Oct 22 - 28, 2001

Bush and Jiang united on terrorism

It was the first time the two men had met President George W Bush has said the US and China have a "common understanding" of the threat posed by international terrorists.

Mr Bush was speaking after meeting his Chinese counterpart, Jiang Zemin, in advance of Asia Pacific Economic Co-operation summit in Shanghai.

It is the first time President Bush has travelled overseas since the 11 September terrorist attacks and the first time he has met the Chinese leader.

Mr Bush said he was satisfied with the level of Chinese co-operation in the battle against Osama Bin Laden, chief suspect of the 11 September terrorist attacks, and his al-Qaeda network.

'No hesitation'.

"There was no hesitation, there was no doubt they'd stand with our people during this terrible time," Mr Bush said.

Mr Jiang said China was willing to work to develop a "constructive relationship" with the United States.

"We have a common understanding of the magnitude of the threat posed by international terrorism," President Jiang said.

"We hope that anti-terrorism efforts can have clearly defined targets and also should hit accurately and also avoid innocent casualties."

The common fight against terrorism looks set to improve relations between the two countries, damaged by the Nato bombing of the Chinese embassy in Belgrade two years ago, and by a row over a US spy plane earlier this year.

China is worried about Islamic separatists in its far western provinces.

Speaking before the meeting, President Bush emphasised personal chemistry.

He said it would be a chance for President Jiang to look him in the eye and take the measure of the American president.

French economic stimulus unveiled

In an effort to stave off a recession, the French government will pump 1.2bn euros into Europe's second largest economy during 2002.

The cash injection will come despite calls for strict controls on government spending from the European Union.

The parliament was told about new income support measures by Finance Minister Laurent Fabius who is eager to prevent a dip in growth ahead of France's national elections early next year.

While Mr Fabius spoke, strikers marched the streets of French cities, calling for higher wages, better job security and the right to retire at 55 instead of at 60.

Transport was disrupted across the country after four of France's five main union federations called the strikes.

The official growth prediction for 2001 has been scaled back to 2% due to the global economic downturn and the crisis caused by the 11 September attacks.

Greenspan upbeat on economy

Mr Greenspan is dubious about stimulus measures prospects for the future of the US economy have been "scarcely diminished" by the 11 September attacks, Federal Reserve chairman Alan Greenspan has said.

In a speech aimed at summing up the effect of the attacks on the economy over the past few weeks, Mr Greenspan said that growth in productivity would undergo "a one-time downward adjustment".

"But once the adjustment is completed, productivity growth should resume at rates in excess of those that prevailed in the quarter-century preceding 1995," he told a Congress committee.

Later in the day, the gloss was taken off Mr Greenspan's remarks when chief White House economic aide Lawrence Lindsey said it was likely that the US would see two quarters of negative growth — pushing it into a technical recession.

Mr Lindsey's comment, coupled with fears over the rapid spread of anthrax scares, helped push the US financial markets into another poor day's trading.

The Dow Jones industrial average fell 151.26 points, or 1.6%, to close at 9,232.97, while the more tech-heavy Nasdaq Composite Index slumped by 4.4% to 1,646.36, its biggest drop in percentage terms since 17 September.

Mr Greenspan was responding to fears that the current slump in spending and investment something that has particularly hit the technology sector — could put a check on growth for years to come.

Investment in technology is seen as the motor of the US economy, since it can help power efficiency gains, and therefore increase output per worker.

In a broadly upbeat speech, Mr Greenspan made no reference to the measures necessary to kick-start the economy.

The Fed has cut interest rates nine times this year — twice since the attacks — and the government is currently mulling a stimulus package to boost demand.

Apec backs world trade round

Apec countries control much of the world's trade Trade and foreign ministers from the Asia-Pacific region meeting in China have backed a new trade round to tackle the world economic slowdown.

President George W Bush has arrived in Shanghai to attend the meeting, which will be the first gathering of world leaders since the terrorist attacks on 11 September.

On Friday he will hold private meetings with Russian President Vladimir Putin, Japan's Prime Minister Junichiro Koizumi, and Chinese leader Jiang Zemin.

Restarting world trade talks, scheduled to begin in Doha in the Gulf Arab state of Qatar in November, has become a top priority of the US administration.

"Ministers have expressed explicit and firm support for the launch of a new WTO round at Doha next month," Chinese Foreign Minister Tang Jiaxuan said.

German finance minister warns on growth

German growth is expected to fall below 1.0% this year Growth in the German economy, Europe's largest, is set to fall well below official forecasts, the country's finance minister has said.

Hans Eichel warned that the economy would expand by about 0.75% this year, compared with a government target of about 2.0%.

"We have at the moment this year growth of under 1%. We have to draw up new estimates but I think we will reach 0.75%" he told German television station ZDF.

Meanwhile, Germany's leading trade unions have called for a multi-billion euro economic stimulus package to boost the German economy.

Government officials have warned for months that growth will fall below target.

But few have forecast an outlook as gloomy as that predicted by Mr Eichel.

"Next year we will clearly come in below the 2-2.25% we had assumed," he added.

"It will be somewhere between 1% and 1.5%.

Mr Eichel also said the implementation of tobacco tax increases, planned for 1 January next year, was likely to be delayed by "one, two or three months".

Germany's export-based firms have been hit by the global slowdown, and domestic demand has been subdued despite income tax cuts at the start of the year.

Although oil prices are well off their highs, domestic demand is expected to continue to remain subdued following the huge layoffs in the hi-tech and financial sectors.

Dieter Hundt, the head of Germany's employers' federation told SWR radio he was "deeply worried" about the economy.

German unemployment is expected to rise to more than 3.9 million in 2002, far above a government target of 3.5 million, which it has pledged to reach by the next general election in September 2002.

Asia's economies face aftershocks

Asia's economies are bracing themselves for further economic damage stemming from the attacks on the US.

But there is still substantial disagreement on how economies will be effected.

Most international financial institutions, such as the World Bank and Asia Development Bank, are simply saying the US military action is going to delay the region's recovery by at least six months.

"We think the current economic slowdown in East Asia will be prolonged by one or two quarters more than it would have been without the attacks," said Pradumna Rana, head of the regional monitoring team at the ADB in Manila.

"And when it does pick up in the later part of next year, the recovery will be weaker."

Results

Microsoft: The company said sales rose 5% in the three months to September but there was a 42% drop in profits, largely because of investment losses. Net profit was $1.29bn, on sales of $6.13bn, compared to profits of $2.2bn for the same period last year.

Hynix Semiconductor: South Korea's Hynix Semiconductor, the world's third-largest chip maker, has reported a bigger than expected 1.62 trillion won ($1.25bn) net loss for the third quarter.

Merrill Lynch: Over the July-to-September period, Merrill Lynch earned $422m (£292m), a decline of 53% on the $885m (£613m) reported for the same period a year ago.

Coca-Cola: Coca-Cola reported profits of $1.07bn, or 43 cents a share, unchanged from the same period of 2000, beating analysts' expectations.

McDonalds : Global fast-food restaurant chain McDonalds fared less well. Profits fell $3m to $545.5m, although the company still outperformed forecasts.

Colgate-Palmolive: Colgate-Palmolive, which makes toothpaste, soap and pet food, said net profits rose to $296.2m, from $275.3m in the same period last year.

RJ Reynolds: Third quarter profits rose 13% to $128m, or $1.31 a share, ahead of consensus estimates for $1.29.

eBay: For the third quarter, net profits rose to $18.8m from $15.2m a year-ago while revenues shot up to $194.4m from $113.4m.

WH Smith: The news, magazine and book retailer WH Smith has suffered an 8% fall in pre-tax profits to £130m.

JP Morgan Chase: For the quarter, the JP Morgan Chase earned $449m (£309.6m), or 22 cents a share, compared with $1.4bn (£965m), or 69 cents a share for the year-ago period.

Citigroup: The nation's largest bank, Citigroup, said it earned $3.26bn (£2.25bn), or 63 cents a share, in the third quarter, compared with $3.53bn (£2.43bn), or 68 cents a share, a year ago.

Mortgage lending falls

UK Mortgage lending by banks and building societies fell to £14.3bn last month, from a record £16.5bn in August, the Council of Mortgage Lenders said.

But the council said that the fall reflected a typical autumn lending drop, rather than a post-attack slide in consumer confidence.

Anthrax fears depress stock prices

Asian markets fell on US consumer confidence fears European shares have extended sharp opening losses, after fears over the impact of the anthrax bacterium on consumer confidence sent US and Asian stock markets tumbling.

London's FTSE 100 index of leading shares closed down 87 points at 5116.

French shares also closed lower, while German stocks stood down in late trade, if well above earlier lows.

Shares in US blue chips stood marginally weaker in midday trade, although the tech-heavy Nasdaq index had clawed its way back into positive territory, after falling 4.4% on Wednesday.

In Japan, shares in Tokyo Electron, a maker of semiconductor-manufacturing equipment, lost 9.12%.

The fall contributed to the Nikkei's 2.61% slump to 10,474.8 points at the close.

In Hong Kong, the Hang Seng ended 3.81% lower at 9,869.94.

The slides followed Wednesday's Nasdaq's fall, which was accompanied by a 1.61% fall in the broad-ranging Dow Jones industrial average.

UK unemployment fall

The number of people claiming unemployment benefit has defied predictions by continuing to fall, official figures have revealed.

The number of UK dole claimants fell by 4,900 last month, the Office for National Statistics said.

Singapore's exports dive

Electronics goods sales to the US halved Singapore's exports suffered their sharpest fall ever in September, as the city state grappled with its worst recession since the 1960s.

Singapore's economy, which depends heavily on hi-tech manufacturing, was feeling the impact of the US economic slowdown even before the 11 September terrorist attacks.

Hi-tech electronic goods make up half of Singapore's manufacturing output and account for about 12% of the total economy. Exports to the US fell by almost half in September, compared with the same month a year earlier. Singapore's overall exports slumped for the seventh month in a row.

Europe says no to airline aid

European carriers remain unhappy with existing aid European countries will not be allowed to pump money into troubled airlines, except to cover losses immediately following the attacks on the US on 11 September.

The ruling is in line with previous advice, and ignores the pleas of governments across Europe that the European aviation industry should get as generous a handout as its US rivals.

In one small loosening of policy, European Union Transport Commissioner Loyola de Palacio told EU transport ministers that aid would be considered on a case by case basis.

The EU previously said only damage done between 11 and 14 September could be considered eligible for state aid.

Bank mulls UK rate cut

Sir Edward cannot rule out a further economic slowdown The Bank of England would cut interest rates again to prevent a UK recession if economic statistics suggested the threat was rising, central bank governor Sir Edward George has confirmed.

"We cannot rule out a further slowdown in the UK," he said, insisting that the bank's Monetary PolicyCommittee (MPC) would step in and cut if that was required.

"If it suggests that the overall economy is weakening unnecessarily... then we will not hesitate to ease monetary policy further to try to reduce that effect," he told business leaders in Swansea.

Sir Edward remained confident that a recession can be avoided.

"I am still persuaded on the evidence that we will avoid the overall recession that is widely spoken of in the media, though it may be a bumpy ride for a time," he said.

Global growth rates would recover by 2004, Sir Edward predicted, urging his audience to be cautious and not exaggerate when considering the attacks' effect on the economy.

US industry slump

US industry is running at its lowest capacity for 18 years US industry is undergoing its longest slump since World War II, official figures have confirmed.

Output at US factories, utilities and mines slid 1% last month, data from the country's central bank, the Federal Reserve, showed.

The fall represented the 12th successive monthly decline, the longest since a series of decreases extending from November 1944 to October 1945.

The report also revealed that US industry was running at 75.5% capacity, the lowest level for 18 years.

Sharp fall in UK inflation

The headline rate of UK inflation, which includes mortgage interest payments, fell last month by 0.4 of a percentage point to 1.7%.

The underlying rate fell by 0.3 of a percentage point to 2.3%, just below the government's target level of 2.5%, the Office for National Statistics said.

The fall, which follows a surprisingly sharp rise in inflation in August, will add to pressure for further cuts in interest rates.

Statisticians credited last month's inflation fall largely to a drop in petrol prices and reduced mortgage payment, following the Bank of England's decision to cut interest rates on 2 August.

Last month's cut in interest rates, from 5% to 4.75%, has yet to show up in the ONS figures.

Japan sets extra budget

Japan's finance minister says reform is safe The Japanese government has settled on a supplementary budget to kickstart its limping economy.

The decision to spend an additional 2,000bn yen ($16.6bn) in the current financial year casts doubt on whether austerity measures to tackle deep-seated economic problems will be implemented, analysts say.

Announcing the extra money, Japanese finance minister Masajuro Shiokawa pledged that a ceiling on government borrowing would not be breached despite a shortfall in tax revenues caused by the economic slowdown.

The government will cut its growth forecast for the current year to March 2002 when it completes drafting the extra budget later this month, said economics minister Heizo Takenaka.

How the government will find its way out of this conundrum remains unclear.

White House mulls insurance aid

The White House is planning to ask Congress to back a plan which would relieve US insurers of some of the financial burden they would face in any future terrorist attack.

But the package on offer — a three-year programme — stops short of the full-scale government-backed terrorism insurance pool the industry had hoped for.

In effect, US insurers wanted the government to become an "insurer of last resort", backing up a multi-billion dollar private sector fund to be raised by insurers themselves.

N Korea in UK trade move

A senior North Korean official has said his government wants to begin discussions on re-adjusting old debt owed to British companies.

It is part of efforts to improve bilateral ties and economic relations.

The Deputy Director-General at the Ministry of Foreign Trade, Ri Hyok, said the government was working on creating a legal framework, including ways of preventing double taxation to encourage greater investment from British companies.

EU steps up war on terror funding

Banks will be asked to provide suspects' details The European Union has announced a major crackdown on money-laundering, as ministers meet to discuss anti-terrorism measures in the wake of the 11 September attacks.

The new measures will mean that a whole range of professionals — including accountants, estate agents and lawyers — will be required to report any "suspicious transactions" they come across.

Big rallies

Tens of thousands of people held peaceful protests across Germany on Saturday against the US air strikes on Afghanistan. Police estimated around 25,000 people were involved, but organizers insisted the total was nearer 60,000.

In London, too, thousands of Muslims and Christians attended a rally in protest against the attacks. The main events in Germany took place in the capital, Berlin, and in the southeastern city of Stuttgart, with other smaller protests in Bonn and in Wuppertal, western Germany.

Anthrax forces US House shutdown

The US House of Representatives shut down till Tuesday as an extraordinary precautionary measure after 34 members of Senate Majority Leader Tom Daschle's staff tested positive for exposure to anthrax.