NEW YORK (AFP) – Wall Street rallied Friday in a delayed reaction to data showing a narrowing of job losses along with a rise in unemployment, offering hope that an economic recovery is on track.

The Dow Jones Industrial Average climbed 96.66 points (1.03 percent) to close at 9,441.27 in a second day of gains for the stock market.

The tech-heavy Nasdaq composite added 35.58 points (1.79 percent) to 2,018.78 and the broad-market Standard & Poor’s 500 index was up 13.16 points (1.31 percent) to 1,016.40.

The market wobbled in early trade as investors struggled to interpret the report.

Analysts viewed the jobs numbers, showing unemployment climbing to 9.7 percent with 216,000 jobs lost in August from 9.4 percent and a revised 276,000 jobs lost in July, as giving conflicting signals.

“The bulls let out a collective sigh of relief today, after the government’s highly anticipated payrolls report wasn’t as sour as expected,” said Andrea Kramer at Schaeffer’s Investment Research.

“Against this backdrop, the bulls won the battle for the session, but the bears won the war for the first week in three.”

Going into the Labor Day holiday weekend, the blue-chip Dow fell 1.18 percent for the week while the Nasdaq dipped 0.49 percent and the broad-market Standard & Poor’s 500 index pulled back 1.22 percent.

Barclays Capital analysts said the payrolls report, one of the best gauges of economic momentum, was a bit weaker than expected on balance, due to a rising unemployment rate and small downward revisions to previous months, but did not alter the outlook for recovery.

“While the labor market is still showing significant job losses, the August employment report showed a continued slowing in their pace, and we expect job growth to turn positive by year-end as the recovery becomes entrenched and businesses feel more comfortable hiring,” said Barclays economist Dean Maki.

He added that the data could mean “the recovery is even stronger than we have forecast.”

Stock investors were also extra cautious ahead of a long Labor Day holiday weekend and the so-called September effect, reflecting the weakest month of the year in historical terms.

“Some caution until about the middle of the month makes sense in this extended market,” said Al Goldman, chief market strategist of Wells Fargo Advisors.

Among stocks in focus, General Electric climbed 3.12 percent to 13.87 dollars. Reports said that aircraft parts maker Moog was in talks with GE Aviation Systems to buy its flight control actuation product line in Britain.

Boeing rose 1.42 percent to 49.15 dollars after reports the Geneva-based World Trade Organization ruled its European-based rival benefited from illegal subsidies.

Clothing and sports goods maker Quiksilver slid 17.48 percent to 2.36 dollars after reporting a 53 percent drop in quarterly profits.

The bond market fell. The yield on the 10-year Treasury bond rose to 3.442 percent from 3.328 percent Thursday and that on the 30-year bond climbed to 4.273 percent from 4.150 percent. Bond yield and prices move in opposite directions.

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NEW YORK (Reuters) – Wall Street’s mettle will be tested this week as traders return from summer vacations to resurfacing signs of weakness after a six-month rally for stocks.

The specter of September may also make investors more inclined to sell. Markets closed the first week of the month with the worst weekly performance since early July, though the bulk of losses were recouped Friday as the monthly employment report was deemed to be less dire than expected.

Increased volume last week has investors keen to see what direction the market will take after the long Labor Day holiday weekend. U.S. markets will be closed on Monday.

Stronger downside volume is not an encouraging sign as it may signal investors are becoming more convincingly bearish.

“What you’d like to see is some evidence that players came back from the weekend and that they’re starting to move assets to this market,” said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.

“This whole advance has largely been that people quit selling.”

On Friday, the Labor Department said declines in nonfarm payrolls for August were the smallest in a year. But it also said the U.S. unemployment rate rose to 9.7 percent, a 26-year high. While an improving labor market is key for an economic rebound, analysts expect unemployment to remain high even as the economy turns around.

The pick-up in market volume does not necessarily mean Wall Street’s party is over, and a continued rally on strong participation will be further grist for the bulls’ case.

So far, pullbacks have been viewed as buying opportunities by those eager to get a foothold into the market. With only second-tier economic data on tap this week and slim earnings releases until the new reporting season, stocks will be relying on those buying opportunities to move higher.

THE CRUELEST MONTH?

The S&P 500 (.SPX) ended August down 0.4 percent, snapping a six-month winning streak, and so far September has continued the downtrend.

For last week, the S&P lost 1.2 percent, the Dow fell 1.1 percent, while the Nasdaq was off 0.5 percent.

September has historically been one of the nastiest months of the year, a notoriety solidified last year by the collapse of Lehman Brothers, the takeover of Merrill Lynch and the bailout of American International Group (AIG.N).

Since 1900, the S&P 500 has posted positive one-month gains in September in slightly less than half of all instances, according to a research note from Tobias Levkovich, chief U.S. equity strategist at Citigroup.

Analysts point out that autumn’s pattern of declines is well known and could already be priced into the market. Even so, the ghosts of Septembers past are not so far from memory that investors will not be keeping their fingers on the “sell” trigger.

“The fact that we got a big volume spike (last) week on a decline in the market is something I want to see if there’s follow-through on,” said Paul Nolte, director of investments at Hinsdale Associates, in Hinsdale, Illinois.

TAKING HEALTHCARE’S PULSE

Healthcare stocks will be in focus with President Barack Obama set to address a rare joint session of Congress on Wednesday in an effort to reinvigorate his push for healthcare reform.

The insurance industry strongly objects to a proposed government-run health insurance plan and investors have fretted over what the public option will mean for corporate profits.

As popularity for the plan has waned, investors have become less nervous about what the corporate fallout will be. If Obama is able to revitalize the debate and sway public opinion, insurance and other related stocks could face a sell off.

“What it means for the market and what it means for health care specifically is how his ideas are received,” said Todd Salamone, vice president of research at Schaeffer’s Investment Research in Cincinnati, Ohio.

“It could be taken as a positive if we don’t see any strong support for this.”

Wall Street faces a lighter week on economic data — reports on initial weekly jobless claims and preliminary September consumer sentiment are on tap.

The frugal consumer has become a concern as investors worry a strong economic recovery will be impossible without increased discretionary spending.

Also expected are data on the U.S. international trade balance and the Federal Reserve’s Beige Book covering anecdotal evidence of economic conditions.

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WASHINGTON – A year after the near-collapse of Fannie Mae and Freddie Mac, the mortgage giants remain dependent on the government for survival and there is no end in sight.

The companies, created by the government to ensure the availability of home loans, have tapped about $96 billion in government aid since they were seized a year ago this weekend. Without that money, the firms could have gone broke, leaving millions of people unable to get a mortgage.

Many questions remain about Fannie and Freddie’s future, but several things are clear: The companies are unlikely to return to their former power and influence, the bailout is sure to cost taxpayers even more money and the government will have a big role in the U.S. mortgage market for years to come.

Fannie Mae was created in 1938 in the aftermath of the Great Depression. It was privatized 30 years later to limit budget deficits during the Vietnam War. In 1970, the government formed its sibling and competitor Freddie Mac.

The companies boomed over the past decade, buying mortgages from lenders, pooling them into bonds and selling them to investors. But critics called them unnecessary, arguing that Wall Street could support the mortgage market itself.

That argument has faded in the wreckage of the failed loans that led to the housing bust. Investors have fled any mortgage investment that doesn’t have the government standing behind it.

“No longer is anyone arguing that the private sector can handle this on its own,” said Jaret Seiberg, an analyst at Washington Research Group.

The government stepped in to take control of the two companies on the weekend of Sept. 6, after they were unable to raise money to cover soaring losses and their stock prices plunged.

A year later, the government controls nearly 80 percent of each company, and their problems are growing as defaults and foreclosures continue to skyrocket.

The percentage of homeowners who have missed at least three months of payments is normally under 1 percent for both companies. Now it’s nearly 4 percent for Fannie and 3 percent for Freddie.

Fannie had nearly $171 billion in troubled loans as of June and had set aside $55 billion to cover those losses, while Freddie had nearly $78 billion in troubled loans and reserves of only $25 billion.

“It’s much worse than anybody thought,” said Paul Miller, an analyst with FBR Capital Markets.

It could be another year before the final taxpayer tab for Fannie and Freddie is known, and that outcome will depend on when delinquencies and foreclosures finally crest.

Barclays Capital predicts the companies will need anywhere from $160 billion to $200 billion out of a potential $400 billion lifeline, which the Obama administration expanded from the original $200 billion set last fall. Most analysts don’t expect the money to be returned anytime soon, if at all.

“What will ultimately end up happening,” said Barclays analyst Ajay Rajadhyaksha, “is that the U.S. taxpayer swallows the bill.”

Despite federal control, Fannie and Freddie have recently surged on Wall Street. The companies said Friday that they now comply with New York Stock Exchange requirement for an average closing price of $1 a share or more. But most analysts still say the companies’ stocks will be worthless in the long term.

The Obama administration doesn’t expect to announce its plans for the two companies until early next year, but powerful interest groups aren’t waiting until then. The Mortgage Bankers Association on Wednesday offered a detailed plan to replace Fannie and Freddie with several federally-regulated private companies.

That proposal still retained a big government role, giving those companies the ability to issue mortgage bonds formally guaranteed by the federal government.

In the meantime, both Fannie and Freddie have been drafted to implement the Obama administration’s effort to attack the foreclosure crisis. Freddie Mac now has about 600 workers either modifying loans or monitoring compliance with the program’s rules. Fannie Mae said it has added hundreds of employees to work on foreclosure prevention efforts.

The early results have been disappointing. For example, while Fannie or Freddie refinanced 2.9 million loans from January through July, only about 60,000 were taking advantage of an Obama administration plan to help “underwater” borrowers who owe more than their homes are worth.

At the same time, nearly 70 percent of U.S. mortgages made in the first half of this year went through Fannie or Freddie, up from 62 percent last year, according to Inside Mortgage Finance, a trade publication. That’s a big change from three years ago, when the risky lending market was still alive and Fannie and Freddie’s share was down to 33 percent.

“We’ve been the mortgage market,” said John Koskinen, Freddie Mac’s chairman. “Without that financing availability, people would not have been able to get a mortgage.”

Fannie and Freddie don’t directly make loans, but they exert enormous influence over the industry by issuing detailed standards for the loans they will purchase. Lenders must feed their borrowers into Fannie and Freddie’s computer systems, which evaluate borrowers based on their credit scores and the size of their down payment.

Both companies, facing huge losses, have kept those standards tight, frustrating many. Eric Delgado, a mortgage broker in Rockville, Md., says there’s zero flexibility with either company. Either borrowers qualify or they don’t. No arguing. No excuses.

But some in the industry say the restrictions are long overdue after several years of lending excesses.

“You needed to bring some reality to the market,” said Michael Moskowitz, chief executive of Equity Now, a New York-based mortgage lender, which does about 80 percent of its business with Fannie and Freddie.

Fannie Mae CEO Michael Williams declined an interview request, but said in an e-mailed statement that “it is not enough to help a borrower own a home. We must also help ensure that they will be able to stay in the home over the long term.”

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WASHINGTON (Reuters) – The U.S. Federal Housing Administration said on Friday it would not need a congressional subsidy even if mortgage-related losses push its reserves below a level demanded by Congress.

Rising losses at the FHA, part of the U.S. Department of Housing and Urban Development, raise the possibility its capital reserve ratio could dip below the 2 percent level, and the government might have to support the agency, analysts say.

The Wall Street Journal on Friday reported that government officials believed reserves at the FHA, which provides government guarantees on mortgages for some home buyers, were in danger of breaching the 2 percent mark.

“Even if that level falls below 2 percent, FHA continues to hold more than $30 billion in its reserves today, or more than 5 percent of its insurance in force,” FHA Commissioner David Stevens said in a statement. “Given this reserve level, FHA will not need a congressional subsidy even if the congressional capital reserve calculation falls below 2 percent.”

Mortgage loans insured by the government have soared to the highest levels in two decades as borrowers take advantage of downpayment requirements for FHA loans, which are lower than those for other mortgages.

Some analysts say the agency may have to tighten lending standards to confront losses.

In his statement responding to the Wall Street Journal article, Stevens noted the mandated FHA reserve ratio measures excess reserves above and beyond projected losses of the next 30 years.

“FHA’s full faith and credit insurance means that there is no risk to homeowners or bondholders independent of the congressional capital reserve requirement,” Stevens said, adding that the FHA continued to generate income for taxpayers.

Credit losses at the FHA would not impact Ginnie Mae mortgage-backed securities, according to Arthur Frank, director and head of MBS research at Deutsche Bank in New York.

“It is completely irrelevant to the Ginnie Mae mortgage bond market,” he said.

Ginnie Mae mortgage-backed securities, the only mortgage bonds backed by the full faith and credit of the U.S. government, did not react to the news and were outperforming Treasuries in afternoon trading.

Ginnie Mae wraps loans from the FHA, along with loans from the Veterans Administration, into mortgage-backed securities for sale to investors, so they do not take on the credit risk that FHA takes. Ginnie Mae mortgage bonds have a zero risk weighting for banks because the government is obliged to back them.

When an FHA loan defaults, FHA takes most of the loss, while mortgage servicers take on the rest. Ginnie Mae, however, would have to provide a backup if the servicers default on their obligations.

(Reporting by Tim Ahmann; additional Reporting by Julie Haviv; Editing by Padraic Cassidy)

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NEW YORK – Where do we go from here?

A year after edging dangerously close to free fall, there are signs the economy is regaining a foothold. But Americans’ sense of financial security is badly shaken and the nation confronts questions that defy quick or comfortable answers.

Without easy credit, what does life hold for a nation of consumers?

With nest eggs broken, will older workers need to rethink retirement?

With old institutions gone — and the government propping up others — what will replace them?

The anxieties reach deeper than those stirred by all other recessions since World War II, when businesses, workers and consumers took reassurance from signs economic life was returning to normal. Instead, the U.S. is at an unsettling economic moment, facing the possibility that some old expectations may no longer apply.

After more than a decade of building dreams atop a bubble — first in technology stocks, then in housing — there is no clear route forward. Moving on, economists say, the country will have to redefine expectations, accepting that the bubble-fueled growth the country became accustomed to is neither something to aim for nor count on, but evidence of an economy that was out of balance.

“The problem is we’re longing for something we shouldn’t have even wanted,” said Joel Naroff of Naroff Economic Advisors in Holland, Pa.

If a slow climb out of recession is in store, as many economists believe, it could take years to answer questions about the future. Until then, the greatest comfort may be in knowing that we are far from alone in our doubts.

That much is clear to Stephen Sullivan, a Metuchen, N.J., accountant who lost his job last fall and at 62 is still searching for work. He sees it in the faces of others like him who meet each Wednesday night for his church’s unemployment ministry.

“If misery loves company, this is it,” Sullivan said. “There’s like a big unknown here and nobody knows from reading it, trying to study it … what will happen. What’s next?”

The Great Recession was years in the making. But while the downturn began at the end of 2007, the economy sidestepped a meltdown until last fall.

Despite eight months of efforts by federal policy makers, the collapse in housing prices had continued rippling through the financial system. Credit markets_ the economic lifeblood for businesses and consumers — were freezing up. In early September, the government seized control of Fannie Mae and Freddie Mac, the federally chartered companies at the heart of the mortgage markets.

Then, with the distractions of summer a memory, the bottom dropped out.

In a weekend of desperate dealmaking, Merrill Lynch & Co. — the nation’s biggest brokerage brought low by billions in losses on bad mortgage investments — signed itself over to Bank of America. By sunrise Monday, Sept. 15, another one of Wall Street’s most storied firms, Lehman Brothers, had collapsed into bankruptcy.

Investors sent the Dow Jones industrial average plummeting 504 points in the biggest single-day loss since the aftermath of Sept. 11, 2001.

In recent months, stocks have regained more than a third of the ground lost since their peak. But unemployment has soared, costing 6.9 million jobs since the start of the recession. Some 14.9 million people are out of work.

The hit to incomes has coincided with a painful blow to Americans’ wealth, not just in stocks but to the equity in their homes. While the dot-com bubble was somewhat larger in dollar terms, the collapse of the housing bubble has been much more far-reaching, and it has depleted public confidence as well as resources.

The crisis has had a pronounced impact on the nation’s economic psychology. Consumers have cut back sharply on spending, stepped up saving and begun re-examining lifestyles financed with borrowed cash.

It’s unclear, though, whether that mindset will last, and if so what it might mean.

“We’re at a cusp,” said Keith Campbell, who studies U.S. consumer psychology and is co-author of “The Narcissism Epidemic: Living in the Age of Entitlement.” “This is an unstable environment and it’s really hard to predict which way it’s going to go.”

The answer is critical. As U.S. manufacturing has continued to move overseas in recent decades, consumer spending has sustained the economy, accounting for more than 70 percent of the gross domestic product.

That spending grew even as pay stagnated, because of increased reliance on credit and debt. At the same time, homes were touted not just as places to live, but as investments whose prices could only rise.

That economic myth retains much of its power.

“We are finding that most homeowners just think of this (the collapse of the bubble in home prices) as a temporary glitch,” said Robert Shiller, a Yale University economist and a leading expert on the housing market and the dynamics of decision-making. “They seem to think it’s going to go up again. This idea that we’re running out of land and this is a good investment is still a popular view.”

But those views are evolving. Some consumers will be so chastened by what has happened that even if they have the capacity to return to old ways, they’ll continue new patterns of spending and savings. Others may not have a choice.

“The economy will never really recover to the way it was before and that’s not necessarily a bad thing,” said Robert Manning, an expert on consumer credit and debt. “It was based on consumers getting deeper and deeper into consuming … and that’s a disaster.”

But with lines of credit to consumers cut this year to half of their 2006 peak, even consumers who want to return to spending will be constrained.

That sets the scene for an economy that will grow much more slowly than in the past, creating fewer jobs and keeping unemployment high. But the economy is made up of many different actors, and the uncertainty ahead raises unique questions for each one.

Some of the most daunting are those set out for young adults, now exiting school and joining the job market. Employers have cut millions of jobs they were destined for. Economic uncertainty has made middle-aged and older workers reluctant to change jobs or retire, limiting movement in the workplace.

“I’m trying to warn people it’s going to be different coming out (of school), that they’re going to have to prepare themselves differently,” said Phil Gardner, director of the Collegiate Employment Research Institute at Michigan State University.

In a survey by the National Association of Colleges and Employers in May, fewer than 20 percent of the new graduates who applied for a job said they actually had one, down from 51 percent a year earlier. Young adults have remained among the most optimistic, with some seeing a chance to explore different economic paths. Applications to the Peace Corps are up 16 percent.

But Gardner believes the job market for new graduates will not turn around until 2011, and wonders whether the optimism is misplaced.

The calculus is complicated by the mindset of workers ahead of them. Adults in late middle-age suffered the biggest losses when the stock market collapsed, a recent survey by the Pew Research Center found, and 75 percent said this recession will make it harder to retire.

Workers were retiring later even before this recession, partly because of the withering of traditional pensions and the raising of the age for full benefits under Social Security, said Steve Sass, associate director at the Center for Retirement Research at Boston College. At the same time, many people also discovered new satisfaction in continuing to work. As a result, the average age for retirement among men has edged up by about a year, to 64.

But the setback of the recession intensifies the pressure on many more people to work longer, potentially pushing the average retirement age to 67.

“It certainly makes things worse,” Sass said. “It’s not going to be easy, but that’s what we as a nation have to do, because we haven’t saved enough.”

To keep working, though, people will have to find a path across a shifting economic landscape.

For most of the past two decades, U.S. workers have heard repeatedly that the future lay in claiming a role in a new economy based on services. Much of the country’s manufacturing was ceded to countries with low-cost labor.

But a huge part of the service economy was the financial sector, which has been devastated by the meltdown. At the same time, other countries have grown into economic rivals not just by offering low costs, but by improving the education of their workers and their technological infrastructure. The U.S. economy’s reliance on borrowing has resulted in a gradual shift of wealth to other parts of the world, most notably to China.

In every previous recession since World War II, policy makers found a route to recovery by cutting interest rates and unleashing pent-up demand for cars, homes and other purchases. But with interest rates at historic lows and over-consumption part of what got us here, this downturn defies such an approach, said Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C.

Economists say the U.S. will have to re-examine policies that have kept the value of the dollar high. A strong dollar keeps the cost of imported goods low for home consumers even as it drives domestic manufacturing overseas. The nation may have to rethink its reliance on cheap imports and abandonment of many manufacturing jobs.

But the difficult choices ahead are fraught with hazards in an economy that derives much of its strength from the freewheeling nature of the marketplace. In the heat of this crisis, the federal government has seized a much larger economic role — moving toward stronger regulation of financial markets, propping up companies that were poised to fail and, arguably, picking winners and losers.

Those actions raise serious questions about government’s long-term role, said Rajshree Agarwal, a University of Illinois economist focused on entrepreneurship. The Obama administration has promised that many of these moves are temporary. But it is setting precedents and regulations that risk interfering with an economy whose chief strength is innovation, she said.

“If we stop that from happening then we have really done major damage to the way our economy functions and these temporary solutions tend to have a cascading effect,” Agarwal said.

Others see it very differently, arguing the government must move more aggressively. A more decisive Washington could set and fund priorities in education and technology for an economy lacking direction and up against increased global competition. It could force banks to reduce the balance homeowners owe on their mortgages.

Without the latter, Manning said, millions of Americans will be so saddled with debt they will have no chance of accumulating the savings to send their children to college, start small businesses or finance their retirement.

“What Americans don’t understand is that the international context is changing,” he said. “It’s almost as if all sectors of American society are going to have to make some pretty big changes, but most of them are in denial.”

The confusion of this economic crossroads does little to clarify which choices U.S. consumers, businesses and policymakers should make. But it does highlight the opportunity and risks at hand.

In China, India and other nations, economic players are already considering those choices and trying to figure out which direction is the way forward. That leaves the U.S. little choice, said Baker, the economist.

“It may not be an easy path, but I think we are going to change just because the current path isn’t sustainable,” he said. “It really isn’t an option open to us.”

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VIENNA – With oil prices about where OPEC wants them and a modest economic upturn in the offing, the oil cartel isn’t likely to tighten the taps when its leaders meet this week in Vienna.

Prices have been hovering near $70 a barrel, and with returning growth expected to support demand, analysts don’t expect the Organization of Petroleum Exporting Countries will feel any need to cut output targets.

“Absolutely nothing,” said John Hall, of John Hall Associates in London.

OPEC President Jose Botelho de Vasconcelos, who is also Angola’s oil minister, said last week that signs of recovery suggest the 12-member group won’t need to intervene. “Everything shows they will keep output unchanged,” he said.

Kuwait also says it thinks oil prices are stable and there’s no need to cut production, even though stockpiles are rising. And Algeria, Kuwait, Libya, Qatar and the United Arab Emirates have signaled they’re happy with the current output quota of just under 25 million barrels a day.

Saudi Arabia, OPEC’s No. 1 producer and most influential member, has said $75 a barrel is a fair price for both consumers and producers — a level that would allow for continued investments in the oil sector without undermining efforts at global economic recovery.

“Unless Saudi says, ‘We’re going to cut by a million barrels a day,’ nothing’s going to happen” at Wednesday’s meeting, Hall said.

Benchmark crude for October delivery crested $68 a barrel Friday in electronic trading on the New York Mercantile Exchange. Over the past six weeks, it has fluctuated in the $65-$75 range amid conflicting signs of economic recovery.

OPEC meets more than a third of the world’s annual oil demand, which the International Energy Agency has put at nearly 86 million barrels a day for 2008 — about 2.5 million barrels more than for recession-ridden 2009.

The economic downturn has taken such a big bite out of demand for OPEC crude, it will take four more years just to recover to 2008 levels, the cartel predicts in its latest outlook.

Still, stockpiles abound despite recent OPEC production cuts: The U.S. Energy Department said last month that U.S. crude stocks rose by 200,000 barrels for the week ended Aug. 21.

“We’re swimming in this stuff,” said Stephen T. Schork, president of The Schork Group in Villanova, Pa., and editor of a newsletter tracking industry trends.

Schork thinks OPEC may have to rein in output next March, but for now, oil prices “have settled into a range that the market can sustain,” Schork said.

“Oil that’s $65 to $75 per barrel translates into gasoline prices of $2.50-$2.75 a gallon, and we know the consumer can handle that,” he said.

Crude prices have taken a wild ride over the past year or so: They peaked at $147 a barrel in July 2008 and plunged close to $30 this past February before settling into their current range.

OPEC’s oil market report for August cautioned that “the market is still fundamentally weak amid ample stocks of crude and products.” Prices in the short term, it said, “will depend largely on economic developments.”

But experts agree that markets will rebound.

Morgan Stanley expects oil to average $85 a barrel in 2010, and crude prices are bound to rise with demand as the northern winter home-heating season draws near.

Another perennial wild-card issue that threatens to drive up prices: hurricane season, which will run until early November and has the potential to disrupt refineries in the Gulf of Mexico.

Experts say the flagging U.S. dollar — which has nudged crude prices up in recent days — also could be a factor if it keeps weakening against the euro.

The 12 OPEC members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. Iraq is the only member not bound by the cartel’s production quotas.

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SAN FRANCISCO – Amazon.com Inc. is offering free books or $30 to Kindle customers whose copies of the George Orwell novels “1984″ and “Animal Farm” were deleted from their electronic reading devices in July.

When Amazon erased the books from Kindles, citing a problem with the rights to the books, the company issued refunds to the buyers. But the episode startled many Kindle customers, who didn’t know Amazon had the neo-Orwellian ability to erase content that had already been purchased and downloaded to their devices.

It prompted an apology from Amazon CEO Jeff Bezos, who said deleting the books from Kindles to address the rights question was “stupid, thoughtless, and painfully out of line with our principles.”

In an e-mail sent Thursday to Kindle owners whose books were erased, Amazon offered to redeliver the titles to their e-readers for free, along with any annotations users had made. Or the customers can get a $30 Amazon.com gift certificate or a $30 check — which could be worth much more than two Kindle books, because many of them cost $10 or less.

Kindle owners who bought both “1984″ and “Animal Farm” will be eligible for $60 if they don’t opt to have their books replaced.

When Amazon deleted the books, it said they had been added to its catalog by an outside party that did not have rights to the books.

Amazon spokesman Drew Herdener said Friday the Seattle-based company now has the proper rights to distribute the Orwell books.

The July deletion prompted a Shelby Township, Mich., high school student to sue Amazon. Justin D. Gawronski, 17, said the removal of “1984″ from his Kindle made the notes he had taken on the e-reader useless. He was reading the book for an advanced placement course in which he had to turn in “reflections” on each 100 pages of text.

The lawsuit, which is seeking class-action status, calls for unspecified damages and a ban on future deletions.

Jay Edelson, a Chicago-based lawyer who filed the suit on behalf of Gawronski and an adult reader in Milpitas, Calif., said Friday he was pushing ahead with the suit despite Amazon’s olive branch, which he called a public-relations move by the company.

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SHANGHAI (AFP) -

Apple’s iPhone will soon officially go on sale in China, more than two years after its US debut, but it may not make much of a splash, with smuggled units and similar devices available, analysts say.

China Unicom late last month announced a multi-year deal to sell the trendy smartphone in the world’s largest mobile market of more than 700 million subscribers, starting in the fourth quarter of 2009.

Unicom beat China Mobile to the punch, putting an end to years of on-off negotiations between the US high-tech giant and the world’s biggest cell phone operator, but experts say customer excitement has waned during the stalemate.

“You?re not likely to see any long lines here,” said Zhang Guoren, an editor for CNMO.com, a leading Chinese mobile phone review site, referring to iPhone launches in other parts of the world, where users queued up overnight.

“They just took too long,” said Shaun Rein, head of the Shanghai-based China Market Research Group.

“Every month there was talk about iPhones coming, and people got really excited. Finally it is coming and people don?t seem to care much.”

Part of the problem is that iPhones have been flooding into China since their US launch, even if Apple was not selling them. Beijing-based high-tech consultancy BDA says more than 1.5 million smuggled handsets are in use here.

Several analysts say they expect the iPhone grey market to continue to thrive because Apple and China Unicom will — at least initially — sell a stripped-down version without its Wi-Fi function to meet government demands.

During the Apple-Unicom negotiations, Beijing in May agreed to allow mobiles with Wi-Fi if they used the homegrown WAPI standard, allowing Motorola to get a jump on Apple with the launch of its touch-screen Motosurf phone, BDA said.

Several mobiles running on Google?s Android and China Mobile?s oPhone operating systems are also soon due to hit the market.

China Unicom however insists it can sell five million iPhones over the next three years, according to media reports.

Chairman Chang Xiaobing also says he is optimistic about sales as most of the bootleg iPhones available here are 2G models, not the 3G model his company will offer to tech-savvy customers.

Analysts such as Rein remain sceptical.

“It’s going to be very hard to hit the number China Unicom is estimating,” he said. “I can?t imagine millions who don?t have an iPhone already are going to buy it.”

Unicom, which had 141 million subscribers at the end of July, is betting on the iPhone to draw in high-value customers, promote the launch of its 3G network and improve its reputation for poor service, analysts say.

The iPhone launch may give Unicom?s Hong Kong-listed stocks an initial boost, Australian investment bank Macquarie Group wrote in a note, before adding that the “euphoria will give way to continuing poor results”.

Unlike other iPhone operators, Unicom has said it will share subscriber revenue with Apple and will buy the devices in batches based on demand.

It has also said it will subsidise the iPhone?s price based on how much subscribers spend monthly, but has released no further details.

Most Chinese use pre-paid mobile packages, in part because subscription contracts require an employer guarantee or government documents such as a residence permit that can be hard to get in major cities, according to Rein.

Many will be watching to see if the iPhone subscription model can work in China, observers said.

BDA analyst Liu Ning suggested it could be one more hurdle for Apple to overcome here.

“That is Apple?s approach to selling the iPhone around the world — Chinese consumers may need to adapt to that,” said Liu.

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HELSINKI (AFP) – Faced with increased competition from up-and-coming rivals, Finnish telecom giant Nokia plans to launch a slew of new products this year but analysts say it faces a tough battle to hold on to its position as the world’s number one mobile phone manufacturer.

To fight back against Apple’s iPhone and RIM’s Blackberry, Nokia announced plans to launch three new smartphones with touch screens, a portable notebook PC, and will tie up with Microsoft to use its popular Office software on its handsets.

Industry observers criticised the Finnish giant for its aging product lineup and for not bringing smartphones to market quickly enough to take on their up-and-coming rivals.

Analysts interviewed by AFP agreed that Nokia had not yet found a product to challenge the iPhone as most new Nokia devices use an outdated operating system to drive their phones.

“It is going to be 2011 before they have the right software to make a really competitive product,” Richard Windsor, a London-based technology analyst for Nomura Securities, told AFP.

Its latest smartphone, the N97, has achieved modest sales so far compared to the iPhone.

Technology consultancy Gartner estimates Nokia has sold just 500,000 of them worldwide since its launch in June. Apple’s new third-generation iPhone sold one million units in its first weekend on sale.

Nokia needs its new models to be a success — smartphones, handsets with high-speed internet access, are the fastest growing segment in the mobile phone market and their higher price tags mean they carry higher profit margins than cheaper, more basic models.

The Finnish giant’s share of this lucrative segment has ebbed away in recent months. In the second quarter of 2009, it sold 45 percent of all 40 million smartphones sold worldwide.

That compares to 47.4 percent of 32 million handsets at the same time last year, according to Gartner data.

“The right high-end product and an increased focus on services and content are vital for Nokia if it wants to both revamp its brand and please investors,” wrote Gartner analyst Carolina Milanesi in a research note to clients.

In addition to its partnership with Microsoft, Nokia will also use Linux software and work with social networking site Facebook to develop new services.

“They have realised that for certain things it makes sense to partner,” Ben Wood, research director at CCS Insight, told AFP.

Apple also beat Nokia in drawing in additional revenue from the sale of online applications: ringtones, videos, games and other Internet gadgets.

Its App’Store went online in July 2008 while Nokia’s Ovi store launched in May this year.

“Nokia cannot create one killer product to beat Apple or Google. Nokia has to create an experience or a solution that is so compelling that a consumer says ‘I like the whole proposition’,” said Wood.

Nokia’s chief executive Olli-Pekka Kallasvuo told reporters on Wednesday that these add-on services were “critical to our future” and that his company wanted to make smartphones more affordable to a wider range of people.

But that will be a hard sell in the current economic climate.

The global financial crisis has weakened demand for mobile phone sales after six years of uninterrupted growth.

Nokia, which has 1.1 billion customers worldwide, posted a 66-percent drop in net profit in the second quarter of 2009 and a nearly 25-percent decline in revenues on a 12-month basis.

In a bid to restore the company to profitability, a cost-cutting programme was launched in January aimed at reducing Nokia’s workforce by some 4,000.

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HANOI, Vietnam (AFP) – A Vietnamese blogger who was arrested in a recent crackdown and who also printed T-shirts to protest a controversial mining project has been released after a week in custody, he told AFP Sunday.

Bui Thanh Hieu, 37, was one of three online writers recently arrested in a “mounting crackdown” that drew strong condemnation Friday from a global press watchdog.

All three had touched on the sensitive topic of Vietnam’s relations with China.

Hieu, who blogs under the name Nguoi Buon Gio (Wind Trader), said he was set free on Saturday after being arrested for allegedly “abusing democratic freedoms to infringe upon the interests of the state”.

He said he had printed T-shirts in protest against bauxite mining projects in the Central Highlands that had triggered a rare public outcry, partly because a Chinese company has been granted a major contract there.

Vietnam and China, both ideologically communist, are engaged in a boundary dispute over two South China Sea archipelagos, the Paracels and Spratleys.

Another blogger, Nguyen Ngoc Nhu Quynh, 30, was arrested by about 15 officers around midnight Wednesday at her home in the southern coastal city of Nha Trang, her mother told AFP.

The blogger, who wrote under the name “Me Nam”, on July 20 wore a T-shirt calling for the cancellation of the bauxite project and announcing Vietnamese sovereignty over the Paracels and Spratleys, her mother said.

A foreign diplomat, who asked not to be named, said Quynh had gone “a step further” than blogging by wearing and producing the T-shirts.

Hieu and Pham Doan Trang, a journalist for prominent news website VietnamNet who was arrested on August 28, was also involved in the T-shirt venture, the diplomat said.

The New York-based Committee to Protect Journalists (CPJ) had called for the immediate release of Hieu and Trang.

“Growing commercial and diplomatic ties with China are particularly sensitive in Vietnam, given the two neighbouring countries’ often antagonistic history,” the CPJ said in a statement.

US ambassador Michael Michalak recently expressed concern over Vietnam’s efforts to crack down on the media and to “criminalise free speech.”

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