LONDON — Fears over the European financial crisis began to spread Tuesday from the weaker countries to healthier ones, including Italy and Belgium, and even much stronger Germany, spurring a stepped up search for a solution to the economic problems putting a strain on Europe’s decade-old monetary union.

Despite the commitment of close to 200 billion euros ($260 billion) in bailout funds to two economically stricken nations — Greece and Ireland — borrowing costs across the continent rose as investors worried about the growing risks.

In recent days, investors have been selling the debt of Germany, whose economy remains relatively robust, because of worries it will bear much of the burden of the ever-higher costs of bailing out weaker countries.

While German bonds recovered by the end of Tuesday, the cost to an investor for insuring against a German default — despite being highly unlikely — also rose, signaling growing nervousness. Further reflecting those worries, the euro slipped to $1.3011 in the United States from $1.3117 Monday. As recently as Nov. 5, the euro traded above $1.40.

No one thinks that the financial problems of Italy and Belgium, much less Germany, are nearly as serious as Greece, Ireland and Portugal, which also suffered a blow on Tuesday when Standard & Poor’s warned of an impending downgrade of its credit rating.

Instead, the fear is that Europe’s strategy so far — painfully drawn out step-by-step rescues of individual countries — has failed to calm the markets. If investors panic and the contagion spreads to larger economies like Spain and perhaps even Italy, the thinking goes, the much higher cost of bailing out those countries would be difficult for Germany to bear — both financially and politically.

Even as the yields on the 10-year bonds of Greece, Ireland, Portugal and Spain ended trading off their highs Tuesday, attention turned to the increase in interest rates on Italian debt to 4.64 percent, of Belgian bonds to 3.97 percent and the recent rise of German bonds, the European benchmark.

At 2.67 percent, the yield on German bonds was down marginally from Monday, but well above the 2.1 percent of last summer. Rising yields reflect increased risk in the eyes of investors, as well as inflationary expectations.

With financial markets still unsettled, fresh ideas about how to calm them have been floated. Some proposals, like a new European bond with fiscal conditions or the establishment of a European version of the International Monetary Fund with resources to help troubled countries, are considered more grandiose at the moment than practical.

But others, especially those that come with a call for bondholders to share the pain by taking some losses on their holdings, are being examined in a new light, even though investors remain adamantly opposed to such measures.

Europe’s debt-ridden countries themselves are wary of any form of negotiated default that would lower the amount they owe creditors, because they fear that this would make it harder to find new lenders in the future. One reason for the increase in borrowing costs is that European countries that share the common currency agreed at the beginning of the week that, starting in mid-2013, lenders might be required to forgive debt as part of any future bailout plans.

One of the latest suggestions from outside specialists is for indebted European countries to consider something modeled on the so-called Brady plan that dealt with Latin American debtors in the 1980s and early 1990s. That could require bondholders to accept a write-down in exchange for a new, more tradeable instrument.

Others have suggested a so-called Abu Dhabi option under which the European Commission and the I.M.F. would promise bailout funds as long as private sector creditors shared the pain, in an echo of Abu Dhabi’s bailout of its fellow emirate Dubai late last year.

But all such plans are difficult to consider in the current atmosphere.

The recent bond market attacks on Ireland and other weak European debtors increased after the German chancellor, Angela Merkel, broached the idea of requiring bondholders to take a share of the losses payday loans. The concerns gathered speed this week when it became clear that Ireland, as well as Greece, would have to pay a still-steep 5.87 percent interest rate on their loans — a tacit acknowledgment on Europe’s part, analysts say, that even with its bailout package Ireland remains a significant default risk.

“We have created more doubts than existed before,” said Paul De Grauwe, an economist who advises the president of the European Commission, José Manuel Barroso. “The interest rate now being charged for Ireland is a vote of no confidence for the package and it has obviously been inspired by a notion that we should punish our sinners. If we don’t succeed in containing this thing it could lead to a disaster in terms of the euro’s survival.”

Mr. De Grauwe, unlike many economists who shout loudly of the euro’s inevitable demise, is no alarmist. He has been a longtime supporter of the European common currency project, giving his views extra weight.

He recently wrote a research paper that has drawn the attention of investors, academics and officials in Brussels and London. In it, Mr. De Grauwe compares the current cycle of soaring bond yields among European economies to the series of competitive devaluations that led to the collapse in the early 1990s of the European Exchange Rate Mechanism, the precursor to today’s monetary union that binds 16 nations in the euro zone.

Then it was investors betting on devaluations, most famously the one that led to the collapse of the British pound in 1992. Now, Mr. De Grauwe predicts, it will be bond investors zeroing in on Europe’s weakest economies that, via a punishing cycle of soaring bond yields, could lead the euro zone to implode — just as its precursor did — as one country after the next defaults on rising debt.

Mr. De Grauwe proposes transforming Europe’s financial rescue fund into a European equivalent of the I.M.F., but other specialists say that Europe is not prepared to undertake the long and political challenging treaty revisions that would be required to bring it to life. Still the feeling is growing that some form of restructuring is crucial.

Daniel Gros, the head of the Center for European Policy Studies in Brussels, said that just as investors of Dubai World were required to share the pain in return for a rescue by Abu Dhabi, so should bondholders in Irish banks. “It was not easy, but in the end all the creditors accepted it,” Mr. Gros said.

Another idea that has gained some ground recently is a Brady plan for indebted European economies. The plan was put forward recently by a former Treasury secretary, Nicholas F. Brady, who led an effort in 1989 to help Mexico and other Latin American economies restructure debt — requiring bondholders to take a loss of 30 percent in exchange for new, longer dated debt with lower rates backed by 30-year United States zero-coupon bonds. Criticized at the time, the plan is now seen as the first step of Latin America’s recovery.

Mr. Brady presented the idea at an exclusive gathering of international financiers in Washington this year that included, among others, the president of the European Central Bank, Jean-Claude Trichet. Mr. Brady does not pretend to be an expert on Europe, but he does recall from experience that for any such plan to gain acceptance, unified leadership is crucial. While Mrs. Merkel has offered her own ideas, they have run into a storm of criticism from other European leaders, including Mr. Trichet.

“It was not easy but we drove the process and got the banks to write down their debt and accept a new security,” Mr. Brady said during an interview. “But now the question is who is going to stand up for the euro?”

Europe Examines Ways to Quell a Crisis

NEW YORK (Reuters) – BP Capital, the investment management firm led by billionaire energy investor T. Boone Pickens, has purchased shares of oil company BP Plc (BP.L) (BP.N) for the first time in nearly six years and dropped its holdings in offshore oil driller Transocean Ltd (RIGN.VX) (RIG.N), according to a quarterly report filed with the U.S. Securities and Exchange Commission.

Dallas, Texas-based BP Capital purchased &&6;19.8 million worth of American depository receipts in BP sometime during the third quarter, after the stock price hit 21-month lows at the end of June. The last time the firm held shares in BP was in the fourth quarter of 2004, SEC filings show.

The firm&&9;s holdings in Transocean were down from nearly &&6;30 million in the first quarter of 2010 to &&6;9.3 million in the second quarter and were not listed at all in its third quarter filing.

The oil company has endured public criticism for the Deepwater Horizon drilling rig explosion which claimed 11 lives and subsequently led to a massive oil spill in the Gulf of Mexico. BP leased the rig from Transocean.

Shares of the multinational oil company fell by more than half between April 20, when the explosion occurred, and the end of June, when it traded near two-year lows of around &&6;27 per share.

BP shares were trading around &&6;41 on Wednesday outdoor fireplaces.

Transocean&&9;s stock price slid by about &&6;50 per share between April 20, when it was around &&6;92 per share, and June 9 when it was trading about &&6;42 per share. The stock was trading around &&6;66 per share on Wednesday.

In line with Mr. Pickens&&9; philosophy of weaning the U.S. off oil and onto domestically produced natural gas, the firm showed that it increased its number of shares in natural gas producers between the second and third quarters of this year.

BP Capital added around &&6;4.5 million worth of Chesapeake Energy (CHK.N) shares to its portfolio; boosted its holdings in Encana Corp (ECA.TO) to &&6;9 million from &&6;5.7 million, and added around 15,000 shares each of Quicksilver Resources Inc (KWK.N) and Southwestern Energy Co. (SWN.N)

Investment fund managers who oversee &&6;100 million or more in equities are required to file a Form 13F to report their securities&&9; holdings to the SEC 45 days after the end of the quarter.

BP Capital spokesman Jay Rosser said the firm does not comment on strategies related to its portfolio.

(Reporting by Jeanine Prezioso; editing by Jim Marshall)

T.Boone's BP Capital adds BP shares

DUBLIN – Lawmakers in Prime Minister Brian Cowen's own party mounted a rebellion Tuesday to try to oust him, an effort that could trigger a snap election and delay a massive EU-IMF bailout of Ireland.

Despite the discontent, Cowen's Cabinet colleagues in the Fianna Fail party said they were confident the rebels have too few votes to pursue a no-confidence motion against Cowen.

At stake is the future course of the potentially euro100 billion ($136 billion) European Union and International Monetary Fund rescue of Ireland, a nation heading toward bankruptcy next year because the government cannot pay a mammoth, mounting bill to save its state-backed banks.

Ireland's deficit this year is 32 percent of GDP — the highest in Europe since World War II — and its banks are running short of cash because they can't borrow on open markets.

The Irish political and economic crisis, and its uncertain solution, drove up borrowing costs Tuesday for debt-struck nations from Portugal to Spain. It also fanned fears that a third member of the 16-nation eurozone — after Greece and now Ireland — might be backed into its own bailout corner soon.

The Cabinet gathered at Cowen's office to complete its four-year plan for unprecedented budget cuts tied to Ireland's international bailout. The plan, which proposes to slash euro15 billion ($20 billion) from the country's 2011-14 budget deficits through a combination of cuts and tax hikes, is to be published Wednesday.

One of Cowen's loyal lieutenants, Transport Minister Noel Dempsey, said the EU-IMF rescue aid couldn't flow until Ireland began slashing euro6 billion ($8.2 billion) from its 2011 deficit as the upcoming budget seeks to do.

"We don't have the luxury of time in relation to this," Dempsey said. "We asked for assistance. We were given that assistance on the basis that we were going to produce this four-year plan, that we were going to produce a budget, and that budget would pass. If we can't do that, then the assistance isn't there."

Two separate meetings were happening Tuesday — one led by a handful of party rebels, the second by the full 70-strong bloc of Fianna Fail lawmakers.

"There's serious discontent within the parliamentary party. I believe it's now up to those who've spoken out to take soundings amongst their colleagues to take action to remove that man (Cowen) immediately," Fianna Fail lawmaker John McGuinness said.

Cowen conceded Monday night he must call an election next year but sought to delay it as long as possible. His hand was forced when the junior party in his coalition, the Greens, said it would withdraw support once the 2011 budget passed.

The Greens said they expected the country to hold an election by late January, but Fianna Fail officials — furious at the Green ambush — say the budget will require multiple votes on different tax increases that could drag the process into February payday loans.

Tensions flared as Fianna Fail and Greens convened around the same table for the first time since Cowen's weekend decision to take a bailout. The Fianna Fail minister for tourism and the arts, Mary Hanafin, accused the Greens of deceiving their colleagues and undermining Ireland at a critical moment.

"I'm very annoyed by it. It certainly wasn't expected. I'm not sure they (the Greens) have shown they have the best interests of the country at heart," Hanafin told Irish state radio RTE.

Hanafin said she wouldn't back any push to oust Cowen — but would put her name forward if the leader's post became vacant.

At the European Parliament in Strasbourg, France, EU monetary and financial affairs minister Olli Rehn gathered Ireland's European lawmakers for a confidential briefing — and came out stressing they must stop the political infighting long enough to pass the 2011 budget.

"It is essential that Ireland pass the budget in the timeline foreseen, and sooner rather than later, because every day that is lost increases uncertainly," Rehn said. "Let's adopt the budget, let's get it out of the way, and let's move on."

Cowen pleaded Monday night with his many opponents not to force him from office until the 2011 budget is fully enacted and EU-IMF money is flowing into Irish banks. He also telephoned the two major opposition leaders, Fine Gael's Enda Kenny and Labour's Eamon Gilmore, to seek their acquiescence when the government unveils the 2011 budget Dec. 7.

But opposition lawmakers emphasized Tuesday they were determined to oust Cowen as soon as possible in pursuit of a pre-Christmas election.

"What's the point of a government preparing a four-year plan that they won't preside over, that they won't be there to implement, and that they haven't consulted the people on?" said Fine Gael lawmaker James Reilly.

Reilly and Labour lawmakers both contended that, if Cowen resigned and dissolved parliament now, an election in mid-December could lead to the new government's revised budget being passed by Christmas. But Dempsey of Fianna Fail called that schedule "quite impossible."

Shares in Ireland's three listed banks tumbled for a second day Tuesday amid growing fears they were headed for nationalization. Ireland's three other banks already have been.

Bank of Ireland plummeted 33 percent to a new record low of euro0.26. Allied Irish Banks fell 22 percent to euro0.32, while Irish Life & Permanent — Ireland's only bank yet to receive a state bailout — shed 9 percent to euro0.77.

Irish premier faces party rebels, crafts deep cuts

DUBLIN — Ireland has formally applied for a bailout from the European Union and the International Monetary Fund, Brian Lenihan, the country’s finance minister, said Sunday.

Speaking on Ireland’s RTE radio, Mr. Lenihan said the application would be approved at a cabinet meeting later Sunday in Dublin.

The bailout would be in the tens of billions of euros, he said, adding that the final figure was subject to further negotiations. Analysts and politicians have suggested that the size of the package may well approach €80 billion, or $109 billion.

Perhaps €15 billion would be set aside in a fund to support the country’s troubled banks, which have been hemorrhaging deposits. Another €60 billion or so would be allocated to Ireland itself so as to give it the flexibility of staying out of the bond markets.

Prime Minister Brian Cowen said Saturday that borrowing at 8 percent was “prohibitive” for Ireland, so it seems likely that the government will follow Greece’s approach and secure a bailout package that would free the country from dependance on the bond markets.

The Irish cabinet began meeting at 3 p.m. Sunday and was expected to make an announcement at 7 p.m.

What remains unclear are what kind of conditions the I.M.F. and the Europe Union would impose on Ireland in exchange for a bailout. Mr. Cowen has already said Ireland was already putting an adequate budget-cutting plan in place, but given the size of the bailout being discussed, it would be surprising if E.U. and I.M.F. officials did not demand more cuts, accompanied by tax increases.

“There will be a lot of pain for the taxpayer and a lot of people will lose their jobs,” said Michael Noonan, the chief economic spokesman for Fine Gael, the main opposition party.

In particular, analysts and opposition politicians say that the fear is that unless some aid package from Europe and the International Monetary Fund was put forward soon, an already worrying erosion of bank deposits might become more serious.

According to data from the Irish Central Bank and the European Central Bank, the six troubled Irish banks have markedly increased their reliance on outside funds in order to compensate for a wave of deposit withdrawals that have picked in the last week

E.C.B. data shows that €130 billion in outside funding have been funneled to Irish banks, with €95 billion being directed to the large locally based banks. These banks are now wholly dependent on Europe for their survival, running up loan-to-deposit ratios that now exceed 160 percent, above and beyond prudential banking guidelines guaranteed payday loans.

On Nov. 12, the Bank of Ireland reported that its outside borrowings had increased by €12 billion, or 11 percent of its assets. And on Nov. 19, Allied Irish Bank reported that its extra borrowings were €27 billion, or 16 percent of its balance sheet.

Barclays Capital estimates that €28 billion in extra funding is going to Anglo Irish, the troubled real estate lender that has chalked up more than €30 billion in failed loans.

Anglo Irish has been fully nationalized and the government has pinned the blame for much of Ireland’s troubles on it. Evidence now that deposit flight is gaining speed at Allied Irish and Bank of Ireland comes as another blow to the Irish authorities and has made the banks a higher priority than finalizing the government’s four-year budget plan.

People who have been briefed on the discussions now say that the bank problem will be the main issue for discussion at the cabinet meeting Sunday, and that the executives of the Irish banks have been told to stand ready in case extraordinary actions are taken.

What a bank rescue plan would look like is unclear.

Prime Minister Brian Cowen said Saturday that some form of a contingency fund was likely. Now, it would seem that the main aim of the fund would be to either sink further amounts of capital into the banks. A more radical option would involve forced mergers, a “fire sale” of one or more banks to an outside investor, or both.

Some analysts feel that the extent of the bank losses has been overstated. Goldman Sachs issued a much remarked upon report last week which said that NAMA, the government body responsible for buying the band loans from the Irish banks, had overestimated their losses.

“That is the first time anyone has said that,” said John Fitzgerald, an economist at the Economic and Social Research Institute in Dublin.

All the same, as the negotiations continue, Dubliners, who are now well into the country’s third consecutive year of negative economic growth, are calling for some form of action to restore calm.

“If I had a lump sum of money now, I would be very nervous about putting it in an Irish bank,” said Brian Kavanagh a 60-year-old cab driver. “There is just no confidence in the banking sector here.”

Stephen Castle contributed reporting from London.

Ireland Asks for Aid From Europe, Minister Says

HONG KONG (MarketWatch) –- Is China about to lift interest rates when almost everyone is on watch for just such a move? At least one analyst sees a 50-50 chance for a rate-hike this weekend.

The People’s Bank of China has a track record of doing the opposite of what’s expected. Its quarter-point hike to lending and deposit rates — announced on a Tuesday evening in mid-October, the first such move in nearly three years — took markets by surprise. And so did the PBOC’s increase to major banks’ reserve ratio requirement earlier this month.

Officials in Hong Kong respond to the region's first case of the bird flu virus since 2003, diagnosed in a 59-year-old woman. Video courtesy of Reuters.

This time, however, Standard Chartered economist Stephen Green says the PBOC might have to act in line with what everyone’s expecting, as it coordinates policy with efforts to talk down inflation expectations.

“Expectations of further rate hikes are widespread and could happen at any time,” said Green in Shanghai.

Green, who expects another rate hike this year, followed by three in the first half of next year, assigns a 50% probability of the move taking place this weekend, citing what he says is a growing sense of urgency among Chinese officials.

“Inflation expectations are uppermost in the minds of the State Council,” Green said.

In a note Friday, Standard Chartered upwardly revised its forecast for gains in China’s consumer price index to 5.5% in 2011, from its earlier estimate of a 4% rise, mostly because of higher food prices fast cash.

October’s CPI showed a rise 4.4% from a year earlier, accelerating from 3.6% consumer inflation in September, the highest rate in 25 months.

Much of this was driven by higher prices for grains, vegetables and sugars, which — along with meats and edible oils — make up about 33% of the prices tracked within the CPI basket.

Data released by the Commerce Ministry earlier this week showed vegetable prices in major Chinese cities surged more than 60% in November from a year earlier, with ginger and garlic among those seeing the highest price gains.

Standard Chartered says food-price inflation will accelerate to 1.7% a month by February as the weather turns colder, then ease to around 0.5% in monthly price gains as the growing picks up.

Green says the inflationary pressures that have focused minds in Beijing is most likely the result of 2009’s massive 10 trillion yuan ($1.5 trillion) in bank lending, which helped spur a massive recovery in demand.

Meanwhile, Chinese officials have been more focused on globally loose monetary conditions, which are manifesting as imported inflation from surging inflows of speculative capital.

Expectations of an imminent interest rate hike by the PBOC weighed negatively on Chinese stocks early Friday, though the Shanghai Composite   managed to recover for a gain of 0.8% in late trading.

Emerging Markets Report: Even odds for weekend Chinese rate hike: analyst

The latest high-stakes maneuvering by Boeing and Airbus does not involve their top-of-the-line models, the 787 Dreamliner and the A380 jumbo jet, but instead their aging smaller workhorses.

The two companies have long been defined by their willingness to take big risks. But perhaps because of all the problems and costs involved with the bigger planes, they have turned more cautious in responding to pressure from the airlines to develop more fuel-efficient substitutes for their smaller planes, the 737 and A320.

Aviation experts say breakthroughs in engine technology offer a rare chance to re-engineer the two companies’ narrow 737s and A320s, which make up three-fourths of the fleets at the largest airlines. But while the new engines could save the airlines hundreds of millions of dollars a year, Airbus would have to invest $1.5 billion to $2 billion — and Boeing possibly twice that — to test and install them on the jets.

And that, both companies say, would force them to push back plans to design brand-new versions of the planes, which would eventually offer even greater cost savings.

James F. Albaugh, the chief executive of Boeing Commercial Airplanes, a unit of Boeing, said in an interview on Monday that his company was likely to hold off on the engine change and instead create a new plane by 2020.

Airbus officials said their top executives were divided about what to do and planned to decide soon. Most analysts say they think Airbus will install the new engines and streamline the A320 by 2015 to take sales from Boeing while it is working out its new design.

But with oil prices back above $80 a barrel, airline executives say that they had hoped to hear cheerier news about faster solutions.

The 737s and A320s, which each typically seat 150 to 180 people, have formed the backbone of the air travel system for decades. More than 10,000 of them shuttle passengers between major airports within the United States and other continents.

But in terms of fuel economy, “we haven’t seen substantial improvements since the 1990s,” said Michael G. Van de Ven, the chief operating officer of Southwest Airlines, one of Boeing’s biggest customers.

And with ticket prices rising, he said, “If there is one single thing that you can do to improve the economics in this industry, that is to introduce a new airplane.”

Boeing and Airbus say they are under too much financial strain, and their engineers too taxed, from delays on the larger planes to jump into designing a new jet, which could cost $7 billion to $10 billion.

Mr. Albaugh, the Boeing executive, said that given the choice of new engines in five years or a whole new plane in 10, most airlines would prefer to wait.

While the engines could help cut the operating costs for a new plane by 15 percent, he said, modifications and other costs in adding them to the 737s could reduce the total savings to less than 5 percent.

“A lot of people will say, ‘Yeah, go re-engine the plane,’ ” Mr. Albaugh said. “But the second question is, Would you buy it?”

Airbus could save even more in a plane’s total operating costs — analysts estimate 7 to 10 percent — by using the new engines and taking other steps to streamline the A320.

But top Airbus officials said last month that they were concerned about whether they had enough engineers to handle all the work in front of them. The companies’ ambivalence about installing new engines on the existing planes — which is essentially a stopgap measure — also illustrates how “the great Airbus-Boeing game is changing,” said Richard L. Aboulafia, vice president for analysis at the Teal Group, an aviation consulting firm in Fairfax, Va.

While dominating the market for large commercial planes over the last two decades, the two companies have loved nothing more than to leapfrog each other with bold technological advances low interest rate personal loans.

But even as the demand for new planes bounces back from the recession, both are finding themselves hamstrung by the need to solve their production problems, Mr. Aboulafia said.

Boeing is nearly three years late in delivering its most important plane, the 787 Dreamliner, the first jetliner made substantially of lightweight carbon composites that are also supposed to slash fuel costs. A fire on a test flight last week reinforced expectations among analysts for further delays in its first deliveries next year.

Airbus said last week that it was pushing the delivery date for the A350 XWB, its answer to the Dreamliner, to late 2013 from mid-2013. Airbus might have to make more changes in its A380 jumbo jet after debris spewed from an engine during a Qantas Airways flight on Nov. 4.

Boeing and Airbus also have to worry about new competitors from Canada, China and Russia. They are taking advantage of the new engine technologies, which can provide more thrust with less fuel, to design planes that could cut into the sales of 737s and A320s over the next few years.

The first plane maker to offer the new engines will be Bombardier of Canada, which is designing jets that could carry 100 to 130 passengers. It estimates that by combining the new engines with lightweight composite wings, it could cut operating costs by 15 percent from today’s levels.

Chinese and Russian companies are designing planes that can seat at least 160 people. The Chinese firm, the Commercial Aircraft Corporation of China, announced on Tuesday that it had received the first orders for its plane.

Bombardier hopes to have its first jet ready by 2013, while the Chinese and Russian ventures are aiming for 2016.

But given the problems that Boeing and Airbus have had in building new planes, analysts say, those delivery dates could easily slip. And some of the newcomers may find that it is harder than they think to build quality planes.

“I don’t think that all the people who have aspirations will be successful,” Mr. Albaugh, the Boeing executive, said. “But I think that one or two of them possibly could.”

Boeing and Airbus recently stepped up production of the 737s and the A320s, both to generate cash and to meet as much of the demand as they can.

Southwest Airlines, Ryanair and Delta Air Lines have all spoken publicly in favor of re-engined aircraft. But unless a consensus emerges behind that option, Mr. Albaugh said, Boeing plans to continue with more incremental changes that could save an extra 2 percent in operating the 737.

Airbus officials said their marketing executives wanted to go ahead with the new engine if the questions about engineering resources could be resolved. Mr. Aboulafia, the Teal Group analyst, said Airbus “could be losing an opportunity” if it did not install the new engines on the A320.

He said the A320 was not as fuel-efficient now as the 737, and the new engines could tilt that equation in Airbus’s favor. Airbus, he said, could then take a significant number of sales from Boeing before Boeing’s new single-aisle plane entered the market by the end of the decade.

Mr. Aboulafia added that Airbus also faced a slightly bigger threat in the short run from the new firms entering the market, with both Bombardier and the Chinese company aiming mostly at Airbus customers for their initial orders.

“They have a carrot and a stick,” Mr. Aboulafia said, referring to Airbus officials. “And they’re just sitting there, not grabbing the carrot and being hit by the stick.”

Boeing and Airbus Waver on Reworking Planes

WASHINGTON (Reuters) – The United States must move to rein in its massive budget deficits or it faces the risk of a bond market crisis, former Federal Reserve Chairman Alan Greenspan said on Sunday.

"We&&9;ve got to resolve this issue before it gets forced upon us," Greenspan said of the ballooning U.S. debt levels.

He spoke as a panel, chaired by former White House chief of staff Erskine Bowles and former Senator Alan Simpson, is due to deliver a report on debt and deficits by December 1.

A draft report made public last week offered a series of politically tough tax and spending choices that would seek to reduce the debt by &&6;4 trillion by 2020.

The suggestions received a lukewarm reception from some politicians and outright condemnation by others, including House of Representatives Speaker Nancy Pelosi, who pronounced the ideas "simply unacceptable."

Greenspan, who spoke on NBC&&9;s "Meet the Press," said he believed "something equivalent" to what Bowles and Simpson recommended would eventually be approved by Congress high quality business cards.

"The only question is, is it before or after a bond market crisis? Because there&&9;s no alternative," he said.

He said the deficit, which hit &&6;1.3 trillion this year, may begin to frighten the bond market, which could undermine the recovery and push the economy back into recession.

"The big, serious problem is whether or not the outlook for the longer-term deficit spooks the bond market to a point where long-term interest and mortgage rates move up very sharply," said Greenspan. "If that happens, that will cause the double dip."

Greenspan caused a stir last week when he said in a Financial Times column that Washington was pursuing a policy of weakening the dollar, prompting Treasury Secretary Timothy Geithner to insist that the United States would never deliberately weaken its currency.

(Reporting by Caren Bohan and Richard Cowan)

Greenspan: High deficits could spark bond crisis

NEW YORK (Reuters) – Investors have put in orders for &&6;60 billion of common stock in General Motors Co&&9;s initial public offering as of Friday, six times the amount being offered, three people familiar with the matter said.

Investor demand for GM&&9;s common shares is still rising, the sources said. GM filed with U.S. regulators for the sale of only about &&6;10 billion worth of common stock.

There is also "excess demand" for the &&6;3 billion worth of preferred shares GM plans to sell, the sources said.

The robust demand suggests that GM&&9;s IPO will likely price around the top end of the &&6;26 to &&6;29 per share range and that the full overallotment option -- additional shares underwriters can sell to help stabilize the stock after it begins trading -- will be exercised, the sources said.

The full overallotment could take the total IPO amount to as much as &&6;15.65 billion including both common and preferred shares, making it the second-biggest U.S. IPO ever, after Visa Inc.

It would also cut the U.S. Treasury&&9;s stake to just over 40 percent. The Treasury currently owns 60.8 percent of GM common stock as a result of the automaker&&9;s &&6;50 billion bailout.

GM is still accepting investor orders for shares in the IPO and is not expected to close the order books until early next week, the sources said.

The sources did not have permission to speak publicly and declined to be named.

Dan Cheng, a consultant at A.T. Kearney, said GM&&9;s reception could show that investors are more confident that the auto industry has come through the crisis of the past two years with sharply lower costs and higher profit potential.

"There&&9;s already a tremendous amount of interest because (GM) restructured themselves completely," said Mirko Mikelic, a fixed-income portfolio manager at Fifth Third Asset Management, who plans to buy GM&&9;s preferred shares poor credit personal loans.

ASIA, MIDDLE EAST BUY

GM is in the final stage of talks to sell equity to Chinese partner SAIC Motor Corp as part of the IPO and is likely to reach an agreement over the weekend, three sources said. The stake is expected to be less than &&6;2 billion, two of the sources said.

Middle Eastern and Asian sovereign wealth funds have also committed to a combined &&6;2 billion stake, the sources said.

In October, GM held meetings with Singapore-based GIC and Temasek Holdings, Kuwait Investment Authority, Qatar Investment Authority and the Abu Dhabi Investment Authority as a precursor to the funds potentially buying into its IPO.

While selling a big chunk of shares to overseas state-backed investors such as SAIC could trigger a political backlash, GM&&9;s advisers and underwriters have argued those investors could help provide long-term stability to the price of GM&&9;s stock.

Retail investors are expected to account for about 20 percent of the IPO, two sources said. There is currently retail demand for &&6;2 billion to &&6;3 billion worth of shares, one source said.

GM was initially planning to allocate as much as 30 percent of the IPO shares to retail investors but shifted some of that allocation to institutional investors, one source said.

"I think at &&6;26 to &&6;29 the shares look very cheap. I would not be surprised to see the final pricing come up a little bit. My own valuation is currently &&6;44 per share," said David Whiston, an analyst at Morningstar.

(Reporting by Clare Baldwin and Soyoung Kim in New York and Philipp Halstrick in Frankfurt and Kevin Krolicki in Detroit, editing by Matthew Lewis and Gerald E. McCormick)

GM has orders for $60 billion in stock: sources

MADRID (MarketWatch) — European stock markets fell on Wednesday, as investors cashed in on some of the prior day’s strong gains, with losses led by France’s Natixis, tumbling after disappointing results.

The Stoxx Europe 600 index  fell 0.2% to 272.78.

Currency traders will listen closely for signs that the Group of 20 nations will counter soaring currencies with protectionist measures, which could hurt global growth, says portfolio manager Axel Merk. MarketWatch's Laura Mandaro reports.

The index gained 0.6% on Tuesday to end at 273.46, marking a new 2010 closing high and the highest closing value since September 2008.

Investors were also warily eyeing the start of a Group of 20 meeting in Seoul, South Korea.

Disappointing results from a couple of banks in Europe weighed on the sector, dragging the Stoxx 600 south.

Shares of Italy’s UniCredit SpA  fell 2% in Milan. Third-quarter net profit fell 15% as net interest income dropped and trading was weaker, according to Dow Jones Newswires.

In Paris, shares of French investment bank Natixis SA   tumbled 7.4%. Third-quarter earnings released after the market close Tuesday fell short of analyst forecasts. The group said net profit fell 16% and net revenue was off 4%.

Also on the downside in Paris, shares of Credit Agricole SA  were off 2.8% ahead of results due later.

The CAC-40 index  slipped 0.4% to 3,928.24.

Among the gainers, shares of Veolia Environnement SA    gained 2.2% after the group’s 9-month results pleased analysts no teletrack payday loan. The French utility said nine-month adjusted operating profit rose 4.7% on 0.8% higher revenue and confirmed full-year guidance.

Also within utilities, Electricite de France SA  rose 2.4%.

The German DAX 30 index  fell 0.3% to 6,768.89, a day after marking a new 2010 closing high and a new 52-week high. Keeping pace with losses for other European banks, Deutsche Bank AG   fell 1.8%.

Auto stocks were also weaker across the board, with shares of BMW AG  down 1.5% and Volkswagen AG  off 1.4%.

On the upside, shares of utility giant E.On AG  jumped nearly 4%. The company said it would seek to divest all or part of certain businesses to help further reduce debt. It swung to a third-quarter loss and cited tough markets in Spain, Italy and France, though improving markets in Germany.

In London, the FTSE 100 index  fell 0.3% to 5,857.35, chiefly weighed by shares of miners, coming off after strong gains in the prior session.

Shares of J Sainsbury PLC  fell 2% after the U.K. supermarket chain said it expects the economic environment to remain challenging in the second half of the fiscal year. It also reported a fiscal first-half profit rise.

Shares of Belgian food retailer Delhaize Group  rallied more than 5% after it reported a rise in third-quarter profit and confirmed guidance for 2010.

Europe Markets: Europe stocks drop, led by France’s Natixis

LONDON (MarketWatch) — Rolls-Royce Group PLC shares hogged the limelight again in London Monday, extending last week’s sharp decline, after Australian airline Qantas Airways Ltd. discovered more problems with the British company’s engines in its A380 fleet.

Meanwhile the FTSE 100 index , which fluctuated between gains and losses all morning, was last down 0.3%, at 5,856.64.

The index closed at a 29-month high on Friday, helped by news that the U.S. Federal Reserve would pump more money into the U.S. economy over the next few months.

“After the aggressive gains of late last week, equity markets are pausing for a breath for the time being and traders are resisting the temptation to start booking profits,” Anthony Grech, head of research at IG Index, said in emailed comments.

Global Dow

Rolls-Royce was initially the top decliner on the U.K. benchmark, losing nearly 5%, but it later pared losses to less than 1%.

Qantas  on Monday said it will suspend all A380s flights for a further three days after finding more problems with the Rolls-Royce engines powering the fleet. Engine failure forced one of Qantas’ A380s to make an emergency lending in Singapore last week.

Rolls-Royce Monday announced a $350 million maintenance contract for 12 Airbus A330s owned by Egyptair.

In a broadly lower energy sector, shares of Royal Dutch Shell PLC  declined 0 cash till payday.7%. The oil major said it’s selling a 10% stake in Australia’s Woodside Petroleum  for $3.3 billion. Shell will hang on to its remaining 24% stake in the company for at least a year.

Still in the commodities sector, miner African Barrick Gold PLC  lost 2.7% after it was downgraded to sell from neutral at Goldman Sachs Group Inc. on fears output may disappoint in the short term.

In the pay-television business, shares of British Sky Broadcasting Group PLC  rose 1.5% after the company said it’s reached its long-standing goal of 10 million TV customers. News Corp. , which owns around 39% of BSkyB, is the parent company of MarketWatch, the publisher of this report.

Outside of the top index, shares of fund manager Gartmore Group Ltd.  took a battering, down 17%, after the company announced a strategic review and said its star manager, Roger Guy, will step down from day-to-day fund management.

The news comes just four months after the departure of Gartmore’s other star fund manager, Guillaume Rambourg, who left after becoming embroiled in a misconduct investigation.

“This is a business that can unravel pretty quickly. There is a general feeling that money is going to come out of the funds as key people leave. I’d be nervous about holding that stock,” said Paul Kavanagh, partner at Kilik & Co.

Gartmore said it has appointed Goldman Sachs to evaluate its strategic options, which could include a sale or a merger of the business.

London Markets: Rolls-Royce shares decline; London slips

CHICAGO (MarketWatch) — Zenyatta, the mare whose quest for a record-breaking 20-win and undefeated career captured the imagination of horse-racing fans around the world, fell a head short in her bid for perfection Saturday, losing the Breeders’s Cup Classic to a colt named Blame at Churchill Downs in Louisville, Ky.

Zenyatta, far behind at the back of the pack in the early stages of the 1 ¼-mile race, made a furious run down the stretch of the historic race track but could not catch Blame, a four-year-old colt trained by Albert Stall and ridden by Garrett Gomez. The third choice in the betting, Blame paid $12.40 for the win.

Zenyatta was seeking to become the first horse in modern history to win 20 races without a loss. She would have retired as one of the best thoroughbreds, male or female, of all time.

Zenyatta won the Classic last year, but that was on a synthetic surface at Santa Anita in Arcadia, Calif. The Churchill Downs surface is conventional dirt, which many tracks across the country have replaced due to safety concerns for the horses.

Zenyatta is a six-year-old mare owned by Jerry Moss and his wife Ann and trained by John Shirreffs. Hall of Fame jockey Mike Smith has ridden Zenyatta for 17 of her 20 races. Her bankroll coming into the Classic was $6.4 million. She will earn about another $1 million for the second-place finish in the $5 million race, making her the richest mare of all time.

While Zenyatta was the star of the Breeders’ Cup show, which drew nearly 115,000 fans over its two days of racing, another mare made history as well. Goldikova on Saturday became the first three-time winner in the history of the Breeders’ Cup thoroughbred horse-racing championships, taking the turf Mile race for the third consecutive year.

The five-year-old’s winner’s share of the $2 million purse put her lifetime earnings over $6 million Payday advance. She won for the 15th time in 21 races for trainer Freddie Head and jockey Olivier Peslier. The 6-5 favorite paid $4.60 to win.

Goldikova has raced in France for much of her career and the three Breeders’ Cup appearances are her only U.S. races. No decision has been made on whether she will race next year, her connections said Saturday.

In other division-championship races Saturday:

Uncle Mo stamped himself as a 2011 Kentucky Derby contender with a convincing victory in the Juvenile. The son of Indian Charlie, trained by Todd Pletcher and ridden by J. R. Velazquez, paid $4.80 to win as the 7-5 favorite.

Dakota Phone won the Dirt Mile in a big upset, hitting the finish line a nose ahead of Morning Line. The five-year-old gelding was dismissed at 37-1, paying $77.40 to win.

Once again there was no Arc de Triomphe-Breeders’ Cup Turf double winner as morning-line favorite and Arc winner Workforce was scratched the morning of the race. Instead another European invader, Dangerous Midge, who passed on the Arc to focus on the Breeders’ Cup, stormed home to win the 1 ½-mile classic and pay $19.

Pluck, a two-year-old colt trained by Pletcher and ridden by Gomez, came from last to first to take the Juvenile Turf, paying $14.80 to win.

The Sprint went to Big Drama, a four-year-old colt winning for the ninth time in 16 starts and for the fifth time in six tries at the race’s six-furlong distance. Big Drama paid $12.40 to win.

The Turf Sprint, a five-furlong dash, went to Chamberlain Bridge, a six-year-old gelding trained by William Brett Calhoun and ridden by Jamie Theriot, the team that captured Friday’s Filly and Mare Sprint.

SportsWatch: Zenyatta falls a head short of perfection

Here is a summary of earnings reports for selected cable and satellite TV companies and what they reveal about the industry's prospects:

Oct. 21. AT&T Inc. said it added 236,000 subscribers to its U-Verse video service in the quarter, in line with the last two years. The phone company has been taking on cable companies, but doesn't plan to offer TV everywhere it offers landline phone service. It ended the quarter with 2.7 million video subscribers.

Oct. 22: Verizon Communications Inc. said added 204,000 FiOS TV subscribers. It's a slowdown compared with 2009, but Verizon now has more TV subscribers than Cablevision Systems Corp., the fifth-largest traditional cable company. Verizon ended the quarter with 3.3 million FiOS TV subscribers.

Oct. 27: Comcast Corp.'s loss of cable video subscribers took a big jump, with a net loss of 275,000 compared with 132,000 a year ago. Comcast attributed much of the loss to customers who had taken advantage of low introductory rates that the company was offering last year during the transition to digital broadcast signals. Comcast is gaining from higher fees, as subscribers took advantage of pricier high-definition video and digital video recorder service. Comcast ended the quarter with 22.9 million video subscribers.

Wednesday: Charter Communications Inc easy payday loans. lost 63,800 video subscribers to end the quarter at 4.7 million.

Thursday: Time Warner Cable Inc. says it lost 155,000 video subscribers in the latest quarter to end with 12.6 million, compared with 64,000 a year ago, when the economy was worse. Cable TV providers usually compensate by upgrading basic subscribers to more expensive digital tiers, as well as adding broadband and phone subscribers. However, Time Warner Cable lost digital video subscribers and added a record-low 22,000 phone subscribers, meaning it lost overall "revenue-generating units," an important measure in the industry.

Cablevision Systems Corp. says it lost 24,500 video subscribers to end the quarter at 3.04 million. It added record-low number of new phone and broadband subscribers. Like Time Warner Cable, Cablevision lost digital video subscribers.

Satellite TV operator DirecTV says its "free HD" promotion helped bring in new customers and reduce cancellations. DirecTV picked up 174,000 subscribers in the U.S. to end the quarter at 18.9 million.

Among pay TV companies' earnings coming up:

Friday: Dish Network Corp.

A look at cable, satellite TV earnings reports

BANGKOK – Oil prices rose above $83 a barrel Tuesday in Asia as stronger manufacturing in the world's two biggest economies — the U.S. and China — boosted optimism that demand for crude will improve.

Benchmark oil for December delivery was up 35 cents at $83.30 a barrel at late morning Bangkok time in electronic trading on the New York Mercantile Exchange. The contract jumped $1.52 to settle at $82.95 on Monday.

Oil traders were more optimistic after two U.S. reports showed improvement in the manufacturing sector and in construction spending. Both came shortly after China said its manufacturing activity had improved.

The Institute for Supply Management reported Monday that U.S. manufacturing activity expanded last month at the fastest pace since May. It credited an increase in new orders, particularly for autos and computers, as well as exports.

In addition, construction spending inched higher in September because of an increase in residential activity and government projects that helped offset weakness in commercial projects. Yet, it remained 34 percent below the 2006 peak when residential housing boomed paperless payday loans.

China said its purchasing managers index rose in October, a sign that its economic recovery remains intact.

The reports were released ahead of two key developments that could affect oil markets: Tuesday's midterm elections in the U.S. and Wednesday's decision from the Federal Reserve on economic stimulus programs.

Many analysts and traders think Fed policymakers will announce a Treasury bond buying program to pump money into the economy. That could push down the dollar which, in turn, would help support oil prices.

Because oil and other commodities are priced in dollars, a weaker dollar means they become more attractive to buyers using foreign currencies.

In other energy trading on the Nymex, heating oil was up 1 cent at $2.28 a gallon, gasoline gained 3 cents to $2.09 a gallon and natural gas fell 2 cents to $3.81 per 1,000 cubic feet.

In London, Brent crude rose 31 cents to $84.93 a barrel on the ICE Futures exchange.

Oil above $83 in Asia amid stronger manufacturing