May 13 -19, 2002
ASIAN INTEREST RATES TO REMAIN LOW
Asian interest rates should stay at their current
lows until late this year despite hikes in Australia and South Korea
as economic recovery remains fragile, economists said on Wednesday.
Australia and South Korea have notched
better-than-expected economic growth and have a more robust domestic
sector to drive growth compared with other Asian countries, they said.
Any shift by regional central banks towards higher
interest rates should come only in the fourth quarter, as the economic
recovery gains a more stable footing, they added.
South Korea on Tuesday raised its overnight call
rate by a quarter percentage point to 4.25 per cent, becoming the
first major Asian country to increase rates.
Australia's central bank on Wednesday followed
suit, announcing a rise — the first in nearly two years in official
interest rates of a quarter point to 4.5 per cent amid inflationary
pressures and signs of overheating in some sectors.
I think the key difference is that those two
countries have shown stronger-than-expected growth, said Song Seng Wun,
a regional economist with G.K. Goh Research Pte. Ltd. While their
growth was boosted by exports, domestic demand in the two countries,
particularly South Korea, was "a lot more robust", he told
The central banks of both countries want to stay
ahead of the curve. For the region, the headline GDP (gross domestic
product) numbers may be improving but the quality of the growth is
still at issue. It's not a full-fledged recovery, he said.
Japan, the region's sputtering economic engine, is
unlikely to change monetary policy within the next 24 months, despite
short-term interest rates being near zero.
UK INTEREST RATES KEPT ON HOLD
The Bank of England has announced that it is
keeping UK interest rates on hold at 4%.
It is the sixth month in a row that rates have been
held at this level - their lowest level for 38 years.
The Monetary Policy Committee (MPC) made its
decision after figures showed that manufacturing was still struggling
to recover from a downturn.
The Engineering Employers' Federation (EEF)
welcomed the bank's decision.
EEF chief economist, Stephen
"While order books are filling up,
manufacturers are still looking to repair badly damaged balance
"We applaud the Bank for giving the recovery
chance to take root before acting," he added.
The EEF said that the absence of inflation anywhere
but in the housing market would give the Bank of England time to
assess the pace of recovery.
Ian Fletcher, chief economist at the British
Chambers of Commerce, agreed: "Although the case for raising
rates in mounting, we believe the Bank is correct to postpone that
"The MPC should not be trying to second guess
whether manufacturing recovery is on a firm footing," he added.
Most analysts believe rates will rise towards the
end of the year.
David Hillier at Barclays Capital told he expected
to see a 0.25% increase in July and he thought that interest rates
would reach 4.75% by the end of the year.
But John Monks, the TUC general secretary, said the
next rate move should be down.
ANGER GREETS US FARM AID
An international outcry has greeted the decision by
the US senate to pass a subsidy bill offering US farmers $173.5bn over
The furore arose fro representatives of rich
countries and poor alike.
"It is a very sad day for the poor farmers of
then developing countries," said a senior World bank official,
speaking on condition of anonymity.
"We are absolutely appalled," said Oxfam
America policy department director Jo Marie Griegsgraber.
"Logically, it will have an adverse impact on
most of the rest of the world," said Bill Reinsch, president of
the National Foreign Trade Council.
Australian prime minister John Howard made it clear
that the bill — which boosts crop and dairy subsidies by two thirds
to shore up support in an election year — runs directly against the
US's professed support for freer trade.
US BUDGET SURPLUS SHRINKS
The US budget surplus in April will be the smallest
since 1995, according to the Congressional Budget Office (CBO)
A wave of income tax receipts usually boost the
surplus in April.
But these receipts were drastically lower this
year, according to the CBO.
The decline in income tax payments and social
insurance taxes was "the largest percentage decline in
decades," it said.
April is a critical month for the government's
overall budget year because of the deadline for filing taxes.
Managing the US economy has been getting gradually
tougher, as the government has implemented tax cuts to help boost the
ailing economy whilst fighting the War on Terror.
The CBO now predicts that the budget forecast will
be $68bn, almost three times lower than the $189.8bn surplus achieved
in the same month the previous year.
Corporate income tax collections fell 40% to $14bn.
JAPANESE FIGURES HINT AT REVIVAL
Japan's economy could be on the verge of climbing
out of recession, new government figures suggest.
The data could make life easier for beleaguered
Prime Minister Junichiro Koizumi as he struggles to put together a
fresh economic stimulus package.
The key number is the diffusion index, which puts
together a range of indicators to come up with an estimate of whether
growth or contraction is on the cards.
For the first time in 15 months the coincident
index, measuring current performance, crept up from 40.0 in February
to 56.3 in March, above the boom-or-bust dividing line of 50.0.
And the leading index, intended to reflect
predictions for the next three to six months, leapt to 80.0, up from a
revised 54.5 the previous month.
CHANGING THE GUARD AT THE FED
The Federal Reserve, the body which sets US
interest rates, is getting two new members one of whom could be in the
running to succeed chairman Alan Greenspan.
President George W Bush is expected to name Fed
insider Donald Kohn and Princeton Professor Ben Bernanke to the
seven-member board of governors of the Fed later on Wednesday.
Mr Greenspan, who has served as Fed chairman since
1987, is widely expected to retire in June 2004 at the age of 78 when
his four-year term expires.
EASYJET BLASTS GO PARTNER
Stelios Haji-Ioannou, the chairman of Easyjet, has
dismissed Go chief Barbara Cassani's opposition to the £400m merger
of the two budget airlines, saying the business woman of the year was
allowing "emotions and ego to cloud her judgement".
STOCK MARKET RALLY FIZZLES OUT
US stock markets ended the day sharply lower,
dashing hopes of a sustained recovery in share prices.
The blue-chip Dow Jones index closed 104 points
lower, while the Nadaq technology index lost almost 3% of its value.
Wednesday saw an explosive rally in US tech stocks,
with the key Nasdaq index rising 8% following news of a threefold
increase in profit at internet and telecoms equipment maker Cisco
In London, the FTSE 100 blue chip index closed 11.5
points lower at 5,198.
In Japan, the benchmark Nikkei 225 index ended its
second straight session of gains up almost 1% or 112.55 points at
VIRGIN MOBILE MAKES FIRST PROFIT
The company said profit before interest, tax,
depreciation and amortisation was £3.4m for the first three months of
ARGENTINES BARTER TO SURVIVE
In the latest of a series of personal testimonies
on Argentina's crisis, psychotherapist Adriana Kundergraber describes
life as "by now ex-upper middle class Argentine
"Buenos Aires used to be the Paris of South
America, the most cosmopolitan city, but things have got so bad that
hunger has become a growing reality."
"We're permanently being confronted with
homeless, with young children, with beggars asking for food — as a
growing reality — it's terrible now."
"You still have areas where you can see
restaurants packed," she says.
GAS GROUP WARNS ON NORTH SEA TAX
The UK gas explorer and producer, BG Group, has
cheered the markets by reporting little change in its profits for the
first three months of this year.
This was seen as good news because its bigger
rivals in the energy sector, BP and Shell, have reported heavy falls
in their earnings.
NISSAN RESULTS SHINE
Results out on Thursday showed that the company
made a 490bn yen ($3.8bn; £2.6bn) operating profit in the year to
March, more than even the most optimistic estimates, and up 69% on the
INDIA SEES JUMP IN FOREIGN INVESTMENT
Foreign investment in India in the year to March
shot up by 65% to $4.06bn (£2.8bn) with the information technology
sector the main driving force, according to government figures.
The Indian government has an annual target of $10bn
for foreign direct investment (FDI), but has recently managed only
about $3bn a year.
WORLD CUP PROMPTS MARKETING SPREE
The football World Cup finals to be staged in Japan
and Korea have generated a frenzy of commercial exploitation.
In the past, products endorsed by players and teams
bore some relation to the game — but that is no longer the case.
We are accustomed to stars such as David Beckham
promoting products but even the English national team coach, Sven
Goran Eriksson, has been taking advantage of the occasion.
Although Mr Eriksson may be aging and balding, he
apparently has enough glamour to be earning millions of dollars
MAURITIUS TO INVEST IN 'CYBER CITIES'
Mauritius is to look to the information technology
sector to help boost its flagging economic growth.
It is planning the creation of several "cyber
cities" where hi-tech facilities are concentrated and wants to be
seen as a "cyber island" Prime Minister Anerood Jugnauth
ROYAL AND SUN ALLIANCE
The group made an operating profit of £160m in the
first three months of the year, compared with £163m in the same
period in 2001. It made a pre-tax loss of £72m, compared with £311m
HOUSE PRICE GROWTH RECOVERS
House prices in England and Wales are growing
strongly again after a slowdown in late 2001, an authoritative survey
The cost of the average house in England and Wales
rose to £121,881 between January and March 2002, 10.23% up on the
same period last year, the Land Registry said in its latest report.
JOBS EVAPORATE IN AUSTRALIA
The ranks of Australia's jobless swelled
unexpectedly in April, just a day after the country's central bank
began tightening interest rates to keep a lid on the consumer boom.
The seasonally adjusted figures showed that a net
43,500 jobs disappeared last month, contrary to expectations of a
slight rise in employment.
But a fall in the number of people looking for work
meant the headline rate stayed steady at 6.3%, lower than at any time
since January 2001.
OUTPUT BLOW TO UK MANUFACTURING
The UK's struggling manufacturing sector has
suffered a set-back with an unexpected fall in output in March,
official figures show.
Analysts had expected to see a rise of 0.3% in
manufacturing output in the last month, but Office for National
Statistics (ONS) data showed it shrank by 0.8%.
Industrial output, which includes oil, gas and
utilities, was down 0.4%.
INVESTORS BET ON GRANADA-CARLTON MERGER
Shares in ITV's two biggest companies, Granada and
Carlton, have jumped because investors now expect them to merge.
The UK government cleared the way for a merger or
takeover in its draft Communications Bill, published on Tuesday.
US JEWELLERY FIRM RESUMES TANZANITE SALES
New rules govern the mining of Tanzanite Zales, the
owner of some of the leading US shopping mall jewellery stores, has
become the first retailer to lift the boycott of the gemstone
Zales, Tiffany and QVC — who make up the world's
largest market for Tanzanite — stopped selling the gemstone last
year after The Wall Street Journal claimed proceeds from its sale were
funding supporters of Osama bin Laden.
GHANA RECEIVES DEBT RELIEF BOOST
The African Development Bank (ADB) has said it will
write off four fifths of the money owed to it by Ghana.
The $131m (£90m) debt cancellation came less than
a week after a visit to the country by the managing director of the
International Monetary Fund (IMF), Horst Koehler.
The ADB said Ghana was eligible for debt relief
under an IMF and World Bank scheme for so-called Heavily Indebted Poor
"With this reduction, Ghana will be relieved
of 80% of its obligations on the annual servicing of its debt to the
ADB group," the Development Bank said.
The debt relief scheme aims to relieve poverty in
countries committed to economic reforms.