* Sector index starts to recover after 29 pct loss in Q3

  * US rig count 8 shy of quarter-century peak hit in 2008

  * Analysts see sell-off as overdone, await exec commentary

  * Halliburton reports on Monday, Schlumberger on Friday

  By Braden Reddall

  Oct 14 (Reuters) - What oilfield services executives say next week about clients' drilling plans will have more of an impact on whether the sector's recent rally can be sustained than the quarterly profit numbers.

  Global No. 2 player Halliburton Co will kick off with its third-quarter report on Monday, followed next Friday by the first set of results from sector leader Schlumberger Ltd since Paal Kibsgaard took over as chief executive.

  Last quarter's 29 percent plunge for the Philadelphia oil service index appears partly justified given the glum mood at a London oil conference this week.

  But analysts see that sell-off as an overreaction -- the index has bounced 13 percent higher in October -- and cite the lack of evidence so far of either a drilling slowdown or weakness in pricing for services.

  " With the group beat down so hard, as if activity levels are going to decline substantially, we're setting up for a decent short-term rally in some of these names," Brian Uhlmer of Global Hunter Securities said, though he noted any rebound would obviously be derailed by a macroeconomic shock.

  Oil demand estimates for 2012 have been pared back, but producers have so far shown no signs they will stop spending on new projects. After all, Brent crude prices remain a third higher than a year ago, even with the recent pullback.

  The rush to develop U.S. shale resources has also only gained speed in the past year, which is a big driver behind the anticipated 60 percent growth in third-quarter net profit for Halliburton, the North American oilfield services leader.

  For a chart of the oil services index and the U.S. rig count, click on http://link.reuters.com/fav44s

  RIG COUNT NEAR PEAK

  The Baker Hughes U.S. rig count, measuring activity for more than half the global fleet, is up by 353 in the past year at 2,023. That happens to be near the quarter-century peak of 2,031 hit in 2008, before the financial meltdown hammered oil prices and the active rig count was sliced in half.

  Analysts caution against reusing the 2008 " playbook" as another economic slump looms, but various unanswered questions haunt investors who were burned last time. So comments from bosses at services companies, who often have valuable insights to oil producers' strategy, will be scrutinized for clues.

  Investors will also keep a close eye on what exploration and production companies say about 2012 capital expenditure. At least as far as North America is concerned, the industry is not yet tipping any dramatic changes.

  " Despite recent commodity price volatility, discussions with our customers indicate continued demand across all segments," Ken Huseman, the CEO of Texas-based Basic Energy Services Inc, said in a monthly update this week.

  " We will monitor customer plans for 2012 before making additional significant commitments for fleet expansion."

  Halliburton has struck an equally sanguine note on pricing and activity. Yet this has not stopped its shares from dropping 7 percent in the last month, against a 4 percent drop for Schlumberger, which is far less dependent on North America.

  Weatherford International Ltd reports results on Oct. 25 and industry No. 3 Baker Hughes follows a week later.

  Analysts at Barclays Capital acknowledged this week that their estimates for North America-focused services companies would have to be cut to reflect a weakened oil price outlook.

  But they see those revisions as more than accounted for by the market, which is discounting a rig count drop of between 25 percent and 30 percent, and a similar decline in pricing.

  " This is a scenario that we do not expect to unfold," Barclays wrote, predicting a 10 percent fall in the rig count and a " modest" reduction in pricing in certain product lines.

  Barclays said on Friday its " flattening to modest decline" outlook was supported by drilling permit levels in the 30 U.S. states it monitors, which fell 5 percent in September after an 8 percent increase in August and a 7 percent decrease in July. (Reporting by Braden Reddall in San Francisco, editing by Matthew Lewis)

* CRB index ends with biggest weekly gain since Dec

  * Brent crude up 8 pct on week, sharpest rise since Feb

  * Coming up: New York Empire State Index (Monday)

  (Adds rally in natural gas, paragraphs 7 and 18)

  By Barani Krishnan

  NEW YORK, Oct 14 (Reuters) - Oil prices closed up 3 percent on Friday and metals and crop markets jumped too, driving commodities to their biggest weekly advance since December.

  Encouraging U.S. retail sales in September boosted risk appetites across financial markets and added to investor confidence, already bolstered by an imminent European debt rescue deal.

  U.S. Treasuries prices for the week were down the most since July, reflecting investor preference again for equities and raw materials after the risk flight seen through August and September.

  Gold finished steady, showing the precious metal's allure against other safe-havens like bonds and the Swiss franc.

  The spot price of bullion saw its biggest weekly gain in six weeks as gold returned to its traditionally inversed correlation to the dollar. The greenback fell as the euro finished its best week against the dollar since January.

  " This is all dollar-driven and I haven't seen anything else that would tell me otherwise," Peter Hillyard, head of metals sales in Europe for ANZ, said, referring to the gains in gold.

  The 19-commodity Reuters-Jefferies CRB index ended up 2 percent on the day after broad gains in key markets, as well as in niche commodities such as as soybeans and natural gas. For the week, the index was up 4.5 percent, its most since early December.

  Crude oil, which accounts for nearly a quarter of the CRB's weighting, drove much of the gains.

  Oil's rally came after retail sales in the United States rebounded at their fastest pace in seven months in September as consumers shook off some of their concerns about stock market drops and political gridlock, potentially giving new momentum to the country's weak economic recovery.

  Analysts will be paying close attention to U.S. data next week that includes readings on New York's manufacturing gauge, the Empire State Index, as well on the Consumer Price Index, housing starts and weekly jobless claims benefits.

  " It's a sentiment thing," Andrey Kryuchenkov, analyst for Moscow-based VTB Capital, said, referring to oil's run-up on Friday after the U.S. retail sales data and euro zone developments. " People are clinging onto any positive news."

  In Europe, French and German officials were trying to put flesh on the bones of a crisis resolution plan in time for a European Union summit on Oct. 23, overshadowing Standard and Poor's cut of Spain's credit rating. which further underlined the challenges facing euro zone finance ministers.

  London's benchmark Brent crude closed at $114.68 a barrel, up 3 percent on the day. For the week, it gained 8.3 percent -- its biggest weekly rise since February.

  U.S. crude settled at $86.80, 3 percent higher on the day and 4.6 percent on the week.

  Copper's benchmark three-month futures in London struck a two-week high of $7,580.25 a tonne, before ending at $7,545, up 3.2 percent on the day. The metal is now up more than 14 percent from a 2011 low of below $6,700 per tonne, hit two weeks ago.

  Soybeans settled at $12.70 a bushel in Chicago, up 1 percent on the day. For the week, prices rose nearly 10 percent -- their biggest weekly gain in over 2-1/2 years -- after some farmers refused to sell their soy crop at current levels.

  Soybeans also benefited from spillover bullish impact from a U.S. government crop report on Wednesday that pegged this year's crop and the ending supply of soy for the current marketing year, that ends on Aug. 31, 2012, below analysts' estimates.

  U.S. natural gas settled at $3.703 per million British thermal units, up nearly 5 percent on the day and more than 6 percent on the week after short covering fueled by forecasts for cooler weather next week in consuming regions.

* S& P 500 closes above key 1,220 level

  * Apple, IBM hit life closing highs before earnings

  * Ten blue chips to report quarterly results next week

  By Rodrigo Campos

  NEW YORK, Oct 14 (Reuters) - With one-third of the Dow components and crowd favorite, Apple, reporting results next week, U.S. stocks are setting the stage for another week of gains.

  After the steepest two-week rally in more than two years, the S& P 500 is at the top end of its range for the past two months.

  The benchmark closed Friday above 1,220 for the first time since early August, and bets against the recent rally could start to pile up.

  But Monday earnings and guidance from IBM, followed by results from Apple, Coca-Cola and Intel on Tuesday could give shorts a reason to put their guns down. The S& P could be on its way to a third straight winning week --a streak not seen since February.

  " There are some fundamental catalysts which could play right into the momentum," said Richard Ross, global technical strategist for Auerbach Grayson in New York.

  He said the S& P 500 " has potential to take out that well defined resistance (at 1,220) and it would be a fast move up to the next level, between 1,265 and 1,275."

  The sharp turnaround in stocks from a 2011 low hit Tuesday took many by surprise, and buying has spurred more buying as traders and money managers try to catch up with the benchmark's performance.

  The pattern repeated itself Friday, with the three major indexes closing at or near session highs.

  For the week, the Dow Jones industrial average gained 4.9 percent, the S& P 500 added 6 percent, and the Nasdaq Composite rose 7.6 percent.

  Ten of the 30 Dow components, including Microsoft, American Express and Johnson & Johnson, are scheduled to report quarterly results next week.

  Big financial names expected to report include Citigroup, Goldman Sachs and Wells Fargo, which follow Thursday's earnings disappointment from JPMorgan Chase & Co that battered the sector.

  Reported and estimated earnings growth for the current earnings season is seen at 12.4 percent for all S& P 500 companies, according to Thomson Reuters data. That is down from this year's estimate peak of 17 percent in July.

  But companies like Apple and IBM, which hit lifetime closing highs on Friday, are expected to trounce expectations. And positive surprises could play into the buying momentum.

  " Price will start to discount even more optimism," said Wasif Latif, vice president of equity investments at the San Antonio, Texas-based USAA Investment Management, which manages about $45 billion in mutual funds.

  " Growth companies, given the high expectations, need to have a 'wow' factor when it comes to reporting and beating earnings," he said, adding it was certainly possible for these two names to rise further.

  The VIX volatility gauge has declined in the past weeks, closing on Friday at its lowest level since Aug. 3. That could translate into less uncertainty and more of the buying frenzy that drove the S& P 500 to its largest two-week percentage advance since mid 2009. ECONOMY: LESS BAD THAN FEARED

  Softening economic numbers in the United States and abroad, as well as a grinding expansion of the euro zone sovereign debt crisis, stymied investors and drove stocks and commodity prices to heavy losses in the third quarter.

  But despite Greece's slow crawl toward a default and rising borrowing costs in Spain and Italy, the perception of efficient action in Europe gave investors the confidence to return to equities --or at least cover their short bets.

  Economic numbers, expected at a certain point in the summer to show the U.S. economy was sliding back into recession, have generally come in above those lowered estimates.

  USAA's Latif said that even if current levels are subdued and expectations are lowered " it's definitely very encouraging" to have data land better than expected.

  Among the main economic indicators due next week are industrial production and capacity utilization on Monday producer and consumer inflation on Tuesday and Wednesday, respectively and weekly jobless claims on Thursday. The week closes with the final reading of the Reuters/University of Michigan consumer sentiment index. (Wall St Week Ahead runs every Friday. Questions or comments on this column can be e-mailed to: Rodrigo.Campos(at)thomsonreuters(dot)com) (Reporting by Rodrigo Campos Editing by Kenneth Barry)

(Adds comment from Australian finance minister)

  * G20 summit may toughen language, nothing definitive on euro zone

  * Euro crisis wipes all else off agenda

  * Communique, closing news conference expected by 1500 GMT

  * German finmin confident about crisis action plan for Oct. 23 EU summit

  * BRICS favour boosting IMF capital U.S., others opposed

  By Abhijit Neogy and Glenn Somerville

  PARIS, Oct 15 (Reuters) - Proposals to double the size of the IMF as part of a broader international response to Europe's debt crisis ran into resistance from the United States and others, burying the idea for now and putting the onus firmly back on Europe.

  The outlines of the plan that had the backing of several developing economies emerged as G20 finance ministers and central bankers met in Paris to discuss a world economy under threat from European nations mired in debt.

  A second day of talks on Saturday may produce more robust language on the urgency of tackling the euro zone debt crisis but little of substance is likely to be inked in with an EU summit in nine day's time the make-or-break moment.

  A communique and round of closing news conferences are expected around 1500 GMT with other decisions set up for a G20 leaders' summit in Cannes on Nov. 3/4.

  One G20 source said emerging market policymakers backed injecting some $350 billion into the International Monetary Fund.

  U.S. Treasury Secretary Timothy Geithner and his Canadian counterpart poured cold water on the idea. The IMF's dominant shareholders, including the United States, Japan, Germany and China, are content that the fund's $380 billion worth of resources is enough.

  " They (the IMF) have very substantial resources that are uncommitted," Geithner said.

  German Finance Minister Wolfgang Schaeuble agreed the euro zone debt crisis was for Europe to solve, and expressed confidence that EU leaders would produce a plan at the Oct. 23 summit that would be convincing for financial markets.

  The United States is among countries keen to keep pressure on the Europeans to act more decisively to end the two-year-old debt crisis that began in Greece but has since spread to Ireland and Portugal and is lapping at Spain and Italy.

  " The first priority here is for Europeans to put their own house in order," Australian finance minister Wayne Swan said, though his office in Canberra later released a transcript of a CNN interview in which he added that the G20 should be willing to support extra IMF resourcing if required.

  Canadian Finance Minister Jim Flaherty also said the G20 should keep up pressure on the euro zone on its " arduous" journey towards a solution and not focus on IMF resources.

  If minds needed concentrating further, Standard and Poor's cut Spain's long-term credit rating, citing the country's high unemployment, tightening credit and high private sector debt, highlighting the risk of a much larger economy than Greece coming under threat.

  French and German officials are trying to put flesh on the bones of a crisis resolution plan in time for the European Union summit.

  Fears about the damage a default by Greece -- and possibly others -- could inflict on the financial system have driven a confidence-sapping bout of market volatility since late July, with global stocks falling 17 percent from their 2011 high in May.

 

 

  DIVISION

  Unlike in 2009 when the G20 launched coordinated stimulus to pull the world out of crisis, the rest of the world is chafing at Europe's slow response while Washington and Beijing are sparring over the yuan currency.

  The Franco-German crisis plan is likely to ask banks to accept bigger losses on their Greek debt than the 21 percent spelled out in a July plan for a second bailout of Athens, which now looks insufficient.

  " It will be more, that's more or less certain," French Finance Minister Francois Baroin said.

  It should also lay out a system for recapitalising banks and plans to leverage the euro zone's 440 billion euros European Financial Stability Facility to give it more punch.

  Schaeuble said European banks should be helped, if necessary, with state means to strengthen their capital.

  Whilst the EFSF has the resources to cope with bailouts for Greece, Portugal and Ireland, it would be overwhelmed by the need to rescue a bigger economy such as Italy or Spain.

  The most effective method would be to turn the EFSF into a bank so it could draw on European Central Bank resources. Both Germany and the ECB are opposed to that. Attention has turned to the idea of making the fund more like an insurer.

  For example, if the EFSF covered the first 20 percent of losses a bank could suffer in case of a default -- it could multiply its firepower fivefold to over 2 trillion euros.

 

  ROLE OF IMF

  G20 sources said most BRICS economies were in favour of bolstering the IMF's capital as a crisis-fighting tool.

  " We have said this before and have conveyed this again, that if emerging economies and the BRICS are called upon to contribute, we can do it via the International Monetary Fund," one of the sources said. " India is open to it, China and Brazil are also okay with the idea."

  Another G20 source said the IMF would present a plan which had broad support to its executive board to make short-term credit lines available to fundamentally healthy countries hit by liquidity crises. It could aid euro zone countries hit by the current crisis of confidence in the bloc's sovereign debt.

  Any real progress on bigger goals such as setting parameters to measure global imbalances and reining in speculative capital flows is unlikely to come before a Nov. 3-4 summit in Cannes, where France passes the G20 baton to Mexico.

  A French finance ministry source said that for Cannes, France hoped to have two or three measures agreed for countries showing imbalances: consolidation measures for those with high deficits and stimulus measures for those with surpluses.

  " We are going to try to make some progress and obtain, perhaps not tomorrow or Saturday but by Cannes, a list of measures country by country," he said. " These must be measures which will have an impact on the real economy."

  A separate G20 source said after preparatory talks late on Thursday that China would commit to boost its consumption through a five-year plan, via households and companies as well as infrastructure.

  The G20 countries make up 85 percent of global output.

  An April G20 meeting placed seven large economies under review -- the debt-burdened United States, export driven China and the economies of France, Britain, Germany, Japan and India. Officials have said privately the aim was to get Beijing to discuss the yuan, and China's cooperation is essential to the success of the process.

  A G20 official said China would not commit to a quick liberalisation of its yuan currency to help rebalance global growth, but would offer to use expansionary fiscal policy to fuel domestic demand.

  " No, they were pretty firm on that -- there will be no progress," the official said. (Additional reporting by Daniel Flynn, Francesca Landini, Randall Palmer, David Milliken, Kevin Yao and Mark Bendeich in SYDNEY Writing by Mike Peacock/Janet McBride Editing by Sanjeev Miglani)

* FTSEurofirst 300 index close up 0.7 pct

  * Cyclical stocks gain on U.S. payroll data

  * Fitch downgrades ratings of Spain and Italy after mkt close

  By Joanne Frearson

  LONDON, Oct 7 (Reuters) - European shares rose to a five-week closing high on Friday, after better-than-expected U.S. nonfarm payroll data eased worries that the world's largest economy was slowing down and boosted optimism about global growth.

  Cyclical stocks such as carmakers and miners were among the strongest gainers on hopes that better economic growth would boost demand for these sectors.

  The STOXX Europe 600 Automobiles & Parts index gained 1.7 percent and the STOXX Europe 600 Basic Resources index rose 1.1 percent.

  Standout risers were miners Vedanta Resources and Xstrata , up 4.2 percent and 2.7 percent respectively in strong volumes.

  " The worries about nonfarm payrolls were overdone," said Jane Coffey, head of equities at Royal London Asset Management. " Sectors like miners have been sold off due to recession fears, but the data is showing that is not really the case."

  Vedanta had lost 34.5 percent since late July and Xstrata 29.5 percent as investors sold out of these companies due to concerns about the growth outlook.

  Coffey added that her portfolio was positioned in companies that will benefit from global growth and had recently been buying back into Xstrata after reducing its position in June.

  The pan-European FTSEurofirst 300 index of top shares closed up 0.7 percent at 947.63 points -- its highest close since Sept. 2 -- and ended the week 2.6 percent higher.

  The benchmark ended above a key resistance level, formed by its 50-day moving average at 937.24 points, with the next resistance seen at the 38.2 percent Fibonacci Retracement of its sell-off from February to September, or 980.52 points.

 

  BEAR MARKET

  However, the index is still in bear market territory having fallen 20.5 percent since its 2011 February high, on concerns about growth and fears of contagion in the euro zone sovereign debt crisis.

  After the European market close, ratings agency Fitch downgraded Spain's sovereign debt rating by two notches and cut Italy by one notch to reflect the worsening of the euro zone crisis.

  Divisions persist among policymakers over how the euro zone's rescue fund should be used to counter the crisis.

  A German source said France wanted to tap the rescue fund for its banks, while Berlin has insisted it should only be used as a last resort.

  Greece was still in talks with the European Union and International Monetary Fund over receiving its next aid tranche and could run out of cash as soon as mid-November.

  Some market participants did not see the day's gains as the start of longer-term upwards trend.

  " Although markets rallied strongly for much of the week, it was based on measures designed only to deal with the symptoms," said Lothar Mentel, chief investment officer at Octopus Investments, which manages nearly $4 billion.

  " Even if the politicians can pull a magic rabbit out of the hat, investors will need to get used to the aftermath, which will likely be at best a lengthy period of low growth, or at worst, a formidable recession." (Editing by David Holmes)

* Central bank not worried about inflation, expects decrease

  * Lending increased by 9 percent in 2011

  * Saudi Arabia " protected" against euro debt crisis (Adds quotes, background)

  JEDDAH, Saudi Arabia, Oct 8 (Reuters) - Saudi Arabia's inflation levels are not worrying and will continue to decline, the country's central bank governor Muhammad Al-Jasser said on Saturday.

  " Inflation levels are not worrying. Inflation has become stable since the beginning of the year between around 4.6 and 4.9 (percent)... I expect it to continue its decline," Al-Jasser told reporters on the sidelines of a conference in Riyadh.

  Analysts polled by Reuters in June expected average inflation in the country to reach 5.6 percent in 2011.

  Al-Jasser also said that lending levels had risen by more than 9 percent in 2011. " In reality, lending has risen by more than 9 percent this year ... an excellent level," he said.

  Asked about his expectations for lending in 2012, he said: " I expect it to be good."

  Fears of debt contagion in the euro zone have been shaking global markets over the past few months but Al-Jasser said Saudi Arabia is protected to a great extend from the European debt crisis.

  " We are not affected by what is happening in Europe. Our lending and deposits are internal... We have, to a great extent, protection from these developments but we are not in an isolated island," he said.

  Saudi Arabia invests heavily in U.S. treasuries. (Reporting by Ibrahim al-Mutawa writing by Asma Alsharif)