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  1. #111
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    Post China bought back a lot of BofA assets: report

    (Reuters) - A consortium that included the Chinese government was the biggest buyer of a 5 percent stake in China Construction Bank Corp sold last month by Bank of America, the Financial Times reported on Sunday.

    The State Administration of Foreign Exchange, the National Social Security Fund and Citic Securities bought the CCB shares, the FT said, citing unnamed sources.

    The Chinese government role has been a closely guarded secret as it comes amid fears that Chinese bank stocks will raise additional capital and dilute the stakes of current investors, the FT said. There has been concern that loans and other assets held by CCB and other Chinese banks are vulnerable to losses in a possible slowdown of the Chinese economy.

    CCB has been the world's second-largest bank by market value.

    Bank of America agreed to sell 13.1 billion CCB shares -- half of its stake -- because of its own drive to raise capital to make up for losses from mortgage loans made during the U.S. housing boom. Bank of America, the biggest U.S. bank by assets, will get $8.3 billion cash from the sale.

    Trading volume in CCB shares surged after the sale, suggesting to some in the market that about one-third of the shares sold by Bank of America went to hedge funds and other institutional investors.

    Temasek Holdings, a Singapore state investor, and Seatown, a related investment firm, were among previously reported buyers of the CCB shares.

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    Post Europe faces week of challenges in debt crisis

    (Reuters) - Europe faces a string of political and legal tests this week that could hurt efforts to resolve its sovereign debt crisis and increase pressure for governments to try more radical solutions.

    A court ruling may reduce the freedom of the German government, the biggest contributor to the euro zone's bailout fund, to finance rescues of crisis-hit countries such as Greece.

    The European Central Bank, internally split over its bond market intervention to protect Italy, is expected to review the program. And Greece will find out how successful it has been in persuading private investors to take part in a bond swap designed to cut its 340 billion euro debt mountain.

    None of these challenges looks likely to doom policymakers' frantic attempts to keep indebted euro zone countries afloat while they try to regain the confidence of financial markets.

    But this week's events may underline how vulnerable those attempts are to worsening political currents in the euro zone, and how far the 17-nation bloc remains from finding a lasting solution to the debt crisis.


    On Wednesday morning, Germany's Federal Constitutional Court will deliver its ruling -- awaited for over a year -- on suits claiming Berlin is breaking German law and European treaties by contributing to multi-billion euro bailouts of Greece, Ireland and Portugal.

    Legal experts think the court is highly unlikely to block the contributions altogether. But it is expected to give the German parliament a bigger say in approving them.

    With German public opinion turning against providing more aid to Europe -- a survey published last week suggested two-thirds of Germans think parliament should not ratify more money for the bailout fund -- that could be a dangerous concession. At the very least, it might further slow and complicate Berlin's responses to the debt crisis.

    It could also encourage parliamentary opposition to bailouts in other disillusioned euro zone states. In Slovakia on Sunday the head of a junior party in the ruling coalition said the Slovak parliament would not vote on expanding the powers of the regional bailout fund, the European Financial Stability Facility, before December at the earliest.

    Euro zone officials have been hoping national parliaments around the bloc will finish approving the EFSF reforms by early October. The threatened delay in tiny Slovakia may not be disastrous -- diplomatic pressure may be put on Bratislava to speed up approval, or a legal subterfuge found for the EFSF to use its new powers pending Slovak approval -- but it underlines how the bloc's crisis plans rest on shaky political ground.

    Politics have also turned ugly in some of the euro zone countries which need aid. The ECB's monthly policy meeting will grapple with this on Thursday as it debates how to handle Italy.

    Early last month, the ECB's 23-member Governing Council decided to begin buying Italian government bonds to prevent a disastrous jump of their yields, overriding the opposition of a small minority of council members who felt this compromised the central bank's monetary policy.

    The ECB's intervention was launched on the understanding that Italy would rush through an austerity plan to regain market confidence. But efforts by Prime Minister Silvio Berlusconi's embattled government to do this have been plagued by disputed figures, policy U-turns and cabinet rows.

    Now the ECB will have to decide whether to continue its bond-buying -- or whether the purchases are actually worsening the situation by reducing pressure on Italy to reform its finances. Italian bond yields have started rising back in the past week; some traders think the ECB may deliberately be permitting this in an attempt to obtain leverage over Rome.

    The ECB is widely expected to maintain a substantial level of bond-buying in coming weeks because an Italian yield surge could destabilize the whole region. But it may not purchase enough to keep yields at comfortable levels for Italy, especially if the strengthening of the EFSF is delayed and the fund is not able to take over buying in October as hoped.

    Meanwhile, Greece has set a deadline of Friday afternoon for European banks to express their interest in its bond swap; the banks will be required to commit by mid-October.

    Athens wants 135 billion euros of outstanding bonds to be swapped or rolled over, which translates to a high take-up rate of 90 percent. It has warned that the whole scheme, and conceivably even its plan to receive a second international bailout, could be threatened if that target is not hit.

    Greece appears likely to come close enough to the 90 percent threshold to declare the operation a success; the chief executive of Intesa Sanpaolo, Italy's biggest retail bank, said on Saturday he was hearing positive indications from the Institute of International Finance banking lobby group.

    But even if the debt swap is fully taken up, analysts think that combined with other planned measures, it will only produce a drop in the ratio of Greece's debt to its gross domestic product to around 120 or 130 percent over the next few years, from above 150 percent now. So another, more painful Greek debt restructuring may be inevitable down the road.


    This helps to explain why markets are unlikely to react with much optimism even if events this week turn out positively -- and why a growing number of past and present policymakers are advocating more radical crisis steps.

    European Commission President Jose Manuel Barroso insisted euro zone policymakers were doing everything possible to resolve the crisis.

    "I want to be clear here. The European Union and the euro are strong and resilient. We are doing all it takes," he said on Monday in Australia after talks with Prime Minister Julia Gillard.

    Still, Italian Economy Minister Giulio Tremonti repeated his call on Sunday for euro zone governments to issue bonds jointly, saying the measure was vital to resolve the crisis. Germany has strongly resisted the idea on the grounds that it would penalize financially responsible countries.

    Former German chancellor Gerhard Schroeder on Sunday called for the creation of a "United States of Europe," saying the bloc needed a common government with a unified budget policy to avoid future economic crises.

    Schroeder, a Social Democrat who ran Germany from 1998 to 2005, said European Union member states would have to return to the negotiating table and hammer out a new treaty covering the bloc's institutional framework.

    Steen Jakobsen, chief economist at investment bank Saxo Bank, said governments had great political will to protect the euro zone, and were likely to take drastic action eventually to head off disasters such as an Italian exit from the zone.

    But for this to happen, he said, "Germany needs to step up to the plate in a way it has not done so far."

  3. #113
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    Post Gold edges lower; growth worry supports

    (Reuters) - Spot gold edged lower on Monday, retaining most of its gains from the previous session, as a dismal growth outlook after the U.S. jobs data supported safe-haven interest in bullion.

    U.S. employment growth ground to a halt in August, reviving recession fears and piling pressure on both President Barack Obama and the Federal Reserve to provide more stimulus to aid the frail economy.

    The bleak outlook of the world's largest economy sent anxious investors to safe haven assets including bullion.

    "Even if you take out the effect from the Verizon strike, it is still a lousy number and people are concerned that growth is not there any more," said Dominic Schnider, head of commodity research of UBS Wealth Management in Singapore.

    He expected the recession fear to send gold to test its record high above $1,911 hit in late August, and to $2,200 in the next three months.

    Technical analysis echoed Schnider's expectations. Spot gold may rise toward the record of $1,911.46 later in the day, as it has resumed its long-term uptrend, said Reuters market analyst Wang Tao.

    Spot gold edged down 0.3 percent to $1,877.45 an ounce by 0327 GMT, after surging 3.2 percent in the previous session. U.S. gold inched up 0.2 percent to $1,880.50.

    Amid concerns about the resurgent debt crisis in Europe, European Commission President Jose Manuel Barroso on Monday said he still expected modest growth in Europe and did not anticipate a recession in Europe.

    "The market has been a bit choppy -- some sold to book profit earlier and many are waiting for cues for further stimulus from the Fed," said a Hong Kong-based dealer.

    Market participants will also closely watch President Barack Obama's speech on Sept 7 to unveil new economic proposals to Congress.

    Money managers cut their net long positions in U.S. gold futures and options for a fourth week in a row in the week ended August 30, as bullion prices pulled off an all-time high set a week earlier, data showed on Friday.

    Spot platinum hit a two-week high of $1,885.50, before easing to $1,869.99.

    The platinum-gold spread dipped into negative territory on Friday and remained at a small discount of $7, which may have spurred investors to buy platinum.

    Precious metals prices 0327 GMT

    Metal Last Change Pct chg YTD pct chg Volume

    Spot Gold 1877.45 -6.35 -0.34 32.27

    Spot Silver 43.03 -0.16 -0.37 39.44

    Spot Platinum 1869.99 -7.81 -0.42 5.80

    Spot Palladium 775.00 -10.78 -1.37 -3.06

    TOCOM Gold 4639.00 113.00 +2.50 24.40 93290
    TOCOM Platinum 4654.00 59.00 +1.28 -0.89 10464

    TOCOM Silver 105.50 2.90 +2.83 30.25 1307

    TOCOM Palladium 1933.00 -13.00 -0.67 -7.82 253

    COMEX GOLD DEC1 1880.50 3.60 +0.19 32.30 16838

    COMEX SILVER DEC1 43.12 0.05 +0.11 39.35 1554

    Euro/Dollar 1.4168

    Dollar/Yen 76.73

    TOCOM prices in yen per gram. Spot prices in $ per ounce.

    COMEX gold and silver contracts show the most active months

  4. #114
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    Post EmpireGlobalfx: European shares lower on recession concerns

    (Reuters) - European shares fell on Monday, extending its previous session slide on concerns that the United States could be heading towards recession following Friday's weaker than expected U.S. nonfarm payroll data.

    Banking stocks featured heavily among the worst performers on the growth outlook concerns, with the STOXX Europe 600 Banks index .SX7P down 2.6 percent.

    "Sentiment seems to be playing a big move in these market swings, nothing happened over the weekend to install investor confidence," Mark Priest, senior equities trader at ETX Capital, said.

    "There are concerns that growth is not what it is expected to be."

    By 8:14 a.m., the pan-European FTSEurofirst 300 .FTEU3 index of top shares was down 2 percent at 929.41 points after dropping 2.5 percent on Friday after the economy failed to create any new jobs on a net basis for the first time in nearly a year.

  5. #115
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    Post Asian shares fall amid euro zone, banking worries

    (Reuters) - Asian shares fell and the euro slipped on Tuesday amid fears that Europe's sovereign debt troubles are worsening and could trigger a second full-blown banking crisis.

    European stocks tumbled 4 percent on Monday, with financial shares falling to their lowest in more than two years. Wall Street was closed on Monday for a holiday, but S&P 500 futures traded in Asia were down 2.3 percent.

    "It's the European disease that is infecting markets all around the world at the moment," said Michael Heffernan, senior client adviser and strategist at Austock Group in Australia.

    Adding to the gloom are worries that the United States may be sliding back into recession, a concern heightened by a slew of downbeat data, most recently employment figures that showed the world's top economy failed to create any jobs last month.

    Gold, traditionally seen as a safe asset in times of uncertainty, sat just short of $1,900 an ounce, not far off its record high, while the yield on 10-year Japanese government bonds(JGBs), another safe haven, fell below 1 percent.

    Tokyo's Nikkei fell 1.2 percent, while MSCI's broadest measure of Asia Pacific shares outside Japan was off 1.1 percent, putting the index more than 18 percent down from its April high.

    Hardest hit sectors in the MSCI index were materials and financials. Banks with heavy exposure to Europe were sold, including HSBC, whose Hong Kong listed shares dropped 2.8 percent.


    The latest focus of Europe's slow motion crisis is Italy, whose bonds were sold off on Monday on worries that Rome is not doing enough to bring its debt under control. Italian 10-year yields rose near 5.6 percent, their highest since early August.

    While European leaders have been able to put together bailout packages for Greece, Ireland and Portugal, investors fear the consequences of a similar crisis engulfing a bigger economy such as Italy or Spain.

    The chief executive of Deutsche Bank said on Monday that the euro zone sovereign debt crisis would stunt bank profits for years and could cause the collapse of weaker lenders.

    The euro traded around $1.4070, having fallen as low as $1.4060. That helped the dollar index climb above 75.200, its highest in nearly a month.

    The European Central Bank, the only major Western central bank to raise interest rates since the 2008/09 financial crisis, meets on Thursday but is expected to leave borrowing costs unchanged at 1.5 percent, which could put the single currency under further pressure.

    "Without the support of a more hawkish central bank, the euro will look very vulnerable," Societe Generale strategists Kit Juckes and Sebastien Galy wrote in a note.

    JGBs were in demand, as investors retreated from riskier assets, with September 10-year futures up 0.12 point at 142.91, after hitting a 10-month high, while the benchmark 10-year yield fell 1.5 basis points to 0.995 percent.

    Brent crude oil rose 0.7 percent $110.82 a barrel, but U.S. crude, whose volume was trimmed by Monday's holiday was down nearly 3 percent, at just below $84.

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    Post Swiss franc plunges 10 percent vs euro on SNB shocker

    (Reuters) - The Swiss franc plunged nearly 10 percent against the euro on Tuesday, posting its worst day ever, after Switzerland's central bank jolted markets by setting a limit on how much the franc can gain.

    The euro surged after the Swiss National Bank said it would enforce a limit of 1.20 francs to the euro by buying foreign currencies in unlimited quantities. The dollar also rose sharply, gaining 9.6 percent against the franc.

    Investors have poured money into the franc, which they see as one of the few safe places for assets amid global financial turmoil. The franc's rise sparked worries among Swiss officials that its export-driven economy will be damaged by the currency's strength.

    "When a central bank communicates that it doesn't want its currency to strengthen, it's generally a bad idea to go against that central bank. Today is a reminder why," said Jonathan Lewis, founding principal at Samson Capital Advisors, with assets under management of $7 billion.

    The euro rose as high as 1.22 francs on trading platform EBS, ending four days of losses.

    The SNB's latest move comes after it cut its already low interest rate target to nil on August 3. It also flooded the banking system with francs, effectively driving money market and forward rates deep into negative territory and making holding Swiss francs a costly proposition for investors.

    The SNB had made repeated warnings that it wouldn't tolerate a strong currency.

    Many analysts believed the SNB may have finally instilled fear in investors still trying to seek shelter in the franc away from the euro zone's sovereign debt crisis. The SNB's ability, however, to hold the floor at 1.20 francs to the euro will very much depend on developments in the euro area.

    "An intensification of the euro zone crisis is a reasonable prospect and such an event could yet result in a significant step up in demand for the Swiss franc," said Jane Foley, senior currency strategist at Rabobank in London.

    However, since there is zero inflation in Switzerland, the SNB could potentially just print francs and sell them on an unlimited basis to counter the surge in currency inflows. For this reason, Foley believes the 1.20 cap on the euro/Swiss franc could hold in the near term.

    In late trading, the euro was up 8.7 percent at 1.20550 francs, rising a low of 1.10200 and a closing level at 1.11000 on Monday,

    The Swiss franc has dropped roughly 20 percent versus the euro in the past month as the single currency has soared from a lifetime low of 1.00750 hit on August 9 on EBS.

    As a result, fund managers who took bets that the franc would fall around that time were sitting on hefty gains.

    The U.S. dollar rose as high as 0.86250 franc on EBS and was last up 9.4 percent at 0.86150 franc, snapping a four-day drop against the franc.


    The Swiss central bank action also funneled some safe-haven flows into the Norwegian crown, a currency with robust fundamentals -- an oil exporter and a country with a current account surplus. The euro fell 1.2 percent against Norway's crown to 7.5772.

    One-month implied volatility on the euro/Norwegian crown pair, a measure of the market's expectations of future movements in either direction, jumped to 9.7 percent from 8.4 percent late on Monday, suggesting more trading action seen on this cross.

    Despite the euro's steep gains against the Swiss franc, the single currency fell against the dollar, down 0.7 percent on the day at $1.39910. It fell to a low of $1.39720, trading below its 200-day moving average around $1.40150 for the first time since July 12.

    Market players said the key risk for the euro this week was that the European Central Bank would signal a pause in its rate tightening cycle.

    Concerns that the next tranche of bailout funds for Greece may be delayed, worries about European bank funding and rising Italian government bond yields on speculation Rome may struggle to implement new austerity measures kept the euro under pressure.

    The dollar rose against the yen on EBS on speculation the SNB's measures could encourage Japanese authorities to intervene in coming days. The dollar was up 1.0 percent at 77.690, well off a record low of 75.941 struck on Aug 19.

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    Post Asian stocks run out of steam, euro vulnerable

    (Reuters) - A rebound in Asian stocks ran out of steam on Thursday, as worries over the widening impact of the euro zone crisis and the faltering U.S. economy gnawed at investor confidence.

    The euro edged down, and remained vulnerable to concerns that European efforts to contain a two-year-old sovereign debt crisis are flagging.

    "Volatility still persists and the market is likely to continue to dance to the tune of policy risks involving the U.S. and European economies," said Kim Hyung-ryol, a market analyst at Kyobo Securities in Seoul.

    Global equities suffered their worst correction since 2008 in August, on fears of renewed recession in the United States and worries about Europe's widening crisis, and the MSCI All-Country World index .MIWD00000PUS remains 16 percent below its 2011 high, reached in May.

    Japan's Nikkei .N225 rose 0.5 percent, paring earlier gains, while MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS fell 0.2 percent.

    Germany's top court on Wednesday rejected lawsuits aimed at blocking Berlin's participation in bailout packages for Greece and other heavily indebted euro zone countries, offering some temporary relief to global markets.

    European stocks rose 3.1 percent markets/index?symbol=gb%21FTPP">.FTEU3 and on Wall Street the S&P 500 rose 2.9 percent .SPX.

    The euro, after jumping on the German court decision, eased on Thursday to around $1.4060, as traders awaited a European Central Bank rate-setting meeting later.


    The ECB is the only major Western central bank to have raised rates since the global financial crisis, but is expected to signal a change in policy tack and halt its tightening cycle in response the sovereign debt crisis.

    Market players will also be closely watching for any comment from ECB President Jean-Claude Trichet on the central bank's buying of Italian and Spanish bonds to force down yields, a policy that has deeply divided its governing council.

    "If Trichet makes cautious remarks on bond buying, Italian and Spanish spreads could rise again and hurt investor sentiment," said Junya Tanase, chief strategist at JPMorgan Chase.

    Federal Reserve Chairman Ben Bernanke is due to speak later on Thursday, at 1730 GMT, and President Barack Obama will outline to Congress his plans for reviving the faltering economy at 2300 GMT. With unemployment stuck above 9 percent, Obama will lay out a plan to spur job creation.

    Many analysts expect Bernanke to hint at further easing steps to try to stimulate the economy, which could put downward pressure on the dollar.

    The U.S. currency was a little firmer against the yen at around 77.40, while the dollar index .DXY, which measures its performance against a basket of major currencies, edged up around 0.2 percent.

    Gold rebounded 1 percent to trade around $1,835 an ounce, after tumbling 3 percent in the previous session.

    The precious metal has hit a succession of records, most recently at $1,920.30 on Tuesday, driven by its appeal as both a safe haven in times of economic uncertainty and as a hedge against inflation, which some fear will be the eventual consequence of the ultra-loose monetary policies being pursued in much of the developed world.

    "Concerns about economic growth in the United States and euro zone will keep supporting gold prices. Even though we may see liquidation repeatedly along the way, gold will rise toward $2,000," said a dealer at a Tokyo-based bullion house.

    Oil was little changed, with U.S. crude flat at $89.33 a barrel and Brent crude down 0.2 percent at $115.60.

  8. #118
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    Post Euro off 2-month low but vulnerable after ECB

    (Reuters) - The euro bounced off a two-month low against the dollar on Friday but the risk of a break below its July trough is seen rising after a deepening debt crisis forced the European Central Bank to drop its tightening policy bias, a key driver in the euro's rally this year.

    The market showed a mostly muted response to U.S. President Barack Obama's $447 billion package on jobs that is made up largely of tax cuts for workers and business, amid doubts over whether he can push it through a divided Congress.

    "The euro now doesn't have the support of expectations for rising interest rates, which clearly points to the higher possibility that the euro will fall below (its July low near) $1.38. In addition, strains on European banks' funding are rising. Given all this, the euro looks likely to fall further," said Minori Uchida, senior analyst at the Bank of Tokyo-Mitsubishi UFJ.

    For now though, sizable buying in the euro against the yen, thought to be from Japanese investors, lifted the euro 0.4 percent against the dollar and the yen in Asia.

    The euro rose to $1.3933, after dropping to $1.3873 on Thursday, its lowest in two months. The common currency also gained to 108.00 yen, about a half-yen above its six-month low of 107.54 yen hit on Thursday.

    Traders expect the currency to head toward the July low of $1.38376, a break of which could send a strongly bearish signal, with $1.35 cited as its next possible target.

    "The euro is unequivocally bearish. It broke through its long-term support and is likely to go significantly lower," said David Scutt, a trader at Arab Bank Australia.

    The European Central Bank held rates steady at its policy meeting on Thursday, saying inflation risks are no longer skewed to the upside and that economic growth in the region will be slow at best, prompting money markets to fully price in a rate cut by the year-end.

    Dollar funding strains for European banks showed no sign of abating with the euro/dollar basis swap spread on Thursday hitting its highest since last 2008.


    Another potential pitfall for the euro is uncertainty over Greece's debt swap plan as Friday is the deadline Athens has given investors in Greek bonds to say whether they intend to take part in its debt exchange offer, a key part of a second 109 billion euro bailout package it clinched on July 21 to avoid bankruptcy.

    Greece had threatened to cancel the deal unless it got 90 percent participation, a stance some banks think may just be tactics by Athens to get most bondholders on board. Still, a low participation rate in Greece's debt swap could mean reluctant euro zone partners will have to cough up more cash for the overall package to work.

    But the dollar also lacked traction after Obama's long-awaited job proposals failed to boost hopes of a U.S. recovery. U.S. jobless claims unexpectedly rose last week, highlighting the fragile state of the U.S. job market.

    "To some extent, this was largely in line with the chatter we heard before it's release. It may even be a bit smaller than needed given the gravity of the problem. That could prevent markets from reacting too positively," said Omer Esiner, senior market analyst at Commonwealth Foreign Exchange in Washington.

    "And at the end of the day, it depends on what the finished product will be. A lot of this will be chopped up before it is passed. We've seen a lot of political paralysis in Washington."

    Federal Reserve Chairman Ben Bernanke offered little new insight as to what the central bank will do at its policy meeting on Sept 20-21 in his speech on Thursday, though most players remain convinced that the bank will start buying longer-dated bonds in a bid to try to lower longer bond yields.

    The dollar index slipped to 76.09, having surged to two-month highs of 76.319 on Thursday. Against the yen, the dollar stood flat at 77.48 yen.

    The Australian dollar gained 0.3 percent to $1.0620, but lacked the energy to tackle a resistance-packed zone from $1.0630, its 55-day moving average, through $1.0648, the 100-day average, to $1.6057, a 61.8 percent retracement of its decline earlier this month.

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    Post Brent oil steady near $115 on storms, U.S. jobs package

    (Reuters) - Brent crude edged up toward $115 a barrel on Friday, after falling more than a dollar in the previous session, supported by storm threats and uncertainty about President Barack Obama's latest plan to revive the world's largest economy.

    Brent for October delivery was on track for a weekly gain of more than 2 percent, trading up 10 cents at $114.65 a barrel by 0627 GMT.

    U.S. crude oil fell seven cents to $88.98 a barrel and was set for a gain of more than 3 percent this week.

    Concerns over economic growth and tepid demand for oil remain the main pressure points for the oil markets, blunting bullish sentiment from Libya's civil war, hurricanes and a battered U.S. dollar.

    "The question for the oil market is demand destruction and how confident the consumer is, both of which are very uncertain," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.

    "If European and U.S. policymakers can find some compromise and willingness to work together before economics force their hand, then that is bullish for oil. But I think we will probably see the market grind sideways," he added.


    Obama unveiled a $447-billion package of tax cuts and new spending to revive a stalled job market but he faces an uphill fight with Republicans.

    Federal Reserve Chairman Ben Bernanke also highlighted the elevated jobless rate and sluggish underlying growth at a speech on Thursday, but disappointed investors by stopping short of laying out a plan for action at the central bank's policy-setting meeting this month.

    The U.S. dollar index .DXY barely reacted to Obama's job package, trading down 0.4 percent to 76.214.

    Oil continued to find support from the busy 2011 hurricane season in the Atlantic and supply outages in OPEC member Libya.

    Tropical Storm Nate, the 14th named storm, was gaining strength and could become a hurricane on Friday or Saturday, the U.S. National Hurricane Center said. The tropical storm has prompted producers in the Gulf of Mexico to begin another round of evacuations of nonessential workers.

    The U.S. Energy Information Administration said commercial oil inventories fell nearly 4 million barrels last week, far deeper than the forecast for a 1.9 million barrel drawdown.

    Inventories dropped as imports slid more than 1 million barrels per day with offloading hampered by Hurricane Irene's passage through the East Coast that also compelled refineries to cut utilization rates by more than a quarter.

    In Libya, the man tasked with running the country, interim Prime Minister Mahmoud Jibril, reminded his forces that the war was not over yet as the latest deadline for the surrender of pro-Muammar Gaddafi towns loomed and fighters massed on both sides.

    "The consensus is that with the Libyan civil war essentially over, market pressures are easing, but the reality is that we are at the peak point of Libyan stress -- without crude production, but with high imports to meet internal fuel needs," analysts at J.P. Morgan said in a research note.

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    Post Euro seen under pressure on lack of G7 support

    (Reuters) - The euro and growth-linked currencies may fall on Monday, hit by a lack of concrete measures from Group of Seven finance chiefs to address either faltering growth, the escalating euro zone debt crisis, or exchange rate volatility.

    The dollar, yen and, to a lesser extent, Swiss franc are set to advance with more investors seeking safe-haven currencies on the back of rising financial market stress.

    That will raise the risk of more solo intervention from Japanese and Swiss authorities.

    The flight to safety should drive core government bonds like German Bunds and British gilts higher, leading to wider spreads over euro zone peripheral debt, while European banking shares may ease on mounting worries about contagion engulfing bigger economies like Italy and Spain.

    Finance ministers and central bankers from the Group of Seven industrialised nations pledged to respond in a concerted matter to a global slowdown. However, they offered no specific steps and differed in emphasis on Europe's debt crisis.

    That will likely offer little solace to investors who had expected some sort of coordinated policy response from G7 policymakers at a time when stock markets have been falling and global growth in showing increasing signs of stalling.

    "As this falls short of any commitment to undertake co-ordinated action in currency markets, investors are likely to react with disappointment when trading resumes on Monday," said Mansoor Mohi-uddin, head of foreign exchange strategy at UBS.

    He expected Japan to stay on intervention watch.

    Japan's finance minister, Jun Azumi, said he met with little resistance to further intervention at the G7 meeting. Japan last intervened in the currency market on August 4 to topple the yen from a record high against the dollar.

    "We expect Japan's authorities will act again unilaterally if dollar/yen tests its post-war lows of 75.95 yen. As a result we think investors should instead keep favouring the dollar now when they seek safe-haven currencies," UBS's Mohi-uddin said.

    The dollar index .DXY, which measures its performance against a basket of six currencies which includes the euro, yen and sterling, rose to its highest in six months at 77.276 on Friday.

    In a bullish signal, it closed above its 55-week moving average at 77.01. Resistance was seen at the base of the weekly Ichimoku cloud around 78.05, while strong resistance was at the 38.2 percent retracement of the index's fall from a high of 88.71 on June 7, 2010 to a low of 72.696 on May 4, 2011 which comes in at 78.80.

    The dollar is set to make strong gains against the euro, which last week fell to its lowest in six months, at around $1.3627. The euro posted its biggest weekly fall since mid-August last year, with many looking for it to test $1.35 in the near term.


    The euro also fell sharply against the safe-haven Japanese yen on Friday, dropping to its lowest in nearly a decade. It ended the week at 105.85 yen, and a break below the psychologically key 105.00 level could see it drop towards 100 yen in coming weeks, analysts said.

    Howard Wheeldon, a strategist at BCG Capital Partners, said the weekend's developments provided little confidence to investors in the euro zone, and the coming week will see increased volatility in stock markets.

    That could hurt the euro more in coming days.

    The euro was sold off last week after European Central Bank President Jean-Claude Trichet shifted the monetary stance from a hawkish bias to a more neutral one.

    The shock resignation of ECB board member Juergen Stark, which highlighted sharp divisions within the central bank over purchases of government bonds in the secondary market and concerns that Greece may not secure its latest aid tranche from the IMF/European Union, also added to the euro's woes.

    Investors will also likely be unsettled by a weekend report from Der Speigel magazine that the German finance ministry was looking at scenarios that included Greece abandoning the euro.

    Indeed, latest data from the Commodity Futures Trading Commission showed speculators added to their bearish bets against the euro in the week to September 6.

    "With $1.40 going last week, I think the euro could fall to $1.35 in the next few days," said Michael Derks, chief strategist at FXPRO. "The dollar be will the currency that will gain from safe-haven inflows given the risk of intervention in the yen and the line in the sand that has been drawn on the Swiss franc by the Swiss National Bank."

    On the charts, near term support was seen at $1.3426, a low hit on February 14 and from where the euro started its move to a 17-month high at $1.4939 struck on May 4.

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