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Technical indicators are pointing to a strained market, though recently stocks have been maintaining the momentum of late 2011.

The potential is certainly there for shares to derail next week with some important economic reports due. A repeat of last month's disappointing U.S. jobs number could spark a sell-off.

"We think in the near term markets are getting ahead of themselves," said Zahid Siddique, portfolio manager for Gabelli Equity Trust in Rye, New York. "The data has to be good for the markets to continue to go up, and if there is any weakness in the data, we think we could have a sell-off."

Analysts in a Reuters poll expect the economy added 126,00 jobs in December, up from 39,000 the prior month, but still not enough to significantly dent unemployment.

A series of global purchasing managers indexes are also due next week, including the Institute for Supply Management's two monthly surveys. They are expected to show growth quickened in December in the U.S. services and manufacturing sectors .

An array of technical factors show the market may be at the top end of its recent trading range, but strongly trending markets often produce false signals.

"There is no denying the fact that the market is overbought," said Paul Hickey, an analyst at Bespoke Investment Group in Harrison, New York. "The entire month of December the S&P 500 has closed in overbought levels everyday."

Hickey considers the S&P 500 overbought when it moves one standard deviation above its 50-day moving average. But looking at prior months where that has occurred he found performance the next month was above average instead of reverting to the mean.

"Momentum tends to carry the market further," he said.

BEST S&P DECEMBER SINCE 1991

Signs of an improving economy, tax breaks and loose monetary policy helped spur a near 20-percent rally in the S&P 500 since the end of August. The index rose 6.5 percent in the last month of the year, its best December since 1991.

The gains stalled in the last week of the year with indexes finishing essentially flat.

Siddique, who helps manage a $1.3 billion equity fund, says his firm raised cash as equities rose by paring positions in strong performing consumer discretionary and industrial sectors.

He says that worries over Europe's sovereign debt crisis, global growth and political tensions may resurface. He is looking at defensive sectors such as utilities, consumer staples and healthcare, which have lagged.

Funds focused on the United States, Japan and other developed market stocks collected $28.44 billion from investors for the fourth quarter, marking a significant shift from full-year data that showed outflows of $62.36 billion, the report said.

Overall, EPFR Global-tracked equity funds took in $30 billion in 2010 for their best year since 2006, led by a record $92 billion earmarked for emerging market stock portfolios, it said.

"Emerging markets will stay strong but you will see a lot more interest in domestic stocks" in 2011, said Keith Springer, president of Springer Financial Advisors in Sacramento, California. The United States will likely lead developed nations in terms of return, he predicted.

"Individual investors are starting to be a little nervous about missing the upside in stocks" after dedicating much of their portfolios to bonds over the past few years, he said.

The year is also ending with record flows into global and emerging market bond funds as well as commodity and real estate funds, the report said.

Global bonds saw inflows of $372.46 billion this year -- including $29.81 billion in the fourth quarter -- compared with $302.65 billion in 2009, EPFR said. But they posted outflows in the past six of seven weeks for their poorest showing since the financial crisis deepened in late 2008, it said.

"The fund groups that set records were, however, not necessarily the ones that will carry momentum into the new year," EPFR Global said in a statement.

U.S. bond funds saw $7.3 billion fall away in the last quarter amid concerns over the fiscal health of towns, cities and public works, EPFR said. U.S. bond funds drew $178.40 billion this year, down from $214.09 billion the year before.

Specific sectors showing greater investor interest include equity funds focused on Japan and Europe the Middle East and Africa, EPFR said. Financial, technology and balanced funds also saw flows accelerate in the fourth quarter, it added.

For the second straight year, commodities funds led inflows among sectors, with $29.33 billion, EPFR said. In 2009, the sector took in $19.95 billion.

Commodities ended the year with another week of inflows as copper prices climbed to new highs, EPFR said.

(Editing by Gary Crosse and Leslie Adler)

Crude was also on track to average $79.60 a barrel for the year, second only to 2008's record average of $99.75.

Strong demand for raw materials, especially in China, is expected to push oil even higher next year, analysts said, although cautioning the global recovery was still fragile.

After rallying to a 26-month high of $91.88 on Monday, U.S. crude edged lower on the day, with the February contract down 30 cents at $89.54 a barrel by 1158 GMT. ICE Brent crude fell 40 cents to $92.69.

U.S. crude stocks fell for the fourth straight week last week, but the drawdown was less than expected and put downward pressure on prices. <EIA/S>

But the fall in gasoline stocks was much bigger than expected on year-end holiday travel demand, possibly signaling rising consumption as the world's largest economy recovers from recession.

"The latest U.S. weekly data release show a continuation of the recent strength in oil demand," said analysts at Barclays Capital in a research note.

"December is set to be the strongest month of the year in demand terms, with particularly strong indications of gasoline demand," they added.

Including all products, the total US implied demand has risen to the highest level of the year and above the levels of 2008, said Olivier Jakob from Petromatrix.

It was, however, soaring demand in Asia that analysts said contributed most to healthy gains in oil and commodities in 2010. Prices in metals and soft commodities also beat records or climbed near multi-year highs.

Chinese President Hu Jintao said on Friday the global recovery would remain difficult but China would work to ensure that its economic growth is stable and fast next year.

The Reuters-Jefferies CRB index .CRB of 19 commodities is up 16 percent on the year, a more attractive return than on stocks. .SPX

However, some analysts have cautioned against excess optimism about a continuation of the rally in 2011.

"Some positive economic news from the U.S. (such as the recent decline in initial jobless claims) at year ending should not outshine how fragile the global economic recovery is," said analysts at JBC Energy.

OPEC SUPPLIES

The statement, from the powerful Ministry of Information and Industry Technology, did not mention any carriers by name.

It called for a crackdown "on illegal VoIP (voice over Internet protocol) telephone services" and said it was collecting evidence for legal cases against them.

Skype, partly owned by web retailer eBay Inc, has been growing in popularity among Chinese individuals and businesses to make cheap or free international phone calls.

The circular, dated December 10, did not say what amounted to illegal services and did not name any VoIP providers it considered to be breaking the law.

Spokespeople for the ministry and the ministry's office gathering information for the campaign did not answer telephone calls on Friday. Skype could not immediately be reached for comment.

The move appeared to be aimed at protecting three government-controlled Chinese phone carriers -- China Telecom, China Unicom and China Mobile -- which provide the bulk of China's telephone services.

The Hong Kong-based South China Morning Post on Thursday quoted an unidentified ministry official as saying VoIP services could only be provided by the big three Chinese operators.

Spokespeople for China Telecom and China Unicom did not answer phone calls on Friday. A spokeswoman for China Mobile, reached in Beijing, referred calls to the firm's Hong Kong office. Attempts to reach the Hong Kong office were not successful.

VoIP calls allow users to make international calls for much less than commercial providers, or even for free if both parties are using VoIP. Many businesses that use VoIP services to cut down on their international telephone costs could lose access to the cheaper alternative.

Skype, which has about 124 million users worldwide, hopes to raise about $1 billion in an initial public offering expected next year.

(Reporting by Terril Yue Jones and Sui-lee Wee; Editing by Benjamin Kang Lim and Alex Richardson)

BHP, under pressure to land a big deal after scrapping a $39 billion bid for Canada's Potash Corp in November, declined to comment on the rumors which drove Anadarko's shares as much as 8 percent higher in U.S. trade.

Fund managers and analysts said Anadarko was a good strategic fit for BHP which is sitting on a pile of cash and needs to expand. Speculation that BHP Chief Executive Marius Kloppers was eyeing Anadarko first surfaced in September when the U.S. firm's shares were hit by its exposure to BP's Gulf of Mexico oil spill.

An unsourced report in Britain's Daily Mail newspaper said BHP may offer $90 per share, propelling the miner's growth strategy back in the headlines during holiday trade.

"The portfolio of exploration and assets in Anadarko would be appealing to BHP and the stock has probably suffered in terms of fallout from the BP situation in the Gulf of Mexico so it might be an opportune time for BHP to make a step change in terms of that portfolio," said Tim Schroeders, portfolio manager at Pengana Capital.

One source familiar with BHP's thinking but not directly working with the company downplayed the Daily Mail report as unreliable. A spokesman for Anadarko said it was company policy not to comment on speculation.

Some analysts said the $90 per share figure would not be enough to land a deal.

"While we believe speculation of a bid at this level is supportive it is not likely credible in our view: the price is simply too low," Bank of America Merrill Lynch analysts said, pointing to Anadarko's base case value of $110 per share which did not factor in recent oil price rises and exploration successes.

On Thursday, Anadarko's shares surged to $76.5, their strongest level since mid-2008, exceeding highs reached before the oil spill. Anadarko owns 25 percent of the ruptured Macondo well that BP operated.

On Friday, BHP shares ended down 1.3 percent in a weak broader market.

Anadarko, which has a huge portfolio of deepwater oil and gas discoveries and Australia's Woodside Petroleum have been touted as potential targets for BHP since its Potash bid was killed in November.

Investors said BHP has grown so big in mining, takeover attempts would run into regulatory opposition, and the oil and gas sector, where it is relatively small, was the easiest path for the company to go.

Woodside has also been cited as a potential target after Royal Dutch Shell sold its stake in November.

"It is far from a done deal obviously but there is probably a higher probability of BHP buying Anadarko than Woodside," said Schroeders of Pengana Capital.

An investment banker who has previously worked with BHP said the miner traditionally surprised the market by bidding for a target which had not been the subject of long-running speculation.

The S&P 500 is up 6.5 percent so far this month, putting it on track for the best December since 1991.

Reports on the labor market, business activity and housing all showed surprising strength.

New U.S. claims for initial unemployment benefits in the latest week dropped to the lowest level since July 2008, while a report from the Institute for Supply Management-Chicago showed business activity in the U.S. Midwest rose to its highest level since July 1988. November pending home sales also rose more than anticipated.

"The numbers were very strong this morning, but people are becoming more cautious since it's the end of the year, especially since we've already had a great run," said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, Ohio.

Monster Worldwide Inc (MWW.N), an employment agency, rose 2.1 percent to $24.12 after the jobless data. The Dow Jones U.S. business training and employment agencies index .DJUSBE rose 0.3 percent.

In a sign of investor anticipation of increased merger activity, Anadarko Petroleum Corp (APC.N) jumped 6.9 percent to $75.59 after the UK's Daily Mail reported BHP Billiton Ltd (BHP.AX) (BHP.N) may be lining up a $90 per share offer for the company.

The Dow Jones industrial average .DJI was down 15.67 points, or 0.14 percent, at 11,569.71. The Standard & Poor's 500 Index .SPX was down 1.86 points, or 0.15 percent, at 1,257.92. The Nasdaq Composite Index .IXIC was down 3.95 points, or 0.15 percent, at 2,662.98.

Technical indicators such as the S&P 500's relative strength index and elevated levels of bullishness are leading some investors to call for a pullback.

Though many predict stocks will pull back in January, Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey, does not see that happening until February.

"The common sense of the street is that we get pullback after this Santa Claus rally and a very strong run-up in the S&P since August," he said. "But I don't think it will be in early January because everybody is expecting it."

The S&P is up more than 14 percent since August, contributing to a reluctance to make large bets as light volume leaves the market more susceptible to volatility.

February crude futures fell 1.9 percent to $89.35 per barrel after the latest U.S. inventory data, though the drop had little impact on energy companies.

(Editing by Leslie Adler)

New applications for unemployment benefits dropped 34,000 last week to 388,000, the lowest level since July 2008, while factory activity in the Midwest expanded in December at its fastest pace in more than 22 years.

Further brightening the picture, pending sales of previously owned homes rose more than expected in November.

The data was the latest in a series, ranging from retail sales to trade, to suggest the recovery has picked up steam.

"The economy is heading into 2011 with some pretty good momentum and some pretty good wind behind its sails right now," said Omair Sharif, an economist at RBS Securities in Stamford, Connecticut.

The reports had a minimal impact on U.S. financial markets, where volumes were light and investors moved to the sidelines as the year wound down.

Prices for U.S. government debt were mostly marginally down, while the dollar rebounded from a seven-week low against the yen. U.S. stock indexes were flat to slightly lower.

Economists, who had expected initial claims for jobless benefits to dip only to 415,000, said the Christmas holiday-shortened week may have led to data distortions.

However, analysts said that did not change the view that the labor market was gaining strength. A four-week average of new claims -- a better measure of underlying trends -- also touched its lowest level since July 2008.

"There's no denying that the economy is improving," said Wayne Kaufman, chief market analyst at John Thomas Financial in New York.

BULLISH SIGNAL FROM MANUFACTURING

The Institute for Supply Management-Chicago's business barometer for the Midwest provided an even more bullish signal.

It jumped to 68.6, the highest since July 1988, from 62.5 in November. Economists had expected it to dip. Any reading above 50 indicates the region's economy is expanding.

The gauge, which closely correlates to the Institute for Supply Management's report on national manufacturing due on Monday, mirrored strong gains in measures of factory activity in other regional surveys reported last week.

In a third report, the National Association of Realtors said its pending home sales index, which is based on signed contracts to buy previously owned houses, rose 3.5 percent last month to 92.2. It was the second straight month of gains and beat market expectations for a 2 percent increase.

Rattner also agreed to be banned from appearing in any capacity before any public pension fund in New York for five years.

Attorney General Andrew Cuomo announced the settlement, which ends two lawsuits by his office. These had sought to recover at least $26 million from Rattner and permanently bar him from the securities industry in New York.

Rattner is the last major figure to resolve allegations by Cuomo in the attorney general's long-running investigation into alleged wrongdoing in the roughly $130 billion New York State Common Retirement Fund.

Cuomo said he has won eight guilty pleas in the probe, including from former state comptroller Alan Hevesi, and more than $170 million of settlement payments.

The Rattner settlement "resolves the last major action of our multi-year investigation," Cuomo said in a statement. "We have been able to help restore and protect the integrity of the state pension fund."

In a statement released by Cuomo, Rattner said he was pleased to settle, and that the accord "allows me to put this matter behind me. I apologize if during the course of this process there is anything I did that may have made reaching this agreement more difficult."

Cuomo and the U.S. Securities and Exchange Commission had accused Rattner of entering quid pro quo arrangements with the pension fund to win $150 million of business in 2005 and 2006 for Quadrangle Group, the private equity firm he co-founded and worked for at the time. He no longer works there.

Rattner entered a civil settlement last month with the SEC, agreeing to pay $6.2 million and accept a two-year ban from working with an investment adviser or broker-dealer.

Quadrangle, Rattner and Rattner's lawyer were not immediately available for comment on Thursday.

Cuomo will become New York's governor on January 1.

(Reporting by Jonathan Stempel in New York; Additional reporting by Nadia Damouni, editing by Dave Zimmerman)

The 3-year-old online discount coupon company raised the funds, according to a regulatory filing on Thursday, after reports last month that it was in talks to sell itself to Google Inc for up to $6 billion.

Had the talks been successful, it would have been Google's biggest acquisition.

Groupon did not disclose the names of the investors. Company executives could not be reached for a comment.

The bulk of the funds raised -- $344.5 million -- will be used to buy back stock from existing shareholders, the company said in a filing with the U.S. Securities and Exchange Commission.

Its shareholders include Chief Executive Andrew Mason and Digital Sky Technologies, which also is an investor in Facebook.

"That is a nice little chunk of change," said Justin Byers, head of business intelligence for VC Experts, a firm that follows investments in private companies.

Analysts estimate it has annual revenue ranging from $500 million to $2 billion. It sends members daily e-mails with discounts from local merchants. The discounts are activated when a certain number of people agree to make a purchase.

(Reporting by Jim Finkle; Editing by Derek Caney)

Initial claims for state unemployment benefits fell 34,000 to a seasonally adjusted 388,000, the lowest reading since early July 2008, the Labor Department said on Thursday. That was well below economists' expectations for 415,000.

The prior week's claims figure was revised modestly up to 422,000 from the previously reported 420,000. A Labor Department official said there was nothing unusual in the state-level data and described the report as clean.

"This adds to the idea that the jobs picture is improving ... this is another feather in the cap of the idea of recovery," said Adam Sarhan, chief executive of Sarhan Capital in New York.

U.S. Treasury debt prices, already soft before the data, lost more ground, while the dollar pared losses against the yen. S&P stock index futures trimmed losses.

The four-week average of new jobless claims, considered a better measure of underlying labor market trends, fell 12,500 to 414,000, the lowest level since the week ending July 26, 2008.

The steady decline in claims in recent weeks likely indicates the pace of job creation picked up this month, after the Labor Department's non-farm payrolls report showed employers added a paltry 39,000 jobs in November.

The December employment data is due on January 7, and a preliminary Reuters survey shows economists expect non-farm payrolls increased 126,000 this month, but still not enough to significantly reduce the unemployment rate, which is expected to have edged down to 9.7 percent from 9.8 percent in November.

The claims data also showed the number of people still receiving benefits under regular state programs after an initial week of aid rose 57,000 to 4.13 million in the week ended December 18, above market expectations for 4.10 million. The prior week's figure was revised slightly up to 4.07 million.

The so-called continuing claims data covered the survey week for the December employment report's household survey from which the unemployment rate is derived.

The jobless rate is likely to remain elevated as the improving labor market and general economic conditions lure discouraged job seekers back into the labor force.

The number of people on emergency unemployment benefits fell 77,741 to 3.71 million in the week ended December 11, the latest week for which data is available.

A total of 8.87 million people were claiming unemployment benefits during that period under all programs.

Initial claims for state unemployment benefits fell 34,000 to a seasonally adjusted 388,000, the lowest reading since early July 2008, the Labor Department said on Thursday. That was well below economists' expectations for 415,000.

The prior week's claims figure was revised modestly up to 422,000 from the previously reported 420,000. A Labor Department official said there was nothing unusual in the state-level data and described the report as clean.

The four-week average of new jobless claims, considered a better measure of underlying labor market trends, fell 12,500 to 414,000, the lowest level since the week ending July 26, 2008.

The steady decline in claims in recent weeks likely indicates the pace of job creation picked up this month, after the Labor Department's non-farm payrolls report showed employers added a paltry 39,000 jobs in November.

The December employment data is due on January 7, and a preliminary Reuters survey shows economists expect non-farm payrolls increased 126,000 this month, but still not enough to significantly reduce the unemployment rate, which is expected to have edged down to 9.7 percent from 9.8 percent in November.

The claims data also showed the number of people still receiving benefits under regular state programs after an initial week of aid rose 57,000 to 4.13 million in the week ended December 18, above market expectations for 4.10 million. The prior week's figure was revised slightly up to 4.07 million.

The so-called continuing claims data covered the survey week for the December employment report's household survey from which the unemployment rate is derived.

The jobless rate is likely to remain elevated as the improving labor market and general economic conditions lure discouraged job seekers back into the labor force.

The number of people on emergency unemployment benefits fell 77,741 to 3.71 million in the week ended December 11, the latest week for which data is available.

A total of 8.87 million people were claiming unemployment benefits during that period under all programs.

The S&P 500 .SPX is heading for its best December in nearly two decades. The index has gained 6.7 percent so far this month and rose in 17 of the last 20 sessions.

Volumes, however, were expected to remain thin due to the year-end holiday period.

The Chicago Purchasing Managers Index (PMI), due at 1445 GMT (9:45 a.m. ET), is likely to give the market some direction.

The index has been running hotter than most other manufacturing indicators but the gap is expected to have narrowed a bit in the December reading, with analysts forecasting a drop to 61.0 from 62.5 the month before.

Other data likely to be closely watched include pending home sales for November, which is expected to show a slight dip, and weekly jobless claims which is seen extending a seasonal slide heading into the last week of December.

In company news, U.S. health regulators have approved Endo Pharmaceuticals Holding Inc (ENDP.O) and ProStrakan Group PLC's (PSK.L) Fortesta testosterone gel to treat men with low levels of the hormone.

Lockheed Martin Corp (LMT.N) and the U.S. unit of Australia's Austal Ltd (ASB.AX) won U.S. Navy contracts potentially worth more than $3.5 billion each to design and build up to a combined total of 20 coastal combat ships through 2015.

A blizzard in the U.S. Northeast this weekend postponed about $1 billion in holiday retail sales by keeping shoppers away from stores in the days after Christmas, research firm ShopperTrak said.

In Europe, the pan-European FTSEurofirst 300 .FTEU3 index of top shares was slightly weaker in early trade, pausing for breath following a rally in December which has put equities on track to post their biggest monthly rise in 17 months.

(Reporting by Harpreet Bhal; Editing by Mike Nesbit)

Going from strength to strength, copper scaled a fresh peak at $9,540.75 a tonne, while U.S. crude oil held within a whisker of a 2-year high near $92 a barrel, reflecting growing optimism for global growth.

For now, investors seemed to be cheering prospects for a stronger U.S. recovery in 2011 and ongoing strength in Asia, while shrugging off the risk of more interest rate hikes in emerging economies like China as they deal with inflation and any flare up of the euro zone sovereign debt crisis.

A private survey on Thursday showed China's vast manufacturing sector continued to expand strongly toward the year-end, albeit at a slightly slower pace than in November.

Overall, analysts believe 2011 will be another positive year for equities, particularly as ultra-low interest rates in major economies mean there will be plenty of cash looking for better returns.

"While GFC (global financial crisis) aftershocks will continue to cause volatility and shares are becoming vulnerable to a short term correction in January after several months of very strong gains, shares are likely to put in good gains through 2011 as a whole," said Shane Oliver, head of investment strategist at AMP Capital Markets.

MSCI's index of Asia Pacific stocks excluding Japan .MIAPJ0000PUS rose 0.6 percent, and was up almost 15 percent this year.

This compared with a rise of 10 percent for the MSCI World stock index .MIWD00000PUS, 13.5 percent for the MSCI America index .MIAM00000PUS and a paltry 1.3 percent for European stocks .MIER00000PUS.

South Korea's KOSPI .KS11 rose 0.4 percent, closing the year some 22 percent higher, while Indonesia's IDX Composite index .JKSE, the region's star performer, advanced 0.4 percent on Thursday, chalking up a whopping 47 percent for this year.

In contrast, Japan's Nikkei .N225 fell 1.1 percent as investors sold some of the major exporters like Toyota Motor (7203.T) on a firmer yen. The index ended the year down about 3 percent, making it one of the worst performers in the region.

"The recent advance of the yen has been a bit unexpected and clearly having a negative psychological impact on share prices," said Takashi Ohba, a senior strategist at Okasan Securities.

Market participants, however, believe Japanese stocks are undervalued compared with other developed markets, suggesting scope for the laggard to make up some lost ground in 2011.

Many Asian markets including Japan, South Korea, Thailand, Indonesia, the Philippines and Malaysia will be shut on Friday, while others like Australia will have half-day sessions.

DOLLAR WILTS

The yen rose to highs not seen since November 9 as the dollar fell across the board after traders took a steep decline in U.S. Treasury yields overnight as a signal to sell the greenback.

In a filing late Wednesday with the U.S. International Trade Commission, Sony said LG violated U.S. trade rules by importing mobile phones and modems that infringed Sony patents.

Sony said LG also infringed patents of some of its licensees, including its Sony Ericsson joint venture, Samsung and Nokia.

The company filed a related complaint with the federal court in Los Angeles, court records show. A copy of that complaint was not immediately available.

LG spokesman John Taylor said in an email that it is company policy not to discuss pending litigation.

Sony said the patent infringement relates to more than 10 phones including the Encore, LG Accolade, Neon, Quantum, Rumor Touch and others.

The patents in the suit involve audio and microphone devices in phones, caller ID technology and transmission power.

LG, South Korea's fourth-largest conglomerate, this month said it is trying to expand its major businesses, including smartphones, and on Tuesday said it wants to raise 2011 sales by 11 percent to 156 trillion won ($135 billion).

Since October, LG has sold 2 million units of the Optimus One smartphone, its most popular smartphone model to date.

Sony reported an operating profit of 68.7 billion yen ($847 million) in the three months ended September 30, reversing a loss the previous year.

The ITC case is In re: Certain Mobile Phones and Modems, U.S. International Trade Commission, No. 337-TA. The California case is Sony Corp. v. LG Electronics USA Inc. et al, U.S. District Court, Central District of California, No. 2:10-09967.

(Reporting by Liana B. Baker; Editing by Phil Berlowitz)

The snowstorm shut roads and canceled flights in New York City and created havoc across the Northeast, where shopper traffic was 11.2 percent below ShopperTrak's expectations for Sunday December 26 and off 13.9 percent on Monday December 27.

The firm said sales for the entire November and December holiday period are on track to be up 4 percent, helped by strong sales in November and December 23, a particularly heavy day for shopping before Christmas.

It expects consumers who stayed home because of the snowstorm will venture out and shop more in the coming days.

"While we do think there will be some retail strength later this week and into the weekend as folks begin to dig out, it will be interesting to see if levels recover in time to boost December sales and the overall holiday shopping season," ShopperTrak co-founder Bill Martin said in a statement.

Other analysts agreed that the blizzard, which dropped 20 inches of snow on Central Park in New York City and more in suburban areas, should only put a small dent into holiday season.

International Council of Shopping Centers chief economist Michael Niemira told Reuters the snowstorm could lower the December sales growth rate by 0.5 percentage point, though some purchases may show up in January.

Scott Bernhardt, the chief operating officer of Planalytics, put the hit at 0.25 percentage point, saying that people will eventually go to malls to redeem gift cards and exchange gifts, which they normally do on December 26 and the following days.

While the gift cards themselves don't generate new sales, customers often end up buying more items when they redeem gift cards or exchange gifts they didn't like.

Shares tracked by the Standard & Poor's Retail Index rose 0.4 percent on Wednesday, slightly better than a 0.3 percent increase for the wider stock market. The retail index is trading close to a 3-1/2 year high reached earlier in December on hopes a strong holiday season will add momentum to consumer spending into 2011 and propel an economic recovery.

Most analysts and research firms are expecting holiday retail sales to improve from 2009's sales.

The National Retail Federation sees holiday sales up 3.3 percent, compared with a 0.4 percent increase last year and a 3.9 percent fall in 2008 due to the financial crisis.

Online sales were up 13 percent to a record $30.8 billion for the November 1 to December 26 holiday period, data company comScore said later on Wednesday.

SALES OFF BEFORE BLIZZARD

U.S. retail sales fell 4.1 percent in the week ending on Christmas Day, according to ShopperTrak, largely because December 26 fell on a Sunday this year and was not included in the week's sales.

China, which produces about 97 percent of the global supply of rare earth minerals, cut its export quotas by 35 percent for the first half of 2011 versus a year ago, saying it wanted to preserve ample reserves. It also cautioned that it has not decided on the quotas for the second half of the year.

The little-known class of 17 related elements is used in numerous electronic devices and clean energy technology.

A European Commission spokesman said the European Union "notes the latest quota figures and expects China to respect its recent assurance of a guarantee of rare earth supplies to Europe." The United States, which earlier this month threatened possible World Trade Organization action over Chinese rare earth export restraints, voiced concern on Tuesday as well.

While Japanese giant Sony said China's move represented a hindrance to free trade, for other companies the Chinese action provided a boost.

Shares of Lynas Corp, which owns the world's richest known non-Chinese deposit of rare earth minerals, jumped more than 10 percent even though it will be at least a year before it is capable of mining any material from a new lode in Australia.

Other rare earth companies, including China Rare Earth Holding Ltd, Arafura Resources, Alkane Resources and Greenland Minerals and Energy Ltd, also gained between 8 percent and 10 percent.

Shares in Colorado-based Molycorp closed Wednesday's session on the New York Stock Exchange up 6.76 percent at $49.30. That was its second-highest close ever and represented a nearly 400 percent jump from the company's initial public offering price of $14 in July.

Molycorp owns a rare earth mine in Mountain Pass, California, which is scheduled to resume production next year after a 10-year hiatus.

"Any reductions China makes in its 2011 exports versus 2010 levels will only exacerbate the global supply shortfall of rare earths we can expect in 2011," Molycorp CEO Mark Smith said in a statement.

U.S. makers of high-tech products such as Apple Inc's iPads and various Japanese companies have been scrambling to secure reliable supplies of the minerals outside of China as Beijing steadily reduces export allocations.

While Sony does not import or buy rare earth elements directly, the minerals are crucial for the production of components used in its finished products. These include magnets, condensers, and abrasives for polishing LCD glass, company spokeswoman Ayano Iguchi said.

SONY MULLS OPTIONS

Sony, maker of Bravia brand flat TVs, Vaio PCs and the PlayStation 3 videogame console, will look for ways to cut its use of rare earth elements, including developing alternative materials, Iguchi said.

"We cannot welcome rare earth export controls or any restrictions that hinder the system of free trade," Sony said in an e-mail statement in response to questions by Reuters.

Interval Licensing LLC, a small research company set up by Allen in 1992, originally filed a broad patent suit in federal court in Seattle in August, but Judge Marsha Pechman dismissed it on the grounds that it did not specify any actual products or devices. The revised suit was filed by Interval on Tuesday.

Allen, who co-founded Microsoft with Bill Gates in 1975, claims Interval was central to research and development of technology in the Internet arena in the 1990s, amassing more than 300 patents and providing research assistance to Google.

In the suit, Allen's firm claims four of its patents -- chiefly related to the way Web data is sorted and presented -- have been infringed by a number of successful companies.

The first patent concerns the generation of data related to information being browsed. Interval claims Google uses this technology to match advertisements from third parties to content being displayed, while AOL's sites use it to suggest items related to news stories.

Interval claims Apple's iTunes service uses the technology to suggest music based on a user's searches, and that eBay Inc, Facebook, Netflix, Yahoo Inc and Office Depot's sites have also infringed the patent in the way they direct users to related content.

The second and third patents concern relaying information on a computer screen in a peripheral, unobtrusive manner, such as in an instant messaging box or overlay.

Interval claims its patent has been infringed by features in AOL's Instant Messenger, Apple's Dashboard, Google Talk and Gmail Notifier, Google's Android phone system and Yahoo Widgets.

The fourth patent concerns alerting web browsers to new items of interest based on activity of other users. Interval claims AOL uses this technology on its shopping sites, while Apple's iTunes uses it to recommend music.

Interval claims eBay, Facebook, Google, Netflix, Office Depot, Staples Inc, Yahoo and Google's YouTube all have infringed the patent in the way they suggest content to users.

Interval has asked the court for damages and a ban on products that use the disputed patents.

The case is C10-1385 MJP in the U.S. District Court Western District of Washington at Seattle.

(Reporting by Bill Rigby; Editing by Derek Caney)

European stocks inched higher in early trade, mirroring gains in Asia and on Wall Street and adding to their sharp December rally, but the rise was limited by a drop in mining shares as heavy rains disrupt Australian coal exports.

Investors will keep an eye on the fixed income market on Wednesday, as U.S. Treasuries prices fell broadly and some maturities were on track for their worst monthly performance in years after an auction of 5-year notes drew dismal demand.

Oil steadied above $91 a barrel on Wednesday ahead of U.S. inventory data expected to show a drawdown in crude and distillate stocks due to severe weather in the world's largest oil user.

The dollar stabilized on Wednesday after a spike in U.S. Treasury yields helped it recover from a sharp loss against the euro in a yo-yo session the previous day marked by thin year-end flows.

SAP AG (SAPG.DE) must pay Oracle Corp (ORCL.O) prejudgment interest on a recent $1.3 billion copyright infringement verdict, but not at the formula suggested by Oracle, according to a judge's ruling filed on Tuesday.

Shares of rare earths prospectors soared on Wednesday after China cut export quotas, threatening to reduce already tight global supplies and risking action from the United States at the World Trade Organization.

Private equity company Blackstone Group (BX.N) has joined the bidding for Australian shopping-center owner Centro Properties Group's (CNP.AX) asset portfolio, the Wall Street Journal reported on Tuesday.

Starbucks Corp (SBUX.O) denied Kraft Foods Inc's (KFT.N) claim that the packaged food maker performed "exceptionally well" under an agreement to sell Starbucks' packaged coffee, court documents showed.

The Dow and S&P 500 rose in light trading on Tuesday, extending December's rally, as cold weather in the Northeast lifted oil prices and energy shares.

The Dow Jones industrial average .DJI was up 20.51 points, or 0.18 percent, at 11,575.54. The Standard & Poor's 500 Index .SPX was up 0.98 point, or 0.08 percent, at 1,258.52. The Nasdaq Composite Index .IXIC was down 4.39 points, or 0.16 percent, at 2,662.88.

(Reporting by Blaise Robinson; Editing by Jon Loades-Carter)

Oracle had sought more than $211 million in interest after winning a high stakes trial in an Oakland federal courtroom last month.

SAP argued in court filings that it shouldn't have to pay any interest. However, Europe's top software maker asked U.S. District Judge Phyllis Hamilton to use a different methodology should she decide interest was necessary.

Hamilton endorsed SAP's formula on Tuesday, though she did not specify the amount SAP would pay.

In its own court filing, SAP pegged the number at roughly $16.5 million.

"While we believe that Oracle should only be awarded damages, we appreciate that the Court agreed with SAP on the proper calculation of interest in this case which dramatically lowered the amount," a spokesman for SAP said in an emailed statement.

A representative for Oracle declined to comment.

The case in U.S. District Court, Northern District of California is Oracle USA, Inc., et al. v. SAP AG, et al, 07-1658.

(Reporting by Dan Levine; Editing by Phil Berlowitz, Gary Hill)

The dollar was steady after a sharp reversal against the euro in an erratic previous session, while the Swiss franc held near a record high against both the dollar and the euro as investors sought refuge from euro zone debt.

A weaker dollar had lifted demand for commodities priced in the U.S. currency, and London Metal Exchange copper rose to a record $9,437.50 a tonne on Wednesday, boosted also by a stoppage at a key port in major producer Chile.

Copper's strength failed to support mining giants Rio Tinto (RIO.AX) and BHP Billiton (BHP.AX), which both fell more than 1 percent as heavy rain disrupted mining and shipping operations. China's Christmas Day interest rate rise also prompted investors to fret about weaker demand for industrial metals, but analysts said the impact was likely to be short-lived.

"The Chinese rate rise was key but it appears it is more about curbing inflation and demand for base metals will not fall sharply," said Ben Potter, research analyst at IG Markets.

Tokyo's Nikkei .N225 rose 0.5 percent, despite the stronger yen that hurt some big exporters such as Canon Inc (7751.T). The Nikkei has risen nearly 10 percent in the final quarter of 2010, although it is down 2 percent for the year.

With shares trading around 1.1 times book value, Japan remains one of the cheapest developed markets after debt-hit Ireland, Greece and Italy.

"There is no solid reason to sell Japanese shares actively as the outlook for the market is still bright," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS was also up 0.5 percent and has risen more than 13 percent this year. Australia's benchmark .AXJO underperformed the region to end flat as the big miners weighed.

Australia's Lynas Corp (LYC.AX), which owns the richest known deposit of rare earth outside China, rose 10.8 percent after China, which produces 97 percent of the minerals, cut it export quotas. Rival Arafura (ARU.AX) rose 11.1 percent.

DOWNBEAT DATA

U.S. shares eked out gains on Tuesday on strength in oil majors such as Chevron (CVX.N) and Exxon Mobil (XOM.N), although downbeat consumer confidence data kept gains in check. The Dow Jones industrial average .DJI gained 0.2 percent and the broader S&P 500 .SPX was up 0.1 percent.

Foreign exchange trading was typically choppy in thin year-end trade, when light volumes can cause exaggerated moves from modest flows of funds.

A spike in U.S. Treasury yields boosted the allure of the U.S. currency, with the dollar index .DXY, which measures its performance against a basket of major currencies, steady around 80.3, off an overnight low of 79.596.

"The market is not driven by factors, but the thin conditions mean there could be more volatile moves," said a trader at a Japanese bank.

Shares of Lynas Corp, which owns the world's richest known non-Chinese deposit of rare earths, -- materials used in high tech and automotive manufacturing -- jumped over 10 percent after China effectively cut its export quotas by 35 percent for the first half of 2011 compared to a year earlier.

Other rare earths companies, including China Rare Earth Holding Ltd, Arafura Resources Alkane Resources and Greenland Minerals and Energy Ltd also gained between 8 percent 10 percent.

"Export quotas continue to be a tool for the Chinese government to limit the export of China's strategic resource,"

Lynas Executive Chairman Nick Curtis said in a statement.

"The growth in the Chinese domestic market coupled with a decrease in production of rare earths in China is a likely cause for the tightening of export regulations," said Curtis, whose company is aiming to start production in about a year.

China, which produces about 97 percent of the global supply of rare earth minerals, warned against basing its total 2011 export quota based on the first half figures.

"Concerned parties should not estimate full-year quotas for rare earth minerals just by looking at the first set of quotas," the Ministry of Commerce said on Wednesday.

Final quotas will take into account domestic production and demand both at home and abroad, according to the ministry.

Demand for rare earths is set to more than double in less than five years, from 120,000 to 250,000 tons by 2015, according to industry estimates.

Prices have surged for these minerals, used in everything from Apple Inc's iPods to fluorescent light bulbs, since authorities in Beijing slashed their rare earth exports by 40 percent this summer, saying China needed them for its economic development.

The U.S. Trade Representative's office was "very concerned" about China's export restraints on rare earth materials and had raised its concerns with China, a spokeswoman said on Tuesday.

Japanese companies, which bore the brunt of China's action, have been scrambling to secure reliable supplies of the minerals.

Last week, Hitachi Metals Ltd signed a joint venture with U.S.-based Molycorp Inc to help ensure a steady supply -- an announcement that sent its shares up 15 percent in a single trading session.

That followed word earlier this month that Sumitomo Corp agreed to invest $130 million in Molycorp Inc to secure a seven-year supply of the materials.

Since debuting in late July at $14, Molycorp's stock price has nearly quadrupled.

Molycorp owns a rare-earth mine in Mountain Pass, California, which is scheduled to come back on line next year.

(Reporting by James Regan; editing by Balazs Koranyi)

The latest data was at odds with other signs suggesting the economic recovery is accelerating and a separate report last week showing consumer sentiment at its highest level since June this month.

The Conference Board, an industry group, said its index of consumer attitudes slipped to 52.5 in December from an upwardly revised 54.3 in November.

The median of forecasts from analysts polled by Reuters was for a reading of 56.0.

Consumers' labor market assessment worsened. The "jobs hard to get" index rose to 46.8 percent in December from 46.3 percent last month, while the "jobs plentiful" index dropped to 3.9 percent from 4.3 percent.

"U.S. consumers are still worried about high unemployment, housing market stagnation and the generally meager growth they've seen so far," said Kathy Lien, director of currency research at GFT in New York.

Financial markets showed a muted reaction to the consumer and housing data, with traders citing very thin post-Christmas trade.

Separate data on Tuesday showed the Standard & Poor's/Case-Shiller composite index of 20 metropolitan areas declined 1 percent in October from September on a seasonally adjusted basis.

It was the fourth straight monthly decline and steeper than the 0.6 percent decrease economists expected. The fall pushed the index 0.8 percent below its year-earlier level, the first year-on-year drop since January.

Some economists cautioned against reading too much into one month's figures and said the surprising drop in consumer confidence doesn't signal a meaningful shift in the outlook for spending.

Optimism about the outlook for the economy has grown in recent weeks after reports on jobless claims, durable goods and consumer spending suggested the economy perked up a bit in the fourth quarter and appears to be entering the new year with a relatively decent amount of momentum.

Economists also expect a tax cut deal recently signed into law by President Barack Obama to lift growth next year by as much as 1 percentage point. The economy is also getting monetary support from the Federal Reserve's planned purchases of $600 billion in government debt.

Despite the consumer confidence data, U.S. retail sales rose in the week before Christmas as shoppers hurried to finish their gift-buying, putting holiday sales on track to hit the high end of estimates.

Data released on Tuesday by the International Council of Shopping Centers and Goldman Sachs showed retail sales rose 4.8 percent for the week ended December 25 compared to the year-earlier period, helped in part by shoppers who could shop all day on Christmas Eve, which was a day off for many given that Christmas fell on a Saturday this year.

(Reporting by Wanfeng Zhou; Editing by Neil Stempleman)

The Valencia, California-based company said it was informed on Monday that the U.S. Food and Drug Administration would not make a decision on whether to approve the product, a whistle-sized inhaled insulin device, by its December 29 deadline.

MannKind, whose founder and biggest shareholder is Alfred Mann, an 85-year-old entrepreneur who made his fortune developing solar cells, insulin pumps and implantable technology to help hearing, has plenty of detractors.

As of November 30, roughly 24 percent of the company's regularly traded shares were held "short" by investors betting the stock will fall.

The device, known as Afrezza, has already been turned back once by the FDA, which said in March it would not approve the product until it had received more information. The company believes it has provided that information.

In July, the FDA accepted a resubmission on the product, and it was due to make its decision by Wednesday.

MannKind's shares rose 6.4 percent to $8.48 in premarket electronic trading.

(Reporting by Toni Clarke and Esha Dey, editing by Dave Zimmerman)

* Japanese factory output rose for the first time in six months in November, and manufacturers expect to boost production in coming months, suggesting that firm demand in Asia will help the economy resume a recovery early next year.

* Economic data expected for Tuesday include the S&P/Case Shiller home prices indexes for October at 9 a.m. 1400 GMT and consumer confidence for December at 10 a.m. 1500 GMT.

* "We have some economic data today in which we should see a new burst of consumer enthusiasm as consumer confidence jumps up," said Peter Cardillo, chief market economist at Avalon Partners in New York.

* "Japan production rose, another good sign for the global economy. So the rally should continue right up until the new year and into the new year based on stronger economic growth both domestically and globally in 2011."

* Trading volumes, already light for the holiday season, were expected to remain thin as the northeastern United States digs itself out from a blizzard that disrupted air and rail travel at the end of the busy Christmas weekend.

* The blizzard pushed oil prices up to just below a more than two-year high struck the previous session with U.S. crude for February up 40 cents at $91.40 a barrel.

* S&P 500 futures rose 2.8 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 19 points, and Nasdaq 100 futures added 3.75 points.

* Inhaled-insulin developer MannKind Corp (MNKD.O) said the U.S. health regulator would not be able to complete the review of Afrezza by December 29 and would require about four more weeks.

* Nasdaq OMX Group (NDAQ.O) is considering a second stab at setting up a market in Japan with the Osaka Securities Exchange (8697.OS), hoping to attract investors from emerging Asian economies, domestic media reported.

* Shares in Japan and China eased on Tuesday as concerns that further Chinese monetary policy tightening will cool the engine of world economic growth.

* European shares rose on Tuesday, with Alcatel-Lucent (ALUA.PA) leading gains in the technology sector after it agreed to settle a bribery case, though volumes were low as the London equity market remained closed. .EU

* Wall Street erased losses and ended little changed on Monday as investors shrugged off the surprise weekend interest rate hike from China's central bank.

(Reporting by Chuck Mikolajczak; Editing by Padraic Cassidy)

It is the first major purchase by Japan's No.2 life insurer since its $11 billion stock market debut in April, and is another deal for Australia's $1.2 trillion wealth management sector, which is growing thanks to compulsory private pension schemes.

While Dai-ichi did not raise any money through its IPO, it said it would use it as a springboard to push into overseas markets to address concerns about its growth prospects in Japan, where the population is shrinking.

It will pay A$4.00 per share for all the shares it does not own in Tower Australia, a 47 percent premium over Tower's latest closing price. Dai-ichi is currently the biggest shareholder in the midsized life insurer, with a 29 percent stake.

"This is a positive move," said Ryosuke Okazaki, chief investment officer at ITC Investment Partners in Tokyo.

"Top management is being decisive and if it did not take steps like this there wouldn't have been any point to it becoming a listed company."

The buyout ranks as the Japan's third biggest insurance acquisition after Tokio Marine Holdings, Japan's No. 2 non-life insurer, spent $4.7 billion to buy U.S. insurer Philadelphia Consolidated and 442 million pounds to buy Lloyd's of London insurer Kiln Plc.

Overseas acquisitions made by Japanese insurers hit a peak in 2008 with 547 billion yen worth of deals struck. This year there has been 109 billion yen worth of transactions made.

Dai-ichi said the deal will increase the amount of net profit derived from overseas to 9 percent from 3 percent. It had 55.6 billion yen net profit for the year ended March 2010.

Dai-ichi also has minority stakes in Ocean Life Insurance Co in Thailand and Star Union Dai-ichi Life Insurance Co in India.

AUSTRALIAN MARKET

Australia's wealth management sector is the world's fourth-largest and has recently seen much M&A activity, with Australian wealth manager AMP and French insurer AXA SA launching a new $13.1 billion-plus bid for AXA Asia Pacific last month.

Private equity firm Kohlberg Kravis Roberts & Co offered $1.7 billion for wealth manager Perpetual, although the deal fell through this month.

Tower Australia's principal activities include life insurance, funds management, superannuation, financial planning, and investment management.

Dai-ichi's shares rose 2.1 percent to 133,600 yen in Tokyo after the Nikkei business daily first reported the deal earlier on Tuesday.

"The recent European proposals for reform of the economic governance of the euro area go in the right direction, but are not ambitious enough to ensure a healthy and efficient functioning of monetary union," Mersch said in a statement.

Firstly, excessive deficit procedures should have a faster trigger, with sanctions applied early and "quasi-automatically," he said. Secondly, greater emphasis should be put on national debt levels, he added.

The sovereign debt crisis had its roots in the fact that euro zone countries were unable to properly monitor each others' economic policy, and procedures should be put in place to correct that, Mersch added.

"Beyond these new mechanisms, whose activation should also occur only in exceptional circumstances and under strict compliance, it is crucial that states should learn from this crisis by intensifying their efforts to consolidate," Mersch said in a new year statement as president of Luxembourg's central bank.

(Reporting by Robert-Jan Bartunek and Pete Harrison)

The euro spiked against the dollar, although market players attributed its strength to technical factors in light holiday trade, and oil edged up near a 26-month high as a snow storm in the U.S. northeast underpinned demand expectations.

Data from Japan showed factory output rose for the first time in six months in November and a survey of manufacturers revealed they expected to boost production in the coming months to meet firm demand from the rest of Asia.

"Data in recent weeks have been supportive of the stocks and commodity markets globally," said David Cohen, director of Asian economic forecasting at Action Economics.

"The U.S. will avoid a double-dip. The Asian region including Japan looks a little bit better, with its industrial production finally showing an increase."

But despite some positive signs on the outlook, investors entering thin year-end trading remained concerned about Chinese monetary policy tightening in the months ahead.

The timing of China's Christmas Day interest rate rise may have surprised but the move itself did not, with Chinese leaders pledged to make fighting inflation a priority in 2011.

World shares mostly fell on Monday in response to the move, as investors fretted that tighter monetary policy would moderate the growth that many are relying on to support the global economic recovery.

On Tuesday, MSCI's broadest index of Asia shares outside Japan, which is up nearly 13 percent for the year, rose 0.1 percent.

But Shanghai shares fell 1 percent, after a 2 percent drop the previous day, and Tokyo's Nikkei shed 0.6 percent.

"Investors locked in profits as Shanghai shares fell in late trade yesterday," said Kazuhiro Takahashi, general manager at Daiwa Capital Markets. "They didn't want to buy further as uncertainty remained for Chinese shares."

With Australian markets closed for a holiday the main stock gains in Asia were in South Korea, where the benchmark index rose 0.6 percent, led by a 1.7 percent rise for Samsung Electronics.

U.S. stocks finished little moved on Monday, with the Dow Jones industrial average down 0.2 percent but the Nasdaq Composite 0.1 percent firmer.

EURO JUMPS

The euro rose sharply as bears who had been betting on further weakness due to worries about the continent's sovereign debt crisis were forced to abandon their positions.