Seventeen dead as Syrians stage mass protests

(Reuters) – Syrian security forces, undaunted by the presence of Arab League observers, have killed at least 12 protesters as hundreds of thousands demonstrated against the government of President Bashar al-Assad, opposition activists said.

Five members of the security forces were also killed in a shooting in the city of Homs, the British-based Syrian Observatory for Human Rights said on Friday.

Assad, 46, has signed up to an Arab League plan for a verifiable withdrawal of his troops and heavy weaponry from towns and cities, where they have been trying to crush protests that have raged since March.

But the presence of Arab League monitors in hotspots across Syria since Monday has, if anything, energised the protesters, while provoking scepticism in Western countries.

Demonstrators determined to show the scale of their movement to the monitors threw rocks at security forces in the Damascus suburb of Douma, where troops tear-gassed the chanting crowds.

Five people were shot dead in the city of Hama and five in the city of Deraa as crowds braved army and police, the Observatory reported, adding that at least two dozen people had been injured in Douma.

“We are determined to show them (the monitors) we exist. Whether or not there’s bloodshed is not important,” an activist named Abu Khaled said by phone from the northern city of Idlib.

Most foreign media are banned from Syria and witness reports and videos are hard to verify.

An opposition supporter named Manhal said thousands had tried to reach the main square of Idlib to start a sit-in but failed “because the security forces are firing a lot of tear gas and a few rounds of live fire”.

“People hoped the presence of monitors will prevent fierce attacks. I believe we have partial protection, I don’t think they would use live fire on us in front of the monitors.”

The Observatory said security forces had shot dead two people and wounded 37 in Idlib province.

SEA OF PROTESTERS

Amateur video from Idlib showed monitors in white baseball caps and yellow safety vests wading through a sea of protesters.

Some rushed at the observers, trying to shout over the thousands chanting “The people want to liberate the country!”.

More than 5,000 people have been killed across Syria since March – most shot during peaceful anti-government protests but many others killed in rebel attacks and local defence actions.

Protesters flooded the streets of many towns, shouting “Peaceful, Peaceful” and “The people want you executed, Bashar!”

Some held up banners with the names of those shot dead in protests. “We will not forget your spilled blood,” they read.

In parts of Hama, videos showed protesters fleeing the main streets as heavy gunfire erupted in the background. In one such segment, a few men rushed back, ducking in the crackle of gunfire, to carry away a man who had fallen limp in the street.

In the Damascus suburb of Douma, protesters bore away a man whose leg had been shredded by what they said were nail bombs.

Activists in Idlib said the army had concealed its tanks in buildings on the outskirts or in dugouts.

The Arab League mission has met with strong scepticism from the outset over its makeup, its lack of numbers – due to rise from 60 to 150 – and its reliance on government transport.

A first assessment by its Sudanese head that the situation was “reassuring” prompted disbelief in the West on Wednesday, but on Friday Syria’s ally Russia accepted the judgment.

“Judging by the public statements made by the chief of the mission (Sudanese general Mohammed) al-Dabi, who in the first of his visits went to the city of Homs, … the situation seems to be reassuring,” Russia’s Foreign Ministry said on its website.

However on Friday Dabi, whom some link to war crimes in Darfur in the 1990s, said the reports of his comments were “unfounded and not true”, a mission statement said.

IMPARTIALITY

The United Nations said it was critical that the team’s “independence and impartiality be fully preserved”.

Spokesman Martin Nesirky urged the Arab League to “take all steps possible to ensure that its observer mission will be able to fulfil its mandate in accordance with international human rights law standards”. He said the United Nations was willing to give the League observers training on human rights monitoring.

The monitoring teams have encountered a range of problems, from hostility when they turn up under army escort to random gunfire, shouting mobs and breakdowns in communications.

An Arab League member from a Gulf State played down expectations for the mission, which has no peacekeeping mandate.

Even if its report turned out to be negative, it would not “act as a bridge to foreign intervention” but simply indicate that “the Syrian government has not implemented the Arab initiative”, the delegate told Reuters.

The commander of the anti-government Free Syrian Army told Reuters he had ordered his fighters to stop offensive operations while the FSA tried to arrange a meeting with the monitors.

“All operations against the regime are to be stopped except in a situation of self defence,” Colonel Riad al-Asaad said. “We have tried to communicate with them and we requested a meeting with the team. So far there hasn’t been any success.”

Just how widely the Turkey-based commander’s order will be heeded by rebel forces inside Syria is open to question. A video shot by rebels this week showed the ambush of a convoy of army buses in which, activists said, four soldiers were killed.

The FSA, formed by thousands of defectors from Assad’s army and financed by expatriate Syrians, has taken the offensive in the past three months, taking the fight to the state rather than simply trying to defend opposition strongholds.

Its decisions are potentially crucial to any peace plan.

Syria says it is fighting Islamist militants steered from abroad who have killed more than 2,000 of its troops. Activists do not dispute a significant toll among the security forces.

(Additional reporting by Thomas Grove in Moscow, Ayman Samir and Yasmine Saleh in Cairo, Justyna Pawlak in Brussels and Stephen Addison in London; Writing by Douglas Hamilton; Editing by Kevin Liffey)

Nobel laureate Ramakrishnan to get knighthood

(REUTERS) – Venkatraman Ramakrishnan, India-born U.S. citizen whose work in molecular biology won him the 2009 Nobel Prize in chemistry, will be knighted in UK, media reports said.

Ramakrishnan, or Venky as he is popularly known, is a biologist based at the Medical Research Council’s Molecular Biology Laboratories in Cambridge,

He has been honoured “for services to molecular biology” in the New Year Honours List 2012, according to an official announcement.

In a statement to the Press Trust of India, he said: “In the current debate about immigration, it is worth noting that this award is yet another example of the numerous contributions that immigrants make to British society.”

Born in 1952 in the temple town of Chidambaram in Tamil Nadu, Ramakrishnan earned his B.Sc. in Physics from MS University in Baroda, Gujarat and later migrated to the US to continue his studies. He earned his Ph.D in Physics from Ohio University, his profile on the Times of India website says.

In 2009, he and two others shared the Nobel for their work on the structure and function of the ribosome.

In 2010, Ramakrishnan was awarded the Padma Vibhusan, nation’s second highest civilian honour.

(Writing by Vipin Das M)

Whirlpool accuses Samsung, LG of dumping washers

REUTERS – Whirlpool Corp (WHR.N) on Friday accused two South Korean rivals, Samsung Electronics (005930.KS) and LG Electronics (066570.KS), of dumping washing machines in the United States by selling them “at substantially less than fair value.”

The action comes as the company’s shares have slid more than 46 percent this year because of by weak demand resulting largely from high unemployment and a depressed housing market.

It filed petitions with the U.S. Department of Commerce and the U.S. International Trade Commission seeking an investigation into its rivals’ clothes washers, which are made in South Korea and Mexico.

Whirlpool accused them of “dumping” the products to gain market share, or selling them in the United States at prices lower than the sale price in the country they were made or lower than the cost of production.

It found some success with similar complaints earlier this year, when the Commerce Department said in a preliminary decision that Whirlpool’s foreign competitors had sold certain refrigerators at unfair prices in the United States.

On Friday, Whirlpool also alleged that South Korea is unfairly subsidizing washing machine exports, in violation of international trade law.

“When foreign manufacturers are permitted to dump products into the United States, it undermines competition,” Whirlpool North America President Marc Bitzer said in a statement.

An LG spokesman said the company is reviewing the petitions and “strongly rejects” any suggestion that it sold clothes washers at dumped prices.

A Samsung representative had no immediate comment.

ECONOMIC SQUEEZE

Stubbornly high unemployment in the United States and the weak housing market have diminished demand for big-ticket items like dishwashers and refrigerators.

In October Whirlpool said it would cut 5,000 jobs, or about one-tenth of its global workforce.

The company’s shares fell 8.9 percent earlier this week, when Sears Holdings Corp, one of its top retailers, announced it would close as many as 120 of its Kmart and Sears discount and department stores because of slumping sales.

Last year Whirlpool derived 8 percent of its sales through Sears.

On Friday Whirlpool, which makes its clothes washers at a plant in Clyde, Ohio, said it filed its petitions after conducting an “exhaustive review” and had found “compelling evidence” that Samsung and LG dumped their products in the United States.

According to the complaint, for example, one Samsung model, a 3.7 cubic foot top-loading washer, had a wholesale price in the United States of $363.18, but a slightly smaller Samsung model of 3.6 cubic feet sold wholesale in South Korea for $666.86. The former, Whirlpool estimated, cost $751.46 to make.

Whirlpool filed a similar petition in March about certain refrigerators sold by its foreign competitors.

In October, the Commerce Department issued a preliminary decision on that petition and found the companies had sold bottom-mount refrigerators — those with freezers below the refrigerator — at unfair prices in the United States.

The government then imposed potential duties of up to 37 percent on the refrigerators. The finding forced the foreign manufacturers to post bonds as security for future payment if they didn’t raise wholesale prices to a fair value.

A final decision on an duties is expected in March.

The Commerce Department did not find a Korean subsidy for the products, a complaint Whirpool had also made.

(Reporting By Phil Wahba and Aruna Viswanatha; Editing by Mark Porter, Gunna Dickson and Steve Orlofsky)

India's April-Nov fiscal deficit rises to $66.3 bln

(Reuters) – India’s fiscal deficit for the first eight months of the financial year ballooned to 3.53 trillion rupees, or nearly 86 percent of the full-year target, reinforcing expectations the government will be forced to tap the bond market for additional borrowing.

During the April-November period a year ago, India’s fiscal deficit was about 49 percent of the budgeted target.

The deficit in revenue receipts was 91.3 percent of the full-year target after eight months, compared with about 51 percent last year, government data showed on Friday.

Net tax receipts were 3.2 trillion rupees while total expenditure was 7.61 trillion rupees for April-November.

Separately, the government said India’s total external debt rose to $326.6 billion at the end of September, from $317 billion at the end of June.

Earlier this month, the government had said the external debt continued to remain within manageable limits.

New Delhi budgeted a fiscal deficit of 4.6 percent of gross domestic product for fiscal year 2011/12 in February, but many private economists see the deficit for the year overshooting by a full percentage point on slowing growth and weak federal finances.

New Delhi has acknowledged that meeting the fiscal gap target would be a “great challenge”, but officials said they would try to keep the deficit under 5 percent of GDP by pruning expenditure.

Any slippage on the fiscal gap target could force the cash-strapped government to borrow more from the market. It has already unveiled 528 billion rupees of extra borrowing for the remainder of this year.

(Reporting by Abhijit Neogy; editing by Malini Menon and Ted Kerr)

BSE Sensex logs 1st annual fall in 3 years; outlook bleak

(Reuters) – The BSE Sensex closed 0.6 percent lower on Friday and posted its first annual fall in three years as a combination of near double-digit inflation, high interest rates, slowing domestic growth and policy inaction turned off investors already shaken by global headwinds.

The benchmark shed 24.6 percent in 2011 to be the world’s worst-performing major equity market and the outlook for next year remains bleak, although cheaper valuations and a possible cooling off in inflation that would allow the central bank to reverse its monetary tightening cycle raise some hopes.

Foreign fund inflows, a major driver of Indian stocks, dried up in the dismal year with net outflows of about $380 million as of Wednesday, a far cry from record inflows of more than $29 billion in 2010 that had powered a 17 percent rise in the benchmark index, following an 81 percent surge in 2009.

The benchmark’s fall in 2011 was only the second annual decline in a decade.

The benchmark index currently trades at about 13.6 times one-year forward earnings, Thomson Reuters data showed, down from 20 times in January this year.

“The way things are, it (2012) looks uncertain,” said Srividhya Rajesh, an equity fund manager at Sundaram Mutual Fund.

“Going forward, the positive catalyst should come from the expected cooling off in interest rates, but to sustain the momentum, the government also needs to ensure its long-term reform programmes are on track.”

The 30-share main index ended down 0.57 percent at 15,454.92 on Friday, with 22 components closing in the red, having risen as much as 1 percent in early trade.

The index fell 4.1 percent in December, it’s second straight monthly fall. For the quarter, it was down 6.1 percent, posting its fourth straight quarter of losses.

By comparison, the MSCI all-country world stock index has lost nearly 10 percent in 2011 and the MSCI Emerging Markets Index has fallen about a fifth.

The RBI kept rates unchanged at a review this month after raising them 13 times since March 2010 to control stubbornly high inflation that has stayed above 9 percent for a year through November.

The coalition government, struggling with a series of corruption scandals and parliament gridlock, has been slow to bring policy reforms, vital for the economy’s growth.

Earlier this month, it suspended plans to open India’s $450 billion supermarket sector to foreign firms such as Wal-Mart Stores Inc, backtracking from one of the boldest reforms in years in the face of a huge political backlash.

Adding to the woes, the rupee is down 16 percent this year, making it the worst performer among major Asian currencies this year.

“The domestic micros are suggesting that there will be some amount of revival for sure, but what is not clear at least in the first quarter of next year is the outlook on currency,” said Deven Choksey, chief executive at brokerage K.R. Choksey.

“If the rupee stays stable, then things should be looking better.”

The main stock index is seen rising to 18,000 points by mid-2012 and to 19,250 points by the end of next year, a Reuters poll conducted in late November showed.

The wider 50-share NSE Nifty index fell 0.47 percent on the year.

Consumer stocks Hindustan Unilever (HLL.NS) and ITC Ltd, which are usually seen as safer bets in a volatile market, were the best performers in the Nifty index, rising about 30 percent and 15 percent, respectively.

Billionaire Anil Ambani’s Reliance Infrastructure (RLIN.NS) and state-run steelmaker Steel Authority of India (SAIL.NS) fell about 60 percent and 55 percent, respectively, to be the worst performers in the Nifty index.

Lingering worries over euro zone sovereign debt crisis have caused wide-spread investor risk aversion for most part of this year.

STOCKS THAT MOVED

* Top software services exporter Tata Consultancy Services (TCS.NS) unseated energy giant Reliance Industries (RELI.NS) to become the most-valuable company at $42.7 billion. TCS shares are little changed on the year.

Shares in Reliance Industries lost nearly 35 percent in 2011, with concerns including slowing gas output at one of its key fields weighing on investors.

* Top lender State Bank of India closed 0.6 percent down, after rising as much as 1.3 percent earlier in the day. The state-run lender expects the government to inject capital “any time” although it is yet to get a formal commitment on the amount, a senior official said on Friday.

TOP THREE BY VOLUME

* IFCI Ltd (IFCI.NS) on 30.8 million shares

* Suzlon Energy (SUZL.NS) on 17.7 million shares

* Unitech (UNTE.NS) on 11 million shares

(Editing Malini Menon)

Syrians plan Friday protests as monitors visit

(Reuters) – Opposition activists urged people to take to the streets on Friday, the main day of protest in the revolts that have swept the Arab world, to convince Arab League peace monitors to pay attention to their plight.

The Arab League mission to verify whether President Bashar al-Assad is keeping to a pledge to end the crackdown on a nine-month pro-democracy uprising has so far failed to bring a reduction in violence.

Government security forces shot dead 25 people on Thursday, the Syrian Observatory for Human Rights said. They opened fire on protests in cities around the country, also wounding about 100 people.

Six were killed in Hama, a centre of unrest, and four more were killed when security forces fired at a street rally in Douma, a Damascus suburb, the British-based Observatory said.

Activists contacted by telephone said they had little hope the Arab League monitors would protect them but they still aimed to bring people out into the streets after Friday prayers.

“We know that just because they are here, it doesn’t mean the bloodshed will stop. But at least they will see it,” said one activist in Hama, who was unwilling to give his full name.

“We have plans for big protests tomorrow,” said another activist in the town of Idlib, although he declined to go into details.

Most foreign journalists are banned from the country, making it impossible to verify the reports on the ground.

The United Nations says more than 5,000 people have been killed in the nine months of protests against Assad and the Arab League monitors are part of efforts to ease the bloodshed.

Some 150 monitors in total are expected to enter Syria by the end of the week.

But anti-Assad activists have said the monitoring mission is too small and easily restricted by state security escorts that many protesters are afraid to approach.

Questions have also been raised about the chief of mission, a Sudanese general whose government has defied an international war crimes tribunal over bloodshed in Darfur.

A Syrian Foreign Ministry spokesman said Arab monitors were getting “all the facilities they need” to assess the crisis.

Monitors aim to check conditions in the turbulent cities of Deraa, Hama and Idlib, which lie along a 450-km (280-mile) arc from the south to the north of Syria.

In Hama, activists said on Thursday protesters went out into the streets to await the Arab League delegation as security forces deployed in strength in the area.

“People really hope to reach the monitors. We do not have much access to the team. The people stopped believing anything or anyone now. Only God can help us now,” said Abu Hisham.

Hama has a resonance for Syrians opposed to Assad. His late father ordered a massacre of up to 30,000 people there in 1982 to put down an Islamist insurrection.

Syria says of the current protests that it is fighting Islamist militants steered from abroad who have killed over 2,000 of his security force.

(Additional reporting by Ayman Samir and Yasmine Saleh in Cairo and Suleiman al-Khalidi in Amman; Writing by Myra MacDonald; Editing by Angus MacSwan)

New details rekindle HP-Hurd flap

REUTERS – Former Hewlett Packard (HPQ.N) CEO Mark Hurd made increasingly aggressive romantic advances over several years toward an independent contractor who later accused him of sexual harassment, according to claims in a letter from her lawyer obtained by Reuters.

The letter, ordered unsealed and allowed to be made public for the first time since the scandal emerged last year, outlined in intricate detail accusations by TV starlet and HP contractor Jodie Fisher that Hurd had wined and dined her, then allegedly sought sexual favors in return for employment.

Fisher retained celebrity lawyer Gloria Allred, who sent the letter in June 2010 accusing Hurd of hiring her with amorous designs. He tried repeatedly to “engage” her by asking Fisher to his hotel room and kissing her on the lips, according to a copy of the letter provided by a source close to the situation.

The letter is at the heart of a scandal that transfixed Silicon Valley in 2010 and culminated in the firing of Hurd, who was popular with investors on Wall Street and is now a president at HP rival Oracle Corp (ORCL.O). Hurd, Oracle and even Fisher herself have said Allred’s letter contained unspecified inaccuracies.

Still, its release threatens to revive the scandal as Hurd looks to put the dispute behind him and focus on his new job at Oracle, where one of his key responsibilities is selling high-end computer systems that compete with products from HP.

Hurd was ousted from HP on August 6 after Fisher – who was hired as a hostess for corporate events – accused him of sexual harassment, a claim an internal probe later dismissed.

“It is appalling that you would use HP revenues for the purpose of procuring female companionship and romance under the guise of HP business,” Allred’s letter read.

“She continually had to put you off, make excuses, scurry away or simply leave.”

The letter is available at r.reuters.com/fav75s

UPHEAVAL

Hurd’s legal team had fought to keep the letter under seal, but a Delaware appeals court ruled this week it should be made public, though some portions would be redacted.

Sources had leaked details of the June letter to Reuters and other media in 2010. These included a claim that Hurd revealed details about HP’s impending acquisition of Electronic Data Systems Corp before the deal was announced in 2008. Hurd has also denied that allegation.

Allred declined comment, as did a spokeswoman for HP.

The fresh revelations have re-focused the spotlight on Hurd’s controversial firing, which preceded a period of instability at HP.

Outspoken Oracle CEO Larry Ellison blasted HP’s board for being “cowardly” and promptly hired Hurd, who is married with children. Former SAP (SAPG.DE) CEO Leo Apotheker replaced Hurd at the helm of the world’s top computer maker, but lasted barely a year before Meg Whitman took up the baton.

The computer services giant missed Wall Street targets for several quarters, killed its much-touted TouchPad tablet, and first considered then backtracked on a plan to hive off its personal computer division, the world’s largest.

ALLRED’S CLAIMS

The eight-page missive penned by Allred, well known for representing women accusing celebrities such as Tiger Woods and politicians of sexual misconduct, blasts Hurd for reducing Fisher to a “nervous wreck” as he continually sought sex with the former actress during meetings from Madrid to Los Angeles.

It detailed claims that the advances began after Hurd was “taken with” Fisher after spotting her on the short-lived TV series, Age of Love. At their first two meetings at hotels after Fisher was contracted, Hurd shared personal details about his life and sought the same from her.

According to the letter, matters escalated when Hurd invited Fisher up to his hotel room at the Atlanta Ritz and asked her to stay the night, kindling a one-sided pursuit that would last till 2009 and span cities around the world.

“This was the beginning of an uncomfortable dance that went on for almost two years,” Allred wrote. “You would relentlessly attempt to cajole her into having sex with you.”

Over the next year or so, Allred’s letter described in detail various instances when Fisher allegedly fended off his advances, though she claimed she had dinner with Hurd several times out of fear for her job.

At one point, the HP CEO stopped at an ATM during a walk and showed Fisher that his checking account balance was over $1 million, which Allred claimed was an attempt to impress her.

Fisher stopped getting contracts for corporate event appearances shortly after a final meeting with Hurd in Idaho, during which Allred said the then-CEO had grabbed and kissed her, but was again spurned.

“She knew that if she did not have sex with you soon, her job was over, which is exactly what occurred,” the letter said.

The tech blog AllThingsDigital first reported details of the June 24, 2010, letter. (Editing by Gary Hill)

U.S. court: Unseal letter in HP Hurd case

REUTERS – An appeals court ruled that a letter linked to Mark Hurd’s abrupt departure from his post as chief of Hewlett-Packard Co (HPQ.N) should be unsealed, potentially revealing new details about his dramatic exit from the technology giant.

Delaware Supreme Court Justice Carolyn Berger said in an opinion dated Wednesday that while the letter contained “embarrassing detail about Hurd’s behavior,” it did not describe any “intimate conversations or conduct.”

Legal experts said the ruling means that the public will almost certainly get to read the disputed document.

“The Delaware Supreme Court is the final word on corporate law matters, so this would be the end of the process,” said Kevin Brady, a partner with Connolly Bove Lodge & Hutz LLP.

The letter was sent to Hurd from Gloria Allred, a high-profile California attorney, on behalf of independent contractor Jodie Fisher, who had accused him of sexual harassment. It prompted the world’s top computer maker to investigate Hurd, who is now a president at rival Oracle Corp (ORCL.O).

Fisher has previously said that the letter contains “many inaccuracies.” Both Oracle and Hurd’s attorney reiterated this on Thursday.

“This letter was recanted by Ms. Fisher. She admitted it was full of inaccuracies,” Oracle Senior Vice President Ken Glueck said in an emailed response to Reuters. He did not comment further.

Hurd’s attorney, Amy Wintersheimer, said in a statement on Thursday that her client had wanted to keep the letter confidential for that reason as well.

“The truth is, there never was any sexual harassment, which HP’s investigation confirmed, and there never was any sexual relationship, which Ms. Fisher has confirmed,” Wintersheimer said.

Although HP’s board found no evidence of sexual harassment, Hurd stepped down after the company accused him of filing inaccurate expense reports involving Fisher.

The decision affirms a March 18 ruling by the Delaware Chancery Court, which ordered that most of the contents of the letter would be made public within 10 days.

The judge ordered that some portions of the letter would remain under seal. For example, the order read “On page seven, first full paragraph: redact the entire rest of the paragraph following the first sentence ending with ‘a married man.’”

Some of the letter’s details have already been released in court documents. The Chancery Court’s 71-page ruling on the matter in March noted that the letter accused Hurd of using corporate funds to “wine and dine” Fisher and leaked to her “potentially material” nonpublic information about the company.

The dispute over the letter stems from a lawsuit by a shareholder, Ernesto Espinoza, who is seeking HP’s records relating to Hurd’s resignation and severance package. The company agreed the letter was not confidential, but Hurd intervened in the case to fight to keep it from the public.

Representatives for Hewlett-Packard, Oracle and Espinoza declined comment.

The case is Ernesto Espinoza v Hewlett Packard Co, Delaware Chancery Court, No. 6000.

(Reporting By Jim Finkle; Additional reporting by Jeremy Pelofsky and Tom Hals; Editing by Matthew Lewis, Gary Hill)

China's factories falter, pro-growth policies eyed

(Reuters) – China’s factory activity shrank again December as demand at home and abroad slackened, a purchasing managers’ survey showed on Friday, reinforcing the case for pro-growth policies to underpin the world’s second-largest economy.

The People’s Bank of China is widely expected to lower its requirement for the amount of cash banks must hold as reserves to let lenders inject more credit into the economy to fight headwinds from Europe’s debt crisis and sluggish U.S. demand.

The HSBC Purchasing Manager’s Index, designed to preview the state of Chinese industry before official output data are published, inched up to 48.7 in December from a 32-month low of 47.7 in November, but fell short of the flash reading of 49.

The HSBC PMI has been mostly under 50, which demarcates expansion from contraction, since July.

“While the pace of slowdown is stabilising somewhat, weakening external demand is starting to bite,” said Qu Hongbin, China economist at HSBC.

“This, plus ongoing property market corrections, adds to calls for more aggressive action on fiscal and monetary fronts to stabilise growth and jobs, especially with prices easing rapidly.”

He said China would avoid a hard economic landing so long as policy easing measures filtered through in coming months.

HSBC believes a PMI reading of as low as 48 in China still points to annual growth of 12-13 percent in industrial output.

China’s once turbo-charged economy is on track to slow for a fourth successive quarter, easing further from the first quarter’s 9.7 percent annual growth rate with economists expecting the final three months of the year to have slipped below 9 percent.

The official PMI, due to be published on Sunday, is expected to paint a similar picture, suggesting the world’s second-largest economy is finishing 2011 on a weak note, in tandem with the global economic outlook.

Both the official and HSBC PMIs are stuck near their weakest levels since early 2009, when China took a blow from the global financial crisis.

Economists polled by Reuters earlier this month forecast the PBOC will deliver 200 bps of required reserve ratio (RRR.L) cuts by the end of 2012 but refrain from an outright cut in interest rates unless quarterly GDP growth dips below 8 percent.

Economists typically view growth of 7 to 8 percent as the bare minimum needed to generate enough jobs to help China absorb the urban influx of rural migrants and maintain social harmony.

“I think the government will ratchet up pro-growth policies if (quarterly) growth falls below 8 percent, otherwise the economy could face big risks,” said Guotai Junan Securities economist Wang Hu in Shanghai.

“Another RRR cut could happen any time.”

ROOM FOR RRR CUTS

China’s central bank cut reserve requirements for commercial lenders late in November for the first time in three years.

The RRR remains at 21 percent for big banks, giving the central bank plenty of room to cut and free up funds that could be used for lending.

Persistent capital outflows from China are putting more pressure on the central bank to release cash to keep credit conditions supportive for growth.

Underlying indexes of the HSBC PMI showed softening demand at home and abroad, which helped cool inflation — a boon for Chinese policymakers, according to the data collated by UK-based information firm, Markit.

The sub-index for overall new orders edged up to 46.9 in December from November’s 45, but still signalled falling demand. New export orders shrank in a reflection of listless demand from the United States and Europe — China’s top overseas markets.

Average input costs faced by manufacturers continued to moderate as raw material prices slipped, the HSBC survey showed.

Inflation appears to be cooling, having fallen from a three-year high of 6.5 percent in July to 4.2 percent in November, creating additional room for policy easing to support growth.

HSBC’s Qu expects the government to move on the fiscal front to boost job creation, cutting taxes for exporters — a sector employing more than 30 million workers — while increasing spending on public housing and other projects.

” On top of monetary easing, mainly in the form of further reserve ratio cuts, we have long argued that fiscal policy can and should play a more important role in stabilise growth and jobs ,” Qu said.

(Editing by Nick Edwards and Chris Lewis)

Asian stocks edge up but poised for 2011 loss

(Reuters) – Asian stocks nudged higher and the euro clung to overnight gains on Friday, the last trading day of 2011, as positive data from the United States helped allay concerns on the global economy, while year-end short covering lifted crude prices.

Still, the region’s stocks have collectively lost about a fifth of their value this year, as natural calamities and financial turmoil took a toll on the risk appetite of investors, driving them to safer assets such as the U.S. dollar and gold.

The MSCI index of stocks outside Japan is down more than 18 percent this year, on track for its first annual loss since 2008.

Australia’s S&P/ASX 200 index, down 14 percent this year, is poised for its first back-to-back loss in 30 years, while Japan’s Nikkei and Topix have lost 18 percent and 19 percent respectively.

“If you look around at all the asset classes, it really has been a year of safe-haven flows, it is about preserving your capital and returning your equity,” said Chris Weston, institutional dealer at IG Markets in Melbourne.

Investors were spooked in 2011 by an earthquake and tsunami in Japan, which was followed by debt crises in the United States and Europe and floods in Thailand.

On Friday, the mood was cautiously upbeat after U.S. data on Thursday pointed to positive trends for the world’s biggest economy and triggered modest gain in U.S. and European stocks.

The MSCI ex-Japan index was up 0.2 percent, while the Nikkei was up 0.4 percent on the day.

Pending sales of existing U.S. homes surged to a 1-1/2-year high in November and factory activity in the U.S. Midwest grew more than expected in December.

The euro also benefited from the data which offset euro zone worries, and offered support to risky assets.

The dollar index retreated from a one-year peak of 80.854 to 80.410 and the euro bounced off a 15-month low of $1.2856 to $1.2951.

Market focus is now on HSBC’s China manufacturing activity report for December due at 0230 GMT. A preliminary purchasing managers’ survey released earlier in the month showed China’s factory output shrank again in December after new orders fell.

Crude oil held on to overnight gains as the rise in the stock market and short covering helped shake off early losses caused by a rise in U.S. crude stockpiles.

US crude was up 0.5 percent, while Brent was up 0.1 percent.

The focus remained on Iran after Tehran again threatened to block traffic through the Strait of Hormuz, a crucial passage for Middle Eastern crude suppliers after the European Union’s decision to tighten sanctions on Iran over its nuclear programme. The United States said it would preserve oil shipments in the Gulf.

(Additional reporting by Victoria Thieberger in MELBOURNE; Edited by Ron Popeski)