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LONDON (Thomson Financial) - Oil held onto earlier gains as fears over the US economic slowdown were overshadowed by lingering worries the standoff between ExxonMobil and Venezuela could worsen, further disrupting US supply.

"At the moment, various short term supply fears are still overwhelming economic worries," said Sucden analyst Andrey Kryuchenkov. He added, however, that economic worries could yet take centre stage again.

"Any more negative economic news or disappointing data could quickly turn market participants' attention back to economic fears, while future gains in crude prices would be capped in this case," he said.

Oil prices were on a downtrend for much of January amid fears a US economic slowdown will crimp demand for crude, especially if it spills over into the broader economy.

They have recovered sharply over the past week, however, partly because markets have taken the view that the view the ExxonMobil-Venenzuela spat still poses a serious risk to US supplies.

At 4.40 pm, New York's WTI crude for March delivery was up 50 cents at 96.00 usd a barrel, in quiet trade with US players away for the Presidents Day holiday.

In London, Brent crude for April delivery was up 28 cents at 94.91 usd per barrel.

Venezuela President Hugo Chavez said on Sunday his country could sue ExxonMobil for unpaid taxes. He also said he would cut off all US oil exports if Washington "attacks Venezuela or tries to harm us".

US oil giant ExxonMobil is currently in arbitration with Venezuelan state oil company PDVSA over the nationalisation of assets in which it had an interest.

Its successful bid to freeze assets held by PDVSA in the European courts last week led Chavez to threaten to cut off oil supplies to the US.

Chavez has since settled for cutting oil exports only to ExxonMobil. The reduction to date is not significant, as Middle East producers have assured the US they can make up for the Venezuelan short-fall.

All the same, oil market players remain concerned the reduction could become significant if the dispute intensifies. Venezuela is the fourth-largest supplier of crude to the US.

Elsewhere, speculation oil cartel OPEC could cut output quotas at its upcoming March meeting -- after Iranian oil minister Gholamhossein Nozari mooted the possibility over the weekend -- was also lending some support to the market.

Speaking to reporters in Tehran, Nozari said "in the normal course of events" a production cut in March would be expected, although he reiterated the cartel would closely review the market before making a decision.

Both Iran and Venezuela have previously called for a reduction in output to protect prices. Although oil remains near its all-time high above 100 usd a barrel, the sliding value of the US dollar has cut oil vendors' spending power overseas, they say.

However, with the US facing a recession, which could potentially affect wider global growth, the cartel is unlikely to pile on further economic pressure by pushing oil prices higher still, analysts said.

The US will pressure its OPEC allies -- most notably Saudi Arabia, the organisation's biggest producer and de facto leader -- not to cut production, which is also likely to have some influence on the final decision.

LONDON (Thomson Financial) - The pound recovered some ground but remained sharply lower on the day after the UK government's plans to nationalise Northern Rock.

With other major currencies range-bound in quiet trade due to the US public holiday, the pound has been in focus following yesterday's surprise decision by Chancellor of the Exchequer Alistair Darling to take the troubled mortgage lender into public ownership.

Earlier the pound fell to a two-week low against the euro of 0.7521 stg and a one-week low against the dollar as news the stricken bank will be taken into public ownership heightened investors' concerns about the prospects for the UK economy.

"The pound was sold from today's European open, on the back of the continent's absorption of yesterday's Northern Rock nationalisation announcement," said Robert Howard, analyst at Thomson IFR Markets.

Meanwhile, relatively downbeat comments from Bank of England rate setter Tim Besley also weighed on the UK currency. The external Monetary Policy Committee member acknowledged inflation was set to rise in the coming months but also noted tighter credit conditions could lead to a fall in consumption.

Besley is generally seen as a hawkish member of the MPC, so highlighting the downside risks to consumer spending were seen by analysts as being particularly significant.

Meanwhile, the dollar was steady against the euro with trade quiet due to the US marking Presidents' Day.

The dollar fell heavily last week after US Federal Reserve chairman Ben Bernanke kept the door open for further cuts in interest rates due to continuing signs of trouble in the US economy.

It recovered some of these losses in early trade this morning but analysts are doubtful whether this will last over the rest of the week as fears about the prospect of a US recession mount.

On Friday, the University of Michigan consumer sentiment dropped by 11 points to its lowest level since Feb 1992, with previous falls of that magnitude generally seen as a prelude to recession.

"These weak US economic reports served to reverse the more optimistic attitude towards the economy which had been triggered by

stronger-than-expected retail sales earlier in the week," noted NAB Capital strategist John Kyriakopoulos.

Analysts said carry trades are likely to remain in vogue in these uncertain economic times. The yen and the Swiss franc are traditionally used in carry trades -- when a low-yielding currency is sold to finance investment in higher-yielding economies.

"In the present environment of significant risk-aversion we still feel that the yen and the Swiss franc will be the better performers amongst the major currencies," said Steve Barrow, currency strategist at Bear Stearns.

"Dollar/yen is expected to slide to around 100 yen this year and dollar/Swiss should fall to parity," he added.

London 1600 GMT London 1235 GMT

US dollar

yen 108.17 down from 108.22

sfr 1.1020 up from 1.1039

Euro

usd 1.4650 up from 1.4623

yen 158.50 up from 158.27

sfr 1.6145 down from 1.6146

stg 0.7506 up from 0.7456

Sterling

usd 1.9512 up from 1.9493

yen 211.18 up from 210.94

sfr 2.1501 down from 2.1521

Australian dollar

usd 0.9123 up from 0.9115

stg 0.4673 down from 0.4675

yen 98.65 up from 98.63

LONDON (Thomson Financial) - European government bonds continued to slide as stock markets rose strongly in the absence of any US trading, closed for President's Day.

The rise in prices is partly magnified by a lack of trading volume as US markets remain closed, but the improved sentiment has caused some profit-taking on the gains made last week.

Analysts say this may continue into tomorrow, when economic data will once again be scarce, leaving the stock market to drive bond prices.

"Whether the good mood will prevail of course remains to be seen; but a lack of A-list US economic data releases this week could mean that fears of a US recession -- whose odds have undoubtedly shortened following Friday's poor batch of US economic figures -- may linger on in investors' minds," said Neil Mellor at Bank of New York Mellon.

The markets are pricing in about 100 basis points-worth of cuts by the Federal Reserve by year-end, a view that has been cemented by the weak US economic data last week.

Looking at the days to come, the US will remain a key focal point, with inflation, housing starts and the Fed minutes due on Wednesday.

John Davies at WestLB believes the overall trend in US economic data "will continue to signal a recession."

"Growth in consumer prices probably accelerated again in January due to the higher energy prices... (but) the Fed will continue to weight growth risks more heavily than inflation risks," said Davies.

In both the US and Europe, bond prices will continue to show a steepening in their yield curve -- as shorter-dated maturities perform better than longer-dated ones on views that interest rates will be cut in the short-term.

In the UK, gilts were also lower, tracking the wider economy in the wake of the news that Northern Rock PLC, the troubled bank, will be nationalised.

Stephen Lewis at Insinger de Beaufort believes there will be little impact on debt markets.

"A more significant issue than Northern Rock for gilts-holders is the ongoing debate about the future liabilities of defined benefit pension schemes," he said.

The UK Pensions Regulator will publish proposals this week to reform the pensions benefit plans to account for greater longevity of beneficiaries, effectively increasing liabilities for pension funds by six to eight percent.

"More funds are, therefore, likely to be channeled into gilts than would otherwise have been the case," said Lewis.

At Yield Change on

1555 GMT pct previous close

March euribor future (Liffe) 95.66 dn 0.01

June euribor future (Liffe) 96.04 dn 0.05

GERMANY

March bund future (Eurex) 116.02 dn 0.41

4.00 pct Jan 2018 govt bond 99.94 4.00 dn 0.39

FRANCE

4.25 pct Oct 2017 govt bond 100.95 4.13 dn 0.39

ITALY

5.25 pct Feb 2018 govt bond 101.31 4.38 dn 0.28

UK

March gilt future 109.25 dn 0.25

5.00 pct March 2018 govt bond 102.88 4.64 dn 0.29

March short sterling future 94.37 dn 0.01

June short sterling future 94.77 dn 0.04

LONDON (Thomson Financial) - Copper surged to a 4-month high amid ongoing worries over sharp declines in LME inventories and as a rebound in demand from China, the world's largest user of the metal, boosted sentiment.

MF Global analyst Ed Meir said gains in copper could be sustained through the week as it is very light on the US macro economic calendar, meaning concerns over the economic decline there will remain sidelined.

US markets are closed today for the President's Day holiday, while the remainer of the week sees the release of January inflation data, as well as housing and building starts.

In any case, traders have pushed aside worries over US growth and falling copper demand there, to focus on fundamental factors like the ongoing decline in LME inventories.

The LME said in a daily report today that copper stocks held in its warehouses fell by 6,275 tonnes to total 144,375 tonnes. Stocks are now at their lowest since mid-October.

At 3.18 pm, LME copper for 3 month delivery was up at 7,930 usd a tonne against 7,730 usd at the close Friday, having earlier hit a 4-month peak of 7,965 tonnes.

Meir said LME copper stocks are being eroded because of a ramp up in Chinese copper imports, which were up 6 pct in January from December to 239,000 tonnes.

Although the increase in imports has helped spark a sharp build up in copper stocks in Shanghai, players are for now holding out for sustained strong demand from China, the world's largest copper consumer.

"China is still consuming and importing healthy amounts of copper," said UBS analyst Robin Bhar. "This shows China has an appetite for copper and that is always going to lend some support (to prices)."

Strong demand from China and falling LME inventories have underpinned copper and other metals in the year to date and helped overshadow worries that demand might wane if the US economy slows further.

Elsewhere, aluminium was up at 2,824 usd a tonne against 2,820 usd at the close Friday, when the metal hit a 9-month high of 2,873 usd amid ongoing jitters over possible supply outages in South Africa.

The country, which is the eighth largest aluminium producer in the world, is currently in the grips of a power crisis that last month led to a complete shutdown of mine output for 5 days.

Although state utility Eskom is currently reviewing plans to buy 45 mln tonnes of coal, in a bid to stave off the crisis, there is growing doubt over the efficacy of the move.

"Eskom is reluctant to purchase the coal at the spot export price, which is three to four times higher its average purchase price, and is in talks to pay somewhere in between the two levels".

"Meanwhile, the company is still weighing up various options and has still not ruled out the possibility of power buy-backs from major industrial and mining companies," said Standard Bank analyst Leon Westgate.

Last week, reports that Eskom was considering a complete buy-back of power from three aluminium smelters in South Africa and Mozambique sparked a sharp price rally.

Up to 1.5 mln ounces of aluminium output could be lost this year if the smelters are shut down. As things stand, industrial users have been forced to cut power usage to 90 pct of normal needs.

Meanwhile over in China, some 650,000 tonnes of output might be lost this year as a result of reduced output in recent weeks, linked to power shortages sparked by severe winter storms.

Although supply from China is starting to recover, the outlook in South Africa is not nearly as bright, with Eskom itself admitting the power shortages will be in place until 2012.

In other metals, lead was up at 3,007 usd against 2,970 usd, supported by a 275 tonne decline in LME inventories, while tin rose to 17,050 usd a tonne from 16,850 usd amid a 185 tonne drop in inventories held by the LME.

Gains in zinc, on the other hand, were capped by a further 575 tonne increase in LME inventories that kept stocks at their highest points since October 2006.

Three month zinc was flat at 2,360 usd a tonne, while nickel bucked the rising trend in metals, falling to 27,501 usd against 27,625 usd amid an increase of 216 tonnes in LME inventories.

LONDON (Thomson Financial) - INTERBANK OFFERED RATES

OVERNIGHT 5.33

1 WEEK 5.35

1 MONTH 5.55

2 MONTHS 5.60

3 MONTHS 5.65

4 MONTHS 5.63

5 MONTHS 5.61

6 MONTHS 5.60

9 MONTHS 5.53

12 MONTHS 5.46

DEPO CDs

1 MONTH 5.55 - 5.47

2 MONTHS 5.60 - 5.52

3 MONTHS 5.65 - 5.57

4 MONTHS 5.63 - 5.55

5 MONTHS 5.61 - 5.53

6 MONTHS 5.60 - 5.52

9 MONTHS 5.53 - 5.43

12 MONTHS 5.46 - 5.36

CLEARER CDs

1 MONTH 5.55 - 5.47

2 MONTHS 5.60 - 5.52

3 MONTHS 5.65 - 5.57

4 MONTHS 5.63 - 5.55

5 MONTHS 5.61 - 5.53

6 MONTHS 5.60 - 5.52

9 MONTHS 5.53 - 5.43

12 MONTHS 5.46 - 5.36

LOCAL AUTHORITY DEPOSITS

2 DAYS 5.25

7 DAYS 5.28

1 MONTH 5.53

3 MONTHS 5.65

6 MONTHS 5.60

12 MONTHS 5.50

EURODOLLAR DEPOSIT

OVERNIGHT 3.13 - 3.06

7 DAYS 3.15 - 3.10

1 MONTH 3.15 - 3.10

3 MONTHS 3.08 - 3.03

6 MONTHS 3.00 - 2.92

12 MONTHS 2.87 - 2.77

EURODOLLAR CDs

1 MONTH 3.06

3 MONTHS 3.00

6 MONTHS 2.91

12 MONTHS 2.73

Local authority rates provided by Tradition

LONDON (Thomson Financial) - Platinum held near a new record peak above 2,100 usd an ounce touched earlier this morning amid ongoing worries over a widening market deficit this year as power outages in South Africa continue to crimp output.

Gold meanwhile remained capped by a steadier tone in the dollar, which reduced the appeal of the precious metal as an alternative asset to the US currency.

Analysts said with the metal having failed Friday to benefit from renewed dollar weakness and strength in oil, it may well have to spend time consolidating before heading higher.

At 2.14 pm, spot gold was quoted at 903.45 usd an ounce against 903.00 usd in late New York trade Friday.

The metal has gained some 250 usd an ounce since last summer on dollar weakness and safe haven flows sparked by a worsening economic outlook in the US. However, gains have stalled recently.

Analysts note buying from physical players dried up as gold hit record peaks last month, adding there is little hope demand will recover with the Indian wedding season and Lunar New Year in China now over.

"Gold prices tend to seasonally weaken from March to August as jewellery manufacturers and other consumers buy less metal," said Fairfax analyst John Mayer.

"Lower expected consumer demand in the US, coupled with high price levels in US dollar terms, are likely to persuade jewellery manufacturers to delay purchases this year," he added.

Elsewhere, platinum was up at 2,109 usd an ounce against 2,077 usd in late New York trade Friday, having earlier touched a high of 2,116 usd amid ongoing supply woes South Africa.

Analysts doubt South African power utility Eskom will be able to buy 45 mln tonnes of coal in a bid to stave off a power crisis that has forced mines to cut their power usage to 90 pct of normal needs.

"Eskom is reluctant to purchase the coal at the spot export price, which is three to four times higher its average purchase price, and is in talks to pay somewhere in between the two levels.

"Meanwhile, the company is still weighing up various options and has still not ruled out the possibility of power buy-backs from major industrial and mining companies," said Standard Bank analyst Leon Westgate.

Last month, mines in South Africa, which produces around 75 pct of the world's platinum, were forced to shut down completely for five full days amid power shortages.

"With the platinum deficit expected to widen to 400,000-500,000 ounces this year, compared with last year's 265,000 deficit, the current upward price momentum has good fundamental support," said Standard Bank's Walter de Wet.

Platinum has hit a series of successive records over the past month, and has risen more than 30 pct this year alone.

Elsewhere, its sister metal palladium was up at 453 usd against 444 usd an ounce, having earlier set a series of fresh six-year highs, the latest recorded at 455.50 usd an ounce.

"Despite having far less favourable fundamentals compared with platinum, the metal has benefited from improved industrial and investment demand, and may look to challenge chart support at 469/480 usd in the coming sessions," said TheBullionDesk.com analyst James Moore.

Silver eased to 17.00 usd against 17.12 usd.

NEW YORK (AP) - The following are key metals settlement prices Friday, compared with late Thursday, on the New York Mercantile Exchange:

April gold $906.10, down $4.70 an ounce

March silver $17.118, down 13.7 cents an ounce

March copper $3.5230, up 3.5 cents a pound

NEW YORK (AP) - The dollar extended its slide Friday against most major currencies after weak manufacturing data and consumer sentiment drove home Federal Reserve Chairman Ben Bernanke's comments about a gloomy economy and the possibility of further interest rate cuts.

Lower interest rates can jump-start a country's economy, but may weigh on its currency as traders transfer funds to countries where they can earn higher returns.

The 15-nation euro rose to $1.4678 Friday from $1.4633, but the dollar jumped higher against the pound. The British currency fell to $1.9603 from $1.9691.

The dollar also slipped to 107.69 Japanese yen from 107.93 yen and dropped to 1.0925 Swiss francs from 1.0973 francs.

A New York Federal Reserve survey showed that manufacturing conditions in the region had deteriorated, while the central bank said that the country's industrial output rose by only 0.1 percent in January. The increase in industrial production was due mostly to higher output at utility companies because of the weather.

A preliminary Reuters/University of Michigan survey showed consumer confidence sank in February to a 16-year low.

Bernanke told Congress on Thursday the economy outlook was gloomy and signaled a readiness to keep on lowering a key interest rate to shore things up.

Bernanke also told the Senate Banking Committee that the one-two punch of housing and credit crises has greatly strained the economy. And he forecast sluggish growth in the near term. Bernanke also noted that hiring has slowed and that people are likely to tighten their belts further because of high energy prices and plummeting home values.

In other New York trading, the dollar rose to 1.0091 Canadian dollars from 99.99 Canadian cents.

Canada Afternoon: C$ Ends Sharply Lower In Thin Trading

TORONTO (Dow Jones)--The Canadian dollar ended sharply lower Friday after earlier selling of the U.S. dollar prompted a short squeeze that sent the greenback scurrying higher against its Canadian counterpart in thin trading conditions.

Weak domestic manufacturing data for December were also a negative for the Canadian unit Friday.

The U.S. dollar was trading at C$1.0086 at 3:39 p.m. EST (2039 GMT), from C$0.9989 at 8:00 a.m. EST (1300 GMT) and C$0.9994 late Thursday.

It slipped to a low of C$0.9924 in overnight trading but had rebounded to the C$0.9970 area when Statistics Canada reported that manufacturing shipments were down 3.4% to C$48.63 billion (US$48.62 billion) after rising 1% the previous month, revised down from the preliminary 1.1% gain.

The market had expected a 0.1% loss.

Sales in constant dollars fell 5.8% to C$46.7 billion, the lowest level since August 2003. Overall 16 of the 21 manufacturing industries posted lower sales, accounting for nearly two-thirds of the total.

The U.S. dollar rallied back to the C$0.9995 area after the data, but then relinquished much of its gains to stabilize around C$0.9985.

However, in early afternoon trading it began a scramble higher that eventually took it to a sessional peak of C$1.0112 before it retreated somewhat.

Analysts said a short squeeze in the U.S. dollar in thin trading conditions was the main factor underlying Friday's turbulent trading.

"Basically, the market got squeezed a little bit. We tried to take out important support around C$0.9923 overnight and basically failed there," said George Davis, chief technical analyst for foreign exchange with RBC Capital Markets.

Around mid day, equity markets weakened and a U.S. dollar break above C$1.0024, that prompted an acceleration to the topside, he said.

"To be honest, I don't think there was much behind it. I think it was a little bit of stop loss buying and short covering, but liquidity was very, very thin," Davis said.

"At that point, I think most people were shutting down for the weekend here and south of the border," he said.

    USD Rally Called A Little Bit Suspect

Foreign exchange trading in Canada will be sharply curtailed Monday for the newly instituted Family Day holiday in Ontario, while U.S. markets will be closed for Presidents Day. "It feels like the market was caught short (U.S.) dollars, today," said Steve Butler, director of foreign exchange at Scotia Capital.

He also said light, pre-holiday trading conditions contributed to the rapid move higher by the greenback.

Whether or not the U.S. dollar will be able to extend its gains when full trading reopens Tuesday isn't clear, but analysts said it's a distinct possibility.

"I don't know if I'd bet the farm that we're going to see a continuation, but it does feel like maybe we're headed back to C$1.0200, now," Butler said. "Just given the way things have gone today, I think the risk is as we move into early next week we'll see prices continue to rally and test the topside levels," Davis said.

"On the one hand, you can say this rally is a little bit suspect, given that it happened in almost-holiday markets and thin liquidity," he said.

But the move above C$1.0024 is significant and likely presages a move towards C$1.0119, a resistance point the U.S. dollar failed to break above last week, Davis said.

"If we get above there, we start looking at the C$1.0250 area," he added.

In other Canadian data, monthly new motor vehicle sales halted three months of declines in December and rebounded on strong truck sales.

Sales were up 4.8% to a seasonally adjusted 140,270 units, versus market expectations of a 3% increase.

While most market activity in Canada will be shut down on Monday because of the the Family Day holiday in Ontario, not all of the country is affected, and in Vancouver, Bank of Canada Governor Mark Carney will speak on the topic of "The Implications of Globalization for the Economy and Public Policy" at 4:15 p.m. EST (2115 GMT).

The text of his speech will be released at 4:00 p.m. EST (2100 GMT).

It will be followed by a news conference at 5:15 p.m. EST (2215 GMT).

These are the exchange rates at 3:39 p.m. EST (2039 GMT), 8:00 a.m. EST (1300 GMT), and late Thursday.

   USD/CAD     1.0086     0.9989     0.9994
  EUR/CAD     1.4812     1.4640     1.4629
  CAD/JPY     106.89     107.78     108.21 

LONDON (Thomson Financial) - Oil rallied to a one-month high late afternoon as the ongoing supply spat between the US and Venezuela and expectations for a cold snap sent jitters through the market.

News of an equipment failure at a Delaware refinery operated by Valero added upward momentum to a market already buoyed by supply fears, analysts said.

Prices climbed more than 4 usd a barrel on Friday and were driven still higher overnight after Venezuelan president Hugo Chavez threatened to cut oil supplies to the US yesterday, before slipping into consolidation mode in morning trade.

However, the news is still fuelling buying this afternoon, analysts said.

"The market is very volatile right now," said Alaron trader Phil Flynn. "The weather forecasts continue to be cold, and heating oil is leading us up on this rally. That is adding to uncertainty (over Venezuela) to keep the market pretty well supported."

At 5.10 pm, New York's WTI crude for March delivery was up 2.02 usd at 93.79 usd per barrel, having earlier touched a high of 94.72 usd, its strongest level since Jan 10.

Meanwhile in London, Brent crude for March delivery was up 1.81 usd at 93.75 usd per barrel.

Chavez's claim that he will halt US sales is linked to legal action brought by Exxon Mobil. The oil giant is pursuing the assets of state oil company Petroleos de Venezuela in US, British and Dutch courts as it challenges the nationalisation of a multibillion dollar oil project by Chavez's government.

A British court has issued an injunction freezing as much as 12 bln usd in assets, leading Chavez to threaten to cut off oil supply to the superpower.

"If you end up freezing (Venezuelan assets) and it harms us, we're going to harm you," Chavez said yesterday. "Do you know how? We aren't going to send oil to the United States. Take note, Mr. Bush, Mr. Danger."

Venezuela, the world's fifth-biggest oil exporter, is also the fourth-largest supplier of crude to the US. While analysts earlier discounted Chavez's threats as unlikely to materialise, uncertainty over the president's next move is continuing to unsettle the market, analysts said.

Any prospect of a supply shortfall is likely to strongly propel prices higher. They rallied towards the end of last week on news that political tensions could cut exports from Nigeria by as much as 1 mln barrels a day, and amid fears of reduced production in the North Sea.

"This week's trading focus will continue to gravitate away from economic indicators and the possibility of a recession and toward geopolitical events capable of disrupting export flows from major producers such as Nigeria and Venezuela," said Ritterbusch & Associates head Jim Ritterbusch.

"For now, we continue to view the Nigerian supply situation as likely having a larger near-term impact on global oil balances and as such we expect further Nigerian developments this week to maintain volatility at a high pitch with an upward bias," he added.

LONDON (Thomson Financial) - The euro fell in afternoon trade with rising risk aversion and a lack of data wiping out earlier gains.

The currency had risen earlier in the day following comments from European Central Bank president Jean-Claude Trichet that there had been no discussion of interest rate cuts at the governing council's meeting last week when rates were left on hold at 4.00 pct. However analysts said that other recent comments from ECB officials coupled with evidence that euro zone economic activity is starting to wane mean the comments did little to later expectations that rates are set to fall in the coming months.

"While Trichet might have been trying to temper rate cut expectations, the less hawkish hue of the ECB last week suggests that the ground work is being

prepared for a rate cut," said analysts at BNP Paribas.

Several major European banks, including UBS and Commerzbank are due to publish results this week which will be closely eyed to see to what extent the subprime losses of US banks are mirrored across the Atlantic.

"Rising risk aversion through greater write-downs would provide support for the dollar against the euro," said the BNP Paribas analysts.

Stocks on Wall Street have also opened down this afternoon, with the dollar and yen gaining on the back of rising risk aversion. This was partly driven by an announcement from American International Group Inc that it has more mortgage debt to write off then previously announced.

Ashraf Laidi, currency strategist at CMC Markets, said Wednesday's release of US January retail sales figures will be key in determining the direction of equity markets this week, which will have a knock-on effect on risk aversion and currencies.

If sales recover after posing a 0.4 pct fall in December then stocks could well receive a much-needed boost.

Meanwhile the pound slipped back a touch after earlier gains, which came on the back of figures showing UK producer prices soared during January.

Output prices rose a monthly 1.0 pct after a 0.4 pct increase in December, the highest monthly rise since January 1995 and well above analyst expectations for another 0.4 pct increase. Input prices rose by 2.6 pct in January from December, far above analyst expectations for a 1.3 pct rise.

Analysts said the numbers signal consumer price inflation could pick up sharply in the coming months, limiting the Bank of England's ability to cut interest rates.

"Today's data will likely add to the already elevated CPI price inflation, and hence we expect the MPC to emphasize upside risks to inflation in its Inflation Report this Wednesday," said Alina Anishchanka, currency strategist at UBS.

Tomorrow sees the release of consumer price inflation data for January, with the annual headline rate expected to have risen to 2.3 pct from 2.1 pct in December.

London 1552 GMT London 1245 GMT

US dollar

yen 106.66 down from 106.73

sfr 1.1038 up from 1.0988

Euro

usd 1.4484 down from 1.4551

yen 154.54 down from 155.31

sfr 1.5993 up from 1.5989

stg 0.7440 down from 0.7470

Sterling

usd 1.9465 down from 1.9478

yen 207.66 down from 207.90

sfr 2.1490 up from 2.1403

Australian dollar

usd 0.9029 down from 0.9100

stg 0.4639 down from 0.4644

yen 96.35 down from 96.54

NEW YORK (AP) - Long-term Treasury prices rose Monday after news of problems at American International Group Inc. again raised concerns about risky low-quality debt.

The insurer said it will make more information public about the methods it used to value the complicated debt pools known as collateralized debt obligations, or CDOs. These assets are a major concern to investors because CDOs contain some subprime debt instruments that are likely to default and it is widely suspected their current prices do not reflect that liability.

AIG also said it had been told there was some weakness in its internal controls at the end of 2007.

Worries about subprime mortgages and other poor-quality debt have fueled a string of vigorous rallys for Treasurys since last August, as risk-averse investors have opted for the safety of government-backed bonds.

"The AIG news that is coming out is impacting the market," said Tom di Galoma, head of Treasurys trading at Jefferies & Co. "There is fear in the market that there will be more negative headlines on this."

The benchmark 10-year Treasury note gained 16/32 to 99 8/32 with a yield of 3.59 percent, down from 3.65 percent late Friday.

The 30-year long bond gained 29/32 to 100 5/32 with a yield of 4.36 percent, down from 4.43 percent. The 2-year note rose 2/32 to 100 14/32 with a yield of 1.89 percent, down from 1.93 percent.

The subprime crisis was also discussed at length over the weekend at a meeting of the Group of Seven finance ministers in Tokyo. After the global economic summit, German Finance Minister Peer Steinbruck said the group fears that losses on securities due to subprime exposure in time will total $400 billion.

The finance chiefs also expressed concern that it is still unknown where much of the subprime pain will emerge, as collateralized debt obligations were sold to institutional and government investors around the world.

And subprime debt is not the only risky asset class that investors are worried about. In recent sessions there also have been concerns about a possible wave of defaults on the low-rated corporate loans that were used to finance a leveraged buyout boom in 2006 and 2007.

Investors suspect that banks will try to sell off these leveraged loans at bargain rates to get them off their books soon.

LONDON (Thomson Financial) - European government bonds were higher, tracking falls on equity markets on fresh write-off fears and as concerns about the global economic outlook intensified following the G7 meeting over the weekend.

The tumble on share markets has been driven by more bad news from financial companies, with American International Group revealing that its auditors have questioned the company's internal controls over the valuation of credit default swap portfolio obligations.

"AIG, 'accounting' and 'credit default swap' all in the same headline have investors scurrying for cover and bidding bonds back up again," said Michael Cartine at Thomson IFR Markets.

Further bad news came from Standard Chartered PLC, which announced it is withdrawing plans to provide liquidity to its Whistlejacket Capital structured investment vehicle.

Meanwhile, this weekend's communique from the G7 meeting in Tokyo only served to give further justification for financial markets to step up levels of risk aversion.

The communique focused heavily on the ongoing credit crunch and risks to global growth. US Treasury Secretary Henry Paulson also stressed that the turbulence in financial markets is both "serious" and "persisting," and he expects "continued volatility as risk is repriced."

Over in the UK meanwhile, gilts pared losses slightly but remained firmly in the red, after much stronger-than-expected producer price inflation data this morning suggested the Bank of England will have limited room to cut interest rates.

The figures showed UK input prices jumped by 2.6 pct in January from December, way above analyst expectations for a 1.3 pct rise and giving a massive annual rise of 19.1 pct, the biggest increase for 22 years.

Output price figures meanwhile showed that companies have had to pass on these extra costs into their prices, with the monthly rise of 1.0 pct the biggest since January 1995 and the annual rise of 5.7 pct the highest since July 1991.

"For a market which is aggressively priced for future easing, this will make for uncomfortable reading and rate cut expectations will need to be pared back," said Daragh Maher at Calyon.

At Yield Change on

1540 GMT pct previous close

March euribor future (Liffe) 95.76 dn 0.04

June euribor future (Liffe) 96.25 dn 0.02

GERMANY

March bund future (Eurex) 117.56 up 0.33

4.00 pct Jan 2018 govt bond 101.22 3.84 up 0.11

FRANCE

4.25 pct Oct 2017 govt bond 102.28 3.96 up 0.15

ITALY

5.25 pct Feb 2018 govt bond 102.50 4.23 up 0.08

UK

March gilt future 110.58 dn 0.27

5.00 pct March 2018 govt bond 104.26 4.46 dn 0.42

March short sterling future 94.42 dn 0.08

June short sterling future 94.87 dn 0.08

LONDON (Thomson Financial) - Copper came off day highs as worries that global economic weakness could crimp demand returned amid sustained falls in global equities. The metal remained up on the day overall, however, still underpinned by LME stock falls.

At 3.12 pm, LME copper for 3 month delivery was up at 7,785 usd a tonne against 7,700 usd at the close Friday.

Earlier the metal touched 7,860 usd, its highest since late October, amid news LME stocks have fallen by another 2,625 tonnes to total 126,300 tonnes. Overall, stocks remain at their lowest since early November, prompting strength in copper.

Offsetting this, however, are worries over the demand outlook.

Finance ministers from major world economies said at this weekend's G7 meeting the impact of the US sub-prime housing crisis may be broader than previously expected.

They estimated write-downs linked to the crisis could reach up to 400 bln usd globally, compared with 120 bln usd reported so far. Global equities have taken a hit as a result.

"We would be surprised if higher (metals) prices can be sustained in the current negative macro environment and especially as there looks to be more scope for demand surprises to the downside," said an analyst at UBS Investment Bank.

They added, however, that they would not take short positions or bets on prices falls either, amid ongoing supply-side problems, notably the lack of power in South Africa and China.

Severe weather in the two countries has damaged the power infrastructure in recent weeks, cutting output at mines and smelters.

Analysts at Fairfax said markets are concerned that when Chinese players return from the Lunar New Year holiday later this week, they will be confronted with supply shortages in copper.

As such the metal should remain well bid this week.

Longer term, however, there is little chance copper demand will remain robust in the face of an ongoing US economic growth slowdown and a possible recession that threatens economies across the world.

"Given the overall poor economic outlook, we would view this rally as an opportunity to put on longer-term strategies to protect against lower prices down the road," said BaseMetals.com analyst William Adams.

He added, however, that he would not try to anticipate a top in metals just yet, especially not in copper, which is at present up 7.5 pct since Wednesday's close.

Elsewhere, lead was up at 2,995 usd a tonne against 2,970 usd at the close Friday, when it clocked up gains of 7.6 pct. Earlier, the metal touched a 2.5 month high of 3,055 usd a tonne.

"Lead market conditions remain very tight, meaning that the lead price can be volatile and squeezed higher," said Commonwealth Bank of Australia analyst David Moore.

Other metals were down, however, on fears over the demand outlook in the face of worsening global economic conditions.

Nickel was down at 27,850 usd a tonne against 28,300 usd, zinc fell to 2,420 usd against 2,450 usd, tin dropped to 16,950 usd a tonne from 17,200 usd, while aluminium edged down to 2,687 usd from 2,695 usd

US Business Group Cites Ways To Reduce US,EU Regulatory Hurdles

WASHINGTON -(Dow Jones)- Increasing transparency and improving data quality are just two actions the U.S. and European Union should take to reduce regulatory obstacles and improve transatlantic trade, the Chamber of Commerce said Monday.

Responding to a joint report by the European Union and U.S. Office of Management and Budget, the business federation said improvements in areas of data quality, transparency, stakeholder input, cost-benefit analysis and the application of sound science would help make business regulations in the two countries more seamless.

"When it comes to protecting consumers and the environment, there is a strong need to reduce the differences between U.S. and EU regulations," said Stan Anderson, chair of the Chamber's Global Regulatory Cooperation Project. "We need to improve the methods of regulating business if we are to mitigate obstacles to trade, investment and economic growth on both sides of the Atlantic."

If the EU and U.S. were to base their regulations on the same core principles, global commerce would benefit greatly, the chamber said in a news release.

The Chamber of Commerce, which represents 3 million companies and organizations, is the world's largest business federation.

WASHINGTON (Thomson Financial) - Treasury Secretary Henry Paulson became the third senior official in as many days to call on mortgage lenders and servicers to speed up their efforts to find workouts for homeowners in danger of foreclosure.

In response to questioning in a Senate Budget Committee hearing, Paulson emphatically said, "I'm gonna be all over them," if companies in the mortgage industry are not making maximum efforts to find and help borrowers who face losing their homes when their mortgages reset to higher rates.

Federal Reserve Governor Randall Kroszner and Treasury Under-Secretary Robert Steel both warned mortgage industry executive groups earlier this week that they needed to speed up their efforts for finding and helping endangered borrowers.

He was optimistic that the fast-track programs the administration has worked out with the mortgage industry could be successful. "I will be unpleasantly surprised if we don't find that people who can afford the initial rate are going to be helped," he said.

The refinancing and other programs are aimed at homeowners who have been making their mortgage payments at the initial interest rate, but may not be able to afford the impending higher rates.

LONDON (Thomson Financial) - Oil fell sharply as worries that a looming US recession will crimp demand combined with improved supply side news in the form of better than forecast increases in US energy inventories.

The US Energy Information Administration said earlier US crude stocks rose by 7 mln barrels last week to total 300 mln barrels. Analysts were expecting stocks to rise by only 2.07 mln barrels

Meanwhile gasoline stocks rose by 3.6 mln barrels last week against forecasts for a 1.7 mln barrel rise, while distillate inventory grew by 0.1 mln barrels against calls for a 1.9 mln barrel decline.

"The major figures were all bearish relative to expectations... About the only supportive element is the drop in refining rates, but no one will care when product stocks are rising," said Citigroup analyst Tim Evans.

At 4.06 pm, New York's WTI crude for March delivery was down 1.03 usd at 87.38 usd per barrel, having dropped 1.61 usd to close at 88.41 usd yesterday.

In London, Brent crude for March delivery was down 68 cents at 88.14 usd per barrel.

Prices were steady before the data release, recouping some of yesterday's losses as players scaled back bets on rising US energy inventory and took the view yesterday's selling was overdone.

However, with US energy inventories clearly on the rise and recession fears still at heightened pitch, there is little to tempt players back to the market on the buy side.

"Sharp declines in the service sector indices in both the US and Europe suggest a further deterioration in the global economic condition, with a subsequent drop in demand being a given for the energy markets," said MF Global analyst John Kilduff.

Yesterday, data from the Institute of Supply Management showed activity in the US services sector slumped to its worst level since March 2003. And in the Eurozone, the PMI services reading plunged to its lowest since July 2003.

Kilduff said the data shows "the economic tumour is clearly metastasizing", threatening oil demand at a time when "supplies have apparently begun to replenish".

Oil prices have now fallen more than 12 pct off a record 100.09 usd set in early January, and many analysts are for now ruling out the upside and instead trying to pick a near term floor in prices.

They note that while the economic contagion from the US has only infected Europe so far, there are possible problems on the horizon in emerging economies also.

China is currently grappling with power shortages that have been exacerbated by the worst winter storms in decades. In addition, it might yet soon have to contend with softness in its export markets.

"What is making the slowdown in the US even more painful is that it is starting to spread... Short term we believe we are on track to test key support at 85.82 usd level basis March WTI," said MF Global analyst Ed Meir.

Should this support level be broken, it would constitute a technical break of the longer term uptrend that has been in place since January 2007, noted Meir, who believes such a scenario is likely.

Looking ahead, it is as yet unclear whether OPEC will attempt to support oil prices by cutting output at its production meeting next month. The cartel has so far resisted such moves.

Yesterday, OPEC Secretary General Abdalla El-Badri said the cartel will roll over production quotas in March if market conditions remain as they are currently.

Others in the cartel have indicated otherwise, however.

WASHINGTON (Thomson Financial) - The companies involved in repackaging and selling mortgages into securities or investing in them are lagging in their response to the coming wave of potential foreclosures, a senior Treasury official warned a group of their executives today.

"Progress is being made, but your industry must move even faster," Under Secretary Robert Steel told the American Securitization Forum (ASF) today. "Each additional day it takes to fully implement (these workouts) we are missing homeowners who could have been helped."

Treasury and the ASF developed a set of fast-track tools for finding homeowners in danger of foreclosure when their mortgages reset to higher rates and helping them in to more affordable mortgages or other financing options.

Steel implied that not enough companies are using the plan, and "we expect your industry to hold to its commitment to help more homeowners, faster, by using the ASF framework, and we look forward to seeing the measurements of your success."

Steel's prod to faster action was similar to one made by Federal Reserve Governor Randall Kroszner to the same group on Monday.

While mortgage securitization fostered a greater flow of capital into housing and made home ownership possible for many more people, Steel also said there was a downside to the innovation.

"We must be honest and admit some malfeasance," he declared. "It is clear that in some instances market participants acted inappropriately." Market participants and regulators both have to commit to a reassessment of some practices that had become business as usual in the mortgage industry, Steel said, and that has begun.

WASHINGTON (Thomson Financial) - Federal Reserve Board Chairman Ben Bernanke will meet with Senate Banking Committee Chairman Christopher Dodd of Connecticut on Wednesday morning to discuss "solutions to the downturn in the US economy."

According to a statement released by Dodd, the two will also discuss the ongoing housing crisis and "recent volatility in US financial markets."

LONDON (Thomson Financial) - Oil prices tumbled by over 2 usd on stock market and dollar weakness and ahead of a weekly report due tomorrow expected to show US crude stocks are growing.

More disappointing data from the US, the world's largest economy, exacerbated price-drops already seen in the earlier part of the session. Futures accelerated to the downside as data showed a surprise contraction in non-manufacturing activity which raised concerns over a slowdown in demand.

The strength prices had garnered yesterday, from Middle East and Nigerian geopolitical tensions and from a statement from the White House announcing it will buy more barrels for the US Strategic Petroleum Reserve, faded. Meanwhile thick fog which slowed crude-carrying ships into the Houston Channel cleared -- helping the supply picture today.

"The petroleum markets are coming under renewed selling ... as a rebound in the US dollar and weakness in the stock market present a consistent bearish picture, and traders are anticipating another week of typical seasonal data in Wednesday's (US inventory) data," said Citigroup analyst Tim Evans.

The US Department of Energy's statistical wing, the Energy Information Administration, will release the weekly figures at 3.30 pm London time tomorrow.

In the week to Feb 1, crude oil stocks will have risen 2.07 mln barrels, gasoline will be up 1.7 mln barrels while distillate inventory, which includes heating oil, will have dropped by 1.9 mln barrels, according to analysts polled by Thomson Financial News.

In recent weeks oil has tracked volatile equity markets. Worries of a global slowdown in growth has seen oil lose some 10 pct since hitting a record 100.09 usd at the start of this year.

"The sharp deterioration in the recent US macro statistics will remain the predominant influence on energy prices over the short-term," said MF Global analyst Ed Meir. "Given how weak the recent stats have been looking thus far, and the potential drag they could have on energy demand, sizable price rallies in crude still look very suspect to us and should be sold into."

Iraqi Oil Minister Dr Hussain al-Shahristani, on the other hand, today said OPEC is well aware of a US slowdown, but reckons demand for crude oil will not be hurt in the meantime as Asia's appetite is not likely to abate.

"The indication to us is that there will be a slowdown in the United States. We're not sure if there is going to be a recession," he told Thomson Financial News on the sidelines of a London conference. "We don't think a slowdown in the US will have a significant effect on the demand for oil, particularly because of growth in east and south Asia."

At 4.05 pm, New York's WTI crude for March delivery was down 2.17 usd at 87.85 usd per barrel.

In London, Brent crude for March delivery was down 2.05 usd at 88.41 usd per barrel.

Looking ahead, all eyes will be fixed on equity market volatility which is likely to spill into commodities as traders try to cover losses and hedge against weakness. On the fundamental side, the OPEC cartel will hold a meeting on March 5 to decide on supply levels.

At its gathering last Friday ministers left output unchanged. Officials are sending mixed signals to the market about the next meeting and there seems to be no consensus yet over the decision.

Kuwait has said an increase is on the cards while Venezuela and Iran are likely to support a cut. Others, meanwhile, including Saudi Arabia, the defacto head of OPEC, have said it is too early to reach a decision on output and that stock levels must be monitored in the weeks ahead of the meeting.