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INTERNATIONAL


April 08 - 14, 2002

EUROZONE INTEREST RATES STAY AT 3.25%

The European Central Bank has left European interest rates untouched at 3.25% for the fifth month in a row.

The decision comes as no surprise, and matches the overwhelming consensus of observers.

The ECB is thought to be awaiting more evidence of a sustained economic recovery before it begins to reverse the four interest rate cuts it made last year.

Earlier on Thursday, the Bank of England decided to leave its key interest rate untouched at 4%, having last lowered it in November.

The bank has a record in comparison with some central banks as being a hawk, and its brief orders it to focus on keeping inflation in check.

But with Europe's economy still crawling out of the doldrums after last year's downturn, growth in the first half of the year is likely to remain flat, picking up towards the end of the year.

Inflation remains uncomfortably high, at 2.4% well above the 2% ceiling the Bank has set itself.

Worries about the level of inflation are combining with fears about rising wages German union IGMetall is demanding a 6.5% increment this year to make economists believe that an interest rate hike can be no more than a few months off.

Oil prices, driven higher by the escalating violence in the Middle East are also likely to figure strongly in the ECB's deliberations from here on.

UK RATES KEPT ON HOLD

Bank of England economists have decided to keep UK interest rates unchanged at 4.0% for the fifth month in a row.

The decision had been widely expected by analysts, most of whom expect the Bank to start raising rates later this year.

Recent figures have indicated that the UK's struggling manufacturing sector is showing signs of recovery.

And as consumer spending has remained buoyant, economists expect the Bank to lift rates at some point to prevent inflation increasing.

"Today's decision is the right one," said Stephen Radley, chief economist at the Engineering Employers' Federation.

"Talk of increases in interest rates is premature as any rise would only serve to stop the tentative recovery dead in its tracks," he added.

The Confederation of British Industry (CBI) agreed.

"With inflation well under control and pay settlements slowing, the Bank had no reason to rock the boat," said Ian McCafferty, CBI chief economic adviser.

But Ruth Lea at the Institute of Directors warned that a rate rise may not be far off.

"Recent economic data has been firm and point to higher interest rates."

"Indeed we expect a rise by the end of the second quarter, despite the benign inflationary picture."

Geoffrey Dicks at RBS Financial Markets thought this would be too soon.

"Some City economists think the first rise will come in May, but I think that is premature," he said.

"The most likely timing is August."

EQUATORIAL GUINEA APPLIES TO JOIN WTO

The West African nation of Equatorial Guinea has asked for observer status at the World Trade Organization (WTO) and plans to apply for full membership.

The government was acting because it could not "remain on the fringes of the globalisation and development of the world's economy", the WTO said in a statement.

"At the international level, Equatorial Guinea's political philosophy is a free market economy within the context of trade liberalization, which is also one of the principles underpinning the creation of the WTO," it added.

President Teodoro Obiang Nguema Mbasogo a former brigadier general who seized power in a military coup in 1973 has begun to liberalise the economy and tried to encourage US investment.

Equatorial Guinea's economy was dependent upon agriculture but this situation was drastically changed with the discovery of large oil reserves.

IMF 'TO WITHHOLD ARGENTINA FUNDS'

The International Monetary Fund (IMF) is unlikely to release new funds to help Argentina's struggling economy, according to sources from the fund.

A delegation from the International Monetary Fund (IMF) arrived in Argentina to decide whether to grant the country fresh aid earlier this week.

"What they have to do, they can do it alone," an IMF source told Reuters.

"This is a case where what they need is adjustment, it is not financing," he said.

"This is for their own good and they should understand that."

Extra money is viewed as essential if Argentina is quickly to pull itself out of its financial crisis, and revive its virtually bankrupt banking sector.

Argentina is stuck in a four-year recession that culminated in the default on its $141bn of debt and a currency devaluation.

BANGLADESH HOPES FOR BUMPER JUTE CROP

Early rains in Bangladesh have boosted hopes for a bumper jute crop this year.

Bangladesh dominates the global jute market, accounting for up to 95% of total world supplies a year.

"The pre-monsoon rain will definitely help us grow more jute this season," said Mohammad Ahsanullah, a senior official of the Directorate of Jute.

Rainfall in the crucial two-week period after the crop is planted has been about 20% higher than last year.

Jute exports from Bangladesh hit a record of 1.55 million bales between July 2000 and June 2001.

But this year's rains have raised hopes that the record may be beaten.

JAPANESE BANKS SUE OVER LOCAL TAX

Sixteen major Japanese banks have filed a lawsuit in the city of Osaka to overturn a local tax on their gross profits, after they won a similar case in a Tokyo court last week.

The litigation aims to revoke a 3% tax on banks over the next five years.

The banks have demanded 1.6bn yen (10m) in damages.

Among the 16 lenders going to court are the Japanese mega-banks Sumitomo Mitsui Bank, Mizuho Holdings, Bank of Tokyo-Mitsubishi and UFJ Bank.

The Osaka tax is due to be collected from May, based on the gross profit of the banks in the year that ended in March, said Hiroyuki Onishi, the Osaka tax official in charge of the levy.

"Our current position is that we believe that this tax regulation is correct and justifiable," Mr Onishi said.

ANDERSEN US PARTNERS DEFECT

Andersen has agreed that most of its US tax partners will join rival accountancy firm Deloitte & Touche.

The agreement signals the start of the break-up of the troubled auditor in the US. Andersen is trying to salvage the remnants of its business both in the US and worldwide.

BA REPORTS FALL

British Airways has reported a 3.2% fall in passenger numbers in March compared with a year earlier.

The global average was pulled down by a 5.6% fall in traffic on its Americas routes.

AFRICAN BREWER CONFIRMS MILLER APPROACH

South African Breweries (SAB) has confirmed that it is in talks with the tobacco giant Philip Morris about buying its Miller Brewing company.

SAB said the talks with the US-based brewer were "at a preliminary stage and no conclusions have been reached".

On Wednesday, the Wall Street Journal reported that SAB was to buy Miller for $5bn (3.5bn) in shares and cash.

A combination of SAB and Miller would create the world's second largest brewer, and give SAB a toe-hold in the US market.

ZAMBIA AGREES STOP-GAP OIL DEAL

Zambia has agreed a stop-gap oil import deal to cover its domestic fuel requirements.

The one-off deal, which will see the southern African country import 180,000 tonnes of crude oil, became necessary following the collapse into receivership of the state oil purchaser.

The oil will cover Zambia's needs for April to July or August.

It was needed because of a growing fuel gap, Energy Minister Kaunda Lembalemba told Reuters.

BP PUTS UP COST OF PETROL

BP has increased the cost of a litre of petrol in the UK by 1p, following rises in the price of crude on the world oil markets.

The move means a litre of petrol at a BP station will now typically cost 74.9p a litre.

Tension in the Middle East, together with output cuts by members of the Opec oil cartel, has pushed the price of crude oil to six-month highs of around $28 a barrel.

MICROSOFT CHIEF IN SURPRISE EXIT

Microsoft's president and chief operating officer has unexpectedly resigned, after a year in the post, to start his own business.

Rick Belluzzo, who many analysts had seen as a rising star at Microsoft, said he was leaving the post on 1 May to start his own firm.

EU PROBES AID TO BMW

The European Commission has launched an investigation into Germany's plans to grant state aid to a new BMW car factory in Leipzig.

"The investigation aims at establishing whether the planned aid meets the requirements of the state aid rules for the automobile sector," a Commission statement said.

Germany could be forced to withdraw or reduce the planned aid package if the Commission rules that it is in breach of its rules.

MALAWI HOPES FOR HIGHER TOBACCO PRICES

This year's tobacco auctions have begun in Malawi, one of Africa's main producers of tobacco leaf, with producers hoping for a better return.

Amid rising global prices, and with supply tight on the Malawian market, tobacco producers want to see an improvement on last year's average of $1.09 per kilogramme.

OIL DEAL FOR NIGERIA AND EQUATORIAL GUINEA

Nigeria and its neighbour Equatorial Guinea have agreed plans for joint exploitation of crude oil reserves along their maritime border.

In an approach that is starkly different from that which has seen Nigeria and Cameroon slugging it out at the world court over the oil rich Bakassi peninsular, the issue of the equally rich maritime border between Nigeria and Equatorial Guinea is being handled in a brotherly way.

Presidents Olusegun Obasanjo of Nigeria and Obiang Nguema Mbasogo of Equatorial Guinea have signed an agreement which allows companies on both sides of their maritime border to explore for oil.

RUSSIA'S BANKS FACE 'HEALTH CHECK'

An inspection team from the International Monetary Fund (IMF) and the World Bank start work in Moscow on Wednesday on what is described as a "comprehensive health check-up" of Russia's shaky financial sector.

The mission will identify the strengths and weaknesses of the country's financial systems and determine how potential risks to the system are being managed.

It will also address specific concerns such as creditor protection, bankruptcy regulations and the problem of rampant money laundering in the country.

Last year the Paris-based Financial Action Task Force (FATF) blacklisted Russia for failing to deal with the problem of money laundering.

Financial experts estimate that about $20bn (14bn) was spirited abroad from Russia last year alone.

MOSS BROS REJECTS NEW BID APPROACH

Menswear retailer Moss Bros has rejected the latest takeover approach from Shami Ahmed, the entrepreneur behind the Joe Bloggs label famed for its baggy jeans.

Last week Mr Ahmed said he was willing to offer 45-50p per share for the company, valuing it at 45.5m.

DAEWOO REDUCES LOSSES

The South Korean car firm Daewoo Motor has reported a net loss of $2.73bn (1.89bn) for 2001, a fall of 70% on the deficit recorded the previous year.