(Updates to close)

  SYDNEY, Aug 14 (Reuters) - Australian shares finished a volatile session flat on Wednesday, as investors sought to lock-in gains after buying heavily in some of the big names recently, including Commonwealth Bank of Australia which posted a record annual profit.

  The S& P/ASX 200 index finished steady at 5,157.4 points. A handful of disappointing earnings shackled the market, with Leighton Holdings Ltd tumbling after its first half results showed weak cashflows.

  The benchmark rose 1 percent on Tuesday to notch 2-1/2 month highs. New Zealand's benchmark NZX 50 index also finished flat at 4,524.6 points. (Reporting by Thuy Ong Editing by Shri Navaratnam)

* About 6 pct of European capacity to be idled or shut

  * H1 EBITDA at 5.5 bln eur vs 5.54 bln Rtrs poll

  * H1 recurrent net income 1.99 bln eur vs 2.09 bln Rtrs poll (Recasts, adds CEO, fund manager quote)

  By Christoph Steitz

  FRANKFURT, Aug 14 (Reuters) - Germany's No.2 utility RWE followed peers by announcing cuts in generating capacity, blaming an expansion of renewable energy that has pushed many gas and coal-fired plants into losses.

  Germany's utilities are suffering from plunging wholesale power prices, down by about a fifth year-to-date, and subsidised renewable energy that takes priority feeding into the grid, reducing the hours that many conventional plants can run.

  " In view of the latest price developments on power exchanges and the continuing, subsidy-driven solar boom, the situation is far from being remedied," Chief Executive Peter Terium said in a letter to shareholders.

  RWE said it would take offline 3,100 megawatts (MW) of power plant capacity in Germany and the Netherlands, about 6 percent of its European total 52,000 MW, and added it was assessing similar steps for further plants.

  A source told Reuters on Monday that the group was planning to idle or shut down thousands of megawatts of capacity.

  On Tuesday, larger peer E.ON said it had already shut down or idled about 6,500 (MW) of capacity and may close or mothball more than the 11,000 MW it has previously put under review.

  NO GREAT EXPECTATIONS

  Operating profit at RWE's conventional power generation business, accounting for 17 percent of the group's total, was down by 62 percent year-on-year at 690 million euros ($913.31 million) in the first half, triggering further savings efforts at its power plant division.

  Having recently fallen to a 10-year low, shares in RWE and E.ON have proven to be a challenging investment, with little growth prospects in the foreseeable future.

  " You shouldn't have great expectations when it comes to growth. The amount of electricity in Germany shrinks, there is less demand for the product," said Thomas Deser, senior fund manger at Union Investment, which holds 0.55 percent in RWE, according to Thomson Reuters data.

  " The company should try to lower costs as much as possible and become a reliable dividend machine," he added.

  RWE said recurrent net income rose by 19 percent to 1.99 billion euros in the first half of the year, which the group said was mainly due to an arbitration ruling under which Russia's Gazprom had to reimburse RWE for overpayments on gas purchases.

  Analysts had, on average, expected the group to post first-half recurrent net income of 2.09 billion euros. ($1 = 0.7555 euros) (Editing by Peter Dinkloh and David Cowell)

TOKYO, Aug 14 (Reuters) - Japan's Nikkei share average closed at a one-week high on Wednesday in choppy trade as positive economic data from Europe and the United States spurred buying, while a weak yen lifted exporters such as Toyota Motor Corp and Honda Motor Co. The benchmark Nikkei rose 1.3 percent to 14,050.16 after falling to as low as 13,747.18 earlier. The broader Topix added 1.2 percent to 1,171.34. Traders attributed late buying to short-term investors' high frequency trade.

* Private, foreign firms have to wait

  * State firms have green light to drill for shale gas

  * Policy for others to take at least three months

  By Nidhi Verma

  NEW DELHI, Aug 14 (Reuters) - India will take at least three months more to draw up a policy framework for shale gas exploration that would allow both private domestic and foreign firms to begin drilling for the fuel, two oil ministry sources said on Wednesday.

  India has a chronic power supply shortage and yet many gas-fired electricity plants stand idle as the country lacks the fuel to supply them, or the infrastructure and cash for expensive imports. Shale gas supplies could eventually help meet demand, but India has been slow to open up the sector.

  The country could be sitting on as much as 96 trillion cubic feet (tcf) of recoverable shale gas reserves, the U.S. Energy Information Administration estimates, equivalent to around 26 years of the country's gas demand.

  India's cabinet will soon approve a policy for shale gas exploration, initially allowing state oil companies holding India's oldest contracts to drill for shale. That would give state-run explorers Oil and Natural Gas Corp and Oil India Ltd a headstart, although neither has yet to show much appetite for drilling for shale.

  Of the 356 blocks the two companies hold, India's upstream regulator has said 176 of them possibly hold shale resources.

  These contracts were awarded when India first started a push to find and produce oil and gas after it got independence from Britain in 1947.

  The old contracts refer to activity related to exploration and output of petroleum, which India's government has interpreted as a broad enough term to cover unconventional energy such as shale.

  The wording of new contracts for blocks awarded to companies such as Reliance Industries, BG and Cairn India , specifies activity related to natural gas and oil. The Indian government has interpreted this as excluding unconventional energy.

  It is unclear how the government would resolve the issue. It is also unclear if the government would open existing blocks to bidding from companies who want to drill for shale.

  BUILDING SHALE EXPERTISE OVERSEAS

  Gas demand in the country is expected to jump to 473 million cubic metres a day (mmscmd) by 2016/17 from 286 mmscmd in 2012/13.

  India is eager to bring in global energy expertise to help it unlock resources and cut import dependency. It will link local gas prices to global indexes from April 2014 in an effort to incentivise and attract producers and importers.

  Reliance Industries, GAIL (India), Oil India and Indian Oil Corp have bought stakes in shale gas assets overseas to help build the expertise needed to pump gas from deposits back home.

  ONGC signed a preliminary agreement last year with ConocoPhillips to exploit shale gas reserves, but is unlikely to be able to use the technical expertise of the Houston-based company.

  Indian rules do not permit equity participation in these particular blocks and multinationals are reluctant to be just service contractors, said an ONGC official.

  " For (these) blocks we have to rely on consultants and service contractors for drilling," said the ONGC official.

* Investors worry Fed could curb stimulus in Sept

  * Libya unable to give clear indication on Sept loadings

  * Coming up: U.S. weekly EIA stocks data at 1430 GMT (Updates prices)

  By Luke Pachymuthu

  SINGAPORE, Aug 14 (Reuters) - Brent crude slipped towards $109 per barrel on Wednesday as investors fretted that the U.S. Federal Reserve could start curbing its commodity-friendly stimulus as early as September, but concerns over supply underpinned prices.

  Brent was down 51 cents at $109.31 a barrel at 0623 GMT, while U.S. oil dipped 43 cents to $106.40.

  Front-month Brent crude oil futures for September delivery had risen for a third straight session on Tuesday, touching their highest in nearly two weeks at $110.06 a barrel.

  " Expect to see a lot of volatility over the next few weeks, because investors are paring back and holding out in anticipation not just of U.S. economic data this week, but also of the Fed meeting on September 17," said Jim Ritterbusch, president of Chicago-based Ritterbusch & Associates.

  U.S. retail sales rose in July, pointing to an acceleration in consumer spending that could bolster the case at the Fed for winding down its major economic stimulus programme.

  Atlanta Fed President Dennis Lockhart said it was too early to detail plans for a tapering, but did not rule out the possibility of it starting next month.

  " Right now the market is not trading on fundamentals, most of the price action we are seeing is primarily speculative, based on assumptions," Ritterbusch said.

  Brent rose back above its 200-day moving average on Monday at $108.17, a technical marker watched by traders. The contract also fully breached its short-term 10- and 15-day moving averages on Tuesday.

  EYES ON SUPPLY

  But concerns over supply disruptions in OPEC members Libya and Iraq supported prices.

  Libya's state National Oil Corp said in a statement addressed to shippers on Tuesday that it could not provide September loading schedules, normally due by now, as unsettled labour disputes at its ports have disrupted operations.

  And maintenance work at Iraq's key southern oil export hub is also expected to slash supplies by 500,000 barrels per day in September.

  " With the supply issues, and looking at the macroeconomic picture, it does look a little better now, even Europe is surprising on the upside," Ritterbusch said.

  " But the market is still oversupplied and we don't quite yet have demand at the kind of levels needed to draw down the overhang."

  The American Petroleum Institute's weekly report showed on Tuesday that U.S. crude oil stockpiles fell last week, although the decrease in inventories was smaller than expected.

  " To get demand kick started we'll need to see that unemployment number get down under 7 percent."

  The U.S. unemployment rate has fallen nearly a percentage point in the last year, though it remains historically high at 7.4 percent.

  The world's largest economy will issue a key survey on manufacturing later on Wednesday. (Editing by Joseph Radford and Muralikumar Anantharaman)

* FTSEurofirst 300 up 0.6 pct, Euro STOXX 50 up 0.3 pct

  * Jump in Chinese factory output sparks rally in miners

  * France's CAC 40, Spain's IBEX indexes hit year highs

  By Blaise Robinson

  PARIS, Aug 9 (Reuters) - European stocks climbed on Friday as strong Chinese factory data fuelled a rally in mining shares, while buoyant euro zone banks propelled French and Spanish benchmark indices to year highs.

  The FTSEurofirst 300 index of top European shares ended 0.6 percent higher at 1,229.58 points, while the euro zone's blue-chip Euro STOXX 50 index gained 0.3 percent to 2,825.62 points.

  Paris's CAC 40 and Madrid's IBEX - which have been outperforming the broader European market since late June, driven by rising banking stocks - both hit their highest levels this year on Friday.

  The CAC gained 0.3 percent to close at 4,076.55 points, surpassing a May peak and hitting its highest level since mid-2011, following a surprisingly strong earnings season.

  Societe Generale gained 1.5 percent while Michelin added 1.9 percent.

  " The structure of the rally is encouraging: you see banks and cyclicals leading the way and beaten-down stocks such as Peugeot recovering, while defensive shares underperform," a Paris-based trader said.

  " It's a sign that this rally could go on for a little while, although in the short term we're ripe for a pull-back."

  The bank-heavy IBEX gained 0.7 percent to 8,735.5 points, after surpassing a January peak and hitting its highest level since early 2012, with BBVA adding 2.4 percent and Banco Santander gaining 0.8 percent.

  But heavyweight mining stocks were the top gainers in Europe, after data showed Chinese factory output rose 9.7 percent in July from a year earlier. That was the fastest pace since the start of the year and added to recent data suggesting the world's biggest metals consumer may be stabilising after more than two years of slowing growth.

  Lonmin was up 7.7 percent and Antofagasta up 7.5 percent.

  The STOXX Europe 600 basic resources sector index has jumped 7.5 percent since Wednesday's close but remains down 15 percent in 2013, by far the worst sector performance this year.

  The broader FTSEurofirst 300 is up 8.6 percent year-to-date, while the Euro STOXX 50 has rallied some 13.4 percent since late June. Alpari market strategist Craig Erlam warned the blue-chip index could be range-bound for the rest of the month, however, as the earnings season draws to a close and with no U.S. Federal Reserve policy meeting before September.

  " May's highs around 2,850 should continue to cap any upside moves throughout the month, while 2,700 should provide significant support," he said. " I don't expect any break outside of this range unless we get any more significant hints about Fed tapering, or disaster once again strikes in the euro zone, which looks unlikely at this stage especially ahead of the German elections in September."

* Wall Street slips as investors pull back from record highs

  * China factory output rise eases concerns over growth outlook

  * Brent oil rises above $108, dollar rebounds off recent lows

  By Leah Schnurr

  NEW YORK, Aug 9 (Reuters) - Wall Street closed out its worst week since June on Friday, pulling back from record highs as investors focused on when the Federal Reserve will start to wind down its stimulus program, while the dollar rebounded from a seven-week low.

  U.S. stocks ended modestly lower as investors found few catalysts in light volume. For the week, the S& P 500 lost 1.1 percent, after several Fed officials alluded to a decline in stimulus before long. The Fed's support has been a major driver in the rally that has pushed the S& P 500 up more than 18 percent so far this year.

  " People are looking ahead to the September FOMC meeting and the prospect that the Fed begins its long-awaited exit strategy," said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

  The dollar rebounded slightly on Friday from recent losses, but it ended the week about 1 percent lower. The dollar index gained 0.2 percent on Friday.

  Investors have been betting heavily on dollar strength in recent months, expecting that Fed plans to reduce bond purchases, along with the relative outperformance of the U.S. economy against other markets, would bolster the dollar and drive U.S. yields higher.

  The repositioning in these trades dominated moves this week in currencies, bonds and foreign stocks. Along with the big bet on the dollar, bets on Japanese stocks, a falling yen and higher U.S. bond yields were all hit hard this week, causing investors to cover these positions ahead of what looks to be a seasonally slow period in the next two weeks.

  Better-than-expected economic figures in Europe have supported the euro and sterling of late. Britain's trade deficit narrowed sharply, supporting the pound, which traded close to the Thursday level of $1.5574 that was its strongest since June 19.

  Bond prices were little changed on Friday. The 10-year Treasury note edged up 4/32 in price, to yield 2.578 percent. However, yields are still sharply lower than the levels seen just before the release on Aug. 2 of the monthly U.S. jobs report, which disappointed investors.

  The Fed has said it will reduce its $85 billion in monthly mortgage-backed securities and Treasury bond purchases later this year if the economy progresses as expected.

  Dallas Fed President Richard Fisher reiterated on Thursday that the central bank remained open to trimming its purchases from September if economic data keeps improving. There was no fresh information on Friday.

  Signs of stabilization in China's economy supported European stocks, which closed up more than half a percent, and the data also pushed crude prices higher.

  Investors pulled a record $3.27 billion out of U.S.-based funds that hold Treasuries in the latest week, data from Thomson Reuters' Lipper service showed. The outflow from Treasury funds in the week ended Aug. 7 was the biggest since Lipper's records began in 1992.

  The Dow Jones industrial average ended down 72.81 points, or 0.47 percent, at 15,425.51. The Standard & Poor's 500 Index was off 6.06 points, or 0.36 percent, at 1,691.42. The Nasdaq Composite Index lost 9.02 points, or 0.25 percent, at 3,660.11.

  But Europe's broad FTSE Eurofirst 300 index gained 0.6 percent as the data out of China lifted stocks of mining companies higher. World shares were flat.

  Upbeat Chinese data in the past two days helped ease investor concerns that a sharp slowdown in the world's second-largest economy could derail global growth.

  China said factory output rose 9.7 percent in July, beating forecasts, and retail sales grew 13.2 percent while inflation held steady. The data added to Thursday's trade figures showing exports from China running at a surprisingly strong pace.

  The promising numbers, along with supply disruptions in the Middle East, lifted Brent oil above $108 a barrel. Brent was up $1.52 to $108.20 a barrel, while U.S. crude gained $2.70 to $106.10.

* U.S. stock indexes poised for worst week since June

  * Priceline gains on results, near $1,000 a share

  * BlackBerry open to going private, sources tell Reuters

  * Dow down 0.4 pct, S& P 500 off 0.3 pct, Nasdaq off 0.1 pct

  By Caroline Valetkevitch

  NEW YORK, Aug 9 (Reuters) - U.S. stocks dipped in light volume on Friday, putting the three major indexes on track for their worst week since June, as investors found little incentive to buy with equity prices not far below last week's record levels.

  Wall Street has struggled this week as an absence of trading incentives kept buyers at bay. Comments from Federal Reserve officials, which created confusion over when the central bank would begin to scale back its stimulus, added to uncertainty.

  The lack of clarity over the Fed's plans gave investors a compelling reason to pull a record $3.27 billion out of U.S.-based funds that hold Treasuries in the latest week ended Aug. 7, data from Thomson Reuters' Lipper service showed on Thursday.

  Richard Fisher, president of the Federal Reserve Bank of Dallas, reiterated late Thursday that the central bank will probably begin cutting back on its massive bond-buying stimulus next month, as long as economic data continues to improve.

  " People are looking ahead to the September FOMC meeting and the prospect that the Fed begins its long-awaited exit strategy," said Michael Sheldon, chief market strategist, RDM Financial, in Westport, Connecticut.

  While many investors are concerned that economic growth will stall without the Fed's help, stock prices have been supported by some strong earnings and encouraging data overseas.

  In China, industrial output rose more than expected, adding to a string of data that indicated the economy may be stabilizing after an extended period of tepid growth.

  The Dow Jones industrial average was down 63.56 points, or 0.41 percent, at 15,434.76. The Standard & Poor's 500 Index was down 4.45 points, or 0.26 percent, at 1,693.03. The Nasdaq Composite Index was down 4.89 points, or 0.13 percent, at 3,664.23.

  For the week, the Dow is down 1.7 percent, on track to snap a six-week string of gains. The S& P 500 is down 1.1 percent and the Nasdaq is down 0.7 percent.

  A week ago, both the Dow and the S& P 500 ended on Friday at record closing highs, with the blue-chip average at 15,658.36 and the broad benchmark at 1,709.67.

  J.C. Penney Co., down 5.3 percent at $12.93, was ranked among the S& P 500 biggest percentage decliners. Bill Ackman, the company's top investor, fired back at the retailer's board on Friday, requesting that it meet as soon as possible so it can select a new chairman and decide on other matters.

  Home Depot Inc shares dropped 1.4 percent to $78.89 and were the top drag on the Dow.

  U.S.-listed shares of BlackBerry Ltd jumped 3.6 percent to $9.57 after Reuters reported that the company was warming to the idea of going private, citing sources familiar with the situation.

  Economic data showed U.S. wholesale inventories unexpectedly fell 0.2 percent in June, marking a second straight month of declines, versus expectations calling for a gain of 0.4 percent.

  Priceline.com Inc, rose 5.1 percent to $981.40 a day after the online travel company reported earnings that beat expectations and gave a strong outlook. Some analysts speculate the stock's price will cross $1,000 soon, which would be a first for a Standard & Poor's 500 stock.

  Monster Beverage Corp rose 1.6 percent to $64.47 after JPMorgan raised its price target on the stock to $70 from $52. Late Thursday, the energy drinks company reported earnings that missed expectations.

  Of 446 companies in the S& P 500 that had reported results through Friday morning, Thomson Reuters data showed that 68 percent have exceeded analysts' expectations, slightly above the 67 percent beat rate over the past four quarters.