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SHANGHAI — China issued regulations made public Tuesday aimed at cracking down on the use of virtual currencies amid worries that a huge underground economy was developing out of the country’s online gaming community.

The rules, issued jointly by the Ministry of Commerce and the Ministry of Culture in Beijing, could deal a blow to the country’s fast-growing online gaming industry.

Beijing said the regulations would curtail trading in virtual currencies, prevent online gambling and restrict virtual currency from being exchanged for cash or used to buy real-world goods.

Among other things, Chinese officials have worried that online currencies could ultimately serve as an alternative to China’s official currency, the renminbi, and have an impact on the country’s financial system.

Some of China’s biggest Internet and online gaming companies were quoted in the state-controlled media Tuesday saying that they welcome the new rules and hope that the rules will prevent fraud in the industry.

But some companies, including Tencent and Shanda, did not return phone calls Tuesday seeking comment.

Richard Ji, an Internet analyst at Morgan Stanley, released a brief report Tuesday, saying he expected only limited financial impact on Chinese gaming companies because much of the trading in virtual currencies and goods does not occur on the sites of big, publicly listed companies; it occurs on other Web sites.

But privately, some gaming experts say they worry that if the new rules are interpreted more broadly they could disrupt the trading in online gaming credits and virtual goods, like game weapons.

China has one of the world’s biggest online gaming markets, and tens of millions of players are believed to be earning gaming credits and even trading them for cash and other real-world goods.

Last year, trading in virtual currency in China amounted to nearly $2 billion, according to the China Internet Network Information Center.

In recent years, China has even become a center for what in the gaming community is called “gold farming,” whereby young Chinese are hired to spend long hours playing popular online games, like Blizzard Entertainment’s “World of Warcraft,” in order to accumulate game credits for players in other countries, including the United States.

Some small companies in China have even created what are dubbed “virtual sweatshops,” cramped rooms where young people work long hours playing online games to earn credits, virtual weapons and other goods that their company then sells to customers in the United States, Taiwan, South Korea and other countries.

Many online marketplaces, like eBay and China’s Taobao, even have online advertisements offering virtual goods for sale, like the gold coins of “World of Warcraft” and virtual QQ coins from Tencent. Some Chinese companies have grown quickly in recent years by dealing entirely in the trading of virtual goods and weapons.

In issuing the rules this week, Beijing said they were meant to cope with a growing number of problems associated with virtual currencies, including disputes over the use of virtual coins.

The government said it would closely restrict who can issue virtual currency and forbid people from taking virtual currency from one online site and selling or trading it somewhere else.

The government also defined virtual currency and said it can no longer be exchanged for real-world goods.

With a flurry of new Internet-related regulations in recent months, including new measures to fight online pornography and so-called unhealthy content, Beijing seems determined to maintain control over fast-evolving online content in China, which now has the largest Internet population with close to 300 million users.

China Limits Use of ‘Virtual’ Currency

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HONG KONG — Air New Zealand is baring all — literally.

Passengers on the 7 a.m. flight from Auckland to Wellington got something a little different to shake them out of their early morning reverie Monday: Air New Zealand’s first screening of a new in-flight safety video featuring staff members clad in nothing but body paint.

The 3-minute, 28-second clip, and a similar 45-second television ad introduced six weeks ago, take a tongue-in-cheek swipe at competing airlines, which Air New Zealand says often tack extra charges on their fares.

“At Air New Zealand, our fares have nothing to hide,” the slogan goes. “Which is why the price you pay includes everything — up front.”

But the new effort to promote, er, transparency is not as revealing you would think, or perhaps even hope. Yes, cabin crew, a pilot and baggage handlers — one of whom is played by the company’s buff chief executive, Rob Fyfe — don immaculate uniforms of mere paint. But seatbelts, luggage and life vests are always positioned to conceal where appropriate.

The mundane “undo the seatbelt by lifting the flap” may never have received such rapt attention as it now gets on this airline’s domestic flights.

The clips — complete with a cheerful soundtrack of “Under My Skin,” by a New Zealand singer, Gin Wigmore — provide unusual light-heartedness in an industry that has been savaged by drastic drop-offs in passenger numbers and air freight. Around the world, airlines — including Air New Zealand — have had to cut flights, staff and investment plans.

And some, like Air New Zealand, have gone that little bit further in the quest for visibility and passenger loyalty.

Long-haul travel has fallen sharply, and Air New Zealand faces new domestic competition from carriers like Jetstar and Pacific Blue, despite a market share of more than 80 percent, said Rob Mercer, an analyst at Forsyth Barr in Wellington.

But they have “never stopped being innovative and nimble,” he said. Last year, the airline paid people to shave their heads and wear temporary tattoos that said, “Need a change? Head down to New Zealand.”

This year’s cheeky ad campaign and the video, “Bare Essentials of Safety,” introduced Monday, have received the attention Air New Zealand was hoping for.

The “Nothing To Hide” ad clip has been viewed nearly two million times on YouTube — the most-viewed clip ever to come out of New Zealand, Steve Bayliss, the airline’s marketing manager, said by telephone Monday.

Each clip took a day to shoot and cost about 10 to 15 percent of the cost of a major brand commercial, Mr. Bayliss estimated. As for the Air New Zealand staff members, they got no extra cash — just a moment in the spotlight.

Nothing to Hide in Airline’s Campaign. Really.

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About half of the 42 million members of LinkedIn, the online professional networking Web site, are outside the United States, and to further expand internationally, the company hopes to be translated into more than its current four languages — English, Spanish, French and German. But when LinkedIn asked thousands of its translator members to complete a survey this month that asked whether they would consider volunteering to translate the site into other languages, many said “nyet.”

Chris Irwin, who lives outside London, was irked by the third multiple-choice question, which asked what “incentive” translators would prefer, with five nonmonetary choices including an upgraded LinkedIn account and none (“because it’s fun”). Mr. Irwin checked a sixth choice, “Other,” typing in that he would prefer cash. In a phone interview, Mr. Irwin said he was surprised that LinkedIn “would have the effrontery to ask for a professional service for free.”

Another translator, Matthew Bennett, who is based in Murcia in Spain, started a group on LinkedIn for those annoyed by the survey, and it swelled to about 300.

Some translators are upset because LinkedIn showed “an enormous amount of disrespect towards them and their work from a networking site for professionals where ‘relationships matter,’ ” wrote Mr. Bennett on his personal blog, referring to one of LinkedIn’s marketing slogans.

But LinkedIn insists that the interpreters are, well, misinterpreting.

Nico Posner, the LinkedIn product manager who circulated the survey, declined to be interviewed but in a post to Mr. Bennett’s group wrote that the survey was not asking translators to volunteer per se. He said he was trying to find out whether they would consider “crowd sourcing,” borrowing the term applied to companies like Wikipedia that rely on volunteers’ collective wisdom.

“While I realize that many professionals in the translation and localization field will not be interested in participating in a crowd sourcing opportunity on LinkedIn,” Mr. Posner wrote, others “would welcome an opportunity to volunteer some of their time and skills towards translating the LinkedIn site and highlight their professional work on their LinkedIn profile, not only for pride and glory, but hopefully to land more paid work.”

In a post on LinkedIn’s company blog, Mr. Posner added that thousands of respondents said they would volunteer, especially if credited on the site.

“I didn’t feel cheapened or exploited at all when they asked,” said Erika Baker, of North Somerset, England. “I just thought, ‘Wow what an opportunity.’ ” A translator for more than 15 years, Ms. Baker said that she had rarely been credited as she would be on the LinkedIn project and that she was certain it would bring in paying work.

“These are new ways of marketing, and the Internet is really the way to go,” Ms. Baker said.

Recently a group of illustrators took umbrage when Google asked them to provide free artwork to feature on its Chrome browser; Google countered that it was offering free exposure and that dozens of other artists had signed on.

In 2007, Facebook asked volunteers to offer translations of the standard explanatory language throughout the site into more than 20 languages, with translators voting among themselves for preferred verbiage. Some faulted the company, saying it was shortchanging translators.

But Nataly Kelly, a former Spanish translator who is an analyst at Common Sense Advisory, a research firm that studies how companies translate, said that Facebook’s critics had missed the big picture.

“It would have been far cheaper for Facebook to pay translators 10 cents a word to translate material than to build a community and pay engineers to set up all this infrastructure,” said Ms. Kelly, who volunteered on the Facebook project herself, casting a vote on such head-scratchers as what to call the Facebook profile “wall,” since in Spanish there are different words for interior and exterior walls.

Web sites may expand using volunteer translators, but they often also pay for work, not only in editing and proofreading the volunteers’ efforts, but also in translating content that requires less local flavor and more legal precision, like privacy policies, Ms. Kelly said.

But Ms. Kelly is sympathetic to translators, who “are often taken advantage of and paid late if at all,” and said LinkedIn had acted undiplomatically.

“It might have been more appropriate for LinkedIn to make it very clear what kind of process this was, and the fact that they employ full-time translators, to appease the fears of translators,” Ms. Kelly said. “That would have prevented a lot of the backlash.”

Translators Wanted at LinkedIn. The Pay? $0 an Hour.

Hot News: Dollar edges up, global stocks hold ranges

MUMBAI (Reuters) – Tata Motors Ltd (TAMO.BO), India's largest vehicles maker, on Sunday announced the launch in India of Jaguar and Land Rover vehicles, the marquee brands it bought from Ford Motors (F.N) last year.

Saying it was a momentous occasion for the company, chairman Ratan Tata said, "This is in keeping with our desire to extend the penetration of the brands in India."

The automobile firm, which controls about 60 percent of the world's fifth-biggest truck and bus market, will soon also be rolling out the Nano, billed as the world's cheapest car.

Jaguar is launching the XF amd XK range of luxury coupes and convertibles in India starting at a price tag of 6.3 million rupees ($130,977) and going up to 9 million rupees.

Land Rover will initially be launching three vehicles including the Range Rover Sport and Land Rover Discovery 3, with prices also starting at 6.3 million rupees but going beyond 9 million.

"The luxury car market in India is very small, but there is a huge opportunity there. It is growing fast and we expect it to grow fast over the next 5 to 10 years," said David Smith, chief executive of Jaguar Land Rover.

"India is an important part of our plans for the future," said Mike Driscoll, managing director of Jaguar.

The luxury car segment in India is less than 1 percent of the total car market there.

On Friday Tata Motors posted its first loss in eight years at $520 million for the year to March 2009, with its Jaguar Land Rover unit reporting a loss of 306 million pounds ($504 million) in the 10 months of the fiscal year to March 2009, as a brutal global recession crippled car sales.

On the issue of loan guarantees for JLR, Tata said, "we are in discussions with the U.K. government on the loan guarantees and hopefully we will find a solution for it … and our funding plan for JLR will progress."

The company is seeking guarantees for the 340 million pounds loan sanctioned by the European Investment Bank and other loans from U.K.-based commercial banks. It is seeking these funds to develop new and more fuel efficient cars for improving its competitive position.

"Sustaining the downturn is important for us … and finding a solution (for the loan guarantees) is extremely important to us," Tata said.

He also said that if there was a large financial package from the U.K. government for Jaguar and Land Rover then, "there should be commensurate level of representation from them," which had to be negotiated and worked out.

($1=48.1 rupees)

(Editing by Jerry Norton)

Tata Motors launches Jaguar, Land Rover in India

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TOKYO (MarketWatch) — Japanese financial regulators are preparing to sanction Citigroup Inc., demanding it suspend some of its retail business operations due to overly lax money laundering controls, reports said Friday.

The Financial Services Agency were planning to announce the measures against Citi later Friday, the reports said, citing unidentified sources.

In 2004, the FSA ordered Citibank Japan to suspend business operations at four branches that dealt with private banking, essentially discontinuing the bank’s private business after it was found to have breached securities regulations.

Tokyo-traded shares of Citi were down 3.6% following reports, while the New York-listed stock had ended Thursday trade down 0.3%.

Japan reportedly to suspend some Citigroup ops

Hot News: Economists divided over end to recession in U.S.

SAN FRANCISCO (MarketWatch) — Villa Rica, Ga.-based Community Bank of West Georgia and Newman, Ga.-based Neighborhood Community Bank were closed by regulators Friday, as the ongoing credit crisis continued to claim victims.

The closures brought the total in Georgia this year to nine, while bringing the national tally to 42.

The Federal Deposit Insurance Corporation said in a statement that it will mail checks to insured depositors at Community Bank of West Georgia on Monday. An institution able to assume the failed bank’s deposits could not be found, the FDIC added.

Community Bank of West Georgia had $199.4 million in assets and $182.5 million in deposits as of May 15, according to the regulator, which said that at the time of the closing the bank had roughly $1.1 million in deposits that exceeded the $250,000 limit for insurance.

The FDIC estimated that the failure of Community Bank of West Georgia will cost its deposit insurance fund roughly $85 million.

Neighborhood Community Bank had $221.6 million in assets and $191.3 million in deposits as of March 31, the FDIC said.

The regulator said that West Point, Ga.-based CharterBank will assume National Community Bank’s deposits, and that offices of National Community will reopen as branches of CharterBank.

CharterBank also agreed to buy $209.6 million worth of the failed bank’s assets.

The failure of National Community will cost the deposit insurance fund $66.7 million, the FDIC added.

Georgia banks fail, bringing 2009 tally to 42

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LAGOS (Reuters) – Nigeria's main militant group said it had blown up a well-head in a Royal Dutch Shell oil field in Delta state late Thursday, hours after President Umaru Yar'Adua announced an amnesty offer for gunmen.

The Movement for the Emancipation of the Niger Delta (MEND) accused the military of going on a "punitive expedition" to hunt down suspected militants in the Agbeti community of Delta state after Yar'Adua's amnesty proclamation.

"In response … (operation) Piper Alpha continued its rampage on the Nigerian oil industry by blowing up the second remaining well-head of the Shell Afremo offshore oil fields in Delta state," MEND said in a statement e-mailed to media.

The military denied carrying out any such campaign.

"Our troops did not carry out any operation in Agbeti. This is a lie, propaganda by these miscreants to justify their attacks on isolated oil facilities," said Colonel Rabe Abubakar, spokesman for the joint military taskforce in the Niger Delta.

Afremo was one of the sites MEND also claimed to have attacked in a triple raid Sunday. It described the field as being 14 miles from an export terminal through which crude oil from Shell's Forcados fields is pumped.

A senior industry source said at the time the location was not a deepwater installation, but a facility located in or close to the mangrove creeks, where pipelines and equipment run across broad stretches of water.

Shell has said it is checking its operations for damage from Sunday's attacks.

BILLIONS IN LOST REVENUE

Yar'Adua Thursday offered the amnesty to gunmen who laid down their weapons during a 60-day period ending on October 4, in a bid to end years of unrest which have cost Africa's top oil exporter billions of dollars in lost revenue.

Pipeline bombings, attacks on oil and gas installations and the kidnapping of industry workers over the past three years have prevented Nigeria from pumping much above two thirds of its installed capacity of 3 million barrels per day of oil.

The supply disruption has at times helped push world energy prices higher and cost Africa's most populous nation, which relies on crude oil for 90 percent of its foreign earnings, tens of millions of dollars a day.

MEND's latest campaign of sabotage, which began just over a month ago and which it has dubbed "Hurricane Piper Alpha," has already forced at least 133,000 barrels per day (bpd) of production to be shut down.

It has again had an impact on global energy prices, helping push oil toward $71 a barrel Friday.

One faction leader, Ateke Tom, has indicated he would consider taking part in an amnesty while a lawyer for Henry Okah, the suspected leader of MEND who is on trial for treason, has said he hoped his client would be covered by the proposal.

But the unrest in the delta is not a straightforward political struggle. Skeptics question whether an amnesty alone will be enough to halt opportunistic attacks, crude oil theft and kidnapping, much of which generates large amounts of money for armed gangs and the disenfranchised youths they recruit.

(Additional reporting by Austin Ekeinde in Port Harcourt; Editing by Alison Williams)

Nigerian rebels say hit Shell site despite amnesty

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NEW YORK (MarketWatch) — American International Group Inc. took a big step Thursday toward paying the U.S. government back, but it will take a long hike to make taxpayers whole.

AIG on Thursday said it received approval from the Federal Reserve Bank of New York to proceed with initial public offerings of two of its international divisions, American International Assurance Co. and American Life Insurance Co., for initial public offerings. See full story.

The combined $25 billion AIG hopes to raise from spinning off the units represents a fraction more than the $20 billion at which AIA once was valued. It also underscores the difficulty AIG’s brokers face as they try to dispose of assets in a market where potential buyers are struggling with internal issues and overall valuations are near the bottom.

Last month, client withdrawals and other market-related forces gummed up the sale of AIG’s asset management units. See full story.

Big insurers, including Prudential Financial Inc. and , MetLife Inc. are trading at levels close to book value.

Estimates in January put the value of AIG assets at more than $225 billion, suggesting that AIG would have to sell more than half of its far-flung insurance companies to recoup the $172 billion in cash the government has fronted the company.

And even in its best years, AIG made only about $10 billion in profits.

Faced with its low margins and the enormity of the task, AIG and its chief executive, Edward Liddy — who is stepping down anyway - won’t be writing a check to Uncle Sam anytime soon. It will take a recovery in insurance market values and a lot of patience to unwind AIG.

Taxpayers should get comfortable; it’s going to be a long ride.

— David Weidner

MarketWatch First Take: IPOs aside, how much money is left at AIG?

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WASHINGTON (Reuters) – The Federal Reserve sought to hide its involvement in Bank of America Corp's acquisition of Merrill Lynch as Merrill's financial condition worsened, the top Republican on the House Oversight and Government Reform Committee said on Wednesday.

The Fed "engaged in a cover-up and deliberately hid concerns and pertinent details regarding the merger from other federal regulatory agencies," Representative Darrell Issa said in a statement released to Reuters.

Bernanke has in the past denied any inappropriate pressure on Bank of America. Fed spokeswoman Michelle Smith on Wednesday referred to a letter Bernanke sent Representative Dennis Kucinich on April 30 and later testimony in which he offered an "unconditional assertion" that he did not ask Bank of America CEO Ken Lewis to withhold information regarding Merrill.

"The Federal Reserve acted with the highest integrity throughout its discussions with Bank of America," Bernanke wrote to the Ohio Democrat, who chairs a subcommittee on the Oversight panel.

The Democrat who heads the committee, Edolphus Towns of New York, has called Bernanke to testify on Thursday. "I am not going to prejudge these issues. We are not even close to finishing the Bank of America-Merrill Lynch investigation at this point," Towns said in a statement.

Former U.S. Treasury Secretary Henry Paulson has also been called to testify before Congress next month about the Bank of America-Merrill Lynch transaction. His planned appearance was confirmed in an e-mail from Jenny Rosenberg, an aide to Towns, who said no date had been set for Paulson's testimony.

POLITICAL FOOTBALL

Democrats on the panel have focused on whether Bank of America's Lewis illegally misled investors about Merrill's finances, while Republicans have zeroed in on whether the Fed and former Treasury Secretary Henry Paulson inappropriately pressured Lewis to seal the deal.

The issue has become a political football as lawmakers look to blame someone for the troubled deal amid taxpayer anger over the billions of dollars the government infused into banks to try to ease the world financial crisis.

A Democratic source close to the committee said Republican members leaked documents just before a hearing earlier this month where Lewis testified. "They framed the story by looking at only a few of the documents," said the source, who was not authorized to be quoted on the matter.

Some Democrats believe Bank of America's Lewis had to know about Merrill's deepening losses and that Lewis was threatening to pull out of the deal as a way to get more assistance from the Fed. Still, the Democratic source said, "The Fed does not come out smelling like roses."

Kucinich said what is remarkable about the situation was that the Fed required no changes in the bank's leadership or conditions on the billions that did go to Bank of America.

The bank, which did not return a phone call seeking comment, has taken $45 billion in bailout funds from the government.

Other documents released by the committee earlier this month revealed that a Fed analysis found deficiencies in the due diligence conducted by Bank of America prior to the Merrill deal.

PRESSURE, DISCLOSURE

Earlier this month, the same panel questioned Lewis about whether he was pressured to complete the deal with Merrill, which lost $15.8 billion in the fourth quarter of 2008. Lewis told the lawmakers that Bernanke never asked him to keep secret any information the bank wanted to disclose to shareholders.

The committee has obtained a number of emails and documents from the Fed about its behind-the-scenes role in the merger, which was quickly brokered late in 2008 amid turmoil in the U.S. banking sector, according to sources familiar with documents. The sources declined to be identified because they were not authorized to speak publicly on the matter.

The sources said documents showed the Fed tried to keep some information about the Bank of America deal secret from the Office of Comptroller of the Currency, the North Carolina-based bank's direct regulator, and from the Securities and Exchange Commission. The bank is also regulated by the Fed.

In one email cited, then-Merrill Lynch chief financial officer Nelson Chai wrote to then-Merrill CEO John Thain, about a discussion he had just had with New York Federal Reserve official Arthur Angulo:

"His hope is that there is no disclosure prior to (Bank of America) quarterly announcement. We told him this was current plan."

That behavior "raises important questions" about whether the Fed can work collaboratively with other regulators and should gain additional power, as proposed in the Obama administration's financial regulation plan, the sources said.

Documents obtained by Republican panel members suggest that the Fed pushed Bank of America to complete the deal by threatening to fire Lewis and the board, according to the sources.

They cited a December 20, 2008 email in which Jeffrey Lacker, president of the Richmond Fed, said he had spoken to Bernanke about Bank of America potentially trying to get out of the deal by claiming that a "material adverse change" (MAC) had occurred.

"Just had a long talk with Ben (Bernanke). Says that they think the MAC threat is irrelevant because it's not credible. Also intends to make it even more clear that if they play that card and they need assistance, management is gone," Lacker wrote, according to the sources.

Bernanke's term as Fed chairman expires in January.

(Reporting by Julie Vorman and Kim Dixon; Additional reporting by Mark Felsenthal; Editing by Gary Hill and Carol Bishopric)

Lawmaker accuses Fed of “cover-up” in BofA deal

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The recession steered a new type of customer to Wal-Mart — deeper in the pockets and suddenly looking for bargains. Now the world’s largest retailer has to figure out how to keep that customer when the economy recovers.

So Wal-Mart is bringing in more brand names, ditching scores of other products and even redesigning hundreds of stores to give them wider aisles, better lighting and better sight lines.

It’s more than just a cosmetic upgrade. That new breed of customer also spends about 40 percent more than the traditional Wal-Mart shopper, and the retailer senses an opportunity to accelerate its growth.

Take Aditya Krishnan, a 42-year-old lawyer from San Jose, Calif. He used to buy only light bulbs at Wal-Mart but now finds himself spending $150 a month there, including buying workout clothes he used to get at Macy’s.

“If I am able to get good stuff at Wal-Mart, and I am able to save money, why would I change?” Krishnan asked. “I am seeing better brands, and the shopping experience is better” than before.

Wal-Mart says that’s no accident. It’s placing a big bet on the redesign of most of its 3,600 stores, started last fall. This fiscal year, it plans to redo up to 600 at a cost from $1.6 billion to $1.7 billion.

The prototype for the remodeling includes lower shelves to make it easier to see across the store, better lighting and wider aisles. Expanded electronics areas will include interactive displays to test video games and portable gadgets.

The store now carries brands like Danskin and Better Homes and Gardens, and its electronics section now stocks pricier products like Palm Inc.’s well-received new Pre smartphone.

Whether it all works, Wall Street analysts say, depends in part on how quickly the behemoth retailer can remodel and keep shoppers satisfied. Concerns about how Wal-Mart will keep its momentum have sent its stock down 13 percent this year.

The early signs are positive, putting pressure on the rest of the industry. Target Corp., whose sales have been hampered by its emphasis on nonessentials like trendy jeans, is expanding its fresh food offerings. Best Buy Co. is beefing up customer service.

“I believe a lot of what (Wal-Mart) is doing is working,” said Joseph Feldman, a retail analyst at Telsey Advisory Group. “They are a threat to everyone.”

Other discounters, including TJX Cos. Inc., which sells name-brand fashions and home furnishings, Costco Wholesale Corp. and BJ’s Wholesale Club Inc., are focusing on how to hold on to new customers lured by low prices during the recession.

But Wal-Mart, which only three years ago struggled with cluttered stores, long lines, stiff towels and unattractive clothing, has a bigger hurdle to climb. And it has to move fast to win over people who still have negative feelings about shopping there.

“The service still needs to be improved, and the stores are a little sloppy,” said Daniel Chou, 35, of Warren, N.J., who was at a local Wal-Mart to pick up a bungee cord but who says he rarely shops there.

Stock in Wal-Mart and a few other discounters such as Costco Wholesale Corp. have fallen this year as investors turn to beaten-down shares of more upscale companies like Macy’s Inc. and Williams Sonoma Inc., which investors believe don’t have much further to fall.

Wal-Mart, which topped $400 billion in sales last year, attracts more than 140 million customers per week. But to get them to buy more than just groceries, which account for about half of annual sales, it’s paring its product lineup and making room for better brands.

Consultant Burt P. Flickinger III estimates the remodeled stores are carrying 10 to 15 percent less inventory, particularly getting rid of no-name labels.

The shift risks turning off longtime customers who are looking for only the cheapest products. It’s happened before: The company had to dump Metro 7, its in-house clothing line launched in 2005, because it turned out to be too trendy for its general clientele.

Wal-Mart executives say 17 percent of its traffic growth in February from new customers, and they’re spending 40 percent more per trip. More than half of those shoppers living in households that take in more than $50,000 a year.

While that may not be considered affluent, it’s a big departure from Wal-Mart’s core customers, of whom one in five does not have a bank account or has limited access to financial services.

To keep prices low while offering better products, Wal-Mart is slashing its own costs in little ways. The Angus ribeye steak being sold at Sam’s Club at 25 percent below competitors’ prices is paid for in part by a switch to shorter straws at its cafe, saving $52,000 a year, says spokeswoman Susan Koehler.

A recently converted customer is Judy Safern, a 42-year-old public relations executive from Dallas who used to buy her children’s clothing at Galleria mall and groceries at Tom Thumb supermarket.

She now says she hasn’t been to the mall in a year and figures she saves several hundred dollars a month by buying most clothing and food at Wal-Mart. “I basically buy everything there,” she said.

Wal-Mart aims to keep a new flock of customers

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NEW YORK – Caution has once again overcome the stock market.

Stocks finished mixed Friday, leaving all the major indexes with their first weekly loss since early May. Tech, financial and retail stocks gained, while utilities and energy stocks were lower.

The market began the day stronger, following surprisingly good reports the day before on jobs and manufacturing. But the early gains gave way to selling in the afternoon, saddling the Dow Jones industrials with four days of losses over the past five.

With little in the way of corporate or economic news Friday, prospects were poor for restarting a rally that powered the market up as much as 40 percent this spring after hitting its lowest level in more than a decade in early March. Traders have grown worried in recent weeks that an economic recovery may be more subdued than originally hoped and that the huge run-up in stocks may have been overdone.

“There’s no question in my mind that the economy is improving,” said Phil Orlando, chief equity market strategist at Federated Investors. “But investors are betting on some sideways consolidation rather than a continuation of a sharp spike in share prices.”

Trading was also jumpy because of the occurrence of a quarterly “quadruple witching,” which marks the simultaneous expiration of four different kinds options and futures contracts.

The Dow Jones industrial average fell 15.87, or 0.2 percent, to 8,539.73, with 16 of the 30 stocks that make up the average posting losses. The broader Standard & Poor’s 500 index rose 2.86, or 0.3 percent, to 921.23 and the Nasdaq composite index gained 19.75, or 1.1 percent, to 1,827.47.

About three stocks rose for every two that fell on the New York Stock Exchange, where consolidated volume came to a heavy 5.47 billion shares, compared with 4.58 billion shares the day before.

All the major indexes closed the week down for the first time since the week of May 11. The Dow lost 3 percent, the S&P 500 index fell 2.6 percent, and the Nasdaq shed 1.7 percent.

Stocks tumbled early in the week as a handful of weak economic reports, including news of a seventh straight monthly drop in industrial production, bucked sharply with the gradual improvement traders had grown used to with other economic readings.

Stocks rebounded modestly on Thursday, spurred by a series of better data on economic activity, including a report that showed the overall number of people drawing unemployment benefits fell last week for the first time since early January.

Traders have been anticipating a pullback after such big gains in such a short period. Usually, a 40 percent move like the one in the S&P 500 index takes years to develop, not months.

“It’s not going to be a one-way ride,” said Keith Walter, portfolio manager of Artio Global Equity Fund.

Analysts are divided over whether the market’s pullback this week has more to go, or if it can now move higher after back-to-back weeks of relatively sideways movement; Last week all the major indexes rose less than 1 percent. Many predict choppy trading well through the summer, when there is typically less volume, and as the market heads into earnings season in July.

Next week will bring reports on existing home sales and durable goods orders, among others. Investors will also be looking to the Federal Reserve for any clues on its monetary policy going forward as the central bank conducts a two-day policy meeting.

Bond prices rose slightly after sliding Thursday ahead of a spate of auctions next week. The yield on the benchmark 10-year Treasury note fell to 3.78 percent from 3.81 percent late Thursday.

Investors have been keeping a close eye on the bonds market recently, concerned that a run-up in Treasury yields will lead to higher borrowing costs and potentially erode some of the economy’s progress. Long-term Treasury yields are closely linked to interest rates on mortgages, which have been rising in recent weeks.

Tech stocks moved higher as Apple Inc.’s latest version of its popular iPhone hit store shelves. Apple shares added $3.60, or 2.7 percent, to $139.48, while rival smart phone maker Palm Inc. jumped more than 6 percent, rising 87 cents to $13.93.

Oil prices reversed early gains and fell $1.82 to settle at $69.55 a barrel in light trading as the contract was set to close Monday.

The dollar fell against the euro and the British pound. Gold prices rose.

Overseas, Japan’s Nikkei stock average rose 0.9 percent. Britain’s FTSE 100 rose 1.5 percent, Germany’s DAX index rose 0.04 percent, and France’s CAC-40 rose 0.9 percent.

BlackBerry maker Research in Motion Ltd. reported a better-than-expected 33 percent increase in first-quarter earnings, but shipments were below expectations. The stock dropped $3.77, or 4.9 percent, to $72.78.

In other trading, the Russell 2000 index of smaller companies rose 3.24, or 0.6 percent, to 512.72.

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The Dow Jones industrial average closed the week down 259.53, or 3.0 percent, at 8,539.73. The Standard & Poor’s 500 index fell 24.98, or 2.6 percent, to 921.23. The Nasdaq composite index fell 31.33, or 1.7 percent, to 1,827.47.

The Russell 2000 index, which tracks the performance of small company stocks, fell 14.11, or 2.7 percent, for the week to 512.72.

The Dow Jones U.S. Total Stock Market Index — which measures nearly all U.S.-based companies — ended at 9,428.97, down 272.46, or 2.8 percent, for the week. A year ago, the index was at 13,514.89.

Stocks log first weekly loss since early May

Hot News: Cautious Traders Send European Shares Lower

LONDON (MarketWatch) — New Royal Bank of Scotland chief Stephen Hester is set to receive a 9.6 million pound ($15.8 million) pay package after the bank secured shareholder support for a new long-term incentives deal last week, according to a published report.

The package for Hester includes a 1.2 million pound salary, a projected 2 million pounds of annual non-cash bonus payments and nearly 6.4 million of long-term share and stock-option awards, the Financial Times reported.

Among other targets, the maximum share grant would only be made if RBS’ share price passes 70 pence, or nearly double its current level.

Shares in the bank slipped 1.6% in Monday.

The report came just days after the group’s former CEO, Fred Goodwin, agreed to take a sharp reduction in his annual pension. See archived story.

Hester took over running the bank after Goodwin took early retirement late last year, following a 20 billion pounds bailout by the U.K. government.

The FT reported that RBS got agreement on the new pay deal from U.K. Financial Investments — which controls the government’s 70% stake in the bank — as well as other top-20 shareholders at a meeting on Friday.

Hester’s deal is similar to HSBC CEO Michael Geoghegan’s 1.1 million pound salary and 7.5 million pound long-term incentive plan, the FT said.

The BBC reported that Hester’s long-term incentive payments will not be automatic and the bank’s board can withhold them if it believes a rise in its share price wasn’t caused by sensible management.

Hester told the U.K.’s Treasury Committee — an influential panel of members of parliament — earlier this year that salaries in some areas of banking were too high and said that RBS intended to help reduce excessive pay.

“This is a different king of problem from Fred Goodwin — we’re not talking about rewards for failure. Mr Hester is trying to turn around a failed and now nationalized bank,” said Vince Cable, shadow chancellor for the Liberal Democrat party in a statement.

“Nonetheless these figures are a reminder of the ludicrous levels of remuneration expected in top jobs in the banking sector,” he added.

RBS chief reportedly getting $15.8 mln pay deal

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The European project known as Desertec is nothing if not ambitious.

It aims to harvest the sun’s energy — using a method known as concentrating solar power, or C.S.P. — from the vast North African desert and deliver it as electricity, via high-voltage transmission lines, to markets in Europe. Eventually, its backers say, it could satisfy as much as 15 percent of the trade bloc’s power needs.

The idea, which has been bouncing around for years, arises out of an alphabet soup of organizations, formal multinational partnerships and regional acronyms like TREC, for Trans-Mediterranean Renewable Energy Cooperation; Eumena, or European Union, the Mediterranean and North Africa; the Union of the Mediterranean; and the Club of Rome.

As James Kanter reported in our Green Inc. blog, the project took a step forward last week when a consortium of German businesses announced plans to pursue financing and otherwise hammer out details for Desertec, which is expected to cost in about €400 billion, or $555 billion.

Munich Re, the large German insurance company, is leading the charge to bring the concept to fruition, and a meeting is scheduled for mid-July to formalize the coalition, which includes companies like Siemens, Deutsche Bank and the energy giant E.on.

“The time now is perfect to start this initiative,” Alexander Mohanty, a Munich Re spokesman, said in an e-mail message Friday, “as climate protection has become an urgent issue and our economies need new impulses.”

Large-scale C.S.P. projects — essentially expansive fields of solar collectors, or mirrors, that concentrate rays from the intense desert sun to heat water, generate steam, drive turbines and produce electricity — are not revolutionary. Such projects have been undertaken in the U.S. Southwest, Spain and elsewhere.

This would take things to a whole new level, however, and as conceived, Desertec would be the largest centralized solar power production project on earth.

That such an ambitious, clean-energy megaproject should be taking a step forward, however incremental, might suggest that deep-pocketed investors have truly seen the writing on the wall with regard to legislated carbon abatement and the slow phase-out of fossil fuels.

In a collection of reactions gathered by Spiegel Online, several observers seemed to welcome the development.

“The project is sending a strong signal that investments in renewable energies don’t just make ecological sense,” wrote The Financial Times Deutschland, “they make economic sense as well.”

A reader at Green Inc. simply said: “Europeans need energy and have cash. Africans have sun and territory. It is quite logical to combine all this.”

But not everyone was convinced.

Some scratched their heads at the idea of spending billions of dollars to harvest sunlight and transmit electricity thousands of kilometers, when it can be produced increasingly efficiently in European backyards.

“It must once again be pointed out that the most successful method of harvesting solar power is with rooftop panels,” wrote the German daily Die Tageszeitung. “In just three to five years, power from the roof will be cheaper than electricity from the wall plug. The economic bar for desert power is, in other words, high. Solar power produced in a decentralized manner will likely always be the cheaper variety.”

The German broadcaster Deutsche Welle, meanwhile, quoted Frank Asbeck, the chief executive of Germany’s largest solar company, SolarWorld, as saying, “Building solar power plants in politically unstable countries opens you to the same kind of dependency as the situation with oil.”

Or in the somewhat more blunt vernacular of a Green Inc. reader: “If this project is built, Europe will shortly become dependent on it, and the Islamic world will have a second, and much tighter, noose to add to the oil one.”

That Mr. Asbeck’s interests lie with a competing solar technology — photovoltaics — is of no small consequence, but there were still other critics who complained that the project smacked of Euro-imperialism — particularly given the history of resource exploitation on the African continent.

“Haven’t we already been here before?” wrote Agatha Koprowski at Green Inc. last week. Ms. Koprowski is a graduate student of Arabic and Islamic Studies at the University of Pennsylvania and a resident, with her husband, of Morocco — one of the African nations likely to become a hub in the Desertec system.

“Europeans covet Africa’s wealth of natural resources,” she continued, “so they make economic investments for the benefit of Europeans and the detriment of Africans.”

Gerhard Knies, the coordinator of TREC and chairman of Desertec’s supervisory board, suggested by telephone Friday that all of these concerns were misplaced.

Ownership of the facilities, for example, would follow several different models, Mr. Knies said, but in every case, local needs would come first. The main obstacle, he said, is money, which is where European investors come in.

“They can go 100 percent on this source of electricity,” he said, referring to potential North African partners like Tunisia, Morocco, Algeria, Egypt and Libya, “and there is no coupling to what they might build for export.”

As for political stability, Mr. Knies was dubious.

“Well, when you look at the Mediterranean region, the most unstable country is Italy,” he said, adding that in any case, the investment in large-scale energy projects in these areas will provide income, jobs and the creation of a new industry — all of which, Mr. Knies said, are “a contribution to stability.”

He also suggested that the additional transmission costs of such a project would be smaller than the gains associated with improved solar radiation in the African desert. The additional power yield, Mr. Knies said, would more than compensate for the cost of transmission to European markets.

Whether or not those economics pan out, and however realistic Mr. Knies’s portrayal of the mutual benefits that might accrue to the project’s member countries, the sheer size and scope of the Desertec plan seemed to stir passions far and wide last week.

An American organization supporting the perennial fringe presidential candidate, Lyndon LaRouche, for example, called Desertec — rather inexplicably — a “genocidal, Malthusian, energy plan.”

Setting aside such unhinged broadsides, Mr. Knies was philosophical — and suggested that critics of the plan were simply missing the larger implications of an international cooperative like Desertec.

“I think they overlook the positive side of this interdependence, which creates win-win situations for the participating sides,” he said. “And that is how neighbors become friends.”

Green Inc. Column: Europe Looks to Africa for Solar Power

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HOUSTON (Reuters) – Texas billionaire Allen Stanford is expected to appear in court Friday morning to face criminal charges, but the venue for the hearing is unclear, Stanford's lawyer said Thursday.

"I don't know where he is going to appear in the morning and the FBI doesn't know where he is going to appear in the morning," attorney Dick DeGuerin told Reuters.

Stanford surrendered to U.S. authorities in Virginia on Thursday after criminal charges were filed against him.

(Reporting by Chris Baltimore; Editing by Peter Cooney)

Stanford expected in court Friday morning-lawyer

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NEW YORK (Reuters) – The operators of anonymous stock trading venues called 'dark pools' defended their existence on Friday, but conceded they could be more transparent after the U.S. Securities and Exchange Commission warned they posed "emerging risks."

The venues allow stock traders to hide their intentions and have come under increased scrutiny as they have grown, and as the United States scrambles to rewrite market rules and bulk up oversight.

SEC Chairman Mary Schapiro said on Thursday she was worried about the effect of dark pools on price discovery, particularly their use of pre-trade messages that tip off certain market participants to upcoming orders, adding the agency is considering taking action.

Dark pools have proliferated as markets have gone electronic. Some operators, which include big banks, told Reuters dark pools could adopt better trade reporting standards, but warned against new rules that would wipe out the benefits of having multiple trading venues.

"If they do something that makes the dark pool light and eliminates the reasons for institutions to trade on our vehicles, that would be a disaster for a hundred million people out there," said Seth Merrin, chief executive of electronic marketplace Liquidnet, a dark pool used by buy-siders.

"I'm definitely afraid of knee-jerk reactions," Merrin said in an interview, adding dark pools may need to improve the way they report trading volumes. "But who knows what could happen in this environment."

The Obama administration unveiled sweeping financial reform plans this week promoting market transparency and regulatory oversight, following the worst financial crisis since the Great Depression.

The next day, Schapiro told a New York Financial Writers Association dinner the SEC, "will be taking a serious look at what regulatory actions may be warranted in order to respond to the potential investor protection and market integrity concerns raised by dark pools."

Other SEC officials have raised similar concerns, but it was the first time Schapiro, who was sworn in to the powerful post in January, raised the dark pool issue in a speech.

The widespread practice of sending pre-trade messages, known as indications-of-interest, or IOIs, could spawn big private markets to which the public does not have fair access, the chairman said.

"Chairman Schapiro opened up a whole other kettle of worms" with IOIs, said Larry Tabb, chief executive of TABB Group, a research and advisory firm that tracks dark pools. "Now the question is how do these actually work and do we really need to rethink how this information gets disseminated."

Tabb said the SEC "could conceivably" wipe out dark pools, but that would make it very difficult to trade large "block" orders and would drive up trading costs.

Liquidnet's Merrin added institutions would have trouble efficiently investing the assets they now manage, and that higher trading fees would eat into profits, if the SEC cracked down on dark pools.

New U.S. rules in the last few years forced exchanges and their non-displayed rivals to link up so investors get fair prices. There are now more than 40 dark pools representing an estimated 9 percent of trading in the United States, with Europe and other regions following suit.

Observers wonder whether the SEC will crack down on flashes and IOIs, require details on those who participate in dark pools, or simply mandate better trade reporting from the murky industry.

"I'd agree that there should be more regulations on IOIs going out," said Whit Conary, president of dark pool LeveL ATS, which was launched in 2006 and is owned by Citigroup Inc (C.N), Credit Suisse Group AG (CSGN.VX), Fidelity and Merrill Lynch, which was acquired by Bank of America Corp (BAC.N).

"I don't think you have to over-regulate it, but at the very least a customer has every right to know if information on his order is being sent out."

Conary added in an interview the SEC is unlikely to ban IOIs, given the consumer demand for them, and that dark pools themselves are valuable because they allow competitive traders to take positions without impacting the overall market.

Several dark pools contacted by Reuters declined to comment on Schapiro's speech, noting the sensitivity of the issue.

Even before the recent explosion in dark pools, they long existed in the form of brokers on the New York Stock Exchange floor and in the networks of broker-dealer members of the then consortium-owned NASDAQ.

This month, Nasdaq OMX Group Inc's (NDAQ.O) Nasdaq Stock Market and BATS Exchange began sending "flash" orders to select groups of market participants before routing them to rival venues. The moves drew criticism from Big Board parent NYSE Euronext (NYX.N) and others, who sent the SEC letters.

(Reporting by Jonathan Spicer; editing by Andre Grenon)

SEC spotlight puts “dark pool” venues on defensive

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