Egyptian opposition to shun Mursi's national dialogue

CAIRO (Reuters) - President Mohamed Mursi was expected to press ahead on Saturday with talks on ways to end Egypt's worst crisis since he took office even though the country's main opposition leaders have vowed to stay away.

Cairo and other cities have been rocked by violent protests since November 22, when Mursi promulgated a decree awarding himself sweeping powers that put him above the law.

The upheaval in the most populous Arab nation, following the fall of Hosni Mubarak last year, worries the West, in particular the United States, which has given it billions of dollars in military and other aid since Egypt made peace with Israel in 1979.

Mursi's deputy raised the possibility that a referendum set for December 15 on a new constitution opposed by liberals might be delayed. But the concession only goes part-way towards meeting the demands of the opposition, who also want Mursi to scrap the decree awarding himself wide powers.

On Friday, large crowds of protesters surged around the presidential palace, breaking through barbed wire barricades and climbing on tanks guarding the seat of Egypt's first freely elected president, who took office in June.

As the night wore on, tens of thousands of opposition supporters were still at the palace, waving flags and urging Mursi to "Leave, leave".

"AS LONG AS IT TAKES"

"We will stay here for as long as it takes and will continue to organize protests elsewhere until President Mursi cancels his constitutional decree and postpones the referendum," said Ahmed Essam, 28, a computer engineer and a member of the liberal Dostour party.

Vice President Mahmoud Mekky issued a statement saying the president was prepared to postpone the referendum if that could be done without legal challenge.

Mursi's planned dialogue meeting was expected to go ahead on Saturday in the absence of most opposition factions. "Everything will be on the table," a presidential source said.

Mursi could be joined by some senior judiciary figures and politicians such as Ayman Nour, one of the candidates in Mubarak's only multi-candidate presidential race, in 2005, in which he was unsurprisingly trounced.

The opposition has demanded that Mursi rescind the decree giving himself wide powers and delay the vote set for December 15 on a constitution drafted by an Islamist-led assembly which they say fails to meet the aspirations of all Egyptians.

EXPAT VOTE DELAYED

The state news agency reported that the election committee had postponed the start of voting for Egyptians abroad until Wednesday, instead of Saturday as planned. It did not say whether this would affect the timing of voting within Egypt.

Ahmed Said, leader of the liberal Free Egyptians Party, told Reuters that delaying expatriate voting was intended to seem like a concession but would not change the opposition's stance.

The opposition organized marches converging on the palace which Republican Guard units had ringed with tanks and barbed wire on Thursday after violence between supporters and opponents of Mursi killed seven people and wounded 350.

Islamists, who had obeyed a military order for demonstrators to leave the palace environs, held funerals on Friday at Cairo's al-Azhar mosque for six Mursi partisans who were among the dead.

"With our blood and souls, we sacrifice to Islam," they chanted.

A group led by leftist opposition leader Hamdeen Sabahy has called for an open-ended protest at the palace.

Some pro-Mursi demonstrators gathered in a mosque not far from the palace, but said they would not march towards the palace to avoid a repeat of the violence that took place on Wednesday night.

In a speech late on Thursday, Mursi had refused to retract his decree or cancel the referendum on the constitution, but offered talks on the way forward after the referendum.

The National Salvation Front, the main opposition coalition, said it would not join the dialogue. The Front's coordinator, Mohamed ElBaradei, a Nobel peace laureate, dismissed the offer as "arm-twisting and imposition of a fait accompli".

ElBaradei said that if Mursi were to scrap the decree with which he awarded himself extra powers and postpone the referendum "he will unite the national forces".

Murad Ali, spokesman for the Muslim Brotherhood's Freedom and Justice Party, said opposition reactions were sad: "What exit to this crisis do they have other than dialogue?" he asked.

(This story corrects Mursi's title to president in paragraph 1)

(Additional reporting by Omar Fahmy; Writing by Giles Elgood; Editing by Michael Roddy and Paul Tait)

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Exclusive: Google to replace M&A chief

SAN FRANCISCO (Reuters) – Google Inc is replacing the head of its in-house mergers and acquisitions group, David Lawee, with one of its top lawyers, according to a person familiar with the matter.

Don Harrison, a high-ranking lawyer at Google, will replace Lawee as head of the Internet search company‘s corporate development group, which oversees mergers and acquisitions, said the source, who spoke anonymously because he was not authorized to speak publicly.

Google is also planning to create a new late-stage investment group that Lawee will oversee, the source said.

Google declined to comment. Lawee and Harrison could not immediately be reached for comment.

One of the Internet industry’s most prolific acquirers, Google has struck more than 160 deals to acquire companies and assets since 2010, according to regulatory filings. Many of Google’s most popular products, including its online maps and Android mobile software, were created by companies or are based on technology that Google acquired.

Harrison, Google’s deputy general counsel, will head up the M&A group at a time when the company is still in the process of integrating its largest acquisition, the $ 12.5 billion purchase of smartphone maker Motorola Mobility, which closed in May.

And he takes over at a time when the Internet search giant faces heightened regulatory scrutiny, with the U.S. Federal Trade Commission and the European Commission conducting antitrust investigations into Google’s business practices. Several recent Google acquisitions have undergone months of regulatory review before receiving approval.

As deputy general counsel, Harrison has been deeply involved in the company’s regulatory issues and many of its acquisitions. He joined Google more than five years ago and has completed more than 70 deals at the company, according to biographical information on the Google Ventures website.

Harrison is an adviser to Google Ventures, the company’s nearly four-year old venture division which provides funding for start-up companies.

While most of Google’s acquisitions are small and mid-sized deals that do not meet the threshold for disclosure of financial terms, Google has a massive war chest of $ 45.7 billion in cash and marketable securities to fund acquisitions.

Lawee, who took over the M&A group in 2008, has had hits and misses during his tenure. Google shut down social media company Slide one year after acquiring it for $ 179 million, for example.

The planned late-stage investment group has not been finalized, the source said. The fund might operate separately from Google Ventures, according to the source.

“Think of it as a private equity fund inside of Google,” the source said.

The company recently said it would increase the cash it allocates to Google Ventures to $ 300 million a year, up from $ 200 million, potentially helping it invest in later-stage financing rounds.

Google finished Friday’s regular trading session down 1 percent, or $ 6.92, at $ 684.21.

(Reporting By Alexei Oreskovic; editing by Carol Bishopric and Jim Loney)

Wireless News Headlines – Yahoo! News

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Susan Powell's Father-in-Law Secretly Took 4,500 Pictures of Her

12/07/2012 at 07:30 PM EST

Wrapping up a year that has brought unimaginable frustration and heartbreak, Susan Powell's family marked the three-year anniversary of her disappearance at a ceremony this week near where her two sons are buried.

"It's a hard time of year," Susan's father, Chuck Cox, tells PEOPLE. "Our daughter's still missing. Someday, we will find out what happened to her."

He added that he is not sure what to make of a West Valley City, Utah, police announcement Thursday that their investigation into Susan's Dec. 6, 2009 disappearance remains active but "has been scaled down," with a reduction in the number of full-time investigators working the case.

The announcement came at the same time that more evidence emerged of the alleged obsession Susan's father-in-law, Steven Powell, had toward her. Authorities released nearly 4,500 pictures that they say he secretly took of her at home and elsewhere.

Cox says he's hopeful that the police are still doing everything possible to solve Susan's case, but he hasn't ruled out suing the department for failing to arrest Susan's husband, Josh Powell, for her murder.

More than two years after Susan's disappearance, Josh on Feb. 5 murdered the couple's two sons and committed suicide by blowing up his house.

Cox's lawyer, Anne Bremner, says Cox "goes back and forth" over whether to sue West Valley City. "He wants them to find her. A lawsuit can have a chilling affect on things."

Cox and Bremner say they do plan to file a lawsuit against the state of Washington for continuing to give Josh visitation with his children despite what they claim were mounting concerns regarding his mental stability.

Although Cox and the police believe that Josh Powell knew more than anyone what happened to Susan, they also strongly suspect that his father, Steven Powell, should still be looked at more closely.

Steven Powell

Ted S. Warren / AP

The Coxes hoped Steve Powell's voyeurism trial in May would unearth some answers but it did not. Powell invoked his Fifth Amendment right against self-incrimination when asked in jail about Susan.

In numerous interviews with PEOPLE, Steve and Josh Powell denied any involvement in Susan's disappearance and have suggested that she ran off with another man.

Steve Powell was prosecuted for surreptitiously photographing his neighbor's young daughters (and is serving a 30-month sentence), but the investigation also unearthed journals in which Powell described his interest in his daughter-in-law, as well as the thousands of photos, which were released Thursday to the Associated Press.

In a journal entry, Steven Powell recalls a sexually charged dream in which Susan asks him, “Do you think I would make a good wife for you?” None of the pictures show Susan naked, although there are images of her crotch and backside.

"We think he knows exactly where our daughter is," Cox says.

Once Susan disappeared, Josh sold the family's home in Utah and moved with the boys into Steven Powell's house in Puyallup, Wash., only about two miles from the Cox family.

On Thursday, families streamed to Puyallup’s Woodbine Cemetery to remember the Powell boys and other children who died tragically and to dedicate a memorial: a bronze angel inspired by the novella The Christmas Box, in which strangers learn the value of love following a child’s death.

The novella's author, Richard Paul Evans, also attended the dedication. The memorial is on a hill overlooking the boys' gravesites 75 yards away.

"We get a lot of support from a lot of people and we're going to make it through," Cox says.

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Smokers celebrate as Wash. legalizes marijuana

SEATTLE (AP) — The crowds of happy people lighting joints under Seattle's Space Needle early Thursday morning with nary a police officer in sight bespoke the new reality: Marijuana is legal under Washington state law.

Hundreds gathered at Seattle Center for a New Year's Eve-style countdown to 12 a.m., when the legalization measure passed by voters last month took effect. When the clock struck, they cheered and sparked up in unison.

A few dozen people gathered on a sidewalk outside the north Seattle headquarters of the annual Hempfest celebration and did the same, offering joints to reporters and blowing smoke into television news cameras.

"I feel like a kid in a candy store!" shouted Hempfest volunteer Darby Hageman. "It's all becoming real now!"

Washington and Colorado became the first states to vote to decriminalize and regulate the possession of an ounce or less of marijuana by adults over 21. Both measures call for setting up state licensing schemes for pot growers, processors and retail stores. Colorado's law is set to take effect by Jan. 5.

Technically, Washington's new marijuana law still forbids smoking pot in public, which remains punishable by a fine, like drinking in public. But pot fans wanted a party, and Seattle police weren't about to write them any tickets.

In another sweeping change for Washington, Gov. Chris Gregoire on Wednesday signed into law a measure that legalizes same-sex marriage. The state joins several others that allow gay and lesbian couples to wed.

The mood was festive in Seattle as dozens of gay and lesbian couples got in line to pick up marriage licenses at the King County auditor's office early Thursday.

King County and Thurston County announced they would open their auditors' offices shortly after midnight Wednesday to accommodate those who wanted to be among the first to get their licenses.

Kelly Middleton and her partner Amanda Dollente got in line at 4 p.m. Wednesday.

Hours later, as the line grew, volunteers distributed roses and a group of men and women serenaded the waiting line to the tune of "Chapel of Love."

Because the state has a three-day waiting period, the earliest that weddings can take place is Sunday.

In dealing with marijuana, the Seattle Police Department told its 1,300 officers on Wednesday, just before legalization took hold, that until further notice they shall not issue citations for public marijuana use.

Officers will be advising people not to smoke in public, police spokesman Jonah Spangenthal-Lee wrote on the SPD Blotter. "The police department believes that, under state law, you may responsibly get baked, order some pizzas and enjoy a 'Lord of the Rings' marathon in the privacy of your own home, if you want to."

He offered a catchy new directive referring to the film "The Big Lebowski," popular with many marijuana fans: "The Dude abides, and says 'take it inside!'"

"This is a big day because all our lives we've been living under the iron curtain of prohibition," said Hempfest director Vivian McPeak. "The whole world sees that prohibition just took a body blow."

Washington's new law decriminalizes possession of up to an ounce for those over 21, but for now selling marijuana remains illegal. I-502 gives the state a year to come up with a system of state-licensed growers, processors and retail stores, with the marijuana taxed 25 percent at each stage. Analysts have estimated that a legal pot market could bring Washington hundreds of millions of dollars a year in new tax revenue for schools, health care and basic government functions.

But marijuana remains illegal under federal law. That means federal agents can still arrest people for it, and it's banned from federal properties, including military bases and national parks.

The Justice Department has not said whether it will sue to try to block the regulatory schemes in Washington and Colorado from taking effect.

"The department's responsibility to enforce the Controlled Substances Act remains unchanged," said a statement issued Wednesday by the Seattle U.S. attorney's office. "Neither states nor the executive branch can nullify a statute passed by Congress."

The legal question is whether the establishment of a regulated marijuana market would "frustrate the purpose" of the federal pot prohibition, and many constitutional law scholars say it very likely would.

That leaves the political question of whether the administration wants to try to block the regulatory system, even though it would remain legal to possess up to an ounce of marijuana.

Alison Holcomb is the drug policy director of the American Civil Liberties Union of Washington and served as the campaign manager for New Approach Washington, which led the legalization drive. She said the voters clearly showed they're done with marijuana prohibition.

"New Approach Washington sponsors and the ACLU look forward to working with state and federal officials and to ensure the law is fully and fairly implemented," she said.

___

Johnson can be reached at https://twitter.com/GeneAPseattle

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Wall Street Week Ahead: "Cliff" worries may drive tax selling

NEW YORK (Reuters) - Investors typically sell stocks to cut their losses at year end. But worries about the "fiscal cliff" - and the possibility of higher taxes in 2013 - may act as the greatest incentive to sell both winners and losers by December 31.

The $600 billion of automatic tax increases and spending cuts scheduled for the beginning of next year includes higher rates for capital gains, making tax-loss selling even more appealing than usual.

Tax-related selling may be behind the weaker trend in the shares of market leader Apple , analysts said. The stock is down 20 percent for the quarter, but it's still up nearly 32 percent for the year.

Apple dropped 8.9 percent in this past week alone. For a stock that gained more than 25 percent a year for four consecutive years, the embedded capital gains suddenly look like a selling opportunity if one's tax bill is going to jump sharply just because the calendar changes.

"Tax-loss selling is always a factor (but) tax-gains selling has been a factor this year," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"You have a lot of high-net-worth individuals in taxable accounts, and that could be what's affecting stocks like Apple. If you look at the stocks that people have their largest gains in, they seem to be under a little bit more pressure here than usual."

Of this year's top 20 performers in the S&P 1500 index, which includes large, small and mid-cap stocks, all but four have lost ground in the last five trading sessions.

The rush to avoid higher taxes on portfolio gains could cause additional weakness.

The S&P 500 ended the week up just 0.1 percent after another week of trading largely tied to fiscal cliff negotiation news, which has pushed the market in both directions.

A PAIN PILL FROM THE FED?

Next week's Federal Reserve meeting could offer some relief if policymakers announce further plans to help the lackluster U.S. economy. The Federal Open Market Committee will meet on Tuesday and Wednesday. The policy statement is expected at about 12:30 p.m. on Wednesday after the conclusion of the meeting - the Fed's last one for the year.

Friday's jobs report showing non-farm payrolls added 146,000 jobs in November eased worries that Superstorm Sandy had hit the labor market hard.

"After the FOMC meeting, I think it's going to be downhill from there as worries about the fiscal cliff really take center stage and prospects of a deal become less and less likely," said Mohannad Aama, managing director of Beam Capital Management LLC in New York.

"I think we are likely to see an escalation in profit-taking ahead of tax rates going up next year," he said.

MORE VOLUME AND VOLATILITY

Volume could increase as investors try to shift positions before year end, some analysts said.

While most of that would be in stocks, some of the extra trading volume could spill over into options, said J.J. Kinahan, TD Ameritrade's chief derivatives strategist.

Volatility could pick up as well, and some of that is already being seen in Apple's stock.

"The actual volatility in Apple has been very high while the market itself has been calm. I expect Apple's volatility to carry over into the market volatility," said Enis Taner, global macro editor at RiskReversal.com, an options trading firm in New York.

Shares of Apple, the largest U.S. company by market value, registered their worst week since May 2010. In another bearish sign, the stock's 50-day moving average fell to $599.52 - below its 200-day moving average at $601.38.

"There's a lot of tax-related selling happening now, and it will continue to happen. Apple is an example, even (though) there are other factors involved with Apple," Aama said.

While investors may be selling stocks to avoid higher taxes in 2013, companies may continue to announce special and accelerated dividend payments before year end. Among the latest, Expedia announced a special dividend of 52 cents a share to be paid on December 28.

To be sure, the big sell-off in stocks following the November 6 election was likely related to tax selling, making it hard to judge how much more is to come.

Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston, said there's a decent chance that the market could rally before year end.

"Even with little or spotty news that one would put in the positive bucket regarding the (cliff) negotiations, the market has basically hung in there, and I think it's hung in there in anticipation of something coming," he said.

(Wall St Week Ahead runs every Friday. Questions or comments on this column can be emailed to: caroline.valetkevitch(at)thomsonreuters.com)

(Reporting by Caroline Valetkevitch; Editing by Jan Paschal; Multimedia versions of Reuters Top News are now available for:; 3000 Xtra: visit Reuters Top News; BridgeStation: view story .134; For London stock market outlook please click on .L/O; Pan-European stock market outlook .EU/O; Tokyo stock market outlook .T/O; Wall St Week Ahead runs every Friday.)

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Philippines starts to bury dead as toll hits 418

NEW BATAAN, Philippines (Reuters) - Residents in the southern Philippines began to bury their dead on Friday even as rescue workers continued scouring remote areas for possible survivors of Typhoon Bopha, the country's strongest storm this year, which killed 418 people and left nearly as many missing.

Officials in Compostela Valley, one of the worst hit provinces on the resource-rich island of Mindanao, were considering mass graves for unclaimed bodies killed by the typhoon which hit two days ago.

Bopha cut a swath of destruction in the valley, flooding farming and mining towns and burying many people in mudslides.

"We are thinking of burying the unclaimed bodies on health concerns," Major General Ariel Bernardo, an army division commander in the southern Philippines, told Reuters. "The foul smell is becoming strong."

Bernardo said rescue and retrieval work was hampered by lack of equipment. "Some of the dead are buried in knee deep mud and we only have our hands and shovels," he said.

Arturo Uy, governor of Compostela Valley, said the province was considering digging mass graves if most of the dead are not claimed in two to three days. He estimates 212 died in his province while nearly 400 were missing.

"Probably half of the missing could be dead by now," he told Reuters.

The official death toll stands at 418, with 383 missing and hundreds injured, the national disaster agency said in its latest tally. But the toll is expected to rise, with local government officials quoting higher numbers of missing.

A Reuters photographer saw at least 10 bodies under mud and piles of logs and debris and only a few hundreds of meters from a crowded makeshift grandstand in New Bataan town in Compostela Valley, where President Benigno Aquino was due to give out relief goods later on Friday.

"Up to now, we are not discussing stopping (the search)," Uy told reporters. "There are still survivors in barangays (villages) which we couldn't reach immediately."

Stephen Antig, executive director of Pilipino Banana Growers and Exporters Association, estimates about 7 billion pesos ($171 million) worth of bananas mostly for export in Compostela Valley and Davao del Norte were destroyed by the typhoon.

The area, where plantations owned by Dole Food Company Inc and Del Monte Pacific Ltd are located, accounts for almost a fifth of the country's total banana production.

Bopha has now weakened and is slowly moving north-northwest towards the South China Sea, with central winds of up to 110 kph (68 mph) and gusts of up to 140 kph (87 mph).

About 20 typhoons hit the Philippines every year, often causing death and destruction. Almost exactly a year ago, Typhoon Washi killed 1,500 people in Mindanao, but most storms make landfall further north.

($1 = 40.965 Philippine pesos)

(Additional reporting by Rosemarie Francisco, Manny Mogato and Erik dela Cruz; Editing by Michael Perry)

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The X Factor Reveals Its Four Semi-Finalists

TV Watch

The X Factor

By Aaron Parsley

12/06/2012 at 09:20 PM EST

There were tears on The X Factor Thursday night.

With only four spots in next week's semi-finals, the six acts who performed two songs each Wednesday night were a tense bunch. Especially after last week's shocking elimination that sent home fan favorite Vino Alan.

A majority of PEOPLE.com readers picked Demi Lovato's only remaining contestant, CeCe Frey, as the singer who most deserved elimination. Was she able to make it through one more week? Keep reading for all the results ...

CeCe Frey was the first to go.

"I'm proud of everything that I've done on this show," she said. "I hope I've taught everyone at home that you need to love who you are, because the more you love who you are, the less you're going to need anybody else to."

Her coach tried to avoid tears but shed a few anyway. "I've grown so close to you," Demi said. "And I'm just so proud of you."

Three acts were then declare safe: Simon Cowell's boy band, Emblem3; Britney Spears's frontrunner, Carly Rose Sonenclar; and L.A. Reid's country singer, Tate Stevens, also a frontrunner.

That left Team Britney's Diamond White and Simon's other group, Fifth Harmony, to sing for survival.

Fifth Harmony sang Mariah Carey's "Anytime You Need a Friend," and Diamond sang Lee Ann Womack's "I Hope You Dance."

As expected, Simon and Britney voted to send home each other's acts. But it was the end of the road for Diamond, after L.A. and Demi both voted to send her home as well.

"I'm just thinking of Cher Lloyd right now," she said of the "Want U Back" singer. "She came in fifth and look where she is."

Here's how the top four ranked:
1. Tate Stevens
2. Carly Rose Sonenclar
3. Emblem3
4. Fifth Harmony

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Celebrations planned as Wash. legalizes marijuana

SEATTLE (AP) — Legal marijuana possession becomes a reality under Washington state law on Thursday, and some people planned to celebrate the new law by breaking it.

Voters in Washington and Colorado last month made those the first states to decriminalize and regulate the recreational use of marijuana. Washington's law takes effect Thursday and allows adults to have up to an ounce of pot — but it bans public use of marijuana, which is punishable by a fine, just like drinking in public.

Nevertheless, some people planned to gather at 12:01 a.m. PST Thursday to smoke in public beneath Seattle's Space Needle. Others planned a midnight party outside the Seattle headquarters of Hempfest, the 21-year-old festival that attracts tens of thousands of pot fans every summer.

"This is a big day because all our lives we've been living under the iron curtain of prohibition," said Hempfest director Vivian McPeak. "The whole world sees that prohibition just took a body blow."

In another sweeping change for Washington, Gov. Chris Gregoire on Wednesday signed into law a measure that legalizes same-sex marriage. The state joins several others that allow gay and lesbian couples to wed.

That law also takes effect Thursday, when gay and lesbian couples can start picking up their wedding certificates and licenses at county auditors' offices. Those offices in King County, the state's largest and home to Seattle, and Thurston County, home to the state capital of Olympia, planned to open the earliest, at 12:01 a.m. Thursday, to start issuing marriage licenses. Because the state has a three-day waiting period, the earliest that weddings can take place is Sunday.

The Seattle Police Department provided this public marijuana use enforcement guidance to its officers via email Wednesday night: "Until further notice, officers shall not take any enforcement action — other than to issue a verbal warning — for a violation of Initiative 502."

Thanks to a 2003 law, marijuana enforcement remains the department's lowest priority. Even before I-502 passed on Nov. 6, police rarely busted people at Hempfest, despite widespread pot use, and the city attorney here doesn't prosecute people for having small amounts of marijuana.

Officers will be advising people to take their weed inside, police spokesman Jonah Spangenthal-Lee wrote on the SPD Blotter. "The police department believes that, under state law, you may responsibly get baked, order some pizzas and enjoy a 'Lord of the Rings' marathon in the privacy of your own home, if you want to."

Washington's new law decriminalizes possession of up to an ounce for those over 21, but for now selling marijuana remains illegal. I-502 gives the state a year to come up with a system of state-licensed growers, processors and retail stores, with the marijuana taxed 25 percent at each stage. Analysts have estimated that a legal pot market could bring Washington hundreds of millions of dollars a year in new tax revenue for schools, health care and basic government functions.

But marijuana remains illegal under federal law. That means federal agents can still arrest people for it, and it's banned from federal properties, including military bases and national parks.

The Justice Department has not said whether it will sue to try to block the regulatory schemes in Washington and Colorado from taking effect.

"The department's responsibility to enforce the Controlled Substances Act remains unchanged," said a statement issued Wednesday by the Seattle U.S. attorney's office. "Neither states nor the executive branch can nullify a statute passed by Congress" — a non-issue, since the measures passed in Washington and Colorado don't "nullify" federal law, which federal agents remain free to enforce.

The legal question is whether the establishment of a regulated marijuana market would "frustrate the purpose" of the federal pot prohibition, and many constitutional law scholars say it very likely would.

That leaves the political question of whether the administration wants to try to block the regulatory system, even though it would remain legal to possess up to an ounce of marijuana.

Colorado's measure, as far as decriminalizing possession goes, is set to take effect by Jan. 5. That state's regulatory scheme is due to be up and running by October 2013.

___(equals)

Johnson can be reached at https://twitter.com/GeneAPseattle

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Asia shares edge higher, focus on U.S. jobs

TOKYO (Reuters) - Asian shares touched fresh 16-month highs on Friday following modest overnight gains in global equities as investors watched progress in U.S. budget talks with expectations for an eventual deal and awaited U.S. nonfarm payrolls data later in the day.

The euro hovered near a one-week low against the dollar, having fallen after the European Central Bank painted a bleak outlook for the euro zone and discussed cutting interest rates at its policy meeting on Thursday when it kept rates steady.

Recent indicators suggesting stabilizing growth in China, the world's second-largest, economy also helped improve sentiment, although the Asian Development Bank slightly lowered its 2012 and 2013 growth estimates for developing Asia on Friday as frail global demand drags on the region.

Buoyed by strong domestic demand, developing Asian economies have shown relatively more resilience compared with developed and more export-reliant economies such as Japan and south Korea.

MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> rose 0.6 percent, and was set for its third-straight weekly gain with a 1.4 percent advance. The index has gained about 17 percent year-to-date, compared to a loss of nearly 18 percent last year.

South and Southeast Asian bourses have outperformed, with a 32 percent year-to-date surge in the Philippines <.psi>, a nearly 31 percent gain in Thailand <.seti>, Indian shares <.bsesn> rising 26 percent and Indonesia <.jkse> up 12 percent to date.

Hong Kong shares <.hsi> were up 0.5 percent to a 16-month high and risen 21 percent so far this year, despite facing bouts of pressure from sputtering mainland Chinese markets.

South Korean shares <.ks11> were up 0.5 percent and Australian shares <.axjo> jumped 0.9 percent to its highest in nearly seven weeks, as top miners were supported by rebounding iron ore prices and banks recovered from losses the previous day.

"One of the reasons for the gains is better news we've seen from China and expectations the economy there has stabilized and growth has improved modestly," said Michael McCarthy, chief market strategist at CMC Markets.

Japan's Nikkei stock average <.n225> inched up 0.2 percent. <.t/>

U.S. stocks advanced modestly while the FTSEurofirst 300 index <.fteu3> of top European shares hit an 18-month closing high on Thursday.

As superstorm Sandy disrupted U.S. economic activity, nonfarm payrolls in November are expected to have increased only 93,000, compared to October's 171,000 job gain, a Reuters survey of economists showed. The unemployment rate is seen holding steady at 7.9 percent.

"A soft number should reinforce the case for the Fed doves ahead of next week's FOMC meeting where QE is likely to be increased in order to at least offset the expiration of Operation Twist. Hence a soft report should hurt USD and vice versa," Sean Callow, senior currency strategist at Westpac bank in Sydney, said in a note.

At its December 11-12 meeting, the Federal Reserve is expected to announce a new round of Treasury bond purchases to reinforce quantitative easing, replacing the expiring programme called Operation Twist, under which it bought $45 billion of longer-dated bonds a month while selling its shorter-date holdings.

The dollar traded at 82.47 yen, sticking close to a 7-1/2-month high of 82.84 hit on November 22.

With little to show after a month of posturing, the White House and Republicans in Congress dropped hints on Thursday that they had resumed low-level private talks on breaking the stalemate over the "fiscal cliff" but refused to divulge details.

Markets have been keeping up hope that Washington would eventually avert some $600 billion of tax hikes and spending cuts scheduled to start in January. Economists have warned that failure by Congress to reach an agreement on deficit reduction could tip the U.S. economy back into recession, further weighing on the fragile global economy.

"The main board is extending its upward trend that began in mid-November on hopes for a positive conclusion to the U.S. 'fiscal cliff' and economic growth policies from China," said Park Hae-sung, an analyst at LIG Investment & Securities.

Global rates: http://link.reuters.com/xyb96s

U.S. fiscal cliff: http://link.reuters.com/dut83t

Asset returns in 2012: http://link.reuters.com/nyw85s

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

EURO ON DEFENSIVE

The euro steadied at around $1.2968, after falling nearly 1 percent to $1.2950 on Thursday in its biggest one-day loss in a month, and retreating from a seven-week peak of $1.3127 set mid-week.

ECB President Mario Draghi said on Thursday policymakers had held a wide discussion on interest rates, including negative deposit rates, leaving the door open to a possible cut in borrowing costs next year.

Creating negative deposit rates means effectively charging depositors rather than paying them interest, with an aim of forcing banks to put their money to work elsewhere.

The ECB's new staff also projected gross domestic product next year could range from a contraction of 0.9 percent to growth of just 0.3 percent, suggesting contraction is far more likely than not. It forecast inflation of 1.1 percent to 2.1 percent next year.

"It is unusual that a negative growth projection for the next year is offered before the end of the current year, but with such a view, markets are naturally pricing in a interest rate cut," said Daisuke Karakama, market economist for Mizuho Corporate Bank in Tokyo.

He expected the euro to remain vulnerable with the risk of falling back to $1.2 at some point, but the single currency appeared to be supported currently by year-end repatriation flows.

U.S. crude futures inched up 0.3 percent to $86.53 a barrel and Brent rose 0.2 percent to $107.27.

(Additional reporting by Joyce Lee in Seoul and Maggie Lu Yueyang; Editing by Kim Coghill)

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Rivals clash as Mursi deputy seeks end to Egypt crisis

CAIRO (Reuters) - Islamists battled with protesters outside Egyptian President Mohamed Mursi's palace on Thursday, after his vice president suggested amendments could be agreed to the draft constitution that has divided the nation.

Fires burned in the streets near the palace perimeter where opponents and supporters of Mursi threw stones and petrol bombs. Riot police tried to separate the two sides, but failed to halt fighting that extended from Wednesday into the early morning.

Residents, frustrated that police had not calmed the streets, set up makeshift road blocks nearby to check passers-by, scenes reminiscent of the popular uprising that toppled Mursi's autocratic predecessor Hosni Mubarak.

Five people were killed and 350 injured in the clashes, according to a statement released by the Ministry of Health.

"No to dictatorship," Mursi's opponents chanted, while their rivals chanted: "Defending Mursi is defending Islam."

Mursi's opponents accused him of creating a new autocracy by awarding himself extraordinary powers in a decree on November 22 and were further angered when an Islamist-dominated assembly pushed through a draft constitution that opponents said did not properly represent the aspirations of the whole nation.

The United States, worried about the stability of a state that has a peace deal with Israel and to which it gives $1.3 billion in military aid each year, called for dialogue.

A presidential source said Mursi was expected to make a statement later on Thursday. His opponents had earlier called on him to address the nation to help calm the streets.

Bidding to end the worst crisis since Mursi took office less than six months ago, Vice President Mahmoud Mekky said amendments to disputed articles in the constitution could be agreed with the opposition. A written agreement could then go to parliament, to be elected after a referendum on the constitution on December 15.

"There must be consensus," he told a news conference inside the presidential palace as fighting raged outside on Wednesday evening, saying opposition demands had to be respected.

PROTESTS SPREAD

Prime Minister Hisham Kandil called for calm to "give the opportunity" for efforts underway to start a national dialogue.

Protests spread to other cities, and offices of the Muslim Brotherhood's political party in Ismailia and Suez were torched.

But Mursi has shown no sign of buckling under pressure from protestors, confident that the Islamists, who have dominated both elections since Mubarak was overthrown in February 2011, can win the referendum and parliamentary election to follow.

On top of the support of the Brotherhood, which backed him for the presidency in the June election, Mursi may also be able to rely on a popular yearning for stability and economic revival after almost two years of political turmoil.

Egypt's opposition coalition blamed Mursi for the violence and said it was ready for dialogue if the Islamist leader scrapped the decree that gave him wide powers and shielded his decisions from judicial review.

"Today what is happening in the Egyptian street, polarization and division, is something that could and is actually drawing us to violence and could draw us to something worse," opposition coordinator Mohamed ElBaradei said on Wednesday.

"We are ready for dialogue if the constitutional decree is cancelled ... and the referendum on this constitution is postponed," he told a news conference.

But liberals, leftists, Christians, ex-Mubarak followers and others opposed to Mursi have yet to generate a mass movement or a grassroots base to challenge the Brotherhood.

'REAL DANGER'

Opposition leaders have previously urged Mursi to retract the decree, defer the referendum and agree to revise the constitution, but have not echoed calls from street protesters for his overthrow and the "downfall of the regime".

Mursi has said his decree was needed to prevent courts still full of judges appointed by Mubarak from derailing a constitution vital for Egypt's political transition.

Mekky said street mobilization by both sides posed a "real danger" to Egypt. "If we do not put a stop to this phenomenon right away ... where are we headed? We must calm down."

U.S. Secretary of State Hillary Clinton weighed into Egypt's political debate, saying dialogue was urgently needed on the new constitution, which should "respect the rights of all citizens".

Clinton and Mursi worked together last month to broker a truce between Israel and Hamas Islamists in the Gaza Strip.

British Foreign Secretary William Hague called for restraint on all sides. He said Egypt's authorities had to make progress on the transition in an "inclusive manner" and urged dialogue.

Both Islamists and their opponents have staged big shows of strength on the streets since Mursi's decree, each bringing out tens of thousands of people.

State institutions, with the partial exception of the judiciary, have mostly fallen in behind Mursi.

The army, the muscle behind all previous Egyptian presidents in the republic's six-decade history, has gone back to barracks, having apparently lost its appetite to intervene in politics.

(Additional reporting by Yasmine Saleh and Marwa Awad; Writing by Edmund Blair; Editing by Will Waterman)

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