the U.S. Constitution.

"Quite simply, this case is about liberty and equality, the two cornerstones of the rights protected by the United States Constitution," Crabb wrote.

Milwaukee County issued 68 marriage licenses to same-sex couples on Friday. Its courthouse stayed open late to allow couples to wed and 66 marriages were performed.

Another 61 marriage licenses were issued to gay couples in Dane County, which includes the state capital, Madison.

"We will continue to defend the constitutionality of our traditional marriage laws and the constitutional amendment, which was overwhelmingly approved by voters," State Attorney General J.B. Van Hollen said in a statement.

CROWDED COURTHOUSE

At the Milwaukee County courthouse, Matt Schreck, 37, and Jose Gutierrez, 35, both from Milwaukee, were the first same-sex couple married on Friday.

"It's amazing, I get to be with my best friend for the rest of my life," Schreck said.

Dozens of people crowded inside the courthouse to be married, amid clapping and tears, including Pat Cline, 51, and Patty McKenzie, 46, both from Oak Creek, Wisconsin.

"We never thought this day would happen. It's overwhelming," Cline said. The pair had planned to go to PrideFest Milwaukee, but decided to get married instead.

The Milwaukee County clerk plans to be open Saturday to issue marriage licenses to gay couples from 9 a.m. to 1 p.m. and the Dane County clerk from 9 a.m. to 5 p.m.

Challenges to state bans on same-sex marriage gathered momentum last June when the U.S. Supreme Court struck down parts of the U.S. Defense of Marriage Act, ruling that legally married same-sex couples were eligible for federal benefits. Not including Wisconsin, same-sex marriage is now legal in 19 states plus the District of Columbia, and the number of states could grow sharply if federal court rulings striking down bans in several states are upheld on appeal. On Friday, seven same-sex couples filed a federal lawsuit challenging North Dakota's ban on same-sex marriage. North Dakota was the last state where a ban on same-sex marriage still in effect had not been challenged.

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(Reporting by Brendan O'Brien; Editing by Cynthia Johnston, Sandra Maler and Michael Perry)

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Putin orders tightening of border control with Ukraine

Russian President Vladimir Putin gave an order to the Federal Security Service to strengthen protection of the country's border with class="mandelbrot_refrag">Ukraine to prevent people crossing illegally, Russian news agencies reported on Saturday.

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The order comes a day after Putin held talks with global leaders in class="mandelbrot_refrag">France, where U.S. President class="mandelbrot_refrag">Barack Obama called on him to cease support for separatists in eastern class="mandelbrot_refrag">Ukraine and stop the provision of arms and material across the border.

(Reporting by Lidia Kelly; Editing by Mark Trevelyan)

Ukraine's new leader stands up to Moscow over Crimea and Europe

Ukraine's new president Petro Poroshenko said his country would never give up Crimea and would not compromise on its path towards closer ties with Europe, spelling out a defiant message to Russia in his inaugural speech on Saturday.

The 48-year-old billionaire took the oath of office before parliament, buoyed by Western support but facing a crisis in relations with Russia as a separatist uprising seethes in the east of his country.

Russia annexed the Crimean peninsula in March, weeks after street protests ousted Poroshenko's pro-Moscow predecessor Viktor Yanukovich, in a move that has provoked the deepest crisis in relations with the West since the Cold War.

 
 
 

"Citizens of class="mandelbrot_refrag">Ukraine will never enjoy the beauty of peace unless we settle our relations with Russia. Russia occupied Crimea, which was, is, and will be, Ukrainian soil," Poroshenko said in a speech that drew a standing ovation.

He said he had delivered that message to Russian President Vladimir Putin when the two met on Friday at a World War Two anniversary ceremony in France.

There is no prospect of Russia reversing its takeover of Crimea, but in what could be a positive signal from Moscow, Russian news agencies reported Putin had ordered the Federal Security Service to strengthen protection of the border with class="mandelbrot_refrag">Ukraine and prevent people crossing illegally.

The move was potentially significant because Ukraine and Western governments have been pressing Moscow to stop what they say is a flow of Russian arms and fighters into eastern Ukraine.

Russia denies it is backing the uprising but journalists have encountered Russian nationals among the separatist ranks.

"NOT TRADE-OFF"

Poroshenko, who earned his fortune as a confectionery entrepreneur and is known locally as the "Chocolate King", said he intended to sign the economic part of an association deal with the European Union as a step towards full membership.

That idea is anathema to Moscow, which wants to keep Ukraine in its own post-Soviet sphere of influence.

His voice swelling with emotion, Poroshenko stressed the need for a united Ukraine and the importance of ending the conflict that threatens to further split the country of 45 million people. He said it would not become a looser federalised state, as advocated by Russia.

"There can be no trade-off about Crimea and about the European choice and about the governmental system. All other things can be negotiated and discussed at the negotiation table. Any attempts at internal or external enslavement of Ukraine will meet with resolute resistance," he said.

Since Poroshenko's election, government forces have stepped up their operations against the separatists who want to split with Kiev and join Russia. The rebels have fought back, turning parts of the Russian-speaking east into a war zone.

Poroshenko offered to provide a safe corridor for Russian fighters to go home. "Please, lay down the guns and I guarantee immunity to all those who don't have bloodshed on their hands."

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Switching from Ukrainian into Russian, he promised to visit the east with guarantees of Russian-language rights and proposals for decentralisation that would give its regions a bigger say in running their own affairs.

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But a scornful response from the rebels, who have declared their own "people's republics", spelled out the scale of the separatist challenge facing him.

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"What they (Kiev's leaders) really want is one-sided disarmament and for us to surrender. That will never happen in the Donetsk People's Republic," a top separatist official, Fyodor Berezin, said by telephone from Donetsk, an industrial hub where rebels have occupied strategic points.

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"As long as Ukrainian troops are on our soil, I can see that all Poroshenko wants is subjugation. The fight will continue."

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AT ODDS WITH MOSCOW

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Poroshenko won a landslide election on May 25 after promising to bridge the east-west divide that has split the country and thrust it into a battle for survival.

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Many Ukrainians hope the election of the former government minister, who is married with four children, will bring an end to the most tumultuous period in their post-Soviet history.

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More than 100 people were shot dead by police in Kiev by police in the street protests that eventually brought Yanukovich down. In the east, scores of people, including separatist fighters and government forces, have been killed since April.

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The uprising is not the only challenge facing Poroshenko, who inherits a country on the verge of class="mandelbrot_refrag">bankruptcy and rated by watchdogs as one of the most corrupt and ill-governed in Europe.

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Kiev is also at odds with Moscow over Russian gas. Russia is threatening to cut supplies as early as next week unless Ukraine settles its debt, the amount of which is disputed.

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Poroshenko's speech drew an ovation from guests at a ceremony attended by Lithuanian President Dalia Grybauskaite, U.S. Vice President Joe Biden and senior EU officials.

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Cheering crowds later greeted him on a walk in blazing sunshine on the square in front of Kiev's St Sophia's Cathedral, which was decked out with the blue and yellow national flags.

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On a visit to France, U.S. Secretary of State John Kerry said Washington hoped for a reduction in Russia-Ukraine tensions in the next few days, including a possible ceasefire.

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Russia's foreign ministry, in its first comments after Poroshenko's swearing-in, acknowledged his inauguration but did not comment on his speech, calling instead for the release of two Russian journalists detained in Ukraine.

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But reaction was hostile in eastern Ukraine, where government forces shelled rebel positions in Slaviansk and manned checkpoints on roads into the city. In another eastern city, Luhansk, separatist leader Valery Bolotov was emphatic in his rejection of Poroshenko and Ukrainian rule.

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"The Ukrainians have made their choice and they must live with it. As for our republic, we have no diplomatic relations with Ukraine," he told journalists, wearing combat fatigues in a conference room hung with crystal chandeliers.

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"Today Ukraine got a new president and now the blood of our people and of Ukrainians will lie on his conscience."

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(Additional reporting by Lidia Kelly in Moscow, Thomas Grove in Slaviansk and Alissa de Carbonnel in Luhansk; Writing by Mark Trevelyan; Editing by David Holmes)

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