* Unrest in Oman raises concerns over Mideast Gulf output

  * Libyan oil exports disrupted by uprising against Gaddafi

  * Technicals see Brent crude up to $117.70

  * Coming Up: Chicago PMI, 1445 GMT (Updates throughout, changes dateline, pvs SINGAPORE)

  By Christopher Johnson

  LONDON, Feb 28 (Reuters) - Oil prices rose more than $1 per barrel on Monday as protests in Oman fuelled wider concern about security of supply from the Middle East after uprisings in Libya dramatically reduced exports from North Africa.

  Saudi Arabia has increased oil production to meet any shortfall from Libya but investors are worried unrest could spread to other big oil producers such as Kuwait or Iran.

  The worst-case scenario for oil markets would be an interruption to supply from Saudi Arabia itself. It holds most of the world's spare crude output capacity, and no other producer could quickly fill supply gaps.

  Brent futures for April rose $1.54 to $113.68 a barrel by 0850 GMT. U.S. crude rose $1.10 at $98.98 a barrel. Both benchmarks posted their highest weekly close in two-and-a-half years last week.

  " 'Fear mode' is clearly where we are right now, as investors look past Libya, and wonder whether the current unrest will sweep eastward into the oil-rich Persian Gulf nations in more dramatic and destabilising fashion," said Edward Meir, senior commodity analyst at brokers MF Global.

  " Dispassionate analysis would lead us to conclude that the current surge in prices is likely overdone," Meir said, noting that Libyan oil production was less than 2 percent of world supply and its output was unlikely to be lost permanently.

 

  OMAN

  Oman is the latest producer to feel the impact of the regional unrest, although its oil flow has not been affected. Omani oil is equivalent to about 1 percent of global oil consumption and any disruption could be expected to have an impact on oil prices.

  Protesters blocked roads into the industrial area of Oman's refined product export port Sohar on Monday. Product shipments continued unhindered, a port spokeswoman said.

  Oman produces around 850,000 barrels per day (bpd) and its crude forms part of benchmark used to price more than 10 million bpd of crude shipped from the Middle East to Asia.

  The uprising in Libya has shut in as much as three-quarters of its output of 1.6 million bpd, according to some estimates.

  State oil giant Saudi Aramco has met all demand for extra supplies from Libya, Chief Executive Khalid al-Falih said on Monday.

  The kingdom has boosted output above 9 million bpd, a senior industry source familiar with Saudi production told Reuters last week. Saudi Arabia pumped around 8.3 million bpd in January, according to a Reuters survey, although some estimates were as high as 8.9 million bpd.

  Iran's oil minister urged Saudi Arabia on Sunday to refrain from taking a hasty decision on increasing its oil production after the popular uprising in Libya, the official IRNA news agency reported.

  Still, Iran is also selling more crude to refiners looking for alternatives to Libyan supplies.

  Traders were looking ahead to manufacturing data to be released from the United States and China on Tuesday. (Additional reporting by Nia Williams in London and Florence Tan in Singapore editing by Keiron Henderson)

  First Published: 2011-02-28 17:08:09
Updated 2011-02-28 17:08:20

* Morgan Stanley, NRDC also looked at assets - source

  * Deal includes 560 shopping centres with Kroger, Safeway among clients

  * Blackstone agrees to pay book value of assets

  * Centro shares in trading halt ahead of deal

  * UBS, JPM running sale for Centro Moelis is adviser to Centro (Fixes graphic link, edits)

  By Michael Smith

  SYDNEY, Feb 28 (Reuters) - Private equity firm Blackstone Group will pay about $9.4 billion for nearly 600 U.S. shopping malls and other properties of Australia's debt-laden Centro Properties , a source with direct knowledge of the transaction said on Monday.

  Blackstone beat rival bidders including Morgan Stanley Real Estate, which had teamed up with Starwood Capital Group, and New York-based NRDC, which also made pitches for the property portfolio, said the source, who was not authorised to talk to the media and did not want to be identified.

  The portfolio includes 560 U.S. shopping centres, whose tenants include top grocers such as The Kroger, Safeway and Ahold USA Inc. It is the latest addition to Blackstone's rapidly expanding property empire, which includes the Hilton hotels chain.

  Shares in Centro were earlier placed on a trading halt ahead of an announcement about a potential transaction. A deal is expected to be announced on Tuesday.

  Officials for Blackstone were not immediately available to comment. A Centro spokeswoman declined to comment.

 

 

  Centro had narrowed down bidders for the U.S. shopping mall assets to three bidders, including Blackstone, a source told Reuters on Feb. 9.

 

  BOOK VALUE

  Blackstone agreed to pay book value for the assets which Centro has valued at around $9.4 billion, the source said, confirming a report in the Wall Street Journal.

  Debt-laden Centro was one of corporate Australia's first casualties of the 2008 global credit crisis. The company said last week its total portfolio was valued at A$16.5 billion, while it has A$16 billion in debt.

  Any asset sales would need approval from Centro's lenders, which are now largely made up of hedge and distressed debt funds.

  Blackstone acquired Hilton for $26 billion at the peak of the buyout bubble in July 2007.

  In November last year, Blackstone bought 180 properties, totaling 23 million square feet, from ProLogis for $1.01 billion. Earlier in 2010, it paid $900 million for industrial real estate from Eaton Vance.

  UBS and JPMorgan are running the sale process for Centro. Moelis & Co is financial adviser to Centro. (Editing by Ed Davies and Muralikumar Anantharaman)

  First Published: 2011-02-28 12:47:27
Updated 2011-02-28 16:46:56

* Glencore IPO an option no decision taken -source

  * CEO Glasenberg and team to brief sell-side analysts

  * Presentations to take place in London Mon/Tues

  * Could be listed in London and Hong Kong -source

  (Adds sources on timing and listings, further background)

  By Alexander Smith and Quentin Webb

  LONDON, Feb 28 (Reuters) - Glencore, the world's largest commodities trader, is briefing analysts ahead of a possible flotation that could be one of the biggest listings ever seen in London, sources familiar with the situation said.

  If it goes ahead, an initial public offering (IPO) of Glencore could value the company at as much as $60 billion, according to Liberum Capital estimates.

  " While no final decision has been taken, an IPO remains one of the options," one source told Reuters on Monday.

  Glencore's senior management team led by Chief Executive Ivan Glasenberg is meeting sell-side analysts in London " over a couple of days" , the source added. " This is a presentation to analysts of the company and its operations. It is educational."

  Glencore, whose one-third holding in mining group Xstrata is a key asset, would also start talking to possible " cornerstone" investors who would be expected to subscribe to large stakes, another source close to the situation said.

  " There will be some reaching out, some preliminary conversations are going to be taking place in the near term about that. Maybe the company will go and meet one or two funds they are interested in," the second source added.

  Qatar Investment Authority and China Investment Corp were both named as such investors in weekend newspaper reports.

  EASTER FLOAT?

  Speculation that an IPO could be done before Easter, which falls at the end of April, was premature and it could equally come after that, the second source said.

  " Something like this you can't really rush through and jam it through, it is a priority not to do that," the source said.

  Glencore could be listed in both London and Hong Kong, but London would be " very much be the primary listing" , they added.

  The first briefings in such situations are normally with the analysts working for the banks which have been hired to advise a company on its options. This can include the so-called global co-ordinators of a possible IPO and a wider syndicate.

  Following such presentations, investment banking analysts normally have a month to produce so-called " paving" research that is used to help explain the company to potential investors.

  Once a decision to take this step and publish such research has been taken, bankers say there are usually a couple of weeks to decide whether or not to proceed with an IPO.

  Citigroup, Morgan Stanley and Credit Suisse have been appointed to lead a possible flotation for Glencore. (Additional reporting by Kylie MacLellan Editing by Will Waterman and David Holmes)

  First Published: 2011-02-28 16:07:39
Updated 2011-02-28 17:03:49

By Jason Benham and Saleh Al-Shaibany

  SOHAR, Oman (Reuters) - Omani protesters demanding political reforms blocked roads to a main export port and refinery on Monday and a doctor said the death toll from clashes with police in the Gulf Arab sultanate had risen to six.

  Hundreds of protesters blocked the entrance to the industrial area of the northern coastal town of Sohar, which includes a port, refinery and aluminium factory. They pushed back four army vehicles that had been observing the scene.

  " We want to see the benefit of our oil wealth distributed evenly to the population," one protester yelled over a loudhailer near the port. " We want to see a scale-down of expatriates in Oman so more jobs can be created for Omanis."

  The unrest in Sohar, Oman's main industrial centre, was a rare outbreak of discontent in the normally sleepy sultanate ruled by Sultan Qaboos bin Said for four decades, and follows a wave of pro-democracy protests across the Arab world.

  Oman's government, trying to calm tensions, promised on Sunday to create more jobs and give benefits to job seekers.

  A main supermarket in Sohar was burning on Monday after being looted, witnesses said. Protesters stormed the town's police station on Sunday to try to free detainees before burning it. They had also set two state offices alight.

  As well as those demonstrating outside the industrial area, hundreds more were at the main Globe Roundabout, angry after police opened fire on Sunday at stone-throwing protesters demanding political reforms, jobs and better pay.

  Graffiti scrawled on a statue said: " The people are hungry." Another message read: " No to oppression of the people."

  Nearby, sidewalks were smashed and office windows broken. Troops deployed around the town but were not intervening to disperse protesters.

  " There are no jobs, there's no freedom of opinion. The people are tired and people want money. People want to end corruption," said Ali al-Mazroui, 30, who is unemployed.

  SOHAR OIL EXPORTS UNAFFECTED

  Marine traffic and exports of refined oil products from Sohar's port, which ships 160,000 barrels per day (bpd) of a range of products, were continuing although the flow of trucks into the port was blocked, a port spokeswoman said.

  " It is true the protesters are making a very non-violent protest," the spokeswoman told Reuters. " Marine traffic in and out is not affected at the moment."

  A doctor at Sohar's main hospital said the death toll had risen to six. Witnesses had earlier put it at two, some saying police had fired live ammunition, while others said they had used rubber bullets.

  " We have received a total of six deaths yesterday from the protests in Sohar," the emergency doctor at the state hospital in Sohar said, without saying how they had died.

  The state news agency, quoting an unnamed government source, said only one person had died in the clashes and that reports of additional dead were " devoid of truth."

  Sultan Qaboos, who exercises absolute power in a country where political parties are banned, shuffled his cabinet on Saturday, a week after a small protest in the capital Muscat.

  The government, under pressure over its response to the Sohar protests, pledged on Sunday to create 50,000 more public sector jobs and hand out unemployment benefits of $390 a month.

  Mostly wealthy Gulf Arab countries have stepped up reforms to appease their populations following popular unrest that toppled the leaders of Tunisia and Egypt and is threatening Libyan leader Muammar Gaddafi's grip on power.

  Oman is a non-OPEC oil exporter which pumps around 850,000 bpd, and has strong military and political ties to Washington.

  Sultan Qaboos appoints the cabinet and in 1992 introduced an elected advisory Shura Council. Protesters have demanded the council be given legislative powers and on Sunday Qaboos ordered a ministerial committee to study increasing its authority.

  First Published: 2011-02-28 12:53:20
Updated 2011-02-28 16:33:28

* Year pre-tax profit $19 bln, consensus forecast $20 bln

  * Cuts long-term return on equity target

  * Shares down 3 percent

  (Adds analyst comments)

  LONDON, Feb 28 (Reuters) - HSBC cut its profitability targets due to the cost of tougher global bank regulations on Monday, and disappointed investors as its 2010 profits came in slightly below analysts' forecasts.

  HSBC said pre-tax profits for the year ending December 31 more than doubled from 2009 to $19 billion. According to analysts polled by Reuters Estimates, the average pre-tax profit forecast stood at around $20 billion.

  HSBC said it had made a good start to the year but its new chief executive Stuart Gulliver cut the bank's long-term return on equity (ROE) target to 12-15 percent from a previous 15-19 percent target.

  HSBC shares, which had been trading up 2 percent before the results, fell back and were down 3.1 percent at 689 pence by 0838 GMT.

  " The main disappointment is that the net income missed analysts' estimates by $0.5 billion and that has led to a sharp share price drop after the announcement," said Mic Mills, head of electronic trading at ETX Capital.

  Ion-Marc Valahu, co-founder and fund manager at Swiss firm ClairInvest, also said there was disappointment at the scaling back of HSBC's return on equity target.

  " Overall, it's a good set of numbers but on the net income figure, they came in a little shy on what analysts were expecting. The return on equity target is also a little light," he said. (Reporting by Steve Slater and Sudip Kar-Gupta Additional reporting by Jon Hopkins Editing by Rosalba O'Brien)

  2011-02-28 16:50:52

* FTSEurofirst 300 index down 0.4 percent

  * Libya tensions escalate, DAX 'fear guage' up 5 percent

  * HSBC the top faller on results

 

  By Simon Jessop

  LONDON, Feb 28 (Reuters) - European shares fell on Monday, hit by forecast-lagging results from banking heavyweight HSBC and a retreat in investor risk appetite after Libya tensions and the price of oil both rose again. Europe's biggest bank, HSBC, fell 3 percent to lead fallers across all sectors after it posted results which fell short of forecasts.

  At 0839 GMT the pan-European FTSEurofirst 300 index of top shares was down 0.4 percent at 1,154.84 points. The market had gained 1.2 percent on Friday, snapping a week long selloff that had been biggest since July 2010.

  " There's little reason to believe traders will deviate the core of their attention in the short term from volatility in oil prices and the evolving geopolitical structure throughout North Africa and the Middle East as the next trading month rolls around," Terry Pratt, institutional trader at IG Index, said.

  Tensions in Libya heightened over the weekend after Muammar Gaddafi rebuffed calls to step down as leader and rebels in the eastern city of Benghazi said they would take the fight to the rest of the country.

  Concern about the escalating violence and fears it could spread to other, more crucial oil-producing states pushed the Brent crude oil price for April delivery up 1.4 percent to $113.69 a barrel in early morning trade, although it is still short of last week's high of nearly $120 a barrel.

  The early stock market falls were a combination of the HSBC and Libya news, said a London-based trader at a leading investment bank. " Over the weekend we definitely had the realisation that macro fears are still as pre-eminent as ever."

  The VDAX-NEW volatility index, Europe's main barometer of investor anxiety, was up 5 percent, reversing most of Friday's fall.

  The higher the volatility index, based on sell and buy options on Frankfurt's top-30 stocks, the lower investors' appetite for risky assets such as equities. (Editing by Greg Mahlich)

  2011-02-28 16:57:38

* Loan balance to reach 2.1 trln yen in March, near BOJ's cap

  * More regional banks borrow under scheme

  * Focus on whether BOJ decides to boost 3 trln yen cap

  By Rie Ishiguro and Leika Kihara

  TOKYO, Feb 28 (Reuters) - The Bank of Japan's loan scheme targeting growth industries continues to draw solid demand with total lending approaching its cap, opening the way for debate within the board on whether to expand the size of the scheme.

  The central bank will lend 722 billion yen ($8.83 billion) to financial institutions extending loans to high-growth industries in the third tranche of the scheme, to be disbursed on March 7.

  That will boost the total balance of lending to 2.1 trillion yen, nearing the 3 trillion yen set aside for the scheme, which expires in March 2012.

  BOJ policymakers may start debating if the size of the loan scheme should be expanded and if there is a way to do so without crowding out investment opportunities for private-sector commercial banks. Its board next meets for a rate review on March 14-15.

  Some analysts, however, are sceptical if there is room to expand the size of the loan scheme.

  " The BOJ is unlikely to expand the loan scheme given that it causes banks' profitability to decline due to depressed interest rates, while bank lending continues to fall," said Masamichi Adachi, a senior economist at JPMorgan Securities Japan.

  " More regional banks are taking advantage of the cheap loans but only at the expense of their competitors. Banks' behaviour as a whole has not changed because of the scheme."

  In a sign of widening interest, however, the cheap loans, which the BOJ lends to commercial banks at 0.1 percent, have attracted more interest from regional banks.

  Of the total loans to be extended in March, 56 percent will be to regional banks, against just 25 percent in the first tranche and 36 percent in the second tranche.

  Commercial banks used much of the money borrowed from the BOJ for loans to industries such as those concerned with the environment and energy, and medical and nursing care, as well as investment in Asia, the BOJ said.

  With interest rates already effectively at zero, the BOJ has launched various measures aimed at funnelling money into the fragile economy and pulling it out of deflation.

  One is the loan scheme put in place in June last year, under which the BOJ offers up to 3 trillion yen in cheap loans to banks that lend to industries with high growth potential such as environmental protection and health care.

  The BOJ already lent 1.46 trillion yen in two tranches last year with the scheme drawing demand from banks big and small.

  Some BOJ officials have not ruled out boosting the loan scheme if it continues to draw strong demand, given that nearly half of the 3 trillion yen set aside was disbursed last year -- well before its expiration in 2012.

  But others are wary about expanding the scheme given strong opposition from some regional lenders, such as credit unions, who complain it is excessively squeezing their profit margins.

  BOJ board member Miyako Suda, whose term expires in March, has been the most vocal advocate of the scheme, saying in December that there was room to make it more attractive by increasing its size or reviewing the conditions for extending loans.

  Deputy Governor Hirohide Yamaguchi also appears keen about expanding the scheme, saying last week that the central bank will continue to look for ways to help boost Japan's potential growth.

  Aside from the loan programme, the BOJ separately launched a 5 trillion yen asset buying pool in October last year to directly purchase assets ranging from government bonds to private debt.

  That fund is a direct, short-term monetary easing measure, whereas the loan scheme is a longer-term, less direct approach to fighting deflation. ($1=81.72 Yen) (Editing by Michael Watson)

  2011-02-28 16:57:26

* China, U.S. cotton contracts rise by daily limit

  * Speculators blamed for pushing up prices

  BEIJING, Feb 28 (Reuters) - Chinese and U.S. cotton futures hit their upward trading limits on Monday, with speculators blamed at least in part for driving up prices that were already rising because of low supply and high demand.

  China's benchmark Zhengzhou cotton futures rose 7 percent to touch the daily trading limit of 32,435 yuan per tonne.

  " We believe the price has been pushed up by (speculative) funds. For the physical market, both cotton and yarn prices have not changed that much or are even slightly down," said Dong Shuangwei, an analyst with Beijing Capital Futures.

  Dong said prices at around 30,000 yuan per tonne reflected production costs.

  " Overall cotton supply is still tight, but today's rise does not reflect fundamentals. It's because of short-term funds."

  Earlier, China's National Bureau of Statistics confirmed China's cotton output fell 6.3 percent in 2010 to 5.97 million tonnes. But the decline was largely expected, having been forecast by an industry body and trailed by a previous, albeit smaller, estimate of falling output.

  Cotton acreage fell to 4.85 million hectares in 2010 from 4.95 million tonnes the previous year, the Bureau said.

  The Chinese contract's daily limit rise followed a similar jump in the benchmark U.S. contract which rose by its 7 cent daily limit in Asian trading earlier on Monday, after another limit-up in late trading on Friday.

  " I think this is due to a rebound in global equity markets, as we can see that the Asian markets are recovering from losses. Cotton prices usually move in step with equity markets," said Ker Chung Yang, an analyst at Phillip Futures in Singapore.

  " The USDA is also forecasting a substantial jump in China's cotton imports. Also, there was news that China's cotton output fell by 6 percent in 2010, all these factors are driving prices higher." (Reporting by Tom Miles and Niu Shuping Additional reporting by Naveen Thukral in SINGAPORE Editing by Jacqueline Wong)

  2011-02-28 16:51:29

By Jack Kim

  SEOUL (Reuters) - South Korean and U.S. forces began on Monday military exercises that they say are defensive but which have raised tension and led to North Korean threats to use nuclear weapons and turn Seoul into a " sea of flames."

  The North's threats were similar to rhetoric unleashed last year when tension peaked on the Korean peninsula after two attacks by the North killed sailors and civilians in the South and drove its conservative government to pledge retaliation.

  The friction dampened market sentiment in Monday trading, with stocks closing down although defence-related issues outperformed the index. The won currency was briefly hit, although it regained ground on demand from domestic exporters. Bond investors shrugged off the tension.

  South Korea brushed off the North's threat saying the drills were defensive and would be going ahead in full to test the readiness of its troops and their U.S. allies against any attack from the North.

  " These are annual drills, and we don't call them off because the North is unhappy about them," a South Korean government official said.

  The U.S. military also said in a statement that the drills were defence-oriented and " designed to enhance readiness, defend the Republic of Korea and respond to any potential situation," adding they were " planned months in advance and they are not connected to any current world events."

  North Korea has twice set off nuclear devices but experts do not believe it has mastered the technology of miniaturizing a nuclear warhead to mount it on a delivery weapon such as a missile.

  The renewed tension coincided with a campaign by the South's military to demoralise the North's hungry troops and residents by dropping leaflets telling of protests in Egypt and Libya against leaders there. The South has also been dropping small baskets of food and medicine from balloons.

  " TREMENDOUS IMPACT"

  While the campaign is aimed at encouraging North Korean residents to think about change, it is not seen as enough to trigger the kind of uprisings seen in the Middle East, analysts and officials in Seoul said.

  But the campaign could alarm the North's leadership as it steps up a succession process with preparations for leader Kim Jong-il's youngest son, still in his 20s and with little to show in terms of accomplishments, due to take over from his father.

  " The leaflets do seem to be having a tremendous impact on the North's leadership," a senior South Korean official said. " The Middle East situation seems to have little impact on the North's residents."

  The South Korean and U.S. drills, which run through March 10 and involve 2,300 U.S. troops joining hundreds of thousands of South Koreans, focus on crisis management and command and control.

  They will continue with large, field-training exercise that will run through April with many of the 10,000 U.S. troops taking part being shipped in from posts outside the Korean peninsula.

  The United States has about 30,000 troops in South Korea to help defend against the North. The 1950-53 Korean War was ended with a truce, not a full treaty.

  On Monday, the North's official Rodong Sinmun said the South was driving the peninsula closer to a nuclear war by joining forces with foreign troops.

  (Additional reporting by Yoo Choonsik and Jungyoun Park Editing by Robert Birsel)

  2011-02-28 16:32:13

HONG KONG, Feb 28 (Reuters) - Hong Kong stocks finished higher on Monday as large cap financials advanced ahead of annual results from HSBC, raising the risk of a pull-back if Europe's largest lender disappoints with a tepid earnings forecast.

  The Hang Seng Index < .HSI> closed up 1.42 percent at 23,338.02, trimming its loss for February to 0.5 percent. Manufacturing and building-related stocks such as cement pushed the China Enterprises Index < .HSCE> of top locally listed Chinese companies up 1.91 percent.

  The Shanghai Composite < .SSEC> recovered from earlier losses to close up 0.92 percent. The index rose 4.1 percent in February making it Asia's top performing market.

  HIGHLIGHTS:

  * HSBC Holdings Plc < 0005.HK> ended the day up 1.5 percent as investors geared up for results and a possible dividend boost from the industry bellwether. High expectations among investors have lifted its Hong Kong-listed shares 13.4 percent this year, easily outpacing the Hang Seng Index's 1.3 percent advance.

  * Coal-related stocks were on fire on Monday after the world's largest producer Coal India Ltd < COAL.BO> raised prices earlier in the day. Sany Heavy International < 0631.HK> , which also received a boost from a ratings upgrade from brokerage Nomura International, rose 9.4 percent.

  DAY AHEAD:

  Corporate earnings will take centre stage this week in Hong Kong, with HSBC rival Standard Chartered Plc < 2888.HK> and Hong Kong Exchanges & Clearing Ltd < 2888.HK> both scheduled to report on Wednesday.

  Monthly gaming revenue from Macau and results from Sands China Ltd < 1928.HK> on Tuesday will keep casino stocks in focus on Tuesday. (Editing by Chris Lewis) (vikram.subhedar@thomsonreuters.com +852 2843 6975 Reuters Messaging: vikram.subhedar.reuters.com@reuters.net))

  2011-02-28 16:21:28

* JGB futures erase gains as shares reverse early losses

  * Players square positions ahead of 10-yr auction

  By Akiko Takeda

  TOKYO, Feb 28 (Reuters) - Japanese government bond prices inched down on Monday as Tokyo shares trimmed earlier losses and as players sold debt to make room on their books ahead of a 10-year auction.

  The sale on Tuesday is expected to draw decent demand from investors, but some analysts were worried that a raft of offers planned for early March could lead to higher yields.

  March 10-year futures were down 0.05 point at 139.54 after climbing to 139.76.

  The Ministry of Finance will sell 2.2 billion yen ($26.92 million) of 10-year JGBs on Tuesday, with the coupon seen at 1.2 or 1.3 percent. The offering is expected to be bolstered by enhanced appetite for government debt on tensions in the Middle East and north Africa.

  " Significant falls in (10-year) yields last week made the maturity unattractive," said Akito Fukunaga, chief fixed-income strategist at RBS securities in Japan.

  " Given the broad trend for economic recovery and the expected gradual yield rise, a 1.3 percent coupon is desirable for the smooth absorption of the upcoming tender."

  The benchmark 10-year yield was up 1 basis point at 1.255 percent. The yield climbed to a 10-month peak of 1.350 percent earlier this month before the turmoil in the Middle East escalated.

  The five-year yield was unchanged at 0.545 percent. The 20-year yield was 1 basis point higher at 2 percent.

  U.S. Treasuries gained in Asia on Monday after oil prices soared on worries about supply from Libya and the Middle East, raising worries U.S. growth could be hindered by higher energy costs.

  Japan's Nikkei stock average gained 0.9 percent on Monday. (Reporting by Akiko Takeda Editing by Joseph Radford)

  2011-02-28 15:55:19

BEIJING, Feb 27 (Reuters) - China must ward off threats to stability from price rises and pressure to sharply raise the yuan currency, Premier Wen Jiabao said on Sunday.

  He was answering questions on an online forum about economic and social worries.

  Here are key comments from the online discussion, which was organised by China's official Xinhua news agency:

 

  PRICE RISES AND INFLATION

  " Rapid price rises have affected the public and even social stability. The Party and government have always made a priority of keeping prices at a generally stable level."

  " Our country has had seven successive years of bumper harvests, it has ample (grain) reserves, we have a robust material base and we have abundant foreign exchange reserves. These all offer favourable conditions for dealing with price rises."

  " There must be unwavering determination to contain investment and speculative demand in housing. We're adopting economic and legal measures, as well as when necessary administrative ones."

  " I'm confident that through our efforts, we'll see results in reining in speculative and investment purchases of housing."

 

  YUAN EXCHANGE RATE POLICY

  " The appreciation of the renminbi exchange rate is in keeping with our economic needs and also in keeping with the people's interests, but we have proposed that the appreciation must be kept gradual because of the features of our external trade, with 50 percent from processed trade and over 50 percent from foreign businesses or joint enterprises."

  The renminbi is another name for China's yuan currency.

  " Under these circumstances, the appreciation of the yuan must take into account the ability of businesses to cope and the impact on employment."

  " If the renminbi had a dramatic one-off revaluation, that would lead to many processing firms being left bankrupt or unable to do business. It would lead to orders from foreign trade companies shifting to other countries, and we would have many workers made unemployed, and most of these workers would rural migrant workers."

  Wen said of foreign critics: " Let them think about that. If businesses go bankrupt, workers become unemployed and rural migrant workers go home, then what do we have to expand domestic consumption, where will increased consumption come from?"

  " They may not know that now close to 50 percent of rural residents' income comes from wage income. That has been a major source of improving rural livelihoods in recent years -- 240 million farmers going to cities to work."

  " Therefore, we must certainly constantly advance renminbi exchange rate reform ... But we must be advance in a prudent, step-by-step, gradual way, so that our businesses can steadily adapt and overall social stability is maintained."

 

  ECONOMIC GROWTH GOALS

  " During the 12th Five-Year Plan, we have set economic growth at 7 percent (annually)."

  " We're doing this because we want to make the focus of our work improving the quality and benefits of economic growth. That is, we want to use the fruits of development on people's well-being. We absolutely must not any longer sacrifice the environment for the sake of rapid growth and reckless roll-outs. That will lead to production capacity gluts and deepening pressure on the environment and resources so that economic development will be unsustainable."

  (Editing by Yoko Nishikawa)

By Abhijit Neogy and Manoj Kumar

  NEW DELHI (Reuters) - India's finance minister announced on Monday a food security bill for 2011/12, a budget measure that would provide cheap grains for millions of India's poor but which has sparked worries over its huge cost.

  It was part of a slew of increased social spending in the annual budget as Prime Minister Manmohan Singh confronts high prices and corruption scandals as well as elections in five states this year.

  In his ongoing budget speech, Finance Minister Pranab Mukherjee said social spending would rise by 17 percent in 2011-12. That includes health spending, which would rise 20 percent in the fiscal year starting April 1.

  But the government hopes buoyant tax revenues from near-nine percent economic growth will keep fiscal deficit falling to 5.1 percent of GDP this fiscal year and to 4.6 percent of GDP in 2011/12 - figures widely seen as too optimistic.

  " Both the borrowing and fiscal deficit numbers have been worked out taking into account the most optimistic macro-economic scenarios, which in all likelihood is not going to be the real situation." said Rupa Rege Nitsure, chief economist at Bank of Baroda in Mumbai.

  There were few of the reforms, like allowing foreign investment in the modern supermarket sector, that many investors had hoped to improve productivity and help India compete with the likes of China.

  " At times the biggest reforms are not the ones that make headlines, but the ones concerned with details of governance which affect the everyday life of the common man," Mukherjee told parliament

  " In preparing this year's budget, I have been deeply conscious of this fact."

  It appeared that ruling Congress party chief Sonia Gandhi and her more leftist advisors had won over reformists like the beleaguered prime minister who is engulfed in corruption scandals.

  India's most-traded 8.13 percent, 2022 bond yield rose 2 basis points to 8.11 percent on news of increased social spending before falling to as much as 8.05 percent after the fiscal deficit target and net borrowing amount of next year was announced.

  FOCUS ON FARM SECTOR

  Mukherjee also announced incentives for private investment in infrastructure as well as moves to help agricultural productivity to sustain economic growth and lower inflation.

  The minister raised the foreign investment limit in corporate infrastructure bonds by $20 billion (12.4 billion pounds). Mukherjee also said infrastructure debt funds would be created.

  In a pilot move, the minister said some subsidies for food and fuel would be directly given as cash to customers starting in March, a move aimed at making the subsidies system more efficient with less waste.

  The government is expected to count on a robust economy to expand revenue in the absence of big one-time gains that it enjoyed in the current year from the sale of 3G telecom licences. Mukherjee said he expected the economy to grow 9 percent in 2011/2012 and for inflation to ease.

  Asia's third-largest economy is on track to grow at 8.6 percent in the current fiscal year that ends in March.

  India's economy grew a slower-than-expected 8.2 percent in the October to December quarter from a year earlier, government data on Monday showed. The median forecast in a Reuters' poll was an annual rise of 8.6 percent.

  Getting rid of supply bottlenecks in the food sector will be in focus in 2011-12, Mukherjee said, adding that cold storage chains would be given infrastructure status, which makes them eligible for preferential borrowing rates to build facilities.

  As much as 40 percent of India's fruit and vegetable production is wasted because of poor networks and a lack of cold storage facilities, with much product still sold on flat-bottomed carts by smallholders even in the centre of cities like Delhi.

  The moves to bolster development of India's infrastructure were expected. Inadequate power, roads and other infrastructure act as bottlenecks to growth and push up costs.

  India's budget will also give a 3 percent interest subsidy to farmers in 2011/12, up from 2 percent previously, and raises the target for loans to the farm sector to 4.75 trillion rupees ($105 billion) from 3.75 trillion rupees previously.

  Some economists say the government is optimistic in its fiscal deficit predictions given the absence of one-time gains from telecom licence sales and the prospect that India's subsidy burden could swell if oil prices stay above $100 per barrel and New Delhi continues to subsidise diesel and cooking fuels.

  Some economists also expect a slowdown in growth in the new year, which would make the deficit target harder to reach.

  New Delhi announced net market borrowing of 3.43 trillion rupees from the bond market in the new year, less than the 3.77 trillion rupees forecast in a Reuters poll.

  India is in a bind over inflation, which has prompted street protests and drawn criticism from the opposition. Food and fuel subsidies are popular with voters and help offset inflation but add to India's fiscal burden.

  (Additional reporting by Jonathon Burch and Jo Winterbottom in Delhi Writing by Alistair Scrutton)

  2011-02-28 15:55:48

HONG KONG, Feb 28 (Reuters) - Shanghai shares rose on Monday as optimism ahead of the annual parliamentary session that begins on Thursday encouraged investors to buy into financials and manufacturing-related stocks.

  The benchmark Shanghai Composite Index ended up 0.9 percent at 2,905.1 points. The index rose 4.1 percent in February making it Asia's top performing market for the month. (Reporting by Emma Ashburn Editing by Jacqueline Wong)

  2011-02-28 15:12:04

* World's oil supply to tighten if unrest spreads in MidEast

  * Technicals show Brent crude to rise to $117.70

  * Coming Up: Chicago PMI, 1445 GMT (Updates prices)

  By Florence Tan

  SINGAPORE, Feb 28 (Reuters) - Brent crude rose on Monday, crossing $114 a barrel, as protests in Oman fueled concern about security of supply from the Middle East and North Africa even as top exporter Saudi Arabia pumps more.

  Oman is the latest producer to feel the impact of the regional unrest, although its oil flow has not been affected. Revolt in Libya has cut as much as three quarters of the OPEC-member's output, prompting Saudi Arabia to step in and plug the supply gap to Libya's oil buyers.

  Brent crude rose by $1.63 to $113.77 a barrel by 0747 GMT. U.S. crude rose $1.59 at $99.47 a barrel. Both benchmarks posted their highest weekly close in 2-1/2 years last week.

  " There is the continued threat that conflicts will spread in the region that produces a large amount of oil in the world," said Ben Westmore, a commodities economist at the National Australia Bank.

  " There's been a bit of a contagion already," he said.

  The worst-case scenario for oil markets would be an interruption to supply from Saudi Arabia. It holds most of the world's spare crude output capacity, and without it there is no producer that could fill supply disruption such as that stemming from Libya.

  The impact on oil supply would also be severe if conflict were to spread to big suppliers such as Iran and Kuwait, Westmore said.

 

  OMAN

  Protesters blocked roads into the industrial area of Oman's refined product export port Sohar on Monday. Product shipments continued unhindered, a port spokeswoman said.

  Oman is a small oil producer pumping around 850,000 barrels per day, but its crude forms part of benchmark pricing for more than 10 million barrels per day (bpd) of crude shipped from the Middle East to Asia. Oman exports crude through the port at Mina al-Fahal.

  Oman accounts for about 1 percent of the global oil consumption and any disruption would have an impact on oil prices, Westmore said.

  " In terms of those countries who directly import from Oman, I think they can source oil from elsewhere," he said.

 

  LIBYA

  Violent revolt in Libya has shut down as much as three-quarters of its output of around 1.6 million barrels a day (bpd), according to some estimates.

  State oil giant Saudi Aramco has met all demand for extra supplies from Libya, Chief Executive Khalid al-Falih said on Monday.

  The kingdom has boosted output to a level exceeding 9 million bpd, a senior industry source familiar with Saudi production told Reuters.

  Saudi Arabia pumped around 8.3 million bpd in January, according to a Reuters survey, although some estimates are higher and one consultant pegged output last month 8.9 million bpd.

  Iran's Oil Minister urged Saudi Arabia on Sunday to refrain from taking a hasty decision on increasing its oil production after the popular uprising in Libya, the official IRNA news agency reported.

  Still, Iran is also selling more crude to refiners looking for alternatives to Libyan supplies.

 

  PRICES

  JPMorgan increased late on Friday its 2011 Brent oil forecast to $108 a barrel, up from the previous $95, on tighter supply after Libyan output losses.

  It also raised its 2011 average forecast for WTI crude by 3.2 percent to $96 a barrel.

  " The new 2011 price forecast maps a projected outcome within a range of scenarios that could encompass the oil market over the next 12 months - ranging from a rapid normalization of geopolitical risk to the loss of output in a major oil producer," JPMorgan said in a report on Friday.

  Traders were looking ahead to manufacturing data to be released from the United States and China on Tuesday, Westmore said. (Editing by Ed Lane)

By Andrew Heavens

  KHARTOUM (Reuters) - At least 10 people were killed in clashes between Arab nomads, militia fighters and police in Sudan's flashpoint Abyei region, officials said, in the first report of significant violence since a tentative peace deal.

  Both north and south Sudan claim the oil-producing area of Abyei, one of the most likely sources of potential conflict in the build-up to the secession of southern Sudan, due in July.

  Fighting in Abyei -- between Misseriya nomads, linked to the north, and the south-linked Dinka Ngok people -- marred the start of voting in a referendum in January that saw the south vote for independence.

  Later in the month, both sides reached a deal promising to pay blood money for earlier clashes and open up migration routes for livestock. Northern and southern leaders promised to hammer out a settlement on who owned Abyei.

  Abyei's chief administrator Deng Arop Kuol, from the Dinka Ngok, told Reuters a group of Misseriya, backed by militia fighters, attacked the settlement of Todach in the early hours of Sunday morning.

  Kuol said the militia were part of the Khartoum-backed Popular Defence Forces. " There are senior figures in the government who are inciting people to fight ... We don't know really what they are aiming at. Do they want to disrupt the (north-south border) demarcation process, or the process of the separation of the south?"

  Senior Misseriya official Saddig Babo Nimr accused south Sudan's army of starting the fighting by attacking a nomadic camp north of Abyei, adding the fighting continued on Monday.

  " You would have to ask the SPLA (southern army) why. From my perspective, they want to evacuate the area of Arabs ... I think the Misseriya are reinforcing."

  No one was immediately available to comment from the government or the northern army. Both have denied accusations of arming the Misseriya and allied militias in the past. The south's army denied any involvement.

  Kuol said around seven police officers in Todach, and around three of the attackers, were killed.

  He said there had been little progress in rolling out the peace deal agreed in Kadugli, the capital of the surrounding state of Southern Kordofan. Sunday's clash came days after a meeting between Dinka and Misseriya leaders over compensation and migration routes ended without agreement, he added.

  Abyei was a battleground in the decades-long civil war between north and south Sudan that ended in the 2005 Comprehensive Peace Agreement -- an accord that promised the southern secession referendum.

  Abyei residents were promised their own vote on whether to join the north or south. That plebiscite never took place after disagreements over who was qualified to vote and the failure to agree on the members of an organising commission.

  Northern and southern leaders were due to meet in the Ethiopian town of Debre Zeit this week to try and resolve other issues, including the division of national debts, the position of their shared border and payments for transporting southern oil through the north to Port Sudan.

  (Additional reporting by Jeremy Clarke in Juba Editing by Peter Graff)