French 10-year bond yield climbs at auction, demand firm

Yields on French long-term OAT bonds rose on Thursday at its first auction of the year as the threat of a cut to the country's AAA credit rating prompted investors to demand higher returns for buying the bonds.

Market fears about the ability of euro zone states to fund their debts remain high, and France is seen by many to be more vulnerable to contagion in the crisis than Germany.

France sold 7.96 billion euros of 10- to 30-year bonds, at the very top of its projected range, after receiving total bids for nearly 15 billion euros.

Investors demanded a yield of 3.29 percent on the 3.25 percent OAT due in October 2021, above the 3.18 percent fixed when it was last auctioned on December 1, reflecting concerns that France is on the brink of losing its triple-A credit rating.

The yield on the 4.5 percent 30-year OAT maturing in April 2041 rose to 3.97 percent from 3.94 percent in the December 1 auction, the Agence France Tresor debt management agency said.

The Treasury placed 4.02 billion and 2.165 billion euros respectively of the 3.25 percent and 4.5 percent OATs.

It also sold 690 million euros of its 4.25 percent OAT maturing in October 2023 and 1.088 billion euros of its 4.75 percent OAT due in April 2035. Those bonds were last auctioned in June 2011, and early 2010, respectively, so yields are not comparable.

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Decided by a nose? Court ponders drug dog's sniff

Franky the drug dog's super-sensitive nose is at the heart of a question being put to the U.S. Supreme Court: Does a police K-9's sniff outside a house give officers the right to get a search warrant for illegal drugs, or is the sniff itself an unconstitutional search?

Florida's highest state court said Franky's ability to detect marijuana growing inside a Miami-area house from outside a closed front door crossed the constitutional line. State Attorney General Pam Bondi, an elected Republican, wants the nation's justices to reverse that ruling.

The Supreme Court could decide this month whether to take the case, the latest in a long line of disputes about whether the use of dogs to find drugs, explosives and other illegal or dangerous substances violates the Fourth Amendment protection against illegal search and seizure.

Many court watchers expect the justices will take up the Florida case.

"The Florida Supreme Court adopted a very broad reading of the Fourth Amendment that is different from that applied by other courts. It's an interpretation that a majority of the U.S. Supreme Court will question," said Tom Goldstein, who publishes the widely read SCOTUSblog website and also teaches at the Harvard and Stanford law schools.

The case, Florida v. Jardines, is being closely monitored by law enforcement agencies nationwide, which depend on dogs for a wide range of law enforcement duties.

"Dogs can be a police officer's best friend because they detect everything from marijuana or meth labs to explosives," said Kendall Coffey, a former U.S. attorney in Miami now in private practice. "They are an essential tool for law enforcement."

The 8-year-old Franky retired in June after a seven-year career as a K-9 dog with the Miami-Dade Police Department. He's responsible for the seizure of more than 2.5 tons of marijuana, 80 pounds of cocaine and $4.9 million in drug-contaminated money. And because he's an amiable chocolate Labrador, he was used extensively in airports, sports arenas and other places where people congregate.

"He's a friendly, happy dog," said his former handler, Detective Douglas Bartelt, who kept Franky after he retired. "People don't have fear because of his appearance."

The U.S. Supreme Court has OK'd drug dog sniffs in several other major cases. Two of those involved dogs that detected drugs during routine traffic stops. In another, a dog hit on drugs in airport luggage. A fourth involved a drug-laden package in transit.

The difference in the Florida case is that it involved a private residence. The high court has repeatedly emphasized that a home is entitled to greater privacy than cars on the road or a suitcase in an airport. In another major ruling, the justices decided in 2001 that police could not use thermal imaging technology to detect heat from marijuana grow operations from outside a home because the equipment could also detect lawful activity.

"We have said that the Fourth Amendment draws a firm line at the entrance to the house," the court ruled in that case, known as Kyllo v. United States. The justices added that the thermal devices could detect such intimate details as "at what hour each night the lady of the house takes her daily sauna and bath."

It's well-settled that law enforcement officials can walk up to a home and knock on the front door, in hopes that someone will open up and talk to them. But if a person inside refuses the "knock and talk" effort, the officers must get a search warrant — and for that they need evidence of a crime.

On the morning of Dec. 5, 2006, Miami-Dade police detectives and U.S. Drug Enforcement Administration agents set up surveillance outside a house south of the city after getting an anonymous tip that it might contain a marijuana grow operation. Bartelt arrived with Franky and the two went up to the house, where Franky quickly detected the odor of pot at the base of the front door and sat down as he was trained to do.

That sniff was used to get a search warrant from a judge. The house was searched and its lone occupant, Joelis Jardines, was arrested trying to escape out the back door. Officers pulled 179 live marijuana plants from the house, with an estimated street value of more than $700,000.

Jardines, now 39, was charged with marijuana trafficking and grand theft for stealing electricity needed to run the highly sophisticated operation. He pleaded not guilty and his attorney challenged the search, claiming Franky's sniff outside the front door was an unconstitutional law enforcement intrusion into the home.

The trial judge agreed and threw out the evidence seized in the search, but that was reversed by an intermediate appeals court. In April a divided Florida Supreme Court sided with the original judge.

"There is simply nothing to prevent agents from applying the procedure in an arbitrary or discriminatory manner, or based on whim and fancy, at the home of any citizen," the Florida court majority concluded.

In its petition to the U.S. Supreme Court, state lawyers argue that the Florida Supreme Court's decision conflicts with numerous previous rulings that a dog sniff is not a search.

"A dog sniff of a house reveals only that the house contains drugs, not any other private information about the house or the persons in it,"(...)More.

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Syrian rebel leader threatens to escalate attacks

The commander of Syria's armed rebels threatened on Tuesday to step up attacks on President Bashar al-Assad's forces, saying he was frustrated with Arab League monitors' lack of progress in ending a government crackdown on protests.

"If we feel they (the monitors) are still not serious in a few days, or at most within a week, we will take a decision which will surprise the regime and the whole world," the head of the Free Syrian Army (FSA), Colonel Riad al-Asaad, told Reuters in an interview.

The Arab League said on Monday its monitors in Syria were helping to stem bloodshed, 10 months into a popular uprising against Syria's longtime ruling family, and asked for more time to do their job.

But since the team's arrival last week, security forces have killed more than 132 people, according to a Reuters tally. Other activist groups say 390 has been killed.

Eighteen security force personnel were killed in the southern town of Deraa as dozens of deserting soldiers returned fire on a police station that shot at them as they fled their posts, the Syrian Observatory for Human Rights said.

Security forces also opened fire and killed two people at a protest in the central city of Hama, the same day that activists met monitors and said the team seemed powerless to help them.

The monitors are checking whether Syria is implementing an Arab League peace plan by pulling troops from flashpoint cities and releasing thousands detained in the revolt, among a series of Arab uprisings that have toppled four leaders in a year.

Rebel leader Asaad, whose FSA is an umbrella group of armed factions, said he was waiting for the League's report on its first week before deciding whether to make a "transformative shift" that he said would mark a major escalation against the president's security forces.

"Since they (the monitors) entered we had many more martyrs," he said, speaking by telephone from his safe haven in southern Turkey. "Is it in the Syrian people's interest to allow the massacre to continue?"

A committee of Arab ministers will discuss the monitors' preliminary report on Saturday, Arab League sources said.

The League mission has already been plagued by controversy. Protesters have complained about its small size and were appalled when the head of the mission suggested he was reassured by first impressions of Homs, one of the main centers of unrest.

French Foreign Minister Alain Juppe said on Tuesday it was crucial that monitors were able to act independently. Protesters have complained that security forces regularly accompany monitors, making them difficult to approach.

"Do they truly have genuinely free access to information? We are waiting for the report they will produce in the coming days for more clarity," Juppe said in an interview on TV news channel i>tele.
MONITORS "AFRAID"
Activists who met the monitors in Hama on Tuesday said they doubted the monitors had freedom of movement.

Mohammed Abul-Khair told Reuters he was among activists that met monitors without security escorts present, handing them details of detainees and suspected detention centers. The monitors said they had found it hard to meet activists until now, but appeared sympathetic, Abul-Khair said.

Others said the team seemed unprepared or unwilling, arguing that they had set up an office in a government-controlled area hard for activists to reach and complaining that many observers who visited them did not bring cameras or notepads.

"I don't think they are sympathetic, I think they are afraid," said activist Abu Faisal, also present at the meeting. "We wanted to take them to one of the narrow alleys where there had been a lot of shelling. They wouldn't go past the buildings where there were snipers.

"People here are getting shot. They are here to get the facts but they are cowards and too afraid to do it," he said.

Juppe said he was confident about the Arab League's determination, but the United Nations could not stand idly by as more people died. Russia has continued to block decisive U.N. action on the issue, he said.

"The (U.N.) Security Council cannot remain silent," he said. "The savage repression is totally clear, the regime has no real future and that's why it's up to the international community to speak out."

More than 5,000 people have been killed in Assad's crackdown on dissent, according to a United Nations estimate.

Armed rebellion has begun to overshadow what began as peaceful protests as rebels fight back. Damascus says it is battling foreign-backed "terrorists" who have killed at(...)More.

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US officials alerted LA authorities in arson case

A State Department official says a German man was identified as a suspect in the Los Angeles arson spree because his mother was the subject of a provisional arrest request by Germany.

Speaking on condition of anonymity because the investigations are ongoing, the official told The Associated Press Tuesday that authorities learned about Harry Burkhart while working on the mother's case and recognized him in security video of the arson suspect.

"When they saw the security footage, they recognized him and they contacted the arson task force," the official said.

The official said the footage was seen on Sunday and Los Angeles authorities were alerted immediately. Burkhart was picked up on Monday, the official said.

The official didn't know the status of Burkhart's mother, Dorothee, or what type of visas the pair had entered the country on. As German citizens, they would be eligible to come to the U.S. without a visa for 90 days under the Visa Waiver Program.

A federal law enforcement official, speaking on condition of anonymity because the official was not authorized to discuss the case, said Harry Burkhart was present when his mother was arrested Dec. 28 by deputy U.S. marshals and Los Angeles police on the provisional arrest warrant.

It's no known why Germany sought the mother.

Provisional arrest warrants are normally issued when there are outstanding criminal charges pending overseas against someone. Ordinarily, U.S. authorities then obtain a U.S. arrest warrant through the State Department and the Justice Department.

The series of arson blazes appeared to have halted with Burkhart's arrest. The blazes caused more than $3 million in damage and put Los Angeles residents on edge during the long holiday weekend.

Police have said nothing about a possible motive in the fires set across Hollywood, neighboring West Hollywood and the San Fernando Valley.

"We are very confident in this arrest, but we have a long way to go," said Police Chief Charlie Beck.

Harry Burkhart was being held without bail. Authorities didn't know how long he's been in the United States and said he isn't cooperating with them. Sheriff Lee Baca called him the "most dangerous arsonist in Los Angeles County that I can recall."
The onslaught of intentionally set fires kept residents anxious over the holiday weekend in some of the most densely populated areas of the city. Hundreds of investigators, police officers and firefighters raced to deal with the blazes. Police conducted extra patrols all weekend, and the noise of helicopters and sirens persisted virtually nonstop in Hollywood.
The blazes forced many apartment dwellers from their homes. But there were no serious injuries — one firefighter was hurt in a fall from a ladder, and another person suffered smoke inhalation.

The arrest came after another night of firefighters scrambling to snuff out the series of arson attacks. Authorities were looking for a man with shoulder-length ponytail seen on a surveillance video near where a car fire was reported.

Five hours later, Burkhart was pulled over by a reserve sheriff's deputy and later booked for investigation of arson of an inhabited dwelling.

While the investigation is ongoing — authorities haven't ruled out the possibility that others may be involved — Burkhart's arrest was a measure of relief to anxious residents who had grown fearful after several nights of seemingly random blazes.

"Our long four-day nightmare is over," said Los Angeles County Supervisor Zev Yaroslavsky.

Galina Illarionova, who lives in the same apartment complex as the suspect, told reporters through a Russian translator that an agitated Burkhart visited her Sunday and said his mother was having some kind of legal problems. He told her his mother was in trouble with authorities and wanted Illarionova to attend a legal hearing with him, but he later said he didn't need her help.

One of Baca's reserve deputies, Shervin Lalezary, pulled over Burkhart's van shortly after 3 a.m. Lalezary, who works as an attorney and gets paid $1 a year to(...)More.

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Wall St rallies in first session of year

Wall Street stocks kicked off 2012 with a rally on Tuesday after data showed U.S. manufacturing activity and construction spending picked up, signaling the economic recovery was gaining steam.

Investors, looking to put cash to work after a tough year in 2011, were also encouraged by data from China and Germany suggesting improvement in those major economies. The broad S&P index has risen more than 10 percent from its November 25 close.

The pace of growth in U.S. manufacturing accelerated in December, its best month since June, while a rise in new orders suggested decent momentum in 2012. Separately, construction spending in November surged to the highest in nearly 18 months.

"The beginning of the year tends to start out positive as people want to put money to work, but the overseas data can't be overstated in its importance, especially since the U.S. data has been so strong as well," said Sal Catrini, a managing director for equities at Cantor Fitzgerald & Co in New York.

The Dow Jones industrial average was up 178.54 points, or 1.46 percent, at 12,396.10. The Standard & Poor's 500 Index was up 18.63 points, or 1.48 percent, at 1,276.23. The Nasdaq Composite Index was up 38.44 points, or 1.48 percent, at 2,643.59.

Financial stocks were among the market leaders as risk appetite returned. Both the S&P financial sector and materials companies' stocks rose nearly 3 percent. Utility companies, considered a defensive play by investors, fell 1.4 percent as the weakest sector, dragged lower by Exelon Corp, which fell 3.9 percent after a downgrade from Macquarie.

Barclays Capital downgraded Intel Corp and other semiconductor stocks, predicting a "volatile" year for the group as an inventory correction extends into the first quarter.
JPMorgan upgraded its recommendation for Cisco Systems Inc, sending shares of the Dow component up 3.1 percent to $18.59.

Blue-chip 3M Co, maker of Post-it Notes and Scotch tape, is buying Avery Dennison Corp's office and consumer products unit, the companies said. Avery Dennison rose 1.8 percent $29.19, while 3M added 2.2 percent to $83.51.

Shares of McDonald's Corp, the Dow's biggest gainer in 2011, fell 1.4 percent to $98.95 on Tuesday.

Investors may gain more insight into the Federal Reserve's view of the economy when the Fed's Open Market Committee is due to release minutes of its December 13 meeting at 2 p.m. (1900 GMT).

Market sentiment also gained after news China, the world's largest consumer of metals, avoided economic contraction in December. Also boosting investors' mood, German unemployment fell more than forecast.

Four-fifths of companies trading on the New York Stock Exchange rose, while 75 percent of Nasdaq-listed shares were in positive territory. Volume topped 3 billion shares.

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