Gunfire, artillery heard in Ukraine's Donetsk - Reuters reporter

DONETSK, Ukraine, Sept 5 Fri Sep 5, 2014 5:01am EDT

DONETSK, Ukraine, Sept 5 (Reuters) - Gunfire and artillery fire were heard from the direction of the airport in the rebel stronghold of Donetsk in eastern Ukraine on Friday, hours before a meeting in Minsk was expected to agree on a ceasefire, a Reuters reporter said.

"A series of machinery gunfire and repeated artillery blasts can be heard from the wider area of Donetsk airport," said the reporter, who was some 2-3 km away from the airport. (Reporting by Gabriela Baczynska; writing by Katya Golubkova, editing by Elizabeth Piper)

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Officials arrive in Minsk for talks on Ukraine crisis - Interfax

MOSCOW, Sept 5 Fri Sep 5, 2014 5:19am EDT

MOSCOW, Sept 5 (Reuters) - Officials arrived in the Belarussian capital Minsk on Friday to take part in talks on the Ukraine crisis, Russia's Interfax news agency reported on Friday citing the Belarussian Foreign Ministry.

Representatives from Ukraine, the pro-Russian rebel leadership, Russia and Europe's OSCE security watchdog are expected to meet on Friday to agree a ceasefire to pave the way for implementation of a "stage-by-stage peace plan" for Ukraine. (Reporting by Katya Golubkova, editing by Elizabeth Piper)

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INVESTMENT FOCUS-UK rate risk puts consumer stocks in firing line

Fri Sep 5, 2014 6:51am EDT

* Consumer-facing UK shares to suffer on rate hike concerns

* Sectors like travel & leisure, autos and retail vulnerable

* Strong rally in housebuilders is likely to slow down

By Atul Prakash

LONDON, Sept 5 (Reuters) - With the Bank of England preparing the ground for an increase in interest rates, investors are questioning the durability of a long boom in cheap credit which has driven consumer-focused British stocks to record highs.

Although the timing and scale of any rate rise remains uncertain, some investors are pulling back from the UK consumer goods sector on perceptions that credit-fuelled demand will be squeezed in the short term.

Data shows that shares in consumer stocks have risen in tandem with borrowing levels. The MSCI UK consumer discretionary index hit a record high in July, at the same time as consumer credit rose to a four-year high.

UK consumer credit vs retail stocks: link.reuters.com/zyk72w

A pull-back since July, even accounting for other factors hitting markets such geopolitical tensions, points to an increasingly bearish backdrop for sectors like travel & leisure, autos and some retail firms.

The consumer discretionary index has fallen more than 4 percent from its July peak, while the blue-chip FTSE 100 index has flatlined.

"The impact of a UK rate hike would indeed be negative on consumer-facing sectors, especially after a good run and stretched absolute valuation metrics," said Jeremy Batstone-Carr, head of private client research at Charles Stanley.

"They could suffer disproportionately."

The latest Reuters poll shows that the Bank of England will raise its key Bank Rate by 25 basis points in the first quarter of 2015 from a record low of 0.5 percent.

According to a recent study by independent firm Verum Financial Research, every 0.5 percent hike in the UK base rate would cut 4.8 billion pounds ($7.96 billion) from household spending, and a 3 percent rise would wipe off about 30 billion pounds due to higher debt interest payments.

It estimates that the total amount of credit owed by UK households has more than quadrupled to 1,437 billion pounds in 2013 from just 347 billion pounds in 1990. Significantly higher debt levels, which have grown from 90 percent of household disposable income in 1990 to 130 percent in 2013, mean that households are much more vulnerable to marginal rate hikes.

"Household debt levels in the United Kingdom are much higher due to significantly more home ownership, against countries like Germany and the United States," said Adrian Fitzpatrick, head of investment dealing at Aegon Asset management.

"Luxury-goods companies such as Burberry may suffer more than others and some cheaper alternatives could benefit as people switch from the high end to the low end. You may find that companies specialising in DIY (do-it-yourself), such as Homebase, could benefit in this kind of environment."

Burberry shares have fallen about 5 percent since June, while Home Retail Group, which owns home improvements chain Homebase, has gained about 1 percent during the same period.

VARIABLE PAINS

Analysts said general retailers are likely to suffer, while discount retailers are expected to benefit. Travel and leisure stocks would be among the worst hit as higher rates would lower households' disposable income especially due to higher mortgage payouts, they added.

Historically, some consumer-facing stocks have generally underperformed in a rising rate environment. Shares in retailer Next fell almost 30 percent from May to July 2007 when rates rose 5.50 percent to 5.75 percent, while holiday operator Thomas Cook and housebuilder Persimmon dropped about 20 percent during the period.

"At the moment, I am avoiding UK retail and consumer related stocks because the economic catalyst remains quite far away and I don't see wage growth picking up anytime soon," Edmund Shing, global equity fund manager at BCS Asset Management, said.

A rate hike will directly hit homeowners, who have seen low mortgage payments due to low interest rates for several years.

The Thomson Reuters UK housebuilding index is down about 9 percent since late February after spiking 67 percent in the previous 12 months on low rates, government incentives for home buyers and a house price boom. Firms like Barratt Developments, Persimmon and Bovis Homes have fallen 6 to 15 percent during the same period.

"The main concern is that if you start raising rates, mortgages will become unaffordable for many at a time when wages are not rising in line with inflation," Oliver Wallin, investment director at Octopus Investments, said.

"Consumers are likely to feel the pressure." (Reporting by Atul Prakash; Editing by Jamie McGeever and Toby Chopra; Graphics by Vikram Subhedar)

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Russia assumes France will fulfil Mistral contract - Interfax

MOSCOW, Sept 4 Thu Sep 4, 2014 6:18am EDT

MOSCOW, Sept 4 (Reuters) - Russia believes France will fulfil a contract to deliver two Mistral helicopter carriers, Industry Minister Denis Manturov was quoted as saying by Interfax news agency on Thursday.

"Russia assumes that the contract will be fulfilled according to the agreements," he was quoted as saying.

French President Francois Hollande's office said on Wednesday that Paris would not deliver the first of the two helicopter carriers for now because of Moscow's actions in eastern Ukraine.

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German growth may just miss 1.8 pct f'cast - sources

BERLIN, Sept 4 Thu Sep 4, 2014 6:26am EDT

BERLIN, Sept 4 (Reuters) - German growth may just miss the 1.8 percent currently forecast by the government this year, Finance Minister Wolfgang Schaeuble told leading conservative lawmakers in a meeting on Thursday, according to participants.

Schaeuble said whether or not the target could be reached depended on how the economy, which shrank by 0.2 percent in the second quarter, fared in the second half of the year. The government's goal to have a balanced budget, however, was not in danger, the sources at the meeting said. (Reporting by Andreas Rinke, writing by Annika Breidthardt; Editing by Madeline Chambers)

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NEWSMAKER-Japan minister for GPIF reform a policy wonk with rebellious streak

By Ritsuko Ando

TOKYO, Sept 4 Thu Sep 4, 2014 6:38am EDT

TOKYO, Sept 4 (Reuters) - Japan's new welfare minister tasked with reforming the country's $1.2 trillion pension fund is a Harvard-educated former central banker with a sharp sense of the reforms that markets want to see and a willingness to buck the system.

Yasuhisa Shiozaki, 63, has a reputation as a policy wonk with a strong resume, but critics say he has sometimes lacked the finesse to navigate ruling party politics.

As head of the Ministry of Health, Welfare and Labor, Shiozaki steps into a crucial role in overseeing a closely watched overhaul of the Government Pension Investment Fund, widely known as GPIF.

He is also under pressure to enact politically unpopular cuts in old-age benefits to stabilise the country's welfare system.

"He is international and an open-minded liberal. That doesn't means he is going to be effective," said Koichi Nakano, a political science professor at Sophia University. "Bureaucrats expect a minister to defend their turf."

Nakano doubted whether Shiozaki's pedigree as a former Bank of Japan official with reform ideas would be enough to guarantee success.

"If it was that simple, policies would have been streamlined years ago."

Shiozaki, like many aides to Prime Minister Shinzo Abe, has said the GPIF's portfolio is too heavily concentrated in Japanese government bonds at some 52 percent of holdings. But health ministry bureaucrats have urged a go-slow approach on GPIF reform, people involved have said.

Prior to Shiozaki's appointment, sources involved in the review of GPIF had told Reuters the fund was finalising plans to boost the weighting of domestic stocks to more than 20 percent from a current 12 percent target.

Shiozaki himself sounded cautious in a news conference on Thursday, saying the priority in overhauling GPIF would be "safe and efficient" asset management.

"It's unknown whether the message coming from Minister Shiozaki will be accompanied by actual change," said Naka Matsuzawa, chief rates strategist at Nomura Securities.

REBELLIOUS STREAK

Shiozaki's appointment marks a comeback for a lawmaker with a rebellious streak who joined student protests in the late 1960s.

Markets have been encouraged by his past calls for reforms. Tokyo stocks have risen to seven-month highs, while the yen has fallen near six-year lows.

Shiozaki entered politics when he quit his job at the Bank of Japan after around 10 years to become an aide to his father, who was also a lawmaker. He later ran for the lower house as a candidate in Ehime, his father's former constituency in western Japan.

That was a surprising move for a man who spent his youth in Tokyo reading German philosopher Immanuel Kant in between frequenting jazz clubs.

During high school, he studied for a year in California in 1968. In an interview on his website, Shiozaki says the sense of freedom he experienced that year, in which he attended anti-war rallies and listened to Jimi Hendrix and Pink Floyd, pushed him towards student activism.

He was close friends with musician Ryuichi Sakamoto, who joined him in student protests.

MIXED RECORD

During his early years in politics, Shiozaki was considered one of the LDP's rising stars, with degrees from the University of Tokyo and Harvard's Kennedy School of Government.

But after he was appointed chief cabinet secretary in Abe's previous government in 2006, he was criticised for being part of Abe's "crony cabinet" and part of a clique of LDP politicians who came from politically well-connected families.

That tenure through 2007, in which he declared war on bureaucracy, was marked by a failure to coordinate policy as the government was hit by scandals and gaffes.

Despite his mixed political record, however, Shiozaki's stock rose over the past year.

As a key member of the LDP's "headquarters for Japan's economic revitalization," he helped to draft plans to overhaul GPIF and to bolster corporate governance and return on equity, moves welcomed by global investors and considered some of the highlights of "Abenomics."

Some said pressure from the Abe administration would provide Shiozaki with the support he needs to reform GPIF.

"I think conditions are such that it would be very difficult to undermine reforms," said Kazuhisa Kawakami, political science professor at Meiji Gakuin University. (Additional reporting by Linda Sieg; Editing by Simon Cameron-Moore)

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UPDATE 4-Japan PM Abe appoints China-friendly lawmakers to key posts

Wed Sep 3, 2014 6:25am EDT

* Abe seeks China thaw with party executive appointments

* GPIF reformer Shiozaki tapped for Labour portfolio

* Key ministers remain signalling policy continuity

* More women, but message mixed (Adds comment from PM Abe)

By Linda Sieg

TOKYO, Sept 3 (Reuters) - Japanese Prime Minister Shinzo Abe picked two veteran lawmakers with friendly ties to China for top party posts on Wednesday in an apparent signal of hope for a thaw in chilly ties with Beijing and a summit with Chinese leader Xi Jinping.

The change in executives in Abe's Liberal Democratic Party (LDP) was twinned with a cabinet reshuffle in which Abe gave the health and welfare portfolio to a reform-minded lawmaker, kept core ministers and boosted the number of women in an effort to polish his image.

In a move welcomed by Tokyo stock market players, Abe drafted Yasuhisa Shiozaki, 63, a proponent of an overhaul of Japan's Government Pension Investment Fund (GPIF), to head the ministry of labour, health and welfare, which oversees GPIF.

The fund is finalising plans to boost the weighting of domestic stocks in its portfolio.

Abe also gave women almost a third of the posts in his 18-minister cabinet to show his commitment to promoting women as part of his "Abenomics" growth strategy.

But he retained powerful cabinet members such as Chief Cabinet Secretary Yoshihide Suga, Finance Minister Taro Aso, 73, Economics Minister Akira Amari, 65, and Foreign Minister Fumio Kishida, 57, signalling policy continuity.

Abe's new line-up faces a number of challenges, including how to repair ties with China that have been frayed by rows over disputed territory and Japan's wartime history, and whether to go ahead with a planned sales tax rise next year despite signs the economy is faltering.

"A positive economic cycle is kicking off," Abe told a news conference after the new line-up was announced.

"We're only halfway through in reforms and we need to deal with new challenges. I reshuffled my cabinet so that we can tackle these challenges boldly and vigorously," he added. "The biggest challenge now is ... to revive the regions of Japan."

In a bid for party unity, the hawkish Abe tapped outgoing Justice Minister Sadakazu Tanigaki, his predecessor as LDP leader, for the key party post of secretary-general, the LDP's de facto election campaign chief.

Tanigaki, 69, is from a moderate wing of the LDP that favours better ties with China. He was also an architect of a plan to hike the sales tax in two stages to curb Japan's huge public debt. Implementation of the second stage is now in doubt due to a string of gloomy economic data.

Veteran lawmaker Toshihiro Nikai, 75, who also has close ties with China, was appointed to a second top party post. Outgoing administrative reform minister Tomomi Inada, 55, a close conservative ally of Abe, became LDP policy chief.

"He is sending a strong message to China that he wants to improve ties. Not only Tanigaki but Nikai have good ties with China," said political analyst Atsuo Ito.

MIXED MESSAGE ON WOMEN?

Abe has signalled that he hopes to meet Chinese leader Xi at an Asia-Pacific leaders gathering in Beijing in November.

"Japan and China both have responsibility for international peace and prosperity. It is vital to develop a forward-looking, cooperative relationship on common issues confronting international society," Suga told a news conference as China marked the anniversary of its World War Two victory over Japan.

Former vice defence minister Akinori Eto takes over from moderate conservative Itsunori Onodera as defence minister. He also assumes a new post responsible for national security reform as Abe pushes ahead with efforts to ease the limits of Japan's pacifist constitution on its military.

The little-known Eto, who is close to Abe, belongs to a group of lawmakers advocating visits to Tokyo's controversial Yasukuni Shrine for war dead, although his office said he has not visited the shrine this year.

Abe's pilgrimage there in December outraged China, where the shrine is viewed as a symbol of Japan's past militarism. Abe has since avoided visiting the shrine in person.

Eto has policy expertise, political analyst Ito said, but added: "He will not have a lot of influence. The message from the appointments to the two party posts is stronger."

Abe has not revamped his cabinet since returning to office in December 2012, a record for a post-World War Two premier. That means dozens of veterans in his male-dominated LDP were eager to be tapped for a post.

Abe, who has made a push to get more women into the workforce a linchpin of his "Abenomics" growth plan, appointed five female ministers, equalling a record set by Junichiro Koizimi in 2001.

Yuko Obuchi, 40, daughter of a former prime minister and mother of two, takes over as minister of trade and industry, while LDP policy chief Sanae Takaichi, 53, an Abe ally and former minister for gender equality in his first cabinet in 2006, was named minister of internal affairs and communications.

His message, however, was somewhat mixed since some of the appointees, including Haruko Arimura, new minister in charge of women's issues and the falling birthrate, are known for promoting highly conservative, traditional family values.

Abe, who surged to power promising to revive the economy and bolster Japan's security stance in the face of a rising China, has seen his support slip to around 50 percent, still high for a Japanese premier but off early peaks of around 60 percent. (Additional reporting by Leika Kihara, Yuko Yoshikawa, Elaine Lies and Kiyoshi Takenaka; Editing by Paul Tait and Jeremy Laurence)

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EMERGING MARKETS-Russia Ukraine assets rally on peace talk; emerging stocks at 3-yr high

By Sujata Rao

LONDON, Sept 3 Wed Sep 3, 2014 6:38am EDT

LONDON, Sept 3 (Reuters) - Russian and Ukrainian bonds rallied on Wednesday, and Moscow-listed shares leapt 4 percent after Kiev said a "permanent ceasefire" had been agreed in the Donbass area, the news also sparking gains across emerging assets.

The Kremlin watered down the talk of a formal ceasefire, but it confirmed that steps for peace had been discussed.

Emerging stocks rose more than 1 percent surpassing three-year highs hit last month, after the ceasefire reports as well as Chinese data that showed a rebound in services activity. The data pushed Chinese domestic stocks to their highest since December 2013.

The biggest gains came in emerging Europe, the region most exposed to the conflict in Ukraine, after Ukraine's President Petro Poroshenko said in a statement that he had reached a deal with Russia's Vladimir Putin following a telephone conversation.

Pro-Russian separatists have been battling Kiev's forces in the mainly Russian-speaking Donbass region, which contains most of Ukraine's heavy industry and provides almost a fifth of the country's economic output. The prolonged conflict had led to fears that the country would be forced to restructure debt.

Russian debt prices had also weakened as the European Union had mooted banning investors from buying new sovereign debt if Moscow failed to end its involvement in eastern Ukraine.

RBS strategist Tatiana Orlova said the ceasefire reports were "very positive news for the market and unexpected too, because in the past 10 days, the geo-political crisis seemed to have deepened."

"The devil is in the detail but if a ceasefire holds that is a very serious positive for securities everywhere, especially in places such as Poland," Orlova added.

Ukraine's dollar bonds rallied even more, jumping around 2-3 cents on the dollar

The country's hryvnia currency was flat after central bank liquidity tightening measures pushed it to one-month highs of around 12.5 per dollar on Tuesday but forwards price it to weaken back to around 14 in six months time

Russian sovereign dollar bonds rallied 1.5-2.0 cents across the curve while credit default swaps (CDS) fell 30 basis points, according to data from Markit. Dollar bonds from state-run oil firm Rosneft jumped 1.8 cents. .

Russia has also cancelled debt auctions six weeks running but Orlova said a bigger concern was that state-run companies - including Rosneft - would be reliant on state help to repay debt if barred from Western capital markets.

"Six weeks (out of rouble bond markets) is not a big problem for Russia's finance ministry but it all depends on developments in the oil market where prices have been dropping," Orlova said.

Russian shares rose more than 4 percent while the rouble rose 1.5 percent against the dollar.

EMEA GAINS

Peace hopes boosted Polish and Budapest stock exchanges more than 1.5 percent each , the Warsaw index hitting a six-month high.

Both markets have lagged broader emerging equities this year, partly because of the growth gloom but also because of the fallout from the Ukraine instability.

Greek and Turkish shares also rose around 0.7 percent . The zloty and forint both firmed 0.3 percent to the euro .

"Apart from the fact that this would come as a major relief for the whole Ukrainian population, this would be a huge development and a massive supportive for EMEA asset prices if true," Commerzbank analysts said in a note.

In domestic news, Poland's central bank is expected by analysts to keep interest rates on hold though forwards are pricing a 25 basis point cut, on back of soft growth and inflation. However the central bank is widely expected to prepare markets for a cut in October.

In Turkey, data showed consumer prices rose well above target inflation rates but was seen having little impact on monetary policy after the central bank cut overnight lending and borrowing rates last month to appease the government while keeping its benchmark interest rate steady.

The lira firmed half a percent to the dollar.

For GRAPHIC on emerging market FX performance 2014, see link.reuters.com/jus35t

For GRAPHIC on MSCI emerging index performance 2014, see link.reuters.com/weh36s

For GRAPHIC on MSCI emerging Europe performance 2014, see link.reuters.com/jun28s

For GRAPHIC on MSCI frontier index performance 2014, see link.reuters.com/zyh97s

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see ) (Additional reporting by Carolyn Cohn; Editing by Hugh Lawson)

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Fitch: Emerging Market Sovereigns Most Exposed to Fed Interest Rate 'Shock'

Wed Sep 3, 2014 6:42am EDT

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: When the Fed Raises Rates: Likely Normalisation Path, Macro Shock Scenario and Sovereign Rating Implications here LONDON, September 03 (Fitch) Fitch Ratings says weaker emerging market sovereigns would be most exposed to a highly negative interest rate 'shock' scenario where US interest rates rise more rapidly and higher than our base case, in which global growth and financial markets are not fundamentally destabilised by a tightening of US monetary policy. In a special report published today, Fitch says there are several risks surrounding the Fed's normalisation path. Monetary policy action and timing depend on the outlook for growth, the labour market and inflation, which is uncertain. A tightening cycle after such an extended period of low interest rates and unwinding quantitative easing is unprecedented. The term premium could increase sharply, magnifying the impact on long-term bond yields from higher expected short-term rates. "Financial markets may also not be fully prepared for higher US interest rates, despite the Fed's forward guidance. Current low volatility and high asset prices suggest markets have not priced in much uncertainty. Therefore, in our 'shock' scenario, the spill-over effects to the rest of the world could be substantial," said Ed Parker, Fitch's Head of EMEA Sovereign Ratings. In this stylised shock scenario we assume that US productive capacity is lower than currently believed and the output gap and labour market slack are closed by end-2014, causing inflation to rise to a peak of 4.5% in 2016. The Fed is forced to raise the Fed funds target rate sharply to 3% by end-2015 and 5% by end-2016. Ten-year Treasury yields jump to 6% by end-2016, the sharpest increase since 1980-1981. In the scenario, financial market volatility and risk premiums spike, with spreads over US Treasuries on perceived risky assets such as emerging market bonds widening by 150bp. US GDP growth drops to 0% in 2016 and unemployment rises. Global growth weakens, commodity prices decline, and many emerging markets are forced to hike interest rates. The dollar is volatile, potentially hitting foreign-currency borrowers. Asset prices and collateral values drop sharply. Fitch rates sovereigns through the "normal" business and monetary policy cycles. Last May's "taper tantrum" did not lead directly to any sovereign downgrades. Nevertheless, our shock scenario is a severe one and would likely trigger some negative rating actions. The most exposed would be weaker emerging markets such as those with large external financing needs, low foreign reserves, high levels of leverage, vulnerable debt structures, weak policy frameworks or political fragilities. Countries with these characteristics include Mongolia, Turkey, Ukraine, El Salvador, Hungary, Lebanon and Jamaica. For the US, a permanent loss of potential output and the revelation that the budget deficit is largely structural would heighten the pressures facing the public finances from population ageing. Downward pressure on the rating could emerge if the US authorities were to fail to act to narrow the budget deficit and to stabilise the public debt/GDP ratio over the medium term. Our base case is for the Fed to gradually tighten monetary policy over the next 12 months, in line with its forward guidance. Raising interest rates and unwinding QE will trigger some increase in financial market volatility, but we do not expect it to fundamentally destabilise global growth or financial markets. We expect the Fed to complete the "tapering" of its asset purchase programme in October 2014; and to start raising interest rates in mid-2015, before taking them to around 3.75% by late 2017 or early 2018. Yields on 10-year US Treasury bonds may rise to 4%-4.5% by 2017, low in historical terms. We expect the Fed to stop reinvesting some or all of principal payments on agency mortgage-backed securities (MBS) and Treasury securities soon after the first rate rise. If it opts purely for a passive run-off, it could take four to five years for its holdings of Treasury bonds to revert to a normal level relative to currency in circulation. The report entitled 'US Monetary Policy: Implications of an Interest Rate Shock' is available on www.fitchratings.com. Contact: Ed Parker Managing Director +44 (0)20 3530 1176 Fitch Ratings Limited 30 North Colonnade London, E14 5GNT James McCormack Managing Director +44 (0)20 3530 1286 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable Criteria and Related Research: Sovereign Rating Criteria here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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UPDATE 1-Argentina to appeal U.S. judge's order on bond payment

Fri Aug 29, 2014 7:36pm EDT

NEW YORK Aug 29 (Reuters) - Argentina said on Friday it would appeal a U.S. judge's decision declaring illegal a $539 million payment the country deposited with Bank of New York Mellon Corp for its restructured bondholders.

BNY Mellon in June obeyed a U.S. court ruling to block the $539 million interest payment on debt that was restructured following Argentina's record 2002 debt default, paving the way for the country's second default in 12 years in July.

Argentina said on Tuesday it had stripped Bank of New York Mellon's authorization to operate in the South American country.

In another court filing, Argentina said it would also appeal a separate order by U.S. District Judge Thomas Griesa in New York that enjoined payments on U.S. dollar-denominated bonds governed by Argentine law. (Reporting by Nate Raymond in New York. Additional reporting by Megan Davies.; Editing by Chris Reese and Andre Grenon)

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