FRANKFURT, Oct 18 (Reuters) - The ECB kept interest rates on hold at 1.5 percent at its meeting earlier this month, although the policymakers also discussed the merits of cutting rates.

  Below are highlights of ECB policymakers' comments since the bank's last meeting on Oct. 6.

  To read full stories, double-click on the numbers in brackets. For highlights of ECB President Jean-Claude Trichet's news conference, click on .

 

  JUERGEN STARK (EXECUTIVE BOARD), OCT 17

  " There is in the medium-term no risk to price stability, so we see, in the medium-term, the inflation rate below but close to 2 percent."

 

  ERKKI LIIKANEN (FINLAND), OCT 14

  " Euro area economic growth is also slowing in the latter part of this year. The uncertainty related to growth prospects is high, and a substantial weakening in economic activity cannot be ruled out."

 

  JOZEF MAKUCH (SLOVAKIA), OCT 13

  " I expect inflation to drop below 2 percent next year." " Negative gross domestic product can't be ruled out if downside risks materialise."

 

  ERKKI LIIKANEN (FINLAND), OCT 13

  " Risks for inflation .... are on balance." " We have no pre-commitment (on interest rates), we'll discuss that in November, next time."

 

  JOSE MANUEL GONZALEZ-PARAMO (EXECUTIVE BOARD), OCT 12

  " The role of a central bank under any circumstances, and in crisis times in particular, is to inflexibly pursue its main objective, which in the ECB's case is price stability, and to perform as a key anchor of stability."

 

  EWALD NOWOTNY (AUSTRIA), OCT 12

  " One need not have any fear of inflation ... we expect a clear decline of inflation, under the 2 percent mark in the second half of 2012."

  " What one must fear is the real economy ... There is the risk that we will enter a relatively long phase of weaker growth."

 

  JEAN-CLAUDE TRICHET (PRESIDENT), OCT 11

  Asked whether the flooding of markets with new money would lead to inflation in the medium term, Trichet said: " This fear is totally unfounded."

  " The crisis is systemic and must be tackled decisively."

  " The high interconnectedness in the EU financial system has led to a rapidly rising risk of significant contagion. It threatens financial stability in the EU as a whole and adversely impacts the real economy in Europe and beyond."

 

  JOSE MANUEL GONZALEZ-PARAMO (EXECUTIVE BOARD), OCT 7

  " As you know, we're responsible to analyse the risk to price stability, which is our main mandate, and that requires we look at the economic situation and the levels of interest rates in relation to this, and we decided that interest rates were sufficiently low in the current situation," he said, when asked why the ECB did not cut interest rates. (Compiled by Sakari Suoninen Editing by Catherine Evans)

* CFTC set to approve limits for commodity speculators

  * Rule nixes class limits, aggregation fought by Wall St

  * After years of debate, topic still contentious

  * Legal challenge looms as financial industry fights back (Updates with Dunn comments, throughout)

  By Christopher Doering and Jonathan Leff

  WASHINGTON, Oct 18 (Reuters) - The United States is set to pass narrowly on Tuesday its toughest measures yet to curtail speculation in commodity markets, likely shifting the focus of a fierce four-year debate from the regulators to the courts.

  In a measure decried by Wall Street and trading companies as a misguided political attempt to cap soaring oil and grain prices, the Commodity Futures Trading Commission was poised to approve " position limits" that will cap the number of futures and swaps contracts that any single speculator can hold.

  The divisiveness of the rule, set for a formal vote at the end of Tuesday's meeting, was stark from the opening. Key swing vote Michael Dunn, a Democrat whose term has already expired, said he would follow the Dodd-Frank law to set the limits while blasting them as a distraction from bigger issues.

  " Position limits are a sideshow," said Dunn, who is serving past his term until Congress confirms his successor. He said markets may become more risky, and hedging practices more difficult, possibly leading to higher prices.

  " I think it's important to let the public know what may happen once we implement position limits. ... In all likelihood prices of heating oil and gasoline will not drop ... Things will remain relatively the same, except for those that use the markets we regulate to provide resources we all need."

  The commission is deeply split and a lawsuit to stop the measure seems ever more likely, one more hurdle for CFTC Chairman Gary Gensler, who is struggling against emboldened Republicans and a hostile Wall Street to put in place the rules required by the Dodd-Frank financial reforms.

  After an eight-month battle, the Securities and Exchange Commission in July had its first Dodd-Frank rule overturned when a federal appeals court found the SEC had conducted a flawed analysis to support a rule that would make it easier for shareholders to nominate directors to corporate boards.

  The position-limits rule may be challenged on similar grounds -- that the costs outweigh the benefits of a plan that many industry officials say will make markets riskier by driving trade to less-regulated overseas venues.

  " We need to be very careful, but I believe we're on very solid legal ground," Democratic Commissioner Bart Chilton told Reuters Insider on Tuesday.

  It was not immediately clear who might bring a lawsuit, but the limits will affect dozens of major commodity traders and exchanges. Normally there is a limited period of two or three months after a rule is published in which a suit can be filed, though some of the rules will not take effect until late 2012.

  Gensler will also need to encourage overseas regulators to keep up with the CFTC to prevent the " regulatory arbitrage" that many fear may ensue. A meeting of global regulators in London on Friday to discuss high-frequency trading will offer him a chance to encourage others to prevent loopholes.

  But it's an uphill battle. Over the weekend, France failed to force mandatory curbs on energy and food commodities, and Britain's Financial Services Authority -- which oversees most of the major non-U.S. commodity exchanges -- has maintained a staunch opposition to mandated limits.

  SOME RELIEF

  The rule offers some cause for relief in the industry, relenting on several key provisions that were heavily criticized, as Reuters reported last month.

  Those included tough measures on whether separately controlled accounts must be aggregated and whether swaps and futures positions can be offset, so-called " class limits" , the CFTC said. It also partly yielded to CME Group calls for equal treatment of cash and physical contracts.

  But giving ground on those details will do little to temper frustration over a plan that could force banks such as Morgan Stanley and traders including grains giant Cargill to scale back business, stemming an influx of investor capital.

  The CFTC estimated the measure would cost the industry $100 million in the first year.

  The limits could temper investors who have poured over $300 billion into commodity markets, often via index swaps with banks. Under the new rules, banks will no longer be given an exemption for such speculative swaps, although they will be able to hedge on behalf of corporate customers.

  Gensler should have the votes of Dunn and Chilton, the two Democrats on the commission. He faces opposition from Republicans Jill Sommers and Scott O'Malia.

  O'Malia said the CFTC had failed to provide the " empirical evidence" to substantiate the rule -- an argument similar to that put forth by industry officials who say there is no proof of the link between speculators and commodity prices.

  Dozens of academic, government and bank studies on the subject have differed on whether speculators influence prices long-term or whether prices simply respond to market conditions. The CFTC's own economists have yet to produce any economic evidence to connect speculators to price spikes.

  Some politicians, however, have clamored for the CFTC to clamp down since early 2008, as oil and grain prices were shooting toward historic peaks.

  DEVIL IN DETAILS

  The rule covers 28 commodities from coffee to crude to copper, including nine crop markets that were already subject to limits, using a predetermined formula based on deliverable physical supply or open interest in the market. It includes for the first time contracts in the $600 trillion swaps market.

  All the rules will be phased in over time, with the final limits for all contract months set only after the agency has collected a year's worth of swaps data, a process likely to be finished only late into 2012, officials said.

  Several key provisions were eliminated from the CFTC's original proposal in January, as Reuters reported.

  One key change relaxed the requirement that big commodity players aggregate all the positions held by any hedge funds or subsidiaries in which they have a stake. Instead, it retains the " independent account controller" regime currently in place, which views separately-run trading books independently.

  Another eliminates a proposed " conditional limits" measure that would have allowed speculators in commodity markets that are settled in cash to accumulate positions of five times the limit for similar physical delivery contracts.

  That rule had riled the CME Group, which feared losing business to rival cash-settled contracts, some of which are listed by the IntercontinentalExchange. The CFTC maintained this measure for the Henry Hub natural gas market, however, where cash contracts -- and in particular the ICE look-alike contract -- are already highly liquid.

  Despite relenting on several elements that Wall Street had fought hardest, the new rule could ensnare a larger number of traders compared to the draft it released earlier this year.

  Spot-month limits could affect 85 traders in the energy markets, more than double the January estimate, according to the CFTC's estimates. However, those estimates included companies that would qualify for hedging exemptions, leaving an open question as to how many speculators would be affected. (Additional reporting by Sarah N. Lynch Editing by Jonathan Leff and Dale Hudson)

NEW YORK, Oct 18 (Reuters) - Wall Street stocks cut losses with major indexes turning positive in mid-morning trade on Tuesday, led by gains in financials and industrial shares.

  The Dow Jones industrial average was up 9.46 points, or 0.08 percent, at 11,406.46. The Standard & Poor's 500 Index added 4.16 points, or 0.35 percent, at 1,205.02. The Nasdaq Composite Index put on 1.58 points, or 0.06 percent, at 2,616.50.

(Updates prices)

  * Gold buckles under dollar strength

  * ETF holdings see largest weekly rise in a month

  By Amanda Cooper

  LONDON, Oct 18 (Reuters) - Gold was set for its largest one-day fall in two weeks on Tuesday after U.S. bank Goldman Sachs reported a quarterly loss, which coupled with evidence of slowing Chinese growth and mounting euro zone concerns, lifted the dollar.

  For the second time in its history, Goldman Sachs reported a quarterly loss, hurt by declines in the value of investment securities and customer trading assets. The bank also cut its exposure to commodities in the quarter.

  In the euro zone, Moody's Investor Services warned France's top-notch credit rating could be at risk if the cost of bailing out banks stretches its budget too much, while a reading of German business confidence fell to its lowest in nearly three years this month.

  The Chinese economy expanded at its slowest pace in two years in the third quarter of this year, which compounded fears that growth in the emerging world may be insufficient to offset slowing developed economies in Europe and the United States.

  Adding to the anxiety over the euro zone ahead of a key summit on Oct. 23, German finance minister Wolfgang Schaeuble doused optimism over the ability of European Union leaders to find a lasting solution to the debt crisis at the meeting, which further curbed investor appetite for risk.

  Spot gold was last down 2.3 percent on the day at $1,632.90 an ounce by 1353 GMT, hampered by the strength of the dollar, but traders and analysts said they expected gold to reprise its role as a safe-haven investment and rally in price.

  The price hit a record $1,920.30 in early September.

  " Overall, it looks like, at the end of the day, that we are in the same trading range of $1,600 to $1,700 and my feeling is that if (the Europeans) don't come up with any results, we are going to go much, much higher," said MKS Finance head of trading Afshin Nabavi.

  " People are nervous and ... will take any excuse to sell, but having said that, investors are on the other side and bargain-hunters are on the other side so they will be jumping on the bandwagon again once the price finds a level."

  Goldman Sachs said it lost $428 million during the third quarter, cutting its earnings per share to a loss of $0.84, compared with earnings of $2.98 per share a year earlier.

  U.S. shares fell after earnings from both Goldman and rival Bank of America disappointed investors, while European stocks declined and the euro came under pressure as hopes faded for an immediate resolution to the regional debt crisis.

  Normally, such events would heighten investor demand for gold, but the strength of the dollar posed an insurmountable headwind for the bullion price, which tends to move inversely to the U.S. currency.

  Gold's correlation to the dollar is at around its lowest in five months, meaning that the bullion price is more likely to move in the opposite direction to the U.S. currency, while its correlation to stocks is around its most positive since June.

  " The problem with all this is it's getting tricky to work out what gold's reaction will be if there was a rescue plan or there isn't a rescue plan or there is a downgrade and so on," said Mitsubishi analyst Matthew Turner.

  " The only rational conclusion I can draw is internal factors in the gold market are moving around and establishing a new level for gold. And while that goes on, the price won't move in line with other assets in a normal way," he said.

  German analyst and investor sentiment fell in October to its lowest level in nearly three years, according to a survey from the Mannheim-based ZEW economic think tank.

 

  EURO WORRIES MOUNT

  Elsewhere in the euro zone, Portugal on Monday released its draft budget bill for next year, which showed the recession would deteriorate in 2012 and the contraction in growth would be worse than had been expected when Lisbon agreed to the terms of a bailout in May.

  Gold is still set for a near-17 percent gain so far this year, driven by expectations for low interest rates in the United States and by investor demand for perceived safe havens in the face of the turmoil in Europe and rising inflation in the emerging world.

  The price of gold also fell in other major currencies including euros, sterling, yen, Swiss francs and Australian dollars, reflecting the breadth of the investor push out of bullion on Tuesday.

  However, global holdings of gold staged their first weekly inflow in a month last week, rising to 67.104 million ounces from a 2-1/2 month low below 67 million ounces early last week, indicating that there are still willing buyers.

  In other precious metals, silver fell by 3.7 percent to $30.68, while platinum fell 2.0 percent to trade at $1,517.74 an ounce and palladium shed 2.1 percent to be quoted at $602.75 an ounce. (Editing by Alison Birrane)

(Fixes headline typo)

  * Carbon traders say EUAs require different approach

  * Commodities as a whole seen less vulnerable to EU plans

  By Jeff Coelho and Barbara Lewis

  LONDON/BRUSSELS, Oct 18 (Reuters) - New EU draft rules to be published on Thursday propose making spot carbon allowances a financial instrument like any other as the European Commission strives to clean up a market that has been rocked by scandal.

  Traders and industry representatives argue European emission allowances (EUA) require special treatment and should not be lumped together with commodities and other financial assets.

  " The proposal would render the entire EUA market subject to financial market regulation," says a revised draft copy of the legislation on markets in financial instruments seen by Reuters on Tuesday.

  " Both spot and derivative markets would be under a single supervisor," it said, adding that would upgrade " the security of the market without interfering with its purpose, which remains emissions reduction" .

  Futures markets, which account for more than 90 percent of the $120 billion EU carbon market, are already covered by financial market rules. The change is to bring in spot markets used to meet punctual requirements for more allowances.

  " This will ensure coherence with the rules already applying to EUA derivatives and lead to greater security as banks and investment firms, entities obliged to monitor trading activity for fraud, abuse or money laundering, would assume a bigger role in vetting prospective spot traders," the draft says.

  The European carbon market crashed to a 31-month low of less than 10 euros < CFI2Zc1> earlier this month, pressured by the euro zone debt crisis. The market has also been undermined by a series of scandals involving fraud.

 

  " AN UNUSUAL ANIMAL"

  Those active in the spot carbon market who buy carbon allowances under Europe's Emissions Trading Scheme purely to comply with rules on how much carbon they can produce, rather than to trade, say the Commission's proposals are the wrong response.

  " There is a risk that because of all the problems with ETS, there could be a knee-jerk reaction," said Russel Mills, global director of energy and climate policy based at Dow Europe.

  " We think Mifid (Markets in Financial Instruments Directive) would be overdoing it."

  Across commodities markets as a whole, traders have said they are relaxed about the EU rules. The rules under discussion are made up of two parts -- a directive, which members states have to implement, and a regulation that would be immediately binding.

  Mills said carbon was different from other assets.

  " The problem is carbon markets are an unusual animal. They are not a pure financial instrument and they are not a pure commodity."

  Other commentators have also emphasised the need for a tailor-made regime.

  " Since EU allowances are primarily serving climate change initiatives and are compliance instruments they should not be treated as financial instruments," said Marco Foresti, an adviser to Eurelectric, a Brussels-based lobby for the electricity sector.

  The power sector accounts for around 60 percent of CO2 emissions in the EU ETS. Industry, such as cement and chemical production makes up the rest.

  For carbon markets, analysts have argued, the new rules might result only in added costs of ensuring rules are met without doing anything to combat the kind of fraud that has beset carbon.

  They did not, however, see any impact on the already much-reduced carbon price.

  " Given the spot market accounts for less than 10 percent of the total ETS trade, with this spot proportion likely to reduce even further as a result of the VAT carousel issues, I do not see it having any material impact on overall EU ETS pricing," said Ashley Thomas, a carbon and utilities analyst at MF Global.

  (Editing by William Hardy)

* CAC 40 suffers biggest loss in two weeks

  * Index outpaced by DAX, FTSE slides towards peripheral indexes

  * French banking stocks tumble despite short sell ban

  * French 10-year bond yield premium vs Bunds hits 16-year high

  By Blaise Robinson

  PARIS, Oct 18 (Reuters) - French stocks suffered their biggest drop in two weeks while the French bond yield spread hit a 16-year high on Tuesday after Moody's warning on France's triple-A credit rating outlook reignited fears of a new front in the euro zone debt crisis.

  France's blue chip CAC 40 index, home to bellwethers such as L'Oreal , Total and LVMH , dropped 2.1 percent to 3,100.79 points, underperforming the broad STOXX Europe 600 index, which was down 1.2 percent, while Moody's warnings also hit the euro .

  French banks, already battered over the last few months due to their big exposure to Greek and Italian debt, were the biggest losers. BNP Paribas and Societe Generale fell 7 percent or more, Credit Agricole was down 5.5 percent and Natixis down 5.0 percent.

  " BNP is down 20 percent in four sessions while there's a short selling ban in place. What is this telling you? Long-only funds are slashing their positions," said Derek Lawless, head of WorldSpreads France.

  Late on Monday, Moody's warned it may slap a negative outlook on France's Aaa credit rating in the next three months if the costs for helping to bail out banks and other euro zone members stretch its budget too much.

  " That's a paradox: Moody's is saying the fact that France is taking the lead in all the initiatives to resolve Europe's debt crisis such as the EFSF fund, Dexia's rescue, etc. could weaken its own finances. (French President Nicolas) Sarkozy has painted himself in a corner," Lawless said.

 

  The credit agency's warning comes as European Union leaders are trying to shape a bold plan to help the region's banks weather an expected Greek debt default.

  The news pushed the French risk premium over benchmark German bonds to a 16-year high, with the 10-year French/Bund yield spread 8 basis points wider at 104 bps, its widest since 1995.

  " It brings back the jitters over France's triple-A rating in the spotlight, and a downgrade hasn't been priced in yet. But Moody's warning is rather soft, otherwise the market reaction would be much more violent," Arnaud Poutier, co-head of IG Markets France, said.

  Moody's warning also had ripple effects on credit default swaps, with five-year CDS on French government debt climbing to 194 bps, according to data monitor Markit.

  The CAC 40's underperformance on Tuesday underscored the index's struggle to keep up with Europe's major indexes this year and its slide towards the kind of performances seen in the benchmarks of debt-troubled euro zone countries.

  So far this year, the CAC 40 is down 18 percent, falling behind UK's FTSE 100 , down 8.8 percent and Germany's DAX , down 15.6 percent, while Italy's FTSE MIB index has dropped 21.2 percent and Portugal's PSI 20 has lost 21.6 percent.