Dow, S&P dip on Chrysler bankruptcy, MetLife off late

NEW YORK (Reuters) – The Dow and S&P 500 fell on Thursday after Chrysler's bankruptcy filing undercut optimism about upbeat corporate profits and reassuring job market data.

Even so, the S&P 500 closed out its best month in nine years despite the big U.S. automaker's bankruptcy after talks to restructure its debt broke down.

Uneasiness about Chrysler's bankruptcy wiped out earlier gains of more than 1 percent in both the Dow industrials and the S&P 500.

"We've got some fairly heavy-handed government intervention here, and the market is concerned about that," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

Exxon Mobil Corp (XOM.N) was the top drag on the Dow, down 2.6 percent at $66.67, after the world's largest publicly traded company posted a 58 percent drop in quarterly profit that missed Wall Street's estimates.

The Dow Jones industrial average (.DJI) dropped 17.61 points, or 0.22 percent, to 8,168.12. The Standard & Poor's 500 Index (.SPX) dipped just 0.83 of a point, or 0.09 percent, to 872.81.

But the Nasdaq Composite Index (.IXIC) gained 5.36 points, or 0.31 percent, to 1,717.30.

FINANCIALS RANK AS TOP SECTOR IN APRIL

For the month of April, the Dow rose 7.4 percent, the S&P 500 gained 9.4 percent and the Nasdaq jumped 12.4 percent.

The gains for the broad S&P were the largest since March 2000, while the Nasdaq scored its biggest percentage rise since October 2002.

The best-performing sectors in the S&P 500 for the month were financials, up 22 percent, and consumer discretionary stocks, up 18.5 percent.

Although worrisome for the overall economy, Chrysler's Chapter 11 filing lifted its rivals' shares. General Motors rose 6.1 percent to $1.92, while Ford Motor Co (F.N) advanced 9.7 percent to $5.98.

After the closing bell, MetLife Inc (MET.N) posted a first-quarter loss as its investment income dropped, driving shares of the largest U.S. life insurer down 3.9 percent to $28.60 in extended trade.

Shares of Alcoa (AA.N) fell slightly to $9.06 in after-hours trade after the aluminum producer said it agreed to sell its wire harness and electrical distribution business to California-based private equity group Platinum Equity for an undisclosed amount.

The S&P 500 is up 29 percent from the bear-market closing low set on March 9. Stocks have been bolstered in part by optimism over the state of the banking sector and hopes the recession is easing.

The broad S&P received substantial support from profit reports from companies like Dow Chemical Co (DOW.N), up 18.4 percent at $16 as its earnings handily beat estimates.

However, shares of Motorola (MOT.N) fell 7.2 percent to $5.53 despite posting a narrower-than-expected loss as the cellphone maker also announced its cash position fell about $1 billion in the last three months.

SUNNY SIDE OF NASDAQ

Shares of big-cap technology companies lifted the Nasdaq, along with green module manufacturer First Solar Inc (FSLR.O), which jumped 23.5 percent to $187.29 after the company posted better-than-expected results.

Of the 280 companies in the S&P 500 that have reported earnings to date, 65 percent topped analysts' estimates, according to data compiled by Thomson Reuters.

However, many of the analysts' estimates had been reduced to reflect the current economic slump.

The latest government data showed the number of workers filing new claims for unemployment benefits unexpectedly fell last week, even as the number of people staying on those benefits rose to a fresh record high.

Trading was active on the New York Stock Exchange, with about 1.74 billion shares changing hands, above last year's estimated daily average of 1.49 billion, while on Nasdaq, about 2.86 billion shares traded, above last year's daily average of 2.28 billion.

Advancing stocks outnumbered declining ones on the NYSE by 1,672 to 1,373 while on the Nasdaq, the trend was reversed: decliners beat advancers on the Nasdaq by 1,360 to 1,335.

(Reporting by Chuck Mikolajczak; additional reporting by Edward Krudy; Editing by Jan Paschal)

Dow, S&P dip on Chrysler bankruptcy, MetLife off late

Hot News: Final Effort to Avert Chrysler Bankruptcy Falls Short

Economic Report: British home prices fall 0.4% in April: Nationwide

The typical house price declined by a seasonally-adjusted 0.4% in April, according to Nationwide's monthly survey, after posting a 0.9% monthly increase in March.

The average price of 151,861 pounds ($224,222) was down 15% from April 2008. In March, the average price was 15.7% below the year-ago level.

The British government's annual budget, unveiled last week, included some measures designed to boost the housing market, including government guarantees for new residential mortgage-backed securities.

The measure might help boost the availability of mortgage credit, but is unlikely to prompt a swift turnaround in the housing market, said Fionnuala Earley, chief economist at Nationwide.

"Lenders have already indicated that the availability of credit is less of an issue than it has been, but at the same time expect that the demand for secured lending will fall further," Earley said. "Given the weakness of the economy and the expected further increase in unemployment this comes as no surprise."

Labor-market conditions are crucial to the housing market's performance, and the outlook for the labor market remains bleak, she said.

"The economy is now in the deepest recession since the Second World War and unemployment is continuing to increase, with the latest data showing that it breached the 2 million mark," Earley said. "Even though negative inflation will mean that real earnings will be increasing, it is likely to be some time before this feeds into a strong enough change in sentiment to encourage a full scale revival in the housing market."

Economic Report: British home prices fall 0.4% in April: Nationwide

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BofA shareholders re-elect Lewis to board: source

CHARLOTTE, North Carolina (Reuters) – Bank of America Corp (BAC.N) shareholders have voted to elect all 18 of the bank's 18 nominees for director, including embattled Chief Executive Kenneth Lewis, by a "clear margin," a source familiar with the matter said on Wednesday.

A Bank of America spokesman said it expects to release full results of the annual meeting vote later on Wednesday.

The largest U.S. bank by assets said it will abide by any shareholder vote appointing an independent chairman at the bank -- effectively stripping Lewis of that title -- if the majority of shareholders vote for it.

(Reporting by Jonathan Stempel)

BofA shareholders re-elect Lewis to board: source

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Central China Expo concludes with 27-billion-dollar contracts

HEFEI, April 28 (Xinhua) -- The three-day Central China Expo ended in Hefei, capital of the Anhui province on Tuesday, with contracts worth more than 27 billion U.S. dollars signed.

At the expo, China's six central provinces - Henan, Shanxi, Hunan, Hubei, Jiangxi and Anhui - got foreign investment of 6.37 billion U.S. dollars.

They also inked contracts with domestic companies from other parts of China, drawing an investment of 144.9 billion yuan (about 21.3 billion U.S. dollars).

The region, with six provinces and considered to be central China, covers 1.03 million square kilometers and its population accounts for 28 percent of China's total. Its provincial economies make up 20 percent of the national total. It is a major grain production base, an important transport hub and a leading energy and raw materials supplier.

The Central China Expo was co-hosted by the Ministry of Commerce, the state administrations of taxation, for industry and commerce, tourism, and radio, film and television, as well as governments of the six provinces.

The Expo attracted 16,000 business people, including representatives from 300 of the "Fortune 500" multinational corporations such as Carrefour and IBM.

Central China Expo concludes with 27-billion-dollar contracts

Hot News: U.S. govt, Chrysler lenders reach deal

BP Posts First Quarter Profits of $2.56 Billion

Filed at 4:54 a.m. ET

LONDON (AP) -- BP PLC, the second-largest European oil company, said Tuesday that it returned to profit in the first quarter, beating analysts' forecasts by earning $2.56 billion as oil prices recovered modestly and the company's refining and marketing business bounced back.

The first quarter net profit contrasted to a loss of $3.3 billion in the fourth quarter when BP, posting its first quarterly loss in seven years, was hit hard by falling oil prices. The first quarter profit was ahead of the analysts' consensus of $2.2 billion.

Still, the rebound left BP well below the $7.1 billion profit for the first quarter of 2008, when oil traded as high as $111.80 per barrel. It is currently selling for around $50 a barrel.

BP shares were down 0.4 percent at 481.25 pence on the London Stock Exchange.

"With a close eye on costs also, the company is improving operationally after a couple of years of perceived inefficiency," said Keith Bowman, analyst at Hargreaves Lansdown Stockbrokers.

"In addition, not only does the dividend yield look increasingly compelling, but the sustainability of the dividend is also becoming more evident," said Bowman, who rated the stocks as a "buy."

The company raised its quarterly dividend payment by 4 percent to $0.14 per share. For its British shareholders, that is a 40 percent gain because of the fall in the value of sterling.

Replacement cost profit -- a key measure for oil companies -- was $2.4 billion, down from $2.6 billion in the fourth quarter and far below the year-earlier result of $7.9 billion.

BP reported a profit of $4.3 billion in its exploration and production division, down from $4.8 billion in the fourth quarter and 62 percent below the year-ago result.

Pretax profit from refining and marketing was $1.4 billion, versus a loss of $8.1 billion in the fourth quarter.

"U.S. refining margins returned to a modest premium relative to other regions and the unusual adverse impacts from prior-month pricing of domestic pipeline barrels, that impacted our fourth-quarter results, were not repeated," the company said.

In other regions, the company said there was no repeat of the currency fluctuations which hit fourth-quarter results.

"BP looks to be ahead of the curve in terms of delivering cost savings," said Tony Shepard, analyst at Charles Stanley & Co.

"BP began to take action on its cost base in 2008 and based on actions already taken, and the deflation entering the supply chain, the cost base should fall by about $2bn this year," Shepard added.

Peter Hitchens, analyst at Panmure Gordon & Co., said he remained cautious about BP shares.

"Although the company pays an attractive yield of approximately 8.1 percent, we believe that the current operating environment will not allow any growth in this dividend and that that there could well be some concerns over a weakening balance sheet," Hitchens said.

On the Net: http://www.bp.com

BP Posts First Quarter Profits of $2.56 Billion

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Asset purchases easing tensions: Bank of England

The announcements and subsequent purchases of assets by the facility during the first quarter of 2009 were followed by a decline in yields on medium to long-term U.K. government bonds, or gilts, the BOE said.

Gilt yields saw a substantial fall in early March after the bank announced its gilt-buying plan but rose "slightly" in later weeks.

Spreads on investment-grade non-financial commercial paper and corporate bonds also fell somewhat over the quarter, leaving yields on those assets lower, the bank said, while the issuance of corporate bonds remained high relative to long-term averages.

"But it may take some time for the full effect of purchases by the facility to be observed," the report said.

Meanwhile, secondary market spreads on sterling investment-grade non-financial corporate bonds also narrowed slightly during the first quarter, and primary issuance remained robust, the bank said.

"Market contacts suggested that many companies were planning to issue corporate bonds in the near future and expected levels of gross issuance to remain fairly high," the report said.

Asset purchases easing tensions: Bank of England

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U.S. says need to resolve Swiss UBS case appropriately

WASHINGTON (Reuters) – The Obama administration has assured Switzerland that it understands the importance of resolving Swiss concerns over a legal case involving Swiss bank UBS, a U.S. Treasury official said on the weekend.

Swiss President Hans-Rudolf Merz, whose country is famous for strict bank secrecy, told a news conference on Saturday after he met U.S. Treasury Secretary Timothy Geithner that Geithner seemed sympathetic to his call for the United States to drop the case in return for a new tax accord between the two countries.

"His answer was that he will reflect about this question, that he understands from his point of view that I was raising this question," Merz said. "He couldn't of course answer immediately but I felt that his bias was to study about that."

Asked about Merz's remarks, a Treasury official provided a measured assessment of Geithner's comments.

"The secretary listened to the Swiss concerns regarding the UBS case and indicated that he understood the importance of appropriately resolving the matter," the official said.

While Merz linked his call for the United States to drop the UBS (UBSN.VX) (UBS.N) case to the pending new tax accord, he did not specify whether Switzerland might refuse to sign the accord if the case was not dropped.

But any such accord must be adopted by lawmakers in both countries and possibly put to a referendum in Switzerland, where it could stumble if the U.S. tax evasion case was still hanging over UBS, Merz said.

"I think Mr. Geithner is conscious of the fact that these criminal procedures that are taking place in the United States could be an obstacle to the political process of the double taxation accords," Merz said.

"This is why I proposed that the criminal proceedings be withdrawn at the time of signing of such an accord."

Geithner said earlier this month that the United States would begin negotiations with Switzerland to revise a 1996 bilateral tax treaty so the two countries can exchange information for tax purposes in accordance with standards set by the Organization for Economic Cooperation and Development.

UBS agreed recently to pay a $780 million fine and disclose the identity of about 300 of its U.S. clients to avert criminal charges. However, U.S. authorities are still pursuing it, seeking to access the data of another 52,000 Americans they say are hiding about $14.8 billion in assets in Swiss bank accounts.

Geithner and President Barack Obama have stated their commitment to tackling the issue of tax shelters and to cracking down on efforts to evade U.S. taxes, most recently at a Group of 20 summit in London on April 2 .

(Reporting by Glenn Somerville and Brian Love, Editing by Chizu Nomiyama)

U.S. says need to resolve Swiss UBS case appropriately

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Unemployment in Spain Reaches 17%

MADRID — The number of unemployed people in Spain rose to a record four million in the first quarter as the economy continued to shed jobs created over the past decade by inexpensive credit and a real estate bubble.

The Spanish unemployment rate climbed to 17.4 percent from 13.9 percent in the final quarter of 2008, or more than twice the European Union average, the National Statistics Institute said Friday. The 800,000 increase in the ranks of the jobless was the largest quarterly increase in more than 30 years.

“These figures are bad and worse than expected,” the finance minister, Elena Salgado, said. The sharp quarterly increase was a sign of “how severe and how deep the crisis is,” she said.

Spain’s grim employment news came as Britain’s national statistics office on Friday reported a 1.9 drop in gross domestic product in the first quarter from a year earlier, the largest quarterly decline in output recorded since 1979.

It was the third successive quarter of economic contraction in the British economy and cast doubt on projections this past week by Alistair Darling, the British chancellor of the Exchequer, that the economy would start to recover by 2010 after shrinking 3.5 percent this year.

“These figures make his forecasts very difficult to achieve,” said James Knightley, a senior economist in London for ING. He said he expected the British economy to shrink 4 percent to 4.5 percent this year and predicted that Britain’s broad-based decline, with a steep, 6.2 percent drop in manufacturing, would be reflected across Europe and the United States.

Amid the gloom from Britain and Spain, data from Germany offered a bright spot Friday, suggesting that confidence in the economy might be turning the corner. The Ifo economic institute in Munich said corporate sentiment rose in April to its highest level in five months. The business climate index, based on a poll of around 7,000 companies, rose to 83.7 from 82.2 in March, according to Reuters.

Meanwhile, President Nicolas Sarkozy of France on Friday announced a plan to spend more than 1 billion euros, or $1.33 billion, on youth job initiatives in an apparent attempt to counter a potentially explosive rise in unemployment among people under 25, Reuters reported.

In Spain, Ms. Salgado said the she expected unemployment to rise more slowly in the coming months as government employment programs took effect. The government has announced stimulus measures to the tune of about 71 billion euros this year in an effort to replace jobs lost in construction and help businesses obtain credit.

But economic analysts said the government’s optimism had little credibility given the consistent discrepancy between its projections and the economic reality. The labor minister Celestino Corbacho predicted in January that unemployment would not reach the four million mark, while the central bank this month said it would reach a maximum of 17.1 percent this year.

Debate continued this past week in Spain — and elsewhere — about how much the government could afford to stretch its budget deficit to stimulate the economy and cover the costs of supporting the unemployed.

The Bank of Spain has warned of little room for additional spending, with Spain’s public sector deficit on track to hit 8.3 percent of G.D.P. this year and its ratio of debt to G.D.P. set to reach 50 percent. The bank’s governor, Miguel Fernández Ordóñez has said that the social security system could go into deficit this year.

But José Antonio Herce, chief economist at Analistas Financieros Internacionales, a financial consultancy, said new stimulus packages were needed.

“There is a little margin to spend more, and what margin there is should be exhausted on productive infrastructure that will help the economy in the long term,” he said, adding that there was room to increase its budget deficit by about two more points of G.D.P. “What we need next is for the government to produce a clear plan which explains to the tax payer how it is going to fix this mess — going all the way through till 2019.”

Unemployment in Spain Reaches 17%

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Budget, credit cards top Senate Democrats list

"We have a lot of work to do," Senate Majority Leader Harry Reid of Nevada told reporters at a briefing.

Reid said Democrats are planning action on housing, tobacco regulation and defense procurement, among other issues, and urged Republicans to team up with their political opponents and make for a productive legislative session.

The Democrats' briefing came shortly after Republicans in the Senate refused to allow a vote to confirm President Barack Obama's nominee to run the Department of Health and Human Services, Gov. Kathleen Sebelius. Sebelius is the last member of the Cabinet to await approval by the Senate.

Republicans' three words are "no, never, nothing," said Sen. Charles Schumer, a New York Democrat also in the Senate leadership.

Reid said he hopes to finalize work on the fiscal year 2010 budget next week. The House and Senate both approved versions similar to Obama's proposal and will now vote on a single bill before sending it to the president for signature.

Reid spoke as Obama was meeting at the White House with credit-card company executives and called for reform to protect card users.

Congress is working on credit-card legislation, and Obama said reform could be enacted "in short order."

"We are confident we can arrive at something that is commonsensical, something that allows the industry to continue to provide loans and run a stable business model," Obama said. See full story.

On Wednesday, a House committee approved legislation that would ban abusive credit-card rates and fees. See full story.

Obama's 100-day mark is approaching next week, and Reid and other Democrats cited what they said was progress during the new president's short time in office, including passage of the economic stimulus bill.

Meanwhile, House Republican Leader John Boehner all but gave Obama's first 100 days a failing grade.

"If you look at the first 100 days, you can sum it up pretty simply: spending, taxing, borrowing, and ducking the hard choices. The Democrat policies, you know, like raising taxes on everyone in the middle of a recession, is going to hurt our economy and hurt jobs in America," said Boehner on Thursday.

Not a single House Republican voted for the stimulus bill and only three Senate Republicans voted for it.

Obama will hold a prime-time news conference on April 29, his 100th day in office, the White House announced Thursday.

Budget, credit cards top Senate Democrats' list

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Economic Report: New-home sales fall 0.6% to 356,000 annual pace

Sales fell 0.6% in March to a seasonally adjusted annual rate of 356,000 from 358,000 in February. February's sales pace was revised higher from 337,000 reported a month ago. January's sales pace was revised from 322,000 to 331,000, the low for the cycle.

A bottom in sales doesn't imply a bottom in prices. "With supply overhang still huge and mortgage financing difficult to obtain, home prices are likely to decline considerably further in the quarters ahead," wrote Joshua Shapiro, chief economist for Maria Fiorini Ramirez Inc.

Builders continued to cut prices in March, and have reduced their inventories of unsold homes by a record amount in the past year. But the time it takes to sell a home rose to record high of 10.2 months, the government said.

Builders are facing the worst market conditions in a half century. Record numbers of foreclosures of existing homes are forcing prices lower. Buyers are struggling with higher standards to obtain a loan, massive job losses and the real possibility that they can save thousands of dollars by waiting to buy. However, lower mortgage rates and lower prices are making homes affordable once again. Read the latest mortgage-rate data. Learn why mortgage rates may stay low all year.

Sales are down 30.6% in the past year.

The median sales price of a new home fell to $201,400 in March, down 12.2% in the past year.

The inventory of unsold homes fell 5.2% in March to 311,000, down a record 33.7% in the past year. The inventory represents a 10.7-month supply at the March sales pace.

Government statisticians have low confidence in the monthly report, which is subject to large revisions and large sampling and other statistical errors. In most months, the government isn't sure whether sales rose or fell. The standard error in March, for instance, was plus or minus 19%. Read the full government report.

The government says it can take up to five months to establish a new trend in sales. Over the past five months, sales have been on a 361,000 annual pace, 38% slower than a year earlier.

Sales of existing homes fell 3% in March to a seasonally adjusted annual rate of 4.57 million, the National Association of Realtors reported Thursday. Homes are mostly being sold to first-time buyers, who can get thousands in subsidies from federal and state governments to buy a home. Distressed sales, including foreclosures and short sales, accounted for more than half of sales in March, the real estate group said. See full story.

In a separate report, the Commerce Department said Friday that orders for durable goods fell 0.8% in March, the seventh decline in the past eight months. Encouragingly, orders for core capital equipment goods rose 1.5%, the second straight increase. See full story.

Economic Report: New-home sales fall 0.6% to 356,000 annual pace

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Treasury Said to Raise Offer to Chrysler Lenders

The Treasury Department has increased its offer to repay Chrysler’s senior lenders as part of continuing talks on how to reduce the company’s debt, a person who had been briefed on the talks said on Wednesday.

The government’s new plan, however, still shows a broad chasm between the two sides as Chrysler races to complete a reorganization plan by April 30 or face a near-certain liquidation through bankruptcy.

Under the terms of the new plan, presented Wednesday afternoon, Chrysler’s lenders, who hold about $6.9 billion worth of debt, would receive about 22 cents on the dollar, or about $1.5 billion. They would also receive a 5 percent equity stake in the reorganized company, this person said, who spoke only on the condition of anonymity because the talks are private.

That is an increase from the government’s original proposal, presented on April 12, under which the lenders would have received just 15 cents on the dollar, or about $1 billion. That is roughly equivalent to where Chrysler’s debt is trading on the public markets today.

But in a plan presented to the government on Monday, the steering committee of Chrysler’s lenders sought at least 65 cents on the dollar, or about $4.5 billion, and a roughly 40 percent equity stake in a restructured Chrysler.

The intensifying proposals and counteroffers between the two sides represent the growing urgency of the situation. The Obama administration has mandated that Chrysler complete an alliance with Fiat, the Italian carmaker, and win concessions from both its lenders and the United Auto Workers union before the April 30 deadline. If Chrysler succeeds, the government would give it an additional $6 billion in loans.

The lenders’ steering committee — comprising five banks and three investment firms and led by JPMorgan Chase and Citigroup — has argued that it would recover more money from a liquidation of the company’s assets than under the government’s offers. The committee represents a wider group of about 45 banks and hedge funds.

These creditors have also argued that Fiat should contribute more capital to its proposed alliance with Chrysler. Under the terms of the potential deal, Fiat would take a 20 percent stake in the company in exchange for small-car models and various technologies. It would not invest any cash.

Chrysler’s lenders have also said that the U.A.W. should be forced to accept greater concessions. The U.A.W. has tentatively agreed to allow Chrysler to use stock to finance half of a $10.6 billion fund for its retired workers’ health care obligations.

Until now, the Treasury task force had been reluctant to offer to pay the lenders more than the debt currently trades at on the public markets. And some politicians have pointed out that many of the banks involved have taken federal bailout financing. Yet the banks contend that they must take care of their own constituents.

Some of the lenders are also split over how to negotiate with the Treasury’s task force, people with knowledge of the matter said, with some institutions, mostly the banks, favoring a more flexible negotiating stance and others advocating a hard-line position.

Treasury Said to Raise Offer to Chrysler Lenders

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British Plan to Raise Taxes and Debt Sets Off Political Sparring

LONDON — Prime Minister Gordon Brown’s government laid out plans on Wednesday for more than $1 trillion in deficit spending over the next five years, a scale of public debt that critics say is without precedent in Britain, and ordered a 5-percentage-point increase, to 50 percent, in the top marginal rate of income tax for the country’s highest earners.

The government’s annual budget statement in the House of Commons offered a new measure of the scale of the financial crisis gripping Britain, which many economists have described as the most severe in any major industrialized country. New figures provided by Alistair Darling, the chancellor of the Exchequer, forecast that the economy would shrink by 3.5 percent this year, the sharpest drop since 1945 and nearly three times the 1.25 percent drop he predicted in November.

Mr. Darling forecast a return to modest growth of 1.25 percent next year, an outlook not shared by the International Monetary Fund, whose gloomy estimates on the British economy have included a continuing recession in 2010. But the British finance minister acknowledged that the government was not expecting the years of deficit spending to end before 2018.

For this year and next year alone, the government expects a deficit of more than $500 billion at current exchange rates, with overall government debt expanding from 59 percent of gross domestic product this year to 68 percent in 2010 and 79 percent in 2013-14.

This would not be exceptionally high by global standards, however. Total federal debt in the United States is projected to rise to around 70 percent of G.D.P. by 2011, according to estimates from the Congressional Budget Office, and Japan’s is threatening to exceed 200 percent.

Nevertheless, some have warned that if the recession is longer and deeper than the Brown government is predicting, the level of debt could lead to Britain’s facing a run on the pound and the possibility of having to turn to the monetary fund for emergency loans, a contingency last resorted to by a Labor government in the 1970s.

The growing public debt was highlighted in Parliament by David Cameron, leader of the opposition Conservatives, who said the government’s borrowing for 2009 and 2010 would exceed all of the borrowing by British governments since the Bank of England was founded in the late 17th century. He said the scale of the debt being taken on would burden British taxpayers for decades.

The political sparring over the budget appeared to prefigure the battle lines in a general election that must be held before June 2010. Mr. Cameron, whose Conservatives are far ahead of Labor in opinion polls, described the Brown cabinet as “a government of the living dead,” and said it was “running out of money, moral authority and time.”

He said that every Labor government since the 1930s had created chaos in the public finances. While Mr. Brown often claimed to have ended the cycle of “boom and bust” in Britain’s economy while he was chancellor of the Exchequer under Tony Blair, Mr. Cameron said that Mr. Brown had earned his own chapter in British history, one that would be written in red ink.

“As of today, any claim they have ever made to economic competence is dead, over, finished,” he said of Labor.

Mr. Darling, presenting the budget, said that Britain was the victim of a worldwide recession and that the government, building “on the strengths of the British economy and its people,” would lead the country out of the slump with its deficit spending. He offered a hint of Labor’s plans for fighting the election with his announcement of a 50 percent top income tax rate beginning in 2010, up from the current top rate of 40 percent. In last year’s budget, Mr. Darling announced an increase to 45 percent that was to have begun in 2011, but the new plan supersedes that.

By government calculations, the 50 percent rate, for all those who earn more than £150,000 a year, about $216,750, will raise about $2.6 billion in additional revenues, a relatively small amount compared with the size of the deficits. To many critics, the new top rate, and other tax increases for high earners, suggested that Labor planned to emphasize its populist traditions and move away from the posture of the Blair years, when “New Labor” said it had turned away from its old hostility toward the wealthy.

When Labor came to power in 1997, it vowed to keep income tax rates at the relatively low rates set during the 18 years of Conservative rule that began with Margaret Thatcher’s first election in 1979. Mr. Brown renewed that pledge in the last election in 2005, and those pledges repudiated the pattern of Labor’s previous stint in power in the 1970s. Then, a top income tax rate of more than 90 percent contributed to high emigration levels among British professionals.

The 50 percent rate would be among the highest in any developed nation, and attracted harsh criticism in London’s financial district. Many critics saw the move as a further blow to London’s claim in recent years to be a rival to New York as the world’s leading financial center.

The new income tax rate marked “the final return of old Labor policies attempting to soak the rich,” said Howard Wheeldon, a senior strategist at BGC Partners in London.

The British Chambers of Commerce said the new rate would be a disincentive for financial professionals considering basing themselves in London.

“If the government was serious about the U.K. remaining a global player, they would not be throwing away such an important advantage for a relatively small return,” said David Frost, the organization’s director general.

British Plan to Raise Taxes and Debt Sets Off Political Sparring

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Wipro’s Net Profit Rose, Beating Expectations

Filed at 1:50 a.m. ET

BANGALORE, April 22 (Reuters) - India's No.3 outsourcer Wipro Ltd (NYSE:WIT) beat expectations with a 4 percent rise in profit, sending its shares to a six-month high, although it forecast a fall in June quarter revenue as the global downturn hits demand.

Wipro, which offers IT solutions such as system integration, software application and back-office services, said it expected software services revenue to fall to $1 billion to $1.03 billion in the June quarter from $1.05 billion in the March quarter.

The January-March IT services revenue was the first decline on quarter in at least five years as the harsh economic climate hit global outsourcing demand.

"Today the environment is such that every customer is asking for price reductions," chief financial officer Suresh Senapaty told reporters.

"We think in the short term the weakness will continue."

New York-listed Wipro , which counts Citigroup (NYSE:C) , telecoms gear makers Cisco , Nokia (NYSE:NOK) Siemens (NYSE:SI) Networks [NSN.UL] and Credit Suisse as clients, saw cutbacks on outsourcing contracts from financial services clients, he said.

Wipro said pricing fell 160 basis points on quarter.

Prices of IT outsourcing services will shrink 5 percent to 20 percent through 2010 due to the uncertain economic climate, IT budget constraints and competition between vendors, research company Gartner said last month. [ID:nLN398055]

"Looking at the trying conditions, it's a decent set of numbers... but looking at the guidance and its range, it looks like Wipro is trying to play it safe," said Arun Kejriwal, director at research firm KRIS.

At 0501 GMT shares in Wipro, which the market values at $8 billion, were up 4.2 percent at 285.80 rupees, after rising as much as 7.5 percent to a six-month high, in a Mumbai market <.BSESN> that was up 0.9 percent.

GLOOMY TECH OUTLOOK

Wipro's lower revenue forecast follows a gloomy outlook by larger rivals Tata Consultancy Services (OOTC:TACSF) and Infosys Technologies (NASDAQ:INFY) . Infosys said it expected its first annual revenue decline. [ID:nBOM471257

Wipro, owned by billionaire Azim Premji who turned the family's ailing vegetable oil business into IT services major, said net profit in its fiscal fourth quarter to March rose to 9.1 billion rupees ($180 million) from 8.75 billion rupees reported a year ago. Sales rose 13 percent to 64.5 billion rupees.

A Reuters poll had forecast a net profit of 8.73 billion rupees.

Earnings were boosted by the integration of Citi Technology Services, which Wipro bought for $127 million from Citigroup in December.

"We expanded our margins despite the headwinds of reduction in volumes and lower tailwind of forex gains," Senapaty said in a statement. Wipro added 20 new clients in the quarter.

Wipro's IT business margin rose to 20.8 percent in the quarter from 20 percent in the December quarter and the weaker rupee helped margins by 40 basis points, an investor relations executive said.

The rupee fell nearly 4 percent against the dollar in the quarter, adding some buffer to profit margins of exporters.

Growth in India's once-booming software services exporting sector has slowed sharply due to a recession in the United States, which accounts for more than one-half of the estimated $60 billion industry supply, and rising competition from the likes of IBM (NYSE:IBM)

On Monday, IBM reported a bigger-than-expected 11 percent drop in quarterly revenue as the slowdown in corporate spending hurt even one of the healthiest U.S. technology companies, but the company affirmed its full-year earnings outlook. [ID:nN20352411].

The market share of India's top outsourcers could come under pressure with the acquisition of fraud-tainted Satyam Computer Services (NYSE:SAY) by mid-sized Indian IT services company Tech Mahindra Ltd (OOTC:TMHAF) in a deal worth about $580 million.

Tech Mahindra, 31 percent owned by Britain's BT Group (NYSE:BT) , will become India's fourth-largest outsourcing firm from a current ranking of sixth after the takeover. [ID:nBOM172810]

Shares in Wipro, rose 5 percent in the March quarter, outperforming a 2.6 percent advance in the sector index <.BSEIT> and a 0.6 percent rise in the main index <.BSESN>. ($1=50.5 rupees)

Wipro’s Net Profit Rose, Beating Expectations

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Bank of New York Mellon Profit Down 57%

Filed at 7:23 a.m. ET

NEW YORK (AP) -- Bank of New York Mellon Corp. said Tuesday that its first-quarter profit dropped an unexpectedly steep 57 percent and that it was slashing its dividend to shore up capital. Its shares fell more than 8 percent in premarket trading.

The New York-based trust bank cut its dividend to nine cents a share from 24 cents as it said investment losses and higher credit costs hurt its quarterly results.

After paying preferred dividends, BNY Mellon earned $322 million, or 28 cents per share, for the January-March period. That's less than half the $746 million, or 65 cents per share, it earned a year ago.

Income from continuing operations excluding merger and integration costs, restructuring charges, investment writedowns and other nonrecurring items, was $676 million, or 59 cents per share.

Wall Street analysts had been expecting earnings of 63 cents per share. Analysts typically exclude one-time items from their estimates.

Shares dropped $2.28, or 8.1 percent, to $25.75 in premarket trading.

Losses on the bank's securities portfolio totaled $295 million, up from $73 million in the first quarter of last year, but down significantly from a loss of $1.24 billion in the fourth quarter.

During the quarter, the company set aside $80 million to cover loan losses, up from $16 million in the prior-year period. The total allowance for credit losses increased by $30 million and the amount of loans deemed uncollectable totaled $50 million.

Total revenue was $2.93 billion, down from $3.75 billion a year ago. Analysts had forecast revenue of $3.66 billion.

Net interest revenue, or the amount earned on loans and deposits, totaled $792 million, up slightly from $767 million in the first quarter of last year.

Fee and other revenue totaled $2.14 billion, compared with $2.98 billion a year ago. The decline reflects drops in securities servicing and asset and wealth management fees. This was partly offset by a 19 percent increase in foreign exchange and other trading revenue.

Total assets under management were $881 billion at quarter end, down 20 percent from the same time last year.

Bank of New York Mellon Profit Down 57%

Hot News: Global Markets Are Mixed

Global Markets Are Mixed

PARIS — Asian markets fell Tuesday amid lingering concerns about global banks while European exchanges gave up early gains. Wall Street appeared headed for lower opening.

At afternoon trading, the Dow Jones Euro Stoxx 50 index, a barometer of euro zone blue chips, was down 0.7 percent, while the FTSE 100 index in London had declined 0.6. The CAC 40 in Paris dropped 0.5 percent, and the DAX in Frankfurt was down 0.3 percent. European stocks fell about 3.6 percent Monday.

Trading in index futures suggested Wall Street stocks would decline when trading begins. On Monday, the Standard & Poor’s 500 index tumbled 4.3 percent after Bank of America fell 24 percent, leading financial shares down.

The bank reported a $4.2 billion first-quarter profit, but investors remain concerned that banks face more credit losses, write-downs and the need to raise additional capital. Analysts also worry that many of the profits being reported by banks this quarter have come from one-time gains or accounting adjustments.

In Hong Kong, the Hang Seng index slipped nearly 3 percent, and the Shanghai Stock Exchange composite index fell 0.9 percent. The Tokyo benchmark Nikkei 225 stock average shed 2.4 percent, and the S&P/ASX 200 in Sydney lost 2.4 percent.

Shares in Japan’s major banks fell Tuesday, with Sumitomo Mitsui Financial Group finishing 1.7 percent lower, Mizuho Financial Group falling 2 percent and Mitsubishi UFJ Financial Group declining 1 percent.

Technology companies like Canon, NEC Electronics and Hitachi were also dragged lower by a larger-than-expected decline in quarterly sales at I.B.M., which is seen as a bellwether for technology spending by corporations.

Many analysts and market watchers have cautioned that the rally seen around the world since early March — set off mainly by signs that the pace of economic deterioration has slowed — has been excessive and only partly justified by fundamentals.

“We are witnessing an appropriate degree of reality. While the pace of global economic contraction is slowing, the fact of contraction appeared to have been ignored,” Patrick Bennett, an analyst at Société Générale in Hong Kong, said in a note.

“One day of a major correction does not break a trend, especially the ferocious rally of the past six weeks,” said Dariusz Kowalczyk, chief investment strategist, CFC Seymour in Hong Kong. “But we do expect a more substantial return to the risk aversion trade some time in the near term, most likely in relation to the U.S. bank stress test results expected on May 4.”

Across Asia, the focus is now shifting to earnings from corporate giants including Toyota and Hyundai, and electronics companies like Samsung, Sony, Hitachi and Toshiba, all of which are due to report in the next few weeks.

LG Electronics, the South Korean manufacturer of mobile phones and LCD televisions, on Tuesday reported a first-quarter net loss of 197.6 billion won ($146 million), down from a profit of 422.2 billion won a year earlier. But operating profits beat expectations as market share rose, helped in part by the weak won, which makes its products cheaper for customers abroad.

LG’s shares rose 1 percent, while the Kospi index in Seoul bucked the regional trend to finish flat.

Toshiba, the largest Japanese maker of semiconductor chips, highlighted the tough conditions that continue to haunt the company and its industry peers, when it indicated last Friday that its net loss for the business year that ended March 31 would be ¥350 billion, or $3.5 billion, rather than the ¥280 billion it had earlier projected.

Toshiba also said it would cut 3,900 contract workers in Japan by next March, an example of how job losses in the word’s second-largest economy are continuing to rise as the recession there drags on.

Meanwhile, India’s central bank on Tuesday lower its key interest rates by a quarter of a percentage point, highlighting how even one of the region’s most resilient economies is being dragged down by the global slump. The central bank also lowered its economic growth estimate for the year that ends March 2010 to 6 percent.

Crude oil futures for May delivery fell 31 cents to $45.57 a barrel. Comex gold rose $3.30 to $890.30 an ounce.

The dollar was mixed against other major currencies. The euro rose to $1.2947 from $1.2921 late Monday in New York, while the British pound rose $1.4565 to $1.4539. The dollar rose to 98.17 yen from 97.89 and to 1.1699 Swiss francs from 1.1688.

Bond prices were broadly stable, with the yield on the benchmark U.S. 10-year Treasury note at 2.83 percent.

David Jolly reported from Paris, and Bettina Wassener from Hong Kong.

Global Markets Are Mixed

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UN chief urges Americas to tackle crisis in sustainable manner

PORT OF SPAIN, April 18 (Xinhua) -- UN Secretary General Ban Ki-moon on Saturday called on the countries in the Americas to deal with the current economic crisis in a sustainable manner.

"Let the Americas be guided by a spirit of global solidarity. Let us be good neighbors," he told 34 leaders attending the 5th Summit of the Americas in Port of Spain, Trinidad and Tobago. UN Secretary-General Ban Ki-moon waves while leaving the Hyatt Regency Trinidad, the main venue of the Fifth Summit of the Americas in Port of Spain, Trinidad and Tobago, April 18, 2009. Ban Ki-moon on Saturday called on the countries in the Americas to deal with the current economic crisis in a sustainable manner during the summit. (Xinhua/Juan Carlos Hernandez)
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Ban Ki-moon stressed that the crisis requires leaders to protect the most vulnerable, and to do so by preserving environmental sustainability.

If not managed properly, the economic crisis can evolve into a total political crisis and incite public angry that they have lost faith in their leaders and their future, Ban said.

To this end, governments should take "new multilateralism�� as the foundation of prosperity and sustainability for all.

On the issue of Cuba, the UN chief said he has "noted with interest the change of direction by the new U.S. administration."

"It is a sign of changing times, of fresh winds blowing, in ways large and small," he said.

Speaking at the start of the three-day event, U.S. President Barack Obama said he is seeking a "new beginning" in relationship with Cuba, the only country in the Americas excluded from the summit.

"I am prepared to have my administration engage with the Cuban government on a wide range of issues -- from drugs to migration and economic issues to human rights, free speech and democratic reform," Obama said.

UN chief urges Americas to tackle crisis in sustainable manner

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Feds Kohn defends central bank credit support steps, policies

In a speech at a conference at Vanderbilt University, Kohn said the central bank's actions over the past 20 months "necessary, safe, and effective and will not lead to adverse after effects."

Kohn also verbally sparred with Paul Volcker, another conference attendee. The former Federal Reserve chairman, who is now an adviser to President Obama, reportedly questioned the current Fed's informal inflation target.

In the minutes of its January policy meeting, the Fed said "most participants" thought 2% inflation, as measured by the price index for personal consumption expenditures, would be consistent with the dual mandate of promoting price stability and maximum employment.

"I don't get it," Volcker said, adding that setting 2% as an inflation objective meant the Fed is "telling people in a generation they're going to be losing half their purchasing power," according to Dow Jones Newswires.

Kohn responded that assuming an inflation rate of 2%, rather than a lower rate, gives the Fed more policy leeway, according to reports.

"We are continuing to discuss... whether an explicit numerical objective for inflation would be beneficial," Kohn reportedly said.

Fed's Kohn defends central bank credit support steps, policies

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Four Convicted in Sweden in Internet Piracy Case

PARIS — A Swedish court has convicted four men linked to an Internet file-sharing service, the Pirate Bay, of violating copyright law, giving the music and movie industries a prominent victory in their campaign to curb online piracy.

The court found on Friday that the men — the three founders, Frederik Neij, Gottfrid Svartholm Warg and Peter Sunde, as well as Carl Lundstrom, who provided financing — had aided copyright infringement by operating the site, which provides links to thousands of songs, films, video games and other material, and helps users download them.

They were each sentenced to a year in prison and were also ordered to pay 30 million kronor (about $3.6 million), in damages to leading entertainment companies.

Internet users and media companies have been following the case closely because of the size of Pirate Bay — it is estimated to have more than 20 million users worldwide — and the defiant stance of its operators. The trial this winter took place amid a carnival atmosphere in Stockholm, with bands playing outside the courtroom and Twitterers tweeting away.

John Kennedy, chief executive of the International Federation of the Phonographic Industry, one of the groups that had supported the case against Pirate Bay, said the decision “sent a strong message about the importance of copyright.”

“We are satisfied that the court has clearly said that what they were doing was wrong,” Mr. Kennedy said.

In the near term, the decision may have little effect on the day-to-day operations of Pirate Bay; the defendants have vowed to continue running the service as they appeal.

Mr. Kennedy said music and movie industry groups planned to file additional litigation to try to get the site shut down. He said that while he expected the defendants to “hand over the baton” to others, that might be more difficult.

Over the last decade, media companies have won a series of court victories around the world against file-sharing services like Napster, Kazaa and Grokster.

But unauthorized copying remains a big problem, in particular for the record business. The music industry federation estimates that 95 percent of music downloads involve pirated work.

Mark Mulligan, an analyst at Forrester Research, said the decision Friday would not result in a “meaningful” decrease in piracy. Internet users are turning to new ways to share music, including streaming and messaging services, which are harder for copyright owners and enforcement officials to detect.

But he said the ruling was “good P.R.” for the music and movie industries.

“There’s a lot of value out of it, even though its value is not going to be a meaningful reduction in file sharing,” Mr. Mulligan said. “They have to be seen to be doing something, in the same way that customs fights drug trafficking — as a deterrent.”

Mr. Mulligan said the decision could encourage more music listeners to turn to services that provide “free” digital music legally, as part of a broadband subscription or with the support of advertising.

“The best way to fight free is with free,” he said.

The decision could also help alter perceptions of Sweden as a haven for piracy. A new law that took effect this month makes it easier for copyright owners to pursue illegal downloaders through the courts. Figures from Netnod, which operates Internet exchanges in Sweden, show that the volume of Internet traffic plunged as the law took effect — suggesting, analysts said, that some file-sharers may have been deterred.

Pirate Bay could not be reached for comment on the decision. On the site, a notice was posted calling the decision a “crazy verdict.”

“But as in all good movies, the heroes lose in the beginning but have an epic victory in the end anyhow,” it said. “That’s the only thing Hollywood ever taught us.”

Pirate Bay is one of the largest so-called Bit Torrent trackers, which facilitate downloads of large digital files by enlisting the help of other computers.

The defendants had maintained that they were innocent because they did not actually host any of the copyrighted material on their servers.

As the media industries battle pirates in court, they have also been lobbying for tougher legislation against unauthorized file-sharing, but with limited success.

In France last week, the National Assembly rejected a government proposal to cut off the Internet connections of persistent copyright pirates, in a surprise vote. President Nicolas Sarkozy has said the government will reintroduce the measure at the end of the month.

Four Convicted in Sweden in Internet Piracy Case

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MGM Mirage and Dubai World Near Deal

MGM Mirage and Dubai World are close to an agreement on a proposal that would ensure the completion of their CityCenter project in Las Vegas, people with knowledge of the talks said on Friday.

While MGM Mirage and Dubai World have settled many of the issues between them, they must still reach an accord with the banks financing CityCenter, a sprawling residential and casino development, one of these people said. The talks are aimed at amending the terms of a $1.8 billion loan needed to complete the project.

The goal of any agreement would be to ensure that CityCenter received the financing to be completed, these people said. It would also seek to protect the development should MGM Mirage, its developer, default on its own debt, which would set off a cross-default on the CityCenter loan.

Under the existing terms of that loan, MGM Mirage and Dubai World must make about $800 million in additional payments to access the financing. The two partners would like to gain access to the financing before those payments are made.

The bank group is led by Bank of America, which is serving as the administrative agent.

Representatives for MGM Mirage and Dubai World declined to comment.

In a statement announcing that MGM Mirage had made a $70 million payment to CityCenter’s banks — a payment that also covered $35 million that was to be paid by Dubai World — James J. Murren, the casino operator’s chief executive, reiterated his company’s support for the development.

“MGM is determined to make CityCenter a success and we continue to review with our partners all options to keep CityCenter fully funded,” Mr. Murren said. “We are continuing to engage in constructive discussions with our senior lenders and the CityCenter lending group and we appreciate the support of the involved parties.”

MGM Mirage and Dubai World Near Deal

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Nokia Profit Plunges 90% in 1st Quarter

Filed at 7:42 a.m. ET

HELSINKI (AP) -- Nokia Corp. on Thursday said profits plummeted 90 percent in the first quarter because of fading demand for mobile phones amid the worldwide downturn -- but its shares surged as analysts had expected an even gloomier report.

The world's top mobile phone maker said net profit was only euro122 million ($161 million) compared to euro1.2 billion in the same period last year.

Sales fell 27 percent to euro9.3 billion ($12.2 billion), from euro12.7 billion in the first quarter of 2008.

Still, Nokia sold more phones than some had expected, and shares rose more than 7 percent to euro10.85 in Helsinki.

''It was really a relief. Although their performance was bad, it wasn't as bad as expected,'' said Neil Mawston from Strategy Analytics in London. ''Everyone talked Nokia down, so there was a general relief that things weren't that bad after all.''

Nokia's handset sales did plunge 33 percent in January through March to euro6.2 billion ($8.17 billion). That left Nokia with a 37 percent market share, unchanged from the previous quarter but down 2 percentage points from the first quarter of 2008.

The company sold 93 million devices in the period, down 19 percent from 115 million in the year-ago quarter but more than the market expected.

''They were definitely ahead of our expectations and they were ahead of consensus expectations as well. The market was expecting 90 to 91 million and we were at 92 million and they came in at 93 million. That seems to be the core driver,'' Mawston said.

Nokia maintained its previous estimate that mobile device market would shrink by 10 percent this year and held on to its target of boosting market share. However, it downgraded its outlook for the network infrastructure market, saying it expects a 10 percent contraction in 2009. Nokia, which has a joint network unit with Siemens AG of Germany, had earlier predicted that market would decline 5 percent this year.

Nokia has fared better than many rivals during the world economic slump. But it, too, has been hit by falling demand. Last month it announced 1,700 layoffs worldwide.

''In what has been an exceptionally tough environment, we continue to invest in a focused manner in consumer Internet services delivered across our broad portfolio of mobile devices,'' chief executive Olli-Pekka Kallasvuo said. ''Combined these solutions will drive our future growth.''

Kallasvuo said he was ''especially pleased'' with the performance of the Nokia5800, a touch-screen music phone that rivals Apple's iPhone.

Nokia Profit Plunges 90% in 1st Quarter

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Japan Drafts $154.4 Billion Stimulus

TOKYO — Japan’s ruling party unveiled the country’s biggest-ever economic stimulus plan Thursday, a ¥15.4 trillion, or $154.4 billion, package of subsidies and tax breaks that aims to stem a deepening recession in the world’s second-biggest economy.

The Liberal Democratic Party released details of the draft stimulus, worth about 3 percent of Japan’s gross domestic product, ahead of a formal announcement Friday. The plan would bring Japan’s total stimulus spending to ¥27 trillion since Prime Minister Taro Aso took office in September.

Japan is reeling from what is likely to be its worst recession since World War II, as its mainstay exports are hit by a global collapse in demand. In the fourth quarter of 2008, its economy shrank at an annualized rate of 12.1 percent. Unemployment is at a three-year high of 4.4 percent, and personal consumption is falling.

Mr. Aso, whose popularity has slumped along with Japan’s economy, has tried to rally support ahead of parliamentary elections later this year with the stimulus spending. With ¥15.4 trillion in fresh funds, the latest drive dwarfs the money Japan pumped into its economy in the late 1990s, during its “Lost Decade” of sluggish growth.

The plan includes emergency spending of ¥1.9 trillion to protect jobs and retrain unemployed workers, according to a draft released by the L.D.P. It also calls for ¥3 trillion in measures to boost corporate financing amid a credit crunch. Another ¥2 trillion would go toward improving health and child care

Japan will also spend ¥1.6 trillion to foster environmentally-friendly technologies, including plans to bring solar

power to more cheaply to Japanese homes. The plan calls for tax breaks worth up to $2,500 dollars on purchases of “green” cars, and subsidies of 5 percent on energy-efficient televisions and other appliances -- a welcome relief for Japan’s struggling auto and electronics industries.

In a much-touted move to spur spending, the stimulus also sets a higher ceiling on tax-free gifts. The aim is that older Japanese, who sit on a large pool of personal savings, can more easily bequeath funds to younger generations, who are more likely to spend on big-budget items like houses.

Later this month, the party is expected to submit to parliament a supplementary budget that finances the plan.

Investors welcomed news of the stimulus, triggering a 3.74 percent jump in the Nikkei stock index.

Some economists called for caution, however, because of concerns about Japan’s burgeoning government debt. The debt already stands at 170 percent of the country’s GDP, one of the highest ratios in the world.

“In the short term, the stimulus plan will help boost economic growth, simply because of its scale,” said Masamichi Adachi, an economist at JPMorgan Securities Japan. “But how much sustainable growth can the plan generate? That’s not clear at this point.”

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European Stocks Modestly Higher

Filed at 6:31 a.m. ET

LONDON (AP) -- European stock markets rose only modestly Thursday despite earlier hefty gains in Asia -- which included a near 4 percent rally on Tokyo's Nikkei following details of a new stimulus package -- as investors remained cautious ahead of a Bank of England interest rate decision and the long Easter weekend.

The FTSE 100 index of leading British shares was up 24.17 points, or 0.6 percent, at 3,949.69, while Germany's DAX rose 50.44 points, or 1.2 percent, to 4,408.36. France's CAC-40 was 17.28 points, or 0.6 percent, higher at 2,938.34. All three indexes are closed for the Good Friday public holiday, and the FTSE won't actually be reopening until Tuesday.

The main point of interest in European markets will be the Bank of England's rate decision at midday London time (1100 GMT). Though the bank is expected to keep its benchmark rate unchanged at 0.5 percent, investors will be focusing on what the Bank says about its quantitative easing strategy, in which the central bank can buy up to 75 billion pounds of financial assets from commercial banks in the hope that they will use the money to start lending again.

Earlier in Asia, Japan's Nikkei 225 stock average added 321.05 points, or 3.7 percent, to 8,916.06 for its highest close in three months, while Hong Kong's Hang Seng climbed 426.55, or 3 percent, to 14,901.41.

Investors across Asia were buoyed by the news that Japan's ruling party is seeking a stimulus package that is substantially bigger than originally announced, involving 15 trillion yen ($150.4 billion) in new fiscal spending. The measures, should they win final approval, would equal some 3 percent of the country's gross domestic product.

''Markets welcomed the move but it may be some time before this optimism is felt across the broader economy,'' said Neil Mellor, an analyst at Bank of New York Mellon.

There was also some encouragement offered by the news that Japan's machinery orders -- an indicator of how much the country's companies plan to spend -- rose in February for the first time in five months. Core private sector machinery orders grew 1.4 percent in February from the previous month to 728.1 billion yen ($7.3 billion), the government said.

In addition, there was upbeat data from China where auto sales hit a monthly record of 1.11 million vehicles in March, exceeding U.S. sales for the third month in a row, as tax cuts and rebates for small car purchases lured buyers back into showrooms. Shanghai's main index closed 32.49 points, or 1.4 percent, higher at 2,379.88.

Despite some losses this week, stocks around the world are still trading much higher than they were just a month ago, amid some tentative optimism that the worst of the global economic downturn may have passed.

However, David Buik, senior strategist at BGC Partners, said there was a lot of potential bad news out there that could fuel a further nasty retreat, especially if corporate earnings come in worse than anticipated.

Next week, he said, could be a testing time for markets, as many U.S. banks are set to post their results, including Citigroup Inc., Goldman Sachs Inc. and JPMorgan Chase & Co.

''Have any of the schemes implemented by the US government started to pay dividends?'' said Buik.

The fairly subdued tone in Europe is expected to carry through into New York, when Wall Street opens.

Dow futures were 45 points, or 0.6 percent, higher at 7,838, while the broader Standard & Poor's 500 futures rose 5.3 points, or 0.6 percent, to 827.90.

On Wednesday, insurance and technology shares led Wall Street higher in a volatile day. The Dow Jones industrials rose 47.55, or 0.6 percent, to 7,837.11, while the S&P closed 9.61, or 1.2 percent, higher at 825.16.

Elsewhere in Asia, South Korea's Kospi rose 4.3 percent to 1,316.25. Elsewhere, Australia's benchmark gained 1.4 percent, Taiwan's jumped 4.1 percent and Singapore advanced 2 percent.

Oil prices rose above $51 a barrel Thursday. Benchmark crude for May delivery rose $1.86 to $51.24 a barrel on electronic trading on the New York Mercantile Exchange.

Meanwhile, the dollar edged back up towards the 100 yen mark from 99.72 yen, while the euro rose to $1.3315 from $1.3297.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

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