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All eyes were on whether Lisbon would be able to raise funds in the debt market on Wednesday, its first bond auction of the year, or if soaring borrowing costs will force it to turn to the IMF and European Union for help.

Japan offered a show of support for Europe's struggle with debt, saying it would tap its euro reserves to buy bonds this month for an Irish rescue plan, but the market doubted it would provide much relief.

"I don't think these comments (by Japanese Finance Minister Yoshihiko Noda) change the backdrop for the euro at all," said Todd Elmer, currency strategist for Citi in Singapore.

"Despite the fact that we're seeing this groundswell of international support, it doesn't really change or address the underlying problem and that's not going to change until the European authorities themselves come up with a more comprehensive solution to mitigate the fallout from the debt crisis."

Japan does not disclose the currency breakdown of its $1 trillion reserves and analysts think only a very small portion is in euro.

The euro rose as high as $1.2992 on trading platform EBS from around $1.2925 in early Asian trade, but quickly pared its gains to stand little changed on the day. At 0551 GMT, it was below its 200-day moving average at $1.2940, just above a four-month trough hit on Monday.

Tokyo's benchmark Nikkei index .N225 slid 0.3 percent on worries about the euro zone and overnight weakness on Wall Street, after hitting an eight-month closing high on Friday. Tokyo markets were closed on Monday for a public holiday. The broader Topix index was slightly higher.

The MSCI index of Asia Pacific stocks ex-Japan .MIAPJ0000PUS inched up 0.2 percent, with Hong Kong's Hang Seng Index .HSI up almost 1 percent.

Gold rose on worries about Portugal's debt, maintaining bullion's appeal as a safety net. A softer dollar typically helps gold because it makes the metal more affordable for holders of the euro and other currencies.

Spot gold was up $1.35 at $1,375.80 an ounce at 0549 GMT. The focus for the metal was Portugal's Wednesday bond aution.

Portugal is widely seen by investors as next in line in the euro zone to need a bailout after Greece and Ireland, but the government has repeatedly denied that it will seek foreign financing.

The European Central Bank threw Lisbon a temporary lifeline on Monday by buying some of its bonds, traders said.

The Dow Jones industrial average .DJI lost 0.3 percent on Monday, while the Standard & Poor's 500 Index .SPX edged down 0.1 percent. The Nasdaq Composite Index .IXIC gained 0.2 percent. .N

U.S. crude prices were steady above $89 on Tuesday as a key Alaskan oil pipeline remained shut, cutting total crude output by nearly 12 percent in the world's largest oil user.

(Editing by Kim Coghill)

At the same time, a record $199 billion surge in foreign exchange reserves in the fourth quarter pushed China's stockpile, already the world's biggest, to $2.85 trillion, highlighting that money streaming in from abroad was complicating policy efforts at home.

Chinese banks issued 7.95 trillion yuan ($1.2 trillion) in new loans last year, the central bank said on Tuesday, more than the 7.5 trillion yuan that the government wanted for the full year. The broad M2 measure of money supply grew 19.7 percent, also topping the official target of 17 percent.

"Lending is still excessive and China's process of monetary normalization has not finished yet," said Wu Tujin, economist with Guosen Securities in Shenzhen. "That means China will still face high pressure from inflation and asset bubbles."

More than just an economic issue, high-speed money and credit growth has become a political concern, helping propel Chinese consumer inflation to its fastest in more than two years.

Determined to rein in rising prices, a source of public discontent, the government declared late last year that it would shift to a tighter monetary policy stance. Some effects of that could be seen in the data for the final month of the year.

Chinese banks extended 481 billion yuan in new loans in December, down from 564 billion yuan in November and the lowest in one year.

MORE TIGHTENING TO COME?

But the December figures also showed that the impact of policy tightening thus far has been less severe than the market had expected. The median forecast of economists was for issuance of 380 billion yuan in new loans.

And the 19.7 percent in annual M2 growth was quicker than the 19.5 percent pace in November and far faster than the 18.9 percent increase expected by analysts.

"Lending was still very strong despite constant regulatory efforts to contain the pace. That shows there is robust demand for loans from the real economy," said Ren Xianfang, economist with IHS Global Insight in Beijing.

"I expect January data will be even higher. That will prompt the Chinese authorities to take pre-emptive steps," he said.

The People's Bank of China raised interest rates twice last year and officially increased lenders' required reserves six times. Economists polled by Reuters expect two further increases of both interest rates and required reserves in the first half this year.

But the central bank on Tuesday allowed just a mild rise in auctioned bill yields and also mopped up liquidity through open-market operations, signaling that it will keep rates and reserve ratios stable until early February.

In another move to ease the build-up of cash in the economy, China will allow residents of the wealthy coastal city of Wenzhou to invest in select markets overseas, an experiment in liberalizing the tightly controlled capital account.

Finance Minister Yoshihiko Noda told reporters after a cabinet meeting on Tuesday that Tokyo was considering buying about 20 percent of euro zone bonds to be jointly issued later this month to raise funds to support Ireland. Japan would use its existing euro reserves to pay for the debt, Noda said.

Japan's offer comes days after China reaffirmed its commitment to buy Spanish debt and analysts said it reflected both Tokyo's concern about the impact of the crisis on its export-reliant economy and an effort to reassert itself on the global stage.

"I think it's appropriate for Japan to purchase a certain amount of bonds to boost confidence in the EFSF (European Financial Stability Facility) and make a contribution as a major country," Noda said.

The European Union set up the 440 billion euro fund as a safety net for heavily indebted euro zone nations, but it failed to deter investors from betting on more bailouts.

A finance ministry source told Reuters that Japan would continue to buy bonds issued under the scheme as part of its commitment as a Group of Seven nation to stabilising the world economy and containing the debt crisis. The official declined to be named because he was not authorized to speak to the media.

Tokyo's pledge also follows reports that the European Central Bank was buying Portuguese bonds on Monday, after speculation that Portugal would soon follow Greece and Ireland in seeking an international bailout pushed the euro to four-month lows.

Japan's announcement lifted the single currency as far as $1.2992 on trading platform EBS from around $1.2925.

But it pulled back later when it became clear that Tokyo would use its existing euro reserves to buy the bonds and analysts expected the impact of Japan's gesture to be short-lived.

"I don't think these comments change the backdrop for the euro at all," said Todd Elmer, currency strategist for Citi in Singapore.

"Despite the fact that we're seeing this groundswell of international support, it doesn't really change or address the underlying problem and that's not going to change until the European authorities themselves come up with a more comprehensive solution."

CHINA'S CLOUT

Analysts said that besides concern that an escalating debt rout in Europe could thwart Japan's own recovery, Tokyo might also be acting to preserve its standing in global economic diplomacy after Beijing seized the initiative.

China's declared support for Spain -- euro zone's fourth-largest economy seen most at risk of contagion from Portugal's troubles -- follows Beijing's pledges last year to buy bonds issued by Greece, the first euro zone nation to need a rescue.

"With China pledging to buy euro zone bonds and its currency-based diplomacy increasingly prominent, Japan appears to be trying to follow suit to secure European support in possible future negotiations, either with the United States or China," said Yasunari Ueno, chief market economist at Mizuho Securities.

But Alcoa shares, which hit a 12-month high last week, dropped 1.3 percent to $16.24 in after-hours trade on the New York Stock Exchange, with some analysts questioning whether the company's bullish forecast was realistic. Others suggested some profit-taking by investors.

"Pretty much every one of our end markets is improving," Chief Executive Officer Klaus Kleinfeld told analysts on a conference call when asked about his projection for a 12-percent global increase in aluminum demand.

"We do not expect the substantial growth to come from the U.S. and Europe. We believe that those emerging economies will accelerate and there the driver pretty much is infrastructure building, and all the other end markets that we are seeing, from automotive to packaging to building and construction."

Kleinfeld said Alcoa expects demand growth in the aerospace sector to increase 7 percent in 2011 and 5-11 percent in the auto industry.

The beverage can sector was likely to be flat to 2 percent higher this year, but Alcoa sees commercial construction industry demand for aluminum increasing 2 percent to 3 percent. In fact, he said the building sector, which was particularly badly hit by the recession, appeared to be improving.

"When you look at the monthly contracts awarded and the construction starts ... it looks really like a bottoming out. It is not dropping further.

"So it could well be, if you take an optimistic perspective, that we might be seeing the bottoming out of this market here in the U.S."

Analyst Curt Woodworth of Macquarie Research said Alcoa's outlook was "phenomenally strong and probably conservative."

But he noted that although the quarterly financial results beat Wall Street estimates, they were below the Street's unofficial "whisper number." He also said some investors might have been taking a profit after Alcoa's stock rose recently.

Marc Pado, a market strategist at Cantor Fitzgerald & Co, said the projected 12-percent demand increase was higher than expected. "The question arises then whether the economy is going to be picking up the pace for this kind of increase in demand."

Analyst John Tumazos, president of Veryindependent Research in Holmdel, New Jersey, was incredulous. "I don't think there's enough aluminum in the world. In order to get a 12-percent growth rate in 2011, the world auto industry would have to be very strong, and each region of the world would have to be very strong."

HIGHER PRICING, DEMAND

Alcoa said income from continuing operations was $258 million, or 24 cents per share -- 21 cents per share excluding special items. That compared with a loss of $266 million, or 27 cents per share in the same quarter of 2009. Net income in the 2010 fourth quarter was 24 cents per share.

Revenue rose 4 percent to $5.7 billion, said the company which is traditionally the first Dow component to report in the quarter.

Robert Feinblatt, who shut his Trivium Capital Management firm in late 2008, was charged in a civil lawsuit on Monday with receiving illegal stock tips from Galleon defendant and cooperating witness Roomy Khan. The case comes as authorities ramp up trading probes involving hedge funds, and Galleon founder Raj Rajaratnam prepares for his criminal trial starting next month.

The Securities and Exchange Commission said Trivium obtained more than $15 million of illicit trading profits in the alleged scheme. Trivium specialized in investing in technology, healthcare and consumer stocks.

Khan had worked as a consultant to Feinblatt, who started Trivium after leaving hedge fund SAC Capital in 2002. A voice mail message left for Feinblatt, 41, at his Manhattan home was not immediately returned.

"Today's action reveals disturbingly corrupt arrangements -- faithless company executives who secretly pass corporate information to hedge fund managers willing to violate the law for profit," SEC enforcement chief Robert Khuzami said in a statement.

The SEC, in a complaint filed in U.S. District Court in New York, said the leaked information concerned earnings results for Google Inc and videoconferencing company Polycom Inc, as well as pending takeovers of Hilton Hotels Corp by Blackstone Group LP and software company Kronos Inc by Hellman & Friedman LLC.

Besides Feinblatt, the SEC also filed charges against Trivium analyst Jeffrey Yokuty, Polycom executive Sunil Bhalla and Shammara Hussein, who had worked at Market Street Partners, an investor relations consultant that did work for Google.

The commission said it has now charged 27 defendants in its insider trading enforcement actions that have centered on Galleon. It said the case now involves illicit profits of about $69 million.

The SEC complaint said the inside information was passed through Khan, a former Intel Corp employee, who pleaded guilty to criminal charges in the Galleon case.

Monday's court papers said that Khan tipped Rajaratnam to material nonpublic information she received from Bhalla about Polycom's earnings results for late 2005 and early 2006.

Rajaratnam has been free on bail after being charged criminally and civilly in October 2009. He pleaded not guilty and is scheduled to go on trial on February 28.

Since authorities first unveiled the Galleon case, they have brought new charges directly linked to that investigation as well as some indirect cases tied to so-called expert network firms that match hedge funds with industry consultants.

Seven consultants linked to expert networking firms were charged in November and December and at least two other cooperating witnesses pleaded guilty in December to charges of conspiracy and securities fraud. They are accused of leaking non-public information that gave certain investors an edge in trading.

Feinblatt's name first surfaced more than a year ago in a Reuters story about the Galleon probe because of his fund's connection to Khan. There is no indication that the SEC charges against Feinblatt are related to the recent expert networks probe.

Since closing his hedge fund, Feinblatt has been submitting posts to investing blog Seeking Alpha, calling himself an individual investor.

(Reporting by Grant McCool, Matthew Goldstein and Jon Stempel; Editing by Maureen Bavdek, Andre Grenon and Bernard Orr)

Duke's offer was a 6.4 percent premium over the last 20 trading days, the company said, and the deal would be accretive to Duke's earnings in the first year.

The transaction would create an industry giant with approximately 7.1 million electricity customers in North Carolina, South Carolina, Florida, Indiana, Kentucky and Ohio, and 57,000 megawatts of generating capacity.

Duke is currently the third-largest U.S. utility and would become both the largest in market value and generating capacity if the purchase is completed.

That could create a hurdle for regulators, who have blocked or created roadblocks in other deals in recent years.

Duke said Progress Energy shareholders would receive 2.6125 shares of common stock of Duke Energy for each share held, or $46.48 per share, representing a 4 percent premium to the stock's Friday close on the New York Stock Exchange.

Duke Energy said it also will assume about $12.2 billion in Progress Energy's debt. The company also expects to effect a reverse stock split immediately prior to closing.

Jim Rogers, chairman and chief executive of Duke, was expected to become chairman of the new company, while Bill Johnson, the chairman and CEO of Progress, would become CEO of the merged companies.

Duke Energy shares closed at $17.79 on the New York Stock Exchange on Friday.

Progress shares rose 1 percent in premarket trading to $45.20, while Duke shares slid less than 1 percent to $17.70.

(Reporting by Matt Daily, additional reporting by Thyagaraju Adinarayan in Bangalore; Editing by Maureen Bavdek)

A senior euro zone source told Reuters on Sunday that Germany, France and other euro zone countries were pushing Portugal to seek an EU-IMF assistance program, following Greece and Ireland, in a bid to prevent contagion spreading to much larger Spain, the fourth biggest economy in the euro area.

The interest rate premium on Portuguese sovereign debt fell on Monday after rising sharply late last week as traders said the ECB intervened to buy government bonds on the secondary market.

"They're buying five-years and 10-years in Portugal, whatever people are offering really," one trader said.

Another trader said the ECB appeared to be buying Greek and Irish bonds too. EU sources say the central bank has not yet bought Spanish government debt.

The euro zone source said Lisbon would need between 50 billion and 100 billion euros ($64.5-$129.1 billion) in loans, similar to Ireland, which accepted an 80 billion euro EU-IMF rescue in December after a banking crisis caused by a burst real estate bubble lumbered the state with huge liabilities.

"LITTLE CHANCE OF ESCAPING"

German Finance Minister Wolfgang Schaeuble denied that Berlin was pushing anyone to seek assistance, but he said it was defending the euro.

Spanish Economy Minister Elena Salgado said Portugal did not need to apply for aid because it was meeting its commitments to reduce its budget deficit. And the European Commission said no discussion was currently under way on assistance for Portugal or any other country.

But economists and market analysts said it was widely regarded as only a matter of time before high-deficit Portugal, with a stagnant economy that has lost competitiveness since joining the euro area, had to seek aid.

"If market spreads keep rising, Portugal has little chance of escaping a bailout," said Laurence Boone, research director at Barclays Capital in Paris.

Deutsche Bank economists Gilles Moec and Marco Stringa said in note that the Lisbon government would have to significantly "over-issue" debt in the first four months to avoid a sharp deterioration in its cash position while Portuguese banks will face a peak in their refinancing needs in January and February.

"It would be rational for Portugal to call for external help sooner rather than later," they said.

European finance ministers are due to consider a more comprehensive response to the continuing debt crisis at their next monthly meeting on January 17-18.

A German Finance Ministry spokeswoman said Portugal was not on the agenda, but the euro zone source said informal exploratory talks had already begun.

* European stocks were down 0.7 percent in morning trade, led lower by retreating banking shares, hurt by nagging concerns over the euro zone debt crisis.

* Pressure is growing on Portugal from Germany, France and other euro zone countries to seek financial help from the EU and IMF to stop the bloc's debt crisis from spreading, a senior euro zone source said on Sunday.

* U.S. Chemicals firm DuPont (DD.N) said on Sunday it will buy Danish food ingredients and enzymes firm Danisco (DCO.CO) for $5.8 billion, boosting its position in the fast-growing food sector.

* French drugmaker Sanofi Aventis SA (SASY.PA) said on Sunday it was in discussions with U.S. bid target Genzyme Corp (GENZ.O) over ways to value a key Genzyme drug, in a sign the two sides are moving closer to a deal.

* British medical equipment firm Smith & Nephew (SN.L) rejected a 7 billion-pounds ($10.9 billion) takeover approach from U.S. rival Johnson & Johnson (JNJ.N) late last year, Sky News said, without citing sources.

* U.S. software firm iGate (IGTE.O), backed by private equity firm Apax Partners, has agreed to buy a majority stake in India's Patni Computer (PTNI.BO) for $862 million, two sources with knowledge of the matter said, marking one of the largest deals in India's technology sector.

* Duke Energy Corp (DUK.N) is near $13 billion-plus deal to buy Progress Energy Inc (PGN.N), a move that would create the largest U.S. power company, sources familiar with the matter said.

* A group of private equity firms including Apollo Global Management APOLO.UL is interested in a buyout of food and beverage company Sara Lee Corp (SLE.N), and has made an approach to the company, a source familiar with the situation said on Sunday.

* Oil surged almost $2 on Monday to within 2 cents of $90 a barrel after a leak shut an Alaskan pipeline that carries 12 percent of U.S. crude output.

* China's global trade surplus narrowed in 2010 for the second straight year, giving Beijing grounds to rebuff U.S. pressure for faster currency appreciation ahead of a visit to Washington next week by President Hu Jintao.

* Japanese markets were closed for a public holiday.

* U.S. stocks fell on Friday after a court ruling in a key foreclosures case prompted investors to pull out of bank stocks, adding to weakness after a lackluster jobs report, but despite the day's losses, the S&P 500 and Dow recorded their sixth straight week of advances.

* the Dow Jones industrial average .DJI slipped 22.55 points, or 0.19 percent, to 11,674.76. The Standard & Poor's 500 Index .SPX was off 2.35 points, or 0.18 percent, to 1,271.50. The Nasdaq Composite Index .IXIC declined 6.72 points, or 0.25 percent, to 2,703.17.

(Reporting by Blaise Robinson; Editing by Hans Peters)