Ethiopia Dec inflation falls yr/yr, at lowest for 2012

ADDIS ABABA (Reuters) - Ethiopian inflation dropped in December to 12.9 percent year-on-year, its lowest rate of 2012, official data showed on Wednesday.
The government had targeted single-digit inflation in 2012, something it now hopes to achieve this year.
Inflation, which has been billed by the IMF as the country's biggest economic challenge, peaked at 36.3 percent last February, and has steadily declined due to rising agricultural output and government subsidies on a number of food items.
Last month's year-on-year inflation fell to 12.9 percent from 15.6 percent in November, according to the Central Statistics Agency.
It said the consumer price index actually fell 0.7 percent month-on-month in December after a 0.5 percent drop in November.
The agency said food price inflation fell to 11.8 percent year-on-year in December, down from 13.4 percent in November. The non-food inflation rate also dropped to 14.6 percent in December from 19.4 percent the previous month.
The International Monetary Fund has said inflation is the biggest challenge facing policymakers in the Horn of Africa country, which has however registered one of the world's highest economic growth rates for the last few years.
Ethiopia's economy is expected to maintain a growth rate of 11 percent in 2012/2013, the seventh consecutive fiscal year of growth, according to senior officials.
High coffee earnings in the past few years have boosted the economy of Africa's biggest coffee producer, as have rising gold, oil seed and livestock exports.

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Sudan says secures $1.5 bln loan from China as it battles currency slide

ABU DHABI (Reuters) - Sudan has secured a $1.5 billion loan guaranteed by Chinese state oil firm China National Petroleum Corp, its finance minister said, throwing a lifeline to the African country battling its worst economic crisis for decades.
Sudanese Finance Minister Ali Mahmoud said the loan, agreed on December 31, would come from a Chinese bank, which he declined to identify. It comes at a crucial time for Sudan which has been unable to stop a slide in its currency since losing three-quarters of its oil production when South Sudan seceded in 2011.
Oil was the main revenue source for the budget and for dollars needed to buy basic food imports such as wheat and sugar.
China is the country's biggest trading partner apart from Gulf Arab oil producers and China National Petroleum Corp (CNPC), which was not immediately available to comment, is the biggest investor in the oil industry in Sudan and South Sudan.
Sudan has avoided an "Arab spring" revolution that toppled the rulers of Egypt, Tunisia and Libya but annual inflation running at 46.5 percent in November has sparked small protests against the government.
"The $1.5 billion loan will be used to bridge the fiscal gap and enhance our balance of payments," Mahmoud told Reuters in Abu Dhabi on Wednesday.
He said the loan would help stabilise the Sudanese pound which has more than halved in value on the key black market since southern secession in July 2011.
In July, Sudan devalued the official dollar exchange rate to around 4.4 pounds to end a differential with the black market rate. But the pound fell further, to 7 pounds to the dollar in December on the black market, which has become the reference for import firms as the central bank struggles to supply dollars.
CHINA INTEREST
China has stayed out of recent tensions between both African countries which came close to war in April. But Beijing has an interest in Sudan overcoming its crisis given that it has been the biggest buyer of South Sudanese oil which has to be exported through Sudan.
Landlocked South Sudan shut down its output of 350,000 barrels a day a year ago after failing to agree with Sudan over export fees. Both countries now plan to resume cross-border flows but need to secure their disputed border first.
CNPC is also helping Sudan to boost its own oil production, last estimated by the oil ministry at almost 140,000 bpd, but the output only serves domestic consumption.
An oil industry source said CNPC, China's biggest oil and gas producer, had done some exploration work in Sudan's Red Sea but had not found it promising in terms of reserves.
Sudan has been expanding exports of minerals and agriculture products to offset the loss of oil revenues. It has forecast it would sell $2.5 billion worth of gold last year, up from $1.5 billion in 2011. China is also a big player in the gold industry.
"With most of our oil exports gone, we are enhancing agricultural products exports. This year we are expecting to export edible oil and will cut imports of sugar by half," Mahmoud said.
Last year, Sudan opened a new sugar factory, funded by Gulf countries, to lower its dependency on imports. But analysts are sceptical the country will be able to expand its agricultural exports soon due to mismanagement, outdated technology and corruption. Much of Sudan's food needs come from abroad.
Mahmoud spoke after the signing ceremony for a $45 million loan for Sudan from the Arab Monetary Fund (AMF), a pan-Arab fund based in Abu Dhabi. Since 1997 the fund has granted Sudan $650 million in total, including the latest loan.

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Obama aide presses Republicans to accept more tax revenues

WASHINGTON (Reuters) - The U.S. Congress should accept in the next round of deficit-reduction talks that revenue from taxes must be raised further if it expects President Barack Obama to sign off on a deal, the president's top economic adviser, Gene Sperling, said in an interview.
The White House and Congress are trying to reach an agreement that would delay planned austerity measures and keep funding the government, while at the same time cutting the budget deficit over the long term.
Senate Republican leader Mitch McConnell has ruled out raising revenues as part of any deal, but Sperling said a significant chunk must come from higher taxes.
"The president is not suggesting that in this next round of deficit reduction it all be on revenues," Sperling said in an interview taped on Tuesday with Reuters TV's "Impact Players."
"He's just suggesting that we continue to do it in a balanced way so that our overall agreement really is about two dollars in spending cuts for every dollar in revenue."
Republicans and Democrats reached a deal last week to soften an austerity package scheduled to kick in at the beginning of the year that may have pushed the economy back into recession.
However the deal only postponed by two months some of the harshest measures: across-the-board spending cuts in areas like defense and education. Also, a temporary budget measure expires in March and failure to extend it could mean another government shutdown like brief ones in 1995 and 1996.
Some Republicans are insisting deficit-reduction talks now be linked to a debate over granting the Treasury authority to borrow more money.
On December 31, the Treasury hit the $16.4 trillion limit on the amount of borrowing that is authorized by Congress, and the United States will default on its debt within a few months unless the debt ceiling is raised.
Sperling lashed out at Republicans for using the debt limit as a bargaining chip.
"We can fight, we can argue, but neither of us should put a gun to the country's head," Sperling said in the interview with Reuters' Robert Wolf, who advises Obama as a member of the president's jobs council and is a former CEO of UBS Americas.
AN ODD PRACTICE
The United States has the odd practice of authorizing government borrowing in a two-stage process, with Congress first drafting plans to spend more than it raises in tax revenues.
Then, typically every few years, lawmakers raise the debt ceiling to accommodate annual deficits.
Obama has said flatly that he will not negotiate over the debt ceiling, arguing that Congress must pay the bills for spending it has already approved.
Last week, the government allowed taxes to rise on most workers by allowing a two-year payroll tax holiday to expire. And in a substantial compromise by Republicans, the deal also raised income tax rates on the wealthiest Americans while keeping them steady for households making less than $450,000 a year.
The Committee for a Responsible Federal Budget, deficit- reduction group, believes that deal will lower the deficit and come pretty close to stabilizing the debt burden over the next ten years, although not in the longer term.
Sperling sketched out the broad outline of a possible deficit-reduction deal that would involve higher taxes along with spending cuts on social welfare programs, including the federal health insurance program for the elderly and the Social Security pension plan. In Washington these programs are called "entitlements."
Sperling pointed out that Republicans have already expressed willingness to allow taxes to rise on wealthy Americans by eliminating exemptions rather than by raising rates.
"There certainly is significant room for more revenues that are related to things that Republicans have agreed to or proposed," said Sperling, who is the director of Obama's National Economic Council.
He noted that Obama already has floated the idea of reducing the ability of rich people to write off mortgage interest payments from their tax bills.
"That's the type of thing that could be paired with very serious entitlement reform to have the next step of deficit reduction," Sperling said.

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Germany to host Sudan forum delayed by embassy storming

KHARTOUM (Reuters) - Germany will host a Sudan investment conference this month which was postponed after its embassy in Khartoum was stormed last year, officials and diplomats said on Monday.
Sudan is trying to attract more investment to overcome a severe economic crisis after losing most oil reserves to South Sudan when it became independent in 2011. Most Western companies shun the country due to a U.S. trade embargo.
The Berlin conference, planned for January 29, will be also attended by officials from South Sudan, who are also eager for Western firms to develop their country, ravaged by decades of civil war.
Germany, one of the few Western countries with good relations with Sudan, had originally planned the forum for October but shelved it after thousands of people stormed and set ablaze its embassy in protest against an anti-Islam film.
The Sudanese government had criticized Germany before the storming for allowing small protests by right-wing activists in August showing cartoons of the Prophet Mohammed. It also criticized Chancellor Angela Merkel for giving an award in 2010 to a Danish cartoonist who depicted the prophet in 2005.
Protesters in Khartoum also attacked the British and U.S. embassies over the film which was posted on the Internet.
Germany agreed to reschedule the forum after Sudanese Foreign Minister Ali Ahmed Karti apologized and provided land free of charge to rebuild the embassy, diplomats said.
Germany's foreign ministry declined to comment but diplomats and Sudan's foreign ministry said Karti would attend the Berlin conference.
German companies are among the few in Europe ignoring the U.S. trade embargo. Engineering group Lahmeyer just helped expanding a major dam in the southeast of the country.
Most Western countries have only limited ties to Sudan, whose President Omar Hassan al-Bashir faces charges of war crimes in Darfur at the International Criminal Court.
Diplomats said Germany was planning the conference on its own, so it would not have to rely on other Western powers which often criticize Khartoum for its human rights record. In March, Norway and Turkey called off similar events after the United States signaled it would not attend.
South Sudan seceded from Sudan under a peace deal that ended the civil war but left tensions and border issues unresolved. The neighbors agreed in September to restart cross-border oil flows but still need to secure their border first.

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Stock markets cool off following gains last week

 Global stock markets drifted lower on Monday as some investors sought to cash in on last week's strong gains and worries grew of more political brinkmanship in Washington.
Major indexes surged last week after U.S. lawmakers passed a bill to avoid a combination of government spending cuts and tax increases that have come to be known as the "fiscal cliff."
The deal, however, remains incomplete. Politicians will face another deadline in two months to agree on more spending cuts and the prospect of more squabbling seemed to hurt market sentiment.
Meanwhile, the U.S. economy keeps recovering, though only at a modest rate. On Friday, official figures showed employers added 155,000 jobs in December, roughly as expected. The good sign was that hiring held up during the tense fiscal negotiations in Washington. But the increase was not large enough to bring the unemployment rate down from 7.8 percent.
Having enjoyed a good few days, investors appeared ready to cash in some of their profits.
"It just seems like markets are entering a consolidation phase after recent gains," Stan Shamu, market strategist at IG Markets in Melbourne, said in a market commentary.
Britain's FTSE 100 fell 0.4 percent to close at 6,064.58 while Germany's DAX dropped 0.6 percent to 7,732.66. France's CAC-40 lost 0.7 percent to 3,704.64.
Wall Street traded lower as well, with the Dow shedding 0.6 percent to 13,358.10 and the broader S&P 500 falling 0.6 percent to 1,457.78.
The one bright spot was the banking sector, where stocks were up after global regulators eased new rules obliging lenders to set capital aside. The so-called Basel III rules are a set of new international standards to make sure banks don't fall back into the sort of trouble that caused the 2008 financial crash. On Sunday, the officials setting those rules delayed the date by which certain amounts of cash had to be readily available.
The move caused a jump in bank shares - Deutsche Bank rose 2.8 percent but the biggest gains were among ailing Spanish banks, which some had feared would struggle to meet the new cash requirements. Bankinter soared 9.2 percent and Banco Popular gained 2.1 percent higher.
The subdued mood in the broader markets was also seen earlier in Asia. The Nikkei in Tokyo fell 0.8 percent to close at 10,599.01.
The Hong Kong Hang Seng was nearly unchanged at 23,329.75. South Korea's Kospi lost less than 0.1 percent to 2,011.25. Benchmarks in Singapore and Taiwan fell while mainland Chinese shares rose. Weakness in Australian's resource sector sent the S&P/ASX 200 in Sydney 0.1 percent lower to 4,717.30.
South Korean and Taiwanese companies that were fined by China last week for fixing prices of LCD display screens saw their stocks tumble Monday. Taiwan's AU Optronics Corp. fell 5.1 percent. HannStar Display Corp. fell 4.7 percent. South Korea's LG Display fell 2.6 percent.
In commodity markets, the benchmark crude oil contract for February delivery was 14 cents lower at $92.95 per barrel in electronic trading on the New York Mercantile Exchange.
In currencies, the euro edged 0.2 percent higher at $1.3105 while the dollar dropped against the Japanese yen, to 87.69 yen from 88.13 yen on Friday.

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Chinese hold anti-censorship protest outside newspaper

GUANGZHOU, China (Reuters) - Hundreds of supporters of one of China's most liberal newspapers demonstrated outside its headquarters on Monday, backing a strike by journalists against interference by the provincial propaganda chief.
The rare anti-censorship protest happened in Guangzhou, capital of wealthy Guangdong, China's most liberal province and birthplace of the reforms, begun three decades ago, that propelled China to become the world's second-largest economy.
The outcry began late last week when reporters at the influential Southern Weekly newspaper accused censors of replacing an original New Year's letter to readers that called for a constitutional government with another piece lauding the party's achievements.
Police allowed the demonstration, suggesting the Guangdong government, led by newly appointed Hu Chunhua, a rising political star, may want to tread carefully in tackling public discontent over censorship.
The protesters, many of them youths, held signs with slogans such as "Freedom of expression is not a crime," and "Chinese people want freedom". Others made speeches defending the paper an laid chrysanthemums, a flower used in Chinese funerals, to symbolically mourn the death of press freedom.
"The Nanfang (Southern) Media Group is relatively willing to speak the truth in China so we need to stand up for its courage and support it now," Ao Jiayang, a young worker for a non-governmental organization, told Reuters.
"We hope that through this we can fight for media freedom in China," Ao said. "Today's turnout reflects that more and more people in China have a civic consciousness."
PETITIONS
On Sunday night, the Southern Weekly's official microblog denied that the removal of the New Year letter was due to censorship, saying the "online rumors were false".
Many Southern Weekly journalists distanced themselves from the statement and said the blog had been taken over by management, and pledged to go on strike the next day.
It was not clear if the strike was ongoing and whether the weekly paper would still appear on Thursday.
One Southern Weekly journalist said staff were determined to "not let those people (the propaganda department) take over our paper". Another reporter said they were not actually on strike, though some staffers had taken time off.
The attention paid to the protest on China's social media highlights the unique position of Guangdong, the first province Xi Jinping's visited after being anointed Communist party chief in November.
Several petitions have circulated on the Internet, signed by the paper's journalists as well as academics and prominent citizens, denouncing the censorship and called for the Guangdong propaganda chief, Tuo Zhen, to step down.
Xiao Shu, formerly a prominent commentator at the Southern Weekly, said Tuo required journalists to submit topics for him to approve.
"He has established within the Guangdong media a system of prior censorship of the press," Xiao said, calling for Tuo's removal.
Retired Southern Weekly editor Yan Lieshan said: "Not since the time of reform and opening up and the founding of China has there been someone like Tuo Zhen," accusing him of overstepping his authority.
Chinese Internet users already cope with extensive censorship, especially over politically sensitive topics such as human rights and high-level politics, and the popular foreign sites Facebook, Twitter and Google-owned YouTube are blocked.
By Monday, most search terms for the Southern Weekly and media censorship were blocked.
China shut the website of a leading pro-reform magazine on Friday, apparently because it had run an article calling for political reform and constitutional government.

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US job market shrugs off fears of 'fiscal cliff'

WASHINGTON (AP) — The U.S. job market proved resilient in December despite fears that a budget impasse in Washington would send the economy over the fiscal cliff and trigger growth-killing tax hikes and spending cuts.
Employers added 155,000 jobs last month, roughly matching the solid but unspectacular monthly pace of the past two years.
The gains announced Friday weren't enough to reduce unemployment, which remained a still-high 7.8 percent. The November rate was revised up a notch from the 7.7 percent the government had originally reported.
The stable pace of December hiring suggested that many employers tuned out the fracas in the nation's capital. The threat wasn't averted until a deal won final passage on New Year's Day.
Rather than hold back until the fiscal cliff was resolved, many employers kept hiring, most likely in anticipation of higher customer demand.
"What would hiring have been if we had not been facing the fiscal cliff in December?" said Robert Kavcic, senior economist at BMO Capital Markets. "We might have seen quite a bit stronger job growth" — something closer to 200,000 a month.
That's an encouraging sign for the job market, because an even bigger budget showdown is looming: Congress must vote to raise the government's $16.4 trillion borrowing limit by late February. If not, the government risks defaulting on its debt. Republicans will likely demand deep spending cuts as the price of raising the debt limit.
Robust hiring in construction and manufacturing drove last month's job increases. Construction firms added 30,000 jobs, the most in 15 months. In part, that increase likely reflected hiring needed to rebuild from Superstorm Sandy. And the housing market's gradual recovery has energized homebuilding. Manufacturers added 25,000 jobs, the most in nine months.
Economists found other hopeful news in the report. Americans were given more work hours in December — an average 34.5 hours a week in December, up from 34.4 in November. And their pay outgrew inflation. Hourly wages rose 7 cents to $23.73 last month, a 2.1 percent increase compared with a year earlier. Over the same period, inflation rose 1.8 percent.
"Perhaps (the) underlying economic performance is accelerating, and even Washington can't screw it up," said Dan Greenhaus, chief global strategist at BTIG.
One company that hired last year and would like to add more jobs in 2013 is Arteriocyte, a Cleveland-based stem-cell therapy and medical device company. But CEO Don Brown is concerned about potential cuts in government spending, which he says could erode Arteriocyte's revenue.
One such cut is a 2 percent reduction in the reimbursements Medicare gives doctors and hospitals. That reduction was delayed by the budget deal reached this week. If the reimbursement cut is imposed later this year, it would lower revenue for the hospitals and surgeons that buy Arteriocyte's advanced products.
"Our entire customer base is unsure about what their reimbursement landscape is going to be," Brown said.
The Obama administration's health care reform law also imposed a 2.2 percent sales tax on medical devices. Brown estimates that will cost his company $400,000. He had hoped the tax would be eliminated as part of a fiscal cliff agreement.
Arteriocyte hired 10 workers last year and now employs 76. The new hires included research scientists, two marketing specialists and a sales representative. Brown hopes to make five to 10 additional hires this year, but he might be unable to do so if the Medicare cut takes effect.
Despite last month's hiring gains, Friday's report pointed to some weakness in the job market. For example, the number of unemployed actually rose 164,000 to 12.2 million. About 192,000 people entered the work force last month, but most did not find jobs.
The unemployment numbers come from a government survey of households. The number of jobs added comes from a separate survey of businesses.
A broader category that includes not only the unemployed but also part-time workers who want full-time jobs and people who have given up looking for work was unchanged in December at 22.7 million.
The government revised up its estimates of job growth for October and November by 14,000 jobs. October's job increases were revised down from 138,000 to 137,000 but November's were revised up from 146,000 to 161,000.
Economists said the pace of hiring almost certainly isn't strong enough to lead the Federal Reserve to cut short its bond-buying program. The Fed is spending $85 billion a month on bond purchases to try to drive down long-term borrowing costs and stimulate economic growth.
The job market is being held back by government cutbacks. Governments at all levels cut 13,000 jobs in December. Since the Great Recession ended in mid-2009, governments have eliminated 645,000 jobs — an average of nearly 15,400 a month.
By contrast, during the recoveries from the recessions of 1990-1991 and 2001, governments added an average of more than 15,000 jobs a month. If governments were hiring at that pace instead of slashing payrolls, the U.S economy would be generating more than 180,000 jobs a month.
Instead, for two full years, monthly job growth has remained stuck at a tepid pace: It averaged 153,000 in both 2011 and 2012. That isn't enough to lower unemployment to what economists regard as a "normal" rate of 6 percent or less. The Federal Reserve doesn't expect unemployment to drop that low until after 2015.
The economy has replaced just 4.8 million, or 54 percent, of the 8.8 million jobs lost between January 2008, when the job market peaked, and February 2010, when it bottomed during the recession. It has been, by far, the weakest jobs recovery since the Great Depression of the 1930s.
"A status quo report in today's labor market represents an ongoing jobs crisis," says Heidi Shierholz, an economist at the liberal Economic Policy Institute.
Still, the economy has been showing broad improvement. Layoffs are down. Banks are lending a bit more freely. Companies have built up a near-record $1.7 trillion in cash. Consumers have cut their debts to pre-recession levels. Europe has avoided a financial catastrophe.
The once-depressed housing market is rebounding. A gauge of U.S. service firms' business activity expanded in December by the most in nearly a year. Manufacturing is benefiting from the best auto sales in five years. And Americans spent more at the end of the crucial holiday shopping season.
"There is little doubt that the seeds of faster growth are being planted," James Marple, an economist at TD Bank, said in a note to clients.
That said, most economists expect slight improvement at best in hiring this year. A 2 percentage point cut in the Social Security tax expired Jan. 1. That means a household with income of about $50,000 will have about $1,000 less to spend. A household with two high-paid workers will have up to $4,500 less.
And the government may impose spending cuts this year.
Higher taxes and less government spending, along with uncertainty about future budget fights, could restrain growth and hiring.
That "likely means acceleration in the labor market will remain elusive for the time being," said Ellen Zentner, an economist at Nomura Securities.

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TSX rises as data boosts sentiment; energy leads

TORONTO (Reuters) - Toronto's main stock index finished broadly higher on Friday, with energy companies leading the gains, as encouraging North American economic data bolstered investor sentiment.
Energy stocks, which make up about 25 percent of the index were up 1.07 percent. Canadian Natural Resources Ltd was the most positive stock on the TSX, adding 2.06 percent to C$30.15. Encana Corp was also a key gainer, rising 2.75 percent to C$20.16.
North American stock markets rose after U.S. reports showed employers there kept up a steady pace of hiring workers, even though the unemployment rate crept up, and the vast services sector expanded at a brisk rate.
"It shows that perhaps we've got stability in the U.S. labor market. It's not great, but it continues to show improvement and that again bodes well for prospects through 2013," said Philip Petursson, a managing director at Manulife Asset Management's portfolio advisory group.
Canada's economy defied expectations to create 39,800 jobs in December, surpassing even the most bullish prediction in a Reuters poll.
The Toronto Stock Exchange's S&P/TSX composite index <.gsptse> finished 70.37 points higher, or up 0.56 percent at 12,540.81. All 10 of the TSX's main groups ended in positive territory and the index as a whole was up about 1.8 percent for the week.
"I still think there's a lot of people away. You're probably not going to get a good feel of the market until next week," said Bruce Latimer, a trader at Dundee Securities.
The heavyweight financial group climbed 0.5 percent, with Royal Bank of Canada gaining 0.51 percent to C$61.07.
The overall materials group recouped early losses and finished the session up 0.52 percent. Potash Corp's led mining gains with a 1.33 percent rise to C$41.03.
In corporate news, Lululemon Athletica shares fell 4.55 percent to C$70.88 after an influential analyst cut his rating on the popular yoga wear retailer's stock, citing rising competition and heavy discounting.
Valeant Pharmaceuticals International Inc said it was aiming to double or quadruple its revenue, but left its fourth-quarter revenue and earnings guidance unchanged. Shares fell 1.61 percent to C$59.40 and was the second most negative influence on the TSX.

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Fed officials eye timeline for ending asset purchases

SAN DIEGO (Reuters) - The Federal Reserve could halt its asset purchases this year if the economy improves and unemployment drops, two top Fed officials said on Friday, a view seconded by most economists at Wall Street's top financial institutions.
Meanwhile, another top Fed official warned the U.S. central bank's aggressive easing plan threatens the Fed's credibility.
St. Louis Fed President James Bullard, a voting member of the Fed's monetary policy panel this year, said a drop in the unemployment rate to 7.1 percent would probably constitute the "substantial improvement" in the labor market that the central bank seeks.
That's the bar for the Fed's policy-setting committee to halt the current round of asset purchases that it began in September.
"If the economy performs well in 2013, the Committee will be in a position to think about going on pause" with the asset buys, Bullard told CNBC TV on a sunny balcony outside of the hotel where thousands of economists were gathered for an annual conference here. "If it doesn't do very well then the balance sheet policy will probably continue into 2014."
The Fed has also promised to keep interest rates at their current near-zero level until unemployment drops to 6.5 percent, as long as inflation does not threaten to rise above 2.5 percent.
U.S. unemployment stood at 7.8 percent last month. While that is down from a year ago, monthly job gains are probably not enough to ratchet down unemployment much more.
Philadelphia Fed Bank President Charles Plosser, who expects unemployment to drop to between 6.8 percent and 7.0 percent by end-2013, said on Friday at the same conference that he hoped the Fed would stop buying bonds before the 6.5 percent threshold, implying he anticipated the asset purchases would halt this year.
Economists at nine of 16 primary dealers -- the large financial institutions that do business directly with the Fed -- said they expect the current Fed program of buying $45 billion per month of Treasuries to end in 2013. The Fed is also buying $40 billion in mortgage-backed securities each month.
Meanwhile, Fed policymakers are increasingly concerned about the impact their monthly purchases of $85-billion in longer-term bonds and mortgage securities are having on financial markets.
Minutes from their December policy meeting showed that "several" top officials expected to slow or stop the so-called quantitative easing program, dubbed QE3, "well before" the end of the year - news that surprised some on Wall Street and prompted a drop in stocks and bonds, and a rise in the dollar.
Jeffrey Lacker, president of the Richmond Fed bank, on Friday held his ground opposing QE3, arguing that continued monetary policy is not the appropriate way to tackle the problem.
"It is unlikely that the Federal Reserve can push real growth rates materially higher than they otherwise would be, on a sustained basis," Lacker, who dissented on all Fed easing moves last year, told a meeting of the Maryland Bankers Association.
"I see an increased risk, given the course the committee has set, that inflation pressures emerge and are not thwarted in a timely way," he said.
EYEING 7.1 PERCENT UNEMPLOYMENT
While Lacker is an outspoken policy hawk, Bullard is more of a centrist who is nonetheless toward the hawkish end of the spectrum of Fed policymakers. The pair were the first top central bank officials to speak publicly since the minutes were unveiled on Thursday.
Bullard said he expects unemployment to "continue to tick down through 2013," adding the Fed could ramp down the asset purchases if the jobless rate drops to 7.1 percent.
"That would be probably substantial improvement and the committee could think about removing accommodation on the balance sheet side of the policy at that point," he said.
After the December meeting, the Fed said it would continue buying bonds until the labor market outlook improves "substantially," which Fed Chairman Ben Bernanke has characterized as a "sustained" decline in the unemployment rate.
With the Fed's key interest rate having remained near zero since late 2008 to encourage economic recovery from the Great Recession, the bond purchases are meant to lower longer-term rates and to encourage investment and hiring in the broader economy.
The U.S. economy expanded a respectable 3.1 percent in the third quarter on an annualized basis, but growth is believed to have slowed sharply to barely above 1.0 percent in the last three months of the year.
Government data released Friday showed the U.S. jobless rate held steady from November to December. Bullard called the December jobs number - a boost of 155,000 in new non-farm jobs - "reasonably good.
Plosser, one of the Fed's most hawkish members, said he believes the United States economy likely suffered a lasting decline in its trend potential growth rate as a result of the severe 2007-2009 U.S. recession.
"Any of you who have looked at the data of the most recent ... recession, it certainly looks like we've had a permanent shock," Charles Plosser, president of the Philadelphia Federal Reserve Bank, told a panel at the annual meeting of the American Economic Association. "The problem is we won't know the answer to that for many years to come."
Fed Vice Chair Janet Yellen, a proponent of aggressive Fed easing, also spoke on Friday, but confined her comments to how regulators are tackling risks to financial stability.

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Fed minutes short-circuit Wall Street rally

NEW YORK (Reuters) - Stocks dipped on Thursday after signs the Federal Reserve has growing concern about its highly stimulative monetary policy, giving investors reason to pull back after a two-day rally.
The minutes from the Fed's December policy meeting, released on Thursday, showed increasing reticence about adding to the central bank's $2.9 trillion balance sheet, which it expanded sharply in response to the financial crisis and recession of 2007-2009.
Some policymakers thought asset buying should be slowed or stopped before the end of 2013 while others highlighted the need for further stimulus. The Fed's policy of easy credit has helped push the S&P 500 to a 13.4 percent gain in 2012. Ending that policy would remove an incentive for investors to purchase riskier assets like stocks.
"The surprise was the changes to duration and extent of that program in 2013, but given the tone in previous Fed meeting minutes, it should not have been an entire surprise," said Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon.
Despite the concerns about the effects of its asset purchases, the Fed look set to continue its open-ended stimulus program for now.
Stocks pushed the S&P 500 index 4.3 percent higher in the previous two sessions. On Thursday investors turned their focus to coming battles in Congress, including the likelihood of bitter fights over budget cuts and raising the federal debt ceiling.
"We were definitely technically extended and ripe for a little bit of a consolidation and today is very orderly - traders and investors are still trying to digest the language and the details from the 2012 taxpayer act," Dickson said.
The Dow Jones industrial average <.dji> dropped 21.19 points, or 0.16 percent, to 13,391.36. The Standard & Poor's 500 Index <.spx> shed 3.05 points, or 0.21 percent, to 1,459.37. The Nasdaq Composite Index <.ixic> lost 11.70 points, or 0.38 percent, to 3,100.57.
Economic data showed U.S. private-sector employers shrugged off a looming budget crisis and stepped up hiring in December, offering further evidence of underlying strength in the economy as 2012 ended.
The government's broader monthly payrolls report, due on Friday, is expected to show the economy created 150,000 jobs compared with 146,000 in November, according to a Reuters poll. The U.S. unemployment rate is seen holding steady at 7.7 percent.
Retailers advanced after several major companies in the sector beat expectations of modest sales increases in December, with the S&P retail index <.spxrt> up 0.4 percent.
Shares in Costco Wholesale Corp rose 1 percent to $102.49 after the company reported a better-than-expected 9 percent rise in December sales at stores open at least a year.
Gap Inc stock climbed 2.3 percent to $32.09 following news that the retailer will buy women's fashion boutique Intermix Inc, the Wall Street Journal reported.
Family Dollar Stores Inc stumbled 13 percent to $55.74 on the company's report of lower-than-expected quarterly profit.
Volume was relatively strong, with about 6.68 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, slightly above the 2012 daily average of 6.42 billion.
Advancing stocks outnumbered declining ones on the NYSE by 1,692 to 1,321, while on the Nasdaq, decliners beat advancers 1,287 to 1,187.

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Asian shares drop on Fed minutes, dollar extends gain

 Asian shares fell on Friday, tracking overnight weakness in global equities, but the dollar gained as U.S. debt yields rose after several Federal Reserve officials expressed concerns about continuing to expand stimulative bond buying.
Minutes from the Fed's December policy meeting released on Thursday showed some voting members of the Federal Open Market Committee were increasingly concerned about the potential risks of the Fed's asset purchases on financial markets, even if it look set to continue an open-ended stimulus program for now.
The Fed's asset buying policy has been a crucial factor underpinning investor risk appetite and supporting global equities, so the more hawkish Fed minutes unnerved financial markets on Thursday, driving benchmark U.S. Treasury yields up to a near eight-month high and weighing on equities and oil, while bolstering the dollar.
The dollar extended gains early in Asia on Friday, hitting its highest since July 2010 against the yen at 87.78 while the euro fell to a three-week low of $1.3022. The U.S. dollar <.dxy> hit a near four-week high against a basket of major currencies on Thursday.
"The minutes have added a fresh degree of uncertainty into the investment climate, which is likely to mean a steeper yield curve. But equity investors should take heart from the fact that the Fed's perception is qualified on an improving economy," Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York, said in a note to clients.
MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> fell 0.4 percent, after scaling its highest since August 2011 on Thursday.
Australian shares <.axjo> slipped 0.5 percent, with investors pulling back after a sharp two-day rally which took shares to their highest in more than 19 months on Thursday.
"U.S. equities were due for a correction at any rate ... and the same is true of the KOSPI. Investors would do well to buy while shares are easing," Lee Seung-woo, an analyst at KDB Daewoo Securities, said of South Korean shares <.ks11>, which opened down 0.1 percent.
Japan's benchmark Nikkei stock average <.n225> opened sharply higher, up 2 percent, to its highest since March 2011 on the back of the tumbling yen. Japanese markets were closed from December 31 to January 3 for the new year's holidays. The Nikkei ended 2012 with the sharpest yearly gain since 2005. <.t>
U.S. lawmakers earlier this week narrowly avoided falling off a "fiscal cliff" of automatic higher taxes and spending cuts, which had been set to kick in at the start of the year and threatened to derail the U.S. economy, providing an immediate boost for financial markets.
But U.S. President Barack Obama and congressional Republicans face tough talks on spending cuts and an increase in the nation's debt limit as the hard-fought deal to avert the fiscal cliff covered only taxes and delayed decisions on expenditures until March 1.
Investor sentiment was, on the other hand, supported by recent data showing activity in China's services sector and at U.S. factories expanded in December, which brightened the outlook for global growth.
The U.S. jobs market remained on a recovery track, with data on Thursday showing U.S. private-sector employers shrugged off the budget wrangling and stepped up hiring in December, heightening hopes for a strong nonfarm payrolls report due later on Friday.
The U.S. economy likely added 150,000 jobs in December, according to a Reuters survey of economists, up from 146,000 in November. The unemployment rate is expected to hold steady at 7.7 percent.
Resolution of the U.S. fiscal cliff crisis could spell trouble for some Asian assets that are coming off a stellar 2012 as investors could start to shift some money out of overpriced Asian investments in favour of the U.S. on a view that the fiscal deal manages to avert a U.S. recession and so boosts the prospects for American stocks.
U.S. crude inched down 0.2 percent to $82.78 a barrel.

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Wal-Mart appoints Lev Khasis to develop new store concepts

The world's largest retailer Wal-Mart Stores Inc appointed Lev Khasis as president and chief executive of New Formats for Walmart International, a company spokesperson said.
Khasis, who joined Wal-Mart in 2011 as senior vice-president, will focus on developing new store concepts that can be deployed across markets, Wal-Mart spokesperson Kevin Gardner said in an e-mail statement.
Khasis built up Russia's biggest food retailer X5 through acquisitions into a Russian market leader until his resignation in 2011.
Wal-Mart has more than 4,480 stores in the United States, including large supercenters, discount stores, grocery stores, small format stores and Sam's Club warehouse club stores.

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Congress members seek investigation of Shell barge

 Calls for federal scrutiny of Royal Dutch Shell PLC drilling operations in Arctic waters swelled Thursday with a request for a formal investigation by members of Congress.
The House Sustainable Energy and Environment Coalition called on the Interior Department and the Coast Guard to jointly investigate the New Year's Eve grounding of the Shell drilling vessel Kulluk on a remote Gulf of Alaska island, and a previous incident connected to Arctic offshore drilling operations in 2012.
The coalition is made up of 45 House Democrats.
"The recent grounding of Shell's Kulluk oil rig amplifies the risks of drilling in the Arctic," they said in a joint statement. "This is the latest in a series of alarming blunders, including the near-grounding of another of Shell's Arctic drilling rigs, the 47-year-old Noble Discoverer, in Dutch Harbor and the failure of its blowout containment dome, the Arctic Challenger, in lake-like conditions."
The coalition believes these "serious incidents" warrant thorough investigation, the statement said.
Shell Alaska spokesman Curtis Smith said in an email that the company is in full support of, and is providing resources for, the investigation of the grounding by the Unified Incident Command, made up of federal, state and company representatives. Smith said the findings will be available to the public.
Shell incident commander Sean Churchfield said at an Anchorage news conference later Thursday that two more salvage crews had boarded the vessel and found damage to emergency and service generators, and to the Kulluk's upper deck.
The vessel is upright and stable, and the Coast Guard has said there is no indication of a fuel leak.
"Findings include some wave damage to the top sides of the vessel, and a number of watertight hatches have been breached, causing water damage inside," Churchfield said. The team has secured some of the open hatches, he said.
Damage to the generators means salvagers may have to bring external generators on board or work without power, Churchfield said. He confirmed salvagers heard "breathing" from a vent but said they couldn't immediately determine whether it was a breech or natural venting.
Salvage is in the assessment stage, Churchfield noted, and options are being developed. He wouldn't speculate on whether the Kulluk is seaworthy or when it might be moved.
An emergency towing system was deposited on deck, and spill response equipment has been staged.
"I want to reiterate there is no limitation on resources, personnel or equipment being deployed as part of the response and recovery activities," Churchfield said.
Coast Guard Capt. Paul Mehler said the top concern remains the safety of responders working in what continues to be hazardous flying and marine conditions.
The Kulluk is a non-propelled, 266-foot diameter barge with a reinforced funnel-shaped hull designed to operate in ice. It is carrying more than 140,000 gallons of diesel and about 12,000 gallons of lube oil and hydraulic fluid. Centered on the vessel is a 160-foot derrick. It drilled during the short open-water season in the Beaufort Sea.
A 360-foot anchor handler, the Aiviq, was towing the Kulluk from Dutch Harbor to Seattle last week for maintenance and upgrades when the tow line snapped south of Kodiak. Lines were reattached at least four times but could not be maintained. A lone tugboat still attached Monday night in a vicious storm couldn't control the vessel and cut it loose as it neared land.
After the grounding, critics quickly asserted it has foreshadowed what will happen north of the Bering Strait if drilling is allowed.
Environmentalists for years have said conditions are too harsh and the stakes too high to allow industrial development in the Arctic, where drilling sites are 1,000 miles or more from the closest Coast Guard base.
Two national organizations kept up the drumbeat Thursday by calling for a halt to all permitting for Arctic offshore drilling in the wake of the grounding.
"This string of mishaps by Shell makes it crystal clear that we are not ready to drill in the Arctic," said Chuck Clusen of the Natural Resources Defense Council. "Shell is not Arctic-ready. We have lost all faith in Shell, and they certainly don't have any credibility left."
Lois Epstein, a civil engineer who works for The Wilderness Society in Anchorage, said Shell has made troubling, non-precautionary decisions that put workers and the Coast Guard at risk.
"These ongoing technical and decision-making problems and their enormous associated costs and risks taken by our military personnel once there were problems should lead the federal government to reassess its previous permitting decisions regarding Shell," Epstein said.
In the short term, she said, damage to the Kulluk may prevent it from being ready for the 2013 open water season. Besides drilling in the Beaufort, the barge was supposed to be on hand for drilling a relief well if Shell's drill vessel in the Chukchi Sea, the Noble Discoverer, experienced a wellhead blowout and was damaged, Epstein said.
Shell has maintained it has taken a heads-up approach to anticipating and reacting to problems.
Shell Alaska spokesman Smith said Wednesday the Kulluk had been towed more than 4,000 miles and had previously experienced similar storm conditions. Shell staged additional towing vessels along the route in case there were problems, he said.
"We know how to work in regions like this," Smith said. "Having said that, when flawless execution does not happen, you learn from it, and we will.

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Google emerges from FTC probe relatively unscathed

 Google has settled a U.S. government probe into its business practices without making any major concessions on how the company runs its Internet search engine, the world's most influential gateway to digital information and commerce.
Thursday's agreement with the Federal Trade Commission covers only some of the issues raised in a wide-ranging antitrust investigation that could have culminated in a regulatory crackdown that re-shapes Internet search, advertising and mobile computing.
But the FTC didn't find any reason to impose radical changes, to the relief of Google and technology trade groups worried about overzealous regulation discouraging future innovation. The resolution disappointed consumer rights groups and Google rivals such as Microsoft Corp., which had lodged complaints with regulators in hopes of legal action that would split up or at least hobble the Internet's most powerful company.
Google is still trying to settle a similar antitrust probe in Europe. A resolution to that case is expected to come within the next few weeks.
After a 19-month investigation, Google Inc. placated the FTC by agreeing to a consent decree that will require the company to charge "fair, reasonable and non-discriminatory" prices to license hundreds of patents deemed essential to the operations of mobile phones, tablet computers, laptops and video game players.
The requirement is meant to ensure that Google doesn't use patents acquired in last year's $12.4 billion purchase of Motorola Mobility to thwart competition from mobile devices running on software other than Google's Android system. The products vying against Android include Apple Inc.'s iPhone and iPad, Research in Motion Ltd.'s BlackBerry and Microsoft's Windows software.
Google also promised to exclude, upon request, snippets copied from other websites in capsules of key information shown in response to search requests. The company had insisted the practice is legal under the fair-use provisions of U.S. copyright law. Nonetheless, even before the settlement, Google already had scaled back on the amount of cribbing, or "scraping," of online content after business review site Yelp Inc. lodged one of the complaints that triggered the FTC investigation in 2011.
In another concession, Google pledged to adjust the online advertising system that generates most of its revenue so marketing campaigns can be more easily managed on rival networks.
Google, though, prevailed in the pivotal part of the investigation, which delved into complaints that the Internet search leader has been highlighting its own services on its influential results page while burying links to competing sites. For instance, requests for directions may turn up Google Maps first, queries for video might point to the company's own site, YouTube, and searches for merchandise might route users to Google Shopping.
Although the FTC said it uncovered some obvious instances of bias in Google's results during the investigation, the agency's five commissioners unanimously concluded there wasn't enough evidence to take legal action.
"Undoubtedly, Google took aggressive actions to gain advantage over rival search providers," said Beth Wilkinson, a former federal prosecutor that the FTC hired to help steer the investigation. "However, the FTC's mission is to protect competition, and not individual competitors."
Two consumer rights groups lashed out at the FTC for letting Google off too easily.
"The FTC had a long list of grievances against Google to choose from when deciding if they unfairly used their dominance to crush their competitors, yet they failed to use their authority for the betterment of the marketplace," said Steve Pociask, president of the American Consumer Institute.
John Simpson of frequent Google critic Consumer Watchdog asserted: "The FTC rolled over for Google."
David Wales, who was the FTC's antitrust enforcement chief in 2008 and early 2009, said the agency had to balance its desire to prevent a powerful company from trampling the competition against the difficulty of proving wrongdoing in a rapidly changing Internet search market.
"This is a product of the FTC wanting to push the envelope of antitrust enforcement without risking the danger of losing a case in in court," said Wales, who wasn't involved with the case and is now a partner at the law firm Jones Day.
FTC Chairman Jon Leibowitz said the outcome "is good for consumers, it is good for competition, it is good for innovation and it is the right thing to do." Before reaching its conclusion, the FTC reviewed more than 9 million pages of documents submitted by Google and its rivals and grilled top Internet industry executives during sworn depositions.
The Computer & Communications Industry Association, a technology trade group, applauded the FTC for its handling of the high-profile case.
"This was a prudent decision by the FTC that shows that antitrust enforcement, in the hands of responsible regulators, is sufficiently adaptable to the realities of the Internet age," said Ed Black, the group's president.
The FTC has previously been criticized for not doing more to curb Google's power. Most notably, the FTC signed off on Google's $3.2 billion purchase of online advertising service DoubleClick in 2008 and its $681 million acquisition of mobile ad service AdMob in 2010. Google critics contend those deals gave the company too much control over the pricing of digital ads, which account for the bulk of Google's revenue.
If Google breaks any part of the agreement, Leibowitz said the FTC can fine the company up to $16,000 per violation. Last year, the FTC determined that Google broke an agreement governing Internet privacy, resulting in a $22.5 million fine, though the company didn't acknowledge any wrongdoing.
Google's ability to protect its search recipe from government-imposed changes represents a major victory for a company that has always tried to portray itself as force for good. The Mountain View, Calif., company has portrayed its dominant search engine as a free service that is constantly tweaking its formula so that people get the information they desire more quickly and concisely.
"The conclusion is clear: Google's services are good for users and good for competition," David Drummond, Google's top lawyer, wrote in a Thursday blog post.
Google's tactics also have been extremely lucrative. Although Google has branched into smartphones and many other fields since its founding in a Silicon Valley garage in 1998, Internet search and advertising remains its financial backbone. The intertwined services still generate more than 90 percent of Google's revenue, which now exceeds $50 billion annually.
Throughout the FTC investigation, Google executives also sought to debunk the notion that the company's recommendations are the final word on the Internet. They pointed out that consumers easily could go to Microsoft's Bing, Yahoo or other services to search for information. "Competition is just a click away," became as much of a Google mantra as the company's official motto: "Don't be evil."
Microsoft cast the FTC's investigation as a missed opportunity.
"The FTC's overall resolution of this matter is weak and — frankly —unusual," Dave Heiner, Microsoft's deputy general counsel, wrote on the company's blog. "We are concerned that the FTC may not have obtained adequate relief even on the few subjects that Google has agreed to address."
FairSearch, a group whose membership includes Microsoft, called the FTC's settlement "disappointing and premature," given that European regulators might be able to force Google to make more extensive changes.
"The FTC's inaction on the core question of search bias will only embolden Google to act more aggressively to misuse its monopoly power to harm other innovators," FairSearch asserted.
Yelp also criticized the FTC's handling of the case, calling "it a missed opportunity to protect innovation in the Internet economy, and the consumers and businesses that rely upon it."
Investors had already been anticipating Google would emerge from the inquiry relatively unscathed.
Google's stock rose 42 cents Thursday to close at $723.67. Microsoft, which is based in Redmond, Wash., shed 37 cents, or 1.3 percent, to finish at $27.25.
In a research note Thursday, Macquarie Securities analyst Benjamin Schachter described the settlement as "the best possible outcome" for Google. "We believe that the terms of the agreement will have very limited negative financial or strategic implications for the company." Schachter wrote.

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Congress tightens belt, trims spy budget for 2013

WASHINGTON (AP) — Congress has drastically trimmed the budget for U.S. spies and satellites for 2013, though not quite as deeply as the White House wanted.
In one of the last votes of the year, House lawmakers voted Monday 373-29 in favor of a Senate-passed bill to slightly boost the president's $72 billion budget request for intelligence agencies including the CIA, adding extra cash for the counterterrorism fight against al-Qaida, and the counterintelligence fight against foreign governments trying to spy on the U.S.
That's down sharply from roughly $80 billion in 2012, which marked the peak of intelligence spending since the attacks of Sept. 11, 2001.
"The bill holds personnel levels, one of the biggest cost drivers, generally at last year's levels," said House Intelligence Committee Chairman Mike Rogers, R-Mich. "Even so, the bill adds a limited number of new personnel positions for select, high-priority positions, such as FBI surveillance officers to keep watch on terrorists."
The House Intelligence Committee's ranking member, Rep. Dutch Ruppersberger, D-Md., said the bill "invests in personnel and programs that are working and cuts things that aren't."
The bill was stripped of several measures meant to block the leaking of classified information, including a provision that would have limited which government officials could brief journalists on intelligence. The measures had been drafted after lawmakers objected to a series of news stories that anonymously quoted senior administration sources describing sensitive intelligence programs, such as the process by which targets are chosen for lethal drone strikes overseas.
The chairwoman of the Senate Intelligence Committee, Dianne Feinstein, D-Calif., says the measures were taken out to get the bill passed but that the issue remains a problem.
"Unfortunately, I am certain that damaging leaks of classified information will continue, and so the committee will need to continue to look for acceptable ways to address this problem," Feinstein said Friday after the Senate version of the bill passed.
The legislation, if signed into law by President Barack Obama, will require the White House to inform Congress when it decides to share classified information with reporters, giving lawmakers a heads-up before they read about it in the media.

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Shell drill ship runs aground on island off Alaska

ANCHORAGE, Alaska (AP) — Royal Dutch Shell PLC's foray into Arctic offshore drilling has suffered a serious setback after one of its two Alaska drilling rigs ran aground in shallow water off a small island.
Officials at a unified command center run by the Coast Guard, Shell, state responders and others said the Kulluk grounded Monday night on rocks off the southeast side of Sitkalidak Island, an uninhabited island in the Gulf of Alaska.
The Kulluk was being towed by a 360-foot anchor handler, the Aiviq, and a tugboat, the Alert. The vessels were moving north along Kodiak Island, trying to escape the worst of a North Pacific storm that included winds near 70 mph and swells to 35 feet. Sitkalidak is on the southeast side of Kodiak Island.
About 4:15 p.m., the drill ship separated from the Aiviq about 10 to 15 miles off shore and grounding was inevitable, Coast Guard Cmdr. Shane Montoya, the acting federal on-scene coordinator, told reporters.
"Once the Aiviq lost its tow, we knew the Alert could not manage the Kulluk on its own as far as towing, and that's when we started planning for the grounding," he said.
The command center instructed the nine tug crew members to guide the drill ship to a place where it would cause the least environmental damage. The tug cut the unmanned ship loose at 8:15 p.m. and it grounded at 9 p.m. near the north tip of Ocean Bay on Sitkalidak.
"The Alert was not able to do anything as far as towing the Kulluk but tried to maintain some kind of control," Montoya said.
The drill ship drafts 35 to 40 feet of water. The Coast Guard planned to fly out early Tuesday to plan a salvage operation and possible spill response. It is carrying 150,000 gallons of diesel and about 12,000 gallons of lube oil and hydraulic fluid, Montoya said.
Susan Childs, Shell's on-scene coordinator, said it was too early to know how the vessel would react to the pounding of the storm when it was aground and stationary.
She was optimistic about its salvage prospects and chances for staying intact.
"The unique design of the Kulluk means the diesel fuel tanks are isolated in the center of the vessel and encased in very heavy steel," she said. "When the weather subsides and it is safe to do so, we will dispatch crews to the location and begin a complete assessment."
The Kulluk is designed for extended drilling in Arctic waters and underwent $292 million in technical upgrades since 2006 to prepare for Alaska offshore exploration. The drill ship worked during the short 2012 open water season in the Beaufort Sea off Alaska's north coast. Its ice-reinforced, funnel-shape hull can deflect moving ice downward and break it into pieces.
Attached to a drilling prospect, the Kulluk is designed to handle waves 18 feet high. When disconnected from a well, it's designed to handle seas to 40 feet. Garth Pulkkinen of Noble Corp., the operator of the drill ship, said it was never in danger of capsizing.
The vessel first separated from a towing vessel Thursday night south of Kodiak Island. It was carrying a skeleton crew of 17 as it was towed by the Aiviq from Dutch Harbor in the Aleutian Islands to Seattle for maintenance. The tow line broke at a shackle attached to one of the vessels.
"It was new. It was inspected before it left Dutch, but it broke," said Shell Alaska spokesman Curtis Smith.
Before a line could be reattached, the Aiviq's engines failed, possibly from contaminated fuel. The Coast Guard cutter Alex Haley attempted to secure the drifting drill ship but that line failed and wrapped itself around one of the cutter's propellers, requiring the cutter to return to Kodiak on one propeller.
With bad weather predicted, the Kulluk's crew was evacuated Saturday. They hooked up emergency tow lines and left them trailing behind the vessel in case they were needed.
The Aiviq, with its engines restored, and a tug re-established lines to the drill ship, but lines broke Sunday. During a lull in the storm early Monday, the crew of Alert grabbed the original 400-foot line trailing the drill ship and later the Aiviq grappled aboard one of the emergency lines.

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Analysis: Economy would dodge bullet for now under fiscal deal

WASHINGTON (Reuters) - A deal worked out by Senate leaders to avoid the "fiscal cliff" was far from any "grand bargain" of deficit reduction measures.
But if approved by the House of Representatives, it could help the country steer clear of recession, although enough austerity would remain in place to likely keep the economy growing at a lackluster pace.
The Senate approved a last-minute deal early Tuesday morning to scale back $600 billion in scheduled tax hikes and government spending cuts that economists widely agree would tip the economy into recession.
The deal would hike taxes permanently for household incomes over $450,000 a year, but keep existing lower rates in force for everyone else.
It would make permanent the alternative minimum tax "patch" that was set to expire, protecting middle-income Americans from being taxed as if they were rich.
Scheduled cuts in defense and non-defense spending were simply postponed for two months.
Economists said that if the emerging package were to become law, it would represent at least a temporary reprieve for the economy. "This keeps us out of recession for now," said Menzie Chinn, an economist at the University of Wisconsin-Madison.
The contours of the deal suggest that roughly one-third of the scheduled fiscal tightening could still take place, said Brett Ryan, an economist at Deutsche Bank in New York.
That is in line with what many financial firms on Wall Street and around the world have been expecting, suggesting forecasts for economic growth of around 1.9 percent for 2013 would likely hold.
At midnight Monday, low tax rates enacted under then-President George W. Bush in 2001 and 2003 expired. If the House agrees with the Senate - and there remained considerable doubt on that score - the new rates would be extended retroactively.
Otherwise, together with other planned tax hikes, the average household would pay an estimated $3,500 more in taxes, according to the Tax Policy Center, a Washington think tank. Budget experts expect the economy would take a hit as families cut back on spending.
Provisions in the Senate bill would avoid scheduled cuts to jobless benefits and to payments to doctors under a federal health insurance program.
AUSTERITY'S BITE
Like the consensus of economists from Wall Street and beyond, Deutsche Bank has been forecasting enough fiscal drag to hold back growth to roughly 1.9 percent in 2013. Ryan said the details of the deal appeared to support that forecast.
That would be much better than the 0.5 percent contraction predicted by the Congressional Budget Office if the entirety of the fiscal cliff took hold, but it would fall short of what is needed to quickly heal the labor market, which is still smarting from the 2007-09 recession.
"We continue to anticipate a significant economic slowdown at the start of the year in response to fiscal drag and a contentious fiscal debate," economists at Nomura said in a research note.
In particular, analysts say financial markets are likely to remain on tenterhooks until Congress raises the nation's $16.4 trillion debt ceiling, which the U.S. Treasury confirmed had been reached on Monday.
While the Bush tax cuts would be made permanent for many Americans under the budget deal, a two-year-long payroll tax holiday enacted to give the economy an extra boost would expire. The Tax Policy Center estimates this could push the average household tax bill up by about $700 next year.
The suspension of spending cuts sets up a smaller fiscal cliff later in the year which still could be enough to send the economy into recession, said Chinn.
He warned that ongoing worries about the possibility of recession could keep businesses from investing, which would hinder economic growth.
"You retain the uncertainty," Chinn said.

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Bill to avert fiscal cliff heads to House

WASHINGTON (AP) — Legislation to negate a fiscal cliff of across-the-board tax increases and sweeping spending cuts to the Pentagon and other government agencies is headed to the GOP-dominated House after bipartisan, middle-of-the-night approval in the Senate capped a New Year's Eve drama unlike any other in the annals of Congress.
The measure cleared the Senate on an 89-8 vote early Tuesday, hours after Vice President Joe Biden and Senate Republican Leader Mitch McConnell of Kentucky sealed a deal.
It would prevent middle-class taxes from going up but would raise rates on higher incomes. It would also block spending cuts for two months, extend unemployment benefits for the long-term jobless, prevent a 27 percent cut in fees for doctors who treat Medicare patients and prevent a spike in milk prices.
The measure ensures that lawmakers will have to revisit difficult budget questions in just a few weeks, as relief from painful spending cuts expires and the government requires an increase in its borrowing cap.
House Speaker John Boehner pointedly refrained from endorsing the agreement, though he's promised a vote on it or a GOP alternative right away. But he was expected to encounter opposition from House conservatives.
"It's three strikes in my book and I'll be voting no on this bill," Rep. Tim Huelskamp told CNN Tuesday morning. Huelskamp says the legislation would impose a hardship on small businesses around the country and falls short of addressing the need for cuts in spending.
The measure is the first significant bipartisan tax increase since 1990, when former President George H.W. Bush violated his "read my lips" promise on taxes. It would raise an additional $620 billion over the coming decade when compared with revenues after tax cuts passed in 2001 and 2003, during the Bush administration. But because those policies expired at midnight Monday, the measure is officially scored as a whopping $3.9 trillion tax cut over the next decade.
President Barack Obama praised the agreement after the Senate's vote.
"While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country and the House should pass it without delay," Obama said in a statement. "This agreement will also grow the economy and shrink our deficits in a balanced way — by investing in our middle class, and by asking the wealthy to pay a little more."
The sweeping Senate vote exceeded expectations — tea party conservatives like Pat Toomey, R-Pa., and Ron Johnson, R-Wis., backed the measure — and would appear to grease enactment of the measure despite lingering questions in the House, where conservative forces sank a recent bid by Boehner to permit tax rates on incomes exceeding $1 million to go back to Clinton-era levels.
"Decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members — and the American people — have been able to review the legislation," said a statement by Boehner and other top GOP leaders.
Lawmakers hope to resolve any uncertainty over the fiscal cliff before financial markets reopen Wednesday. It could take lots of Democratic votes to pass the measure and overcome opposition from tea party lawmakers.
Under the Senate deal, taxes would remain steady for the middle class but rise at incomes over $400,000 for individuals and $450,000 for couples — levels higher than President Barack Obama had campaigned for in his successful drive for a second term in office. Some liberal Democrats were disappointed that the White House did not stick to a harder line, while other Democrats sided with Republicans to force the White House to partially retreat on increases in taxes on multi-million-dollar estates.
The measure also allocates $24 billion in spending cuts and new revenues to defer, for two months, some $109 billion worth of automatic spending cuts that were set to slap the Pentagon and domestic programs starting this week. That would allow the White House and lawmakers time to regroup before plunging very quickly into a new round of budget brinkmanship, certain to revolve around Republican calls to rein in the cost of Medicare and other government benefit programs.
Officials also decided at the last minute to use the measure to prevent a $900 pay raise for lawmakers due to take effect this spring.
Even by the dysfunctional standards of government-by-gridlock, the activity at both ends of historic Pennsylvania Avenue was remarkable as the administration and lawmakers spent the final hours of 2012 haggling over long-festering differences.
Republicans said McConnell and Biden had struck an agreement Sunday night but that Democrats pulled back Monday morning. Democrats like Tom Harkin of Iowa said the agreement was too generous to upper-bracket earners. Obama's longstanding position was to push the top tax rate on family income exceeding $250,000 from 35 percent to 39 percent.
"No deal is better than a bad deal. And this look like a very bad deal," said Harkin.
The measure would raise the top tax rate on large estates to 40 percent, with a $5 million exemption on estates inherited from individuals and a $10 million exemption on family estates. At the insistence of Republicans and some Democrats, the exemption levels would be indexed for inflation.
Taxes on capital gains and dividends over $400,000 for individuals and $450,000 for couples would be taxed at 20 percent, up from 15 percent.
The bill would also extend jobless benefits for the long-term unemployed for an additional year at a cost of $30 billion, and would spend $31 billion to prevent a 27 percent cut in Medicare payments to doctors.
Another $64 billion would go to renew tax breaks for businesses and for renewable energy purposes, like tax credits for energy-efficient appliances.
Despite bitter battling over taxes in the campaign, even die-hard conservatives endorsed the measure, arguing that the alternative was to raise taxes on virtually every earner.
"I reluctantly supported it because it sets in stone lower tax rates for roughly 99 percent of American taxpayers," said Sen. Orrin Hatch, R-Utah. "With millions of Americans watching Washington with anger, frustration and anxiety that their taxes will skyrocket, this is the best course of action we can take to protect as many people as possible from massive tax hikes."

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Senate approves "fiscal cliff" deal, crisis eased

WASHINGTON (Reuters) - The Senate moved the U.S. economy back from the edge of a "fiscal cliff" on Tuesday, voting to avoid imminent tax hikes and spending cuts in a bipartisan deal that could still face stiff challenges in the House of Representatives.
In a rare New Year's session at around 2 a.m. EST (0700 GMT), senators voted 89-8 to raise some taxes on the wealthy while making permanent low tax rates on the middle class that have been in place for a decade.
But the measure did little to rein in huge annual budget deficits that have helped push the U.S. debt to $16.4 trillion.
The agreement came too late for Congress to meet its own deadline of New Year's Eve for passing laws to halt $600 billion in tax hikes and spending cuts which strictly speaking came into force on Tuesday.
But with the New Year's Day holiday, there was no real world impact and Congress still had time to draw up legislation, approve it and backdate it to avoid the harsh fiscal measures.
That will need the backing of the House where many of the Republicans who control the chamber complain that President Barack Obama has shown little interest in cutting government spending and is too concerned with raising taxes.
All eyes are now on the House which is to hold a session on Tuesday starting at noon (1700 GMT).
Obama called for the House to act quickly and follow the Senate's lead.
"While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country and the House should pass it without delay," he said in a statement.
"There's more work to do to reduce our deficits, and I'm willing to do it. But tonight's agreement ensures that, going forward, we will continue to reduce the deficit through a combination of new spending cuts and new revenues from the wealthiest Americans," Obama said.
Members were thankful that financial markets were closed, giving them a second chance to return to try to head off the fiscal cliff.
But if lawmakers cannot pass legislation in the coming days, markets are likely to turn sour. The U.S. economy, still recovering from the 2008/2009 downturn, could stall again if Congress fails to fix the budget mess.
"If we do nothing, the threat of a recession is very real. Passing this agreement does not mean negotiations halt, far from it. We can all agree there is more work to be done," Majority Leader Harry Reid, a Democrat, told the Senate floor.
A new, informal deadline for Congress to legislate is now Wednesday when the current body expires and it is replaced by a new Congress chosen at last November's election.
The Senate bill, worked out after long negotiations on New Year's Eve between Vice President Joe Biden and Senate Republican Minority Leader Mitch McConnell, also postpones for two months a $109 billion "sequester" of sweeping spending cuts on military and domestic programs.
It extends unemployment insurance to 2 million people for a year and makes permanent the alternative minimum tax "patch" that was set to expire, protecting middle-income Americans from being taxed as if they were rich.
'IMPERFECT SOLUTION'
The tax hikes do not sit easy with Republicans but conservative senators held their noses and voted to raise rates for the rich because not to do so would have meant increases for almost all working Americans.
"It took an imperfect solution to prevent our constituents from a very real financial pain, but in my view, it was worth the effort," McConnell said.
House Speaker John Boehner - the top Republican in Congress - said the House would consider the Senate deal. But he left open the possibility of the House amending the Senate bill, which would spark another round of legislating.
"The House will honor its commitment to consider the Senate agreement if it is passed. Decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members ... have been able to review the legislation," Boehner and other House Republican leaders said in a statement.
Boehner has struggled for two years to get control over a group of several dozen Tea Party fiscal conservatives in his caucus who strongly oppose tax increases and demand that he force Obama to make savings in the Medicare and Social Security healthcare and retirement programs.
A campaign-style event held by Obama in the White House as negotiations with Senate leaders were taking place on Monday may have made it more difficult for Republicans to back the deal. In remarks to a group of supporters that resembled a victory lap, the president noted that his rivals were coming around to his way of seeing things.
"Keep in mind that just last month Republicans in Congress said they would never agree to raise tax rates on the wealthiest Americans. Obviously, the agreement that's currently being discussed would raise those rates and raise them permanently," he said to applause before the Senate deal was sealed.
Obama's words and tone annoyed Republican lawmakers who seemed to feel that the Democrat was gloating.
"That's not the way presidents should lead," said Republican Senator John McCain, Obama's rival in the 2008 election.
A deal with the House on Tuesday, while uncertain, would not mark the end of congressional budget fights. The "sequester" spending cuts will come up again in February as will the contentious "debt ceiling," which caps how much debt the federal government can hold.
Republicans may see those two issues as their best chance to try to rein in government spending and clip Obama's wings at the start of his second term.

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BMW's vehicle sales reach 1.8 million in 2012: CFO

BMW , the world's largest premium carmaker, has sold about 1.8 million vehicles in 2012, its chief financial officer told a German newspaper.
"One of our goals was to increase vehicle sales in 2012 and to reach a new record in deliveries. With about 1.8 million vehicles, we have achieved this," the executive, Friedrich Eichiner, told Die Welt in an interview.
In December, BMW said vehicle sales in the January-November period had increased by 10.1 percent to 1.66 million. For the whole of 2011, BMW had vehicles sales of 1.67 million.

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