"Cliff" concerns give way to earnings focus

NEW YORK (Reuters) - Investors' "fiscal cliff" worries are likely to give way to more fundamental concerns, like earnings, as fourth-quarter reports get under way next week.

Financial results, which begin after the market closes on Tuesday with aluminum company Alcoa , are expected to be only slightly better than the third-quarter's lackluster results. As a warning sign, analyst current estimates are down sharply from what they were in October.

That could set stocks up for more volatility following a week of sharp gains that put the Standard & Poor's 500 index <.spx> on Friday at the highest close since December 31, 2007. The index also registered its biggest weekly percentage gain in more than a year.

Based on a Reuters analysis, Europe ranks among the chief concerns cited by companies that warned on fourth-quarter results. Uncertainty about the region and its weak economic outlook were cited by more than half of the 25 largest S&P 500 companies that issued warnings.

In the most recent earnings conference calls, macroeconomic worries were cited by 10 companies while the U.S. "fiscal cliff" was cited by at least nine as reasons for their earnings warnings.

"The number of things that could go wrong isn't so high, but the magnitude of how wrong they could go is what's worrisome," said Kurt Winters, senior portfolio manager for Whitebox Mutual Funds in Minneapolis.

Negative-to-positive guidance by S&P 500 companies for the fourth quarter was 3.6 to 1, the second worst since the third quarter of 2001, according to Thomson Reuters data.

U.S. lawmakers narrowly averted the "fiscal cliff" by coming to a last-minute agreement on a bill to avoid steep tax hikes this weeks -- driving the rally in stocks -- but the battle over further spending cuts is expected to resume in two months.

Investors also have seen a revival of worries about Europe's sovereign debt problems, with Moody's in November downgrading France's credit rating and debt crises looming for Spain and other countries.

"You have a recession in Europe as a base case. Europe is still the biggest trading partner with a lot of U.S. companies, and it's still a big chunk of global capital spending," said Adam Parker, chief U.S. equity strategist at Morgan Stanley in New York.

Among companies citing worries about Europe was eBay , whose chief financial officer, Bob Swan, spoke of "macro pressures from Europe" in the company's October earnings conference call.

REVENUE WORRIES

One of the biggest worries voiced about earnings has been whether companies will be able to continue to boost profit growth despite relatively weak revenue growth.

S&P 500 revenue fell 0.8 percent in the third quarter for the first decline since the third quarter of 2009, Thomson Reuters data showed. Earnings growth for the quarter was a paltry 0.1 percent after briefly dipping into negative territory.

On top of that, just 40 percent of S&P 500 companies beat revenue expectations in the third quarter, while 64.2 percent beat earnings estimates, the Thomson Reuters data showed.

For the fourth quarter, estimates are slightly better but are well off estimates for the quarter from just a few months earlier. S&P 500 earnings are expected to have risen 2.8 percent while revenue is expected to have gone up 1.9 percent.

Back in October, earnings growth for the fourth quarter was forecast up 9.9 percent.

In spite of the cautious outlooks, some analysts still see a good chance for earnings beats this reporting period.

"The thinking is you need top line growth for earnings to continue to expand, and we've seen the market defy that," said Mike Jackson, founder of Denver-based investment firm T3 Equity Labs.

Based on his analysis, energy, industrials and consumer discretionary are the S&P sectors most likely to beat earnings expectations in the upcoming season, while consumer staples, materials and utilities are the least likely to beat, Jackson said.

Sounding a positive note on Friday, drugmaker Eli Lilly and Co said it expects profit in 2013 to increase by more than Wall Street had been forecasting, primarily due to cost controls and improved productivity.

(Reporting By Caroline Valetkevitch; Editing by Kenneth Barry)

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Leaders of Sudan and South Sudan in Ethiopia for Talks

KHARTOUM, Sudan — The presidents of Sudan and South Sudan, two nations that have been locked in a tense dispute over borders, territory and oil since the south split off and became its own country 18 months ago, arrived in the Ethiopian capital, Addis Ababa, on Friday for a summit meeting intended to speed up an agreement signed between both sides last September.

Both presidents were scheduled to meet Friday afternoon, but a report by a Sudanese television channel said the summit meeting was postponed, without giving a reason.

The official Sudanese News Agency reported on Friday that a closed meeting was held between President Omar al-Bashir of Sudan, Prime Minister Hailemariam Desalegn of Ethiopia and Thabo Mbeki, chairman of the African Union panel facilitating the talks.

The meeting was to be followed by a similar closed meeting with President Salva Kiir of South Sudan, the news agency said.

In a statement on Thursday, Secretary General Ban Ki-moon of the United Nations welcomed the talks.

“The secretary general encourages both presidents to address decisively all outstanding issues between Sudan and South Sudan regarding security, border demarcation and the final status of the Abyei Area, to urgently activate agreed border security mechanisms, and implement all other agreements signed on 27 September 2012,” the statement by Mr. Ban’s office read.

Secretary of State Hillary Rodham Clinton — along with the Norwegian foreign minister, Espen Barth Eide, and the British foreign secretary, William Hague — issued a joint statement in support of the talks emphasizing the “full implementation of all agreements on their own terms and without preconditions or linkages between them, will help build confidence and benefit the people of the two countries.”

South Sudan became independent from Sudan in July 2011, but a number of issues between both states, including how to share oil wealth, the demarcation of borders and the disputed district of Abyei, remained unresolved.

In January 2011, South Sudan shut down oil production, which flows from oil wells in the south through pipelines and a refinery for export in the north. Both countries nearly came to all out war in April 2012 after the south took brief control of the border town of Heglig in the north.

Under international pressure and the threat of United Nations sanctions, however, both sides signed an agreement in Addis Ababa in September 2012 outlining solutions for unsettled issues.

Carrying out the agreement, however, has gone slowly, with Sudan putting a precondition that South Sudan first end its support for rebels inside Sudanese territory, an accusation South Sudan denies.

The rebels are active in the Sudanese states of Blue Nile state and South Kordofan, which border South Sudan. The rebels also fought alongside the South.

South Sudan accuses Khartoum of carrying out areal bombardments along the border, the last being on Thursday, a day before the scheduled summit meeting.

Faisal Muhammad Salih, a Sudanese columnist, believes that despite what appeared to be a lack of political will and the existence of what he described as “extremists on both sides” who want to derail the implementation of the cooperation agreement, a compromise will be reached at the summit meeting.

“Thabo Mbeki was able to convince the U.N. Security Council to give him more time,” he said. “But if his patience runs out, and the issue returns to the Security Council, that means sanctions for both countries.”

“So I think we will see concessions,” he added.

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Kobe Bryant: I’m on Twitter now

LOS ANGELES (AP) — Kobe Bryant is no longer a holdout. He’s on Twitter.

With five words — “The antisocial has become social” — the Los Angeles Lakers guard sent the first tweet from his account Friday. About 270,000 people followed his verified account, (at)kobebryant, within a few hours and he was up to 365,000 late Friday night as the Lakers played the Clippers.

Bryant tiptoed into the Twitterverse last week when he briefly took over Nike basketball’s account, when he sent out things like a photo of him hanging out with his daughter, an ice bath that he was dreading and even a suit he was wearing to a particular game.

Bryant says those few days made him consider starting his own account, saying he enjoyed connecting with fans “with no filters.”

Heat star LeBron James has 6.8 million followers, the most of any NBA player.

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Courteney Cox: I'll 'Show My Boobs' on the New Season of Cougar Town

TV Watch

01/04/2013 at 08:00 PM EST

Courteney Cox is taking the term "boob tube" literally.

The Cougar Town star, 48, whose show moves from ABC to TBS on Jan. 8, eagerly anticipates more um, revealing scenes once the program makes its way to the cable network.

"You will not see one scene that I don't show my boobs," Cox joked to reporters Friday at the Television Critics Association winter tour, according to Access Hollywood.

"You know what? I'm getting older, so I've decided at this point I'm taking less focus [on] the face, and focusing here," she added, pointing to her chest. "By the time I'm much older, I will just be absolutely nude. I think it's [going to] work for me, I hope."

The show's executive producer, Bill Lawrence, backed up Cox's comments. "There is one difference [with the show going to cable]," he said Friday. "I think I'm allowed to say … Courteney did declare this the year of her cleavage."

Still, the star isn't exactly baring it all. Although there is an episode themed "naked day" for Cox's character Jules and her on-camera hubby Grayson (Josh Hopkins), there will be no actual nudity on the show.

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FDA proposes sweeping new food safety rules

WASHINGTON (AP) — The Food and Drug Administration on Friday proposed the most sweeping food safety rules in decades, requiring farmers and food companies to be more vigilant in the wake of deadly outbreaks in peanuts, cantaloupe and leafy greens.

The long-overdue regulations could cost businesses close to half a billion dollars a year to implement, but are expected to reduce the estimated 3,000 deaths a year from foodborne illness. Just since last summer, outbreaks of listeria in cheese and salmonella in peanut butter, mangoes and cantaloupe have been linked to more than 400 illnesses and as many as seven deaths, according to the federal Centers for Disease Control and Prevention. The actual number of those sickened is likely much higher.

The FDA's proposed rules would require farmers to take new precautions against contamination, to include making sure workers' hands are washed, irrigation water is clean, and that animals stay out of fields. Food manufacturers will have to submit food safety plans to the government to show they are keeping their operations clean.

Many responsible food companies and farmers are already following the steps that the FDA would now require them to take. But officials say the requirements could have saved lives and prevented illnesses in several of the large-scale outbreaks that have hit the country in recent years.

In a 2011 outbreak of listeria in cantaloupe that claimed 33 lives, for example, FDA inspectors found pools of dirty water on the floor and old, dirty processing equipment at Jensen Farms in Colorado where the cantaloupes were grown. In a peanut butter outbreak this year linked to 42 salmonella illnesses, inspectors found samples of salmonella throughout Sunland Inc.'s peanut processing plant in New Mexico and multiple obvious safety problems, such as birds flying over uncovered trailers of peanuts and employees not washing their hands.

Under the new rules, companies would have to lay out plans for preventing those sorts of problems, monitor their own progress and explain to the FDA how they would correct them.

"The rules go very directly to preventing the types of outbreaks we have seen," said Michael Taylor, FDA's deputy commissioner for foods.

The FDA estimates the new rules could prevent almost 2 million illnesses annually, but it could be several years before the rules are actually preventing outbreaks. Taylor said it could take the agency another year to craft the rules after a four-month comment period, and farms would have at least two years to comply — meaning the farm rules are at least three years away from taking effect. Smaller farms would have even longer to comply.

The new rules, which come exactly two years to the day President Barack Obama's signed food safety legislation passed by Congress, were already delayed. The 2011 law required the agency to propose a first installment of the rules a year ago, but the Obama administration held them until after the election. Food safety advocates sued the administration to win their release.

The produce rule would mark the first time the FDA has had real authority to regulate food on farms. In an effort to stave off protests from farmers, the farm rules are tailored to apply only to certain fruits and vegetables that pose the greatest risk, like berries, melons, leafy greens and other foods that are usually eaten raw. A farm that produces green beans that will be canned and cooked, for example, would not be regulated.

Such flexibility, along with the growing realization that outbreaks are bad for business, has brought the produce industry and much of the rest of the food industry on board as Congress and FDA has worked to make food safer.

In a statement Friday, Pamela Bailey, president of the Grocery Manufacturers Association, which represents the country's biggest food companies, said the food safety law "can serve as a role model for what can be achieved when the private and public sectors work together to achieve a common goal."

The new rules could cost large farms $30,000 a year, according to the FDA. The agency did not break down the costs for individual processing plants, but said the rules could cost manufacturers up to $475 million annually.

FDA Commissioner Margaret Hamburg said the success of the rules will also depend on how much money Congress gives the chronically underfunded agency to put them in place. "Resources remain an ongoing concern," she said.

The farm and manufacturing rules are only one part of the food safety law. The bill also authorized more surprise inspections by the FDA and gave the agency additional powers to shut down food facilities. In addition, the law required stricter standards on imported foods. The agency said it will soon propose other overdue rules to ensure that importers verify overseas food is safe and to improve food safety audits overseas.

Food safety advocates frustrated over the last year as the rules stalled praised the proposed action.

"The new law should transform the FDA from an agency that tracks down outbreaks after the fact, to an agency focused on preventing food contamination in the first place," said Caroline Smith DeWaal of the Center for Science in the Public Interest.

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S&P 500 finishes at 5-year high on economic data

NEW YORK (Reuters) - The benchmark Standard & Poor's 500 index ended at a five-year high on Friday, lifted by reports showing employers kept up a steady pace of hiring workers and the vast services sector expanded at a brisk rate.

The gains on the S&P 500 pushed the index to its highest close since December 2007 and its biggest weekly gain since December 2011.

Most of the gains came early in the holiday-shortened week, including the largest one-day rise for the index in more than a year on Wednesday after politicians struck a deal to avert the "fiscal cliff."

The Dow Jones industrial average <.dji> gained 43.85 points, or 0.33 percent, to 13,435.21. The Standard & Poor's 500 Index <.spx> rose 7.10 points, or 0.49 percent, to 1,466.47. The Nasdaq Composite Index <.ixic> edged up 1.09 points, or 0.04 percent, to 3,101.66.

For the week, the S&P gained 4.6 percent, the Dow rose 3.8 percent and the Nasdaq jumped 4.8 percent to post their largest weekly percentage gains in more than a year.

The CBOE Volatility index <.vix>, a measure of investor anxiety, dropped for a fourth straight session, giving the index a weekly decline of nearly 40 percent, its biggest weekly fall ever. The close of 13.83 on the VIX marks its lowest level since August.

In Friday's economic reports, the Labor Department said non-farm payrolls grew by 155,000 jobs last month, slightly below November's level. Gains were distributed broadly throughout the economy, from manufacturing and construction to healthcare.

Also serving to boost equities was data from the Institute for Supply Management showing U.S. service sector activity expanding the most in 10 months.

With the S&P 500 index at a five-year closing high, analysts said any gains above the index's intraday high near 1,475 in September may be harder to come by.

"We are getting to a point where we need a strong catalyst, which could be earnings, it could be three months of good economic data, it could be a variety of things," said Adam Thurgood, managing director at HighTower Advisors in Las Vegas, Nevada.

"What is going on right now is this conflicting view of fundamentals look pretty good and improving, and then you've got these negative tail risks that could blow everything up," Thurgood said.

He referred to "a fiscal superstorm brewing" of issues still left unresolved in Washington, including tough federal budget cuts and the need to raise the government's debt ceiling all within a couple of months.

The rise in payrolls shown by the jobs data did not make a dent in the U.S. unemployment rate still at 7.8 percent.

A Reuters poll on Friday of economists at Wall Street's top financial institutions showed that most expect the Fed in 2013 to end the program with which it bought Treasury debt in an effort to stimulate the economy.

A drop in Apple Inc shares of 2.6 percent to $528.36 kept pressure on the Nasdaq.

Adding to concerns about Apple's ability to produce more innovative products, rival Samsung Electronics Co Ltd is expected to widen its lead over Apple in global smartphone sales this year with growth of 35 percent. Market researcher Strategy Analytics said Samsung had a broad product lineup.

Eli Lilly and Co was among the biggest boost's to the S&P, up 3.7 percent to $51.56 after the pharmaceuticals maker said it expects its 2013 earnings to increase to $3.75 to $3.90 per share, excluding items, from $3.30 to $3.40 per share in 2012.

Fellow drugmaker Johnson & Johnson rose 1.2 percent to $71.55 after Deutsche Bank upgraded the Dow component to a "Buy" from a "Hold" rating. The NYSEArca pharmaceutical index <.drg> climbed 0.6 percent.

Shares of Mosaic Co gained 3.3 percent to $58.62. Excluding items, the fertilizer producer's quarterly earnings beat analysts' expectations, according to Thomson Reuters I/B/E/S.

Volume was modest with about 6.07 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, slightly below the 2012 daily average of 6.42 billion.

Advancing stocks outnumbered declining ones on the NYSE by 2,287 to 701, while on the Nasdaq, advancers beat decliners 1,599 to 866.

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski and Kenneth Barry)

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Letter from Europe: Ghetto Survivors Fight for Recognition and Pensions

BERLIN — Uri Chanoch has a gift for plain speaking, which brought a welcome reprieve during a highly technical and legalistic meeting of the German Parliament’s labor and social affairs committee last month.

The federal lawmakers had invited pension experts, lawyers, historians and Holocaust survivors to discuss one of the chapters of World War II that Germany has yet to close: how to pay pensions to Jews who worked voluntarily in the ghettos.

That may seem a strange topic to be discussing so long after 1945. The German government has already compensated Jews who were forced to work in the ghettos. But until 2002, there was no payment system for Jews who chose to work.

“We wanted to work. It meant surviving,” Mr. Chanoch, 84, a board member of the Center of Organizations of Holocaust Survivors in Israel, told the committee.

As a young boy, Mr. Chanoch worked in the ghetto of Kaunas, Lithuania, after the city’s thriving community of 40,000 Jews was rounded up in August 1941. “We got paid for our work. We also paid into the insurance funds,” he said in an interview. “That money is our money.”

Mr. Chanoch was later deported to the Stutthof concentration camp in Poland and then to Dachau. His grandparents, parents and sister were killed in Auschwitz and Stutthof.

“For me and every other ghetto survivor, recognition for the work we did in the ghetto would mean that this aspect of history has also finally been acknowledged and will be taken into account in both compensation and social legislation,” Mr. Chanoch told the committee.

In 2002, the Bundestag, or German Parliament, retroactively passed a law: “German Pensions for Work in the Ghettos.” The Federal Social Court, which is responsible for insurance claims, ruled in 1997 that work carried out in the ghettos could be recognized as employment time under German pension laws.

At the time, the government believed the payments would not be exorbitant. It estimated that about 700 of the ghetto workers would apply for pensions. This was despite the fact that there had been more than 1,150 ghettos, according to Stephan Lehnstaedt, a historian at the German Historical Institute in Warsaw who participated in the committee hearing. The Warsaw ghetto alone held more than half a million Jews.

Once the 2002 law was enacted, 70,000 survivors applied to receive pensions. The pension insurance funds were taken aback because of the costs involved. After assessments, they rejected more than 90 percent of the applications.

The pension insurance funds argued that those who had worked in the ghettos were forced laborers. They were therefore entitled to compensation to be paid by the Finance Ministry, not from the public pension fund.

As for boys barely in their teens, like Mr. Chanoch, they were considered too young to have held proper jobs. “The pension fund experts did not understand the historical conditions of life in the ghetto,” Mr. Lehnstaedt said at the committee hearing.

In 2009, after criticism by Israel and Jewish organizations over the rejection of so many claimants, the German Federal Social Court relaxed the restrictive measures. Rejected cases were reconsidered.

But the court’s ruling did not end the matter. The National Pension Board announced that payments under review would be backdated by four years, the statutory limit, to 2005. Germany’s Federal Social Court backed that position.

In the meantime, thousands of elderly claimants had died, according to the Conference on Jewish Material Claims Against Germany, or Claims Conference. The conference represents world Jewry in negotiating compensation and restitution for victims of Nazi persecution and their heirs.

Jan-Robert von Renesse, one of the German judges who attended the committee hearing, said it was shameful how the pension funds and courts had acted.

“What has been established is that in dealing with the ghetto pension issue, the National Pension Fund misjudged both real and legal conditions of the ghetto — culpably,” he said.

Even after the hearing last month, nothing was decided. The opposition Social Democrats, Green and Left parties said they wanted payments to be backdated to 1997. Chancellor Angela Merkel’s government coalition is more cautious, fearing new legal entanglements and lawsuits. All acknowledged, however, that somehow this ignominious chapter of German history needs to be closed.

On his return to Israel after the hearing, Mr. Chanoch was cautiously optimistic that some compromise could be found.

“All I ask,” he said, “is that we get old gracefully.”

Judy Dempsey is Editor in Chief, Strategic Europe for Carnegie Europe. (www.carnegieeurope.eu)

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Nielsen And Twitter Team To Track TV

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CDC: 1 in 24 admit nodding off while driving

NEW YORK (AP) — This could give you nightmares: 1 in 24 U.S. adults say they recently fell asleep while driving.

And health officials behind the study think the number is probably higher. That's because some people don't realize it when they nod off for a second or two behind the wheel.

"If I'm on the road, I'd be a little worried about the other drivers," said the study's lead author, Anne Wheaton of the Centers for Disease Control and Prevention.

In the CDC study released Thursday, about 4 percent of U.S. adults said they nodded off or fell asleep at least once while driving in the previous month. Some earlier studies reached a similar conclusion, but the CDC telephone survey of 147,000 adults was far larger. It was conducted in 19 states and the District of Columbia in 2009 and 2010.

CDC researchers found drowsy driving was more common in men, people ages 25 to 34, those who averaged less than six hours of sleep each night, and — for some unexplained reason — Texans.

Wheaton said it's possible the Texas survey sample included larger numbers of sleep-deprived young adults or apnea-suffering overweight people.

Most of the CDC findings are not surprising to those who study this problem.

"A lot of people are getting insufficient sleep," said Dr. Gregory Belenky, director of Washington State University's Sleep and Performance Research Center in Spokane.

The government estimates that about 3 percent of fatal traffic crashes involve drowsy drivers, but other estimates have put that number as high as 33 percent.

Warning signs of drowsy driving: Feeling very tired, not remembering the last mile or two, or drifting onto rumble strips on the side of the road. That signals a driver should get off the road and rest, Wheaton said.

Even a brief moment nodding off can be extremely dangerous, she noted. At 60 mph, a single second translates to speeding along for 88 feet — the length of two school buses.

To prevent drowsy driving, health officials recommend getting 7 to 9 hours of sleep each night, treating any sleep disorders and not drinking alcohol before getting behind the wheel.

__

Online:

CDC report: http://www.cdc.gov/mmwr

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Asian shares drop on Fed minutes, dollar extends gains

TOKYO (Reuters) - Asian shares fell on Friday, as investors booked profits from a recent sharp climb after senior Federal Reserve officials expressed concerns about continuing to expand stimulative bond buying, but the dollar extended gains as U.S. debt yields rose.

European shares were seen tracking Asian peers lower, with financial spreadbetters predicting London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> would open down as much as 0.3 percent. A 0.1 percent drop in U.S. stock futures suggested a soft Wall Street start. <.l><.eu><.n/>

Minutes from the Fed's December policy meeting released on Thursday showed concerns among some members of the Federal Open Markets Committee about the potential risks of the Fed's asset purchases on financial markets, even if it looked set to continue an open-ended stimulus program for now.

The Fed's asset-buying policy has been pivotal in underpinning investor risk appetite, so the more hawkish Fed minutes unnerved financial markets.

Benchmark U.S. Treasury yields continued their climb, hitting an eight-month high around 1.93 percent in Asia on Friday, while key 10-year Japanese government bond yields touched a 3-1/2-month high of 0.83 percent.

The dollar also rose on data showing U.S. private-sector hiring improved in December, raising hopes for a strong monthly payrolls report due later in the day, a key gauge to the U.S. economy and the Fed's future policy course.

The dollar's rise makes dollar-based assets more expensive for non-dollar investors, hitting precious metals and oil.

The Fed's minutes spurred consolidation from broad-based buying which took place after U.S. lawmakers earlier this week narrowly avoided falling off the "fiscal cliff" of automatic taxes rises and spending cuts, which risked derailing the economy.

"Market moves largely reflect positioning after the recent rallies and before the nonfarm payrolls, which could tip the markets either way," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo, adding that markets may be dictated by interest rates this year, rather than risk-on, risk-off sentiment as was last year.

MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> slid 0.7 percent, after scaling its highest since August 2011 on Thursday. But the pan-Asian index was set to end the first week of 2013 up 1.8 percent, thanks to the New Year's rally.

"After the big relief rally we had on the fiscal cliff decision and compromise, I would expect the market to consolidate a little bit," Martin Lakos division director at Macquarie Private Wealth, said of Australian shares <.axjo> which slipped 0.4 percent, retreating from Thursday's 19-month highs. Hong Kong shares <.hsi> eased from a 19-month highs, falling 0.6 percent, but Shanghai <.ssec> rose 0.5 percent.

The dollar hit its highest since July 2010 against the yen at 87.835 while the euro fell to a three-week low of $1.3019. The U.S. dollar <.dxy> also touched a six-week high against a basket of major currencies on Friday.

"Dollar-positive momentum is solid as the fiscal cliff was averted, the overnight data was good and yields were rising. I won't be surprised to see the dollar rise to 90 yen soon," said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo.

"Despite repeated Japanese intervention, the dollar had refused to strengthen in the past, but now, it's advancing without any action, suggesting the direction has completely changed to support continued dollar buying," Maeba said.

The yen's tumble pushed Japan's benchmark Nikkei stock average <.n225> briefly up more than 3 percent to its highest since March 2011, outshining the Asian regional bourses. The Nikkei closed up 2.8 percent. <.t/>

ADP vs US gov't jobs data: http://link.reuters.com/fex44t

Global services activity: http://link.reuters.com/dyh85s

Video on fiscal cliff: http://link.reuters.com/zaf94t

SE Asia valuations: http://link.reuters.com/cuj64t

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FISCAL CLIFF VS DATA

U.S. President Barack Obama and congressional Republicans face tough talks on spending cuts and an increase in the nation's debt limit as the hard-fought fiscal deal delayed decisions on expenditures until March 1.

Investor sentiment was supported by recent solid data from the world's two largest economies, the United States and China.

China's services sector saw its slowest rate of expansion in nearly a year and a half in December, a private sector survey showed on Friday, but underlying growth revival remained intact, even if it were modest.

"We are coming off overbought levels today. This cyclical-led rally in offshore Chinese shares should continue in the next few weeks, China's improving economic data will help," said Wang Ao-chao, UOB-Kay Hian's Shanghai-based head of China research.

The U.S. economy likely added 150,000 jobs in December, according to a Reuters survey, up from 146,000 in November. The unemployment rate is expected to hold steady at 7.7 percent.

Resolution of the U.S. fiscal cliff crisis could weigh on some Asian assets as investors could start to shift some money out of overpriced Asian investments in favor of the U.S. on brightening prospects for American stocks.

U.S. crude fell 0.7 percent to $92.26 a barrel while Brent shed 0.6 percent to $111.47.

Spot gold fell 1 percent to around $1,645, dragging silver down more than 2 percent to $29.48.

Despite the decline in equities markets, sentiment in Asian credit markets remained upbeat, with the spread on the iTraxx Asia ex-Japan investment-grade index narrowing by two basis points.

(Additional reporting by Maggie Lu Yueyang in Sydney and Clement Tan in Hong Kong; Editing by Eric Meijer)

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