LONDON (Reuters) – Caution ahead of U.S. jobs numbers kept a lid on gains for stock markets on Friday after an optimistic start to the year that has added more than 7 percent to global company values.

Sentiment was underpinned by data that hinted the euro zone may yet avoid recession, boosting European shares, and that China has room to ease monetary policy.

The U.S. nonfarm payrolls report will be a key catalyst as strong data would fuel growing hopes the global economy is on a firm recovery path, while disappointing numbers could add to pressure on the U.S. Federal Reserve to stimulate the economy, supporting appetite for riskier assets.

"A weak read will probably be interpreted as an indication that QE3 (a third round of quantitative easing) is needed to help the recovery," Cameron Peacock, market analyst at IG Markets, said.

Payrolls are forecast to rise by 150,000 after a 200,000 increase in December, with the unemployment rate seen static at 8.5 percent.

Tensions ahead of the data kept the dollar teetering near three-month lows versus the yen on Friday, trading at 76.19 yen and keeping alive the threat of official intervention from Tokyo to weaken the Japanese currency.

"The pressure has really been on the dollar after the FOMC meeting," said John Hardy, currency strategist at Saxo Bank.

"I think the will of the Japanese will be tested in coming days, but we're up against a hard wall with all the determination and the artillery the Japanese have."

Signs of life in a moribund euro zone came from a business survey showing the private sector economy snapped a four-month decline in January and expanded, albeit very weakly and roughly in line with earlier flash estimates.

Markit's Eurozone Composite Purchasing Managers Index (PMI) rose in January to 50.4 from 48.3 in December, above the 50 mark that denotes growth for the first time since August.

The FTSEurofirst 300 index (.FTEU3) of top European shares turned positive after the data, rising 0.2 percent.

The MSCI world equity index, which despite the euro zone debt crisis is up nearly 7.4 percent this year, was unchanged at 321.86.

But events in Greece, which is striving to seal a broader restructuring deal with its creditors by early next week, were likely to keep prices vulnerable intra-day.

The remaining risks that that process could still end up in a messy default that would have repercussions for banks and governments across Europe, supported demand for safe-haven government debt, with the German Bund future up 41 ticks higher at 139.49.

"The focus is squarely on the U.S. employment report which is crucial for near-term sentiment not just for the U.S. but in other markets as well," " Nick Stamenkovic, bond strategist, RIA Capital Markets, said

"On top of that, investors (are) still awaiting news from the Greek PSI negotiations which seem to be dragging on."

GREEK DEADLINE LOOMS

Euro zone finance ministers aim to approve a key second financing package for Greece on Monday, including agreement on the size of voluntary losses private bondholders are willing to accept and new reforms Athens must undertake.

Finance Minister Evangelos Venizelos said on Thursday the European Central Bank needed to share the restructuring burden.

It could send Athens profits from Greek bonds it holds via a roundabout route that would provide aid while respecting a ban on the ECB financing governments direct, sources said.

Investors were also on watch for possible monetary easing in China after its Purchasing Managers Index for non-manufacturing sectors dipped to 52.9 in January from 56.0 in December and input price inflation eased.

"With inflation on track to ease further, …policymakers still have ample room for more …easing measures to ensure a soft-landing," Qu Hongbin, chief economist for China and co-head of Asian economic research at HSBC, said.

The euro inched up to $1.3166, struggling to make much headway after the Chinese data.

Shares in commodities trader Glencore (GLEN.L) shed 1 percent and Xstrata (XTA.L) was down 0.7 percent.

They held on to the bulk of steep gains posted on Thursday on news the commodities trader is in talks to buy the mining group in all-share tie-up that could create a combined group worth more than 50 billion pounds ($79 billion), shaking up the industry with its biggest deal to date.

(Additional reporting by Brian Gorman, Neal Armstrong and Ana Nicolai da Costa; editing by Patrick Graham)

WASHINGTON (Reuters) – U.S. securities regulators will question the top U.S. audit watchdog about his budget and policy priorities on Wednesday, in a rare public meeting designed to shed more transparency on the agency that has tightened the screws on the auditing profession over the past year.

The meeting at the Securities and Exchange Commission will be styled like a congressional hearing, with Public Company Accounting Oversight Board Chairman James Doty on hand to answer questions and make the case for why the SEC should agree to give the PCAOB a budget boost.

The meeting on the PCAOB budget comes at a crucial time. Since Doty first joined the PCAOB about a year ago, he has greatly raised the profile of the audit watchdog.

A vocal critic of the way auditors did their job during the 2007-2009 financial crisis, Doty has called for a series of major regulatory changes that have been met with strong resistance from accounting firms.

The PCAOB is considering whether to limit the number of years an audit firm can work for the same client – an action that could break up some business relationships more than a century old. It also is considering forcing auditors to put their names on the audit reports attached to companies' financial statements.

Further, Doty has been fighting for the ability to inspect overseas accounting firms, especially in China where they have denied U.S. regulators access to documents despite a rash of accounting scandals at U.S.-listed companies based in China.

Doty may face questions on some of these controversial policy areas in addition to the PCAOB's 2012 budget request, according to people familiar with the matter. For 2012, the PCAOB is requesting approval of a $227.7 million budget, which is up from its 2011 budget of $204.4 million.

Its budget is not funded with taxpayer money, but through fees imposed on public companies and broker-dealers. However, the SEC must sign off on it.

Those who know Doty or who are familiar with his tenure at the PCAOB so far say they expect he will do well when he presents the PCAOB's budget request before the SEC.

"Chairman Doty is a veteran securities lawyer and is well respected on both sides of the aisle," said Bradley J. Bondi, a partner at Cadwalader, Wickersham & Taft LLP and former SEC attorney.

Created by the Sarbanes-Oxley Act of 2002, the PCAOB has the power to impose rules and to inspect and fine accounting firms, including the Big Four accounting firms: Ernst & Young LLP, KPMG, PricewaterhouseCoopers and Deloitte & Touche LLP.

RARE MEETING

Wednesday's meeting will mark only the fifth time the SEC has met in public to vote on the PCAOB's budget since the board was established. In most years, SEC commissioners have treated the budget approval as a formality and voted on it behind closed doors without any public debate.

The last time the SEC met publicly to discuss the PCAOB's budget was in December 2008, the same month that Bernard Madoff's Ponzi scheme came to light and the U.S. government was still grappling with a response to the financial crisis.

The first open meeting on the PCAOB budget was held at the request of SEC Republican commissioners Cynthia Glassman and Paul Atkins. Over the years, Atkins was often critical of the high salaries paid to the PCAOB chairman and its members.

According to PCAOB records, the 2011 salary for the chairman was $672,676 while members made $546,891. Salaries have remained flat since 2009. As a comparison, SEC Chairman Mary Schapiro's 2012 salary is $165,300.

This time, the SEC's newest commissioner Dan Gallagher, a Republican who once worked for Atkins, is the one calling for a public review of the PCAOB's budget.

"This meeting adds sunlight to the PCAOB budget process," Gallagher said in a statement provided to Reuters. "It is no different in kind to the congressional hearings at which Congress asks the SEC and other federal agencies about their budget and spending priorities each year. Indeed, our public meeting on Wednesday is the only mechanism by which the public is assured that the SEC is properly exercising its oversight of the PCAOB."

Atkins said in an interview he is glad to see the SEC is getting back to holding public meetings on the PCAOB budget, and urged commissioners to ask questions about salaries, plans for how they will use the funds, policy and enforcement matters, among other things.

"Organizations usually love to try to gloss over the difficult issues," Atkins said.

Atkins added that he feels the SEC has "neglected its duty" in recent years to more closely scrutinize the PCAOB's spending, but Mark Olson, a former PCAOB chairman who has in the past participated in public SEC meetings over the budget, said the lack of a public meeting in recent years is understandable.

"I think the SEC believed they had bigger fish to fry, especially in the post-Madoff environment," said Olson, now a co-chairman of Treliant Risk Advisors. "I think Rome was burning all around them and…contrary to back in the Sarbanes-Oxley days, the PCAOB and audit standards in general were not the same priorities."

(Reporting By Sarah N. Lynch; additional reporting by Dena Aubin in New York; editing by Carol Bishopric)

LONDON (Reuters) – European stocks rose and the euro stayed under pressure on Tuesday as investors weighed the debt turmoil in the euro zone against an improved U.S. economic picture that looks set to deliver upbeat corporate results.

European shares gained from the start on Tuesday, led by mining stocks after forecast-beating results from U.S. aluminum producer Alcoa (AA.N) improved the outlook for commodities.

"A good start to the earnings season; it shows the demand outlook is not so bad and we could get more positive surprises," Mike Lenhoff, chief strategist and head of research at Brewin Dolphin Securities, said.

The key FTSEurofirst 300 (.FTEU3) index was up 1.3 percent at 1,021.47 points, while the STOXX Europe 600 euro zone banking index (.SX7P) gained around 2.0 percent.

Nervous currency markets remained focused on the outlook for the euro zone economy, upcoming government debt sales and how the region's banks will raise much needed capital to repair their balance sheets.

The euro rose slightly to trade around $1.2792, holding firmly above the 16-month lows of $1.2666 hit on Monday, due mainly to traders buying back the currency to square their positions after recent heavy selling.

The Bank of France focused attention on the ailing euro zone economy by reporting growth had stalled at zero in the fourth quarter of 2011 in the region's second-biggest economy.

But separate data showed French industrial production rose 1.1 percent in November, bucking expectations for no growth as output from refineries rose from weak levels of a year ago during strikes.

"There's short-covering and a bit of risk appetite with positive equity markets overnight," said Niels Christensen, currency strategist at Nordea in Copenhagen.

"But we have the debt auctions, the ECB meeting on Thursday and it's still a weak and vulnerable euro…, with no sign of a quick solution to the debt problems in the euro zone," he said.

The worries about the health of the region's banks saw commercial lenders' overnight deposits held at the European Central Bank hit another record high of 482 billion euros.

The banks are awash with cash after taking an unprecedented 489 billion euros in the ECB's first-ever three-year liquidity operation late last month, but they are still uncertain about what to do with the money in the longer term.

French banks were also likely to be in the spotlight after an internal memo obtained by Reuters on Monday showed Societe Generale (SOGN.PA) is forecasting a sharp drop in investment bank revenue in 2012, weighed by higher funding costs and efforts to slash its balance sheet.

AUSTRIAN EXPOSURE

Earlier, data showed China's exports and imports grew at their slowest pace in more than two years in December. The figures fuelled expectations of more policy action from Beijing to support the world's second biggest economy, and most Asian markets gained on Tuesday.

Wall Street ended slightly higher on Monday in a light-volume session as investors stayed cautious ahead of the earnings season that kicked off with Alcoa.

Tuesday's focus in euro zone debt markets will mainly be on Austria's auction of 1.3 billion euros of 10-year bonds which should give an indication of how worried investors are about the country's exposure to neighboring Hungary, which is locked in a dispute with the IMF over international aid.

Bund futures were slightly lower in midmorning trade.

Elsewhere, British retailers finished 2011 with the best sales growth in months as hefty discounting lured in shoppers, while weak business a year earlier flattered the figures, the British Retail Consortium said on Tuesday.

It added that it expected another tough year.

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

The euro zone crisis: http://r.reuters.com/xyt94s

China imports and exports: http://link.reuters.com/ked55s

Euro zone bond yields: http://r.reuters.com/hyb65p

BRC UK retail sales http://link.reuters.com/vyv85s

ECB bank borrowing, deposits http://link.reuters.com/nyd85s

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

(Additional reporting by Joanne Frearson and Jessica Mortimer; Editing by John Stonestreet)

NEW YORK (Reuters) – Stocks have strayed from their recent link to euro moves, and the start of U.S. corporate earnings next week could help shift investor focus back to U.S. fundamentals from Europe.

Stocks have traded in line with the euro over the autumn, with both experiencing sharp swings on headlines from the euro zone.

That trend may be changing, and it comes just as investors get their first glimpse at fourth-quarter U.S. earnings.

Aluminum company Alcoa (AA.N) is expected to report Monday after the closing bell, unofficially starting the reporting period for U.S. corporations. JPMorgan Chase (JPM.N) is due to report on Friday, but the bulk of Standard & Poor's 500 (.SPX) earnings will come in the weeks ahead.

"I think this month we're probably going to break away and see the pattern of U.S. market trade on U.S. fundamentals rather than in reaction to the euro movement," said Fred Dickson, chief market strategist, D.A. Davidson & Co. in Lake Oswego, Oregon.

"I think we're in a time-out period for that (dollar) carry trade, and it will stay a time out for a while."

The correlation between S&P 500 E-mini futures and the euro, which moved in near lockstep in the fall, has receded. A 22-day moving average of the correlation shows almost no relation between the movements of the two assets.

While the corporate results will be searched for evidence of the European crisis' impact on overseas sales, they should also bring back more of a focus on what's happening in the United States, where the economy has been northward bound.

Friday's U.S. jobs reports was the latest data to suggest the recovery is gathering momentum, with non-farm payrolls rising in December and the jobless rate dropping to a near three-year low of 8.5 percent.

S&P 500 fourth-quarter earnings are expected to have risen 7.8 percent from a year ago, according to Thomson Reuters data. But that number is down from a July 1 forecast for growth of 17.6 percent in the quarter.

"We're going to need good, strong positive news on earnings to lift all three of the market averages out of their trading ranges," Dickson said. "They're bumping into some overhead resistance, and it's going to take fundamental news to do it."

The S&P 500 ended virtually unchanged for 2011, even though most strategists had expected gains for the year.

The index has been unable to pierce through 1,285, the closing high set in late October.

Stocks ended with gains for the first trading week of the year, as the mostly upbeat U.S. economic data offset lingering worries about the euro zone. The Dow Jones industrial average (.DJI) was up 1.2 percent for the week, the Standard & Poor's 500 (.SPX) was up 1.6 percent and the Nasdaq (.IXIC) was up 2.7 percent.

Next week's economic calendar includes data on U.S. retail sales and consumer sentiment.

Even with a focus on earnings, investors will be watching Italian and Spanish government bond sales next week.

Both are seen as the year's first big funding tests for struggling euro zone countries. Italy is to pay out 100 billion euros in bond coupons and redemptions in the first four months of 2012.

"Ultimately, the market is still progressing towards a test of the (European Central Bank's) reluctance to be a lender of last resort. I don't know that the test will get that far, but I think it will," said David Joy, chief market strategist at Ameriprise Financial in Boston, where he helps oversee $571 billion in assets under management.

On the earnings front, while all 10 S&P 500 sectors have seen profit estimates cut since July, materials and financials have been the hardest hit. Based on a July forecast, the financial sector was expected to show year-over-year growth of 36.6 percent in the fourth quarter, but the latest forecast is for growth of just 10.1 percent, according to Thomson Reuters data.

Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, which manages about $13 billion, said she has been overweight U.S. equities since the autumn and is considering shifting money into some smaller and midcap names.

"Additional positive momentum in the U.S. can offset additional negative momentum in Europe in terms of earnings impact on U.S. companies," she said.

"Net net it might spell somewhat better relative performance for U.S. small and midcaps versus the large caps," she said. "Large caps may give up some of their leadership this year as the U.S. economy continues to gain momentum and small caps start to benefit from that acceleration."

(Reporting By Caroline Valetkevitch; additional reporting by Ryan Vlastelica; Editing by Kenneth Barry)

NEW YORK (Reuters) – Stocks have strayed from their recent link to euro moves, and the start of U.S. corporate earnings next week could help shift investor focus back to U.S. fundamentals from Europe.

Stocks have traded in line with the euro over the autumn, with both experiencing sharp swings on headlines from the euro zone.

That trend may be changing, and it comes just as investors get their first glimpse at fourth-quarter U.S. earnings.

Aluminum company Alcoa (AA.N) is expected to report Monday after the closing bell, unofficially starting the reporting period for U.S. corporations. JPMorgan Chase (JPM.N) is due to report on Friday, but the bulk of Standard & Poor's 500 (.SPX) earnings will come in the weeks ahead.

"I think this month we're probably going to break away and see the pattern of U.S. market trade on U.S. fundamentals rather than in reaction to the euro movement," said Fred Dickson, chief market strategist, D.A. Davidson & Co. in Lake Oswego, Oregon.

"I think we're in a time-out period for that (dollar) carry trade, and it will stay a time out for a while."

The correlation between S&P 500 E-mini futures and the euro, which moved in near lockstep in the fall, has receded. A 22-day moving average of the correlation shows almost no relation between the movements of the two assets.

While the corporate results will be searched for evidence of the European crisis' impact on overseas sales, they should also bring back more of a focus on what's happening in the United States, where the economy has been northward bound.

Friday's U.S. jobs reports was the latest data to suggest the recovery is gathering momentum, with non-farm payrolls rising in December and the jobless rate dropping to a near three-year low of 8.5 percent.

S&P 500 fourth-quarter earnings are expected to have risen 7.8 percent from a year ago, according to Thomson Reuters data. But that number is down from a July 1 forecast for growth of 17.6 percent in the quarter.

"We're going to need good, strong positive news on earnings to lift all three of the market averages out of their trading ranges," Dickson said. "They're bumping into some overhead resistance, and it's going to take fundamental news to do it."

The S&P 500 ended virtually unchanged for 2011, even though most strategists had expected gains for the year.

The index has been unable to pierce through 1,285, the closing high set in late October.

Stocks ended with gains for the first trading week of the year, as the mostly upbeat U.S. economic data offset lingering worries about the euro zone. The Dow Jones industrial average (.DJI) was up 1.2 percent for the week, the Standard & Poor's 500 (.SPX) was up 1.6 percent and the Nasdaq (.IXIC) was up 2.7 percent.

Next week's economic calendar includes data on U.S. retail sales and consumer sentiment.

Even with a focus on earnings, investors will be watching Italian and Spanish government bond sales next week.

Both are seen as the year's first big funding tests for struggling euro zone countries. Italy is to pay out 100 billion euros in bond coupons and redemptions in the first four months of 2012.

"Ultimately, the market is still progressing towards a test of the (European Central Bank's) reluctance to be a lender of last resort. I don't know that the test will get that far, but I think it will," said David Joy, chief market strategist at Ameriprise Financial in Boston, where he helps oversee $571 billion in assets under management.

On the earnings front, while all 10 S&P 500 sectors have seen profit estimates cut since July, materials and financials have been the hardest hit. Based on a July forecast, the financial sector was expected to show year-over-year growth of 36.6 percent in the fourth quarter, but the latest forecast is for growth of just 10.1 percent, according to Thomson Reuters data.

Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, which manages about $13 billion, said she has been overweight U.S. equities since the autumn and is considering shifting money into some smaller and midcap names.

"Additional positive momentum in the U.S. can offset additional negative momentum in Europe in terms of earnings impact on U.S. companies," she said.

"Net net it might spell somewhat better relative performance for U.S. small and midcaps versus the large caps," she said. "Large caps may give up some of their leadership this year as the U.S. economy continues to gain momentum and small caps start to benefit from that acceleration."

(Reporting By Caroline Valetkevitch; additional reporting by Ryan Vlastelica; Editing by Kenneth Barry)

NEW YORK (Reuters) – U.S. stocks have strayed from their recent link to euro moves, and the start of U.S. corporate earnings next week could help shift investor focus back to U.S. fundamentals from Europe.

Stocks have traded in line with the euro over the autumn, with both experiencing sharp swings on headlines from the euro zone.

That trend may be changing, and it comes just as investors get their first glimpse at fourth-quarter U.S. earnings.

Aluminum company Alcoa (AA.N) is expected to report Monday after the closing bell, unofficially starting the reporting period for U.S. corporations. JPMorgan Chase (JPM.N) is due to report on Friday, but the bulk of Standard & Poor's 500 (.SPX) earnings will come in the weeks ahead.

"I think this month we're probably going to break away and see the pattern of U.S. market trade on U.S. fundamentals rather than in reaction to the euro movement," said Fred Dickson, chief market strategist, D.A. Davidson & Co. in Lake Oswego, Oregon.

"I think we're in a time-out period for that (dollar) carry trade, and it will stay a time out for a while."

The correlation between S&P 500 E-mini futures and the euro, which moved in near lockstep in the fall, has receded. A 22-day moving average of the correlation shows almost no relation between the movements of the two assets.

While the corporate results will be searched for evidence of the European crisis' impact on overseas sales, they should also bring back more of a focus on what's happening in the United States, where the economy has been northward bound.

Friday's U.S. jobs reports was the latest data to suggest the recovery is gathering momentum, with non-farm payrolls rising in December and the jobless rate dropping to a near three-year low of 8.5 percent.

S&P 500 fourth-quarter earnings are expected to have risen 7.8 percent from a year ago, according to Thomson Reuters data. But that number is down from a July 1 forecast for growth of 17.6 percent in the quarter.

"We're going to need good, strong positive news on earnings to lift all three of the market averages out of their trading ranges," Dickson said. "They're bumping into some overhead resistance, and it's going to take fundamental news to do it."

The S&P 500 ended virtually unchanged for 2011, even though most strategists had expected gains for the year.

The index has been unable to pierce through 1,285, the closing high set in late October.

Stocks ended with gains for the first trading week of the year, as the mostly upbeat U.S. economic data offset lingering worries about the euro zone. The Dow Jones industrial average (.DJI) was up 1.2 percent for the week, the Standard & Poor's 500 (.SPX) was up 1.6 percent and the Nasdaq (.IXIC) was up 2.7 percent.

Next week's economic calendar includes data on U.S. retail sales and consumer sentiment.

Even with a focus on earnings, investors will be watching Italian and Spanish government bond sales next week.

Both are seen as the year's first big funding tests for struggling euro zone countries. Italy is to pay out 100 billion euros in bond coupons and redemptions in the first four months of 2012.

"Ultimately, the market is still progressing towards a test of the (European Central Bank's) reluctance to be a lender of last resort. I don't know that the test will get that far, but I think it will," said David Joy, chief market strategist at Ameriprise Financial in Boston, where he helps oversee $571 billion in assets under management.

On the earnings front, while all 10 S&P 500 sectors have seen profit estimates cut since July, materials and financials have been the hardest hit. Based on a July forecast, the financial sector was expected to show year-over-year growth of 36.6 percent in the fourth quarter, but the latest forecast is for growth of just 10.1 percent, according to Thomson Reuters data.

Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, which manages about $13 billion, said she has been overweight U.S. equities since the autumn and is considering shifting money into some smaller and midcap names.

"Additional positive momentum in the U.S. can offset additional negative momentum in Europe in terms of earnings impact on U.S. companies," she said.

"Net net it might spell somewhat better relative performance for U.S. small and midcaps versus the large caps," she said. "Large caps may give up some of their leadership this year as the U.S. economy continues to gain momentum and small caps start to benefit from that acceleration."

(Reporting By Caroline Valetkevitch; additional reporting by Ryan Vlastelica; Editing by Kenneth Barry)

WASHINGTON (Reuters) – Deutsche Boerse (DB1Gn.DE) won U.S. antitrust approval to buy NYSE Euronext (NYX.N) in a $9 billion deal to create the world's No. 1 exchange operator, but the transaction still faces serious regulatory headwinds in Europe.

The Justice Department said on Thursday that the deal, which was announced in February, won U.S. approval on condition that a Deutsche Boerse subsidiary, the International Securities Exchange, divest its 31.5 percent interest in Direct Edge.

There have been few critics of the deal in the United States, despite the NYSE's symbolism as a bastion of American capitalism. The exchange was founded in 1792 when share trading began on a block now designated as Wall Street.

Deutsche Boerse and NYSE must also continue to provide some services, under the Justice Department approval, to Direct Edge, the fourth-largest U.S. stock exchange operator, behind NYSE Euronext, Nasdaq OMX (NDAQ.O) and BATS Exchange.

Direct Edge is run by a consortium that includes hedge fund Citadel and investment bank Goldman Sachs Group Inc (GS.N).

"We are very pleased to have received the approval of the DOJ, an important milestone on our path to completing our compelling Trans-Atlantic combination," Duncan Niederauer, chief executive of NYSE Euronext, said in an emailed statement.

NYSE Euronext shareholders have already approved the deal.

Richard Repetto, an analyst at Sandler O'Neil, called the U.S. approval "irrelevant."

"The big issue is over in Europe, and whether the European competition commission is going to approve the deal. They expected this. They knew they would likely have to divest the ownership in Direct Edge," he said.

Potential buyers of the stake include BATS, he said. " I don't know whether they'd allow Nasdaq to own it because there'd be a lot of concentration again," he added.

ALL EYES ACROSS THE ATLANTIC

In Europe, there have been weeks of negotiations with antitrust regulators, in which staff made clear their reservations about approving a combination of Deutsche Boerse's Eurex and NYSE Euronext's Liffe on concerns that the merged entity would have a monopoly over European listed derivatives trading.

Both Deutsche Boerse and NYSE Euronext have said they would not pursue the merger if they were asked to divest either Eurex or Liffe. A formal decision by the European Commission is not expected until January or early February.

In a bid to soothe regulatory concerns, Deutsche Boerse and NYSE Euronext have offered to cap fees on trading in their European derivatives contracts for three years, and to sell the entire single-stock equity derivatives business of NYSE Euronext's Liffe unit.

The EU Commission has said it would make a decision on the deal by February 9.

In Germany, Deutsche Boerse's home regulator is insisting on concessions to win European approval, potentially further complicating the path to completing the deal.

(Reporting By Diane Bartz; Additional reporting by Ann Saphir in Chicago; Editing by Gerald E. McCormick and Tim Dobbyn)

NEW YORK (Reuters) – U.S. stocks rose on Thursday, as signs of strength in the economy and higher-than-expected profit at FedEx outweighed more warnings about Europe.

The U.S. equity market continued its familiar back-and-forth rotation between optimism about the U.S. economy and fears that Europe's debt crisis could spark a global recession.

Lately the fear trade has been winning, as Wall Street fell to its lowest level in two weeks on Wednesday.

But FedEx Corp (FDX.N) boosted the market's sentiment. Shares shot up 8 percent to $82.47 after the package delivery company, viewed as an economic bellwether, reported stronger-than-expected quarterly profit.

The news from FedEx, along with two strong regional manufacturing surveys and other data, was welcomed after some high-profile companies recently warned about falling profits. On Thursday, Honeywell International (HON.N) said Europe's slowing economy would take a toll on orders. Honeywell's stock rose 1.7 percent to $52.41.

Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York, said the question for investors is whether the U.S. economy can grow if European economies stalled.

"Can the U.S. go it totally alone? No. But the rest of the world, with the exception of Europe, we are pretty positive about. We don't think it's going to fall apart," he said.

Data showed weekly applications for unemployment insurance fell to a 3-1/2 year low, while a gauge of New York state manufacturing activity rose to its highest level since May and another measure of factory activity in the mid-Atlantic region showed a surge in new orders.

The Dow Jones industrial average (.DJI) was up 45.33 points, or 0.38 percent, at 11,868.81. The Standard & Poor's 500 Index (.SPX) was up 3.93 points, or 0.32 percent, at 1,215.75. The Nasdaq Composite Index (.IXIC) was up 1.70 points, or 0.07 percent, at 2,541.01.

Trading was volatile ahead of Friday's quadruple witching expiration when not only equity options expire, but also stock index futures, stock index options and individual stock futures.

Earlier, stocks pared some of their gains after Christine Lagarde, the head of the International Monetary Fund, said the world economic outlook is "quite gloomy" and will require action by all countries to head off an escalating crisis that carries risks of a global depression.

The market's gains were concentrated in defensive sectors such as utilities, suggesting uncertainty was causing risk-takers to put their portfolios in neutral as the week nears an end, said Chad Morganlander, portfolio manager at Stifel, Nicolaus & Co in Florham Park, New Jersey.

"Unfortunately austerity without a plan for structural changes will cap economic growth and potentially could bleed into earnings. Going into the new year, portfolio managers are squaring their books for that scenario," Morganlader said.

"There's a continued rotation into safety and stability in a global austerity environment."

Big-cap technology shares slipped, including Apple Inc (AAPL.O) off 0.3 percent to $378.94 and International Business machines (IBM.N), which fell 0.7 percent to $187.48.

Novellus Systems Inc (NVLS.O) jumped 16.3 percent to $40.37 a day after it agreed to be bought by larger rival Lam Research Corp (LRCX.O) for $3.3 billion in stock.

Michael Kors Holdings Ltd (KORS.N) shares jumped 21 percent to $24.20 in their debut on the New York Stock Exchange after the luxury goods company went public at $20 per share on Wednesday, above the expected range. The stock climbed as much as 25 percent to a session high at $25.23.

About 6.72 billion shares changed hands on the New York Stock Exchange, NYSE Amex and the Nasdaq. On the NYSE, advancers beat decliners by a ratio of 18 to 11, and on the Nasdaq, 13 shares rose for ever 10 that fell.

(Reporting by Angela Moon; Editing by Kenneth Barry)

(Reuters) – A top Securities and Exchange Commission lawyer is leaving the world of civil enforcement to lead the criminal division of the Manhattan U.S. attorney's office, according to an email reviewed by Reuters.

Lorin Reisner, the deputy director of the SEC's enforcement division since August 2009, will likely start his new position early in the new year, the email said.

"He (Reisner) made a real difference in our efforts to hold wrongdoers accountable, lessen the suffering of victim-investors and reinforce the public's faith in its governmental institutions," the SEC's enforcement director, Robert Khuzami, said in the email announcing the departure.

At the SEC, Reisner was the lead lawyer in the agency's April 2010 lawsuit against Goldman Sachs & Co and Fabrice Tourre, a vice president at the bank. Goldman settled with the SEC in July 2010 for $550 million without admitting wrongdoing.

Reisner will replace Richard Zabel, who became Manhattan U.S. attorney Preet Bharara's deputy earlier this year.

With over 150 attorneys, the criminal division handles cases ranging from financial fraud, such as the successful prosecution earlier this year of hedge fund tycoon Raj Rajaratnam, to international narcotics and terrorism cases.

Prior to joining the Washington D.C.-based market regulator, Reisner had been a partner at the law firm Debevoise & Plimpton in New York since 1996. He was also an assistant U.S. attorney in the Manhattan office from 1990 to 1994.

(Reporting by Sarah Lynch in Washington and Basil Katz in New York, editing by Dave Zimmerman)