(Reuters) – Stocks rose more than 1 percent on Tuesday on hopes China may unleash more spending measures and Greek election polls pointing to support for pro-bailout parties.

The Dow Jones industrial average .DJI gained 134.71 points, or 1.08 percent, to 12,589.54. The Standard & Poor’s 500 Index .SPX rose 14.15 points, or 1.07 percent, to 1,331.97. The Nasdaq Composite Index .IXIC added 33.97 points, or 1.20 percent, to 2,871.50.

(Reporting By Edward Krudy, editing by Dave Zimmerman)

(Reuters) – Dell Inc is in talks to buy Quest Software Inc, the network security software maker that had earlier agreed to be acquired by Insight Venture Partners for $2 billion, Bloomberg reported, quoting sources.

Quest shares were up 5 percent at $26.45 in early trading on Friday on the Nasdaq.

Shares of the company, which now has a market value of $2.12 billion, gained more than a third of their value after Insight Venture’s offer.

Quest said earlier this month it had received multiple alternative proposals during its go-shop period following the offer from the private investment firm.

Dell has been seen by analysts as one of the possible bidders for Quest, whose backup and security software offerings would complement Dell’s product portfolio.

Faced with falling PC sales, Dell has been diversifying its revenue base, giving up low-margin sales to consumers and moving into higher-margin areas, such as catering to the technology needs of small and medium businesses in the public sector and the healthcare industry.

Analysts have also named BMC Software Inc, CA Inc, Microsoft Corp and Oracle Corp as other potential bidders.

Quest has retained Morgan Stanley as its adviser.

The company, whose products include software that monitors the flow of data through networks, is led by Chief Executive Vinny Smith, who took over in February after Doug Garn stepped down citing poor health.

When contacted, a Dell spokesman said the company does not comment on rumors or speculation. Quest Software could not be immediately reached for comment.

Dell shares were up 1 percent at $12.58 on the Nasdaq.

(Reporting by Supantha Mukherjee in Bangalore, Jennifer Saba in New York; Editing by Saumyadeb Chakrabarty)

(Reuters) – U.N. nuclear inspectors have found uranium traces in an Iranian underground site refined to a somewhat higher level than the enrichment work normally done there, but still well below the weapons-grade threshold, diplomatic sources said on Friday.

One source said the higher level detected at the Fordow site – where Iran has declared it is refining uranium to a fissile concentration of 20 percent only – was believed to be between 20 and 30 percent, making clear this was not a big difference.

“It is not up there … towards nuclear weapons capability,” the diplomat said. It could simply be a production glitch, but the U.N. nuclear watchdog had asked Iran to clarify the issue, since the agency is tasked with ensuring member states do not “weaponize” the enrichment process.

Iran started enriching to 20 percent in 2010 and has since sharply expanded the work, saying the material will serve as fuel for a medical reactor. But a suspicious West is alarmed since such enhanced enrichment accomplishes much of the technical leap towards 90 percent – or weapons-grade – uranium.

Another diplomatic source said he had also heard of the find but it was unclear whether it would be included in an IAEA report due to be released to member states later on Friday. The IAEA regularly inspects Fordow and other Iranian nuclear sites.

“My understanding is that the IAEA had found a particle or had tested a sample that had uranium enriched at a higher rate than had been declared at that facility,” the first source said of the find at Fordow.

Enriched uranium can be used to fuel power plants, which is Iran’s stated purpose, or provide material for bombs, if refined to a much higher degree, which the West suspects may be Iran’s ultimate goal. The Islamic Republic denies that.

U.S. proliferation expert David Albright said he believed it was a production error that caused the higher-enriched uranium trace at Fordow. “Nonetheless, (it is) embarrassing for Iran,” Albright said by telephone from Washington.

He said the centrifuge cascades – interlinked networks of enrichment machines – at Fordow had 17 stages instead of 15 as in the old design.

“An effect is to overshoot 20 percent when 3.5 percent LEU (low-enriched uranium) is fed into the tandem cascades at the rate used for the 15-stage cascade,” he said.

But, “this process of moving to 17 stages also reflects a reconfiguration of the cascades that can make (a nuclear weapons) breakout easier,” Albright added.

(Editing by Mark Heinrich)

(Reuters) – Consumer sentiment rose to its highest level in more than four years in May as Americans stayed optimistic about the job market, while higher income households expected to see bigger wage increases, a survey released on Friday showed.

The Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment rose to 79.3 from 76.4 in April, topping forecasts for 77.8 and an initial May reading of the same.

It was the highest level since October 2007.

“Unfortunately, consumer confidence is still extremely vulnerable to a reversal, as occurred in the past two years,” survey director Richard Curtin said in a statement.

“While their most optimistic expectation for job growth could go unfulfilled without much harm, if the recent slowdown in job growth persists in the months ahead, it could form the basis for a third retreat in confidence.”

Half of all consumers said the economy had improved during the past year, while buying plans for vehicles and household durables also improved. The gauge of buying plans rose to 132 from 126.

Higher income households anticipated a 2 percent income increase in the year ahead, while lower income households expected just a 0.3 percent gain.

The survey’s barometer of current economic conditions jumped to 87.2 from 82.9, while its gauge of consumer expectations improved to 74.3 from 72.3.

The indexes were at their highest levels since January 2008, and July 2007, respectively.

The survey’s one-year inflation expectation eased to 3.0 percent from 3.2 percent, while the survey’s five-to-10-year inflation outlook dipped to 2.7 percent from 2.9 percent.

(Reporting By Leah Schnurr; Editing by Chizu Nomiyama)

(Reuters) – Chinese President Hu Jintao has demanded senior Communist Party officials stifle tensions over the ousting of ambitious politician Bo Xilai and show unity as they prepare for a change of leadership, sources briefed on recent meetings said.

Hu urged the party to close ranks at a meeting of about 200 officials early this month at a Beijing hotel, declaring the downfall of Bo – China’s biggest political scandal in two decades – to be an “isolated case”, the three sources said.

The sources’ comments represent the first confirmation of speculation that Hu recently intervened to prevent a wider rift in the party and to resist pressure from some elements for a wider purge of the populist Bo’s policies and supporters.

Bo, former party chief of Chongqing city, was suspended from the party’s top ranks in April after his wife became a suspect in the murder of British businessman Neil Heywood. Before the scandal broke, Bo had been seen as a candidate to join China’s new top leadership team to be unveiled this year.

“It’s been settled that this will be dealt with as a criminal case, not a political case,” said one of the sources, a retired official. “The central leadership wants to focus on ensuring a stable environment for the 18th Party Congress, so the guiding policy is to end all the rumors and contention.”

The party congress, scheduled to be held late this year, will appoint a new generation of leaders. Hu and Premier Wen Jiabao will then step down from their government posts at the National People’s Congress in early 2013, when Vice President Xi Jinping is likely to succeed Hu as president.

The sources, all with ties to senior party officials, spoke on condition of anonymity to avoid possible recriminations for speaking about internal party discussions.

Two of them said Hu had convened this month’s meeting at the Jingxi Hotel, the party’s heavily guarded conference hotel in western Beijing where leaders often hold secretive conclaves.

The meeting was part of a series of steps taken to shore up unity and advance preparations for the 18th Party Congress. Those steps included retired leaders, especially former president Jiang Zemin, giving their backing to Hu’s position.

“Jiang said that if you have solid evidence that Gu Kailai committed murder and that Bo Xilai also committed major errors, then deal with it as an isolated criminal incident,” said the retired official, paraphrasing a summary of Jiang’s comments.

“There’s already been too much instability. The overriding goal now must be a successful 18th Party Congress,” the former official said, paraphrasing Jiang, 85, who a decade after he retired still exercises some influence over major decisions. One of the sources said Jiang was not at the Jingxi meeting and it was unclear where he made the remarks or how he conveyed them.

Hu’s expected successor, Xi, also has stayed closely in line with the leadership’s position on Bo, said the retired official.

IDEOLOGICAL RIFTS, RUMOURS

Describing Bo’s downfall as a serious but isolated case of wrongdoing, Hu urged officials at the meeting to end ideological rifts and rumors ignited by the scandal, the sources added.

The domestic security chief, Zhou Yongkang, has faced accusations that he sought to protect Bo, but his career appears to have survived the controversy, despite rumors that Zhou could be sidelined.

“Zhou has been encouraged by the party leadership to make regular appearances and show he’s trusted,” said the retired official. He noted that Zhou and President Hu made a high-profile joint appearance before police on May 18.

Premier Wen had suggested he favored a wider reckoning in March when, a day before Bo was sacked as Chongqing party chief, the premier linked Bo’s failings to the discredited radicalism of the Cultural Revolution.

But at the recent party meetings, Wen’s comments were chided by some other officials, two of the sources said.

However, China’s leaders could find enforcing demands for conformity from the public harder than from within the party.

Bo nurtured an ardent following among leftists who embraced what they viewed as his model of egalitarian growth, and they have continued to defend him as the victim of a plot. He had used Chongqing, a province-level municipality in southwest China, as a showcase for left-leaning populist policies.

Liberal reformers, however, want the government to look beyond Heywood’s death and examine complaints about Bo’s leadership, including accusations that his populist crackdown on organized crime in Chongqing involved abuses such as torture.

He was brought down after a furor erupted when his police chief, Wang Lijun, fled to a U.S. consulate for more than 24 hours in February and told American diplomats that he believed Bo’s wife, Gu Kailai, was implicated in Heywood’s death in November, according to later descriptions of Wang’s allegations.

“The leadership won’t turn this into a line struggle,” independent politics researcher Chen Ziming said, using the party’s jargon for an ideological purge.

Beijing-based Chen, who has sources close to the party, said there appeared to have been heated internal debate over how to handle the Bo case before deciding to contain it.

“The drama is focused on the three actors, and that’s already complicated enough,” Chen said, referring to Bo, his wife Gu, and the ex-police chief Wang.

“If there are more actors brought into the drama, then it will become just too complicated and troublesome.”

Bo, 62, and Gu, 52, have disappeared from public view and have had no chance to respond publicly to the allegations.

OUT OF SIGHT

The make-up of the next central leadership elite will be settled over coming months through an opaque process of inspections, jockeying and balancing rival camps in the party.

In recent weeks, the party has launched informal ballots and inspections to size up potential candidates for promotion into the Central Committee, which has about 200 full members, and the Politburo, a more powerful body with about two dozen members, the three sources said.

The Politburo Standing Committee, the core decision-making body, is chosen from the Politburo. The standing committee currently has nine members.

“Now they’re going from province to province to examine officials and settle on possible candidates for the next leadership,” said Chen, the researcher.

In China’s top-down politics, final decisions rest with a handful of leaders, but the results of these assessments can sway deliberations, he said.

The informal polls would serve as a basis for discussions when the leaders head to summer villas in coastal Beidaihe in July or August, when the new succession lineup would be firmed up, said one of the sources who spoke on condition of anonymity.

(Editing by Brian Rhoads, Don Durfee and Mark Bendeich)

(Reuters) – Europe’s second-highest court will rule on June 27 whether EU regulators were justified in fining Microsoft 899 million euros ($1.1 billion) four years ago for failing to comply with an antitrust ruling intended to make business easier for its rivals.

The European Commission imposed the fine – a record at the time – after the U.S. software group failed to provide information to firms with competing products, as had been ordered by the EU watchdog in 2004.

The penalty was the first imposed by the EU regulator for non-compliance with an antitrust decision.

The Luxembourg-based General Court of the European Union will issue its ruling next month, the court’s website showed on Thursday.

Microsoft’s lawyers argued during a court hearing in May last year that the fine was excessive and undeserved.

A lawyer for the Commission compared the company to a gambler who had lost a bet and then wanted his money back.

The EU executive imposed a 497 million euro fine on Microsoft in 2004 for abusing its dominant position to block competitors.

The case is crucial to other companies challenging big regulatory fines. Intel Corp is set to argue its case before judges from July 3-6 in a bid to overturn its 1.06 billion euro penalty levied by the Commission in 2009.

Intel’s fine is the largest ever in the European Union for a single company. EU regulators said the firm used anti-competitive tactics against smaller rival Advanced Micro Devices Inc.

(Reporting by Foo Yun Chee; Editing by Rex Merrifield and Mark Potter)

(Reuters) – Analysts said Hewlett Packard Co’s plan to cut jobs was a step in the right direction but the PC maker will have to do more to regain investors’ confidence.

Shares of the world’s No. 1 personal computer maker were up 6 percent at $22.26 in early trading on the New York Stock Exchange on Thursday.

“While we certainly don’t believe HP has resolved all their issues, we do see the company moving in the right direction,” RBC Capital Markets LLC analyst Amit Daryanani wrote in a note to clients.

The accelerating popularity of mobile computing devices such as Apple Inc’s iPad has been eroding PC sales for years and a downturn in the European markets has just added to the pressure.

Rival Dell gave a disappointing revenue forecast Earlier this week that spurred fears that global tech spending is weakening faster than anticipated.

HP said the layoff of 27,000 workers, or 8 percent of its workforce, would be made mainly through early retirement and would generate annual savings of $3 billion to $3.5 billion as it exits fiscal year 2014. The company employs more than 300,000 people globally.

Hewlett Packard, which also posted a second-quarter profit above market estimates, said it expects to use the cost savings from job cuts to drive organic growth.

“The market will likely want to see that the savings are real and tangible in the bottom line before they are diverted to other things,” Nomura Equity Research analyst Richard Windsor said in a research report.

“When one has little faith in a management team, there will be little hope that these savings will ever be properly realized as they will never be properly visible,” Windsor said.

At least three brokerages raised their price targets on the stock on Thursday.

Analysts said it may be too early to predict a sustainable turn, given the deterioration of demand in Europe and secular pressures in many of HP’s businesses into the second half of the year.

“We believe many of HPQ’s further risks stem from inconsistent operational execution and recent large acquisitions, which combined with aggressive buy-backs have weakened its balance sheet,” said Evercore analyst Rob Cihra.

Rival Dell has been diversifying its revenue base in the face of weakened consumer demand, giving up low-margin sales to consumers and moving into higher-margin areas, such as catering to the technology needs of small and medium businesses in the public sector and the healthcare industry.

Analysts, however, prefer HP over Dell saying the PC maker’s revenue and margins growth will take too long to play out, whereas HP’s restructuring will likely help the stock over the next few quarters, despite weak revenue.

(Reporting by Supantha Mukherjee in Bangalore; Editing by Joyjeet Das, Saumyadeb Chakrabarty)

(Reuters) – European Union leaders, advised by senior officials to prepare contingency plans in case Greece decides to quit the single currency, urged the country to stay the course on austerity and complete the reforms demanded under its bailout program.

After nearly six hours of talks held during an informal dinner, leaders said they were committed to Greece remaining in the euro zone, but it had to stick to its side of the bargain too, a commitment that will mean a heavy cost for Greeks.

“We want Greece to stay in the euro, but we insist that Greece sticks to commitments that it has agreed to,” German Chancellor Angela Merkel told reporters after a Wednesday evening summit in Brussels dragged long into the night.

Three officials told Reuters the instruction to have plans in place for a Greek exit was agreed on Monday during a teleconference of the Eurogroup Working Group (EWG) – experts who work for euro zone finance ministers.

The Greek finance ministry denied there was any such agreement but Belgian Finance Minister Steven Vanackere, said: “All the contingency plans (for Greece) come back to the same thing: to be responsible as a government is to foresee even what you hope to avoid.”

Two other senior EU officials confirmed the call and its contents, saying contingency planning was only sensible.

In its monthly report, Germany’s Bundesbank said the situation in Greece was “extremely worrying” and it was jeopardizing any further financial aid by threatening not to implement reforms agreed as part of its two bailouts.

It said a euro exit would pose “considerable but manageable” challenges for its European partners, raising pressure on Athens to stick with its painful economic reforms.

Greek officials have said that without outside funds, the country will run out of money within two months and there remains the threat that if it crashes out of the euro zone, other member states could be brought down too.

A document seen by Reuters detailed the potential costs to individual member states of a Greek exit and said that if it came about, an “amiable divorce” should be sought with the EU and IMF possibly giving up to 50 billion euros to ease its path.

Although EU leaders’ minds will have been focused by that prospect, disagreements have flared over a plan for mutual euro zone bond issuance and other measures to alleviate two years of debt turmoil, such as giving countries like Spain an extra year to make the spending cuts demanded of them.

“The idea is to put energy into the growth motor. All the member countries don’t necessarily share my ideas. But a certain number expressed themselves in the same direction,” new French President Francois Hollande told reporters.

For the first time in more than two years of crisis summits, the leaders of France and Germany did not huddle beforehand to agree positions, marking a significant shift in the axis which has traditionally driven European policymaking.

Instead, Hollande met Spanish Prime Minister Mariano Rajoy in Paris to discuss policy, before the pair travelled to Brussels by train.

Despite fears Greeks could open the departure door if they vote for anti-bailout parties at a June 17 election, Spain, where the economy is in recession and the banking system in need of restructuring, is at the front line of the crisis.

After meeting Hollande, Rajoy said he had no intention of seeking outside aid for Spain’s banks, which are laden with bad debts from a property boom that bust and still has some way to go before it touches bottom.

But his government said its rescue of problem lender Bankia would cost at least 9 billion euros and it is also seeking ways to help its highly indebted regions meet huge refinancing bills.

SHIFTING SANDS

Socialist Hollande’s election victory has significantly changed the terms of the debate in Europe, with his call for greater emphasis on growth rather than debt-cutting now a rallying cry for other leaders.

That has set up a showdown with conservative Merkel, whose primary objective is budget austerity and structural reform.

At his first EU summit, Hollande chose to make a stand on euro bonds – issuing common euro zone debt – despite consistent German opposition to the idea. “I was not alone in defending euro bonds,” he said.

Merkel showed no sign of dropping her objections to the proposal, which she has said can only be discussed once there is much closer fiscal union in Europe. “There were differences in the exchange about euro bonds,” she said bluntly.

The Netherlands, Finland and some smaller euro zone member states support her.

No major decisions were made at Wednesday’s summit, which was intended to promote ideas on jobs and growth ahead of another meeting at the end of June.

But debate was intense, not just over euro bonds but over how to rescue banks and whether to give more time to struggling euro zone countries to meet their budget deficit goals.

“We haven’t come together to confront each other … but we have to say what we think – what are the right instruments, the right methods, the right steps, the right initiatives to raise growth,” Hollande said.

The leaders discussed broad measures to stem the fallout from a winding up or restructuring of bad banks, EU officials said, with the European Central Bank pressing for the bloc to stand behind its struggling lenders but with Merkel’s approval seen as far from guaranteed.

At the heart of the discussion are proposals from the European Commission for a legal framework to wind up or reorganize insolvent banks so as to avoid a repeat of the multi-trillion-euro taxpayer bailouts during the financial crisis.

Another suggestion is for the euro zone’s rescue funds to be allowed to recapitalize banks directly, rather than having to lend to countries for on-lending to the banks. But that is another idea with which Germany is uncomfortable.

Having rallied on Tuesday, European stocks dropped 2.2 percent as investors priced in a lack of dramatic policy action. The euro tumbled against the dollar to its lowest since August 2010 and Spanish and Italian borrowing costs climbed.

A German two-year debt auction gave a stark illustration of how money is dashing for safe havens. Investors snapped up the 4.5 billion euros of paper on offer even though it came with a zero coupon – offering no return at all.

SEARCH FOR GROWTH

With the euro zone registering no growth in the first quarter and threatening to slip back into recession, policymakers touted three ideas to provide stimulus:

– ‘Project bonds’ backed by the EU budget to finance infrastructure projects alongside private sector investment.

– Doubling the paid-in capital of the European Investment Bank, the EU’s co-financing arm, to a little over 20 billion euros.

– Redirecting structural funds which tend to flow to poorer countries, to other areas where they might reap more immediate growth rewards.

Even if all three proposals were to be activated quickly, economists say they will not provide a sufficient shot in the arm to the euro zone and the wider EU economy.

(Additional reporting by Jan Strupczewski, John O’Donnell, Catherine Bremer and Marine Hass in Brussels and Julien Toyer in Madrid. Writing by Mike Peacock, editing by Anna Willard and Giles Elgood)

(Reuters) – Facebook Inc and banks including Morgan Stanley were sued by the social networking leader’s shareholders, who claimed the defendants hid Facebook’s weakened growth forecasts ahead of its $16 billion initial public offering.

The defendants, who also include Facebook Chief Executive Officer Mark Zuckerberg, were accused of concealing from investors during the IPO marketing process “a severe and pronounced reduction” in revenue growth forecasts, resulting from increased use of its app or website through mobile devices. Facebook went public last week.

The lawsuit was filed in U.S. District Court in Manhattan on Wednesday, according to a law firm for the plaintiffs. A day earlier, a similar lawsuit by a different investor was filed in a California state court, according to a law firm involved in that case.

In the New York case, shareholders said research analysts at several underwriters had lowered their business forecasts for Facebook during the IPO process, but that these changes were “selectively disclosed by defendants to certain preferred investors” rather than to the public generally.

“The value of Facebook common stock has declined substantially and plaintiffs and the class have sustained damages as a result,” the complaint said.

Representatives of Facebook and Morgan Stanley did not immediately respond to requests for comment.

Facebook shares fell 18.4 percent from their $38 IPO price in the first three days of trading, reducing the value of stock sold in the IPO by more than $2.9 billion.

(Reporting by Dan Levine in San Francisco and Jonathan Stempel in New York; Editing by Gerald E. McCormick and Lisa Von Ahn)

(Reuters) – New single-family home sales rose solidly in April and prices pushed higher, offering further evidence the housing market was turning the corner.

The Commerce Department said on Wednesday sales increased 3.3 percent to a seasonally adjusted 343,000-unit annual rate after a 332,000-unit pace in March.

The report, whose details were fairly bullish, came on the heels of news on Tuesday that home resales hit a two-year high in April and suggested the housing market recovery was gaining traction.

It also highlighted the economy’s underlying strength, even though job growth has slowed in recent months. The weak housing market had been the Achilles heel of the economy’s recovery from the 2007-09 recession.

“It’s encouraging. These are signs that we might be forming a bottom in housing,” said Omer Esiner, chief analyst at Commonwealth Foreign Exchange in Washington. “We’ll need to see housing shore up before we can talk about a meaningful recovery in the U.S.”

Stocks opened lower on worries about Greece’s debt problems, while Treasury debt prices rose. The dollar extended gains against the euro after the home sales data.

Compared to April last year, new home sales were up 9.9 percent. Signs of life in the housing market were also bolstered by a 4.9 percent rise in the median price of a new home last month to $235,700 from a year ago.

A separate report from the Federal Housing Finance Agency showed house prices rose 1.8 percent in March after gaining 0.3 percent in February. Prices were up 2.7 percent from year ago.

The improving housing market picture helped Toll Brothers Inc, the largest luxury home builder, report a higher-than-expected quarterly profit and a strong jump in new orders.

“The spring selling season has been the most robust and sustained since the downturn began,” Chief Executive Douglas Yearley said in a statement.

Despite the rise in sales, the housing market continues to be hamstrung by an oversupply of previously owned homes on the market – especially from foreclosures, many of which sell well below their market value.

A separate report from the Mortgage Bankers Association showed applications for loans to buy houses fell for a second week in a row last week, even though mortgage rates dropped to a record low.

While the inventory of new homes on the market rose 1.4 percent to 146,000 units last month, it remained near record lows. At April’s sales pace it would take 5.1 months to clear the houses from the market, down from 5.2 months in March.

New home sales last month were buoyed by a 28.2 percent jump in the Midwest. Sales in the Northeast rose 7.7 percent, to the highest level in over a year, while in the West sales soared 27.5 percent. Sales were down 10.6 percent in the South.

New home sales account for about 7.6 percent of the overall housing market and face stiff competition from previously the owned home segment despite low levels of stock.

(Editing by Neil Stempleman)