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HONG KONG (Reuters) � Asian stocks edged up while the yen rose to a 15-year high on Tuesday ahead of a decisive vote in Japan, leaving unclear whether a rally that lifted global equities to the highest in four months can stay alive.

The yen has for the past few years been a gauge of investors' distaste for risk-taking, rising when the need for stability is high. For a yen PDF, click http://ping.fm/saDu1

Investors though have had mixed signals in September about whether it is the right time to shift out of havens and buy back riskier, higher-yielding assets.

Resilient economic growth out of China and relief that new banking regulations will not unleash a rush to raise equity have gently turned the attention of investors away from uncertainty about the U.S. recovery.

August U.S. retail sales due later could be a reminder though of how much the economy is slowing.

"Although better data in the U.S. and China and the agreement in Basel on new regulations have boosted risk appetite, the moves are already beginning to look exhausted," Mitul Kotecha, global head of foreign exchange strategy at Credit Agricole CIB, said in a note.

"It would be easy to jump on the bandwagon, but after the sharp gains registered over recent days we would suggest taking a cautious stance about jumping into risk trades at current levels."

Japan's ruling party was holding a leadership election on Tuesday that will determine who is Japan's prime minister and could have a big impact on how Tokyo deals with persistent yen strength and deflation.

The U.S. dollar was down 0.4 percent to 83.34 yen after earlier falling as low as 83.23 yen in busy trade.

TOO CLOSE TO CALL

The race between Prime Minister Naoto Kan and party heavyweight Ichiro Ozawa was too close to call, Japanese media surveys showed, ahead of a party conference due to start at 1 a.m. ET. Analysts generally agree an Ozawa victory could cause the yen to weaken, since he is more open to government intervention to stop the currency's 11 percent climb this year.

The U.S. dollar index (.DXY), a measure against six other major currencies, fell 0.2 percent to a one-month low after weakening by the most in two months on Monday, as dealers scooped up yen and Swiss francs.

Japan's Nikkei share average (.N225) led Asia's declining markets, falling 0.2 percent. The strong yen has been a lead weight on Japanese stocks, causing them to underperform other advanced markets.

"While opinion polls have favored Kan, the stock market overwhelmingly would want to see Ozawa win because he is seen to be a more aggressive leader, including his view on currencies," said Kenichi Hirano, operating officer at Tachibana Securities in Tokyo.

The Nikkei has not risen above its 200-day moving average since early May. The U.S. S&P 500 index (.SPX) on the other hand has breached the key long-term indicator three times since May, including overnight. A third failure to stay above the 200-day moving average could trigger a bout of profit-taking.

The MSCI index of Asia Pacific stocks outside Japan was up 0.3 percent (.MIAPJ0000PUS), having fallen for only two days so far in September. The raw materials sector provided the biggest lift, while sectors associated with safety from volatility underperformed, a hopeful sign for equity bulls.

The index is trading at 11.7 times expected earnings a year from now, still way below the five-year average of 13.2 times, suggesting there are still more bargains out there, Thomson Reuters I/B/E/S data showed.

The all-country world stocks index (.MIWD00000PUS) rose for a fifth day to the highest since May 5.

While equity market traders tried to keep a rally going, bond markets could hold a clue on investor sentiment on risk taking.

A precipitous decline in the yield of the 10-year U.S. Treasury note since April paused in September, while investors reloaded on cheap equities and higher-yielding credit. The resumption of declining U.S. yields could be an additional weight on the dollar and a sign of interest in risk taking.

The U.S. 10-year yield was at 2.74 percent, roughly unchanged from where it was late Monday in New York.

Japanese 10-year government bond yields edged up 2 basis points on the day to 1.17 percent, giving way to equity strength.

Oil was steady near a one-month high with the shutdown of the biggest Canada-U.S. pipeline entering a fifth day. U.S. crude for October was trading at $77.25, having earlier touched an intra-day peak at 78.04, the highest since August 11.

(Additional reporting by Aiko Hayashi in Tokyo; Editing by Nick Macfie)

BANGALORE (Reuters) � American International Group Inc (AIG.N) is in talks with U.S. officials to formulate a plan that would speed up the insurer's exit from government ownership, the Wall Street Journal said, citing people familiar with the matter.

The exit plan could be rolled out as early as the first half of 2011 and is designed to repay the U.S. taxpayers in full, the Journal said.

As per the plan, the Treasury department may convert $49 billion in AIG preferred shares it owns into common shares.

This move would increase the government's ownership stake in the insurance company to above 90 percent, from 79.8 percent currently, the Journal said, citing people familiar with the matter.

However, after the conversion, the common shares would be sold off to private investors in a phased manner, a move that would reduce U.S. ownership and potentially earn the government a profit if the shares rise in value, the newspaper said.

"Our objectives remain the same: to repay taxpayers and position AIG over time as a strong, independent company worthy of investor confidence," an AIG spokeswoman told the Journal.

She declined to provide details of the exit plan, the Journal said.

AIG could not immediately be reached for comment by Reuters outside of regular U.S. business hours.

AIG was bailed out by the U.S. government two years ago from near-collapse with a $182.3 billion taxpayer-funded rescue package.

(Reporting by Sakthi Prasad in Bangalore; Editing by Muralikumar Anantharaman)

NEW YORK (Reuters) � Hewlett-Packard Co announced a deal to buy security software firm ArcSight Inc for $1.5 billion in a bid by the world's top personal computer maker to cash in on growing demand for security technology.

The transaction would mark HP's second big acquisition since the departure of CEO Mark Hurd following a sexual harassment probe in August. The deal follows HP's winning of a bidding war against Dell Inc for data storage company 3PAR Inc.

HP said it will pay $43.50 per share in cash for ArcSight, representing a 24 percent premium to its closing price last Friday.

ArcSight shares rose 25 percent to $43.90 in morning trading, with some analysts saying a rival bid was possible. The stock has risen 56 percent since The Wall Street Journal reported on August 26 that ArcSight had put itself up for sale and could be bought by the likes of HP, IBM or Oracle Corp.

"It wouldn't be surprising" Michael Holt, a Morningstar analyst, said about the likelihood of a rival bid. He said ArcSight could fit in a number of "tech titan" portfolios, including Dell.

Cupertino, California-based ArcSight develops software that protects corporate networks from security threats. It serves customers including utilities, government agencies as well as financial services and telecommunications providers.

The deal is the latest in a rash of consolidation in the security technology sector. Last month, Intel Corp agreed to buy McAfee Inc for $7.7 billion. In May, Symantec Corp bought Verisign Inc's payment authentication unit for about $1.3 billion.

HP said on a conference call that buying ArcSight would not materially hurt its earnings per share in fiscal 2011.

Some analysts on the call questioned executives about the high premiums for both ArcSight and 3PAR, both companies beyond HP's core computing business, especially after the departure of Hurd.

HP executives said there was no change to their acquisition strategy and that the company was comfortable with its balance sheet and ability to generate cash.

Hurd left HP after he was accused of falsifying expense reports and concealing a relationship with a female contractor. He has been appointed co-president of Oracle.

HP said it sees the ArcSight deal closing by year-end.

ArcSight's biggest shareholders are Fidelity management which has a stake of almost 15 percent, and Kleiner, Perkins, Caufield & Byers, which has a nearly 11 pct stake, according to Thomson Reuters data.

ArcSight shares were up $8.83 or 25 percent at $43.93 on Nasdaq after the news. Shares in HP were up 7 cents to $38.27 in morning trade on the New York Stock Exchange.

(Additional reporting by Sinead Carew and Jennifer Saba in New York and Sayantani Ghosh in Bangalore)

(Reporting by Liana Baker, editing by Dave Zimmerman)

OSLO (Reuters) � The world's rich countries need to extend initiatives to boost spending and support employment to fix a "dire" labor market that could threaten entire societies, the International Monetary Fund said on Monday.

At a conference co-hosted by the IMF and the International Labor Organization, visiting Spanish Prime Minister Jose Luis Rodriquez Zapatero said high unemployment may trigger a "crisis of confidence" in Europe.

The IMF said more and more workers worldwide were unable to find jobs for longer periods, weakening social cohesion and raising risks of unrest and even undermining democracy.

"The labor market is in dire straits," IMF Managing Director Dominique Strauss-Kahn told the one-day meeting, adding that the Great Recession had left a "wasteland of joblessness." "We must acknowledge that the crisis will not be over until unemployment declines significantly," he said, calling growth and jobs the "most urgent problems."

According to International Labor Organization (ILO) data, 30 million people have lost their jobs since 2007 -- three-quarters of them in the developed world. A further 23 million would be without a job if not for stimulus packages.

The IMF said that extended fiscal stimulus was worth the additional debt if it helped cut long-term unemployment, which imposes an even costlier burden on society as workers get discouraged, lose lifetime earnings or leave the labor market.

PESSIMISM AND STRIKES

Zapatero said longer periods of high unemployment could set off a confidence crisis in the European Union, which has been rocked by high debt and financing fears from Greece to Portugal.

"The worst crisis would be a crisis of pessimism, of a lack of confidence, of resignation. Europe must not fall into that," he said, adding that job training would be the top priority for Spain, where 20 percent of the workforce is without a job.

"We have to bring new oxygen into our democratic institutions," Greek Prime Minister George Papandreou said.

European Commissioner for Employment and Social Affairs Laszlo Andor said 2010 had been an "annus horribilis" for unemployment. "If we fail to act ... 2011 may still turn out to be the annus horriblis for social cohesion."

Ahead of planned strikes in several EU countries, such as France, Greece and Spain, ILO director general Juan Somavia said it was "natural" for trade unions to protest and help "vent steam" in societies hurt by job losses -- but they should also be involved in brokering deals to keep the economy going.

IMF'S CHANGING FACE?

The IMF said that given the extent of the crisis, it now backs schemes to extend unemployment benefits to help maintain demand and morale, and to give short-term incentives to companies to retain more workers but at reduced hours and wages.

Strauss-Kahn defended the IMF's focus on jobs and concerns over the impact of long-term unemployment, saying it was a "misleading caricature" to think that the fund cared only about the austerity cuts usually associated with its programmes.He said unemployment was "about far more than just a pay check."

In developed countries, the jobless had poorer health and their children performed worse at school, while in poorer states unemployment led to violent conflict, "even war," he said.

The ILO estimates some 443 million people will seek to join the global workforce over the next decade, compared with 210 million currently without a job, raising the specter of a "lost generation." Somavia called on governments to extend measures to foster a still "fragile" recovery and jobs.

But Iain Duncan Smith, Britain's Secretary of State for Work and Pensions, disagreed, telling Reuters: "Everyone is throwing out a lot of stimulus, but to lesser and lesser effect."

"We think it's time to start pulling that back," he said. "If it goes on, we will start to squeeze out the private economy so it won't have room to grow."

(Additional reporting by Alister Doyle and Joachim Dagenborg, writing by Wojciech Moskwa; Editing by Ruth Pitchford)

NEW YORK (Reuters) � Shares of financial companies rose in premarket trading on Monday as traders were encouraged by new bank capital rules.

The new requirements, known as Basel III, will demand banks hold top-quality capital totaling 7 percent of their risk-bearing assets, but a long lead-in time eased fears that lenders will have to rush to raise capital.

Bank of America Corp (BAC.N) rose 1.8 percent to $13.80 in premarket trading, while Citigroup Inc (C.N) gained 1 percent to $3.95, and the Select Sector Financial SPDR (XLF.P) was up 1.4 percent to $14.74.

(Reporting by Ryan Vlastelica; editing by Jeffrey Benkoe)

NEW YORK (Reuters) � U.S. stock index futures pointed to a higher open for Wall Street on Monday, with futures for the S&P 500, the Dow Jones industrial average and Nasdaq futures up 0.7 to 0.9 percent by 4:51 a.m. ET.

* Some relief is expected in the banking sector, after regulators gave lenders a longer-than-anticipated transition period to comply with tough new capital requirement rules under Basel III.

* Global regulators agreed on Sunday to force banks to more than triple the amount of top-quality capital they must hold in reserve but gave the lenders transition periods, extending in some cases to January 2019 or later, to comply with the rules.

* Some expectations of a brightening outlook for the economy were bolstered by data on Friday showing U.S. wholesale inventories surged the most in two years in July.

* The Dow (.DJI) and S&P 500 (.SPX) closed the week with their seventh gain in eight sessions in a turnaround period for stocks that has seen investors' worst fears about the economy start to dissipate.

* Data set for release on Monday include August's Federal Budget statement at 2 p.m. ET.

* Later in the week, notable data scheduled for release include U.S. retail sales for August on Tuesday, producer price index figures for the same period on Thursday and August consumer price index (CPI) numbers on Friday.

* In company news, UBS (UBS.N) and Credit Suisse (CS.N) must hold over 20 billion Swiss francs ($19.6 billion) more in capital as a consequence of new international standards, the newspaper NZZ am Sonntag reported, citing experts familiar with the matter.

* Goldman Sachs Group Inc (GS.N) is in the process of shuffling its ranks of partners and could well name as many as 100 executives to the coveted post this year, the New York Times said.

* BP (BP.L) believes compensation claims related to its Gulf of Mexico oil spill will be less than the $20 billion the oil giant has put into an independent claims fund, analysts at Citigroup said, following a meeting with incoming Chief Executive Bob Dudley.

* British defense company BAE Systems (BAES.L) on Monday said it had hired advisors to sell its Platform Solutions business. Sources told Reuters on Saturday that BAE was looking to sell part of its North American commercial aerospace business in an auction that could generate up to $2 billion.

* Hewlett-Packard Co (HPQ.N) is nearing a deal to buy cybersecurity company ArcSight Inc (ARST.O) for about $1.5 billion, the Wall Street Journal reported on Sunday, the latest in a series of tech sector transactions.

* Car rental company Hertz Global Holdings Inc (HTZ.N) struck a sweetened $1.56 billion deal to buy Dollar Thrifty Automotive Group Inc (DTG.N) on Sunday, outdoing a rival bid from Avis Budget Group Inc (CAR.N).

* In Europe, the FTSEurofirst 300 index (.FTEU3) rose to its highest intraday level since late April by mid morning trade, with banks boosted by relief over a long transition period for lenders to comply with Basel III capital requirement rules.

(Reporting by Harpreet Bhal; Editing by Louise Heavens)