TOKYO (Reuters) – The Japanese government is considering a dollar swap arrangement with India to provide emergency liquidity in case the European debt crisis reaches emerging economies, the Nikkei business newspaper said on Sunday.

The agreement would set the total swap arrangement at $10 billion, or 780 billion yen, the Nikkei said.

Both countries are looking to sign off on the arrangement next Wednesday, when leaders meet at a bilateral summit, the paper said.

The currency swaps are expected to support the Indian rupee as it continues to weaken against the greenback and Europe's sovereign debt crisis hits India's exports.

The dollar-swap arrangement with India would follow a similar agreement with South Korea in October.

(Reporting by Mari Saito; Editing by Paul Tait)

BANGKOK – Asian stock markets were mostly lower Monday as investors shifted their focus from Europe’s debt woes to the strength of the U.S. economy. Japan sold the yen to limit its export-sapping strength.

Hong Kong’s Hang Seng slipped 1.1 percent to 19,791.74 and South Korea’s Kospi fell 1 percent to 1,910.94. Benchmarks in Australia, mainland China, Singapore and Taiwan also posted losses.

The Nikkei 225 index in Tokyo swung between positive and negative territory after Japan intervened to weaken its currency, which had earlier hit a new post World War II high against the greenback. The Nikkei was 0.2 percent lower at 9,021.08 in afternoon trading.

The strong yen has dented earnings of Japanese corporations such as Nintendo Co. and Toyota Motor Corp. and hurt the economy’s recovery from the March 11 earthquake and tsunami. Finance Minister Jun Azumi said monetary authorities could continue intervening.

The dollar surged about 5 percent to above 79 yen, and Japan’s export sector — whose fortunes are largely tied to the relative strength of the yen — rose abruptly.

Isuzu Motors Corp. jumped 4.3 percent. Canon Inc. rose 1.7 percent and Nikon Corp. added 2.3 percent. Nintendo Co. gained 3.6 percent.

In Sydney, shares of Australian flag carrier Qantas Airways Ltd. jumped 4.3 percent after a court ordered employees of the world’s 10th-largest airlines back to work. The airline had grounded its entire fleet on Saturday following weeks of strikes by its workers, but an arbitration court on Sunday ordered an end to the strikes and canceled the staff lockout.

Last week, investors were cheered by the debt crisis deal reached by European leaders. European banks were asked to take a 50 percent loss on their holdings of Greek government bonds. They will also set aside more money to cushion against future losses. Leaders also pledged to expand the European Union’s bailout fund.

But economists caution that many details in the plan still have to be worked out, including the difficult task of deciding who will pay for it.

“With more questions than answers markets will be hungry for further details over coming weeks and until then it is difficult to see risk appetite stretching too far,” analysts at Credit Agricole CIB wrote in a research note.

This week, investors will likely turn their attention to the U.S.

A key jobs report for October, a Federal Reserve policy meeting and Fed Chairman Ben Bernanke’s quarterly news conference are all due.

“This month is going to be another watershed insight into whether we are looking at a low growth environment or something worse,” said Ric Spooner, chief market analyst at CMC Markets in Sydney. “To maintain the low growth environment view, the market is going to want to see positive employment growth.”

A report Thursday showed that the U.S. economy expanded at a solid 2.5 percent annual rate in the July-September quarter. That helped ease concerns that another recession might be nearing.

But while the economy is growing, it may not be enough to generate many jobs. The U.S. unemployment rate has been stuck at 9.1 percent for three months. Analysts expect roughly 100,000 jobs to be added in October. Anything less could raise concerns that the economy may slow.

In currencies, the euro fell to $1.4034 from $1.4170 on Friday in New York. The dollar sprinted to 79.18 yen from 75.76 yen.

Benchmark crude for December delivery was down 96 cents at $92.36 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 64 cents to settle at $93.32 in New York on Friday.

WASHINGTON – The dollar rose strongly against the euro and other major currencies Thursday as a selling spree in global stock markets increased demand for lower-risk investments.

Asian and European markets plunged Thursday as traders absorbed the Federal Reserve’s bleak assessment of the U.S. economy. The Fed had said that the U.S. economy is vulnerable to major risks, including from unstable financial markets.

Bad economic news from Asia and Europe also pushed people to sell riskier investments that typically gain value during periods of growth. HSBC’s index of Chinese manufacturing showed that factories there have slowed in September.

Markets in China and India closed down more than 4 percent as traders questioned whether emerging economies will remain strong if developed nations enter recession. Major indexes in Germany and France lost 5 percent on spreading fears about an economic slowdown caused by the sovereign debt crisis there.

U.S. shares followed, with indexes sliding more than 3 percent by midmorning.

Money flooded into currencies that are seen as safe, stable bets — the dollar, Japanese yen and Swiss franc.

At 1:10 p.m. Eastern time, the euro was worth $1.3481, down from $1.3667 late Wednesday. The British pound fell to $1.5368 from $1.5578. The dollar rose to 0.9073 Swiss franc from 0.8954 franc. But it slipped to 76.37 yen from 76.62 yen.

Traders dumped commodities such as oil and metals, fearing demand will decrease as the global economy slows. Oil fell more than 6 percent, silver lost nearly 9 percent.

That hurt currencies of nations that produce those commodities. The dollar rose to 1.0286 Canadian dollar from 1.0035 on Wednesday. It rose against the Norwegian krone and Swedish krona as well.

The Australian dollar was worth 97.76 cents, down from $1.0125. The New Zealand dollar fell to 78.06 cents from 80.54.

LONDON (Reuters) – Global stocks fell to their lowest in more than a week on Thursday, knocked down by mounting concerns about a U.S. debt default which also kept the dollar subdued against the safe-haven Swiss franc and the yen.

European stocks fell for the fourth straight session, following their Asian counterparts, as sovereign debt risks weighed on sentiment and drove investors away from riskier assets to safer ones such as gold.

Stalemate in Washington over lifting the debt ceiling is increasing the possibility of a U.S. credit rating downgrade and has raised the prospect that the government of the world’s leading economy will run out of money to pay its bills.

“The problem is that the whole thing has been a wake-up call for the market, a real black swan: we’re now starting to price in a default risk for the world’s biggest economy, which was inconceivable just a few months back,” said David Thebault, head of quantitative sales trading at Paris-based broker Global Equities.

European stocks (.FTEU3) were also hurt by a raft of mixed earnings reports which sparked worries about company profits.

Banks were among the top losers, led by Credit Suisse (CSGN.VX), down 3.6 percent. The Swiss lender posted lower-than-expected quarterly net profit, hit by weak trading activity, and said it would cut about 2,000 jobs.

World shares as measured by MSCI (.MIWD00000PUS) were down 0.3 percent while the MSCI index of Asia Pacific stocks outside Japan (.MIAPJ0000PUS) was down 0.85 percent, with technology, commodity-related and consumer shares the biggest drags.

The safe-haven yen was the main beneficiary of poor risk sentiment, making gains against both the euro and the dollar.

The greenback also hovered near a record low against the Swiss franc with investors increasingly downbeat about its prospects on concerns that deficit reduction proposals being discussed in Washington may fall short of the budget cuts necessary to avert a U.S. debt downgrade.

EUROPEAN WORRIES

The deadlock in Washington has not pulled traders’ attention away completely from the euro zone, where Italian and Spanish bond yields keep rising relative to German bonds and calm after last week’s second bailout for Greece has evaporated.

“At the moment it’s all about the U.S. debt ceiling,” said David Bloom, global head of FX research at HSBC. “But if you ask which of these debt crises you would prefer, the answer is neither.”

The 10-year Spanish/German bond yield spread widened 7 basis points on the day to 341 bps, while the equivalent Italian/German bond yield spread widened 10 basis points on the day to 322 basis points.

Attention is now on an Italian bond auction as investors try to gauge appetite for its high-yielding paper amid concerns the debt crisis could spread to the euro zone’s No. 3 economy.

Japanese fund managers slashed their euro zone bond weighting to a record low and cut their U.S. bond allocations, while raising their Japanese bond weighting to a fresh all-time high, a Reuters poll showed.

U.S. 10-year Treasuries edged higher, stabilizing after falling overnight on a less-than-stellar auction of new five-year bonds. The 10-year yield was at 2.97 percent, a basis point below where it finished last night in New York.

With a ratings downgrade possible at any time, investors also kept a wary eye on U.S. credit default swap rates. The one-year CDS blew out to a record 85 basis points, pushing out the difference over five-year CDS to more than 20 basis points.

Gold has been a big winner as investors seek out hard assets to hedge against risks. Gold was steady at $1,617.80 an ounce after hitting an all-time high of $1,628 on Wednesday.

Brent crude was 0.7 percent higher at $118.20 a barrel.

(Additional reporting by Blaise Robinson and; Nia Williams; Editing by Catherine Evans)

TOKYO – Most Asian stock markets slipped along with the dollar Thursday after Moody’s Investors Service threatened to lower the United States’ credit rating.

Japan’s Nikkei 225 stock average fell 0.4 percent to 9,926.74. Exporters lost ground as the dollar weakened against the yen, which reduces the value of overseas profits when repatriated.

The dollar fell into the mid-78 yen range, prompting Japan’s finance minister to issue his strongest language this week on the Japanese currency.

“I think this is a move far removed from reality, and we will be troubled if this (trend) is underpinned,” Noda told reporters, according to Kyodo News agency.

Moody’s Investors Service said Wednesday there is a small but rising risk that Washington will default on its debt. The credit rating agency said it will review the U.S. government’s triple-A bond rating because the White House and Congress are running out of time to raise America’s $14.3 trillion borrowing limit and avoid a default.

The government reached its borrowing limit in May. Treasury says the government will default on its debt if the limit is not raised by Aug. 2.

Hong Kong’s Hang Seng was down 0.3 percent at 21,862.46, South Korea’s Kospi fell 0.5 percent to 2,118.40, and Australia’s S&P/ASX 200 shed 0.3 percent to 4,500.30.

A profit warning from Australian department store operator David Jones Ltd. rocked the retail sector. The issue plunged more than 16 percent after telling investors to expect profit in the first half of 2012 to fall 15 to 20 percent. It said profit this year would fall by up to 2 percent.

Meanwhile, benchmarks in mainland China and Singapore were posting slight gains.

In New York Wednesday, the Dow Jones industrial average rose 44.73, or 0.4 percent, to 12,491.61 after comments from Fed Chairman Ben Bernanke.

In testimony before Congress, Bernanke said the central bank would be open to new economic stimulus measures, but only if the economy gets much worse. The remarks were far from a promise for more Fed action, but markets reacted immediately nonetheless.

The broader Standard & Poor’s 500 index rose 4.08, or 0.3 percent, to close at 1,317.72. The Nasdaq composite rose 15.01, or 0.5 percent, to 2,796.92.

Oil prices hovered near $98 a barrel in Asia as traders mulled a possible new round of U.S. monetary stimulus.

Benchmark crude for August delivery was up 3 cents at $98.08 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 62 cents to settle at $98.05 on Wednesday.

In currencies, the dollar fell to 78.62 yen from 78.99 yen late Wednesday. The euro rose to $1.4231 from $1.4151.

SINGAPORE (Reuters) – The euro hit a three-week high versus the dollar on Tuesday on a report that Germany could make concessions on efforts to put together a bailout for Greece, while Japanese shares rose on data suggesting industrial activity has begun to recover from a March earthquake.

The euro rose to $1.4407, its highest in three weeks, supported by a Wall Street Journal report that Germany was considering dropping its demand for an early rescheduling of Greek bonds in order to facilitate a new package of aid loans for heavily-indebted Greece.

European shares were expected to open higher, with financial spreadbetters calling Britain’s FTSE 100 (.FTSE), Germany’s DAX (.GDAXI) and France’s CAC-40 (.FCHI) to open up 0.7-0.8 percent.

The European Union wants to draft a second bailout package for Greece to release vital loans next month and avert the risk of the euro zone country defaulting.

Trader said the euro’s next upside target was $1.45.

“The euro zone problems appear to be subsiding for now. Or putting it another way, the market appears to have stopped looking at them as a factor for now,” said Teppei Ino, a currency analyst at Bank of Tokyo-Mitsubishi UFJ, adding the market could focus on upcoming U.S. data releases. Key numbers including ISM manufacturing and payroll data are due this week.

China’s official purchasing managers’ index for May is scheduled for release on Wednesday, and is expected to weaken slightly from April. A surprisingly big fall could prompt investors to sell riskier assets, a reflex reaction.

In Japan, the Nikkei average (.N225) rose 1.8 percent to 9677.28, boosted by industrial output figures.

Though an output increase of 1 percent in April was below expectations, manufacturers sharply increased their forecasts for May, predicting output would rise 8.0 percent compared with the previous 2.7 percent forecast, data from the Ministry of Economy, Trade and Industry showed.

Companies expect the recovery to continue in June, a sign they are making progress in recovering from the March earthquake.

“Investors got past the weak data in April and cheered the strong outlook by buying futures,” said Tsuyoshi Segawa, an equity strategist at Mizuho Securities.

Big gainers on the Nikkei included solar power firms, expected to win business as a result of Germany’s decision to shut all its nuclear reactors by 2022, a switch in policy prompted by the Fukushima radiation scare in Japan.

Panel-maker Sharp Corp (6753.T) rose 2.5 percent to 759 yen and panel equipment manufacturer Ulvac (6728.T) was also up 2.5 percent to 2,065 yen.

MSCI’s index of Asia-Pacific stocks outside Japan was up 1.3 percent.

The yen slipped marginally to around 81 per dollar from 80.70 after credit rating agency Moody’s said it had placed it rating of Japan on review for a possible downgrade.

Brent crude oil for July delivery rose 55 cents to $115.23 a barrel, having slipped below $115 on Monday, when markets were closed in the United States and Britain. Prices are down around 9 percent in May, the biggest drop since May last year.

Gold ticked down to $1,537.09 per ounce by 1:25 a.m. EDT, after closing at $1,597.95 on Monday in trade drastically thinned by market holidays in the United States and Britain.

Gold, one of the chief beneficiaries of worries about the security of currencies and other assets, set a record high of $1,575.79 per ounce in early May.

SINGAPORE (Reuters) – The euro hit a three-week high versus the dollar on Tuesday on a report that Germany could make concessions on efforts to put together a bailout for Greece, while Japanese shares rose on data suggesting industrial activity has begun to recover from the March earthquake.

The euro rose to $1.4354, its highest in three weeks, supported by a Wall Street Journal report that Germany is considering dropping its demand for an early rescheduling of Greek bonds in order to facilitate a new package of aid loans for heavily-indebted Greece.

The European Union wants to draft a second bailout package for Greece to release vital loans next month and avert the risk of the euro zone country defaulting, EU officials said on Monday.

“The euro zone problems appear to be subsiding for now. Or putting it another way, the market appears to have stopped looking at them as a factor for now,” said Teppei Ino, a currency analyst at Bank of Tokyo-Mitsubishi UFJ, adding the market could focus on upcoming U.S. data releases. Key numbers including ISM manufacturing and payroll data are due this week.

In Japan, the Nikkei average (.N225) rose more than 1 percent to 9615.54, boosted by industrial output figures.

Though an output increase of 1 percent in April was below expectations, manufacturers sharply increased their forecasts for May, predicting output will rise 8.0 percent compared with the previous 2.7 percent forecast, data from the Ministry of Economy, Trade and Industry showed.

Companies expect the recovery to continue in June, a sign they are making progress in recovering from the March earthquake.

“Investors got past the weak data in April and cheered the strong outlook by buying futures,” said Tsuyoshi Segawa, an equity strategist at Mizuho Securities.

Big gainers on the Nikkei included solar power firms, expected to win business as a result of Germany’s decision to shut all its nuclear reactors by 2022, a switch in policy prompted by the Fukushima radiation scare in Japan.

Panel-maker Sharp Corp (6753.T) rose 3.0 percent to 762 yen and panel equipment manufacturer Ulvac (6728.T) surged 2.9 percent to 2,073 yen.

MSCI’s index of Asia-Pacific stocks (.MIAPJ0000PUS) outside Japan was up 1.2 percent.

Brent crude oil for July delivery rose 97 cents to $115.65 a barrel, having slipped below $115 on Monday, when markets were closed in the United States and Britain. Prices are down around 9 percent in May, the biggest drop since May last year.

Gold ticked up to $1,538.80 per ounce by 0209 GMT, after closing at $1,597.95 on Monday in trade drastically thinned by market holidays in the U.S. and Britain.

Gold, one of the chief beneficiaries of worries about the security of currencies and other assets, set a record high of $1,575.79 per ounce in early May.

NEW YORK (Reuters) – U.S. stocks rose in light volume on Friday, with basic materials shares leading the way as commodity prices kept rising on the back of a weaker U.S. dollar.

The greenback fell broadly after weaker-than-expected U.S. consumer spending and housing data stoked worries that the recovery is losing momentum.

Freeport-McMoRan Copper & Gold Inc (FCX.N) rose 2.5 percent to $51.65. The S&P materials sector index (.GSPM) added 0.8 percent as the dollar’s decline helped lift metals and other commodity prices. The Reuters-Jefferies CRB index (.CRB) was headed for a third straight week of gains.

The inverse correlation of the dollar to equities “seems to be a trend that you can focus on as an investor for the time being,” said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

“The logic is that a weaker dollar helps increase exports, sales and profits for multinational companies in the United States.”

The Dow Jones industrial average (.DJI) gained 28.64 points, or 0.23 percent, to 12,431.30. The Standard & Poor’s 500 Index (.SPX) rose 4.11 points, or 0.31 percent, to 1,329.80. The Nasdaq Composite Index (.IXIC) added 10.24 points, or 0.37 percent, to 2,793.16.

The S&P 500 was on track to close its fourth straight week of losses, a streak not seen since February 2010.

Thin trading made for a lackluster day on Wall Street, with desks short-staffed before the Memorial Day holiday that will keep U.S. markets closed on Monday.

“Trading is on the soft side, with many investors getting a head start on the holiday weekend,” RDM Financial’s Sheldon said.

Bank stocks led gains in Europe and also boosted the U.S. market. Bank of America (BAC.N), which had the heaviest turnover on the New York Stock Exchange with more than 9 million shares, rose 2.1 percent to $11.70. It was the Dow’s biggest percentage gainer.

Medco Health Solutions Inc (MHS.N) will lose a major pharmacy benefit contract to CVS Caremark Corp (CVS.N) starting next year, a setback that drove its shares down 9.8 percent to $58.13. CVS shares rose 1.8 percent to $38.83.

On the macroeconomic front, separate reports showed the U.S. economy remained sluggish early in the second quarter with high gasoline prices crimping consumer spending and bad weather helping to push home resales to a seven-month low in April.

(Reporting by Rodrigo Campos; Editing by Jan Paschal)

NEW YORK (Reuters) – Stocks pared gains on Friday after pending home sales fell far more than expected in April.

Pending home sales dropped to a seven-month low in April, a trade group said, dealing a blow to hopes of a recovery in the housing market.

The Dow Jones industrial average (.DJI) was up 32.39 points, or 0.26 percent, at 12,435.15. The Standard & Poor’s 500 Index (.SPX) was up 4.12 points, or 0.31 percent, at 1,329.81. The Nasdaq Composite Index (.IXIC) was up 7.05 points, or 0.25 percent, at 2,789.97.

(Reporting by Angela Moon, Editing by Kenneth Barry)

NEW YORK (Reuters) – Signs of a Wall Street sell-off are all over the place, but U.S. stocks might well survive another week relatively unscathed if investors keep betting on sectors less vulnerable to an economic downturn.

Pressure for a correction in the stock market has been building up in the past few weeks as the euro and oil prices fell in tandem, knocking down shares of energy companies and dollar-sensitive multinationals.

Still, investors have averted a broad sell-off by diving into shares of companies that are less vulnerable to the economic cycle, including well-known defensive sectors such as utilities and household products, but also large-cap companies with steady earnings performance.

That strategy may hold the market afloat for a little longer. But with the end of the Federal Reserve’s easy money policies just around the corner, investors are becoming more sensitive to risk in general.

“There is good reason for a pause, there is good reason to be conservative in here, and there is good reason to raise some cash ahead of a summer correction and a better buying opportunity,” said Richard Ross, global technical strategist with Auerbach Grayson in New York.

The sharp sell-off in commodities markets earlier this month was seen by many as the first warning sign of a coming market correction. The U.S. dollar has been strengthening since then, in another sign that appetite for risk is dwindling.

Next month’s end of the Fed’s massive bond-buying program, also known as quantitative easing, is expected to knock down the value of stocks, commodities and the euro, a recent Reuters poll of 64 analysts and fund managers found.

CONSUMER STAPLES BACK IN STYLE

Ross, who believes that a correction could come at any moment, warned that Wall Street remains close to multi-year highs as investors head into a traditional period of weak seasonality that stretches from May to November.

The Standard & Poor’s 500 index (.SPX) has kept its year-to-date gain of 6 percent for the past two weeks, as defensive sectors such as utilities advanced while more volatile technology shares posted losses.

Despite the rotation between sectors, the S&P 500 has been trading in a narrow range between 1,330 and 1,340, indicating Wall Street’s lack of direction. Most technical analysts agree that the market is poised to break out of that range soon — either with a sell-off or a rally.

Robert Sluymer, an analyst with RBC Capital Markets, said there is no technical evidence that the current market cycle has peaked. He recommended investors keep building exposure to defensive themes, while getting out of cyclical stocks.

Among the defensive sectors favored in the current environment, Standard & Poor’s Equity Strategy recommended the stocks in the S&P 500 Consumer Staples Index (.GSPS). For the week, this index was up 0.6 percent.

With the earnings season coming to a close, Wall Street will have just a sprinkling of marquee names set to release quarterly results in the coming week. On tap are earnings from Campbell Soup (CPB.N), Costco Wholesale Corp (COST.O) and HJ Heinz Co (HNZ.N), whose stocks are in the S&P 500 Consumer Staples Index. Preppies, take note: Polo Ralph Lauren Corp (RL.N) and Tiffany & Co (TIF.N) are also set to release their results. These companies’ outlooks could shed light on the

consumer’s mindset and headwinds facing the retail sector.

As far as economic indicators are concerned, there’s no data with overwhelming star power. The calendar includes new home sales for April, a second look at first-quarter gross domestic product, personal income and consumption for April and the final reading for May on consumer sentiment from the Thomson Reuters/University of Michigan Surveys of Consumers.

So investors could very well be at the mercy of the headlines from Europe, where fears about a possible debt restructuring by Greece are on the rise.

With the euro, commodities and stocks trading with extraordinary correlation, investors should look at the euro-dollar trade for direction, said Ross of Auerbach Grayson.

“If you continue to see the dollar strengthening,” he said, “it should provide a headwind for commodities and for the S&P.”

(Editing by Jan Paschal)