Dr. Phil says Manti Te’o hoaxer admits to love for linebacker

LOS ANGELES (Reuters) – A California man who has admitted to fabricating Notre Dame linebacker Manti Te‘o’s fake girlfriend in an elaborate hoax told talk show host Phil McGraw he felt a deep romantic love for the football player, McGraw said on Wednesday.

“Here we have a young man that fell deeply, romantically in love,” McGraw told the television morning show “Today” to discuss his two part interview with Ronaiah Tuiasosopo, which will air on “Dr. Phil” on Thursday and Friday.

“I asked him straight up, ‘Was this a romantic relationship with you?,’ and he says yes. I said, ‘Are you then therefore gay?’ And he said, ‘When you put it that way, yes.’ And then he caught himself and said, ‘I am confused,’” McGraw told “Today.”

Te’o has said in a previous media interview he is not gay.

The fake girlfriend hoax involving Te’o, who was a finalist for college football’s highest individual honor the Heisman trophy, caused a sensation when it was revealed earlier this month on news website Deadspin.com.

Tuiasosopo says he played the part over the phone of Lennay Kekua, the fictitious woman who was Te’o's girlfriend in the hoax. Te’o, 22, had spoken about the woman in media interviews, and reports described her surviving a car accident and then dying of leukemia in September.

Te’o has said since the hoax was exposed that he was the victim of an elaborate prank, that he never met Kekua and that his acquaintance Tuiasosopo admitted to him that he was the one who played the part of Lennay.

Dr. Phil said in a segment on “Today” on Wednesday that after an extensive interview with Tuiasosopo, he believes Te’o had no role in creating the hoax.

“Absolutely, unequivocally, no,” McGraw said, in pinning the blame for the scheme on Tuiasosopo.

The NBC morning program also showed some comments Tuiasosopo made in his interview for the “Dr. Phil” daytime program.

“There are many times where Manti and Lennay had broken up,” Tuiasosopo told “Dr. Phil.”

“But something would bring them back together, whether it was something going on in his life or in Lennay’s life, in this case in my life,” Tuiasosopo said.

Tuiasosopo, 22, is from southern California and played high school football in 2005 at Antelope Valley High north of Los Angeles, according to media reports. Tuaisosopo’s attorney had previously told reporters his client was behind the hoax.

Before the hoax was exposed, a photo of a woman who was described as Lennay Kekua was presented in media reports about Te’o and his struggles to overcome her death and that of his grandmother, who actually did pass away.

But the photo of Kekua was taken from a Facebook profile of a California woman who said she was unaware of the scheme, according to Deadspin.com.

Te’o told Katie Couric in a broadcast of her show “Katie” last week that he received a telephone call from the person claiming to be Kekua on December 6 – two days before the Heisman presentation. But he said he was not really certain she never existed until Tuiasosopo’s later confession to him.

The linebacker, during the Katie Couric interview, presented a voice mail he received from the person he said he thought was Kekua. “Doesn’t that sound like a girl?” Te’o told Couric.

Te’o also told Couric he is not gay. “No, far from it,” he said.

(Reporting by Alex Dobuzinskis; Editing by Cynthia Johnston and Andrew Hay)

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American Idol Discovers Big Talent in Texas and California

TV Watch

American Idol

By Jamie Bufalino

01/30/2013 at 11:00 PM EST

From left: Randy Jackson, Mariah Carey, Ryan Seacrest, Nicki Minaj and Keith Urban

Michael Becker/FOX.

It's the final week of American Idol's cross-country talent search. And as the judges head to San Antonio, Texas, a surprising lack of diva-on-diva trash-talking allowed the focus to fall squarely on the contestants who seemed like they could be serious contenders this season (or at least keep things interesting).

Case in point: 19-year-old Mississippi native Papa Peachez who described himself as "a cute little white boy and ... so much more than that. I'm really just a big black woman trapped in a trapped in a little boy's body."

After Peachez belted out an original song, Nicki Minaj immediately showed him some love. "I think that you are a superstar," she said. The other judges weren't as convinced, but Minaj managed to twist enough arms (not literally) to get the boy through to Hollywood.

Peachez is going to have some steep competition from another 19-year-old – San Antonio's Adam Sanders, who blew away the judges with his rendition of the Etta James classic "At Last."

"You shocked us all, Dawg," Randy Jackson told the singer before giving him a standing ovation along with Mariah Carey and Keith Urban.

Other notables from the Lone Star State included an Arkansas beauty queen, a vibrant mariachi singer and 16-year-old Senni M'mairura, whose rendition of the Jackson 5's "Who's Lovin You" drew raves and left Minaj sputtering about other things that apparently make her feel good: "Candy canes, strawberries, whip cream, rainbows and sunny skies," she said.

Next the judges hopped aboard the Queen Mary in Long Beach, Calif., to see what the West Coast had to offer. That's where Jesaiah Baer, 16, had to contend with an impromptu fire drill but still managed to blaze her way to Hollywood.

Then, after an emotional number from Iraq war veteran Matt Farmer, the episode ended with two powerful stories from young, would-be Idols who've overcome bullying.

Briana Oakley, 16, had to change schools after her classmates turned on her when she found success on a televised talent show. But she won the judges over with her performance Patty Griffin's "Up to the Mountain."

And 21-year-old Matheus Fernandes, who was quite a bit shorter than everyone else in the room, broke down in tears after getting praise from the judges for his version of "A Change Is Gonna Come."

"To me," Randy told him, "You're 10 feet tall."

Thursday American Idol heads to Oklahoma – and next week to Hollywood.

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Sex to burn calories? Authors expose obesity myths

Fact or fiction? Sex burns a lot of calories. Snacking or skipping breakfast is bad. School gym classes make a big difference in kids' weight.

All are myths or at least presumptions that may not be true, say researchers who reviewed the science behind some widely held obesity beliefs and found it lacking.

Their report in Thursday's New England Journal of Medicine says dogma and fallacies are detracting from real solutions to the nation's weight problems.

"The evidence is what matters," and many feel-good ideas repeated by well-meaning health experts just don't have it, said the lead author, David Allison, a biostatistician at the University of Alabama at Birmingham.

Independent researchers say the authors have some valid points. But many of the report's authors also have deep financial ties to food, beverage and weight-loss product makers — the disclosures take up half a page of fine print in the journal.

"It raises questions about what the purpose of this paper is" and whether it's aimed at promoting drugs, meal replacement products and bariatric surgery as solutions, said Marion Nestle, a New York University professor of nutrition and food studies.

"The big issues in weight loss are how you change the food environment in order for people to make healthy choices," such as limits on soda sizes and marketing junk food to children, she said. Some of the myths they cite are "straw men" issues, she said.

But some are pretty interesting.

Sex, for instance. Not that people do it to try to lose weight, but claims that it burns 100 to 300 calories are common, Allison said. Yet the only study that scientifically measured the energy output found that sex lasted six minutes on average — "disappointing, isn't it?" — and burned a mere 21 calories, about as much as walking, he said.

That's for a man. The study was done in 1984 and didn't measure the women's experience.

Among the other myths or assumptions the authors cite, based on their review of the most rigorous studies on each topic:

—Small changes in diet or exercise lead to large, long-term weight changes. Fact: The body adapts to changes, so small steps to cut calories don't have the same effect over time, studies suggest. At least one outside expert agrees with the authors that the "small changes" concept is based on an "oversimplified" 3,500-calorie rule, that adding or cutting that many calories alters weight by one pound.

—School gym classes have a big impact on kids' weight. Fact: Classes typically are not long, often or intense enough to make much difference.

—Losing a lot of weight quickly is worse than losing a little slowly over the long term. Fact: Although many dieters regain weight, those who lose a lot to start with often end up at a lower weight than people who drop more modest amounts.

—Snacking leads to weight gain. Fact: No high quality studies support that, the authors say.

—Regularly eating breakfast helps prevent obesity. Fact: Two studies found no effect on weight and one suggested that the effect depended on whether people were used to skipping breakfast or not.

—Setting overly ambitious goals leads to frustration and less weight loss. Fact: Some studies suggest people do better with high goals.

Some things may not have the strongest evidence for preventing obesity but are good for other reasons, such as breastfeeding and eating plenty of fruits and vegetables, the authors write. And exercise helps prevent a host of health problems regardless of whether it helps a person shed weight.

"I agree with most of the points" except the authors' conclusions that meal replacement products and diet drugs work for battling obesity, said Dr. David Ludwig, a prominent obesity research with Boston Children's Hospital who has no industry ties. Most weight-loss drugs sold over the last century had to be recalled because of serious side effects, so "there's much more evidence of failure than success," he said.

___

Online:

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

New England Journal: http://www.nejm.org

___

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

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German jitters hit European shares, euro

LONDON (Reuters) - European shares fell for a second straight day and the euro halted its recent rally, as weak German retail sales and poor earnings at its biggest bank added to investors' nerves after a shock fourth quarter contraction in the U.S. economy.

Data on Wednesday showed U.S. GDP slipped back 0.1 percent, though the country's central bank, the Federal Reserve, indicated the pullback was likely to be brief as it repeated its pledge to continue providing support.

European shares, which have surged 3.7 percent this month, took their biggest daily hit of the year on Wednesday, and a plunge in German retail sales, stagnant French consumer spending and a huge quarterly loss at Deutsche Bank dashed hopes of a quick rebound.

The mood blackened through the morning, leaving London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> down 0.3 to 0.6 percent by 5:15 a.m. ET. The MSCI world share index <.miwd00000pus> was down 0.1 percent despite shares in Asia posting modest gains. <.l><.eu><.n/>

"Perhaps the German retail sales have contributed a little bit, but we knew that Q4 was weak, so I would it attribute it more to earnings news," said Chris Scicluna, an economist at Daiwa Capital Markets.

"The Deutsche Bank loss does look to be on the sizable side. There has clearly been some mismatch between financial markets and the real economy so that does lend itself to a bit of a pullback."

In the currency market, the German jitters also put the euro under pressure and halted its recent 4 percent rally.

It had started to show signs of stabilization by mid-morning but remained well short of Wednesday's 14-month high of $1.3588 at $1.3560. The Federal Reserve's promise of continued support was widely expected to mitigate the fall, however, by keeping downward pressure on the dollar.

Evidence of that pull was seen as the dollar slipped 0.2 percent against the yen to 90.88 yen, having hit its strongest level since 2010 on Wednesday. Market focus now turns to Friday's monthly U.S. employment report.

PULL-BACK

The nervy market atmosphere also pushed up Spanish and Italian government bond yields as some investors switched from higher-yielding debt into German Bunds.

Spanish 10-year yields rose 10 basis points on the day to 5.31 percent, while equivalent Italian debt rose 10 bps to 4.38 percent.

German Bund futures were half a point higher, spurred on by the Fed's determination to maintain its policy of stimulus for the U.S. economy.

The downbeat European mood also began to creep into commodities markets, though investors seemed broadly happy to stick with the bigger picture view that the global economy is gradually regaining strength.

Risky assets such as equities, commodities, and high-yield debt have risen sharply in the past six months as growth in emerging economies like China has picked up and fears of a collapse of the euro have been calmed by the European Central Bank.

Spot gold drifted down to $1,675 an ounce, having hit a one-week high on Wednesday, while oil prices inched down 23 cents to just under $115 per barrel, still well above their starting price this year of $110 a barrel.

And there was no sign of weakness in growth-attuned copper as it marched to its highest level since October.

"We are still quite confident about a Chinese copper demand recovery in the first half, and we have seen evidence of pent-up demand, so the downside risk is limited," said Henry Liu, head of commodity research at Mirae Asset Securities in Hong Kong.

"But exceeding $8,500 this year might be a challenge, because domestic inventories are quite high," he added.

(Additional reporting by Richard Hubbard and Melanie Burton in Singapore; Editing by Will Waterman)

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Mursi heads to Germany on trip cut back by Egypt crisis

CAIRO/BERLIN (Reuters) - Egyptian President Mohamed Mursi flew to Germany on Wednesday to convince Europe of his democratic credentials, leaving behind a country in crisis after a wave of violence that has killed more than 50 people.

The Egyptian army chief warned on Tuesday that the state was on the brink of collapse if Mursi's opponents and supporters did not end the street battles that have marked the two year anniversary of the revolt that toppled autocrat Hosni Mubarak.

Because of the crisis, Mursi has curtailed the schedule of his European visit, cancelling plans to go to Paris after Berlin. He is due to return to Cairo later on Wednesday.

Near Cairo's Tahrir Square on Wednesday morning, dozens of protesters threw stones at police who fired back with teargas, although the scuffles were short-lived.

"Our demand is simply that Mursi goes, and leaves the country alone. He is just like Mubarak and his crowd who are now in prison," said Ahmed Mustafa, 28, a youth who had goggles on his head to protect his eyes from teargas.

Opposition politician Mohamed ElBaradei called for a meeting between the president, government ministers, the ruling party and the opposition to halt the violence. But he also restated the opposition's precondition that Mursi first commit to seeking a national unity government, which Mursi has so far rejected.

Mursi's critics accuse him of betraying the spirit of the revolution by keeping too much power in his own hands and those of his Muslim Brotherhood, the Islamist movement banned under Mubarak which won repeated elections since the 2011 uprising.

Mursi's supporters say the protesters want to overthrow Egypt's first democratically elected leader. The unrest has prevented a return to stability ahead of new parliamentary elections due within months, and worsened an economic crisis that has seen the pound currency tumble in recent weeks.

The worst violence has been in the Suez Canal city of Port Said, where rage was fuelled by death sentences passed against soccer fans for deadly riots last year. Mursi responded by announcing on Sunday a month-long state of emergency and curfew in Port Said and two other Suez Canal cities.

Protesters ignored the curfew and returned to the streets on Monday although the streets grew quieter on Tuesday. Human Rights Watch called for Mursi to lift the emergency decree.

Mursi will be keen to allay the West's fears over the future of the most populous Arab country when he meets German Chancellor Angela Merkel and powerful industry groups in Berlin.

"DISTURBING IMAGES"

"We have seen worrying images in recent days, images of violence and destruction, and I appeal to both sides to engage in dialogue," German Foreign Minister Guido Westerwelle said in a radio interview on Wednesday ahead of Mursi's arrival.

Germany's "offer to help with Egypt's transformation clearly depends on it sticking to democratic reforms", he added.

Germany has praised Mursi's efforts in mediating a ceasefire between Israel and Palestinians in Gaza after a conflict last year, but became concerned at Mursi's efforts to expand his powers and fast-track a constitution with an Islamist tint.

Berlin was also alarmed by video that emerged in recent weeks showing Mursi making vitriolic remarks against Jews and Zionists in 2010 when he was a senior Brotherhood official. Germany's Nazi past and strong support of Israel make it highly sensitive to anti-Semitism.

Westerwelle called Mursi's past anti-Jewish remarks "unacceptable. But at the same time President Mursi has played a very constructive role mediating in the Gaza conflict".

Egypt's main liberal and secularist bloc, the National Salvation Front, has so far refused talks with Mursi unless he promises to include opposition figures in a national unity government.

"Stopping the violence is the priority, and starting a serious dialogue requires committing to guarantees demanded by the National Salvation Front, at the forefront of which are a national salvation government and a committee to amend the constitution," ElBaradei said on Twitter.

Those calls have also been backed by the hardline Islamist Nour party - rivals of Mursi's Muslim Brotherhood. Officials from Nour and the Front were due to meet on Wednesday to discuss Nour's proposals, suggesting an unlikely alliance of Mursi's critics from opposite ends of the political spectrum.

Mursi has agreed to the opposition demand to explore changes to the constitution he passed in a referendum last year, but has so far resisted the Front's calls for a unity government.

Brotherhood leader Mohamed El-Beltagy dismissed the unity government proposal as a ploy for the Front to take power despite having lost elections. On his Facebook page he ridiculed "the leaders of the Salvation Front, who seem to know more about the people's interests than the people themselves".

German industry leaders see potential in Egypt but are concerned about political instability.

"At the moment many firms are waiting on political developments and are cautious on any big investments," said Hans Heinrich Driftmann, president of Germany's Chamber of Industry and Commerce.

Mursi's supporters blame the opposition for preventing an economic recovery by halting efforts to restore stability. The opposition says an inclusive government is needed to bring calm.

"The economy depends on political stability and political stability depends on national consensus. But the Muslim Brotherhood does not talk about consensus, and so it will not lead to any improvement in the political situation, and that will lead the economy to collapse," said teacher Kamal Ghanim, 38, a protester in Tahrir Square.

(Additional reporting by Yasmine Saleh and Marwa Awad in Cairo, Stephen Brown and Gernot Heller in Berlin and Arshad Mohammed in Washington; Writing by Peter Graff; Editing by Giles Elgood)

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Facebook Graph Search Still Doesn’t Speak Human

Despite hiring a couple of linguists to get its new search engine to move “beyond ‘Robospeak” and actually understand how people talk, Facebook hasn’t actually taught Graph Search how to do that very well just yet. And that’s a problem, no matter which way the social network spins it. Unlike Google‘s pattern-matching search engine, Facebook’s new recommendation-based social search platform tries to understand full sentences. And that takes context, something that’s very hard to teach even the smartest computers, as one of the linguists that worked on the project, Amy Campbell, told The New York Times‘s Somini Sengupta. 

RELATED: Why Facebook’s Graph Search Can’t Give Users What They’re Looking for… Yet

In order to think more like a person the Graph Search team taught the engine 25 synonyms for “student” so that when someone types in “Stanford Academics that work at Facebook” the engine knows to look for “students” — 275,000 different ways in fact. But it turns out that an English class isn’t the future of machine learning: a grammar and vocabulary lesson proves a lot easier than complex sentient thoughts, and that’s where Facebook’s new product breaks down in practice.

RELATED: Why Google Isn’t Scared of Facebook’s Graph Search

For example, Graph Search doesn’t get vague pronouns. My query today for “photos Elle Reeve likes that she commented on” confuses Facebook’s beyond-robo engine. Instead, Graph Search results track down photos that my Atlantic Wire colleague “likes” but that I commented on:

RELATED: The Bad News-Good News of Tech Trademark Infringement

But Facebook’s ambiguity problem extends beyond “I” and “she.” Graph Search also has problems with double entendres, or sentences with nuance. The phrase “sports fans that like Lady Gaga play” has multiple meanings, notes the Times, especially because the word “fan” has its own special meaning on Facebook. (People with “Pages” have “fans.”) 

It’s not impossible to fix these specific issues. Facebook can add more relevant “context” to Graph Search as more people use it (beta testing rolled out over the last week). But never once has a machine perfectly understood our natural language. IBM’s Watson has come close, but it still made an embarrassing mistake every so often, and newer robots like Georgia Tech’s Simon are still getting there. Messups are okay (and entertaining) for a computer on a gameshow, or robots that might end up really helping bridge the computer-human divide. But, if I’m really going to use Graph Search as a way to find things in my day-to-day life, right now, those kind of hiccups should happen rarely to never — and Facebook’s slow phase-in excuse isn’t cutting it. If Graph Search can’t understand what humans want, it’s simply not doing its job. 

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Ashley Judd Splits from Husband Dario Franchitti

01/29/2013 at 08:05 PM EST

Ashley Judd and Dario Franchitti

Robin Marchant/Wireimage

Ashley Judd and Dario Franchitti are splitting after more than a decade of marriage.

"We have mutually decided to end our marriage. We'll always be family and continue to cherish our relationship based on the special love, integrity, and respect we have always enjoyed," Judd, 44, and Franchitti, 39, tell PEOPLE exclusively in a statement on Tuesday.

After being engaged for about two years, the Missing star and the racecar driver tied the knot in a highly private ceremony in Scotland in 2001.

Judd's sister, Wynonna Judd, served as maid of honor, while the groom's brother Mario was the best man. – Julie Jordan

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Soldier with new arms determined to be independent

BALTIMORE (AP) — After weeks of round-the-clock medical care, Brendan Marrocco insisted on rolling his own wheelchair into a news conference using his new transplanted arms. Then he brushed his hair to one side.

Such simple tasks would go unnoticed in most patients. But for Marrocco, who lost all four limbs while serving in Iraq, these little actions demonstrate how far he's come only six weeks after getting a double-arm transplant.

Wounded by a roadside bomb in 2009, the former soldier said he could get by without legs, but he hated living without arms.

"Not having arms takes so much away from you. Even your personality, you know. You talk with your hands. You do everything with your hands, and when you don't have that, you're kind of lost for a while," the 26-year-old New Yorker told reporters Tuesday at Johns Hopkins Hospital.

Doctors don't want him using his new arms too much yet, but his gritty determination to regain independence was one of the chief reasons he was chosen to receive the surgery, which has been performed in the U.S. only seven times.

That's the message Marrocco said he has for other wounded soldiers.

"Just not to give up hope. You know, life always gets better, and you're still alive," he said. "And to be stubborn. There's a lot of people who will say you can't do something. Just be stubborn and do it anyway. Work your ass off and do it."

Dr. W.P. Andrew Lee, head of the team that conducted the surgery, said the new arms could eventually provide much of the same function as his original arms and hands. Another double-arm transplant patient can now use chopsticks and tie his shoes.

Lee said Marrocco's recovery has been remarkable, and the transplant is helping to "restore physical and psychological well-being."

Tuesday's news conference was held to mark a milestone in his recovery — the day he was to be discharged from the hospital.

Next comes several years of rehabilitation, including physical therapy that is going to become more difficult as feeling returns to the arms.

Before the surgery, he had been living with his older brother in a specially equipped home on New York's Staten Island that had been built with the help of several charities. Shortly after moving in, he said it was "a relief to not have to rely on other people so much."

The home was heavily damaged by Superstorm Sandy last fall.

"We'll get it back together. We've been through a lot worse than that," his father, Alex Marrocco, said.

For the next few months, Marrocco plans to live with his brother in an apartment near the hospital.

The former infantryman said he can already move the elbow on his left arm and rotate it a little bit, but there hasn't been much movement yet for his right arm, which was transplanted higher up.

Marrocco's mother, Michelle Marrocco, said he can't hug her yet, so he brushes his left arm against her face.

The first time he moved his left arm was a complete surprise, an involuntary motion while friends were visiting him in the hospital, he said.

"I had no idea what was going through my mind. I was with my friends, and it happened by accident," he recalled. "One of my friends said 'Did you do that on purpose?' And I didn't know I did it."

Marrocco's operation also involved a technical feat not tried in previous cases, Lee said in an interview after the news conference.

A small part of Marrocco's left forearm remained just below his elbow, and doctors transplanted a whole new forearm around and on top of it, then rewired nerves to serve the old and new muscles in that arm.

"We wanted to save his joint. In the unlucky event we would lose the transplant, we still wanted him to have the elbow joint," Lee said.

He also explained why leg transplants are not done for people missing those limbs — "it's not very practical." That's because nerves regrow at best about an inch a month, so it would be many years before a transplanted leg was useful.

Even if movement returned, a patient might lack sensation on the soles of the feet, which would be unsafe if the person stepped on sharp objects and couldn't feel the pain.

And unlike prosthetic arms and hands, which many patients find frustrating, the ones for legs are good. That makes the risks of a transplant not worth taking.

"It's premature" until there are better ways to help nerves regrow, Lee said.

Now Marrocco, who was the first soldier to survive losing all four limbs in the Iraq War, is looking forward to getting behind the wheel of his black 2006 Dodge Charger and hand-cycling a marathon.

Asked if he could one day throw a football, Dr. Jaimie Shores said sure, but maybe not like Baltimore Ravens quarterback Joe Flacco.

"Thanks for having faith in me," Marrocco interjected, drawing laughter from the crowd.

His mother said Marrocco has always been "a tough cookie."

"He's not changed that, and he's just taken it and made it an art form," Michelle Marrocco said. "He's never going to stop. He's going to be that boy I knew was going to be a pain in my butt forever. And he's going to show people how to live their lives."

___

Associated Press Chief Medical Writer Marilynn Marchione in Milwaukee and AP writer David Dishneau in Hagerstown, Md., contributed to this report.

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Euro surges to 14-month high, Fed decision awaited

LONDON (Reuters) - The euro hit its highest level in over a year on Wednesday and shares, oil and metals were also on the rise, as confidence in the global economic outlook strengthened ahead of European data and the U.S. Federal Reserve's latest policy decision.

The Fed is expected to maintain asset buying at $85 billion a month when it concludes its meeting later and retain its commitment to hold interest rates near zero until unemployment falls to at least 6.5 percent.

European economic confidence data for January at 1000 GMT, ECB crisis loan repayments and Italy's sale of five and 10-year bonds will absorb most of investors' attention before then, as they look for further evidence of a pick-up in the region.

Share markets in London, Paris and Frankfurt opened little changed ahead of the data, leaving all eyes on a rally by the euro as it broke above $1.35 for the first time since December 2011.

Alongside the recent rebound in confidence in the euro zone, one of the drivers behind the recent spike has been the eagerness of banks to repay the crisis loans they took from the European Central Bank just over a year ago.

"It (the euro rise) is just a carry on with the current trend, risk is pretty healthy and equities are doing well," said Bank of Tokyo Mitsubishi strategist Derek Halpenny.

"The danger is European policymakers allow a spike (in euro and market rates) as a result of a removal of one of the principle support measures ... With the Fed and the BOJ still easing the euro is clearly the path of least resistance."

An earlier rise in Asian equities meant the MSCI world share index was up 0.2 percent at a new 21-month high as European trading gathered pace. U.S. stock futures suggested a cautious start on Wall Street.

Strong U.S. housing data on Tuesday and China's promising economic growth forecast for 2013 also supported the upbeat mood and raised expectations for robust demand for fuel and industrial commodities, underpinning oil prices and lifting copper.

In the bond market, German Bund futures opened lower as investors made room for a sale of long-dated German paper and braced for solid demand at an Italian debt auction.

Italy will offer up to 6.5 billion euros of bonds maturing in 2017 and 2022. Traders expect the sale to benefit from yield-hungry investors but flagged the risk of indigestion after a bout of buying in recent months that triggered a sharp rally.

"(The auction) probably (goes) alright but I don't think it trades well afterwards," one trader said.

(Additional reporting by Ana Nicolaci da Costa; Editing by Giles Elgood)

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Army says political tussle taking Egypt to brink

CAIRO, Egypt (Reuters) - Egypt's army chief said political strife was pushing the state to the brink of collapse - a stark warning from the institution that ran the country until last year, as Cairo's first elected leader struggles to contain bloody street violence.

General Abdel Fattah al-Sisi, appointed by President Mohamed Mursi last year to head the military, added in a statement on Tuesday that one of the primary goals of deploying troops in cities on the Suez Canal was to protect the waterway that is vital for Egypt's economy and world trade.

Sisi's comments, published on an official army Facebook page, followed 52 deaths in the past week of disorder and highlighted the mounting sense of crisis facing Egypt and its Islamist head of state who is struggling to fix a teetering economy and needs to prepare Egypt for a parliamentary election in a few months that is meant to cement the new democracy.

The comments are unlikely to mean the army wants to take back the power it held, in effect, for six decades since the end of the colonial period and in the interim period after the overthrow of former general Hosni Mubarak two years ago.

But it sends a powerful message that the Egypt's biggest institution, with a huge economic as well as security role and a recipient of massive direct U.S. subsidies, is worried about the fate of the nation after five days of turmoil in major cities.

"The continuation of the struggle of the different political forces ... over the management of state affairs could lead to the collapse of the state," said General Abdel Fattah al-Sisi, who is also defense minister in the government Mursi appointed.

He said the economic, political and social challenges facing the country represented "a real threat to the security of Egypt and the cohesiveness of the Egyptian state" and the army would remain "the solid and cohesive block" on which the state rests.

Sisi was appointed by Mursi after the army handed over power to the new president in June. Mursi sacked Field Marshal Hussein Tantawi, who had been in charge of Egypt during the transition and who had also been Mubarak's defense minister for 20 years.

Political opponents spurned a call by Mursi for talks on Monday to try to end the violence. Instead, huge crowds of protesters took to the streets in Cairo and Alexandria, and in the three Suez Canal cities - Port Said, Ismailia and Suez - where Mursi on Sunday imposed emergency rule and a curfew.

"DOWN, DOWN MURSI"

Residents in the three canal cities demonstrated overnight in defiance of the curfew. At least two men died in fighting in Port Said, raising to at least 42 people who have now been killed there, most of them by gunshot wounds.

Protests first flared to mark the second anniversary of the uprising that erupted on January 25, 2011 and toppled Mubarak 18 days later. They have been exacerbated by riots in Port Said by residents enraged by a court ruling sentencing several people from the city to death over deadly soccer violence last year.

"Down, down with Mohamed Mursi! Down, down with the state of emergency!" crowds shouted in Ismailia. In Cairo, flames lit up the night sky as protesters set vehicles ablaze.

The demonstrators accuse Mursi of betraying the two-year-old revolution. Mursi and his supporters in the Muslim Brotherhood accuse the protesters of seeking to overthrow Egypt's first ever democratically elected leader by undemocratic means.

Debris from days of unrest was strewn on the streets around Cairo's Tahrir Square, cauldron of the anti-Mubarak uprising.

Youths clambered over a burned-out police van. But unlike on previous mornings in the past few days, there was no early sign of renewed clashes with police.

Since the 2011 revolt, Islamists who Mubarak spent his 30-year rule suppressing have won two referendums, two parliamentary elections and a presidential vote.

But that legitimacy has been challenged by an opposition that accuses Mursi of imposing a new form of authoritarianism, and punctuated by repeated waves of unrest that have prevented a return to stability in the most populous Arab state.

U.S. UNEASE

The army has already been deployed in Port Said and Suez and the government agreed a measure to let soldiers arrest civilians as part of the state of emergency.

The instability has provoked unease in Western capitals, where officials worry about the direction of a powerful regional player that has a peace deal with Israel. The United States condemned the bloodshed and called on Egyptian leaders to make clear violence is not acceptable.

Mursi's invitation to rivals to hold a national dialogue with Islamists on Monday was spurned by the main opposition National Salvation Front coalition, which described it as "cosmetic".

The only liberal politician who attended, Ayman Nour, told Egypt's al-Hayat channel after the meeting ended late on Monday that attendees agreed to meet again in a week.

He said Mursi had promised to look at changes to the constitution requested by the opposition but did not consider the opposition's request for a government of national unity. Mursi's pushing through last month of a new constitution which critics see as too Islamic remains a bone of contention.

The president announced the emergency measures on television on Sunday. "The protection of the nation is the responsibility of everyone. We will confront any threat to its security with force and firmness within the remit of the law," Mursi said.

His demeanor infuriated his opponents, not least when he wagged a finger, imperiously, at the camera.

Some activists said Mursi's measures to try to impose control on the turbulent streets could backfire.

"Martial law, state of emergency and army arrests of civilians are not a solution to the crisis," said Ahmed Maher of the April 6 movement that helped galvanize the 2011 uprising. "All this will do is further provoke the youth. The solution has to be a political one that addresses the roots of the problem."

(Additional reporting by Yasmine Saleh and Omar Fahmy in Cairo, Yusri Mohamed in Ismailia and Abdelrahman Youssef in Alexandria; Writing by Edmund Blair; Editing by Alastair Macdonald)

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