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Many of Obama's fellow Democrats in that chamber strongly oppose the measure as favoring the wealthy, and are still angry with him for cutting the deal with Republicans without them.

"We have a situation where we have a proposal before us that gives 6,600 families in America $25 billion and holds the rest of the provisions in the bill, (such as) low-income tax cuts, hostage to that blackmail," House Speaker Nancy Pelosi said on Wednesday, referring to a provision on the estate tax.

Still, most analysts believe the deal, which has already received overwhelming bipartisan approval in the Senate, will pass the House with substantial backing from Republicans and some Democrats.

The legislation would extend for two years income tax cuts enacted under Republican former President George W. Bush, with Democrats backing off their earlier fervent opposition to extending the cuts for the richest Americans. The Bush-era cuts are due to expire at the end of 2010 unless Congress acts.

The measure would also prevent a spike in taxes on capital gains and dividends, renew long-term unemployment insurance and provide new tax relief for students, working families and businesses.

House Democrats are becoming more resigned to passage of the $858 billion package. Experts predict the measures will probably boost economic growth but add to the $1.3 trillion budget deficit, which has unsettled the bond market.

Most of the 255 House Democrats may oppose the overall tax package, but it is expected to be approved with overwhelming support among the chamber's 179 Republicans.

ONE POINT GDP BOOST

Obama on Wednesday called on the House to approve the bill "as soon as possible" to avoid tax increases across the board in January.

Many economists predict the tax package could add up to 1 percentage point to economic expansion next year, due partly to a one-year cut in the payroll tax and removal of uncertainty about taxes in general.

Obama's current position on taxes contrasts sharply with his position earlier this year when he and his fellow Democrats fought against renewing tax reductions for the wealthiest Americans -- those with household incomes above $250,000 -- while supporting continued cuts for middle-class taxpayers.

At the time, they said that with budget deficits at record levels, the United States could not afford to give the tax breaks to the wealthiest.

But with Republicans drawing a line in the sand on the issue and scoring major victories in November 2 congressional elections -- taking control of the House and making gains in the Senate -- Obama acquiesced on tax cuts for upper-income Americans.

Democrats did win their desired extension of unemployment benefits, which were expiring for millions of people shut out of jobs in the lackluster economy.

Traders were wary that headlines from the discussion in Brussels about a permanent mechanism to prevent fiscal crises from spreading may push up the euro toward $1.33, though persistently higher U.S. bond yields have been keeping the dollar broadly supported in year-end markets.

Shrinking trading volumes in Asian equity markets have been a tell-tale sign that investors are heading to the sidelines for the rest of the year rather than expose their portfolios to more risks. However, Japanese stocks continued to outperform thanks to foreign investment.

"The Nikkei is taking a breather after a six-week rally, but sentiment remains bullish overall," said Takashi Ohba, a senior strategist at Okasan Securities in Tokyo.

* Japan's Nikkei share average was flat though up 1 percent .N225 so far in the week, outperforming the MSCI all-country world index advance of 0.1 percent .MIWD00000PUS.

* The MSCI Asia Pacific ex-Japan index of equities fell 0.4 percent .MIAPJ0000PUS in sluggish trade.

* After sliding more than 2 percent in November on early profit taking, the index has staged a rally in light turnover in December. It is up 3.6 percent so far in December.

* The euro was up 0.1 percent at $1.3225, though sell orders around $1.3300 kept it hemmed in a tight range, traders said. Chart support at $1.3164, the low of the range carved out in the past week, if breached could lead to a further decline to around $1.2969, the November low.

* Ten-year U.S. Treasury futures expiring in March were up 9/32 after plumbing a 7-month low overnight. In the cash market, the yield on the 10-year note slid to 3.48 percent after climbing as high as 3.57 percent overnight.

(Editing by Kim Coghill)

(Additional reporting by Antoni Slodkowski and Hideyuki Sano in TOKYO)

The lawsuit seeks damages from the well owners BP, Anadarko Petroleum Corp and Mitsui & Co Ltd unit MOEX, and well driller Transocean Ltd and its insurer QBE Underwriting/Lloyd's Syndicate 1036, part of Lloyds of London, for their roles in the Gulf of Mexico disaster.

"While today's civil action marks a critical step forward, it is not a final step," U.S. Attorney General Eric Holder told reporters at a news conference.

"Both our criminal and civil investigations are continuing, and our work to ensure that the American taxpayers are not forced to bear the costs of restoring the Gulf area -- and its economy -- goes on," he said.

The suit, the first by the U.S. government after the April 20 explosion aboard the drilling rig in which 11 workers died, was filed in a New Orleans federal court which is considering private lawsuits against BP and the others for the spill.

BP, which returned to profitability in the third quarter of 2010, has begun selling assets and amassing a massive warchest to pay for damages caused by the oil spill, which the oil concern has estimated could reach as much as $40 billion.

The oil company said on Wednesday it was weighing the sale of its Canadian natural-gas liquids business.

In response to the lawsuit, BP said it is "solely a statement of the government's allegations and does not in any manner constitute any finding of liability or any judicial finding that the allegations have merit."

"BP will answer the government's allegations in a timely manner and will continue to cooperate with all government investigations and inquiries," the company said.

SETTLEMENT IS A POSSIBILITY

Legal experts have said they expect the two sides to settle eventually but it could take years. In comparison, Exxon XOM.N> settled government claims over the spill by its Valdez tanker in Alaska in 1991, two years after the oil hit the coast.

The lawsuit against BP and others warned that "the full extent of potential injuries, destruction, loss and loss of services is not yet fully known and may not be fully known for many years."

Shares in the companies targeted in the lawsuit fell in the wake of the lawsuit.

The stocks trimmed early losses to close off their lows, with BP down 1.3 percent at $43.86 and Anadarko Petroleum down 2.3 percent at $67.41. Halliburton, which wasn't named in the suit, closed near session lows, down 3.1 percent at $39.79.

The Deepwater Horizon drilling rig blowout spilled about 4.9 million barrels of oil over several months. It fouled resort beaches and fishing grounds and led to hundreds of lawsuits over lost revenues and wages.

The investment came from Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers and existing investors, Twitter said.

The money will help Twitter grow the company, Twitter said in a post on its corporate blog on Wednesday. The blog post did not elaborate and a spokesman declined to offer specifics.

Twitter, which had 175 million users as of September, is among the new crop of quickly growing Internet social networking services. Others include Facebook and Zynga.

The company added two new board members -- FlipBoard Chief Executive Mike McCue and DoubleClick CEO David Rosenblatt.

The moves come two months after the four-year-old company handed the job of chief executive to Dick Costolo, the architect of its new advertising efforts, a sign that making money is a priority for the service.

Costolo told Reuters in May that Twitter planned to have hundreds of advertisers using its ad system by the end of the year. He said the company's previous valuation of $1 billion meant that it was incumbent on Twitter to develop a business that can generate hundreds of millions of dollars of revenue.

Twitter had raised $160 million in four earlier funding rounds.

Technology blog AllThingsDigital first reported the $200 million funding round. It said that Kleiner Perkins beat out Russian investment firm DST Global. The Twitter spokesman confirmed that the figures were accurate.

Twitter, which allows users to send 140-character text messages, or Tweets, to followers, is one of the Web's most popular social networks, and is challenging established Web services like Google Inc and Yahoo Inc.

Investors are watching the service closely, hoping one day to buy public shares of the company.

(Reporting by Alexei Oreskovic. Additional reporting by Jim Finkle. Editing by Robert MacMillan)

Industrial output rebounded 0.4 percent, the Federal Reserve said on Wednesday, the latest data to suggest the recovery gained momentum in the fourth quarter.

However, with inflation barely rising, economists said the pick-up in economic activity was insufficient to discourage the Fed from completing its planned purchase of $600 billion in government bonds to keep borrowing costs tamped down, and weekly data showed mortgage applications fell on high rates.

"The economy is picking up momentum as we finish up the year. But the improvement in data is not enough to stop the Fed doing what they are doing," said Neil Dutta, an economist at Merrill Lynch Bank of America in New York.

The closely watched core Consumer Price Index, which excludes food and energy costs, edged up 0.1 percent in November, the first gain in three months, the Labor Department said. Overall consumer prices inched up 0.1 percent, slowing from a 0.2 percent rise in October.

The rise in core CPI matched economists' expectations, but CPI was below the 0.2 percent increase that had been forecast.

Stocks on Wall Street .SPX rose on the data, but gains were limited as worries about the debt crisis in the euro zone resurfaced after ratings agency Moody's warned it could downgrade Spain's debt, and the market later started to slip into negative territory.

Prices for U.S. government debt were mostly up, while the dollar rose against a basket of currencies .DXY.

UTILITIES BOOST OUTPUT

Utility output surged 1.9 percent last month and manufacturing increased 0.3 percent, despite a steep drop in vehicle production.

Continued strength in manufacturing, which has been the star performer during the recovery, was underscored by a strong rebound in a gauge of manufacturing in New York state in December.

Adding to the brightening economic picture, credit card delinquency rates fell at major domestic lenders last month as fewer consumers fell behind on bill payments.

Fed officials took little note of the improving tone of economic data after a policy meeting on Tuesday, however, and kept the spotlight on high unemployment and low inflation.

Economists parsing the latest report on consumer prices on Wednesday said it was likely that a slowing in core inflation, which had been troubling the Fed, had now run its course.

In the 12 months to November core CPI gained 0.8 percent, edging up from October's record low 0.6 percent but staying way below the Fed's comfort zone of 1.7 to 2.0 percent inflation.

Investor concerns over a possible Moody's downgrade of Spain gave way as data showed manufacturing rebounded in New York state this month after falling sharply in November.

U.S. industrial output in November also rose, posting its biggest gain since July, as signs emerged of a firmer end to the year for the world's largest economy.

"We walked in this morning with a potential downgrade by Moody's, which brought back the macro concerns, but what we are seeing here is just an overall positive bias to stocks all the way to the year end," said Kevin Kruszenski, head of listed trading at KeyBanc Capital Markets in Cleveland.

"At this point, most people are thinking they would rather be in stocks than anything else."

The Dow Jones industrial average .DJI was up 32.21 points, or 0.28 percent, at 11,508.75. The Standard & Poor's 500 Index .SPX was up 1.37 points, or 0.11 percent, at 1,242.96. The Nasdaq Composite Index .IXIC was up 6.87 points, or 0.26 percent, at 2,634.59.

Wall Street ended mostly flat on Tuesday on a late-day sell-off after another cautious assessment on the strength of the economy from the U.S. Federal Reserve.

The S&P 500 is up more than 7 percent from a year ago, but bullish sentiment continued to rise among financial advisers surveyed in the weekly Investors' Intelligence poll.

The percentage of financial advisers who are bullish on the stock market rose to 56.8 percent, up from 56.2 percent last week. The percentage of bearish investors fell to 20.5 percent from 21.3 percent last week, according to the poll.

"The current above-55 percent (bullish) reading makes it risky to take on many new positions, with a strong likelihood that the rally is nearing a top," Investors' Intelligence said in a note to clients.

Novartis AG (NOVN.VX) (NVS.N) has wrapped up its long-awaited buyout of the remainder of U.S.-listed Alcon Inc (ACL.N) it didn't own.

U.S-listed shares of Novartis was up 6 percent at $59.18, and Alcon gained 1.8 percent to $165.32.

Investor Carl Icahn said he had agreed to buy power producer Dynegy Inc (DYN.N) for $665 million in cash, just three weeks after a bid by private equity firm Blackstone Group (BX.N) failed to win over Dynegy shareholders. Dynegy shares were up 4.2 percent at $5.68.

(Editing by Padraic Cassidy)

But consumer prices barely increased last month, a reminder of the still-abundant slack in the economy, making it certain the Federal Reserve will complete its controversial $600 billion government bond-buying program to further help the economy.

"The economy is getting its groove back," said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

Industrial output rose 0.4 percent in November, the Fed said on Wednesday, after contracting 0.2 percent in October. For details, see [ID:nN15128935]

Separately, the Labor Department said its Consumer Price Index nudged up 0.1 percent, below economists' expectations for a 0.2 percent, following a 0.2 percent increase in October, the Labor Department said.

Excluding food and energy, core CPI ticked up 0.1 percent as expected, after being flat for three straight months.

The data had little impact on U.S. financial markets as investors worried about the debt crisis in the euro zone after Moody's said it may downgrade Spain's debt rating. U.S. stocks nudged up, while government debt prices rose.

The U.S. dollar rose against the euro and the yen.

Although core consumer prices edged up in November, inflation remains mute. The Fed on Tuesday reaffirmed its intention to purchase government bonds through the end of the second quarter of 2011, saying measures of underlying inflation were somewhat low.

The U.S. central bank also noted that the recovery from the worst recession since the Great Depression of the 1930s was still insufficient to lower a 9.8 percent unemployment rate.

In the 12 months to November, consumer prices increased 1.1 percent, in line with expectations. Core CPI gained 0.8 percent, edging up from October's record low 0.6 percent rise, but staying way below the Fed's comfort zone of between 1.7 percent to 2.0 percent.

Energy prices rose only 0.2 percent last month as household gas tumbled, helping to hold back overall CPI. Energy prices rose 2.6 percent in October. Food prices gained 0.2 percent, rising for a fourth straight month.

Elsewhere, new vehicle prices slipped 0.4 percent in November, extending the prior month's fall. Prices for used cars and trucks fell 0.5 percent, declining for a third straight month.

Apparel rebounded 0.2 percent after falling for three straight months, as retailers heavily discounted merchandise to attract shoppers.

Shelter costs edged up 0.1 percent in November, the second consecutive month of gains, which should support views that rentals were stabilizing.

But the housing market continues to struggle and remains one of the weak spots in the recovery. Applications for home loans dropped last as mortgage rates rose for a fifth consecutive week to touch seven month highs, the Mortgage Bankers Association said.

Adding to the downbeat outlook for the housing market, home-builder sentiment was remained stuck at record low levels in December, the National Association of Home Builders/Wells Fargo survey showed.

(Reporting by Lucia Mutikani; additional reporting by Pedro Nicolaci da Costa and Corbett Daly; editing by Jeffrey Benkoe)

The Swiss drugmaker has been trying to clinch 100 percent ownership in Alcon since the start of the year, but its original all-paper offer of 2.8 Novartis shares for each Alcon share met stiff resistance from Alcon's Independent Director Committee (IDC), which repeatedly dismissed it as "grossly inadequate."

The merger consideration will now include up to 2.8 Novartis shares and, if necessary, be topped up with cash to ensure that each Alcon shareholder gets $168 per Alcon share, Novartis said on Wednesday.

The group added that if the value of 2.8 Novartis shares is more than $168, the number of Novartis shares will be reduced accordingly and that a share buyback program would be started again to minimize dilution to Novartis shareholders.

The move completes the final stage of a lengthy process to get full control of the eyecare group, which is the dominant player in the multibillion-dollar intraocular lens market and is also No. 1 in cataracts -- an area that is set to benefit from aging populations.

"The announcement ... removes uncertainty around this transaction which has weighed heavily on the Novartis share price in recent months. This together with the re-activation of the share buyback program should support the Novartis share price," Helvea analyst Karl-Heinz Koch said.

Novartis shares were indicated to open over 1 percent higher, according to data provided by bank Clariden Leu.

GLOBAL EYECARE LEADER

"With this step Novartis takes full ownership, becoming the global leader in eyecare, a rapidly expanding, innovative platform based on the growing needs of an aging population," Novartis Chairman Daniel Vasella said in a statement.

The Basel-based group is hoping the Alcon deal, worth $51.6 billion in total, will help it diversify and protect it against patent loss on big selling medicines such as blood pressure drug Diovan.

Novartis earlier this year completed its buy of a 77 percent stake from Nestle (NESN.VX) and paid the Swiss foods group on average $168 per Alcon share.

But the drugmaker refused to budge from its offer made to the remaining Alcon shareholders, which throughout the year this was worth less than the average price paid to Nestle and at Tuesday's closing price was worth $156.

Novartis argued it would be able to push the deal through under Swiss merger law, but Alcon's IDC still threatened to fight Novartis in the courtrooms to get a fair price.

Novartis said its board of directors had unanimously approved the merger and it was likely to be completed during the first half of 2011.

It is, however, conditional on clearance of a registration statement by the U.S. Securities and Exchange Commission, two-thirds approval by the shareholders of each of Novartis and Alcon voting at their respective meetings, and other customary closing conditions.

(Editing by Hans Peters and Ben Hirschler)