Oct 29 - Nov 04, 2001

Bush's $100bn booster package

The US House of Representatives has narrowly passed a plan to inject $100bn into the country's flagging economy through further tax cuts.

But the bill is likely to face strong opposition in the Democrat-controlled Senate, which favours fewer tax cuts and more public spending.

"It's clear the House bill cannot pass the Senate as it is," commented one Senator.

The White House said it would continue to work with Congress on a final product.

Bush approval Treasury Secretary Paul O'Neill will meet senators of both parties to hammer out a compromise.

President George W Bush has already given his seal of approval to the House plan.

The House legislation, which would cost an estimated $99.5bn in 2002 and more than $159bn over 10 years, includes four key items sought by President Bush: repeal of the corporate alternative minimum tax.

A new round of tax rebate cheques of up to $600 for lower-income workers a cut in the 27% income tax rate to 25% in 2002 instead of 2006 greater tax write-offs for business equipment purchases.

The plan has been criticised by Democrats for not being generous enough to ordinary Americans and not doing enough to help people who lose their jobs.

Democrats favour fewer tax cuts and a $55bn public spending programme. The final legislation could take some weeks to formulate.

Fed sees US economy struggling

Few areas of the US economy escaped the fallout from the 11 September terrorist attacks, according to the Federal Reserve's latest survey of economic conditions.

The Fed found that the already ailing US economy was brought to a virtual standstill by events in New York and Washington.

Air travel was temporarily suspended and most Americans stayed at home to watch television news reports.

This was followed by widespread lay-offs, cancelled manufacturing orders and a fall in retail sales.

The weakness continued into October, with some areas of the economy recovering quicker than others, the Fed found.

The report, compiled from information gathered by the central bank's 12 regional banks, will be used by the Fed when it meets on 6 November to decide its next move on interest rates.

The findings, compiled in the so-called Beige Book, which takes its name from the colour of its cover, are likely to add to pressure for a 10th successive rate cut.

UK 'will avoid recession'

The UK is likely to boast the fastest growing economy in the G7 group of industrialised nations next year, says a report by the National Institute of Economic and Social Research (NIESR).

This flies in the face of recent predictions by the Confederation of British Industry (CBI), which is calling for a further cut in interest rates to stimulate growth.

The Governor of the Bank of England, Sir Edward George, has also said it is "too early" to rule out a UK recession.

However, the NIESR predicts that the UK economy will grow by a healthy 2.3% this year and 2.1% next year.

While inflation will be a little below the Bank of England's target of 2.5% in the fourth quarter of 2001, falling to 1.8% by the end of 2002.

"Unless the economic situation worsens further, there is no need for Bank of England to make further cuts in interest rates," the NIESR's quarterly report said.

"Fortuitously" last year's increases in public spending would help "insulate" the UK against a recession, it said.

Figures due out later on Friday are expected to show UK GDP growth is slowing but still nowhere near recession.

The Bank of England has cut interest rates six times this year in an effort to stave off recession, reducing borrowing costs to their lowest since the early 1960s.

The CBI recently called for a further half point cut to help Britain's hard-pressed manufacturers.

But Nigel Pain, senior research fellow with NIESR, told BBC Breakfast, that there was no need for any further cuts.

"We have growth of about 2% in the economy as a whole next year, a little bit below trend, but a long way from actual declines in output, which would signal a full-blown recession," he said.

This meant that the risk of a UK recession was almost non-existent at the moment, although much would depend upon the world economy.

UK export outlook 'worst in 21 years'

Export prospects for UK manufacturers have deteriorated at their fastest rate for 21 years, the Confederation of British Industry has warned.

Just 6% of factories were predicting better export trade over the year ahead, compared with 59% forecasting a gloomier outlook, a CBI survey said.

The figures left the ratio of pessimists compared with optimists was at its highest level since July 1980.

The CBI, which undertook the survey between 20 September and 10 October, said the reflected the turmoil immediately following last month's terror attacks on the US.

"Confidence can be unduly influenced in the short term by dramatic events such as the terrorist attacks," the CBI said.

Germany 'on the brink of recession'

Germany has suffered a sharp fall in growth this year and the recovery next year is likely to be very slight, a bi-annual report from the country's top six economic institutes has warned.

Europe's largest economy "is on the brink of recession", the report said, calling for tax cuts and lower interest rates across the European Union in order to secure a recovery in 2002.

Growth in Germany is expected to slip to just 0.7% this year from 3% in 2000, then next year it is expected to bounce back to 1.3%, according to the institutes' predictions.

The 11 September terrorist attacks on the US got parts of the blame for the economic slowdown.

In a direct challenge to the Berlin government, the wise men have added their voice to German industry and oppostion demands for urgent measures to stimulate Europe's biggest economy.

They warn that without loosening the government's tight public finances, the risk of a recession will increase significantly.

Specifically, they say tax cuts planned for 2003 should be brough forward by a year.

"Finance policy needs to reflect the economic risk," the institutes insisted.

The planned 13.5 billion marks cuts ($6.2bn, £4.3bn, 6.9bn euros) are part of a 60bn marks tax-relief package that has been approved for the period 2001-2005.

There is much resistance from the government against an early release of any tax-cut packages since this would delay efforts to balance its federal budget by 2006.

ECB leaves rates on hold

The European Central Bank has left interest rates unchanged at 3.75%, ignoring growing political pressure for cheaper borrowing costs in order to save the eurozone from a full-blown recession.

The ECB has cut rates only three times this year, unlike the US Federal Reserve which has made nine reductions to stimulate the economy there.

Analysts were evenly divided over whether rates would be cut or left on hold after recent weakness in the euro and falls in eurozone inflation.

"The ECB probably believes that there is insufficient data in the light of the September events to have moved just yet ... there may be a chance of one perhaps at the next meeting," said Kelly Tonkin of Lehman Brothers.

Japan's consumer prices fall

Consumer prices on Japan's high streets fell in September, continuing a relentless two-year slide and prompting economics minister Heizo Takenaka to say the country needs a tougher approach to halting deflation.

"There's an argument that falling prices are good for consumers, but we have to acknowledge that it is clearly problematic for the macroeconomy," he said.

"We have to put a high priority — and set a target on — measures to stop price falls," the minister said.

The index fell 0.8% from its September 2000 level, official figures showed.

New York welcomes XP launch

If attendees of the official launch ceremony in New York of Microsoft's latest operating-system software were expecting a splashy affair, they may have been a bit disappointed.

The recent terror attacks on the Twin Towers and the Pentagon have caused American business to rethink the way it does business, including the way in which it launches new products.

Gone is the bravado that characterised much of the promotion around US products, replaced by softer adverts that speak to the vulnerability felt by so many Americans.

Results

Chevron: Profits have fallen 24% at Chevron, which earlier this month formally completed its $39.5bn acquisition of Texaco.

The San Francisco-based oil firm said profits fell to $1.17bn for the three-month period between July and September compared with $1.5bn a year earlier.

American Airlines: US attacks AMR, the parent of the world's largest carrier American Airlines, has reported a $414m net loss in the third quarter, despite a half-billion-dollar bail-out package from the US government after the September attacks.

Lucent: Lucent reported a third quarter loss of $8.8bn, on sales of $5.2bn, including an $8bn one-off charge. That compared to losses of $484m in the same quarter last year, on sales of $7.2bn.

Compaq: Compaq said it lost $120m in the quarter on sales of $7.5bn, compared to profits of $557m on sales of $11.2bn in the same period last year.

Exxon: Profits at the Texas-based company fell to $3.32bn in the three months to the end of September, down from $4.29bn in the same period a year earlier.

GSK pharmaceutical: GSK pharmaceutical sales grew by 13% GlaxoSmithKline, Europe's biggest pharmaceuticals firm, has reported another healthy rise in profits. Pre-tax profits for the third quarter rose 17% to £1.35bn, in line with expectations.

World trade stagnates

China escapes the global slowdown in trade World trade will come close to stagnation this year as the US economic slowdown has spread to Western Europe and hit once-dynamic Asian emerging economies hard.

In its annual report, the World Trade Organisation (WTO) said it expected growth in the volume of global trade to shrink to only 2% this year, compared with 12% last year.

The WTO's gloomy forecast represents a retreat from its prediction in May of 7% expansion in world trade this year.

Asian economies moribund

Mr Koizumi still enjoys unprecedented popularity Japan's government and central bank are preparing to issue gloomy economic forecasts reflecting the impact of the global slowdown and the US attacks.

"I understand full-year growth will fall considerably below the 1.7% target," economics minister Heizo Takenaka told a parliamentary financial committee ahead of publishing the new forecast on Friday.

Bank of Japan Governor Masaru Hayami told the same committee the central bank's semi-annual economic report due on 30 October, would be much bleaker than the one in April.

Meanwhile in South Korea, the central bank has warned the economy would recover only in the second half of next year because of US-led war.

GM recalls 314,000 vehicles

The Chevrolet Venture is one of the models affected General Motors is recalling 314,000 'minivans' in the United States after a fault was discovered in door latches.

US and Bayer settle anthrax row

The United States government has secured a deal to cut the cost of stockpiling the anti-anthrax drug Cipro.

The treatment is made by German pharmaceutical firm Bayer, which has confirmed it will sign an agreement with the US authorities on Wednesday.

The two sides held talks on Tuesday amid pressure from the US Congress to disregard Bayer's patent and buy ciprofloxacin, the generic name for Cipro, cheaper elsewhere.

Bosses bemoan new EU rules

The EU fears companies don't consult their staff enough French industrialists have written an open letter to Prime Minister Lionel Jospin, complaining about the latest European directive on workers' rights.

The European Union's "Information and Consultation Directive' requires employers to consult their staff before major decisions.

Trade unions have welcomed the legislation, but employers argue it will hamper important decisions.

Chief executives from companies such as Peugeot, Totalfina Elf and Galeries Lafayette were among the 50 executives who wrote to Prime Minister Jospin.

Insurance costs 'threaten US stability'

US Treasury Secretary Paul O'Neill has warned Congress that the cost of insuring against future terrorist attacks poses a serious threat to America's economic stability.

Companies must be given access to affordable terrorism risk insurance, Mr O'Neill said.

And the government must be prepared to share the extra financial burden on insurers.

In a statement to the Senate Banking Committee, Mr O'Neill said the White House wanted to work with legislators to find a solution.

Copper bounces back

The US giant plans to cut production by 14% The price of copper has bounced back from the 15-year lows seen earlier this week.

News that the world's second-largest copper producer, Phelps Dodge, was to cut production propelled the copper price off its lows.

The news comes as the metals world congregates at London Metals Week, amid predictions of falling prices in the coming months.

On Monday, the price of copper hit $1,364 a tonne, a level last seen in February 1987. On Wednesday, the price of copper was about $1,382.

Foreign investors shun Britain

The UK's cost-base has become less competitive The UK has lost its edge as a target for foreign direct investment (FDI), according to a new report from consultants Ernst & Young.

The flop of internet-driven businesses and a sharp downturn in the telecoms and software sectors has led to a decline in foreign investment projects throughout Europe.

But the UK has lost market share to other European competitors as well as seeing overall FDI fall away.

US may issue war bonds

The United States could issue war bonds for the first time since 1945 after members of Congress voted in favour of the measure.

War bond sales would enable ordinary Americans to show support for the United States' campaign against the suspects in the 11 September attacks, according to the bill's backers.

"At this time of national unity these war bonds serve as an ideal vehicle for Americans to support efforts to bring those responsible for these attacks to justice," said John Sweeney, a Republican congressman from New York who initiated the bill.

New Railtrack will be a 'good risk'

Transport Secretary Stephen Byers has said the company he is proposing as a replacement for Railtrack would be viewed by lenders as a "good risk".

The new not-for-profit company would face challenges in its early years, Mr Byers told the House of Commons in a written statement.

But he assured potential investors that it would have access to emergency loan facilities in the event of a financial crisis.

US steel ruling condemned

A US trade panel has cleared the way for President George W Bush to impose import restrictions on steel products, after finding that some foreign steel products harmed the domestic industry.

The ruling by the International Trade Commission (ITC) has been condemned by South Korea, which has called for joint action with Japan and the European Union.

US steel importers warned the ruling risked triggering a trade war.

Dutch plan euro giveaway

On 1 January 2002 the euro finally becomes legal tender in 12 different countries.

More than 15 billion euro notes and 50 billion coins will be delivered to banks around Europe over the next few weeks in preparation.

The Netherlands has embraced the single currency with enthusiasm, and aims to complete the changeover in less than half the time that other countries are aiming for.

The government has undertaken an expensive advertising campaign and plans to give away free cash.

Bangladesh exports hit by US slowdown

Bangladesh's Finance Minister Saifur Rahman has warned that the country's economy will be hard hit by the slowdown in the US, one of its largest export markets.

The economic repercussions of the 11 September attacks in the US are likely to hit Bangladesh hard, he said.

World economists have already warned that poorer nations would be the ones who would suffer most from any resultant down-turn in the American economy.

Canada cuts interest rates

The Canadian central bank has cut its key interest rate by 75 basis points, surprising analysts who had expected a smaller cut.

The bank cited the 11 September attacks as a reason for the cut in its overnight rate to 2.75%, which is "intended to underpin confidence and provide additional support for domestic demand".

"They're obviously expecting some weakness as far as consumer spending and employment so I think they're being as proactive as possible," Robert Spector, senior economist at Merrill Lynch Canada said.