* Market awaits further liquidity injections from ECB

  * S& P cuts Greece's long-term ratings to 'selective default'

  * Coming Up: Feb. U.S. consumer confidence at 1500 GMT (Adds fresh quote, updates prices)

  By Claire Milhench

  LONDON, Feb 28 (Reuters) - Oil prices slipped towards $123 a barrel on Tuesday as investors worried about high prices hurting demand, but ongoing supply concerns and the expectation of further liquidity injections from the ECB helped underpin prices at elevated levels.

  Front-month Brent was down 98 cents to $123.19 a barrel by 1054 GMT, after settling more than $1 lower on Monday. U.S. crude was down 25 cents at $108.31 a barrel.

  Analysts and traders said the rise in oil prices to near 10-month highs last week had led to worries about the impact on the struggling economies of Europe, especially as the euro remains weak against the dollar.

  " There is some concern growing that high oil prices may impact the economy and oil demand in future," said Carsten Fritsch, an analyst at Commerzbank in Frankfurt.

  " That is leading to profit-taking, which is not surprising given the huge build in speculative net long positions in recent weeks." He pointed to data from the CFTC showing that net long positions in U.S. crude futures had reached the highest levels since May 2011.

  " We're going through a bit of consolidation," said Tony Machacek, a trader at Jefferies Bache in London. " Up until Friday we'd had five upward closes in a row and a steady climb since the last week of January."

  The surge in prices - an increase of more than 14 percent for Brent crude futures since the start of the year - has prompted the International Monetary Fund to flag oil as a rising threat to the global economy.

 

  Brent will average $110.30 a barrel this year, according to a Reuters monthly oil poll, up from January's estimate of $107.30 due to fears of a loss of Iranian supplies.

 

  TIGHTER SUPPLY

  Apart from Iran, oil markets are already coping with a disruption in shipments from smaller producers such as South Sudan and Syria.

  More than 1 million barrels per day (bpd) of supply is estimated to be offline - 1.1 percent of daily world demand - including Libyan output yet to return after the virtual shutdown of its oil sector during its 2011 civil war.

  " There are more upside risks than downside risks to oil prices because of supply concerns," said Victor Shum, senior partner at oil consultancy Purvin & Gertz.

  Investors are worried that higher oil prices will hammer demand in the eurozone as it struggles to emerge from the sovereign debt crisis.

  On Monday, ratings agency Standard & Poor's cut Greece's long-term ratings to 'selective default' in a widely expected move.

  The European Central Bank (ECB) has also temporarily suspended the eligibility of Greek bonds for use as collateral in its funding operations.

  The market is now looking to a second tranche of liquidity from the ECB on Wednesday as part of its Long-Term Refinancing Operation (LTRO).

  Analysts and traders said the extra liquidity from the LTRO was helping to keep oil markets buoyant.

  " I don't see a sharp correction given the supply side risks and the huge amount of liquidity in the market," said Commerzbank's Fritsch.

  The market is estimating that about 500 billion euros will be injected into the market by the ECB, but Fritsch said some estimates ranged up to 1 trillion euros. " If some of that money flows into commodity markets, that will push up prices," he said. (Additional reporting by Manash Goswami in Singapore Editing by Alison Birrane)

* February indicator points to optimism among businesses

  * Morale rises in France, but largely stable in Germany (Adds economists' quotes, details)

  By Robin Emmott

  BRUSSELS, Feb 28 (Reuters) - Confidence in the euro zone's economy rose for a second consecutive month in February, a survey showed on Tuesday, confirming a wider stabilisation across Europe that likely signals only a mild recession this year.

  The European Commission's economic sentiment indicator rose by a point in the euro zone to 94.4, better than the 93.9 forecast by economists in a Reuters poll, and a recovery to October's level. The rise built on January's increase, which was the first improvement in sentiment since March last year.

  But business morale was fractionally worse than forecast, rising to -0.18 compared with economists' estimates of -0.15. On a national level, German optimism in the economy barely rose from January, even if France showed some recovery.

  " There are few signs here that a burst of economic growth is going to help to solve the debt crisis," said Jonathan Loynes, chief European economist at Capital Economics. " The indicator is still well below the levels seen throughout most of last year and consistent, on past form, with broadly stagnant GDP."

  The Commission expects the euro zone's economic output to shrink 0.3 percent in 2012, the second recession in just three years for the currency area. But last year's political deal among most EU countries to commit to budget austerity and the European Central Bank's offer of near unlimited funds have calmed markets and bought policymakers some time.

  The green shoots of recovery are a turnaround from the final months of 2011, when investors forced borrowing costs to unsustainably high levels for Spain and Italy and depressed business morale in the euro zone and the wider European Union.

  The EU's top economic official Olli Rehn now sees a recovery in the second half of the year if EU leaders can agree to a large enough financial firewall to assuage any remaining concerns about southern Europe's ability to honour its debts.

  A stronger economic expansion in the United States in the last quarter of 2011 and robust growth in Asia have also maintained demand for Europe's goods, particularly those of competitive Germany and its high quality manufactured exports.

  ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

  For a table on the confidence survey:

  More on the euro zone crisis:

  For full multimedia coverage: http://r.reuters.com/xyt94s

  ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

 

  " PLENTY TO WORRY ABOUT"

  Still, the euro zone's recovery is fragile and there is wide divergence between the fortunes of wealthy northern Europe and those on the indebted southern periphery.

  The closely-watched purchasing managers' index for the euro zone, released last week, fell unexpectedly in February, missing even the lowest forecast in a Reuters poll.

  The fragility complicates the task of EU leaders who are meeting in Brussels on Thursday and Friday to try and sketch a path out of the economic slump and resolve the debt crisis.

  The Commission's survey highlighted the difficulties.

  Confidence in industry improved in February, while optimism in services remained unchanged from January. Business's employment expectations remained well blow levels of early last year and Europeans' worries about hanging on to their jobs intensified.

  Unemployment in the euro zone is at record highs at about 10 percent of the working population and is expected to rise this year as the currency area heads into its recession.

  France reported a 1.6-point increase in economic sentiment, and there were rises in the Netherlands and Italy. But there was barely any change from January's level in Germany, Europe's biggest economy, which nudged up 0.1 point. Spain saw sentiment worsen and morale remained low in Portugal and Greece.

  " With more fiscal austerity in the pipeline, the debt crisis still unresolved and oil prices in euro terms breaching record highs, consumers and businesses still have plenty to worry about," said Martin van Vliet, an economist at ING. (Reporting By Robin Emmott editing by Rex Merrifield/Jeremy Gaunt)

By Eva Kuehnen

  KARLSRUHE, Germany, Feb 28 (Reuters) - Chancellor Angela Merkel's room for manoeuvre on future euro zone bailouts, in doubt after a revolt by coalition lawmakers, shrank further on Tuesday when Germany's top court raised a hurdle to swift action in financial rescues.

  The German constitutional court ruled that parliament may not delegate most decisions on disbursing bailout funds to a special committee meeting in secret, as Merkel had planned after a previous ruling bolstered lawmakers' oversight powers.

  But financial markets, buoyed by the prospect of another bumper injection of cheap, three-year European Central Bank funds to banks on Wednesday, shrugged off the setbacks for Europe's main paymaster.

  Italy's 10-year borrowing costs fell to the lowest since last August at an auction in another sign that the ECB's three-year cash bonanza, combined with Rome's fiscal and economic reforms, have steadied bond markets and eased the euro zone's debt crisis.

  The court ruling came a day after Merkel won parliamentary backing for a second aid programme for debt-stricken Greece without securing an absolute majority of her own centre-right deputies, in a sign of growing public hostility to bailouts.

  Seventeen of her 330 lawmakers rebelled against the Greek package, up from 13 who defied her in a vote on the euro zone rescue fund last September.

  That could make it harder for her to agree to an increase in the currency bloc's financial firewall as major economies are demanding as a condition for giving the IMF more money to fight the fallout from Europe's debt crisis.

  Former chancellor Helmut Kohl, one of the architects of the euro, warned in the popular daily Bild that Germany was in danger of " losing sight of the goal of a united Europe" .

  In a case brought by two opposition lawmakers, the court said a nine-member sub-committee created to approve urgent action by the bailout fund was " in large part" unconstitutional because it infringed on the rights of other deputies.

  The judges said the panel may approve price-sensitive debt purchases on the secondary market by the EFSF bailout fund, since confidentiality was essential in such operations.

  But they denied it the power to authorise loans or preventive credit lines to troubled states or for the recapitalisation of banks.

  While not a show-stopper, the decision means parliamentary deliberations on future rescue operations could be slower and more cumbersome, since the full 41-member budget committee or the entire 620-member lower house will have to decide.

 

 

  EXCEPTION?

  Euro zone leaders have insisted that Greece is an exception and after bailouts for Portugal and Ireland, they do not expect other members of the 17-nation single currency area to require assistance from their rescue fund.

  Portugal said on Tuesday it has passed a third compliance review by international lenders of its bailout programme.

  However, many economists say Lisbon is likely to need increased emergency funds, and the chairman of euro zone finance ministers, Jean-Claude Juncker, has acknowledged that Greece may also need further assistance at a later stage.

  There are some concerns too about Spain, which announced on Monday that its 2011 public deficit was 8.51 percent of gross domestic product, far higher than the 6 percent target set by the European Union and above a preliminary estimate of 8.2 percent from the new centre-right government.

  That made it even less likely that Madrid will be able to reduce the deficit to 4.4 percent of FDP this year, as promised to the EU, against a backdrop of recession.

  None of that dented financial markets. The euro rose close to a three-month high against the dollar.

  The ECB temporarily suspended the eligibility of Greek bonds for use as collateral in its funding operations and said national central banks would have to provide banks with liquidity using an emergency measure.

  The move, which was expected but not so soon, was triggered by ratings agency Standard & Poor's cutting Greece's long-term ratings to 'selective default' after Athens launched a bond swap to lighten its debt burden.

  The swap is intended to wipe some 100 billion euros off Greece's 350 billion euro debt pile, reducing it to 120 percent of GDP by 2020, and forcing private debt holders to take a 53.5 percent loss on the face value of their bonds.

  Anticipating such temporary downgrades, the euro zone and ECB had struck a deal whereby Greece would receive 35 billion euros in support from the EFSF rescue fund to enable the central bank to continue accepting Greek bonds and other assets underwritten by Athens in its lending operations. But the ECB action came before the EFSF funds have been activated.

  S& P's head of European sovereign ratings, Moritz Kraemer, said the downgrading of Greece's long-term ratings to 'selective default' could well be short-lived but there was a risk Athens could fall back into default later.

  " It's a distinct possibility that this will be a short default which will be cured," Kraemer told Reuters Insider television. " The more interesting question is not when it will be cured but whether it will be the last one."

  When assessing what rating to give Greece in the future, S& P would look at the political environment, the growth outlook and the remaining debt stock. " We think that on all three fronts there are huge question marks," said Kraemer. (Additional reporting by Stephen Brown in Berlin, Alexandra Za in Milan, Axel Threlfall in London, Paul Carrel in Frankfurt and Axel Bugge in Lisbon. Writing by Paul Taylor, editing by Mike Peacock)

* Euro firms as bidding opens for ECB's cheap loans

  * Rise in bank shares lifts European stocks

  * Oil prices ease, Brent under $124 a barrel

  By Richard Hubbard

  LONDON, Feb 28 (Reuters) - The European Central Bank's upcoming cash boost for banks supported the euro and shares on Wednesday but some investors are worried the benefits of the cheap money will be short lived.

  The pressure on riskier assets from oil also eased as Brent crude futures extended losses and slipped below the $124 a barrel level, ending a surge that had dampened demand for other commodities and slowed the gains in global stock prices.

  Markets expect European banks to borrow about 500 billion euros ($670 billion) of the cheap funds to be offered by the ECB on Wednesday, although forecasts range from 200 billion to 750 billion euros.

  " The euro has priced in a cash injection of 500 billion euros and anything above 600 billion will be risk positive and push the euro higher," said Ankita Dudani, G-10 currency strategist at RBS Global Banking.

  On the other hand, a take up of less than 400 billion will hurt risk appetite and could drag the euro lower, she added.

  The euro edged up 0.4 percent to $1.3445, below the near three-month high of $1.3487 reached on Friday. The U.S. dollar was 0.2 percent higher against the yen at 80.74 yen , but off the nine-month high of 81.66 yen hit on Monday.

  European share prices pushed higher in early trades on hopes for a good take up of the cheap ECB money, which is designed to improve their balance sheets and encourage lending activity.

  The FTSEurofirst 300 index of top European shares was up 0.3 percent 1076.92, still just below a seven-month high hit last week before rising oil prices unnerved investors. The STOXX Europe 600 Banks index up 0.4 percent.

  A solid session on Asian markets, helped by strong gains in Japan's Nikkei index, which has gained about 15 percent this year, pushed the MSCI world equity index up 0.32 percent to 331.96.

 

  LIMITED BENEFITS

  Behind the gains in both the euro and European shares are growing concerns that the boost from Wednesday's ECB lending operation may be short lived.

  " The market is anticipating a good result on the (ECB tender), it adds some liquidity to the market and there are lots of strategists that think this will push stocks higher," Koen De Leus, strategist at KBC Securities said.

  " But it is just a sign that banks still can not go to the interbanking market to get loans and it is probably the last operation for a while. I would not get my hopes up on a strong rally, the market could still go down 5-10 percent."

  Foreign exchange analysts at Morgan Stanley said renewed selling of the euro could emerge soon after the loan tender as there was little other positive news around.

  The International Swaps and Derivatives Association, the arbiter of rules governing the sale and use of credit default swaps, will rule this week whether the debt swap included in the second Greek bailout deal constitutes a " credit event" .

  That would trigger payout on default protection policies that could create uncertainty in markets.

  One positive is that oil prices have snapped a surge linked to concerns over supply from the Middle East.

  Front-month Brent was down 70 cents to $123.47 a barrel, after losing more than $1 a barrel on Monday. U.S. crude slipped 20 cents to $108.36 a barrel, after ending seven straight days of gains in the previous session.

  Gold edged up 0.3 percent to $1,771.96 an ounce after two sessions of straight losses, gaining in line with other major assets on hopes of the ECB loan offer with the weaker U.S dollar against the euro lending some extra support.

  In debt markets Italy's 10-year borrowing costs are expected to fall below 6 percent at an auction later as the debt-laden euro zone member taps demand for its longer-dated issues in a key test of market confidence.

  The new 10-year yielded around 5.7 percent on the grey market on the eve of the auction, compared with a month ago when Italy paid 6.08 percent to borrow over 10 years. (Editing by Anna Willard)

* Investors pick beaten-down consumer, bank shares

  * Worry about high oil prices keeps buyers cautious

  By Viparat Jantraprap

  BANGKOK, Feb 28 (Reuters) - Indonesian stocks climbed more than 1 percent on Tuesday while most other Southeast Asian stock markets moved higher amid selective buying of beaten-down big caps though investors remained cautious about the impact of high oil prices.

  Consumer and banking stocks that had led recent losses in such as Indonesia's PT Astra International, Thailand's Kasikornbank Pcl and Philippine Metropolitan Bank and Trust Co, recouped some lost ground.

  The region's biggest gainer was Jakarta's Composite Index , which ended up 1.1 percent. During the previous four sessions, it was down a combined 3.6 percent.

  Indonesia posted foreign outflows since last week amid concerns about the government's plans to raise fuel prices or cut fuel subsidies.

  Jakarta posted a combined $174 million foreign outflows in four sessions to Monday, according to Thomson Reuters data.

  Harry Su, head of research at Jakarta-based Bahana Securities, said higher fuel prices could push inflation this year to 8 percent compared with the broker's current forecast of 5 percent. He said the market could remain volatile due to the issue.

  " I think it will depend a lot on what the government will do in terms of how much of an increase there will be. Obviously, it will be short-term pain but it's going to be longer-term gain for this economy," he said.

  " Over the longer run, we continue to remain quite optimistic and positive on the market," he said. Tuesday's rebound was a technical one that was " from bottom fishing as well," Su said.

  Singapore's Straits Times Index was up 0.8 percent, the Thai SET index rose 0.99 percent, and the Philippine main index closed 0.44 percent higher.

  Stocks in Malaysia inched down 0.15 percent and Vietnam's Ho Chi Minh Stock Exchange index fell 1.44 percent.

  Indonesia's Astra shares gained 1.6 percent, Thailand's Kasikornbank rose 1.1 percent and Philippine Metropolitan bank was up 0.8 percent.

  Asian shares and the euro edged higher on Tuesday as markets waited for a second liquidity injection from the European Central Bank to gauge risk appetite that has been somewhat dented by worries over high oil prices.

  By 0941 GMT, MSCI's broadest index of Asia Pacific shares outside Japan edged up 1.02 percent.

  (Editing by Richard Borsuk)

* Banks, automakers rise on rate cut hopes

  * Foreign fund buying top $7.1 bln in 2012 (Updates to close, adds comments, detail)

  NEW DELHI, Feb 28 (Reuters) - Indian shares climbed 1.6 percent on Tuesday, snapping a four-session slide, with banks and automakers leading the rise on expectations for an interest rate cut next month.

  Fund managers are betting the economy would pick up pace in the coming fiscal year that start in April after slowing sharply in the current year, traders said.

  " Investors who felt left out in the rally since the beginning of the year are buying since the markets have fallen in the past few sessions," said Alex Mathews, who heads research at Geojit BNP Paribas Financial Services.

  The main 30-share BSE index closed up 1.64 percent, or 285.37 points, at 17,731.12 with all but six of its components rising.

  The benchmark, which fell 5.3 percent over the previous four sessions, is up 14.7 percent in 2012 on foreign fund buying of about $7.1 billion worth of shares.

  A sharp slowdown in infrastructure sector output growth to 0.5 percent in January from an upwardly revised annual growth of 4.6 percent in the previous month, should pile pressure on the central bank to ease its tight policy, traders said.

  The sector accounts for 37.9 percent of India's industrial output.

  Data due on Wednesday is expected to show the economy likely grew at its slowest pace in more than two years during the final months of 2011, a Reuters poll showed.

  Gross domestic product in Asia's third-largest economy grew at an annual 6.4 percent rate in the quarter to end-December, according to the poll of 26 economists. Forecasts ranged from 6.0 to 7.3 percent with a majority of them lying below the consensus.

  Mathews said this would further fuel expectations for a rate cut when the central bank reviews policy on March 15.

  State Bank of India, the country's biggest lender, rose 5.1 percent, ICICI Bank gained 2.6 percent and HDFC Bank added 2.9 percent.

  Automakers, whose sales get a boost from cheaper credit, rallied. Tata Motors, whose products include trucks, buses, luxury brands Jaguar Land Rover and the Nano -- the world's cheapest car -- firmed 5.15 percent while carmaker Maruti Suzuki rose 1 percent.

  Energy conglomerate Reliance Industries, which has the heaviest weight on the benchmark index, rose 1.93 percent.

  Oil and Natural Gas Corp advanced 0.84 percent and GAIL India added 0.7 percent after a media report said the two state-run companies plan to offer $2 billion to acquire Africa-focused gas explorer Cove Energy.

  Top software services exporter Tata Consultancy Services and No. 2 Infosys shed 2.04 percent and 0.38 percent respectively. India's showpiece $76-billion software services industry gets most of its revenue from the United States and Europe.

  The 50-share NSE index rose 1.79 percent to 5,375.50. In the broader market, there were about 6 gainers for every loser on a volume of 863 million shares.

  Elsewhere, the MSCI's measure of Asian markets other than Japan was up 1.01 percent.

 

  STOCKS THAT MOVED

  * GVK Power and Infrastructure rose 8.1 percent to 17.30 rupees after the Mint newspaper cited unnamed sources as saying the company is in talks with UK-based BG Group to sell stake in seven oil and gas blocks off India's west coast. GVK denied any deal of a stake sale.

  * Hexaware Technologies Ltd closed up 6.6 percent at 114.30 rupees after news channel ET Now cited sources as saying that Tokyo-headquartered NEC Corp is in talks to buy out the software services provider.

  * JSW Steel Ltd rose 4.6 percent to 793.85 rupees after the company's January crude steel production increased 39 percent on the year.

 

  TOP 3 BY VOLUME

  * Lanco Infra with 77.8 million shares

  * IFCI Ltd with 34.6 million shares

  * Suzon Energy with 28.6 million shares

 

  FACTORS TO WATCH * Indian rupee report * Indian bond report * Euro near 3-mth high vs dollar, yen subdued * Prospect of ECB money supports euro, shares * Brent crude oil slips on demand worries * U.S. stock index futures signal early gains * For closing rates of Indian ADRs * Foreign institutional investor flows (Reporting by Sanjeev Choudhary Editing by Ranjit Gangadharan)

 

 

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SEOUL (Reuters) - South Korea's richest man has been hit with a second lawsuit by a close relative relating to his inheritance of shares in companies that are part of the Samsung Group, the country's largest conglomerate.

  The lawsuit from 70-year-old Lee Kun-hee's sister was filed in Seoul Central District Court on Monday and comes as Samsung confronts a tricky succession to the third generation of the family that founded a company that is synonymous with the success of " Korea Inc."

  Lee is chairman of Samsung Electronics with a fortune estimated at $9.3 billion by Forbes magazine.

  His elder sister, Lee Sook-hee, is demanding that he return assets worth about 190 billion won ($168.27 million), some shares in Samsung Life Insurance and Samsung Electronics as well as cash that she says were rightfully her inheritance from her father, a spokesman for the court told Reuters.

  The law firm representing the sister, Hwawoo, confirmed the suit but declined to comment further.

  Hwawoo is also representing Lee's elder brother in a similar suit filed earlier that is seeking 710 billion won in compensation, according to Korean media reports.

  A spokeswoman for parent Samsung Group declined to comment directly on the suits against Lee.

  " We understand that the matter of inheritance has long since been settled," she said.

  Lee took over the helm of Samsung Group in 1987 and has been indicted for tax evasion, but was pardoned by the president. He is still involved in running Samsung Electronics, the world's largest technology company by revenue.

  His son, Lee Jae-yong, who is now president and chief operating officer of Samsung Electronics, is believed to have been groomed to take over the company.

  The lawsuits have come as South Korea faces parliamentary and presidential elections in the same year for the first time in 20 years and the role of the country's conglomerates, or chaebol, has come under close scrutiny from opposition politicians who say they have enriched themselves excessively.

  A top opposition politician told Reuters recently that if his party took power, it would seek to rein in the power of the chaebol. The top 30 Korean chaebol have net profits equivalent to 40 percent of total government spending, according to official data.

  (Reporting by Ju-min Park Additional reporting by Hyunjoo Jin Editing by David Chance and Nick Macfie)

HONG KONG, Feb 28 (Reuters) - Hong Kong shares rose in relatively thin Tuesday trade, bolstered by property and Chinese financials, ahead of key corporate earnings scheduled to be released after the market close.

  The Hang Seng Index finished up 1.65 percent at 21,568.73. The China Enterprises Index of top mainland listings in Hong Kong finished up 1.92 percent at 11,761.3.

  The Shanghai Composite Index reversed early losses to end up 0.2 percent at 2,451.86, extending its winning streak into an eighth session and closing at the highest since Nov. 17.

 

  HIGHLIGHTS:

  * Chinese banks were strong after official mainland media reported that China's banking regulator had allowed banks to make new loans to unfinished local government investment projects that are at least 60 percent complete to ensure completion.

  Industrial and Commercial Bank of China Ltd and China Construction Bank Corp were among the top boosts to the Hang Seng Index, up 2.7 and 1.9 percent, respectively.

  * Hong Kong bellwether Sun Hung Kai Properties Ltd , due to post earnings results after market hours on Tuesday, gained 2.6 percent. Over the past three weeks, excluding Tuesday, nine out of 18 analysts have raised their 2012 earnings forecasts for Sun Hung Kai Properties by an average of 1.3 percent. During that period, the stock has risen 7.3 percent, according to StarMine.

  * Country Garden Holdings Co Ltd, the mainland's fifth-largest property developer by sales value, rose 3.4 percent after posting a 35.5 percent gain on 2011 profit at the midday trading break. The result also boosted the sector, with Evergrande Real Estate Group Ltd up 4.4 percent.

 

  DAY AHEAD:

  * Corporate earnings expected on Wednesday include Hong Kong Exchanges and Clearing Ltd (HKEx), SJM Holdings Ltd and New World Development Co Ltd. (Reporting by Clement Tan and Vikram Subhedar Editing by Chris Lewis)

* ECB to launch second 3-year financing operation on Wed

  * Spot gold may rise to $1,797/oz - technicals

  * Coming up: U.S. consumer confidence, Feb 1500 GMT (Adds details, comments updates prices)

  By Rujun Shen

  SINGAPORE, Feb 28 (Reuters) - Gold traded steady on Tuesday, trapped in a tight $4 range below $1,770, as a major cash injection action by the European Central Bank expected later this week supported sentiment.

  Gold posted losses in the previous two sessions as the momentum fizzled after bullion hit a more than three-month high last week, during which a Greece bailout deal and expectations of more monetary easing from key economies inspired gold bugs.

  European banks are expected to guzzle another half a trillion euros of cheap three-year loans offered by the European Central Bank on Wednesday, after the funding operation late last year helped avert a credit crunch in the region.

  " As long as central banks around the world lean towards further easing, gold will rise further, although $1,800 will be a key resistance level for the time being," said Li Ning, an analyst at Shanghai CIFCO Futures.

  Li said gold could face short-term correction after the attempt to breach the $1,800 level failed, but $1,750 should provide firm support.

  Spot gold was little changed at $1,768.15 an ounce by 0257 GMT. U.S. gold edged down 0.3 percent to $1,769.70.

  Technical analysis suggested that spot gold could rise towards $1,797 an ounce during the day, Reuters market analyst Wang Tao said.

 

  Oil prices dipped for a second straight session, snapping a recent surge that aided gold prices, while concerns over supply from the Middle East are expected to stem the slide.

  Bullion prices have been supported by inflation concerns triggered by higher oil prices, but an analyst at INTL FCStone, Edward Meir, warned that rising crude could also hurt precious metals by nipping the fragile global recovery.

  " The soaring cost of energy, while not necessarily being bearish for gold on the surface, has the potential to hurt the precious metals group should it start to destabilise other markets, like US equities," he said in a research note.

  " Should US economy falter just as most other economies around the world are decelerating, equity markets could correct rather sharply, sending the dollar higher, and hurting commodities in the process."

  In Asia's physical gold market, buying interest remained sluggish out of China, while some scrap flow continued in Southeast Asia, dealers said.

  " If we stay on this level, there won't be much interest," said a Hong Kong-based dealer, adding that premiums on gold bars stood around $1-$1.50 an ounce above London prices.

  Spot platinum lost 0.4 percent to $1,693.99 an ounce, on course for a fourth consecutive session of losses.

  South Africa's National Union of Mineworkers (NUM) urged its members on Monday to accept an offer by Impala Platinum to rehire miners at its Rustenburg operation, the scene of a violent, illegal strike that has pushed platinum prices higher.

 

  Precious metals prices 0257 GMT Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1768.15 1.66 +0.09 13.07 Spot Silver 35.39 0.03 +0.08 27.81 Spot Platinum 1693.99 -7.50 -0.44 21.61 Spot Palladium 701.00 -0.72 -0.10 7.43 COMEX GOLD APR2 1769.70 -5.20 -0.29 12.95 5930 COMEX SILVER MAR2 35.40 -0.12 -0.35 26.81 2508 Euro/Dollar 1.3410 Dollar/Yen 80.22 COMEX gold and silver contracts show the most active months (Editing by Himani Sarkar)

(Updates to midday)

  * Hang Seng Index up 0.4 percent, China banks help

  * Shanghai Composite down 0.4 percent, energy drags

  * HSBC down 1.4 percent, checking HSI gains

  * Earnings in focus, Sun Hung Kai to report after close

  By Vikram Subhedar

  HONG KONG, Feb 28 (Reuters) - China shares were slightly lower by midday Tuesday, coming off a more than three-month high as investors locked in gains, while Hong Kong's benchmark index held onto gains supported by banks and local property developers.

  The Shanghai Composite Index has enjoyed a six-week gaining streak led by sectors such as oil, materials and infrastructure on steadily rising turnover that suggested domestic investors were returning to the market.

  Last week's close above the index's 125-day moving average, a popular indicator on the mainland, prompted calls that the market could continue to rise with expectations of more selective easing and policy support for certain sectors underpinning the move.

  On Tuesday, recent outperformers such metals and mining and energy plays led the Shanghai benchmark down 0.39 percent to 2,437.5. PetroChina Co Ltd, down 0.7 percent, and China Petroleum & Chemical Corp (Sinopec), down 0.5 percent, were the biggest drags on the index.

  " I think the consensus is that things need to take a bit of a break," said Christian Keilland, head of trading at BTIG in Hong Kong.

  A report that China's banking regulator has allowed banks to make loans to unfinished local government investment projects would ordinarily have provided a boost to the market, but failed to do so indicating a pause to the rally, said Keilland.

  While Chinese banks rose, with Bank of Communications Co Ltd up 1.6 percent and China Minsheng Banking Corp Ltd up 1.2 percent, those gains were not enough to offset weakness in more cyclical sectors such as mining.

  Zijin Mining Group Co Ltd, that has benefited from a rebound in gold prices, lost 2.1 percent, retreating from a 14-week high.

 

  HONG KONG FIRMER DESPITE HSBC DRAG

  Shares in Hong Kong were slightly higher, tracking regional markets, with the benchmark Hang Seng Index up 0.4 percent at 21,302.65 by the midday trading break.

  The China Enterprises Index of top Hong Kong-listed mainland companies was up 0.56 percent led by financials.

  Gains by Chinese banks offset weakness in index heavyweight HSBC Holdings Plc, which lost 1.4 percent.

  HSBC reported profit for 2011 just shy of $22 billion after the close of Hong Kong's markets on Monday, although its London-listed shares dropped 4 percent partly on higher costs including a $1 billion bump in its wage bill.

  HSBC currently trades at about 8.9 times forward 12-month earnings forecasts, according to Thomson Reuters StarMine, a 25.7 percent discount to their historical median levels.

  Corporate earnings are likely to be key factor for investors over the next few weeks as Hong Kong blue-chips announce 2011 results starting with the property sector.

  Hong Kong bellwether Sun Hung Kai Properties Ltd is expected to announce results after market hours on Tuesday.

  Over the past three weeks, nine out of 18 analysts have raised their 2012 earnings forecasts for Sun Hung Kai Properties by an average of 1.3 percent. During that period the stock has risen 7.3 percent, according to StarMine.

  Developers in Hong Kong have rallied sharply this year, with the sector sub-index up 23.2 percent, beating the broader market's 15.6 percent gain, partly on short-covering as last year's investor bearishness on the sector receded. (Editing by Chris Lewis)

(Refiles to fix formatting)

  * MSCI Asia ex-Japan up 0.3 pct, Nikkei falls 0.6 pct

  * Euro off recent highs, yen off 9-month lows vs dollar

  * Oil extends losses after sell-off on Monday

  By Chikako Mogi

  TOKYO, Feb 28 (Reuters) - Asian shares edged higher and the euro steadied on Tuesday as markets waited for a second liquidity injection from the European Central Bank to gauge risk appetite that has been somewhat dented by worries over high oil prices.

  U.S. and Brent crude oil futures slipped, extending losses after snapping a week-long rally on Monday, hurt by a warning from the Group of 20 leading economies about the risks to global growth from higher oil prices.

  MSCI's broadest index of Asia Pacific shares outside Japan edged up 0.3 percent, with the defensive healthcare sector outperforming. The pan-Asia index has risen 13 percent this year, while Japanese equities have gained 14 percent.

  " Markets have risen too rapidly and may consolidate from time to time, (with people) looking to buy after prices fall. But underlying sentiment is gradually firming, as people believe they've seen the worst." said Xiao Minjie, chief economist at FuNNeX Asset Management in Tokyo.

  He said that while ample liquidity supplied by global central banks was pushing crude prices higher, demand in Europe and China was unlikely to pick up strongly enough to lift oil prices closer to all-time peaks scaled in 2008.

  The ECB will conduct a longer term refinancing operation on Wednesday with analysts focusing on the size of the gross allotment as well as net new liquidity. A poll showed 30 euro money market traders expect the ECB to allot 500 billion euros, with forecasts ranging from 200 billion to 750 billion euros.

  The ECB's first liquidity injection into the system in late December helped stabilise markets by removing concerns about a liquidity crunch in Europe.

  " Although the issues surrounding Greek PSI (private sector involvement) and additional financial resources for Europe will likely dominate headlines, we believe that the upcoming LTRO and behaviour of energy prices are more important for market sentiment," said Barclays Capital analysts.

 

  NIKKEI LOSES GROUND

  The euro stood steady at $1.3410, off a near three-month high of $1.3487 reached on Friday. The dollar eased 0.5 percent against the yen at 80.21 yen, retreating from a nine-month high of 81.66 yen hit on Monday.

  Greece is proceeding with scheduled steps to restructure its huge debts, setting a March 8 deadline for private holders of its bonds to participate in an unprecedented bond swap. The German parliament endorsed a recently approved second bailout for Greece with a comfortable victory.

  Market reaction was muted after Standard & Poor's on Monday cut Greece long-term ratings to 'selective default'.

  Among equities in Asia, Japan's Nikkei average retreated from Monday's seven-month highs to fall 0.6 percent as investors took profits while chipmakers were slammed after Elpida Memory Inc filed for protection from creditors on Monday.

  But Elpida's woes helped lift Korean equities, boosting shares in rivals Hynix Semiconductor and Samsung Electronics.

  Brent fell 0.4 percent on Tuesday to $123.65 a barrel, moving further away from a near 10-month peak above $125 a barrel on Friday. U.S. crude fell 0.6 percent to $107.89 a barrel.

  In addition to ample liquidity in financial markets, oil's week-long rally had also been spurred by concerns of supply disruptions amid heightening tension between Iran and the West over Tehran's nuclear programme.

  Working to help risk sentiment, fresh U.S. data showed contracts for home resales rose to a near two-year high in January, boosting optimism that the housing market may be recovering.

  Highly-indebted and struggling Portugal also looked likely win a positive assessment for its economic reform and cost-cutting efforts from the European Union, the ECB and the International Monetary Fund. That should ensure approval of the next tranche of money under a bailout.

  Asian credit markets were subdued, with the spreads on the iTraxx Asia ex-Japan investment-grade index steadying from Monday. (Editing by Edwina Gibbs)

* G20 " alert to" high oil price impact on economy

  * Dollar index gain, equities weak open weighs on oil

  * Coming up: API oil stocks data 4:30 p.m. EST Tuesday (Recasts, updates prices, market activity, changes byline, moves dateline from previous LONDON)

  By Robert Gibbons

  NEW YORK, Feb 27 (Reuters) - Brent crude prices pulled back on Monday, after five straight higher settlements, as G20 concerns about the effect of higher oil prices on global growth and a stronger dollar helped counter ongoing fears about tensions with Iran and potential supply disruptions.

  The Group of 20 finance ministers and central bankers said on Sunday they were " alert to the risks of higher oil prices" and discussed at length the impact that sanctions on Iran will have on crude supplies and global growth.

  The G20 officials also said that they welcomed a commitment from producer countries to ensure oil supplies.

  The dollar index edged up and the euro eased against the U.S. currency, even as the Japanese yen recovered from a nine-month low against the dollar. A stronger dollar can weigh on dollar-denominated oil by making it more expensive for consumers using other currencies.

  Adding to the less supportive sentiment, U.S. equities on Wall Street opened lower before recovering to near flat, following the S& P 500's four-year closing high last week and after the G20 told Europe it must commit more money to fight the European Union debt crisis before seeking broader assistance.

  " The energy complex is pulling back about 1 percent this morning partially on a softening in the equities and euro," Jim Ritterbusch, president at Ritterbusch & Associates, said in a note.

  " Weekend G20 meetings also prompted some selling amidst some reluctance to provide more European bailout packages," Ritterbusch added.

  Brent April crude fell $1.25 to $124.22 a barrel by 11:31 a.m. EST (1631 GMT), after settling at a near 10-month peak above $125 a barrel on Friday.

  Brent remained on pace to post a nearly 12 percent gain for February and is up nearly 16 percent on the year, after a 13.3 percent gain in 2011, raising fears of strains on some of the world's weaker economies, particularly in Europe.

  U.S. April crude fell 62 cents to $109.15 a barrel, having swung from $108.24 to $109.77, following seven straight higher closes.

  U.S. crude is on pace for a 10 percent gain in February and is up nearly 11 percent for the year after a 2011 gain of 8.2 percent.

  Sanctions against Iran over its nuclear program have removed a major supply source for many refiners and investors worry escalating confrontation in the Middle East could disrupt oil flows from other suppliers in the Gulf.

  Supplies from several smaller producers, including South Sudan, Yemen and Syria, have also been cut off in recent months, tightening supplies to some markets.

  But supplies from Saudi Arabia and Nigeria were rising and there has also been speculation about a release of U.S. strategic reserves to offset lost Iranian barrels and combat high prices.

 

  (Additional reporting by Gene Ramos in New York, Christopher Johnson in London and Manash Goswami in Singapore Editing by Marguerita Choy)

By Gleb Bryanski

  MOSCOW (Reuters) - Security services in Russia and Ukraine said Monday they had foiled a plot to kill Prime Minister Vladimir Putin, but his opponents ridiculed the announcement as a campaign stunt six days before he runs in Russia's presidential election.

  Russia's pro-government Channel One television said two men arrested belonged to a group seeking an Islamist state in Russia's North Caucasus. A computer seized contained numerous video files showing Putin's motorcade, usually heavily guarded, moving about Moscow.

  " Our final goal was to go to Moscow and attempt to assassinate Putin," a bruised man described as one of the plotters was shown

  saying in a police interview transmitted on Channel One. " Our deadline was after the election of the president of Russia."

  Opinion polls show Putin will win the election and reclaim the post he held from 2000 to 2008. But he faces a growing opposition protest movement and wants to secure outright victory Sunday, averting a runoff that might dent his authority.

  A spokeswoman for Ukraine's security agency SBU said a man was detained in the Black Sea port of Odessa on January 4 after an explosion at an apartment that killed an accomplice. Another suspect, on the international wanted list, fled.

  " We found him in an apartment and detained him without a single shot being fired on February 4," SBU spokeswoman Marina Ostapenko said.

  " I can officially confirm that they were preparing an (assassination) attempt on Putin."

  Viktoria Bogomolova, a spokeswoman for the FSO, an agency in charge of guarding Russian officials, confirmed the agency had worked with the SBU to identify the alleged attackers.

  Channel One said one of the alleged would-be assassins, who had previously lived in London, had shown them a secret store of explosives close to one of Moscow's main roads used by Putin to go to his government residence.

  The channel attributed the plot to a group known as the Caucasus Emirate, led by Chechen warlord Doku Umarov, which has carried out attacks including a suicide bombing at Russia's busiest airport last year which killed 37 people.

  " TACTIC OF DICTATORS"

  The FSO spokeswoman said it would be premature to discuss taking any additional security measures following the incident.

  Separatists in North Caucasus have said they target Putin, Russia's dominant leader for the past 12 years and the man they hold responsible for a military crackdown on their movement.

  Putin, a former KGB officer who has forged a tough guy image with stunts such as shooting a tiger and riding a horse bare chested, is often accompanied by hundreds of armed bodyguards when he travels.

  Traffic is halted when he goes to and from work in Moscow in a long motorcade with flashing blue lights. Several assassination attempts have been reported over the years.

  The Russian opposition, which has staged the biggest political protests since Putin came to power, reacted with scepticism, suggesting that the timing of the announcement was intended to attract sympathy for Putin before Sunday's election and underlined his weakness.

  " Without a doubt there is always information about preparations or attempted terrorist attacks. But what does it really mean that (news of) this assassination attempt appears today?" said opposition parliamentarian Gennady Gudkov.

  " The timing was certainly political," he told reporters.

  Another opposition leader, Vladimir Ryzhkov, said that " assassination attempts are the favourite tactic of dictators."

  Putin's spokesman Dmitry Peskov dismissed such allegations as " inappropriate" given the " real threats for Putin's security." Monday Putin, 59, chaired a meeting on arms trade in his residence outside Moscow.

  LONG HISTORY OF ASSASSINATION ATTEMPTS

  Allegations of widespread fraud in a parliamentary election on December 4 have angered many liberals and nationalists in Moscow and St Petersburg, and some Russians are alarmed that he could rule Russia for another 12 years if he wins two more terms.

  Previous reports of assassination attempts have rarely made a big impact in Russia. The FSO spokeswoman said such attempts had taken place but declined to specify.

  In one of the incidents, a sniper was widely reported to have been preparing to shoot at Putin and his ally, President Dmitry Medvedev, as they walked outside the Kremlin after Medvedev's victory in the 2008 presidential election.

  Putin has remained the more powerful of the two, despite stepping aside to become premier in 2008 because of constitutional limits.

  Russia has a long history of assassinations. Tsar Alexander II was killed by a bomb in 1881 and Prime Minister Pyotr Stolypin was shot in a theatre in 1911.

  A plot to kill Soviet dictator Josef Stalin along with the British and U.S. leaders was foiled in 1943, Soviet leader Leonid Brezhnev was shot at in 1969, and Soviet state founder Vladimir Lenin survived several attempts to kill him. An attempt on President Boris Yeltsin's life was reported in 1993.

  But no acting Soviet head of party, state or government was assassinated, and no Russian president or prime minister has been assassinated since the Soviet Union collapsed in 1991.

  (Additional reporting by Jennifer Rankin in Moscow and Natalya Zinets in Kiev, Editing by Timothy Heritage)

LONDON, Feb 27 (Reuters) - Iran is struggling to find buyers for its crude, with top Asian consumers seeking to cut purchases as tightening U.S. sanctions make it difficult to keep doing business with the OPEC producer.

  In Europe customers are also beginning to walk away from Iranian oil in advance of European Union sanctions, reducing flows to the continent in March by more than a third - or over 300,000 barrels daily.

  China, India and Japan, the top three buyers of Iranian oil, together buy about 45 percent of the Islamic Republic's exports and all of them are planning cuts of at least 10 percent.

  The following tables lists Asian and European buyers and the volumes they plan to purchase under various contracts. Volumes are in thousand barrels per day.

  Iran's Oil Exports to Asia CUSTOMER VOLUME

  2012 2011

  China Zhuhai Zhenrong 240 240 Unipec 230 270 Chinaoil 8 8

  Japan* Showa Shell NA 100 JX NA 90 Toyota Tsusho NA 50 Cosmo Oil About 30 40 Mitsubishi NA 15 Idemitsu Kosan NA 10 Kanematsu NA 10 Mitsui NA 10 Marubeni NA 10 Itochu NA 5 India MRPL NA 142 Essar Oil 100 160 HPCL 60 70 BPCL -- 30

  S Korea SK Energy 130 120 Hyundai Oilbank 70 70

 

  *Most of the 2012 numbers for Japan are not immediately available because contract negotiations are still ongoing. Japan and India typically have annual contracts starting in April.

  Iran's Oil Exports to Europe Figures in thousands of barrels per day based on industry and Reuters estimates. Customer Country Volume 2012 Volume 2011 Tupras Turkey 200 200 Total France 0 100 Shell UK/NL 30 100 Hellenic Greece 30 80 Cepsa Spain 50 70 Motor Oil Greece 0 60 Repsol Spain 15 30 ERG Italy 30 30 Iplom Italy 30 30 ENI Italy 20 20 Saras Italy 20 20

  TOTAL 425 740 (Compiled by Asian and European Energy Desks Editing by Anthony Barker)

NEW YORK (Reuters) - U.S. stocks rebounded on Monday from near 1 percent losses after the open to turn flat in late morning trading.

  Consumer stocks led gains, with housing sector stocks ahead after data showed that signed contracts for U.S. home resales rose to a nearly two-year high in January, further evidence of a recovery in the housing market.

  The Dow Jones industrial average gained 6.92 points, or 0.05 percent, to 12,989.87. The S& P 500 Index gained 0.92 points, or 0.07 percent, to 1,366.66. The Nasdaq Composite gained 5.11 points, or 0.17 percent, to 2,968.86.

* Govt struggles to convince voters of economic position, prospects

  * Pessimism at odds with two decades of near constant growth

  * Political and global economic uncertainty weigh

  * High cost of living, housing biggest gripes

  By Wayne Cole and Lincoln Feast

  SYDNEY, Feb 27 (Reuters) - Australia's prime minister may have resolved a bitter leadership crisis but the rancour over her government's performance highlights a deeper sense of dissatisfaction that belies the so-called Lucky Country's economic strength.

  Prime Minister Julia Gillard, who on Monday fought off a challenge to lead the ruling Labor Party, has largely failed despite a string of policy successes to convince voters that their position and prospects compare favourably to much of the rest of the world.

  The discontent puzzles policymakers who have tried to ensure businesses and consumers don't turn their glumness into a reality.

  " Perhaps we as a society tend to not give sufficient weight to the fact that we are in a long upswing," Reserve Bank of Australia Governor Glenn Stevens told lawmakers last week, highlighting the country's low unemployment rate, subdued inflation, strength in government finances and attractiveness to foreign investment.

  " We've got issues, but it's actually a pretty reasonable performance compared both with our historical experience and with the vast bulk of other countries you might choose with which to draw a comparison."

  The resource-rich country of just 22.8 million people has grown almost without pause for over two decades. Indeed, it was the only developed nation to dodge recession during the global financial crisis.

  Its jobless rate of 5.1 percent is half that of the European Union and comfortably below the United States' 8.3 percent.

  The country's banks are sound, government debt is small and the budget is well on the way to surplus. Sydney, Melbourne, Adelaide and Perth recently made the Economist magazine's top 10 list of the world's most liveable cities.

  Yet you can't turn on a TV or pick up a newspaper without being bombarded by negative headlines, focussing on the political crisis, job losses and the rising cost of living.

  The top official in the country's Treasury Department also described an " overwhelming negative" tone in much of the current debate on the economy, and told businesses and consumers to lighten up.

  " It is almost as if most Australians seem to think we live in Greece. We don't," Martin Parkinson told a Senate hearing earlier this month. " We actually have an incredibly bright future ahead of us."

 

  UNCERTAINTY WEIGHS

  Much has been made of the patchy, two-speed nature of Australia's economic growth.

  The country's vast mining sector is enjoying a once-in-a-century, China-fuelled boom but manufacturers are being gutted by the strong Australian dollar and retailers are struggling.

  " The economy is very strong in general, but it's really strong for high income-earners and people around the mining industry. It's not enormously strong for an ordinary man in the street," said Bob Gregory, a professor of economics at Australia National University.

  " There are some scare stories out there like the banks are laying off people, the car makers are laying off people...that just makes people a little edgy."

  Bernard Salt, a partner at KPMG and a consultant on cultural and demographic trends, said global economic uncertainty, combined with local political uncertainty, was weighing on Australians.

  " We are waiting for something to happen with the hung parliament, we are waiting for something to happen with Greece, and that means we just don't have the confidence in the future."

  An improvement in either could spark a sharp revival in Australia's mood, Salt said.

  " If ...we still have a fundamentally sound economy, then later this year consumers will suddenly realize that they've been saving and what will happen is that you get a complete turnaround in consumer confidence."

  A much-watched monthly survey of 1,200 consumers from Westpac showed optimists only fractionally outnumbered pessimists in February, with family finances and the economy cited as the main concerns.

  The lack of optimism could also have something to do with coalition leader Tony Abbott who has been running a relentlessly negative campaign against the government.

  In particular, Abbott has managed to tar a coming price on carbon as a " huge tax on everything" , tapping into household unease about the rising cost of living, particularly housing.

  In a country with home ownership levels among the world's highest, the average home loan is A$294,100, which at the current high exchange rate is $315,000 against an average U.S. mortgage of $240,000.

  Home loan rates are more than double those in the United States at just over 7 percent, leading to annual payments of around A$2,000 a month, although affordability has actually been improving for the past four quarters.

  Starved of investment in the past, water and power generators are having to spend heavily to modernise. That has resulted in double-digit rises in utility bills, with the promise of more to come for years yet.

  Private education has also become something of an obsession with the middle classes, sending enrolments surging in the last few years. But it's an expensive choice, given inflation in the sector is twice the national rate.

  Private schooling can cost more than A$20,000 a year for each child.

  Then again, there are few countries so rich that private schooling is an everyday concern. Australians also seem confident enough to travel abroad in record numbers, taking advantage of a currency at multi-decade highs.

  Neither has cost concerns interrupted their love affair with sports utility vehicles, where sales surged almost 30 percent in 2011 to an all-time high.

 

  GREATEST GIFT

  The RBA's Stevens, who described the country's mining boom as " the biggest gift the global economy has handed Australia since the gold rush of the 1850s" , has explained the perception in the context of the impact of the global financial crisis on household wealth.

  In the 10 years up to 2005, household wealth expanded at twice the pace of the previous three decades, mostly thanks to a debt-driven rise in home values. The government was also flush with revenue and happy to cut taxes year after year.

  But since 2008 growth in home prices braked sharply before turning negative last year. As a result, assets peaked at 803 percent of disposable income in the third quarter of 2007. Four years later the same ratio was back at 681 percent.

  Meanwhile the global crisis blew a hole in government revenues, likely putting an end to tax cuts for some time to come, and turned households cautious on spending.

  Having been negative for a while in the middle of the last decade, the household savings ratio has since shot up to 10 percent and looks set to stay there.

  Importantly, however, this sea change is not due to a lack of income, a stark difference with most other rich world peers. National disposable income is growing round 6 percent a year, even after adjusting for inflation.

  " There's no doubt household wealth has fallen and costs are rising, especially for non-discretionary items, and that's playing on people's minds," said Brian Redican, a senior economist at Macquarie.

  " But really, these problems are nowhere as tough as what other developed nations are facing. Given the choice, they are the kinds of problems you would prefer to have." (Additional reporting by Maggie Lu YueYang in CANBERRA, Editing by Jonathan Thatcher)

By Fredrik Dahl

  VIENNA (Reuters) - Iran is still relying on old technology to expand its nuclear programme, in what may be a sign it is having difficulties developing modern machines that could speed up production of potential bomb material.

  A report by the U.N. nuclear watchdog last week said Iran was significantly stepping up its uranium enrichment, a finding that sent oil prices higher on fears tensions between with the West could escalate into military conflict.

  Israel has threatened to launch pre-emptive strikes to prevent Iran getting the bomb and Defence Minister Ehud Barak has said Tehran's continued technological progress mean it could soon pass into a " zone of immunity" , suggesting time was running out for an effective military intervention.

  But, contrary to some Western media reports in the run-up to Friday's International Atomic Energy Agency report, Iran does not yet seem ready to deploy advanced enrichment equipment for large-scale production, despite years of testing.

  Instead, the IAEA document showed Iran was preparing to install thousands more centrifuges based on an erratic and outdated design, both in its main enrichment plant at Natanz and in a smaller facility at Fordow buried deep underground.

  " It appears that they are still struggling with the advanced centrifuges," said Olli Heinonen, a former chief nuclear inspector for the Vienna-based U.N. agency.

  " We do not know whether the reasons for delays are lack of raw materials or design problems," he said.

  Iran says it is refining uranium to fuel a planned network of nuclear power plants so that it can export more of its oil and gas. The United States and its allies accuse it of a covert bid to acquire nuclear weapons capability.

  Tehran often trumpets technical advances in its nuclear programme, including the development of new centrifuges - machines that spin at supersonic speed to increase the concentration of the fissile material in uranium.

  In mid-February, President Mahmoud Ahmadinejad said Iran now had a " fourth generation" centrifuge that could refine uranium three times faster than previously.

  " Iran unveiled a third-generation model two years ago and then never said more about it," said Mark Fitzpatrick of the International Institute for Strategic Studies think tank.

  " Now it says it has a fourth-generation model, which is probably a variation of the problematic second-generation machines."

  MILLION DOLLAR QUESTION

  The IAEA, which regularly inspects Iran's declared nuclear sites, has little access to facilities where centrifuges are assembled and the agency's knowledge of possible centrifuge progress is mainly limited to what it can observe at Natanz.

  Asked whether Iran may keep more advanced centrifuges at a location which U.N. inspectors were not aware of, an official familiar with the issue said: " That is, of course, the million dollar question" .

  If Iran eventually succeeded in introducing the newer models for production, it could significantly shorten the time needed to stockpile enriched uranium, which can generate electricity or, if processed much further, nuclear explosions.

  But it is unclear whether Tehran, subject to increasingly strict international sanctions, has the means and components to make the more sophisticated machines in bigger numbers.

  " Iran has been testing its second-generation models for several years but they do not appear to be ready for full-scale use yet," said analyst Peter Crail of the Arms Control Association, a Washington-based research and advocacy group.

  " Iran's ability to mass produce them is also uncertain."

  The U.N. Security Council has long called on Iran to suspend uranium enrichment and Tehran's failure to comply has earned it four rounds of sanctions, as well much tougher U.S. and European Union measures that take direct aim at its biggest export, oil.

  Western experts say Iran's stockpile of low-enriched uranium could be enough for about four atomic bombs if refined much more, should the Iranian leadership decide to do so.

  " CRACK THE CODE"

  Iran has for years been trying to develop centrifuges with several times the capacity of the 1970s-vintage, IR-1 version it now uses for the most sensitive part of its atomic activities.

  Marking a potential step forward, Iran last year started installing larger numbers of more modern IR-4 and IR-2m models for testing at a research and development site at the enrichment facility near the central town of Natanz.

  But last week's IAEA report suggested Iran was encountering problems testing them in interlinked networks known as cascades, said David Albright of the Institute for Science and International Security (ISIS) think tank.

  " The testing of advanced-centrifuge production-scale cascades ... is going far more slowly than expected," he said in an analysis. Iran's " advanced centrifuge programme appears troubled," the ISIS report added.

  The IAEA said Iran had informed it in early February of plans to install three new types of centrifuge - IR-5, IR-6 and IR-6s - as single machines at the Natanz R& D site.

  When so many models are tested simultaneously, " it indicates that Iran has not yet reached a point where it can decide which would be the next generation centrifuge to be deployed," Heinonen, now at Harvard University's Belfer Center for Science and International Affairs, said.

  Fitzpatrick said: " Sooner or later Iran will probably crack the code on advanced centrifuges and introduce them in larger numbers, but so far that hasn't been possible."

* Lowe's shares rise after results

  * G20 urges Europe to commit more to bailout fund

  * Indexes off: Dow 0.7 pct, S& P 0.75 pct, Nasdaq 1 pct (Updates to open)

  By Rodrigo Campos

  NEW YORK, Feb 27 (Reuters) - U.S. stocks opened lower on Monday following the S& P 500's four-year closing high last week and after the Group of 20 leading economies told Europe it must commit more money to fight the EU debt crisis before seeking broader help.

  The S& P 500 has risen almost 8 percent this year. It has been stuck in a tight range between 1,355 and 1,370 as expectations for a pullback are offset by an ongoing string of data pointing to a firmer recovery in the U.S. economy, including in the key housing and labor markets.

  " In the absence of a lot of news you're seeing profit taking to start the day," said Rick Meckler, president of investment firm LibertyView Capital Management in New York, which oversees about $2 billion. " It wouldn't be healthy if there wasn't some profit taking."

  The financial and industrial sectors of the S& P 500 were the worst performers in early trading, both declining nearly 1 percent. Financials are still up 11 percent for the year and industrials have gained more than 9 percent in 2012.

  Ministers from leading economies told Europe it must disburse extra money if it wants more help from the rest of the world, piling pressure on Germany to drop its opposition to a larger European Union bailout fund.

  LibertyView Capital's Meckler said even though he expects the European crisis to continue to dominate the news into the mid-year, U.S. investors are getting used to erratic developments from the euro zone.

  The Dow Jones industrial average dropped 91.28 points, or 0.70 percent, to 12,891.67. The S& P 500 Index fell 10.29 points, or 0.75 percent, to 1,355.45. The Nasdaq Composite lost 30.04 points, or 1.01 percent, to 2,933.71.

  Through Friday, of the 461 S& P 500 companies that have reported earnings for the most recent quarter 63 percent have beaten analyst expectations. More than 20 companies in the index are expected to report results this week.

  Lowe's Cos, the world's second-largest home improvement chain, reported higher-than-expected quarterly sales, and its shares rose 3 percent to $27.95.

  Concern about rising oil prices eased slightly as Brent and U.S. crude futures fell more than 1 percent, retreating from recent highs triggered by worries over disruptions to Middle East supplies.

  Still, some analysts warned consistently high oil prices could throw a wrench into the global economic recovery.

  The National Association of Realtors on Monday said signed contracts for U.S. home resales rose to a nearly two-year high in January, further evidence of a budding recovery in the housing market. (Reporting by Rodrigo Campos Editing by Padraic Cassidy)

BEIJING (Reuters) - China said on Monday it held talks with North Korea last week about providing food aid to the chronically hungry North, and urged other countries to help while Pyongyang weighs returning to six-party nuclear disarmament negotiations.

  Beijing rarely acknowledges talks about aid with Pyongyang, although its economic, energy and political aid has become increasingly important to North Korea as its ties with South Korea and other allies of the United States have soured.

  " Last week, officials in positions of responsibility from each country's foreign ministry had contact. The two sides exchanged views on bilateral relations and international and regional issues of mutual concern," ministry spokesman Hong Lei told a daily briefing.

  " Both sides also discussed China's provision of food aid to North Korea."

  China is guarded about its relationship with neighbouring North Korea, which it sees as a bulwark against possible encroachment by the United States and its allies. And Beijing is especially tight-lipped about flows of oil, grain and other aid to its much poorer and isolated neighbour.

  Hong did not give any details about the size or timing of aid, but he urged other countries to pitch in.

  " China has always done as much as it can to provide help to North Korea," he said. " We also welcome other concerned parties and the international community to provide all forms of support and help to North Korea. This would help North Korea overcome its temporary difficulties."

  North Korea suffered famine in the 1990s that killed an estimated 1 million people. It has continued to endure chronic food shortages, which have been compounded since 2008-9 when the United States and South Korea suspended their food assistance.

  Critics accuse the North's one-party leadership of siphoning off aid to feed its million-strong army or stockpiling in the event of further, tightened sanctions over its nuclear program.

  The United States last week in Beijing held its first sit-down negotiations with North Korea since its new and untested leader, Kim Jong-un, replaced his late father, and the North's demands for food aid were also discussed then.

  The talks are aimed at laying the groundwork for renewed six-party disarmament negotiations with North Korea, whose ties with South Korea have deteriorated, especially after deadly attacks on the South in 2010. One major concession the North is seeking is U.S. food aid for its chronically hungry population.

  The six-party disarmament talks involving the two Koreas, the United States, China, Japan and Russia broke down in 2008, and United Nations nuclear inspectors were expelled from North Korea in 2009.

* 2011 pretax profit $21.9 bln vs forecast $22.2 bln

  * Sees emerging markets growing in 2012, but at slower pace

  * Underlying profit down 6 pct on higher costs

  * Costs rise 10 pct, with wages climbing over $1 bln

  * Shares down 2.3 pct, lag UK market (Adds more CEO comments, details updates shares)

  By Steve Slater and Sarah White

  LONDON, Feb 27 (Reuters) - HSBC Holdings, Europe's biggest bank, said paying rising wages in Brazil, China and other emerging market is the price of avoiding the slowdown being felt by most of its rivals as it posted the largest 2011 profit by a western bank.

  HSBC, which makes over three quarters of its profits outside Europe and north America, said on Monday it was confident growth in Asia, Latin American and the Middle East would continue to offset sluggish European economies this year.

  However, with costs rising 10 percent and its wages bill up over $1 billion in 2011, chief executive Stuart Gulliver told reporters it would be a challenge to meet the bank's 2013 target for reducing costs as a proportion of income.

  Banks across Europe have been posting billions of dollars of losses as the euro zone sovereign debt crisis has hit their trading profits, and as they strive to meet tough new rules aimed at preventing a repeat of the 2007-09 banking crisis.

  HSBC which has been relatively unscathed thanks to its strength in faster-growing emerging markets, said on Monday it expected that trend to continue, despite fears some of these economies were overheating and could see an abrupt slowdown.

  " We remain comfortable with the emerging markets (outlook) and are confident that GDP growth in emerging markets will be positive and China will have a soft landing," Gulliver said. But he predicted the euro zone economy would flatline this year, with " marked recessions" in some southern countries.

  HSBC, with 89 million customers in 85 countries, said pretax profit rose 15 percent to $21.9 billion in 2011, compared with a forecast for $22.2 billion in a Reuters poll.

  The figure fell short of the group's record profit of $24.2 billion in 2007, but beat all other western banks that have reported so far for last year, including U.S. rival J.P. Morgan , which made a $19 billion profit.

  The world's most profitable banks in recent years have been Chinese groups ICBC, which made a 215 billion yuan ($34.2 billion) pretax profit in 2010, and China Construction Bank which made 175 billion yuan ($27.8 billion).

  HSBC's profit was boosted by a $3.9 billion accounting gain on the value of its debt. Stripping that out, underlying pretax profit fell 6 percent to $17.7 billion, due in part to rising wages in emerging markets and to restructuring costs.

  Gulliver was paid 8 million pounds ($12.7 million) last year -- including a 2.2 million bonus -- down from 8.4 million in 2010 when he ran the investment bank.

  HSBC said it paid another banker, whom it declined to name, 7 million pounds, while 192 employees took home more than 1 million pounds each, including 64 in Britain.

 

  WAGES AND BONUSES

  " Wage price inflation and competition for staff is very high. We are not the only people to work out that the emerging markets have high GDP growth and there's a limited pool of talent," Gulliver said, singling out Brazil, India and China as seeing particularly big increases in wages.

  HSBC would continue to pay competitively in these markets, as the growth being delivered made the investment worthwhile, he said, adding that would keep pressure on costs.

  While the group remained on track to hit its return on equity target of 12-15 percent by the end of 2013, it would be a " challenge" to achieve its cost-to-income goal of 48-52 percent by then, he said, adding that was mainly due to a difficult macro-economic backdrop holding back income.

  Its cost-to-income ratio deteriorated to 61 percent in 2011 from 55.6 percent the year before for its underlying business.

  Gulliver said HSBC would offset some of the pressure by redoubling its cost-cutting efforts elsewhere in the business, and said it was confident of hitting the upper end of its $2.5-$3.5 billion annual cost savings range.

  At 1045 GMT, HSBC shares in London were down 2.4 percent at 566.1 pence, lagging a 0.8 percent decline in the UK's benchmark FTSE 100 index. The shares have beaten the STOXX Europe 600 banking index by 15 percent over the past year.

  " They've had a good run so I can't get too enthusiastic, but they're (HSBC) going in the right direction and it's a good bet in a difficult sector," said Brown Shipley fund manager John Smith, who holds HSBC shares in his portfolio.

  HSBC said profit at its investment bank fell 24 percent to $7 billion, hurt as the euro zone debt crisis slowed capital markets activity in the second half of last year.

  Loan impairment charges and other credit risk-related provisions, however, fell $1.9 billion to $12.1 billion.

  HSBC said it paid out $4.2 billion in bonuses, down 2 percent on 2010. Banks are coming under intense pressure from politicians and the public to rein in pay awards because of the role of the sector in the world's economic problems.

  The bank, which lifted its 2011 dividend by 14 percent to 41 cents a share, has cut 11,000 jobs so far under Gulliver's plan. He said on Monday that total job losses might be less than the 30,000 originally envisaged. ($1 = 0.6306 British pounds) ($1 = 6.2978 Chinese yuan) ($1 = 0.6306 British pounds) (Additional reporting by Sudip Kar-Gupta and Kelvin Soh Writing by Mark Potter Editing by David Holmes)