Dow falls more than 1 percent

NEW YORK (Reuters) - Stocks fell for a fourth day in a row on Thursday and a measure of investor anxiety hit its highest in five months after the top Senate Democrat warned a deal to avoid fiscal austerity measures may not be reached by the December 31 deadline.

The comments by Senate Majority Leader Harry Reid just days before the hefty tax hikes and spending cuts go into effect pushed stocks down. The S&P 500 has lost 2.7 percent over the past four days, its worst such run in over a month.

A four-day drop would also mark the S&P 500's longest losing streak in three months as Wall Street wakes up to the possibility that a deal may not be reached until next year.

The CBOE VIX volatility index <.vix>, a measure of investor fear, jumped above 20 for the first time since July, climbing around 4 percent in another sign of growing concern. Investors fear the so-called fiscal cliff could push the economy into recession next year.

The VIX's "recent spike seems to suggest that market participants are bracing for a rather significant uptick in market volatility in early 2013," said Frederic Ruffy, options strategist at WhatsTrading.com.

Stocks in the materials and the financial sectors, which are more vulnerable to the economy's performance, took the brunt of the selling. Shares in Bank of America fell 2 percent to $11.29, while Freeport-McMoRan Copper & Gold fell 1.6 percent to $33.38.

Reid criticized Republicans for refusing to go along with any tax increases as part of a compromise solution with Democrats. Referring to the fiscal cliff, he said: "It looks like where we're headed."

The Dow Jones industrial average <.dji> was down 106.63 points, or 0.81 percent, at 13,007.96. The Standard & Poor's 500 Index <.spx> was down 12.33 points, or 0.87 percent, at 1,407.50. The Nasdaq Composite Index <.ixic> was down 27.48 points, or 0.92 percent, at 2,962.68.

Frank Lesh, a futures analyst and broker at FuturePath Trading in Chicago, said his clients have been delaying trading due to uncertainty about the fiscal cliff, making the year-end period quieter than usual.

"With the added drama in Washington, we have got even more people sidelined," he said. "No one knows how this turns out or how the markets are going to react to it."

President Barack Obama arrived back in Washington from Hawaii to restart stalled negotiations with Congress. House Speaker John Boehner and other Republican leaders were to hold a conference call with Republican lawmakers. The expectation was that lawmakers would be told to get back to Washington quickly if the Senate passed a bill.

Treasury Secretary Timothy Geithner announced the first of a series of measures that should push back the date when the U.S. government will hit its legal borrowing authority - a limit known as the debt ceiling - by about two months.

Economic data seemed to confirm worries about the impact of the fiscal cliff on the economy.

The Conference Board, an industry group, said its index of consumer attitudes in December fell to 65.1 as the budget crisis dented growing optimism about the economy. The gauge fell more than expected from 71.5 in November.

However, the job market continues to mend. Initial claims for unemployment benefits dropped 12,000 to a seasonally adjusted 350,000 last week and the four-week moving average fell to the lowest since March 2008.

But recent signs that the economy is improving have taken a back seat to the political uncertainty.

"The U.S. equity market has not yet adequately responded to a genuinely improving macro backdrop, and is probably held back by uncertainties surrounding the resolution of the 'fiscal cliff'," said Goldman Sachs in a research note.

Marvell Technology Group fell 4.2 percent to $7.09 after it said it would seek to overturn a jury's finding of patent infringement. The stock had fallen more than 10 percent in the previous session after a jury found the company infringed patents held by Carnegie Mellon University and ordered the chipmaker to pay $1.17 billion in damages.

(Reporting by Edward Krudy; Additional reporting by Doris Frankel; Editing by Jan Paschal and Kenneth Barry)

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United Arab Emirates Arrests Suspects in Terror Plots

DUBAI, United Arab Emirates (Reuters) — Security forces in the United Arab Emirates have arrested members of a cell made up of militants from Saudi Arabia and the emirates who were planning to carry out attacks in both countries and in other states, the official Emirates News Agency said on Wednesday.

The federation of seven emirates, a major oil exporter and an ally of the United States, has had no attacks by Al Qaeda and other terrorist groups. But Islamist sentiment has risen in recent years, and Dubai, a business and tourism hub that attracts many Westerners, could make an attractive target for militants, analysts say.

The suspects had acquired materials and equipment for use in what the news agency called terrorist operations.

“The security authorities in the U.A.E., in coordination with the related security parties in Saudi Arabia, announced the arrest of an organized cell from the deviant group that was planning to carry out actions against national security of both countries and some brotherly states,” the agency said, without elaborating.

The phrase “deviant group” is often used by the authorities in Saudi Arabia to describe Al Qaeda.

In August, the Saudi authorities arrested a group of militants in Riyadh — mostly Yemeni nationals — suspected of having links to Al Qaeda. Thousands of people believed to be militants have been arrested since dozens were killed in terrorist attacks between 2003 and 2006 on Saudi residential compounds and offices for foreign workers and on government facilities.

The United States has poured aid into Yemen to stem the threat of attacks from the group Al Qaeda in the Arabian Peninsula and to try to prevent any spillover of violence into Saudi Arabia, the world’s top oil exporter.

In 2010, Al Qaeda in the Arabian Peninusla, formed with the merger of Al Qaeda’s Yemeni and Saudi branches, said it was behind a plot to send two parcel bombs to the United States. The bombs were intercepted in Britain and Dubai.

Though the emirates have escaped much of the upheaval that has shaken the Arab world, the authorities there have moved swiftly to stem any sign of political dissent, detaining more than 60 Islamists this year over suspected threats to state security and links to foreign groups.

Those detainees, who belong to an Islamist group called Al-Islah, have confessed to setting up a secret organization with an armed force whose aim was to take power and establish an Islamic state, the local news media reported in September. The group denied the accusations.

Many of the detained Islamists are from the more religiously conservative northern emirates like Sharjah and Ras al-Khaimah, which produced one of the Sept. 11 hijackers.

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Harley Pasternak Blogs: The 5 Best Bodies of 2012

Celebrity Blog

By Harley Pasternak

12/26/2012 at 01:45 PM EST

Harley Pasternak

Courtesy Harley Pasternak

In 2012 we re-elected our president, fell in love with Honey Boo Boo and danced "Gangnam Style."

For me, 2012 was an incredibly rewarding year. First off, I'm healthy. Without health, nothing else matters. Second, as a fitness trainer I've been blessed with a profession that helps other people become healthier, feel better and look better. Below are five of my celebrity clients I was very proud to help this year. Their dedication to healthy eating and regular exercise sets a great example for all of their fans – including me.

1. Jessica Simpson's Post-Baby Weight Loss
Perhaps the biggest story this year in Hollywood bodies was Jessica's amazing post-baby transformation. With the help of Weight Watchers' point-based nutrition plan and three to four sessions a week with me, Jessica shed all her baby weight (and then some!).

During our workouts, we focused on training one upper body exercise, one lower body exercise and one core exercise to maximize calorie burn and muscle tone. I also got Jessica to wear a pedometer and go walking. Jessica even gave her whole Weight Watchers group pedometers to inspire them all to walk over 10,000 steps a day. (Of course, now that she's expecting baby No. 2, Jessica will modify her exercise and nutrition appropriately.)

2. Jordana Brewster
The Brazilian beauty and her husband Andrew have been longtime clients. As she appeared on both the big screen (The Fast and the Furious) and small screen (Dallas), Jordana was a busy – and fit! – lady.

Aside from our three workouts a week, she truly perfected her healthy eating lifestyle with three meals and two snacks a day. From my 5-factor oatmeal frittatas for breakfast, to my shrimp quesadillas for lunch and delicious stir-fries for dinner, Jordana was on top of her diet. She also started to use her blender this year, following some of my new Body Reset Diet recipes.

3. Maria Menounos
Fresh off of a grueling Dancing with the Stars season, the Extra host and WWE wrestler was riddled with injuries and had zero free time to exercise. So, we focused on her diet and non-gym physical activity to sculpt her incredible body into top form for the cover of Men's Health magazine.

Maria blended smoothies (from the Body Reset Diet) for breakfasts and lunches, cooked a variety of healthy salads, stir-fries and seafood for dinners, and ate her favorite Greek yogurt-covered snack bars between meals. It all paid off as she blew everyone away with her flawless photos.

4. The Year of the Kardashians
The Kardashian sisters continued to wow in 2012. Occasionally, I get the chance to kick their butts in the gym. I make sure to focus on their posterior muscle groups – the back, triceps, glutes and hamstrings – using strengthening moves like dumbbell deadlifts, superman and lying triceps extensions. These exercises improve posture and protect against injury.

I also got the girls and their age-defying mother, Kris Jenner, to get friendly with their blenders. The girls try to make at least one of their daily meals a delicious Body Reset Diet smoothie.

5. Megan Fox's Post-Baby Body

Megan Fox and Brian Austin Green

John Shearer / Invision / AP

As 2012 was the year of many celeb post-baby transformations (including three of my clients), it's only fitting that the top two stories are new mommy bounce-backs. Largely due to the fact that Megan stayed so active and fit during her pregnancy, only three weeks after delivering baby Noah, she was red carpet ready and as stunning as ever. Megan and her husband, Brian Austin Green (also a client) made eating well and working out with me a top priority.

I hope 2012 was an incredibly happy, healthy and successful year for all of you. And may next year bring you even more of the same.

Tweet me your New Year's resolutions @harleypasternak

Check back every Wednesday for more insider tips from celebrity trainer Harley Pasternak on Hollywood's hottest bodies – and learn how to get one yourself! Plus: follow Harley on Twitter at @harleypasternak

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Predicting who's at risk for violence isn't easy

CHICAGO (AP) — It happened after Columbine, Virginia Tech, Aurora, Colo., and now Sandy Hook: People figure there surely were signs of impending violence. But experts say predicting who will be the next mass shooter is virtually impossible — partly because as commonplace as these calamities seem, they are relatively rare crimes.

Still, a combination of risk factors in troubled kids or adults including drug use and easy access to guns can increase the likelihood of violence, experts say.

But warning signs "only become crystal clear in the aftermath, said James Alan Fox, a Northeastern University criminology professor who has studied and written about mass killings.

"They're yellow flags. They only become red flags once the blood is spilled," he said.

Whether 20-year-old Adam Lanza, who used his mother's guns to kill her and then 20 children and six adults at their Connecticut school, made any hints about his plans isn't publicly known.

Fox said that sometimes, in the days, weeks or months preceding their crimes, mass murderers voice threats, or hints, either verbally or in writing, things like "'don't come to school tomorrow,'" or "'they're going to be sorry for mistreating me.'" Some prepare by target practicing, and plan their clothing "as well as their arsenal." (Police said Lanza went to shooting ranges with his mother in the past but not in the last six months.)

Although words might indicate a grudge, they don't necessarily mean violence will follow. And, of course, most who threaten never act, Fox said.

Even so, experts say threats of violence from troubled teens and young adults should be taken seriously and parents should attempt to get them a mental health evaluation and treatment if needed.

"In general, the police are unlikely to be able to do anything unless and until a crime has been committed," said Dr. Paul Appelbaum, a Columbia University professor of psychiatry, medicine and law. "Calling the police to confront a troubled teen has often led to tragedy."

The American Academy of Child & Adolescent Psychiatry says violent behavior should not be dismissed as "just a phase they're going through."

In a guidelines for families, the academy lists several risk factors for violence, including:

—Previous violent or aggressive behavior

—Being a victim of physical or sexual abuse

—Guns in the home

—Use of drugs or alcohol

—Brain damage from a head injury

Those with several of these risk factors should be evaluated by a mental health expert if they also show certain behaviors, including intense anger, frequent temper outbursts, extreme irritability or impulsiveness, the academy says. They may be more likely than others to become violent, although that doesn't mean they're at risk for the kind of violence that happened in Newtown, Conn.

Lanza, the Connecticut shooter, was socially withdrawn and awkward, and has been said to have had Asperger's disorder, a mild form of autism that has no clear connection with violence.

Autism experts and advocacy groups have complained that Asperger's is being unfairly blamed for the shootings, and say people with the disorder are much more likely to be victims of bullying and violence by others.

According to a research review published this year in Annals of General Psychiatry, most people with Asperger's who commit violent crimes have serious, often undiagnosed mental problems. That includes bipolar disorder, depression and personality disorders. It's not publicly known if Lanza had any of these, which in severe cases can include delusions and other psychotic symptoms.

Young adulthood is when psychotic illnesses typically emerge, and Appelbaum said there are several signs that a troubled teen or young adult might be heading in that direction: isolating themselves from friends and peers, spending long periods alone in their rooms, plummeting grades if they're still in school and expressing disturbing thoughts or fears that others are trying to hurt them.

Appelbaum said the most agonizing calls he gets are from parents whose children are descending into severe mental illness but who deny they are sick and refuse to go for treatment.

And in the case of adults, forcing them into treatment is difficult and dependent on laws that vary by state.

All states have laws that allow some form of court-ordered treatment, typically in a hospital for people considered a danger to themselves or others. Connecticut is among a handful with no option for court-ordered treatment in a less restrictive community setting, said Kristina Ragosta, an attorney with the Treatment Advocacy Center, a national group that advocates better access to mental health treatment.

Lanza's medical records haven't been publicly disclosed and authorities haven't said if it is known what type of treatment his family may have sought for him. Lanza killed himself at the school.

Jennifer Hoff of Mission Viejo, Calif. has a 19-year-old bipolar son who has had hallucinations, delusions and violent behavior for years. When he was younger and threatened to harm himself, she'd call 911 and leave the door unlocked for paramedics, who'd take him to a hospital for inpatient mental care.

Now that he's an adult, she said he has refused medication, left home, and authorities have indicated he can't be forced into treatment unless he harms himself — or commits a violent crime and is imprisoned. Hoff thinks prison is where he's headed — he's in jail, charged in an unarmed bank robbery.

___

Online:

American Academy of Child & Adolescent Psychiatry: http://www.aacap.org

___

AP Medical Writer Lindsey Tanner can be reached at http://www.twitter.com/LindseyTanner

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Retailers lead Wall Street lower, "cliff" still a concern

NEW YORK (Reuters) - Stocks fell on Wednesday, dragged lower by retail stocks after a report showed consumers were less enthusiastic about the holiday shopping season than last year.

Many investors said concerns about the "fiscal cliff" kept shoppers away from stores, suggesting markets may struggle to make any ground until next year.

Holiday-related sales rose 0.7 percent from October 28 through December 24, compared with a 2 percent increase last year, according to data from MasterCard Advisors SpendingPulse. The Morgan Stanley retail index <.mvr> skidded 1.8 percent while the SPDR S&P Retail Trust slipped 1.5 percent to 61.24.

"With the 'fiscal cliff' hanging over our heads, it was hard to convince people to shop, and now it's hard to convince investors that there's any reason to buy going into year-end," said Rick Fier, director of trading at Conifer Securities in New York.

President Barack Obama is due back in Washington early Thursday for a final effort to negotiate a deal with Congress to bridge a series of tax increases and government spending cuts set to begin next week, the so-called "fiscal cliff" many economists worry could push the economy into recession if it takes effect.

Coach Inc fell 6 percent to $54.08 as the biggest decliner on the S&P 500, followed by Ralph Lauren Corp , off 4 percent to $144.99. Online retailer Amazon.com fell 3.1 percent to $250.52. Gamestop Corp , Urban Outfitters and Abercrombie & Fitch were also among the S&P's biggest decliners.

The Dow Jones industrial average <.dji> was down 34.16 points, or 0.26 percent, at 13,104.92. The Standard & Poor's 500 Index <.spx> was down 6.57 points, or 0.46 percent, at 1,420.09. The Nasdaq Composite Index <.ixic> was down 18.82 points, or 0.62 percent, at 2,993.78.

Volume was light, with only 2.17 billion shares having traded at midday on the New York Stock Exchange, the Nasdaq and the NYSE MKT. Many senior traders were still on vacation during this holiday-shortened week and major European markets were closed for the day.

Still, Wednesday marked the third day of losses for the S&P 500 in its worst three-day decline since mid-November.

A Republican plan that failed to gain traction last week triggered the S&P 500's recent drop, highlighting the market's sensitivity to headlines centered on the budget talks.

During the last five trading days of the year and the first two of next year, it's possible for a "Santa rally" to occur. Since 1928, the S&P 500 has averaged a gain of 1.8 percent during that period and risen 79 percent of the time, according to data from PrinceRidge.

"While it's unlikely there could be a budget deal at any time, no one wants to get in front of that trade," said Conifer's Fier, who helps oversee about $12 billion in assets. "Investors can easily make up for any gains when there's more action in 2013."

The benchmark S&P 500 Index is up 12.8 percent for the year, and has recouped nearly all of the losses after the U.S. election, when the "fiscal cliff" concerns moved to the forefront. This is the best yearly gain for the S&P 500 since 2010.

Data showed U.S. single-family home prices rose in October, reinforcing the view that the domestic real estate market is improving, as the S&P/Case-Shiller composite index of 20 metropolitan areas gained 0.7 percent in October on a seasonally adjusted basis.

In the energy sector, China's Sinopec Group and ConocoPhillips will research potentially vast reserves of shale gas in southwestern China over the next two years, state news agency Xinhua reported. Conoco's stock fell 0.8 percent to $57.99.

An outage at one of Amazon.com Inc's web service centers hit users of Netflix Inc's streaming video service on Christmas Eve and was not fully resolved until Christmas Day, a spokesman for the movie rental company said on Tuesday. Netflix rose 0.8 percent to $90.97.

(Editing by Dan Grebler)

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Chinese Driver Runs Down Students

HONG KONG — A man angry over a court ruling in the case of his daughter’s murder used his car to run down a group of  high school students in northern China, causing 13 to be hospitalized with injuries, the local government and the state news media reported on Tuesday. It was the second major attack on students in China in less than two weeks.

The man, Yin Tiejun, 48, ran down 23 students at the school in Fengning County, in Hebei Province, during their lunch break on Monday, Xinhua, the state news agency, reported. He then tried to set fire to his car by igniting a container of diesel fuel. Xinhua quoted the police as saying he was upset that the court had not sentenced all of his daughter’s killers to death. Mr. Yin was detained on charges of endangering public safety.  

One of the hospitalized students suffered a serious head injury, while another had two broken ankles and a third had a concussion, the local government said.

The Beijing Times said the driver made no apparent effort to slow down before hitting the students and did not stop until he hit a taxi soon after.

As with the previous attack, in which a man with a meat cleaver injured 23 students in adjacent Henan Province on Dec. 14, the episode received limited attention from the state news media. The Chinese media have given heavy coverage instead to the school massacre in Newtown, Conn., and the shootings on Monday of four firefighters, two of whom died, in Webster, N.Y.

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Jessica Simpson Confirms: I'm Pregnant Again!

Mom & Babies
Celebrity Baby Blog

12/25/2012 at 12:15 PM ET

Courtesy Jessica Simpson; Jamie McCarthy/WireImage

It’s official: the stork is once again headed to Jessica Simpson‘s house!

Just seven months after the singer and actress delivered daughter Maxwell Drew, Simpson and fiancé Eric Johnson are expecting their second child, the couple announced via Twitter Christmas Day.

Amid growing pregnancy speculation online, the Fashion Star mentor, 32, shared a photo of her baby girl wearing holiday pajamas and smiling in the sand atop the words, “BIG SIS.”

“Merry Christmas from my family to yours!” Simpson writes.

Recently, Simpson has been spotted around Los Angeles in loose-fitting clothing. She also appeared, in a figure-hugging black dress, at best friend Cacee Cobb‘s recent wedding to Donald Faison, where she served as maid of honor.
Simpson also had been touting her recent post-pregnancy weight loss of 60 lbs. after starring in commercials for Weight Watchers and working out with celebrity trainer Harley Pasternak.

– Andrea Billups and Sarah Michaud

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Predicting who's at risk for violence isn't easy

CHICAGO (AP) — It happened after Columbine, Virginia Tech, Aurora, Colo., and now Sandy Hook: People figure there surely were signs of impending violence. But experts say predicting who will be the next mass shooter is virtually impossible — partly because as commonplace as these calamities seem, they are relatively rare crimes.

Still, a combination of risk factors in troubled kids or adults including drug use and easy access to guns can increase the likelihood of violence, experts say.

But warning signs "only become crystal clear in the aftermath, said James Alan Fox, a Northeastern University criminology professor who has studied and written about mass killings.

"They're yellow flags. They only become red flags once the blood is spilled," he said.

Whether 20-year-old Adam Lanza, who used his mother's guns to kill her and then 20 children and six adults at their Connecticut school, made any hints about his plans isn't publicly known.

Fox said that sometimes, in the days, weeks or months preceding their crimes, mass murderers voice threats, or hints, either verbally or in writing, things like "'don't come to school tomorrow,'" or "'they're going to be sorry for mistreating me.'" Some prepare by target practicing, and plan their clothing "as well as their arsenal." (Police said Lanza went to shooting ranges with his mother in the past but not in the last six months.)

Although words might indicate a grudge, they don't necessarily mean violence will follow. And, of course, most who threaten never act, Fox said.

Even so, experts say threats of violence from troubled teens and young adults should be taken seriously and parents should attempt to get them a mental health evaluation and treatment if needed.

"In general, the police are unlikely to be able to do anything unless and until a crime has been committed," said Dr. Paul Appelbaum, a Columbia University professor of psychiatry, medicine and law. "Calling the police to confront a troubled teen has often led to tragedy."

The American Academy of Child & Adolescent Psychiatry says violent behavior should not be dismissed as "just a phase they're going through."

In a guidelines for families, the academy lists several risk factors for violence, including:

—Previous violent or aggressive behavior

—Being a victim of physical or sexual abuse

—Guns in the home

—Use of drugs or alcohol

—Brain damage from a head injury

Those with several of these risk factors should be evaluated by a mental health expert if they also show certain behaviors, including intense anger, frequent temper outbursts, extreme irritability or impulsiveness, the academy says. They may be more likely than others to become violent, although that doesn't mean they're at risk for the kind of violence that happened in Newtown, Conn.

Lanza, the Connecticut shooter, was socially withdrawn and awkward, and has been said to have had Asperger's disorder, a mild form of autism that has no clear connection with violence.

Autism experts and advocacy groups have complained that Asperger's is being unfairly blamed for the shootings, and say people with the disorder are much more likely to be victims of bullying and violence by others.

According to a research review published this year in Annals of General Psychiatry, most people with Asperger's who commit violent crimes have serious, often undiagnosed mental problems. That includes bipolar disorder, depression and personality disorders. It's not publicly known if Lanza had any of these, which in severe cases can include delusions and other psychotic symptoms.

Young adulthood is when psychotic illnesses typically emerge, and Appelbaum said there are several signs that a troubled teen or young adult might be heading in that direction: isolating themselves from friends and peers, spending long periods alone in their rooms, plummeting grades if they're still in school and expressing disturbing thoughts or fears that others are trying to hurt them.

Appelbaum said the most agonizing calls he gets are from parents whose children are descending into severe mental illness but who deny they are sick and refuse to go for treatment.

And in the case of adults, forcing them into treatment is difficult and dependent on laws that vary by state.

All states have laws that allow some form of court-ordered treatment, typically in a hospital for people considered a danger to themselves or others. Connecticut is among a handful with no option for court-ordered treatment in a less restrictive community setting, said Kristina Ragosta, an attorney with the Treatment Advocacy Center, a national group that advocates better access to mental health treatment.

Lanza's medical records haven't been publicly disclosed and authorities haven't said if it is known what type of treatment his family may have sought for him. Lanza killed himself at the school.

Jennifer Hoff of Mission Viejo, Calif. has a 19-year-old bipolar son who has had hallucinations, delusions and violent behavior for years. When he was younger and threatened to harm himself, she'd call 911 and leave the door unlocked for paramedics, who'd take him to a hospital for inpatient mental care.

Now that he's an adult, she said he has refused medication, left home, and authorities have indicated he can't be forced into treatment unless he harms himself — or commits a violent crime and is imprisoned. Hoff thinks prison is where he's headed — he's in jail, charged in an unarmed bank robbery.

___

Online:

American Academy of Child & Adolescent Psychiatry: http://www.aacap.org

___

AP Medical Writer Lindsey Tanner can be reached at http://www.twitter.com/LindseyTanner

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Yen on defensive on U.S. fiscal worry, helps Nikkei

TOKYO (Reuters) - Uncertainty over whether U.S. lawmakers will strike a deal by an end-of-year deadline to avert a severe fiscal retrenchment undermined the yen and bolstered Japanese shares on Tuesday in low volume, with many participants away on Christmas holiday.

The dollar rose to a 20-month high of 84.965 yen early on Tuesday in Asia, as Japanese markets caught up with global investors who had reacted overnight to incoming Japanese Prime Minister Shinzo Abe's weekend comments that raised the pressure on the Bank of Japan.

During a meeting on Tuesday with officials from Japan's major business lobby, Keidanren, Abe reiterated calls on the BOJ to conduct bold monetary easing to beat deflation by setting an inflation target of 2 percent.

The head of Abe's coalition partner said on Tuesday the coalition party and Abe had agreed to set a 2 percent inflation target and compile a large stimulus budget to help the economy return to growth and overcome deflation.

The yen has come under pressure as a result of expectations that the BOJ will be compelled to adopt more drastic monetary stimulus measures next year.

The dollar was expected to stay firm this week as investors repatriate dollars, and as the U.S. fiscal impasse is likely to continue to sap investor appetite for risky assets and raise the dollar's safe-haven appeal.

"The dollar is seen relatively well bid, with all focus on the fiscal cliff," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.

"Negotiations may be carried over the weekend, but markets still expect a deal to be struck by December 31. It is unthinkable that the U.S. will risk driving its economic growth sharply lower by not agreeing to avoid it."

U.S. lawmakers and President Barack Obama were on Christmas holiday and talks were unlikely to resume until later in the week.

House of Representatives Speaker John Boehner failed to gain support for a tax plan at the end of last week, raising fears that the United States may face the "fiscal cliff" of some $600 billion in automatic spending cuts and tax increases set to start on January 1.

Japan's Nikkei stock average <.n225> resumed trading after a three-day weekend with a 1.1 percent gain, recapturing the key 10,000 mark it ceded on Friday after Boehner's failure sparked a broad market sell-off and the Tokyo benchmark closed down 1 percent. The Nikkei was likely to be supported as long as the yen stayed weak. <.t/>

"Ongoing optimism about the weak yen is lifting hopes that exporters' earnings will be better than expected," said Hiroichi Nishi, general manager at SMBC Nikko Securities.

Analysts say a near-term correction may be possible as the index is now in "overbought" territory after gaining 16.2 percent over the last six weeks, hitting a nine-month high last Friday. Its 14-day relative strength index was at 72.34, above the 70 level that signals an overbought condition.

MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> nudged up 0.1 percent, driven higher by surging Shanghai shares, as most Asian bourses were shut for Christmas.

The Shanghai Composite Index <.ssec> soared over 2 percent to five-month highs as investors bought property stocks on mounting optimism about the sector. Taiwan shares <.twii> jumped 1.3 percent on gains in technology and financial shares.

Asset performance in 2012: http://link.reuters.com/muc46s

2012 commodities returns: http://link.reuters.com/faz36s

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

U.S. HOLDS 2013 KEY

Goro Ohwada, president and CEO at Japan-based fund of hedge funds Aino Investment Corp, said investors were likely to focus on economic fundamentals and the United States for cues on investment direction in 2013.

"There is a feeling that an investment strategy based on economic fundamentals may finally work next year, with asset prices more closely reflecting fair value. The problem is, we don't know yet which asset is a better bet than others," Ohwada said, adding that oil and gold appeared to be near their highs.

Naohiro Niimura, a partner at research and consulting firm Market Risk Advisory, said commodities and energy prices will likely move in tight ranges in 2013, with investors eyeing political events, including the U.S. fiscal cliff outlook, Italian parliamentary election set for February 24-25, and Germany's elections in September.

"The macroeconomic policies taken this year around the world to support growth are expected to result in a moderate recovery in 2013 to reduce an excessive downside risk to prices. This will likely keep commodities, gold and energy prices near their highs," Niimura said.

(Additional reporting by Ayai Tomisawa in Tokyo; Editing by Edmund Klamann and Daniel Magnowski)

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In Aiding Quake-Battered Haiti, Lofty Hopes and Hard Truths

Damon Winter/The New York Times

Vegetable vendors worked recently amid rubble in Port-au-Prince, three years after an earthquake devastated the city. More Photos »

PORT-AU-PRINCE, Haiti — A few days after the Jan. 12, 2010, earthquake, Reginald Boulos opened the gates of his destroyed car dealership to some 14,000 displaced people who settled on the expansive property. Seven months later, eager to rebuild his business, he paid the families $400 each to leave Camp Boulos and return to their devastated neighborhoods.

At the time, Dr. Boulos, a physician and business magnate, was much maligned for what was portrayed as bribing the homeless to participate in their own eviction. But eventually, desperate to rid public plazas of squalid camps, the Haitian government and the international authorities adopted his approach themselves: “return cash grants” have become the primary resettlement tool.

This represents a marked deflation of the lofty ambitions that followed the disaster, when the world aspired not only to repair Haiti but to remake it completely. The new pragmatism signals an acknowledgment that despite billions of dollars spent — and billions more allocated for Haiti but unspent — rebuilding has barely begun and 357,785 Haitians still languish in 496 tent camps.

“When you look at things, you say, ‘Hell, almost three years later, where is the reconstruction?’ ” said Michèle Pierre-Louis, a former prime minister of Haiti. “If you ask what went right and what went wrong, the answer is, most everything went wrong. There needs to be some accountability for all that money.”

An analysis of all that money — at least $7.5 billion disbursed so far — helps explain why such a seeming bounty is not more palpable here in the eviscerated capital city, where the world’s chief accomplishment is to have finally cleared away most of the rubble.

More than half of the money has gone to relief aid, which saves lives and alleviates misery but carries high costs and leaves no permanent footprint — tents shred; emergency food and water gets consumed; short-term jobs expire; transitional shelters, clinics and schools are not built to last.

Of the rest, only a portion went to earthquake reconstruction strictly defined. Instead, much of the so-called recovery aid was devoted to costly current programs, like highway building and H.I.V. prevention, and to new projects far outside the disaster zone, like an industrial park in the north and a teaching hospital in the central plateau.

Meanwhile, just a sliver of the total disbursement — $215 million — has been allocated to the most obvious and pressing need: safe, permanent housing. By comparison, an estimated minimum of $1.2 billion has been eaten up by short-term solutions — the tent camps, temporary shelters and cash grants that pay a year’s rent.

“Housing is difficult and messy, and donors have shied away from it,” said Josef Leitmann, manager of the Haiti Reconstruction Fund.

Benefactors and Dysfunction

Beyond the numbers, the sluggish reconstruction has been the latest dispiriting chapter in the chronically dysfunctional relationship between Haiti and its benefactors.

After the earthquake, with good will and money pouring into Haiti, international officials were determined to use the disaster as a catalyst for transforming not only the intractably poor country but the world’s ineffectual strategies for helping it.

Bill Clinton, the United Nations special envoy for Haiti, invoked the “build back better” mantra he had imported from his similar role in South Asia after the tsunami. And Secretary of State Hillary Rodham Clinton cautioned donors to stop working around the government and instead work with it, and to stop financing “a scattered array of well-meaning projects” rather than making “deeper, long-term investments.”

But an examination by The New York Times shows that such post-disaster idealism came to be undercut by the enormousness of the task, the weakness and volatility of the Haitian government, the continuation of aid business as usual and the limited effectiveness of the now-defunct recovery commission that had Mr. Clinton as co-chairman.

André Paultre and Damon Winter contributed reporting.

This article has been revised to reflect the following correction:

Correction: December 24, 2012

An earlier version of this article misstated the date of the earthquake. It was on Jan. 12, 2010, not Jan. 10.

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