Wall St clings to hopes for budget deal, but market risks rising

NEW YORK (Reuters) - If the United States sails over the fiscal cliff in less than two weeks, it probably will not mean disaster for the stock market, investors said on Friday, but the margin for error is getting dangerously thin.
At heart are fears over how long the U.S. economy, the world's largest, can hold up under the brunt of higher taxes and big spending cuts that would be triggered by the fiscal cliff.
If Washington's inability to reach a deficit-reduction deal persists into late January or provokes a second credit ratings agency to strip the United States of its top triple-A rating, all bets may be off.
"Clearly, if this thing drags on with no deal, eventually markets are going to start to take it on the chin," said Sandy Lincoln, chief market strategist at BMO Asset Management in Chicago, which oversees $38 billion.
Stock markets fell on Friday after a Republican proposal that would have prevented tax increases on all but those earning more than $1 million unraveled amid a conservative backlash.
Though President Barack Obama had vowed to veto the bill, opposition from Republicans stoked doubt about the ability of House of Representatives Speaker John Boehner to win support within his party. That suggested the two sides were too far apart to reach a deal to forestall the $600 billion in automatic tax hikes and spending cuts before they are set to begin to take effect in January.
"The fact they couldn't even get the Republicans in Congress to sign on for that is disturbing. If we get into late January, early February and we are still in the soup, then the odds of going into a recession go up, and I just can't believe anybody wants that," said Jeffrey Saut, chief investment strategist at Raymond Jones Financial.
HEATING UP
If the new year dawns without a deal, Jack Ablin, chief investment officer at BMO Private Bank, said he would view "any incremental market sell-off as a buying opportunity."
But if things remain in limbo in February, "that is going to leave a mark on the economy," he said. "The way I'd characterize it is that we're sitting in this pot of water and on January 1, Congress turns on the flame underneath. It's comfortable at first, but eventually it's going to start to hurt."
Americans would start to feel the effects in their wallets. As of 2013, payroll taxes would revert to 6.2 percent of Americans' paychecks, up from the 4.2 percent level put in place during the economic downturn.
Higher income tax rates would also start to hit, though that could be delayed by officials in Washington. Still, Americans would start to feel a pinch on their paychecks, which could hurt spending next year. Some investors believe holiday sales are already being affected.
Another risk, said BNY Mellon currency strategist Michael Woolfolk, would be if a second ratings agency cuts the United States' AAA rating, a move that Standard & Poor's made after a similar budget standoff in 2011.
Fitch Ratings said this week it would be more likely to downgrade the United States if the economy goes over the cliff.
"Markets would take that very badly," Woolfolk said. "Stocks sold off by 10 percent after the S&P downgrade in 2011, and I'd expect something at least as severe" if Fitch were to act.
LAST-MINUTE DEAL STILL POSSIBLE
Of course, lawmakers still have 10 days left in 2012 to strike a deal, and some are confident they will return to Capitol Hill after Christmas and do just that.
"So far, the market has been handling setbacks in talks very well, and with a bit of time left on the clock, this time will be no different," said Jim Barnes, senior fixed income manager at National Penn Investors Trust Co.
For some, the political disarray among Congressional Republicans that sent Boehner's "Plan B" to defeat late on Thursday only increased those hopes.
"Given that Reid called Plan B 'dead on arrival' and Obama said he would veto it, the non-passage of this bill due to lack of Republican support makes it more likely, not less likely, that compromise will be reached," said Jeffrey Gundlach, chief executive officer and chief investment officer of DoubleLine Capital, which oversees more than $50 billion.
Harry Reid is the Democratic Senate leader.
The "continued positioning and posturing" isn't a huge concern to investors, Woolfolk said. "Neither side has incentive to compromise too much, too soon. They can extract concessions by delaying. So I would not be surprised if it takes until minutes before midnight on December 31."
All the back-and-forth, however, may keep the stock market a bit more volatile than it would normally be so late in the year.
The benchmark S&P 500 <.spx> has gained or lost more than 1 percent in three of the past five trading sessions, while the CBOE Volatility Index <.vix> has climbed more than 20 percent over the past three days.
In a sign of the type of volatility investors may be confronted with, S&P 500 E-Mini futures fell as much as 3.6 percent in after-hours trading Thursday evening, with a 15-point drop in less than one second that resulted in a brief halt in futures trading.
"While last night's mini-crash is a rare event, I do expect bigger moves than we've seen in the past year," said Enis Taner, global macro editor at RiskReversal.com, an options trading firm based in New York.

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Signs suggest better economy if 'cliff' is averted

WASHINGTON (AP) — Fresh signs of a strengthening U.S. economy on Friday suggested that if Congress and the White House can avert the "fiscal cliff," the economic recovery might finally accelerate in 2013.
Consumers spent and earned more in November. And for a second straight month, U.S. companies increased their orders for a category of manufactured goods that reflects investment plans.
In light of the latest figures, some analysts said the economy could end up growing faster in the current October-December quarter — and next year — than they previously thought.
"I see momentum building," said Joel Naroff, chief economist at Naroff Economic Advisors. "If Washington makes the moves it needs to make, then the economy should pick up speed next year."
That's a big "if." House Republicans called off a vote on tax rates and left budget talks in disarray 10 days before the package of tax increases and spending cuts known as the fiscal cliff would take effect.
Still, helping lift the optimism of some analysts was a government report that consumer spending, which fuels about 70 percent of the economy, rose 0.4 percent in November compared with October. Spending had dipped 0.1 percent in October. But that decline was linked in part to disruptions from Superstorm Sandy.
Incomes rose 0.6 percent in November, the biggest gain in 11 months. It reflected a rebound in wages and salaries, which had been depressed in October. Damage from Sandy in the Northeast prevented some people from working at the end of October and reduced wages at an annual rate of $18 billion.
A separate report Friday showed that a category of durable-goods orders that tracks business investment surged 2.7 percent. That gain followed an upwardly revised 3.2 percent jump in October, the biggest in 10 months.
The back-to-back increases followed a period of weakness in so-called core capital goods that had raised concerns about business investment, a driving force in the economy.
The economy grew in the July-September quarter at a solid 3.1 percent annual rate. But some analysts said they thought growth would slow significantly in the October-December period. They predicted that consumers and businesses would cut back on spending because of worries about the fiscal cliff.
But after Friday's reports, Peter Newland, an economist at Barclays Capital, said Barclays is raising its estimate of growth in the current quarter to a 2.4 percent annual rate, from a previous estimate of 2.2 percent.
Naroff said he thinks growth in the fourth quarter can reach a 2.6 percent annual rate. He said he expects growth to hit a rate of around 3.2 percent in the January-March quarter and 3.6 percent in the April-June quarter.
He said those estimates are based on his confidence that Washington policymakers will avert the sharp tax increases and spending cuts, which could trigger a recession if they remain in place for much of 2013.
Naroff said U.S. economic growth would benefit next year from a rebounding housing market, gradual hiring gains that will boost incomes and the likelihood that Europe's financial crisis will ease and dampen U.S. exports less than in 2012.
But he said his optimistic forecasts would be derailed if the economy goes off the fiscal cliff in January, which could send shockwaves through financial markets.
"If the fiscal cliff is breached, the biggest concern is confidence," Naroff said. "I remain hopeful that saner heads will prevail in Washington."
Economists said the budget impasse and the uncertainty it's created about tax rates are reducing consumer confidence. The University of Michigan said Friday that its index of consumer sentiment for December fell to 72.9, its lowest point since July. It was a sharp drop from the November reading of 82.7, a five-year high.
Chris G. Christopher Jr., senior economist at IHS Global Insight, said he still expected holiday retail sales to increase a respectable 3.9 percent this year over last year despite slumping consumer confidence. And he said spending momentum should continue into 2013 — as long as the fiscal cliff is resolved in a way that avoids damaging the economy.
"We are assuming that the fiscal cliff does get resolved, and if it does, we should see strong consumer spending and momentum for the economy in 2013," Christopher said. "But if we go down the fiscal cliff, then the first quarter will not be pretty.

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Scenarios: Seven ways the US 'fiscal cliff' crisis could end

The U.S. House of Representatives' rejection of a bill to raise taxes on just 0.18 percent of Americans - those making more than $1 million a year - has raised questions about the Republican-led chamber's ability to approve any plan to avert the looming "fiscal cliff."
Unless President Barack Obama and the U.S. Congress can forge a deal during the Christmas and New Year's holiday season, the largest economy in the world could be thrust back into a recession because of the steep tax increases and spending cuts that are due to begin in January.
The threat of across-the-board government spending cuts and tax increases - about $600 billion worth - was intended to shock the Democratic-led White House and Senate and the Republican-led House into moving past their many differences to approve a plan that would bring tax relief to most Americans and curb runaway federal spending.
For weeks, Obama and House Speaker John Boehner, the top Republican in Congress, have struggled to find a compromise.
But after a glimmer of hope that a deal was close early this week, Boehner - apparently under pressure from anti-tax House Republicans aligned with the conservative Tea Party movement - pressed the "pause" button on negotiations. He then tried to push a backup plan through the House late on Thursday, only to see his fellow Republicans kill it.
Where do Obama and Congress go from here? Here are some possible scenarios.
* Obama and Boehner go back into their secret negotiations.
Before Boehner started touting his failed "Plan B" to boost taxes on those who make more than $1 million, he and Obama were moving closer together on a plan to raise taxes on certain high-income Americans and cut spending. They could pick up where they left off and quickly cut a deal to bridge the gap.
But a compromise with possibly $1 trillion in new taxes and $1 trillion in new, long-term spending cuts could be a tough sell for both Republicans and Democrats in Congress.
Boehner would have to persuade enough Republicans on the idea of tax increases. Obama, meanwhile, would have to get Democrats in Congress to back cuts to some social safety net programs such as Social Security pensions and Medicare and Medicaid health insurance for the elderly and poor. House Republicans appear to be the tougher sell.
* A huge drop in the stock market sends a loud message to Washington politicians to stop arguing and cut a quick but meaningful deal.
That is what happened in late September 2008, after Congress rejected a massive financial bailout package despite warnings by Federal Reserve Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson of an economic collapse if the bill failed.
The Dow Jones Industrial Average plunged more than 700 points and Congress quickly reversed course, approving the $700 billion Troubled Asset Relief Program just days later.
The "fiscal cliff" may not be as dramatic a situation, but the tax increases and cuts in federal spending could deal a stiff blow to the economy.
* No deal happens in the dwindling days of 2012 and the U.S. government jumps off the fiscal cliff - at least temporarily.
On January 1, income taxes would go up on just about everyone. During the first week of January, Congress could scramble and get a quick deal on taxes and the $109 billion in automatic spending cuts that most lawmakers want to avoid.
Why could they reach a deal in January if they fail in December?
The reason would be that once taxes go up, it would be easier to allow a few of those increases to remain in place - mostly on the wealthy - and repeal those that would hit middle- and lower-income taxpayers.
Such a scenario would mean that no member of Congress technically would have to vote for a tax increase on anyone - taxes would have risen automatically - and the only votes would be to decrease tax rates for most Americans back to their 2012 levels.
* No deal occurs for another six weeks or so.
If Congress does not raise the nation's debt limit, by mid-February the Treasury Department likely would exhaust its ability to borrow. That would put the nation at risk of defaulting on its debt.
Republicans have withheld their approval of the debt-limit increase as leverage to try to get the kind of "fiscal cliff" solution they want: Fewer increases in spending and taxes, and more cuts to Social Security, Medicare and Medicaid.
This is the strategy they employed in mid-2011 during the last fight over the debt limit, which is about $16.4 trillion.
Republicans wrung spending cuts out of Democrats in return for new borrowing authority, but paid a political price. Global financial markets were rocked by the long uncertainty brought on by the standoff in Congress, one ratings agency downgraded U.S. credit standing and Republicans saw their public approval ratings sink.
* Boehner decides on a gutsy move: Call a House vote on a bill that would raise tax rates for families with net annual incomes above $250,000, exactly what Obama has sought.
The plan could pass the House with strong Democratic support and some Republican votes. As soon as it passed, the House likely would leave town for the rest of the year without addressing other Obama priorities such as increasing the government's debt limit.
* A partial deal is struck at any point.
Congress could pass a plan that would put off most of the income tax increases that are due in January, or extend some other expiring tax breaks - namely one to prevent middle-class taxpayers from being subject to higher tax rates aimed at the wealthy under the alternative minimum tax.
* Stock markets do not tank and Washington politicians conclude that the "fiscal cliff" is not such a bad thing.
Under this scenario, Congress and the White House could continue sniping at each other throughout 2013 and 2014 as they try to revamp tax policy and impose long-term spending cuts.

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Wall Street Week Ahead: A lump of coal for "Fiscal Cliff-mas"

NEW YORK (Reuters) - Wall Street traders are going to have to pack their tablets and work computers in their holiday luggage after all.
A traditionally quiet week could become hellish for traders as politicians in Washington are likely to fall short of an agreement to deal with $600 billion in tax hikes and spending cuts due to kick in early next year. Many economists forecast that this "fiscal cliff" will push the economy into recession.
Thursday's debacle in the U.S. House of Representatives, where Speaker John Boehner failed to secure passage of his own bill that was meant to pressure President Obama and Senate Democrats, only added to worry that the protracted budget talks will stretch into 2013.
Still, the market remains resilient. Friday's decline on Wall Street, triggered by Boehner's fiasco, was not enough to prevent the S&P 500 from posting its best week in four.
"The markets have been sort of taking this in stride," said Sandy Lincoln, chief market strategist at BMO Asset Management U.S. in Chicago, which has about $38 billion in assets under management.
"The markets still basically believe that something will be done," he said.
If something happens next week, it will come in a short time frame. Markets will be open for a half-day on Christmas Eve, when Congress will not be in session, and will close on Tuesday for Christmas. Wall Street will resume regular stock trading on Wednesday, but volume is expected to be light throughout the rest of the week with scores of market participants away on a holiday break.
For the week, the three major U.S. stock indexes posted gains, with the Dow Jones industrial average <.dji> up 0.4 percent, the S&P 500 <.spx> up 1.2 percent and the Nasdaq Composite Index <.ixic> up 1.7 percent.
Stocks also have booked solid gains for the year so far, with just five trading sessions left in 2012: The Dow has advanced 8 percent, while the S&P 500 has climbed 13.7 percent and the Nasdaq has jumped 16 percent.
IT COULD GET A LITTLE CRAZY
Equity volumes are expected to fall sharply next week. Last year, daily volume on each of the last five trading days dropped on average by about 49 percent, compared with the rest of 2011 - to just over 4 billion shares a day exchanging hands on the New York Stock Exchange, the Nasdaq and NYSE MKT in the final five sessions of the year from a 2011 daily average of 7.9 billion.
If the trend repeats, low volumes could generate a spike in volatility as traders keep track of any advance in the cliff talks in Washington.
"I'm guessing it's going to be a low volume week. There's not a whole lot other than the fiscal cliff that is going to continue to take the headlines," said Joe Bell, senior equity analyst at Schaeffer's Investment Research, in Cincinnati.
"A lot of people already have a foot out the door, and with the possibility of some market-moving news, you get the possibility of increased volatility."
Economic data would have to be way off the mark to move markets next week. But if the recent trend of better-than-expected economic data holds, stocks will have strong fundamental support that could prevent selling from getting overextended even as the fiscal cliff negotiations grind along.
Small and mid-cap stocks have outperformed their larger peers in the last couple of months, indicating a shift in investor sentiment toward the U.S. economy. The S&P MidCap 400 Index <.mid> overcame a technical level by confirming its close above 1,000 for a second week.
"We view the outperformance of the mid-caps and the break of that level as a strong sign for the overall market," Schaeffer's Bell said.
"Whenever you have flight to risk, it shows investors are beginning to have more of a risk appetite."
Evidence of that shift could be a spike in shares in the defense sector, expected to take a hit as defense spending is a key component of the budget talks.
The PHLX defense sector index <.dfx> hit a historic high on Thursday, and far outperformed the market on Friday with a dip of just 0.26 percent, while the three major U.S. stock indexes finished the day down about 1 percent.
Following a half-day on Wall Street on Monday ahead of the Christmas holiday, Wednesday will bring the S&P/Case-Shiller Home Price Index. It is expected to show a ninth-straight month of gains.
U.S. jobless claims on Thursday are seen roughly in line with the previous week's level, with the forecast at 360,000 new filings for unemployment insurance, compared with the previous week's 361,000.

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U.S. judge approves settlement in BP class action suit

(Reuters) - A U.S. judge on Friday gave final approval to BP Plc's settlement with individuals and businesses who lost money and property in the 2010 Gulf of Mexico oil spill.
The order only addressed the settlement of economic and property damage claims, not a separate medical benefits settlement for cleanup workers and others who say the spill made them sick.
BP has estimated that it will pay $7.8 billion to settle more than 100,000 claims in the class action litigation.
U.S. District Judge Carl Barbier initially approved the deal in May, but held a "fairness hearing" in November to weigh objections from about 13,000 claimants challenging the settlement to resolve some of BP's liability for the worst offshore oil spill in U.S. history.
London-based BP's Macondo well spewed 4.9 million barrels of oil into the Gulf of Mexico over a period of 87 days. The torrent fouled shorelines from Texas to Alabama and eclipsed the 1989 Exxon Valdez spill in Alaska in severity.
Lawyers for some affected parties had objected to the deal, reached in March between BP and lawyers representing plaintiffs ranging from restaurateurs, hoteliers, and oyster men who lost money from the spill. They argued that some claimants would be underpaid or unfairly excluded.
But in a 125-page order approving the settlement, Barbier called the deal "fair, reasonable and adequate," citing the low number of class members who objected or opted out.
BP welcomed the approval order in a statement, adding that the settlement resolves the majority of economic and property damage claims stemming from the accident.
"Today's decision by the Court is another important step forward for BP in meeting its commitment to economic and environmental restoration efforts in the Gulf and in eliminating legal risk facing the company," BP said.
Separate from the class action claims, BP has been locked in a year-long legal battle with the U.S. government and Gulf Coast states to settle billions of dollars in civil and criminal liability from the explosion.
In a settlement with the U.S. government announced last month, BP agreed to pay $4.5 billion in penalties and plead guilty to felony misconduct. The government also indicted the two highest-ranking BP supervisors aboard the Deepwater Horizon rig during the disaster, charging them with 23 criminal counts including manslaughter.
The class action case is In Re: Oil Spill by the Oil Rig "Deepwater Horizon" in the Gulf of Mexico on April 20, 2010, U.S. District Court for the Eastern District of Louisiana, No. 10-2179.

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Senators write Sony, criticize 'Zero Dark Thirty'

WASHINGTON (AP) — The movie "Zero Dark Thirty" is misleading and "grossly inaccurate" in its suggestion that torture produced the tip that led the U.S. military to find terrorist leader Osama bin Laden, three senators said Wednesday in a letter to the head of Sony Pictures Entertainment.

The filmmakers dispute that interpretation and encourage people to see their movie, already considered a top Oscar contender, before characterizing it.

The members of the Senate Intelligence committee — Dianne Feinstein, Carl Levin and John McCain — insisted that Sony and its president and CEO, Michael Lynton, had an obligation to alter the movie and make clear that torture in the hunt for bin Laden was fiction and not based on fact.

"We are fans of many of your movies, and we understand the special role that movies play in our lives, but the fundamental problem is that people who see 'Zero Dark Thirty' will believe that the events it portrays are facts," the three senators wrote. "The film therefore has the potential to shape American public opinion in a disturbing and misleading manner."

McCain has insisted that the waterboarding of al-Qaida's No. 3 leader, Khalid Sheikh Mohammed, did not provide information that led to the bin Laden's compound in Pakistan.

Last year, McCain asked then-CIA Director Leon Panetta for the facts, and he said the hunt for bin Laden did not begin with fresh information from Mohammed. In fact, the name of bin Laden's courier, Abu Ahmed al-Kuwaiti, came from a detainee held in another country.

Feinstein, who heads the Intelligence committee, backed up McCain's assessment that waterboarding of Mohammed did not produce the tip that led to bin Laden.

In their letter to Sony, the lawmakers said the "use of torture in the fight against terrorism did severe damage to America's values and standing that cannot be justified or expunged. It remains a stain on our national conscience. We cannot afford to go back to these dark times, and with the release of 'Zero Dark Thirty,' the filmmakers and your production studio are perpetuating the myth that torture is effective. You have a social and moral obligation to get the facts right."

Director Kathryn Bigelow and screenwriter Mark Boal said in a statement from Sony that they depicted "a variety of controversial practices and intelligence methods that were used in the name of finding bin Laden."

Bigelow and Boal, who won Oscars for "The Hurt Locker," said the new film showed that no single method was responsible in the successful manhunt for bin Laden, and no single scene in isolation captures the total effort the movie dramatizes.

McCain said he watched the movie Monday night after receiving a copy.

"Zero Dark Thirty" is opening in New York and Los Angeles this week. It opens across the country next month.

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Arnold Schwarzenegger's "Ten" to kick off 2014

LOS ANGELES (TheWrap.com) - Open Road Films will release Arnold Schwarzenegger's action thriller "Ten" nationwide on January 24, 2014, the company announced on Wednesday.

Directed by David Ayer ("End of Watch"), the former governor leads an elite DEA task force that takes on the world's deadliest drug cartels.

When the team executes a high-stakes raid on a cartel safe house, they think their work is done until, one-by-one, the 10 members start to be eliminated.

The film also stars Joe Manganiello, Sam Worthington, Harold Perrineau, Terrence Howard, Max Martini, Josh Holloway, Olivia Williams and Mireille Enos.

The original "Ten" screenplay is by Skip Woods ("X-Men Origins: Wolverine"). Bill Block, Paul Hanson, Joe Roth, Palak Patel and Al Ruddy produced the film.

Financing was by QED International.

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'Zero Dark Thirty' Is Now Officially Wrong About Torture

We already knew that Zero Dark Thirty messed up a couple of details about the bin Laden raid, but now, some senators would like the filmmakers to know they're straight up "incorrect." More specifically, Senators Diane Feinstein, Carl Levin and John McCain wrote in a letter addressed to Michael Lynton, chairman and CEO of Sony Pictures, that "Zero Dark Thirty is factually inaccurate, and we believe that you have an obligation to state that the role of torture in the hunt for Usama Bin Laden is not based on the facts, but rather part of the film's fictional narrative." They go on to say that the film encourages the minority of Americans who favor torture as an intelligence gathering technique. "This is false," the letter reads. "We know that cruel, inhuman, and degrading treatment of prisoners is an unreliable and highly ineffective means of gathering intelligence."

RELATED: Members of Congress Mull Over Looking at Bin Laden's Death Photo

This is hardly the cut-and-dry issue the senators make it out to be, though. Ever since the initial details of what Glenn Greenwald called a White House "propaganda film," critics and pundits alike have been jousting over the scenes that depict torture. Mother Jones's Adam Serwer said as much as the senators' letter does about the film's potential for changing Americans' mind about torture. That is, if they think torture helped us find bin Laden, they'll probably think torture is a good thing. Greenwald said in a separate column that the film propagandizes the public to favorably view clear war crimes by the US government, based on pure falsehoods." (He loves the "p" word.) Critics of the critics said that torture happened, the film is fiction and, furthermore, most Americans haven't even seen the film, so who are we to say what they'll think. You can read more about these issues in our handy guide to the Zero Dark Thirty debate.

RELATED: Legislation Congress Wants After Bin Laden's Death

On a pretty fundamental level, though, Wednesday evening's letter is a pretty assertive gesture from the senators. And it's a gesture that Sony Pictures probably ought to respond to, especially in light of other developments in the Zero Dark Thirty controversy, like that tricky situation in which the Pentagon leaked sensitive information to the filmmakers. The rest of us are free to continue arguing about whether or not the torture in the film is warranted and even whether or not the government is lying when they say that torture didn't provide any clues about bin Laden's location. (The senators do provide a lot of evidence for their claim, however.) Zero Dark Thirty's filmmakers, however, now have to work within the reality that is an official letter from the Senate. Their film is now officially factually inaccurate. It should blend in nicely with the rest of the world's films that are "based on first-hand accounts of actual events." 

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China's airing of 'V for Vendetta' stuns viewers

BEIJING (AP) — Television audiences across China watched an anarchist antihero rebel against a totalitarian government and persuade the people to rule themselves. Soon the Internet was crackling with quotes of "V for Vendetta's" famous line: "People should not be afraid of their governments. Governments should be afraid of their people."

The airing of the movie Friday night on China Central Television stunned viewers and raised hopes that China is loosening censorship.

"V for Vendetta" never appeared in Chinese theaters, but it is unclear whether it was ever banned. An article on the Communist Party's People's Daily website says it was previously prohibited from broadcast, but the spokesman for the agency that approves movies said he was not aware of any ban.

Some commentators and bloggers think the broadcast could be CCTV producers pushing the envelope of censorship, or another sign that the ruling Communist Party's newly installed leader, Xi Jinping, is serious about reform.

"Oh God, CCTV unexpectedly put out 'V for Vendetta.' I had always believed that film was banned in China!" media commentator Shen Chen wrote on the popular Twitter-like Sina Weibo service, where he has over 350,000 followers.

Zhang Ming, a supervisor at a real estate company, asked on Weibo: "For the first time CCTV-6 aired 'V for Vendetta,' what to think, is the reform being deepened?"

The 2005 movie, based on a comic book, is set in an imagined future Britain with a fascist government. The protagonist wears a mask of Guy Fawkes, the 17th-century English rebel who tried to blow up Parliament. The mask has become a revolutionary symbol for young protesters in mostly Western countries, and it also has a cult-like status in China as pirated DVDs are widely available. Some people have used the image of the mask as their profile pictures on Chinese social media sites.

Beijing-based rights activist Hu Jia wrote on Twitter, which is not accessible to most Chinese because of government Internet controls: "This great film couldn't be any more appropriate for our current situation. Dictators, prisons, secret police, media control, riots, getting rid of 'heretics' ... fear, evasion, challenging lies, overcoming fear, resistance, overthrowing tyranny ... China's dictators and its citizens also have this relationship."

China's authoritarian government strictly controls print media, television and radio. Censors also monitor social media sites including Weibo. Programs have to be approved by the State Administration of Radio, Film and Television, but people with knowledge of the industry say CCTV, the only company with a nationwide broadcast license, is entitled to make its own censorship decisions when showing a foreign movie.

"It is already broadcast. It is no big deal," said a woman who answered the phone at movie channel CCTV-6. "We also didn't anticipate such a big reaction."

The woman, who only gave her surname, Yang, said she would pass on questions to her supervisor, which weren't answered.

The spokesman for the State Administration of Radio, Film and Television said he had noticed the online reaction to the broadcast. "I've not heard of any ban on this movie," Wu Baoan said Thursday.

The film is available on video-on-demand platforms in China, where movie content also needs to be approved by authorities.

A political scientist at the Chinese Academy of Social Sciences who used to work for CCTV said the film might have approval, or it could have been CCTV's own decision to broadcast it.

"Every media outlet knows there is a ceiling above their head," said Liu Shanying. "Sometimes we will work under the ceiling and avoid touching it. But sometimes we have a few brave ones who want to reach that ceiling and even express their discontent over the censor system.

"It is very possible that CCTV decided by itself" to broadcast the film, Liu said. If so, he added, it would have been "due to a gut feeling that China's film censorship will be loosened or reformed."

"V for Vendetta" was released in the United States in 2005 and around the world in 2006. China has a yearly quota on the numbers of foreign movies that can be imported on a revenue share basis, making it tough to get distribution approval. Other movies that failed to reach Chinese screens in 2006 include "Brokeback Mountain" and "Pirates of the Caribbean: Dead Man's Chest." Chinese moviegoers that year were able to see "Mission: Impossible III" with Tom Cruise and "The Painted Veil," which was filmed in China and set in a Chinese village.

Warner Brothers, which produced and distributed "V for Vendetta," declined to comment.

China doesn't have a classification system, so all movies shown at its cinemas are open to adults and children of any age. A filmmaker and Beijing Film Academy professor, Xie Fei, published an open letter on Sina Weibo on Saturday calling for authorities to replace the movie censorship system that dates from the 1950s with a ratings system.

The airing of "V for Vendetta" raised some hopes about possible changes under Xi, who was publicly named China's new leader last month. He has already announced a trimmed-down style of leadership, calling on officials to reduce waste and unnecessary meetings and pomp. His reforms are aimed at pleasing a public long frustrated by local corruption.

State media say they have reduced reports on officials' trips as part of this drive. The official Xinhua News Agency warned this week that media outlets should "learn to play professionally in today's information age as an increasingly picky audience is constantly" putting them under scrutiny.

An American business consultant and author with high-level Chinese contacts said there is no less commitment to one-party rule in China, so any media reforms will only go so far.

"You can't have a totally free media as we would have in the West and still maintain the integrity of a one-party system," said Robert Lawrence Kuhn, who wrote the book "How China's Leaders Think." He said he thinks restrictions are being eased, "but it has to be limited."

The new leadership has to tread carefully, Kuhn said, because in the age of the Internet, talk about reforms won't be forgotten.

"High expectations, if they are not fulfilled, will create a worse situation," he said.

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2012 London Film Awards Announces Winners

"Beauty and the Breast" directed by Liliana Komorowska wins the London Film Awards’ top prize, the Gold Lion Award and Grand Jury Prize. “Womble” directed by Robert Pirouet wins the competition’s Special Jury Award.

London, UK (PRWEB) December 20, 2012
Jury Prizes and top award-winners of the 2012 London Film Awards were announced December 17th, 2012. The London Film Awards is London’s premiere film awards body which celebrates and awards the work of independent film's best and brightest contemporary filmmakers and screenwriters spanning the globe. The Official Jury selected one exclusive Gold Lion Award Winner for each official competition category, the awards’ highest and most esteemed honors. A full list of the 2012 winners can be found at the competition’s official website, http://www.londonfilmawards.com.

“Our 2012 competition marks an incredible year for the London Film Awards. LFA received submissions representing some of the world’s most talented filmmakers. After careful consideration, we have distilled the very best of this year’s entries,” said Joey Paulos, Executive Director of the London Film Awards. “We are honored to celebrate the talent and commitment of each of these accomplished artists.”

The Grand Jury Prize was presented to Beauty and the Breast directed by Liliana Komorowska (Canada).


Synopsis: A first-time documentary filmmaker offers a compelling insight into the devastating reality of breast cancer, as seen through the eyes of several female patients helping demystify the deadly disease while painting poignant and often humorous intimate.

The Special Jury Prize was presented to Womble directed by Robert Pirouet (United Kingdom).


Synopsis: Years have passed and what's changed? Jim Labey sits waiting in the corridor of his old school waiting for a job interview. The problem? The other side of the desk is Piers Mourant, an old classmate of Jim's...and Pier's remembers everything!

The Best Feature Film was presented to Pechorin directed by Roman Khrushch (Russia).


Synopsis: Based on the Russian classic Mikhail Lermontov novel “The Hero of Our Time”. All events shown as they are reflected in the mind of the dying hero, as a series of irrevocable mistakes and interpreted anew: it is either reconsideration or repentance.

The Best Short Film was presented to Dissarray directed by Chandradeep Das (India).


Synopsis: A day in the life of an obsessed loner whose immaturity and emotional isolation lead to dynamic imbalances in his life, driving him even to a point where he considers killing the girl.

The Best Animated Film was presented to Seasons directed by Haowei Hu (USA).


Synopsis: Seasons, is a surreal motion graphics animation based on the changing seasons. Beginning with spring, the richly hued illustrations in this work come alive as they transform in color and rhythmic tempo to reveal the full seasonal spectrum.

The Best Documentary Short was presented to Ian Wright / Nothing to Something directed by Marcel Beckford (United Kingdom).


Synopsis: This detailed account documents the rise of a young black boy from the harder side of South East London, who rose through all adversity to become the highest scoring player for Arsenal Football Club.

The Best Screenplay was presented to One of These Things is Not Like the Others directed by Adam Wilson (USA).


Synopsis: Josh, a NYC grad student, surprises his southern conservative family at Thanksgiving when he brings home his African-American boyfriend.

The Best Experimental Film was presented to The Color of Time directed by Anthony Szulc (USA).


Synopsis: The Color of Time, a collaboration between painter/sculptor Carol Brown Goldberg and filmmaker Anthony Szulc is an 11 minute 'Documoir' exploration of color, memory, art, history, family, poetry, and human imagination.

The Best British Film was presented to Turn a Blind Eye directed by Harold Salakianathan (United Kingdom).


Synopsis: A city trader incriminates himself amidst the protests against the global financial crisis.

The Best Director was presented to Aurelia directed by Victor Ghizaru (Canada).


Synopsis: Aurelia embarks on a journey to find her father. Cut off from the world, she naïvely discovers simple things that marvel her infant spirit. A peaceful story about self-discovery, taking place in the empty fields of a forgotten land.

The Cinematic Vision Award was presented to Ghost Track directed by Fabrizio Rossetti (Spain).


Synopsis: Isabel is a cleaner who dreams of being a singer. She owns an Ipod, within which there are six women, each of whom, like Isabel, represent a musical note. Each woman is the protagonist of a different story connected to the path Isabel must take.

The Best Web Video was presented to Ian Wright / Nothing to Something directed by Marcel Beckford (United Kingdom).


Synopsis: This detailed account documents the rise of a young black boy from the harder side of South East London, who rose through all adversity to become the highest scoring player for Arsenal Football Club.

The Best Comedic Film was presented to Womble directed by Robert Pirouet (United Kingdom).


Synopsis: Years have passed and what's changed? Jim Labey sits waiting in the corridor of his old school waiting for a job interview. The problem? The other side of the desk is Piers Mourant, an old classmate of Jim's, and Pier's remembers everything.

The Best First-Time Director was presented to Beauty and the Breast directed by Liliana Komorowska (Canada).


Synopsis: A first-time documentary filmmaker offers a compelling insight into the devastating reality of breast cancer, as seen through the eyes of several female patients helping demystify the deadly disease while painting poignant and often humorous intimate

Feature Screenplay Competition Winners

Grand Prize Winner was awarded to Russian Cross written by Brian Moniz.

Second Place Screenplay was awarded to Safewood written by Zoe Mavroudi.

Third Place Screenplay was awarded to Seeing Red written by Sundae Jahant-Osborn.

Fourth Place Screenplay was awarded to Smilers written by Mike McGeever.

Fifth Place Screenplay was awarded to Crater written by Luke Pimental.

Short Screenplay Competition Winners

First Place Screenplay was awarded to El Jardinero written by Stefano Valentini.

Second Place Screenplay was awarded to Path written by Michael Wright.

Third Place Screenplay was awarded to GodsStorm written by Loren Sterman.

The Best Stage Play was presented to The City of Burning Bridges written by Ivana Jajalo.

The Best First-Time Screenwriter was presented to Sea Fever written by Neasa Hardiman.

The Best Television Pilot was presented to Grey Matters written by Ian Longacre.

About the London Film Awards:


As a distinguished international film competition, the London Film Awards celebrates and awards independent film's best and brightest talent spanning the globe. The London Film Awards places an emphasis on exclusivity and recognizes and awards only the most finely produced films and screenplays with honors. The Grand Prize Winners of each official competition category, as determined by our Official Jury, each receive the coveted Gold Lion Award as commemoration of their exemplary achievements. Additionally, the London Film Awards offers various Special Achievement Awards for standout productions.

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