Stocks end higher for sixth straight week, tech leads

NEW YORK (Reuters) - The Nasdaq composite stock index closed at a 12-year high and the S&P 500 index at a five-year high, boosted by gains in technology shares and stronger overseas trade figures.

The S&P 500 also posted a sixth straight week of gains for the first time since August.

The technology sector led the day's gains, with the S&P 500 technology index <.splrct> up 1.0 percent. Gains in professional network platform LinkedIn Corp and AOL Inc after they reported quarterly results helped the sector.

Shares of LinkedIn jumped 21.3 percent to $150.48 after the social networking site announced strong quarterly profits and gave a bullish forecast for the year.

AOL Inc shares rose 7.4 percent to $33.72 after the online company reported higher quarterly profit, boosted by a 13 percent rise in advertising sales.

Data showed Chinese exports grew more than expected, a positive sign for the global economy. The U.S. trade deficit narrowed in December, suggesting the U.S. economy likely grew in the fourth quarter instead of contracting slightly as originally reported by the U.S. government.

"That may have sent a ray of optimism," said Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.

Trading volume on Friday was below average for the week as a blizzard swept into the northeastern United States.

The U.S. stock market has posted strong gains since the start of the year, with the S&P 500 up 6.4 percent since December 31. The advance has slowed in recent days, with fourth-quarter earnings winding down and few incentives to continue the rally on the horizon.

"I think we're in the middle of a trading range and I'd put plus or minus 5.0 percent around it. Fundamental factors are best described as neutral," Dickson said.

The Dow Jones industrial average <.dji> ended up 48.92 points, or 0.35 percent, at 13,992.97. The Standard & Poor's 500 Index <.spx> was up 8.54 points, or 0.57 percent, at 1,517.93. The Nasdaq Composite Index <.ixic> was up 28.74 points, or 0.91 percent, at 3,193.87, its highest closing level since November 2000.

For the week, the Dow was down 0.1 percent, the S&P 500 was up 0.3 percent and the Nasdaq up 0.5 percent.

Shares of Dell closed at $13.63, up 0.7 percent, after briefly trading above a buyout offering price of $13.65 during the session.

Dell's largest independent shareholder, Southeastern Asset Management, said it plans to oppose the buyout of the personal computer maker, setting up a battle for founder Michael Dell.

Signs of economic strength overseas buoyed sentiment on Wall Street. Chinese exports grew more than expected in January, while imports climbed 28.8 percent, highlighting robust domestic demand. German data showed a 2012 surplus that was the nation's second highest in more than 60 years, an indication of the underlying strength of Europe's biggest economy.

Separately, U.S. economic data showed the trade deficit shrank in December to $38.5 billion, its narrowest in nearly three years, indicating the economy did much better in the fourth quarter than initially estimated.

Earnings have mostly come in stronger than expected since the start of the reporting period. Fourth-quarter earnings for S&P 500 companies now are estimated up 5.2 percent versus a year ago, according to Thomson Reuters data. That contrasts with a 1.9 percent growth forecast at the start of the earnings season.

Molina Healthcare Inc surged 10.4 percent to $31.88 as the biggest boost to the index after posting fourth-quarter earnings.

The CBOE Volatility index <.vix>, Wall Street's so-called fear gauge, was down 3.6 percent at 13.02. The gauge, a key measure of market expectations of short-term volatility, generally moves inversely to the S&P 500.

"I'm watching the 14 level closely" on the CBOE Volatility index, said Bryan Sapp, senior trading analyst at Schaeffer's Investment Research. "The break below it at the beginning of the year signaled the sharp rally in January, and a rally back above it could be a sign to exercise some caution."

Volume was roughly 5.6 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the 2012 average daily closing volume of about 6.45 billion.

Advancers outpaced decliners on the NYSE by nearly 2 to 1 and on the Nasdaq by almost 5 to 3.

(Additional reporting by Angela Moon; Editing by Bernadette Baum, Nick Zieminski, Kenneth Barry and Andrew Hay)

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Stocks end higher for sixth straight week, tech leads

NEW YORK (Reuters) - The Nasdaq composite stock index closed at a 12-year high and the S&P 500 index at a five-year high, boosted by gains in technology shares and stronger overseas trade figures.

The S&P 500 also posted a sixth straight week of gains for the first time since August.

The technology sector led the day's gains, with the S&P 500 technology index <.splrct> up 1.0 percent. Gains in professional network platform LinkedIn Corp and AOL Inc after they reported quarterly results helped the sector.

Shares of LinkedIn jumped 21.3 percent to $150.48 after the social networking site announced strong quarterly profits and gave a bullish forecast for the year.

AOL Inc shares rose 7.4 percent to $33.72 after the online company reported higher quarterly profit, boosted by a 13 percent rise in advertising sales.

Data showed Chinese exports grew more than expected, a positive sign for the global economy. The U.S. trade deficit narrowed in December, suggesting the U.S. economy likely grew in the fourth quarter instead of contracting slightly as originally reported by the U.S. government.

"That may have sent a ray of optimism," said Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.

Trading volume on Friday was below average for the week as a blizzard swept into the northeastern United States.

The U.S. stock market has posted strong gains since the start of the year, with the S&P 500 up 6.4 percent since December 31. The advance has slowed in recent days, with fourth-quarter earnings winding down and few incentives to continue the rally on the horizon.

"I think we're in the middle of a trading range and I'd put plus or minus 5.0 percent around it. Fundamental factors are best described as neutral," Dickson said.

The Dow Jones industrial average <.dji> ended up 48.92 points, or 0.35 percent, at 13,992.97. The Standard & Poor's 500 Index <.spx> was up 8.54 points, or 0.57 percent, at 1,517.93. The Nasdaq Composite Index <.ixic> was up 28.74 points, or 0.91 percent, at 3,193.87, its highest closing level since November 2000.

For the week, the Dow was down 0.1 percent, the S&P 500 was up 0.3 percent and the Nasdaq up 0.5 percent.

Shares of Dell closed at $13.63, up 0.7 percent, after briefly trading above a buyout offering price of $13.65 during the session.

Dell's largest independent shareholder, Southeastern Asset Management, said it plans to oppose the buyout of the personal computer maker, setting up a battle for founder Michael Dell.

Signs of economic strength overseas buoyed sentiment on Wall Street. Chinese exports grew more than expected in January, while imports climbed 28.8 percent, highlighting robust domestic demand. German data showed a 2012 surplus that was the nation's second highest in more than 60 years, an indication of the underlying strength of Europe's biggest economy.

Separately, U.S. economic data showed the trade deficit shrank in December to $38.5 billion, its narrowest in nearly three years, indicating the economy did much better in the fourth quarter than initially estimated.

Earnings have mostly come in stronger than expected since the start of the reporting period. Fourth-quarter earnings for S&P 500 companies now are estimated up 5.2 percent versus a year ago, according to Thomson Reuters data. That contrasts with a 1.9 percent growth forecast at the start of the earnings season.

Molina Healthcare Inc surged 10.4 percent to $31.88 as the biggest boost to the index after posting fourth-quarter earnings.

The CBOE Volatility index <.vix>, Wall Street's so-called fear gauge, was down 3.6 percent at 13.02. The gauge, a key measure of market expectations of short-term volatility, generally moves inversely to the S&P 500.

"I'm watching the 14 level closely" on the CBOE Volatility index, said Bryan Sapp, senior trading analyst at Schaeffer's Investment Research. "The break below it at the beginning of the year signaled the sharp rally in January, and a rally back above it could be a sign to exercise some caution."

Volume was roughly 5.6 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the 2012 average daily closing volume of about 6.45 billion.

Advancers outpaced decliners on the NYSE by nearly 2 to 1 and on the Nasdaq by almost 5 to 3.

(Additional reporting by Angela Moon; Editing by Bernadette Baum, Nick Zieminski, Kenneth Barry and Andrew Hay)

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Euro near two-week low, shares up on rekindled rate cut hopes

LONDON (Reuters) - The euro hovered near a two-week low and European shares rose on Friday after the European Central Bank rekindled expectations that it could again take the knife to interest rates.

Strong Chinese trade data also helped lift optimism about global growth prospects, boosting oil, copper and Asian shares, although investors booking profits before next week's Chinese new year holidays limited gains.

ECB President Mario Draghi levered the door to a rate cut back open on Thursday, saying the bank would monitor the potential downward pressure of a strengthening euro on already near-target inflation.

European share markets opened higher on the hopes lower borrowing rates would also reverse some of the 8 percent trade-weighted rise in the euro over the last six months that has began to weigh on exporters.

"We're in a 'risk-on' mode and continental Europe should continue to do well in this environment," said Cyrille Urfer, who heads up asset allocation at Swiss bank Gonet.

The pan-European FTSEurofirst 300 <.fteu3> was up 0.5 percent by 0815 GMT, though it remained on course for its second weekly loss in a row.

London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> were up 0.6, 0.4 and 0.3 percent respectively and U.S. stock futures pointed to a steady Wall Street start. <.l><.eu><.n/>

While Draghi said the euro's recent surge was a sign of a return of confidence, he said: "We certainly want to see whether the appreciation is sustained and will alter our risk assessment as far as price stability is concerned."

The comments went further than many analysts had expected and as European trading gathered pace the euro steadied at $1.3398 after earlier dropping to $1.33705, the lowest since January 25.

China said its exports grew 25 percent in January from a year ago, the strongest showing since April 2011 and well ahead of market expectations for a 17 percent rise, while imports also beat forecasts, surging 28.8 percent on the year.

The MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> added 0.3 percent and Australian shares rallied 0.7 percent to 34-month highs.

"China's economic conditions are improving and the trade data confirms the continuation of a recovery trend. Not just the trade data but retail, production and investment flows clearly show that the economy bottomed out in the third quarter last year," said Hirokazu Yuihama, a senior strategist at Daiwa Securities in Tokyo.

In the bond market, benchmark German Bund futures were little changed in early trade as Draghi's cautious tone on the euro zone's economy underpinned demand for low risk assets.

Investors focused on Irish bonds after benchmark 10-year yields slid to their lowest since before the start of the subprime crisis in 2007 on news Dublin had clinched a bank debt deal that will cut its borrowing needs over the next decade.

(Additional reporting by Sudip Kar-Gupta; editing by Philippa Fletcher)

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Global shares, euro pause ahead of ECB decision

London (Reuters) - The euro, German bonds and shares steadied on Thursday, as investors awaited the European Central Bank's policy meeting later in the day and President Mario Draghi's views on the region's growth prospects.

Testimony from the new head of the Bank of England, bond auctions from France and Spain, earnings reports from a host of major European companies and the start of a two-day European Union summit provide more reasons for investors to be cautious.

The euro was nearly flat at $1.3530, holding above this week's low of $1.3458 plumbed on Tuesday but well shy of a 15-month peak of $1.3711 set last Friday.

The common currency has now soared 20 percent against Japan's yen in just three months, risen 8 percent on sterling and 7 percent on the dollar, increasing tensions among policymakers across the recession-hit region.

The gains will put the spotlight on ECB president Draghi at his 1330 GMT news conference, which follows the bank's meeting, at which interest rates are not expected to be changed.

"The market will want to hear stronger words on the foreign exchange front to stop the upwards trend that's in place, but we doubt this will happen," said Nomura economist Nick Matthews.

Equity markets were being held in check ahead of the news conference, with the FTSEurofirst 300 index <.fteu3> index of top European shares, London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> all little changed in early trading. <.eu/>

"The medium and long-term positive trend is still intact, although on the short term, we're turning 'neutral'; indexes are very close to key support levels," said Aurel BGC chartist Gerard Sagnier.

German Bund futures reflected the cautious mood, edging up 5 ticks to 142.61, with early attention on a Spanish auction of up to 4.5 billion euros of new debt following a rise in political tensions in Madrid as a corruption scandal threatens to engulf prime minister Mariano Rajoy.

Brent crude was steady in a tight range around $117 per barrel, while gold inched up to about $1,680 an ounce, with traders in all commodity markets wary of the impact of Draghi's comments on the outlook for the euro.

(Additional reporting by Francesco Canepa; Editing by Will Waterman)

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Asian shares, industrial commods recover on economic optimism

TOKYO (Reuters) - Nascent global economic recovery buoyed risk assets from Asian shares to industrial commodities on Wednesday, while the prospect of a dovish new governor for the Bank of Japan sent the yen to a three-year low.

The signs of a recovery taking hold in Europe, the United States and China have helped improve the demand outlook for oil, copper and platinum while a solid reading for euro zone business activity supported the euro.

The slide in the yen bolstered Japanese equities to their highest since October 2008 while expectations of more monetary easing pushed two-year Japanese government bond yields down to a nine-year low of 0.045 percent.

The MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> added 0.3 percent, tracking a more than 1 percent gain overnight in the Standard & Poor's 500 Index <.spx> and the Nasdaq Composite Index <.ixic> on data showing the U.S. services sector extended a three-year expansion in January.

In Asia, investors have been quick to book profits as prices approached their highs, but analysts and traders say any dip was likely to be seen as a chance to buy back into the market.

The pan-Asian index scaled a 18-month high on Monday, and was up about 2.3 percent so far this year, still modest compared to the S&P's nearly 6 percent gain in the same period.

Australian shares <.axjo> rose 0.8 percent, leading regional peers.

"Investors are positioning themselves for further upside moves while global economic data provides cause for optimism," said Tim Waterer, senior trader at CMC Markets.

Brent crude futures were up 0.1 percent to $116.64 a barrel, while U.S. crude was steady at $96.65, hovering near a 20-week high.

London copper rose 0.3 percent to $8,291.25 a tonne after nearing a four-month high of $8,322, while platinum hit a four-month high of $1,714.75 an ounce.

European markets are seen inching higher, with financial spreadbetters predicting London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> would open flat to up 0.1 percent. A 0.1 percent gain in U.S. stock futures suggested a firm open on Wall Street. <.l><.eu><.n/>

YEN TAKES CENTRE STAGE

Expectations for stronger reflationary policies from the Band of Japan intensified after BOJ Governor Masaaki Shirakawa said he would step down on March 19, three weeks earlier than the official end of his five-year term, leaving at the same time as his two deputies. His decision raised the prospect that the next BOJ governor will more readily adopt the expansionist monetary policy demanded by Prime Minister Shinzo Abe.

The dollar touched 94.075 yen to its highest since May 2010, while the euro also rose to 127.71 yen, its strongest since April 2010. The Aussie reached a 4-1/2 year peak around 97.42 yen. The pound touched a 3-year high near 147.25 yen.

Japan's benchmark Nikkei stock average <.n225> soared 3.8 percent to close at a 52-month high. <.t/>

"The momentum in Japan is continuing to favour yen weakening and a risk-on mood," said Stefan Worrall, director of cash equity sales at Credit Suisse in Tokyo.

Despite recent rallies, the Nikkei remains below levels before the 2008 financial crisis while the S&P 500 and Germany's benchmark stock index have both already exceeded that level.

EURO ALSO RESILIENT

The euro was steady around $1.3570, above a key technical support of its 14-day moving average at $1.34653.

The euro drew support from growing confidence in the region's economy and improving funding conditions for deeply-indebted euro zone members.

News the European Central Bank's balance sheet fell to an 11-month low of 2.8 trillion euros ($3.8 trillion) as markets unwound some of the ECB's crisis funding measures underpinned the euro, appearing in stark contrast to the U.S. Federal Reserve and the BOJ which keep expanding asset buying.

"Flows matter more than stock in currency markets when comparing central bank balance sheets ... highlighting the euro's outperformance over the last few months," said Ashraf Laidi, chief global strategist at City Index, in a note to clients.

The ECB is expected to keep interest rates unchanged at its policy meeting on Thursday, but its president may face a grilling over an Italian banking scandal.

Spanish and Italian yields fell on Tuesday after jumping on worries over a corruption scandal in Spain and polls showing Italy's former prime minister Silvio Berlusconi regaining ground before elections this month.

The yen's fall lifted benchmark Tokyo gold futures to a record high of 5,067 yen per gram on Wednesday.

(Additional reporting by Thuy Ong in Sydney and Ayai Tomisawa and Sophie Knight in Tokyo; Editing by Sanjeev Miglani and Eric Meijer)

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Euro, oil slide on European worries, shares flat

LONDON (Reuters) - The euro and oil fell on Tuesday while European shares were largely flat as renewed worries over political risks in the euro zone trimmed demand for riskier assets for a second day.

A rise in political uncertainty in Spain, where the prime minister is facing calls to resign, and in Italy, which holds a general election later this month, provoked a big sell off on Monday, ending a solid new year rally.

The euro, which has taken the brunt of the selling, had risen 2.3 percent against the U.S. dollar this year to a high of just over $1.37 on Friday, before the selloff began and was down 0.4 percent at $1.3460 in early European trade.

The broad FTSE Eurofirst 300 index <.fteu3> of top European shares dropped 1.5 percent to its lowest level of the year on Monday, steadied to open up 0.1 percent up. Across Europe London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> were all recovering from the previous days sharp falls.

Most analysts see this week's selloff as a correction to a rally linked to signs of growing euro zone economic stability and an improving global outlook, which has been underpinned by the easier monetary policies of major central banks.

"What we are looking at, at the moment, is a correction, a consolidation or even a 'baby risk off', " said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.

"Nevertheless our working hypothesis remains that after the correction the trends in place before will continue as the two main drivers are still there; namely central banks continuing to inject liquidity and more and more proof of an economic recovery," he said.

Bond markets have also stabilized after a sharp rise in yields on Spanish and Italian debt and growing demand for safe-haven German government bonds. This followed a narrowing of spreads this year between peripheral and core government debt.

"We had a very strong rally in peripheral markets, strong spread compression in January which was probably faster than fundamentals were favoring, so we are in a correction. It's not a new trend, it's just a correction," Patrick Jacq, European rate strategist at BNP Paribas said.

(Additional reporting by Ana Nicolaci da Costa and Atul Prakash.)

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Spanish worries tarnish growth outlook

London (Reuters) - European shares edged up but the euro fell and German bonds trimmed their losses on Monday as a resurgence of worries about Europe undermined positive sentiment stemming from stronger U.S. and Chinese economic data.

However, the rising confidence in the global economic recovery underpinned oil and copper, although prices moved in narrow ranges at the start of a week which sees policy meeting by several major central banks and a summit of European leaders.

"We are now seeing a consistent story of moderate growth in the U.S. and China," said Ric Spooner, chief market analyst at CMC Markets in Sydney.

The economic outlook brightened considerably last week after data showed U.S. factory activity quickened in January and hiring increased, and after a survey of euro zone business activity suggested the worst of the region's downturn may be over.

On Sunday China's official purchasing managers' index (PMI) for the increasingly important services sector posted a fourth-straight monthly rise in January, although its slim gain added to evidence that the global recovery is a modest one.

But Spain dampened the mood in Europe by reporting that its unemployment problems are worsening as a corruption scandal threatens to engulf Prime Minister Mariano Rajoy, with the opposition calling for his resignation.

"If Rajoy were really forced to resign, if we were to have new elections in Spain, that would not help the improvement we've seen in financial markets," Tobias Blattner, European economist at Daiwa Capital Markets said.

Ten-year Spanish government bond yields rose 11 basis points to 5.32 percent in early Monday trade.

The equivalent Italian yields also rose on concerns that a scandal involving a major domestic bank could boost support for the centre-right party led by former prime minister Silvio Berlusconi as election day approaches.

The German Bund future which had opened 53 ticks lower at 141.48, trimmed its losses to be only down 13 ticks.

The pan-European FTSEurofirst 300 index <.fteu3> held near a 23-month high after a solid rally since the start of the year to be up 0.15 percent. London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> were flat to slightly lower.

Meanwhile the euro fell 0.3 percent to a day's low of $1.3602 after the Spanish jobs data was released, with bids cited at $1.3580 and $1.3600.

(Reporting by Richard Hubbard. Editing by David Stamp)

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"Great Rotation"- A Wall Street fairy tale?

NEW YORK (Reuters) - Wall Street's current jubilant narrative is that a rush into stocks by small investors has sparked a "great rotation" out of bonds and into equities that will power the bull market to new heights.

That sounds good, but there's a snag: The evidence for this is a few weeks of bullish fund flows that are hardly unusual for January.

Late-stage bull markets are typically marked by an influx of small investors coming late to the party - such as when your waiter starts giving you stock tips. For that to happen you need a good story. The "great rotation," with its monumental tone, is the perfect narrative to make you feel like you're missing out.

Even if something approaching a "great rotation" has begun, it is not necessarily bullish for markets. Those who think they are coming early to the party may actually be arriving late.

Investors pumped $20.7 billion into stocks in the first four weeks of the year, the strongest four-week run since April 2000, according to Lipper. But that pales in comparison with the $410 billion yanked from those funds since the start of 2008.

"I'm not sure you want to take a couple of weeks and extrapolate it into whatever trend you want," said Tobias Levkovich, chief U.S. equity strategist at Citigroup. "We have had instances where equity flows have picked up in the last two, three, four years when markets have picked up. They've generally not been signals of a continuation of that trend."

The S&P 500 rose 5 percent in January, its best month since October 2011 and its best January since 1997, driving speculation that retail investors were flooding back into the stock market.

Heading into another busy week of earnings, the equity market is knocking on the door of all-time highs due to positive sentiment in stocks, and that can't be ignored entirely. The Standard & Poor's 500 Index <.spx> ended the week about 4 percent from an all-time high touched in October 2007.

Next week will bring results from insurers Allstate and The Hartford , as well as from Walt Disney , Coca-Cola Enterprises and Visa .

But a comparison of flows in January, a seasonal strong month for the stock market, shows that this January, while strong, is not that unusual. In January 2011 investors moved $23.9 billion into stock funds and $28.6 billion in 2006, but neither foreshadowed massive inflows the rest of that year. Furthermore, in 2006 the market gained more than 13 percent while in 2011 it was flat.

Strong inflows in January can happen for a number of reasons. There were a lot of special dividends issued in December that need reinvesting, and some of the funds raised in December tax-selling also find their way back into the market.

During the height of the tech bubble in 2000, when retail investors were really embracing stocks, a staggering $42.7 billion flowed into equities in January of that year, double the amount that flowed in this January. That didn't end well, as stocks peaked in March of that year before dropping over the next two-plus years.

MOM AND POP STILL WARY

Arguing against a 'great rotation' is not necessarily a bearish argument against stocks. The stock market has done well since the crisis. Despite the huge outflows, the S&P 500 has risen more than 120 percent since March 2009 on a slowly improving economy and corporate earnings.

This earnings season, a majority of S&P 500 companies are beating earnings forecast. That's also the case for revenue, which is a departure from the previous two reporting periods where less than 50 percent of companies beat revenue expectations, according to Thomson Reuters data.

Meanwhile, those on the front lines say mom and pop investors are still wary of equities after the financial crisis.

"A lot of people I talk to are very reluctant to make an emotional commitment to the stock market and regardless of income activity in January, I think that's still the case," said David Joy, chief market strategist at Columbia Management Advisors in Boston, where he helps oversee $571 billion.

Joy, speaking from a conference in Phoenix, says most of the people asking him about the "great rotation" are fund management industry insiders who are interested in the extra business a flood of stock investors would bring.

He also pointed out that flows into bond funds were positive in the month of January, hardly an indication of a rotation.

Citi's Levkovich also argues that bond investors are unlikely to give up a 30-year rally in bonds so quickly. He said stocks only began to see consistent outflows 26 months after the tech bubble burst in March 2000. By that reading it could be another year before a serious rotation begins.

On top of that, substantial flows continue to make their way into bonds, even if it isn't low-yielding government debt. January 2013 was the second best January on record for the issuance of U.S. high-grade debt, with $111.725 billion issued during the month, according to International Finance Review.

Bill Gross, who runs the $285 billion Pimco Total Return Fund, the world's largest bond fund, commented on Twitter on Thursday that "January flows at Pimco show few signs of bond/stock rotation," adding that cash and money markets may be the source of inflows into stocks.

Indeed, the evidence suggests some of the money that went into stock funds in January came from money markets after a period in December when investors, worried about the budget uncertainty in Washington, started parking money in late 2012.

Data from iMoneyNet shows investors placed $123 billion in money market funds in the last two months of the year. In two weeks in January investors withdrew $31.45 billion of that, the most since March 2012. But later in the month money actually started flowing back.

(Additional reporting by Caroline Valetkevitch; Editing by Kenneth Barry)

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Exxon’s 2012 profit of $44.9B just misses record

Exxon Mobil Corp. nearly set a record for annual profit. The oil giant reported Friday that 2012 net income was $ 44.88 billion, just $ 340 million — less than 1 percent — short of the company’s record set in 2008, when crude oil prices hit an all-time high. Exxon‘s profit for the last 10 years totals $ 343.4 billion.

— $ 44.88 billion in 2012

— $ 41.06 billion in 2011

— $ 30.46 billion in 2010

— $ 19.28 billion in 2009

— $ 45.22 billion in 2008

— $ 40.61 billion in 2007

— $ 39.50 billion in 2006

— $ 36.13 billion in 2005

— $ 25.33 billion in 2004

— $ 20.96 billion in 2003

Source: Exxon Mobil annual reports filed with the U.S. Securities and Exchange Commission

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"Great Rotation"- A Wall Street fairy tale?

NEW YORK (Reuters) - Wall Street's current jubilant narrative is that a rush into stocks by small investors has sparked a "great rotation" out of bonds and into equities that will power the bull market to new heights.

That sounds good, but there's a snag: The evidence for this is a few weeks of bullish fund flows that are hardly unusual for January.

Late-stage bull markets are typically marked by an influx of small investors coming late to the party - such as when your waiter starts giving you stock tips. For that to happen you need a good story. The "great rotation," with its monumental tone, is the perfect narrative to make you feel like you're missing out.

Even if something approaching a "great rotation" has begun, it is not necessarily bullish for markets. Those who think they are coming early to the party may actually be arriving late.

Investors pumped $20.7 billion into stocks in the first four weeks of the year, the strongest four-week run since April 2000, according to Lipper. But that pales in comparison with the $410 billion yanked from those funds since the start of 2008.

"I'm not sure you want to take a couple of weeks and extrapolate it into whatever trend you want," said Tobias Levkovich, chief U.S. equity strategist at Citigroup. "We have had instances where equity flows have picked up in the last two, three, four years when markets have picked up. They've generally not been signals of a continuation of that trend."

The S&P 500 rose 5 percent in January, its best month since October 2011 and its best January since 1997, driving speculation that retail investors were flooding back into the stock market.

Heading into another busy week of earnings, the equity market is knocking on the door of all-time highs due to positive sentiment in stocks, and that can't be ignored entirely. The Standard & Poor's 500 Index <.spx> ended the week about 4 percent from an all-time high touched in October 2007.

Next week will bring results from insurers Allstate and The Hartford , as well as from Walt Disney , Coca-Cola Enterprises and Visa .

But a comparison of flows in January, a seasonal strong month for the stock market, shows that this January, while strong, is not that unusual. In January 2011 investors moved $23.9 billion into stock funds and $28.6 billion in 2006, but neither foreshadowed massive inflows the rest of that year. Furthermore, in 2006 the market gained more than 13 percent while in 2011 it was flat.

Strong inflows in January can happen for a number of reasons. There were a lot of special dividends issued in December that need reinvesting, and some of the funds raised in December tax-selling also find their way back into the market.

During the height of the tech bubble in 2000, when retail investors were really embracing stocks, a staggering $42.7 billion flowed into equities in January of that year, double the amount that flowed in this January. That didn't end well, as stocks peaked in March of that year before dropping over the next two-plus years.

MOM AND POP STILL WARY

Arguing against a 'great rotation' is not necessarily a bearish argument against stocks. The stock market has done well since the crisis. Despite the huge outflows, the S&P 500 has risen more than 120 percent since March 2009 on a slowly improving economy and corporate earnings.

This earnings season, a majority of S&P 500 companies are beating earnings forecast. That's also the case for revenue, which is a departure from the previous two reporting periods where less than 50 percent of companies beat revenue expectations, according to Thomson Reuters data.

Meanwhile, those on the front lines say mom and pop investors are still wary of equities after the financial crisis.

"A lot of people I talk to are very reluctant to make an emotional commitment to the stock market and regardless of income activity in January, I think that's still the case," said David Joy, chief market strategist at Columbia Management Advisors in Boston, where he helps oversee $571 billion.

Joy, speaking from a conference in Phoenix, says most of the people asking him about the "great rotation" are fund management industry insiders who are interested in the extra business a flood of stock investors would bring.

He also pointed out that flows into bond funds were positive in the month of January, hardly an indication of a rotation.

Citi's Levkovich also argues that bond investors are unlikely to give up a 30-year rally in bonds so quickly. He said stocks only began to see consistent outflows 26 months after the tech bubble burst in March 2000. By that reading it could be another year before a serious rotation begins.

On top of that, substantial flows continue to make their way into bonds, even if it isn't low-yielding government debt. January 2013 was the second best January on record for the issuance of U.S. high-grade debt, with $111.725 billion issued during the month, according to International Finance Review.

Bill Gross, who runs the $285 billion Pimco Total Return Fund, the world's largest bond fund, commented on Twitter on Thursday that "January flows at Pimco show few signs of bond/stock rotation," adding that cash and money markets may be the source of inflows into stocks.

Indeed, the evidence suggests some of the money that went into stock funds in January came from money markets after a period in December when investors, worried about the budget uncertainty in Washington, started parking money in late 2012.

Data from iMoneyNet shows investors placed $123 billion in money market funds in the last two months of the year. In two weeks in January investors withdrew $31.45 billion of that, the most since March 2012. But later in the month money actually started flowing back.

(Additional reporting by Caroline Valetkevitch; Editing by Kenneth Barry)

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Chevron profit up on asset exchange, refineries

NEW YORK (AP) — Chevron Corp. posted a 41 percent gain in net income for the fourth quarter as the company produced more oil and gas, improved the performance of its refinery business and realized a gain from swapping assets in an Australian natural gas field.

Chevron Corp. posted net income of $ 7.2 billion for the quarter on revenue of $ 60.6 billion. That’s up from $ 5.1 billion on revenue of $ 60 billion a year ago.

It was the biggest fourth quarter profit in the company’s history. The company’s annual profit of $ 26.2 billion was second only to last year’s numbers.

On a per-share basis, Chevron earned $ 3.70. Analysts had expected the company to earn $ 3.06 per share, according to FactSet, but analysts had not factored in the $ 1.4 billion gain from Chevron’s asset exchange.

Stacey Hudson, an analyst at Raymond James, estimates the exchange was worth 72 cents per share, which would put Chevron’s adjusted earnings 8 cents below what analysts had expected but 40 cents higher than the fourth quarter of last year. Chevron’s results were also helped by the sale of the company’s fuels marketing operations in the Caribbean.

Excluding the gain from the Australian asset sale Chevron’s net income rose 14 percent in the quarter.

Hudson described the results as “solid.” Chevron shares rose $ 1.35 to close at $ 116.50 Friday.

Chevron’s production rose to 2.67 million barrels of oil and gas per day for the quarter, up just slightly from a year ago but up substantially from the 2.5 million the company produced in the third quarter of last year. For the year, Chevron produced an average of 2.64 million barrels per day, down from 2.67 million barrels per day in 2011.

Production has been hurt by the temporary closure of the company’s Brazilian offshore project in what is known as the Frade field. It has been closed since oil was found to be seeping from the field in November 2011 and again in March 2012.

The company’s production of oil and other liquid hydrocarbons in the U.S. rose 3 percent to 462,000 barrels per day in the quarter. That lagged the blistering growth of overall U.S. production which has been rising dramatically in recent years. U.S. crude production rose 14 percent in the fourth quarter of last year to 6.85 million barrels per day, up from 5.98 million barrels per day in the same period of the previous year, according to the Energy Department.

Chevron sold oil and liquids for an average of $ 91 per barrel in the fourth quarter in the U.S., down from $ 101 per barrel during last year’s fourth quarter. Abroad, Chevron brought in $ 100 per barrel, down from $ 101 last year.

Chevron’s chemicals and refining operations improved, especially in the U.S., because input costs at the plants including crude oil, natural gas and natural gas liquids fell while the prices for the refined fuels and chemicals rose. Chevron’s refinery output in the U.S. fell by 75,000 barrels per day, however, after an August fire at its Richmond, Calif. plant shut down a processing unit.

Larger rival Exxon Mobil Corp. reported a 6 percent increase in fourth-quarter earnings to $ 9.95 billion.

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Euro gains but shares steady before economic data

LONDON (Reuters) - The euro hit a fresh 14-month high on Friday as investors returned to the region's riskier asset markets, while shares steadied ahead of a batch of major U.S. and European economic data.

The euro hit a high of $1.3634 to the dollar, building on gains of over 3 percent in January, as the European Central Bank prepared to reveal how much more of its three-year emergency loans banks were likely to repay early.

The repayments are seen as a sign the euro zone debt crisis has eased, encouraging demand for peripheral European debt, but have also raised expectations short term money market rates could rise, which is supporting the euro. Details from ECB are due at 1100 GMT.

Otherwise attention is focused on the economic outlook with the release of January data on factory activity across the euro area to be followed by the latest U.S. jobs report at 1330 GMT and a national report on the state of American manufacturers.

Markets expect the data to show conditions in the euro zone remain weak but have at least stabilized after a weak fourth quarter, while the jobs data in the U.S. should confirm a gradual recovery is underway.

"We are seeing indications of improvement in underlying conditions and the seeds are being sown for a future economic recovery, but here and now economic conditions are still weak," Nick Kounis, head of macro research at ABN-AMRO, said.

Ahead of the data the broader FTSEurofirst 300 index <.fteu3> of top companies was 0.2 percent higher at 1,166.87 points, near a 223 month high.

Earlier China's said official purchasing managers' index (PMI) eased to 50.4 in January, missing market expectations for a rise and underscoring the fragility of the recovery from the economy's weakest year since 1999.

However, a separate private survey showed that growth in China's giant manufacturing sector hit a two-year high in January as domestic demand strengthened, underlining hopes the nation's economic recovery is slowly gaining momentum.

The Chinese data left MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> little changed and capped gains in oil prices from escalating tensions in the Middle East.

U.S. crude futures inched up 9 cents to $97.58 a barrel while Brent rose 23 cent to $115.978

London copper added 0.5 percent to $8,203 a tonne.

(Reporting by Richard Hubbard; editing by Philippa Fletcher)

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ODOT crews prepare for wintry weather

CLEVELAND – ODOT had all of its crews on the roadways on Thursday, monitoring conditions as 6 to 12 inches of snow is predicted to fall across the snowbelt in the next 48 hours.

The crews are working 12-hour shifts throughout the weekend to make sure roads are driveable.

ODOT officials are asking motorists to give their highway technicians room to do their jobs. They said you should stay at least 500 feet behind them while they’re working.

They said motorists should also avoid using cell phones during inclement weather. They said one moment of distraction could have dangerous repercussions.

Copyright 2013 Scripps Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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German jitters hit European shares, euro

LONDON (Reuters) - European shares fell for a second straight day and the euro slid on Thursday, as weak German retail sales and poor earnings at its biggest bank added to investors' nerves after a shock fourth quarter contraction in the U.S. economy.

Data on Wednesday showed U.S. GDP slipped back 0.1 percent, though the country's central bank, the Federal Reserve, indicated the pullback was likely to be brief as it repeated its pledge to continue providing support.

European shares, which have surged 3.7 percent this month, took their biggest daily hit of the year on Wednesday, and a plunge in German retail sales and a huge quarterly loss from Deutsche Bank dashed hopes of a quick rebound.

London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> were all around 0.3 percent lower by 0830 GMT as trading gathered pace after shares in Asia posted modest gains. <.l><.eu><.n/>

"Perhaps the German retail sales have contributed a little bit, but we knew that Q4 was weak, so I would it attribute it more to earnings news," said Chris Scicluna, an economist at Daiwa Capital Markets.

"The Deutsche Bank loss does look to be on the sizable side. There has clearly been some mismatch between financial markets and the real economy so that does lend itself to a bit of a pullback."

In the currency market, the German jitters also left the euro under pressure. It was well off Wednesday's 14-month high at $1.3548, though the Federal Reserves promise of continued support was expected to mitigate the fall by keeping downward pressure on the dollar.

The nervy market atmosphere also pushed up Spanish and Italian government bond yields as some investors switched from higher-yielding debt into German Bunds.

Spanish 10-year yields rose 10 basis points on the day to 5.31 percent, while equivalent Italian debt rose 10 bps to 4.38 percent.

German Bund futures were half a point higher, spurred on by the Fed's determination to maintain its policy of stimulus for the U.S. economy.

Spot gold hovered near its one-week high of $1,683.39 an ounce reached on Wednesday. A weak yen pushed the most active gold contract on the Tokyo Commodity Exchange to a record high of 4,944 yen a gram on Thursday.

(Reporting by Marc Jones; Editing by Will Waterman)

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Wild Weather On The Way

By Carol Erickson

PHILADELPHIA (CBS) – The weather needs a new calendar. It’s acting like April even though we are deep into winter.

This afternoon temperatures reached the upper 60′s in advance of a cold front so strong that it could pull warmth to that level into the area.

Tonight the warm and cold air fight it out, with our area on the receiving end of heavy rain and strong, gusty winds.

A flash flood watch for an inch or more of rain covers Pennsylvania and a high wind warning for gusts between 40 and 60 mph covers New Jersey and Delaware.

Loose objects could become missiles in the wind and the recently frozen ground and waterways could flood from runoff.

By sunrise, it’s a whole other story.

The weather and calendar match, temperatures will fall through the 30′s, the winds will blow to about 45 mph and we await an even colder Friday with a moisture starved clipper system hoping to drop a few snow flurries.

The weekend looks equally cold.

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Euro surges to 14-month high, Fed decision awaited

LONDON (Reuters) - The euro hit its highest level in over a year on Wednesday and shares, oil and metals were also on the rise, as confidence in the global economic outlook strengthened ahead of European data and the U.S. Federal Reserve's latest policy decision.

The Fed is expected to maintain asset buying at $85 billion a month when it concludes its meeting later and retain its commitment to hold interest rates near zero until unemployment falls to at least 6.5 percent.

European economic confidence data for January at 1000 GMT, ECB crisis loan repayments and Italy's sale of five and 10-year bonds will absorb most of investors' attention before then, as they look for further evidence of a pick-up in the region.

Share markets in London <.ftse>, Paris <.fchi> and Frankfurt <.gdaxi> opened little changed ahead of the data, leaving all eyes on a rally by the euro as it broke above $1.35 for the first time since December 2011.

Alongside the recent rebound in confidence in the euro zone, one of the drivers behind the recent spike has been the eagerness of banks to repay the crisis loans they took from the European Central Bank just over a year ago.

"It (the euro rise) is just a carry on with the current trend, risk is pretty healthy and equities are doing well," said Bank of Tokyo Mitsubishi strategist Derek Halpenny.

"The danger is European policymakers allow a spike (in euro and market rates) as a result of a removal of one of the principle support measures ... With the Fed and the BOJ still easing the euro is clearly the path of least resistance."

An earlier rise in Asian equities meant the MSCI world share index <.miwd00000pus> was up 0.2 percent at a new 21-month high as European trading gathered pace. U.S. stock futures suggested a cautious start on Wall Street.

Strong U.S. housing data on Tuesday and China's promising economic growth forecast for 2013 also supported the upbeat mood and raised expectations for robust demand for fuel and industrial commodities, underpinning oil prices and lifting copper.

In the bond market, German Bund futures opened lower as investors made room for a sale of long-dated German paper and braced for solid demand at an Italian debt auction.

Italy will offer up to 6.5 billion euros of bonds maturing in 2017 and 2022. Traders expect the sale to benefit from yield-hungry investors but flagged the risk of indigestion after a bout of buying in recent months that triggered a sharp rally.

"(The auction) probably (goes) alright but I don't think it trades well afterwards," one trader said.

(Additional reporting by Ana Nicolaci da Costa; Editing by Giles Elgood)

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With or without Exxon, Iraq Kurds strive for energy autonomy

ARBIL, Iraq (Reuters) – Behind the closed doors of their offices in the United States, top executives and lawyers for Exxon Mobil are poring over two sets of contracts, weighing a decision that could shift the balance of power in Iraq.

Iraqi Prime Minister Nuri al-Maliki last week hastily convened a meeting with Exxon’s chief executive Rex Tillerson in a bid to woo back the U.S. major, which had seemed intent on pulling out of the $ 50 billion West Qurna 1 oilfield in the south, in an area under Baghdad‘s control.

Since signing for six blocs with the Kurdistan regional government in 2011, Exxon has situated itself on one of Iraq’s deepest faultlines, bringing to a head friction between the northern enclave and Baghdad, which says only it has the authority to grant oil contacts and control crude exports.

Industry sources say Maliki has offered Tillerson substantial incentives to stay in Iraq’s southern oilfields as long as the company forfeits its assets in the autonomous Kurdish region.

A final decision is due within the next few days, Iraqi Oil Minister Abdul Kareem Luaibi said on Sunday. It remains to be seen which way Exxon’s compass will swing. The company has declined to comment on the impending decision.

“The loss of prestige would be huge,” said a former U.S. diplomat, contemplating the fallout for Kurdistan if Exxon were to quit the region in favor of Baghdad. “Exxon’s presence here levels the political playing field.”

As the first major oil company to risk Baghdad’s ire by venturing north, Exxon afforded the Kurds a victory in their turf war with the central government over how to exploit Iraq’s hydrocarbon riches.

The U.S. major’s vote of confidence opened the door for others such as Total, Russia’s Gazprom Neft and Chevron Corp, which recently added a third bloc to its Kurdish portfolio and is eyeing further acquisitions.

Three of Exxon’s blocs, however, are located in the “disputed areas”, an oil-rich band of territory over which both Baghdad and the Kurds claim jurisdiction and where the Iraqi army and Kurdish troops are facing off against each other.

SECURITY CONCERNS

Industry sources say Tillerson raised concerns about security at a meeting in Switzerland with the Iraqi Kurdish region’s president, Masoud Barzani, although Kurdistan said later that Exxon had restated its commitment to working in the region.

But Baghdad also expects Exxon to take its side.

“We’re positive the company is not willing to quit West Qurna,” said an Iraqi Oil Ministry official, noting that output from that field alone exceeds total current Kurdish production capacity.

“We think Exxon will halt operations in Kurdistan and wait until a solution is reached to all the unresolved issues,” he added, asking to remain anonymous because he was not authorized to speak to the media.

New legislation to govern the world’s fourth largest oil reserves has been caught up for years in a struggle over how to share power between Iraq’s Sunni, Shi’ite and Kurdish factions, which has intensified since U.S. troops withdrew a year ago.

The Kurds say the right to dictate their own oil policy is enshrined in the country’s federal constitution, but Baghdad rejects contracts signed by the region as illegal and has blacklisted some firms operating there.

International oil companies have been prepared to take that risk in return for Kurdistan’s better contract terms, security and an easier working environment, as opposed to the bureaucracy and infrastructure bottlenecks that hamper oil projects in the rest of Iraq.

Baghdad would have to promise Exxon favorable terms to entice it away from the north, but analysts and industry sources doubt Maliki’s capacity to deliver those, and say it would be a mistake for him to do so.

“If they go for Baghdad, I’m sure they (Exxon) will want sweeteners,” said a senior executive from a rival company. “But if they get better terms, others will want the same.”

Some industry sources even suggested that may have been part of Exxon’s calculations all along: that when defying Baghdad the company figured it might eventually be able to use its Kurdish contracts as leverage to extract concessions in the south.

“POINT OF NO RETURN”

Despite the loss of face if Exxon were to back away from Kurdistan, experts say such a move would ultimately do little to slow the region’s drive towards greater energy autonomy from Baghdad.

“Exxon was a game-changer then, but things have moved on,” said one industry source.

Now there are other majors waiting to snap up acreage in what has been described as one of the final frontiers for onshore oil exploration, and they are unlikely to be deterred.

The real challenge lies in finding new ways to sell Kurdish oil, until now shipped to world markets through a Baghdad-controlled pipeline running from Kirkuk to the Turkish port of Ceyhan.

But Kurdish exports via that channel dried up in December from a peak of around 200,000 bpd as result of a row over payments with Baghdad.

Fed up with waiting, the Kurds have already started bypassing the federal pipeline network by trucking small quantities of crude over the Turkish border in exchange for refined products. The trade is small, but symbolic.

“Oil and gas wise, it’s a point of no return,” said an industry source. “From this point on, the Kurds will not agree to a centralized oil and gas policy. Other regions will do the same.”

Kurdistan is looking to Turkey for answers. A broad energy partnership between them has been in the works since last year.

“This will be a big bang deal. That’s the only way to do it, involving everything at the same time,” said a diplomatic source familiar with the negotiations.

Details are still unclear, but industry sources said it would range from exploration to export and seek to open up a new “energy corridor” to Turkey that would reduce Ankara’s dependence on Russia and Iran for oil and gas.

The deal would involve a new Turkish entity taking a stake in several Kurdish blocs and an alternative pipeline, which the United States is actively discouraging for fear it will further destabilize Iraq and threaten its federal integrity.

GAME-CHANGER

It would also have to include a mechanism to pay the Kurds directly for their exports instead of the current arrangement whereby Baghdad receives the proceeds and then passes on 17 percent of the country’s revenues as a whole.

Kurdish officials have long complained what they end up getting is in fact closer to 10 percent.

“When the money starts flowing straight to Arbil, that will be the game-changer,” said a diplomatic source.

Kurdish officials say they would keep the share to which they are entitled and send the rest on to Baghdad, but an independent revenue stream would theoretically give the region the means to stand on its own economically.

“Assuming they could export 1 million barrels per day, they’d make more revenues from that than their current share of the national budget, depending on how much oil the south is producing,” said Robin Mills of UAE-based energy consultancy Manaarco.

Opponents of the tie-up worry it would make Kurdistan too dependent on Turkey, which has a fraught relation with its own Kurdish community and will be keen to have the upper hand in any dealings with their ethnic kin in Iraq.

But champions of the deal argue that landlocked Kurdistan has few options besides isolated Iran and war-torn Syria — its other neighbors — neither of which has the strategic advantages of Turkey.

“Economically, we’re already at their mercy,” said a senior Kurdish regional government official. “Once we start mass producing, the equation changes and the relationship with Turkey becomes interdependent.”

Majority Sunni Turkey’s links with Iraqi Kurdistan have already come at a price, heightening tensions between Ankara and the Shi’ite-led government in Baghdad.

Baghdad has accused Ankara of complicity in “smuggling” Iraqi oil, and late last year prevented Turkey’s energy minister from attending an oil conference sponsored by Exxon in Kurdistan by denying his plane permission to land.

“Collaboration between the KRG (Kurdistan Regional Government) and Turkey to transfer oil and gas to the world markets will strengthen our ties,” Turkish Deputy Energy Minister Selahattin Cimen said at that conference.

But given the regional turmoil and political ramifications of building a pipeline to Turkey, it may be less imminent than the rumors suggest.

Turkish Prime Minister Tayyip Erdogan has already made an enemy along his longest border with Syria, having turned his back on one-time friend, President Bashar al-Assad and embraced the rebels fighting him.

“Of course the Turks want access to Kurdish energy, but is it worth torpedo-ing relations with Baghdad when you have a crisis in Syria to deal with?,” Mills said. “I think they may wait.”

(Additional reporting by Ahmed Rasheed in Baghdad and Peg Mackey in London; Editing by Giles Elgood)

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Shares, oil steady before U.S. data, Fed meeting

LONDON (Reuters) - European shares consolidated near two-year highs on Tuesday and oil prices steadied as investors awaited data on the strength of U.S. economy and a Federal Reserve policy decision later in the week.

Most markets for riskier assets have risen solidly this year - despite only modest global growth - due to robust corporate earnings reports, signs of an end to the euro zone crisis and renewed momentum in the U.S. and Chinese economies.

But particularly in the equity markets, where many major indexes are close to multi-year highs, investors are looking for reassurance that a lasting economic recovery is underway.

"With markets posting significant gains for the year already, traders are becoming more demanding in their need for positive cues to keep up the buying momentum," said Jonathan Sudaria, a dealer at Capital Spreads in a trading note.

The FTSE Eurofirst 300 index <.fteu3> of top European shares was up 0.2 percent in early trade after hitting a 23-month high on Monday. London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> were flat to 0.1 percent higher.

U.S. stock futures gained 0.1 percent, pointing to a firm Wall Street start. <.l><.eu><.n/>

Earlier the MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> rallied 0.9 percent to end a four-day losing streak, led by a 1.1 percent jump in Australian shares <.axjo> to a fresh 21-month high.

The major event in investors' sights is the two-day Federal Reserve policy meeting. They are awaiting the Fed's decision and statement on Wednesday for any signs that the recent run of positive economic data would encourage policymakers to consider changing its easing policy.

The first estimate of U.S. fourth-quarter gross domestic product also will be released on Wednesday, followed by non-farm payrolls on Friday.

In Europe investors are looking to Spanish GDP data and Italian and German debt auctions on Wednesday, the first big day of European earnings on Thursday and the month-end.

Official data on China's growth outlook due Friday will also be important, especially for commodities markets.

Brent crude and U.S. oil were edging higher on Tuesday but, in line with equities, gains were limited with Brent crude up 16 cents to $113.64 a barrel and U.S. crude rising 44 cents to $96.88.

The euro was at $1.3450, not far from an 11-month high of $1.3480 hit on Friday when it had gained a boost from news of early repayments by euro zone banks of three-year loans to the European Central Bank, which suggested that parts of the banking system may be on the mend.

The euro, however, faces a series of major resistance levels near $1.35, including its 2012 high of $1.34869.

German government bond prices edged higher on Tuesday, as some investors were attracted by a dip that had followed Friday's announcement that banks would repay 137 billion euros of the ECB money.

Bund futures were 8 ticks higher on the day at 141.87. They hit a two-month low of 141.61 on Monday, having fallen by almost two full points in the past three sessions.

(Reporting by Richard Hubbard. Editing by)

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Deep Space Industries: A New Asteroid-Mining Company Is Born

SANTA MONICA, Calif. — Tuesday mornings are usually pretty quiet at the tiny Santa Monica Municipal Airport, and doubly so at the Museum of Flying located there. But last Tuesday (Jan. 22), the main hall was abuzz with something unusual.

On a dais in front of a WWII fighter, Geoffrey Notkin, co-host of Science Channel’s “Meteorite Men,” opened up a press conference by introducing the principals of the latest entry into the asteroid-mining business, a company called Deep Space Industries. The brainchild of private space veterans Rick Tumlinson and David Gump, among others, DSI is the second major player to jump into the celestial gold rush.

The company is moving along a path similar but not identical to that mapped out by Planetary Resources, the billionaire-backed firm unveiled last April. Planetary Resources was founded by Peter Diamandis of X-Prize fame and Eric Anderson, formerly of the space-tourism outfit Space Adventures.

While both companies seek to extract resources from near-Earth asteroids, Deep Space Industries wants to concentrate more on in-space utilization of these resources. [Deep Space Industries' Asteroid-Mining Vision in Photos]

A grand vision

Chairman Tumlinson laid out the plan at the press conference. He described a phased program of asteroid reconnaissance, exploration and utilization, carried out with predominantly existing technological know-how.

Starting with a fleet of small, unmanned spacecraft called Fireflies, the company will journey to nearby asteroids beginning in 2015 to assess their stores of water, hydrogen and other volatiles, as well as metals such as nickel that can be used in the fabrication of metal parts.

A later generation of spacecraft, known as Dragonflies, will return samples from the drifting bodies to Earth. More ambitious spacecraft called Harvestors will do the actual asteroid-mining work, perhaps beginning as early as 2020.

The upshot of this grand plan is to provide fuel, water and oxygen for in-space use, as well as metals for parts fabrication away from Earth’s surface.

Since one of the biggest costs associated with venturing beyond Earth’s orbit is the launching of water and fuel for the trip, finding and processing it in space could make journeys to Mars and other far-flung destinations much cheaper, advocates say. And in-space manufacturing could help build human habitats, satellites and other spacecraft, again saving greatly on launch costs. [Gallery: Future Visions of Human Spaceflight]

To garner needed profits in the short term, DSI would sell fuel to the many operators of satellites currently in orbit around the Earth. When these satellite run out of maneuvering fuel, they must either be re-provisioned or abandoned. The new company plans to make refilling the fuel tanks on such satellites economically feasible, saving tens of millions of dollars per year for the owner-operators in the process.

Making it happen

Will DSI pull it off, or will the company join the ranks of the many other similar operations that have burned through small fortunes, only to be born, live a brief, struggling life stuck on Earth’s surface, and meet their demise never having flown higher than the occasional corporate jet to the next fund raiser?

DSI’s founders certainly believe they can make it. After a lightly comical introduction by the resident celebrity Notkin, Tumlinson took the stage and delivered a rousing call to action.

So many people have lost belief in what we can do as a species, Tumlinson said. We seem to be heading into the future with “less hope… less [sic] things to dream about… less, less, less, less… this myth exists only in the minds of those who believe that this is it, that this one ball, this tiny rock, is all there is, that this is all we have. We at Deep Space Industries don’t believe that… we believe that we sit in a sea of resources that is so infinite that it’s hard to describe.”

Tumlinson then turned over the presentation to a small panel of experts and board members. There was an asteroid-mining expert from Australia, a satellite engineer from aerospace giant Loral, the aforementioned David Gump as CEO and many others.

Each added his bit of the story, ranging from the technical feasibility of Deep Space‘s ambitions to the (planned) financial backing to descriptions of multiple revenue streams.

At times the meeting became refreshingly candid, as when Gump mentioned that there were multiple reasons for the press conference besides merely announcing the company’s existence. Such reasons include, he said, “letting the investors know that we are here.”

It was noted that many people in the aerospace industry are of an age that regards both the Apollo program and “Star Trek” as prime motivators, and the former was called into view more than once. That call went something like this: let companies like SpaceX, Bigelow Aerospace and Deep Space Industries do the day-to-day work of routine spaceflight, and let NASA get back to their “Lewis-and-Clark function” of great exploration and daring accomplishments.

Deep Space’s early mission plan is for wealthy partners to sponsor the initial efforts to reconnoiter some near-Earth asteroids as the small, unmanned spacecraft are developed, then sell commercial missions for $ 20 million, using clusters of three spacecraft to maximize chances for success.

Over time, the process would grow from exploration to resource acquisition to in-space processing of volatiles to in-space manufacturing of metal parts using the metals available on some asteroids and a 3D printer.

Private spaceflight taking off

Only time will tell if Deep Space Industries can make it happen. Both Gump and Tumlinson have had mixed success in the private space sector in the past — working, for example, to privatize the Russian Mir space station (some initial success, but over the long haul, nyet) and producing the first TV commercial shot in orbit for tech retailer Radio Shack (Da!).

Flights are scheduled to begin as early as 2015, which doesn’t give Deep Space Industries much time to move from computer animations to finished spacecraft. But this is, after all, the age of private industry in space, as evidenced by the successful flights of SpaceX’s Dragon capsule to the International Space Station and the nearly concluded test flights of Virgin Galactic’s suborbital spacecraft, among others.

DSI may join the ranks of the successful despite the challenges. Many of us here on the ground will be watching them — and Planetary Resources, and many other private spaceflight companies — with fingers crossed.

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GLOBAL MARKETS-Euro, shares stall as investors turn cautious

LONDON (Reuters) - Rallies in European shares and the single currency stalled on Monday after strong gains last week as investors awaited confirmation that financial market conditions and the outlook for the euro area have improved.

Investor sentiment rose strongly on Friday after data showed European banks would repay more than expected of the emergency loans they borrowed from the European Central Bank (ECB) and that business sentiment in Germany was improving sharply.

A solid start to the corporate earnings season has also helped send many equity indexes to pre-financial crisis highs, with the Standard & Poor's 500 index closing last week at its highest level in over five years.

In the equity markets Europe's FTSEurofirst 300 index <.fteu3> shed 0.1 percent in early trade to 1,173.87 points, leveling off near its highest level for almost two years, though traders said there was still strong underlying demand.

"All European benchmarks are at their 2012-2013 highs. Every time there's even a slight pull-back, the buying pressure comes in," Aurel BGC chartist Gerard Sagnier said.

The market's cautious mood on Monday also followed a weaker session in Asia, where falls in technology companies saw the MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> drop 0.4 percent.

The euro held near an 11-month high against the dollar $1.3440

Meanwhile, German government bond futures, a key gauge of investor sentiment, continued to ease, slipping a further 7 ticks to 142.40 on Monday, and gold is languishing near a two-week low as hopes for an economic recovery worldwide dampen the metal's appeal as a safe haven.

Investors are keenly awaiting the ECB's monthly data on bank lending to companies and consumers, due later, for confirmation that growth is returning to the economy. Italy will also provide a test of investor sentiment when it auctions almost 7 billion euros ($9.4 billion) of 2-year and 5-year bonds.

However, the main focus for investors this week will be on the U.S., where the Federal Reserve's Open Market Committee meets on Tuesday and Wednesday, and where the nonfarm payrolls report is due out on Friday.

Oil prices were being held in check by the events coming up in the U.S., with Brent crude unchanged at $113.28 a barrel, while U.S. crude rose 17 cents to $96.05 after seven straight weekly gains - the longest such streak since early 2009.

($1 = 0.7421 euros)

(Reporting by Richard Hubbard; Editing by Will Waterman)

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