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A flat close on Wall Street offered stock markets little inspiration, while resurgent fears of an imminent Chinese interest rate rise kept investors on the defensive.

In Japan, the benchmark Nikkei average .N225 was dragged down by the strength of the yen, and a Reuters poll showed the mood among Japanese manufacturers darkened in late November and is expected to grow even gloomier in the coming months as a strong yen and the global slowdown eat into profits.

"The impact of a strong yen, slowing exports and declines in profits weighed on corporate sentiment and companies are growing more cautious about the outlook," said Yoshimasa Maruyama, an analyst at Itochu Corp.

The Nikkei fell 0.4 percent, though Sumitomo Corp (8053.T) and Mitsubishi Corp (8058.T) outperformed the broader index on reports they are making moves to expand their rare earths businesses. Non-Chinese sources of the hi-tech minerals are much in demand, on worries the world's biggest supplier may in future restrict exports.

MSCI's gauge of Asian stocks excluding Japan .MIAPJ0000PUS rose 0.4 percent, taking its gains for the year to over 12 percent versus 7.5 percent for the MSCI world index.

Asia has been one of the chief beneficiaries of flows of capital from the United States, where the Federal Reserve is pursuing a policy of printing more cash.

But adding to the market's generally cautious tone was the belief that the cost of borrowing in China will soon rise.

China's central bank may raise rates again this weekend as it tries to contain inflationary pressures, official newspaper the China Securities Journal reported on Tuesday.

Another newspaper said Chinese bank lending had exceeded by the end of November the government's full-year loan target of 7.5 trillion yuan ($1.13 trillion), supporting arguments in favor of further credit tightening.

POLITICAL BICKERING WEIGHS ON EURO

The euro slipped in early trade before recovering to $1.3325, just above its late levels in New York on Monday, with support seen at $1.3268.

The next major market event will be the outcome of the Irish budget, due later on Tuesday, traders said., The deeply unpopular government is set to unveil a record austerity plan that will inflict more pain on voters.

"If the (Irish) parliament fails to approve proposals, we could see a fresh flare-up in euro zone tensions and the euro could fall sharply against major forex counterparts," said David Rodriguez, strategist at DailyFX.

Ireland last month received an 85 billion euro bailout from the International Monetary Fund and European Union, and markets are wondering if Portugal and Spain will be the next ones in need of rescue.

In a banner headline across its front page, the China Securities Journal said this weekend offered a "sensitive window" for a rate rise, which would be the country's second after a surprise increase in October, the central bank's first rate hike since 2007.

An increase in rates would also put flesh on the bones of Beijing's announcement late last week that it was switching to a "prudent" monetary policy from the "appropriately loose" stance of the past two years.

The report weighed on Asian stock markets in early trade, though the country's main index in Shanghai later pared losses. Chinese asset markets have tumbled in recent weeks as investors have priced in more tightening.

The newspaper said the timing was right for a rate rise with official monthly economic indicators, notably the consumer price index (CPI), likely to show an increase in inflationary pressure when released on Monday, December 13.

"With reference to the central bank's record of raising interest rates just ahead of the release of CPI, this weekend will provide a window for a possible policy change," the newspaper said, without citing any source.

China's CPI in November may have accelerated to a 27-month high of 4.7 percent from a year earlier, according to a Reuters poll, up from a 4.4 percent pace in October.

"The general trend of China's monetary policy is appropriate tightening on the basis of the previous extremely loose stance," said Chen Jiagui, a senior government economist.

GETTING READY

Traders in China's interbank market said big lenders have already prepared enough money for another 50 basis point increase in banks' required reserves, which are already at a record high for big banks.

So far, the People's Bank of China has relied primarily on reserve requirements to mop up excess cash in the economy, officially ordering lenders to lock up more of their deposits five times this year.

Banks had also been holding back from lending in anticipation of more government moves to curb inflation, driving up short-term money market rates. But these rates tumbled on Tuesday after large banks caved into pressure from smaller institutions which had refused to borrow at the higher rates.

But concern over further hot money inflows could make Beijing hesitate before raising interest rates aggressively.

Comments from Chairman Ben Bernanke that the Federal Reserve could increase its commitment to buy $600 billion in U.S. government bonds has reinforced fears in Beijing that money printed in the United States will compound the inflationary headache in China.

"I don't think China should increase interest rates on a continuous basis," said Chen Kexin, an economist with a government-sponsored market monitoring agency in Beijing.

The U.S. Treasury said it will take in $10.5 billion from a public offering of 2.4 billion Citigroup shares, announced just hours earlier. The price is 10 cents below the $4.45 closing price on the New York Stock Exchange.

"By selling all the remaining Citigroup shares today, we had an opportunity to lock in substantial profits for the taxpayer and avoid future risk," said Tim Massad, Treasury acting assistant secretary for financial stability.

"With this transaction, we have advanced our goals of recovering TARP funds, protecting the taxpayer, and getting the government out of the business of owning stakes in private companies," Massad added in a statement.

The Treasury invested a total of $45 billion to bail out Citigroup in 2008 and 2009 during the financial crisis. The company paid back $20 billion in preferred stock, while another $25 billion was converted to 7.7 billion common shares held by the Treasury.

It has whittled that stake down over the past year from 27 percent to less than 7 percent through controlled sales in the market.

The move to sell the remaining shares in one large offering follows last month's successful initial public offering in General Motors Corp, which significantly reduced the government's stake. The GM IPO attracted strong interest from domestic institutional investors and foreign sovereign wealth funds alike.

"Citi is pleased that the U.S. Department of the Treasury has finalized plans to exit from its remaining holdings of Citigroup common stock. We are very appreciative of the support provided by the Treasury during the financial crisis," Citigroup spokesman Jon Diat said in a statement.

The offering, run by Morgan Stanley as bookrunning manager, is expected to close on or about December 10, 2010. Underwriting fees for the transaction will be paid by Citigroup, Treasury said.

IN THE BLACK

The Treasury said its estimate of a $12 billion profit from the $45 billion bailout includes gains from the sale of common stock, interest and dividends of $2.9 billion and $2.2 billion in Trust Preferred Securities it received for guarantees on a pool of Citigroup assets.

Treasury averaged a price of $4.14 for each of the 7.7 billion Citgroup shares it sold. It received the shares at a conversion rate of $3.25 each.

The sale, however, does not completely free Citigroup from the government's clutches. The Treasury also said it would continue to hold warrants to purchase Citigroup shares issued as part of the bailout. These may be repurchased by Citigroup or sold in a separate auction for an additional profit.

The Treasury also said it is entitled to receive some $800 million in Citigroup Trust Preferred Securities from the Federal Deposit Insurance Corp under a debt guarantee program -- provided that the FDIC incurs no losses on Citigroup debt it backstopped during the financial crisis.

The Treasury next year is expected to begin selling off its stake in bailed-out insurer American International Group, and it anticipates a profit on the complex series of transactions. (Additional reporting by Glenn Somerville in Washington, Paritosh Bansal and Maria Aspan in New York; Editing by Muralikumar Anantharaman)

Under the deal being discussed, Bright Food would purchase GNC for $2.5 billion to $3 billion, a source familiar with the situation said late on Monday in the United States.

The potential acquisition of Pittsburgh-based GNC, which is owned by Ares Management and the Ontario Teachers' Pension Plan Board, could be announced in the next few days, said the source who declined to be identified because the talks were not public.

A spokesman for Shanghai-based Bright Food Group had no comment.

China has been aggressively snapping up overseas assets in the resources sector to feed its fast-growing economy, but a purchase of GNC marks a less common instance of a major acquisition in the U.S. consumer space by a Chinese company.

Analysts were generally positive on the deal, saying it would help Bright Food, backed by the Shanghai city government, to catch up with domestic rivals in catering to the growing number of Chinese who have money to spend on more discretionary products such as vitamins.

Bright Food, best known for its dairy products, has been less successful in building its brand compared with other major rivals including Mengniu (2319.HK) and Yili (600887.SS), said Shaun Rein, managing director of China Market Research Group.

"If they buy strong foreign brands and then bring them back to China, they are able to catch up with the local competitors which have better brands in their products category," he said.

"It is a very smart move because they need to be able to capture brands and technical expertise and products they currently don't have."

OTHER DEALS EXPLORED

GNC, which sells nutrition supplements, vitamins, sports drinks and other diet products through 7,100 stores worldwide, had been exploring an initial public offering, as well as an outright purchase.

In September, it filed registration papers with the U.S. stock regulator for an IPO to raise up to $350 million.

Ares Management LLC and the Ontario Teachers' Pension Plan bought GNC in 2007 from Apollo Management LP APOLO.UL in a deal with a total enterprise value of $1.65 billion. Apollo had twice previously tried to take GNC public.

Ares Management, and the Ontario Teachers' Pension Plan could not be immediately reached for comment.

Bright Food controls four listed companies, including Bright Dairy & Food Co.

The proposed offering would mark the disposal of a government stake in Citigroup that once stood as high as 36 percent after $45 billion in taxpayer bailouts in 2008 and 2009.

Citi has paid back $20 billion in preferred stock, while another $25 billion was converted to 7.7 billion common shares held by the Treasury. A subsequent Citi share offering reduced the government's stake to 27 percent, which the Treasury has whittled down over the past year via the sale of 5.3 billion shares in controlled trades in the market.

The Treasury, which will sell the final stake with Morgan Stanley acting as bookrunning manager, on Monday filed a prospectus for the sale with the Securities and Exchange Commission. It can be seen at: here#107

"Citi is pleased that the U.S. Department of the Treasury has finalized plans to exit from its remaining holdings of Citigroup common stock. We are very appreciative of the support provided by the Treasury during the financial crisis," Citigroup spokesman Jon Diat said in a statement.

The move to sell the remaining shares in a public offering follows last month's stronger-than-expected initial public offering in General Motors Corp. (GM.N), the bailout-out automaker whose IPO attracted interest from domestic institutional investors and foreign sovereign wealth funds alike.

IN THE BLACK

The Treasury can already declare a profit on the Citigroup bailout, a person close to the offering said.

Through October, it took in $42.8 billion in total proceeds from Citigroup, including repayments, share sale proceeds and dividend payments against the $45 billion bailout.

The Treasury sold another 900 million shares in November and so far in December at prices above $4, providing at least another $3.6 billion, pushing the total take above $46 billion, said the person, who cited figures that have not yet been made public.

If the remaining 2.4 billion shares were sold at Monday's closing price of $4.45 a share, the offering would add another $10.68 billion to the Citi proceeds. The Treasury acquired the shares at a $3.25 conversion rate.

The Treasury also said it would continue to hold warrants to purchase Citigroup shares issued as part of the bailouts. These may be repurchased by Citigroup or sold in a separate auction for an additional profit.

The Treasury also said it is entitled to receive some $800 million in Citigroup Trust Preferred Securities from the Federal Deposit Insurance Corp under a debt guarantee program -- provided that the FDIC incurs no losses on Citigroup debt it backstopped during the financial crisis.

(Additional reporting by Paritosh Bansal and Maria Aspan in New York; Editing by Leslie Adler)

The nation's highest court agreed to hear an appeal by the world's largest retailer and the largest private employer arguing the claims of as many as 1.5 million current and former female employees were too diverse to proceed as a single class-action lawsuit.

The justices decided to review a ruling by a appeals court in California that upheld the class-action certification in the lawsuit alleging discrimination against every woman employed over the past decade at the company's 3,400 U.S. stores.

The Supreme Court is expected to hear arguments in the case, which immediately became the most important business dispute before the justices this term, in March, with a ruling likely by the end of June.

The ruling could affect other class-action lawsuits. Anthony Sabino, a professor of law and business at St. John's University in New York, said the case "will test the very limits of class litigation."

Bentonville, Arkansas-based Wal-Mart said in a statement it was pleased the court granted review in the important case and it looked forward to the court's consideration of the appeal.

"The current confusion in class-action law is harmful for everyone -- employers, employees, businesses of all types and sizes and the civil justice system. These are exceedingly important issues that reach far beyond this particular case," Wal-Mart said.

The original lawsuit by seven women, filed in 2001, claimed that Wal-Mart paid female workers less than male colleagues and gave them fewer promotions. Wal-Mart denied that it discriminated on the basis of sex.

At issue in the Supreme Court appeal is the question of class certification, not the merits of the sex-discrimination allegations. The lawsuit has not yet gone to trial.

Large class-action lawsuits make it easier for big groups of plaintiffs to sue corporations and have led to huge payouts by tobacco makers, and oil and food companies. Companies have sought to limit such lawsuits to individual or small groups of plaintiffs.

The Supreme Court, with a conservative majority that has often ruled for businesses, in recent years has been highly skeptical of large class-action lawsuits.

WAL-MART: EMPLOYEES IN DIFFERENT STATES

In its appeal to the Supreme Court, Wal-Mart sought to undo the class-action certification and said the female employees held different jobs in different states under the supervision of different managers.

"The class is larger than the active-duty personnel in the Army, Navy, Air Force, Marines and Coast Guard combined -- making it the largest employment class action in history by several orders of magnitude," the company said.

Attorneys for the lead female plaintiffs in the case opposed the appeal and urged the Supreme Court to reject it.

Lacker, one of the central bank's vocal hawks, said the decision to increase monetary stimulus was based primarily on weakness in the labor market and set a precedent he said threatens future inflation.

"The provision of further monetary stimulus at this point in the business cycle is not without risks," Lacker told a conference sponsored by the Charlotte Chamber of Commerce in North Carolina.

"Historical experience, including the inception of the Great Inflation of the 1970s, suggests central banks should be careful not to steer monetary policy off course by targeting the unemployment rate," he said.

His comments come a day after Fed Chairman Ben Bernanke, a strong advocate of the policy, told CBS television program "60 Minutes" that inflation fears associated with Fed policy are "way overstated."

Bernanke also did not rule out an increase in bond purchases beyond $600 billion if the economy fails to respond. He added that the risk of deflation, a corrosive downward spiral in wages and prices, was receding in large part due to the Fed's efforts to stimulate growth.

Lacker, who is not a voting member this year on the policy-setting Federal Open Market Committee, has hinted strongly at his opposition to the November decision to ease.

"With many commodity prices spiking, outright deflation is clearly even less of a risk than it was a few months ago," Lacker said.

He said inflation is "well contained" and "very close to my own long-term objective," putting him at odds with other officials at the central bank, who are worried about a recent trend of disinflation and dire employment conditions.

Contradicting Bernanke's view that the economy is "close to the border" of being sustainable, Lacker argued growth already had enough momentum of its own.

EUROPE RISK "MANAGEABLE"

Asked about the situation in Europe, where markets have taken a beating over fears of possible defaults in some of the continent's more indebted nations, had only minor risks for the United States for now.

"At this point it looks like the magnitude of the likely fall out for the United States economy is relatively manageable and relatively minor," he said.

"If broader, deeper growth effects were to hit Europe, if they were to enter a substantial recession again, bets would be off and there could more substantial effects."

Regarding U.S. monetary policy, Lacker said he worries that more aggressive action by the Fed now could lead to a potentially turbulent day of reckoning down the line.

"Further balance sheet expansion now could require more rapid balance sheet reduction later on, complicating the withdrawal of monetary stimulus," he said.

The world's largest drugmaker's shares rose 1.4 percent in early trading on Monday as the broader market edged lower, after the company announced late on Sunday that Jeffrey Kindler had retired as CEO and was replaced by Pfizer veteran Ian Read, the company's global head of pharmaceuticals.

Kindler said in a statement issued by Pfizer that the job had been "extremely demanding" and that he wanted to "recharge my batteries."

But Kindler, 55, may also have been under pressure because of the stock's sluggish performance.

Since July 2006, when Kindler assumed the CEO post, Pfizer's shares have fallen roughly 27 percent compared with a 10 percent decline for the NYSE Arca Pharmaceutical index of large U.S. and European drugmakers.

"When a company's shares underperform, shareholders express their frustrations to the board, and the board expresses its frustrations by making management changes," said Les Funtleyder, portfolio manager of the Miller Tabak Healthcare Transformation Fund, which does not hold Pfizer.

Goldman Sachs analyst Jami Rubin applauded the change, saying she has "long argued that Pfizer should be more aggressive in achieving greater efficiencies in both its $28.5 billion operating expenses base as well as its massive balance sheet and portfolio of various businesses, some of which should be divested."

"We are delighted to see the board taking action as Pfizer's share price continues to underperform amid a flurry of questions about strategic direction," Rubin said in research note.

Rubin also said Pfizer should remove its 2012 forecast, which she said was set "unrealistically high" and has been a source of anxiety.

Pfizer's 2012 forecast includes the first full year of impact from losing exclusive U.S. rights to Lipitor, its mammoth-selling cholesterol drug, and has implied somewhat stable results despite the Lipitor loss.

Kindler's departure comes more than a year after the drugmaker completed the signature move of his tenure -- the $67 billion acquisition of rival Wyeth.

The acquisition of Wyeth, which brought Pfizer more access to biotech drugs and vaccines as well as cost-cutting opportunities, was intended to help Pfizer maneuver through the decline of Lipitor, due to lose U.S. patent protection in November 2011.

But the move has so far failed to jump-start the stock. Pfizer shares have fallen 5.2 percent since the company bought Wyeth on October 15, 2009. By contrast, shares of Merck & Co have jumped 15 percent since it clinched its own mega-merger, of Schering-Plough Corp, on November 3, 2009.

JP Morgan analyst Chris Schott said the CEO change could lead to more aggressive actions by Pfizer, including share repurchases or dividend increases, as well as more business development or divestitures.

"While a CEO transition in the midst of a major merger integration will likely create added uncertainty with the story, the key question, in our view, remains on the changes this transition will bring to the Pfizer story," Schott said in a research note.

Meanwhile, euro zone finance ministers met amid pressure to increase the size of a 750 billion euro ($1,006 billion) safety net for debt-stricken members in hopes of halting potential contagion to other countries.

On Sunday, Bernanke told the CBS television program "60 Minutes" that the Fed could end up increasing its commitment to buy $600 billion in U.S. government bonds if the economy fails to respond or unemployment stays too high.

Bernanke also said it would take four to five years for the country's unemployment rate to come down to what he called more "normal" levels of about 5 percent to 6 percent.

Quantitative easing has been a double-edged sword for equities as it has helped inflate asset prices but also signaled the recovery is still fragile.

The euro fell ahead of the European meeting, pressuring equities. Stocks and the euro have moved in tandem of late with the euro looked at as a proxy for debt concerns.

S&P 500 futures dropped 3 points and were below 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 lost 11 points, and Nasdaq 100 futures slipped 7 points.

Stocks closed their best week in a month on Friday, despite data showing tepid jobs growth. The S&P 500 rose 3 percent last week.

The S&P 500 faces strong technical resistance at about 1,228, near a recent high of more than two years and also the 61.8 percent Fibonacci retracement of the index's slide from October 2007 to March 2009, a key technical indicator.

Support for the benchmark kicks in at 1,200, which was recently a stubborn resistance point, and the top end of its recent trading range. The S&P closed at 1,224.71 on Friday.

Pfizer Inc's (PFE.N) chief executive stepped down unexpected, acknowledging the personal toll involved in steering the world's largest drugmaker through a multibillion dollar merger, the company said late Sunday.

Bank of America Corp (BAC.N) has told U.S. regulators it has met the final condition in repaying the government's $45 billion bailout funding, the Financial Times reported.

(Reporting by Leah Schnurr; editing by Jeffrey Benkoe)

The Fed will regularly review the policy and could adjust the amount of buying up or down depending on the economy's path, he added.

In a rare televised interview, Bernanke told the CBS program "60 Minutes" the Fed's actions are aimed at supporting what is still a fragile economic recovery, dismissing critics who argue the policy will lead to future inflation.

"This fear of inflation I think is way overstated," Bernanke said in the interview aired on Sunday.

"What we're doing is lowering interest rates by buying Treasury securities," he said. "And by lowering interest rates, we hope to stimulate the economy to grow faster. The trick is to find the appropriate moment when to begin to unwind this policy. And that's what we're going to do."

Bernanke said it would take four to five years for the country's unemployment rate, which rose to 9.8 percent in November, to come down to what he called more "normal" levels of around 5 percent to 6 percent.

Asked if the central bank could go beyond the $600 billion of bond buys announced at its November meeting, Bernanke said: "Oh, it's certainly possible. It depends on the efficacy of the program. It depends, on inflation. And finally it depends on how the economy looks," he said.

But he also did not rule out stopping short of the total.

"We're gonna be regularly reviewing this," Bernanke said. "This is not something that we've set into automatic motion going forward. We want to continue to think about it. Whether it needs to be changed. Whether it needs to be increased or decreased or modified."

The U.S. economy grew at a modest 2.5 percent annual rate in the third quarter, and more vigorous growth is needed to bring down unemployment.

The "60 Minutes" interview is as part of a broader effort to raise the Fed chairman's public profile in order to counter critics of Fed policy -- both in Washington and within the central bank itself.

NOT PRINTING MONEY

The decision to offer further monetary stimulus at a time overnight borrowing costs are already effectively at zero and the banking system is awash with $2.3 trillion in Fed-created credit has proven controversial both at home and abroad.

Many economists, some Republican lawmakers, and a small but vocal minority of top officials within the Fed worry that the central bank's actions are unlikely to do much to spur economic growth with borrowing costs already unusually low.

Instead, they worry the massive bond purchases will lead to distortions in financial markets, potentially sparking asset bubbles in unexpected places. Some also fear, as Charles Plosser of the Philadelphia Fed has argued, the expansion of reserves could create the "kindling" that will spark inflation in the future.

Rio's move on Australia's Riversdale is likely to spark a bidding war, as the company has hard coking-coal projects in Mozambique that could eventually supply 5-10 percent of the global market for the key steel-making material.

Brazil's Vale is seen by some analysts as the most likely rival bidder, as it already has coal mines nearby in Mozambique. India's Tata Steel, Riversdale's top shareholder, was also seen as a potential bidder.

Xstrata Plc, Anglo American and Peabody Energy could also be interested. Top coking-coal exporter BHP Billiton is seen as a less likely contender, as it has its own growth options in Australia.

Xstrata and Anglo declined to comment.

The company's fourth-biggest shareholder, Australian investment firm LinQ Management, expects Riversdale to be hotly contested, given the scarcity of good quality coking-coal assets and booming demand from China and India for the commodity.

"It's in a good part of the world for accessibility, and we think there's plenty of further upside for whoever's interested in buying it. Hopefully there will be other interested suitors coming to the table," LinQ Managing Director Clive Donner said.

Riversdale confirmed media reports that Rio was talking about an offer around A$15 a share for Riversdale, which would value the group at A$3.5 billion ($3.48 billion), only a 6 percent premium on Riversdale's close on December 3 ahead of a leak to a UK newspaper. Riversdale also hinted that it was talking to others.

"While discussions with Rio Tinto are ongoing, there is no certainty that Rio Tinto or any other party will proceed with any proposal for the acquisition of Riversdale," Riversdale said.

Rio Tinto confirmed it was in talks, but also said that it had told Riversdale it was not currently in a position to submit a formal bid for the company.

"Hence nothing is on the table," a Rio spokesman told Reuters in an email. "Discussions are incomplete."

Riverdale's shares hit a high of A$16.41 on Monday, its biggest one-day gain in more than two years. They ended up 15.7 percent at A$16.31.

UBS is advising Riversdale and Macquarie is advising Rio Tinto.

SEEKING MID-SIZED TAKEOVERS

A deal would mark Rio Tinto's first significant acquisition since its badly timed $38 billion takeover of Alcan at the height of the commodities boom in 2007, which forced it to sell more than $13 billion worth of assets to help slash debt.