Global shares, oil slip on Fed stimulus nerves

LONDON (Reuters) - World shares edged lower and the dollar rose before U.S. jobs data on Friday which investors will watch even more closely than usual after Fed officials raised concerns about possible side effects of its stimulus program.

Minutes from the Federal Reserve's December policy meeting unsettled financial markets on Thursday after they showed some policymakers were worried about the program's longer-term impact.

Fed bond-buying has underpinned appetite for risk and the comments reopened debate on how much longer the central bank will keep stimulating the U.S. economy, unnerving investors before the U.S. employment figures.

European shares echoed their Asian peers to edge lower. But following a sharp jump on Wednesday after the United States edged back from the "fiscal cliff" budget crisis, they were on track for weekly gains of almost 2.7 percent.

Tentative signs that the euro zone economy may have passed the worst of its downturn also helped to restrict the moves.

Markit's Euro zone Composite PMI, which gauges business activity across thousands of the region's companies, rose in December to 47.2 from 46.5 in November - below the 50 line which divides growth from contraction but at its highest level since March last year.

"The surveys at least bring some substance to the belief that the worst is over and that a return to growth is in sight for the region in 2013," said Chris Williamson, chief economist at Markit.

London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> were down 0.1-0.5 percent by mid-morning, while the MSCI index of world shares was just over 0.2 percent lower at 345.85.

Wall Street was expected to open slightly higher though, with S&P 500 futures up 0.1 percent and contracts for the Dow Jones and the Nasdaq 100 up 0.2 percent.

U.S. stocks will largely depend on the non-farm payrolls report due at 8:30 a.m. ET and any clues it gives on the health of the U.S. and global economies.

Analysts polled by Reuters expect a 150,000 rise in jobs, with unemployment holding steady at 7.7 percent. However, after a better-than-expected ADP employment report on Thursday, many may now be betting on an above-consensus jobs number.

"The Fed has made it clear that it will keep policy loose until unemployment drops to 6.5 percent or below, so strong jobs data will undoubtedly raise expectations of a more hawkish Fed," analysts at Tradition brokerage said in a note.

CORE WEAKNESS

The Fed's concerns about the longer-term impact of its policies gave fresh momentum to the recent slide by low-risk bonds including U.S. and German debt.

Bund futures slipped almost half a point to 143.12, having already fallen steeply from last week's close of 145.64.

Benchmark U.S. Treasury yields continued their climb, hitting an eight-month high of 1.96 percent, while in Asia, 10-year Japanese government bond yields touched a 3-1/2-month high of 0.83 percent.

In the currency market, the dollar hit its highest level against the yen since July 2010 at 87.835 while the euro fell to a three-week low of $1.3006. The dollar <.dxy> also touched a six-week high against a basket of currencies.

"We have seen quite a broad-based dollar rally after the minutes which has ignited a fresh debate about how much liquidity the Fed is going to pump into the economy," said Daragh Maher, FX strategist at HSBC.

The yen has fallen in recent weeks as investors bet the new government will push the Bank of Japan to weaken the currency by implementing aggressive economic stimulus.

"Breaking through 88 in dollar/yen is a significant move. It was a target for a number of people in the market and the question is now whether we have a mindset of taking profit or we look to extend," added Maher.

The dollar's recent climb makes dollar-based assets more expensive for non-dollar investors and this hit precious metals and oil.

Brent crude shed 0.6 percent to $111.47 a barrel while gold fell 1 percent to $1,645, dragging silver down more than 2 percent to $29.48.

(Additional reporting by William James and Anooja Debnath; editing by David Stamp)

Read More..

Myanmar says jets used against Kachin rebels

YANGON (Reuters) - Myanmar's military has used jets to attacks rebel fighters in northern Kachin state, the government said on Thursday, its first admission of an intensification of a conflict that has raised doubts about its reformist credentials.

Rebel sources have reported aerial bombings, shelling and even the use of chemical weapons since December 28 after the Kachin Independence Army (KIA) ignored an ultimatum to stop blocking an army supply route in the hilly, resource-rich state where more than 50,000 people have been displaced.

Official newspapers said that air support was used on December 30 to thwart KIA fighters who had occupied a hill and were attacking logistics units of the Tatmadaw, as Myanmar's military is known.

"The Tatmadaw troops cleared Point-771 hill and its surrounding areas where the KIA troops were attacking the Tatmadaw logistic troops," the New Light of Myanmar, a government mouthpiece, said. "The air cover was used in the attack."

U.N. Secretary-General Ban Ki-moon voiced concern on Wednesday over reports of helicopters and fighter jets being used in the state bordering China. The KIA said the attacks were intended to clear the path for an assault on its headquarters in Laisa.

Ban called on Myanmar's government to "desist from any action that could endanger the lives of civilians" and reiterated demands for humanitarian aid groups to be granted access, U.N. spokesman Martin Nesirky said in a statement.

President Thein Sein's quasi-civilian administration insists it wants a ceasefire and political dialogue. It says troops have acted only in self-defense and on Thursday denied having plans to seize the KIA's stronghold.

DOMINANT MILITARY

The escalation of fighting has raised doubts about the sincerity of the reformist ex-generals running the government and the extent of their power in a country the size of Britain and France plagued by decades of internal conflict.

Some analysts and diplomats say central government is either not fully committed to peace with the KIA or unable to assert control over the military, which still dominates politics and the economy despite formally ceding power in March 2011.

Colonel James Lum Dau, a Thai-based spokesman for the KIA's political wing, said Kachin officials on the ground had reported up to 300 people killed in air strikes.

"We are in a defensive position. Right now more people are suffering not only bombings, but shelling and spraying of chemical weapons with helicopter gunships and jets," he said. "Only god knows what to do. We are praying."

It is difficult for journalists to independently verify accounts from the two sides.

Fighting erupted in Kachin in June 2010, ending a 17-year truce, and has continued even as government negotiators have agreed ceasefires elsewhere with ethnic Shan, Chin, Mon and Karen militias after decades of fighting in border areas.

Mistrust runs deep between the military and the KIA, which was once backed by China, and multiple rounds of talks aimed at reaching a ceasefire have gone nowhere. Analysts say a history of bad blood and a battle for control of resources, including highly lucrative jade, could be stoking the unrest.

Zaw Htay, a senior official in Thein Sein's office, told Reuters no air strikes had taken place but K-8 trainer jets had provided cover fire to protect ground troops from rebel attacks. The military, he said, had no intention of seizing the KIA's headquarters.

"The president has said this and at the same time he has invited KIA leaders to come and talk with him in Naypyitaw, but they still haven't responded," Zaw Htay said.

(Additional reporting by Paul Carsten in Bangkok; Writing by Martin Petty; Editing by Alan Raybould)

Read More..

Hillary Clinton Recuperating at Home

By Stephen M. Silverman

01/03/2013 at 06:30 AM EST

The state of the Secretary of State has improved.

Hillary Rodham Clinton was discharged from New York Presbyterian/Columbia Hospital in Manhattan on Wednesday after checking in on Sunday for treatment of a blood clot in a vein in her head.

News photos showed the secretary, 65, leaving the facility with her husband, former President Bill Clinton, and daughter Chelsea. It is reported that she is now resting at the Clinton home in Chappaqua, N.Y.

"Her medical team advised her that she is making good progress on all fronts, and they are confident she will make a full recovery," Philippe Reines, a senior adviser to the secretary, said in a statement.

On Wednesday, Chelsea Clinton Tweeted, "Thank you to the doctors, nurses & staff at NewYork Presbyterian Hospital Columbia University Medical Center for taking great care of my Mom."

The New York Times quotes Dr. David J. Langer, a brain surgeon and associate professor at Hofstra North Shore-LIJ School of Medicine – and who is not involved in Clinton's treatment – as saying she will require close monitoring in the coming months to ensure she is on the proper doses of blood thinners and that the clot is not growing.

The blood clot was found in the space between her brain and skull behind the right ear during an exam related to a concussion Clinton sustained during a fall earlier last month in her Washington, D.C., home.

The series of health setbacks prevented Clinton from appearing at a Congress probe about the State Department's handling of the fatal attack on an American mission in Libya or attending President Obama's announcement that Senator John Kerry is his pick to serve as her successor when she soon steps down from her cabinet post.

Read More..

Flu? Malaria? Disease forecasters look to the sky

NEW YORK (AP) — Only a 10 percent chance of showers today, but a 70 percent chance of flu next month.

That's the kind of forecasting health scientists are trying to move toward, as they increasingly include weather data in their attempts to predict disease outbreaks.

In one recent study, two scientists reported they could predict — more than seven weeks in advance — when flu season was going to peak in New York City. Theirs was just the latest in a growing wave of computer models that factor in rainfall, temperature or other weather conditions to forecast disease.

Health officials are excited by this kind of work and the idea that it could be used to fine-tune vaccination campaigns or other disease prevention efforts.

At the same time, experts note that outbreaks are influenced as much, or more, by human behavior and other factors as by the weather. Some argue weather-based outbreak predictions still have a long way to go. And when government health officials warned in early December that flu season seemed to be off to an early start, they said there was no evidence it was driven by the weather.

This disease-forecasting concept is not new: Scientists have been working on mathematical models to predict outbreaks for decades and have long factored in the weather. They have known, for example, that temperature and rainfall affect the breeding of mosquitoes that carry malaria, West Nile virus and other dangerous diseases.

Recent improvements in weather-tracking have helped, including satellite technology and more sophisticated computer data processing.

As a result, "in the last five years or so, there's been quite an improvement and acceleration" in weather-focused disease modeling, said Ira Longini, a University of Florida biostatistician who's worked on outbreak prediction projects.

Some models have been labeled successes.

In the United States, researchers at Johns Hopkins University and the University of New Mexico tried to predict outbreaks of hantavirus in the late 1990s. They used rain and snow data and other information to study patterns of plant growth that attract rodents. People catch the disease from the droppings of infected rodents.

"We predicted what would happen later that year," said Gregory Glass, a Johns Hopkins researcher who worked on the project.

More recently, in east Africa, satellites have been used to predict rainfall by measuring sea-surface temperatures and cloud density. That's been used to generate "risk maps" for Rift Valley fever — a virus that spreads from animals to people and in severe cases can cause blindness or death. Researchers have said the system in some cases has given two to six weeks advance warning.

Last year, other researchers using satellite data in east Africa said they found that a small change in average temperature was a warning sign cholera cases would double within four months.

"We are getting very close to developing a viable forecasting system" against cholera that can help health officials in African countries ramp up emergency vaccinations and other efforts, said a statement by one of the authors, Rita Reyburn of the International Vaccine Institute in Seoul, South Korea.

Some diseases are hard to forecast, such as West Nile virus. Last year, the U.S. suffered one of its worst years since the virus arrived in 1999. There were more than 2,600 serious illnesses and nearly 240 deaths.

Officials said the mild winter, early spring and very hot summer helped spur mosquito breeding and the spread of the virus. But the danger wasn't spread uniformly. In Texas, the Dallas area was particularly hard-hit, while other places, including some with similar weather patterns and the same type of mosquitoes, were not as affected.

"Why Dallas, and not areas with similar ecological conditions? We don't really know," said Roger Nasci of the Centers for Disease Control and Prevention. He is chief of the CDC branch that tracks insect-borne viruses.

Some think flu lends itself to outbreak forecasting — there's already a predictability to the annual winter flu season. But that's been tricky, too.

Seasonal flu reports come from doctors' offices, but those show the disease when it's already spreading. Some researchers have studied tweets on Twitter and searches on Google, but their work has offered a jump of only a week or two on traditional methods.

In the study of New York City flu cases published last month in the Proceedings of the National Academy of Sciences, the authors said they could forecast, by up to seven weeks, the peak of flu season.

They designed a model based on weather and flu data from past years, 2003-09. In part, their design was based on earlier studies that found flu virus spreads better when the air is dry and turns colder. They made calculations based on humidity readings and on Google Flu Trends, which tracks how many people are searching each day for information on flu-related topics (often because they're beginning to feel ill).

Using that model, they hope to try real-time predictions as early as next year, said Jeffrey Shaman of Columbia University, who led the work.

"It's certainly exciting," said Lyn Finelli, the CDC's flu surveillance chief. She said the CDC supports Shaman's work, but agency officials are eager to see follow-up studies showing the model can predict flu trends in places different from New York, like Miami.

Despite the optimism by some, Dr. Edward Ryan, a Harvard University professor of immunology and infectious diseases, is cautious about weather-based prediction models. "I'm not sure any of them are ready for prime time," he said.

Read More..

Global share rally stalls as more U.S. budget battles loom

LONDON (Reuters) - A global share market rally petered out on Thursday as investors focused on U.S. political battles ahead over spending cuts, halting the gains that followed a deal to avoid sharp tax hikes.

The MSCI world equity index <.miwd00000pus> dipped from an 18-month high to be down 0.1 percent at 346.7 points while other riskier assets such as oil and the euro also eased.

The main share indexes in Germany <.gdaxi>, Britain <.ftse> and France <.fchi> were down 0.1 to 0.4 percent, having hit multi-month highs on Wednesday when relief swept the markets after U.S. lawmakers reached a deal to prevent a fiscal crunch.

But President Barack Obama and congressional Republicans face two more months of tough talks on spending cuts and an increase in the nation's debt limit as the hard-fought deal to avert the so called "fiscal cliff" covered only taxes and delayed decisions on expenditure until March 1.

"Of the three key issues - tax increases, spending cuts and the debt ceiling - policymakers have tackled just one," said Mouhammed Choukeir, chief investment officer at Kleinwort Benson.

"The fiscal cliff issue is unresolved. This is likely to increase market volatility, supporting safe-haven assets such as gold and some commodities," he said. "Paradoxically, as the U.S. debt and deficit issues continue to make investors jittery, the dollar can be expected to remain a safe-haven asset."

The dollar was up 0.3 percent <.dxy> against a basket of major currencies at a three-week high on Thursday, although it slipped 0.2 percent against the yen to 87.14.

The euro, which had touched an 8-1/2 month high against the dollar on Wednesday, was down was down 0.2 percent at $1.3162,.

"The reality is that budget talks will continue for the next two months and could get sour," said Jane Foley, senior currency strategist at Rabobank. "We see the dollar index reclaiming some ground."

The dollar's strength and profit-taking pushed oil prices lower, with Brent crude slipping 0.4 percent to $112 a barrel and U.S. crude futures down 45 cents to $92.67.

"After the initial excitement, reality sets in," said Victor Shum, oil consultant at IHS Purvin & Gertz. "There will be other negotiations and the (U.S.) deal is a compromise."

Gold was firm, holding near its highest level in two weeks hit on Wednesday in the wake of the initial U.S. fiscal deal. Spot gold was trading at $1,687.70 an ounce, up $1.35.

The precious metal ended 2012 with gains of around 7 percent - the 12th straight annual rise, and marking one of the longest bull runs for a commodity.

GROWTH OUTLOOK BRIGHTENS

Thursday's retreat across riskier asset markets might have been sharper but for data showing activity in China's services sector and at U.S. factories had expanded in December, brightening the outlook for global growth.

China's official purchasing managers' index (PMI) for the non-manufacturing sector rose to a four-month high in December, adding to signs of a revival in the world's second-largest economy.

Investors will now turn their attention to the December U.S. employment report on Friday. This is expected to show modest job growth of around 150,000 compared with 146,000 in November.

(Additional reporting by Anooja Debnath.; editing by David Stamp)

Read More..

Syrian rebels attack military airport in northwest

BEIRUT (Reuters) - Syrian rebels, some from Islamist units, fired machineguns and mortars at helicopters grounded at a northern military air base near the main Aleppo-Damascus highway on Wednesday, a monitoring group said.

The al Qaeda-linked al-Nusra Front, Ahrar al-Sham Brigade and other units operating in Syria's northwestern province of Idlib were attacking the Afis military airport near Taftanaz, the pro-opposition Syrian Observatory for Human Rights said.

There was no immediate account of the fighting around the air base from Syrian state media.

Insurgents trying to topple President Bashar al-Assad see his air power as their main threat. They hold swathes of eastern and northern provinces, as well as a crescent of suburbs around the capital, Damascus, but have been unable to protect rebel-held territory from relentless attack by helicopters and jets.

In recent months, rebel units have besieged several military installations, especially along Syria's main north-south artery from Aleppo, its most populous city, to Damascus.

The Observatory's director, Rami Abdelrahman, said Wednesday's attack was the latest of several attempts to capture the base. A satellite image of the airport shows more than 40 helicopter landing pads, a runway and aircraft hangars.

An estimated 45,000 people have been killed in the Syrian conflict, which began in March 2011 with peaceful protests against four decades of Assad family rule but turned into an armed revolt after months of government repression.

In Damascus, Assad's forces fired artillery and mortars at the eastern districts of Douma, Harasta, Irbin and Zamlaka, where rebels have a foothold, activists living there said.

Syria's civil war is the longest and deadliest conflict to emerge from uprisings that began sweeping the Arab world in 2011 and has developed a significant sectarian element.

Rebels, mostly from the Sunni Muslim majority, confront Assad's army and security forces, dominated by his Shi'ite-derived Alawite sect, which, along with some other minorities, fears revenge if he falls.

U.N.-led diplomatic peace efforts have stumbled. Western and many Sunni Arab states demand Assad's immediate removal, an idea resisted by Russia, China and Syria's Shi'ite ally Iran.

The rebels say they will not negotiate unless Assad, who has vowed to fight to the death, leaves power.

More than 110 people, including at least 31 of Assad's soldiers and militiamen, were killed in Syria on the first day of 2013, according to the Observatory, which tracks the conflict from Britain using a network of contacts inside the country.

(Editing by Peter Graff and Alistair Lyon)

Read More..

Jessica Simpson and Kendall & Kylie Jenner Make Readers Smile - and Frown

01/01/2013 at 07:00 PM EST

Splash News Online; Michael Simon/Startraks

What's on the minds of PEOPLE readers this week? We love getting your feedback, and as always, you weighed in – even while celebrating during the holidays – with plenty of reactions to all of our stories.

From Kelly Osbourne's dramatic weight loss to Jessica Simpson's happy baby news to the tragic death of hero surfer Dylan Smith in Puerto Rico, readers responded to what made them happy, what made them laugh out loud and what made them sad this week.

Check out the articles with the top reactions on the site this week, and keep clicking on the emoticons at the bottom of every story to tell us what you think!

Kelly Osbourne says loving herself was the key to her 60-lb. weight loss. She had to get to a place where she respected herself enough to take care of her health – and she emerged a fierce style star who is not afraid to rock a bikini.

Jessica Simpson became a new mom just 8 months ago – so the news that she's expecting baby No. 2 with fiancé Eric Johnson made readers say, "Wow!"

Reality stars Kendall and Kylie Jenner showed off expensive Christmas gifts on Instagram, and their pricey public display turned many readers off. From a pair of Louboutin spike heels to Balenciaga boots with a more than $1,000 price tag, the teens cleaned up with lavish presents that most could only dream about.

Dylan Smith captured our hearts with his heroic efforts during Superstorm Sandy, saving six people on his surfboard. But the Queens, N.Y., lifeguard, 23, who was named one of PEOPLE's Heroes of the Year, drowned on Dec. 24 in a surfing accident off Puerto Rico.

Does the idea of Tom Cruise dating a new woman make you laugh? Maybe. A story that falsely linked the actor romantically to a 26-year-old restaurant manager, had readers clicking LOL. Or maybe the funny part was this quote from a source, who told told PEOPLE: "He's single and will be talking to women – all of whom he won't be instantly dating."

Check back next week for another must-read roundup, and see what readers are reacting to every day here.

Read More..

Brain image study: Fructose may spur overeating

This is your brain on sugar — for real. Scientists have used imaging tests to show for the first time that fructose, a sugar that saturates the American diet, can trigger brain changes that may lead to overeating.

After drinking a fructose beverage, the brain doesn't register the feeling of being full as it does when simple glucose is consumed, researchers found.

It's a small study and does not prove that fructose or its relative, high-fructose corn syrup, can cause obesity, but experts say it adds evidence they may play a role. These sugars often are added to processed foods and beverages, and consumption has risen dramatically since the 1970s along with obesity. A third of U.S. children and teens and more than two-thirds of adults are obese or overweight.

All sugars are not equal — even though they contain the same amount of calories — because they are metabolized differently in the body. Table sugar is sucrose, which is half fructose, half glucose. High-fructose corn syrup is 55 percent fructose and 45 percent glucose. Some nutrition experts say this sweetener may pose special risks, but others and the industry reject that claim. And doctors say we eat too much sugar in all forms.

For the study, scientists used magnetic resonance imaging, or MRI, scans to track blood flow in the brain in 20 young, normal-weight people before and after they had drinks containing glucose or fructose in two sessions several weeks apart.

Scans showed that drinking glucose "turns off or suppresses the activity of areas of the brain that are critical for reward and desire for food," said one study leader, Yale University endocrinologist Dr. Robert Sherwin. With fructose, "we don't see those changes," he said. "As a result, the desire to eat continues — it isn't turned off."

What's convincing, said Dr. Jonathan Purnell, an endocrinologist at Oregon Health & Science University, is that the imaging results mirrored how hungry the people said they felt, as well as what earlier studies found in animals.

"It implies that fructose, at least with regards to promoting food intake and weight gain, is a bad actor compared to glucose," said Purnell. He wrote a commentary that appears with the federally funded study in Wednesday's Journal of the American Medical Association.

Researchers now are testing obese people to see if they react the same way to fructose and glucose as the normal-weight people in this study did.

What to do? Cook more at home and limit processed foods containing fructose and high-fructose corn syrup, Purnell suggested. "Try to avoid the sugar-sweetened beverages. It doesn't mean you can't ever have them," but control their size and how often they are consumed, he said.

A second study in the journal suggests that only severe obesity carries a high death risk — and that a few extra pounds might even provide a survival advantage. However, independent experts say the methods are too flawed to make those claims.

The study comes from a federal researcher who drew controversy in 2005 with a report that found thin and normal-weight people had a slightly higher risk of death than those who were overweight. Many experts criticized that work, saying the researcher — Katherine Flegal of the Centers for Disease Control and Prevention — painted a misleading picture by including smokers and people with health problems ranging from cancer to heart disease. Those people tend to weigh less and therefore make pudgy people look healthy by comparison.

Flegal's new analysis bolsters her original one, by assessing nearly 100 other studies covering almost 2.9 million people around the world. She again concludes that very obese people had the highest risk of death but that overweight people had a 6 percent lower mortality rate than thinner people. She also concludes that mildly obese people had a death risk similar to that of normal-weight people.

Critics again have focused on her methods. This time, she included people too thin to fit what some consider to be normal weight, which could have taken in people emaciated by cancer or other diseases, as well as smokers with elevated risks of heart disease and cancer.

"Some portion of those thin people are actually sick, and sick people tend to die sooner," said Donald Berry, a biostatistician at the University of Texas MD Anderson Cancer Center in Houston.

The problems created by the study's inclusion of smokers and people with pre-existing illness "cannot be ignored," said Susan Gapstur, vice president of epidemiology for the American Cancer Society.

A third critic, Dr. Walter Willett of the Harvard School of Public Health, was blunter: "This is an even greater pile of rubbish" than the 2005 study, he said. Willett and others have done research since the 2005 study that found higher death risks from being overweight or obese.

Flegal defended her work. She noted that she used standard categories for weight classes. She said statistical adjustments were made for smokers, who were included to give a more real-world sample. She also said study participants were not in hospitals or hospices, making it unlikely that large numbers of sick people skewed the results.

"We still have to learn about obesity, including how best to measure it," Flegal's boss, CDC Director Dr. Thomas Frieden, said in a written statement. "However, it's clear that being obese is not healthy - it increases the risk of diabetes, heart disease, cancer, and many other health problems. Small, sustainable increases in physical activity and improvements in nutrition can lead to significant health improvements."

___

Online:

Obesity info: http://www.cdc.gov/obesity/data/trends.html

___

Marilynn Marchione can be followed at http://twitter.com/MMarchioneAP

Mike Stobbe can be followed at http://twitter.com/MikeStobbe

Read More..

Stock futures surge on fiscal deal

During an oddly jokey statement at the White House as the fiscal deadline bore down Monday afternoon, President Obama said, "I'm going to be president for the next four years. I hope." He was warning Republicans that, yes, they'd have to deal with him for a while. But it was, to be sure, a strange moment. Could he actually have been joking about assassination? About impeachment? The apocalypse? Or has everyone just had enough of these negotiations? 

Read More..

North Korean leader seeks end to confrontation with South

SEOUL (Reuters) - North Korean leader Kim Jong-un called for an end to confrontation between the two Koreas, technically still at war in the absence of a peace treaty to end their 1950-53 conflict, in a surprise New Year speech broadcast on state media.

The address by Kim, who took over power in the reclusive state after his father, Kim Jong-il, died in 2011, appeared to take the place of the policy-setting New Year editorial published in leading state newspapers.

But North Korea has offered olive branches before and Kim's speech does not necessarily signify a change in tack from a country which vilifies the United States and U.S. ally South Korea at every chance it gets.

Impoverished North Korea raised tensions in the region by launching a long-range rocket in December that it said was aimed at putting a scientific satellite in orbit, drawing international condemnation.

North Korea, which considers North and South as one country, the Democratic People's Republic of Korea, is banned from testing missile or nuclear technology under U.N. sanctions imposed after its 2006 and 2009 nuclear weapons tests.

"An important issue in putting an end to the division of the country and achieving its reunification is to remove confrontation between the north and the south," Kim said in the address that appeared to be pre-recorded and was made at an undisclosed location.

"The past records of inter-Korean relations show that confrontation between fellow countrymen leads to nothing but war."

The New Year address was the first in 19 years by a North Korean leader after the death of Kim Il-sung, Kim Jong-un's grandfather. Kim Jong-il rarely spoke in public and disclosed his national policy agenda in editorials in state newspapers.

"(Kim's statement) apparently contains a message that he has an intention to dispel the current face-off (between the two Koreas), which could eventually be linked with the North's call for aid (from the South)," said Kim Tae-woo, a North Korea expert at the state-funded Korea Institute for National Unification.

"But such a move does not necessarily mean any substantive change in the North Korean regime's policy towards the South."

The two Koreas have seen tensions rise to the highest level in decades after the North bombed a Southern island in 2010 killing two civilians and two soldiers.

The sinking of a South Korean navy ship earlier that year was blamed on the North but Pyongyang has denied it and accused Seoul of waging a smear campaign against its leadership.

Last month, South Korea elected as president Park Geun-hye, a conservative daughter of assassinated military ruler Park Chung-hee whom Kim Il-sung had tried to kill at the height of their Cold War confrontation.

Park has vowed to pursue engagement with the North and called for dialogue to build confidence but has demanded that Pyongyang abandon its nuclear weapons ambitions, something it is unlikely to do.

Conspicuously absent from Kim's speech was any mention of the nuclear arms program.

(Additional reporting by Sung-Won Shim; Editing by Nick Macfie)

Read More..