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NEW YORK/WASHINGTON (Reuters) � Chinese Premier Wen Jiabao pushed back on Wednesday against U.S. pressure to revalue the yuan, as U.S. lawmakers threatened to penalize China for keeping its currency artificially low.

Wen, who is due to meet U.S. President Barack Obama in New York on Thursday during the U.N. General Assembly, said in a speech to U.S. business officials the yuan exchange rate had no relation to U.S. trade deficits and should not be politicized.

He added that a 20 percent appreciation of the yuan, also called the renminbi, as demanded by U.S. lawmakers would cause many bankruptcies in the Chinese export sector, where firms operate on thin margins.

"The conditions for a major appreciation of the renminbi do not exist," Wen said, adding the appreciation of China's currency demanded by U.S. lawmakers would not bring jobs back to the United States because U.S. firms no longer make such labor-intensive products.

A House of Representatives committee scheduled a vote for Friday on a China currency bill, and a Democratic aide said the full House was expected to vote on the measure next week.

Critics inside and outside Congress say China deliberately undervalues its currency by as much as 25 percent to 40 percent to give Chinese companies an unfair trade advantage, hurting U.S. exports and job prospects.

Obama said on Monday that China had not done enough to raise the value of the yuan, keeping up Washington's tough rhetoric on Chinese policy as U.S. lawmakers planned legislation to punish Beijing.

"It is time for Congress to pass legislation that will give the administration leverage in its bilateral and multilateral negotiations with the Chinese government," House Speaker Nancy Pelosi said in a statement.

"If China allowed its currency to respond to market forces, it could create a million U.S. manufacturing jobs and cut our trade deficit with China by $100 billion a year, with no cost to the U.S. Treasury."

In his speech in New York, Wen said, "I fully believe that all the disputes and friction in China-U.S. trade at the moment can be resolved."

He added that China wanted a "strong and stable U.S., just as the U.S. needs a strong, stable China."

"The main reason for the U.S. trade deficit with China is not the renminbi exchange rate, but the structure of trade and investment between the two countries," he said.

ISSUE GAINING MOMENTUM

U.S. lawmakers have pressed this issue for years with little success, but it appears to be gaining momentum -- and bipartisan support -- six weeks before congressional elections in which the high unemployment rate is the top issue.

The bill being considered was co-sponsored by a Democrat and Republican, and several Republican lawmakers strongly criticized China's currency policy at congressional hearings on the matter last week.

Prospects for action in the Senate, which would also have to approve legislation, is uncertain. Key senators have said time may be too tight since lawmakers hope to leave Washington in just a few weeks to campaign ahead of the November elections.

The U.S. Treasury Department said it would "carefully examine" any proposals put forward by Congress.

Some analysts see pressure for a bill building.

"The momentum is certainly there on the Hill to push this forward before the midterm elections," said Eswar Prasad, a professor at Cornell University. "There is a real prospect on this occasion that heated rhetoric will get translated into substantive legislative action."

China's central bank said in June it would loosen a peg against the dollar and let the yuan fluctuate more freely. Since then it has risen 1.8 percent against the dollar.

That makes the yuan an easy target for U.S. politicians eager to address high unemployment in an election year.

EXPORT SUBSIDY

The proposed legislation, which is certain to irritate Beijing, would essentially treat China's "undervalued" currency as an export subsidy and allow the Commerce Department to impose countervailing duties to offset the undervaluation.

U.S. companies applying for the duties would have to show they have been injured by China's exchange rate practices.

Congressional aides said the bill did not guarantee the United States would apply countervailing duties against undervalued currencies, but eliminates a hurdle that has blocked the Commerce Department from doing that in the past.

"This bill is being advanced in the absence of effective action on a multilateral basis," House Ways and Means Committee Chairman Sander Levin said as he announced his panel would take up the bill.

"Hopefully the concrete step of this bill can spur efforts leading to the kind of multilateral structure needed to address major currency imbalances," he said in a statement.

Both Obama and his predecessor, President George W. Bush, pushed China to move to a more market-oriented exchange rate. But the results have not come fast enough for American lawmakers who blame the huge U.S. trade deficit with China for the loss of manufacturing jobs.

"It is very important that our companies face a level playing field around the world and that's why it's so important that we continue to try and encourage China to let their exchange rate reflect market forces and to end practices that discriminate against U.S. companies," U.S. Treasury Secretary Timothy Geithner told lawmakers on Wednesday.

In a strongly worded statement on Tuesday, China's Foreign Ministry told Washington to stop pointing its finger at Beijing over the yuan and focus instead on fixing its fragile economy.

(Additional reporting by Emily Kaiser; Editing by Peter Cooney)

TORONTO (Reuters) � Potash Corp (POT.TO) said on Wednesday it filed a lawsuit against BHP Billiton (BHP.AX) (BLT.L) that seeks to block the mining giant's $39 billion hostile bid for the Canadian fertilizer producer.

The lawsuit filed in a U.S. District Court alleges that BHP misrepresented and failed to inform investors about material facts, and it accuses BHP of engaging in fraudulent, deceptive and manipulative behavior related to its offer.

A BHP spokesman declined to comment on the Potash Corp lawsuit.

Potash Corp claims that the Anglo-Australian miner sought to drive down the Canadian company's perceived value by strategically timing announcements about BHP's plans to become direct competitor in the potash business. That way, the suit argues, BHP could eventually make a bid for Potash Corp that was low enough to avoid triggering a BHP shareholder vote.

Before bidding for Potash Corp last month, BHP was focused on developing its Jansen potash project in Saskatchewan. The project, which is slated to begin production around 2015, is expected to be the world's single largest potash mine once it completes a multi-year ramp-up process.

Under British law a shareholder vote is required if a company attempts a takeover that exceeds 25 percent of its own market valuation.

At $39 billion, or $130 a share, BHP's current offer allows it to avoid a vote that would give its own shareholders an opportunity to scupper a deal.

STALLING TACTIC?

Such litigation is a standard tactic that takeover targets use mostly as a stalling tactic, legal experts say, and rarely do suits of this kind alter the outcome of a battle.

"Litigation is standard, but it accomplishes only modest goals of giving the target a window into the bidder and some delay, some smoke," said John Coffee, a professor at Columbia Law School in New York. "It is very unlikely to result in a permanent injunction that ends the contest."

Even so, lawyers say the litigation process gives a target company the opportunity to pursue a discovery process that could lead to disclosure violations coming to light.

"Litigation is designed to slow things down and that usually helps the target company in formulating and executing its strategy in defense of a takeover. It looks like a pretty typical move," said Gordon Smith, a professor at Brigham Young University Law School in Provo, Utah.

Potash Corp's U.S.-listed shares were down 72 cents at $146.80 on Wednesday, but are still trading well above BHP's $130 offer, suggesting investors anticipate a higher bid.

Many observers expect a competing bid to involve a Chinese entity such as Sinochem, the giant, state-owned chemicals group that has hired two investment banks to advise it on options.

China is believed to be worried about a BHP takeover of Potash Corp because it needs low-cost fertilizer to feed its growing population. Expectations of surging demand has fueled BHP's strategy of adding the No.1 supplier to its extensive mining assets.

COERCIVE OFFER?

The suit filed in the U.S. District Court for the Northern District of Illinois, also alleges that BHP has sought to increase its chances of acquiring Potash Corp on the cheap by making its offer in an unusually coercive form.

Potash Corp's lawsuit states that BHP atypically has not conditioned its tender offer on obtaining sufficient shares to enable it to carry out a full merger of the two companies.

BHP would have the choice of ending its offer when just over 50 percent of Potash Corp's shareholders tender shares, the suit says. Under Canadian law, a company needs to secure at least 66.67 percent shareholder support in order enable it to eventually win full control.

That would leave the remaining shareholders in the lurch - owning shares in an enterprise controlled by BHP with no clear way to exit their investments, Potash Corp says.

Saskatoon, Saskatchewan-based Potash Corp argues that the current structure of the BHP offer results is pressuring its shareholders into tendering shares toward the BHP offer.

The case is Potash Corp v. BHP Billiton in the U.S. District Court for the Northern District of Illinois Eastern Division, No. 1:10-cv-06024.

(Additional reporting by Michael Erman in New York, Pav Jordan in Toronto and Tom Hals in Wilmington, Delaware; Editing by Frank McGurty)

NEW YORK (Reuters) � Blockbuster Inc is preparing to file for Chapter 11 bankruptcy within the next few days, a source familiar with the video rental chain's plans said on Wednesday.

The Dallas-based retailer has more than $900 million of debt and has struggled to adapt as consumers download movies from their computers rather than go to free-standing rental stores.

Blockbuster is working with debtholders to craft a plan in which it would continue operating but shutter hundreds more stores, said the source, who was not authorized to speak publicly about the situation. A bankruptcy filing is expected as early as Wednesday.

The details were originally reported in the Wall Street Journal.

Under the proposed plan, senior bondholders would convert about $630 million of debt into equity of the restructured company. The other bondholders would be wiped out, according to this source.

"We continue to explore all of our options and are making good progress in our recapitalization process," Blockbuster said in an emailed statement on Wednesday.

"Our discussions with the studios and bondholders continue to be productive, and we have every reason to believe we will come out of the recapitalization process financially stronger and more competitively positioned for the future."

Investor Carl Icahn holds about one-third of the senior debt, the source said.

Icahn was not immediately available to comment.

Senior bondholders have agreed to provide the company with a loan of about $125 million to help support operations while it is under bankruptcy protection, according to the source.

The company said in its statement that it had the support "of a wide range of parties" and that it was working on putting in place "a more appropriate capital structure to support Blockbuster's long-term growth, including investments in our multi-channel platform and new opportunities."

As of early this year, Blockbuster had more than 6,500 stores in the United States and internally. The company has introduced a movie download service to move beyond retail locations, but that service's popularity lags behind Netflix Inc's offerings.

Shares of Blockbuster were down 17.5 percent at 6.6 cents in morning trading.

(Reporting by Chelsea Emery; Editing by Martha Graybow and Lisa Von Ahn)

WASHINGTON (Reuters) � Treasury Secretary Timothy Geithner said on Wednesday U.S. banks should be able to meet new higher capital rules through future profits without crimping lending in a way that would harm the recovering economy.

Earlier this month, regulators from 27 countries agreed to make banks hold more and higher quality capital so they can better withstand economic downturns and financial shocks. Under the proposal, the new rules would be phased in gradually and would not go into full effect until 2019.

"It is important to note that because we moved so quickly with the bank stress tests in early 2009 that forced banks to raise more common equity, the U.S. financial system is in a very strong position internationally to adapt to the new global rules," Geithner said in remarks prepared for delivery to a congressional committee.

"For the most part, banks should be able to meet these new requirements through future earnings, which will help protect the recovery currently under way," he said.

Leaders from the Group of 20 developed and emerging nations are set to endorse the agreement, known as Basel III, when they meet in Seoul in November. It will then be left to each country to implement the deal.

"It is ... essential that the Basel agreements are implemented by national authorities in a way that generates a 'level playing field' in our increasingly integrated global financial system," Geithner said. "We will engage our foreign counterparts to look for ways to ensure that that these agreements are implemented in a transparent and consistent way by supervisors in different countries."

The new Basel III rules will force banks to hold top-quality capital totaling 7 percent of their risk-bearing assets, more than triple what they do now. Banks will have until 2015 to meet the minimum core Tier 1 capital requirement, which consists of shares and retained earnings worth at least 4.5 percent of assets.

An additional 2.5 percent "capital conservation buffer" will have to be in place by 2019.

Geithner argued that the new capital standards will help create a more stable financial system and will help avoid a repeat of the 2007-2009 financial crisis.

"By forcing financial institutions to hold more capital, we will both constrain excessive risk-taking and strengthen banks' abilities to absorb losses," he said.

(Editing by Andrea Ricci)

NEW YORK (Reuters) � U.S. packaged foods maker General Mills Inc (GIS.N) reported quarterly sales that missed Wall Street's view but affirmed its full-year profit target, saying growth should accelerate as the year progresses.

Quarterly profit was hurt by higher commodity costs and advertising expenses, as the maker of Cheerios cereal, Pillsbury baked goods and Green Giant frozen vegetables works harder to make its brands stand out in a weak economy.

"The global operating environment is still quite challenging, but our food businesses are resilient," General Mills Chief Executive Ken Powell said in a statement.

He did not give an update on a disagreement with the owners of the Yoplait yogurt brand, which General Mills sells in the United States.

Earlier this month General Mills said the French dairy company from which it licenses the trademark wants to renegotiate the terms of a deal the companies have had for more than 30 years. General Mills said it had filed a petition for arbitration over the issue.

The disagreement comes as French private equity fund PAI Partners, which owns 50 percent of Yoplait, is looking to unload its stake.

General Mills has been named as a possible suitor, with a British newspaper report on Sunday saying it was mulling a bid of over $1 billion. The company declined to comment at the time.

SALES TO STORES RISE

General Mills said on Wednesday that it still expects fiscal 2011 earnings of $2.46 to $2.48 per share, excluding the impact of revaluing certain commodity positions.

In its fiscal first quarter that ended on August 29, General Mills' net income was $472.1 million, or 70 cents per share, up from $420.6 million, or 62 cents per share, a year earlier.

Excluding items, earnings were 64 cents per share, topping analysts' average estimate of 63 cents per share, according to Thomson Reuters I/B/E/S, by a penny.

Net sales rose 1.5 percent to $3.53 billion, missing analysts' average estimate of $3.57 billion. Increased sales volume boosted net sales by 2 percentage points while foreign exchange rates reduced it by 1 percentage point.

In the company's U.S. retail segment, its largest business, sales rose 2 percent, helped by increases in sales volume and average price. Yet the segment's operating profit was 3 percent lower, due to higher commodity costs and advertising expenses.

The retail business saw net sales rise 4 percent for cereals, 5 percent for snacks, 4 percent for yogurt and 3 percent for meal products such as Old El Paso Mexican foods and Macaroni Grill frozen entrees. Pillsbury sales fell 3 percent.

Shares of the company were unchanged at $35.67 in pre-market trading from their close on Tuesday.

(Reporting by Martinne Geller; Editing by Lisa Von Ahn, Maureen Bavdek, Dave Zimmerman)

LONDON (Reuters) � Futures for the Dow Jones industrial average, the S&P 500 and the Nasdaq 100 fall 0.3 to 0.4 percent, pointing to a weaker start on Wall Street on Wednesday.

At 1100 GMT the Mortgage Bankers Association will release the Weekly Mortgage Market Index for the week ended September 17, versus the prior week. The index was at 801.5 and the refinancing index was at 4,396.1 in the previous week.

U.S. Treasury Secretary Timothy Geithner is scheduled to appear at a House Financial Services Committee hearing on financial regulation on the state of the international financial system, including regulatory concerns.

The Federal Housing Finance Agency issues at 1400 GMT Home Price Index for July. In the prior month, the index fell 0.3 percent.

Cheerios maker General Mills (GIS.N) will lead quarterly results from several companies that might give an indication of the mood of consumers about spending in the currently weak economy. Other companies reporting results include Bed Bath & Beyond Inc. (BBBY.O) and Darden Restaurants (DRI.N).

eBay shares (EBAY.O) rose 0.7 percent in extended trade on Tuesday after the company said it expects its third-quarter results to be near the high end of guidance provided in July.

China's foreign ministry told the United States on Tuesday to stop pointing its finger at Beijing and pushing for a stronger yuan, saying Washington should focus on spurring its fragile economy.

The strong-worded statement by the ministry came as U.S. President Barack Obama kept up the rhetoric ahead of mid-term U.S. congressional elections in November and as the yuan extended gains to a ninth day -- its longest rally since it was revalued in July 2005.

India is aiming to finalize a $5.8 billion defense agreement with the United States before the November visit of Obama in a deal that would mark the biggest India-U.S. defense deal ever.

The two countries are in talks for India to acquire 10 Boeing (BA.N) C-17 Globemaster III transporter planes, senior government officials said on Wednesday, adding the parties hope to make the announcement during Obama's visit.

Japan's Sharp Corp (6753.T) said it will buy U.S.-based developer of solar power systems Recurrent Energy for up to $305 million.

Shares in Adobe Systems Inc (ADBE.O) slid more than 8 percent late on Tuesday after the company reported quarterly results.

U.S. stocks ended flat to lower in an erratic session on Tuesday after the Federal Reserve inched closer to further steps to spur the economy. Stocks initially popped higher but then quickly fell back.

Investors had hoped that with recent improvements in economic data the Fed would issue a more upbeat outlook or clarify the measures it would take to stimulate demand.

The Dow Jones industrial average (.DJI) was up 7.41 points, or 0.07 percent, at 10,761.03. The Standard & Poor's 500 Index (.SPX) was down 2.93 points, or 0.26 percent, at 1,139.78. The Nasdaq Composite Index (.IXIC) was down 6.48 points, or 0.28 percent, at 2,349.35.

Japan's Nikkei stock average (.N225) dipped on Wednesday, but losses were stemmed after the dollar edged back up toward the 85 yen level and by expectations that a strong yen rise would bring further Japanese intervention.

European shares fell more than 1 percent on Wednesday, led lower by banks, as investors remained concerned about the sustainability of the global economic recovery.

The dollar fell on Wednesday to its lowest level versus the yen since Japan intervened last week, with the dollar index hitting a six-month trough after the Federal Reserve raised expectations of more monetary easing.

(Reporting by Atul Prakash; Editing by Greg Mahlich)

LONDON (Reuters) � Gold rose for a third day on Wednesday to hit record highs above $1,290 an ounce after the Federal Reserve's signal that it was prepared to pump fresh cash into the economy hurt the dollar and whet investor appetite for bullion.

Silver edged ever-closer to its highest in thirty years, against a backdrop of investors seeking cheaper safe-haven assets, which was reflected in the largest one-day inflow of metal into the iShares Silver Trust in 10 months.

Global equities and government bond prices rose after the Fed on Tuesday laid the groundwork for further stimulus measures and expressed concerns about low inflation, yet made no policy shift at the end of a one-day meeting.

Spot gold hit a new record of $1,294.95 an ounce, before easing to $1,293.10 an ounce by 0945 GMT, still showing a 0.6 percent gain on the day. U.S. gold futures rose $21 an ounce to $1,294.50, having hit a contract high at $1,296.5.

"The key driver was the .... statement and the subtle change in language that it was "prepared to provide additional accommodation if needed" a shift from the previous wording that it "will employ its tools as necessary'," said Credit Agricole analyst Robin Bhar.

"We interpret this as a conditional easing bias. It ushers the door for QE2 wider and the implication that this has for a weaker dollar and further unease of what governments will do to weaken their currencies to support flagging economic growth."

Should the Fed resort to a second round of quantitative easing, which involves large-scale purchases of Treasuries to keep interest rates low in exchange for a cash injection into the system, gold's appeal to investors grows as the opportunity cost of holding a non-yield bearing asset declines.

Also, fresh cash in the economy raises the risk of a pick-up in inflation, which erodes the returns from currency, equity and bonds holdings, yet benefits owners of gold, who see the value of their holdings rise in line with consumer prices.

Gold has risen by over 17 percent this year, as investors have sought a relatively safe asset in which to park their cash as major currencies, stocks and bonds have become increasingly volatile.

But large investor positions in gold, as reflected by holdings of metal under the SPDR Gold Trust, the world's largest exchange-traded fund, and open interest in U.S. futures puts gold at the risk of a downward correction.

"The market looks overextended to me. People are predominantly long and keen to see higher prices, and as such, no one is going to stand in the way," said Simon Weeks, head of precious metals at ScotiaMoccatta.

"Once we've settled down a bit, I think further gains from here toward $1,300 are going to be tough. Having said that -- I hate the cliche -- but the trend has very much been people's friend of late."

On the physical market, premiums in Hong Kong and Singapore were little changed despite high prices, with those in Singapore being around 50 to 80 cents, a dealer based in the city said.

"I reckon customers are recovering from the aftershock of $20 jump. Again it's a mixed market -- in Thailand we see both physical demand and scrap selling, while Indonesian clients have gone hiding this morning and nothing is seen from India so far," said the dealer.

Silver prices broke above $21.00 an ounce to their highest since March 2008 and remained within a hair's breadth of highs not seen since October 1980.

Holdings in the iShares Silver Trust jumped 127.81 tons, the biggest gain in nearly 10 months, to 9,509.55 tons.

Spot silver was last at $21.04, up 0.5 percent on the day, and set for a rise of 9.1 percent in September, its largest monthly gain since November 2009.

Spot palladium rose nearly 2 percent to $536 an ounce. The price hit a near 4-month high of $563 on Sept 15, while platinum was up 0.6 percent at $1,630.50.

(Additional reporting by Lewa Pardomuan and Rujun Shen in SINGAPORE; Editing by William Hardy)