Business Blog Posts

The HSBC flash manufacturing purchasing managers' index (PMI), the earliest indicator of China's industrial activity, slumped in November to 48, a low not seen since March 2009.

The data showed the world's growth engine is not immune to economic troubles abroad, and could further unnerve financial markets already roiled by Europe's deteriorating debt crisis.

November's flash reading is a sharp three-point fall from October's final figure of 51 and indicated Chinese factory output shrank on the month in November. A PMI reading of 50 demarcates expansion from contraction.

The last time the PMI slipped below 50 was in September, when the index hit 49.9.

"Industrial production growth is likely to slow further to 11-12 percent year-on-year in coming months as domestic demand cools and external demand is set to weaken," said Qu Hongbin, a HSBC economist.

In line with the dismal headline number, the flash output sub-index tumbled to a 32-month low of 46.7, a steep drop from October's final reading of 51.4.

The marked slowdown in activity cooled factory inflation sharply. The sub-indices for input and output prices sunk around 10 points each to below 50, hugging lows last seen in April 2009.

New export orders were the only bright spot in the survey, holding steady from October to stay above 50.

But the sub-index for new orders suffered its biggest drop in 1- years to sink well below the 50-point mark, suggesting factories received fewer orders on the whole in November even though export orders held up.

Unlike China's official PMI which is published by Beijing and tilts toward large state firms, the HSBC PMI surveys are skewed toward private companies that have been harder hit by China's monetary tightening campaign.

As recent as July, China raised interest rates for the third time this year in a bid to calm rising consumer prices.

STILL A SOFT LANDING?

Weighed by tight domestic monetary conditions and waning demand in its two biggest export markets, Europe and the United States, China's economy lost steam in the third quarter and all signs suggest it would slow further.

Easing activity puts pressure on Beijing to relax monetary policy at the margins by loosening bank lending restrictions, for instance. But until Europe's crisis gets out of hand, few analysts think China is ready to cut interest rates.

Growth in exports hit eight-month lows in October as manufacturing output grew at its weakest in a year. The exuberant Chinese property market is also coming off a boil to drag on real estate construction and investment.

But HSBC's Qu argued China is still headed for a soft-landing as cooling inflation gives Beijing more room to ease policy and support economic growth if needed.

"As inflation is likely to decelerate at a faster-than-expected pace, it will leave more room for Beijing to step up selective easing measures, which should gradually filter through to keep China on track for a soft-landing," he said.

A slackening economy pulled China's inflation to 5.5 percent in October, down from three-year peaks of 6.5 percent struck in July.

The flash PMI is based on up to 90 percent of total responses to the monthly survey and is a snapshot of the final data. HSBC stared publishing the series in February.

(Editing by Jacqueline Wong)

The market remains anchored by concerns about the worsening debt crisis in Europe where rising yields suggest the outlook continues to deteriorate and stocks have been tied to the European credit market's volatility.

News that the International Monetary Fund would make short-term credit available for struggling euro-zone countries gave stocks a temporary boost, but the gains quickly evaporated.

Spain's short-term borrowing costs hit a 14-year high on Tuesday as political uncertainty about a solution to the euro zone's sovereign debt crisis punished another vulnerable southern European country.

The S&P managed to hold near 1,187, seen as the next technical support, representing the 61.8 percent retracement of the 2011 high to low. The index fell below the 1200 mark last week.

Joseph Cusick, senior market analyst at OptionsXpress Holdings Inc in Chicago, said the stock market is currently battered and is reaching a technically oversold level.

"I will be watching the 1,200 level on the S&P. If reached, it would reclaim about 50 percent of the latest two-day pullback, potentially acting as a pivot area for the bulls."

The Dow Jones industrial average .DJI was down 53.59 points, or 0.46 percent, at 11,493.72. The Standard & Poor's 500 Index .SPX was down 4.94 points, or 0.41 percent, at 1,188.04. The Nasdaq Composite Index .IXIC was down 1.86 points, or 0.07 percent, at 2,521.28.

Before Wall Street's opening bell, data showed the U.S. economy grew at a 2 percent annual rate in the third quarter. While down from the government's prior estimate of 2.5 percent one month ago, reduced inventories and solid consumer spending could result in better-than-expected growth in the fourth quarter.

The market showed a muted reaction to minutes from the Federal Reserve's recent policy meeting in which some officials said they were prepared to do more to support the domestic economy. But the committee decided to hold off taking action amid an uncertain outlook.

Hewlett-Packard Co (HPQ.N) dropped 0.8 percent to $26.65 after the computer and printer maker gave a 2012 profit outlook that was below consensus late Monday.

Among Nasdaq stocks, Groupon Inc (GRPN.O) slumped as much as 14 percent on Monday on concern about increased competition, leaving shares of the largest daily deal company at $20.07 compared with their $20 initial public offering price.

In total, about 6.99 billion shares exchanged hands on the New York Stock Exchange, NYSE Amex and Nasdaq, below the current daily average of 8 billion shares.

On the NYSE, decliners beat advancers by 18 to 11, while on the Nasdaq, about two stocks fell for every one that rose.

(Reporting by Angela Moon, Editing by Kenneth Barry)

The Fed said it will publish next year the results of the tests for six banks that have large trading operations: Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo.

"They are clearly worried about the issue of Europe," said Nancy Bush, a longtime bank analyst and contributing editor at SNL Financial. "In a time of risk aversion and concern, you need transparency."

The Fed said its global market shock test for those banks will be generally based on price and rate movements that occurred in the second half of 2008, and also on "potential sharp market price movements in European sovereign and financial sectors."

In the Fed's hypothetical stress scenario, unemployment would spike as high as 13 percent while U.S. gross domestic product would fall by as much as 8 percent.

The heightened stress tests are part of a larger supervisory test the Fed will conduct on the capital plans of 31 firms with at least $50 billion in assets.

The tests will apply to 19 banks who have previously been through the process and 12 more financial firms considered less complex. The test each bank faces will be based on its size and complexity.

The banks must submit their capital plans to the Fed by January 9, 2012. The Fed said that it plans to respond to banks by March 15. It was not clear when the results would be published.

The Fed will use the stress tests to determine whether banks are robust enough to raise dividends or repurchase stock, or whether they need to obtain additional capital.

The Fed plans to release more information than it did last year about the tests' results. The regulator said it is doing so to "foster market discipline."

The Fed will disclose the estimate of revenues, losses and capital ratios of the 19 biggest banks if they were to suffer a market shock.

This type of disclosure could give investors and markets more certainty about the strength of U.S. banks at a time when there are deep concerns about their European counterparts.

"Eventually, this will be viewed as a positive, and a lot of people will focus on this as a way to verify the viability of these companies," said Matt McCormick, portfolio manager at Bahl & Gaynor investment counsel in Cincinnati.

CONTAGION FEARS

Fitch Ratings earlier this month expressed concern that U.S. banks could take a hit from the debt crisis in Europe.

Analysts at the credit rater said their concerns are based, in part, on U.S. banks having increased trading operations in Europe in the past several years.

"Our concern is with counterparty risk, the impact of Europe on global economic growth and how that weighs on the economic recovery in the U.S.," said analyst Joseph Scott in the November 16 note.

Fears over U.S. firms' European exposure grew after brokerage MF Global filed for bankruptcy on October 31. MF Global collapsed after disclosures about its massive bets on European debt spooked investors and counterparties.

U.S. bank stocks in general have taken a beating over the last year with investors concerned about the sluggish economy, European debt, and the impact of more intense regulation.

The KBW Bank Index of stocks has fallen more than 30 percent this year.

DIVIDENDS

Banks have been eager to boost dividends and buy back stock, but the Fed has indicated it will take a tough stance, particularly if a bank is not far along in meeting new international Basel capital standards.

In a November 9 speech, Fed Governor Daniel Tarullo said the central bank would be "comfortable with proposed capital distributions" only when it is "convinced" a bank is on a path to easily meet the new standards.

"I don't think anyone could say that this is anything but an extremely stringent stress test," said Karen Petrou, managing partner of Federal Financial Analytics. "It will really put the burden on the affected bank holding companies to prove they can make a capital distribution, not on the Fed to block it."

The Fed is putting in place a broad stress testing regime in the wake of the 2007-2009 financial crisis when taxpayers were forced to extend a $700 billion bailout to the financial system.

This will be the second round of Fed tests of banks' capital plans.

Earlier this year, the Fed rejected Bank of America's plan to boost its dividend in the second half of 2011, while allowing other big banks to move ahead with dividend hikes.

Under the 2010 Dodd-Frank financial oversight law, the Fed is required to conduct stress tests on banks with more than $50 billion in assets.

The latest capital tests are separate from this requirement but the Fed said on Tuesday it would try to harmonize the different testing regimes facing banks.

The expansion of the capital tests beyond the 19 who have been scrutinized in the past will likely not be welcomed by those being added to the list.

"It's another layer of Fed oversight on their capital, and they've fought tooth and nail not to be included in this," said Paul Miller, analyst at FBR Capital Markets. "So I don't think any of those banks are particularly happy right now."

(Reporting by Karey Wutkowski, Dave Clarke and Alexandra Alper in Washington, Joe Rauch and Rick Rothacker in Charlotte, and Lauren Tara LaCapra and David Henry in New York; Editing by Bernard Orr and Tim Dobbyn)

The Fed said it will publish next year the results of the tests for six banks with large trading operations: Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo.

The Fed said its global market shock test for those banks will be generally based on price and rate movements that occurred in the second half of 2008, and also on "potential sharp market price movements in European sovereign and financial sectors."

The heightened stress tests are part of a larger supervisory test the Fed will conduct on the capital plans of 19 firms with at least $50 billion in assets, including those six large banks.

In addition, the Fed will conduct a scaled-back test on the capital plans of 12 more financial firms considered less complex.

The Fed's review of those plans will determine whether the banks are robust enough to raise dividends or repurchase stock, or whether they need to raise additional capital.

The banks must submit their capital plans by January 9, 2012. The Fed said that it plans to respond to banks by March 15.

The Fed is putting in place a broad stress testing regime in the wake of the 2007-2009 financial crisis when taxpayers were forced to extend a $700 billion bailout to the financial system.

This will be the second round of Fed tests of banks' capital plans.

Earlier this year, the Fed rejected Bank of America's plan to boost its dividend in the second half of 2011, while allowing other big banks to move ahead with dividend hikes.

The Fed on Tuesday said it will release the results of the stress test to "foster market discipline."

It said it will disclose the estimate of revenues, losses and capital ratios of the 19 biggest banks if they were to suffer a market shock.

(Reporting by Karey Wutkowski and Dave Clarke, editing by Bernard Orr and Tim Dobbyn)

Gross domestic product grew at a 2.0 percent annual rate in the July-September quarter, the Commerce Department said in its second estimate on Tuesday, down from the previously reported 2.5 percent.

While the growth pace was weaker than economists had expected, the composition of the report, particularly still-firm consumer spending and the first drop in businesses inventories in nearly two years, set the stage for a stronger performance in the final months of the year.

A deterioration in consumer sentiment likely had led businesses to anticipate weaker demand. With consumer spending showing resilience, analysts said they will now have to rebuild inventories, keeping factories busy.

"The mix or composition of growth improved. Inventory investment was lower so firms are more likely to produce more goods going forward. And exports rose," said Cary Leahey, a senior economist at Decision Economics in New York.

"So while you lost a half percentage point in the revision to third-quarter growth, you might easily get it back in the fourth quarter of this year or the first quarter of next."

Data so far suggest the fourth-quarter growth pace could exceed 3 percent, which would be the fastest in 18 months.

INVENTORIES A DRAG

U.S. Treasury debt prices were trading modestly weaker in the morning session, while stocks were lower. The dollar was little changed against a basket of currencies.

Despite the downward revision, last quarter's growth is still a step-up from the April-June period's 1.3 percent pace.

The government revised third-quarter output to account for an $8.5 billion drop in business inventories, the first decline since the fourth quarter of 2009.

The drop in inventories lopped off 1.55 percentage points from GDP growth, which was partly offset by strong exports.

Excluding inventories, the economy grew at an unrevised brisk 3.6 percent pace after expanding 1.6 percent in the second quarter.

Consumer spending was taken down a notch to a 2.3 percent growth pace from 2.4 percent, but remained the quickest pace since the fourth quarter of 2010.

But weak income growth could crimp spending going forward. Taking inflation into account, disposable income fell at a steeper 2.1 percent rate instead of 1.7 percent, the report showed. It had declined 0.5 percent in the prior three months.

The failure of a congressional "super committee" to agree on a deficit reduction package of at least $1.2 trillion also clouds the outlook. It is less clear now that Congress will extend a payroll tax cut and emergency unemployment benefits due to expire next month.

That potential fiscal drag, together with the festering European debt crisis, could undermine growth early next year.

"The economy looks to be moving in the right direction, but the first quarter could be a different story, particularly if the payroll tax cut isn't extended, which looks even more unlikely after the super committee fiasco," said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

REVERSAL OF TEMPORARY FACTORS

Part of the pick-up in output during the last quarter reflected a reversal of factors that held back growth earlier in the year.

A jump in gasoline prices had weighed on spending in the first half of the year, and supply disruptions from Japan's big earthquake and tsunami in March had curbed auto production.

Business investment was revised down to a 14.8 percent rate from 16.3 percent as estimates for investment in nonresidential structures and outlays on equipment and software were lowered.

The department also said after-tax corporate profits increased at a 3.0 percent rate after rising 4.3 percent in the second quarter.

Exports grew at a stronger 4.3 percent rate instead of 4.0 percent, while imports rose at a much slower 0.5 percent rate rather than 1.9 percent.

Elsewhere, there were revisions to show modest residential construction and weak government spending.

The GDP report also showed inflation pressures subsiding, with a price index for personal spending rising at a 2.3 percent rate, instead of 2.4 percent. That compared to a 3.3 percent rate in the second quarter.

A core inflation measure, which strips out food and energy costs, rose at a 2.0 percent rate rather than 2.1 percent. The measure -- closely watched by the Federal Reserve -- grew at a 2.3 percent rate in the prior three months.

The ongoing debt crisis in the euro zone along with worries over how the United States will tackle its ballooning debt have sparked steep equity losses. The S&P 500 fell almost 2 percent on Monday while the Dow turned negative for the year. Last week, the S&P recorded its worst week in two months.

The FTSEurofirst 300 .FTEU3 rose as much as 0.7 percent but later pared gains in a volatile session after yields in a Spanish government debt auction rose to their highest in 14 years.

"We're getting to a point where there's been so much selling, bargain hunters are taking advantage of an oversold market," said Art Hogan, managing director of Lazard Capital Markets in New York.

Crude oil rebounded more than 1 percent after dropping on Monday on concerns about how the debt issues would impact economic growth and commodity demand.

"After the uniform selloff we saw across pretty much all asset classes yesterday, we're seeing a nudge up, although we're still very concerned about what's going on in Europe, especially the yields on Spanish debt," Hogan said.

Technology shares will be in focus a day after Hewlett-Packard Co (HPQ.N) projected fiscal 2012 earnings of at least $4 per share versus estimates of $4.54. The Dow component also reported a steep drop in quarterly profit. The stock fell 2.1 percent to $26.30 in light premarket trading.

S&P 500 futures rose 1.4 points and were slightly above 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 added 3 points, and Nasdaq 100 futures fell 5.75 points.

The S&P has fallen through a key support level at 1,200. The next technical support was seen at 1,187, representing the 61.8 percent retracement of the 2011 high to low.

"We're in a range between about 1,180 and 1,250 on the S&P, and we're unlikely to break out of that until we see real policy changes get implemented in Europe," Hogan said. "However, we do have a higher floor for markets than a month ago, and that's positive."

Late Monday, the co-chairs of a special U.S. congressional committee said it had failed to reach a deal on reducing government deficits. There are concerns the stalemate will make it more difficult to pass extensions of stimulative measures like payroll tax cuts, which could hurt the U.S. economy.

While the news was expected, it could further limit market upside. Trading volume is likely to be low this week as global uncertainties and the U.S. Thanksgiving holiday prompt investors to sit on the sidelines.

Economic data due later in the day includes the second estimate of U.S. third-quarter gross domestic product, with economists in a Reuters survey forecasting a 2.5 percent annualized rate of growth, same as the first estimate. The report is due at 8:30 a.m. EST <1330 GMT>

Campbell Soup Co (CPB.N) reported first-quarter earnings that beat expectations while sales were slightly below consensus. Medtronic Inc (MDT.N) also reported profit above estimates.

The news was a blow to customers still hoping to get more of their cash out of frozen broker accounts and raised new questions about why the authorities managed to locate only about 60 percent of the segregated customer funds three weeks after the parent firm's October 31 bankruptcy.

"I'm flabbergasted," said Tom Ward, a retired Chicago Board of Trade member whose two sons cleared their futures trades through MF Global and have been blocked from accessing their money. "The bottom line is, there's going to be a haircut involved. It's devastating, what this has done to the industry."

Monday's announcement was trustee James Giddens' first public statement on the size of the shortfall, which regulators initially said was about $600 million.

Regulators are investigating what happened to the money and whether MF Global may have improperly mixed customer money with its own -- a major violation of industry rules. No charges have been filed.

Hours after the statement, the bankrupt MF Global parent filed court papers along with JPMorgan Chase & Co (JPM.N), one of its key lenders, seeking the rare appointment of a separate trustee to take over the company's assets in bankruptcy.

Such appointments are reserved for cases in which a company's executives are accused of wrongdoing or when it may otherwise be in the estate's best interest. JPMorgan, which pledged $8 million of its collateral to keep MF Global afloat during bankruptcy, agreed to increase that pledge to $26 million if a trustee were appointed, according to the filing.

The request is on the agenda for a hearing tomorrow afternoon in U.S. Bankruptcy Court in Manhattan.

An MFGlobal spokeswomen declined to comment on the case.

QUESTIONS RAISED

In Monday's statement, Giddens said he currently controls about $1.6 billion of the brokerage's funds that he can use to pay back customers. His plans to pay back 60 percent of customer funds by early December would nearly exhaust that amount.

The sharply higher estimate of the shortfall raises questions about the investigation, said Tim Butler, an attorney for a group of customers demanding a fuller payback.

"What did the CFTC know three weeks ago and what do they know now?" Butler said. "If the amount has changed that much over three weeks, where did the money go? What were (regulators) looking at before?"

Leaders on Capitol Hill have entered the fray with calls for hearings and accountability.

Sen. Chuck Grassley, R-Iowa, said the CFTC should "do everything possible" to get more information to customers on the status of their funds. The call comes as angry farmers and ranchers across the country begin to reconsider a livelihood in the market and how they hedge future crops and livestocks.

"Unlike the big banks, the average farmer who lost money in this fiasco can't afford to hire an attorney and attend proceedings in a Manhattan courtroom," Grassley said in a statement.

MF Global was run by former Goldman Sachs & Co Inc (GS.N) chief and New Jersey governor Jon Corzine before its bankruptcy. The Chapter 11 filing came after the New York-based company revealed it made a $6.3 billion bet on European sovereign debt. Corzine resigned on November 4.

On Sunday, Reuters reported that, based on initial reports of what was supposed to be segregated for customers, the trustee appeared to be keeping about $3 billion on hand to cover the shortfall.

Customers had been clamoring for more specifics, saying that was too large of a cushion -- a notion Giddens rejected.

"Restoring 60 percent of what is in segregated customer accounts ... would require approximately $1.3 to $1.6 billion to implement," or nearly all the money at the trustee's disposal, he said.

Giddens previously transferred more than $2 billion to other brokers, giving most customers access to a portion of their funds.

Sen. Pat Roberts, R-Kan., said legislators should call on Corzine to testify about his former company's actions. Roberts said in a statement on Monday that the Senate Committee on Agriculture, Nutrition and Forestry should hold a special hearing on the matter.

If the trustee does exhaust the funds he now controls, his focus would shift to going after monies that may belong to the brokerage, but may be tied up in foreign depositories, or may be part of the shortfall, Giddens spokesman Kent Jarrell said.

"We can't distribute money we don't have, but we do have legal means for going after other assets," Jarrell said.

INVESTIGATION CONTINUES

The Commodity Futures Trading Commission and other regulators are investigating MF Global.

CFTC Commissioner Jill Sommers refused to speculate on how the $1.2 billion figure might compare with earlier estimates.

"From the very beginning we have tried as much as possible to never use a figure, out of fear that it's not right," said Sommers, who has been leading the agency's investigation into MF Global after Chairman Gary Gensler recused himself from the probe because of his ties to Corzine.

"Until the final reconciliation (of accounts) is done, you don't know what the shortfall is."

CME Group Inc (CME.O), operator of the clearinghouse for most of MF Global's customers, declined to comment.

Commodity customers say they have more questions than answers about MF Global's collapse and the safety of their money.

Sean McGillivray, vice president of Great Pacific Wealth Management, still has about $5 million tied up in MF Global for his customers. He was aware of the latest estimates of the shortfall, but wants exact figures.

"It would be in the best interest of all clients, brokers and anyone else caught in this mess to know just how much has been transferred ... and how much is supposed to be there," he said. "You could do this with an abacus and it would take less (time)."

A spokesman for the Commodity Customer Coalition in Chicago, which represents more than 7,000 former MF Global customers, said it was unclear how much of the trustee's estimate related to possible co-mingling of customer money.

Some of the missing money could be tied up overseas, said spokesman John L. Roe.

"We're hopeful given what was accounted for initially that more of the money will be found and that the trustee will work with us on an expedited claims process for customers," he said.

INVESTORS REACT

In a sign that even distressed investors are losing faith in a decent return, MF Global's bonds fell to an all-time low below 30 cents on the dollar, according to Tradeweb, down more than 5 cents on the day. The $325 million in 6.25 percent notes were issued at par in August.

Some investors have targeted other financial institutions. Two pension funds have sued seven banks, including Bank of America Corp (BAC.N), JPMorgan and Goldman Sachs, over prospectuses that allegedly concealed the problems that led to MF's collapse.

The trustee's case is In re MF Global Inc, U.S. Bankruptcy Court, Southern District of New York, No. 11-2790.

The MF Global bankruptcy is In Re MF Global Holdings Ltd, in the same court, No. 11-15059.

(Reporting by Nick Brown and David Sheppard; additional reporting by Jonathan Stempel in New York, Philip Shishkin in Washington and Tom Polansek and Ann Saphir in Chicago; editing by Martha Graybow, Tim Dobbyn, Edward Tobin and Carol Bishopric)

Shares in the company jumped about 20 percent to 869 yen on Tuesday, as traders speculated the company might avoid being delisted from the Tokyo Stock Exchange, despite being engulfed in an accounting scandal.

Olympus, a maker of cameras and medical equipment, is under investigation by regulators, prosecutors and also organised-crime police. The scandal broke when CEO-turned-whistleblower Michael Woodford publicly questioned its accounts after being fired last month.

"I was invited to the board meeting on Friday by Olympus and welcome the opportunity of going to Japan," Woodford, a Briton, told Reuters in London on the eve of his departure for Tokyo.

The trip will be his first to Olympus headquarters since his sacking at a board meeting just over five weeks ago.

Woodford has been cast by two major foreign shareholders as the best man to lead a clean-up of the 92-year-old company, which has lost about 65 percent of its market value since he first went public with his concerns of improper accounting.

Goldman Sachs (GS.N) is now the second-biggest shareholder in Olympus, a public filing showed on Tuesday. The Wall Street bank has a 6.67 percent stake in the firm for clients' trading purposes, second in size to Mitsubishi UFJ Financial Group (8306.T), which has 7.61 percent.

Other big players, such as Morgan Stanley (MS.N), appear to have been buying up the stock on behalf of clients, market sources said.

Olympus, which at first denied any wrongdoing, this month admitted to hiding investment losses from investors for two decades and to using some of $1.3 billion in unusual merger and acquisition payments to help in the cover-up.

It was not immediately clear whether the man who presided over Woodford's sacking, former chairman and president Tsuyoshi Kikukawa, would also attend the board meeting. Kikukawa quit as chairman over the scandal last month but remains a director.

Speculation of organised-crime links has swirled around the Olympus scandal, but the firm said on Monday that a third-party panel it set up to investigate the matter had, so far, found no evidence that funds from its M&A deals went to organised crime syndicates or that "yakuza" gangsters were involved.

The panel's report is due in early December.

Woodford has cited unspecified security concerns for his decision to leave Japan in a hurry after he was sacked, but said on Monday he was now comfortable about returning and reiterated his willingness to "go back and run" the company.

"I'm reassured about the security. The Japanese authorities are aware and arrangements have been made that I'm satisfied with," the 31-year Olympus veteran said.

Woodford, who remains a director, would not discuss the agenda of the board meeting, saying only that it would be an opportunity to "ask my colleagues to do the best for Olympus."

During his visit this week, Woodford will meet Japanese police and other authorities, he has said.

SPECULATION OVER ORGANISED CRIME

The scandal at the once-proud firm has rekindled concerns about lax corporate governance in Japan and revived worries about links between companies and organised crime.

A unit from the Tokyo Metropolitan Police Department's organised crime division has joined the investigation, a source familiar with the matter said on Friday. But the source added it was premature to say if gangsters were involved.

Speculators who believe Olympus' core medical equipment business still has value have been betting that executives responsible for the scandal will bear the brunt of any punishment and that the company can escape with a fine.

Olympus has admitted to improperly accounting for M&A payments going back to 2006. A large share of these payments went to obscure Cayman Islands companies that have since closed, making it difficult to trace the money.

Tokyo prosecutors have already questioned former vice-president Hisashi Mori on a voluntary basis, Japanese media say, and are expected to soon question ex-president Kikukawa and internal auditor Hideo Yamada over their roles in the scandal.

Olympus' new president, Shuichi Takayama, has blamed the three for the cover-up, saying he would consider criminal complaints against them. Mori was sacked as an executive this month but, like Kikukawa, remains a director. It is also unclear whether Mori will attend this week's board meeting.

The Tokyo exchange has placed Olympus on a watch-list as a possible prelude to delisting. If the firm misses a December 14 deadline for filing its financial statements for the six months to September, it will be automatically delisted.

Even if Olympus meets the deadline, the bourse can still delist the stock depending on the scale of its past financial misstatements or if the firm is found to have done business with organised crime syndicates.

(Additional reporting by Kirstin Ridley in London and Lisa Twaronite and Junko Fujita in Tokyo; Editing by Linda Sieg and Mark Bendeich)