By Fredrik Dahl

  VIENNA (Reuters) - The International Atomic Energy Agency is " increasingly concerned" about possible activity in Iran to develop a nuclear payload for a missile, the IAEA said in a confidential report obtained by Reuters on Friday.

  The U.N. nuclear agency's report said it continued to receive new information adding to such worries.

  The IAEA's information had come from many states and also through its own efforts, and was " broadly consistent and credible in terms of technical detail, the time frame in which the activities were conducted and the people and organisations involved."

  The developments highlighted in the IAEA's latest quarterly inspection report are likely to fan Western suspicions about the underlying nature of Iran's nuclear activity, which Western powers suspect is aimed at developing atom bombs.

  It could provide additional arguments for the United States and its European allies to further tighten sanctions pressure on Iran, one of the world's largest oil producers.

  The IAEA used " stark language" to show its concerns about possible military links to Iran's nuclear programme, a U.S.-based think-tank, the Institute for Science and International Security, said in a commentary.

  Iran's envoy to the IAEA, Ali Asghar Soltanieh, dismissed what he called " baseless allegations" about Iran's programme.

  But he nevertheless described the report as a step in the right direction, saying it showed that Iran had fully cooperated with the IAEA by allowing a senior nuclear inspector full access to atomic sites during a five-day visit last month.

  " This new trend of positive cooperation between Iran and the IAEA should continue," Soltanieh told Reuters.

  Western diplomats have dismissed Iran's attempt to show increased openness about its nuclear work, saying it is still failing to address core concerns about its aims.

  In addition to addressing the issue of alleged military dimensions to Iran's nuclear programme, the U.N. agency said Tehran had begun installing machines for higher-grade uranium enrichment in an underground bunker near the holy city of Qom.

  Shifting enrichment activity to such a subterranean site could offer greater protection against any attacks by Israel or the United States, which have both said they do not rule out pre-emptive strikes to stop Iran getting nuclear weapons.

  At a separate research and development site, the Vienna-based IAEA said, Iran had started enriching uranium experimentally with a more advanced model of centrifuge than the erratic, 1970s vintage machine it has been using for years.

  NUCLEAR MISSILE WORK?

  " Iran has made progress on the enrichment side," a diplomat familiar with the IAEA's investigation said, adding the Islamic state was making a " lot of effort" to get the underground Fordow site up and running.

  Uranium enriched to a low level of fissile purity is suitable for running civilian nuclear power plants. If refined to a much higher degree, it forms the core of nuclear bombs.

  The report showed that Iran has now produced a total of more than 4.5 tonnes of low-enriched uranium since the activity began in 2007, an amount which experts say could provide material for at least two bombs if refined much more. Its output of higher-grade refined uranium had also risen.

  For several years, the IAEA has been investigating Western intelligence reports indicating Iran has coordinated efforts to process uranium, test explosives at high altitude and revamp a ballistic missile cone to accommodate a nuclear warhead.

  The IAEA, tasked with ensuring that nuclear technology is not diverted for military aims, says Iran has not engaged with the agency in substance on these issues since 2008.

  The IAEA report said it was " increasingly concerned about the possible existence in Iran of past or current undisclosed nuclear-related activities involving military-related organizations, including activities related to the development of a nuclear payload for a missile, about which the agency continues to receive new information."

  Iran denies harbouring any nuclear weapon ambitions, saying it wants to refine uranium only for electricity or isotopes for medicine and agriculture. But it has long restricted the access of IAEA inspectors, stoking concerns abroad.

  " I categorically reject this sort of allegation. I'm 100 percent sure (about Iran's) exclusively peaceful activities," Soltanieh said.

By Jeremy Laurence

  WONJONG BORDER POST, North Korea (Reuters) - Impoverished North Korea appears to have emerged from the depths of a bad winter and late spring in reasonable shape, at least in the far north and south, where a variety of crops are nearly ready for harvest.

  The North has pleaded for food aid this year due to bad weather and the impact of international sanctions imposed for its nuclear programme, winning donations in recent months from Russia, the European Union and U.N. organisations after sending in their own assessment teams.

  But South Korea and the United States have so far refused food aid, granting only emergency aid to help the impoverished state deal with flood damage from a series of bad storms in the middle of the year.

  Washington says it is still assessing the North's requests, while Seoul says it doubts Pyongyang's pleas are genuine. Until the imposition of sanctions, the two had been the biggest aid donors to the North, which has suffered chronic food shortages for years.

  During a five-day trip which started near the China-Russia border and ended at the South Korean border, foreign journalists saw that fields in the respective Rason and Kumgang zones were lush with crops, sometimes stretching over many acres.

  " We had bad winter, and late spring, but the crops look good now," said a North Korean guide who escorted a group of foreign journalists on a rare trip through the areas this week. The harvest is due in October.

  From the North Korean border post of Wonjong to the port of Sonbong, about 70 km (43 miles) away, the area had many fields of corn and rice. Maize was growing over a metre high in small plots around many of the small bungalow style houses in village compounds while communal rice fields sometimes stretched for acres.

  Soybeans and potatoes are also grown in the area, the North Korean guide said. There was little livestock, but some healthy-looking cows were seen grazing. Three people were seen riding horses.

  Western journalists have not been taken to the area before, at least in recent memory. Pyongyang, with China's backing, has this year broken ground on new infrastructure projects in the zone as it attempts to woo foreign investors to generate hard currency for the state's flailing economy.

  KUMGANG THRIVES

  In another special 'international' zone with more market-oriented rules, the resort of Kumgang which was built with South Korean capital, the area was lush with the same crops, as well as barley and cabbage. There were also some orchards, along green houses with vegetables.

  Men, women and children were working in the fields, along with a couple of ox-drawn ploughs.

  But, not one item of mechanised farm equipment was seen during the entire trip.

  An Australian tourist, who travelled in the centre of the country, driving two hours north of Pyongyang and five hours from the capital to the South Korean border, said he had seen acres and acres of crops ready for harvest.

  " I don't know about the politics of it all, but what I saw was plenty of crops that looked really good," said 51-year-old Max Ward, touring the country for a week with a friend.

  " And the kids all seemed happy and they certainly didn't look like they were starving. Sure, there is poverty, but no more than any other third world country."

  A resident of the Rason area, who cannot be identified, said adults were entitled to 700 grams (1.54 pounds) of rice per day and children 300 grams under the socialist state's public distribution system.

  " Everyone uses the market to buy everything," he said. " This is allowed because we are in the Rason Special Economic Zone."

  The marketplace was a hive of activity when foreign journalists were shown around the complex which was the size of about four football fields. Bags of rice and other grains as well as meats and cooked foods were also for sale.

  But trading was not just restricted to the market. Vendors were sold juice and watermelon throughout the town.

  At the beach front, a few dozen people were seen having a picnic, and about a dozen people were swimming in the sea.

  Outside a tourist office in the town, a vendor was even selling ice-cream. Despite pleas for food aid, reclusive North Korea observes of policy of juche, or isolation, saying it can stand on its own without any outside help.

By Edward Krudy

  NEW YORK, Sept 2 (Reuters) - Friday's jobs report that showed hiring in the United States unexpectedly ground to a halt in August is increasing speculation the U.S. Federal Reserve will move to stimulate the economy. But will it help stocks?

  Fed action -- if it happens -- is no longer viewed as the elixir for the stock market it once was.

  Wall Street tumbled over 2 percent on Friday as investors fretted more about the economic outlook rather than looking ahead to another round of Fed bond buying.

  Next week, the question of whether the Fed will step up to the plate with another round of quantitative easing will take center stage with a highly anticipated speech from President Barack Obama. That could make for another volatile week.

  This time last year, anticipation of a second round of quantitative easing, or QE2, sparked an almost uninterrupted rally that lifted the S& P 500 around 30 percent from August to May.

  What a difference a year makes. Confidence in policy makers is sapping away as the economy languishes, the United States grapples with the loss of its top-notch credit rating, and the European Union seems to be coming undone at the seams.

  Wall Street sees an 80 percent chance the Federal Reserve will intervene in the bond market to lower long-term interest rates, according to a Reuters poll on Friday.

  But Friday's action in the stock market signaled that equity investors do not see that prospect as silver bullet for their woes. The broad-based S& P 500 index fell 2.5 percent on the day.

  " This downdraft is based on sentiment and that has to be turned around," said Brian Battle, vice president of trading at Performance Trust Capital Partners in Chicago. " I think we're in for a longer trend of either malaise or just a down channel."

  That means traders and investors who were hoping for a return to normalcy after extreme volatility in August may have to wait a little longer.

  Obama is due to address a joint session of Congress on Thursday to lay out plans to create jobs, boost economic growth and lower the deficit.

  He faces an uphill struggle when it come to reassuring investors, who fault the lack of consensus in Washington. Heading into an election year, the disharmony is not likely to get better any time soon.

  Nonfarm payrolls were unchanged last month, the Labor Department said on Friday, and figures for previous months were also revised down to show employers created a combined 58,000 fewer jobs than had been thought in June and July.

  The U.S. Treasury market rallied after the data as Goldman Sachs and other U.S. primary dealers -- big Wall Street firms that do business directly with the Fed -- said they expect the U.S. central bank to start buying longer-dated bonds after its Sept. 20-21 meeting.

  Seasoned traders say that August's extreme volatility was one of the most trying periods in living memory, outstripping the 2008-2009 meltdown and the 1987 stock market crash on Black Monday.

  " I've been doing this for 20 years and it's never been more exhausting," said the chief executive of a New York-based proprietary trading firm, who said many of his traders closed out their positions in August, reducing the firm's inventories to just 15 to 20 percent of what they could be.

  At least some of that volatility looks set to spill over into September until there is more clarity over the economy and what the Fed is likely to do at its Sept. 20-21 meeting.

  But some fund managers who take a more long-term view are using pullbacks to cut back positions that have done less well while increasing positions in their preferred stocks.

  Many fund managers are still convinced the U.S. economy will avoid a recession and stocks will rally into the end of the year.

  One of them, Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia, does not expect the Fed to act this month. He is not expecting a recession, but admits he has become more defensive.

  " We used some of the volatility to swap out lower yields for higher yields, believing that a combination of income with capital growth potential will help us weather days like today," he said. " Equity values should still hold their own if not appreciate given the still-good corporate profit picture."

  (Wall St Week Ahead runs every Sunday. Questions or comments on this column can be e-mailed to: edward.krudy(at)thomsonreuters.com) (Reporting by Edward

* U.S. nonfarm payrolls show no growth, worst in a year

  * U.S. Gulf of Mexico braces for a tropical storm

  * Brent-U.S. spread reaches new record

  * EU sanctions Syrian oil, lifts Libya bans

  * Economists say odds increase for more U.S. Fed stimulus

  (Adds settlement prices and details)

  By Joshua Schneyer

  NEW YORK, Sept 2 (Reuters) - Oil fell on Friday as stalled U.S. job growth in August rekindled worries of another will be recession, which would slow fuel demand.

  Pressure from the jobs data more than offset support from oil companies shutting down nearly half of the crude production in the U.S. Gulf of Mexico ahead of Tropical Storm Lee.

  U.S. nonfarm payrolls were unchanged last month, the Labor Department said on Friday. The weakest job reading in a year bucked economists' expectations for a gain of 75,000 jobs.

  Brent fell by $1.96 a barrel to settle at $112.33. U.S. crude was down $2.90 at $86.03. U.S. crude fell $2.48 a barrel to settle at $86.45 a barrel, in trading volume around 37 percent below the 30-day average.

  U.S. financial markets will close on Monday for Labor Day, although electronic trading will remain active.

  Stunted jobs growth would weigh on fuel demand, but it may also raise the odds of more quantitative easing (QE) from by the U.S. Federal Reserve. That could cheapen borrowing, weaken the dollar, and encourage investment in commodities as an asset class.

  " The (jobs) data reinforces our concern that the U.S. economy has stalled, and we think there is a 60 percent chance it will fall into recession by the end of the year or at the start of next year," said Rachel Ziemba at Roubini Global Economics in London.

  " We think QE3 is coming," she said.

  The August U.S. jobs data will be " likely enough to spur Fed easing action at the September meeting," Goldman Sachs economists wrote in a note.

  The Fed may extend the maturity of its Treasuries holdings after a policy meeting slated for Sept. 20-21, they added.

  BRENT-WTI SPREAD WIDENS

  The spread between Europe's benchmark crude and U.S. crude surged to as much as $26.98 a barrel, a new record.

  European Union governments agreed to ban imports of oil from Syria, which typically ships 150,000 barrels per day.

  The EU also lifted sanctions on Libyan ports and oil firms, but few expect the country's normal oil production -- around 1.6 million bpd -- to be restored soon, after a civil war halted its oil sector this year.

  The newly-appointed chairman of Libya's National Oil Corporation expressed optimism this week that full production could be restored within 15 months.

  Oil also followed equities markets lower, as the S& P 500 index shed 2.5 percent. Copper, another economic bellwether, fell 0.6 percent in London. Gold, a perceived safe haven bet, jumped nearly 3 percent to a 1-1/2 week high.

  STORM RISK

  Friday's oil losses wiped out part of U.S. crude's 4.1 percent gain in the week through Thursday, when it had settled at a one-month high, in part due to a tropical storm threat in the U.S. Gulf of Mexico.

  Oil companies shut in 666,321 barrels of crude production in the U.S. Gulf of Mexico on Friday, or 48 percent of the region's output, as they braced for Tropical Storm Lee.

  The weather cycle is moving towards Louisiana and has forced wide evacuations of offshore oil platforms.

  BP Plc, the largest oil producer in the Gulf, evacuated all personnel from its platforms in the region. Refiners on the Gulf Coast said they were getting ready for up to 15 inches (38 cm) of rain in the next 48 hours.

  " The fact that this storm isn't very supportive (for U.S. crude prices) shows you that the U.S. is well supplied," said Richard Ilczyszyn at MF Global in Chicago.

  Speculators hiked their bets on rising U.S. crude oil prices in the week to Aug. 30, raising their net longs futures and options positions by the largest percentage amount since June, the U.S. Commodity Futures Trading Commission said.

  Hedge funds and other large investors increased their net longs on the New York Mercantile Exchange by 18,422 or 12 percent to 161,617.

* Treasuries surge long US bond yields at Feb 2009 lows

  * Swiss franc, gold also up on flight to safety

  * Stocks dive after Aug U.S. jobs show no growth from July (Updates with Wall Street's close)

  By Barani Krishnan

  NEW YORK, Sept 2 (Reuters) - Paralysis in the U.S. jobs market reinforced fears of recession on Friday, driving investors out of stocks and into the safety of bonds, gold and the Swiss franc.

  Stocks on Wall Street and other major exchanges closed down more than 2 percent after the U.S. Labor Department said employers added no net new jobs last month and July's total was revised lower.

  The biggest reaction came in the U.S. Treasuries market, where the yield on the 30-year bond hit two-and-a-half-year lows on growing bets the dismal data will compel the Federal Reserve to take additional steps to boost the economy.

  After a treacherous August of out-sized market volatility, the jobs report fed worries that September could bring more of the same, especially if economic data rekindles fear of another recession.

  " There are a lot of confidence issues in the marketplace the jobs number only made things worse," said Sal Arnuk, co-manager of trading at Themis Trading in Chatham, New Jersey. " My only question is 'Why the market isn't down more?'"

  U.S. equities suffered their biggest drop in two weeks.

  The Dow Jones industrial average closed down 253.31 points, or 2.20 percent, at 11,240.26. The Standard & Poor's 500 Index was down 30.45 points, or 2.53 percent, at 1,173.97. The Nasdaq Composite Index was down 66.71 points, or 2.58 percent, at 2,480.33.

  The MSCI world equity index fell 2.3 percent while European stocks slid 2.5 percent. Emerging stocks dropped by 1.6 percent.

  President Barack Obama, in a speech set for Sept. 8, will unveil a jobs program he hopes will provide " meaningful" tax relief and help the nation's long-term unemployed, a top aide told Reuters Insider.

  Some think stocks will suffer from anemic jobs growth, at least for a while.

  " What the market is looking for this time, realizing that unemployment is a barrier, and until the federal government wakes up and realizes what the restraints are and designs a program attacking restraints, it's not going to make much progress," said Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.

  Benchmark 10-year Treasury notes were up 35/32 in price, with the yield at 1.9961 percent, down more than 8 basis points on the day.

  The 10-year yield is within striking distance of 1.976 percent, an intraday low set in mid-August, according to Tradeweb, and a level not seen in at least 60 years.

  In Treasury Inflation Protected Securities trading, the yield on 10-year TIPS touched minus 0.02 percent, down 7 basis points from late Thursday. This signaled that traders have slashed their expectations for long-term U.S. economic growth and inflation.

  There is now a growing expectation the Federal Open Market Committee will extend the maturity of its $1.65 trillion Treasuries holdings at its Sept. 20-21 policy meeting.

  The intended effect would be to push rates lower throughout the economy in an attempt to ignite consumer demand.

  " This (jobs) report will certainly strengthen the case for the doves on the committee going into the next meeting later this month," said Millan Mulraine, senior U.S. macro strategist with TD Securities in New York.

  In a research note, Goldman Sachs economists said they expect the Fed will announce plans to lengthen the average maturity of its portfolio, " with sales of relatively short-dated Treasuries and purchases of relatively long-dated Treasuries."

  The 30-year Treasury bond soared more than three points in price. Yields dropped to 3.32 percent, the lowest since Jan. 2009.

  Bund futures rose 1.2 percent, hitting a record high on safe-haven demand.

  In currency trading, the Swiss franc was up nearly 1 percent at 0.7898 to the dollar after hitting session highs at 0.7959.

  The euro was near $1.419, having hit a three-week low of $1.418 earlier on confirmation that Greece will miss its 2011 deficit target of 7.6 percent and uncertainty over Italy's commitment to austerity measures.

  Benchmark U.S. gold futuressettled up 2.6 percent, just shy of $1,877 an ounce after peaking at $1,885 during the session.

  Crude oil in New York finished down 2.8 percent at below $87 a barrel, after slipping to a session low $85.42, on worries a weaker U.S. economy would hurt energy demand. The United States is the world's No. 1 energy consumer. (Reporting by Richard Leong, Chuck Mikolajczak, Angela Moon and Joshua Schneyer in New York and Barbara Lewis and Natsuko Waki in London Writing by Barani Krishnan Editing by Dan Grebler)

* ISM data shows U.S. factory sector not as weak as feared

  * Jobless claims fall 12,000 last week

  * Stocks up: Dow 0.3 pct, S& P 0.2 pct, Nasdaq 0.3 pct (Updates to midmorning)

  By Angela Moon

  NEW YORK, Sept 1 (Reuters) - U.S. stocks gained on Thursday after data showed factory activity cooled in August but was still expanding, easing investors' fears the economy could be headed for another recession.

  Energy and information technology stocks led the market higher. The S& P energy sector index rose 0.6 percent and the information technology sector gained 0.2 percent.

  Wall Street started off little changed, but rose after the Institute for Supply Management (ISM) factory activity index stayed above 50, the expansion threshold. The reading was 50.6, down from 50.9 in the previous month, but topped the forecast of 48.5.

  " Relative to the fear that was in the markets a few weeks ago, ISM wasn't too bad. The fact that we're getting confirmation that some numbers aren't too bad is encouraging," said Mark Foster, who helps manage $500 million at Kirr Marbach & Co in Columbus, Indiana.

  The Dow Jones industrial average was up 32.51 points, or 0.28 percent, at 11,646.04. The Standard & Poor's 500 Index was up 2.28 points, or 0.19 percent, at 1,221.17. The Nasdaq Composite Index was up 7.75 points, or 0.30 percent, at 2,587.21.

  The Nasdaq was supported by Ciena Corp which jumped 19.3 percent to $14.63. The communication equipment maker posted a profit for the first time in three years, surprising analysts who expected another loss, as cost cuts helped boost margins.

  U.S. construction spending fell unexpectedly in July as public construction outlays dropped to their lowest level since December 2006 and private spending also sagged, separate data showed.

  Weekly jobless claims declined by 12,000 in the latest week, while nonfarm productivity was weaker than previously thought in the second quarter.

* European institutions were not aggressive enough - IASB

  * IASB had BNP Paribas, CNP Assurances in mind - FT

  * ESMA says studying differences in Greek debt reporting (Adds German audit regulator, ESMA)

  By Lionel Laurent and Rosalba O'Brien

  PARIS/LONDON, Aug 30 (Reuters) - European financial institutions should have booked bigger losses on Greek government bond holdings during the recent results season, the International Accounting Standards Board said.

  The IASB -- aiming to become the global benchmark for financial reporting -- said on Tuesday banks and insurers had been inconsistent in the way they wrote down the value of Greek sovereign debt in second-quarter earnings.

  The IASB, in a letter to the European Securities and Markets Authority (ESMA), said some companies had used internal models and not market prices to calculate the fair value of Greek bond holdings.

  While some companies claimed this practice was because the market for Greek debt had become illiquid, the IASB disagreed. " Although the level of trading activity in Greek government bonds has decreased, transactions are still taking place," chairman Hans Hoogervorst said.

  ESMA has begun assessing whether differences in the treatment of sovereign debt by banks were legitimate under IASB rules, spokeswoman Victoria Powell said.

  " We note that the responsibility for implementing accounting principles lies primarily with listed companies, including financial institutions, and their auditors," she said.

  The IASB letter, posted on its website on Tuesday after a leak to media, did not single out particular countries or banks.

  According to an unnamed source cited by the Financial Times, the move reflected specific concerns over the approach taken by France's biggest listed bank BNP Paribas and French insurer CNP Assurances , both of which used their own valuation models rather than market prices.

  A BNP spokeswoman said: " BNP took provisions against its Greece exposure in full agreement with its auditors and the relevant authorities, in accordance with the plan decided upon by the European Union on July 21."

  A CNP spokeswoman said its Greek debt provisions had been calculated in accordance with the EU plan.

  The STOXX Europe 600 bank index was up 1.1 percent at 1445 GMT.

  " The Greek debt issue has been treated very lightly," said Jacques Chahine, head of Luxembourg-based J. Chahine Capital, which manages 320 billion euros ($465 billion) assets. " And it is not just Greek debt. All of it needs to be written down, Spain, Italy."

  Citing recent comment by International Monetary Fund chief Christine Lagarde that called for mandatory recapitalisation of European banks, Chahine said: " I agree with Christine Lagarde.

  " European banks need to be recapitalised ... It is clear their balance sheets are extremely fragile."

  The European Banking Authority on Tuesday denied this was the case.

 

  CONFIDENCE HIT

  European banks taking a 3 billion euro hit on Greek bond holdings earlier this month employed different approaches to valuing the debt. Writedowns disclosed in results varied from 21-50 percent.

  The low end corresponded to the so-called " haircut" on banking sector involvement in a planned second bailout of Greece now being finalised. A 50 percent loss represented the discount markets were expecting at the end of June.

  Klaus-Peter Feld, a board member of German auditor body IdW, told Reuters the French view there was no market price for Greek debt at the end of June was not valid and against IASB rules.

  Feld said he was comfortable with German write-downs, also in a 21-50 percent range, as they were consistent with the category the bonds were booked in, adding that in those cases where bonds were fully written down to market value write-backs could be seen as soon as the current quarter.

  ESMA was unable to impose a uniform Greek haircut across the EU and guidance it published at the end of July simply stressed the need for banks to tell investors clearly how they accounted for Greek debt values.

  The IASB, which has no power of enforcement in how banks book impairments, has been keen to show the United States, which will decide this year whether to adopt IASB standards, that its rules are consistent and properly represent markets.

  Auditors have said a patchwork approach will confuse investors and concerns over Greek haircut reporting will fuel calls for a pan-EU auditor regulator, either standalone or within ESMA.

  " The impact is more likely to be to further reduce investors' confidence in buying bank debt, rather than sovereign debt," Tamara Burnell, head of Financial Institutions/Sovereign Research at M& G told Reuters.

  " After all, nobody is paying much attention to the banks' arguments about why they cannot value Greek debt at market prices, and the 21 percent haircut ... is patently insufficient."

  Using the most aggressive markdown approach -- marking to market all Greek sovereign holdings -- would saddle 19 of the most exposed European banks with another 6.6 billion euros in potential writedowns, according to Citi analysts.

  BNP would take the biggest hit with 2.1 billion euros, followed by Belgian group Dexia with 1.9 billion and German lender Commerzbank with 959 million, Citi said.

  The European Commission said on Monday there was no need to recapitalise the banks over and above what had been agreed after a recent annual stress test. ($1 = 0.688 euro) (Additional reporting by Huw Jones and Sinead Cruise in London, and Alexander Huebner in Frankfurt Editing by Jon Loades-Carter and Dan Lalor)