LOS ANGELES | Thu Sep 27, 2012 10:29pm EDT

LOS ANGELES (Reuters) - Police recovered a multimillion-dollar collection of paintings stolen from the Southern California home of superstar bond fund manager Jeffrey Gundlach, and two men are in jail on suspicion of possessing the stolen property, authorities said on Thursday.

The 13 paintings, which included works by Jasper Johns and Piet Mondrian, were taken from Gundlach's home in the coastal city of Santa Monica between September 12 and September 14, officials with the city's police department said.

Gundlach, who was in New York at the time, put forward a $1.7 million reward earlier this week for the recovery of all his stolen art, increasing his previous offer of $200,000.

Officers arrested Jeffrey Nieto, 45, at Al & Ed's Autosound in the Los Angeles suburb of Pasadena on Wednesday in connection with the theft, and recovered most of the paintings at that business, where Nieto is the manager, police said.

They took the second man, Wilmer Cadiz, 40, into custody at his home in nearby San Gabriel and found another four paintings there, police said. The last painting was recovered at a home in the Los Angeles bedroom community of Glendale. The person who had that painting has been interviewed and is cooperating with investigators, police said.

Police are still investigating the case, including whether Nieto and Cadiz committed the actual burglary at Gundlach's home, Santa Monica police spokesman Sergeant Richard Lewis said.

It was not immediately clear if Nieto or Cadiz have attorneys to represent them.

Gundlach, who is chief executive officer and chief investment officer of DoubleLine Capital, in a statement thanked the Santa Monica Police Department for "apprehending the criminals" and recovering "all of the artwork stolen."

"This is a great day for the art world and all those who seek order and justice in our society," Gundlach said. A representative for Gundlach did not immediately respond to an email about payment of the reward in the case.

The stolen art pieces included works by Frank Stella, Guy Rose, Hanson Duvall Puthuff and other artists.

The painting by Jasper Johns, who last year received the Presidential Medal of Freedom, is his 1956 "Green Target." The piece by the late Dutch artist Piet Mondrian is his 1936 "Composition (A) En Rouge Et Blanc."

The Mondrian piece alone is worth between $10 million and $15 million, Lewis said. The total value of the stolen paintings could be up to $39 million, but police initially valued all the items stolen from Gundlach's home at $10 million to be conservative about the price tag, Lewis said.

Police have not recovered a Porsche Carrera 4S sports car taken from Gundlach's home, nor have they found several luxury watches, a handgun and some wine that was also stolen, Lewis said. The car originally sold for $120,000 and the wine was worth $100,000, he said.

Nieto was being held in jail on bail of $500,000 and Cadiz was being held on $20,000, according to Los Angeles County inmate records.

(Editing by Cynthia Johnston and Eric Walsh)

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1 of 2. Research in Motion (RIM) BlackBerry smartphone handsets are pictured in this illustration picture taken in Lavigny, Switzerland in this July 21, 2012 file photo.

TORONTO | Thu Sep 27, 2012 9:17pm EDT

TORONTO (Reuters) - Research In Motion Ltd reported a narrower-than-expected loss on Thursday and the struggling BlackBerry maker bolstered its cash reserves, sparking optimism ahead of the launch of its make-or-break line of next-generation smartphones.

Shares of RIM surged 20 percent in after-hours trade on indications the company will have plenty of cash to ramp up production of its new BlackBerry 10 devices and mount a robust marketing campaign for the revamped line, due in early 2013.

It was the biggest jump for the stock since a 50 percent surge in December 2003, underlining the importance of the BB10 launch. The company, which has fallen far behind its rivals in a smartphone market it once dominated, has staked its future on the BB10 and its completely redesigned operating system.

RIM's second fiscal quarter brought shareholders additional glimmers of hope, a break from a succession of dreadful quarterly reports. The company not only generated more revenue than Wall Street had forecast but it topped expectations on the number of devices shipped in the period, which ended on September 1.

"It's very impressive," said Jefferies & Co analyst Peter Misek. "I didn't expect they could execute on the business given the models they have in the market, but they obviously did really well in emerging markets."

RIM was also able to bolster its cash pile by collecting on cash owed to the company, drawing down inventories and cutting costs.

ONE-TIME PIONEER

A one-time smartphone pioneer, RIM has failed to keep pace with rivals such as Apple Inc and Samsung Electronics Co, and its stock price has tumbled about 70 percent over the past year while its market share shriveled.

But the latest quarter showed that RIM is still able to lure buyers for its lower-end smartphones in the more price-conscious emerging markets. And that has helped make up for ground the BlackBerry has lost to cutting-edge devices such as Apple's iPhone and Samsung's Galaxy S III in North America and Europe.

"RIM and its products, however obsolescent, are still relevant in the parts of the planet where most people live," said CCS Insight analyst John Jackson. "The bad news is that these results have little or no bearing on what remains true, and that is, RIM still needs to execute on BB10."

In an attempt to create a buzz, Chief Executive Thorsten Heins gave a preview of the new smartphone and its features to app developers at an event on Tuesday in San Jose, California.

Analysts said RIM struck the right chords at the event but cautioned that it is hard to evaluate how well the BB10 devices will work in real world conditions until they are on the market.

"We are now just a few months away from our launch and our teams are working night and day to meet the expectations we have of ourselves," said Heins on a conference call after the results were released on Thursday.

Heins said RIM executives have met with dozens of carriers in more than 16 countries in the last few weeks and the feedback on the new devices so far has been overwhelmingly positive.

QUARTERLY RESULTS

Shipments of BlackBerry smartphones were 7.4 million in the quarter, easily outpacing Wall Street's expectation of about 6.9 million.

The Waterloo, Ontario-based company reported a net loss of $235 million, or 45 cents a share, in its fiscal second quarter. That compared with a profit of $329 million, or 63 cents, in the same period a year earlier.

Excluding one-time restructuring-related items, the loss came in at $142 million, or 27 cents a share, in the quarter just ended.

Revenue rose to $2.9 billion, a gain of 2 percent from the fiscal first quarter, but the latest result was down about 30 percent from the same period a year earlier.

Analysts, on average, had expected RIM to report a loss of 46 cents a share, on revenues of $2.5 billion, according to Thomson Reuters I/B/E/S.

"You still have revenue declining 31 percent on a year-over-year basis but it's certainly not the train wreck that a lot of people feared," said BGC Partners analyst Colin Gillis. "They live to fight another day."

CASH PILE

RIM also increased its cash to about $2.3 billion from $2.2 billion in the fiscal first quarter.

"In the last two quarters RIM has done a really good job on collecting on receivables," said Sterne Agee analyst Shaw Wu, but he cautioned that this was not sustainable over the long run and RIM would have to return to a profitable business model for it to thrive once again.

While RIM has warned that it faces another operating loss in its fiscal third quarter, it expects its cash position to remain stable unless it is hit by restructuring charges.

Wu believes that the company can achieve this by continuing to draw down on its receivables, which stood just shy of $2.2 billion as of Sept 1.

RIM's chief financial officer said the company had entered into a new secured credit facility of $500 million which expires in September 2013, and in the first half RIM realized some $350 million of the up to $1 billion in cost savings it hopes to achieve in fiscal 2013, which ends on March 2 of next year.

The company, which earlier this year said it would cut about 5,000 jobs to save money, said it has already laid off roughly 2,500 workers.

"It's still bad, but it's a much smaller disaster than expected," said Wu. "These stocks all trade on expectations. Expectations were really low, and they were able to beat that."

RIM's U.S.-listed shares surged 20 percent to $8.55 in trade after the closing bell on Thursday.

(Additional reporting by Alastair Sharp, Allison Martell and Cameron French; Editing by Frank McGurty and Edmund Klamann)

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KUALA LUMPUR | Thu Sep 27, 2012 6:05am EDT

KUALA LUMPUR (Reuters) - Malaysia's Tune Group, a financial services-to-discount hotel conglomerate owned by AirAsia Bhd's founders, said it plans to list its insurance arm in a move to fund the company's expansion overseas.

Tony Fernandes and Kamarudin Meranun, who in 1993 founded Asia's biggest budget carrier, plan to list Tune Insurance Malaysia in a move that comes hot on the heels of other planned initial public offerings by AirAsia.

These include listings by AirAsia's long haul arm AirAsia X and its Indonesian unit.

"Tune Insurance is definitely going to be the first candidate to go public under the Tune brand. As to when, we are looking at it but no news as of yet," Fernandes told reporters on Thursday in the Malaysian capital.

"It has a good business, it is in a fantastic part of the world, which is under insured. We are looking at acquisitions in Thailand, Indonesia and the Philippines," he said in reference to Southeast Asia.

It was not immediately clear how much the IPO intended to raise and where the company would list.

Tune Group has been expanding its insurance business in preparation for the listing.

In April, Tune Group bought a 77.9 percent stake for 153.13 million ringgit ($49.69 million) in Oriental Capital Assurance Bhd, in a move to beef up its financial services division and allow it to underwrite its insurance businesses.

Tune Group now owns some 83 percent in Tune Insurance, according to its chief executive officer Peter Miller. It could not be immediately ascertained who owned the remaining stake. ($1 = 3.0820 Malaysian ringgits)

(Reporting by Yantoultra Ngui and Anuradha Raghu; Editing by Muralikumar Anantharaman)

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Cindy Lee Garcia, an actress in the ''Innocence of Muslims'', an anti-Islam movie that has spawned violent protests across the Muslim world, attends a news conference outside her attorney's office after a court hearing in Los Angeles, California September 20, 2012.

LOS ANGELES | Thu Sep 27, 2012 3:58pm EDT

LOS ANGELES (Reuters) - An actress who said she was duped into appearing in an anti-Islam film that stoked violent protests across the Muslim world took her legal bid to federal court on Wednesday in a renewed effort to force it off YouTube.

The lawsuit filed by Cindy Lee Garcia names the popular online video site YouTube and its parent company Google Inc. as defendants, along with the Egyptian-American Coptic Christian from California believed to be behind the making of the film.

Last week, a Los Angeles Superior Court judge denied Garcia's request for a temporary restraining order that would have required YouTube to stop posting the crudely made 13-minute video, finding the actress was unlikely to prevail on the merits of her case in state court.

As in her previous lawsuit, Garcia accused the purported filmmaker of fraud, libel and unfair business practices. But her federal lawsuit also asserts a copyright claim to her performance in the video, titled "The Innocence of Muslims."

Garcia's case was the first known civil litigation stemming from the video, billed as a film trailer, which depicts the Prophet Mohammad as a fool and a sexual deviant. The clip sparked a torrent of anti-American unrest in Egypt, Libya and dozens of other Muslim countries over the past two weeks.

The outbreak of violence coincided with an attack on U.S. diplomatic facilities in Benghazi that killed four Americans, including the U.S. ambassador to Libya.

U.S. and other foreign embassies were also stormed in various cities across the Middle East, Asia and Africa. For many Muslims, any depiction of the prophet is considered blasphemous.

Google has refused to remove the film from YouTube, despite pressure from the White House and others to take it down, though the company has blocked the trailer in Egypt, Libya and other Muslim countries.

COPYRIGHT ISSUE

Garcia's lawyer argued in court last week that her client, who is from Bakersfield, California, has suffered harm similar to a person whose privacy is violated by the unauthorized release of a sex tape.

But Google's attorneys said that the rights of an actor do not protect that person from how a film is perceived.

In her latest lawsuit filed in U.S. District Court in Santa Clara, California, Garcia says that Google is infringing on the copyright she holds to her performance in the film by distributing the video without her approval via YouTube.

Garcia's lawsuit identifies Nakoula Basseley Nakoula, 55, a Los Angeles-area Coptic man who has served time in federal prison for bank fraud, as the film's producer.

On Saturday, a Pakistani cleric offered a $100,000 reward to anyone who killed the film's maker. Garcia said in her lawsuit that an Egyptian cleric had issued a fatwa, or religious edict, against anyone who served as a director, producer or actor in the video.

According to Garcia, Nakoula operated under the assumed name of Sam Bacile, misleading her and other actors into appearing in a film they believed was an adventure drama called "Desert Warrior."

After the fact, however, she learned that some of her lines spoken in the production had been dubbed over.

The alteration made it look like Garcia "voluntarily performed in a hateful, anti-Islamic production," the lawsuit says, adding that she has "been subjected to credible death threats and is in fear for her life and the life and safety of anyone associated with her."

Nakoula has been in hiding for much of the past two weeks after being questioned by federal authorities looking into whether he may have violated terms of his probation in the making or promotion of the video.

(Reporting by Steve Gorman)

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Author J.K Rowling poses for photos with her certificate after being presented with the Freedom of the City of London, at Mansion House, central London May 8, 2012.

NEW YORK/LONDON | Wed Sep 26, 2012 4:09pm EDT

NEW YORK/LONDON (Reuters) - Harry's still finished, but don't rule out any return to the Potter world.

Although J.K. Rowling's first novel tailored for adults is being released this week, she says her next book will likely be a children's book, and in the future she may pen a story related to the Harry Potter universe.

"I think it very likely that the next thing I publish will be for kids. I have a children's book that I really like, it's for slightly younger children than the Potter books," Rowling told the BBC in a television interview broadcast on Wednesday.

In one of a handful of appearances to promote "The Casual Vacancy," which hits bookstores worldwide on Thursday, Rowling told the BBC: "Truly, where Harry's story is concerned, I'm done.

Yet the 47-year-old best-selling British author did not rule out a Potter spin-off, while she was adamant it would never be for commercial reasons. The seven "Harry Potter" books have sold more than 450 million books worldwide.

"I have always left the door ajar because I'm not that cruel. If I had a fabulous idea that came out of that world, because I loved writing it, I would do it," she told the BBC.

"But I've got to have a great idea, I don't want to go mechanically into that world and pick up odds and ends and glue them together and say 'Here we go, we can sell this'. It would make a mockery of what those books were to me."

Were that great idea to come, she said: "I probably would do it. I'm very averse to the prequel/sequel idea. I've never seen it work well in either literature or film. That's a personal preference."

Rowling, who started her writing career as a financially struggling, single mother, said while there was clearly "an appetite for eight, nine, ten," Potter novels, she knew she only had enough plot for seven books about Harry's magical adventures.

"To go further would have been money for old rope. Couldn't do it. And that's largely why I slapped on that epilogue (in the final "Harry Potter" novel). (It) says he's leading a quiet life, and he's earned it. He's done," she said of the boy wizard.

POTTER DIRECTOR'S CUT, TEEN OCD

Rowling said she would have liked more time to work on some of the books.

"I had to write on the run and there were times when it was really tough. And I read them, and I think 'Oh God, maybe I'll go back and do a director's cut". I don't know," she said in BBC interview.

"But you know what?" she added. "I'm proud I was writing under the conditions under which I was writing. No one will ever know how tough it was at times."

In a separate interview with ABC's "Nightline", Rowling revealed that she had signs of obsessive-compulsive behavior when she was a teenager, and that one of the characters in "The Casual Vacancy" was drawn from her own experiences.

"These are things I know from the inside," she said in the interview, some of which was aired on "Good Morning America" on Wednesday. "When I was in my teens, I had issues with OCD ... checking things, it's very common, double checking, triple checking, it's an anxiety disorder."

Rowling has spoken openly in the past about dealing with depression, which she estimated she had not had to deal with for more than a decade.

She credited Harry Potter with helping. "Forget the money," she said; it gave her self-respect. "Harry gave me a job that I loved to do more than anything else," she told ABC.

(Additional reporting by Mike Collett-White in London, editing by Jill Serjeant and Gunna Dickson)

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NEW YORK | Thu Sep 27, 2012 7:58am EDT

NEW YORK (Reuters) - A seven-year old child is torn from a secure and happy life when the Khmer Rouge come to power in Cambodia in 1975 and send her privileged family into the misery of hard labor as the new regime destroys the established order.

"In the Shadow of the Banyan" is the first novel of Vaddey Ratner, 41. While the book is powerful as told through the eyes of seven-year-old Raami, Ratner's own story is more so.

Only five when the Khmer Rouge came to power, the author endured four years of forced labor and starvation before she and her mother were able to flee the country. Arriving in the United States by a tortuous path and unable to speak English, she ultimately graduated from Cornell University and only years later returned to Cambodia.

Ratner now resides in Potomac, Maryland, with her husband and daughter and talked to Reuters about the book and her experiences during a brutal period of Cambodian history.

Q: How much of your story is autobiographical?

A: "The overall narrative follows my family experience, the move from the city, the uprooting, the loss of loved ones, the starvation. I make my father a poet but in real life he was a pilot. The story is a closed narrative and the characters have to move the story forward. I had to collapse some characters into one, the same with villages and towns. I created a lot of fictional villages and towns and used the memories of where we stayed."

Q: Do you want vengeance? Do you feel any bitterness?

A: "I don't want vengeance and I don't feel any bitterness. If I feel anything, I mourn for those I lost and the act of remembering requires so much energy, I feel that is all I have to give. I don't have the energy for anger or vengeance, nor do I want to have it."

Q: Your father was a pilot and member of the Cambodian royal family. Did you reveal who your father was to the Khmer Rouge as the child does in the book?

A: "Yes, I revealed who he was. I said his name. I revealed who he was."

Q: Do you feel guilty?

A: "What I feel is haunted and I will never be free of what happened. I will always reflect on what if I had not said his name."

Q: Mae and Pok, the two peasants who took in the book's main protaganists as family, were very sympathetic characters. Were they based on real people? Did you ever try to find them?

A: "Yes, they were real people. They were the easiest to capture as I felt they just translated into English. I did not need to collapse any other people into them to make them in the book. They were as I remember them as a child. But I would not go back to those various villages. Even now, my heart goes aflutter at the thought of going back to those various villages. I would only be confronted with those various losses. What was redemptive about writing this book was I found something beyond those losses. For me to go back, I fear that."

Q: Is your mother still alive? How does she feel about her life?

A: "My mother is still alive. She is very grateful and fiercely guards the few things she feels she has. The peace and solitude she has now. We have so little left of our family, what she was able to build was out of sheer determination."

Q: How much do you tell your daughter? How old is she?

A: "My daughter is 12. My husband and I have an understanding with each other, maybe an extension of how my father spoke to me, when we are asked something we tell her the truth as much as she wants to know."

Q: Was writing the book an act of personal therapy?

A: "It was a strange kind of therapy. At the end of writing it, I realized the depth of redemption I feel. I had felt apprehension that I would have to relive a lot of the ordeal over again. I did not know for sure whether I would come out of it. But I also felt this was the story I had to write.

Q: What was the one personal anecdote in the book that was hardest to write? Why?

"Gosh, every single one of them. Each one dealt into a different dimension of loss. With the loss of my father, it is founded on loss that is unanswerable to this day. I don't know what happened to him. With my sister I felt even the certainty I felt was so absurd, that a disease such as malaria could have been prevented. I chose all of them (the anecdotes) to find some understanding. They did not appear at random. I struggle with them still."

(Reporting By Nick Olivari; editing by Patricia Reaney and Paul Casciato)

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A man is seen behind the entrance door of the offices of the Financial Services Authority (FSA) in Canary Wharf, London, November 19, 2010.

LONDON | Fri Sep 28, 2012 12:08am EDT

LONDON (Reuters) - Britain's top financial watchdog, in a much-awaited reform of benchmark interest rates that have been plagued by scandal, outlined a 10-point plan to fix Libor but stopped short of scrapping the rates.

Martin Wheatley, head of the Financial Services Authority, acknowledged problems with London interbank offered rates, but said that Libor is so deeply entrenched in the financial system that it cannot be easily replaced. There are no better alternatives now, and any transition to a new benchmark would be difficult, he said.

"The system is broken and needs a complete overhaul," Wheatley said in a speech made available in advance.

Longer term, it makes sense for market participants to examine whether there are other possible benchmark rates, Wheatley said.

The plan marks regulators' first effort to fix the tarnished benchmark, but rulemakers have to thread the needle carefully.

On the one hand, they must restore confidence in the financial system, but on the other hand, they cannot take steps that are too radical without creating big trouble with existing transactions that use the benchmark.

More than $300 trillion of contracts and loans — from U.S. mortgages to Japanese interest-rate swaps - refer to Libor.

Dramatic changes to the rates would have resulted in a "huge amount of legacy contracts to resolve, introducing a lot of disputes," said Darrell Duffie, a derivatives expert and finance professor at Stanford University.

CHARGES OF MANIPULATION

Multiple banks have been accused of trying to manipulate Libor, a series of rates set daily in London. Barclays in June agreed to pay $453 million to U.S. and British authorities to settle allegations that it tried to move Libor to help its trading positions.

Wheatley's program for reform includes auditing banks that contribute data used to calculate the rates, to ensure they are not submitting false rates to benefit trading positions.

Libor, which is meant to reflect the rates at which banks borrow from one another, will be based on actual borrowing transactions, Wheatley said. Previously, banks could estimate where they think they would borrow, which left room for manipulation.

Transactions will be recorded with regular external audits of banks that participate. Bank employees making Libor submissions will have to be approved by the FSA. Wheatley is looking for authorization to criminally sanction those who attempt to manipulate the rate.

Reuters parent company Thomson Reuters collects information from banks, and uses it to calculate Libor rates for 10 currencies and 15 maturities according to specifications drawn up by the British Bankers Association.

SHRINKING THE NUMBER OF RATES

Rates that are infrequently referenced in trades, such as Australian and Canadian dollar rates, will be phased out, Wheatley said. Maturities that are infrequently used, such as four, five, seven, eight, 10 and 11 months, will also be ended.

The reductions will shrink the current number of Libor rates set daily to 20 from 150. Rates that are rarely traded are easier to manipulate.

More banks will be required to submit their borrowing rates, Wheatley said.

"Libor requires collective responsibility if it is to work effectively," Wheatley said.

As expected, the British Bankers' Association, which had overseen the rate, will be replaced with a new, as-yet unidentified oversight panel.

"The British Bankers' Association clearly failed to properly oversee the Libor setting process and should take no further role in the administration and governance of Libor," Wheatley said.

The BBA said it worked closely with Wheatley on his review and it has strongly stated the need for greater regulatory oversight of Libor and tougher sanctions against manipulation.

A major problem that remains is that in financial crises, such as the one in 2008, banks cease lending to one another, effectively causing the evaporation of data needed to calculate Libor.

"There isn't enough transaction data during a financial crisis," said Rosa Abrantes-Metz, principal at Global Economics Group and adjunct professor at New York University's Stern School of Business.

The reforms come amid more crackdowns on the banks that submitted rates used to calculate Libor. Royal Bank of Scotland is expected to be next to settle Libor charges, with other banks to follow.

Britain's government commissioned Wheatley to report on reforming Libor and is expected to back the findings in full. Legislative changes will be inserted into a financial services bill now being approved by parliament.

(Additional reporting by Rick Rothacker in Charlotte, North Carolina, and Carrick Mollenkamp and Jennifer Saba in New York; Writing by Dan Wilchins; Editing by Edmund Klamann)

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Thu Sep 27, 2012 6:00am EDT

n">(Reuters) - Affluent Americans feel more in control of their finances and say they are less conservative with their investments than they were a year ago, according to a bi-annual survey released on Thursday by Merrill Lynch Global Wealth Management.

Wealthier investors recognize there is likely to be more volatility ahead thanks to the November U.S. elections, the looming fiscal cliff and continued uncertainty in the European Union, but they feel confident when it comes to their personal finances, said Ted Durkin, head of the Merrill Lynch Affluent Client Segment.

That uptick of confidence came in part from changes affluent investors have made in their financial lives.

Those participating in the August poll of 1,000 people with investable assets of over $250,000 said they are living more within their means, making more joint investment decisions with their spouses and setting tangible goals for their future.

"People have done a great job of controlling what they can control," Durkin said.

Thirty percent of wealthy investors described their investing approach as conservative this year - down from 36 percent in 2011 and 50 percent in 2010.

That shift may be, in part, because investors have become used to volatility, not because they see tangible improvements in the economy. Almost half of the respondents said they see economic uncertainty as a "new normal" that will be here for the foreseeable future.

Younger affluent investors are more confident. Nearly two-thirds of those between 18 and 34 years of age said they think their financial situation will improve next year, citing an ability to take advantage of investment opportunities.

Tony Montanari, a financial adviser who manages $26 million in client assets for Charlotte, North Carolina-based ACM Wealth Management, agreed that the wealthy are getting more aggressive in their investments. But, he said, they might be disappointed.

"People should have been the most aggressive and the least conservative four years ago when the market bottomed," he said.

Heather Walsh, a financial adviser with Merrill based in Burlington, Massachusetts, said she's stressing to her clients that even though the markets have improved, it's critical to stay focused on budgeting and saving. That, in turn, can make them less reliant on unrealistic market returns, said Walsh, whose team manages $500 million in client assets.

That message may resonate with wealthier investors. Despite increased confidence in their financial situation, four out of five of those polled in Merrill's survey said they were concerned about accomplishing certain financial goals, like having enough money to sustain their lifestyle in retirement and buying their dream home.

And only 38 percent of parents paid or plan to pay the full cost of their children's college education, down from nearly 48 percent a year ago.

(Reporting By Jennifer Hoyt Cummings; Editing by Jennifer Merritt; Twitter @jenhoytcummings)

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Worker Derrick Williams loads material into a cutting machine at a Wrap-Tite manufacturing facility in Solon, Ohio July 13, 2012.

WASHINGTON | Thu Sep 27, 2012 2:29pm EDT

WASHINGTON (Reuters) - Orders for long-lasting U.S. manufactured goods fell sharply in August, suggesting the main engine of the economic recovery was stalling even as a report showing a drop in new claims for jobless aid offered a hopeful sign on the labor market.

While weak demand for aircraft and automobiles accounted for much of the drop in orders last month, the Commerce Department report on Thursday underscored the damage being inflicted by the uncertainty over U.S. fiscal policy, Europe's debt troubles and a slowdown in China.

"Given the uncertainty associated with the fiscal cliff, there is certainly a wait-and-see attitude which is impacting a lot of the data," said Omair Sharif, an economist at RBS in Stamford, Connecticut.

The so-called fiscal cliff refers to the $500 billion or so in expiring tax cuts and government spending reductions set to take hold in 2013 if the U.S. Congress fails to agree on an orderly way to reduce a huge budget deficit.

The Commerce Department said durable goods orders dived 13.2 percent, the largest drop since January 2009, when the economy was in the throes of a recession. The decline primarily reflected weak demand for aircraft and automobiles, and transportation orders fell 34.9 percent. Plane maker Boeing reported only one aircraft order last month versus 260 in July.

But orders were down for a wide range of goods, and even excluding transportation, orders fell 1.6 percent, dropping for a third consecutive month. The fall was in sync with other data indicating a marked cooling in the production side of the economy.

Economists polled by Reuters had expected orders for durable goods -- items from toasters to aircraft that are meant to last at least three years -- to fall 5 percent, with non-transportation orders rising marginally.

Unfilled orders dropped by the most since December 2009, pointing to weak factory activity in the months ahead.

"The thesis that manufacturing activity is likely to struggle for the remainder of the year continues to build," said John Ryding, chief economist at RDQ Economics in New York.

Underscoring the economy's weakness, the government revised its measure of second-quarter growth to just a 1.3 percent annual pace from 1.7 percent, largely to reflect the impact a drought in the Midwest had on farm inventories.

Inventories lopped off almost half a percentage point from GDP growth in the last quarter. However, economists expected this to reverse in the third quarter.

Durable goods inventories set a fresh record high in August, prompting economists at Macroeconomic Advisers to raise their third-quarter GDP growth estimate by one-tenth of a percentage point to 1.8 percent.

There was also bad news on the housing market, which has been one of the economy's relative bright spots. Contracts to buy previously owned homes fell in August, providing a counterpoint to other recent data that have shown activity in the housing market picking up, a separate report showed.

However, not all the news on Thursday was downbeat.

The Labor Department showed the number of Americans filing new claims for jobless benefits fell 26,000 last week to a two-month low of 359,000. The four-week moving average for new claims, a better measure of labor market trends fell for the first time after five weeks of increases.

Investors on Wall Street shrugged off the mixed economic data and bought stocks after five straight days of losses. U.S. Treasury debt prices fell on profit-taking after recent gains, while the dollar was little changed versus a currency basket.

ANXIETY OVER FISCAL POLICY

Despite the drop in claims last week, labor market weakness was expected to persist for a while because of anxiety over higher taxes and deep government spending cuts in January and slowing global growth, economists said.

Sluggish job gains and stubbornly high unemployment spurred the Federal Reserve this month into launching a third round of bond purchases to drive down already low interest rates.

The U.S. central bank vowed to buy $40 billion worth of mortgage-backed securities each month until it sees a sustained upturn in the labor market.

"Today's reports suggest that the Fed is going to remain very accommodative for quite some time to try and spur demand and job growth," said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

Mortgage finance company Freddie Mac said the mortgage-backed securities purchases helped push the average rate on a 30-year fixed rate mortgage down to a record low of 3.40 percent this week.

In a preliminary estimate of an upcoming annual revision to its main employment measures, the Labor Department said it likely undercounted job growth in the 12 months through March by 386,000.

The encouraging news on the labor market was eclipsed by the weak durable goods report.

Orders for non-defense capital goods excluding aircraft, a proxy for business spending plans, rose 1.1 percent in August, only partly reversing a 5.2 percent slide the prior month.

What's more, shipments of these goods, which are used to calculate equipment and software spending in the GDP report, fell for a second straight month. That implies little or no growth in equipment and software investment this quarter.

(Additional reporting by Rachelle Younglai; Editing by Andrea Ricci and Tim Ahmann)

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1 of 9. Dissident Chinese artist Ai Weiwei (C) buys fruit from a local vendor on the street outside the Chaoyang District Court before trying to attend his appeal verdict hearing in Beijing September 27, 2012.

BEIJING | Thu Sep 27, 2012 10:21am EDT

BEIJING (Reuters) - A Chinese court upheld a $2.4 million tax evasion fine against China's most famous dissident Ai Weiwei on Thursday, ending his long legal battle with the authorities but paving the way for him to be jailed if he does not pay.

The loss of Ai's second appeal in a higher court means that the world-renowned artist could risk arrest if he does not pay a remaining fine of around 6.6 million yuan ($1.05 million), in a case that has further tarnished China's poor human rights reputation.

He has paid a bond of 8.45 million yuan already lodged with the tax authorities to contest the tax charge.

Ai, whose 81-day detention last year sparked an international outcry, told Reuters he will not pay the remaining fine as that would be tacit acknowledgement of the case's legality, which he has always maintained is trumped up.

Ai said he is uncertain whether he faces arrest if he doesn't do so.

"If I need to go to jail, there's nothing I can do about it," Ai said. "This country has no fairness and justice, even if I've paid the 6 million yuan, I still could possibly go to jail. They don't need an excuse to arrest me - they can always find another excuse at any time."

The case is widely seen by activists as an attempt to muzzle the outspoken artist, who has repeatedly criticized the Chinese government for flouting the rule of law and the rights of citizens.

Ai, 55, had asked the Chaoyang District Court to overturn the city tax office's rejection of his appeal against the 15 million yuan ($2.38 million) tax evasion penalty imposed on the company he works for, Beijing Fake Cultural Development Ltd, which produces his art and designs.

Ai, who has waged a near five-month long legal battle with a Beijing tax agency, said he could not appeal further and has not enough cash to pay the remaining 6.6 million yuan, adding that the tax agency has not given him a deadline to pay.

Government efforts to silence Ai have frequently backfired, as demonstrated by an outpouring of public sympathy - and cash - in response to the tax penalty.

Ai had collected more than 9 million yuan, he says he will start to return, from about 30,000 donors, to pay the bond. Many of Ai's supporters folded money into paper planes that were flown over the walls of his home.

Earlier, an angry Ai, who was allowed to attend court in person for the first time and without an obvious police presence, said he scolded the judge for being a "shame and a disgrace".

"It (the court) didn't respect the facts or give us a chance to defend ourselves; it has no regard for taxpayers' rights," he told reporters.

He said the court had flouted Chinese law by not providing a written notification of the appeal verdict three days in advance, and only notifying his wife, Lu Qing, by telephone earlier this week. One of his lawyers, Pu Zhiqiang, is in France and could not make it back in time.

Ai's loss of his appeal is a predictable outcome in a country where the courts, controlled by the ruling Communist Party, toe the government line. It also underscores Beijing's increasing intolerance of dissent ahead of a tricky transition of power later this year.

"I never imagined the court would disregard the facts this much, be so unreasonable and so insulting," Ai said.

($1 = 6.3066 Chinese yuan)

(Additional reporting by Ben Blanchard and Maxim Duncan; Editing by Jonathan Thatcher)

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Artist Francis Bacon's painting ''Untitled (Pope),'' which Bacon painted circa 1954, is shown in this publicity image released to Reuters September 27, 2012.

NEW YORK | Thu Sep 27, 2012 5:52pm EDT

NEW YORK (Reuters) - A painting from Francis Bacon's iconic screaming Pope series, which has not been seen in public since 1975, is hitting the auction block where it is expected to sell for as much as $25 million, Sotheby's said on Thursday.

"Untitled (Pope)," which Bacon painted circa 1954, will be sold at the November 13 New York sale of impressionist and modern art, the auction house said in a statement.

"This is a great collecting opportunity," Oliver Barker, Sotheby's senior specialist for contemporary art, told Reuters in a telephone interview.

"Paintings of this nature have become tremendously important in terms of asset value," he said, adding that Bacon's early Pope paintings "are truly unattainable objects" with most gracing museum walls and only a few remaining in private hands.

Sotheby's said the work was last sold, and seen in public, in 1975, when a collector it declined to identify bought it for $71,500 at its London auction.

"The timing is absolutely right to capture the upward momentum of the Bacon market," Barker said, noting that prices in recent years "have been driven by an international reassessment of his works by the market".

Barker said Bacon's most desirable works were his Pope series.

Works by the British painter have commanded high prices. A female nude sold for $34 million in London in February, and his "Triptych, 1976" went for $86 million in New York in May 2008.

Art prices have recovered since the financial crisis, and Barker said several of the highest prices for Bacons had been realized in the last three or four years.

Sotheby's has estimated the painting will fetch $18 million to $25 million. It will go on exhibition in Los Angeles on Thursday and be shown in London and New York before the auction.

(Editing By Christine Kearney)

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Author J.K Rowling poses for photographers with a copy of her adult fiction book ''The Casual Vacancy'', at the Queen Elizabeth Hall in London September 27, 2012.

LONDON | Thu Sep 27, 2012 7:47pm EDT

LONDON (Reuters) - What does the author of the most eagerly awaited book of the year do on publication day?

If you are J.K. Rowling, whose adult fiction debut "The Casual Vacancy" hit the shelves on Thursday, you watch a movie in your hotel, avoid reading newspaper reviews and later in the evening address 900 people at a question-and-answer session.

The 47-year-old read from her new novel and took questions on death, digital publishing and the Olympics opening ceremony at her first public appearance to promote The Casual Vacancy held at London's Southbank Centre (southbankcentre.co.uk).

She engaged openly with fans, at one point accepting a gift from a breathless visitor from Spain whom she embraced and kissed on stage, and later personally signed hundreds of copies of her new book.

Asked by moderator Mark Lawson how she had spent her day, she replied: "I've spent most of the day trying to avoid newspapers. I will read reviews, but I don't like to do it on a day where I've got to go out and talk about the book.

"We sat in our hotel and watched 'Men in Black 3'. I'd never seen it. It was very good".

Rowling, who received mixed reviews for her gritty tale about a small English town, added that she probably would read what critics had to say eventually, just as she did with the seventh and final Harry Potter instalment published in 2007.

"With ('Harry Potter and the) Deathly Hallows' I didn't read any of the reviews at all for ages.

"I kind of felt about Hallows the way I feel about this book. In both cases I felt well, I've done the best I can do, the book is what I want it to be, so, I don't mean it in an arrogant way, that's it. I'm done. So it doesn't really matter.

"I did later. It was months later. It takes the heat out of it if you're not reading them on publication day."

"SOCIALIST MANIFESTO"

The release of The Casual Vacancy is one of the highlights of the publishing calendar this year, with hefty sales expected for a writer whose Potter series sold 450 million copies and who went on to become the world's first billionaire author.

Rowling could not resist mentioning one review, however, which she had clearly either read or been told about.

Jan Moir wrote a scathing assessment in the Daily Mail, a newspaper considered the preserve of the middle class which Moir felt Rowling had unfairly lampooned in her book.

Moir described The Casual Vacancy as "more than 500 pages of relentless socialist manifesto masquerading as literature", a description Rowling, who was an unemployed single mother living on state benefits when she started writing the Potter books, took as a compliment.

"A 500 page socialist manifesto. I high-fived my husband!" she joked. "I thought that's all right. It made me laugh so much. Apart from Men in Black 3 that was the highlight of my day."

Rowling was asked why death was such a prominent theme throughout her work.

"Death obsesses me. What can I tell you?" she said. "I can't really understand why it doesn't obsess everyone. I think it does really, I'm just maybe a little more out about it.

"It's made me much less afraid of it," she added later. "I think things lose their mystique when you think about them a lot and you consider them a lot.

"I'm frightened of leaving my children. It's the thing I dislike most about the idea that I will die, but death itself doesn't frighten me really."

POTTER MISTAKES

She said she understood why her publishers, Little, Brown Book Group, had imposed strict conditions on allowing journalists to read the book before publication.

"The internet really has changed everything. It's the net that's done it," she explained, quoting examples of other leading writers who had seen their manuscripts end up online or proofs being auctioned on eBay.

"As a writer that is a horrible, horrible experience."

On Potter, Rowling admitted she had made mistakes, in particular a mirror belonging to the character Sirius Black in "Harry Potter and the Order of the Phoenix", the fifth book.

The "Marauder's Map" used by Potter was also problematic.

"Half way through the series I cursed myself for giving Harry the Marauder's Map, because it was far too useful an object so I had to take it away from him and then give it back to him.

"That's the trouble. You invent these amazing objects, and then they cause you as much trouble as they solve. So quite a bit of that went on."

In a separate BBC Radio interview broadcast on Thursday, Rowling said that the world of witches and wizards "does sometimes tug at me a little bit," although she had no plans to write anything else Potter-related.

"I've always said never say never purely because I liked it and I might want to do it again, but Harry's stories I am as sure as you can be it is done."

Rowling added that two books for children "are pretty well developed" and she knew what her next one for adults would be, although it was "not very well advanced."

(Editing by Paul Casciato)

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Actress Amanda Bynes arrives for the premiere of the film ''Semi-Pro'' at the Mann Village Theater in Los Angeles, February 19, 2008.

LOS ANGELES | Thu Sep 27, 2012 2:49pm EDT

LOS ANGELES (Reuters) - Former child star Amanda Bynes pleaded not guilty on Thursday to a pair of hit-and-run charges - just two of a slew of alleged driving violations over the past six months that have led to the suspension of her license.

Bynes, 26, did not show up for the brief court hearing in a Los Angeles suburb, but entered the pleas through her attorney. The misdemeanor charges resulted from two minor crashes in April and August, according to court documents.

Bynes, who had her own comedy sketch TV show at the age of 13, has been hitting headlines for all the wrong reasons over the past half year.

The "Hairspray" actress was charged last week with two counts of driving on a suspended license in the Los Angeles area in September. She has pleaded not guilty to driving under the influence in the nightclub section of West Hollywood in April.

Bynes, the latest young Hollywood actress whose life has apparently derailed, now has three court dates in October on the various charges.

She has strenuously denied drinking and driving, and has shrugged off multiple reports of bizarre behavior.

"I am doing amazing," Bynes, whose last film was "Easy A" in 2010, told People magazine last week. "I don't drink and drive. It is all false."

(Reporting by Jill Serjeant; Editing by Dale Hudson)

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Professor Alessandro Vezzosi, Director of the Museo Ideale Leonardo da Vinci, points to details on a painting attributed to Leonardo da Vinci and representing Mona Lisa during a presentation in Geneva September 27, 2012.

GENEVA | Thu Sep 27, 2012 3:17pm EDT

GENEVA (Reuters) - A Swiss-based art foundation on Thursday unveiled what it argues is Leonardo da Vinci's original "Mona Lisa", backing its claim with evidence from a U.S. research physicist, a forensic imaging specialist and a top Italian expert on the artist.

Members of the group told a packed Geneva news conference that the portrait of a woman who appears to be some 10 years younger than the sitter in the famous painting in the Paris Louvre could only be the work of the Renaissance genius.

"The facts are overwhelming and clearly prove the authenticity of the masterpiece," said Swiss lawyer Markus Frey, president of the private Mona Lisa Foundation which insists it has no financial stake in the painting.

And Stanley Feldman, an art historian and member of the group, said that critics who have rejected any suggestion the "younger" version could be by Leonardo had never seen it. "We invite them to Geneva to study it themselves," he added.

"It is absolutely clear that neither this nor the Louvre version are copies," he said, in a clear response to British Leonardo authority Martin Kemp, who told a London newspaper last week "so much is wrong" with the foundation's painting, including that it is painted on canvas and not on wood, the artist's preferred medium.

In a luxurious 300-page publication devoted to research over 30 years on what has long been known as the "Isleworth Mona Lisa," the foundation argues that it was painted between 1503 and 1505 in Florence and never finished.

Alessandro Vezzosi, director of the Leonardo museum in the Renaissance giant's home town of Vinci in central Italy and a world-renowned expert on the artist, said he had long believed in the existence of two Mona Lisas.

The foundation's version -- which has been owned since 2008 by a private consortium -- seemed likely to be the one that was recorded in a recently discovered document from 1503 and which he had long been seeking, said Vezzosi.

SAME ENIGMATIC SMILE

Slightly larger than the Paris portrait, which is widely dubbed "the world's most famous painting," it shows a woman in an identical pose, the same enigmatic smile and with the same geometric proportions.

John Asmus, a former space scientist from the University of California who has developed digitization techniques to study art works and applied them to the Louvre Mona Lisa, said his studies indicated Leonardo also painted the "Isleworth" version.

And Joe Mullins, an FBI-trained forensic imaging specialist, showed how he had made a computerized version of the woman in the Paris portrait as she would have been 10 years earlier and found it almost identical to the newly unveiled version.

Neither Vezzosi, Asmus or Mullins are members of the foundation.

Documents prove the painting, known in French as "La Joconde" and in Italian "La Giaconda", was commissioned from Leonardo by Florentine nobleman Francesco del Giacondo as a portrait of his wife, Lisa Gherardini.

Leonardo -- also an architect, sculptor and engineer -- left Florence in 1506, apparently delivering the unfinished work to Giacondo before leaving, as documents record it was seen there some 30 years later.

According to backers of the "Younger" Mona Lisa, the Paris version was probably painted around 1516 when the painter left for France. Before he died in 1519 in a small chateau on the Loire he is known to have shown visitors a Mona Lisa.

After his death, it found its way into the collection of French King Francois 1, and from there to the Louvre.

The "younger" version first surfaced in 1913 when British art connaisseur and painter Hugh Blaker found it in a manor house in western England, recording that it had been hanging there for about 150 years.

For the next 20 years, it hung in his home in the London suburb of Isleworth, so gaining its name.

But efforts by Blaker, who died in 1936, and subsequent owners to convince the art world at large of its authenticity failed. "What we want now if for people to come and look at this with an open mind," Feldman told the news conference.

(Reporting by Robert Evans, editing by Paul Casciato)

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BRUSSELS | Thu Sep 27, 2012 12:27pm EDT

BRUSSELS (Reuters) - The outlook for Europe's economy darkened on Thursday with euro zone business confidence falling to a three-year low and a range of economic indicators across the continent pointing towards recession.

Shrinking lending and rising unemployment in Germany, until now a mainstay for growth in the euro zone, added to the gloom, with economists saying there was now no hope of growth for the region in the third quarter of the year.

"It is bad. Everything is down, we are heading towards another quarterly economic contraction," said Carsten Brzeski, economist at ING bank in Brussels.

The euro zone economy stagnated in the first three months of the year and contracted 0.2 percent in the April-June period. Economists expect another contraction in the third quarter.

Two consecutive quarters of contraction is considered to mark recession.

"While the (European Central Bank's) promise of bond buying and the German court ruling (endorsing the euro zone's permanent bailout fund) did a lot to calm financial markets, there is still the big issue of non-existent growth," Brzeski said.

The European Commission's monthly economic sentiment survey showed the index for the 17 countries sharing the euro falling to 85 points this month from 86.1 in August. Economists polled by Reuters had expected no change.

"It's yet another blow to euro zone growth hopes, especially as it follows on from the purchasing managers' surveys indicating that services and manufacturing output contracted at the fastest rate for 39 months in September," said Howard Archer, economist at IHS Global Insight.

"Consequently, it appears that the euro zone has suffered further, appreciable GDP contraction in the third quarter. This would put the euro zone officially into recession."

The European Commission's business climate indicator for the euro area, which points to the phase of the economic cycle, fell to -1.34 points in September from -1.18 in August, against market expectations of -1.19 points. The September reading was the lowest since October 2009.

GLOOM

More evidence of economic gloom in the third quarter came from European Central Bank data on lending to households and companies, which showed credit to the economy fell more than expected in August.

Loans to the private sector fell 0.6 percent from the same month a year ago, data released by the European Central Bank showed on Thursday, coming in below the expectations of economists polled by Reuters for no change.

The flow of loans to non-financial firms fell 10 billion euros after rising by 8 billion euros in July. The monthly flow of loans to households showed a gain of 7 billion euros after a drop of 1 billion euros in the previous month.

The Commission sentiment survey showed euro zone sentiment in industry declined to -16.1 in September from -15.4 in August, and to -12 in the services sector from -10.8.

"The country breakdown signals a sharper deterioration in the core than in the peripheries, the latter, however, remained at extremely low levels," said Evelyn Herrmann, European economist at BNP Paribas.

Germany, long the main engine of the euro zone economy, was suffering too.

"German economic sentiment posted another deterioration to an index level of 94.7 from 95.8, which, again, was mostly driven by the manufacturing sector, but also by the services sector," she said.

German unemployment rose for a sixth month running in September, suggesting domestic demand might not be able to compensate for weakening exports amid the euro zone crisis and power growth in the bloc's number one economy.

Joblessness remains near to its lowest level since German reunification more than two decades ago, and the unemployment rate held steady at 6.8 percent, contrasting starkly with the sickly labor market in many peers, including France and Spain.

But it rose by 9,000 in September, as the global slowdown and the euro zone's three-year-old crisis weigh on exports and prompt companies to hold back on investment, and economists said they saw it rising more in the months ahead.

The Commission data showed sentiment among euro zone consumers - the buying public - fell to -25.9 from -24.6 and to -18.6 from -17.2 in retail trade. Construction was the only sector where confidence improved marginally, to -31.9 from -33.1 in August.

The data also showed that inflation expectations rose among producers, the services sector and households alike, potentially complicating any possible decision by the European Central Bank to cut interest rates and help the economy.

But ING's Brzeski said the results of the Commission survey on inflation expectations were more closely correlated to ongoing price developments, with opinions strongly influenced by the spike in fuel prices.

"It does not make life easier for the ECB, but, under (President Mario) Draghi, the ECB has become more growth oriented with inflation more a derivative of growth, so with this drop in growth, the window for another rate cut this year is still open," he added.

(Reporting By Jan Strupczewski; editing by Rex Merrifield/Jeremy Gaunt)

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