(Reuters) – Western trade sanctions against Iran have begun to strangle its oil exports, a U.S. advisory body said, amid signs the squeeze on Tehran is only set to intensify and could push global crude prices higher unless Washington eases its grip.

With crude prices trading at around 10-month highs and limited spare production capacity world-wide to make up for the embargo on Iran, the United States may seek to offer Iran’s major trade partners more room to move on sanctions.

Iran’s biggest oil customers, including China, Japan and India, have become tangled up in the U.S.-led sanctions aimed at curbing Iran’s nuclear ambitions. Unless they cut back on Iranian crude, they could harm their own U.S. trade ties.

“With oil inventories and spare OPEC production capacity running low, consumers don’t have much buffer against additional disruptions in supply,” said Trevor Houser, a partner at Rhodium Group and a former State Department adviser.

“That means the needle the administration has to thread to pressure Iran without raising oil prices has gotten even smaller.”

Washington is concerned about rising U.S. petrol prices ahead of November presidential elections and hopes to avoid inflaming global markets. U.S. President Barack Obama can temporarily waiver sanctions if it is in the national interest.

The Energy Information Administration, an independent arm of the U.S. Department of Energy, Wednesday said Western insurers were declining to cover the trade risk on some Iranian oil shipments.

On June 28, Washington will slap sanctions on foreign banks facilitating Iran’s oil trade, ratcheting up pressure not only on Tehran but also the global banking sector. Wednesday, news emerged that the U.S. government recently forced Dubai-based Noor Islamic Bank to stop channeling Iranian oil money.

The world’s biggest electronic bank clearing system, SWIFT, is preparing to block Iran’s central bank from using its network to transfer funds — a move that could further exacerbate Asia’s already-stressed oil trade with Iran.

To cut its reliance on Iranian crude, India revealed on Wednesday it had sought up to 80,000 barrels per day extra oil from Iraq in 2012/13, days after placing a similar request with top exporter Saudi Arabia. India now buys more than 340,000 bpd oil from its third-largest crude supplier, Iraq.

Traders also noted Iran was trying to sell about 200,000 tones of crude oil from a supertanker floating off Singapore, a rare move. In another sign of more spot Iranian cargoes looking for a home, they said a vessel heading toward China was carrying volumes greater than the usual term-contract supplies.

The EIA report, which looked at global oil output and prices over the last two months since Obama signed the sanctions into law, said markets had become increasingly tight.

It said global spare crude production capacity was “quite modest” by historical standards, especially in the context of global uncertainties that were not limited to Iran.

There could be a global supply gap of 1.6 million barrels per day if Iranian oil was completely taken out of the picture, the report said. Iran has threatened to retaliate against the sanctions by closing the Straight of Hormuz, which carries nearly 20 percent of the global oil trade.

IAEA WORRIED, FEARS OF ISRAEL STRIKE

The political backdrop to the Iranian sanctions also intensified with the U.N. nuclear watchdog concerned over unspecified “activities” that might be taking place at Iran’s Parchin military facility, Western diplomats said Wednesday.

It was unclear what kind of activities the International Atomic Energy Agency (IAEA) suspected, or whether it thought Iran might be trying to clean the site or conceal something ahead of a possible visit. Diplomats said the agency was monitoring the site via satellite images.

With Israel hinting it could launch a pre-emptive strike on an Iranian nuclear facility, a pro-Iranian militant group, Hezbollah, warned that such an attack would set the Middle East ablaze, possibly drag in the United States and unleash a conflict beyond the Jewish state’s control.

“America knows that if there is a war on Iran, this means that the whole region will be set alight, with no limit to the fires,” Hezbollah deputy Sheikh Naim Qassem told Reuters.

The United States and Israel have not ruled out a military strike on Iran to halt its nuclear program.

SOARING US PRICES ELECTION ISSUE

U.S. President Barack Obama, concerned about soaring U.S. gasoline prices, has the ability to selectively ease Iranian sanctions. Obama may waive sanctions for up to 120 days, and every 120 days thereafter, if he determines that it “is in the national security interest of the United States.”

Rising petrol prices are a hot issue ahead of the presidential elections, with Republicans seeking to tap into voter anger about prices to criticize Obama and his Democratic party’s energy policy.

The sanctions aim to cut funds to Iran’s nuclear program by slashing its oil revenues. Iran says the program is for peaceful purposes and denies it is trying to build nuclear weapons.

A string of oil outages in Yemen, Syria, South Sudan, and the North Sea have added to supply worries.

Fortunately for oil consumers, Saudi Arabia, home to the world’s biggest spare oil cushion, has also boosted production in the last two months.

The kingdom produced an average of 9.7 million bpd over the last two months, according to Wednesday’s EIA report, about 100,000 bpd less than a Reuters survey said Wednesday. The EIA figure is up about 600,000 bpd from the same period last year.

(Reporting by Timothy Gardner, Rachelle Younglai, Ayesha Rascoe; Writing by Mark Bendeich; Editing by Michael Perry)

(Reuters) – North Korea’s neighbors and its old enemy, the United States, appealed for stability on Monday after the death of the totalitarian state’s leader, Kim Jong-il, plunged one of the world’s most heavily militarized regions into fresh uncertainty.

Kim suffered a heart attack while travelling on a train, North Korean state media said, setting up the autocratic, well-armed and nuclear-ambitious state for only its second leadership change since the Korean war ended in an uneasy truce in 1953.

Later, state media anointed his youngest son, Kim Jung-un, as the “great successor”, but little is known about how he would run a reclusive state with more than a million troops and missiles that Washington fears could one day reach U.S. shores.

President Barack Obama and South Korean and Japanese leaders held telephone hook-ups to discuss the situation, which was unfolding well into Washington’s night, while the North’s biggest ally, China, expressed grief over Kim’s sudden death .

South Korea, still technically at war with the North, put its military on alert after the news, Yonhap news agency said, and President Lee Myung-bak convened its National Security Council. But Seoul’s Defense Ministry said there were no signs of any unusual North Korean troop movements.

The White House released a short statement committing itself to working with both South Korea and Japan, two of its closest Asian allies, to ensure continued stability in the region.

“We remain committed to stability on the Korean peninsula, and to the freedom and security of our allies,” White House press secretary Jay Carney said in a short written statement.

Japan also convened a special security meeting but stopped short of putting its own armed forces on special alert, and said it had to be prepared for unexpected security developments.

“Prime Minister (Yoshihiko) Noda instructed ministers at the security meeting to prepare for the unexpected, including financial matters, North Korea’s domestic issues and border affairs,” Japan’s top government spokesman said on Monday.

JAPAN NERVOUS OVER MISSILES

Japan is acutely sensitive to uncertainty on the Korean peninsula, after Pyongyang has repeatedly tested missiles into the sea between them and also at times over Japan itself. North Korea has also abducted Japanese citizens.

Asked whether the issue of North Korean missiles had been discussed at the Tokyo security meeting, the government spokesman added: “There was some report on the missile issue at the security meeting but I decline to elaborate.”

There was initially a yawning four-hour silence from North Korea’s main ally, China, before it praised Kim Jong-il as a great leader who had

made important contributions to relations with

Beijing, a friendship that had helped to maintain stability.

“China and North Korea will strive together to continue making positive contributions to consolidating and developing the traditional friendship between our two parties, governments and peoples, and to preserving the peace and stability of the Korean peninsula and the region , “

state news agency Xinhua quoted Foreign Ministry spokesman Ma Zhaoxu as saying .

Without China’s support, many experts believe the Kim dynasty would collapse. Russia, another neighbor with a stake in a stable Korea, had yet to comment on the news.

China, Russia, the United States, Japan, South Korea and North Korea make up the so-called “six-party talks”, a troubled dialogue aimed at persuading Pyongyang to scrap nuclear programs and give up ambitions to develop nuclear weapons.

The talks collapsed in 2008, though there have been some fruitless diplomatic efforts since then to revive them.

Taiwan set up an emergency committee

within its Foreign Ministry to monitor

developments on the Korean peninsula and is asking Taiwanese in South Korea to stay alert .

Australia, which fought for the South in the Korean war and maintains diplomatic relations with Pyongyang, called for calm and restraint after Kim Jong-il’s death, especially around the so-called demilitarized zone separating the two Koreas.

“It’s at times like this that we cannot afford to have any wrong or ambiguous signaling,” said Foreign Minister Kevin Rudd, who visited the heavily fortified border zone last month.

“This is the single largest militarily armed zone anywhere in the world and we need to ensure that calm and restraint are exercised in an exceptionally difficult period of transition.”

(Writing by Mark Bendeich; Editing by Ed Davies and Robert Birsel)

The Mac and the iPod, the iPhone and the iPad, born out of his vision of marrying high technology with an elegant and simple form, are already recognized as iconic products of the digital age.

One architect compared Jobs to Mies van der Rohe, the Modern designer who said “less is more” and unleashed stark glass skyscrapers on a world used to brick and mortar.

“He is the virtual Mies. The Mies of the virtual world,” said Harvard Graduate School of Design’s Florian Idenburg.

But he said that the influence of Jobs on Harvard design students went beyond the look of his products. In fact, although every person in the building appeared to have an iPhone, some aesthetes are turning against the ultra-smooth look.

The enduring influence of Jobs may be more in how his products unlock creativity and change how we view the world — and what we want and make the world to be.

Idenburg said students who constantly use the iPhone in their work want their own designs to have a similar “flexibility and looseness,” so that a concert hall could be ready to host different types of events, for instance.

“It’s a nice little phone. But what it really does, is it absolutely changes how people behave,” said Thom Mayne, the avant garde Los Angeles architect who is a winner of architecture’s Nobel prize, the Pritzker.

“We’re all interested in what buildings look like, but what I’m interested in is how they reshape behavior,” he said. “He’s a symbol that we really need in this culture at this time.”

BIG AND SMALL

Jobs maintained strict control over the creation of his own product, even as he expected others to invent new uses for it.

He displayed an inspiring combination of mastering detail and dreaming big, said British architect Norman Foster, known for working on major projects such as the Millennium Bridge and Swiss Re’s headquarters dubbed “The Gherkin” in London.

“Steve Jobs encouraged us to develop new ways of looking at design to reflect his unique ability to weave backwards and forwards between grand strategy and the minutiae of the tiniest of internal fittings,” said Foster.

Foster, who has designed a new Apple headquarters that looks like a cross between a donut and a spaceship, called Jobs “One of the truly great designers and mentors”.

All over the world, iPods are tucked into the back of torn jeans and in the pockets of executive suits, strapped to the arms of joggers or entertaining commuters on tedious journeys home, and the lesson for many designers is that daily objects can be beautiful.

At Paris Fashion Week, which ended on Wednesday, fashion buyers took photos of dresses with their iPad and once the show was over, they flicked through them as a catalog they had just created and decided which ones they wanted to buy.

“What I think was extraordinary about Steve Jobs was his ability to create sophisticated objects that are simple to use. My three-year-old daughter Giulia knows how to use the iPhone,” said Paolo Pininfarina, CEO of the eponymous group that has designed Ferrari sportscars since the early 1950s.

Museums around the world have been collecting early Apple and Jobs products, starting from the original Apple 1 developed in a bedroom in the 1970s by Jobs and Apple co-founder Steve Wozniak to the first NeXt computer, a magnesium “cube” developed by Jobs during a break with Apple in the 1980s.

“It (the iPod) may not be working in 20 years time but it will remain in that echelon of great designs for sure,” said Campbell Bickerstaff, curator for the information and communication technology collections at Sydney’s Powerhouse Museum, which collects icons of contemporary culture,

FROM CALLIGRAPHY TO THE APPLE MAC

Jobs was inspired by design early on, having revealed in a famous 2005 commencement speech to Stanford University students — which is easy to view on YouTube — that one of his formative experiences was a calligraphy class at Reed College.

“None of this had even a hope of any practical application in my life. But 10 years later, when we were designing the first Macintosh computer, it all came back to me. And we designed it all into the Mac. It was the first computer with beautiful typography,” Jobs said at the time.

“I was almost brought to tears” watching a video of the address, said Calvin Klein, the fashion designer, who attributed part of Jobs’s success to his devotion.

“It sounds like he had a full life. But to build a business of that size, and to be constantly innovating, it takes up as much as one can imagine. It becomes your life. It requires a dedication that is very special and very unusual.”

In the Stanford address, Jobs also spoke of the importance of being confident in oneself, a command that resonates with artists and designers.

“Steve Jobs has shown that breakthrough products come from taking intuitive risks, not from listening to focus groups,” said British industrial designer James Dyson, whose bagless vacuum cleaner that swivels on a ball is an object of desire as well.

(Additional reporting by Clare Jim in TAIPEI, Abi Sekimitsu in TOKYO, Georgina Prodhan in London, Tarmo Virki in Helsinki, Silvia Aloisi in Milan; Editing by Chris Wickham and David Cowell, Gary Hill)

The Mac, the iPod and iPhone, born out of his vision of
marrying high technology to an elegant and simple form, are
already recognised by designers as among the most iconic
products of the digital age.

Creations from the founder of Apple not only
changed the way people communicate, watch films, listen to music
and shop on the Internet but large Mac screens and
graphics-friendly Mac software also make life easier for
architects, publishers, artists and fashion designers.

“One of the truly great designers and mentors,” said British
architect Norman Foster, known for working on major projects
such as the Millennium Bridge in London, the Millau Viaduct in
southern France and Swiss Re’s headquarters in London dubbed
“The Gherkin.”

“Steve Jobs encouraged us to develop new ways of looking at
design to reflect his unique ability to weave backwards and
forwards between grand strategy and the minutiae of the tiniest
of internal fittings,” Foster added.

The iPod, Apple’s big game-changer launched a decade ago,
has a special place on the wall of fame of global consumer
icons, alongside the Volkswagen Beetle, the Coca-Cola bottle,
the Swiss Army pocket knife or the Olivetti portable typewriter.

Every country or culture can have its own consumer design
icons — Italy’s Vespa motorscooter or America’s Cadillac — but
only relatively few go truly global and endure.

Rarer still are those that change the way people do things.

“Steve Jobs has shown that breakthrough products come from
taking intuitive risks, not from listening to focus groups. He
was a master of semiotic design”, said British industrial
designer James Dyson, best known for the dual-cyclone bagless
vacuum cleaner.

From its inception in 2001, the iPod spread like electricity
and reshaped the music industry in a way its predecessor, the
Sony Walkman, failed to do in a lasting fashion.

Apple is a computer company yet it was the first to
successfully commercialise digital music on the Internet well
before industry giants EMI, Warner Music Group and Sony Music
and helped save the industry from slow death by piracy.

Hundreds of millions of iPods have been sold, each featuring
a simple retro dial that bears the hallmark of Jobs’ design
philosophy of clean minimalism.

All over the world, iPods are tucked into the back of torn
jeans and in the pockets of suits, strapped to the arms of
joggers or entertaining commuters on tedious journeys home.

“Many credit Apple as probably the best advertisement for
professional design and the role of design that we have ever
seen,” said Brandon Gien, an executive member of the
International Council of Societies of Industrial Design.

Then came the iPad, released in 2010, which changed the way
people read newspapers and books, took notes, surfed the
Internet, called each other on Skype and dealt with everyday
practical problems thanks to hundreds of savvy applications.

At Paris Fashion Week, which ended on Wednesday, fashion
buyers took photos of dresses with their iPad and once the show
was over, they flicked through them as a catalogue they had just
created and decided which ones they wanted to buy.

“We saw a lot of iPads on the front row,” said Marigay
McKee, Harrods Fashion,Beauty Director who was at Fashion Week.

“All the bloggers and a lot of the fashion editors
diligently carried iPads,” she added. Many luxury brands,
including Louis Vuitton and Hermes (at a price of $1,400), make
iPad holders as chic accessories.

The iPad is also getting the airline industry to rethink
entertainment technology used on board. Airlines such as
Australia’s Quantas are looking into using iPads for in-flight
entertainment to help trim costs and weight.

Professional designers regard Jobs not as one of them per se
but as an innovator and businessman who recognised that form was
as just important as function for a product’s success.

They say there is no question Jobs directed the design
fundamentals at Apple — from the elimination of any unsightly
screws in product casings to the type-face used to stamp them –
but he also relied on talented professional designers, from
Hartmut Esslinger in the 1980s to Jonathan Ive who joined in the
1990s and still heads up product design at Apple.

Jobs was so obsessed with design that he hired Esslinger in
1982 on the then astronomical salary of a $1 million a year to
create Apple’s design strategy, which produced the “Snow White”
design of all Apple products for the rest of that decade.

“Design was not a department that was buried in bureaucracy.
He lifted that right up to where it rightfully belonged,” said
Gien, an Australian industrial designer based in Sydney.

FROM CALLIGRAPHY TO THE APPLE MAC

Jobs was inspired by design early on, having revealed in a
famous 2005 speech to Stanford University students that one of
his formative experiences was attending a calligraphy class at
Reed College before finally dropping out of university himself.

“None of this had even a hope of any practical application
in my life. But 10 years later, when we were designing the first
Macintosh computer, it all came back to me. And we designed it
all into the Mac. It was the first computer with beautiful
typography,” Jobs said at the time.

Museums around the world have been collecting early Apple
and Jobs products, starting from the original Apple 1 developed
in a bedroom in the 1970s by Jobs and Apple co-founder Steve
Wozniak to the first NeXt computer, a magnesium “cube” developed
by Jobs during a break with Apple in the 1980s.

Sydney’s Powerhouse Museum, which collects icons of
contemporary culture, has no doubt the iPod and perhaps the
iPhone will one day also take their place alongside the greats
of earlier eras, such as the Olivetti Lexikon 80 typewriter
designed by Italy’s Nizzoli Marcello or the Braun shaver
developed by legendary German designer Dieter Rams in 1951.

“It (the iPod) may not be working in 20 years time but it
will remain in that echelon of great designs for sure,” said
Campbell Bickerstaff, curator for the museum’s information and
communication technology collections.

(Additional reporting by Clare Jim in TAIPEI, Abi Sekimitsu in
TOKYO, Georgina Prodhan in London, Tarmo Virki in Helsinki;
Editing by Chris Wickham and David Cowell)

Booming iron ore sales to China and strong prices offset weaker volumes and propelled underlying profit 35 percent higher to $7.8 billion. The group also expanded its closely watched share buyback program by $2 billion.

But its warnings on costs and risks to the economic outlook, despite growth in China, held back its shares, down 2.4 percent in London at 0810 GMT to 3,921 pence and marginally underperforming a 1.8 percent drop in the sector.

“It’s a slight miss — (on) costs, mostly. They have had stronger currencies, higher energy costs, higher labor costs, higher input costs,” Des Kilalea, analyst at RBC Capital Markets in London said.

“If this was a bull market (the miss) wouldn’t matter. But the warning on costs… is of concern to the market, global growth is of concern to the market and Rio, as with the other miners, is saying economic conditions are volatile.”

Cash costs, the impact of stronger exchange rates and higher energy prices took a $2.1 billion bite out of Rio’s underlying earnings. Lower volumes added a $444 million hit.

Rio Tinto joins major rivals Anglo-American Plc (AAL.AX: Quote, Profile, Research, Stock Buzz) and Xstrata Plc (XTA.L: Quote, Profile, Research, Stock Buzz) in reporting profit growth of a third or more over the past week while struggling to overcome spiraling costs and restive labor unions.

“We have obviously seen much higher labor settlements and salary increases…. And the input prices that are relevant to the mining industry are also very tight in many places,” Guy Elliott, chief financial officer, told reporters.

“This is especially the case in regions like Western Australia but also other parts of Australia and Canada are not immune from these ‘hot spot’ type features.”

Tight labor markets have spurred unions from Australia to Chile to take a hard line on wage talks, triggering strikes.

Rio owns a 30 percent stake in Chile’s Escondida, the world’s largest copper mine. Escondida, hit by a strike that has lasted almost two weeks, has been forced to declare force majeure and a deal is still proving elusive.

IRON ORE CLIMBS

Rio’s underlying earnings came in at $7.8 billion, just below a consensus expectation of $8.03 billion. Underlying core earnings climbed 27 percent to $14.3 billion, also just below expectations.

Rio, like its peers, forecast continuing strength in commodity prices, as miners struggle to bring more production onstream. Chief Executive Tom Albanese forecast stronger average prices for the rest of 2011 and into 2012.

Capital expenditure at the group was $5 billion in the first half and Albanese said the group had commitments for a further $6 billion to the end of the year.

Analysts had fretted over the impact of weather-hit sales on the bottom line at Rio’s key iron ore unit, which accounts for 78 percent of group earnings, but lofty prices helped offset lower volumes to lift core profit up 44 percent.

The iron ore unit was hit by cyclones, flooding and a train derailment as the La Nina weather phenomenon battered Rio’s key Pilbara operations in western Australia at the start of the year and interrupted ship-loading.

Rio said its planned expansion of Pilbara capacity was on track and accelerated work meant it would reach expected capacity of 333 million tonnes per year in the first half of 2015, six months ahead of schedule.

Its copper unit saw underlying earnings again marginally below forecasts, but up 16 percent as higher prices helped offset lower volumes from key mines and lower grades.

Copper has also been a concern for investors, who point to production at the lowest levels in years at a time when prices of the commodity are close to record highs. Rio has been hit along with the entire copper mining sector by the effect of lower ore grades.

Aluminum earnings rose 4 percent at an underlying level.

Earnings from the energy division, which includes coal and uranium, tumbled 39 percent, partly reflecting flooding at its Australian collieries and at the operations of its Australian uranium subsidiary, Energy Resources of Australia (ERA.AX: Quote, Profile, Research, Stock Buzz).

Rio Tinto also boosted its interim dividend to 54 U.S. cents per share from 45 cents a year earlier.

(Additional reporting by Michael Smith; Editing by Balazs Koranyi, Ed Davies and Sophie Walker)

Japan welcomed news that late on Sunday, the White House and Republican and Democrat leaders agreed on a plan to raise the U.S. borrowing limit and avoid a catastrophic default, buoying the dollar and share markets.

Governments and policymakers had warned Washington of the risk of financial disaster if they failed to raise the $14.3 trillion U.S. debt ceiling. An official Chinese newspaper had called U.S. handling of the crisis “irresponsible” and “immoral.”

The leaders’ agreement still needs to be endorsed by Congress by Tuesday to allow the U.S. debt ceiling to be lifted in time to avoid default or a seizure of government finances.

“This looks like a short-term fix and we don’t have a long-term solution put in place, which is really what the rating agencies were looking for,” said Michael Woolfolk, senior currency strategist with BNY Mellon in New York.

Rating agencies had yet to react to the news.

The dollar rebounded against safe-haven currencies such as the yen and Swiss franc, and share markets rallied on news of the deal, which President Barack Obama said would lead to $2.5 trillion in cuts from the budget deficit over the next 10 years.

The price of gold, a safe-haven asset that had climbed to record highs on fears of stalemate on Capitol Hill, fell back on news of the deal, but analysts said credit agencies were likely to be less impressed than markets.

They noted the agreement called for just under $1 trillion in initial cuts, with a joint committee charged with finding another $1.5 trillion — a task which, given the poisonous state of U.S. politics, seemed to promise yet more uncertainty.

“I am not sure this will be enough to remove the negative outlook,” said Annette Beacher, head of Asia-Pacific research for TD Securities in Sydney. “I don’t think it is necessarily a done deal that the ratings agencies will accept this programme to avoid an eventual downgrade.”

Markets are waiting for rating agencies to hand down their verdicts on the deal. Standard & Poor’s had sent the clearest signal that it was prepared to downgrade the United States’ top-notch AAA rating even in the event of a political compromise.

S&P signaled a possible U.S. downgrade last month, putting the rating on negative watch and warning that it might still cut the rating if a political deal lacked the resolve to stabilize the country’s medium-term debt dynamics.

Japan, though, was relieved a political deal had been struck, with the safe-haven yen coming off its highs as funds swung back into the dollar.

But policymakers there were expected to remain on guard to defend the yen from another sharp appreciation, the last thing its disaster-struck economy needs.

“We welcome the U.S. debt deal and hopefully this will stabilize markets,” Japanese Chief Cabinet Secretary Yukio Edano said at a regular news conference.

U.S. stock index futures bounced on news of the agreement, and the Japanese stock market surged as much as 2 percent, though U.S. Treasury futures fell slightly as the deal emerged.

Washington came under increasing international pressure at the weekend to come up with a solution.

IMF head Christine Lagarde told CNN that the world was watching the United States “with trepidation, with anxiety, with concern, but also with hope.”

Asia, which holds close to $3 trillion in U.S. government debt, has a powerful vested interest in Washington finding a solution to avoid default.

China’s People’s Daily, the official mouthpiece of the Chinese Communist Party, on Saturday accused U.S. politicians of “sacrificing other people’s interests in exchange for a few votes.” China is the United States’ biggest foreign creditor.

(Editing by Neil Fullick)

Neither the conservative opposition nor Prime Minister Julia Gillard’s Labor Party won a clear majority at the Aug. 21 election. Both are now locked in a race to secure enough support from independent MPs to form a minority government.

Financial markets hope that opposition leader Tony Abbott’s conservative coalition prevails, given he has promised to scrap Gillard’s proposed mining profits tax and carbon-trading plans, as well as a $38 billion fibre-optic broadband telecoms project.

Those hoped firmed on Tuesday, during the final stages of counting, when the conservatives eliminated Labor’s lead in terms of overall votes — an advantage Gillard had earlier promoted as a major reason why she was best placed to form a new government.

“It’s basically consistent with what the market seems to have factored in: that Abbott will get up,” said Shane Oliver, head of investment strategy at insurer and asset manager AMP, which manages $85 billion in Australia.

“At the moment the market is hanging on the belief that the coalition will probably get up, and that’s helped mining stocks.”

Australian shares fell on Tuesday, in tune with a sell-off on Wall Street, but mining stocks have fared better than other sectors of the local market since the election on hopes that Gillard would be ousted and the mining tax scrapped.

Miners that stand to benefit from the tax’s demise include Rio Tinto, BHP Billiton, Xstrata and Fortescue Metals Group.

Political and constitutional experts have dismissed the market’s reaction as wishful thinking, noting that more seats or votes could have no bearing on outcome. They also point out that most of the independents in the new parliament favour some Labor policies over the conservative’s agenda.

Underlining the volatility in the wake of the election, a poll on Tuesday showed more than one in 10 people would have voted differently had they known the country was headed towards gridlock, pointing to a vastly different parliament next time around.

But the opposition sought to claim the moral high ground on Tuesday, as the official vote count showed the conservatives just ahead of Labor on the two-party vote: 50.01 percent versus 49.99 percent — a difference of 1,700 votes — with 85 percent of the vote counted.

In terms of seats, projections point to the conservatives ending up with 73 seats and Labor 72, with four independents and one Green MP. The Green lawmaker has already said he is likely to side with Labor, leaving the independents to decide who governs.

To govern, 76 seats are needed in the 150-seat lower house.

“We hold more seats in the House of Representatives, we hold more (upper house) Senate seats than Labor, so it’s hard to see what moral authority or legitimacy Julia Gillard can now claim to try and seek to govern,” deputy opposition leader Julie Bishop told ABC radio on Tuesday.

Later on Tuesday, Prime Minister Gillard is due to speak at the National Press Club in Canberra, in between intense negotiations with the independents in an effort to form government. At least one of the independents said he would decide this week which side to back.

That independent, Andrew Wilkie, has already asked both Gillard and Abbott to launch a crackdown on gambling, which would affect stocks like Tabcorp Holdings, Tatts, Crown and Aristocrat Leisure.

(Editing by Balazs Koranyi)

Neither the conservative opposition nor Prime Minister Julia Gillard’s Labor Party won a clear majority at the August 21 election. Both are now locked in a race to secure enough support from independent MPs to form a minority government.

Financial markets hope that opposition leader Tony Abbott’s conservative coalition prevails, given he has promised to scrap Gillard’s proposed mining profits tax and carbon-trading plans, as well as a $38 billion fiber-optic broadband telecoms project.

Those hoped firmed on Tuesday, during the final stages of counting, when the conservatives eliminated Labor’s lead in terms of overall votes — an advantage Gillard had earlier promoted as a major reason why she was best placed to form a new government.

“It’s basically consistent with what the market seems to have factored in: that Abbott will get up,” said Shane Oliver, head of investment strategy at insurer and asset manager AMP, which manages $85 billion in Australia.

“At the moment the market is hanging on the belief that the coalition will probably get up, and that’s helped mining stocks.”

Australian shares fell on Tuesday, in tune with a sell-off on Wall Street, but mining stocks have fared better than other sectors of the local market since the election on hopes that Gillard would be ousted and the mining tax scrapped.

Miners that stand to benefit from the tax’s demise include Rio Tinto, BHP Billiton, Xstrata and Fortescue Metals Group.

Political and constitutional experts have dismissed the market’s reaction as wishful thinking, noting that more seats or votes could have no bearing on outcome. They also point out that most of the independents in the new parliament favor some Labor policies over the conservative’s agenda.

Underlining the volatility in the wake of the election, a poll on Tuesday showed more than one in 10 people would have voted differently had they known the country was headed toward gridlock, pointing to a vastly different parliament next time around.

But the opposition sought to claim the moral high ground on Tuesday, as the official vote count showed the conservatives just ahead of Labor on the two-party vote: 50.01 percent versus 49.99 percent — a difference of 1,700 votes — with 85 percent of the vote counted.

In terms of seats, projections point to the conservatives ending up with 73 seats and Labor 72, with four independents and one Green MP. The Green lawmaker has already said he is likely to side with Labor, leaving the independents to decide who governs.

To govern, 76 seats are needed in the 150-seat lower house.

“We hold more seats in the House of Representatives, we hold more (upper house) Senate seats than Labor, so it’s hard to see what moral authority or legitimacy Julia Gillard can now claim to try and seek to govern,” deputy opposition leader Julie Bishop told ABC radio on Tuesday.

Later on Tuesday, Prime Minister Gillard is due to speak at the National Press Club in Canberra, in between intense negotiations with the independents in an effort to form government. At least one of the independents said he would decide this week which side to back.

That independent, Andrew Wilkie, has already asked both Gillard and Abbott to launch a crackdown on gambling, which would affect stocks like Tabcorp Holdings, Tatts, Crown and Aristocrat Leisure.

(Editing by Balazs Koranyi)

Neither the ruling Labor party nor the conservative opposition won a majority at Aug. 21 elections, which delivered the nation’s first hung parliament in 70 years and put the fate of government in the hands of four independents and one Green MP.

This disparate group, whose pet issues range from curbs on banana imports and better rural health services to gay rights and tougher gambling laws, could determine major issues such as Labor’s proposed mining tax and a $38 billion telecoms project.

“I would hope that by the end of the week we should be able to make a decision,” independent MP Tony Windsor said.

Australia political risks r.reuters.com/gan92n

For a graphic on the election, click

here

link.reuters.com/vyr37n

But Windsor urged Australians to “calm down”, acknowledging the media pressure on cross-bench MPs to make quick decisions. The process of forming a government, he said, should not be rushed.

“It could take a little longer than that. For my part in it, I don’t intend to rush,” Windsor told a TV interview.

With the one Green MP already siding with Labor, Australian newspapers are piling pressure on the four independents to end the uncertainty and choose either Prime Minister Julia Gillard’s Labor or opposition leader Tony Abbott’s conservative coalition.

The Australian newspaper, owned by media baron Rupert Murdoch’s News Corp, published an opinion poll at the weekend showing that most voters in three of the independents’ electorates preferred the conservatives to form government.

Editorials are also calling for an end to the political limbo, highlighting the risk that a sudden renewal of the global financial crisis could catch the nation off guard.

The independent and Green lawmakers have scheduled an intense round of talks this week with Gillard and Abbott, with financial markets hoping that the conservatives, which oppose Labor’s mining tax and its $38 billion national broadband project, will win over enough independents to form a government.

The count from last week’s election is still incomplete, but it appears likely the conservatives will end up with 73 seats in the lower house, one more than Labor. Seventy-six seats are needed in the 150-member chamber to command a majority.

FRESH ELECTIONS?

With so much uncertainty, online bookmakers Sportingbet said the odds were shortening for another election within months.

Windsor again raised the prospect of fresh elections if one or more of the independents decided to back neither of the major parties. Windsor rated that a 10 percent chance at the moment.

And he said he might not support either party in the end.

“I have not ruled that out,” he said.

Financial markets have so far been patient, but investors are concerned that Gillard could make major concessions to the Green MP, Adam Bandt, and another independent, former Greens party member Andrew Wilkie, in order to secure a working majority.

Bandt backs the proposed mining tax, which affects miners like Rio Tinto and BHP Billiton, while Wilkie wants a crackdown on gambling, which would affect stocks like Tabcorp Holdings, Tatts, Crown and Aristocrat Leisure.

But Gillard’s deputy, Treasurer Wayne Swan, denied on Sunday that Bandt or any Green members of the upper house Senate were being offered a ministry in a new Labor government.

“That is not on the table at all,” Swan told the TV show “Meet the Press”.

(Additional reporting by James Grubel in CANBERRA; Editing by Ron Popeski)

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Neither the ruling Labour party nor the conservative opposition won a majority at August 21 elections, which delivered the nation’s first hung parliament in 70 years and put the fate of government in the hands of four independents and one Green MP.

This disparate group, whose pet issues range from curbs on banana imports and better rural health services to gay rights and tougher gambling laws, could determine major issues such as Labour’s proposed mining tax and a $38 billion (24 billion pounds) telecoms project.

“I would hope that by the end of the week we should be able to make a decision,” independent MP Tony Windsor said.

But Windsor urged Australians to “calm down,” acknowledging the media pressure on cross-bench MPs to make quick decisions. The process of forming a government, he said, should not be rushed.

“It could take a little longer than that. For my part in it, I don’t intend to rush,” Windsor told a TV interview.

With the one Green MP already siding with Labour, Australian newspapers are piling pressure on the four independents to end the uncertainty and choose either Prime Minister Julia Gillard’s Labour or opposition leader Tony Abbott’s conservative coalition.

The Australian newspaper, owned by media baron Rupert Murdoch’s News Corp (NWSA.O: Quote, Profile, Research), published an opinion poll at the weekend showing that most voters in three of the independents’ electorates preferred the conservatives to form government.

Editorials are also calling for an end to the political limbo, highlighting the risk that a sudden renewal of the global financial crisis could catch the nation off guard.

The independent and Green lawmakers have scheduled an intense round of talks this week with Gillard and Abbott, with financial markets hoping that the conservatives, which oppose Labour’s mining tax and its $38 billion (24 billion pounds) national broadband project, will win over enough independents to form a government.

The count from last week’s election is still incomplete, but it appears likely the conservatives will end up with 73 seats in the lower house, one more than Labour. Seventy-six seats are needed in the 150-member chamber to command a majority.

FRESH ELECTIONS?

With so much uncertainty, online bookmakers Sportingbet said the odds were shortening for another election within months.

Windsor again raised the prospect of fresh elections if one or more of the independents decided to back neither of the major parties. Windsor rated that a 10 percent chance at the moment.

And he said he might not support either party in the end.

“I have not ruled that out,” he said.

Financial markets have so far been patient, but investors are concerned that Gillard could make major concessions to the Green MP, Adam Bandt, and another independent, former Greens party member Andrew Wilkie, in order to secure a working majority.

Bandt backs the proposed mining tax, which affects miners like Rio Tinto (RIO.AX: Quote, Profile, Research) (RIO.L: Quote, Profile, Research) and BHP Billiton (BHP.AX: Quote, Profile, Research)(BLT.L: Quote, Profile, Research), while Wilkie wants a crackdown on gambling, which would affect stocks like Tabcorp Holdings (TAH.AX: Quote, Profile, Research), Tatts (TTS.AX: Quote, Profile, Research), Crown (CWN.AX: Quote, Profile, Research) and Aristocrat Leisure (ALL.AX: Quote, Profile, Research).

But Gillard’s deputy, Treasurer Wayne Swan, denied on Sunday that Bandt or any Green members of the upper house Senate were being offered a ministry in a new Labour government.

“That is not on the table at all,” Swan told the TV show “Meet the Press.”

(Additional reporting by James Grubel in CANBERRA; Editing by Ron Popeski)