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Canada's National Post said Investment Canada officials had recommended Ottawa allow the world's largest miner to proceed with its hostile offer, but only on condition that BHP spend billions of dollars on new infrastructure in Canada.

The newspaper did not detail the infrastructure commitments that would be sought, but it quoted political insiders as saying the investment agency had recommended a government-appointed task force be set up to monitor and enforce the takeover terms.

BHP Chief Executive Marius Kloppers is betting an increasingly hungry world will pay dearly for the hot commodity, marking the miner's entry into the global food industry.

Fund managers said any conditions requiring onerous new investments from BHP could mean the bidder baulks at raising its offer or even undermines the viability its current bid of $130 a share for Potash, the world's largest fertilizer producer.

"Yes, it could have some impact on BHP's ability to raise the bid," said Peter Chilton, a fund manager at Constellation Capital, which owns BHP shares.

"Expectations are running at $160 to $170 a share, which is a big price. It just depends on BHP's internal study on the prospects for the commodity," Chilton said.

A spokeswoman from BHP declined to comment on the report.

Potash's U.S.-listed shares ended up 1.1 percent at $146.6, above the $130 a share offered by BHP. BHP's Australian-listed shares were little changed on Tuesday in a steady broader market.

Since BHP announced its bid in late August, Potash stock has held well above the offer price, which Potash has rejected as inadequate. Markets are betting that a higher bid would eventually materialize.

WHO HAS THE FINAL SAY?

The National Post, quoting insiders from the ruling Conservative Party, said Prime Minister Stephen Harper himself would have the final say on the deal.

Harper's office said Industry Minister Tony Clement, not the prime minister, would have the final say on the takeover. The decision is due by midnight on November 3.

By law, Ottawa must decide whether the bid would bring a net benefit to Canada as it makes its decision.

Canadian approval is likely to force BHP to decide whether to raise its $130-a-share offer.

The examiner wrapped up a three-month investigation into an agreement between JPMorgan Chase & Co and a federal regulator aimed at ending Washington Mutual's two-year bankruptcy.

His conclusions were welcomed by the company, but will be a blow to shareholders, who stand to get nothing under the company's proposed reorganization.

The examiner, Joshua Hochberg, determined that "the proposed settlement will most likely result in no recovery for any classes of shareholders under the plan. The examiner also concludes that further litigation concerning any disputed asset is highly unlikely to materially to benefit classes that are 'out of the money.'"

An attorney for the official committee of equity holders declined to comment.

The report digs through the final months leading up to Washington Mutual's collapse into Chapter 11 the day after regulators seized its bank operations and sold them to JPMorgan Chase & Co for $1.9 billion.

The bank's failure came at the height of the 2008 financial panic and followed a $16 billion run on deposits.

The report recalls the fears at the time of a wider financial meltdown, concerns about Washington Mutual's hidden toxic assets and FDIC jitters that its deposit insurance fund would be rendered insolvent by a large bank failure.

What the 353-page report does not uncover is a smoking gun.

The examiner did not seem to find conspiracies to benefit JPMorgan while wiping out the investments and life savings of thousands of Washington Mutual shareholders, as some shareholders had hoped.

"The examiner's report reaffirms our long-standing belief that the global settlement agreement will result in significant recoveries for the estate's stakeholders and is in the best interests of the estate," said a statement from Washington Mutual.

Hochberg was charged with examining a settlement among JPMorgan, the Federal Deposit Insurance Corp and Washington Mutual over how to divide billions of dollars in disputed assets such as tax refunds and bank deposits.

That settlement forms the basis for the company's plan to distribute more than $7 billion to creditors and end Washington Mutual's two years in bankruptcy. The plan has wide support among creditors.

The report did find the bidding process for the seized bank was "less than optimal," citing contacts between FDIC Chairman Sheila Bair and JPMorgan's chief executive, Jamie Dimon.

JPMorgan declined to comment.

Two surveys of the manufacturing sector, which are designed to provide an early indication of conditions in a broad range of industries, both jumped to six-month highs in October.

The official purchasing managers' index (PMI) rose to 54.7 in the month from 53.8 in September, blowing past expectations. The HSBC PMI, a private companion, climbed to 54.8 from 52.9.

The increase was all the more impressive since the official survey has traditionally sagged in October, weighed down by the week-long National Day holiday, when factory production slows.

"The fact that the PMI went up despite this seasonal bias suggests real activity growth was likely to have been exceedingly strong in October," Goldman Sachs economists Yu Song and Helen Qiao said in a note to clients.

Asian shares were lifted by the surprisingly strong PMIs, with the main index in Shanghai rising 1.9 percent in the morning session.

Four straight months of stronger official PMIs jive with other signs that China's economy has built up a head of steam.

This momentum gave the government the confidence to raise interest rates on October 19 for the first time in nearly three years, and some economists believe another increase could be in store before the end of the year.

DOMESTIC POWER

Both surveys showed that output expansion was driven by domestic growth, not external demand.

While the sub-index for total new orders in the official PMI climbed to a six-month high of 58.2 from 56.3, that for new export orders dipped to 52.6 from 52.8. The HSBC survey revealed a similar pattern.

"Another upbeat reading for the HSBC China Manufacturing PMI suggests strong growth momentum in domestic demand to warrant about 9 percent GDP growth in the fourth quarter, despite the still soft increase in new export orders," said Qu Hongbin, chief economist for China at HSBC.

The 54.7 reading for the official PMI, released by the China Federation of Logistics and Purchasing (CFLP), was higher than the median forecast of 52.9 in a Reuters poll of 12 economists and, in fact, higher than every individual forecast.

PRICE PRESSURES

But Zhang Liqun, a government researcher, cautioned against over-optimism, saying that growth was likely to ease and that inflationary pressures were a concern.

* The Institute for Supply Management releases its October manufacturing index at 10 a.m. ET. Economists in a Reuters survey expect a reading of 54.0 versus 54.4 in September.

* U.S. computer chipmaker Intel Corp (INTC.O) has agreed to make chips for startup firm Achronix Semiconductor Corp, an Intel spokesman told Reuters. The deal with Achronix would be the first time Intel has given another company access to its most advanced production processes.

* Commerce Department releases September personal income and consumption data at 8:30 a.m. ET. Economists in a Reuters survey expect a rise of 0.2 percent in September income and a 0.4 percent increase in spending. In the previous month, income rose 0.5 percent and spending increased 0.4 percent. * The amount of potential damages that British private equity firm Terra Firma TERA.UL could receive if a case against Citigroup Inc (C.N) regarding music group EMI goes its way has fallen, according to court documents.

* At 10 a.m. ET, the Commerce Department releases September construction spending. Economists forecast a drop of 0.5 percent, compared with a 0.4 percent rise in the prior month.

* Resource-related stocks will be in focus as crude oil prices rose 0.6 percent, buoyed by expectations that the U.S. Federal Reserve would commit to a new round of monetary stimulus this week and prompt further weakness in the dollar. Key base metals prices also rose 1.3 to 1.9 percent.

* Companies reporting results on Monday include Baker Hughes (BHI.N), Corning (GLW.N) and Simon Property Group (SPG.N).

* European shares rose on Monday, with miners gaining on higher metals prices after surprisingly strong Chinese manufacturing data, and as the dollar weakened.

* China's factories ramped up their production last month and were buoyed by an influx of new business, highlighting the strength of the world's second-largest economy but also pointing to price pressures.

* Japan's Nikkei average .N225 hit a seven-week closing low on Monday, hit by a drop in shares of Honda Motor (7267.T) after its earnings disappointed investors, with the yen's strength near a record high against the dollar put an additional damper on confidence.

* U.S. stocks ended on a flat note on Friday, wrapping up another strong month driven by expectations the Federal Reserve will flood the economy with cash.

(Reporting by Atul Prakash; Editing by Hans Peters)

But the U.S. currency quickly gave up its gains, with traders saying the move was likely caused by a trading glitch rather than intervention. The Japanese Finance Ministry declined to comment on the incident.

The MSCI Asia share index outside Japan .MIAPJ0000PUS rose 1.6 percent, led by gains in Hong Kong and Shanghai, after data showed China's official purchasing managers' index (PMI) for manufacturing rose to a six-month high in October.

The PMI rose to 54.7 in October from 53.8 in September, higher than the median forecast of 52.9 in a Reuters poll of 12 economists and, in fact, higher than every individual forecast.

HSBC's China PMI also hit a six-month high last month.

But Japanese shares, Asia's worst performer this year, eased a touch as the yen's strength weighed on exporters.

The Nikkei average .N225 was down 0.2 percent near a new seven-week low. Top Japanese brokerage Nomura was among the biggest losers (8604.T), with its shares slumping 3.6 percent after Friday's disappointing earnings.

For the year, Japan's underperformance is striking. The Nikkei is down 13 percent, compared to an 11 percent rise in the MSCI index.

Speculation about possible Japanese intervention kicked in after the dollar spiked as far as 81.60 yen on trading system EBS in a matter of seconds, from 80.40 before, and compared to a 15-year low of 80.21 hit in early trade.

But by mid-morning Asian trade, the yen had recovered to 80.67, within spitting distance of its post-war record low of 79.75.

"Judging from the price action, the market probably doesn't think right now there had been any intervention," said a trader at a major Japanese bank.

Currency investors have been on edge about possible intervention from Tokyo after it intervened to sell the yen in September for the first time in six years to pull the dollar from a 15-year low.

The U.S. dollar .DXY, struggling to hold ground due to entrenched speculation the Federal Reserve could further ease policy when it meets this week by buying more U.S. government bonds, was down 0.3 percent against a basket of currencies.

The soft U.S. dollar was a boost to commodity prices. Oil rose toward $82 a barrel, gold hit a two-week high, spot silver jumped to 30-year peaks and palladium climbed to nine-year highs.

Some analysts said share and commodity prices could tear higher still if the Fed pledges to buy more bonds than the market expects, or if the Bank of England follows the Fed's lead by further loosening policy when it meets this week.

Two surveys of Chinese executives showed broad-based strength in the manufacturing sector of the world's second-largest economy and helped boost Asian shares outside Japan by 1.7 percent.

The official purchasing managers' index (PMI) rose to a six-month high in October of 54.7 from 53.8 in September, easily beating market forecasts of 52.9.

A figure above 50 denotes expansion; a reading below 50 indicates contraction.

The strength of the official PMI was especially striking because the index normally heads down in October, said Yu Song and Helen Qiao, economists at Goldman Sachs.

"The fact that the PMI went up despite this seasonal bias suggests real activity growth was likely to have been exceedingly strong in October," they said in a note.

The survey showed that manufacturers continued to run down stocks last month to meet rising domestic orders, which Ting Lu with Bank of America Merrill Lynch said was a reflection of strength in construction and consumption.

"These readings bode well for a recovery of output in coming months," Lu told clients.

A companion PMI produced by Markit for HSBC painted a similar picture, rising to 54.8 from 52.9 -- one of the largest month-on-month rises in the history of the survey.

Calling the official PMI one of the best leading indicators of the economy, Lu said the October report supported his forecast of 9.3 percent year-on-year growth in gross domestic product in the fourth quarter and 10.3 percent for all of 2010.

In contrast, the United States reported on Friday that its economy grew at a tepid 2.0 percent rate in the third quarter, reinforcing expectations that the Federal Reserve will agree this week to ease monetary policy by embarking on a new program of bond purchases.

The HSBC Markit PMI for India, Asia's third-largest economy, rose to 57.2 in October from 55.1 in September.

"The manufacturing sector remains supported by strong local consumption growth, and growing employment suggests that domestic demand will remain robust," Frederic Neumann, co-head of Asian Economics Research at HSBC, said in a statement.

STRONG KOREAN EXPORTS

Not all the economic news from Asia was rosy.