Asian stocks mixed on Europe, US woes; Japan gains

BANGKOK (AP) — Asian stock markets were mixed Friday after data showed Europe slipped back into recession and several big U.S. retailers disappointed investors with weak forecasts.

The European Union‘s statistics agency said Thursday that the combined economy of the 17 countries that use the euro contracted 0.1 percent in the third quarter from the previous quarter. Surveys pointing to difficult conditions ahead suggest the recession could deepen.

“Although unsurprising, data in Europe confirmed that the region fell back into recession, an outcome that will do little to ease tensions,” analysts at Credit Agricole CIB in Hong Kong said in an email commentary.

Hong Kong’s Hang Seng rose 0.3 percent to 21,171.28. South Korea‘s Kospi fell 0.5 percent to 1,860.92. Australia‘s S&P/ASX 200 lost 0.2 percent to 4,339.40. Benchmarks in Taiwan, New Zealand and mainland China fell. Singapore, Thailand and the Philippines rose.

Japan‘s Nikkei 225 stock index jumped 1.8 percent to 8,990.80, rallying for a second straight day on expectations that the opposition Liberal Democratic Party may win elections next month and pursue more aggressive stimulus policies than the current leadership.

LDP leader Shinzo Abe has said he is determined to push for such policies and to find ways to weaken the yen, whose strength against other currencies has hammered exporters.

Stan Shamu, strategist at IG Markets in Melbourne, said Abe wants an inflation target of between 2 and 3 percent as a way to cheapen the Japanese currency, perhaps by printing yen or bulking up on purchases of assets like Japanese government bonds. Still, the target might be difficult to achieve, given the economy’s weakness, he said.

“With such a big export economy, the yen has massive significance on how the local economy performs,” Shamu said.

Japan’s exporters, whose fortunes are linked to the yen’s valuation, were buoyed by the prospect of a changing of the guard. Mazda Motor Corp. soared 8.9 percent. Nissan Motor Co. jumped 5.8 percent. Nikon Corp. surged 6.9 percent and Canon Inc. gained 5 percent.

In Australia, Whitehaven Coal fell 1.4 percent after announcing it would scale back some operations due to the decline in global coal prices.

In the U.S., investors were dealt dual blows: worse-than-expected revenue from global retailing giant Wal-Mart and data showing that manufacturing weakened in the Philadelphia and New York regions, reflecting damage from Superstorm Sandy.

Wal-Mart, Ross Stores and Limited Brands, the owner of Victoria’s Secret, also disappointed investors by issuing profit forecasts that fell short of expectations.

The Dow Jones industrial average closed down 0.2 percent to 12,542.38. The Standard & Poor’s 500 index fell 0.2 percent to 1,353.33. The Nasdaq composite index lost 0.4 percent to 2,836.94.

Benchmark oil for December delivery was up 10 cents to $ 85.55 in electronic trading on the New York Mercantile Exchange. The contract fell 87 cents to close at $ 85.45 a barrel in New York on Thursday.

In currencies, the dollar weakened to 81.09 yen from 81.21 yen late Thursday in New York. The euro fell to $ 1.2769 from $ 1.2773.

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France urges Mali to step up talks with rebels

PARIS (AP) — France‘s president called Thursday for stepped-up talks between Mali’s government and any leaders from its breakaway north “who reject terrorism,” even as African nations geared up for a possible military operation against Islamic extremists there.

President Francois Hollande‘s comments suggested a growing openness to dialogue with the extremists, but he remained committed to supporting the military planning effort.

Northern Mali fell to Islamic extremists in April, after coup leaders toppled the government in Bamako, Mali‘s capital. Fearing that northern Mali could become the latest hotbed of terrorism, France has been a driving force in international efforts to bolster Mali’s army to drive the Islamists from power.

Hollande spoke with interim Mali President Dioncounda Traore by phone on Thursday, partly to detail European efforts to help strengthen Mali’s army.

In recent days, representatives from the most moderate of three al-Qaida-linked groups that control northern Mali have been meeting with Burkina Faso‘s president, appointed as a mediator.

“France reiterates its wish that political dialogue will intensify between Malian authorities and representatives of northern populations who reject terrorism,” Hollande’s office said in a statement. “The acceleration of this dialogue must accompany the progress in African military-planning efforts.”

Earlier this week, the African Union approved a plan that calls for 3,300 African troops to be deployed in order to win back Mali’s north. European countries including France and Germany have expressed a willingness to provide military trainers and logistics support, but have stopped short of committing combat troops.

France, like many European countries, fears that the arid, northern Sahel region of Mali could become a breeding ground for terrorism, where al-Qaida and its allies could plot hostage-takings and attacks in Europe or beyond.

France has millions of people whose families hail from former French colonies in north and west Africa. Authorities have long been concerned that French-born militants could travel abroad for terrorism training and return home later to possibly carry out attacks.

French authorities are already investigating two French citizens who were arrested in Mali and neighboring Niger and are suspected of seeking to join up with the al-Qaida-linked extremists, a judicial official told The Associated Press.

Ibrahim Ouattara, a 24-year-old native of the northern Paris suburb of Aubervilliers who has dual French and Malian nationality, was arrested inside Mali this month and remains in custody there, the official said.

Separately, a 27-year-old Frenchman was arrested in August in Niger and has since been handed over to authorities in France, the official said, speaking on condition of anonymity because she was not authorized to discuss terrorism cases publicly.

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RIM CEO sees new BlackBerry powering growth

WATERLOO, Ontario (Reuters) – A new line of BlackBerry 10 devices will provide Research In Motion with a framework for growth over the next decade, offering long-term value for unhappy shareholders, Chief Executive Thorsten Heins said on Wednesday.

In an interview with Reuters, Heins said RIM had identified $ 800 million of the $ 1 billion of savings it promised for the financial year ending in early March, and was confident of finding the rest as it gets ready to launch the new phones.

RIM is betting that the new smartphones will help it claw back the market share it has lost to the likes of Apple Inc’s iPhone and devices powered by Google’s Android operating system.

Both consumers and corporate customers have abandoned the BlackBerry in droves, even though the devices offer security features that rivals have been unable to match.

“There’s this high-level security that you cannot walk away from, and then there’s ‘good enough’ security,” Heins said in an interview at RIM’s Waterloo, Ontario, campus, a sprawl of low-rise buildings.

But analysts remain skeptical, especially after the botched 2011 launch of RIM’s PlayBook tablet computer, which the company had hoped would compete with Apple’s wildly popular iPad. The PlayBook had top-of-the-line hardware, but its software was far from complete at the launch and needed multiple updates.

RIM delayed the roll-out of the BlackBerry 10 phones to the first quarter of 2013 so as not to repeat the errors that surrounded the PlayBook launch.

Heins said the delay was the correct decision – the way to ensure the BB10 phones are a high-quality product rather than a rushed one that would not meet customer expectations.

“I think it’s all lining up. Sometimes you get the feeling that the universe is in disarray, and with BlackBerry 10 coming, I see the stars lining up,” Heins said.

SLEEK DEMO MODELS

Sleek demo models of the new phones look much like the high-end smartphones in the market today, and company executives proudly showed off a touch-screen version and a version with the miniature QWERTY keyboard popular with many BlackBerry users.

Users flick a thumb or finger to maneuver from one program to another and can sneak a look at an incoming email while browsing the Internet or using other applications, a multi-tasking ability that RIM says rival devices lack.

Personal and business profiles can be kept separately, something RIM calls BlackBerry Balance. Corporations can erase only their share of the data on a device if they need to do so for security reasons, leaving personal photos, contacts and emails untouched.

The app library available at launch will not match the vast number available on other devices. Heins said RIM had chosen to focus on providing those apps needed in different regional markets. It expects some 100,000 apps to be ready at launch.

The developer community has been broadly enthusiastic about the devices. But financial analysts have mixed views on their likely reception in an ultra-competitive market.

Pacific Crest analyst James Faucette warned last week that BlackBerry 10 is likely to be dead on arrival – with an operating system that gets “a lukewarm response at best,” due to the unfamiliar user interface and a shortage of apps.

SHAREHOLDER VALUE

Heins insisted morale was high at the company, despite 5,000 job cuts and a rapidly sliding market share ahead of the launch of the new phones.

RIM’s share price is down more than 90 percent from a 2008 peak of about $ 148. It has fallen even after Heins, a former Siemens AG executive, took over in January. The shares on Wednesday closed at $ 8.49 on Nasdaq.

“The message to our shareholders is that we understand this is and has been a difficult time for them and for us,” the tall, bespectacled CEO said. “But with the development of the BlackBerry 10 platform we are truly convinced that we will create long-term value for RIM’s shareholders and investors.”

RIM has already given the demo phones to developers and to carriers, and its new BlackBerry Enterprise Server 10, which runs the devices on corporate networks, is in beta testing with 20 key customers — both government agencies and corporates.

Next month, the company will give more than 50 top enterprise customers technical previews of both BES 10 and the devices.

Heins said the feedback he is getting from the customer base “is very encouraging.”

With the erosion of RIM’s base particularly strong in North America, there has been speculation the company could choose to launch the new phones in a region where the phones remain popular. Heins said that would not be the case.

“We cannot launch every carrier and every country on the same day, but what we have defined is a set of waves in the various regions,” he said. “It is going to be a global launch. There isn’t one preferred region. We are managing and planning it as we speak.”

(Reporting by Euan Rocha and Janet Guttsman; Editing by Frank McGurty and Leslie Adler)

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Public Health Service Aids Hurricane Sandy Relief

The U.S. Public Health Service has begun its third week assisting with Hurricane Sandy relief in New York City. Rapid Deployment Force 1 (RDF-1) assumed command of the medical special needs shelter at Brookdale University Hospital and Medical Center late yesterday afternoon from RDF-2. RDF-2 arrived in New York City on Oct. 31 and immediately set up a medical shelter at York College in Queens. Within two days they were moved to Brookdale Hospital to establish a new shelter.

Captain Dan Beck, director of the USPHS Commissioned Corps Readiness and Response Program, discussed the Public Health Service’s response to Hurricane Sandy in a telephone interview yesterday afternoon. The Public Health Service is currently operating two medical special needs shelters, one in Edison, N.J., and the one at Brookdale Hospital in Brooklyn. The shelters are for storm evacuees with medical needs that cannot be met at a standard shelter. The Brookdale shelter has about 100 evacuees from nursing homes that were in the path of the hurricane.

The U.S. Public Health Service has five Rapid Deployment Forces, Beck said. RDF-3 is at the New Jersey shelter. RDF-2 has just completed its two week deployment in Brooklyn and its role has been assumed by RDF-1. Both shelters have received assistance from other USPHS teams , such as mental health teams and services access teams. Of the 41 total teams in the response program, including the five RDF teams, 14 (three RDFs) have had some or all of their members deployed to this emergency.

Captain Beck noted that the hurricane has required the deployment of a significant portion of the Public Health Service’s RDF personnel and assets. RDF-4 and RDF-5 are being held in reserve, in the event of another disaster. If New York or New Jersey need the USPHS to continue to operate either shelter, “tiger teams” of qualified PHS officers currently on other assignments will be used.

The shelter at Brookdale has had a fairly steady patient population of around 100 since it opened, according to Beck. The majority of the patients are from skilled nursing homes and cannot be discharged to a regular shelter. Some of the LPNs and nursing aides from the homes that were evacuated accompanied their patients and are working alongside the Public Health staff in the shelter, which comprises the sixth and 11th floors of the hospital.

The U.S. Public Health Service has deployed rapid deployment force teams for many recent hurricanes. RDF-3 was stationed in Connecticut after Hurricane Irene. RDF’s also were used with Hurricane Gustav and Hurricane Katrina. The role of an RDF in a disaster response, as Captain Beck described it, is to set up and operate a medical special needs shelter, using the cache of supplies from a Federal Medical Station. Patients in such shelters can be nursing home patients, or evacuees who have medical needs such as diabetics or those on home oxygen.

The U.S. Public Health Service is one of seven uniformed services in the United States government. Those consist of the four branches of the military, the Coast Guard, the uniformed members of the National Oceanic and Atmospheric Administration and the Public Health Service. The 6,500 members of the commissioned corps of the USPHS are all officers, and the corps uses the ranks of the U.S. Navy. The corps consists of medical professionals in fifteen different areas, including physicians, nurses, pharmacists and dentists. Their normal assignments include work in the Bureau of Prisons, the Indian Health Service, the National Institutes of Health and other venues where the medical needs of disadvantaged citizens can be met.

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French CEOs: ‘Help!’

When some German politicians called on French President François Hollande recently to step up the pace of economic reform in France, Finance Minister Wolfgang Schäuble sprang to Hollande’s defense in Berlin, saying it was wrong to call Europe’s second-largest economy the “sick man” of the region.

The heads of France’s biggest companies do not agree. Over the past few weeks, an extraordinary cry of alarm has risen from chief executives who warn that the French economy has gone dangerously off track. In an interview to be published on Nov. 15 in the magazine l’Express, Chief Executive Officer Henri de Castries of financial-services group Axa (CS:FP) warns that France is rapidly losing ground, not only against Germany but against nearly all its European neighbors. “There’s a strong risk that in 2013 and 2014, we will fall behind economies such as Spain, Italy, and Britain,” de Castries says.

On Nov. 5, veteran corporate chieftain Louis Gallois released a government-commissioned report calling for “shock treatment” to restore French competitiveness. And on Oct. 28, a group of 98 CEOs published an open letter to Hollande that said public-sector spending, which at 56 percent of gross domestic product is the highest in Europe, “is no longer supportable.” The letter was signed by the CEOs of virtually every major French company. (The few exceptions included utility Electricité de France, which is government controlled.)

The outcry is unusual for France Inc., which has tended to lobby behind the scenes and avoid public criticism of the government. That’s perhaps not surprising, since many CEOs attended the same schools as the country’s top politicians and often worked in government before going into business. De Castries was a classmate of Hollande’s at the elite Ecole Nationale d’Administration; Serge Weinberg, chairman of pharmaceutical giant Sanofi (SAN:FP) and a signatory of the Oct. 28 letter, used to work for Socialist Foreign Minister Laurent Fabius.

The problems they’re complaining about aren’t new. Heavy taxes and social charges required to support high government spending have eroded corporate profitability. In the l’Express interview, de Castries says that on average, the government charges incurred by his company for each employee are more than double the employee’s take-home pay. French labor costs are the second-highest in Europe, after Belgium, as companies are burdened with rigid and devilishly complicated work rules. No surprise, then, that operating margins at French companies have shrunk almost 40 percent over the past decade, while those of companies in Germany—where painful labor-market reforms were carried out—have risen about 40 percent.

With Europe mired in economic crisis, the French citizenry is now reaping the bitter results. Companies are shedding workers, pushing unemployment to a 13-year high of more than 10 percent, almost twice Germany’s rate. After three quarters of flat growth, the economy looks to be tipping into recession.

At the same time, the crisis has pushed other European governments—Italy’s, for example—to carry out long-overdue reforms. As Gallois put it in his report, France has become “unhooked” from the broader economic realities. Gallois listed 22 recommendations, including a €30 billion ($ 38 billion) reduction in payroll taxes, loosening of labor laws, and the lifting of a ban on shale-gas exploration.

Hollande’s government didn’t respond to most of the recommendations but said it would enact temporary tax credits for business totaling €20 billion over three years. Corporate bosses are not impressed. A temporary credit will not “structurally diminish the cost of labor” or reduce administrative burdens on business, Michel Landel, CEO of food-service group Sodexo (SW:FP), said in a Nov. 10 radio interview.

Businesses also fret that the process of applying for tax credits will add to already burdensome paperwork. “The first thing they do is to complicate the mechanism for lowering the social charges,” de Castries laments in the l’Express interview.

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Egypt recalls envoy to Israel after Gaza strike

CAIRO (AP) — Egypt has recalled its ambassador to Israel after an Israeli airstrike killed the military commander of Gaza‘s ruling Hamas.

In a statement read on state TV late Wednesday, spokesman Yasser Ali said that President Mohammed Morsi recalled the ambassador and asked the Arab League‘s Secretary General to convene an emergency ministerial meeting in the wake of the Gaza violence.

Morsi also called for an immediate cease fire between Israel and Hamas, an offshoot of Morsi’s Muslim Brotherhood. Israel says it struck in response to rocket attacks from Gaza.

Hours earlier, Morsi’s Muslim Brotherhood group denounced the Israeli airstrike as a “crime that requires a quick Arab and international response to stem these massacres.”

Relations between Israel and Egypt have deteriorated since longtime President Hosni Mubarak was ousted last year.

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Zynga CFO David Wehner deflects to Facebook

NEW YORK (AP) — Zynga‘s finance chief is leaving the troubled online game company to join Facebook.

San Francisco-based Zynga Inc. said Tuesday that David Wehner will take a “senior finance position” at the social networking company. His exact title will be vice president of corporate finance and business planning, Facebook said.

Chief accounting officer, Mark Vranesh, is replacing Wehner as chief financial officer, returning to the post he held from 2008 to 2010, while Zynga was still a private company.

Zynga also reshuffled its executive ranks, a move CEO Mark Pincus said puts the company in a position for “long-term growth.” Zynga, whose games include “FarmVille” and “Texas HoldEm Poker,” has seen its stock price fall sharply in recent months amid concerns about its ability to make money from mobile games, off of Facebook.

David Ko, who was previously chief mobile officer, is now chief operations officer. Barry Cottle, who came to Zynga from Electronic Arts Inc., is now chief revenue officer. He was previously executive vice president of business and corporate development.

The appointments seek to fill some of the holes left by executives who’ve left Zynga in recent months. John Schappert, Zynga’s chief operating officer, left in August after less than a year and a half on the job. Schappert’s exit was followed by that of Mike Verdu, the company’s chief creative officer. And in September Jeff Karp, the chief marketing and chief revenue officer, left the company.

Zynga is also reaffirming its guidance. The company still expects adjusted earnings of 2 or 3 cents per share. Analysts polled by FactSet expect 3 cents.

Zynga shares closed up 1 cent at $ 2.11 and added 2 cents in after-hours trading.

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Meningitis outbreak spurs calls to strengthen FDA

WASHINGTON (Reuters) – U.S. and state health regulators called on Congress on Tuesday to strengthen federal oversight of compounding pharmacies as lawmakers prepared for two days of hearings on a deadly fungal meningitis outbreak linked to a compounded steroid.

But the main federal regulator, the U.S. Food and Drug Administration, said in a statement to Reuters that it faces legal restrictions in regulating drug compounders such as the New England Compounding Center. The Massachusetts pharmacy was at the center of the outbreak that has infected 438 people, including 32 who have died, in 19 states.

The chief public health officer for Massachusetts also urged immediate congressional action to bolster federal oversight of the little-known, lightly regulated compounding industry, which is primarily overseen by state pharmacy boards.

“It is clear that the patchwork of disparate state regulations is not enough to keep the public safe,” Dr. Lauren Smith, interim commissioner of the Massachusetts Department of Public Health, said in written testimony filed with a U.S. House of Representatives oversight panel.

Lawmakers hope to shed light on why regulators failed to act against NECC despite multiple problems dating back to 1999. They also are focusing on whether new legislation may be needed to grant FDA clear authority to police the drug compounding industry.

“FDA’s authority over compounding pharmacies is more limited by law and needs to be strengthened,” said the federal agency’s statement to Reuters. “We look forward to working with Congress to prevent this from happening again.”

Those sentiments were echoed on Tuesday by a new report from the minority Democratic staff of the oversight and investigations panel.

“Legal authority over compounding has been complicated by court decisions that have cast doubt on FDA’s authority to regulate compounders,” the report said. “Compounders operate in a regulatory gap between state-regulated pharmacies and federally regulated drug manufacturers.”

Smith and FDA Commissioner Margaret Hamburg are scheduled to testify on Wednesday before the panel, the House Energy and Commerce subcommittee for oversight and investigations. A second congressional hearing is scheduled to take place before the Senate Health, Education, Labor and Pensions Committee on Thursday.

The Massachusetts health commissioner, who took office less than three weeks ago, said she is determined to find out why the Massachusetts Board of Registration in Pharmacy voted to sanction the company in September 2004 but ultimately agreed to a far weaker consent agreement with NECC in January 2006.

“I will not be satisfied until we know the full story behind this decision,” she said in her written testimony.

DEFRAUDING FDA

Smith said the Massachusetts pharmacy board’s executive director and staff attorney learned in April 2006 that executives from a company hired to ensure NECC’s compliance were convicted of federal crimes related to defrauding the FDA.

“However, we found no evidence to indicate that the executive director or staff attorney … provided this crucial information to the board. Nor did they see fit to send inspectors back to NECC in 2006 to determine if they were fulfilling the requirements of the corrective action plan,” Smith said.

But in May 2006, the board affirmed NECC to be in compliance with the consent agreement.

Smith also believes the board would have acted immediately against NECC last July — a month before it produced the final doses of steroid injections linked to the outbreak — if board staff had told board members about a complaint against NECC brought by Colorado authorities.

Earlier this month, the state fired board director James Coffey and board counsel Susan Manning for failing to act on the Colorado complaint.

The Massachusetts pharmacy board was left to oversee NECC’s operations in 2003 when state and FDA officials agreed that its activities did not constitute a manufacturing operation that would need to meet stringent federal standards for safety and efficacy, the FDA acknowledged on Tuesday.

The decision was originally disclosed on Monday by a House Republican staff report.

Where to draw the line between drug manufacturing and drug compounding is a central question for Congress as lawmakers debate the potential need for new legislation to expand the FDA’s authority.

Drug compounding is a little-known practice in which pharmacists traditionally alter or recombine drugs to meet the special needs of specific patients. It is overseen mainly by state authorities who are often ill-equipped for the job.

The activity has evolved in recent decades to include large-scale production that some experts view as drug manufacturing that should be subject to FDA regulation.

Not everyone agrees that the FDA needed new authority to stop New England Compounding Center from operating, however.

Advocacy group Public Citizen earlier this month called on the Obama administration to launch an independent probe of the FDA’s lack of action against NECC. The group alleges that the FDA already has the authority it needs, but that agency officials failed to take steps that could have prevented the current outbreak.

Smith’s written testimony also shows that NECC co-owner Barry Cadden was named to a state task force to study oversight of the compounding pharmacy industry in 2002. The task force met for two years and discussed potential regulatory changes.

But there is no record of formal recommendations and no changes were ever adopted.

(Editing by Lisa Von Ahn and Dan Grebler)

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EU workers in austerity protests

13 November 2012 Last updated at 20:19 ET

Workers across the European Union are set to stage a series of protests against rising unemployment and austerity measures.

The Day of Action and Solidarity calls on leaders to address growing social anxiety and abandon austerity measures.

Some 40 groups from 23 countries are involved in Wednesday’s protests.

Strikes are expected in Spain, Greece, Portugal and Italy, with other protests planned in Belgium, Germany, France the UK and some eastern EU states.

Wednesday’s action, which may affect some transport links and services across the continent, has been urged by the European Trade Union Confederation.

“Austerity is a total dead end, and must be abandoned,” said the group in a statement.

Continental protests

Unions in Spain and Portugal started strikes at midnight local time (23:00 GMT), to protest against austerity measures that have combined cuts in salaries, pensions, benefits and social services with hikes in tax rises.

Italy will see a four-hour national strike which transport workers are also expected to join.

In Greece the strike action is the third major walkout in two months as the country tries to reduce its budget deficit in line with international demands.

Continue reading the main story

The government must meet a 5bn-euro debt repayment by Friday and says it needs the bailout cash to avoid going bankrupt.

Greece must back a package of salary and pension cuts, and labour market reforms, and the 2013 budget, to receive the next part of a bailout – a 31.5bn-euro instalment from the International Monetary Fund and European Union that has been on hold for months – and avoid bankruptcy.

The BBC’s Mark Lowen in Athens says that with proposals for a fifth consecutive cut to pensions, an increase in the retirement age and reductions to salaries, benefits and healthcare, the fury among Greece’s population is growing.

In France, the CGT union has called for public sector strikes, but there are questions about how many workers will stay away.

The strikes are not anti-government, correspondents say, but rather a way of showing that workers in France are in solidarity with their fellow-workers elsewhere in Europe.

While some Belgian unions have told the BBC they will not be striking, all have expressed solidarity with the day’s protests, which is expected to see demonstrations outside the Brussels embassies of Germany, Spain, Greece, Cyprus, Portugal and the Republic of Ireland.

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General investigated for emails to Petraeus friend

PERTH, Australia (AP) — In a new twist to the Gen. David Petraeus sex scandal, the Pentagon said Tuesday that the top American commander in Afghanistan, Gen. John Allen, is under investigation for alleged “inappropriate communications” with a woman who is said to have received threatening emails from Paula Broadwell, the woman with whom Petraeus had an extramarital affair.

Defense Secretary Leon Panetta said in a written statement issued to reporters aboard his aircraft, en route from Honolulu to Perth, Australia, that the FBI referred the matter to the Pentagon on Sunday.

Panetta said that he ordered a Pentagon investigation of Allen on Monday.

A senior defense official traveling with Panetta said Allen’s communications were with Jill Kelley, who has been described as an unpaid social liaison at MacDill Air Force Base, Fla., which is headquarters to the U.S. Central Command. She is not a U.S. government employee.

Kelley is said to have received threatening emails from Broadwell, who is Petraeus’ biographer and who had an extramarital affair with Petraeus that reportedly began after he became CIA director in September 2011.

Petraeus resigned as CIA director on Friday.

Allen, a four-star Marine general, succeeded Petraeus as the top American commander in Afghanistan in July 2011.

The senior official, who discussed the matter only on condition of anonymity because it is under investigation, said Panetta believed it was prudent to launch a Pentagon investigation, although the official would not explain the nature of Allen’s problematic communications.

The official said 20,000 to 30,000 pages of emails and other documents from Allen’s communications with Kelley between 2010 and 2012 are under review. He would not say whether they involved sexual matters or whether they are thought to include unauthorized disclosures of classified information. He said he did not know whether Petraeus is mentioned in the emails.

“Gen. Allen disputes that he has engaged in any wrongdoing in this matter,” the official said. He said Allen currently is in Washington.

Panetta said that while the matter is being investigated by the Defense Department Inspector General, Allen will remain in his post as commander of the International Security Assistance Force, based in Kabul. He praised Allen as having been instrumental in making progress in the war.

The FBI’s decision to refer the Allen matter to the Pentagon rather than keep it itself, combined with Panetta’s decision to allow Allen to continue as Afghanistan commander without a suspension, suggested strongly that officials viewed whatever happened as a possible infraction of military rules rather than a violation of federal criminal law.

Allen was Deputy Commander of Central Command, based in Tampa, prior to taking over in Afghanistan. He also is a veteran of the Iraq war.

In the meantime, Panetta said, Allen’s nomination to be the next commander of U.S. European Command and the commander of NATO forces in Europe has been put on hold “until the relevant facts are determined.” He had been expected to take that new post in early 2013, if confirmed by the Senate, as had been widely expected.

Panetta said President Barack Obama was consulted and agreed that Allen’s nomination should be put on hold. Allen was to testify at his confirmation hearing before the Senate Armed Services Committee on Thursday. Panetta said he asked committee leaders to delay that hearing.

NATO officials had no comment about the delay in Allen’s appointment.

“We have seen Secretary Panetta‘s statement,” NATO spokeswoman Carmen Romero said in Brussels. “It is a U.S. investigation.”

Panetta also said he wants the Senate Armed Services Committee to act promptly on Obama’s nomination of Gen. Joseph Dunford to succeed Allen as commander in Afghanistan. That nomination was made several weeks ago. Dunford’s hearing is also scheduled for Thursday.

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Associated Press writer Slobodan Lekic in Kabul, Afghanistan, contributed to this report.

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