May 06 -12, 2002

US ECONOMY RECOVERS FROM LAST YEAR DOWNTURN

Treasury Secretary Paul O'Neill said on Wednesday the US economy has fully recovered from last year's downturn and fears that the US trade gap threatened global stability were overblown.

As he began testifying before the Senate Banking Committee, O'Neill flatly warned he wasn't about to give currency speculators any "ammunition" by implying any change was forthcoming in the strong-dollar policy of the U.S.

His prepared testimony made no reference at all to currency policy and also struck a generally upbeat tone about world economic prospects.

O'Neill said only speculators benefit from swings in foreign-exchange values and "I don't want to give them any ammunition to say that there's a basis for roiling the world currency markets out of our conversation here this morning."

The US Treasury chief played down charges a huge gap on the US current account — the broadest measure of trade — left the country vulnerable to a sudden reversal in fortune and said it reflected a productivity-driven US investment boom over the past decade.

"I am convinced that the United States has regained its economic footing," O'Neill told the hearing, convened ostensibly to discuss a semiannual report from Treasury but that pitted opponents of a strong US dollar against O'Neill.

Manufacturers charge that the strength of the currency is costing Americans jobs because foreign producers are able to sell their goods more cheaply into US markets.

Jerry Jasinowski, president of the National Association of Manufacturers, told the committee there was no question the dollar was "overvalued" in relation to other leading world currencies. "This overvaluation is having a devastating effect on US manufacturing and on jobs," he said.

IMF CALLS FOR SMALL BUSINESS LOANS

The International Monetary Fund boss says he wants the World Bank to focus more on credit for small businesses.

The IMF Managing Director Horst Koehler was speaking during a visit to the Ivory Coast capital Abidjan, the third stop in a five country tour of Africa.

He says he will be raising the issue of what is called micro-finance with the World Bank President James Wolfensohn when he gets back to Washington.

Mr Koehler says he would like the International Finance Corporation, the World Bank's arm for lending to the private sector, to make more small loans.

Mr Koehler has been banging the drum for small scale credit on a number of occasions during his African tour. It is a bit of a departure from the IMF's traditional focus on encouraging countries to achieve economic stability achieving low inflation and strong government finances as a foundation for sustainable economic growth.

Mr Koehler says that growth alone is not enough to reduce poverty. He says policies need to be focused on poverty and creating jobs.

Much of Africa's poverty is concentrated in rural areas. It can be hard for new businesses to get started in such an environment. It is particularly difficult to raise loans for investment, but Mr Koehler sees opportunities for small enterprises as key to tackling poverty in Africa.

Much of Mr Koehler's tour has been about poverty reduction strategies.

In 1999, the IMF and the World Bank adopted a new approach to the developing world that explicitly emphasises poverty reduction and participation in shaping the policy.

EUROZONE CONFIDENCE EDGES LOWER

Economic confidence in the eurozone weakened in April from the previous month, surveys of both businesses and consumers have shown.

Separately, statistics showed that the prices charged by manufacturers in the eurozone fell in March from a year earlier.

But in the European Union (EU) as a whole, there was more optimism to be found, according to the European Commission surveys.

The economic sentiment indicator for the 12 countries in the eurozone fell to 99.4 in April from 99.5 in March.

The fall was the first since November 2001. Analysts had expected a rise to 99.7.

The same indicator for the 15 EU member countries rose to 100 in April from 99.7 in March.

Other Commission surveys confirmed the weak outlook in the eurozone countries.

Its business climate indicator fell to minus 0.64 in April from a revised March figure of minus 0.59.

US, CHINA DISCUSS SITUATION IN S. ASIA

The South Asian situation was among subjects covered in talks between Chinese Vice-President Hu Jintao and United States officials.

Mr Hu, who is tipped to become China's next leader and has been given unusual attention since he arrived earlier this week, has had meetings with President George W. Bush, Vice-President Richard Cheney and the foreign and defence secretaries.

State Department spokesman Richard Boucher told his regular briefing on Wednesday that Mr Hu and Secretary Colin Powell had met for a working dinner on Tuesday night and agreed to continue "to advance in our cooperation against terrorism. There was a very good discussion of the Middle East, South Asia...of how to promote stability on the Korean Peninsula, including stressing the importance of North-South dialogue".

Asked whether Kashmir was discussed, Mr Boucher said the two sides talked about the "tensions between India and Pakistan over Kashmir and the need and the desire of both our countries to play a positive role in helping the parties defuse those tensions".

EUROZONE RATES LEFT UNCHANGED

Interest rates in the 12-nation eurozone have been kept on hold, as expected.

In a statement, the European Central Bank said it was holding its key rate at 3.25%.

Speaking at a news conference after the decision was announced, bank president Wim Duisenberg said the eurozone's economic outlook remained "subject to uncertainties" while prospects for price stability were less favourable than at the end of last year.

He said the uncertainties included the future direction of oil prices and the US current account deficit, which he said was a risk to the world economy and "over time... unsustainable".

US ALLOWS SHRIMP IMPORTS FROM 41 STATES

The United States said on Wednesday it had barred shrimp imports from Haiti but authorized sales from 41 countries and Hong Kong whose fishing practices it said posed no threat to sea turtles.

Shrimp from Haiti and other nations that harvest shrimp in ways harmful to turtles are subject to an embargo, consistent with the US legislation, the State Department said in a statement.

The law requires that commercial shrimp boats use a mechanism known as a "turtle excluder device," (TED) which prevents the accidental deaths of already endangered sea turtles snared in shrimping operations.

The department said shrimp boats from 17 nations were found to have met the TED standard: Belize, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Guyana, Honduras, Mexico, Nicaragua, Nigeria, Pakistan, Panama, Surinam, Thailand, Trinidad and Tobago, and Venezuela.

VODAFONE SHARES SLUMP

Shares in Vodafone, the UK mobile phone giant, slid to less than £1 in pre-market trade on Friday, before recovering slightly after the markets opened.

The latest fall came after the company cut its forecasts for its German and Italian businesses.

Telecoms analysts had been expecting Vodafone's profits from its German D2 and Italian Omnitel operations to be 6.5bn euros (£4bn) this financial year.

UK HOUSE PRICES UP AGAIN

UK house prices rose by another 0.7% last month from March, but the property boom is set to cool later this year, according to the Halifax bank.

In its closely-watched monthly house price survey, the country's biggest mortgage lender said UK property prices posted "further significant gains" in April, with the average house worth 15.1% more than it was one year earlier.

VOLKSWAGEN

Volkswagen, has said its profits fell 20% during the first three months of this year to 997m euros (£615m; $900m).

PLASTIC SPREE ADDS TO RATE RISE PRESSURE

Continued heavy spending on debit and credit cards is adding to pressure for higher UK interest rates, according to a report from the Credit Card Research Group (CCRG).

Total spending on plastic in March rose to £16.8bn, 14.3% higher than the same period a year earlier, the CCRG said on Friday.

The double-digit increase, which is in line with growth estimates for January and February, makes it more likely that the Bank of England will raise rates later this year in order to choke off an inflationary consumer boom, the group said.

US WARNS JAPAN OVER 'BOXCAR' ECONOMY

The Japanese economy, the world's second largest, risks becoming a "boxcar" on the global racetrack, US Treasury Secretary Paul O'Neill has said.

Experts predict that, on current trends, Japan will fall behind China in the global economic league, and claim an economy one quarter the size of the US's, Mr O'Neill said.

"In 1991, the Japanese economy was nine time the size of China's and three-fifths the size of the United States'," he told a conference in New York.

Japan's fall would reduce its influence on the global stage.

"Japan will no longer be a engine for the world economy, it will be a boxcar," he said.

US TRADE CHIEFS PROPOSE TIMBER TARIFFS

The US International Trade Commission has approved import tariffs of up to 27.2% on Canadian timber imports, claiming they threaten the domestic industry.

The unanimous ruling clears the way for the US to impose punitive duties on softwood imports from Canada.

"The US International Trade Commission has made affirmative threat determinations in connection with its final phase countervailing duty and anti-dumping investigations concerning softwood lumber from Canada," the US ITC said in a statement.

Canada denies it illegally subsidises domestic forestry operations, and sells timber in the US below market value.

Canada is expected to appeal to North American trade group Nafta and to the World Trade Organisation over the tariffs.

COLT TELECOM

Colt Telecom has defied sceptics over the future of the new generation of telecom carriers by announcing a doubling in profits.

Colt said that underlying profits hit £9.8m in the first three months of the year, 111% more than the same period last year.

PACT TO END AFRICAN 'CHOCOLATE SLAVERY'

Chocolate manufacturers, human rights groups and the Ivory Coast Government have signed pact aimed at ending the abuse of child labour in the chocolate industry.

The agreement aims to address the use of children in West Africa's cocoa fields, and measures designed to crack down on mistreatment are set to be in place before the harvest season in autumn.

IMPERIAL TOBACCO

Imperial Tobacco has reported a 17% rise in profits.

The group, whose British brands include Lambert & Butler and Embassy, made a profit of £261m in the six months to March.

SOUTH KOREAN CAR SALES SOAR

South Korea's car industry has experience a domestic sales boom helped by low interest rates, tax cuts and strong consumer confidence.

Figures from Hyundai Motor, Kia, Renault Samsung and Daewoo Motor showed domestic sales shot up 19.4% in April from a year ago and up 7.7% from March to 152,040 units.

Only 1% of sales in the domestic market are foreign brands.

"In terms of compact cars, Korean firms are very strong and foreigners do not provide the products," Richard Pyo of CSFB in Seoul told the BBC's World Business Report.

The figures are the best since August 1997, just before the Asian financial crisis.

"There's a lot of pent up demand from the financial crisis and a lot of new products coming onto the market," he said.

Exports have also shown a strong rise, up 7.2% from April last year.