PREVIEW-NFL-Texans' Schaub facing big test against Patriots

Jan 11 (Reuters) - Houston Texans quarterback Matt Schaub starts his first road playoff game, at the New England Patriots on Sunday, with the pressure on.
The Patriots, corning in from a bye week, loom as favorites in the American Football Conference (AFC) divisional round clash as they look to go one better than last season when they lost to the New York Giants in the Super Bowl.
New England crushed Houston 42-14 in week 14, a result which knocked the Texans off their perch and started a slump which also affected Schaub.
Although the Texans beat the Indianapolis Colts in week 15, they ended the regular season with successive losses and then were far from convincing in the 19-13 wild-card round win over the Cincinnati Bengals.
Schaub has thrown just one touchdown in those four games and has made three interceptions and given up 10 sacks.
The intense atmosphere of a road game in the playoffs will test all of the 31-year-old's character.
"I think he will be ready," said Texans wide receiver Andre Johnson.
"He's working his butt off like he's done every week. I think just getting his first (playoff) win probably got a monkey off his back because that is something people talked about," he said.
Schaub missed out on the playoffs last year due to injury but his opposite number Tom Brady has no shortage of post-season experience.
Brady has won 16 playoff games, a league record that he shares, for the moment, with Joe Montana.
He has also played in five Super Bowls, winning three of them, but he believes track records go out of the window when it comes to the playoffs.
"I played games early in my career when I had no experience and I did pretty well," he told reporters. "I think it always comes down to who is executing the best and not so much the experience."
The Texans must hope that their outstanding defensive end J.J. Watt can get to Brady and make life painfully uncomfortable.
"He's a force on every play, no matter what play you have called, he can run it," said Patriots head coach Bill Belch of Watt.
"He makes a lot of plays on the backside, disrupts the ball, strip-sacks, causes fumbles, batted balls. He's an excellent pass rusher, quick and powerful.

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Texans' Schaub facing big test against Patriots

(Reuters) - Houston Texans quarterback Matt Schaub starts his first road playoff game, at the New England Patriots on Sunday, with the pressure on.
The Patriots, corning in from a bye week, loom as favorites in the American Football Conference (AFC) divisional round clash as they look to go one better than last season when they lost to the New York Giants in the Super Bowl.
New England crushed Houston 42-14 in week 14, a result which knocked the Texans off their perch and started a slump which also affected Schaub.
Although the Texans beat the Indianapolis Colts in week 15, they ended the regular season with successive losses and then were far from convincing in the 19-13 wild-card round win over the Cincinnati Bengals.
Schaub has thrown just one touchdown in those four games and has made three interceptions and given up 10 sacks.
The intense atmosphere of a road game in the playoffs will test all of the 31-year-old's character.
"I think he will be ready," said Texans wide receiver Andre Johnson.
"He's working his butt off like he's done every week. I think just getting his first (playoff) win probably got a monkey off his back because that is something people talked about," he said.
Schaub missed out on the playoffs last year due to injury but his opposite number Tom Brady has no shortage of post-season experience.
Brady has won 16 playoff games, a league record that he shares, for the moment, with Joe Montana.
He has also played in five Super Bowls, winning three of them, but he believes track records go out of the window when it comes to the playoffs.
"I played games early in my career when I had no experience and I did pretty well," he told reporters. "I think it always comes down to who is executing the best and not so much the experience."
The Texans must hope that their outstanding defensive end J.J. Watt can get to Brady and make life painfully uncomfortable.
"He's a force on every play, no matter what play you have called, he can run it," said Patriots head coach Bill Belch of Watt.
"He makes a lot of plays on the backside, disrupts the ball, strip-sacks, causes fumbles, batted balls. He's an excellent pass rusher, quick and powerful.
"He is a tough match-up with good technique, well coached and he plays hard. He's a factor on every play.

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Chiefs announce coordinators, assistant coaches

KANSAS CITY, Mo. (AP) — Andy Reid is wasting about as much time putting together his first coaching staff in Kansas City as he did in finding his new job.
The Chiefs coach announced Friday that former Eagles coach Doug Pederson would be his offensive coordinator and longtime Jets assistant Bob Sutton the defensive coordinator, along with the majority of the staff Reid hopes will turn around a 2-14 franchise.
The moves come one week after Reid was hired by the Chiefs to replace the fired Romeo Crennel, and less than two weeks after he was dismissed following 14 seasons with the Eagles.
Reid announced that Matt Nagy will coach the Chiefs' quarterbacks after two seasons as the Eagles' offensive quality control coach. Eric Bieniemy will work with running backs, Tom Melvin the tight ends, and David Culley will be an assistant head coach and work with wide receivers.
Reid has not announced an offensive line coach. Tommy Brasher will work with the defensive line, but Reid has not announced coaches for linebackers, defensive backs or special teams.
"I'm pleased we were able to get all of these coaches on board," Reid said. "I have relationships with each of them, and I know their past experiences, work ethics and coaching styles. These are high-character coaches, and each one brings something different to the table."
Pederson spent 12 seasons playing quarterback in the NFL, most of them with Green Bay. But he started the first part of the 1999 season for Philadelphia, when Reid has just been hired. He then helped tutor Donovan McNabb, the Eagles' second overall pick in the draft.
Pederson retired in 2004 and began his coaching career, spending two years as Reid's quality control coach and the past two seasons working with the Eagles' quarterbacks.
"Doug has been around the game a long time, and he has great vision," Reid said. "As a former player in this league, he sees the game from a different perspective, and that will be a great benefit for our players. He has a knack for developing talent."
Pederson will inherit an offense that was among the NFL's worst last season with quarterbacks Matt Cassel and Brady Quinn. Pederson and Reid both said they'll examine the QB options already on the roster, but they'll also consider free agency, the trade market and using their No. 1 pick in the draft on upgrading the position.
"It's something I've studied the last few days, ever since Coach Reid and I talked about coming in," Pederson said on a conference call with reporters.
"It's a very talented group. It could be an explosive group," he said. "There's some weapons there on offense. Very similar to the circumstances we had this past year in Philadelphia."
Sutton will take over a defense that fared only slightly better than the Chiefs' offense.
A longtime college coach, Sutton spent nine seasons as the coach of Army before spending the past 13 seasons with the Jets. He was their linebackers coach from 2000-05, defensive coordinator for three years and senior defensive assistant and linebackers coach for two years. He spent the past season as Rex Ryan's assistant head coach.
"Bob is a creative coach that is going to give our defense a variety of looks and packages," Reid said. "He has a lot of experience and is well respected across the league."
Bieniemy has spent the past two seasons as offensive coordinator at his alma mater, Colorado. Melvin, Culley and Brasher all spent time with Reid in Philadelphia.
Reid also announced that Barry Rubin would serve as the Chiefs' head strength coach and Travis Crittenden would be his assistant. Reid's son, Britt Reid, and Corey Matthaei will be in charge of quality control, and Mike Frazier will be their statistical analysis coordinator.

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Analysis: In battle for the car, Sirius faces fight from Pandora

NEW YORK (Reuters) - Sirius XM Radio Inc's grip on drivers is under an increasing threat as the availability of Internet connections in more cars is helping Pandora Media Inc counter some of its rival's big selling points.
In a sign of how important drivers are to the two companies, each of their top executives made the trek to Las Vegas this week to court automakers at the annual Consumer Electronics Show.
Sirius XM, which has its satellite radios in 70 percent of new vehicles, generates the vast majority of its revenue through subscriptions and derives only a fraction from advertising dollars. Streaming service Pandora is just the opposite, collecting most of its revenue from advertising and operating only a nascent subscription business.
Right now, Sirius XM is the much bigger company, with almost 24 million subscribers and more than $3 billion in annual revenue. In the third quarter, it generated average revenue of $12.14 per subscriber.
Pandora, by contrast has 60 million users, about 1 million of whom are paid subscribers, and is on track to generate $424 million in revenue this year.
But the migration of music audiences to mobile devices threatens to upend a market that Sirius current dominates. The key to both companies' futures rests on winning the battle for the listener on the go, particularly people traveling by car.
With its presence in new vehicles, Sirius XM has a first-mover advantage over Pandora. But Pandora is making a huge push to get into the car, a move that dovetails with ubiquitous wireless access that makes it easier to listen to its service.
"Internet-enabled radio in the car has already begun," Pandora Chief Executive Officer Joe Kennedy said in an interview. "It will grow as a snowball, initially small but growing exponentially."
Sirius XM declined to make its executives available for interviews.
Of Pandora's 60 million total listeners, 77 percent have tuned in with a mobile device. The problem is, the revenue per 1,000 listener hours on mobile was only $26.96 in the third quarter, up from $23.60 a year earlier, but still less than half of the $56.40 the company generated from other listeners.
"They do have to continue their mobile monetization," said Cowen and Co analyst John Blackledge, who has a "neutral" rating on the stock.
Kennedy called the third quarter a "key milestone" since the mobile revenue increase outpaced mobile usage growth.
At Sirius XM, executives have said its customers are increasingly listening to its service on mobile devices, but it has never broken out figures on that usage. It costs Sirius XM car subscribers an extra $3.50 a month to stream the service over the Internet on devices.
"They don't really promote it, and it's not really a cornerstone of the product," Gabelli & Co analyst Brett Harriss said.
Sirius XM Chief Financial Officer David Frear said at an investor conference on Wednesday that the strategy was "to capture you in the car and then allow you to extend to other platforms."
DASH FOR THE DASHBOARD
While Sirius XM touts the ability of its satellites to deliver a strong signal and high audio quality, the importance of those attributes is likely to fade because of the widespread availability of faster and better Internet connections in cars.
"From the consumer standpoint, the reception advantages of satellite radio will be marginalized or go away over time," said a former Sirius XM executive familiar with the business models of the company and its competitors.
Indeed, Liberty Media Corp, which ranks as Sirius XM's largest shareholder and is close to gaining operating control of the company, has criticized its former longtime CEO, Mel Karmazin, for not adapting to changing technologies fast enough.
Critics say Sirius XM has relied too heavily on its position in the auto market and perceived programming advantage. About 50 million cars in the United States come equipped with the satellite radios, with just under half of their owners actually subscribing to the service.
For its part, Pandora is available in just 75 vehicle models, although it also has deals with automakers like General Motors Co, Ford Motor Co, BMW and most recently Chrysler Group LLC that allow drivers to plug in their Pandora-enabled mobile devices and use the car's dashboard to control the service.
More than 1 million people have used Pandora's dashboard integration, Pandora said.
Sirius XM also believes it has an edge with its programming from the likes of shock jock Howard Stern, talk show host Oprah Winfrey and major sports leagues. Access to this type of content, Sirius contends, justifies the subscription cost of at least $14.49 per month.
In the first three quarters of the year, Sirius XM's programming and content costs were $205.2 million, while it paid $409.4 million in revenue sharing and royalties, the company has reported. This represents roughly 25 percent of its revenue in the period.
On the other hand, Pandora spends roughly 55 percent its revenue on acquiring music.
"Having music is an important thing, but having the diversity of the content, the music, the news, the talk and the entertainment content is really what sets us apart," Sirius XM CFO Frear said at a December 3 investor conference.
But as Internet access becomes more readily available in cars, people will be able to listen to podcasts and other content.
"The value of commercial-free music on Sirius could decrease," said Gabelli analyst Harriss. "There is no doubt competition from Pandora will increase in the next two or three years."
RIHANNA VS. PANDORA
Still, Sirius XM has an unlikely ally in its battle with streaming music services: the U.S. government.
As it stands, Pandora and other streaming music services pay a much bigger percentage of revenue to license songs than Sirius XM does. Plus, the more popular these services become, the more they have to shell out for music royalties.
Based on rules that U.S. lawmakers set under the Digital Millennium Copyright Act, Pandora pays more than 50 percent of its revenue to an agency called SoundExchange to license songs on a per-performance basis.
Sirius XM pays 8 percent of its revenue for song licensing, and that will increase to just 11 percent by 2017 under a new deal struck with regulators. Traditional radio pays nothing at all to SoundExchange, although it pays composers to air their music.
Pandora and its brethren are pushing for changes in how royalties for online radio are collected and are backing the Internet Radio Fairness Act, a bill that would change regulation of royalties.
But they are up against big stars like Billy Joel, Rihanna and Missy Elliott, who are opposed to the bill because they believe their royalties would be cut drastically.
"Music is a poisonous area of investment because the royalty structures are so out of whack, it's impossible to be profitable," said David Packman, a veteran of the music industry and partner in venture capital firm Venrock.

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CES 2013: Shhh, don’t tell, but Las Vegas likes secrets, even at a trade show

LAS VEGAS—In a leather banquette in a sparkling Las Vegas club, a knockout blonde discreetly kicked the Louis Vuitton bag at her feet.
“It’s in there,” she whispered to me, conspiratorially. I followed this dame’s fishnet-clad legs down to her shoe’s pointed toe. Beautiful bag. “I call it the football,” she said. “I’m not going to bring it out yet.”
Leslie Bradshaw’s honey-colored Cali perfection brings to mind a young Cheryl Tiegs, but tonight she’s gone for broke in showgirl makeup, smoky eyes and red lipstick. I love her on sight.
'Til this moment on Wednesday night I knew only of Leslie, the co-founder and chief operating officer of JESS3, a brilliant and profitable data-visualization firm. I knew her from Twitter and tech blogs and magazines, where she’s forever featured as a top everything—woman, entrepreneur, kid genius—under 30. (She’s now 30.)
And now Leslie Bradshaw was hiding something. A new drug? A lap-dance voucher? We are in Vegas, after all.
But we’re here for the Consumer Electronics Show, the annual jamboree for the debut of new gadgets. Anyone with something to flog is flogging with gusto. Leslie is a cooler customer, raised on the idea of discretion when it comes to startups and venture capital. She’s not being a demented Qualcomm freak and overhyping stuff in a loony-bin, tone-deaf, tradeshow way. It’s all about stealth with her. A little film noir. The “football” in Leslie’s logo-spangled bag is the prototype for her latest venture.
At CES, the bellisima Leslie is not the only entrepreneur with something up her sleeveless sleeve. At the Las Vegas Convention Center, amid the neurotoxic audiovisuals of this vast trade show, I ran into two others—Sonaar Luthra, a TED global fellow, and Sarah Szalavitz, the ingenious philosopher queen of 7 Robot and the MIT Media Lab—who were keeping their most recent initiatives under wraps.
If you don’t pay up for a kissing booth or a speaking part at CES, as Qualcomm (disastrously) did this year, you mostly just stroll the floors testing stuff, exchanging gossip and being surprisingly generous about what looks cool. At nightfall you find friends and meet their friends. Cards are exchanged. Disorientation and dehydration are collectively experienced. Soft rock played loudly is heard; the clamor of slot machines and spastic LED light schemes are brooked. Oxygenated nicotine air is breathed.
It’s not bad for a day or two, but it’s extremely, extremely difficult to do business. You can’t be heard. You can’t find the right person to pitch, in a city where “adjacent” hotels can be a mile and a half apart. And there are no flat, vacant surfaces for showing off prototypes.
And that’s what Leslie Bradshaw meant. Though she doesn’t drink, or not much, she’s an expert cocktailer. She has a gift for making people feel comfortable, while also privately wowed. She could tell at a glance that the cocktail tables in front of us, jammed with cans of Red Bull and glasses of seltzer-lime on them, were not suitable for a full-dress presentation of her protoype. Which, I discovered later, is not a prototype at all—but a tablet cued up to demo the super-secret app she’s been working on, which launches on January 15.
I’ll say one thing I know about her elusive app: It transforms things into other things. Text into audio; audio into television. Text into television.
Sorry, folks. I can’t say more. Just as I can’t say more about Sonaar Luthra’s or Sarah Szalavitz’s projects, either. Though they might have something to do with Luthra’s inspiring Water Canary company, or Szalavitz’s seductive disbelief in “impossibility.”
But I promise that all three of these stealthy ideas are just as intriguing as the idea of stealth itself, right here at a circuslike trade show.

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Whitman says it will take five years to turn HP around

Whitman says it will take five years to turn HP around
To understand what an unholy mess HP (HPQ) is in right now, consider that CEO Meg Whitman says she needs more time to fix the company than she would have had to fix the entire California economy if she’d been elected governor. In a long Businessweek article about HP’s current turmoil, Whitman says that it will take her five years to execute her full plan to turn the company around. Whitman acknowledges that “some people don’t like that answer” when they ask her how long it will take, but she says it’s simply a reality at this point.
[More from BGR: ‘Apple is done’ and Surface tablet is cool, according to teens]
In the meantime, Whitman is trying to promote a new culture of thrift at the company by booting executives out of their plush office suites and forcing them to work in cubicles, Businessweek reports. Whitman tells the publication that she doesn’t want HP to be “a fancy pants kind of company” and that she aims to be more like the Marriott than the Four Seasons.
[More from BGR: Is BlackBerry back? Strong early BlackBerry 10 demand could signal RIM comeback]
Whitman also touches upon HP’s future plans for smartphones by saying the company will produce one in the future as soon as “we… figure out how to do it without losing a boatload of money.” And it’s not as though HP can simply acquire a struggling smartphone vendor like Nokia (NOK) or RIM (RIMM) at the moment since the company is woefully short on cash after writing off more than $17 billion last year related to past acquisitions.
But despite being completely clear-eyed about HP’s woes, Whitman still insists that she’s having more fun running the company than she’d had running for public office.
“Running for political office was the hardest thing I have ever done,” Whitman tells Businessweek. “When things seem challenging here, I go back to that.

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New York governor wants casinos to spur upstate economy

(Reuters) - New York Governor Andrew Cuomo proposed on Wednesday dozens of new initiatives for the state, including new casinos and other measures aimed at helping upstate areas regain their financial footing after decades of economic decline.
Cuomo, in his annual State of the State address, proposed locating up to three casinos upstate to increase tourism and provide some local property tax relief and education funds for struggling cities.
New York legislators agreed last year to legalize public casinos, saying they would amend the state constitution to expand gambling outside Native American resorts. They must still finalize the legislation.
Cuomo also said the state, with a population of nearly 20 million, would launch new marketing plans that include duty-free stores for New York-made products and a national white-water rafting competition.
Cuomo floated several ideas for supporting fledgling businesses, including the creation of a $50 million venture capital fund. He also proposed 10 high-tech incubator "hot spots" in which start-up companies would not have to pay business, property or sales taxes.
The plans were just a few of the dozens put forward by Cuomo in what he said was the most aggressive agenda he has proposed since taking office in January 2011. But he did not indicate in his speech how any of the proposed programs would be funded.
Speaking for more than an hour, Cuomo said he would focus on upgrading the state's fuel delivery system, subways, and other infrastructure to prevent multibillion-dollar damage from severe weather events like Superstorm Sandy, which slammed into the region on October 29.
He also proposed specific new restrictions on firearms in the wake of deadly shooting rampages in late 2012 in Newtown, Connecticut, and Webster, New York.
And he said the state's minimum wage should rise to $8.75 an hour from the current $7.25.
"We have daunting challenges," he said. "But these challenges also pose exciting opportunities."
Several of New York's local governments have faced severe financial struggles after the recession, including Nassau and Suffolk counties, both on Long Island to the east of New York City.
But several cities in the northern and western parts of the state, including Syracuse, Rochester and Buffalo, have been losing jobs for many years.
On Wednesday, Moody's Investors Service downgraded Niagara Falls to Baa1 from A2, warning that it could cut the credit rating further if the city loses a legal dispute with the Seneca Nation over gambling revenue.
Cuomo proposed creating a program that would advise local governments on how to restructure their finances.
The program would be run jointly by private consultants, the state's budget division, the attorney general and New York State Comptroller Thomas DiNapoli, whose program to monitor municipal fiscal distress went into effect this year.
He also said the state should consider spending $1 billion to create or preserve 14,000 units of affordable housing over the next five years.

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ECB to hold fire as euro zone economy shows glimmers of hope

FRANKFURT (Reuters) - The European Central Bank is expected to keep interest rates at a record low of 0.75 percent on Thursday, refraining from a cut as the euro zone economy shows some signs of stabilising and inflation still tops its target.
The 17-country euro zone is in recession, but recent data points to some stabilisation, and ECB President Mario Draghi could strike a slightly more positive tone in the news conference that follows the rate decision.
"Rates are definitely on hold. Nothing has been spectacular enough in recent data to force the ECB to any action," Deutsche Bank economist Gilles Moec said.
"There is a recession, but no further deterioration. Lending is weak, but also not deteriorating further, so the ECB is not compelled to act."
The 23-man Governing Council will find some comfort from improving business morale as well as a survey of purchasing managers, which gave tentative signs that the worst of the downturn may have passed.
"Since the December meeting key figures have generally surprised on the upside," Nordea analyst Anders Svendsen said in a note to investors.
While the ECB had, in Draghi's words, "a wide discussion" on reducing rates last month, the grounds for such a move have not grown and Executive Board members have argued against a cut.
Yves Mersch said last month he did not see the logic of a debate about the ECB cutting its main rate and Peter Praet said there was little room to cut.
Another cut of the refinancing rate would raise the question of whether the ECB would also lower its deposit rate - currently at zero - by the same amount, which would push it into negative territory, essentially charging a fee, for the first time.
Even though Draghi has said the bank was "operationally ready" for such a step, it has grown increasingly wary of the idea over the past couple of months, a source with knowledge of the ECB's thinking said.
Negative deposit rates could deal a hefty blow to money market funds, which have already seen cash outflows since the ECB cut the deposit rate to zero in July. The rate is a peg for short-dated money market rates and at zero it is already almost impossible for funds to generate a return for their investors.
Executive Board member Joerg Asmussen said last month he would be "very reluctant" about the ECB cutting the deposit rate any further, adding that "our (monetary) policy is very accommodative".
INFLATION STUBBORN
ECB staff projections published last month saw inflation at about 1.4 percent in 2014, which would usually justify another interest rate cut.
The central bank also sees inflation falling below 2 percent this year with underlying price pressures remaining moderate.
But inflation has eased more slowly than the ECB initially expected and as long as it misses the target - it has been above 2 percent for more than 2 years - a cut could be difficult to justify.
Furthermore, in the euro zone's largest economy, Germany, prices rose faster in December than in the previous month.
In addition to gauging whether the ECB is entertaining another cut or not, Draghi will be pressed on what other options the ECB has, especially to improve lacklustre bank lending.
ECB data showed last week that bank lending to the private sector fell at an annual rate of 0.8 percent in November.
At his December news conference, Draghi attributed the drop mainly to demand factors, but added that in a number of countries, credit supply is restricted.
A move by global regulators to give banks more time and flexibility to build up cash reserves is expected to do little to support a recovery in Europe, where recession-hit firms and households have scant appetite for more debt.
"One thing the ECB needs to engineer is recovery in lending," Rabobank economist Elwin de Groot said.

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Asia stocks rise on positive start to US earnings

BANGKOK (AP) — A positive start to U.S. corporate earnings season helped boost Asian stock markets Thursday.
Major regional benchmarks rose on the heels of a handful of better-than-expected results that also lifted Wall Street.
Consumer products maker Helen of Troy, whose brands include Dr. Scholl's and Vidal Sassoon, reported a 15 percent profit increase. Electronic payments processor Global Payments said its fiscal second-quarter earnings rose nearly 15 percent, beating Wall Street expectations.
After markets closed Tuesday, Alcoa Inc. predicted rising demand for its aluminum this year and topped revenue expectations for the fourth quarter. Earlier in the day, agricultural products giant Monsanto said its profit tripled and raised its guidance for 2013.
Japan's Nikkei 225 index rose 0.9 percent to 10,677.74. Hong Kong's Hang Seng gained 1 percent to 23,439.46. South Korea's Kospi added 0.7 percent to 2,005.39 and Australia's S&P/ASX 200 advanced 0.4 percent to 4,725.80.
The European Central Bank will meet later Thursday to set monetary policy for the 17 countries that use the euro. It is expected to keep its benchmark interest rate unchanged at the record low of 0.75 percent even though the eurozone economy as a whole is back in recession. Investors are also awaiting the release in the U.S. of weekly jobless claims.
On Wall Street, the Dow Jones industrial average rose 0.5 percent to close at 13,390.51 on Wednesday. The Standard & Poor's 500 rose 0.3 percent to 1,461.02. The Nasdaq composite index rose 0.5 percent to 3,105.81.
Benchmark crude oil contract for February delivery was up 33 cents to $93.44 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 5 cents to close at $93.10 per barrel on the Nymex on Wednesday.
In currencies, the euro fell to $1.3047 from $1.3053 while the dollar rose to 88.05 yen from 87.75 yen.

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Venezuela postpones inauguration for cancer-stricken Chavez

CARACAS (Reuters) - Venezuela will postpone the inauguration of President Hugo Chavez for a new term due to health problems, the government said on Tuesday, another sign the socialist leader's cancer may be bringing an end to his 14 years in power.
The 58-year-old former soldier who has dominated the South American OPEC nation since 1999 has not been heard from since surgery on December 11 in Cuba - his fourth operation since he was diagnosed with an undisclosed type of cancer in June 2011.
The announcement outraged opposition leaders who insist that Chavez must be sworn in before the National Assembly on January 10 as laid out in the constitution, or temporarily step aside and leave an ally in power.
"The commander president wants us to inform that, based on his medical team's recommendations, the post-operative recovery should extend past January 10," said Vice President Nicolas Maduro, Chavez's chosen successor, in a letter read to the legislature.
"As a result, he will not be able to be present at the National Assembly on that date."
The letter said authorities would seek another date for the inauguration ceremony but did not say when it would take place or give a time frame for Chavez's return from Havana.
Rather than being sworn in by the legislature, he would take his oath at a later date before the Supreme Court, the letter said, as allowed by the constitution.
Government leaders insist Chavez is completely fulfilling his duties as head of state, even though official medical bulletins say he has a severe pulmonary infection and has had trouble breathing.
The government has called for a massive rally outside the presidential palace on Thursday, and allied presidents including Uruguay's Jose Mujica and Bolivia's Evo Morales have confirmed they will visit Venezuela this week despite Chavez's absence.
Argentine President Cristina Fernandez has announced plans to visit Chavez in Havana on Friday.
But the unprecedented silence by the president - famous for regularly speaking for hours in meandering broadcasts - has left many convinced he could be in his last days.
His resignation or death would upend politics in the oil-rich nation, where he enjoys a deity-like status among poor supporters thankful for his social largesse.
His critics call him a fledgling dictator who has squandered billions of dollars from crude sales while dashing the independence of state institutions.
CONSTITUTION DISPUTE
The constitution does not specify what happens if the president does not take office on January 10.
The Supreme Court, controlled by Chavez allies, called a news conference for Wednesday. It is widely expected to announce an interpretation of the constitution that will give Chavez leeway to take office when he is fit to do so.
If he dies or steps aside, new elections would be called within 30 days. Before leaving for Havana in December, the president instructed his supporters to back Maduro in that vote if he were unable to continue.
Opposition leaders argue that Congress chief and Chavez ally Diosdado Cabello should take over, as mandated by the constitution if the president's absence is formally declared.
Cabello has ruled that out, saying the president continues to be in charge.
"Who could have believed the opposition would be screaming for Diosdado Cabello to be given the presidency of the republic?" he said during a rambunctious session of Congress. "That's crazy, the opposition is losing it."
Meanwhile opposition deputies accused the Socialist Party of failing to follow Chavez's instructions - a scene that would have been unimaginable before Chavez's prolonged absence.
"President Chavez is the only one among you who has spoken clearly," said opposition leader Julio Borges.
He was drowned out by pro-Chavez deputies clapping and chanting the socialist leader's name and rebuffed by Cabello, who had long been considered a potential successor to Chavez until he was passed over for Maduro.
"It's not my fault you weren't chosen, don't take your frustration out on me," Borges quipped.
Another opposition deputy complained that during the debate a copy of the constitution was thrown across the chamber from the direction of the Socialist Party's deputies.
Chavez's supporters have held near-daily vigils for his recovery, while opposition activists accuse the president's allies of a Cuban-inspired manipulation of the situation.
Maduro has taken over the day-to-day running of the government and looks set to continue in the role past Thursday.
The mustachioed former bus driver lacks Chavez's charisma, but he has sought to imitate the president's style with vituperative attacks on the opposition and televised ribbon-cutting ceremonies.
With the micro-managing Chavez away, major policy decisions in Venezuela, such as a widely expected devaluation of the bolivar currency, appear to be on hold.
Venezuelan bond prices, which had soared in recent weeks on Chavez's health woes, dipped on Monday and Tuesday as investors' expectations of a quick government change apparently dimmed.
"The 'regime change' euphoria seems excessive taking into account the unclear legal transition and perhaps, more importantly, the risk that regime change does not allow for policy change," New York-based Jefferies' managing director Siobhan Morden said in a note on the bonds.

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Officials: US may leave no troops in Afghanistan

WASHINGTON (AP) — The Obama administration gave the first explicit signal Tuesday that it might leave no troops in Afghanistan after December 2014, an option that defies the Pentagon's view that thousands of troops may be needed to keep a lid on al-Qaida and to strengthen Afghan forces.
"The U.S. does not have an inherent objective of 'X' number of troops in Afghanistan," said Ben Rhodes, a White House deputy national security adviser. "We have an objective of making sure there is no safe haven for al-Qaida in Afghanistan and making sure that the Afghan government has a security force that is sufficient to ensure the stability of the Afghan government."
The U.S. now has 66,000 troops in Afghanistan, down from a peak of about 100,000 as recently as 2010. The U.S. and its NATO allies agreed in November 2010 that they would withdraw all their combat troops by the end of 2014, but they have yet to decide what future missions will be necessary and how many troops they would require.
At stake is the risk of Afghanistan's collapse and a return to the chaos of the 1990s that enabled the Taliban to seize power and provide a haven for Osama bin Laden's al-Qaida network. Fewer than 100 al-Qaida fighters are believed to remain in Afghanistan, although a larger number are just across the border in Pakistani sanctuaries.
Defense Secretary Leon Panetta has said he foresees a need for a U.S. counterterrorism force in Afghanistan beyond 2014, plus a contingent to train Afghan forces. He is believed to favor an option that would keep about 9,000 troops in the country.
Administration officials in recent days have said they are considering a range of options for a residual U.S. troop presence of as few as 3,000 and as many as 15,000, with the number linked to a specific set of military-related missions like hunting down terrorists.
Asked in a conference call with reporters whether zero was now an option, Rhodes said, "That would be an option we would consider."
His statement could be interpreted as part of an administration negotiating strategy. On Friday Afghan President Hamid Karzai is scheduled to meet President Barack Obama at the White House to discuss ways of framing an enduring partnership beyond 2014.
The two are at odds on numerous issues, including a U.S. demand that any American troops who would remain in Afghanistan after the combat mission ends be granted immunity from prosecution under Afghan law. Karzai has resisted, while emphasizing his need for large-scale U.S. support to maintain an effective security force after 2014.
In announcing last month in Kabul that he had accepted Obama's invitation to visit this week, Karzai made plain his objectives.
"Give us a good army, a good air force and a capability to project Afghan interests in the region," Karzai said, and he would gladly reciprocate by easing the path to legal immunity for U.S. troops.
Karzai is scheduled to meet Thursday with Panetta at the Pentagon and with Secretary of State Hillary Rodham Clinton at the State Department.
Without explicitly mentioning immunity for U.S. troops, Obama's top White House military adviser on Afghanistan, Doug Lute, told reporters Tuesday that the Afghans will have to give the U.S. certain "authorities" if it wants U.S. troops to remain.
"As we know from our Iraq experience, if there are no authorities granted by the sovereign state, then there's not room for a follow-on U.S. military mission," Lute said. He was referring to 2011 negotiations with Iraq that ended with no agreement to grant legal immunity to U.S. troops who would have stayed to help train Iraqi forces. As a result, no U.S. troops remain in Iraq.
David Barno, a former commander of U.S. forces in Afghanistan and now a senior fellow at the Center for a New American Security, wrote earlier this week that vigorous debate has been under way inside the administration on a "minimalist approach" for post-2014 Afghanistan.
In an opinion piece for ForeignPolicy.com on Monday, Barno said the "zero option" was less than optimal but "not necessarily an untenable one." Without what he called the stabilizing influence of U.S. troops, Barno cautioned that Afghanistan could "slip back into chaos."
Rhodes said Obama is focused on two main outcomes in Afghanistan: ensuring that the country does not revert to being the al-Qaida haven it was prior to Sept. 11, 2001, and getting the government to the point where it can defend itself.
"That's what guides us, and that's what causes us to look for different potential troop numbers — or not having potential troops in the country," Rhodes said.
He predicted that Obama and Karzai would come to no concrete conclusions on international military missions in Afghanistan beyond 2014, and he said it likely would be months before Obama decides how many U.S. troops — if any — he wants to keep there.
Rhodes said Obama remains committed to further reducing the U.S. military presence this year, although the pace of that withdrawal will not be decided for a few months. Last year the U.S. military pulled 23,000 troops out of Afghanistan on Obama's orders.

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Rwanda opposes use of drones by the U.N. in eastern Congo

UNITED NATIONS (Reuters) - Rwanda on Tuesday opposed the use of surveillance drones in eastern Congo as proposed by the United Nations until there is a full assessment of their use, saying it did not want Africa to become a laboratory for foreign intelligence devices.
Envoys said U.N. peacekeeping chief Herve Ladsous told the Security Council during a closed-door session that the U.N mission in the Democratic Republic of Congo plans to deploy three unmanned aerial vehicles, also known as drones, in the country's conflict-torn eastern provinces.
The United Nations has wanted surveillance drones for eastern Congo since 2008. Alan Doss, the former head of the U.N. peacekeeping force there at the time asked the Security Council for helicopters, drones and other items to improve real-time intelligence gathering.
The request was never met, but the idea generated new interest last year after M23 rebels began taking over large swathes of eastern Congo.
Rwanda, which has denied allegations by U.N. experts that it has been supporting M23, made clear it considered Ladsous' call for deploying drones premature.
"It is not wise to use a device on which we don't have enough information," Olivier Nduhungirehe, Rwanda's deputy U.N. ambassador, told Reuters. "Africa shall not become a laboratory for intelligence devices from overseas."
U.N. Secretary-General Ban Ki-moon is expected to submit a report to the Security Council in the coming weeks recommending ways of improving the U.N. force in Congo, known as MONUSCO.
The U.N. force in Congo suffered a severe blow to its image in November after it failed to intervene when well-equipped M23 rebels seized control of the eastern Congolese city of Goma. The rebels withdrew after 11 days.
Congolese troops, aided by U.N. peacekeepers, have been battling M23 - who U.N. experts and Congolese officials say are backed by both Rwanda and Uganda - for nearly a year in the mineral-rich east of the country.
Diplomats said the Rwandan delegation informed the Security Council behind closed doors on Tuesday that MONUSCO would be a "belligerent" if it deployed drones in eastern Congo now.
Nduhungirehe explained this position, saying it was vital to know before deploying drones what the implications would be for individual countries' sovereignty. He said Rwanda had no problem with helicopters, night-vision equipment or other high-tech gadgetry for the U.N. peacekeeping force.
Other diplomats, including some from Europe, have also expressed reservations. They said there were unanswered questions about who would receive the information from the drones and how widely it would be disseminated. They expressed discomfort at the idea of the United Nations becoming an active gatherer of intelligence.
Russia and China are among the nations on the council that have concerns about the deployment of drones in eastern Congo, diplomats told Reuters.
Western diplomats from countries that support the deployment of drones say Rwanda's opposition is the first manifestation of the difficulties they expect to face over Congo while Rwanda is on the Security Council for the next two years.

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U.S. health cost growth slowed in 2011 but with signs of pickup

WASHINGTON (Reuters) - U.S. healthcare spending rose at a historically low rate of 3.9 percent for the third consecutive year in 2011, but showed underlying signs of acceleration as the economy recovered from recession, the Obama administration said on Monday.
The report, released by the U.S. Centers for Medicare and Medicaid Services and published in the journal Health Affairs, said the sprawling national healthcare system totaled $2.7 trillion, or $8,680 per person. It accounted for 17.9 percent of gross domestic product, a level that has been steady since 2009.
The findings showed a rebound in personal healthcare spending that benefited physicians, clinics and drugmakers. Rising job and income growth helped stabilize the private insurance market after years of enrollment losses.
Hospital spending growth slowed. The growth of the Medicaid program for the poor dropped by more than half to 2.5 percent, as job growth slowed the rate of enrollment and cash-strapped states moved to contain costs by reducing benefits and provider payments, tightening eligibility and increasing costs to beneficiaries.
Medicare, the widely used program for the elderly and disabled, grew 6.2 percent with a rise in doctor visits and a one-time change in payment rates for skilled nursing facilities. Overall, the federal government's share of healthcare spending swelled to 28 percent in 2011, from 23 percent in 2010.
The figures provide an official snapshot of the scale and pace of healthcare spending as the U.S. government prepares for a dramatic expansion in health coverage under President Barack Obama's healthcare reform law, which is expected to boost spending and costs beginning in 2014 as more than 30 million uninsured Americans enter the system.
Rising healthcare costs are blamed by some for undercutting U.S. economic competitiveness as well as job and wage growth, and have begun to attract new attention from the administration and outside experts. The 3.9 percent advance in 2011 healthcare spending outstripped the 2.1 percent GDP inflation rate, a broad measure that takes in price changes across the economy.
2011 is the most recent year for which figures are available.
THE FUTURE IS NOT THE PAST
"The more coverage you have, the more services you use ... when you get as many as 30 million more people with coverage, you would expect them to use many more services and you would expect a higher cost," said Richard Foster, chief actuary at CMS, part of the U.S. Department of Health and Human Services.
"There is a growing amount of evidence that healthcare providers are getting it - getting that the future can't be the same way as the past," he added.
According to official administration projections, healthcare spending will surge by 7.4 percent to represent 18.2 percent of GDP in 2014, as millions of people acquire coverage through new subsidized online marketplaces and an expansion of Medicaid under the Patient Protection and Affordable Care Act.
But CMS analysts also say the law is expected to put downward pressure on spending later in the decade.
The results for 2011 were generally in line with forecasts issued last year. But the authors of Monday's report cast a question mark over future expectations, noting that economic, income and job growth in 2011 were less than might have been expected during an economic recovery.
"This fact raises questions about whether the near future will hold the type of rebound in healthcare spending typically seen a few years after a downturn," they wrote.
Monday's report showed Obama's reform law having a minimal effect on healthcare spending in 2011, although a new rule allowing adult children to remain on their parents' insurance plans until they turn 26 helped the private insurance market rebound by adding 2.7 million new beneficiaries to the rolls.
The law, known to Republican critics as "Obamacare" - a nickname the White House has also come to embrace - slowed the rate of growth in prescription drug prices for Medicare and Medicaid beneficiaries through extended rebates, discounts for senior citizens.
Spending growth for physician and clinical services climbed to 4.3 percent to $541.4 billion, and hospital spending growth dipped to the same rate for a total of $850.6 billion.
Prescription drug spending in retail outlets climbed 2.9 percent to $263 billion, versus a historically low growth rate of 0.4 percent in 2010.
Private insurers saw premiums increase 3.8 percent, partly as a result of the spread of low-premium, high-deductible insurance plans.
Out-of-pocket spending for consumers climbed 2.8 percent, accelerating from 2.1 percent in 2010.

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UK stores suffer lacklustre Christmas sales - BRC

LONDON (Reuters) - British retailers suffered from lacklustre sales last month, as a tough economy limited consumer spending in the run-up to Christmas when many stores make most of their profits, a leading trade body said on Tuesday.
The British Retail Consortium said the total value of goods sold was up just 1.5 percent from December 2011, while on a like-for-like basis which excludes new floorspace sales were only 0.3 percent higher.
With annual consumer price inflation currently running at 2.7 percent, this suggests that stores sold less in real terms, increasing the chance that Britain's economy slipped back into contraction in the last three months of 2012.
"This rather underwhelming result brings a year of minimal sales growth to a close," said Helen Dickinson, the BRC's new director general.
So far, 2013 has showed few signs of being any better than 2012, and a greater number of stores were at risk of closure, she added.
"Retailers will be hoping that a continuing boost from post-Christmas sales events strengthens January's figures, but unfortunately there are few signs that their sense of 'running fast to stand still' is likely to ease off any time soon."
The BRC figures contrast with a more upbeat survey from the British Chambers of Commerce for the economy as a whole, also released on Tuesday, which showed a broad rise in sentiment across businesses in the last three months of 2012.
According to the BRC, online sales put in the strongest performance, showing annual growth of almost 18 percent, as one of the wettest Decembers on record kept shoppers at home.
Overall, December's figures marked a slowdown both from November, when sales grew 1.8 percent in total and 0.4 on a like-for-like basis, and from December 2011, when there was 4.1 percent total sales growth.
The rise in December 2011 in part represented a rebound from December 2010, when heavy snow depressed sales.
British retailers themselves have reported mixed fortunes so far, with upmarket department stores John Lewis and House of Fraser posting solid sales growth, while supermarket chain Wm Morrison - which lacks an online operation - reported a fall in underlying sales.

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Asia stocks down ahead of US corporate earnings

 Asian stock markets headed lower Tuesday as investors turned cautious before U.S. earnings season kicks off this week.
Investors will get a feel for corporate America's outlook as earnings reports start coming. Aluminum producer Alcoa Inc. will launch the reporting season for the fourth quarter of 2012 on Tuesday after U.S. markets close. Events during the quarter such as Superstorm Sandy, the presidential election, and worries about the narrowly avoided "fiscal cliff" could lead to some unexpected results.
Japan's Nikkei 225 index fell 0.5 percent to 10,548.56 as the yen crept upward against the U.S. dollar. The rebound in the yen led to some investors to sell export shares that had surged as the currency weakened in recent weeks. Isuzu Motors Co. fell 3 percent while Mazda Motor Corp. lost 3.9 percent.
Hong Kong's Hang Seng fell 0.4 percent to 23,239.64. South Korea's Kospi lost 0.4 percent to 2,003.35 and Australia's S&P/ASX 200 shed 0.1 percent to 4,712.70. Benchmarks in Singapore, Taiwan and Thailand fell, while Indonesia and the Philippines rose. Mainland Chinese shares were mixed.
Major indexes surged last week after U.S. lawmakers passed a bill to avoid a combination of government spending cuts and tax increases that have come to be known as the fiscal cliff. The deal, however, remains incomplete. Politicians will face another deadline in two months to agree on more spending cuts.
"The looming budget battle in the US has also prompted some hesitancy to buy risk assets," said analysts at Credit Agricole CIB in Hong Kong.
Benchmark crude oil contract for February delivery was up 9 cents to $93.27 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 10 cents to close at $93.19 a barrel on the Nymex on Monday.
In currencies, the euro rose to $1.3129 from $1.3112 in New York late Monday. The dollar fell to 87.65 yen from 87.84 yen.

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AP Interview: Palestinian PM warns of cash crisis

The Palestinian self-rule government is in "extreme jeopardy" because of an unprecedented financial crisis, largely because Arab countries have failed to send hundreds of millions of dollars in promised aid, the Palestinian prime minister said Sunday.
The cash crunch has gradually worsened in recent years, and the Palestinian Authority now has reached the point of not being able to pay the salaries of about 150,000 government employees, Salam Fayyad told The Associated Press. The number of Palestinian poor is bound to quickly double to 50 percent of the population of roughly 4 million if the crisis continues, he said.
"The status quo is not sustainable," Fayyad said in an interview at his West Bank office.
The Palestinian Authority, set up two decades ago as part of interim peace deals with Israel, is on the "verge of being completely incapacitated," Fayyad warned. Only a year ago, he said he expected to make great strides in weaning his people off foreign aid.
The self-rule government was meant to be temporary and replaced by a state of Palestine, which was to be established through negotiations with Israel. However, those talks repeatedly broke down, and for the past four years the two sides have been unable to agree on the terms of renewing the negotiations.
In late November, Palestinian President Mahmoud Abbas won U.N. recognition of a state of Palestine in the West Bank, Gaza and east Jerusalem, overriding Israeli objections to the largely symbolic step. On Sunday, Abbas asked his West Bank-based government to prepare for replacing the words "Palestinian Authority" with "State of Palestine" in all public documents, including ID cards, driving licenses and passports.
Israeli officials declined comment, including on whether Israel would prevent Palestinians with new ID cards and passports from crossing borders and checkpoints.
The U.N. bid gave the Palestinians new diplomatic leverage by affirming the borders of a future state of Palestine in lands Israel captured in 1967, but changed little in the day-to-day lives of Palestinians.
In an apparent response to the U.N. move, Israel in December halted its monthly transfer of about $100 million in tax rebates it collects on behalf of the Palestinians. That sum amounts to about one-third of the monthly operating costs of the Palestinian Authority. Fayyad said he now only takes in about $50 million a month in revenues.
Israel has said it used the withheld money to settle Palestinian Authority debt to Israeli companies, and it's not clear whether the transfers will resume. In the meantime, the 22-nation Arab League has not kept a promise to make up for the funds Israel withholds, Fayyad said.
The head of the League has written to member states, urging them to pay the $100 million, Mohammed Sobeih, a league official, said Sunday.
Fayyad pinned most of the blame for the Palestinian Authority's financial troubles on delinquent Arab donors, saying they are "not fulfilling their pledge of support in accordance with Arab League resolutions."
European countries kept their aid commitments, he said.
Some $200 million in U.S. aid were held up by Congress last year, a sum the Obama administration hopes to deliver to the Palestinians this year, along with an additional $250 million in aid. "We have made it clear that we think the money should go forward," State Department spokeswoman Victoria Nuland said last week.
The Palestinian Authority has relied heavily on foreign aid since the outbreak of the second Palestinian uprising in 2000. It has received hundreds of millions of dollars each year since then, but has struggled to wean itself off foreign support, in part because harsh Israeli restrictions on Palestinian trade and movement have hurt economic growth.
Only a year ago, Fayyad said he hoped to increase local revenues, including through spending cuts and higher taxes for wealthier Palestinians. He even set 2013 as a target for financing the government's day-to-day operations with local revenues. However, his tax plan was met by widespread protests and modest economic growth slowed.
Now he's not even sure how he will cover the government payroll, his heftiest monthly budget item.
The Palestinian Authority employs some 150,000 people, including civil servants and members of the security forces. About 60,000 live in Gaza and served under Abbas before the Hamas takeover, but continue to draw salaries even though they've since been replaced by Hamas loyalists.
In recent months, the government has paid salaries in installments.
Fayyad said he managed to pay half the November salaries by getting another bank loan, using as collateral Arab League promises of future support. He said he can't pay the rest of the November salaries, let alone start thinking about December wages.
The Palestinian Authority already owes local banks more than $1.3 billion and can't get more loans. It also owes hundreds of millions of dollars to private businesses, including suppliers to hospitals, some of whom have stopped doing business with the government.
The crisis "has put us in extreme jeopardy," Fayyad said.
The malaise has sparked growing protests. Civil servants have held warning strikes. On Sunday, their union called for four days of strikes over the next two weeks.
Walid Abu Muhsin, a government employee who makes 4,000 shekels ($1,000) a month, said he received only $500 in November, and his bank deducted 50 percent of that for car and home loans, leaving the father of three with $250 to live on.
"I am spending from the few savings I have," he said.
Fayyad said he's thought about quitting, but won't leave during a crisis. He was appointed by Abbas in 2007, after the Islamic militant Hamas seized Gaza by force. Hamas has received money from Iran, while Qatar last year pledged some $400 million for housing projects in Gaza.
Repeated attempts to heal the Palestinian rift have failed. Meanwhile, recent surveys suggest support for Hamas is on the rise, in part because it extracted what were perceived as Israeli concessions after a round of heavy cross-border fighting late last year.
The failure of the Palestinian Authority to deliver on many of its promises, Fayyad said, "has produced a reality of a doctrinal win" for Hamas.
He said the international community must decide whether it wants the Palestinian Authority, once seen as key to any Mideast peace deal, to survive.
"A weak Palestinian Authority cannot be an effective player if you are all the time preoccupied with making ends meet," he said.

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Defiant Assad pledges to continue fighting

A defiant Syrian President Bashar Assad rallied a chanting and cheering crowd Sunday to fight the uprising against his authoritarian rule, dismissing any chance of dialogue with "murderous criminals" that he blames for nearly two years of violence that has left 60,000 dead.
In his first public speech in six months, Assad laid out terms for a peace plan that keeps himself in power, ignoring international demands to step down and pledging to continue the battle "as long as there is one terrorist left" in Syria.
"What we started will not stop," he said, standing at a lectern on stage at the regal Opera House in central Damascus — a sign by the besieged leader that he sees no need to hide or compromise even with the violent civil war closing in on his seat of power in the capital.
The theater was packed with his supporters who interrupted the speech with applause, cheers and occasional fist-waving chants, including "God, Bashar and Syria!"
The overtures that Assad offered — a national reconciliation conference, elections and a new constitution — were reminiscent of symbolic changes and concessions offered previously in the uprising that began in March 2011. Those were rejected at the time as too little, too late.
The government last year adopted a constitution that theoretically allows political parties to compete with Assad's ruling Baath Party. It carried out parliamentary elections that were boycotted by his opponents.
Assad demanded that regional and Western countries must stop funding and arming the rebels trying to overthrow him.
"We never rejected a political solution ... but with whom should we talk? With those who have an extremist ideology, who only understand the language of terrorism? "Or should we with negotiate puppets whom the West brought?" he asked.
"We negotiate with the master, not with the slave," he answered.
As in previous speeches and interviews, he clung to the view that the crisis was a foreign-backed plot and not an uprising against him and his family's decades-long rule.
"Is this a revolution and are these revolutionaries? By God, I say they are a bunch of criminals," he said.
He stressed the presence of religious extremists among those fighting in Syria, calling them "terrorists who carry the ideology of al-Qaida" and "servants who know nothing but the language of slaughter."
He said the fighters sought to transform the country into a "jihad land."
Although he put up a defiant front, Assad laid out the grim reality of the violence, and he spoke in front of a collage of photos of what appeared to be Syrians killed in the fighting.
"We are now in a state of war in every sense of the word," Assad said, "a war that targets Syria using a handful of Syrians and many foreigners. It is a war to defend the nation."
He said Syria will take advice but not dictates from anyone — a reference to outside powers calling on him to step down.
The speech, which was denounced by the West, including the U.S. and Britain, came amid stepped-up international efforts for a peaceful way out of the Syrian conflict. Previous efforts have failed to stem the bloodshed.
U.N.-Arab League envoy Lakhdar Brahimi met Assad last month to push for a peace plan for Syria based on a plan first presented in June at an international conference in Geneva. The proposal calls for an open-ended cease-fire and the formation of a transitional government until new elections can be held and a new constitution drafted.
The opposition swiftly rejected Assad's proposals. Those fighting to topple the regime have repeatedly said they will accept nothing less than his departure, dismissing any kind of settlement that leaves him in the picture.
"It is an excellent initiative that is only missing one crucial thing: His resignation," said Kamal Labwani, a veteran dissident and member of the opposition's Syrian National Coalition umbrella group.
"All what he is proposing will happen automatically, but only after he steps down," Labwani told The Associated Press by telephone from Sweden.
Haitham Maleh, an opposition figure in Turkey, said Assad was offering the initiative because he feels increasingly besieged by advancing rebels.
"How could he expect us to converse with a criminal, a killer, a man who does not abide by the law?" he asked.
Assad has spoken only on rare occasions since the uprising began, and Sunday's speech was his first since June. His last public comments came in an interview in November to Russian TV in which he vowed to "live and die" in Syria.
On Sunday, he seemed equally confident in the ability of his troops to crush the rebellion despite the recent fighting in Damascus.
"He did not come across as a leader under siege, nor as a leader whose regime is on the verge of collapse," said Fawaz A. Gerges, head of the Middle East Center at the London School of Economics.
"He seemed determined that any political settlement must come on his terms, linking those terms with the Syrian national interest as if they are inseparable," he said.
U.S. State Department spokeswoman Victoria Nuland said in a statement that Assad's speech was "yet another attempt by the regime to cling to power and does nothing to advance the Syrian people's goal of a political transition."
British Foreign Secretary William Hague called Assad's speech "beyond hypocritical." In a message posted on his official Twitter feed, Hague said "empty promises of reform fool no one."
European Union foreign policy chief Catherine Ashton's office said in a statement that the bloc will "look carefully if there is anything new in the speech, but we maintain our position that Assad has to step aside and allow for a political transition."
Foreign Minister Ahmet Davutoglu of Turkey said the speech was filled with "empty promises" and repetitive pledges of reform by a leader out of touch with the Syrian people.
"It seems (Assad) has shut himself in his room, and for months has read intelligence reports that are presented to him by those trying to win his favor," Davutoglu told reporters in the Aegean port city of Izmir on Sunday.
Turkey is a former ally of Damascus, and while Ankara first backed Assad after the uprising erupted, it turned against the regime after its violent crackdown on dissent.
Observers said the speech signaled the violence would continue indefinitely as long as both sides lacked the ability to score a victory on the battlefield.
Randa Slim, a research fellow at the New America Foundation in Washington, said Assad's made clear he has no intention of making way for a political transition.
"He sees himself rather as an orchestrator and arbiter of a process to be organized under his control," she said.
The Internet was cut in many parts of Damascus ahead of the address, apparently for security reasons, and some streets were closed.
At the end of his speech, loyalists shouted: "With our blood and souls we redeem you, Bashar!"
As he was leaving the hall, supporters pushed forward and swarmed around him to try to talk to him. Nervous security guards tried to push them away.
Many shouted "Shabiha forever!" — referring to the armed regime loyalists whom rebels have blamed for sectarian killings.
Amid the melee, Assad quickly shook hands with some of them and blew kisses to others.

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Analysis: Air assaults raise doubts about Myanmar's reformist rulers

BANGKOK (Reuters) - Unprecedented aerial attacks on ethnic Kachin rebels by Myanmar's military have raised doubts about whether the retired generals in a government hailed for its reforms have really changed their harsh old ways.
Assurances by the quasi-civilian government that it wants a peace deal with the Kachin Independence Army (KIA) and that the military is exercising "maximum restraint" are starting to ring hollow as jets and helicopter gunships take to the air.
The 18-month conflict is back under the spotlight, with U.N. Secretary-General Ban Ki-moon voicing concern last week about reports of air strikes in Kachin State. The U.S. State Department said they were "extremely troubling".
Western countries that suspended most sanctions as a reward for political, social and economic reforms after the new government took power in March 2011 are now in a tricky spot.
Questions have been raised about the sincerity, or authority, of the former soldiers who had convinced them of their "irreversible" course of liberalization when they ended nearly half a century of military rule.
"Skeptics had warned the international community not to get too caught up in all the excitement of the changes going on," said Christopher Roberts, a Myanmar expert at the Australia National University.
"This escalation is enough to spark a debate on whether sanctions were removed too soon."
The United Nations has repeatedly demanded humanitarian access to an estimated 70,000 people displaced by fighting that resurfaced in June 2011, ending a 17-year truce agreed after decades of bloody battles. The number of casualties is unknown, but they are estimated to be high on both sides.
The KIA says it is under attack in seven areas and that the military wants to seize its headquarters in Laiza, close to the Chinese border. It says the military has been using air strikes since December 24 to try to weaken the rebels and force them to the negotiating table -- claims the government strenuously denies.
Despite 11 rounds of peace talks, the KIA is the only ethnic minority army that has not agreed to a ceasefire with the government and won't stand down until it is offered a political deal. It says the current, army-drafted constitution won't guarantee their rights and wants it changed first.
BITTER HISTORY
State peace negotiators have a three-stage plan starting with a truce before any political dialogue, followed by a parliamentary congress in which permanent deals offering unspecified guarantees and concessions are signed.
The two sides have a bitter history and deep distrust. Political leaders are determined to ensure their people are treated fairly and get a share of the vast mineral resources they have long accused the military of looting.
"It's difficult to cease fighting while not knowing what will happen after," said KIA vice commander-in-chief, Major-General Gun Maw. "What should we do after a ceasefire? That's the answer we're looking for," he told the 7-Day News journal.
The decision to use air power against ethnic militias, a tactic unheard of even under military rule, runs counter to reformist President Thein Sein's assurances that troops were acting only in self defense.
Official Myanmar newspapers have said air support was used on December 30 to thwart KIA fighters who had occupied a hill and were attacking logistics units of the Tatmadaw, as Myanmar's military is known.
The former junta heavyweight has twice publicly ordered the military chief, a protégé of reviled former dictator Than Shwe, to ensure troops don't launch any offensives. The recent escalation has raised questions about him that are almost impossible to answer in a country where the inner workings of the leadership in Naypyitaw remain highly secretive.
Zaw Htay, a president's office spokesman, said on Friday troops were responding defensively to KIA aggression and destruction of transport and power infrastructure and the army was committed to protecting the civilian population.
Nobel laureate Aung San Suu Kyi, now a lawmaker, has always urged a cautious approach to the changes. While lauding Thein Sein for his leadership, she has repeatedly said the role the military plays in Myanmar will dictate the country's future.
Thein Sein and his loyalists appear to be driving the reforms but the extent to which he controls the Tatmadaw remains unclear. Diplomats and analysts say either he is insincere about peace or the military is acting independently.
"He's just Mr. Nice Guy, the human face to the world and he has no authority to tell the army what to do," said Bertil Lintner, a journalist, author and expert on Myanmar's ethnic conflicts, who recently visited Kachin State
"Fundamentally, nothing has changed, it's the same people in power, they're just much more clever at managing things."
A more aggressive approach to the conflict could be embarrassing for the United States, which welcomed Thein Sein to Washington in September and has offered support to try to reform Myanmar's military, including an invitation to observe the annual U.S.-led Cobra Gold exercises in Thailand.
DOMINANT MILITARY
Any indication the military was pulling rank over the civilian government might concern foreign firms planning to invest in a country with a power structure dominated by retired or serving soldiers and plagued by vested interests.
The military remains a major player in many industries through its Myanma Economic Holdings Ltd and the Myanma Economic Corporation, both blacklisted by the U.S. Treasury Department. Those firms, or their close business allies, might not take kindly to competition.
The international community has been guarded in its criticism, wary not to upset Myanmar's notoriously thin-skinned rulers and drive them back into China's orbit. China was Myanmar's lifeline when sanctions were in place and once backed the KIA.
An alliance of Kachin groups issued an open letter on Friday urging the International Crisis Group to reconsider presenting Thein Sein with its highest peace award, accusing his office of a "duplicitous strategy" and "outright lies" that have undermined his credibility.
Experts say it's too soon to tell how Western powers would respond in the coming months, but confidence in Thein Sein could start to slow if the military follows its hard line against the KIA and risks killing off the peace process altogether.
"It doesn't look good for Thein Sein now and this (escalation) may not have been his intention," said Roberts.
"It's unlikely to threaten the broader reforms going on, but could damage the momentum and it'll certainly dampen the enthusiasm about progress.

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