U.S. budget setback hits shares, euro

LONDON (Reuters) - European and Asian shares weakened on Friday and both the euro and gold slipped, as a new setback in talks to avert a U.S. fiscal crisis stoked investor nerves.

A proposal from Republican leader John Boehner to avoid the so-called fiscal cliff failed to get support from his party on Thursday, casting fresh uncertainty over talks to avoid across-the-board tax hikes and spending cuts that could push the U.S. economy into recession in 2013.

The worries prompted selling in European shares as trading resumed, with the FTSEurofirst 300 <.fteu3> index of the top European stocks down 0.4, albeit still on course for a fifth straight week of gains.

"The market is still too complacent and the odds are increasing that a (U.S. budget) deal will not get done in the immediate future," Saxo Bank Chief Economist Steen Jakobsen said.

"That leaves European equities (in terms of earnings multiples) vulnerable to the negative exposure of the fiscal drag and even a compromised deal is going to do very little to structurally reform anything," he added.

London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> were down 0.3-0.5 percent following a 0.7 percent tumble in Asian stocks <.miapj0000pus>, and futures prices pointed to sharp falls Wall Street later.

Anxiety was exacerbated by weaker-than-expected German data which showed consumer morale dropped for the fourth month running to its lowest level in more than a year.

The combined worries helped push up German government bonds and the dollar <.dxy>, both traditionally favored by risk adverse investors.

The euro eased back to just over $1.32, trimming some of the gains it has seen this week as euro zone sentiment continued to improve.

Gold was also caught up in the U.S. disappointment, slipping $1.38 to $1,645.76 an ounce, putting it near a four-month low and on track for its steepest weekly drop since June.

(Reporting by Marc Jones; editing by Philippa Fletcher)

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Douglas wins AP female athlete of the year honors

When Gabby Douglas allowed herself to dream of being the Olympic champion, she imagined having a nice little dinner with family and friends to celebrate. Maybe she'd make an appearance here and there.

"I didn't think it was going to be crazy," Douglas said, laughing. "I love it. But I realized my perspective was going to have to change."

Just a bit.

The teenager has become a worldwide star since winning the Olympic all-around title in London, the first African-American gymnast to claim gymnastics' biggest prize. And now she has earned another honor. Douglas was selected The Associated Press' female athlete of the year, edging out swimmer Missy Franklin in a vote by U.S. editors and news directors that was announced Friday.

"I didn't realize how much of an impact I made," said Douglas, who turns 17 on Dec. 31. "My mom and everyone said, 'You really won't know the full impact until you're 30 or 40 years old.' But it's starting to sink in."

In a year filled with standout performances by female athletes, those of the pint-sized gymnast shined brightest. Douglas received 48 of 157 votes, seven more than Franklin, who won four gold medals and a bronze in London. Serena Williams, who won Wimbledon and the U.S. Open two years after her career was nearly derailed by a series of health problems, was third (24).

Britney Griner, who led Baylor to a 40-0 record and the NCAA title, and skier Lindsey Vonn each got 18 votes. Sprinter Allyson Felix, who won three gold medals in London, and Carli Lloyd, who scored both U.S. goals in the Americans' 2-1 victory over Japan in the gold-medal game, also received votes.

"One of the few years the women's (Athlete of the Year) choices are more compelling than the men's," said Julie Jag, sports editor of the Santa Cruz Sentinel.

Douglas is the fourth gymnast to win one of the AP's annual awards, which began in 1931, and first since Mary Lou Retton in 1984. She also finished 15th in voting for the AP sports story of the year.

Douglas wasn't even in the conversation for the Olympic title at the beginning of the year. That all changed in March when she upstaged reigning world champion and teammate Jordyn Wieber at the American Cup in New York, showing off a new vault, an ungraded uneven bars routine and a dazzling personality that would be a hit on Broadway and Madison Avenue.

She finished a close second to Wieber at the U.S. championships, then beat her two weeks later at the Olympic trials. With each competition, her confidence grew. So did that smile.

By the time the Americans got to London, Douglas had emerged as the most consistent gymnast on what was arguably the best team the U.S. has ever had.

She posted the team's highest score on all but one event in qualifying. She was the only gymnast to compete in all four events during team finals, when the Americans beat the Russians in a rout for their second Olympic title, and first since 1996. Two nights later, Douglas claimed the grandest prize of all, joining Retton, Carly Patterson and Nastia Liukin as what Bela Karolyi likes to call the "Queen of Gymnastics."

But while plenty of other athletes won gold medals in London, none captivated the public quite like Gabby.

Fans ask for hugs in addition to photographs and autographs, and people have left restaurants and cars upon spotting her. She made Barbara Walters' list of "10 Most Fascinating People," and Forbes recently named her one of its "30 Under 30." She has deals with Nike, Kellogg Co. and AT&T, and agent Sheryl Shade said Douglas has drawn interest from companies that don't traditionally partner with Olympians or athletes.

"She touched so many people of all generations, all diversities," Shade said. "It's her smile, it's her youth, it's her excitement for life. ... She transcends sport."

Douglas' story is both heartwarming and inspiring, its message applicable those young or old, male or female, active or couch potato. She was just 14 when she convinced her mother to let her leave their Virginia Beach, Va., home and move to West Des Moines, Iowa, to train with Liang Chow, Shawn Johnson's coach. Though her host parents, Travis and Missy Parton, treated Douglas as if she was their fifth daughter, Douglas was so homesick she considered quitting gymnastics.

She's also been open about her family's financial struggles, hoping she can be a role model for lower income children.

"I want people to think, 'Gabby can do it, I can do it,'" Douglas said. "Set that bar. If you're going through struggles or injuries, don't let it stop you from what you want to accomplish."

The grace she showed under pressure — both on and off the floor — added to her appeal. When some fans criticized the way she wore her hair during the Olympics, Douglas simply laughed it off.

"They can say whatever they want. We all have a voice," she said. "I'm not going to focus on it. I'm not really going to focus on the negative."

Besides, she's having far too much fun.

Her autobiography, "Grace, Gold and Glory," is No. 4 on the New York Times' young adult list. She, Wieber and Fierce Five teammates Aly Raisman and McKayla Maroney recently wrapped up a 40-city gymnastics tour. She met President Barack Obama last month with the rest of the Fierce Five, and left the White House with a souvenir.

"We got a sugar cookie that they were making for the holidays," Douglas said. "I took a picture of it."

Though her busy schedule hasn't left time to train, Douglas insists she still intends to compete through the Rio de Janeiro Olympics in 2016.

No female Olympic champion has gone on to compete at the next Summer Games since Nadia Comaneci. But Douglas is still a relative newcomer to the elite scene — she'd done all of four international events before the Olympics — and Chow has said she hasn't come close to reaching her full potential. She keeps up with Chow through email and text messages, and plans to return to Iowa after her schedule clears up in the spring.

Of course, plenty of other athletes have said similar things and never made it back to the gym. But Douglas is determined, and she gets giddy just talking about getting a new floor routine.

"I think there's even higher bars to set," she said.

Because while being an Olympic champion may have changed her life, it hasn't changed her.

"I may be meeting cool celebrities and I'm getting amazing opportunities," she said. "But I'm still the same Gabby."


AP Projects Editor Brooke Lansdale contributed to this report.

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EPA Scrambles on Year-End Regulatory Push

Forget the fiscal cliff and the National Rifle Association. The Environmental Protection Agency really got back to business on Friday after an election-year bottleneck, unleashing two new regulations and a controversial report on oil and natural-gas drilling.

The trio of EPA news developments is part of the agency’s expected year-end push after several rules were kept in regulatory limbo much of this year as President Obama sought reelection. Congressional Republicans have accused Obama of holding back the agency’s regulatory agenda just until after the election. 

EPA’s announcements on Friday will likely provide political fodder for the GOP. But even Republicans might not focus much on EPA’s actions on a day when Washington is transfixed on the fiscal cliff, the NRA’s first press conference since the elementary school shooting in Connecticut, Obama’s selection of Sen. John Kerry, D-Mass., to be his secretary of State, and the funeral for Sen. Daniel Inouye, D-Hawaii. And don’t forget most people, including policymakers, are trying to get home to spend the holidays with their families. 

The pair of rules that EPA released on Friday will impose tougher air-pollution standards for industrial boilers and for the cement industry. Boilers, which burn fossil fuels to produce electricity and heat, are found in all kinds of buildings, ranging from hospitals to manufacturing plants. The agency said on Friday that it was issuing the cement rule to meet a legal deadline.

Also on Friday, EPA issued a preliminary report on the impact of hydraulic fracturing on drinking-water supplies. This drilling technology, nicknamed “fracking,” is controversial for its potential effects on the environment, but it also is key for unlocking newly discovered reserves of oil and natural gas. Fracking involves injecting large amounts of water, sand, and chemicals deep underground to break apart rocks holding the fuel.

The almost 300-page “progress” report lays out what EPA has found and how it is conducting the study. People hoping for declarative statements that green- or red-light fracking will be disappointed.

“The report does not draw conclusions about the potential impacts of hydraulic fracturing on drinking water resources,” EPA said in its release of the report. EPA plans to release the completed study in 2014, and at that point the public will be able to comment.

Because this Friday is a particularly busy news day, EPA’s actions will likely get buried more than they would have on a slower news day. But EPA is no stranger to the Friday news-dump strategy. Resources for the Future, a nonprofit and nonpartisan environmental group based in Washington, culled through more than 21,000 press releases issued by EPA between 1994 and 2009 to conclude the agency announced new regulations and enforcement actions on Fridays and before holidays, “a time when news has the least impact on media coverage and financial markets.”

Last Friday, EPA Administrator Lisa Jackson announced a tougher standard for soot pollution that comes from a host of sources, such as cars and power plants. EPA was facing a legal deadline to issue the standard on that day. That news got buried deep beneath the coverage of the Connecticut school shooting, which occurred that morning.

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Madness in the air in Washington

National Rifle Association Executive Vice President Wayne LaPierre calls on Congress to pass a law putting armed police officers in every school in America.


  • David Gergen: After election, there were hopes partisan tension would fade

  • He says this week we've seen a complete breakdown on the fiscal cliff

  • The NRA doubled down on its anti-gun-control rhetoric despite Newtown, he says

  • Gergen: We're seeing the character assassination of a hero, Chuck Hagel

Editor's note: David Gergen is a senior political analyst for CNN and has been an adviser to four presidents. A graduate of Harvard Law School, he is a professor of public service and director of the Center for Public Leadership at Harvard University's Kennedy School of Government. Follow him on Twitter.

(CNN) -- What in the world is gripping Washington? Everywhere one turns -- from finances to guns to nominations -- there is madness in the air.

With time rapidly running out, efforts have collapsed to reach a major agreement on federal spending and taxes before year's end, and both Congress and President are leaving town for the holidays. At best, they will return next week and construct a small bridge over the "fiscal cliff"; at worst, they won't. But who knows?

David Gergen

David Gergen

And that's a big part of the problem -- no one can be confident that our national leaders are still capable of governing responsibly. And in the process, they are putting both our economy and our international reputation at risk.

Fresh poison

President Barack Obama had rightly hoped that the elections would clear the air; they haven't. If anything, the recent squabbling over the federal budget has injected fresh poison into relationships and dimmed prospects for other bipartisan agreements in the next few years, starting with hopes for a "grand bargain"in 2013.

John Boehner and Eric Cantor, the House GOP leaders

The President insists he remains an optimist, but if he and Republicans can't agree on how to bring the nation's finances under control -- something fundamental to the welfare of the country -- why should we have faith they will succeed on other important issues like energy, education, immigration and gun safety?

As the blame game heats up, Republicans are sure to pay the biggest price with the public. It was bad enough that they lost the message fight, letting themselves be painted as protectors of the wealthy. But it was inexcusable when they revolted against House Speaker John Boehner in his search for a way forward: that only reinforced a narrative that the Grand Old Party has fallen hostage to its right wing -- a narrative that already exacted a huge price in the fall elections.

Most voters -- I am among them -- believe the country needs a center-right party but will not support an extremist party.

President Obama is certainly not blameless in these financial talks. Early on, he overplayed his hand, alienating rank-and-file Republicans. Like Boehner, he has been more accommodating recently, offering concessions on taxes and entitlement spending that narrowed the negotiating gap between the parties, even as his leftward allies fretted.

Still, Boehner has a point in arguing that what Obama now has on the table comes nowhere close to what the he was advocating in the election season: a ratio of 2.5 dollars in spending cuts to 1.0 dollars in tax increases.

The buck stops on the President's desk, so that ordinarily one would expect him to take the lead in these final days before January 1. For reasons that are still unclear, he instead chose in his press statement late Friday to toss responsibility for negotiations next week into the laps of Congressional leaders.

Perhaps he has reached a quiet understanding with Boehner and Senate Majority Leader Harry Reid that the two of them can work out a stripped-down agreement. Let's hope so. But as we enter the holidays, it appears to be a mess. And time is quickly running out.

The NRA in denial

As if Friday weren't gloomy enough, the National Rifle Association weighed in with its long-awaited response to the horrors of Newtown, Connecticut. There had been hints that the NRA would offer a more conciliatory stance. Just the opposite: they doubled down.

Incredibly, Wayne LaPierre, executive vice president of the NRA, called for putting armed police officers in every school. Isn't that what parents of every six-year old have been longing for: to have their child studying and playing under the watchful eye of an armed guard? Has LaPierre visited an elementary school classroom in recent years? If so, he would know his idea would be repulsive in most schools.

Just as strikingly, the NRA response refused to acknowledge and address the beliefs of a majority of Americans in recent polls that the U.S. needs tougher laws in favor of gun safety. Americans aren't saying no one should have guns or that the 2nd Amendment should be gutted but they are demanding a national conversation to see what can be sensibly done. It is hard to have a conversation when one side won't talk.

Character assassination

Meanwhile, in a less noticed but important saga in Washington, we are once again watching the character assassination of a public servant of honor and distinction.

Chuck Hagel served America with valor as a sergeant in the Vietnam war, earning two Purple Hearts. He was a popular Republican senator from Nebraska who paid close attention to international affairs and is now co-chair of the President's Foreign Intelligence Advisory Board, serving with another former Senator, David Boren.

Ever since Hagel's name arose as a top candidate to become the next Secretary of Defense, he has been pilloried for statements and stands he has taken in the past. Is it legitimate to question his positions on Israel, Iran, and on gays? Absolutely. But what is grossly unfair is to misstate them, saying that he is against sanctions on Iran when in fact he has argued in favor of international sanctions, not unilateral sanctions (which don't work). As someone who strongly favors Israel, I am also deeply troubled by the way he has been misrepresented as virtually anti-Semitic.

Nor is this a fair fight. Hagel is in no-man's land because his name is prominently mentioned but he hasn't been formally nominated, so the White House isn't rushing to the barricades to support him.

The signals from 1600 Pennsylvania Avenue were that the Secretary of Defense nominee would be announced in a package with the Secretary of State. The President has now gone ahead with John Kerry but the absence of a Defense nominee has now left Hagel dangling in the breeze, a piƱata.

The White House should now move early next week -- by announcement or by leak -- to settle this by making a decision. Whether or not the President nominates Hagel, he should put a stop to the defamation by recognizing Hagel as a patriot with an independent mind and a long record of honor. If selected as Secretary, Hagel would be a very fine member of the national security team.

One had hoped that the shootings at Sandy Hook would draw us together. Sadly, they haven't. Now, perhaps the blessings of the holidays and a brief moment to take a breath will lift our sights. Surely, this madness should not continue into the New Year.

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The opinions expressed in this commentary are solely those of David Gergen.

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2 children dead in Englewood fire

Two children have died in a fire in the Englewood neighborhood on the South Side, fire officials say.

The fire started around 3:30 a.m. at a home in the 6400 block of South Paulina Street, officials said.

Check back for details.

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Egypt's constitution seen passing in referendum

CAIRO (Reuters) - Egyptians voted on a constitution drafted by Islamists on Saturday in a second round of balloting expected to approve the charter that opponents say will create deeper turmoil in Egypt.

After a first round last week in which unofficial results showed 57 percent of those who voted approved the constitution, the opposition cried foul, saying a litany of alleged abuses meant the first stage of the referendum should be re-run.

But the committee overseeing the two-stage vote said their investigations showed no major irregularities in voting on December 15, which covered about half of Egypt's 51 million eligible voters.

Islamist supporters of President Mohamed Mursi, who was elected in June, say the constitution is vital to moving Egypt towards democracy two years after Hosni Mubarak was overthrown in a popular uprising. They say it will help restore the stability needed to fix an economy that is on the ropes.

If the basic law is passed, a parliamentary election will be held in about two months.

However, the opposition says the constitution is divisive and accuses Mursi of pushing through a document that favors his Islamist allies and ignores the rights of Christians, who make up about 10 percent of the population, as well as women.

"I'm voting 'no' because Egypt can't be ruled by one faction," said Karim Nahas, 35, a stock market broker, heading to a polling station in Giza, a province included in this round of voting which covers parts of greater Cairo.

Polling stations opened at 8 a.m. (0600 GMT) and close at 7 p.m. (1700 GMT) though voting could be extended as it was last week. Queues formed at some polling stations around the country.

Unofficial tallies are likely to emerge within hours of the close, but the referendum committee may not declare an official result for the two rounds until Monday, after hearing appeals.

Shahinaz Shalaby, a housewife, said she would be voting "yes" even though she disagreed with some clauses. "We feel our voice matters," she said, adding that a "yes" vote would not stop protests but "then it will stabilize afterwards".

Cairo districts covered in the first round voted "no", but overall the vote in that round was in favor.

Analysts expect another "yes" vote on Saturday because it covers rural and other areas seen as having more Islamist sympathizers. Islamists may also be able to count on many Egyptians who are simply exhausted by two years of turmoil.


But, even if it is approved, the opposition say it is a recipe for trouble since the charter has not received broad consensus backing from the population. They say the result may go in Mursi's favor but will not be the result of a fair vote.

"I see more unrest," said Ahmed Said, head of the liberal Free Egyptians Party and a member of the National Salvation Front, an opposition coalition formed after Mursi expanded his powers on November 22 and then pushed the constitution to a vote.

Citing what he said were "serious violations" on the first day of voting, he said anger against Mursi and his Islamist allies was growing: "People are not going to accept the way they are dealing with the situation."

At least eight people were killed in protests outside the presidential palace in Cairo this month. Islamists and rivals clashed on Friday in the second biggest city of Alexandria, hurling stones at each other. Two buses were torched.

Mohamed Beltagy, a senior official in the Muslim Brotherhood, the group that propelled Mursi to elected office, said the constitution was crucial to holding a parliamentary election and setting up the essential institutions of state.

"What is the catastrophe of this constitution?" he asked the assembly which drafted the document, during a sitting on Friday that was called to challenge opposition criticism of the text.

Opponents, who had earlier quit the drafting assembly saying their voices were not heard, were invited but stayed away.

The vote was staggered after many judges refused to supervise the vote, meaning there were not enough to hold the referendum on a single day nationwide.

The first round was won by a slim enough margin to buttress opposition arguments that the text was divisive. Opponents who include liberals, leftists, Christians and more moderate-minded Muslims accuse Islamists of using religion to sway voters.

"The problem is not whether the majority approves, it is that they rallied the people in the name of the religion," said Mustafa Shuman, who is among dozens of people who have been camped outside Mursi's palace in Cairo in protest.

Islamists, who have won successive ballots since Mubarak's overthrow albeit by narrowing margins, dismiss charges that they are exploiting religion and say the document reflects the will of a majority in the country where most people are Muslim.

(Additional reporting by Tamim Elyan; Writing by Edmund Blair; Editing by Andrew Osborn)

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Samsung drops attempt to ban Apple sales in Europe

Korea's Samsung Electronics on Tuesday said it would drop law suits aimed at banning the sale of Apple Inc. products in Europe just a day after scoring a victory in a battle in the United States with the maker of iPhones.

Samsung and Apple, the world's top two smartphone makers, have been locked in patent disputes in at least 10 countries over the last 18 months since Apple sued Samsung, saying the Korean firm copied its best-selling iPhone and iPad.

On Tuesday, Samsung said it was dropping an attempt to stop the sale of some Apple products in Germany, Britain, France, Italy and the Netherlands, though it did not say it would halt its court battle for compensation.

"Samsung remains committed to licensing our technologies on fair, reasonable and non-discriminatory terms, and we strongly believe it is better when companies compete fairly in the marketplace, rather than in court," the company said in a statement.

A spokesman for Apple declined to comment on Samsung's decision.

The decision comes a day after a judge rejected Apple Inc's request for a ban on the sale of Samsung Electronics' smartphones in the United States.

In August, Apple was awarded $1.05 billion in damages after a U.S. jury found Samsung had copied critical features of the iPhone and iPad. The Samsung products run on the Android operating system, developed by Google.

In January, the European Commission opened an investigation into whether Samsung Electronics has distorted competition in the European mobile device market, breaking EU antitrust rules.
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