NEW YORK (Reuters) – Stock index futures pointed to a slightly higher open on Wednesday as investors remained cautiously optimistic about progress on plans to lessen the euro zone’s debt woes.

International auditors headed to Greece to scrutinize new austerity measures they must endorse for Athens to get the next tranche of aid.

German Chancellor Angela Merkel suggested that parts of a planned new 109-billion-euro ($148.6 billion) rescue for the debt-laden country could be reopened, depending on the outcome of the audit.

Recent efforts to solidify a euro zone rescue fund and alleviate the region’s sovereign debt crisis lifted stocks on Tuesday for a third consecutive session and came after four straight days of losses for the benchmark S&P 500.

“At least they are doing something and for the moment it has taken away the fear of a collapse for now,” said Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago.

“It is certainly interesting that we had that nice rally yesterday and gave it all back late afternoon but it just shows how nervous the markets are and it is tough to commit. We will probably continue like this until there is a little more clarity and who knows when that comes.”

Market volatility could remain as traders react to European headlines.

Analysts also said equities would be supported by quarter-end “window dressing,” when portfolio managers drop underperforming stocks and buy outperformers.

S&P 500 futures rose 3.7 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration of the contract. Dow Jones industrial average futures gained 35 points, and Nasdaq 100 futures added 4.5 points.

In the latest economic data, new orders for long-lasting U.S. manufactured goods slipped in August on weak demand for motor vehicles, but a rebound in a gauge of business spending suggested the economy would avoid another recession.

In the latest quarterly earnings reports, spicemaker McCormick & Co Inc posted a profit that topped estimates, while discount chain Family Dollar Stores Inc recorded higher quarterly income.

Darden Restaurants Inc, parent of the Red Lobster and Olive Garden chains, posted a 6 percent drop in earnings.

Family Dollar shares slid 8 percent to $53.75 and Darden ticked up 2 cents to $47 in premarket trade.

(Reporting by Chuck Mikolajczak; editing by Jeffrey Benkoe)

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ATHENS (Reuters) – Greece’s lenders are sending a team to Athens to inspect a government austerity plan they want implemented in exchange for aid, while Germany suggested a new bailout may have to be renegotiated.

Facing a wave of strikes and protests, Greece’s Socialist government is accelerating its debt strategy to meet the terms of an International Monetary Fund and European Union rescue deal so it can receive a new loan next month and avoid bankruptcy.

The “troika” team of inspectors, which had threatened to cut off aid if Athens did not move faster, will begin talks on Thursday on a plan demanded by lenders to deepen budget cuts and raise taxes, which has set off protests not seen since June when riot police fought running battles with activists.

“I can confirm the Eurogroup (of euro zone ministers) will hold an additional meeting as soon as possible, still in October, to discuss the situation of Greece and consider the disbursement of the next tranche,” a European Commission spokesman said in Brussels, announcing the troika’s return.

German Chancellor Angela Merkel suggested that parts of a planned new 109-billion-euro ($148.6 billion) rescue for the debt-laden country could be reopened, depending on the outcome of the troika’s audit.

“We have to wait and see what the troika … finds and what it will tell us (whether) we will have to renegotiate or not,” she told Greek state television NET, without elaborating.

Several hundred activists affiliated with the Greek Communists converged on the finance ministry on Wednesday waving a banner saying “We won’t pay!.” They planned to burn bills for a new one-off income tax introduced this summer, while Athens and other parts of the country were hit by transport strikes.

If deemed adequate by the inspectors, the new austerity drive will secure an 8-billion-euro loan Greece needs to pay bills and salaries in October and bring it closer to starting a second bailout agreed in July.

As a condition of the visit and to resolve the row with the lenders, the Greek government had promised to send a written assurance outlining its new plan to meet its bailout targets. Its contents have not been made public.

Germany has repeatedly said negotiations about the details of the second rescue deal can begin only when the troika says Greece has qualified to receive the tranche expected in October, the sixth under a first bailout agreed in 2010.

At the same time, leaders from around the world have urged euro zone capitals to end a tortuous debate and create a safety net big enough to prevent Greece’s problems from spreading to other euro members and triggering a fresh global downturn.

DEBT SWAP DEBATE DEEPENS

The second bailout aims to ease Greece’s debt burden by imposing a 21 percent loss on private Greek bondholders.

After intensifying debate among economists and policymakers that only a 50 percent loss would make the country’s debt viable, more investors have signed up to the bond exchange plan, Greek financial daily Naftemporiki reported.

Citing an unidentified finance ministry official, it said Greece’s weeks-long struggle to lure private bondholders into the rescue plan had ended with it reaching the 90 percent participation target.

The finance ministry declined to comment on the report.

There is no agreement yet among euro zone governments on whether a renegotiation is needed, including more pain for Greece’s bank creditors, or on a U.S.-sponsored plan to leverage the bloc’s rescue fund to give it more firepower.

Germany’s Bundestag (lower house) will vote on Thursday on widening the scope of the European Financial Stability Facility bailout fund, as agreed by the EU leaders on July 21.

Merkel faces a revolt within her conservative camp and may have to rely on support from the opposition Social Democrats and Greens to get the measure approved, damaging her authority.

STRIKES GRIP GREECE

Late on Tuesday, police dispersed about 1,000 anti-austerity protesters with tear gas in Athens’ Syntagma Square, the epicenter of anti-austerity protests.

Taxi drivers, bus and tram operators staged strikes on Wednesday, causing long traffic jams leading into the ancient city center and forcing luggage-hauling tourists scrambling to find rides to the airport.

Other trades ranging from craftsmen, printers and tax officials also staged stoppages and activists planned marches on

parliament and the port of Piraeus later in the day.

“I’ve been trying to find a job for a year now and it’s impossible,” said Maria Kappa, a graduate of the School of Philosophy in Athens. “I don’t see the rich people hurt by this austerity, it’s always the poor who have to pay.”

Lawmakers opened the way to the troika visit on Tuesday by passing a property tax bill. That piles the pressure on Greeks suffering from several waves of belt-tightening and deepens an economic downturn heading into its fourth year.

Prime Minister George Papandreou’s 154 Socialist deputies forced the measure through in the 300-seat parliament.

In the accelerated strategy, the government will cut the 730,000 public workforce by a fifth, reduce the public wage bill by 20 percent, as well as lower overall pensions by 4 percent in addition to a 10 percent cut already agreed in previous plans.

It will also now extend the new real estate tax until 2014, two years longer than originally planned, after the troika judged Greece’s estimate that it would raise 2 billion euros a year to be too high.

(Writing by Michael Winfrey; Editing by Peter Millership/Mike Peacock)

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LONDON (Reuters) – Former BP (BP.L) boss Tony Hayward is considering whether to step down from the board of Russian oil joint venture TNK-BP but has yet to inform the British oil company of any decision, a spokesman for the company said.

The announcement followed Hayward’s return to the oil business last week, when his investment vehicle Vallares (VLRS.L) announced an agreement to acquire Turkish explorer Genel Energy.

The enlarged group will likely be big enough to enter the FTSE 100 index of blue-chip London-listed companies.

A spokesman for BP, responding to a report in the Sunday Telegraph, said it had been aware for some time that Hayward may be considering his future on the board of TNK-BP. The spokesman said were Hayward to leave the board of the joint venture, he would be replaced by another BP-nominated director.

In an interview with the Sunday Telegraph, Hayward said he did not have any plans to step down from either TNK-BP (TNBP.MM) or the board of Glencore (GLEN.L). However, the paper quoted people close to Hayward as saying he was expected to inform BP of his intention in the coming weeks.

The paper said Hayward did not believe he would have the time to devote to TNK-BP.

Hayward quit as BP chief executive after its blown-out Macondo well caused the worst ever offshore oil spill in the United States. As part of the crisis, Hayward was vilified by much of the American press for a string of comments, including when he said he wanted to get his “life back.”

The news comes as Britain’s prime minister, David Cameron, travels to Russia for a visit focused on business and trade. Cameron will travel with more than 20 business executives, including BP chief executive Bob Dudley.

BP has been engaged in a spat with its partners in TNK-BP, who have alleged billions of losses due to BP’s failed plan to establish a parallel joint venture with state-controlled Rosneft.

Last week, black-clad special forces raided BP’s Moscow offices and searched for documents related to the failed Rosneft deal.

(Reporting by Kate Holton; Editing by Dan Lalor)

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THESSALONIKI, Greece (Reuters) – Greek Prime Minister George Papandreou said on Saturday he would do whatever it takes to rescue his country from bankruptcy and stay in the euro zone, as doubts in Europe grew over its membership in the bloc.

Sending a message to international lenders increasingly frustrated with delays in reforms and missed fiscal targets, Papandreou said his government was determined to take the difficult decisions and make the sacrifices needed.

“We decided to fight the battle to avoid a disaster for the country and its people and to stay in the euro,” he said in his annual economic speech at a trade fair in the northern city of Thessaloniki. “Any delay and wavering is dangerous for the country.”

Anger at the country’s failure to meet fiscal targets under its EU/IMF bailout has reached boiling point, prompting senior euro zone policymakers to cast doubt on its ability to avoid default or even its membership in the single currency.

The embattled premier, who was heckled by angry labor unions on Friday, said he would redouble efforts to fight endemic tax evasion, a main hurdle in achieving fiscal targets.

His Finance Minister Evangelos Venizelos said earlier Greece may even take additional fiscal measures in 2011 to make up for budget deficit slippage that threatens the disbursement of an 8 billion euro EU/IMF loan tranche.

Venizelos pledged to further cut the civil service payroll, push privatizations and deepen labor market reforms.

Civil servants, who have seen about a fifth of their wages slashed, will suffer more after the government decided to put thousands of them in a so-called “Labor Reserve,” in which they will draw 60 percent of their salary and possibly face dismissal if they find no other public sector job within a year.

But austerity measures are throwing the economy into an ever deeper recession. GDP will shrink by more than 5 percent this year, Venizelos said, topping earlier projections in its third straight year of contraction.

PUBLIC DISCONTENT

More than 20,000 protesters gathered in the northern city to mark Papandreou’s speech. Police fired tear gas at youths smashing shop windows and setting fires on the main shopping streets. Police said 106 people were detained.

Demonstrations were organized by civil servants, students, taxi drivers and even football fans. Some restaurants in the city shut down to protest a VAT hike that took effect earlier this month.

“We are suffering an unprecedented tax raid … we deeply worry about tomorrow,” George Kasimatis, chairman of Greece’s Chamber of Commerce Federation, told Venizelos during the conference.

About 7,000 police were patrolling the city’s streets, cordoning off the fairgrounds. Ministers canceled plans for their usual walkabouts in the city and Papandreou avoided touring the fair in the morning, as prime ministers traditionally do on the event’s first day.

While vowing to keep its side of the bargain, the Greek government sharply criticized its EU partners for delaying ratification of a second, 109-billion-euro bailout for the country, agreed by euro zone leaders on July 21.

“Europe must rise to the challenge and move toward implementing the July 21 decisions, to put an end to the Sisyphean ordeal the Greek people is going through,” said Development Minister Mihalis Chrysohoidis.

“Doing nothing is disastrous for all of us,” he added.

A G7 source said the troika (EU/IMF/ECB), which suspended talks with Athens last week in frustration at Greece’s struggle to stick to its deficit reduction plan, would probably come up with a form of words in its next report to allow the next tranche of bailout funds to be paid.

But the working assumption is that Greece will not avoid default indefinitely.

However, a bond swap plan for private bondholders, which is part of the second bailout plan and is supposed to ease Greece’s debt payments was progressing well, Venizelos said.

“The private sector is responding very well to the PSI (private sector involvement),” he said, without elaborating, one day after an initial deadline for banks to express interest in the scheme expired.

(Additional reporting by George Georgiopoulos and Yannis Behrakis; Writing by Dina Kyriakidou; Editing by Janet Lawrence)

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ZURICH (Reuters) – Some banks may have to get help from the state as plunging share prices could make it difficult to raise capital, UBS (UBSN.VX) chief executive Oswald Gruebel told Swiss newspaper Sonntag in an interview published on Sunday.

Gruebel said his comment did not apply to the top two Swiss banks as Credit Suisse (CSGN.VX) and UBS were now less likely, compared with 2008, to be affected by European banks that found themselves in difficulty given that interbank trading was no longer as important.

Gruebel said future returns from investment banking were unlikely to be 20 percent and above but around 10 percent, adding this also applied to the big players on Wall Street.

UBS itself had to be rescued by the state in 2008 after massive losses on toxic assets.

Gruebel criticized the Swiss National Bank’s recent move to set an exchange rate cap on the Swiss franc at 1.20 euros.

“We, as a small country with the franc, can’t dictate an exchange rate against the euro. That is impossible in the long term. Despite this, I hope the effect that has been reached is sustainable,” he said.

Separately, Credit Suisse chairman Urs Rohner, interviewed by NZZ am Sonntag, welcomed the SNB move to cap the franc.

“The franc was massively overvalued, as the actual purchasing power of the euro is estimated at about 1.35 francs to 1.40 francs,” Rohner was quoted as saying.

Credit Suisse analysts expect the euro to rise to 1.25 francs in the next three months and to 1.30 francs in the next 12 months, Rohner said.

(Reporting by Katie Reid; Editing by Dan Lalor)

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VICENZA, Italy (Reuters) – Jewelry company Richline International, part of billionaire investor Warren Buffett’s Berkshire Hathaway (BRKa.N), will buy its fifth small Italian jewelry brand as it plans to expand further in Italy.

Italy-based Richline International, fully owned by Berkshire’s unit Richline Group, said in a statement it has signed a letter of intent to buy the production, design, intellectual property and distribution rights of Carniani.

It did not disclose financial details of the deal.

Lucio Carniani, who would continue to run his gold and silver jewelry maker, told Reuters his company revenues came in at 4 million euros ($5.63 million) last year.

Earlier this year, U.S. jewelry manufacturer and distributor Richline Group, has bought four privately held Italian jewelry brands: children’s jewelry maker Erz, earrings and bracelets maker Farinex, 7AR and Zeno, fuelling expectations that other deals could be in the pipeline.

Richline is looking for other acquisitions on the Italian jewelry market after the Carniani deal, Dennis Ulrich, chief executive officer of Richline Group, told Reuters.

“We are looking to expand … We always have ongoing conversations (about possible acquisitions) … A bigger acquisition is not excluded,” Ulrich said in an interview at an international jewelry trade fair.

Richline could be interested in small artisanal jewelry makers and in industrial companies as long as they produce high quality creative products, Ulrich said.

Italian jewelry highly fragmented manufacturing sector, made up mostly of small family-owned companies, has been hit hard by the 2008/2009 financial crisis and many companies need cash injections to keep going.

Richline Group, which was formed in 2007 and includes such brands as Andin, Alarama, Aurafin, Auragem and Bel-Oro (www.richlinegroup.com), made $500 million in sales last year, Ulrich said.

With buying Italian companies and setting up Richline International as a hub for further expansion, Richline Group goes beyond its traditional North American markets to boost sales in Italy, France, Germany, Britain, Scandinavia and reach as far as Australia and Hong Kong, he said.

Carniani is expected to double its sales within a year while the whole Richline International is seen boosting its business by 50 percent over the period thanks to organic growth and new acquisitions, Ulrich said.

Richline does not plan acquisitions of jewelry makers in Asia for now but aims to establish commercial relations there, he said.

(Reporting by Svetlana Kovalyova; Editing by Toby Chopra)

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PARIS (Reuters) – The resignation of the top German official at the European Central Bank could hardly have come at a worse time for euro zone policymakers as they grope for a way out of the deepest crisis in the single currency’s 12-year history.

The ECB is the one institution that has kept the euro zone afloat in the sovereign debt crisis and prevented a bond market meltdown. The European Union has no federal government or common fiscal authority and speaks with many dissonant voices.

Juergen Stark’s departure from the ECB’s Executive Board in despair at the policy of buying government bonds to prevent the crisis spreading comes as policymakers in Berlin and beyond are preparing for the growing possibility of a Greek default.

It seems bound to complicate the next round of crisis management because it has injected the poison of inter-state politics as well as ideological division into the independent central bank.

“It’s the ECB that is holding the show together, so anything that weakens the ECB is bad news,” said an EU official involved in financial crisis management.

Stark’s walkout will further sap the ECB’s credibility with Germany’s conservative financial establishment, which saw the bond-buying as an improper means of financing government debt, and among voters in Europe’s largest economy.

That could make greater fiscal integration in the euro zone politically harder to achieve at a time when Chancellor Angela Merkel is coming to realize that a big leap forward in economic governance is needed to preserve the single currency.

It risks importing a north-south divide, between self-styled virtuous creditor countries and peripheral states seen as profligate and feckless, into the central bank.

At worst, Stark’s departure may constrain the ECB’s ability to act decisively in the coming months when the debt crisis enters an even more dangerous phase.

HAMSTRUNG

“This comes at a very, very bad time and it’s certainly serious,” said Jean Pisani-Ferry, director of the Bruegel economic think-tank in Brussels.

“If the ECB is shackled in its ability to buy Italian and Spanish bonds and at the same time we have to do a real restructuring of Greece’s debts, with a proper haircut, we risk a contagion shock spreading to other countries. If the ECB is hamstrung by a lack of consensus, that is the risk.”

A growing number of policymakers, as well as market economists, are convinced it is only a matter of time before Greece, which keeps falling behind on its fiscal targets, will have to default.

A source at this weekend’s G7 finance chiefs’ meeting in Marseille said the troika of EU, ECB and IMF inspectors, who suspended talks with Athens last week, would probably find a formula in its progress report to allow the next 8 billion euro ($11 million) tranche of bailout funds to be paid in October.

That would keep Greece going for a couple more months until European parliaments approve new powers for the EFSF rescue fund to give preventive credit lines to euro zone member states, buy bonds in the secondary market and lend money to recapitalize banks.

The source said the German Finance Ministry was increasingly convinced that Greece will not be able to avoid default for much longer, so ring-fencing the euro zone’s weakest debtor and limiting contagion will be crucial.

Even when the EFSF has its new powers, it will require the unanimous agreement of the 17 euro zone member states to use them, with the German parliament having just gained a bigger oversight role on those decisions. Political hurdles abound.

Markets may bid up euro zone bond yields again in anticipation of the ECB pulling out of bond-buying and handing over to the inexperienced EFSF, traders say.

The ECB has bought a total of 135 billion euros’ worth of Italian, Spanish, Greece, Irish and Portuguese bonds so far.

The rescue fund may find itself short of firepower in a crisis. It will have about 380 billion euros in uncommitted funds. Italy alone has 1.9 billion euros of outstanding government bonds, of which 45 percent are held by foreigners.

HARDER LINE

The replacement of Stark on the ECB board by the more pragmatic German junior finance minister Joerg Asmussen, the seasoned crisis manager proposed by Berlin on Saturday, may reduce ideological tensions at the central bank.

But it could also force incoming ECB President Mario Draghi, who succeeds Jean-Claude Trichet on November 1, to take a harder line on ending bond purchases and sticking to the bank’s core mandate of fighting inflation.

Draghi has already warned governments, including his native Italy, that continued bond-buying cannot be taken for granted.

“The next step will be increased pressure on the ECB to keep its hands clean. Stark is from the German school that sees this kind of intervention as bad in principle,” said Josef Janning, director of research at the European Policy Center in Brussels.

“His likely successor will be less orthodox and more of a political crisis manager. But Stark may use his new freedom to speak out. That could make things more complicated for Merkel and for Draghi,” the German political scientist said.

Stark’s resignation could also affect international confidence in the ECB and the euro zone at a crucial moment.

“Politics has never been completely absent from the ECB but this has now been reinforced. This awakens the idea that the ECB is still a structure that amalgamates national institutions and views, not primarily individuals belonging to its board,” Pisani-Ferry said.

“You have to think about how this looks from New York. It looks as if these people can’t even sit around the same table and work things out.”

($1 = 0.729 Euros)

(Additional reporting by Annika Breidthardt in Marseille and Luke Baker in Brussels; Editing by Kevin Liffey)

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LONDON (Reuters) – The euro and growth-linked currencies may fall on Monday, hit by a lack of concrete measures from Group of Seven finance chiefs to address either faltering growth, the escalating euro zone debt crisis, or exchange rate volatility.

The dollar, yen and, to a lesser extent, Swiss franc are set to advance with more investors seeking safe-haven currencies on the back of rising financial market stress.

That will raise the risk of more solo intervention from Japanese and Swiss authorities.

The flight to safety should drive core government bonds like German Bunds and British gilts higher, leading to wider spreads over euro zone peripheral debt, while European banking shares may ease on mounting worries about contagion engulfing bigger economies like Italy and Spain.

Finance ministers and central bankers from the Group of Seven industrialized nations pledged to respond in a concerted matter to a global slowdown. However, they offered no specific steps and differed in emphasis on Europe’s debt crisis.

That will likely offer little solace to investors who had expected some sort of coordinated policy response from G7 policymakers at a time when stock markets have been falling and global growth in showing increasing signs of stalling.

“As this falls short of any commitment to undertake co-ordinated action in currency markets, investors are likely to react with disappointment when trading resumes on Monday,” said Mansoor Mohi-uddin, head of foreign exchange strategy at UBS.

He expected Japan to stay on intervention watch.

Japan’s finance minister, Jun Azumi, said he met with little resistance to further intervention at the G7 meeting. Japan last intervened in the currency market on August 4 to topple the yen from a record high against the dollar.

“We expect Japan’s authorities will act again unilaterally if dollar/yen tests its post-war lows of 75.95 yen. As a result we think investors should instead keep favoring the dollar now when they seek safe-haven currencies,” UBS’s Mohi-uddin said.

The dollar index, which measures its performance against a basket of six currencies which includes the euro, yen and sterling, rose to its highest in six months at 77.276 on Friday.

In a bullish signal, it closed above its 55-week moving average at 77.01. Resistance was seen at the base of the weekly Ichimoku cloud around 78.05, while strong resistance was at the 38.2 percent retracement of the index’s fall from a high of 88.71 on June 7, 2010 to a low of 72.696 on May 4, 2011 which comes in at 78.80.

The dollar is set to make strong gains against the euro, which last week fell to its lowest in six months, at around $1.3627. The euro posted its biggest weekly fall since mid-August last year, with many looking for it to test $1.35 in the near term.

EURO ON THE WAY DOWN

The euro also fell sharply against the safe-haven Japanese yen on Friday, dropping to its lowest in nearly a decade. It ended the week at 105.85 yen, and a break below the psychologically key 105.00 level could see it drop toward 100 yen in coming weeks, analysts said.

Howard Wheeldon, a strategist at BCG Capital Partners, said the weekend’s developments provided little confidence to investors in the euro zone, and the coming week will see increased volatility in stock markets.

That could hurt the euro more in coming days.

The euro was sold off last week after European Central Bank President Jean-Claude Trichet shifted the monetary stance from a hawkish bias to a more neutral one.

The shock resignation of ECB board member Juergen Stark, which highlighted sharp divisions within the central bank over purchases of government bonds in the secondary market and concerns that Greece may not secure its latest aid tranche from the IMF/European Union, also added to the euro’s woes.

Investors will also likely be unsettled by a weekend report from Der Speigel magazine that the German finance ministry was looking at scenarios that included Greece abandoning the euro.

Indeed, latest data from the Commodity Futures Trading Commission showed speculators added to their bearish bets against the euro in the week to September 6.

“With $1.40 going last week, I think the euro could fall to $1.35 in the next few days,” said Michael Derks, chief strategist at FXPRO. “The dollar be will the currency that will gain from safe-haven inflows given the risk of intervention in the yen and the line in the sand that has been drawn on the Swiss franc by the Swiss National Bank.”

On the charts, near term support was seen at $1.3426, a low hit on February 14 and from where the euro started its move to a 17-month high at $1.4939 struck on May 4.

(Reporting by Anirban Nag; Editing by Dan Lalor)

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SHANGHAI (Reuters) – China’s key commodity imports, including crude oil, copper and iron ore, all climbed in August from the previous month, adding to evidence that demand in world’s second-largest economy was still going strong despite the economic turmoil in the West.

The wave of buying of oil and industrial commodities suggests that Chinese companies remain confident about the domestic economy and that they would likely see any price corrections as a rare restocking opportunity — a move which should offer strong support to commodity prices.

With China’s inflation having pulled back in August from a three-year high, market watchers also expect the central bank to hold off further tightening measures, which could in turn ease the credit crunch and potentially draw producers and traders to import more raw materials.

China imported 21.04 million tons of crude oil in August, up 1.8 percent from the 20.66 million in the previous month, according to Reuters calculations using the revised July numbers.

Although implied oil demand in August slipped to the lowest rate this year, plant maintenance and accidents were the main reasons behind the dip and traders generally expect demand to improve from September.

“August-arrival crude cargoes were mostly loaded in June and July, when oil prices fluctuated a lot,” said a crude oil trader.

Data from the General Administration of Customs also showed China’s iron ore imports in August jumped 33 percent from a year ago to a five-month high of 59.09 million tons, thanks to the steel sector’s robust production.

However, analysts have cautioned that steel output could decelerate in the coming months amid a seasonal demand slowdown.

Despite slowing export growth due to the economic malaise in the United States and Europe, China’s economy has continued to grow at an enviable clip of over 9 percent, thanks in part to the government’s construction of over 10 million houses as well as feverish investments in the less-developed mid and western provinces.

These two factors have led Chinese mills to churn out near record amount of steel, cement plants to ramp up production and metal smelters to expand capacity — bolstering the country’s voracious appetite for a raft of commodities.

COPPER DEMAND UP FOR 3rd MONTH

Imports of unwrought copper to China, the world’s No. 1 consumer of the metal, posted a third monthly gain of 11.0 percent — the highest since March — to 340,398 tons in August, as buyers took advantage of lower prices overseas.

Compared to a year ago, however, copper imports remain down 10.3 percent, with year-to-date shipments down 20.5 percent.

Fu Bin, an analyst at Jinrui Futures, said China had kept on buying spot copper in recent weeks as arbitrage windows continued to surface, a trend which should support import numbers for September and October.

Unwrought aluminum imports posted smaller monthly gains of 0.8 percent, but declined 2.3 percent from year ago.

Soybean was the only laggard of all commodities, falling 15.7 percent from the previous month to 4.5 million tons as high prices overseas led crushers to turn to domestic supplies.

Amid the economic doom and gloom in the eurozone and United States, investors have wondered if China, one of the top buyers, would be able to avoid a hard landing.

However, a series of economic data released over the past few months has suggested that domestic demand was holding up relatively well, although overall economic growth has eased.

Statistics released on Friday showed industrial output moderated only slightly to gain 13.5 percent in August from a year earlier, while fixed-asset investment, a primary driver of the country’s economic growth, rose 25.0 percent in the January-August period from a year earlier.

(Additional reporting by Judy Hua, Polly Yam and Ruby Lian; Editing by Raju Gopalakrishnan)

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LONDON (Reuters) – As his global teleconference broke up in disarray on September 11, 2001, a top economist at a U.S. investment bank began to ponder what the attacks on the United States might tell him about the future shape of the world. His conclusions had little to do with Al Qaeda.

Jim O’Neill of Goldman Sachs had been at a meeting in the World Trade Center only two days before, and flew home to London just hours before airliners slammed into New York’s twin towers. About to become head of the bank’s global economics team, he was looking for a “big idea” to put a stamp on his leadership.

Soon, he had it: the decade after September 11 would be defined not by the world’s sole superpower or the war on terror but by the rise of the four biggest emerging market economies – China, Russia, India and Brazil. O’Neill nicknamed them the “BRICs” after the first letter of their names.

“I’ll never forget that day,” O’Neill told Reuters. “It was right at the core of how I dreamt up the whole thing… Something clicked in my head that the lasting consequence of 9/11 had to be the end of American dominance of globalization… that seems to be exactly what happened.”

O’Neill, who now heads Goldman’s global asset management business, launched the BRIC phrase in a pamphlet published in November 2001. The numbers from the past decade suggest the trend he identified will resonate more in world history than the strikes and their aftermath.

When O’Neill dreamed up the BRIC acronym, the four big emerging powers made up eight percent of the world economy. The top five world economies were, in order, the United States, Japan, Germany, Britain and France.

Ten years later, the BRICs have grown faster than even O’Neill expected to constitute nearly 20 percent of the global economy. China is the world’s number two economic power, while Britain – the closest ally of the U.S. in the decade-long war on terror — has dropped out of the top five, overtaken by Brazil. India and Russia are not far behind.

Within days of the attacks on New York and Washington, the U.S. had launched a costly and attention-sapping global “war on terror” and was plotting retaliation against not just Al Qaeda but also other members of what it saw as a wider “axis of evil,” including Saddam Hussein’s Iraq.

At first sight, the U.S. and its allies appear to have won their war. The Al-Qaeda network is badly damaged, Osama Bin Laden and other key leaders are dead and the group has not pulled off a major terror strike in the West for years.

What is less obvious is the cost of that apparent victory, both financially and diplomatically.

“For most of the first decade of the century, as the world economy gradually shifted its center of gravity toward Asia, the United States was preoccupied with a mistaken war of choice in the Middle East,” said Joseph Nye, a former U.S. under-secretary of state and defense as well as ex-chair of the National Intelligence Council and now a Harvard professor of international relations.

U.S. actions, he says, critically undermined its “soft power” in diplomacy, values and culture, while diverting and ultimately weakening its military and economic “hard power.”

COSTLY OVERREACTION?

The day before the attacks, the U.S. national debt stood at a sliver under $5.8 trillion. A decade on, it has skyrocketed to $14.7 trillion.

Unfunded tax cuts, post-financial crisis stimulus and other increased domestic spending account for much of that. But America’s post-9/11 conflicts added heavily to the burden.

One recent estimate, from Brown University in the U.S., put the cost of America’s wars in Iraq, Afghanistan and Pakistan at up to $4.4 trillion – nearly a third of the total.

“It was pretty immediately obvious that the Americans were going to lash out and probably going to overreact,” says Nigel Inkster, a former deputy head of Britain’s Secret Intelligence Service (MI6) and now head of transnational threats and political risk at London’s International Institute for Strategic Studies (IISS).

“In the overall scheme of things, I suspect the impact of 9/11 and rise of Al Qaeda is going to be seen as not much more than a blip.”

The United States was not the only Western power to take drastic measures.

Like then-U.S. president George W Bush, British Prime Minister Tony Blair saw the September 11 attacks as a defining moment.

“I was very, very clear from the outset that this was not just a terrorist attack of extraordinary magnitude but one that had to change global politics” says Blair in a television interview to be published this weekend on www.reuters.com.

“… I don’t think we were clear on what exactly had to be done but I do think we were clear that the calculus of risk had changed.”

That belief helped send Blair and his country to war in Iraq and later Afghanistan, costly military adventures that ultimately may have made far less difference to Britain than the threats it faced from a fast-changing world economic order — as well as its own internal financial problems.

The Iraq war ended up seriously tarnishing Blair’s premiership and his reputation, after it emerged Britain went to war based on a faulty assessment of the risks posed by weapons of mass destruction.

Wolfgang Ischinger, a former German deputy foreign minister appointed ambassador to the U.S. in 2001, says September 11 “burst the bubble” of any illusion that one superpower could rule the world.

“But in terms of importance for the global power situation, for global governance, I think the rise of the BRICs will have the more enduring effect. 9/11 created such a lot of confusion that it took us the better part of a decade to figure out what conclusions we should draw from it and the wrong turns some countries took.”

LESS A TURNING POINT THAN FINANCIAL CRISIS?

On a flight into Houston, Texas for a meeting between Jordan’s King Abdullah and Bush when Al Qaeda struck, Jordan’s ambassador to Washington Marwan Muasher’s initial worries were over an anti-Muslim backlash in the United States. He believes Washington did well to avoid that, but misjudged its broader reaction and should never have launched the Iraq war.

“But there have been other developments since then such as the financial crisis that in some ways, overshadow much of 9/11,” says Muasher, who later became foreign minister and is now a vice president at the Carnegie Endowment for International Peace, a U.S. think-tank.

“It is not a matter just of U.S. decline, it is a matter of the emergence of other powers. The age of the unipolar power of the United States was very short in part because it was ultimately never sustainable.”

Ian Bremmer, president of political risk consultancy Eurasia Group, says the world has already moved on from September 11.

“With hindsight, 2008 was the seminal moment,” Bremmer told Reuters. “Not only did we have the financial crisis, we also had the Beijing Olympics. Before that, China was seen simply as an emerging market, a backwater. Suddenly we saw them coming into their own.”

China paraded brash self-confidence at the 2008 Olympics opening ceremony, showing off spectacular new buildings in its capital and brushing aside Western concerns at human rights abuses.

The country’s growing financial and economic weight – it now holds $1.2 trillion of U.S. government debt, by far the biggest foreign investor in these securities – means the West can ill afford to question it.

When a government debt crisis hit Europe this year as buyers shunned the most indebted countries, leaders begged China to come to their help by buying up euro-zone securities – a scenario unimaginable in the 20th century.

August 2008 also saw fellow BRIC Russia swiftly won a war with U.S.-backed neighbor Georgia, the first time Moscow had sent troops outside its borders since the 1991 collapse of the Soviet Union. That more muscular approach from emerging powers — particularly in their own backyard – could in future be adopted by the likes of China or India.

HASTENING THE WEST’S (RELATIVE) DECLINE?

Reflecting broader changes to investment patterns, Stephen Jennings, the CEO of Moscow-based investment bank Renaissance Capital, says he sees more and more big “south-south” business deals now struck in developing nations, funded by BRIC banks on behalf of emerging market investors – and at which there is not a single face from London or New York.

“The traditional financial centers and Western economic model are losing their pre-eminence,” Jennings said in a speech to investors in Moscow in June. “There is a gravitational shift of business, capital and ideas toward emerging market economies. fast-growing economies, including Russia, are becoming the leaders of the new economic order.”

The diplomatic order has also changed. When it came to salvaging a deal at the Copenhagen climate summit in 2009, U.S. President Barack Obama went into a room not with the other G8 developed states but with the leaders of the emerging world: China, India, Brazil and South Africa, the latter increasingly keen to position itself as part of a wider “BRICS” grouping to counterweight older powers.

The uprisings of the so-called “Arab Spring” across the Middle East and North Africa — which blindsided not only regional leaders but also Western intelligence agencies and apparently Al Qaeda — were seen by some as a wake-up call for more authoritarian BRICs like China. But critics said the uprisings also pointed to double standards on the part of the U.S. and its allies.

The West, they charged, backed authoritarian Arab rulers when they needed their business or support in the “war on terror,” then abandoned them when their positions became untenable.

Now, Britain and the United States have been embarrassed by documents found in Libya suggesting that their intelligence services were cooperating closely with Col. Muammar Gaddafi’s regime.

“In many ways, it shows the whole hypocrisy of the approach that said you had to embrace the dark side to defeat terror,” says Jan Egeland, Europe head of Human Rights Watch and United Nations global humanitarian chief between 2003 and 2006, a role in which he became a frequent critic of U.S. Policy.

“It was devastating for the reputation of the West — and it happened at the same time as the emerging economies were already closing the gap in other ways.”

A CHANGED WORLD

In many ways, much of what has happened since September 11, 2001 was precisely the opposite of what conventional opinion expected.

Whilst the US and allies spent much of the following decade at war in the Middle East, in much of the rest of the globe the number of conflicts fell sharply.

Whilst development economists such as Jeffrey Sachs say the billions spent on Western wars represent a lost opportunity to tackle poverty and hardship in the poorest countries, BRIC economic growth in particular has lifted millions from poverty – despite a growing internal wealth gap in many states.

Now, following a long-standing historical pattern, the growing economic power of the BRICs is starting to translate into greater military strength – and the West’s financial decline is mirrored in ever more drastic cuts to its defense spending.

London’s International Institute for Strategic Studies highlighted in its annual survey of global military power this year a key theme: while Western military budgets are being pruned, those in Asia and the Middle East are growing sometimes by double digits every year.

“There is persuasive evidence that a global redistribution of military power is under way,” it said.

This year, Britain replaced China as the only member of the UN Security Council without an aircraft carrier, scrapping the Royal Navy’s flagship “Ark Royal” just as China launched its first such vessel.

Goldman’s O’Neill believes the dramatic economic growth of the BRICs will dwarf the long-term impact of September 11. His bank is now touting the merits of what they term the “N-11″ – the next 11 big emerging market economies after the BRICs, including such powers as Mexico, Indonesia and Turkey.

He also believes the attack and its aftermath may have played a part in shaping the BRICs’ newly assertive approach in the world.

“What it may have done at the margin was to sow the seeds of doubt about the power of America and therefore the need for them to stand more on their own two feet,” he says.

With the West’s single-minded focus on the Middle East, Al Qaeda and its allies, some worry that the old powers missed their chance to help shape the new world order that is emerging. But even had they been paying more attention, perhaps it would have made little difference.

“The focus on the Islamic world meant that shift (to emerging powers) took us by surprise,” says former British spy Inkster. “But it probably would have done so in any case.” (Additional reporting by Jamie McGeever, Darcy Lambton, Alan Wheatley and Noah Barkin; Editing by Michael Stott)

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