Asian shares mixed after China data, "fiscal cliff" weighs

TOKYO (Reuters) - Asian shares were mixed on Friday with a pick-up in China's manufacturing sector lending support but worries over the progress of U.S. budget talks to avert the "fiscal cliff" weighing on investor sentiment.

European shares were expected to start higher, with financial spreadbetters predicting London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> will open as much as 0.3 percent higher. A 0.3 percent gain in U.S. stock futures hinted at a firm Wall Street open. <.l><.eu><.n/>

A deteriorating business sentiment survey and expectations that the Bank of Japan will ease policy further to support the weak economy next week pushed the yen to a near 9-month low against the dollar and an 8-month low against the euro, helping Japanese equities wipe out earlier losses.

China shares outperformed Asian peers after the HSBC flash purchasing managers' index for December hit a 14-month high of 50.9, the fifth straight monthly gain, showing growth in China's vast manufacturing sector picked up and underlined a brighter outlook for the economy in coming months.

The private survey followed recent positive data suggesting Chinese economic activity has gained some momentum in the fourth quarter after it slowed for seven consecutive quarters.

A state-backed think tank has also forecast China's GDP growth next year at around 8 percent -- above the likely government target -- while calling for an expansion in the central government's fiscal deficit to offset an uncertain external environment.

The Shanghai Composite Index <.ssec> soared 4 percent while Hong Kong shares <.hsi> rose 0.8 percent to a 16-month peak.

"We're seeing positive PMI, industrial data and they are all pointing to the direction of an economic recovery," said Sijin Cheng, a commodities analyst at Barclays Capital. "The underlying demand is going to improve gradually."

MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> was little changed, hovering near 16-month highs which it had hit successively since December 5. The index was set to end the week up 1.4 percent.

Australian shares <.axjo> ended flat, giving up earlier gains as investors remained wary of the stalled U.S. budget talks.

A seven-day rally in world shares came to a halt and commodity prices slipped on Thursday after negotiations over the U.S. "fiscal cliff" hit a wall.

President Barack Obama and House of Representatives Speaker John Boehner held a "frank" face-to-face meeting late on Thursday in an effort to break an impasse in talks to avert the "fiscal cliff" of some $600 billion of tax hikes and spending cuts scheduled to start in January.

"With the end of the year coming up, I can't see anybody taking any significant positions ahead of this political unknown (the fiscal cliff)," the trader added.

Failure to avert the "fiscal cliff" could derail the struggling U.S. economic recovery and also snuff out encouraging signs emerging from China, the world's second-largest economy after the United States.

"You're not going to get a solution that will be a 100 percent, but it may be a third or a quarter. It will be something a bit hard to reduce the deficit, but they'll get a good vote on it which will make it a good rosy story -- the U.S. is not interested in can-kickers any more," said Jonathan Barratt, chief executive of Barratt's Bulletin, a Sydney-based commodity research firm.

China PMI surveys: http://link.reuters.com/rej64t

Japan Tankan: http://link.reuters.com/qet44t

Japan economy, election: http://link.reuters.com/jyc64t

Asset returns in 2012: http://link.reuters.com/nyw85s

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YEN SELLING ACCELERATES

In the world's third-largest economy, big Japanese manufacturers' sentiment worsened in the three months to December, a Bank of Japan's quarterly tankan survey showed on Friday, hurting an economy already seen to be in a mild recession.

The data will help reinforce market expectations for the Japanese central bank to further ease monetary policy.

The yen fell as low as 83.95 against the dollar. The euro stood at 109.83 yen, its highest in more than eight months and looked set to end the week up over 3 percent on the yen.

Japan's Nikkei share average <.n225> turned up 0.1 percent, rebounding from earlier declines. <.t/>

Japan's conservative Liberal Democratic Party (LDP) is on track for a stunning victory in Sunday's election, gaining momentum to pressure the BOJ for more forceful easing.

"The market is growing confident the next government will be one of the most aggressive about easing that you could think of," said a trader at a Japanese bank.

Oil prices rebounded from Thursday's fall after Chinese manufacturing data raised hopes for firmer demand, with U.S. crude futures rising 0.8 percent to $86.54 a barrel and Brent adding 0.4 percent to $108.39.

Spot gold steadied near $1,696 an ounce after tumbling 1 percent the previous session to push prices below $1,700 for the first time this week. Gold was set for a third weekly decline as funds liquidate positions to lock in profit for the year.

Sluggish stocks weighed on Asian credit markets, keeping the spreads on the iTraxx Asia ex-Japan investment-grade index barely changed from Thursday.

(Additional reporting by Hideyuki Sano in Tokyo, Florence Tan and Melanie Burton in Singapore; Editing by Jacqueline Wong)

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Pro-Assad Alawites Blamed in Killings of Others in Sect

Scores of Syrian civilians belonging to President Bashar al-Assad’s minority Alawite sect were killed Tuesday in the first known Alawite massacre since the Syrian conflict began. But the killings, in the village of Aqrab, happened under circumstances that remain unclear.

Rights organizations researching the massacre said Wednesday that members of the shabiha, a pro-government Alawite militia, were the killers. The Syrian Observatory for Human Rights, an anti-Assad group based in Britain with a network of contacts inside Syria, said 125 to 150 civilians died.

The accusation, if confirmed, would be a shocking episode of Alawite-on-Alawite violence in a conflict punctuated by violence between sects.

Videotaped testimony said to be from survivors, primarily women and children, has flooded the Internet in the last 24 hours, providing a series of glimpses of an atrocity in a devastated town. The picture they paint is inconclusive, however, and restrictions on foreign reporting inside Syria made verification difficult.

Many of the videos were filmed by members of the Free Syrian Army, the main anti-Assad armed group, in what appears to be a clinic, where survivors were being treated for wounds or lie wrapped in blankets, faces blank with shock. In the videos, they say that members of the shabiha gathered civilians inside a building or compound as the Free Syrian Army approached the village.

Soon, though, survivors said the shabiha turned their weapons on the same civilians they had been professing to defend.

“The shabiha came and told us they wanted to protect us from the rebels, but then they wouldn’t let us go,” said a young man in one video who gave his name as Mohamed Ibrahim al-Judud, and who like others in the videos said he was able to identify the attackers by their first names. “They killed my father, my mother and my brother.”

In another video, a young man who gave his name as Mohamed Fathy Jowwal lay wrapped in a blanket, speaking to a member of the Free Syrian Army.

“They said it was better that we kill ourselves than wait for you to kill us,” he said, looking at the young rebel fighter crouching beside him. “They were from our own group.”

Throughout the videos, members of the Free Syrian Army professed a commitment to religious pluralism and said the survivors of Aqrab were under their protection. Nevertheless, there were moments when flashes of sectarian animosity shone through. In one video, a rebel fighter could be heard saying to an injured young man, “Get well soon, even if you are in the Alawite sect.”

“Man, so what if I was in the Alawite sect?” the injured young man protests, as medics busily gathered around his bare legs. A second rebel, standing nearby, interjected and stroked his face.

“Bashar does not represent the Alawite sect,” the second fighter reassured the victim. “The Syrian people are one.”

The Syrian Observatory for Human Rights said it believed the massacre victims had died from “gunfire and bombs.” Almost all were members of the Alawite sect.

The observatory also could not confirm the circumstances of their deaths, but said it had identified several similar narratives of the attack. One was that shabiha members had sought cover among civilians in a residential area, using them as shields. Another was that “pro-regime militiamen held Alawite civilians captive.” It also said that explosions had caused many of the deaths.

Syria’s conflict began as an Arab Spring protest movement after four decades of rule by the family of Mr. Assad, and has since transformed into a sectarian conflict. Even so, attacks by Alawite militias on their own civilian populations have so far been unheard-of.

Faiek al-Meer, a longtime antigovernment activist, wrote on Facebook that the Aqrab episode could be seen as a metaphor for the predicament facing the entire Alawite sect. Mr. Assad, he wrote, “will continue to fight to defend his seat and the interests of his clique even if has to use the Alawites as human shields to protect himself.”

Liam Stack reported from New York, and Hania Mourtada from Beirut, Lebanon.

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Fandango launches Oscar-themed web series with Dave Karger

LOS ANGELES (TheWrap.com) – Fandango is elbowing into the Oscar horse race.

The movie-ticket seller launched its first original digital video series Wednesday, “The Frontrunners,” which will cover the major contenders for the top awards. The show will feature conversations with a star-studded group of Oscar hunters that includes Richard Gere (“Arbitrage”), Amy Adams (“The Master”), Hugh Jackman (“Les Miserables”) and Ben Affleck (“Argo”).

During the broadcasts, actors and directors will deconstruct key scenes from their movies, explaining how they crafted a moment of domestic conflict, in the case of Gere, or decided to intercut between a Hollywood script reading and the Iranian Hostage Crisis, as with Affleck.

However, commerce will be mixed in along with the art. Fandango will offer ticketing information along with the digital videos, with the hopes that the clips will inspire users to check out the movie being discussed.

The show, shot at Soho House in Los Angeles, will be hosted by Fandango’s Chief Correspondent Dave Karger, the movie guru the company lured over from Entertainment Weekly in September. It’s part of a bold bet that Fandango is making on original content.

To that in end, the company tapped former Disney digital executive Paul Yanover to serve in the newly created role of president and tasked him with creating a suite of programming for Fandango and its 41 million unique visitors.

“Our goal with Fandango is to make it the definitive movie-going brand across all platforms,” Nick Lehman, the president of digital for NBC Universal Entertainment Networks & Interactive Media, told TheWrap in October. “We want to continue expanding in ways that entertain and inform and video is key to that strategy. Advertisers are clamoring for it because there is a dearth of high quality original video content on the web.”

As TheWrap reported exclusively in October, Karger is also planning programs that will center on box office contenders and one program that will boast both A-List actors and below-the-line talent.

New episodes of “The Frontrunners” will air weekly through the Academy Awards on February 24, 2013. The first three installments will be available Wednesday

Internet News Headlines – Yahoo! News

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Tevin Hunte Is 'So Happy' After His Voice Elimination

TV Watch

The Voice

By Jessica Herndon and Julia Haskins

12/12/2012 at 07:45 PM EST

Team Cee Lo's Trevin Hunte was eliminated on Tuesday's episode of The Voice, but the soulful singer isn't letting the end of this journey hold him back.

"I feel like the best person on the planet Earth. I am so happy and excited to be honest," Hunte told PEOPLE after the show. I feel like a weight has been lifted. Being away from family and friends and what you're used to was definitely a hard thing for me."

Hunte is looking forward to his mom's cooking and seeing his friends back home, and he won't waste a second wondering what if he'd made it further.

"I have no regrets. I am glad that I took a leap of faith and auditioned," he said. "I auditioned for American Idol and told my family I didn't have the strength to do it again. But I am definitely happy and excited that I made it this far."

And he still has a long way to go. "I'm only 18," he said. "I'm just really excited."

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Congress examines science behind HGH test for NFL

WASHINGTON (AP) — A congressional committee has opened a hearing to examine the science behind a human growth hormone test the NFL wants to start using on its players.

Nearly two full seasons have passed since the league and the players' union signed a labor deal that set the stage for HGH testing.

The NFL Players Association won't concede the validity of a test that's used by Olympic sports and Major League Baseball, and the sides haven't been able to agree on a scientist to help resolve that impasse.

Among the witnesses before the House Oversight and Government Reform Committee on Wednesday is Pro Football Hall of Fame member Dick Butkus. In his prepared statement, Butkus writes: "Now, let's get on with it. The HGH testing process is proven to be reliable."

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Asian shares rise, yen slips after Fed's stimulus steps

TOKYO (Reuters) - Asian shares extended gains for a seventh day on Thursday, after the U.S. Federal Reserve took new stimulus steps to bolster the economy, pressuring the yen with expectations the Japanese central bank will follow suit with more easing next week.

While stocks gained, oil and gold fell from post-Fed rallies, as investors took profits ahead of the year-end, and concerns over the U.S. budget impasse also weighed on sentiment.

The upside for equities was also contained despite the Fed's fresh dose of liquidity-pumping measures, as investors were worried the United States would miss a year-end deadline to avert the "fiscal cliff," some $600 billion of tax hikes and spending cuts scheduled to start in January.

U.S. House of Representatives Speaker John Boehner said on Wednesday "serious differences" remain with President Barack Obama on the budget talks.

Failure to reach a compromise by the end of the year risks pushing the U.S. economy into recession and has stoked fears that a fragile recovery trend emerging in China and some other countries would be stifled.

Against this backdrop, European shares were expected to start narrowly mixed, with financial spreadbetters predicting London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> will open flat to 0.2 percent higher. A 0.1 percent gain in U.S. stock futures hinted at a firm Wall Street open. <.l><.eu><.n/>

MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> added 0.3 percent to a 16-month peak, having hit successive 16-month highs since December 5. South Korean shares <.ks11> advanced 0.8 percent to a two-month high.

"The Fed's easing measures met the market's expectations, while the setting of clear inflation and unemployment targets exceeded hopes and will clear uncertainty on the monetary front," said Kim Yong-goo, an analyst at Samsung Securities.

The U.S. central bank committed to monthly purchases of $45 billion in Treasuries on top of the $40 billion per month in mortgage-backed bonds it started buying in September. But it also took the unprecedented step of indicating interest rates would remain near zero until unemployment falls to at least 6.5 percent.

YEN WEAKNESS CONTINUES

The dollar advanced to its loftiest in nearly nine months against the yen, touching a high of 83.635 yen. The slumping yen boosted Japan's Nikkei share average <.n225> up 1.6 percent and above 9,700 for the first time in eight months. <.t/>

Japan holds an election on Sunday, with opinion surveys showing conservative former Prime Minister Shinzo Abe's opposition Liberal Democratic Party and its smaller ally heading for a resounding victory.

Abe wants to step up aggressive monetary easing along with heavy public works spending, policy prescriptions dubbed "Abenomics" by the media, and while he threatens to curtail the Bank of Japan's independence, investors reckon the responsibility of power will prevent Abe taking excessive risks that could lead to a bond market meltdown.

"As the Fed sets direction on policy rates for the rest of central banks and equity markets, the Bank of Japan sets the currency vehicle, by stepping up asset purchases and driving down the yen once LDP Chief Abe becomes the likely PM at Sunday's elections," Ashraf Laidi, chief global strategist at City Index, said in a note to clients.

At its December 19-20 meeting, the BOJ is widely expected to further ease monetary policy to support its weak economy.

The Fed's latest move to make the jobless rate a target for its monetary policy could have a longer-term implication on the BOJ.

"While the BOJ's ultimate goal is to pull Japan out of deflation, the Fed's latest move could prompt Japanese politicians or the government to urge the BOJ to also commit itself to growth, not just price stability," said Chotaro Morita, chief fixed income strategist at Barclays.

Morita said that market consensus is for the BOJ to expand its asset-buying and lending program, currently at 91 trillion yen ($1.1 trillion), by another 5-10 trillion yen, and put off taking bolder steps until after a new cabinet is formed.

Rising U.S. Treasury bond yields also drew demand for the dollar against the yen, given the stable and low Japanese yields.

BETTER EUROPEAN NEWS

The euro was relatively more robust than the dollar and the yen, inching up 0.1 percent to $1.3082 to approach Wednesday's high of $1.3098, as some positive news emerged.

Europe clinched a deal on Thursday to give the European Central Bank new powers to supervise euro zone banks, the first step in a new phase of closer integration to help underpin the single currency.

Greece's foreign lenders welcomed a bond buyback, paving the way for Athens to get long-delayed aid to avoid bankruptcy.

In Italy, another debt-straddled euro zone country, Silvio Berlusconi offered to stand back and make way for Mario Monti as Italy's next leader if the outgoing technocrat premier agreed to run as the candidate for a center-right coalition. Monti's intention to resign has raised concerns that his austerity policies may not be carried out.

Oil prices retreated from overnight gains, with U.S. crude futures down 0.2 percent to $86.57 a barrel and Brent falling 0.2 percent to $109.24.

Gold tumbled more than 1 percent on stop-loss selling after touching their highest in nearly two weeks on Wednesday. Spot gold dropped as much as 1 percent to $1,693.80.

($1 = 82.9300 Japanese yen)

(Additional reporting by Somang Yang in Seoul; Editing by Jacqueline Wong)

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Hugh Hefner's Engagement Ring to Crystal Harris Revealed

By Mike Fleeman

12/11/2012 at 07:00 PM EST

The wedding's back on – though it may be a good idea to save that gift receipt.

Hugh Hefner, 86, officially confirms that he is once again engaged to Crystal Harris, 26, telling his Twitter followers, "I've given Crystal Harris a ring. I love the girl."

And to prove it, Harris posted photos of the big diamond sparkler, calling it "my beautiful ring."

Neither announced a wedding date, though sources tell PEOPLE they're planning to tie the knot at the Playboy Mansion in Los Angeles on New Year's Eve.

Whether that still happens remains to be seen.

This is the plan they had in 2011 – a wedding at the mansion – except that Harris called it off just days before the nuptials were scheduled to happen in front of 300 invited guests.

Hugh Hefner and Crystal Harris

David Livingston / Getty

The onetime Playmate of the Month then ripped Hef's bedroom skills, calling him a two-second man, to which Hefner replied, "I missed a bullet" by not marrying her.

A year later, Hefner's "runaway bunny" bounded back to him.

• Reporting by JENNIFER GARCIA

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DA investigating Texas' troubled $3B cancer agency

AUSTIN, Texas (AP) — Turmoil surrounding an unprecedented $3 billion cancer-fighting effort in Texas worsened Tuesday when its executive director offered his resignation and the state's chief public corruption prosecutor announced an investigation into the beleaguered agency.

No specific criminal allegations are driving the latest probe into the Cancer Prevention and Research Institute of Texas, said Gregg Cox, director of the Travis County district attorney's public integrity unit. But his influential office opened a case only weeks after the embattled agency disclosed that an $11 million grant to a private company bypassed review.

That award is the latest trouble in a tumultuous year for CPRIT, which controls the nation's second-largest pot of cancer research dollars. Amid the mounting problems, the agency announced Tuesday that Executive Director Bill Gimson had submitted his letter of resignation.

"Unfortunately, I have also been placed in a situation where I feel I can no longer be effective," Gimson wrote in a letter dated Monday.

Gimson said the troubles have resulted in "wasted efforts expended in low value activities" at the agency, instead of a focused fight against cancer. Gimson offered to stay on until January, and the agency's board must still approve his request to step down.

His departure would complete a remarkable house-cleaning at CPRIT in a span of just eight months. It began in May, when Dr. Alfred Gilman resigned as chief science officer in protest over a different grant that the Nobel laureate wanted approved by a panel of scientists. He warned it would be "the bomb that destroys CPRIT."

Gilman was followed by Chief Commercialization Officer Jerry Cobbs, whose resignation in November came after an internal audit showed Cobbs included an $11 million proposal in a funding slate without a required outside review of the project's merits. The lucrative grant was given to Dallas-based Peloton Therapeutics, a biomedical startup.

Gimson chalked up Peloton's award to an honest mistake and has said that, to his knowledge, no one associated with CPRIT stood to benefit financially from the company receiving the taxpayer funds. That hasn't satisfied some members of the agency's governing board, who called last week for more assurances that no one personally profited.

Cox said he has been following the agency's problems and his office received a number of concerned phone calls. His department in Austin is charged with prosecuting crimes related to government officials; his most famous cases include winning a conviction against former U.S. House Majority Leader Tom DeLay in 2010 on money laundering charges.

"We have to gather the facts and figure what, if any, crime occurred so that (the investigation) can be focused more," Cox said.

Gimson's resignation letter was dated the same day the Texas attorney general's office also announced its investigation of the agency. Cox said his department would work cooperatively with state investigators, but he made clear the probes would be separate.

Peloton's award marks the second time this year that a lucrative taxpayer-funded grant authorized by CPRIT instigated backlash and raised questions about oversight. The first involved the $20 million grant to M.D. Anderson Cancer Center in Houston that Gilman described as a thin proposal that should have first been scrutinized by an outside panel of scientific peer-reviewers, even though none was required under the agency's rules.

Dozens of the nation's top scientists agreed. They resigned en masse from the agency's peer-review panels along with Gilman. Some accused the agency of "hucksterism" and charting a politically-driven path that was putting commercial product-development above science.

The latest shake-up at CPRIT caught Gilman's successor off-guard. Dr. Margaret Kripke, who was introduced to reporters Tuesday, acknowledged that she wasn't even sure who she would be answering to now that Gimson was stepping down. She said that although she wasn't with the agency when her predecessor announced his resignation, she was aware of the concerns and allegations.

"I don't think people would resign frivolously, so there must be some substance to those concerns," Kripke said.

Kripke also acknowledged the challenge of restocking the peer-review panels after the agency's credibility was so publicly smeared by some of the country's top scientists. She said she took the job because she felt the agency's mission and potential was too important to lose.

Only the National Institutes of Health doles out more cancer research dollars than CPRIT, which has awarded more than $700 million so far.

Gov. Rick Perry told reporters in Houston on Tuesday that he wasn't previously aware of the resignation but said Gimson's decision to step down was his own.

Joining the mounting criticism of CPRIT is the woman credited with brainstorming the idea for the agency in the first place. Cathy Bonner, who served under former Texas Gov. Ann Richards, teamed with cancer survivor Lance Armstrong in selling Texas voters in 2007 on a constitutional amendment to create an unprecedented state-run effort to finance a war on disease.

Now Bonner says politics have sullied an agency that she said was built to fund research, not subsidize private companies.

"There appears to be a cover-up going on," Bonner said.

Peloton has declined comment about its award and has referred questions to CPRIT. The agency has said the company wasn't aware that its application was never scrutinized by an outside panel, as required under agency rules.

___

Follow Paul J. Weber on Twitter: www.twitter.com/pauljweber

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Asian shares hit new highs, Fed outcome pressures dollar

TOKYO (Reuters) - Asian shares rose on Wednesday buoyed by strength in global equities markets, hopes of a deal from U.S. budget talks and expectations for more stimulus from the Federal Reserve when it ends its two-day policy meeting later in the day.

Oil, copper and gold prices were also underpinned while the dollar remained broadly pressured, but the yen weakened against the dollar on expectations the Bank of Japan will take additional easing steps at its policy meeting next week.

European shares were expected to climb, with financial spreadbetters predicting London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> will open as much as 0.4 percent higher. But a 0.1 percent drop in U.S. stock futures hinted at a soft Wall Street open. <.l><.eu><.n/>

MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> gained 0.5 percent to a 16-month peak. The index has hit successive 16-month highs since December 5.

Australian shares <.axjo> were up 0.2 after touching a nearly 17-month peak, as higher commodities prices lifted the resources sector.

London copper steadied at $8,103.50 a metric ton (1.1023 tons), near two-month highs, while spot gold inched up 0.1 percent to $1,710.65 an ounce. U.S. crude futures were little changed at $85.81 a barrel and Brent rose 0.2 percent to $108.25.

"No doubt about it, the liquidity from the U.S. Fed is a good driver for prices," said Henry Liu, head of commodity research at Mirae Asset Securities in Hong Kong, adding that copper is also supported by a recovery in China and the United States.

While mainland markets remained sluggish, Hong Kong shares <.hsi> rose to a 16-month high, underpinned by foreign investors' optimism on China.

In China, "it's tough to get a clear picture of what's happening on the ground but you can infer that domestic investors remain relatively pessimistic," a Hong Kong-based fund manager said.

South Korean shares <.ks11> added 0.6 percent, shrugging off news that North Korea launched the second rocket this year earlier on Wednesday.

Japan's Nikkei share average <.n225> rose 0.6 percent to end at its highest in nearly eight months, led by gains in tech shares and other exporters on the weak yen. <.t/>

The euro popped back above $1.3000, pulling away from a two-week low of $1.2876 plumbed on Friday.

The Fed is expected to announce a fresh round of bond buying as part of its efforts to support a fragile economic recovery threatened by political wrangling over the government's budget. The central bank looks certain both to extend its purchases of mortgage-backed debt and replace another expiring stimulus program with a new bout of money creation.

Against the yen, the dollar rose 0.2 percent to 82.65 yen.

Data on Wednesday showed Japan's core machinery orders rose 2.6 percent in October from the previous month, up for the first time in three months but below a 3 percent rise forecast, highlighting how uncertainty over the global outlook continued to weigh on business investment and the broader economy.

India's industrial production, in contrast, soared by 8.2 percent in October from a year earlier, government data showed on Wednesday, well above a 4.5 percent rise forecast.

Investors also closely followed developments in U.S. budget talks to avert the "fiscal cliff," some $600 billion of tax hikes and spending cuts scheduled to start in January, which economists have warned could send the U.S. economy into recession and drag down the fragile global economy.

Negotiations to avert the "fiscal cliff" ahead of a year-end deadline intensified as President Barack Obama and U.S. House of Representatives Speaker John Boehner spoke by phone on Tuesday after exchanging new proposals, in a possible sign of progress ahead of the end-of-year deadline [ID:nL1E8NB6UF]

A group of high-profile chief executives urged President Barack Obama and Republican congressional leaders on Tuesday to strike a deal, reflecting mounting urgency to resolve the issue with time running out.

"Definitely the momentum is to the upside," said Stan Shamu, a market analyst at IG Markets. "Everyone seems to be pricing in a fairly positive outcome to the fiscal cliff negotiations as well."

(Additional reporting by Maggie Lu Yueyang in Canberra and Vikram Subhedar in Hong Kong and Melanie Burton in Singapore; Editing by Jacqueline Wong)

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Euro Watch: Bonds in Spain and Italy Shaken by Italian Politics

ROME — Italian stock and bond prices fell on Monday after a weekend of political turmoil in Italy gave rise to fears that the country was headed for renewed instability.

Shares of Italian banks, which are big holders of the government’s bonds, were among the hardest hit.

The action occurred in the first day of trading after Prime Minister Mario Monti said over the weekend that he would soon step down after his predecessor, Silvio Berlusconi, withdrew his party’s support from Mr. Monti and said he would again seek election as prime minister.

Mr. Berlusconi, who was elected prime minister three times, left office a year ago as markets pushed Italy to the brink of financial collapse. Mr. Monti, an economist who was appointed as his temporary successor, has restored Italy’s credibility with investors, who have given the country a break on its borrowing costs. But those gains have come at the cost of painful austerity measures that have worsened the country’s economic situation and given Mr. Berlusconi an opening to attack.

The Milan benchmark index, MIB, fell more than 2 percent on Monday. Italian banks, which remain sensitive to declines in the country’s bond prices, were among the big losers. Intesa Sanpaolo, the most active stock, fell 5.2 percent, as did UniCredit.

Mr. Monti, who joined other leaders in Oslo on Monday to receive the Nobel Peace Prize awarded to the European Union, said at a news conference that the market reactions “need not be dramatized.”

“I am confident,” he said, that the Italian elections would result in a government “that will be responsible and oriented toward the E.U. and this will be in line with efforts the Italian government has made so far.”

The decline in bond prices sent their yields, or interest rates, higher — an indicator of the Italian government’s borrowing costs. The spread between interest rates on Italian 10-year sovereign bonds and equivalent German securities, the European benchmark for safety, grew to 3.5 percentage points on Monday. That was up from 3.25 percentage points late Friday, suggesting that investors were growing more wary of holding Italian debt.

The yield on Italian 10-year bonds, which breached 7 percent this year, ended trading on Monday at 4.8 percent, up 29 basis points. A basis point is one-hundredth of a percent.

Bonds of Spain, which is the other big economy of concern in the euro zone, also came under renewed pressure on Monday after Mr. Monti’s announcement.

The spread between Spanish 10-year bonds and equivalent German bonds widened to 4.27 percentage points from 4.16 points on Friday. The yield on the benchmark Spanish 10-year rose 10 basis points, to 5.5 percent; it reached 7.1 percent in July amid concerns that Spain would be forced into a full bailout after having to negotiate a 100 billion euro, or $129 billion, rescue package for its banks in June.

Luis de Guindos, the Spanish economy minister, warned that Italy’s political turmoil would affect his country.

“When doubts emerge over the stability of a neighboring country like Italy, which is also seen as vulnerable, there’s an immediate contagion for us,” he said Monday morning on Spanish national radio.

Asked whether Spain would itself seek further European rescue funding, he instead said, “The help that Spain needs is that the doubts over the future of the euro be removed.”

Speaking before the Nobel ceremony on Monday, the European Commission president, José Manuel Barroso, said Italy must “continue on the road of structural reforms.” The elections, Mr. Barroso said on Sky News, “must not be used to postpone reforms.”

A dismal economic report on Monday served as a reminder that despite Mr. Monti’s success with investors, the real economy continues to suffer. Italian industrial production fell a seasonally adjusted 1.1 percent in October from September, and by 6.2 percent from a year earlier, Istat, the national statistics agency, said.

Some analysts said they thought that Mr. Berlusconi’s re-emergence as a political leader was as responsible for unnerving investors as Mr. Monti’s unexpected decision to resign. Nicholas Spiro, managing director of Spiro Sovereign Strategy, a research firm, wrote on Monday in a note that Mr. Berlusconi remained “the boogeyman of investors,” who “epitomizes the dysfunctional nature of Italian politics.”

Angela Merkel, the German chancellor, was to meet on Monday with Mr. Monti on the sidelines of the Nobel ceremony, said Georg Streiter, a spokesman for the chancellor.

Ms. Merkel pushed to have Mr. Monti succeed Mr. Berlusconi. But she ended up facing Mr. Monti’s own ideas for economic change, which focused more on growth and job creation than on the austere fiscal discipline championed by Ms. Merkel.

As a rule, the German government does not comment on its partners’ domestic politics, but Foreign Minister Guido Westerwelle warned that an attempt to scale back Italy’s reform push could result in further destabilization in the euro zone.

“Italy cannot remain stagnant on two-thirds of its reform process,” Mr. Westerwelle said through a spokesman. “This would throw not only Italy but the rest of Europe into turbulence.”

Elisabetta Povoledo reported from Rome and David Jolly from Paris. Raphael Minder contributed reporting from Madrid and Melissa Eddy from Berlin.

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