* BASF, Siemens warnings hit Germany's DAX

  * FTSEurofirst 300 closes 0.5 percent lower

  * Charts signal more near-term selling pressure

  * Miners fall sharply on China concerns

  By Atul Prakash

  LONDON, July 25 (Reuters) - Profit warnings by German heavyweights BASF and Siemens hit the country's stock index on Thursday and cast a shadow over the broader European market, which was seen vulnerable to further declines.

  The world's top chemicals group BASF warned on its 2013 profit outlook, while engineering group Siemens, Germany's second-biggest company by market value, said it did not expect to reach its 2014 profit margin target.

  Their shares fell 4.5 percent and 6 percent, respectively, taking the most points off Germany's DAX index, down 1 percent, and leading fallers across the FTSEurofirst 300 index , which closed 0.5 percent lower at 1,209.11 points.

  " More companies, especially cyclicals, could disappoint next week when about three dozen major firms announce results, as many companies suffered in the second quarter due to sluggish industrial production and slowing growth in emerging markets," said Christian Stocker, strategist at UniCredit in Munich.

  " The DAX could fall another 5 to 8 percent during the summer months, but I don't see any further major fall as improving economic fundamentals would keep the markets underpinned."

  The wider market fell as other major companies disappointed. Consumer goods giant Unilever warned growth was slowing in emerging markets, beermaker SABMiller's lager volumes shrank and Swiss industrial group ABB's net profit missed expectations. Their shares fell 1.5 to 3.1 percent.

  The market lacked direction as investors struggled to choose between positives and negatives. Stocks were supported by signs of an economic recovery in Europe and the United States, but concerns of a cut in U.S. stimulus, slowing Chinese growth and disappointing earnings slowed upward momentum, analysts said.

  About 23 percent of the STOXX Europe 600 companies have reported second-quarter results so far, with half of the firms meeting or beating profit forecasts, according to Thomson Reuters StarMine data. In contrast, 74 percent of U.S. S& P 500 companies have met or beaten expectations.

  Charts suggested major indexes could face further selling pressure in the near term after failing to move beyond key targets. The euro zone's blue-chip STOXX Europe 600 index fell 0.4 to 2,740.29 points after touching a horizontal resistance level at 2,750.

  " I expect some more setbacks for the index," Commerzbank technical analyst Sophia Wurm said. " An attempt to overcome the medium-term resistance zone of 2,800- 2,850 should not be on the technical agenda in the coming trading days."

  Stocker of UniCredit said that in the current environment, investors should buy stocks such as Swiss drugmaker Roche which have structural growth potential, adding he was " overweight" the healthcare, food and beverage, and personal household goods sectors for their positive growth momentum.

  Roche, up 0.6 percent, outperformed after beating first-half profit forecasts following strong sales.

  Miners were hit hard, with the STOXX Europe 600 basic resources index falling 1.9 percent on mounting worries about China following recent poor manufacturing data.

* Liberal Democrats push back, wary of Wall Street ties

  * Group of Senate Democrats throws support to Yellen

  * Sources see quiet proxy campaign on behalf of Summers

  * Obama said to see Summers' Wall Street ties as a strength

  By Pedro da Costa and Mark Felsenthal

  WASHINGTON, July 25 (Reuters) - President Barack Obama could be months away from announcing his pick to replace Ben Bernanke at the Federal Reserve, yet critics are already making an unusual public effort to stop one contender in the race - former U.S. Treasury Secretary Lawrence Summers.

  The outcry has come not from Republicans, but the left wing of the Democratic Party. Summers advised Obama, was treasury secretary under former President Bill Clinton, led Harvard University and was chief economist for the World Bank. He helped tame the Asian financial crisis that threatened to sweep the globe under Clinton.

  But liberals blame him for spearheading financial deregulation that they charge helped create the financial crisis, and say his work at hedge fund D.E. Shaw makes him the epitome of a revolving door between Wall Street and government.

  A representative for Summers, who writes an opinion column for Reuters, declined to comment for this article, as did the White House and the Fed.

  Some powerful Democrats, including former Treasury Secretary and one-time Citigroup executive Robert Rubin, have been speaking up behind the scenes for Summers, according to multiple sources with close ties to the Fed or the White House.

  If Obama tapped Summers, he would be picking him over the Fed's current vice chair, Janet Yellen, who is seen as the other main candidate for the job.

  Both Yellen and Summers would be expected to hew fairly close to the policy course set by Bernanke.

  Supporters of Summers argue he should have an edge given his crisis-management experience.

  " When there is consensus, who the Fed chair is hardly matters, and the times when it matters are the times when you have to think outside the box, and then his strengths shine," said Brad DeLong, a professor at the University of California, Berkeley, who worked with Summers in the Clinton Treasury Department.

  According to aides, Senate Democrats who oppose him have penned a letter urging Obama to choose Yellen, who has been a major force in the Fed's efforts to stimulate a sluggish U.S. recovery using unconventional monetary policies. Yellen would be the first woman to head the central bank.

  Democratic Senator Sherrod Brown of Ohio was circulating the letter, the aides said. It was unclear how many senators had signed it, but several Democrats have already spoken out in favor of Yellen and against Summers.

  " I am for Janet Yellen. I am taking that position," Democratic Senator Tom Harkin of Iowa told Reuters.

  A spokeswoman for Brown did not respond to emails requesting comment, and a Fed spokeswoman said Yellen declined to comment.

  Bernanke's second four-year term at the helm of the central bank expires on Jan. 31, 2014. While he has not discussed his plans, it is widely expected he will step down.

  Some critics of Summers wonder why Obama might turn down a woman for a man who has been accused of sexism. As president of Harvard, Summers sparked a firestorm by suggesting intrinsic aptitude might explain why relatively fewer women reach top academic positions in math and science - comments for which he later apologized.

  " The president's track record of appointing women is mediocre at best," Greg Valliere, chief political strategist at Potomac Research Group, said in a note to clients. " So there's a brilliant female candidate to replace Ben Bernanke she's highly respected within the Fed - and Obama is going to appoint someone who will never live down his comments that women lack the qualifications for some university jobs?"

  CONCERNS ON REGULATION

  When he served as Treasury chief under Clinton, Summers helped clinch the law that revoked the Depression-era Glass-Steagall Act, which separated investment banking activities from those of commercial, deposit-taking institutions.

  That opened the gate for commercial banks to get involved in riskier financial products, such as the credit default swaps that were at the heart of the 2007-2009 financial crisis.

  Moveon.org, a liberal group that provided major support to both Obama presidential campaigns, is circulating a petition entitled: " Don't let Larry Summers head the Fed," which accuses him of laying the groundwork for the deep U.S. recession.

  Senate Banking Committee member Jeff Merkley, a Democrat from Oregon, told Reuters he would find a nomination of Summers " disconcerting."

  " Many questions need to be asked and answered related to his philosophy of regulation and deregulation," he said.

  LEANING TOWARD SUMMERS?

  A person with close ties to the Obama administration said he had reason to believe the president was closely considering Summers, and perhaps even leaning toward him. The source said Obama would likely view Summers' ties to Wall Street and crisis-management experience as important attributes.

  At the same time, sources familiar with thinking inside the Fed say staff and some members of the central bank's board are concerned Summers' often blunt manner could be a detriment in shaping policy at the consensus-driven central bank.

  Those sources requested anonymity given the sensitive nature of the personnel discussions.

  Yellen has been the runaway favorite to replace Bernanke in media polls of financial market participants, but analysts say Summers has the advantage of a close relationship with Obama.

  He also has powerful supporters.

  " His allies have been ginning up support, making it clear that he's interested - and that's the kiss of death. If you want a major job in this town, you have to be coy," Valliere said.

  A person familiar with the nomination process said Obama had yet to make a decision. An announcement is not expected until the autumn.

* Nikkei should see support at 25-day moving average -
analysts
* Yahoo Japan, Advantest disappoint market
* CPI seen positive but failed to support decline

By Ayai Tomisawa
TOKYO, July 26 (Reuters) - Japan's Nikkei share average fell
to a two-week low on Friday morning, as selling accelerated on
the back of a firmer yen and disappointing quarterly earnings
from the likes of Canon Inc and Advantest Corp
.
The Nikkei fell 1.9 percent to 14,288.92 in
mid-morning trade after slipping to a low of 14,236.46 earlier,
the lowest level since July 9.
Analysts said that the Nikkei's immediate support is seen at
its 25-day moving average of 14,119.61.
The first-quarter earnings season is at its peak, with more
blue chips reporting their results next week. Analysts said that
investor sentiment has turned sour on the results after
companies like Canon and Shin-Etsu Chemical Co
disappointed the market on the previous day. Canon extended its
losses, down 1.9 percent.
On Friday, Yahoo Japan Corp fell as much as 5.7
percent after the company Posted worse-than-expected earnings.
Advantest tumbled 8.7 percent after reporting an operating
loss of 3.32 billion yen for the April-June quarter.
Exporters took a hit as the yen rose against the dollar,
with Toyota Motor Corp falling 2.0 percent, Sony Corp
dropping 1.8 percent and Honda Motor Co
shedding 2.1 percent.
Market players said that investors are reluctant to take
large positions for now.
" Trading may be led by futures as many investors are
reluctant to take positions in the cash market until they see
all the earnings outcomes," said Yutaka Miura, a senior
technical analyst at Mizuho Securities.
Investors will also watch to see whether the dollar holds
above 99 yen during the day, given a greater focus on dollar-yen
levels as exporters release their results. A weak yen lifts
exporters' competitiveness overseas as well as their profits
when repatriated.
" Since the weak yen has been a major factor to buy into the
Japanese market, exporters' first quarter earnings will likely
drive investor sentiment from now on in deciding whether they
want to buy more or retreat," said Hikaru Sato, senior technical
analyst at Daiwa Securities.
The dollar last traded at 99.25 yen.
The Topix dropped 1.7 percent to 1,181.34, with 32
of its 33 subsectors in negative territory.
Before the market opened, Japan's June core consumer price
index came in at 0.4 percent, just above forecasts for 0.3
percent.
Economists said the data was positive for the stock market
in the mid to long term.
" The rise in the CPI is mainly due to the weaker yen, which
is raising import costs, so it's too early to be overly
optimistic. But we can say that 'Abenomics' is very much in
play," said Nobuhiko Kuramochi, strategist and economist at
Mizuho Securities.
The Nikkei has dropped around 10 percent from the year's
peak at 15,942.60 hit on May 23, but it is up 38 percent this
year on the back of the weaker yen as Prime Minister Shinzo Abe
continues to drive an aggressive policy mix of fiscal and
monetary stimulus.

* Eighteen-day break gets Merkel away from scandals in Berlin

  * Signal to voters that there is no cause for concern

  * Low turnout on Sept. 22 likely to favour Merkel over rivals

  By Erik Kirschbaum

  BERLIN, July 25 (Reuters) - The German election is just eight weeks away, a clear victory is far from certain - and Chancellor Angela Merkel is taking a long holiday. What's more, voters and strategists alike think it's about the best thing she could do.

  For one thing, Germans take their holidays seriously and 85 percent tell pollsters they have no qualms about Merkel taking a break abroad, as millions of others do, after a busy year leading Europe's biggest economy through the euro zone crisis.

  But that doesn't mean there isn't also a strategy in spending 18 days on leave, some of it hiking with her husband in the Italian Alps.

  It elegantly gets Merkel away from Berlin as two potentially damaging affairs swirl around her government - over intrusive U.S. electronic surveillance, and the waste of 500 million euros ($660 million) on an arms procurement project that was scrapped.

  And it conveys a subtle message to voters ahead of the vote on Sept. 22.

  " Merkel is sending a signal that, hey, there's an election coming up but there's nothing to fear, everything's going to be fine and people should just relax," said Thomas Jaeger, a political scientist at Cologne University.

  " She really doesn't want to campaign at all," he added. " She knows if she disappears for a few weeks, there's less scope for anyone to attack her. She wants to lull the voters to sleep."

  Analysts say a low turnout benefits Merkel because her supporters are likely to vote even without big issues to galvanise them, although her Social Democrat challenger Peer Steinbrueck will aim to jolt his struggling campaign into life her absence.

  ELECTION? WHAT ELECTION?

  The latest weekly Forsa opinion poll gives Merkel's centre-right coalition a combined 46 percent, 12 points ahead of a centre-left SPD-Greens alliance led by Steinbrueck, and just enough for a mathematical majority. Other polls show a smaller centre-right lead, just short of a majority.

  " By going on holiday now, Merkel is acting as if there isn't even an election campaign going on," said Manfred Guellner, managing director of the pollsters Forsa, whose survey found overwhelming support for Merkel's long holiday.

  " Germans believe firmly in the summer holiday and most feel she has earned a break."

  And the public seem to back him up.

  " Everyone deserves a holiday, even the leader of the German government," said businessman Thomas Schenck, 53, after jogging through the Berlin government quarter.

  " Maybe it would be an issue if she went on holiday just a few days before the election," said Ronald Mettelstaedt, 63. " Merkel's going away now won't make any difference to anyone."

  Columnist Marek Dutschke wrote in the business daily Handelsblatt that Merkel had done her best to make this dullest election in decades.

  " You get the impression Merkel doesn't realise there's an election coming," he said. " Her holiday now is a bit of an act suggesting everything's fine. But everything's not fine. Three million children in Germany can't afford holidays and millions more are working in jobs that don't pay enough to survive." ($1 = 0.7555 euros) (Additional reporting by Marzanne van den Berg Editing by Kevin Liffey)

NEW YORK, July 25 (Reuters) - U.S. stocks fell at the open on Thursday, setting up the S& P 500 index for a third day of declines, as mixed earnings and concerns about China's economic slowdown weighed on investor sentiment.

  The Dow Jones industrial average dropped 47.15 points, or 0.30 percent, to 15,495.09. The Standard & Poor's 500 Index lost 3.98 points, or 0.24 percent, to 1,681.96. The Nasdaq Composite Index added 7.45 points, or 0.21 percent, to 3,587.05.

SANAA, July 25 (Reuters) - Tribesmen blew up impoverished Yemen's main oil export pipeline on Thursday, halting the flow of its main source of foreign currency, security and oil officials said.

  " The attack has stopped the flow of exports, but we have engineering teams fixing the damage now and we expect that it will be repaired by tomorrow," said an oil ministry official.

  The Arabian Peninsula state, which relies on crude exports to finance up to 70 percent of budget spending, has suffered frequent bombings of its main pipeline in the central Maarib province since an anti-government uprising broke out in 2011.

  Tribesmen often carry out such attacks to put pressure on the government to meet demands including jobs, land disputes or freeing relatives from prison.

  The last attack on the pipeline was on June 30, but it was repaired swiftly and crude was flowing again by July 3.

  A third of Yemen's 25 million people live on less than $2 a day and unemployment is estimated at around 35 percent, with youth joblessness at 60 percent.

  Yemen's stability is a priority for the United States and its Gulf Arab allies because of its strategic position next to oil exporter Saudi Arabia and shipping lanes, and because is home to one of al Qaeda's most active branches. (Reporting by Mohamad Ghobari Writing by Amena Bakr Editing by Kevin Liffey)

(Updates to close)

  SYDNEY, July 25 (Reuters) - Australian shares reversed early losses to finish the session flat on Thursday after a recovery in metals prices and a jump in the financial sector helped offset a retreat on Wall Street overnight.

  The S& P/ASX 200 index rose 0.5 points to 5,035.6. The benchmark rose 0.4 percent to end at a two-month closing high on Wednesday. New Zealand's benchmark NZX 50 index fell 0.5 percent or 22.4 points to finish the session at 4,576.8. (Reporting by Thuy Ong Editing by Jijo Jacob)

TOKYO, July 25 (Reuters) - The Nikkei share average fell for a second day on Thursday in volatile trade, as investors were disappointed with company results such as for blue-chip Canon Inc, which tumbled after slashing its profit outlook. The benchmark Nikkei fell 1.1 percent to 14,562.93, after rising as high as 14,748.77 at the open. The broader Topix dropped 1.4 percent to 1,202.32.

* Asian stocks, excluding Japan, slip from 7-week highs

  * Tokyo's Nikkei also in the red after subdued Wall St performance

  * Dollar dawdles after snapping a three-day slide

  * Lacklustre start seen for European stocks

  By Ian Chua

  SYDNEY, July 25 (Reuters) - Asian stocks slipped from seven-week highs on Thursday after Wall Street buckled under profit-taking pressure and as investors retreated to the sidelines with the earnings season heating up.

  But a dearth of market-moving news saw the dollar struggle to extend gains after snapping a three-day slide, while gold found a tentative footing following a 2 percent fall.

  MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.3 percent, having posted a seven-week closing high just a day earlier. Tokyo's Nikkei closed 1.1 percent lower at 14,562.9, continuing to find resistance ahead of the 15,000 mark.

  Financial bookmakers expect a subdued start for European stocks, although traders are hopeful that economic data will provide a catalyst for more gains.

  " A moderation in the Spanish unemployment rate and an increase in the German IFO Business Climate should keep the continent happy whilst closer to home the first reading for Q2 UK GDP is expected to confirm the bullish undercurrent," Jonathan Sudaria, a dealer at Capital Spreads in London wrote in a morning note.

  Investors were also waiting on key company results and outlooks before deciding on whether to jump back in.

  The earnings season has kicked off in earnest in major financial centres including Japan, Europe and the United States, keeping markets in check as investors gauge the business outlooks amid challenging global growth prospects, including a slowdown in China.

  The decline in Asian bourses came after the U.S. S& P 500 index shed 0.4 percent, a modest move and yet still the biggest fall in almost a month.

  Analysts said Wall Street was taking a breather as investors booked profits in a rally that has swept the index to a string of record highs.

  DOLLAR STRUGGLES

  Currency investors lacked the drive to do much in Asia with the dollar slipping 0.2 percent against a basket of major currencies, erasing some of the gains made on Wednesday.

  The dollar had ended a three-day fall after U.S. data showed a further recovery in the housing market and an acceleration in factory activity, supporting the Federal Reserve's view that the economy will continue to recover gradually..

  Treasury bond yields rose as a result, which in turn provided support for the greenback. But there was a clear lack of follow-through buying in Asia.

  " We're still in summer, relatively thin markets so I wouldn't expect the bounce (in the dollar) to be dramatic from here," said Callum Henderson, global head of FX research for Standard Chartered Bank.

  The dollar dipped back below 100 yen, off an early high of 100.45, while the euro edged up 0.1 percent to $1.3213 , recovering a bit of ground lost on Wednesday.

  Against the yen, the common currency gave back some of its overnight gains, easing to 132.09 from a two-month peak around 132.74.

  Investors had warmed to the common currency after closely watched surveys showed unexpected growth in euro zone factories, with Markit's flash Eurozone Composite PMI jumping to an 18-month high of 50.4 in July.

  Data later on Thursday is expected to show Britain's economy expanded at a faster pace in the second quarter, helped by growing confidence among consumers and by signs that companies are ready to borrow and spend more.

  A standout currency was the New Zealand dollar, which made a strong comeback after the country's central bank surprised some by sounding slightly hawkish, even as it pledged to leave the overnight cash rate (OCR) unchanged at a record low 2.5 percent until year end.

  " There was a clear tightening bias with acknowledgement that the removal of monetary policy stimulus will 'likely' be needed in the future," analysts at ANZ highlighted in a note.

  " We're still picking early 2014. The precise date is somewhat secondary with the real issue being at what pace and regularity the OCR ends up being lifted. We're in the gradual camp."

  The kiwi was last at $0.7995, well off a low of$0.7925 seen before the Reserve Bank of New Zealand rate decision.

  Doing less well, most commodities were under pressure given ongoing worries about a slowdown in China.

  Copper fell 0.4 percent to $7,023 a tonne, reversing all of Wednesday's 0.2 percent rise. U.S. crude slipped 0.4 percent to $105 a barrel, extending its pullback from a 16-month high of $109.32 set last Friday.

  " We think that China is going to continue to be under a bit of pressure and that could weigh on the base metals market a bit more," said Natalie Rampono, commodity strategist at Australia and New Zealand Banking Group.

  Spot gold, though, was steadier at $1,320 an ounce, following a 2.0 percent slide on Wednesday.

LONDON, July 25 (Reuters) - European stock index futures pointed to a steady open on Thursday, with investors focussed on digesting a swathe of earnings reports that were expected to provide direction to the market.

  At 0603 GMT, futures for Euro STOXX 50, for UK's FTSE 100, for Germany's DAX and for France's CAC were flat to 0.1 percent lower.

* HSI -0.3 pct, H-shares -0.1 pct, CSI300 +0.1 pct

  * Beijing's " mini stimulus" buoys railway, cement, steel sectors

  * A-share market weighed by planned $7.5 bln share placement

  By Clement Tan

  July 25 (Reuters) - Railway-related stocks outperformed in Hong Kong and China on Thursday after Beijing pledged more funding to support rail construction in a series of measured moves to stem the slowdown in the world's second-largest economy.

  Their gains stood out in a tepid market. The A-share market was further weighed by a planned $7.5 billion private share placement, raising concerns the largest equity offering in a year could put pressure on tight liquidity conditions.

  At midday, the Hang Seng Index was off 0.3 percent and the China Enterprises Index edged down 0.1 percent, both slipping after closing on Wednesday at their highest since early June.

  The CSI300 of the leading Shanghai and Shenzhen A-share listings was up 0.1 percent, while the Shanghai Composite Index slipped 0.1 percent in fairly weak bourse volumes.

  Index losses had briefly accelerated after the Chinese labour ministry warned the economy faces mounting employment pressures in the future.

  Beijing's war against industrial overcapacity was cited as a reason. These comments came a day after a private preliminary survey of manufacturing activity in the mainland showed employment at its weakest since March 2009.

  " I think you can expect more of these types of policy support from Beijing. They are making it clear they are serious about restructuring the economy, but I don't think we have tested their bottom limit for growth yet," said Cao Xuefeng, a Chengdu-based head of research for Huaxi Securities.

  On Thursday, Chinese railway counters rose for a third-straight day. China Railway Construction jumped 3.6 percent in Hong Kong to its highest since May 9, while its Shanghai listing jumped 5.1 percent and has now soared more than 13 percent this week.

  Building material counters were also stronger on hopes that railway construction will buoy physical demand. Anhui Conch Cement jumped nearly 4 percent each in Shanghai and Hong Kong. Angang Steel spiked 4.3 percent in Hong Kong and 3.3 percent in Shenzhen.

  China's support for the railway industry was part of series of targeted policy measures the country's cabinet announced late on Wednesday, which also included an elimination of taxes for small firms and more help from banks for exporters.

  Shares of China Rongsheng, the country's largest private shipbuilder which asked for financial help from Beijing last month, surged 6.3 percent in Hong Kong as investors rushed to cover short bets.

  The Chinese coal and banking sectors, which have broadly risen in the last month, were on the defensive and were key index drags in Hong Kong.

  Bank of China slipped 0.6 percent, while China Shenhua Energy shed 2.1 percent after both had closed on Tuesday at their highest since mid-June.

  Sino Pharmaceutical tumbled 4.2 percent to HK$5.54 after a major shareholder sold 100 million shares priced at HK$5.43 each, suggesting demand for the placement was relatively healthy.

  BOE Technology dived 6.3 percent in Shenzhen. IFR reported that the company plans to raise up to 46 billion yuan ($7.50 billion) from a private placement to not more than 10 institutional investors in what could become the largest equity offering in the A-share market in a year.

By Megha Rajagopalan

  JINAN, China (Reuters) - China charged disgraced senior politician Bo Xilai with bribery, abuse of power and corruption on Thursday, paving the way for a trial that is seen by many as a test for legal reform and President Xi Jinping's commitment to combat corruption.

  Prosecutors in the eastern city of Jinan in Shandong province indicted Bo, state news agency Xinhua said, meaning the trial will take place there.

  About two dozen uniformed and plainclothes police officers hovered around the gates of the main courthouse in Jinan, but there were no signs that the trial was imminent.

  Xi, who formally took power in March, will be eager to put the Bo scandal behind him and keep the party united as he embarks on an ambitious rebalancing of the world's second-largest economy and cracks down on corruption among senior officials.

  Bo's lawyers, Li Guifang and Wang Zhaofeng, did not answer calls to their mobile phones. Government and court officials in Jinan could not be reached for comment.

  Xinhua did not say when Bo's trial will start. But according to Chinese law, charges must be served to the defendant and his or her lawyers at least 10 days before a trial begins.

  Bo, as a civil servant, took advantage of his position to seek profits for others and accepted an " extremely large amount" of money and properties, Xinhua quoted the indictment paper as saying.

  Bo also embezzled a huge amount of public money and abused his power, seriously harming the interests of the state and people, the report said.

  Bo had committed serious crimes and will be indicted on the charges of bribery, embezzlement and power abuse, Xinhua quoted the indictment as saying. Bo had been informed of his legal rights and interviewed by prosecutors, it said.

  Bo has been accused of receiving more than 20 million yuan ($3.26 million) in bribes and embezzling another 5 million yuan, Hong Kong's South China Morning Post reported on Wednesday.

  After his appointment as party chief of the southern metropolis of Chongqing in 2007, Bo, a former commerce minister, turned it into a showcase of revolution-inspired " red" culture and his policies for egalitarian, state-led growth. He also won national attention with a crackdown on organised crime.

  His brash self-promotion irked some leaders. But his populist ways and crime clean-up were welcomed by many of Chongqing's 30 million residents, as well as others who hoped that Bo could take his leftist-shaded policies nationwide.

  Bo's likely trial could renew the debate. However, China's party-run courts rarely find in favour of defendants, especially in politically-sensitive cases.

  Nevertheless, China's censors appear to have temporarily lifted the ban on Bo's name on the country's Twitter-like microblogs. Searches for his name were blocked earlier in the week, as hey had been for many months.

  Bo's wife, Gu Kailai, and his former police chief, Wang Lijun, have both been jailed over the scandal stemming from the murder of British businessman Neil Heywood.

  The government in September last year accused Bo of corruption and of bending the law to hush up that murder.

  (Additional reporting by Sui-Lee Wee, Hui Li and Ben Blanchard, Writing by Sui-Lee Wee)

(Adds further comments from ministry, background)

  BEIJING, July 25 (Reuters) - There will be a lot pressure on employment in China in coming months, the labour ministry said on Thursday, highlighting a major challenge facing Beijing as it tries to wean the economy off its export dependency without disrupting social stability.

  China's leaders are forging ahead with plans to turn the economy into one led by domestic consumption and demand from a traditional focus on manufacturing and exports, raising the possibility of job losses as traditional industries restructure.

  The government is trying to tackle overcapacity in some industries and is looking to a developing services industry to absorb surplus workers, a transition the labour ministry acknowledged could be painful.

  " China faces quite heavy employment tasks in the following months and the pressure over employment will be very big," Yin Chengji, spokesman for the Ministry of Human Resources and Social Security, told a media briefing.

  " The service industry plays an important role in absorbing labour, especially for those emerging services industry and network services."

  Failure to keep Chinese in jobs could threaten the social stability and economic prosperity that the Communist Party says justifies its one-party rule. Premier Li Keqiang has talked about the government safeguarding the lower limits of growth and employment, although he has not specified what the limits are.

  " If the job market appears in an obvious bad trend, we will probably take some targeted measures to resolve employment problems," Yin said, though he did not give details.

  On Wednesday, the government scrapped some taxes for small business, which state radio said employed " tens of million of workers" , as well as offering measures to help exporters.

  China added 7.25 million jobs in the first half of this year, slightly higher than the number created in the same period a year earlier, the ministry said last week.

  However, Wednesday's flash HSBC/Markit Purchasing Managers' Index survey showed China's job market weakened further in July as the employment sub-index slid to the lowest level in more than four years.

  Economic growth slowed to 7.5 percent in the second quarter, and economists say China's leaders believe annual growth of 7 percent is needed to create enough jobs to maintain social stability, although the top leaders have never specified a figure.

  The ministry said employment in the second quarter was generally stable, and that it was making a priority of creating job opportunities for graduates.

  It added that the unemployment rate in the second quarter was 4.1 percent, the same as in the first quarter. (Reporting by Xiaoyi Shao and Jonathan Standing Editing by John Mair)

July 24 (Reuters) - Hong Kong's Hang Seng Index eked out a fourth day of gains in weak Wednesday trade, buoyed by a firmer European open and as larger Chinese lenders reversed early losses.

  The Hang Seng Index ended up 0.2 percent at 21,968.9 points, while the China Enterprises Index of the top Chinese listings finished flat. Hong Kong bourse turnover sank 26 percent from Tuesday's two-week high.

  Markets were earlier set back after China's flash HSBC/Markit Purchasing Managers' Index fell to 47.7 this month from June's final reading of 48.2 as new orders faltered and a sub-index measuring employment sank to its weakest since March 2009.

By Julien Toyer

  MADRID (Reuters) - Like the coming of the messiah, depressed southern Europe nations await Angela Merkel's likely victory in Germany's September election with a mixture of hope and trepidation.

  Four years into the euro zone debt crisis, people in debt-laden Spain, Italy, Greece, Portugal and Cyprus are deeply worried that a third term in power for the conservative chancellor may only bring them more austerity and pain.

  The five countries that implemented Merkel's anti-crisis recipes and cut spending massively in areas such as health and education, have been in or close to recession since 2008. Unemployment tops 27 percent in Spain and Greece.

  Their leaders, however, disagree. Confident that Merkel will tone down her budget cutting mantra and accept more burden-sharing within the euro zone, they are positioning themselves as close allies of Europe's main paymaster.

  " I think we will see a different Mrs Merkel after the elections," said Cypriot President Nicos Anastasiades, echoing a view shared by most of his fellow southern European leaders.

  In Greece, where crunch time for plugging a budget gap with a third bailout of the country starts at the end of September, hopes are high that debt issues can finally be sorted out after the German election, maybe through a new debt write-off.

  In Italy and Portugal, where austerity has not yielded many positive results, policymakers believe Merkel will accept a more balanced model for managing the economic crisis if she wins.

  In Spain, where banks were rescued with 42 billion euros of European money, expectations are that the chancellor will lean towards common euro zone debt issuance and accept a full-fledged banking union, unlocking credit in the recession-hit nation.

  WISHFUL THINKING?

  While market turmoil has eased in the euro zone and last year's massive capital outflows from southern Europe to safe-haven Germany have started to reverse, more needs to be done.

  The correction pace of imbalances in the European Central Bank's Target 2 cross-border payments system, a key indicator of financial stress within the single currency zone used by ECB President Mario Draghi to monitor monetary policy, remain slow.

  Continued German support will be key to keep the fever down.

  Senior government sources in these countries insist Merkel has signalled flexibility on these issues in recent private talks. But she has given no public indication of such a U-turn and many in Berlin caution it is highly unlikely to happen, warning against wishful thinking.

  " Many people are waiting for the elections then hope, expect ... a change in the German position. This is not what I would expect," German European Central Bank executive board member Joerg Asmussen told Reuters in an interview this month.

  Noting that other countries such as the Netherlands, Finland, Slovakia and Estonia shared Berlin's doubts, he said: " It's easy to hide behind Germany... It's a group of countries, it's not only Germany."

  What's more, a good part of Merkel's post-election crisis response will depend on which party she needs to team up with to secure a majority.

  PARTNERS

  Anastasiades, Portugal's Pedro Passos Coelho, Italy's Enrico Letta, Spain's Mariano Rajoy and Greece's Antonis Samaras share a common appetite for closing ranks behind Merkel as she tops the polls 60 days to the vote.

  Earlier this month, they flocked to Berlin to cheer her at a summit on youth unemployment in Europe which many saw as a mere political show for her campaign.

  Centre-right governments in Spain, Portugal, Greece and Cyprus hope to bank on a new political landscape in the European Union after the departure of France's Nicolas Sarkozy and Italy's Mario Monti, Merkel's closest allies in the continent.

  New French President Francois Hollande and Italian Prime Minister Letta, both from the centre-left political family, while working on their relations with Merkel do not enjoy the close ties of their predecessors.

  " Hollande will always be there of course but Germany needs a very strong ally in the south and that should be us," said a senior Spanish government source who talked to Reuters on condition of anonymity. " No effort should be spared in gaining this place we already enjoyed in the nineties."

  Rajoy is not alone in pushing this line. Samaras, Passos Coelho and Anastasiades are also jockeying for a " special relationship" with Merkel which they say will help secure their countries better bailout deals.

  Although results have been limited, they intend sticking to their game plan after the September 22 elections.

  " Irrespective of how harsh she was towards us, she is a capable leader both of Germany and of Europe," Anastasiades said, adding that Merkel's leadership was behind recent successes by the euro zone in tackling the debt crisis.

  " NAZI, NAZI"

  But while politicians, businessmen and bankers are convinced different winds are blowing in Berlin, ordinary citizens have yet to be persuaded.

  The efforts deployed by Merkel and her finance minister Wolfgang Schauble to support governments in the struggling countries and restore Germany's damaged public image have had little or no effect so far.

  The dominant feeling remains that Germany was too slow to respond to the debt crisis and when it did, it pursued only national objectives such as indirectly bailing out its banks exposed to southern Europe, and shielding its own taxpayers.

  An anti-Merkel sentiment has grown in these nations as she imposed unpopular austerity policies in return for financial support, adding to historical animosity towards Germany dating back from World War Two.

  " I just hope it's not true that treating us badly makes her more popular in Germany," said Teresa Reis, a technology student in Lisbon. " That would mean something is seriously wrong with Germany and Europe. But anyway, we all need better leaders and I hope Germany gets one too."

  The tune is the same in Athens where, on the occasion of Schauble's visit last week, a group of women unfolded Greek flags and chanted " Nazi, Nazi" outside the finance ministry.

  One of the protesters, 34-year old Efi Anestopoulou who has been unemployed since the crisis began, told Reuters: " I've been unemployed for three years and my pockets are empty. I don't even have money to buy food.

  " I didn't rob anyone, I didn't steal any money to deserve this... It's our politicians who don't want us to revolt against the German visitor," she said in a trembling voice, showing her empty pockets to a policeman trying to disperse the small group.

  (Additional reporting by Renee Maltezou in Athens, Michele Kambas in Nicosia, Andrei Khalip in Lisbon and Naomi O'Leary in Rome Editing by Paul Taylor)

(Repeats with no changes to text)

  * Rap, graffiti helped inspire protests vs Mubarak, Mursi

  * Artists now say edgy art less fit for divided country

  By Tom Finn and Noah Browning

  CAIRO, July 24 (Reuters) - Egyptian rappers and graffiti artists who captured the spirit of the youthful rebellion that toppled president Hosni Mubarak are toning down their outrage as the path to democracy has become more complicated.

  Three weeks since the military ousted Mubarak's elected successor, the Islamist Mohamed Mursi, street artists who want neither religious nor military rule see little place in today's exhausted Egypt for their once defiant world view.

  " Emotions are high. The country is divided...it's too soon," said Cairo rapper Mohammed al-Deeb whose lyrics once tapped into growing discontent with life under Mursi's Muslim Brotherhood.

  Last year, al-Deeb rapped: " Trials slowing down, corruption is rampant, it stinks like armpits, the police execute orders like Robocop."

  Now that the Brotherhood is out of power and its supporters hold massive sit-ins and rallies that have repeatedly led to deadly clashes with the military and with other Egyptians, his hopes for peace have muted the raps that once aimed to provoke.

  " We still don't know where this is headed. The army is in power. We have a temporary president. We have to put our revolutionary feelings away, at least for now," he said.

  Sculptor Alaa Abdel Hameed, 27, has stopped a provocative art project he began last month: gluing onto street walls brightly coloured plaques of the eagle from the armed forces' insignia, upside down.

  After the military toppled Mursi on July 3, many of the eagles were ripped off by passers-by who chastised him for insulting the symbol of those they see as the nation's saviours.

  Abdel Hameed relented, telling detractors: " If you don't like it, you can take them down."

  " Now is not the right moment to direct our message at the army or any one party, because we don't think average people are on one side or the other," he told Reuters.

  Art against the army, left over from the 16 months of military rule following Mubarak's fall in 2011, has mostly been defaced.

  Only in a few forlorn alleys can you still see sprayed slogans such as: " Down with the field marshal!" - referring to Hussein Tantawi, the army chief who ruled Egypt immediately after Mubarak's ouster.

  " WHO AM I WITH?"

  The demonstrations that led to the toppling of Mubarak were accompanied by an explosion of daring new art that challenged the norms of a conservative Arab country.

  But paintings of martyred youths and grimacing leaders fading on Cairo's walls are now relics of past upheaval, no longer rallying cries for action.

  Walking Cairo's streets with a paint spattered satchel and matching bright green shirt and shoes, graffiti artist Ammar Abo Bakr said it was now time for more reflection.

  " We already lived through the bloodiest days and painted martyrs covered in flowers," he said.

  " It's not time to say the things we've said before. We've passed this period of suffering. It's time for dialogue and to preserve Egyptian identity, not just talk politics," he said.

  Abo Bakr is sceptical about the June 30 demonstrations which toppled the Islamist president, seeing them as a settling of old scores between remnants of Mubarak's government and Mursi's Muslim Brotherhood. Still, he insists it was no coup.

  His latest work, by a parking garage, is a mural in shades of soft sky blue depicting an Egyptian woman wearing an elaborate beaded necklace, her face painted in shimmering gold like the Pharaonic-era statues of queens and goddesses.

  Abo Bakr said his work reaffirmed Egyptians' continuity with an ancient past spurned by the Islamists.

  Ahmed Nagy, 27, from the poor Cairo suburb of Giza, started rapping and writing poetry after a friend was shot by police during anti-government protests in 2011.

  His lyrics from the time evoked the pain of his loss and the unfairness of poverty. He says the protests that toppled Mubarak made him feel fulfilled as a citizen and as a person for the first time.

  These days, though, he's wary of backing any side and keeps politics out of his rhymes.

  " I'm not with the Salafists, I'm not with the liberals or the army, so who am I with?" he said. " The people don't want a military dictatorship or rule by Islamic fascists."

  But the sense of caution felt by many street artists may border on self-censorship.

  Graffiti artist Omar " Picasso" Fathy created a well-known piece near the Ittihadiya presidential palace depicting the faces of ousted rulers Mubarak, Field Marshal Tantawi and Mursi, one behind the other in a series.

  It ended with a white question mark in a black-silhouetted face wearing an army beret, suggesting that the military would seize power next.

  But he later revised the mural, smoothing away the beret.

  " I didn't want to ruin the happiness of the people around Ittihadiya, who at that time wouldn't understand my point of view," Picasso wrote on Facebook.

  " But I'm still convinced of what was in the (original) picture ... Maybe I'm wrong. I hope I am." (Editing by Crispian Balmer and Robin Pomeroy)

PARIS, July 24 (Reuters) - European stock index futures pointed to a slightly higher open on Wednesday, after strong results from Apple and as investors bet European manufacturing and services PMI surveys due in the morning will show a slight improvement.

  At 0602 GMT, futures for Euro STOXX 50, for the UK's FTSE 100, for Germany's DAX and for France's CAC were flat to up 0.2 percent.

BANGKOK, July 24 (Reuters) - Most Southeast Asian stocks
were weaker-to-flat on Wednesday, retreating from the previous
session's rally as investors turned cautious over the global
outlook after a weak reading of China July flash HSBC
Manufacturing PMI.
Jakarta's Composite Index eased 0.3 percent,
Bangkok's main SET index was a tad higher at midday and
Vietnam's benchmark index fell 1.3 percent. Singapore
edged up 0.3 percent and Malaysia was up 0.2
percent.
The Philippine index bucked the trend, gaining almost
1 percent to around a six-week high of 6,793.92. Among gainers,
Alliance Global Group Inc jumped 3.3 percent amid
optimism about an expansion plan for its hotel joint
venture.
Southeast Asian firms saw a mixed performance in the
reporting season. Indonesia's PT Bank Tabungan Negara
slid 4 percent after reporting lower first-half results.

Singapore's CapitaMalls Asia Ltd gained 3.1
percent after reporting a 41 percent jump in quarterly operating
profit, while profit-taking hit Bangkok Bank Pcl
following Tuesday's 1.9 percent rise after it reported strong
quarterly earnings.
Traders said last week's downgrade of Thailand's 2013 GDP
forecast to 4.2 percent by the Bank of Thailand dented earnings
outlook for the second half, mainly on sectors related to
domestic growth such as bank and property.
KGI Securities expects a volatile session with the main
index moving close to its short-term target of 1,520 to 1,530.
The SET was at 1,514.79 at midday.
" While the market has the rising momentum we would say that
earnings of major sectors are unexciting in the second quarter
and small caps are set to perform better," strategist Rakpong
Chaisuparakul wrote in a report.
Thai stocks and others in Southeast Asia had rebounded from
their lows in late June as foreign investors accumulated shares
again amid hopes about monetary stimulus in the United States.


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SOUTHEAST ASIAN STOCK MARKETS
Change at 0554 GMT
Market Current Prev Close Pct Move
TR SE Asia Index* 439.55 439.29 +0.06
Singapore 3262.80 3253.76 +0.28
Kuala Lumpur 1808.20 1805.31 +0.16
Bangkok 1514.79 1513.31 +0.10
Jakarta 4752.02 4767.16 -0.32
Manila 6793.92 6743.21 +0.75
Ho Chi Minh 498.01 504.29 -1.25