Iran has stepped up its defiance of the UN by expanding its nuclear enrichment activities, the UN’s nuclear watchdog said today.

The International Atomic Energy Agency’s findings have set the stage for further sanctions against Iran, which insists its nuclear programme is for peaceful purposes.

“Iran has not suspended its enrichment-related activities,” an IAEA report said. “[They] have continued with the operation of their pilot fuel enrichment plant and with construction of their [planned industrial underground] enrichment plant.”

The UN security council has twice imposed sanctions on Iran, starting last December, when Tehran rejected an offer of aid in exchange for a halt in uranium enrichment.

With the council’s latest deadline for Iranian compliance ending tomorrow, today’s report could pave the way for a new round of talks on fresh measures within days.

“Unless Iran addresses long-outstanding verification issues, and implements … required transparency measures, the agency will not be able to fully reconstruct the history of Iran’s nuclear programme and provide assurances about the absence of undeclared nuclear material and activities in Iran or about the exclusively peaceful nature of that programme,” the report said.

Meanwhile, the US has assembled nine warships off the Iranian coast to perform drills in what is the largest daytime assembly of ships in the Gulf since the 2003 invasion of Iraq.

In response, the Iranian defence minister, Mostafa Mohammad Najjar - who was not notified of the drills - said his country would resist any threat by its enemies.

Today’s report came after Mohamed ElBaradei, the head of the IAEA, faced criticism for saying that attempts to prevent Iran from developing its enrichment process were obsolete because it had already done so.

Mr ElBaradei said the security council should focus on negotiating to limit the programme to a level short of “industrial scale” to prevent Iran from constructing nuclear weapons.

“We believe they pretty much have the knowledge about how to enrich,” Mr ElBaradei told the New York Times last week. “From now, it’s simply a question of perfecting that knowledge. People will not like to hear it, but that’s a fact.”

The US, British, French and German ambassadors to the IAEA plan to formally complain that the comments “were not helpful”, a US official said.

In the past, Mr ElBaradei has clashed with the US - but his latest remarks disturbed officials in both Washington and Europe because they were interpreted as bolstering Tehran at a critical time.

Iran has vowed not to freeze its quest for atomic energy before, during or even as an outcome of negotiations.

The latest UN sanctions package - passed unanimously by the security council on March 24 - included a ban on Iranian arms exports and the freezing of assets of several leaders of the Revolutionary Guard and Iran’s fifth biggest bank.

Meanwhile, the new French president, Nicolas Sarkozy, said Iran must decide whether it wanted to cooperate with the international community or face new sanctions.

“I for my part think one should not hesitate to toughen the sanctions,” Mr Sarkozy told the German monthly magazine Cicero. Iran has announced plans to run 54,000 centrifuges to produce enriched uranium - enough for dozens of nuclear warheads.

Afternoon. Now then, here’s what the closing holes at Carnoustie are all about. The main news this morning was Ian Poulter’s charge up the leaderboard. After 14, he was five under for the day, and one under for the championship. But at 15 he hoicked his ball into a gorse bush - to a cry of “nice shot” from the gallery, causing Poults to reply “yeah, right” - and ended up carding double bogey. Lucky Slap indeed. Then he dropped another at the par-three 16th to move back to +2. And now he’s just dumped his drive at 17 into the Barry Burn. So another great round at Carnoustie falls to pieces over the closing holes, and it’s no Auld Claret Jug for Mr Troosers this year. Very sad.

12.20pm: Tiger tees off at the first… and finds the fairway! Well done! Now, no club-flinging tantrums today, please, Mr Tiger. And with his calm gameface on, he flings in a fine approach and sets himself up with a ten footer for bird. There’s a lesson to us all.

Thanks to increasing globalization, roughly 44% of the S&P 500’s 2006 revenues came from international sources. This compares to only 32% in 2001. The energy sector has the largest international exposure with 55.9%, followed closely by information technology with 55.2%. Interestingly, the exposure for the influential financials sector is a mere 30.9%.

Despite the housing-driven slowdown in the United States, overall global growth is surprisingly robust, as European and Asian economic momentum continues unabated. According to data from the International Monetary Fund (IMF), the U.S. represented only 12% of 2006 global GDP growth - highlighting the importance of global revenue diversification for U.S. multinationals.

As S&P 500 sales become increasingly internationally diversified, U.S. companies are better able to capitalize on overseas strength. At the same time, they can minimize the negative impact of the downturn in new housing demand at home.

We saw this dynamic at work in the first quarter. S&P 500 earnings growth of 8% significantly exceeded the 3% analysts expected heading into the earnings season. For the second quarter, S&P analysts expect earnings growth of 5.7%, dropping to 2.4% in the third quarter. S&P Equity Strategy believes rising foreign sales exposure, amid continued international economic momentum and a weakening U.S. dollar, will continue to act as a support to earnings.

Even so, S&P Equity Strategy does not believe the S&P 500’s increased international sales are a substitute for international equity portfolio diversification, for three reasons.

First, foreign companies are valued based on local political, economic, and regulatory conditions that do not impact the valuations of U.S. multinationals to nearly the same degree.

Second, we think currency diversification represents a major reason for owning foreign stocks. Many U.S. multinationals dilute this opportunity for diversification by hedging the currency risk associated with their overseas revenue, undermining their ability to leverage a weakening greenback.

Third, S&P believes foreign companies tend to reinvest locally for growth, thereby boosting their long-term prospects, whereas U.S. multinationals repatriate much of their overseas revenue to fund domestic share buybacks and dividends. After spending a record $431.8 billion on buybacks last year, S&P 500 companies spent an additional $117.7 billion on buybacks in the first quarter, putting 2007 on a pace for another record. Similarly, S&P 500 companies spent $58.3 billion on first-quarter dividend payouts. This means 2007 could eclipse the 2006 dividend record of $224.25 billion.

S&P Equity Research maintains its 65% equity allocation, divided between 40% U.S. stocks and 25% foreign issues. Our U.S. allocation includes 34% in large caps («www.businessweek.com»), 4% in mid-caps («www.businessweek.com»), and 2% in small-caps («www.businessweek.com»). The international allocation includes a 17% weighting in developed overseas markets like Europe, Australia, and Hong Kong («www.businessweek.com»); a 5% emerging market weighting («www.businessweek.com»), which includes China, India, South Korea, Taiwan, Latin America, Eastern Europe, Africa, and the Middle East; and a 3% allocation to Japan («www.businessweek.com»), reflecting its low 0.28 correlation to the S&P 500.