Business Blog Posts

TOKYO Reuters Asian stocks rose to a two-week high, with Japans Nikkei briefly rising more than 2 percent, as strong U.S. manufacturing data further soothed worries about the global economy.

The dollar and the yen began the day on the defensive, while commodities gained, helping make materials shares some of the strongest performers across the region as gold steadied after a two-month top hit on Wednesday.

The Institute for Supply Management said its index of U.S. factory activity rose to 56.3 in August from 55.5 in July, much higher than forecast by economists.

Coming on the heels of strong Chinese manufacturing data and stronger-than-expected growth in Australia, the numbers eased investor fears about the pace of global economic recovery and helped Wall Street to its best day in eight weeks. .N

But gains in Asian stocks, which were also boosted by gains in tech shares, appeared capped by wariness about whether the global economy is truly on the path to recovery, as well as concern about closely watched U.S. nonfarm payrolls data on Friday.

"Its too early to say worries about a double-dip recession in the economy have been wiped away just because Chinas PMI, Australias GDP and U.S. data werent bad," said Masahiko Sato, an executive director at Nomura Securities equity marketing department.

"But stocks may become more resilient to poor economic indicators going forward and gain further if money that had shifted to bonds on extreme concern over the economy comes back to equities, early signs of which have likely appeared in U.S., Germany and U.K. bonds after yesterdays data."

The MSCI index of Asia Pacific stocks outside Japan .MIAPJ0000PUS rose 0.8 percent to its highest level since mid-August.

Japans benchmark Nikkei .N225 rose more than 2 percent at one point, moving further away from a 16-month low hit on Wednesday, helped by what some market players said was buying by domestic institutional investors at lows and buying of futures by foreign players.

But the Nikkei pared gains to 1.2 percent by midday. It lost 7.5 percent in August and is down roughly 14 percent on the year.

Seoul shares .KS11 rose 0.3 percent, boosted by tech stocks, with market players saying foreign investors, cheered by the rise on Wall Street, could turn strong buyers.

Australian stocks .AXJO rose 0.8 percent to a three-week high, with miners such as Rio Tinto RIO.AX gaining after copper prices rose to a four-month high.

STEADY DOLLAR

The dollar index, a gauge of the greenbacks performance against a basket of six major currencies, was steady on the day at 82.528 .DXY after falling 0.9 percent on Wednesday, marking its biggest one-day fall in six weeks.

The dollar edged down 0.2 percent to 84.27 yen but still stayed above a 15-year low of 83.58 yen hit last week.

Through the ISM data boosted higher-yielding currencies such as the Australian dollar, investors have now turned hesitant about taking fresh positions ahead of the European Central Banks policy meeting later in the day and Fridays closely watched monthly U.S. job report, a trader said.

Spot gold edged up to $1,246.70 an ounce, after hitting $1,254.65 on Wednesday, its highest since June 28.

Oil held onto most of the previous sessions gain of 2.8 percent after the strong manufacturing data in top consumers the United States and China raised hopes record oil inventories will draw down.

U.S. crude for October delivery was steady at $73.91 a barrel at 0211 GMT after a jump of nearly $2 on Wednesday.

Additional reporting by Aiko Hayashi in Tokyo; Editing Kazunori Takada.

MELBOURNE/HONG KONG Reuters China is stepping up attempts to hamper BHP Billitons $39 billion hostile offer for Potash Corp, amid worries about future supplies of fertilizer it needs to rapidly boost food production.

Chinas state-run Sinochem has hired HSBC to advise it on its options regarding Potash Corp, the worlds largest fertilizer maker, the Wall Street Journal reported in a blog on Wednesday.

Citing a person familiar with the situation, the WSJ said the Chinese companys move is preliminary and doesnt mean it has decided to make a counterbid for Potash.

On Wednesday, a Chinese newspaper reported Beijing was also considering launching an anti-monopoly investigation into the deal.

A Sinochem spokesman in Beijing was not immediately available for comment, while HSBC in Hong Kong declined to comment.

Potash Corp has held discussions with Sinochem, a source close to the matter told Reuters in August.

Sinochems options may be limited due to Canadian government worries. The energy minister of Saskatchewan, Potash Corps home base, said the province would have "lots of concerns" about a Chinese sovereign fund or state-owned company buying part or all of the company.

"Thats where some of the concern would be: having a customer whose interests obviously are to have very low prices," Energy Minister Bill Boyd told Reuters in an interview this week.

QUESTION OF PRICE

If HSBC has snared a mandate with Sinochem, that would be significant as HSBC did not rank within the top 25 mergers and acquisitions advisers worldwide in 2009, while Morgan Stanley was No.1, according to Thomson Reuters data.

Potash Corp shares slipped 0.9 percent on Wednesday to $145.95, while the U.S. market rose, reflecting creeping doubts about the chances of a rival bid emerging.

But the stock was still 12 percent above BHPs offer of $130 a share, with investors holding out for a higher offer.

BHP shareholders on average see $155 a share, or $46 billion, as the maximum BHP should pay for Potash Corp, according to a Reuters poll, while Potash shareholders see $162 a share clinching a deal, according to a separate Reuters poll.

BHP investors do not need to approve the $38.6 billion bid. However under UK listing rules, they would have to vote on a deal if the offer is raised to 25 percent of BHPs total market value.

Based on BHPs market value on Thursday, the offer would have to be hiked to at least $45.3 billion to trigger a vote of its own shareholders.

"Even uncontested, theyll pay too much," said a Melbourne-based fund manager whose fund owns BHP shares. "Once it gets into the $160s, youll get a fairly negative shareholder reaction."

CHINA REACTION

Chinas reaction to BHPs move has also been wary, with Beijing mulling an anti-monopoly investigation into BHPs bid for Potash Corp, China Business News said on Wednesday.

It is not clear what steps Chinese regulators could take against the bid, as BHP does not currently have any potash production, although it is planning to develop the worlds largest potash mine, the Jansen project in Canada.

China buys about 7 percent of the output of Potash Corp, which controls around one-fifth of world production of the key crop nutrient.

"In order to protect Chinese farmers interest, we hope that some big Chinese companies will make a bid," Chen Li, a fertilizer expert at China National Chemical Information Center told Reuters Insider television.

"We believe that China has a few candidates. For instance Sinochem, or Chinese private equity funds, as well as other international companies," she said, adding that money shouldnt be an obstacle.

"If its in the interest of Chinese farmers, the Chinese government and Chinese investment institutions can help out."

COUNTERBIDDERS SCARCE?

Bankers not advising BHP or Potash Corp, such as Morgan Stanley and Australias Macquarie Group, are scrambling to find potential bidders to enter the fray, bankers have said.

Rio Tinto, Brazils Vale and Canadas Teck Resources are all seen as unlikely to get into a bidding war against BHP as they have other priorities or dont have the balance sheet strength.

At $39 billion, some BHP investors are already nervous about the deal and would prefer if BHP returned some of its cash pile to shareholders.

"Ive said since day one, we think its more accretive for shareholders for BHP to return capital. And we dont think diversification for diversifications sake is a reason to buy Potash Corp," said James Bruce, portfolio manager at Perpetual Investments, based in Sydney.

Additional reporting by Megan Davies in NEW YORK and Alison Leung in HONG KONG; Editing by Ed Davies and Lincoln Feast

NEW YORK Reuters Automaker General Motors Co plans to begin courting investors for its initial public offering immediately after the November 2 U.S. midterm congressional elections, two sources familiar with the plans said on Wednesday.

GMs roadshow is set to begin on November 3 and will last two weeks, the sources said. The IPO is expected to price on November 17 and debut on November 18, the sources said.

The sources cautioned that the plans were still being finalized and could change based on how U.S. stock markets perform.

Waiting until after the November 2 elections would also allow bankers to tout GMs third-quarter financial results to investors although the automaker has cautioned that the second half of the year will show a slowdown from the first half.

In August, GM filed paperwork for an IPO that could be worth as much as $20 billion, making it potentially one of the biggest IPOs of all time and the biggest new issue in the United States since Visa Incs March 2008 IPO of $19.7 billion.

The final value of the IPO has not been set but one source said early plans for the IPO envisioned selling $12 billion to $16 billion in common stock and $3 billion to $4 billion in preferred stock that would convert to common stock under a mandatory provision.

GM filed paperwork for its IPO just over a year after emerging from a government-sponsored restructuring in bankruptcy. The U.S. government poured $50 billion of taxpayer money into the carmaker and emerged with a 61 percent stake.

Despite its success in preventing the liquidation of GM and Chrysler that many analysts had feared, the government bailout of the U.S. auto industry has been criticized by Republican lawmakers and proved unpopular with voters.

The Obama administration is eager to cast the GM IPO as a success, but GM executives and government officials have repeatedly denied any political motivation in timing the IPO for the top U.S. automaker so close to the mid-term congressional elections.

Republicans are likely to gain ground when all 435 seats in the U.S. House of Representatives and 37 of the 100 seats in the Senate are up for grabs in the November 2 midterm elections, analysts say.

The high jobless rate is dragging on the Democrats poll ratings and Republicans might win control of the House and probably pick up seats in the Senate.

The Obama administration has pledged to begin selling down its stake in GM as soon as practical and had said that process would begin in late 2010 at the time GM exited bankruptcy last year.

A final decision on how much of its stake in GM the U.S. Treasury will sell in an IPO will be made in consultations led by Treasury Secretary Timothy Geithner and White House economic adviser Lawrence Summers after the terms of the deal are established, sources have said.

GM is waiting for its S-1 filing to be approved by the U.S. Securities and Exchange Commission.

Its shares will trade on both the New York Stock Exchange and the Toronto Stock Exchange since both the U.S. and Canadian governments helped bail it out.

Reporting by Clare Baldwin and Soyoung Kim in New York and Kevin Krolicki in Detroit; Editing by Richard Chang

SAN FRANCISCO Reuters Apple Inc unveiled a smaller, cheaper version of its Web-to-TV device on Wednesday, stepping up a battle with Google Inc and Microsoft Corp for control of the digital living room.

Apple co-founder Steve Jobs also rolled out a completely overhauled lineup of iPod media players and the latest version of iTunes, with a new logo that does away with the outdated image of a CD.

The new Apple TV device, which accesses content from the Internet and plays it on a TV, will sell for $99. It is a quarter the size of the original, which cost $229.

The 4-inch-square device allows users to rent TV shows for 99 cents and first-run films for $4.99. Earlier models, which allowed users to only buy shows, failed to find a major audience.

"Consumers are already terrified of hooking anything up to their televisions, so unless you can make it crystal clear why they should and make it super easy for them to do so, youre limiting yourself to a niche market," said Avi Greengart, research director for consumer devices at Current Analysis.

The biggest shift to iTunes is the introduction of a social networking feature called Ping, which allows users to recommend songs to followers or their chosen circle of friends.

"Its Facebook and Twitter meets iTunes. Its a social network all about music," Jobs said at a presentation to unveil the products on Wednesday.

But the centerpiece of the event for reporters and investors was Apple TV, which the company introduced in 2006 but which never became a big hit.

Jobs once referred to Apple TV as a hobby, but made clear that the company is now ready to seriously focus on marrying the Web to TV, a combination that is also in the sights of some of the worlds most creative and deep-pocketed companies, including Google, Microsoft and Amazon.com Inc.

"Theyre beginning to shift the paradigm for a very entrenched behavior," said Altimeter analyst Michael Gartenberg, who attended the event. "TV viewing hasnt changed that much in 50 years. Theyre trying to shift that behavior the way they shifted phone behavior."

Alongside renting TV shows and movies, Apple TV users will be able to stream content from video rental site Netflix Inc. Netflix shares closed 7.5 percent higher on Nasdaq.

Analysts were lukewarm toward the device, though some saw it as only a small, initial step in a much more ambitious plan.

Apples shares rose almost 3 percent, roughly in line with a broadly higher Nasdaq composite index.

"What they showed was an improvement from what they had before, but its not as far reaching as it could have been," said analyst Daniel Ernst of Hudson Square Research.

Others doubted whether users would pay to rent TV shows on top of their cable bill, and suggested TV networks would be wary of allying with Apple5.

"The content companies have to be careful not to destroy any of the value to their ecosystem because the cable bundle is really valuable and breaking apart content into individual pieces is risky," said Laura Martin, analyst Needham & Co.

Apple said it has struck rental deals with Walt Disney Cos ABC and News Corps Fox. "We think the rest of the studios will see the light and get on board pretty fast," Jobs said.

Rival Google is taking a slightly different path with its latest offering of Google TV, which allows viewers to search and watch programs, DVR recordings and the Internet in one fell swoop.

Some new TVs will come Google TV-ready, though plans are in the works to market a separate stand-alone device in the fall. Google is working with the cable and satellite distributors.

Jobs spent most of his presentation on a snazzier line of its iPod, which dominates the music- and media-player market with 275 million units sold, but has suffered moderating sales in recent years. Jobs has turned his attention toward the iPhone and more recently the iPad, which became an immediate success when it was launched in April.

The company has revamped its product line ahead of the key holiday sales season. Jobs called it the "biggest change in the iPod lineup ever."

But Rodman & Renshaw LLC analyst Ashok Kumar said the new products wouldnt stop his expectations for iPod sales to stop growing after this year as they will be cannibalized by sales of devices such as iPad and iPhone.

"We think this year the iPod category will peak and then start to decline," Kumar said.

The revised iPod shuffle has been updated to include playlists and buttons to navigate the volume, and is smaller than the previous model. Jobs said it would play 15 hours of music, and would come in five different colors at a price of $49.

The nano, the next model up, now includes FM radio and can hold 24 hours of music. It will be priced at $149 for the 8-gigabyte version or $179 for the 16-gigabyte model, Jobs said.

A third revised iPod model, the touch, will include a front camera and is thinner than the current model. It will be priced from $229 to $399 depending on storage, and will be available next week.

Apple stressed the FaceTime video chat function on the touch, and its ability to play games with advanced graphics, a move which puts the device in competition with existing mobile gaming devices such as Sony Corps PSP, Nintendo Cos DS, and the soon-to-be released Microsoft-powered phones that will run some Xbox games.

Writing by Paul Thomasch; Additional reporting by Jennifer Saba, Yinka Adegoke, Sinead Carew in New York, Alex Dobuzinskis in Los Angeles, Poornima Gupta in San Francisco; Editing by Richard Chang

DETROIT/PARIS Reuters Auto sales in the United States and Europe slumped in August, reflecting the end of government subsidies that had propped up demand and underscoring uncertainty about the strength of the U.S. economic recovery.

The monthly auto sales figures reflect one of the first and broadest-based snapshots of consumer demand.

Initial sales figures from major automakers pointed toward a U.S. auto sales rate near 11.5 million vehicles on an annual basis, analysts and industry forecasters said.

That would be up from the 11.3 million sales rate of the second quarter but down sharply from the 14 million-plus in August 2009 when the U.S. governments "cash for clunkers" sales incentives touched off a short-lived boom.

General Motors Co GM.UL, which is readying a stock offering intended to reduce the U.S. governments majority stake in the automaker, posted a 25 percent sales drop for August.

Ford Motor Co F.N reported an 11 percent sales decline, while Nissan Motor Co 7201.T posted a sales drop of 27 percent.

Chrysler, now operating under the control of Fiat SpA FIA.MI, posted a 7 percent sales gain. The No. 3 U.S. automaker has relied more heavily than its rivals on less-profitable fleet operators, led by car rental agencies.

Almost 40 percent of Chryslers U.S. sales through July were to fleet customers, according to industry estimates.

Under Chief Executive Sergio Marchionne, the automaker has declined to disclose that figure, breaking with its larger U.S. rivals GM and Ford.

The U.S. market has failed to deliver the kind of accelerating recovery that most automakers projected heading in to 2010 but major automakers said they saw no sign of a double-dip recession.

"Based on what Im seeing in the industry, I would be very surprised if it happened," said Al Castignetti, head of Nissan brand sales in the United States, who said the Japanese automaker was surprised by the volume of car shoppers at dealerships at the end of August.

The risk of a reversal in the U.S. economic recovery is a potential threat to GMs plans for an initial public offering expected to reduce the U.S. Treasurys nearly 61 percent ownership stake.

GM sales chief Don Johnson said the automaker expected that American consumers would remain "cautious" given a weak job market but that the industry would continue to recover from the 10.4 million vehicle sales of 2009.

"We still see a low risk of any double-dip recession unless theres some unforeseen shock to the system," Johnson said on a conference call.

SALES TUMBLE IN WESTERN EUROPE

French, Spanish and Italian car sales fell, as scrapping incentives are fading or have run out in those markets.

In China, the worlds biggest auto market, passenger car sales jumped almost 60 percent for the month, a sharp improvement from the sales rise seen in July. For a graphic on August car sales in China, Japan, France and Spain, see: http://ping.fm/CXctd

But runaway growth has been tapering in the worlds No. 2 economy since the second quarter as the government tries to stop the economy from overheating, and executives are cautious about the outlook for the rest of the year.

Chinas car sales rose to 977,300 in August, according to the government-affiliated China Automotive Technology & Research Center.

Sales at Indias top three local automakers -- Maruti Suzuki MRTI.BO, Mahindra & Mahindra MAHM.BO and Tata Motors TAMO.BO -- rose between a quarter and a third.

India is one of the fastest growing automobile markets in the world, expanding at 35 percent on average in the first four months of the current fiscal year, data from the Society of Indian Automobile Manufacturers showed.

Auto sales in Japan rose sharply in August, led by Toyota Motor 7203.T, Honda Motor 7267.T and others, as consumers bought before government subsidies expire at end-September.

Japanese automakers are bracing for a hard landing after subsidies disappear. The government has allocated $6.9 billion for the initiative and that pool looks set to run dry in less than two weeks at the current pace of registration.

Sales of new cars, trucks and buses in Japan soared 46.7 percent to 290,789 vehicles, marking the third-biggest monthly rise on record, the Japan Automobile Dealers Association said.

Sales in the U.S. market -- the second-largest behind China in volume but the most lucrative by revenue -- were expected to be just above 1 million vehicles in August.

Additional reporting by Chang-Ran Kim in TOKYO, Miyoung Kim and Hyunjoo Jin in SEOUL, Sonya Dowsett in MADRID, Phil Blenkinsop in BRUSSELS, Antonella Ciancio in MILAN, Gianni Montani in TURIN and Bharghavi Nagaraju in BANGALORE; Editing by Matthew Lewis and Erica Billingham

SAN FRANCISCO Reuters Apple Inc unveiled a snazzier line of its iPod on Wednesday, with new designs for every model of the popular media device in hopes of kick-starting holiday sales.

"Weve gone wild," Apple co-founder Steve Jobs said. "Its the biggest change in the iPod lineup ever."

At a presentation to reporters and investors, Jobs said that to date the company has sold 275 million iPods.

Still, while Apples iPods dominate the music- and media-player market, sales growth has moderated in past years. Jobs has turned his attention toward the iPhone and more recently the iPad, which became an immediate success when it was launched in April.

As a result, the company has revamped its product line ahead of the key holiday sales season. Jobs called it the "strongest lineup of iPods weve ever had."

The revised iPod shuffle, for instance, has been updated to include playlists, buttons to navigate the volume and is smaller than the previous model. He said it would play 15 hours of music, and would come in five different colors at a price of $49.

The nano, another model, now includes FM radio, 24 hours of music. It will be priced at $149 for the 8-gigabyte version or $179 for the 16-gigabyte version, Jobs said.

A third revised iPod model, the touch, will include a front camera and is thinner than the current model. It will be priced from $229 to $399 depending on storage, and will be available next week.

Jobs also announced an update to its operating system, due out next week, saying it was meant to fix bugs on some of its popular mobile devices such as the iPhone 4. He said yet another update would come out in November.

Reporting by Bill Rigby and Noel Randewich; Editing by Richard Chang

WASHINGTON Reuters New powers from the financial reform law will help avoid a repeat of 2008s frenzied sale of Wachovia and the wreckage that followed the collapse of Lehman Brothers, U.S. regulators said on Wednesday.

A commission investigating the causes of the financial crisis was told that the legislation, signed into law in July, gives regulators more options, imposing stricter rules on risk-taking and management at large institutions.

The Financial Crisis Inquiry Commission is holding its seventh public hearing, a two-day session focused on what to do about "too big to fail," firms that are so central to the financial system that their disorderly failure could trigger a global economic meltdown.

"The real question before us is: How did we end up with only two choices - either bail out the banks, or watch our world sink?" said commission Chairman Phil Angelides.

The regulatory reform, known as Dodd-Frank after the chairman of the two committees that hammered out the provisions, was aimed at curbing excessive risk-taking by countering the perception that too-big-to-fail firms enjoy an implicit government guarantee.

"If a systemically significant organization like Lehman needs to be resolved, Dodd-Frank creates a new resolution procedure that should facilitate a more orderly winddown," Thomas Baxter, general counsel of the Federal Reserve Bank of New York, said in written testimony.

But some critics of the legislation argue regulators will still be highly reluctant to let a big financial firm fail.

Wednesdays commission session is focused on the September 2008 bankruptcy of Lehman Brothers, where regulators say they lacked authority to intervene and could not find a buyer, and the government-brokered sale of Wachovia Bank that began later that month.

Former Lehman Chief Executive Dick Fuld will testify later on Wednesday that regulators did not grant Lehman Brothers the same assistance as its competitors, knocking out the possibility of an orderly unwinding of the firm that could have avoided aggravating the financial crisis.

Thursdays session features Fed Chairman Ben Bernanke and Federal Deposit Insurance Corp Chairman Sheila Bair.

The 10-member, congressionally-appointed commission is due to issue its report on the causes of the financial crisis by December 15.

Lehmans collapse was preceded by the government takeover of housing finance giants Fannie Mae and Freddie Mac.

It was followed days later by extraordinary government aid to American International Group as credit markets froze with fear.

Wachovia, burdened with souring mortgages, also found itself unable to raise capital and was bought by Wells Fargo, which beat out a Citigroup bid that would have required government assistance. The FDIC played a major role in that deal, with Bair reaching out to executives in after-hour phone calls.

"September of 2008 will likely be remembered as an epochal period in the history of American finance," Baxter wrote.

He was joined in hailing Dodd-Franks contribution to curbing risk and improving supervision by Fed Board of Governors General Counsel Scott Alvarez and John Corston, a complex institutions expert at the FDIC.

The Fed gets greater powers to regulate systemically important financial institutions under the new financial law, while the FDIC is the agency that would liquidate a firm.

FEDS DEFENSE

Baxter defended the New York Feds actions with respect to Lehman, saying it worked hard with the U.S. Treasury and other regulators to try to save it.

"We did not succeed, but the effort made was serious and determined. We came very close," he said in written testimony.

In the end, Lehman was sentenced to bankruptcy when no buyer for the firm emerged from a series of high pressure meetings at the New York Fed on the weekend of September 14-15. No government assistance was offered.

Baxter hailed Dodd-Frank provisions aimed at forcing systemically important firms like Lehman to have more capital and liquidity, adding that this was "precisely the type of medicine that Lehman needed."

But Harvey Miller, an attorney for Weil, Gotshal and Manges LLP, which represented Lehman in its final days, painted a different picture, saying that Fed and Treasury officials never explained their decision not to aid Lehman.

Miller said the government missed an opportunity to save billions of dollars in lost value when it opted against a government supported wind-down. This may have cost $40 billion to $50 billion up front, but it would have averted $700 billion in market losses in the first week after Lehmans bankruptcy.

"The damages and harm precipitated by the Lehman bankruptcy could have been substantially reduced by innovative actions of the government. Instead, the government miscalculated and the financial system was pushed to the brink of collapse," he said, echoing statements by former Treasury Secretary Henry Paulson.

Fuld, who has testified multiple times in Washington since the firms collapse, again said the government could have acted sooner to defuse the crisis of confidence that led to the storied investment banks downfall.

WAMU VS WACHOVIA

September of 2008 was also marked by the September 25 government seizure of Washington Mutual, a massive bank failure involving $307 billion in assets.

But Corston said WaMus failure, while vastly larger than Wachovias, was easier for the FDIC to deal with.

He said Wachovia was a far more complex institution and the FDIC had little time to prepare for its downfall.

"In the case of WaMu, the FDIC had adequate time to develop strategies and understand the risks associated with those strategies," Corston said.

"In the case of Wachovia, the FDIC wasnt informed until the weekend of its collapse and as a result, had very limited information that could be used to understand the market implications especially in a market that was extremely unstable -- or to develop a resolution strategy."

Robert Steel, a former Treasury official who became CEO of Wachovia in July 2008, offered the panel a blow-by-blow account of the banks collapse in his written testimony.

Reporting by David Lawder and Dave Clarke; Editing by Karey Wutkowksi and Tim Dobbyn

NEW YORK Reuters Private employers unexpectedly cut jobs in August, a report by a payrolls processor showed on Wednesday, delivering another blow to the already faltering economic recovery.

The private sector cut 10,000 jobs in August compared to a revised gain of 37,000 in July, ADP Employer Services said. The July figure was originally reported as a gain of 42,000.

The ADP figures come ahead of the governments much more comprehensive labor market report on Friday, which includes both public and private sector employment and is expected to show job losses driven by the public sector.

"Clearly, last month was a bad month. We already know that. And we know that some of the numbers are clearly going to be bad," said Ned Riley, chief executive officer at Riley Asset Management in Boston.

"Im still very concerned about Fridays report, because of the impact of census workers, but the ADP report doesnt change my thinking about what to expect. Fridays number was already supposed to be significantly on the downside."

Stock index futures trimmed their gains after the ADP report and government bonds initially erased some of their losses before selling off further. The dollar extended its losses versus the yen.

The median of estimates from 34 economists surveyed by Reuters for the ADP report, which was jointly developed with Macroeconomic Advisers LLC, was for a rise of 19,000 private-sector jobs in August.

The ADP release followed a separate report on Wednesday showing the number of planned layoffs at firms fell 17 percent in August from the prior month and hit the lowest level in 10 years.

Employers announced 34,768 planned job cuts last month, down from 41,676 in July, outplacement consultancy Challenger, Gray & Christmas, Inc. said.

It was the first month-on-month decline since April, when planned job losses had hit a seven-year low, and the lowest level since June 2000.

Fridays nonfarm payrolls report is expected to show a fall overall of 100,000 in August, based on a Reuters poll of analysts, but a rise in private payrolls of 41,000.

Economists often refer to the ADP report to fine-tune their expectations for the payrolls numbers, though it is not always accurate in predicting the outcome.

In other data, mortgage applications for home purchasing and refinancing increased last week as interest rates hit a new low, a glimmer of hope for a housing market that has failed to find footing in the absence of government support.

Demand for home loan refinancing rose for a fifth straight week, a development that may provide a much-needed jolt to a flailing economy as it could portend an increase in consumer spending.

Additional Reporting by Ryan Vlastelica

WASHINGTON Reuters U.S. regulators did not grant Lehman Brothers the same assistance as its competitors, knocking out the possibility of an orderly unwind of the firm and aggravating the global crisis, former Lehman Chief Executive Dick Fuld said on Wednesday.

Fuld will tell a U.S. commission investigating the causes of the financial crisis that Lehman proposed to government regulators a menu of options that could have given the investment bank relief and possibly averted its September 2008 collapse

Regulators rejected these options -- including allowing Lehman to become a bank holding company -- but weeks later extended the measures for other Wall Street firms, Fuld said in testimony prepared for the Financial Crisis Inquiry Commission.

Fuld focused on Sunday, September 14, 2008, when he said Lehman was mandated by government regulators to file for bankruptcy before the Asian markets opened the next day.

That same Sunday, the Fed expanded for investment banks the types of collateral that would qualify for borrowings from its discount window, Fuld said.

"Only Lehman was denied that expanded access. I submit, that had Lehman been granted that same access as its competitors, even as late as that Sunday evening, Lehman would have had time for at least an orderly wind down or for an acquisition which would have alleviated the crisis that ensued," Fuld said.

Fuld has testified multiple times in Washington since Lehman filed for bankruptcy on September 15, 2008, touching off a new level of the financial crisis during which credit markets virtually froze.

He is testifying before the Financial Crisis Inquiry Commission, a 10-member congressionally appointed panel, during a two-day hearing exploring "too big to fail" -- the concept that some firms are so important to the financial system that they enjoy implicit government backing.

The FCIC is using the collapse of Lehman Brothers and the government-brokered sale of Wachovia to Wells Fargo as case studies.

Also testifying on Wednesday are Robert Steel, a former Treasury official who became CEO of Wachovia in July 2008; Thomas Baxter, general counsel of the Federal Reserve Bank of New York; and JPMorgan Chase Chief Risk Officer Barry Zubrow.

On Thursday the FCIC will hear from Fed Chairman Ben Bernanke and Federal Deposit Insurance Corp Chairman Sheila Bair.

Reporting by Karey Wutkowski, editing by Dave Zimmerman