NEW YORK, Oct 28 (Reuters) - The dollar extended losses against the yen on Friday, falling to a session low, as investors continued to test the resolve of Japanese authorities to stem the strength of the Japanese currency.

  The dollar was last down 0.3 percent at 75.70, not far from the record low touched on Thursday on electronic trading platform EBS of 75.661. (Reporting by Nick Olivari Editing by James Dalgleish)

* Bankia says does not need state aid to meet EBA requirements

  * Bankia to sell non-strategic assets

  * Popular says can meet new requirements

  * Popular plans to convert bonds ahead of schedule (Adds comments on meeting capital requirements)

  By Tracy Rucinski

  MADRID, Oct 28 (Reuters) - Spanish banks Banco Popular and Bankia said on Thursday they will be able to raise 3.5 billion euros ($4.9 billion) to meet new European core capital requirements, even as they forecast their bad loans would continue to rise due to the country's soaring unemployment.

  Popular, the biggest of Spain's mid-sized banks, and which recently bought Pastor , said it could raise 2.362 billion euros by June next year by advancing the conversion of 1.2 billion euros in convertible bonds, by trimming assets and through its scrip dividend programme.

  Newly-listed Bankia said its parent BFA will also meet the new requirements, 1.140 billion euros in its case, through organic growth and by selling assets in Austria and the United States as well as in Spain.

  " BFA will reach the ... capital required by June 30, 2012, without needing public funds," the bank said on Friday in its presentation of third-quarter results.

  Spanish lenders, fresh from a government-driven shake-up of the financial system, have been struggling with wholesale money markets that are effectively closed to them while facing calls to increase provisions against their real estate loans.

  European banks have been called on to raise a total of 106 billion euros of core capital by the end of June 2012 to shore up their balance sheets -- part of a plan to restore confidence in the sector and contain the euro zone debt crisis.

  After Greece, Spain's banks were asked to raise the most new capital, but all so far have said they will be able to meet the new numbers.

  However, Spain's banks still have to contend with the large portfolios of property loans and assets they were left with when the country's real estate bubble burst.

 

 

  PROFITS WEAK, PROVISIONS UP

  Spain's unemployment climbed to a 15-year high in the third quarter, with almost 5 million people out of work, or 21.5 percent of the working population, the government reported on Friday.

  And with economic growth slowing and the risk of a new recession looming, more and more people and companies in Spain are falling into arrears on loans, hitting banks hard.

  Popular saw net profit fall 22.5 percent to 404 million euros ($571 million) in the nine months to September, hit by higher provisions against bad property-related loans.

  The bank said it was too soon to predict when the unpaid debt trend would improve after bad loans as a percentage of total lending crept up to 5.85 percent at end-September from 5.58 percent at end-June.

  Popular charged 615 million euros in provisions against property-related loans in the nine months to September, compared with 459 million a year earlier.

  Bankia, formed by the merger of seven regional banks led by Caja Madrid, said it made a net profit of 295 million euros in the first nine months of the year, with bad loans as a percentage of the total spiking to 7.09 percent, one of the highest in its peer group.

  Bankia, with more exposure to property than its rivals, said it had 1.08 billion euros of provisions at the end of September.

  " The outlook still remains very uncertain," said Daragh Quinn, banking analyst at Nomura International in London.

  Net interest income, the difference between what a bank earns on loans and what it pays out on deposits, also fell at Popular, mirroring declines at other banks like Banesto and Bankinter as higher funding costs continued to squeeze margins.

  Popular said it expected net interest income to grow in 2012 but warned the fourth quarter of this year would remain tough.

  On Thursday the euro zone's biggest bank Santander said it expected bad loans in Spain to keep on growing as Spaniards, blighted by unemployment and heavy mortgage debt, fall into arrears on payments.

  Popular shares were trading almost flat at 3.438 euros, at 1400 GMT on Friday, while Bankia shares were down 0.5 percent at 3.631 euros per share. The European bank index was off 0.22 percent at 148.69. ($1=0.707 euros) (Additional reporting by Jesus Aguado and Tomas Cobos Writing by Fiona Ortiz Editing by Greg Mahlich)

(Recasts with c.bank governor, adds detail)

  * Norway c.bank governor: no " aid" to euro zone from oil fund

  * Fund head says too early to say if will invest in EFSF

  * Says oil fund's current exposure to euro rescue fund is small

  * Fund experiences 2nd worst quarter ever

  * Says Europe debt crisis, slump fears weighed on stocks

  By Victoria Klesty and Camilla Knudsen

  OSLO, Oct 28 (Reuters) - Norway's $572-billion sovereign wealth fund will not invest in any euro zone rescue schemes that have elements of aid in them, the country's central bank Governor Oeystein Olsen said on Friday.

  Olsen's comments came after the head of the fund said he was holding fire on possible investments in the euro zone's beefed-up rescue mechanism until it has more information on how they would be structured.

  The fund, commonly known as the " oil fund" , is managed by a unit of the central bank.

  " It's not on the agenda to contribute any extra investments in the special purpose investment vehicle (SPIV) that have elements of help or aid. That's outside of the mandate," Olsen said.

  Earlier on Friday, the fund's chief executive told Reuters it was too early to say whether the fund would be interested in participating in a planned special fund aimed to bolster the euro zone's debt problems.

  It needed more information on how the fund would be structured before a decision could be made, he said.

  " We do not have sufficient detail really to comment on what it would do for us in terms of investment opportunity," Yngve Slyngstad said in an interview, adding the oil fund's existing exposure to the European Financial Stability Facility (EFSF) was small.

  Euro zone leaders stepped up efforts on Thursday to tackle the region's debt crisis, agreeing to leverage the EFSF to give it enhanced firepower of 1.0 trillion euros ($1.4 trillion) and proposing a special investment vehicle to bolster it with outside funds.

  " It's a direction which we think is positive, but it is still (lacking the) details that make it possible for us to comment on whether we want to participate," Slyngstad said.

  The fund, Europe's largest equity investor, has about 75 billion euros ($106 billion) invested in euro-denominated bonds and Slyngstad said it had a large interest in seeing the euro project succeed.

  Slyngstad earlier told a news conference the fund only had a limited exposure to the EFSF.

  It had less than 100 million euros in EFSF investments at the end of the third quarter compared with the 13 billion euros the rescue mechanism issued in three sales of bonds on behalf of the euro zone states it is bailing out.

 

  EUROPE DEBT CRISIS, RECESSION FEARS WEIGH

  The fund battled through the second-worst quarter ever in the three months to September as Europe's debt crisis and a fear of a worldwide recession hit share prices, Slyngstad said as he presented the fund's third-quarter results.

  Its return on investment was -8.8 percent, 0.3 percentage points below the fund's benchmark portfolio, which is a neutral weighting against all the markets the fund is allowed to invest in.

  The value of the central bank-run fund stood at 3.055 trillion Norwegian crowns ($564 billion) at the end of September, down from 3.111 trillion crowns at the end of June. On Friday it was worth 3.09 trillion, according to its website.

  Strong October stock markets helped the fund regain all of the 222 billion crowns lost in the first nine months of the year, Slyngstad said.

  " Today, our return on the fund for the year is back to about zero," he said, adding that the fund was prepared for the possibility of further market volatility.

  The fund is shifting its long-term focus away from European equities and fixed income and instead aims to direct its cash inflow, stemming from Norway's oil and gas assets, towards Asian growth markets and real estate.

  " Of course we are committed to Europe although we have signalled that over time the fund will have less of its investment in Europe," the CEO said.

  " In the third quarter we actually used a majority, or nearly all of the capital inflow to buy into European equities. So we are still investing in Europe and increasing our exposure there."

  Slyngstad said that, while the fund's equity investments had not targeted specific European sectors in the quarter, it had decreased its exposure to the financial sector.

  " It is quite likely that the European financial institutions and banks within the euro zone will raise more capital, and we will look at that situation when we see anything more concrete," he said.

  " It hasn't been anything that has been flagged to us, so we are still in a wait-and-see mode."

  The best performing stocks in the quarter included Apple , Vodafone and IBM , while the worst were BNP Paribas , Siemens and Daimler < DAIGn.DE> .

  Commonly known as the oil fund, the fund invests abroad the Norwegian state's tax revenues from oil and gas activities to save for future generations, and is one of the world's largest sovereign wealth funds. (Additional reporting by Gwladys Fouche and Terje Solsvik in Oslo Editing by Stephen Nisbet)

* Some worries that euro zone bailout may not be successful

  * Euro zone leaders still working out rescue deal

  * Brent, WTI set for weekly gains of 4-6 percent

  * U.S. oil sees biggest weekly rise since March (Updates throughout)

  By Philip Baillie

  LONDON, Oct 28 (Reuters) - Brent crude oil dropped to around 110 per barrel on Friday as investors took another look at the details of a financial rescue plan for the euro zone, which has helped boost oil prices sharply this week.

  Oil jumped on Thursday after European leaders announced they had agreed a plan to solve the euro zone debt crisis and recapitalise the region's banks, but many of those gains were lost on Friday as doubts over the proposals set in.

  By 1440 GMT, the benchmark December Brent contract < LCOc1> was down $1.40 per barrel at $110.68. U.S. crude < CLc1> fell $1.95 to a low of $92.01 but was still headed for a weekly rise of around 6 percent, its biggest weekly gain since March.

  Euro zone leaders are under pressure to finalise details of a plan to slash Greece's debt and strengthen the European Financial Stability Fund (EFSF), possibly through investment by emerging economies such as China and Brazil.

  " After a rally like we saw yesterday it was reasonable to see oil prices fall," Torbjorn Kjus of DnB NOR said.

  " There was a bit of euphoria yesterday based on the EU meeting and when you look at it (it) wasn't that strong a package. It was a moderate package so it was a little bit surprising to see so much of a rally."

 

  RELIEF

  " The rise was a bit of a relief rally, but the banks will need to boost their reserves in line with the 9 percent core capital requirements, which means harder access to money for companies and lower economic growth," he added.

  Christophe Barret of Credit Agricole said: " Perhaps prices went too high, we are still lacking a lot of detail on the euro zone deal."

  On Thursday, European leaders struck a deal with private holders of Greek debt to write down half their holdings and agreed to boost the region's rescue fund.

  U.S. President Barack Obama said the deal had calmed global markets and it was now important the countries follow through on implementation of the pact.

  The FTSEurofirst 300 index of leading European shares was up 0.15 percent in early trade. The benchmark index is up around 10 percent so far this month and on track for its biggest monthly rise since April 2009, though it is still down 9 percent for the year.

 

 

  U.S. OUTLOOK

  Data this week has been positive, with the U.S. economy growing 2.5 percent in the third quarter, its fastest pace in a year, and an index of China factory output returning to growth after three months of contraction, boosting global demand for oil.

  Next week financial markets will focus on a meeting of the Federal Reserve's rate-setting committee, which is set to discuss a possible programme of monetary easing, which some analysts think could lead to a price rally.

  Carsten Fritsch at Commerzbank said oil prices were likely to begin to look more closely at fundamentals and the general state of the macro-economy after a week of focus on the euro zone debt crisis.

  " Overall the peak in the oil market hasn't changed really much, which points to weak fundamentals," Fritsch said. (Additional reporting by Seng Li Peng in Singapore editing by Anthony Barker)

* Total, Chevron earnings climb on oil, refineries

  * Latest in oil sector to see rosy quarter

  * Production falls slightly at both companies

  * Total shares slip, Chevron slightly up

  Oct 28 (Reuters) - Chevron Corp and Total posted higher quarterly profits on Friday, the latest two major oil companies to reap the benefit of firm oil prices and rosier refinery conditions.

  The third-quarter profits from Total and Chevron capped a week of earnings figures that saw gains at Exxon Mobil, Royal Dutch Shell and BP Plc as benchmark Brent oil prices hover near $112 per barrel, nearly 50 percent higher than the year-earlier quarter.

  Still, oil prices were slightly down from the second quarter of the year, which helped the companies' refineries to post higher margins and profits.

  Chevron Corp, the second-largest U.S. oil company behind Exxon, said its profits more than doubled, helped by a gain of about $500 million from the sale of its Pembroke refinery to Valero Energy Corp.

  Total's profits climbed a more modest 24 percent, but met market expectations, as its output fell by 1 percent because of disruptions in Libya.

  Chevron also posted a decline in output to 2.6 million barrels of oil equivalent per day (bpd), down from 2.74 million a year ago.

  It July, Chevron had said a slower Gulf of Mexico project ramp-up and a Thai pipeline problem would trim its 2011 production by about 30,000 bpd.

  Like their peers, Chevron and Total have struggled to increase oil production in recent years.

  Disappointment about the trend has hit oil stocks, and Total has been punished by investors more harshly than its rival -- until a rally that has lifted its stock 27 percent since Sept. 26 when it raised its 2010-15 average output goal to 3 percent per year from 2 percent.

  Total has made over $10 billion of acquisitions in the past 18 months, expanding its geographical footprint beyond its historical heartland of Africa to Australia, Canada and Russia.

  Shares in Total fell about 2 percent in Friday trading, while Chevron shares climbed less than 1 percent. (Reporting by Marie Maitre in Paris, Braden Reddall in San Francisco and Matt Daily in New York, editing by Dave Zimmerman)

* Regling trip just a day after EU strikes rescue deal

  * To meet with Chinese finance minister, central bank

  * China hasn't asked for concessions on investment-Regling

  * China awaiting details on EFSF proposal-official (Adds quotes, context throughout)

  By Koh Gui Qing and Aileen Wang

  BEIJING, Oct 28 (Reuters) - The head of Europe's bailout fund said he does not expect to reach a conclusive investment deal with China during a trip to Beijing, a point underscored by a senior Chinese official who cautioned any decision to buy would inevitably take time.

  Some analysts say China has far more upside than downside in providing support for Europe, not least in protecting its global trade, but it may strike a hard bargain to part with some of its huge foreign exchange reserves.

  Vice Finance Minister Zhu Guangyao told reporters in Beijing that China is waiting for details on the new investment options for the rescue fund, the European Financial Stability Facility (EFSF), before deciding on further purchases.

  " This is not investment in EFSF itself, but in its new forms of investment as guarantor or participant," he said. " So of course we have to wait until it's clearly fully prepared technically and only after conscientious discussion will we decide about this investment."

  EFSF Chief Executive Klaus Regling was in cash-rich China just a day after euro zone leaders struck a last minute deal to boost the firepower of its rescue fund, recapitalise banks and reduce the debt burden on struggling Greece.

  " We all know China has a particular need to invest surpluses," Regling said at a news conference, referring to the country's foreign exchange reserves of $3.2 trillion -- the world's biggest stockpile. Analysts estimate a quarter of the reserves are euro-denominated assets.

  Some Chinese intellectuals say that now is the time for Beijing to negotiate hard, securing access to, control over, or even ownership of some of Europe's best brand names, companies and intellectual property in return for fresh funds.

  " Europe has some many famous brands, intellectual property and many high-quality corporate assets. Why should we worry that we cannot get enough returns?" Ding Yifan, an economist at Development Research Centre, a cabinet think-tank, said.

  It wasn't clear that Friday's visit would yield any solid additional commitments from China -- already a regular buyer of bonds issued by the EFSF -- to help bail out Europe.

  " We think this trip is about helping China understand better the new funding channels of the EFSF," said Chi Sun, an economist with Nomura in Hong Kong.

 

  Chinese officials have welcomed Europe's debt deal but added that the purchase of EFSF bonds is not on the agenda for next week's G20 meeting in Cannes.

  European leaders are now under pressure to finalise the details of their plan to slash Greece's debt burden and strengthen efforts to revive the euro zone.

  French Finance Minister Francois Baroin said investment by China would be a " gesture of confidence" .

 

  WAITING FOR DETAILS

  Regling was due to meet officials from China's central bank and finance ministry on Friday. He said he was also in contact with sovereign funds globally.

  New instruments were being designed and models tested to scale up the fund, Regling said, adding that he wanted to hear how the fund could best structure investments to secure capital.

  Chinese analysts were skeptical that Beijing would agree to a big investment just yet.

  " If everything is not clear, how can you ask China to get involved in the process?" said Zhang Yongjun, an economist at CCIEE, a top government think-tank in Beijing.

  The 440-billion-euro EFSF was set up last year and has already been used to provide aid to Portugal, Ireland and Greece as the euro zone deals with its biggest ever crisis.

  After the Brussels summit, governments announced a deal under which private banks and insurers would accept 50 percent losses on their Greek debt holdings and hard-hit European banks would be recapitalised. Regling said Tier-1 capital at large European banks would be raised temporarily to 9 percent.

  They also said the EFSF would be leveraged to give it firepower of some 1 trillion euros to put a safety net under bigger euro zone states, such as Spain and Italy and prevent them from being swept up by the crisis.

  European officials have said the leverage would be achieved either by offering insurance to buyers of euro zone debt in the primary market or via a new special purpose investment vehicle that it hopes would draw funds from China and Brazil, among other countries.

  Brazil rejected the idea of buying euro zone bonds even before the region's leaders struck a deal.

  " I believe that European countries do not need funds from Brazil to buy bonds. Brazil is not considering it," Mantega told reporters in Brasilia on Tuesday. " They have to find solutions to the European problems within Europe."

 

  NO CONCESSIONS TO BEIJING

  Beijing has repeatedly expressed confidence that Europe can overcome its two-year-old debt crisis. President Hu Jintao said China hoped the measures agreed in Brussels would help stabilise the euro zone.

  But an English-language commentary by the official Xinhua news agency played down the potential impact of the EFSF, saying Europe would face debt, economic and integration challenges for years to come.

  " A European Financial Stability Fund with more firepower would not play a magic role in addressing the root cause of the problems," it said.

  Regling tried to reassure China that investing in the fund was a safe investment, saying its triple-A rating was solid.

  " I think the EFSF can offer a good product that is commercially interesting," he said.

  When asked if China was asking for any special concessions in return for its support, Regling said Beijing hadn't done so.

  " When they buy our bonds, they buy the same bonds as everybody buys," he said. " There is no special deal and so it is normal conditions and we published those conditions on our website."

  One factor that will determine China's negotiating position is that the amount of money on hand in its reserves may not be anywhere near the $3.2 trillion mark.

  Excess reserves are calculated closer to $1.5 trillion, some of which has been channelled into China's sovereign wealth fund. A lot could also be used to clean up a pile of local government debt.

  Free reserves might be as low as $500 billion, said MES Advisers President Paul Markowski, a long-time external adviser to China's monetary policy makers.

  Any contribution to the rescue fund is fraught with risks for China but for many analysts the upside far outweighs the danger of failure.

  A meltdown in the euro zone would lead to a global downturn that would impact China's exports. A collapse of the euro could drive up the dollar and set back China's efforts to internationalise the yuan.

  Support on the other hand would give China political leverage to promote some of its global ambitions.

  China also recognises the potential temptation for Europe and the United States, trying to tackle a sluggish economy, to look to currency devaluation as an answer to their problems.

  The main currency reserve countries should " maintain relative exchange rate stability and avoid forcing other countries to depreciate," Zhang Tao, director of the international department of China's central bank, told reporters. (Additional reporting by Chris Buckley, Nick Edwards and Kevin Yao Writing by Kevin Yao Editing by Ken Wills and Don Durfee)

SHANGHAI, Oct 28 (Reuters) - China stocks ended up 1.6 percent on Friday, the highest level since late September, boosted by property shares after official media reported that the authorities were working towards a longer term plan to rein in prices and would phase out the current set of home purchase restrictions.

  The Shanghai Composite Index finished at 2,473.4 points, up 6.7 percent for the week, the biggest rise in more than a year. The index rose 0.3 percent on Thursday.

  (Reporting by Chen Yixin and Jacqueline Wong)

HONG KONG, Oct 28 (Reuters) - Hong Kong shares finished higher on Friday, rounding off its best week in almost 2-1/2 years and boosted by Chinese financial and property stocks, with global risk aversion ebbing following a deal that could ease Europe's debt problems.

  The Hang Seng Index ended up 1.68 percent on the day and 11.06 percent on the week at 20,019.24. The China Enterprises Index ended up 0.56 percent on the day and 15.24 percent on the week at 10,625.16.

  The Shanghai Composite Index closed up 1.55 percent on the day at 2,473.41, boosted by energy and property stocks in the highest A-share turnover since July 25. The benchmark gained 6.74 percent on the week, its best in a year.

 

  HIGHLIGHTS:

  * Some longer-term investors remained skeptical of the rally after turnover on the Hong Kong bourse trailed off in the afternoon after midday levels almost equalled midday levels on Aug. 5, when the first of two selloffs last quarter occurred.

  * A good portion of the gains came on short-covering in sectors that have been heavily shorted in the last two weeks despite short-selling dipping below 10 percent of overall turnover in all but two of the last 15 sessions. Full data for Friday is not available at market close.

  * The short squeeze helped Chinese financial, property, infrastructure and resources counters, which took the brunt of a brutal selloff last quarter, lead the rebound this week following recent data and corporate earnings that suggest fears of a hard landing in China could turn out to be excessive.

  * In a measure of the magnitude of the bounce up this week, Evergrande Real Estate Group Ltd gained 5.5 percent, rounding off gains of more than 40 percent this week. Mainland media reported on Friday that the authorities intended to replace property purchase restrictions with a plan to accelerate the expansion of property taxes that would contribute information to a housing database that could help control the market. Analysts said this move should create a base for Chinese property stocks prices from here.

 

  WEEK AHEAD:

  * Third-quarter earnings announcements are expected to continue to stream in, including from Lenovo Group Ltd on Wednesday.

  * China is expected to report its official Purchasing Managers Index (PMI) for October on Nov. 1. HSVC's flash PMI on Oct. 24, showed that China's vast manufacturing sector expanded moderately in October, snapping three months of contraction. (Reporting by Clement Tan Editing by Chris Lewis)

* Europe fund chief cautious on China deal

  * Says Greek rescue is a one-off

  * Italy pays euro-era record borrowing costs at auction

  * Stock markets shrug off lack of detail, rally (Adds context, details)

  By Aileen Wang and Koh Gui Qing

  BEIJING, Oct 28 (Reuters) - The head of Europe's bailout fund sought financial support from China on Friday to help resolve the bloc's debt crisis, saying that while no quick deal was in sight he was still confident Beijing would keep buying bonds issued by his fund.

  Klaus Regling, chief executive of the European Financial Stability Facility (EFSF), was in Beijing for talks with Chinese officials a day after euro zone leaders struck a hard-fought accord on the two-year crisis that nonetheless left major economies Italy and Spain under financial market pressure.

  After the European summit in Brussels reached agreement in the early hours of Thursday, French President Nicolas Sarkozy immediately got on the phone to China to seek financial help, saying Beijing had " a major role to play" .

  But despite a characteristically bullish sales pitch, the French leader did not appear to have received any specific commitments.

  European governments had announced an agreement under which private banks and insurers would accept 50 percent losses on their Greek debt holdings in the latest bid to cut Athens' debt load to sustainable levels.

  European leaders are now under pressure to finalise the details of the plan if they expect China and others to support it and Regling said he expected Beijing to continue buying bonds issued by the EFSF.

  " We all know China has a particular need to invest surpluses," Regling told a Beijing news conference, referring to the country's $3.2 trillion of foreign exchange reserves, the world's biggest.

  Regling said the bailout deal with Greece was an exceptional case that he did not believe would have to be repeated for other nations.

  Many in financial markets are concerned that the fund is not big enough to cope if Italy and Spain are drawn deeper into the crisis.

  Italy's borrowing costs hit new euro-era highs at a bond auction on Friday. Prime Minister Silvio Berlusconi was forced to promise new reforms and counter speculation that his coalition government was about to collapse.

  Despite Berlusconi's assertion that his centre right alliance remains solid, critics contend that his reform promises do not go far enough and the country will face early elections next year with no significant progress to show.

  France said investment by China would inspire confidence in the euro zone.

  " The reality is that China is the third largest shareholder in the International Monetary Fund, and if China via the IMF wants to participate - not by saving Greece or the euro - but by participating in investment, that is a gesture of confidence," French Finance Minister Francois Baroin said.

  " What is happening in Europe and creating instability is that public and private investors are pulling out," he told RMC radio.

  Global stocks were heading for their best week in over two years on Friday, bolstered by the Brussels deal, while the euro hit a seven-week high at one stage before falling back, shrugging off the lack of detail in Thursday's anti-crisis plan.

  Switzerland said it was looking at participating in the EU bailout fund via a special investment vehicle, although the idea could run into domestic opposition given the country's eurosceptical tradition.

  Norway, however, whose $572 billion oil fund is Europe's biggest investor in equities, said it had less than 100 million euros in EFSF investments and would not invest in any euro zone rescue schemes that had elements of aid in them.

  Key aspects of the euro zone deal, including the mechanics of boosting the EFSF and providing Greek debt relief, have yet to be finalised. It is proving difficult to explain in the meantime and European officials were jeered by journalists at one briefing as they struggled to outline it clearly.

  There are fears that the latest deal will fall apart like the last one, three months ago, that was also meant to draw a line under the troubles of the 12-year-old currency bloc.

  Within weeks it was clear that deal was inadequate given the scale of Greece's problems and the vulnerability of European banks. The new deal aims to plug these holes.

 

 

  " ABSOLUTELY SUSTAINABLE"

  Under it, the private sector agreed to voluntarily accept a nominal 50 percent cut in its bond investments to reduce Greece's debt burden by 100 billion euros, cutting its debts to 120 percent of gross domestic product by 2020, from 160 percent now.

  The euro zone will offer 30 billion euros in " credit enhancements" or sweeteners to the private sector to get them on board. The aim is to complete these negotiations by year end, so Greece has a full, second financial aid programme in place before 2012.

  The value of that package, EU sources said, would be 130 billion euros -- up from 109 billion euros in the July deal.

  " The debt is absolutely sustainable now," Greek Prime Minister George Papandreou said.

  In a bid to convince markets that they can defend larger countries like Italy and Spain, euro zone leaders also agreed to scale up the EFSF, the 440 billion euro bailout fund they created in May 2010 and have already used to provide aid to Ireland, Portugal and Greece.

  Around 250 billion euros remaining in the fund will be leveraged 4-5 times, producing a headline figure of around 1.0 trillion euros.

  The EFSF will be leveraged in two ways, either by offering insurance, or first-loss guarantees, to purchasers of euro zone debt in the primary market, or via a special purpose investment vehicle that will be set up in the coming weeks and which is aimed at attracting investment from countries such as China and Brazil.

  The methods could be combined, giving the EFSF greater flexibility, the euro zone leaders said.

  But EU finance ministers are not expected to define the plan until some time in November, with the exact date not fixed.

  Another question mark is Berlusconi's commitment to shoring up his country's debt-laden economy. Dogged by scandals, Berlusconi has promised to raise the retirement age to 67 by 2026 and attempt other reforms, but the EU is reserving judgement after repeated backsliding from Rome in recent months.

 

  SARKOZY TALKS TO HU

  Sarkozy said he had spoken to Chinese President Hu Jintao by telephone after the summit on Thursday and that Hu was relieved Europe had announced a deal to tackle a crisis that could otherwise have taken down the entire world economy.

  Sarkozy also donned the hat of euro salesman.

  " China has a major role to play. China must deploy more resources to stimulate the world economy: If they decide to invest in the euro rather than the dollar, why reject that? "

  " Why not accept that the Chinese place their trust in the euro zone?" the French president said.

  " China hopes all these measures will help stabilise the European financial market and conquer the current difficulties and promote the economic recovery and development," Hu said, according to China's state television. ($1 = 0.724 Euros) (Writing by Giles Elgood Editing by Ruth Pitchford)

By Jeremy Gaunt, European Investment Correspondent

  LONDON, Oct 28 (Reuters) - It would be nice to think that with the euro zone having come up with a plan to tackle its debt crisis, investors could focus in the coming week on more than another meeting of global leaders.

  Not so.

  Key central bank meetings, corporate earnings reports and seriously important economic data will have to compete with a Group of Seven summit at the end of the week in the southern French resort town of Cannes.

  As one keen observer of financial markets put it: " Another week, another summit" .

  G20 meetings have become increasingly important as the economic clout of developed economies wanes and that of the likes of China, India and Brazil increases.

  The coming week's meeting will essentially be watched for coordinated efforts or pledges to help stabilise world financial markets, which have been battered this year by the euro zone debt crisis and a slowing world economy.

  " The key is just a sense that the policymakers are aware of the challenges that the world economy faces, which are profound, and have the conviction to enact the right policies to deal with this," said Chris Cheetham, chief investment officer of HSBC Global Asset Management.

  A more specific issue, however, will be the extent to which China and other countries with large fiscal surpluses are willing to fund the euro zone's rescue fund.

  The past week's meeting of euro zone leaders left open to a great extent how the fund -- the European Financial Stability Facility -- was to increase its firepower, which is arguably the most important part of the agreement.

  It has been taken as implicit that China et al will be brought in.

  China has sought to lower expectations by insisting the purchase of EFSF bonds is not on the G20 summit agenda.

  Crises, however, have a long history of tearing up well-thought out agendas.

 

  RALLY, RALLY

  How much satisfaction investors get from the G20 may decide just how financial markets perform at the end of the year, a period which historically sees stock markets rallying.

  It goes, perhaps, against what many people would expect, but global stocks could quite easily end the year with relatively modest gains.

  MSCI's developed market stocks index needs only a little more than 2 percent to break even for the year -- a good day's trading.

  Most of the major losses have been on volatile emerging markets , but being 13 percent or so in the hole for the year to date is not a rout, particularly when a solid two-month rally could cut deeply into those losses.

  Investors, for their part, have begun putting more risk, eg stocks, in their portfolios, albeit cautiously. UK firm Schroders provides a typical example.

  " We have increased our exposure to equities and credit over October in the expectation of improved market performance into year end," Johanna Kyrklund, its head of multi-asset investments, said in a note.

  " In the short term, U.S. economic data have improved and for the time being the European authorities have kicked the can a little further down the road. However, we remain vigilant."

  Just how far along the U.S. recovery from its slump has come will be tested next Friday in the October jobs report.

  Employment usually lags. But it is crucial to consumer sentiment, house prices, retail sales and a broad range of major underlying data.

 

  RATES AND EARNINGS

  In the meantime, central bank rune-readers will have an interesting time on Thursday, when a new European Central Bank president, Mario Draghi, holds his first post-policy meeting news conference.

  Jean-Claude Trichet has his last day as ECB president on Monday.

  The U.S. Federal Reserve also meets, on Wednesday. European rate cuts are in the frame, but the Fed is probably done with new liquidity moves for now.

  Investors will also be driven by the corporate earnings season, nearing an end in the United States but heating up in Europe.

  Company earnings have been the one bright spot this year for many investors.

  The coming week brings Barclays, ING, BNP Paribas, Credit Suisse, Royal Bank of Scotland and Commerzbank to give a taste of the state of European banks.

  On Wall Street, the latest data from Thomson Reuters Proprietary Research shows that with 31 percent of S& P 500 companies having reported, estimated and actual Q3 earnings per share are up 14.8 percent.

  That is less than half the year-ago Q3 growth of 31.2 percent, but better than the 12.1 percent of this year's Q2.

  And they did it without a summit.

By Maria Golovnina and Taha Zargoun

  BANI WALID, Libya (Reuters) - Muammar Gaddafi's son Saif al-Islam called his father frequently on the telephone and became increasingly feared being hit by a mortar as he tried to escape from the besieged town of Bani Walid last week, an officer who had been with him told Reuters on Tuesday.

  " He was nervous. He had a Thuraya (satellite phone) and he called his father many times," said al-Senussi Sharif al-Senussi, a lieutenant in Gaddafi's army who was part of Saif's security team in Bani Walid until the city fell on October 17.

  " He repeated to us: don't tell anyone where I am. Don't let them spot me. He was afraid of mortars. He seemed confused."

  Senussi spoke to Reuters at a makeshift jail inside Bani Walid's airport where he has been kept by forces loyal to Libya's ruling National Transitional Council (NTC) since his capture alongside other pro-Gaddafi troops last week.

  Al-Senussi's identity was confirmed by Omar al Mukhtar, commander of anti-Gaddafi forces in northern Bani Walid whose brigade is in charge of the jail and the airport.

  Saif al-Islam, a London-educated, fluent English speaker who was long seen as a Western-friendly face of Libya, is the only one of Gaddafi's sons still unaccounted for.

  Mukhtar and Senussi, both of whom Reuters interviewed separately in Bani Walid on Tuesday, said Saif al-Islam slipped out of the city around the day it fell to anti-Gaddafi forces.

  " When his convoy left Bani Walid it was hit by an air strike but he escaped alive," said Senussi, who is not related to Gaddafi's powerful former security chief, Abdullah al-Senussi.

  NTC soldiers allowed Reuters to speak to him privately at the jail and did not listen to the conversation.

  An NTC official told Reuters on Monday that Gaddafi's fugitive son was near Libya's borders with Niger and Algeria and planning to flee the country using a forged passport.

  Mukhtar, the commander, said: " I and my unit were chasing him on Oct 19. Then NATO struck his convoy. He was in an armoured vehicle and survived and someone helped him to escape. We searched that area but we lost him there."

  INNER CIRCLE

  His curly, Gaddafi-style hair sticking out from under a baseball cap reading " Tokyo, Japan," Senussi said he was in charge of communication among various pro-Gaddafi brigades in Bani Walid, and fought until the last day.

  He said saw Saif frequently until he escaped from Bani Walid, and attended many meetings with him.

  " We we were not friends but we knew each other. We had a professional relationship," said Senussi, who was clad in military fatigues. " We did not really listen carefully to what he said towards the end. We were too busy fighting."

  He added that Moussa Ibrahim -- the face of Gaddafi's regime and his chief spokesman -- had also been there until recently but managed to escape separately days before it fell.

  Bani Walid residents said Saif had been holed up in a safe house in a neighbourhood called al Taboul -- a scattering of mudbrick houses cascading into a rocky valley -- before his final push out of the besieged city last week.

  The neighbourhood appeared tense when Reuters visited it on Tuesday.

  Unlike central parts of Bani Walid, no NTC flags flew on rooftops and hostile-looking locals made it clear to outsiders appearing on their doorstep that they were not welcome.

  " We have not seen him (Saif) around here since the rebels arrived," said one teenager who refused to give his name. " Before we sometimes saw his vehicles pass by. We have seen him around here."

  At the jail, describing the chaos within pro-Gaddafi forces as Bani Walid's defences crumbled, Senussi said:

  " I fought on the frontline. I was captured the day Bani Walid fell. They (Gaddafi commanders) kept telling us that reinforcements were on their way to Bani Walid, that they were sending more men. But they never did," he said.

  Like around 70 other former Gaddafi loyalists kept in the airport jail, he said he now fully endorsed the revolution and wished he had realised it earlier. Asked why he did not try to defect, he fidgeted nervously on his mattress and said:

  " I wish I could have joined the rebels earlier. I was in hospital for five months, then military police handcuffed me and brought me here. I was forces to fight."

By Dan Williams

  JERUSALEM (Reuters) - Israel's help for earthquake-struck Turkey is a humanitarian gesture with limited prospects of rebuilding ties between the former allies, Israeli officials said on Wednesday.

  Responding to an international appeal by Ankara following Sunday's 7.2 magnitude quake that killed more than 400 people and forced thousands to flee their homes in the eastern Van province, Israel planned to fly out a small number of prefabricated homes and said it could ship hundreds more by sea.

  " We said that we would be prepared to provide all possible aid, as they desire and request, and there is no mixing political-diplomatic relations and natural disasters," Foreign Minister Avigdor Lieberman told Israel's Army Radio.

  " We are separating the two things absolutely."

  Israeli relief after a 1999 Turkish earthquake helped seal a strategic partnership that has since collapsed over Israel's Palestinian policies and the killing of nine Turks aboard an activist ship that tried to breach its Gaza blockade.

  Despite the crisis, Turkey's Islamist-rooted government dispatched firefighters to help Israel contain a deadly blaze in its northern Carmel forest in December.

  " When a country is in distress and has humanitarian problems, it is right to help and put things aside for a minute," said Ehud Shani, director-general of Israel's Defence Ministry, which had overseen bilateral military cooperation.

  A ministry spokesman said a plane carrying six or seven prefabricated homes was scheduled to depart on Wednesday evening, and another on Thursday. A ship was also being prepared to supply hundreds more of the structures, if required, he said.

  Turkey had initially declined Israel's offer of help. Asked during an Israel Radio interview whether the turnaround signalled ties were on the mend, Shani sounded circumspect.

  " I think that destruction takes hours. Constructing a building, brick by brick, takes more time," he said. " Therefore every element that we bring to the table will, it seems, bring about some kind of improvement, and we will ultimately reach better days."

  Lieberman blamed the breakdown of relations on a " dramatic change in Turkish policy" but said shifting regional strategies could nudge the countries back together.

  He cited Turkish anger at neighbouring Syria's crackdown on a citizen revolt, which has pitted Ankara against two old foes of Israel -- Syria and its ally Iran.

  " I'm not talking about a warming of relations. I'm talking about trying to identify where the common interests are," Lieberman said.

(For related story, double-click )

  SEOUL, Oct 26 (Reuters) - South Korea signed an agreement with China on Wednesday to double the value of their bilateral currency swap pact after securing a similar deal with Japan last week, in a move to beef up its forex defences in the wake of global uncertainties.

  The expanded swap arrangements with the world's top two foreign reserve holders now allow South Korea to secure some $126 billion in dollar, yuan and yen by simply printing the equivalent amount in its own currency.

  Following are details of swap deals that South Korea has sealed in recent years to secure a pool of foreign currencies that it can tap into in addition to official reserves: COUNTRY VALUE CURRENCIES SIGNED EXPIRY U.S. $30 bln* won-dollar Oct 2008 Feb 2010 Japan $3 bln won-yen May 2005 July 2013

  $17 bln* won-yen Dec 2008 April 2010

  $10 bln local-dollar part of E.Asia fund

  $27 bln won-yen Oct 2011 Oct 2012

  $30 bln local-dollar Oct 2011 Oct 2012 China $26 bln* won-yuan Dec 2008 ~

  $56 bln won-yuan Oct 2011 Oct 2014 * Deals closed ~ Replaced by new agreement ahead of expiry in April 2012 SOURCE: The Bank of Korea, Thomson Reuters (Reporting by Yoo Choonsik Editing by Kavita Chandran)

By Elias Biryabarema

  KAMPALA (Reuters) - The Uganda shilling extended its rally against the dollar on Tuesday as banks sold greenbacks to bolster their local currency positions on fears consumer spending on imported goods will slow due to runaway inflation.

  At 0730 GMT, commercial banks quoted the shilling at 2,731/2,741, nearly 2 percent stronger than Monday's close of 2,785/2,795.

  " When the market opened it was scramble and chaos with banks selling (dollars)," said Faisal Bukenya, head of market making at Barclays Bank Uganda.

  " They (banks) want to strengthen their shilling reserves because importers' demand for the dollar is down, which is undermining confidence in (the dollar)," said Bukenya.

  Analysts said the Bank of Uganda (BOU)'s monetary policy tightening had kicked in, dampening expectations of increased consumer spending during the peak holiday season in December and forcing importers to cut back on their orders.

  The central bank has been running a tight monetary policy stance since July when it introduced its benchmark Central Bank Rate (CBR) to try to tame high inflation and support a weak shilling.

  Uganda's year-on-year headline inflation leapt to 28.3 percent in September, up from 21.4 percent in August, pushing BOU to raise the CBR by 4 percent to 20 percent in October.

  " We still anticipate to see further gains in the shilling today ... on the back of slackened customer appetite coupled with interbank (dollar) selling which has been by spurred by shilling tightening," said Stanbic Bank Uganda in a report.

  But a trader with a leading commercial bank said the shilling was likely to come under moderate pressure this week reflecting end-of-month dollar demand from the energy sector.

  Traders said they expected the shilling to trade in the 2,740/2,800 range over the next few days.

* PBOC fixes mid-point weaker from record high, at 6.3456

  * U.S. Republicans ask Obama to lead on China currency

  * Yuan at 6.3533, up 3.72 percent so far this year

  By Chen Yixin and Jason Subler

  SHANGHAI, Oct 26 (Reuters) - The yuan closed up slightly versus the dollar on Wednesday, with the market remaining cautious amid growing pressure from the United States for China to do more to let its currency strengthen.

  The People's Bank of China (PBOC) has continued to set the yuan's daily mid-point at or around record high levels over the past few days, in what traders interpreted as a gesture ahead of a Group of 20 summit in France next month that China is willing to let the currency appreciate.

  The PBOC set the mid-point at 6.3456 versus the dollar on Wednesday, just shy of a record high fixing on Tuesday.

  But whether Beijing will actually continue to engineer appreciation in the longer run is less certain.

  " The relatively high mid-point is another good political gesture just ahead of the G20 summit," said a trader at a European bank in Shanghai. " But at the same time, investors are worried over the outlook for China's economy."

  Beijing has come under renewed pressure especially from U.S. politicians over the value of its currency, prompting onshore forex dealers to look for signs of how it will respond.

  Republican lawmakers aired U.S. grievances over subsidies, piracy and other Chinese trade practices on Tuesday, urging President Barack Obama to take the lead on correcting what they call China's " misaligned" exchange rate.

  At the same time, China has its own reasons for treading cautiously on the currency, as signs that the world's second-biggest economy could be facing headwinds could argue for not pushing the yuan up much further in value.

  China's industrial firms face increased difficulties due to weakening global demand, while inflation could maintain a " relatively" high level, the Ministry of Industry and Information Technology said on Wednesday.

  With traders concerned about potential economic trouble ahead, spot yuan did not follow the strong mid-point and continued to trade weaker than the mid-point on Wednesday in a range of 6.3486 to 6.3687 versus the dollar.

  The yuan closed at 6.3533, having risen 3.72 percent so far this year and 7.44 percent since it was depegged from the dollar in June 2010.

  Offshore, one-year dollar/yuan non-deliverable forwards (NDFs) were bid at 6.3870 in late trade compared with 6.3880 at the close on Tuesday.

  They implied yuan depreciation of 0.65 percent in 12 months from the mid-point on Wednesday, compared with depreciation of 0.66 percent on Tuesday. (Editing by Jacqueline Wong)

* Boeing reports higher profit, Ford posts lower net

  * Durable goods, new home sales data on tap

  * Futures up: S& P 7.6 pts, Dow 79 pts, Nasdaq 11.75 pts (Adds quote, byline, updates prices)

  By Angela Moon

  NEW YORK, Oct 26 (Reuters) - U.S. stock index futures rose on Wednesday after the S& P fell 2 percent in the previous session as optimism about corporate earnings offset concerns about an upcoming meeting of European leaders to tackle the region's debt crisis.

  Prospects for a comprehensive deal to resolve the crisis at a summit on Wednesday looked dim, with deep disagreements on critical aspects, including how to give the region's bailout fund greater firepower.

  " This entire crisis still comes down to Italy and Spain and their ability to grow their economy and cut their debt over the next few years. The EU is still awaiting a letter today specifically from Italian officials on how they plan to do so," said Peter Boockvar, equity strategist at Miller Tabak + Co in New York.

  With corporate earnings in high gear, Ford Motor Co reported lower third-quarter earnings but beat estimates. The stock fell 0.3 percent at $12.42 in premarket trade.

  Boeing Co shares rose 3.1 percent to $65.70 premarket after the planemaker posted a larger quarterly profit. Also, Boeing's long-delayed 787 Dreamliner takes its first paying passengers later in the day.

  WellPoint Inc recorded a higher-than-expected quarterly profit, while Nasdaq OMX Group Inc said profit rose 20 percent from a year ago.

  ConocoPhillips reported a lower quarterly profit, hurt by higher taxes and losses on asset sales.

  Visa Inc is also due to report later in the day.

  S& P 500 futures rose 7.6 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 79 points, and Nasdaq 100 futures added 11.75 points.

  The Commerce Department releases September durable goods orders data at 8:30 a.m. EDT (1230 GMT). Economists expect a 0.9 percent drop in durable goods orders, compared with a 0.1 percent decrease in August.

  The Commerce Department releases new home sales for September at 10 a.m. EDT (1400 GMT). Economists forecast a total of 300,000 annualized units, compared with 295,000 units in August.

  Amazon.com Inc issued a far weaker-than-expected outlook for the crucial holiday season quarter as it spent heavily on its new Kindle Fire tablet computer. The stock fell 12 percent to $199.79 in premarket trade after tumbling 18 percent in extended trading.

  European shares edged higher in thin, choppy trade on Wednesday ahead of the meeting of regional leaders.

* Ireland wants to use EFSF changes to cut its debt burden

  * Larger EFSF offers chance to cut cost of Irish bank bailout

  * More flexible EFSF could also boost funding profile

  * Ireland anxious to distance itself from Greece (Adds more detail)

  By Carmel Crimmins

  DUBLIN, Oct 26 (Reuters) - Ireland is hoping to capitalise on any deal to increase the firepower of the euro zone's rescue fund on Wednesday to reduce its own debt burden, Prime Minister Enda Kenny told the country's parliament.

  Ireland is positioning itself as the euro zone's recovery story and is anxious to ensure higher private sector losses on Greek debt do not spook sentiment towards Irish bonds.

  " We don't want to see the hard-won progress we have made undermined by events beyond our control," Kenny said in a speech ahead of his departure for an EU summit in Brussels.

  " We remain vulnerable to negative developments and .. there is a shared interest in ensuring that we are adequately protected."

  Prospects for a comprehensive deal to resolve the euro zone debt crisis at Wednesday's summit appeared dim, with disagreements remaining on critical aspects of a potential agreement, including how to give the EFSF bailout fund greater firepower.

  International investors have warmed to Ireland in recent months after Dublin, piggybacking on a worsening Greek crisis, won concessions amounting to around 1 billion euros annually on the cost of its bailout loans.

  Kenny wants to build on those gains by reducing the cost of financing the country's bank bailout, which has seen nearly 63 billion euros in state funds poured into five lenders, by possibly tapping an enlarged EFSF for cheaper loans to refinance the bank-related debts.

  A July summit of euro zone leaders agreed the EFSF would be able to participate in bank recapitalisations and also buy sovereign bonds in the secondary market, which could also offer Ireland the opportunity to refinance its debt, improving its funding profile and helping it to exit its bailout programme.

  " We will continue to seek improvements in relation to the legacy costs that have been incurred by the state in rescuing the banking system," Kenny said.

  " The deal to boost the capacity of the EFSF, which we hope to reach in today's discussions, may also offer further opportunities from which we can benefit."

  Ireland's 85 billion euro EU-IMF bailout runs out at the end of 2013 and in order to exit its programme, Dublin will need to raise 12 billion euros to meet a bond redemption in January 2014, on top of a need to borrow 9.5 billion euros to meet day-to-day spending for 2014.

  If Ireland was to tap the EFSF to help redeem the January 2014 bond redemption it would soothe concerns about the country's funding programme and help it to issue medium-term debt for the first time since 2009.

  Opposition lawmakers have called on Kenny to follow Greece and impose writedowns on the country's sovereign debt but he ruled that out yet again, saying such a route meant a decade of harsh austerity for the Greeks.

  " What is being done for Greece - including the steps that will need to be taken to make its debt sustainable - reflect a uniquely difficult situation," he said.

  " I cannot say it often enough or strongly enough we will not be going down the same road." (Additional reporting by Padraic Halpin Editing by John Stonestreet)