"Retail sales up a bit, led by gas costs"

By MARTIN CRUTSINGER, Associated Press

Last updated: 7:02 p.m., Monday, April 14, 2008

WASHINGTON -- Consumers, beset by a credit crunch, rising energy and food costs and a prolonged housing slump, boosted spending only slightly in March.

The gain reflected soaring gasoline costs rather than any real strength in demand, however.

The Commerce Department reported Monday that retail sales edged up 0.2 percent in March after a 0.4 percent decline in February.

However, without a 1.1 percent jump in sales at gasoline service stations, retail sales would have been flat last month.

Economists said the March report did nothing to dispel their worries that the country has either toppled into a recession or is very close to a downturn as households have been battered by a series of blows and now are facing rising layoffs.

"Don't expect to see consumers return any time soon," said Bernard Baumohl, managing director of the Economic Outlook Group.

"They're going to be hibernating for the balance of the year, nursing the wounds that stem from the worst job market in five years, the highest drop in home prices in more than half a century, record high gasoline prices and the worst credit crisis since the Great Depression."

Last week, the University of Michigan's consumer sentiment index for early April plunged to the lowest reading in 26 years, reflecting in part a third straight month of job losses in March and a rise in the unemployment rate to 5.1 percent.

Many analysts believe the sustained rise in layoffs is the strongest sign yet that the economy has slipped into its first recession since 2001.

The Bush administration, which has yet to call the current slowdown a recession, insists a $168 billion economic stimulus plan will help jump-start the economy when checks begin arriving for 130 million households next month.

President Bush told members of his Cabinet on Monday that those stimulus checks will be "an important part of making sure this economy begins to recover in a way that will add confidence and hope."

The day before the April 15 tax filing deadline, Bush also called on Congress to make his first term tax cuts permanent as another way to boost the economy by eliminating "economic uncertainty" in the tax code.

But Senate Majority Leader Harry Reid said making Bush's tax cuts permanent would help multimillionaires and special interests, not average working Americans.

Reid said stagnating incomes and rising health care, education, food and energy prices are squeezing middle-class families, who are looking for a change in U.S. economic policy -- "not the same economic ideas that got us into this mess in the first place."

On Wall Street, stocks finished a quiet session with the Dow Jones industrial average rising by 23.36 points to close at 12,302.06.

The 0.2 percent increase in retail sales was slightly better than the 0.1 percent increase that analysts had expected but outside of the big jump in gasoline prices, sales in other areas either declined or posted lackluster gains such as the 0.2 percent rise in auto sales.

Analysts questioned even the small rise in auto sales, saying the government statistics did not square with industry reports showing big declines in unit sales in March.

Sales at department stores and general merchandise stores fell by 0.6 percent in March while sales at specialty clothing stores were down 0.5 percent.

Demand at these stores was hurt by an extremely early Easter, which came at a time when most of the country was blanketed by frigid weather that depressed demand for spring clothes.

Sales were also down at furniture stores, building supply stores and appliance stores, all areas where demand has been hurt by the bursting of the housing bubble.

In addition to the 1.1 percent increase in sales at gasoline service stations, sales were up 0.3 percent at grocery stores, a gain that probably reflected continued big rises in food costs.

Consumers are battling a number of problems, from soaring energy prices which have pushed gasoline pump prices up to record levels well above $3 per gallon, to a prolonged housing slump that has seen home prices plummet in many parts of the country, leaving consumers feeling less well off.

In other economic news, the Commerce Department said Monday that inventories held by businesses on shelves and backlots increased by 0.6 percent in February after an even bigger 0.9 percent gain in January.

The increase in inventories, while boosting overall economic output in the first quarter, will likely act as a drag in coming months as businesses cut back on production to reduce stockpiles to more comfortable levels.

"Treasurys close modestly lower"

By JOE BEL BRUNO, Associated Press

Last updated: 5:42 p.m., Monday, April 14, 2008

NEW YORK -- Treasury prices were mostly lower Monday as investors digested more worrisome news in the banking sector and a government report that showed retail sales moved higher in March.

Wachovia Corp. announced a first-quarter loss linked to turmoil in the housing market and the economy's drag on consumer spending.

The nation's fourth-largest bank slashed its dividend and said it will raise $7 billion in a share sale to boost reserves.

There continues to be anxiety about other earnings reports, which this week will include a number of financial institutions.

JPMorgan Chase & Co., Merrill Lynch & Co. and Citigroup Inc. will post results in the next few days.

Wachovia's report confirms fears that more pain will be felt before the credit crisis abates.

Treasuries are viewed as safe-haven bets during uncertainty.

However, government bonds lost some of their gains after a government report showed retail sales unexpectedly edged higher in March after a big drop in February.

The Commerce Department said retail sales edged up 0.2 percent in March after a 0.4 percent decline in February.

The March gain primarily reflected higher costs for gasoline, which climbed to record highs.

Joe Balestrino, a portfolio manager at Federated Investors, said the Treasury market has barely budged on both good and bad news.

One of the reasons is that investors have already priced in that the economy's problems, and have already priced it into the market.

"The market went there a long time ago," he said.

"The concept of 'are we in a recession' from a fixed-income perspective almost doesn't matter ... because its already in the market."

The benchmark 10-year Treasury note fell 11/32 to 99 29/32 with a yield of 3.51 percent, up from 3.48 late Friday, according to BGCantor Market Data.

Prices and yields tend to move in opposite directions.

The yield was unchanged in after-hours trading at 3.51 percent.

The 30-year long bond fell 27/32 to 100 13/32 with a yield of 4.35 percent, up from 4.32 percent late Friday.

Its yield was also unchanged in later trades.

The 2-year note was flat at 99 31/32 with a yield of 1.76 percent.

The yield dipped to 1.75 percent in after-hours trading.

The 3-month Treasury bill's yield was at 1.10 percent, down from 1.19 percent late Friday, while its discount rate was at 1.06 percent.

CONFIDENCE AND HOPE MY @$$ ....

THE ONLY THING THAT I HAVE CONFIDENCE IN THESE DAYS IS THE FACT THAT AMERICA IS LED BY THE BIGGEST FOOL TO BE THE "LEADER" OF ANYTHING AT ALL IN THE LAST SEVERAL THOUSAND YEARS ...

AND AS TO HOPE?

YEAH, RIGHT ...

THAT WENT OUT THE WINDOW BACK IN 2004 WHEN AMERICA PUT THIS FOOL BUSH BACK IN POWER TO "FIX" ALL THE MESSES HE MADE DURING HIS FIRST FOUR YEARS OF INEPTNESS AND JUST PLAIN IDIOCY ...

AND SO ...

ACTUALLY, I THINK I FELL DOWN A RABBIT HOLE TO GET TO WHERE WE APPEAR TO BE IN THIS PLACE CALLED "AMERICA" ...

WHERE EVERYTHING SEEMS TO BE IRRATIONAL ...

AND NOTHING APPEARS TO MAKE A LICK OF SENSE ...

STARTING WITH EVERY SINGLE WORD UTTERED BY THE WITLESS TEXAS PECKERWOOD WHO CALLS HIMSELF THE "LEADER OF THE FREE WORLD" ....

AND WHAT A CROCK OF **** THAT IS ...

NEVER IN MY LIFE HAVE I SEEN SUCH KNEE-JERKING AND BLIND FLAILING ABOUT FROM AN AMERICAN PRESIDENT AS WE ARE SEEING FROM THIS FOOL BUSH ...

GEORGE W. BUSH WAS ULTIMATELY A WASH-OUT AS A PILOT BECAUSE HE COULDN'T LAND THE PLANES WITHOUT CRAPPING IN HIS PANTS ONCE HE WAS OFF THE GROUND ...

AND HE SURE CAN'T SAFELY LAND OUR ECONOMY, AS WELL ...

BECAUSE HE IS STILL FULL OF CRAP ...

And so ...

"Report highlights Fannie, Freddie risks"

By ALAN ZIBEL, Associated Press

Last updated: 5:42 p.m., Monday, April 14, 2008

WASHINGTON -- A deep recession could force mortgage-finance titans Fannie Mae and Freddie Mac to require a federal bailout large enough to hurt the U.S. government's top-grade credit rating, Standard & Poor's warned Monday.

A lower credit rating would mean higher borrowing costs for the U.S. government and could lead to a flight from Treasury securities, which investors -- including foreign governments -- consider to be virtually risk-free.

The financial stress Fannie and Freddie may face poses a far larger risk to the government than the $29 billion in mortgage assets taken on by the Federal Reserve to avoid the bankruptcy of investment bank Bear Stearns Cos, the credit rating agency said.

Still, S&P analysts see a bailout of Fannie and Freddie as unlikely and point out that U.S. officials "are focused on avoiding a deep and prolonged recession."

While the government isn't obligated to assist Fannie or Freddie in a financial emergency, many on Wall Street believe it would bail them out if there is a collapse.

The idea that they are "too big to fail" enables the two companies to borrow relatively cheaply by issuing top-rated securities backed by mortgages.

Washington-based Fannie and McLean, Va.-based Freddie face intense pressure to do more to help out a hobbled housing market.

Over the past year, their share of new mortgages has soared, as Wall Street investors have backed away from all but the safest mortgage investments.

The two companies' share of new mortgages rose from 46 percent in the second quarter of 2007 to 80 percent in January, S&P said.

Encouraged by regulators and politicians intent on keeping more homeowners from defaulting, Fannie Mae and its smaller government-sponsored sibling Freddie Mac have expanded their roles in the stricken housing market.

The companies together must provide as much as $200 billion in new funding for home loans in exchange for getting their risk cash cushions reduced.

The government requires them to keep a certain amount on reserve to guard against risk.

The Bush administration has long been concerned about the risks posed by Fannie and Freddie, but given a housing market on the skids, has no choice but to let the two play a bigger role, said David Jones, president of Denver-based consulting firm DMJ Advisors.

"It's a risk the government has to take," he said, adding that the country's $14 trillion economy is strong enough to insulate the government's credit rating from a downgrade.

Many analysts, however, believe the government's actions expose Fannie and Freddie to more risk.

"If housing prices go down another 15 percent, they're not going to be able to withstand it," said Harvard University economist Kenneth Rogoff.

But it's not just economists and policymakers who are closely monitoring the growing dependence on Fannie and Freddie.

Their shareholders, too, should see the reliance as a "growing concern," Piper Jaffray analyst Robert Napoli wrote in a research report Monday.

"The U.S. government will go to great lengths to lessen the pain of this housing market downturn," Napoli wrote, adding that shareholders' stake in the company could wind up being diluted as the companies may be pressured to raise more capital than investors desire.

"The longer and more severe the housing downturn, the more this risk grows," he wrote.

Aiding Fannie and Freddie, plus the government agencies that back home loans and student loans could add up to 10 percent of gross domestic product, the total value of all goods and services produced within the United States, S&P said.

John B. Chambers, chairman of Standard & Poor's sovereign rating committee, said in a statement that in a worst-case scenario the size of Fannie and Freddie "could create a material fiscal burden to the government that would lead to downward pressure on its rating."

A Fannie Mae spokesman declined comment.

Freddie Mac spokesman Doug Duvall said in an e-mailed statement called the report a "a scenario analysis, not a prediction."

"Freddie Mac remains a well capitalized company."

Shares of Fannie Mae fell 70 cents, or 2.7 percent, to close at $25.34, while shares of Freddie Mac fell 39 cents, or 1.7 percent, to close at $23.10.

"Soybeans jump on weather worries"

By STEVENSON JACOBS, Associated Press

Last updated: 5:02 p.m., Monday, April 14, 2008

NEW YORK -- Soybean prices surged Monday as investors bet that more wet weather in the U.S. Midwest will further delay spring planting and strain already tight supplies -- worsening food inflation.

Other commodities traded mostly higher, with gold, silver and energy futures all gaining.

Soybean prices have risen 10 percent this year, driven higher by poor harvests around the globe and growing demand for the beans used to feed people and livestock, particularly from China.

China is the No. 1 buyer of U.S. soybeans, purchasing 25 percent of the entire crop yearly.

Cold, rainy weather in the U.S. corn belt has delayed spring planting for most U.S corn and soybean farmers, straining stockpiles and adding to already skyrocketing food prices that have burdened U.S. consumers and triggered food riots in impoverished countries such as Haiti.

"The story has really been the planting delays."

"Soil temperatures are colder than usual and things are still pretty wet, so people aren't planting," said Elaine Kub, analyst with DTN in Omaha.

Soybeans for May delivery gained 40 cents to settle at $13.725 a bushel on the Chicago Board of Trade, after earlier trading as high as $13.76.

Other agriculture futures traded mixed Monday.

Corn for May delivery gained 7.5 cents to settle at $5.9175 a bushel on the CBOT, while May wheat fell 0.5 cents to settle at $8.96 a bushel.

In energy futures, a fresh drop in the dollar elevated oil prices to a record settlement and within striking distance of last week's record $112.21 a barrel.

Prices also rose on supply disruptions, including the weekend closure of a 1.2 million barrel a day Royal Dutch Shell PLC pipeline in the Midwest due to a leak.

The pipeline has since reopened and is operating at reduced capacity.

Light, sweet crude for May delivery rose $1.62 to settle at a record $111.76 a barrel on the New York Mercantile Exchange.

Other energy futures also traded higher Monday.

May gasoline futures added 1.45 cents to settle at $2.8218 a gallon, and May heating oil futures rose 0.54 cent to settle at $3.2029 a gallon.

In precious metals, gold rebounded Monday after the dollar weakened, bolstering the metal's appeal as a hedge against inflation.

Gold for June delivery rose $1.70 to settle at $928.70 an ounce on the Nymex, gaining for the first time in three sessions.

Other precious metals traded mixed Monday.

Silver for May delivery added 10 cents to settle at $17.790 an ounce on the Nymex, while May copper fell 4.8 cents to settle at $3.8965 a pound.

"Gas prices could pass $3.50 in weeks"

By JOHN WILEN, Associated Press

Last updated: 3:52 p.m., Monday, April 14, 2008

NEW YORK -- Gas prices fluctuated over the weekend but appear poised to resume their seemingly relentless trek toward a record high milestone of an average $3.50 a gallon.

Forecasts call for gas to peak as high as $3.65 within a month.

Oil prices, meanwhile, rose to a record settlement and are within striking distance of last week's trading record of $112.21 a barrel as the dollar fell and crude supplies were disrupted in the U.S. and overseas.

At the pump, the national average price of a gallon of gas edged lower overnight to $3.373 a gallon, 0.1 cent shy of a new record set Sunday, according to a survey of stations by AAA and the Oil Price Information Service.

Still, prices are 0.8 cent higher than Friday, and almost 53 cents higher than a year ago.

The Energy Department recently predicted gas prices could average as much as $3.60 a month this summer, and said the daily national average could rise as high as $4 a times.

Prices are already over $4 in some parts of the country.

But a growing number of analysts don't believe the national average will rise that high unless something unanticipated occurs.

"I don't think so, unless there is some sort of outage or refinery event," said Fred Rozell, retail pricing director at the Oil Price Information Service.

Indeed, barring such an event, prices could fall back to $3 a gallon, or lower, by late summer, said Jim Ritterbusch, president of Ritterbusch and Associates, an energy consultancy in Galena, Ill.

"Take your vacation late this year," said Ritterbusch, who believes prices will dip to those lows in July or August.

Still, unexpected refinery outages have forced pump price spikes in the past.

Last spring, a string of unanticipated refinery outages caused gas prices to peak at record levels in May.

Prices then mostly fell until late in the year, when they began to track crude oil higher.

Prices normally rise in the spring as suppliers stock up in advance of peak summer driving season, and as refiners switch over from making winter grade gasoline to the more expensive, but less polluting, summer version of the fuel.

As they perform this switch, refiners try to sell off all of their winter grade fuel, driving overall supplies down.

This year, refiners are also facing short supplies of alkylate, a key ingredient in summer grade fuel.

And gas prices are also following oil prices, which are near record levels.

Light, sweet crude for May delivery rose $1.62 to settle at a record $111.76 a barrel Monday as the dollar weakened.

Many investors regard commodities such as oil as a hedge against a weak dollar and inflation.

Also, a weaker dollar makes oil cheaper to investors overseas.

Oil prices also rose on word of supply disruptions, including the weekend closure of a 1.2 million barrel a day Royal Dutch Shell PLC pipeline in the Midwest due to a leak.

The pipeline has since reopened and is operating at reduced capacity.

In Nigeria, Italian energy giant ENI said sabotage has cut crude production from one of its facilities by about 5,000 barrels a day.

Still, analysts believe the weak dollar is the main reason oil prices have risen to record levels this year, and have held above $100 for more than a month.

Ritterbusch said prices could rise a few dollars higher than last week's record, but expects that moves by world governments to support the dollar will send oil prices lower later in the year.

The Group of Seven industrialized nations raised concerns about the dollar's fall in a statement on Friday, a warning some analysts see as a sign the G7 may be contemplating an intervention that could lessen crude's attraction as an inflation hedge and send it lower.

"That should provide some relief at the pump," Ritterbusch said.

In other Nymex trading Monday, May gasoline futures rose 1.45 cents to settle at $2.8218 a gallon, and May heating oil futures rose 0.54 cent to settle at $3.2029 a gallon.

May natural gas futures rose 15.2 cents to settle at $10.053 per 1,000 cubic feet.

In London, May Brent crude rose $1.09 to settle at $109.84 on the ICE Futures exchange.

------

Associated Press Writers Pablo Gorondi in Budapest and Gillian Wong in Singapore contributed to this report.

AND HERE IS SOME REAL SURPRISING NEWS, ALRIGHT ...

"AP poll: Mortgage payments worry many"

By ALAN FRAM, Associated Press

Last updated: 3:32 p.m., Monday, April 14, 2008

WASHINGTON -- One in seven mortgage holders worry they may soon fail to make their monthly payments and even more fret that their home's value is shrinking, according to a poll showing widespread stress from the nation's housing crisis.

In an ominous snapshot of how the sagging real estate market and sour economy are intersecting, the Associated Press-AOL Money & Finance poll also found that 60 percent said they definitely won't a buy a home in the next two years.

That was up from 53 percent who said so in an AP-AOL poll in September 2006.

Only 11 percent are certain or very likely to buy soon, down from 15 percent two years ago.

In today's economic climate, even holding onto what they already have is a challenge and source of distress for significant numbers of homeowners.

Nearly three in 10 said they are concerned their home's value will decline over the next two years, while 14 percent of mortgage holders expressed worry that they might miss payments in the next six months.

One nervous homeowner is Daniel Gallego, a warehouse worker in Stockton, Calif., who said in a followup interview that he may have to sell his house at a big loss.

"We may have to move in with my wife's parents or my parents," said Gallego, 30, who has two young children.

"I could pay off some debt, then we could rent, and maybe buy another house in a few years."

He said the rising cost of gasoline and other expenses have made his adjustable rate mortgage unaffordable.

Because he doesn't expect his home's value to recover soon, he said he may be better off moving now before his rates rise.

One in 10 have adjustable rate mortgages, half the number who said so two years ago.

These mortgages generally start at a low interest rate and are later adjusted to market conditions -- which has often meant steep, unaffordable boosts that have forced many to refinance or even lose their homes.

The growing reluctance to dip into the housing market seems to stem partly from worry that housing prices will continue falling -- good if you're buying a house but bad if you have to sell one.

The number envisioning falling prices in their area has grown to one in four, while four in 10 think prices will rise, a decrease from two years ago.

Expectations for rising prices are highest in the South, with Westerners likeliest to predict they will drop.

"This is a great time to buy, but not necessarily to sell," said Robert Jackson, who lives in a two-bedroom house in Ferguson, Mo., with his wife and four young children.

He said he would love to purchase a larger home, but can't because even if he found a buyer, he would probably lose thousands on his house, which he bought less than two years ago.

"We're just going to have to slap a Band-Aid on it and stay here until the market gets a little bit better," said Jackson, 30.

Underscoring the public's unsettled feelings, the number saying local housing prices are about right has fallen to 35 percent.

Half say homes are overpriced -- especially in the Northeast -- while those saying housing is underpriced have doubled to one in 10.

Midwesterners were likelier than those in other regions to feel this way.

Some areas of the country buck regional trends.

Laurie Jensen, a single mother of three, struggles to make payments on her home in Whitehall, Mont., by working as a seasonal road construction flagger and at times collecting unemployment.

She said she'd like to move outside of town, but the area is popular and prices have surged.

"Things are pretty crazy," she said.

"Places I don't consider that great are really expensive."

The public anxiety is in reaction to an economy that is veering toward recession and losing jobs even as the housing market sputters badly.

Foreclosures have soared to record highs, mortgage rates have increased, sales of existing and new homes have fallen and home values have dropped.

Gus Faucher, director of macroeconomics for Moody's Economy.com, a consulting firm, estimated that 9 million homeowners owe more on their home than its worth.

He said his company believes home sales are at or near bottom and home values will continue to fall until early next year.

Even so, he said, many people bought their homes before the run-up in values that started around 2001 and remain in good shape.

"So the value of your house goes down temporarily," he said.

Unless the homeowner must sell now or can't afford the payments, "that doesn't have that much of an impact."

The poll also found:

--The biggest worriers are those expecting to buy soon.

Of that group 43 percent frets that their home's value will drop in the next two years, compared with 25 percent of those not expecting to buy soon.

--Fifty-nine percent think now is a good time to buy.

--Half think this is a very tough time for first-time buyers, an increase from two years ago.

Nearly two-thirds think it's harder for first-home buyers than it was five years ago.

The AP-AOL Money & Finance poll was conducted from March 24-April 3 by Abt SRBI Inc.

It involved telephone interviews with 1,002 adults nationwide, for whom the margin of sampling error is plus or minus 3.1 percentage points.

Included were interviews with 769 homeowners, for whom the sampling margin of error is plus or minus 3.5 points.

The margin of sampling error for other subgroups was larger.

------

AP Director of Surveys Trevor Tompson and AP News Survey Specialist Dennis Junius contributed to this report.

------

On the Net:

AOL Money & Finance: http://money.aol.com

AND HERE IS SOME REALITY FOR US ....

"Wachovia's loss a grim sign for banks"

By MADLEN READ, Associated Press

Last updated: 3:02 p.m., Monday, April 14, 2008

NEW YORK -- The shocking first-quarter loss at Wachovia Corp., a company long viewed as a relatively conservative player during the mortgage boom, suggests that 2008 will be at best a rebuilding year even for the nation's better-positioned banks.

Results this week from large banks such as JPMorgan Chase & Co., Citigroup Inc., Washington Mutual Inc. and Wells Fargo & Co. should shed more light on how much fixing-up the industry has to do.

So far, it's not looking pretty -- and that means fewer loans for consumers, skimpier dividends for shareholders and more job cuts.

Wachovia's $393 million quarterly loss was accompanied by a 41 percent dividend cut, plans to eliminate 500 jobs in its corporate and investment bank, and a move to sell $7 billion worth of stock.

Many banks have already tried to raise cash through stake sales -- Wachovia itself raised $8.3 billion earlier this year, Citi has raised about $20 billion, and WaMu has raised $5 billion, just to name a few.

But investors are not convinced banks have enough cash to survive what is expected to be a tough year for consumer credit.

Wachovia's loss -- brought on by a $2 billion asset write-down and provisions of $2.8 billion for anticipated credit losses -- was viewed as a harbinger for the industry, and sent bank shares tumbling on Monday.

"What you're seeing is a taste of things to come," said Len Blum, managing director at Westwood Capital LLC and former managing director of Prudential Securities Inc.'s investment banking group.

Already, analysts were forecasting first-quarter losses at Washington Mutual and Citigroup, which report Tuesday and Friday, respectively.

JPMorgan and Wells Fargo are expected to post profits on Wednesday, but much smaller ones than they notched at this time last year.

Citi, for one, is expected to write down its portfolio by anywhere between $10 billion and $20 billion.

All told, the global financial industry has written down assets by some $190 billion over the past few quarters.

Last week, the International Monetary Fund estimated that in a couple years, write-downs will total nearly $1 trillion.

"I think it's going to get a lot worse before it gets better," Blum said.

"I don't think any bank is immune from this."

The reasons, he said, are that the housing market is nowhere near a rebound and consumers are extremely burdened with debt, having taken on $6.9 trillion in debt between 2000 and 2006 to more than double what they owed previously.

It's not just subprime mortgages causing problems for banks.

In Wachovia's report, it said defaults are increasing for option adjustable-rate mortgages -- where the rates change monthly and consumers can defer payments -- and Alt-A mortgages, which are given to people with better credit than subprime borrowers, but who are not prime.

Anticipated losses in option ARMs -- which essentially operate like a mortgage with a home-equity loan embedded in it -- do not bode well for home equity loans, said Keefe Bruyette & Woods bank analyst Fred Cannon.

WaMu, Wells Fargo and Bank of America Corp. have particularly large exposure to home-equity loans.

JPMorgan has already warned it expects to write off $450 million in home-equity loans in the first quarter.

"While subprime was kept to a fairly small share of assets, exposure to home equity is much more significant," Cannon said.

"Home equity loans for a lot of consumers became a savings account."

So with banks paring back lines of home equity credit, it's inevitable that defaults are going to rise in an expanding swath of debt, from auto loans to credit cards to personal loans.

And as defaults rise, banks will need to sock away more cash to prepare for future losses.

Wachovia's big provision suggests that banks are realizing they can no longer rely on historical models for reserving.

"When there's a radical shift, the models are out the window," said SNL Financial banking analyst John McCune.

As more banks alter their loan-loss modeling, he said, "I think it's going to show that they haven't been provisioning aggressively."

"... They're surely under-reserved for all this."

"Factories to shut to clean Beijing's air"

By STEPHEN WADE, Associated Press

Last updated: 3:32 p.m., Monday, April 14, 2008

BEIJING -- Construction will halt, heavy industries will close, and even spray painting will stop in order to clean Beijing's polluted air for the Olympics -- an issue that suddenly has taken a back seat to political protests.

An aggressive plan to temporarily shutter belching steel and chemical plants, cut back emissions by 30 percent at 19 heavy-polluting companies and stop excavation and pouring of concrete at hundreds of sites around the city was explained Monday by the city's Environmental Protection Bureau.

"From the suggestions of experts we think that we need to take these measures to guarantee the air quality of Beijing," said Du Shaozhong, the bureau's deputy director.

The measures are severe and will be in effect officially for two months -- July 20-Sept. 20 -- although reports a few months ago suggest some production cutbacks may come even sooner.

Officials also are expected to ban about half of Beijing's 3.3 million vehicles for the Aug. 8-24 Olympics.

Du said specific details would be announced later.

A month ago, pollution looked like the biggest threat to the Olympics, which are supposed to mark the emergence of China as an economic and political power.

Since then, deadly riots in Lhasa have triggered worldwide demonstrations by pro-Tibet and human rights groups, threatening the country's image on a stage it has spent billions to build.

Last week, chaotic protests disrupted legs of the Olympic torch relay in London, Paris and San Francisco, prompting usually cautious International Olympic Committee President Jacques Rogge to say the IOC was facing "a crisis" -- one of its toughest tests since the boycotts of the 1970s and '80s.

More demonstrations along the relay route are expected.

Beijing's noxious pollution still presents an enormous problem, a health menace and a public relations minefield.

Rogge has said endurance events of more than an hour will be postponed if the air quality is poor, and he's acknowledged some performances might be "slightly reduced."

Many top athletes are reported staying away from the games until the last minute, and some have been advised to wear masks in non-competition situations.

Du did not say if shuttered companies would receive compensation for lost production.

"Enterprises have made active sacrifices for the Olympics in terms of how to allocate their production and how to offset all these negative impacts," he said.

To a suggestion that some companies might ignore the government orders, Du replied: "It's not very difficult for Chinese plants to implement all the measures."

The Capital Steel Group in west Beijing has been told to reduce emissions, and production will be halted at the Eastern Chemical Plant of Beijing Eastern Petrochemical Co.

In addition, coal-burning boilers that fail to meet emission standards also will be shuttered.

Du said production would be stopped at concrete and cement plants in southeastern Beijing.

Quarry operations will also be stopped.

The environmental body said gas stations, oil depots and tanker trucks would be shut down unless they were equipped with "oil vapor recovery" technology.

Outdoor spray-painting will also be banned during the period, and "spraying or painting with harmful solvents will be temporarily banned."

Du said even more "strident" measures would be taken during the 17-day games "in case of extremely negative meteorological conditions."

Hot, humid and stagnant air often settles over the city in August.

Five provinces and municipalities surrounding Beijing will also be closing factories, although their plans were not released.

They are: the city of Tianjin; Hebei, Shanxi and Shandong provinces; and the huge Inner Mongolia region.

Beijing is one of the world's most polluted cities.

A mix of particulate matter, carbon monoxide, sulfur dioxide and nitrogen dioxide often blankets the city at levels five times higher than World Health Organizations safety standards.

As Du made his announcement, Beijing was covered in a moderate level of smog.

An IOC study released last month said that competition conditions would "not necessarily (be) ideal at every moment," but said Beijing's air quality was better than expected.

Asked if he could make a 100 percent promise that no endurance events will be postponed by pollution, Du replied: "We will do everything possible to honor the promise."

"Iraq's financial free ride may end"

By ANNE FLAHERTY, Associated Press Writer

14 April 2008

WASHINGTON - Iraq's financial free ride may be over.

After five years, Republicans and Democrats seem to have found common ground on at least one aspect of the war.

From the fiercest war foes to the most steadfast Bush supporters, they are looking at Iraq's surging oil income and saying Baghdad should start picking up the tab, particularly for rebuilding hospitals, roads, power lines and the rest of the shattered country.

"I think the American people are growing weary not only of the war, but they are looking at why Baghdad can't pay more of these costs."

"And the answer is they can," says Sen. Ben Nelson of Nebraska.

Nelson, a Democrat, is drafting legislation with Republican Sen. Susan Collins of Maine and Democrat Evan Bayh of Indiana that would restrict future reconstruction dollars to loans instead of grants.

Their bill also would require that Baghdad pay for the fuel used by American troops and take over U.S. payments to predominantly Sunni fighters in the Awakening movement.

Plans are to propose the legislation as part of a war bill to cover spending through September.

Likewise, Sen. Carl Levin, D-Mich., chairman of the Armed Services Committee, said he wants to add a provision to a defense policy bill that would force the Iraqi government to spend its own surplus in oil revenues to rebuild the country before U.S. dollars are spent.

These senators, who are well-known war skeptics, could find allies in lawmakers who support President Bush's current Iraq policies.

In hearings last week, Joseph Lieberman, I-Conn., asked Defense Secretary Robert Gates whether Baghdad should start paying some U.S. combat costs, and Lindsey Graham, R-S.C., raised the possibility that an anticipated Iraqi budget surplus this year could be used to help Afghanistan, whose $700 million in annual revenue represents a small fraction of Iraq's $46.8 billion budget.

Bush has suggested that Congress is preaching to the choir.

Last week, he noted that Baghdad's latest budget would outspend the U.S. by more than 10 to one on Iraq reconstruction, with American funding for large-scale projects "approaching zero."

"Ultimately, we expect Iraq to shoulder the full burden of these costs," he said.

But lawmakers are skeptical.

Considering that past predictions in Iraq have fallen short, the legislation would ensure Iraq assumes more of the financial burden, they say.

On the surface, it looks as though the U.S. has about split the costs of rebuilding efforts with the Iraqis: Congress has appropriated about $47.5 billion since 2003 while the Iraqis have budgeted $50.6 billion.

International contributions have totaled $15.8 billion.

And, as Bush pointed out, Iraq's latest budget is on track to outspend the U.S. when it comes to rebuilding.

Baghdad has devoted $13.4 billion in 2008 for capital expenses, more than a quarter of its $48.6 billion budget.

However, there is a key difference: Whereas the U.S. has actually spent most of the money it has approved, Iraq hasn't, according to the watchdog agency that audits reconstruction efforts.

In 2006 and 2007, for example, Iraq spent only $2.9 billion of its designated $16.3 billion capital budget, which is used to invest in reconstruction projects.

Administration and military officials say the lack of spending isn't sinister.

"Part of it's a lack of expertise."

"Part of it is a lack of trained people."

"And part of it, in the past, has probably been politics," Gates told Congress last week.

"We think they're making headway on all of those."

Levin said he doesn't buy it, including Bush's declaration that the U.S. is no longer in the business of major reconstruction.

Congress received notice on April 3 that the Pentagon planned to transfer $590 million in its war budget to cover construction and infrastructure improvements for Iraq security forces.

"I just think it's totally unacceptable that we say they don't know how to cut a check," Levin said.

A primary cause for the unhappiness in Congress is the high price of oil as the U.S. heads into election season.

While Americans are complaining of gasoline prices, officials predict that Iraq is headed toward a major windfall because of the soaring price of oil and record-setting production levels.

While early estimates suggested Iraq's oil revenue would reach $35 billion this year, it could climb as high as $60 billion, said Stuart Bowen, special inspector general for Iraq reconstruction, in a March hearing.

The country's 2008 budget of $46.8 billion was calculated based on $57 per barrel of oil, roughly half the market rate, the inspector general noted in its latest report.

Meanwhile, the U.S. military isn't reaping those benefits.

American troops in Iraq are buying fuel on the open market at $3.23 a gallon and spending some $153 million a month, according to a recent report by The Associated Press.

Collins says the Iraqis should cover those costs.

"It's really difficult for Americans who are struggling with the high cost of the energy to see us paying for fuel costs in a country that has the second-largest oil reserves" and a burgeoning budget surplus, she said.
___

On the Net:

Special Inspector General report. http://www.sigir.mil/reports/quarterlyrepo...anuary_2008.pdf

"More than 50 killed by car bombs in Iraq"

By KIM GAMEL, Associated Press

Last updated: 7:53 a.m., Tuesday, April 15, 2008

BAGHDAD -- Car bombs ripped through crowded areas at lunch hour in the former Sunni insurgent strongholds of Baqouba and Ramadi on Tuesday as more than 50 people were killed in one of the deadliest days in Iraq in months.

A parked car bomb also targeted a police patrol in central Baghdad, killing four civilians who were passing by and wounding 15 other people, police said.

Nobody claimed responsibility for Tuesday's attacks, but they bore the hallmarks of al-Qaida and came after weeks of few car bombings or suicide attacks.

The first attack occurred in Baqouba, 35 miles northeast of Baghdad, when an explosives-laden car parked in front of a restaurant exploded just before noon across the street from the courthouse and other government offices in the city center.

Many of the victims were people visiting the government offices, petition writers helping people with documents in stalls outside or the occupants of cars that were caught in the explosion as they passed through the area, witnesses said.

Several cars and minibuses were set ablaze, while more than 10 shops and the restaurant were heavily damaged.

One man who was there described a huge fire that sent black smoke billowing into the sky and left charred bodies inside their cars.

"I was on my way to the government office when a big explosion occurred near site," said the witness, who would only identify himself by his nickname Abu Ali.

"As I approached the site, I saw cars on fire, burned bodies and damaged shops damaged with shattered glass everywhere."

At least 38 people were killed and 64 wounded in the blast, according to police and hospital officials, who spoke on condition of anonymity because they weren't authorized to release the information.

The U.S. military in northern Iraq gave a lower casualty toll of 20 local citizens killed and 35 wounded based on initial reports.

It was the deadliest blast in Baqouba since Oct. 29, when 27 people were killed in a suicide bombing outside a police camp in the city.

Another parked car bomb exploded near a kebab restaurant at about 12:30 p.m. in Ramadi, killing at least 14 people and wounding 14 others, police Lt. Col. Jubair al-Dulaimi said.

He said the attack occurred in an area known as the Five Kilometers area for its distance west of the city center.

Ramadi, 70 miles west of Baghdad, is the capital of Anbar province and has largely been sealed off by checkpoints.

Like Baqouba, the area has seen a sharp decline in violence in recent months as tribal leaders have joined forces with the Americans against al-Qaida in Iraq.

The U.S. military said overall attacks in Diyala province have dropped more than 76 percent since June 2007.

The relative calm in predominantly Sunni areas has coincided with a burst of Shiite violence as militia fighters clashed with U.S. and Iraqi forces in Baghdad and the oil-rich southern city of Basra.

U.S. soldiers backed by an airstrike killed six militants earlier Tuesday after coming under small-arms fire during an operation in the Sudayrah area near Baghdad's main Shiite militia stronghold of Sadr City, the military said.

Iraqi police in the area claimed that two boys were among those killed in the airstrike, but the military said no civilian casualties were reported.

------

Associated Press writers Hamid Ahmed and Sinan Salaheddin contributed to this report.

"US takes over new Baghdad embassy"

By MATTHEW LEE, Associated Press

Last updated: 7:22 p.m., Monday, April 14, 2008

WASHINGTON -- The United States has taken ownership of the mammoth new, heavily fortified embassy in Baghdad after months of delay, the State Department said Monday.

The government had held off on taking legal possession of the $736 million complex until construction problems and delays were resolved.

An order signed Monday covers the main embassy building but not additional office space now set aside for the top U.S. ground commander in Iraq, Gen. David Petraeus.

The "certificate of occupancy" means the U.S. government can now move into 27 buildings inside the heavily protected compound inside the Green Zone, where a recent spate of insurgent attacks has killed at least two U.S. soldiers and two American civilians.

The move is expected to take place in late May or early June.

The certificate "attests to substantial completion of construction, as well as successful testing and validation of the major buildings and communications systems," State Department spokesman Tom Casey said.

The new embassy will be the largest U.S. diplomatic mission in the world, with fortified working space for 1,000 people and living quarters for several hundred on a 104-acre site.

But the project has been beset by construction, logistical and security hitches that caused major delays beyond its planned September 2007 opening date and angered some lawmakers.

U.S. Ambassador to Iraq Ryan Crocker told reporters last week that construction was complete at the Vatican-sized compound, which will replace the current embassy quarters in a Saddam Hussein-era palace.

"It's been a difficult few weeks, rockets are bouncing off your buildings, and maintaining focus can be an occasional challenge," Crocker said.

"We will begin moving into the new embassy -- some of the office space and the apartments -- probably the end of next month, the beginning of June, so that will certainly improve quality of life and provide some added protection," he told reporters.

The rise in insurgent attacks prompted the embassy late last month to order personnel not to leave reinforced buildings and to wear helmets and body armor if they must go outside.

A shortage of space in fortified areas has forced some diplomats to sleep at the new embassy site despite the lack of occupancy approvals.

"We worry a lot less about formal safety certifications and a lot more about ensuring people have a place to sleep where rockets couldn't get at them," Crocker said.

In October, the department conceded that a host of problems, including major malfunctions in the complex's physical plant, including electrical and water distribution systems, would push back the embassy opening at least until this spring.

Some of those problems have since recurred.

Some of the deficiencies have been blamed on shoddy work by the company hired to build the project, First Kuwaiti General Trading & Contracting Co., for $592 million.

Changes to the original design have pushed the cost up by $144 million.

First Kuwaiti has been accused of tricking foreign laborers into working on the embassy, mistreating them and paying $200,000 in kickbacks in return for two unrelated Army contracts in Iraq.

The company denies the charges.

Congressional Democrats have launched investigations into whether the State Department had adequate control of the project, which has been complicated by security concerns, including a September incident in which private Blackwater USA guards are accused of killing 17 Iraqi civilians while protecting an embassy convoy.

------

AP Diplomatic Writers Anne Gearan and Barry Schweid contributed to this report.

"Oil rises to intraday record above $112"

By GEORGE JAHN, Associated Press

Last updated: 7:53 a.m., Tuesday, April 15, 2008

VIENNA, Austria -- Oil prices rose to an intraday trading record above $112 a barrel Tuesday as the U.S. dollar fell against the euro and crude oil shipments along one U.S. pipeline were said to be operating below capacity.

Light, sweet crude for May delivery on the New York Mercantile Exchange rose to an intraday record of $112.80 a barrel in electronic trading by early afternoon in Europe, well above the previous trading high of $112.21 set last week.

Crude's rally this week started with a decline in the dollar against the euro on Monday, analysts said.

Crude oil's recent run above $100 a barrel has been largely attributed to a steadily depreciating U.S. currency because a weakening dollar prompts investors to seek a safe haven in hard commodities such as oil and gold.

"We've seen another swing down in the U.S. dollar so I think we saw short term traders go back into oil as a hedge against the falling dollar," said Mark Pervan, senior commodity strategist at the ANZ Bank in Melbourne, Australia.

Stephen Schork, in his Schork Report, described the rush into oil on the falling dollar as an automatic reflex.

"Traders on the Numex saw the dollar take another tumble, so they did what they have been conditioned to do when the dollar falls, i.e. they bought crude oil," he wrote.

The dollar fell further against the 15-nation euro on Tuesday.

The euro rose to $1.5832 in morning European trading, up from $1.5808 in New York late Monday.

The euro set its latest all-time high of $1.5912 last Thursday.

Monday's news from Wachovia supported oil prices by making the U.S. dollar less attractive, said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Wachovia, the fourth largest bank in the U.S., reported a hefty first-quarter loss and cut its dividend, and said it was forced to seek a $7 billion cash injection to make up for a poorly timed expansion of its mortgage business.

"This news highlights the strains in the banking sector and credit markets and that has led to more dollar selling, and so that tends to drive investors into oil and other commodities," Shum said.

He said the news from Wachovia as well as disappointing first-quarter results from General Electric Co. on Friday overshadowed concerns raised by the Group of Seven industrialized nations about the dollar's fall.

The G-7 remarks were seen as a warning by some analysts that the group may be contemplating an intervention that could lessen crude's attraction as an inflation hedge and send it lower.

Crude was also supported by news of disruptions to crude supplies, though analysts said the interruptions were minor.

"They only look like temporary shut downs but ... the combination of that and the fact that the dollar was off again was the key," Pervan said.

The Capline pipeline -- the Royal Dutch Shell PLC conduit that carries 1.2 million barrels of crude each day from the U.S. Gulf Coast to the Midwest -- was closed on the weekend, and has since resumed operations at a slightly reduced capacity.

In Nigeria, Italian energy giant ENI reported a 5,000 barrel per day reduction in production at one of its facilities.

In other Nymex trading, heating oil futures added over a penny to sell for $3.2144 a gallon while gasoline prices were flat at $2.8196 a gallon.

Natural gas futures gained more than 6 cents to $10.116 per 1,000 cubic feet.

In London, Brent crude futures rose 49 cents to $110.33 a barrel on the ICE Futures exchange.

"US foreclosure filings jump in March"

By J.W. ELPHINSTONE, Associated Press

Last updated: 5:22 a.m., Tuesday, April 15, 2008

The onslaught of homes facing foreclosures has yet to ebb, a research report showed Tuesday, with bank repossessions skyrocketing last month as more troubled homeowners mailed in their keys and walked away.

And the worst isn't over: the wave of adjustable-rate loans resetting to higher rates will crest in May and June.

And that's expected to push more homeowners into default and foreclosure in the third and fourth quarters of this year, according to RealtyTrac Inc. of Irvine, Calif.

"Once we're through that batch of loans, the worst will have been worked through the system," said Rick Sharga, RealtyTrac's vice president of marketing.

The number of U.S. homes receiving at least one foreclosure filing jumped 57 percent in March to 234,685, compared with 149,150 properties a year earlier.

Filings include default notices, auction sale notices and bank repossessions.

The overall foreclosure rate is 5 percent higher than in February, which saw an unexpected month-to-month decline over January.

March marked the 27th consecutive month of year-over-year increases in national foreclosure filings.

That meant one in every 538 households received a filing during the month.

Forty-four percent were households that slipped into default for the first time and more than a fifth were homes banks took back.

Lenders took possession of homes at a sharply higher rate, up 129 percent over last year, as more homeowners relinquished their homes, said Sharga.

Banks repossessed 51,393 properties nationwide, many of them without a public foreclosure auction.

"In a lot of cases, banks worked something out with the owner in advance and took back the keys and deed."

"For a homeowner, it's not as embarrassing and it's a little less of a blemish on their credit record compared to a foreclosure," Sharga said.

He estimates between 750,000 and 1 million bank-owned properties will hit the market this year, or about a quarter of the homes up for sale.

In some areas, these properties will continue to slow sales and depress prices further.

Declining home prices and stricter lending requirements have exacerbated the foreclosure environment.

Homeowners stuck in unmanageable mortgages aren't able to sell their homes or refinance into cheaper loans before their mortgage payments reset higher.

Nevada clocked in the worst foreclosure rate for the 15th straight month.

Last month, one in every 139 households received a foreclosure-related notice, nearly four times the national rate.

The number of properties with a filing increased 24 percent over February and 62 percent over the previous March.

California had the second-highest foreclosure rate in the country.

One in every 204 California households received a foreclosure-related notice.

The state had 64,711 properties facing foreclosure, the most of any state and more than double last year's total.

In Florida, 30,254 homes reported at least one filing, down nearly 7 percent from February, but up 112 percent from the year before.

Rounding out the states with the highest foreclosure rates were Arizona, Colorado, Georgia, Ohio, Michigan, Massachusetts and Maryland.

------

On the Net:

RealtyTrac Inc.: http://www.realtytrac.com

"Stock futures off ahead of economic data"

By MADLEN READ, Associated Press

Last updated: 7:02 a.m., Tuesday, April 15, 2008

NEW YORK -- Wall Street was poised to extend its losses Tuesday as investors awaited readings on inflation and manufacturing and more earnings reports.

The Commerce Department at 8:30 a.m. EDT releases its Producer Price Index.

The index is expected to show a 0.5 percent rise for March, and the core index, which strips out food and energy prices, is anticipated to increase 0.2 percent.

High inflation figures could raise worries that the Federal Reserve will hesitate to lower interest rates again, and that consumers will continue paring back their discretionary spending to afford necessities like food, energy and health care.

Meanwhile Tuesday, the New York Fed is expected to report that manufacturing in the region contracted, but at a much milder pace than in March, when the state's manufacturing shrank at a record clip.

And in earnings news, Johnson & Johnson, one of the 30 Dow Jones industrials, releases its first-quarter results.

Wall Street is forecasting a rise in profit at the maker of health care and personal products.

After stocks closed Monday moderately lower, Dow futures on Tuesday fell 31, or 0.25, to 12,285.

Standard & Poor's 500 index futures fell 2.60, or 0.20 percent, to 1,328.70.

Nasdaq 100 index futures fell 3.00, or 0.17 percent, to 1,793.25.

Bond prices rose.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.48 percent from 3.51 percent late Monday.

In dealmaking news, Delta Air Lines Inc. and Northwest Airlines Corp. agreed late Monday to combine in a stock-swap deal, creating the world's biggest airline.

Oil prices traded at record highs.

Light, sweet crude rose 88 cents to $112.64 a barrel in premarket electronic trading on the New York Mercantile Exchange.

Gold prices rose, and the dollar was mixed against other major currencies.

Overseas, Japan's Nikkei stock average rose 0.77 percent.

Britain's FTSE 100 rose 0.91 percent, Germany's DAX index was flat percent, and France's CAC-40 slipped 0.10 percent.

----------

On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

AND HERE IS ANOTHER LOAD OF CRAP COMING DOWN THE PIKE AT US FROM THE BUSHCOS ....

SINCE THEY ARE UNENFORCEABLE, THESE GUIDELINES ARE MEANINGLESS ....

"New guidelines proposed for hedge funds"

By MARTIN CRUTSINGER, Associated Press

Last updated: 3:22 a.m., Tuesday, April 15, 2008

WASHINGTON -- In the place of new government regulations, the Bush administration is coming forward with some industry-developed "best practices" to guide the operation of hedge funds.

Those guidelines were scheduled to be unveiled Tuesday by Treasury Secretary Henry Paulson and the leaders of the two groups working on guidelines for the funds.

One set of recommendations provides guidelines on how investors of hedge funds should operate.

It was drawn up by an investors' group headed by Russell Read, the chief investment officer of the California Public Employees' Retirement System (CalPERS), the largest pension fund in the United States.

The other set of recommendations designed to serve as guidelines for the managers of the hedge funds was draw up by an advisory panel headed by Eric Mindich, the head of Eton Park Capital Management, a large hedge fund.

The Bush administration has resisted pressure to increase government regulation of hedge funds, arguing that market discipline is the best way to handle these funds.

The White House still supports that view even after the turbulence that has hit financial markets roiled by a serious credit crisis.

Those troubles claimed their biggest victim last month with the near-collapse of Bear Stearns, the country's fifth largest investment bank, which was taken over by JP Morgan Chase & Co. in a deal in which the Federal Reserve provided a $30 billion loan.

Hedge funds, vast pools of capital that operate secretively and with very little government supervision, have grown explosively in recent years.

While hedge funds cater to institutional investors and very wealthy individuals, millions of ordinary people have become investors in them through their pension plans.

Hedge funds have been caught up in the recent turmoil in financial markets, with investors growing worried about the solvency of funds that had invested heavily in securities backed by subprime mortgages, where delinquencies have hit record levels.

"German investor confidence declines"

By GEIR MOULSON, Associated Press

Last updated: 7:22 a.m., Tuesday, April 15, 2008

BERLIN -- German investor confidence unexpectedly declined this month with rising inflation, the euro's near-record strength and high oil prices eating into expectations, a closely watched survey showed Tuesday.

The ZEW institute said its monthly index, which measures investors' expectations for the German economy over the next six months, dropped to minus 40.7 points in April from minus 32 last month.

The drop followed two consecutive monthly rises and dashed economists' expectations of another small increase.

"The slight optimism of the financial market experts last month seems to be only a temporary phenomenon," ZEW President Wolfgang Franz said in a statement.

"New record highs of the euro and the oil price have reduced expectations again."

ZEW said "economic expectations were affected by the extraordinary high price pressure in Germany this month."

Still, ZEW said a portion of its index measuring investors' assessment of the current economic situation improved slightly, climbing by 1.1 points to 33.2 points this month.

High inflation erodes discretionary income and weakens private consumption, and the ZEW added that low numbers of incoming orders to German companies point to slower growth.

Germany, which has Europe's biggest economy, saw its annual inflation rate accelerate to 3.1 percent in March from 2.8 percent the previous month.

That is part of a trend across the 15-nation euro zone that has prompted the European Central Bank to hold off following others in cutting interest rates.

The euro has been hovering close to all-time highs against the dollar, which has been weighed down by worries about a possible U.S. recession and the Federal Reserve's repeated interest-rate cuts.

The dollar hit a new low last week.

That raises the prospect of European goods becoming less competitive overseas, eating into exports -- a key element of Germany's current economic upswing.

However, "at the moment there is no reason for exaggerated pessimism," Franz said.

"A growth rate for Germany of 1.7 percent this year is still realistic."

Economists pointed to the ZEW index's traditional volatility and argued that the decline should not be over-interpreted.

Andrea's Rees at HVB in Munich said it was puzzling, given that German companies have shown "outstanding resilience over the last few weeks" and industrial activity has held up well.

"However, starting from autumn or so, signs of a slowdown will be mounting, as the signals of a cooling in major (euro-zone) countries like Italy and Spain are unambiguous," he said.

Underlining Germany's resilience so far, the Federal Statistical Office said Tuesday that Germany's foreign trade surplus reached an all-time high of 196.5 billion euros ($310 billion) last year.

It said the value of exports exceeded that of imports by 25.4 percent in 2007, but did not detail the previous record.

"Britain woos Chinese investment"

By JOE McDONALD, Associated Press

Last updated: 6:12 a.m., Tuesday, April 15, 2008

BEIJING -- The British treasury chief made a pitch Tuesday for China's $200 billion state investment fund to invest in Britain as he visited Beijing amid strains over Tibet and China's trade surplus.

"We welcome the creation of the Chinese sovereign wealth fund and its potential for investing in our country," Chancellor of the Exchequer Alistair Darling said after meeting China's top finance reform official, Vice Premier Wang Qishan, for talks on financial cooperation.

Darling said ahead of his trip that he would express British concern about China's crackdown in Tibet and appeal for restraint.

But he made no mention of the issue as he and Wang appeared briefly before reporters following their meeting.

Darling is the highest-ranking British official to visit China since Brown's office said last week he would skip the opening ceremonies of the Beijing Olympics in August.

Brown's decision came amid demands by activists for foreign leaders to boycott the ceremony in protest over Beijing's crackdown on protests in Tibet.

But the prime minister's office said the decision was unrelated to those demands and was not a gesture of protest.

The meeting was the first in an annual series of high-level dialogues that are meant to promote trade and financial cooperation between Beijing and London.

Darling was accompanied by executives of British and European banks and a London private equity firm.

Darling and Wang said they agreed to cooperate more closely on financial regulation, environmental technology and other areas, though they gave no details.

Wang said coordination on financial regulation would be especially important at a time when markets have been roiled by the U.S. credit crisis.

Prime Minister Gordon Brown visited Beijing in January and said Britain welcomed investment by China's government fund.

That was a break with other Western officials who have expressed concern that such funds might have political motives and have suggested they should face restrictions.

Brown is trying to promote London as a base for the Chinese fund to make investments in Europe.

Beijing created the fund in September in hopes of getting a better return on its $1.5 trillion in foreign reserves.

It bought a $5 billion stake in Wall Street bank Morgan Stanley in December and says it expects to invest some $60 billion abroad.

Darling said he and Wang agreed on the need to promote free trade and combat what he said was rising protectionist sentiment in some parts of the world, though they gave no details of any possible initiatives.

Britain and other European governments face growing pressure to respond to China's rising trade surplus, which Europe's companies say is threatening to wipe out thousands of jobs in manufacturing, textiles and other industries.

"Slumping TV sales damp Philips 1Q profit"

By ARTHUR MAX, Associated Press

Last updated: 10:12 p.m., Monday, April 14, 2008

AMSTERDAM, Netherlands -- The television age appears to be fading for Philips, the Dutch company that carries a global reputation for its home electronics: Philips' first-quarter profit fell 75 percent.

Sagging TV sales, especially in the United States, dragged down first-quarter profits, as Royal Philips Electronics NV reported net income of $347 million, nearly 20 percent lower than the $433 million analysts had forecast.

Net profit was $1.386 billion in the same period last year -- a quarter boosted by receiving $1.161 billion for part of its stake in Taiwan Semiconductor Manufacturing Co. Ltd.

Chief Financial Officer Pierre-Jean Sivignon said there was stiff competition in the TV market.

"The U.S. remains the black spot, but when we look at the quarter it was tough all across," he said in a conference call.

Philips last week announced that it would license Funai Electric Co. Ltd. of Japan to market the Philips and Magnavox brands in the U.S. and Canada for five years.

Philips is taking a charge of $198 million to cover the cost of the transfer and other steps to make its global supply base more efficient and focus its TV business on the strongest markets, especially in Europe and some developing countries.

But in Europe, where the Philips brand is much stronger than in North America, the company also lost money on TV sales and is unlikely to show a profit for the rest of the year, Sivignon said.

Sivignon said Philips had no immediate plan to license its brands in Europe but was keeping its options open.

For the time being, it is focusing on cost efficiencies for TVs -- a product it has been developing since 1925.

This quarter included a gain of $131 million for the partial sale of LG Display, Philips said.

Shares fell 3 percent to close at $36.78.

Chief Executive Gerard Kleisterlee said the company's performance was strong in other sectors.

"Unfortunately our results are clouded, more than we like, by the adverse situation in our TV business" and lower revenue from license agreements, Kleisterlee said.

Revenue growth came from the company's ultrasound and other imaging equipment and was helped by the acquisition of Respironics Inc., which makes products to help people with sleep disorders.

Comparable sales for the medical division grew 5 percent over the same quarter in 2007, and equipment orders were up by 9 percent, the company reported.

Lighting grew by 3 percent in comparable sales, it said.

Philips is the world's largest maker of light bulbs, and energy-saving devices now make up about half its portfolio of lighting products.

Analyst Jurgen Smits van Oyen of Petercam said the quarterly results were unimpressive, but no cause for excessive concern.

Consumer products were disappointing, but that was balanced by "positive surprises" in health care.

"On balance, we believe the company has released a fairly decent set of results given the economic circumstances," he said.

CEO Kleisterlee said he was confident about Philips' progress in 2008 and that it was on target to meet its 2010 goals to increase earnings per share before interest, taxes and amortization to 10 percent or more.

IF GEORGE W. BUSH CONSIDERS A SCHOOL TEACHER TO BE "HIGHLY QUALIFIED" SIMPLY BECAUSE THE HAVE A BACHELOR'S DEGREE, I WONDER WHAT HE DEEMS TO BE "QUALIFIED", THEN ....

AN EIGHTH GRADE DROP-OUT, PERHAPS, WHO HASN'T A CLUE AT ALL?

"Number of 'highly qualified' teachers increases in NY schools"

Associated Press

Last updated: 5:33 p.m., Monday, April 14, 2008

ALBANY -- State education officials say New York raised the percentage of core academic classes taught by "highly qualified" teachers in all subjects between 2005-2006 and 2006-2007.

The State Education Department says New York City has shown major improvement, with nearly 91 percent of core classes taught by highly qualified teachers in 2006-2007.

That's up from 87 percent in 2005-2006, and 79 percent in 2004-2005.

Science is the subject area still most lacking, with over 16 percent of earth science classes in the state taught by teachers who aren't highly qualified.

The federal No Child Left Behind Act defines highly qualified teachers as teachers who have a bachelor's degree, meet state certification requirements and can prove they know each subject they teach.

"Food costs rising fastest in 17 years"

By ELLEN SIMON, AP Business Writer

Mon Apr 14, 4:10 PM ET

NEW YORK - Steve Tarpin can bake a graham cracker crust in his sleep, but explaining why the price for his Key lime pies went from $20 to $25 required mastering a thornier topic: global economics.

He recently wrote a letter to his customers and posted it near the cash register listing the factors — dairy prices driven higher by conglomerates buying up milk supplies, heat waves in Europe and California, demand from emerging markets and the weak dollar.

The owner of Steve's Authentic Key Lime Pies in Brooklyn said he didn't want customers thinking he was "jacking up prices because I have a unique product."

"I have to justify it," he said.

The U.S. is wrestling with the worst food inflation in 17 years, and analysts expect new data due on Wednesday to show it's getting worse.

That's putting the squeeze on poor families and forcing bakeries, bagel shops and delis to explain price increases to their customers.

U.S. food prices rose 4 percent in 2007, compared with an average 2.5 percent annual rise for the last 15 years, according to the U.S. Department of Agriculture.

And the agency says 2008 could be worse, with a rise of as much as 4.5 percent.

Higher prices for food and energy are again expected to play a leading role in pushing the government's consumer price index higher for March.

Analysts are forecasting that Wednesday's Department of Labor report will show the Consumer Price Index rose at a 4 percent annual rate in the first three months of the year, up from last year's overall rise of 2.8 percent.

For the U.S. poor, any increase in food costs sets up an either-or equation: Give something up to pay for food.

"I was talking to people who make $9 an hour, talking about how they might save $5 a week," said Kathleen DiChiara, president and CEO of the Community FoodBank of New Jersey.

"They really felt they couldn't."

"That was before."

"Now, they have to."

For some, that means adding an extra cup of water to their soup, watering down their milk, or giving their children soda because it's cheaper than milk, DiChiara said.

U.S. households still spend a smaller chunk of their expenses for foods than in any other country — 7.2 percent in 2006, according to the USDA.

By contrast, the figure was 22 percent in Poland and more than 40 percent in Egypt and Vietnam.

In Bangladesh, economists estimate 30 million of the country's 150 million people could be going hungry.

Haiti's prime minister was ousted over the weekend following food riots there.

Still, the higher U.S. prices seem eye-popping after years of low inflation.

Eggs cost 25 percent more in February than they did a year ago, according to the USDA.

Milk and other dairy products jumped 13 percent, chicken and other poultry nearly 7 percent.

USDA economist Ephraim Leibtag explained the jumps in a recent presentation to the Food Marketing Institute, starting with the factors everyone knows about: sharply higher commodity costs for wheat, corn, soybeans and milk, plus higher energy and transportation costs.

The other reasons are more complex.

Rapid economic growth in China and India has increased demand for meat there, and exports of U.S. products, such as corn, have set records as the weak dollar has made them cheaper.

That's lowered the supply of corn available for sale in the U.S., raising prices here.

Ethanol production has also diverted corn from dinner tables and into fuel tanks.

Soybean prices have gone up as farmers switched more of their acreage to corn.

Drought in Australia has even affected the price of bread, as it led to tighter global wheat supplies.

The jump has left people in the food business to do their own explaining.

Twin Cafe Caterers in lower Manhattan posted a letter on its deli cooler: "Due to the huge increase of the gas, the electricity, the water and all the other utilities, we had to raise the prices a little bit."

It went on to say that all its food prices have risen, too.

Wonder Bagels, in Jersey City, N.J., posted a letter from its wheat supplier, A. Oliveri & Sons, saying the recent situation was unprecedented.

"The major mills across the country are using words like 'rationing' and 'shortages' if things continue," it said.

"We will sweat out the summer together, hoping there will be some flour left to purchase at any price."

The letter called for an immediate halt to exports and a change in farm policy, "stop paying farmers NOT to grow crops."

A new farm bill, stalled in Congress, would expand farm subsidies if it passes, however.

For some Americans, the resulting increases might be barely perceptible.

The Cheesecake Factory raised prices by 1.5 percent at the end of February, Applebee's by 3 percent.

But for the poorest U.S. families, the higher costs may mean going hungry.

A family of four is eligible for a maximum $542 a month in food stamps, which never lasted the whole month before, Food Bank of New Jersey's DiChiara said.

"Now food stamps go fewer and fewer days of the month," she said.

The Food Bank recently got a letter of its own from a key vendor.

Its grim message: Sorry, but the prices they charge the Food Bank would be increasing 20 percent, due to food inflation.

"Stocks rise in erratic trading after economic, earnings data - Wall Street advances after gains in inflation, recovery in NY manufacturing, mixed earnings"

By MADLEN READ, Associated Press

Last updated: 5:42 p.m., Tuesday, April 15, 2008

NEW YORK -- Wall Street closed an erratic session moderately higher Tuesday after investors sorted through a mixed batch of data that included a rebound in New York manufacturing, signs of rising inflation and uneven first-quarter earnings.

The market also had its eye on the rising price of crude oil.

Following a spate of disappointing readings on the economy, investors were pleased that the New York Federal Reserve reported regional manufacturing expanded modestly in April, after shrinking at a record clip in March.

The market had expected another contraction.

And in a positive sign for earnings, health care products maker Johnson & Johnson said its first-quarter profit jumped 40 percent on rising sales and declining costs.

Results from the maker of consumer staples ranging from baby shampoo to pharmaceuticals came as a relief to investors, who have been unimpressed by most first-quarter earnings so far.

Still, the market remains anxious about inflation.

As crude oil prices surged to a record $114 a barrel, and retail gasoline and diesel prices reached new highs, the Labor Department's Producer Price Index registered a much higher-than-anticipated 1.1 percent rise for March.

The core index, which strips out food and energy prices, rose by 0.2 percent, as expected.

Core producer price increases have slowed over the past three months, so most investors are not too worried that inflation will keep the Federal Reserve from lowering interest rates again if the economy weakens further.

However, food and energy prices keep soaring, so consumers have been paring back their discretionary spending to afford necessities -- and that is hurting some corporate profits.

"My guess is people are still really concerned about the inflation impact down the road."

"If oil stays where it is, it's going to be a problem," said Philip S. Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis.

The Dow Jones industrial average closed up 60.41, or 0.49 percent, at 12,362.47.

Broader stock indicators also advanced.

The Standard & Poor's 500 index rose 6.11, or 0.46 percent, to 1,334.43, while the Nasdaq composite index added 10.22, or 0.45 percent, to 2,286.04.

Bond prices fell in response to the inflation and manufacturing news.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.57 percent from 3.51 percent late Monday.

The yield rose to 3.60 percent in after-hours trading.

High oil prices are one reason Wall Street is pessimistic about the airline industry.

Delta Air Lines Inc.'s and Northwest Airlines Corp.'s combination to create the world's largest carrier weighed on the stock market Tuesday, with investors uneasy about the all-stock deal.

Delta fell $1.46, or 14 percent, to $9.02, while Northwest fell $1.121, or 10 percent, to $10.10.

Johnson & Johnson slipped 9 cents to $65.65, but the company's earnings were a refreshing surprise for the market, RBC's Dow said.

And despite everything that has happened this year with the global financial system and the economy, he added, the stock market has not fallen a full 20 percent from its highs last year, the traditional indication of a bear market.

"There's no shortage of things to worry about, but it seems to me that most people in equities have thought about selling or have sold."

"There's a much larger population that's sold than not," Dow said.

"It's a time when if you're willing to be patient, there are some pretty attractive valuations right now."

Banks are looking particularly cheap.

On Tuesday, a mild recovery in financial stocks, including Citigroup Inc. and JPMorgan Chase & Co., after a string of down days for the banks, helped lift the broader stock market.

"Financials have stabilized today, which is a good thing," said Todd Leone, managing director of equity trading at Cowen & Co.

"They've been backing and filling."

"I wouldn't say the worst is over with these stocks, but I think they've become more transparent."

JPMorgan releases its first-quarter results on Wednesday, Citigroup reports Friday, and Bank of America Corp. reports next week.

JPMorgan rose 62 cents to $42.12; Citi added 29 cents to $22.80; and BofA ended unchanged at $35.58.

Overall, Tuesday's trading was fairly quiet, with investors cautious about making big bets ahead of earnings later this week and next.

"There's no real prevailing theme to the market right now," Leone said.

"They're waiting for a whole slew of earnings."

Gold prices rose, while the dollar fell against other major currencies.

The Russell 2000 index of smaller companies rose 5.99, or 0.87 percent, to 692.06.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where consolidated volume came to 3.49 billion shares, compared to 3.59 billion shares on Monday.

Overseas, Japan's Nikkei stock average rose 0.77 percent.

Britain's FTSE 100 rose 1.29 percent, Germany's DAX index rose 0.47 percent, and France's CAC-40 rose 0.30 percent.

----------

On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

"Washington Mutual swings to 1Q loss on $3.5B provision - Washington Mutual swings to $1.1 billion loss in 1st quarter as bad loan provision doubles"

Associated Press

Last updated: 5:12 p.m., Tuesday, April 15, 2008

NEW YORK -- Washington Mutual says it lost more than $1 billion in the first quarter as the struggling economy and flagging real estate values pummeled the bank's borrowers.

The Seattle-based bank lost more than $1.1 billion, or $1.40 per share, compared with a profit of $784 million, or 86 cents per share, in the first quarter a year earlier.

Washington Mutual, which last week estimated a loss of about $1.1 billion for the quarter, says it needed to set aside $3.5 billion to cover bad loans in its $250 billion portfolio during the period.

The bank set aside less than half as much to cover bad loans in the year-ago period.

With the housing market suffering and the economy slowing, more consumers are missing payments on their bills, Washington Mutual says.

AND THE BEAT GOES ON ....

"Crude oil at new high just above $114; gas also at a record"

By ADAM SCHRECK, Associated Press

Last updated: 5:32 p.m., Tuesday, April 15, 2008

NEW YORK -- Energy traders rewrote the record books again Tuesday, pushing oil futures past $114 a barrel as gasoline and diesel prices struck new highs of their own at the pump.

Light, sweet crude for May delivery jumped as high as $114.08 a barrel shortly after regular trading ended on the New York Mercantile Exchange.

That is nearly $2 above an intraday high set last week.

Concerns about insufficient global supply, stoked by a high-profile report by the International Energy Agency that said Russian oil production dropped this year for the first time in a decade, was largely responsible for the surge.

Oil prices rose as high as $113.99 a barrel during the regular session before settling at $113.79, up $2.03 from Monday's record close of $111.76 a barrel.

"In an emotionally driven market like we've got now, it just doesn't take much in the way of a headline to prompt a psychological response," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill.

Prices at the pump also charged ahead.

Retail gasoline prices rose to a new average national record of $3.386, according to AAA and the Oil Price Information Service.

Prices were highest in California, where mid-range and higher grades are now averaging more than $4 a gallon.

Diesel prices at the pump jumped to $4.119 a gallon, also a record, setting the stage for even higher prices on food and other goods transported by truck, ship and rail.

Prices are widely expected to keep rising as summer approaches.

Gasoline futures jumped by nearly 6 cents to finish at a settlement record of $2.881.

That is less than a nickel below the all-time intraday high for the benchmark contract that was set as Hurricane Katrina made landfall in 2005.

"Unfortunately, we do expect the price of gasoline, and probably diesel as well, are going to escalate as long as the price of oil keeps moving higher," said Geoff Sundstrom, a fuel price analyst for AAA.

Oil's recent run above $100 a barrel has been largely attributed to a steadily depreciating dollar, because the weakness prompts investors to seek a safe haven in hard commodities such as oil and gold.

The greenback strengthened marginally against the euro Tuesday afternoon, but still remains near all-time lows against the 15-nation currency.

The oil report from the IEA -- the Paris-based energy watchdog for industrialized countries -- said Russia, the world's biggest oil exporter after Saudi Arabia, averaged 10 million barrels per day from January through March, down 1 percent from 2007.

That is the first time production has failed to exceed previous-year figures since 1998.

Artyom Konchin, an analyst with Russian investment bank Aton Capital, attributed Russia's oil supply lull to high taxes and insufficient reinvestment into infrastructure.

"It's not that we don't have enough oil," he said.

"We just don't have enough capital going into developing the fields."

Crude prices were also supported by reports of a number of supply disruptions.

Attracting the most attention was the closure of Mexico's three main oil-exporting ports on the Gulf Coast because of bad weather starting Sunday.

Only one of the ports remained closed Tuesday, according to Mexico's Communications and Transportation Department.

The department issued a bulletin Tuesday morning that the Pacific oil port of Salina Cruz also had been closed because of strong wind and high waves, although that terminal is not a major supplier for the U.S.

"It just shows you how fragile the oil markets are," Sundstrom said.

In other Nymex trading, heating oil futures surged by 7.1 cents to settle at $3.2739 gallon, while natural gas futures spiked 15.2 cents to settle at $10.212 per 1,000 cubic feet.

In London, May Brent crude rose $1.47 to settle at $111.31 on the ICE Futures exchange.

------

Associated Press Writers George Jahn in Vienna, Austria, Gillian Wong in Singapore, and Jessica Bernstein-Wax in Mexico City contributed to this report.

"Intel 1Q profit meets subdued forecasts, revenue hits record - Intel 1Q profit matches Wall Street's subdued forecast in sign core business remains healthy"

By JORDAN ROBERTSON, Associated Press

Last updated: 6:42 p.m., Tuesday, April 15, 2008

SAN FRANCISCO -- Intel Corp.'s first-quarter profit matched Wall Street's subdued expectations, a sign the company's core microprocessor business remained healthy amid fears of a broader slowdown in technology spending.

The stock jumped about 7 percent in after-hours trading Tuesday after the technology bellwether forecast higher profit margins in the second quarter and signaled that it is thriving while its smaller rival, Advanced Micro Devices Inc., continues to stumble.

Santa Clara-based Intel said Tuesday that its net profit for the three months ended March 29 was $1.44 billion, or 25 cents per share.

That represents a 12 percent decline from the year-ago period, when Intel earned $1.64 billion or 28 cents per share.

But it was in line with the average estimate of analysts polled by Thomson Financial.

Intel's sales of $9.67 billion -- a 9 percent improvement over last year and a record for the first quarter -- came in slightly higher than Wall Street's estimate of $9.63 billion.

Intel's chief financial officer, Stacy Smith, said the results reflect the company's ability to overcome slumping prices in some segments of the semiconductor market with a new chip-making process that lowers the manufacturing costs for each chip.

"What we're seeing is the strength of the core business is offsetting that weakness," he said in an interview.

Intel warned in March that a steeper-than-expected drop in prices for a type of memory chip called NAND flash -- commonly used in digital cameras and MP3 players -- hurt profits more than anticipated.

Analysts lowered their estimates.

Memory chip prices have been under pressure because of oversupply and fierce competition, a trend that has cut deeply into the profits of companies like Samsung Electronics Co., the world's largest memory chip maker.

It was a surprise that Intel, whose primary business is making microprocessors -- a different type of chip that acts as the brain of personal computers and servers -- was hurt so badly.

Intel is the world's No. 1 maker of microprocessors with about three-quarters of the worldwide market.

AMD, which has been dragging under the weight of heavy acquisition costs and fierce competition, is No. 2.

Intel began making NAND flash in 2006 under a joint venture with Micron Technology Inc. to cash in on growing demand for the most popular type of memory for consumer electronics, a move that some analysts now say was ill-timed considering the price plunge for those chips.

Intel Chief Executive Paul Otellini said the joint venture is rethinking how much factory space it wants to devote to making NAND flash and has delayed construction on its new factory in Singapore for the memory chips as a result.

He added that economic jitters didn't appear to have harmed Intel in its major markets during the latest quarter.

Microprocessor prices were flat in the first quarter and unit sales declined from the fourth quarter.

Smith said those results were in line with seasonal trends in the semiconductor industry.

The company forecast second-quarter sales of between $9 billion and $9.6 billion, which was in line with analyst expectation.

Intel's gross profit margin -- a key measure of its ability to control the cost of making its chips -- is expected to be 56 percent, plus or minus a couple percentage points, higher than the gross profit margin of 53.8 percent in the first quarter.

Intel and AMD have both been hurt by their intensifying competition.

AMD is scheduled to report first-quarter results Thursday.

The Sunnyvale-based company warned last week that sales across all business units were lower than expected and that it plans to cut 10 percent of its global work force, or about 1,600 workers.

Analysts are expecting a loss of 51 cents per share on $1.51 billion in sales.

Intel finished cutting about 10,500 workers, or 10 percent of its own work force, last year in a move to shore up profits amid fierce competition with AMD.

Intel shares rose $1.51, or more than 7 percent, to $22.42 in after-hours trading.

They closed Tuesday up 22 cents at $20.91 before the results were released.

"Lehman CEO Fuld says worst of credit crisis behind Wall St. - Lehman Brothers CEO joins other top bankers in saying worst over, yet market still challenging"

By JOE BEL BRUNO, Associated Press

Last updated: 5:32 p.m., Tuesday, April 15, 2008

NEW YORK -- Lehman Brothers Holdings Inc. Chief Executive Richard Fuld joined a growing chorus of investment bank executives in saying on Tuesday that the worst of the credit crisis is behind Wall Street.

Fuld, speaking at the investment bank's annual shareholder meeting, said that credit markets have begun to ease but still believes the environment "will remain challenging."

Steep losses tied to mortgage-backed securities has cost the world's biggest banks and brokerage about $200 billion since last year.

Similar comments came last week from two other investment bank CEOs -- Goldman Sachs Group Inc.'s Lloyd Blankfein and Morgan Stanley's John Mack.

Both said during shareholder meetings that Wall Street is closer to the end of the crisis, and that it might last a few more quarters.

Lehman Brothers, the nation's fourth-largest investment bank, raised about $4 billion from a stock sale earlier this month to help boost capital levels.

The securities firm also announced in a regulatory filing on April 9 that it liquidated three funds with assets of about $1 billion during the first quarter because of "market disruptions."

There had been concerns that other investment banks might be having financial problems after Bear Stearns Cos. nearly collapsed in March.

The Federal Reserve later engineered a bailout for Bear Stearns by helping the company be sold to JPMorgan Chase & Co.

Lehman has avoided major losses compared to its larger rivals.

Investors might get a better glimpse about the state of the credit markets with first-quarter earnings reports expected from JPMorgan on Wednesday, Merrill Lynch & Co. on Thursday and Citigroup Inc. on Friday.

Shares in Lehman rose 29 cents to $39.67 Tuesday, and are down about 40 percent for the year.

"Schwab posts its best 1Q ever, lands 246,000 new accounts - Charles Schwab's 1Q profit up 12 percent as brokerage gets off to best start in its history"

By MICHAEL LIEDTKE, Associated Press

Last updated: 5:22 p.m., Tuesday, April 15, 2008

SAN FRANCISCO -- Charles Schwab Corp.'s first-quarter profit rose 12 percent to catapult the discount stock brokerage to the most prosperous start in its history, providing a glimmer of good news amid the gloom hanging over the financial sector.

The San Francisco-based company said Tuesday that it earned $305 million, or 26 cents per share during the first three months of the year.

That compared with net income of $273 million, or 22 cents per share, in last year's first quarter.

The results topped the first-quarter of 2000, when a soaring stock market lifted the company to a record $284 million profit.

"No one will confuse those market conditions with today's," Joe Martinetto, Schwab's chief financial officer, said during an interview.

The results met expectations among analysts surveyed by Thomson Financial.

Revenue during the period climbed 13 percent to $1.31 billion from $1.15 billion.

Schwab shares rose $1.64, or nearly 9 percent, to finish Tuesday at $19.95.

Schwab's stock price nevertheless remains down by 22 percent this year, reflecting persistent concerns over a faltering economy.

Schwab so far has managed to dodge most of the shaky mortgage investments that have dragged down peers, helping to bolster customer confidence.

More than $41 billion flowed into Schwab during the first quarter, a record for any three-month period except the first quarter of 2000 that preceded the dot-com bust.

As of March, Schwab's customers had investments and deposits totaling $1.39 trillion.

That was down 4 percent from $1.45 trillion in December, partly because the tumbling stock market took a bite out of customers' investment portfolios.

Despite market turbulence, Schwab opened 246,000 brokerage accounts in the first quarter -- the most in nearly seven years.

"Charles Schwab continues to fire on all cylinders," said industry analyst Robert Ellis of Celent.

Ellis believes Schwab is luring customers away from some of its rivals, particularly E-Trade Financial Corp., which has been staggered under its exposure to toxic mortgage markets.

Schwab's own bank isn't shying away from the battered real estate market.

The company closed more than $1 billion in home loans during the first quarter, increasing its total mortgages and home equity loans to $3.9 billion, up 61 percent from last year.

Although Marinetto said there are no signs of trouble in Schwab's home loan portfolio, the company already has been sullied by the mortgage mess.

Schwab YieldPlus, a mutual fund marketed as a more lucrative alternative to money market accounts, invested a large chunk of its assets in mortgage-backed securities, which began to crumble last summer.

The unexpected losses in Schwab YieldPlus prompted investors to start bailing early, which forced money managers to sell some of their holdings at sharply discounted prices.

The fund's assets shriveled from nearly $14 billion last summer to less than $1.5 billion earlier this month.

Schwab YieldPlus now ranks as the nation's worst-performing "ultra-short" bond fund, according to the research firm Morningstar.

A lawsuit has since been filed on behalf of Schwab customers who allege they were misled about the fund's safety.

Martinetto declined to comment on the case Tuesday.

"New 'best practices' urged for giant hedge funds - Hedge fund managers urged to improve procedures in areas such as transparency, risk management"

By MARTIN CRUTSINGER, Associated Press

Last updated: 5:12 p.m., Tuesday, April 15, 2008

WASHINGTON -- Managers of hedge funds would have to improve the operating procedures of the giant pools of capital in such areas as transparency and risk management under new proposals offered Tuesday.

Two advisory groups assembled by the Bush administration proposed new "best practices" for the hedge fund industry, but a leading critic attacked the effort as falling far short of the mandatory government regulations that are needed.

One set of the recommendations was prepared by hedge fund managers and the other was put together by investors who use the funds.

Treasury Secretary Henry Paulson said the recommendations would send "a strong message that heightened vigilance is necessary and appropriate and that all stakeholders have an important role to play."

However, Richard Blumenthal, attorney general of Connecticut, the home for many hedge funds, said the voluntary guidelines were a "virtual farce" that would do little to halt abuses in an industry that has seen explosive growth with assets now close to $2 trillion in an estimated 8,000 funds.

"Hedge funds have become too big and too important to remain outside the rules," Blumenthal said in a statement.

"Instead of voluntary guidelines, the federal government should set specific, common sense rules and provide for federal and state enforcement."

The release of the guidelines comes at a time when a severe credit crisis has roiled financial markets with many large banks and investment houses being forced to declare billions of dollars in losses.

Hedge funds have been caught up in the turmoil as investors have grown worried about the solvency of funds that invested heavily in securities backed by subprime mortgages, where delinquencies have hit record levels.

Hedge funds, which operate with little government supervision, cater to institutional investors and very wealthy individuals.

However, millions of ordinary people have also become unwitting investors in the funds through their pension plans.

In early 2007, a presidential working group headed by Paulson rejected the idea that the funds needed increased regulation and said what was needed was improved voluntary standards for both fund managers and investors.

In unveiling the recommendations of the advisory groups on Tuesday, Paulson said the administration was not endorsing the status quo but rather pushing for improvements that would keep U.S. financial markets competitive in a global economy.

Sen. Charles Schumer, D-N.Y., a key voice on financial matters in the Senate, said that Congress was just beginning to examine what needs to be done in the wake of the severe credit crisis but "in the interim these best practices should strengthen the hedge fund industry and provide investors and regulators with better information."

The credit crisis claimed its biggest victim last month with the near-collapse of Bear Stearns, the country's fifth largest investment bank, which was taken over by JP Morgan Chase & Co. in a deal in which the Federal Reserve provided a $30 billion loan.

Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said in an interview with The Associated Press on Tuesday, that he expected Congress -- not this year -- but in the future to revamp financial regulations to better keep pace with financial innovations such as the growth in hedge funds.

The set of guidelines for investors was drawn up by an advisory panel headed by Russell Read, the chief investment officer of the California Public Employees' Retirement System (CalPERS), the largest pension fund in the United States.

The other set of recommendations for hedge fund operations was draw up by an advisory panel headed by Eric Mindich, the head of Eton Park Capital Management, a large hedge fund.

Mindich said in an interview with The AP that the effort was intended to "raise the bar" for the industry.

He said the proposals could be modified based on comments received during an upcoming 60-day comment period.

In a spectacular hedge fund failure, Amaranth Advisors lost $6 billion in the fall of 2006 because of bad bets on natural gas prices.

Read told reporters at a briefing that Amaranth was the "poster child" for what the advisory groups were trying to guard against by proposing a set of best practices.

"I think this represents a coming of age for the hedge fund industry," Read said.

------

Associated Press writers Marcy Gordon and Jeannine Aversa contributed to this report.

"Agriculture futures mostly up after Kazhakstan bans exports - Agriculture prices mostly rise after Kazakhstan bans exports to curb inflation; oil near $114"

By STEVENSON JACOBS, Associated Press

Last updated: 5:02 p.m., Tuesday, April 15, 2008

NEW YORK -- Agriculture futures mostly rose Tuesday after Kazakhstan banned wheat exports to help ease spiraling food inflation in the Central Asian nation, in the process adding to global supply concerns.

Other commodities traded mostly higher, with crude oil rising to a record past $114 and gold and silver also gaining.

Kazakhstan announced Tuesday it will suspend wheat exports until Sept. 1, following similar attempts by Russia, Ukraine and Argentina to curb rising domestic food prices that have burdened consumers and stirred unrest in poor countries.

Kazakhstan, the world's fifth largest wheat exporter, produces 20 million tons of wheat per year, with about two-thirds destined for overseas markets.

"There's a searing desire by governments to hold down this food inflation spiral, and one way to do that is not letting any more wheat flow out of the country," said Roy Huckabay, executive vice president for the Linn Group in Chicago.

"Argentina still has exports banned, Ukraine has limited exports and now Kazakhstan is doing the same, so that's all drawing the wheat trade higher."

Wheat for May delivery jumped as high as $9.16 a bushel on the Chicago Board of Trade before easing back on profit-taking to settle at $8.9575, down 0.25 cent.

It was wheat's highest trading level in more than a week, although the grain remains well below its all-time high of $13.495, reached Feb. 27.

Other commodities traded higher.

Corn and soybean futures jumped on concerns that more cold, wet weather in the U.S. corn belt will prolong delays in spring planting and add to supply concerns.

"Corn has a fundamental problem of too few acres."

"You're not getting them planted fast enough," Huckabay said.

Corn for May delivery added 14.25 cents to settle at $6.06 a bushel on the CBOT, while May soybeans rose 7.5 cents to settle at $13.80 a bushel.

In energy futures, crude oil jumped to a record past $114 a barrel after the dollar tumbled and new data raised concerns about global supplies.

An International Energy Agency report said Russian oil production fell this year for the first time in a decade, raising questions about whether the oil-producing nation has the capacity to help meet increasing global demand.

Light, sweet crude for May delivery traded as high as $114.08 in after-market trading on the New York Mercantile Exchange.

During the regular session, the contract had gained $2.03 to settle at $113.86 a barrel after reaching a record trading price of $113.99.

Other energy futures also rose.

May gasoline added nearly 6 cents to finish at a settlement record of $2.881 a gallon, while May heating oil futures jumped 7.1 cents to settle at $3.2739 a gallon.

In precious metals, gold rose for a second session after the dollar weakened, enhancing its appeal as a safe-haven investment during times of rising inflation.

Gold for June delivery added $3.30 to settle at $932 an ounce on the Nymex, after earlier rising as high as $939.80 an ounce.

Othe precious metals traded mixed.

Silver for May delivery rose 6 cents to settle at $17.85 an ounce on the Nymex, while May copper fell 3.75 cents to settle at $3.859 a pound.

"Treasurys fall following reports on inflation, manufacturing - Treasury prices fall after report shows jump in inflation, NY regional manufacturing gains"

By TIM PARADIS, Associated Press

Last updated: 5:52 p.m., Tuesday, April 15, 2008

NEW YORK -- Long-term bond prices fell sharply Tuesday following a jump in wholesale prices and a better-than-expected report on regional manufacturing.

Inflation at the wholesale level increased at almost triple the rate that had been expected.

Rising costs for energy and food helped propel the Labor Department's Producer Price Index to a 1.1 percent increase; analysts had been expecting a rise of 0.4 percent.

The so-called core figure, which excludes often-volatile food and energy costs, increased by 0.2 percent, as had been expected.

That report stirred concerns about inflation, which eats into fixed-income returns and makes bonds less attractive over the long term.

The market's greatest losses came on longer-term maturities, since they are the most vulnerable to rising prices across the economy.

The New York Federal Reserve's regional survey that manufacturing stabilized in April after falling in February and March made some investors less cautious, curbing demand for the safety of government debt.

The Fed branch said its index of general business conditions rose sharply to 0.6.

Economists, on average, had expected manufacturing would show further contraction.

"Overall PPI is now near its highest level since the early 1980s," said T.J. Marta, fixed-income analyst at RBC Capital Markets.

"At the same time we also had an Empire Manufacturing report that was much greater than expected."

"They both would argue for higher yields."

The benchmark 10-year Treasury note fell 20/32 to 99 9/32 and yielded 3.59 percent, up from 3.51 late Monday, according to BGCantor Market Data.

Prices and yields tend to move in opposite directions.

The 30-year long bond fell 1 1/32 to 99 2/32 and yielded 4.43 percent, up from 4.35 percent late Monday.

The 2-year note fell 5/32 to 99 26/32 with a yield of 1.85 percent, up from 1.75 percent.

The 3-month Treasury bill's yield was at 1.16 percent, up from 1.10 percent late Monday, while its discount rate was at 1.14 percent.

Prices fell slightly in late trading, the 10-year yield rose to 3.60 percent, the 30-year yield rose to 4.45 percent and the 2-year yield rose to 1.86 percent.

Losses in Treasurys were probably exacerbated somewhat by a rally on Wall Street.

Stock prices fluctuated in erratic trading as investors sorted through the mix of economic numbers, but turned higher in the afternoon.

That lessened some of bonds' appeal as a safe haven; Treasurys have had a huge rally in recent months in response to the volatility in the equity markets.

"Wholesale prices soared in March - Wholesale prices soared 1.1 percent in March, nearly triple the rate analysts had anticipated"

By MARTIN CRUTSINGER, Associated Press

Last updated: 6:32 p.m., Tuesday, April 15, 2008

WASHINGTON -- Inflation at the wholesale level soared in March at nearly triple the rate that had been forecast as energy prices kept rising and food costs posted a much bigger jump than anticipated.

The Labor Department reported Tuesday that wholesale prices rose by 1.1 percent last month, the largest increase since a 2.6 percent rise last November.

The November gain in the Producer Price Index was the biggest one-month jump in 33 years.

Analysts had expected a much more moderate 0.4 percent rise in wholesale prices for the month.

However, food costs, which had fallen by 0.5 percent in February, leapt by 1.2 percent last month, propelled upward by big gains in vegetables and beef and the biggest increase in rice prices in more than five years.

Those were far higher increases in food prices than expected.

Core inflation, which excludes energy and food, was better behaved last month, rising by just 0.2 percent, down from a worrisome 0.5 percent rise in February.

But with the crude oil price rising to a record close of $113.79 per barrel on Tuesday, analysts said consumers should be braced for more bad inflation news to come.

"Wholesale prices are rising and the consumer should expect more shocks at the supermarket and the gas station," said Joel Naroff, chief economist at Naroff Economic Advisors.

The surge in energy and food costs is coming just as unemployment is rising and many economists believe the country has fallen into a recession, developments that have taken a toll on President Bush's approval ratings.

Seven out of 10 Americans now disapprove of Bush's handling of the economy, an all-time high, according to the latest Washington Post-ABC News poll.

Democrats, hoping to win the White House in November, said the string of bad economic statistics showed how Americans were hurting.

"As the paychecks of middle class families get smaller and their homes lose value, their wallets are being further emptied by the skyrocketing everyday costs of gas and food," said Sen. Charles Schumer, D-N.Y.

On Wall Street, stocks climbed higher as investors were encouraged by a report showing a modest rebound in manufacturing in the New York region.

The Dow Jones industrial average rose 60.41 points to close at 12,362.47.

For the past 12 months, wholesale prices are up by 6.9 percent and core inflation is up by 2.7 percent, the biggest year-over-year increase in nearly two years.

With the economy slowing and inflation rising, some analysts are concerned the country could be facing another bout of stagflation, the malady that last occurred in the 1970s when economic growth stagnated but inflation kept rising.

Such a development would put the Federal Reserve in a bind.

The central bank has been cutting interest rates to combat the current slowdown, but if inflation pressures keep rising, it might be forced to stop cutting interest rates for fear that it would make inflation worse.

For March, energy prices jumped 2.9 percent, the biggest increase since November.

The price of gasoline was up 1.3 percent while natural gas rose by 4.2 percent.

Home heating oil shot up by 13.1 percent and diesel fuel, used to power the nation's trucking fleet, increased by 15.3 percent.

Outside of food and energy, the price of soap and detergent jumped 2 percent, the biggest gain in more than two years, while pet food increased by 1.3 percent.

However, the price of new cars dropped by 0.2 percent and the cost of light trucks was down 0.3 percent, indicating the struggles automakers face as a weak economy dampens demand.

The government will report on consumer prices Wednesday.

Analysts said they still expect this report would show a moderate increase of 0.3 percent.

"Earnings estimates may be wishful thinking - Earnings estimates for 2008 stay high, despite economic headwinds"

By RACHEL BECK, Associated Press

Last updated: 1:12 p.m., Tuesday, April 15, 2008

NEW YORK -- If we use analysts' estimates for corporate earnings to gauge the economy's health, we all should be ready to celebrate better times by the end of the year.

Look at their forecasts for the second half of 2008: Profit gains for Standard & Poor's 500 companies in the third quarter are expected to top 14 percent and the fourth quarter could bring a year-over-year surge of 55 percent.

That sure sounds like a happier economic world than the one we are living in right now.

It also sounds like wishful thinking, so don't break out the champagne yet.

General Electric Co.'s massive profit miss on Friday should be reason enough to be wary about optimistic views for the rest of this year.

The conglomerate, which is considered a proxy for the overall economy, reported first-quarter earnings per share from continuing operations of 44 cents compared with analysts' estimates of 51 cents.

The earnings miss shows how the credit crisis and global economic downturn aren't just hurting financial businesses, but have infected health care and consumer products, too.

The Fairfield, Conn.-based GE, which typically hits its earnings targets, also revised its earnings outlook for the year to a gain of no more than 5 percent, down from double-digit projections a month ago.

"We assume the economy is going to be very tough and remain very tough," GE CEO Jeffrey Immelt said during a conference call with analysts.

GE isn't alone.

In recent days, Alcoa Inc. and Wachovia Corp.'s results both came in below expectations, while UPS Inc. and J.C. Penney Co. revised their first-quarter outlooks down significantly.

It's possible that analysts' estimates may be way off for the first quarter, even though they've been revising them down for months.

Back on Jan. 4, analysts were forecasting a year-over-year 4.7 percent gain in S&P 500 earnings.

By Feb. 15, that turned negative, with a 1.4 percent decline expected.

A month later, that was extended to a 7.8 percent fall and at the end of March, it tumbled to a 9.9 percent pullback, according to Citigroup.

The percentage of companies beating earnings estimates -- which Bespoke Investment Group says is a gauge of the market's health -- has been on the decline since the third quarter of last year.

In the fourth quarter, about 60 percent of companies topped analysts' estimates, still well above the 50 percent level seen during the bear market of 2001 and 2002, according to Bespoke.

But that "beat" rate could drop if analysts' estimates stay high, despite no evidence that the economy has or will soon turn it course.

Federal Reserve Chairman Ben Bernanke recently acknowledged for the first time that a recession was possible.

Most economists believe growth contracted in the first three months of this year and will continue on that path due to the slump in housing and the pullback in consumer spending.

This isn't just a U.S.-centric problem.

The global economic landscape is also fragile, prompting the International Monetary Fund to issue a sobering new forecast last week that greatly raised the odds of a worldwide economic slump.

What's troublesome to Citigroup's chief U.S. equity strategist Tobias Levkovich is that industrial production will begin to wane later this year because banks have tightened credit standards considerably on commercial and industrial loans.

He also has been tracking the narrowing difference between small firms' plans to raise prices and their pricing intentions -- which tends to lead corporate profit margin trends by about two years.

Given that data, Levkovich sees some crimping of profit margins after the middle of this year.

Still, analysts' estimates remain high, and the blame for that could go to the companies themselves, which typically guide analysts on what their performance will look like.

James Montier, who heads global strategy equity research at Societe General in London, thinks some companies maybe spinning things to make them seem better than they really are.

And analysts have been "asleep at the wheel" in challenging those views, only doing so when there is "irrefutable proof" they were wrong.

"The analysts all acknowledge the sense of lowering forecasts in aggregate."

"However, when they discuss such a move with the companies they cover, the companies' response is that it won't happen to them," Montier said in a note to clients.

"This creates a fallacy of composition problem in which all the analysts think 'their' stocks are immune from the influence of this cycle."

That disconnect is clear in the latest Duke University's Fuqua School of Business/CFO Magazine Business Outlook survey.

It showed 72 percent of the 475 chief financial officers who responded were less optimistic about the U.S. economy in March than they were in December, but only 38 percent are less optimistic about their own companies' performance.

Maybe they think that their companies are insulated from the current downturn.

GE's CEO thought the same, too.

Now he knows better.

------

Rachel Beck is the national business columnist for The Associated Press. Write to her at rbeck(at)ap.org

"Bombings kill nearly 60 people in Sunni areas of Iraq; US blames al-Qaida"

By KIM GAMEL, Associated Press

Last updated: 6:52 p.m., Tuesday, April 15, 2008

BAGHDAD -- Bombings blamed on al-Qaida in Iraq tore through market areas in Baghdad and outside the capital on Tuesday, killing nearly 60 people and shattering weeks of relative calm in Sunni-dominated areas.

The bloodshed -- in four cities as far north as Mosul and as far west as Ramadi -- struck directly at U.S. claims that the Sunni insurgency is waning and being replaced by Shiite militia violence as a major threat.

The deadliest blasts took place in Baqouba and Ramadi, two cities where the U.S. military has claimed varying degrees of success in getting Sunnis to turn against al-Qaida.

In Baqouba, the Diyala provincial capital 35 miles northeast of the capital, a parked car exploded about 11:30 a.m. in front of a restaurant across the street from the central courthouse and other government offices.

Many of the victims were on their way to the court, at the restaurant or in cars passing through the area.

A man identifying himself as Abu Sarmad had just ordered lunch.

"I heard a big explosion and hot wind threw me from my chair to outside the restaurant," he said from his hospital bed.

The force of the blast jolted the concrete barriers erected along the road to protect the courthouse, witnesses said.

At least 40 people were killed and 70 wounded, according to hospital officials, who spoke on condition of anonymity because they weren't authorized to release the information.

The U.S. military in northern Iraq gave a slightly lower toll, saying 35 Iraqi citizens were killed, including a policeman, and 66 wounded.

It said the blast destroyed three buses and damaged 10 shops.

AP Television News footage showed many of the bodies covered in crisp white sheets and black plastic bags in a hospital courtyard while the emergency room inside was overwhelmed with the wounded.

It was the deadliest bombing in Iraq since March 6, when a twin bombing killed 68 people in a crowded shopping district in the central Baghdad district of Karradah.

The attack was also the deadliest in Baqouba since The Associated Press began tracking Iraqi casualties in late April 2005.

The U.S. military said Tuesday that attacks in Baqouba have dropped noticeably since last June.

But a series of assassinations and other high-profile attacks have occurred in and around the city this year, and American commanders have consistently warned that al-Qaida-led insurgents continue to pose a serious danger.

"Although attacks such as today's event are tragic, it is not indicative of the overall security situation in Baqouba," Maj. Mike Garcia, a spokesman for U.S. forces in Diyala province, said in a statement.

According to an AP count, at least 126 Iraqis have been killed in war-related violence in Baqouba so far in 2008; the majority, 65, were killed in 10 separate bombings.

At least 818 Iraqis were killed in war-related violence in the city last year, up slightly from 793 the year before.

Baqouba and Ramadi were strongholds of al-Qaida in Iraq and saw some of the fiercest fighting of the U.S.-led war until local Sunni tribal leaders fed up with the terror network's brutal tactics joined forces with the U.S. military against it last year.

The Sunni revolt, an influx of some 30,000 American troops and a cease-fire by radical Shiite cleric Muqtada al-Sadr led to a decline in violence there as well as in Baghdad.

In particular, the U.S. military has touted Ramadi as a success story.

The former al-Qaida stronghold, 70 miles west of Baghdad, is the capital of Anbar province and has largely been sealed off by checkpoints.

Tuesday's bombing in Ramadi came about an hour after the Baqouba attack.

A suicide attacker on a motorcycle drove up to a kebab restaurant, went inside and detonated his explosives vest, killing at least 13 people, including three off-duty policemen and two children, and wounding 20, according to police and hospital officials.

Ahmed al-Dulaimi, a 27-year-old mechanic, escaped injury because he was sitting at a back table.

But he said his cousin, who owned the restaurant, was killed.

"Suddenly a motorcycle parked near the restaurant and a man came running in and then a huge explosion took place," al-Dulaimi said.

"Pieces of flesh flew into the air and the roof fell over us."

The blast in central Baghdad also took place shortly after midday.

A parked car bomb targeted a police patrol, killing four civilians who were passing by and wounding 15 other people, police said.

The U.S. military condemned the bombings in Baqouba, Ramadi and Baghdad and said they appeared to have been carried out by al-Qaida in Iraq.

The fourth bombing took place in Mosul, a city 225 miles northwest of Baghdad that the U.S. military has called the last urban stronghold for al-Qaida in Iraq.

At 3:45 p.m., a double car bombing wounded three Iraqi policemen and 15 civilians, the U.S. military said.

Iraqi police Brig. Gen. Khalid Abdul-Satter said the attack killed one civilian was killed and wounded 16 others.

U.S.-allied Sunni fighters have found themselves increasingly targeted by violence and frustrated by a perceived lack of support by the Shiite-dominated government.

The purported leader of the al-Qaida umbrella group, the Islamic State of Iraq, called on those who switched sides to return to the insurgency.

He made his statement in an Internet audiotape posted Tuesday on a militant Web site.

Abu Omar al-Baghdadi, whom the U.S. has described as a fictitious character used to give an Iraqi face to the organization, urged the Sunnis to direct their arms against "the Crusaders and those who support them," using typical militant rhetoric for the United States.

While the Sunni insurgency has recently appeared to wane, the U.S. military has increasingly pointed to Shiite militia violence as one of the greatest threats to Iraq's stability.

On Tuesday, Shiite extremists clashed again with U.S.-Iraqi forces in Baghdad and the oil-rich southern city of Basra.

U.S. soldiers backed by an airstrike killed six militants after a gunbattle broke out in the Sudayrah area, near Baghdad's main Shiite militia stronghold of Sadr City, the military said.

Iraqi police in the area claimed that two boys were among those killed in the airstrike, but the military said no civilian casualties were reported.

In southern Iraq, three aides to Iraq's top Shiite cleric, Grand Ayatollah Ali al-Sistani, escaped assassination in separate attacks Tuesday, although two of them were seriously wounded, police said.

The attacks came four days after a top al-Sadr aide was assassinated in Najaf.

------

Associated Press writers Sameer N. Yacoub and Bushra Juhi in Baghdad, Katya Kratovac in Cairo, Egypt, and the AP News Research Center in New York contributed to this report.

"US, Iraq far apart on security pacts"

By QASSIM ABDUL-ZAHRA, Associated Press

Last updated: 1:22 p.m., Monday, April 14, 2008

BAGHDAD -- U.S. and Iraqi negotiators are far apart over key issues in talks to replace the U.N. mandate that governs American military operations in this country, Iraqi officials said Monday.

Talks began last month on a strategic framework agreement providing for long-term bilateral ties and a separate status of forces pact that spells out the regulations governing U.S. military operations in Iraq.

U.S. Embassy spokeswoman Mirembe Nantongo said the two sides have exchanged "a number of drafts and proposals."

She refused to give details because negotiations continue.

However, Iraqi officials familiar with the discussions said significant differences exist on the major issues of immunity for U.S. personnel and contractors, authority to order raids and attacks and detention of people believed a threat to security.

The officials refused to discuss the differences in detail and spoke on condition of anonymity because they were not supposed to talk about the negotiations.

Those three issues have caused friction in the past between the U.S. military and the Iraqi government.

The Iraqis have from time to time demanded an end to the immunity from prosecution under Iraqi law enjoyed by U.S. soldiers and U.S. government contractors and have criticized U.S. military operations in some populated areas such as the Sadr City district of northeastern Baghdad.

U.S. officials claim authority under the U.N. mandate to detain indefinitely anyone suspected of being a threat to coalition forces.

The mandate expires at the end of this year.

Last December, President Bush and Prime Minister Nouri al-Maliki signed a statement of principles regarding future U.S.-Iraqi relations and said they planned to finalize a new security agreement by July 31.

Nantongo said the Iraqi government intends to submit the agreement to Iraq's parliament for ratification, a move which could spell trouble for the document if it is perceived as being too generous to the Americans.

"Al-Sadr: Troops should get jobs back"

By ABDUL-HUSSEIN AL-OBEIDI, Associated Press

Last updated: 11:52 a.m., Monday, April 14, 2008

NAJAF, Iraq -- Shiite cleric Muqtada al-Sadr is demanding the Iraqi government reinstate all security forces fired for deserting during fighting in Basra.

Monday's statement comes a day after more than 1,300 soldiers and policemen were sacked for abandoning their posts or refusing to fight when clashes broke out.

The anti-U.S. cleric says those who gave up their arms "were only obeying their grand religious leaders" and "were driven by their religious duties."

He says in a statement issued by his office in holy city of Najaf that they should be reinstated and even rewarded for their loyalty.

"Iraqi militias win recruits with aid"

By ANNE FLAHERTY, Associated Press

Last updated: 6:23 p.m., Monday, April 14, 2008

WASHINGTON -- Sectarian militias are increasing their profile in Iraq and recruiting members by providing much-needed assistance to families displaced by the war, according to the Washington-based advocacy group Refugees International.

In a report to be released on Tuesday, the group says that the Iraqi government's inability to provide basic services for its displaced citizens has attracted the attention of Sunni and Shiite militias, who are stepping in to provide food, oil, electricity, clothing and money.

"In need of an array of services, and often led by the desire to 'belong' to their new communities, increasing numbers of displaced men are now members of these armed groups," the report states.

According to the group, the militia led by anti-American cleric Muqtada al-Sadr has emerged as the largest unofficial "humanitarian" organization.

The report compares the Sadrist movement to the terrorist group Hezbollah in the Middle East because it has established itself as a primary service provider in several Iraqi cities.

While less organized, Sunni militias play a similar role for displaced Sunnis, particularly in the distribution of heating gas and electricity, the report states.

The group says the Iraqi government should implement a better plan to address the humanitarian crisis with the U.S. providing technical expertise to relevant ministries.

The United Nations also should improve access to affected areas in Iraq by building security agreements with local power holders, according to the report.

AND GOING BACK INTO THE PAST, HERE ...

"Ex-leader recalls Warsaw Ghetto uprising - AP Interview: Leader speaks of ill-fated Warsaw Ghetto uprising 65 years ago"

By MONIKA SCISLOWSKA, Associated Press

Last updated: 4:22 p.m., Tuesday, April 15, 2008

LODZ, Poland -- Marek Edelman, the last surviving commander of the 1943 uprising in the Warsaw ghetto by a handful of scrappy, poorly armed Jews against the Nazi army, becomes emotional when he speaks of the fighters he led.

"I remember them all -- boys and girls -- 220 altogether, not too many to remember their faces, their names," says the 89-year-old doctor, who still works in a Lodz hospital.

Edelman will lay a wreath in their honor at the Monument to the Heroes of the Ghetto on Saturday, the 65th anniversary of the uprising.

The Nazis walled off the ghetto in November 1940, cramming 400,000 Jews from across Poland into a 760-acre section of the capital in inhuman conditions.

On April 19, 1943, German troops started to liquidate the ghetto by sending tens of thousands of its residents to death camps.

Several hundred young Jews took up arms in defense of the civilians -- the first act of large-scale armed civilian resistance against the Germans in occupied Poland during World War II.

"It was the first, most important and most spectacular" instance of Jewish armed resistance to the Nazi Holocaust, said Andrzej Zbikowski, head of the Jewish Historical Institute in Warsaw.

In an interview with The Associated Press, Edelman said the Nazis "wanted to destroy the people, and we fought to protect the people in the ghetto, to extend their life by a day or two or five."

Then 24 years old, Edelman took command of one of the revolt's three groups.

His fighters, between the ages of 13 and 22, scraped together guns and ammunition that they and the Polish resistance managed to smuggle in from the outside.

His brigade included 50 fighters known as "brush men" because their base was a brush factory.

"There weren't enough guns, ammunition."

"There was not enough food, but we were not starving."

"You can live for three weeks just on water and sugar," which they found in the homes of those deported to death camps, he said.

They adopted hit-and-run tactics.

With time, as supplies and forces began to run low, they resorted to attacks at night, for more safety.

"Every moment was difficult."

"It was two or three or 10 boys fighting with an army," Edelman said.

"There were no easy moments."

But they were outnumbered and outgunned.

"It lasted for three weeks, so this great German army could not cope so easily with those 220 boys and girls," he said with a grain of pride.

The uprising ended when its main leaders -- rounded up by the Nazis -- committed suicide on May 8, 1943.

The Nazis then burned down the ghetto, street by street.

About 40 fighters escaped through Warsaw's sewers and joined the Polish partisans.

"No one believed he would be saved," Edelman said.

"We knew that the struggle was doomed, but it showed the world that there is resistance against the Nazis, that you can fight the Nazis."

Edelman and a few others stayed in Warsaw to help coordinate and supply the Jewish resistance groups.

Some fighters still live in Israel and Canada.

Edelman is the last one in Poland.

Despite the ghetto uprising's ultimate failure, "it was worth it," Edelman said.

"Even at the price of the fighters' lives."

After the war, Edelman chose to remain in Poland, becoming a social and a democratic activist, and guardian of the ghetto fighters' memory.

"When you were responsible for the life of some 60,000 people, you don't leave and abandon the memory of them," he said.

A service was held in Warsaw on Tuesday -- to avoid conflicting with the Jewish sabbath -- and drew a crowd of 1,000, including Israeli President Shimon Peres and his Polish counterpart, Lech Kaczynski, as well as U.S. Homeland Security Secretary Michael Chertoff.

Israeli and Polish flags fluttered in the afternoon breeze as Poland's chief orthodox rabbi, Michael Schudrich, read out the Kaddish, or Jewish prayer for the dead.

Peres praised the young fighters, who he said displayed "a heroism that our children will proudly carry with them in their hearts."

Edelman views the annual observances as "part of educating people and fighting genocide."

He said people "have to be educated from childhood, from kindergarten, that there should be no hatred."

"They have to be shown that all people are the same, that skin color, race, religion don't matter," he said.

"We have only one life and we must not murder each other."

"We see the sun only once."

IS THE DONKEY BUSH JUST STARTING TO WAKE UP TO THE NEED FOR LEADERSHIP ON THE ISSUE OF GLOBAL WARMING?

IF SO, THE FOOL IS ONLY ABOUT SEVEN YEARS TOO LATE ....

And so ....

"Bush to pitch climate change strategy in Rose Garden speech - Bush to offer strategy rather than specific proposal for climate change in speech on Wednesday"

By DEB RIECHMANN, Associated Press

Last updated: 7:02 p.m., Tuesday, April 15, 2008

WASHINGTON -- President Bush, stepping into the debate over global warming, plans to announce on Wednesday a national goal for stopping the growth of greenhouse gas emissions over the next few decades.

In a speech in the Rose Garden, Bush will lay out a strategy rather than a specific proposal for curbing emissions, White House press secretary Dana Perino said Tuesday.

She did not disclose details of his announcement and would not say whether the president would propose any kind of mandatory cap on greenhouse gas emissions.

The president wants every major economy, including fast-growing nations like China and India, to establish a national goal for cutting the emissions believed responsible for global warming.

In his remarks, Perino said, Bush will articulate a "realistic intermediate goal" for the United States.

Bush will emphasize the importance of offering incentives to promote technology as an effective way to reduce green house gas emissions, she said.

Bush's announcement is expected to go beyond what he said in 2002.

Then, he set a goal of reducing the growth of greenhouse gas emissions, while taking into account economic expansion.

His critics argued that would still allow actual emissions to rise as the economy grew.

The White House search for a new climate proposal comes amid growing indication that mandatory action to address global warming is highly likely -- if not now, in the next year or so.

At the same time, the administration is facing growing pressure to regulate carbon dioxide under the federal clean air law.

The Environmental Protection Agency has been told by the Supreme Court that carbon dioxide, the leading greenhouse gas, is a pollutant and must be regulated if the EPA determines it is a danger to health and welfare.

At the same time, the Interior Department is under pressure to give polar bears special protection under the Endangered Species Act because of disappearing Arctic sea ice.

A lawsuit has been filed under the same law for more protection for arctic seals.

Together these cases would pull the enforcement of the Clean Air Act and the Endangered Species Act into the debate over climate change.

"Recent court decisions hold the very real prospect that the federal government will regulate greenhouse gas emissions with or without a new law being passed," Perino said.

"To us, having unelected bureaucrats regulating greenhouse gases, at the direction of unelected judges, is not the proper way to address the issue."

She said Bush also is to talk about his concerns with legislative proposals likely to be considered during Senate debate in June.

Perino called the legislative proposals "unrealistic" and said they would have a negative impact on the U.S. economy.

"We believe there's a right way and a wrong way to address this problem," Perino said, adding that there is no legislative proposal on Capitol Hill that the administration supports.

The speech comes a day before a meeting Thursday and Friday in Paris of the world's largest carbon polluters.

Representatives from more than a dozen countries are expected to attend the meeting, the third in a series of talks that Bush organized last year.

A new global warming pact is being crafted to succeed the first phase of the 1997 Kyoto Protocol.

It requires 37 industrialized nations to reduce greenhouse gas emissions an average of 5 percent below 1990 levels by 2012.

The United States is the only industrialized nation not to have ratified Kyoto, but it agreed with nearly 200 other nations at a conference in Bali in December to negotiate a new agreement by the end of 2009.

"JPMorgan Chase's profit falls 50 percent in the first quarter after adding $4.4B to reserves"

Associated Press

Last updated: 7:22 a.m., Wednesday, April 16, 2008

NEW YORK -- JPMorgan Chase says its profit fell 50 percent in the first quarter, after the bank added $4.4 billion to reserves and lost $2.6 billion from the value of its loan portfolio.

The New York-based bank, which recently bought the collapsing investment bank Bear Stearns, reported earnings of $2.37 billion, or 68 cents per share, and $16.9 billion in revenue.

The profit is down from $4.79 billion, or $1.34 per share, in the first quarter of 2007.

But it is above the average analyst forecast of 64 cents a share, according to Thomson Financial.

"Oil hits new record as investors flee the falling dollar - Weaker dollar sends oil prices to record high above $114 a barrel as euro inflation rises"

By PABLO GORONDI, Associated Press

Last updated: 7:52 a.m., Wednesday, April 16, 2008

Oil prices surged to record highs Wednesday as the weakening U.S. dollar drove up investments into commodities.

Light, sweet crude for May delivery rose as high as $114.53 a barrel in electronic trading on the New York Mercantile Exchange before retreating to $114.46 by midday in Europe, up 67 cents.

The contract closed at a record $113.79 a barrel Tuesday and then jumped in after-hours trading to an all-time high of $114.08.

In London, June Brent crude contracts were up 52 cents to $112.10 a barrel on the ICE Futures exchange, after setting a new record of $112.16 earlier in the session.

Analysts said the oil increases were being caused by euro's new highs against the U.S. currency -- $1.5966 per euro -- as higher inflation in the euro zone practically eliminated the chances of an interest-rate cut by the European Central Bank.

Annual inflation in euro nations rose to a record 3.6 percent in March, boosted by higher prices in transport fuel, heating, dairy products and bread, said Eurostat, the EU's statistical agency.

It is the highest inflation rate in 16 years.

Olivier Jakob of Petromatrix in Switzerland said there had been a "very strong correlation" between rising oil prices and the weakening dollar in the last few months, which appeared to have been broken at the start of this week.

"Monday and Tuesday crude oil managed to move ahead without the help of the dollar," Jakob said.

"But once we broke above 1.59 euros per dollar and as we move toward 1.60, there's going to be more buying coming into oil."

Analysts said growing investor demand for commodities -- which have performed better than other financial instruments -- also helped prop up prices.

"This is really driven by investors purchasing oil because returns have simply outpaced those of stocks and bonds," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Shum said he didn't think supply and demand fundamentals were that strong, but added that "oil's price rise seems unstoppable."

Oil's recent run above $100 a barrel has been largely attributed to a steadily depreciating U.S. currency because a weakening dollar prompts investors to seek a safe haven in hard commodities such as oil and gold.

Traders were awaiting the release of U.S. government data later Wednesday on the state of America's petroleum supplies.

Last week's EIA report showed an unexpected drop in crude inventories, which started oil on its way to several records.

The U.S. Energy Information Administration was expected to report later in the day that crude inventories grew 1.5 million barrels last week, according to a survey of analysts by Platts, the energy research arm of McGraw-Hill Cos.

Gasoline inventories were expected to decline 2 million barrels, to post their fifth consecutive weekly drop amid increasing demand for the fuel, the survey showed.

"Implied gasoline demand typically starts to increase at this time of year, but high prices at the pump and a slowing U.S. economy appear to have dented the pace of demand growth," the Platts report said.

Analysts also projected a 1.7 million barrel drop in distillate stocks, which include heating oil and diesel, while refinery utilization rates were expected to jump 0.9 percentage points to 83.9 percent.

"The market may choose to focus on the expected product drawdowns and interpret the report as bullish," Shum said.

"But product inventories in the U.S. are at healthy levels."

"The declines would simply be because refinery utilization operating rates have not been strong, and that's because refiners are responding to weak demand."

Crude prices were also supported by reports of a number of supply disruptions.

Attracting the most attention was the closure of Mexico's three main oil-exporting ports on the Gulf Coast because of bad weather that started Sunday.

Only one of the ports remained closed Tuesday, according to Mexico's Communications and Transportation Department.

In other Nymex trading, heating oil futures added 2.61 cents to $3.3000 a gallon (3.8 liters) while gasoline prices rose 0.65 cent to $2.8875 a gallon.

Natural gas futures were up 7.5 cents to $10.280 per 1,000 cubic feet.

------

Associated Press writer Gillian Wong in Singapore and Aoife White in Brussels, Belgium, contributed to this report.

HOW MANY MORE YEARS DOES THE WITLESS TEXAS PECKERWOOD GEORGE W. BUSH THINK HE IS GOING TO BE PRESIDENT, ANYWAY?

"Bush revises climate strategy - Bush unveiling new climate strategy Wednesday in Rose Garden speech"

By H. JOSEF HEBERT and DEB RIECHMANN, Associated Press

Last updated: 7:13 a.m., Wednesday, April 16, 2008

WASHINGTON -- Revising his stance on global warming, President Bush will propose a new target for stopping the growth of the nation's greenhouse gas emissions by 2025.

The president also will call Wednesday for putting the brakes on greenhouse gas emissions from electric power plans within 10 to 15 years, according to a senior administration official familiar with the afternoon speech Bush will deliver in the Rose Garden.

The official spoke on condition of anonymity in advance of the speech.

Bush is not going to outline a specific proposal, but he'll lay out a strategy for "realistic" emission reduction targets and "principles" he thinks Congress should follow in crafting global warming legislation.

The new goal for curtailing greenhouse gas emissions is an attempt to short-circuit what White House aides call a potential regulatory "train wreck" if Congress doesn't act on climate change.

The president's speech is aimed at shaping the debate on global warming in favor of solving the problem while avoiding heavy costs to industry and the economy.

The Bush administration has been a staunch opponent of a mandatory so-called "cap-and-trade" approach to reducing greenhouse gases.

While it has backed some mandatory programs, it has preferred largely voluntary measures to broadly address global warming.

In his speech, however, the president will not slam the door on discussing market-based approaches to stem the rise in greenhouse gas emissions.

"We aren't necessarily against cap-and-trade proposals," White House press secretary Dana Perino said earlier this week.

But she added quickly, "What we've seen so far from Congress is not something that we can support."

The president remains opposed to a Senate bill that would require mandatory caps on greenhouse gas emissions, calling that proposal unrealistic and economically harmful, Perino said.

Bush will speak forcefully about concerns he has over a possible rush to address the Earth's warming through a hodgepodge of regulations under existing federal laws such as the Clean Air Act and the Endangered Species Act.

Senior White House officials last week told a group of conservative Republican lawmakers in a private meeting that the administration wants Congress to act on climate change to avoid regulating carbon dioxide and other heat-trapping -- or greenhouse -- gases under existing laws.

Perino says the administration is concerned about a potential regulatory "train wreck" as a result of climate-related court rulings.

"Recent court decisions hold the very real prospect that the federal government will regulate greenhouse gas emissions with or without a new law being passed," Perino said.

"To us, having unelected bureaucrats regulating greenhouse gases at the direction of unelected judges is not the proper way to address the issue."

Several of the conservative GOP lawmakers who heard the White House presentation last week said they viewed it as a move toward endorsing a limited type of "cap-and-trade" emissions reduction proposal, targeting power plants, and a reversal of long-standing administration climate policy.

The new White House climate initiative comes as Bush appears, in the view of congressional Democrats and environmentalists, as increasingly irrelevant in the climate debate both on the domestic and international stage.

All three presidential candidates -- Democratic Sens. Hillary Rodham Clinton and Barack Obama and Republican Sen. John McCain -- favor a more aggressive program on climate change than does Bush, all supporting mandatory limits on greenhouse gases.

Senate Democratic leaders plan to begin debate in June on legislation that would cap greenhouse gases and allow polluters to ease some of the cost by buying emissions credits.

This cap-and-trade approach is aimed at cutting the emissions by 70 percent by mid-century.

The House also is moving toward considering a cap-and-trade proposal.

And many industry lobbyists have become resigned to some type of cap-and-trade proposal moving forward, if not this year probably next, and are trying to find ways to limit the damage.

"The key is whether the president supports a mandatory cap on emissions," said Tony Kreindler, a climate specialist at the advocacy group Environmental Defense.

"You never achieve any real reductions in pollution without legal limits."

"That's what we're going to be looking for."

Meanwhile, many environmentalists maintain that the congressional debate may be overtaken by the courts -- the same prospect the White House is fretting over.

The Environmental Protection Agency already is under orders from the Supreme Court to determine whether carbon dioxide is endangering public health or welfare.

If so, the court said, the EPA must regulate CO2 emissions.

Carbon dioxide is the leading greenhouse gas, so named because its accumulation in the atmosphere can help trap heat from the sun, causing potentially dangerous warming of the planet.

At the same time, the Interior Department has been told by another court to decide whether the polar bear should be brought under the protection of the Endangered Species Act because of disappearing sea ice -- a phenomenon blamed by scientists on global warming.

While senior Bush administration officials were traveling to Paris this week to join a discussion with other countries about what actions to take on global warming, many foreign negotiators involved in such talks are increasingly looking ahead, knowing that likely the next administration will take the most decisive steps on U.S. climate policy.

The United States and other countries agreed at a meeting in December in Bali, Indonesia, to work to set firm targets for reducing greenhouse emissions by the end of 2009, as a follow-up to the Kyoto reduction targets that expire in 2012.

------

On the Net:

White House: http://www.whitehouse.gov

"Wall Street poised to advance after upbeat earnings - Stocks poised for higher open after earnings from Intel, JPMorgan ease 1Q anxiety"

By JOE BEL BRUNO, Associated Press

Last updated: 7:32 a.m., Wednesday, April 16, 2008

NEW YORK -- Wall Street was poised for a higher opening Wednesday after strong reports from Intel Corp. and JPMorgan Chase & Co. helped ease investor anxiety about corporate earnings and their impact on the economy.

JPMorgan, the nation's third-biggest bank, surpassed first-quarter expectations despite $2.6 billion worth of write-downs linked to the credit crisis.

The bank also said it is well positioned with liquidity and capital for the year.

Intel Corp. late Tuesday reported a first-quarter profit that matched analysts' expectations, along with sales that topped projections.

Intel also issued a forecast that kept profit-margin predictions for 2008 intact, and expects to protect its earnings despite falling memory-chip prices and fears about a slowdown in tech spending.

Meanwhile, Coca-Cola Co. reported first-quarter profit rose 19 percent on a 21 percent increase in sales.

The results easily surpassed Wall Street expectations.

The reports helped lift major indexes.

Dow Jones industrial average futures added 46, or 0.43 percent, to 12,400.

Standard & Poor's 500 index futures rose 5.50, or 0.41 percent, to 1,341.40.

Nasdaq 100 index futures were up 23.00, or 1.28 percent, to 1,819.75.

In addition to dozens of earnings reports due during the session, Wall Street will also get economic reports on inflation, housing and weekly oil inventories.

Government data is expected to show that consumer prices resumed an upward climb in March due mainly to higher energy and food costs.

The Labor Department's Consumer Price Index, the federal government's primary inflation yardstick, is forecast to show a 0.3 percent gain from February, according to the consensus of Wall Street economists surveyed by Thomson/IFR.

Data on new home construction and building permit applications for March is forecast to show continued declines.

The Commerce Department report is expected to show construction of new homes and apartments fell to an annual rate of 1.018 million units in March, a 4.4 percent drop from a rate of 1.065 million units a month earlier.

Oil prices that crossed $114 for the first time on Tuesday extended their advance ahead of a report that's forecast to indicate a modest rise in crude stockpiles.

Light, sweet crude added 63 cents to $114.42 a barrel in premarket electronic trading on the New York Mercantile Exchange.

Gold prices rose, and the dollar was mixed against other major currencies.

Overseas, Japan's Nikkei stock average rose 1.20 percent.

Britain's FTSE 100 rose 0.56 percent, Germany's DAX index was up 0.34 percent, and France's CAC-40 added 0.25 percent.

----------

On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

"Japan rejects British hedge fund's plans to raise stake in electricity company"

By YURI KAGEYAMA, Associated Press

Last updated: 5:52 a.m., Wednesday, April 16, 2008

TOKYO -- Japan rejected a proposal from Britain's The Children's Investment Fund on Wednesday, blocking the hedge fund's efforts to raise its stake in a major electricity company because of potential disruptions to "public order."

The London-based hedge fund had proposed raising its stake in J-Power -- Japan's largest electricity wholesaler -- to as much as 20 percent from its current 9.9 percent.

It was the first rejection of such a proposal under a law that requires government approval before foreign companies can hold stakes of more than 10 percent in companies in sensitive sectors such as utilities, broadcasting and weapons manufacturing.

The standoff with the fund is raising questions here about how smoothly Japan has adapted to its self-trumpeted growing needs to open its markets to foreign investment.

Foreign investors have been blocked in high-profile takeover attempts recently, fueling fears that overseas investors will be discouraged when the nation sorely needs new capital to keep its modest growth going.

Ministry officials, speaking on the condition of anonymity customary for bureaucrats here, said an increased stake could allow the fund to control decisions at J-Power, whose full name is Electric Power Development Co.

That could, in turn, hurt Japan's overall energy policies, including a key nuclear power plant project, they said.

J-Power plans to build the plant in in northern Japan for operation by 2012.

It will run on MOX fuel, a uranium-plutonium mixture that includes recycled plutonium.

If such plans don't go as scheduled, it could endanger the operation of a plutonium reprocessing plant and hurt Japan's other nuclear power plants that are counting on the plutonium supply.

In an official statement Wednesday, Japan recommended that the fund drop its plan to buy more J-Power shares, a trade ministry official said.

The fund has 10 days to respond.

Disobeying the decision would be a crime under Japanese law.

John Ho, head of the fund's Asian operations, said the government was making the wrong decision.

"This is a sad day for Japan," he said on NHK TV.

"The ability to attract investments into the sector long-term is now severely curtailed."

"Japanese assets will also be undervalued because legitimate capital is being turned away."

But Nobutaka Machimura, the top government spokesman, was quoted by Kyodo News as saying that a rejection of the fund's bid won't slow foreign investment into Japan.

"This case is straightforwardly related to national security," he told reporters, adding that the fund is aiming for short-term profits.

A government advisory panel rejected The Children's Investment Fund's proposal to own more of J-Power late Tuesday.

"The proposal may disrupt the maintenance of public order," the panel said in a report.

Other nations, including the U.S. and Great Britain, have ways to control stakes in companies considered critical to national security or energy needs.

But it is a relatively new issue in Japan and highlights the country's growing pains as it grapples with establishing checks on foreign investors.

In the past three years, the government approved 763 instances of foreign investors raising their stakes in sensitive sectors, according to the trade ministry.

But in some areas, foreign investors have run into roadblocks.

Last year, Japan's Supreme Court rejected an appeal by U.S. investment fund Steel Partners -- one of the most visible funds aggressively investing in Japan -- to block a sauce-maker's takeover defense.

That supported Bull-Dog Sauce Co.'s dilution of Steel Partners' stake to ward off its tender bid for a larger holding in the company.

Steel Partners has also run into resistance in trying to raise its stake in Japanese beer maker Sapporo Holdings Ltd.

Although mergers and acquisitions have grown in recent decades, many companies still tend to be run by an insular group of managers that seek passive consensus from stakeholders.

As a resource-poor nation that imports all its oil, Japan has made reducing dependence on energy imports a pillar of its policy.

Japan relies on nuclear plants for about a third of its energy needs.

J-Power stock rose 1.1 percent to 3,600 yen (US$35) in Tokyo shortly after the government decision.

The Children's Investment Fund, founded by Chris Hohn in 2003, donates a part of its profits to one of Britain's largest charities for children.

"China GDP growth eases slightly to 10.6 percent while inflation stays above 8 percent"

By JOE McDONALD, Associated Press

Last updated: 6:52 a.m., Wednesday, April 16, 2008

BEIJING -- China's robust economy slowed only slightly in the first quarter despite global gloom, while inflation stayed above 8 percent in March, the government said Wednesday, adding to pressure to rein in prices that are battering Chinese consumers.

The world's fourth-largest economy expanded by a still impressive 10.6 percent in January-March from a year earlier, down from the previous quarter's 11.2 percent rate, amid weaker global demand for exports and government steps to cool an investment boom.

Consumer prices rose 8.3 percent in March over the same month last year, down only slightly from February's 8.7 percent, the highest rate in nearly 12 years, according to the National Bureau of Statistics.

The price spike that began in mid-2007 has been blamed on shortages of pork, grain and other food.

The government is trying to increase output by raising farm subsidies and curbing exports, but that effort was hampered by snowstorms in January and February that wrecked crops.

"Consumer price inflation this year is still running at a high level," said Li Xiaochao, a bureau spokesman, at a news conference.

"We need to further enhance agricultural production and pay attention to production of grain and pigs."

Beijing also will "adopt sound fiscal policies and tight monetary policies," he said.

"It will create a favorable environment for curbing inflation."

Premier Wen Jiabao, the country's top economic official, says taming inflation is the government's top priority.

Communist authorities worry about a possible public backlash if prices keep rising rapidly.

Bouts of high inflation in the 1980s and '90s sparked protests -- an embarrassment that Chinese leaders want to avoid ahead of this summer's Beijing Olympics, which is meant to showcase the country as prosperous and stable.

Analysts expect inflation to stay high as late as May before it subsides.

March inflation was well above the 4.8 percent target that Wen has set for this year.

Li, the statistics bureau spokesman, said that to meet Wen's target, inflation has to fall below 4.2 percent each month for the rest of the year.

On the broader economic front, Li noted that while export growth is slowing, the economy appears to be weathering the U.S. credit crisis and weaker global demand for Chinese goods.

Beijing has raised interest rates repeatedly and tried to curb spending on real estate, factories and other assets to cool an investment boom that is driving growth.

Regulators worry that runaway spending could ignite a financial crisis.

"The Chinese economy in the first part of this year continued to maintain steady fast and sound development," said Li.

"The slowdown in economic growth is really in response to the microcontrol policies."

On Wednesday, the central bank raised the amount of money Chinese banks must hold in reserve by 0.5 percentage points to a record high of 16 percent in a new effort to curb lending.

The government has repeatedly nudged up the reserve ratio over the past two years to cool a lending boom.

Total economic output in the January-March period was 6.1 trillion yuan ($880 billion; 550 billion euros), according to the bureau.

That brought China closer to overtaking Germany as the world's third-largest economy.

That is expected to happen this year, though the status will be largely symbolic.

China, with more than 1.3 billion people, is still far poorer on a per capital basis.

Despite government curbs, spending on real estate and other fixed urban assets grew by 24.6 percent in the first quarter, the Statistics Bureau said.

That was up 0.9 percentage points from the rate of the same period last year.

China's economy grew by 11.9 percent in 2007, but analysts expect that to fall as low as 9 percent this year.

By contrast, Germany's 2007 growth rate was 2.5 percent.

"Chinese state oil companies promised tax rebate to help offset losses blamed on price controls"

Associated Press

Last updated: 2:02 a.m., Wednesday, April 16, 2008

BEIJING -- China's two major state oil companies will get a tax rebate on gasoline and diesel imports to help offset losses blamed on price controls, the government said Wednesday.

China National Petroleum Corp. and China Petroleum & Chemical Corp., better known as Sinopec, will receive a refund on a 17 percent value-added tax on imports between April 1 and June 30, the Finance Ministry said on its Web site.

The government ordered the companies in November to step up imports to ease fuel shortages.

CNPC and Sinopec blamed the shortages on controls that barred them from passing on record-high crude prices to consumers, leading to losses for their refining units and prompting them to cut back output.

The rebate "is aimed at reducing the refining losses of the oil companies and increasing refined oil products supply in the domestic market to prevent a shortage," the government newspaper China Daily said.

CNPC will receive a rebate on imports of 4.2 million barrels of gasoline and 8.5 million barrels of diesel, while Sinopec gets a rebate on a similar amount of gasoline and 12.7 million barrels of diesel, the Finance Ministry said.

Beijing froze retail gasoline and diesel prices in September as part of efforts to contain rising inflation.

It raised prices by about 10 percent in November to curb surging demand but has rejected appeals by the oil companies for more increases.

Analysts had expected the oil companies to get government aid to offset refining losses.

They received similar aid at the end of 2006.

Sinopec, Asia's biggest refiner by volume, said this month its refining unit lost 13.7 billion yuan ($2 billion) in the latest quarter due to the price freeze.

Sinopec said it received a 12.3 billion yuan ($1.75 billion) government subsidy to compensate for the losses.

CNPC's publicly traded arm, PetroChina Ltd., said in March that its refining unit lost 20.1 billion yuan ($2.9 billion) in the latest quarter due to the price freeze.

The company has not said whether it received a government subsidy.

"Penney moderates 2008 growth plans amid economic concerns - J.C. Penney to open fewer stores in 2008 than initially planned amid economic challenges"

By ANNE D'INNOCENZIO, Associated Press

Last updated: 2:02 a.m., Wednesday, April 16, 2008

NEW YORK -- J.C. Penney Co. officials are expected to offer investors more details Wednesday about how the department store operator will balance a moderated store growth strategy with an accelerated push for more exciting merchandise to attract frugal shoppers.

Chairman and Chief Executive Myron "Mike" Ullman III said late Tuesday that the company is stretching out its five-year store growth strategy because of the economic downturn, with plans to open 36 new stores this year instead of the 50 it had projected.

It also aims to renovate 20 units this year, instead of the planned 65.

But Ullman also told analysts that the company plans to accelerate its merchandising innovation.

Penney this week announced several new lines for teens, along with the launch of a new store brand of home furnishings and accessories called Linden Street.

Ullman's address, which kicked off a two-day analyst meeting, came as Penney and other retailers have stumbled in the face of a consumer spending slowdown amid higher gasoline prices, slumping home prices and a drop in consumer confidence.

Penney slashed its first-quarter profit outlook last month, and last week the retailer reported a larger-than-expected 12.3 percent drop in same-store sales, or sales at stores open at least a year, for March.

Ullman told analysts that Penney is taking "a hard look" at 2009 and will figure out its store growth plans for next year in July.

The cautious mood at the analyst meeting was different from the investor session only a year ago, when the company said it planned to open 250 new stores over the next five years and predicted its earnings per share would grow at a 16 percent compound annual rate from 2008 to 2011.

Penney executives are slated to offer a financial update Wednesday.

Ullman told investors that what's most challenging about this economic downturn compared with other past slowdowns is that it has been so "unpredictable."

Consumers, he said, are faced with much uncertainty in the housing market.

Meanwhile, shoppers are confronted with a lot of volatility in the financial market.

Ullman also pointed to how the overall economic slowdown is hurting some markets more than others.

For example, Phoenix, Las Vegas and Tampa, Fla., have been among the hardest hit, while markets like Texas and Manhattan have seen stability, he said.

"We think it's going to take awhile before it gets predictable," Ullman said.

Amid such economic uncertainty, Ullman believes that Penney is stealing some market share away from other rivals.

He said its American Living collection -- a partnership with Polo Ralph Lauren that marks the biggest launch in the store's history -- has been well received, though some merchandising categories are doing better than others.

------

On the Net:

J.C. Penney Co.: http://www.jcpenney.com

SHADES OF VIET NAM, ALL OVER AGAIN ...

"Airstrike kills 4 in Basra, 2 die in Sadr City clashes"

By BUSHRA JUHI, Associated Press

Last updated: 7:32 a.m., Wednesday, April 16, 2008

BAGHDAD -- An unmanned U.S. drone fired two Hellfire missiles at militants attacking Iraqi soldiers in a Shiite militia stronghold in the southern city of Basra on Wednesday, killing four of the gunmen, the military said.

In Baghdad, clashes between U.S.-backed Iraqi troops and Shiite militiamen in the Sadr City district killed two men and injured 18 other people, police said Wednesday.

The airstrike in Basra occurred about 1 a.m. after militiamen attacked an Iraqi army patrol with rocket-propelled grenades on the eastern side of the Hayaniyah district, the U.S. military said.

A vehicle suspected of containing more weapons and ammunition also was destroyed.

The area has seen some of the fiercest fighting since a government offensive against the militias in Basra began March 25.

In Sadr City, a police officer said those injured in gunbattles Tuesday included three women and three children.

Sadr City is a stronghold of the Mahdi Army militia of anti-American cleric Muqtada al-Sadr.

It is also home to an estimated 2.5 million Shiites.

The officer, who spoke on condition of anonymity because he was not authorized to speak to the media, said sporadic shooting was still going on and it was too dangerous to venture out on the streets.

The ferocity of the Shiite militia response to the government crackdown has surprised Iraqi security forces -- which are dominated by Shiites -- raising doubts about whether the Iraqis could handle an all-out war without U.S. help.

The New York Times reported that an 80-strong company of Iraqi soldiers abandoned their positions Tuesday night in Sadr City, leaving a crucial stretch of road undefended for hours despite pleas by American soldiers in the area for them to stay.

The Iraqi company leader, who was identified as Maj. Sattar, and his troops complained that they were short of ammunition and overall poorly equipped to battle the militias and had no means to communicate directly with the U.S. troops positioned behind them, according to the newspaper.

It added that an elite Iraqi unit was rushed in and began to fight its way north with the help of the Americans.

The U.S. military said the report was factual and the Baghdad command would address the issue.

Lt. Col. Steve Stover, a military spokesman in Baghdad, called it "a snapshot of one area where U.S. soldiers are in close support of their Iraqi counterparts" and stressed that it is a new army and Iraqi soldiers and national police are taking casualties daily in fighting in other areas.

"This is one company-sized unit, part of a recently formed Iraqi army battalion," Stover said, adding that 65 other Iraqi battalions were operating in Baghdad with "varying degrees of experience and capability."

"The older units are able to conduct independent counterinsurgency operations and others obviously need more work, better leadership and more experience," he said in an e-mailed statement.

In other violence Wednesday, a mortar shell slammed into a house in eastern Baghdad, killing at least three civilians and wounding three others, police said.

Gunmen also opened fire on a minibus near Muqdadiyah, 60 miles north of Baghdad, killing 2 women and wounding 3 men, police said.

Also Wednesday, the U.S. military said two Marines were killed by a roadside bomb in western Anbar province.

The statement said the blast occurred on Sunday while their vehicle was under attack by enemy fighters.

The two deaths raise to at least 4,036 the number of U.S. military members who have died since the war started in March 2003, according to an Associated Press count.

The bloodshed came a day after nearly 60 people died in a series of bombings in four cities in northern and central Iraq that were blamed on al-Qaida in Iraq.

The bombings struck directly at U.S. claims that the Sunni insurgency is waning and being replaced by Shiite militia violence as a major threat.

Meanwhile, the Iraqi government said 33,121 detainees have been released since a general amnesty went into effect in February.

Spokesman Abdul-Sattar al-Berqdar said judicial reviews of thousands of other cases were continuing.

He said that so far the reviews had identified 9,726 detainees who would not be released because they did not fall within the amnesty.

------

Associated Press writer Kim Gamel contributed to this report.

AH, YES ....

VIET NAM ALL OVER AGAIN ...

IN SPADES ...

FIVE YEARS LATER ...

AND AMERICA IS STILL NOT PREPARED FOR WAR AND RECONSTRUCTION IN IRAQINAM ...

BUT THEN, ALL WE HAVE FOR A LEADER IN AMERICA RIGHT NOW IS A WITLESS TEXAS PECKERWOOD WHO IS A COMPLETE FOOL IF THERE EVER WAS ONE ...

And so ...

YOU GET WHAT YOU PAID FOR ...

WHICH IN THE CASE OF TEXAS PECKERWOOD GEORGE W.(orthless) BUSH IS NOT MUCH AT ALL ...

And so ...

"Rice defends commitment of diplomats despite pushback by some on serving in Iraq"

By ANNE FLAHERTY, Associated Press

Last updated: 5:02 p.m., Tuesday, April 15, 2008

WASHINGTON -- Secretary of State Condoleezza Rice on Tuesday defended the commitment of the nation's diplomats, despite recent resistance by many foreign services officers to a proposal to require tours in Iraq.

Last fall, several hundred diplomats convened for an hour-long "town hall meeting" to discuss an order that would have mandated some service at the U.S. embassy in Baghdad and outlying provinces.

Some questioned the ethics of sending people against their will to a war zone, with one calling the forced assignments a "potential death sentence" to loud applause.

"I was deeply offended myself, and deeply sorry that these people who had self-selected into this town hall went out of their way, to my view, cast a very bad light on the foreign service," Rice told a House panel.

The State Department eventually found enough volunteers for the 48 vacancies, and the call-ups were never enforced.

But the agency could face another round of protests as it opens up its "bidding cycle" this spring for jobs in Iraq and Afghanistan that will be vacated in the summer of 2009.

Fearing a new staffing crisis at hardship posts amid uncertainty about how the next administration will approach Iraq, the department is separating the process of filling jobs in Iraq and Afghanistan from that of other positions.

Rep. Duncan Hunter, the top Republican on the House Armed Services Committee, said he thought the protests against a mere four dozen vacancies for the heavily fortified embassy in Baghdad was pathetic considering the lengthy combat tours by service members.

"I thought it was a sad commentary when you have tens of thousands of soldiers and Marines laying their lives on the line who are re-enlisting for that combat and you have State Department people standing up and saying they were not going to go to Iraq," said Hunter, R-Calif.

In response, Rice said the comments made were isolated and prompted a visceral response by the rest of the diplomatic corps, including those serving in dangerous posts outside Iraq and Afghanistan.

"I will tell you, the blogs were lit up in the Department of State by people who were offended. . . who were absolutely offended by those comments," she said.

Rice said not only did she find enough volunteers to fill the posts, but four diplomats gave up ambassadorships elsewhere to serve at the Baghdad embassy under Ryan Crocker, the U.S. ambassador to Iraq.

The State Department has changed dramatically its approach to deploying diplomats since the Sept. 11 attacks, including shifting foreign service officers from Europe to places like Pakistan and Afghanistan and increasing the number of political officers serving alongside military commands.

In its 2009 budget proposal, the administration has requested 1,100 new foreign service officers and 300 new USAID officers.

Also requested is some $249 million to develop a corps of diplomats, other federal employees and private-sector volunteers willing to deploy to places like Iraq and Afghanistan to aid reconstruction.

Defense Secretary Robert Gates said he would like to see increased deployments of federal personnel outside the State and Defense departments.

Recently, about a dozen Treasury Department officials were sent to Baghdad to help the ministries better execute their budgets -- an invaluable asset in the reconstruction effort, Gates said.

But more could be done faster if the government was better prepared.

"I would give, frankly, the departments probably an A for will, but we'd have to talk about their repeating the semester when it comes to performance," he said.

On another matter, Gates and Rice said the government in recent months has been able to increase substantially its oversight of private security contractors.

In December, following a shooting involving Blackwater Worldwide employees, the departments of State and Defense reached an agreement that gave the military in Iraq more control over such contractors.

Gen. David Petraeus, the top military commander in Iraq, recently submitted a favorable report on the subject, Gates said.

"I would say that while State is still doing their own contracting in an operational sense, the lack of visibility that was part of the problem before the Blackwater incident, as far as Gen. Petraeus is concerned, that problem has been solved and he's quite satisfied with the arrangement that exists today," Gates said.

Rice said she agreed.

"I do think we've come to a good modus vivendi for working through the problems."

"And to my knowledge, at this point, it is a system that is much better," she said.

"Iraq leader says he's more confident than ever of defeating al-Qaida in Iraq"

By CONSTANT BRAND, Associated Press

Last updated: 7:42 a.m., Wednesday, April 16, 2008

BRUSSELS, Belgium -- Iraqi Prime Minister Nouri al-Maliki said Wednesday he's more confident than ever his government will defeat al-Qaida in Iraq and that confrontation with militia fighters will help achieve political stability.

The prime minister told lawmakers at the European Parliament that Iraq's leaders were "determined to achieve victory against terrorism" during a visit to European Union headquarters in which he is pushing for closer ties with the 27-nation bloc.

"We are today more confident than any time before that we are close to the point where we can declare victory against al-Qaida ... and its allies," al-Maliki said.

On Tuesday, bombings blamed on al-Qaida in Iraq tore through market areas in Baghdad and outside the capital, killing nearly 60 people.

The bloodshed -- in four cities as far north as Mosul and as far west as Ramadi -- struck directly at U.S. claims that the Sunni insurgency is waning and being replaced by Shiite militia violence as a major threat.

Al-Maliki oversaw a faltering offensive against Shiite militia fighters in the southern port of Basra last month.

His Shiite political rivals have portrayed the clampdown as an attempt to diminish their growing power before provincial elections in October.

Al-Maliki's government says it is only aiming to weed out criminal groups that have controlled the city since 2005.

On Wednesday al-Maliki said the latest fighting would not deter efforts to keep the provincial elections on track.

Laws to enable the vote are making their way through Iraq's parliament.

"The militias, whether in the south or in Baghdad, in Mosul ... combating them is to ensure that there won't be any militias that will interfere with these elections, that there won't be misleading results," he said.

The Iraqi premier also reiterated a warning to neighbors Iran, Turkey, Saudi Arabia, Syria and others not to interfere in Iraq's internal politics.

Al-Maliki's visit was eagerly awaited by European Commission President Jose Manuel Barroso, who, along with other EU officials, is keen to forge closer economic ties, especially in opening up Iraq's vast oil and gas reserves to European energy firms.

That would contribute to EU efforts to lessen dependence on energy supplies from Russia.

Despite insurgent attacks on oil facilities and employees, oil exports account for more than 90 percent of revenues in Iraq, which has the world's third-largest crude oil reserves -- an estimated 115 billion barrels.

"Afghan opposition politicians meeting with Taliban in hopes of starting peace negotiations"

By JASON STRAZIUSO, Associated Press

Last updated: 6:22 a.m., Wednesday, April 16, 2008

KABUL, Afghanistan -- An opposition group says its leaders, including a former president, have been meeting with the Taliban and other anti-government groups in hopes of negotiating an end to rising violence in Afghanistan.

The contacts have taken place between leaders of the opposition National Front and "high level" militant leaders during the last few months, party spokesman Sayyid Agha Hussain Fazel Sancharaki said in an interview Sunday.

He said among those at the meetings were former President Burhanuddin Rabbani, now a member of parliament, and Mohammad Qasim Fahim, who is President Hamid Karzai's security adviser and a powerful northern strongman.

Rabbani said Afghanistan's six-year war must be solved through talks, echoing a view held by many in the country.

"There's no doubt that some inside the Taliban are not willing to negotiate, but there are some Taliban who are interested in solving problems through talks," Rabbani, Afghanistan's president from 1992-96, told The Associated Press in an interview.

"We in the National Front and I myself believe the solution for the political process in Afghanistan will happen through negotiations," he said.

Support for talks to end the increasingly bloody Afghan conflict have gained steam over the last year.

President Hamid Karzai said for the first time in April 2007 that he had met with Taliban militants in attempts to negotiate peace.

Rabbani said opposition leaders will soon discuss and possibly select a formal negotiating team and that Taliban fighters, in their talks with Karzai, have also proposed sending a formal team for talks with the government.

The behind-the-scenes maneuverings come just as the United States is pouring more troops into the country.

Some 32,000 U.S. forces are in Afghanistan, the most since the 2001 invasion to oust the Taliban for hosting al-Qaida leader Osama bin Laden.

Two NATO soldiers died and two others were wounded Wednesday in an explosion in southern Afghanistan, the military alliance said, while a clash in the same region left five Taliban militants and a policeman dead.

It did not disclose the nationalities of the casualties or the exact location of the blast.

The wounded were evacuated to a military base for treatment, NATO said in a statement.

In Zabul province, militants ambushed a police convoy, killing an officer, said Gen. Abdul Raziq Khan, a provincial police official.

In ensuing firefight, five militants were also killed, Raziq said.

Authorities recovered their bodies alongside their weapons.

Separately, militants abducted and beheaded two Afghan men working at a U.S. military base in the eastern Kunar province, provincial police Chief Abdul Jalal Jalal said.

The two men were abducted Monday after they left the base in Korangal Valley, the scene of fierce clashes between U.S. troops and insurgents in the past few years.

Their bodies were discovered Tuesday, Jalal said.

Militants regularly target people working for U.S. and other foreign forces.

Despite the violence and heightened military posture, U.S. ambassador William Wood has said the U.S. supports talks with militants who will lay down arms and recognize the Afghan constitution.

The U.S. does not support talks with al-Qaida fighters.

Across the border in Pakistan, where militant violence has spiked over the last year, Prime Minister Yousaf Raza Gilani late last month offered talks to militants ready to renounce violence there.

Negotiations will ultimately be the only way to end the Afghan conflict, said Wadir Safi, a professor of public and international law at Kabul University.

"Negotiations," he said.

"Find the address of all of the Taliban, find out what they want."

"They will have their own suggestions, and if it's not anti-civilization, you can come to terms with them instead of spending money on military budgets."

Karzai, in a news conference this month, said the National Front efforts are good for the country.

He said many rebels are Afghans who need to be brought back into society.

For months, Karzai has trumpeted reconciliation, even offering to meet with Taliban leader Mullah Omar.

But the National Front says Karzai has not followed up his words with action.

He needs to put a formal negotiations process in place involving all parties, Rabbani said.

"I told Karzai that when a person starts something he should complete it."

"On the issue of the negotiations it is not right to take one step forward and then one step back," he said.

"This work should be continued in a very organized way."

Rabbani and Sancharaki declined to say who the National Front has met with.

Sancharaki said their militant interlocutors were "important people."

The Taliban, through spokesman Zabiullah Mujahid, denied there had been any contact.

"If they are claiming they have contact with somebody, we don't know who," he said.

Thousands of former members of the hard-line Taliban regime, including a sprinkling of former senior commanders and officials, have made peace with the government through its national reconciliation commission.

But Safi, the university professor, said that because the National Front does not represent the government, its negotiations are "nonsense."

He said the group, whose leaders fought each other and then the Taliban in Afghanistan's devastating civil wars during the 1990s, only wants to advance its own power.

"They want the Taliban side to be on their side," Safi said.

"It's an unholy alliance ... and the Taliban want to use Rabbani and Fahim against Karzai."

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Associated Press writers Fisnik Abrashi and Rahim Faiez contributed to this report.

"Turkey's military says its warplanes hit Kurdish rebels in northern Iraq"

Associated Press

Last updated: 7:32 a.m., Wednesday, April 16, 2008

ISTANBUL, Turkey -- Turkish warplanes hit an area in northern Iraq where a group of Kurdish rebels was trying to infiltrate Turkey, the military said Wednesday.

The aircraft attacked the rebels in the Avasin-Basyan region of northern Iraq, near the Turkish border town of Cukurca, the Turkish military said.

The military said the rebel group was "rendered ineffective," a euphemism generally used to refer to killed rebels.

But in Wednesday's statement, it was unclear if there were any casualties.

The military also reported clashes in Turkey's Diyarbakir and Sirnak provinces and said one rebel was killed.

In response to the Turkish military report, the rebel group commented on what appeared to be a different bombing.

"Turkish airplanes bombed today some areas in the Zagros mountains in the Iraq-Iranian-Turkey triangle," rebels spokesman Ahmed Denis said, adding that no casualties or damage had been reported.

In February, the Turkish military staged a ground incursion against Kurdish rebels in Iraq, and it has periodically bombed and shelled suspected rebel positions across the border in past months.

The United States lists the rebel Kurdistan Workers' Party as a terrorist group and is sharing military intelligence about the rebels with Turkey.

Kurdish guerrillas seek autonomy for Kurds in southeast Turkey and have been fighting since 1984.