Dec 10 - 16, 2001

US Trade bill passes Congress

House Republicans in the US Congress have succeeded in their effort to secure enough votes to grant President George W Bush renewed authority to make international trade agreements.

The narrow vote — 215 to 214 — followed a day of last-minute phone calls by President George W Bush, who busily spent Thursday afternoon appealing to undecided House members just prior to the vote.

The bill now makes its way to the Senate, which has promised fast action on the legislation.

"By promoting open trade, we expand export markets and create high-paying jobs for Americans, while providing opportunities for other nations as a result of free trade," President George W Bush said in a written statement moments after the tight vote.

Under the bill, lawmakers have agreed to give the president authority to make trade deals, subject only to an up or down vote of the Congress.

Republicans, who hold a slight majority in the House of Representatives, pressed their Democratic counterparts with promises to help both displaced workers and endangered industries if lawmakers signed on to the legislation.

Republicans and Democrats have squabbled for years over whether to include protections for the environment and labour, with conservatives arguing that such provisions have no place in making such trade deals.

Mr Bush, who has made trade a top priority of his administration, has called upon Congress several times since arriving in the White House in January to give him the authority to make such deals.

Presidents have not enjoyed such power to make trade deals since it expired in 1994.

But it is precisely that sort of unilateral power that has some groups up in arms over the idea.

Japan confirms recession

Japan has entered a recession, according to the latest official figures, which show the world's second largest economy continued to shrink between July and September.

The news means the world's three biggest economies — the United States, Japan and Germany — are all now in, or on the verge of, recession for the first time since the 1970s.

Japan's prime minister, Junichiro Koizumi, pledged his government will push through promised austerity measures to tackle the problem: "We're taking steps. Structural reform is the best policy."

Meanwhile two members of the cabinet's economic team warned of worse to come.

More pain ahead Trade Minister Takeo Hiranuma raised the possibility that the economy may continue to contract in the next fiscal year — which ends in March 2003.

"If the current situation continues, negative growth is inevitable" in the next fiscal year, he said.

For this year, Economy Minister Heizo Takenaka warned, "there is much possibility that the October to December figures could also be severe".

Long-awaited figures showed that Japan's gross domestic product (GDP) shrank by 0.5% in the July to September period compared to the previous three months, giving an annualised decline of 2.2%.

The economy shrunk by 1.2% in the April to June period according to revised official figures.

This means Japan has now had two successive quarters of negative growth — which is the common definition of a recession.

The economy minister's warning suggests that the recession could be extended into a third quarter.

The US entered recession in March this year, according to the US National Bureau of Economic Research, an official panel of senior economists in a statement last month.

Mixed signs from US economy

Figures showing a big fall in the number of Americans receiving unemployment benefits and a rise in factory orders have raised hopes that the US economy could be heading for a swift recovery.

But other data suggested the outlook for the economy was not clear-cut, with worker productivity growing at a slower rate than expected.

And a study of US retailers found the weakest sales growth for November since the recession of 1990.

On Wall Street, the main Dow index of leading shares ended down 15 points at 10,099.

The Dow has posted big gains in recent days on hopes the US economy can pull out of recession relatively quickly, and on Wednesday it finished above the 10,000 level for the first time since early September.

ECB holds rates steady

The European Central Bank (ECB) has left its key interest rate unchanged at 3.25% at its last meeting before the introduction of euro notes and coins in January.

The ECB lowered rates by a bigger than expected fifty basis points four weeks ago, pushing them down to their lowest level since February 2000.

But the bank has reduced rates only four times this year unlike the ten cuts made by the US Federal Reserve and the seven by the Bank of England.

The ECB has not cut rates as often as its counterparts because inflation in the eurozone has been exceeding the 2% target.

European Central Bank President Wim Duisenberg said that euro-zone inflation was "firmly on a downward trend" and should fall below the 2% per cent next year.

Inflation fell to 2.1% in November from 2.4% in October.

UK leaves interest rates on hold

The Bank of England has left the cost of borrowing unchanged at 4%, in line with analysts' forecasts.

The news came as a disappointment to manufacturers, which have been calling for lower borrowing costs to lift them out of an eight month contraction.

But the Bank's decision was widely predicted by City analysts, who said that a firm housing market and robust consumer spending suggested that the risk of inflation remained too high for a further cut in rates.

Lowering interest rates encourages consumer spending, boosting the economy, but at the risk of higher inflation.

Inflation is currently running at 2.3% a year, just under the BoE's 2.5% target.

Analysts added that, having reduced interest rates by an unexpectedly high 0.5% last month, the BoE was unlikely to cut again this week.

Australia cuts rates as growth surges

Australia's central bank has taken out an insurance policy against slower economic growth with a quarter-point interest rate cut, taking rates to a 28-year low.

The decision came hard on the heels of news that the country is — so far at least — bucking the gloomy global trend, with gross domestic product leaping 1.1% between July and September.

For the full year to September, the economy expanded 2.5%, a sharp spurt after a 1.6% gain in the year to June.

But announcing its move to a 4.25% base rate, the sixth cut this year, the Reserve Bank of Australia made it clear that the mismatch might not last long.

Housing spending in particular could well flag as part of "the dampening impact on other parts of the economy of global events" in 2002, said RBA governor Ian Macfarlane in a statement

Argentina seizes pension funds

The Argentine government has said it is to use money held in private pension funds to help pay its bills.

The move came just hours before Economy Minister Domingo Cavallo left for Washington for talks with the International Monetary Fund (IMF) on Friday in a bid to secure a fresh loan.

"The people have to remain calm. Nothing new has happened," said Mr Cavallo.

The move is the latest measure to be carried out by the government as it struggles to avoid defaulting on its $132bn debt.

On Wednesday the International Monetary Fund (IMF) blocked a $1.3bn loan deal for Argentina, reviving fears of a default.

UK industrial output slumps

The UK's industrial sector put in its worst performance for a decade in October.

The figures, released by the Office of National Statistics, showed UK industry to have shrunk 1.1% compared to the previous month and 4.2% compared to October 2000. The 12-month slide is the worst since the UK's last recession in 1991.

France delays gas sale

The French Government has shied away from fully liberalising the gas market, dropping mention of gas privatisation from next year's budget.

The move is likely not only to anger the European Commission but also other EU countries, who argue that French companies have benefited from liberalisation in other countries.

With presidential and general elections next year, the Socialist-led government is anxious not to upset its smaller coalition partners, the Communists.

The government stuck with its original plan of transferring the state's gas network property to state-owned gas company Gaz de France and French energy giant TotalFinaElf.

Afghanistan's central banker invited home

Afghanistan's former central banker has been asked by the leader of the Northern Alliance to return to run the country's monetary policy.

The 38 year-old Abdul Qadeer Fitrat left Afghanistan in 1996 to attend the World Bank's annual meeting, but while travelling through New Delhi, Kabul was overrun by the Taleban.

De Beers may lose Russian diamonds

The Russian government is to ask Alrosa which mines one fifth of the world's diamonds to cut its guaranteed supply to De Beers, the world's leading diamond producer.

Taiwan targets Chinese business prospects

The appetite of Taiwanese firms for investment in China shows no sign of letting up now both have been accepted as members of the World Trade Organisation (WTO).

The island is believed to have invested at least $60bn in China since the communist state opened up to the outside world in 1978, and there are currently about 50,000 Taiwanese companies with a foothold on the mainland.

These figures are now expected to rise. Restrictions which limit business between the two will be relaxed, allowing more Taiwanese firms to invest in China.

Elizabeth Arden

The cosmetics company Elizabeth Arden has reported that net profits jumped by 160% in its third quarter. Net sales for the quarter were $302.9m compared with $163.4m for the same period a year ago.

Germany's slowdown continues

Unemployment in the Eurozone's biggest economy continued to slide in November as service industries contracted.

The pace at which German joblessness rose, and the contraction in the service sector, was less marked than it had been in recent months.

But that offered little comfort to the 3.789 million people now out of work, amounting to 9.2% of the working population, up from 9% in October.

Unusually, the slowdown is affecting the Western states more than their poorer counterparts in what had once been East Germany.

But unemployment in the East is still more than twice that in the West.

"The global growth slowdown is having a particularly strong effect on western Germany due to the concentration of industry there," said Bernhard Jagoda, president of the German Labour Office.

Ireland warns of slowdown

Irish finance minister Charlie McCreevy presented his pre-election budget to parliament, warning that the economy will slow down in the year ahead.

Job losses and poor tax revenues have hampered Mr McCreevy's ability to deliver the pre-election budget voters might have hoped for.

But Mr McCreevy forecast an exchequer surplus of 170 million euros next year surprising those who expected the government to have to borrow heavily — and promised an extra 425 million euros would be spent on health.

This year's budget was seen as heralding an end to an era of giveaways that characterised the heyday of the Celtic Tiger.

Landmark ruling

HSBC has had its appeal over dual mortgage rates rejected by the Financial Ombudsman, in a ruling, which could have implications for up to one million borrowers.

HSBC, along with other lenders Halifax and Nationwide have been taken to the Financial Ombudsman over dual variable rates, but this is the first decision — and it could have widespread implications.

The dispute centres on two-tiered mortgage rates — when lenders charge higher variable rates for existing customers than for new customers.

US steel giants eye merger

US Steel is considering merging with at least three other steel companies, including Bethlehem Steel and Wheeling-Pittsburgh Steel.

The companies believe consolidation is necessary to survive in what has been described as a dying industry, hit by high costs and cheap imports.

German truckers assess euro benefits

European cross-border transport companies are among those expected to benefit the most from the introduction of the euro.

One trucking business in Germany sends drivers to every single EU country every day.

Trucks from a sorting plant near Ulm head out on their overnight journeys across Europe.

Profits slide for Japan Inc

Japanese companies have seen their profitability slide by nearly a third in the three months to September — and expect things to get worse for the full year, which ends in March.

That could trigger a reverse in the slight rise in investment by companies, pushing the country deeper into recession.

Whether or not the recession — widely regarded as already well advanced — is official or not will be revealed on Friday, when economic growth figures are released.

Most observers expect a contraction, making two straight quarters of negative growth.

Severn Trent

Severn Trent said it was "particularly pleased" with its purchase, and said it should start to save £15m a year after it has been fully integrated with Biffa. Overall the group's pre-tax profits before interest, goodwill and exceptional items grew 10.6% to £210.6m.

Stagecoach sees profits fall

UK rail and bus operator Stagecoach said that the six months to October produced a pretax profit of £75.1m before one-off charges, down from £91.8m in the same period the year before.