INTERNATIONAL

 

Aug 19 - 25, 2002

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF

 

EUROPE'S FLOOD DANGER WORSENS

Surging floodwaters are continuing to threaten towns and cities across central Europe and tens of thousands more residents have been moved from their homes.
In eastern Germany the Elbe swollen by waters from the Vltava river has burst its banks, forcing parts of Dresden to be evacuated.

 

Floodwaters that have wreaked havoc in Austria are now threatening the Slovak capital, Bratislava, where the level of the River Danube has risen dramatically.

The flood affecting the Czech capital, Prague, is receding although the tens of thousands of residents who have been recently evacuated have been told to stay away.

In Dresden, in the hard-hit eastern state of Saxony, army helicopters flew hundreds of hospital patients out of the reach of the advancing floods on Wednesday.

The authorities are rushing to empty the historic city centre, which is already flooded waist-deep in places.

In other East German cities such as Chemnitz and Leipzig residents have fled water pouring over the banks of the Elbe.

German Chancellor Gerhard Schroeder, on a visit to Saxony, described the situation as a catastrophe and promised federal aid to flood victims.

"This is not a task for one state or for Saxony," he said, "this is a task for Germany."

At least 12 flood victims have been killed across Germany, and a state of emergency has been declared in several Bavarian districts.

In the Czech capital, Prague, water levels appear to be going down after two days of destructive flooding.

US INTEREST RATES KEPT ON HOLD

The Federal Reserve has retained rates at 1.75%, the lowest since July 1961.

But the Fed said that economic weakness, rather than rising inflation, was now its greatest concern.

"The risks are weighted mainly toward conditions that may generate economic weakness," the Fed said.

The bank blamed falling share values and concerns over accounting scams for delaying the US's revival this year.

The statement also left the door open for future rate cuts in an effort to stimulate the economy.

"If the economic statistics continue to come in on the weak side I would think we would see an easing in September," said Mary Ann Hurley, vice-president of fixed income trading at DA Davidson in Seattle.

But the prospect of lower rates failed to perk up US shares.

The Dow Jones Industrial Average, which had stood seven points lower before the Fed announcement, fell a further 80 points in the following minutes, and closed down 206 points.

The decision to keep rates on hold was backed by all members of the Fed's rate setting committee.

The US economy is taking longer than many economists had expected to recover from last year's recession.

"If you look at the economic data... it is largely consistent with warnings the Fed has been providing the market this year, that the recovery may be modest by historical standards," Steve Mayon, economist at Scotia Capital Markets, said.

US President George W Bush held a summit on Tuesday with about 240 Americans, ranging from company bosses to a rubbish collector, to discuss the challenges facing the US economy.

EUROPE COUNTS COST OF FLOOD DAMAGE

The floods sweeping through Europe and leaving devastation in their wake could cost local people and companies billions of euros.

Insurers, farmers, consumers and governments are set to foot the bill for the floods which have left about 90 people dead and hundreds of thousands homeless.

The Austrian government is considering drastic cuts in its defence budget to pay for the damage, while German politicians have to reconcile the pressures of an election year with the constraints of a budget in deficit.

Consumers could face higher food prices thanks to the damage caused to crops at the start of the harvest season.

CONCERNS OVER AFRICAN MINING OWNERSHIP

A top level meeting was taking place in South Africa on Wednesday between cabinet ministers and bosses of the big mining groups about how to increase black ownership in the sector.

Last month a government document was leaked which suggested that 51% of all mining operations should be in the hands of black empowerment groups within 10 years.

The government has said this charter is a negotiating document rather than policy.

It also said on Wednesday that it had no intention of nationalising any part of the mining industry, despite fears to the contrary.

SURPRISE RISE FOR UK INFLATION

UK inflation has risen higher than expected, casting doubt on the need for another interest rate cut.

The annual underlying rate of inflation rose by half a percentage point last month to 2%, official figures showed on Tuesday.

But it was still well below the Bank of England's target rate of 2.5%, with 1% leeway either way.

The headline rate of inflation, which includes mortgage interest payments, also rose half a percentage point to 1.5%, the Office for National Statistics (ONS) said.

IMF PROPOSES $200M LOAN TO PARAGUAY

The International Monetary Fund (MF) has proposed a $200 million loan to Paraguay to combat a deepening recession sparked by neighbouring Argentina's economic woes.

A statement by the IMF said that the 18-month loan would be given to Paraguay on the condition that the country's parliament approved government measures to strengthen public finances and the country's banks.

HOPE GLIMMERS FOR TURKISH LEFT

Former Turkish Economy Minister Kemal Dervis has said he will not give up efforts to form a social democratic alliance for November's election, despite failing to do so this week.

Mr Dervis, seen by many as Turkey's best guarantee of financial stability, quit the government on Saturday to work on building a strong, secular alliance capable of challenging the pro-Islamic Justice and Development Party, which is topping opinion polls.

BRAZILIAN REAL RESUMES SLIDE

The Brazilian currency has resumed its slide to fresh lows, just days after the International Monetary Fund's (IMF) $30bn aid package was approved.

The real's slide coincided with a downgrade of Brazil's debts by the credit rating agency Moody's Investors Service.

The real fell 4.1% to close at 3.15 reals to the US dollar on Monday despite attempts by the central bank to prop up the currency.

Brazil's stock market also headed lower, with the Bovespa index of leading shares falling by 2.6%.

SPAIN UNVEILS COASTAL SPY SYSTEM

Spain has unveiled a multi-million-dollar surveillance system to protect its southern coast from the immigrants who brave treacherous waters to enter the country.

Radar sensors and night-vision cameras will monitor the 110 kilometres (70 miles) of Spanish coastline closest to Morocco, where many clandestine migrants start their journey.

AMERICA ONLINE FINDS AUDIT PROBLEM

US media and entertainment firm, has said it may have overstated the revenues of its America Online internet business by $49m (32m).

The group's accounting practices are already being investigated by the US stock market regulator and the US Justice Department.

In a filing to the stock market regulator, AOL Time Warner said it may have "improperly recognised" three payments to America Online as advertising revenue.

MURDOCH TO FIGHT UK EURO ENTRY

Media tycoon Rupert Murdoch has said he will use his best-selling UK newspapers to campaign against British euro membership if the government calls a referendum on the single currency.

Mr Murdoch told the Financial Times that he would like his UK newspapers to spread the message "vote no" in the run-up to a referendum.

ASIA STOCKS CHEERED BY US GAINS

Shares rose across Asia on Thursday morning, lifted by a strong closing surge on US markets, which had been losing ground for much of Wednesday.

In Tokyo, the benchmark Nikkei index closed the morning 157 points higher at 9,795. Stocks were higher elsewhere in Asia, including Hong Kong and Sydney.

In New York, the technology-laden Nasdaq index had rocketed 5.1% upwards, gaining 65 points to close Wednesday's session at 1,334.

The Dow Jones index jumped 260 points, or more than 3%, to end the day 8,743.31, while the wider Standards and Poor's 500 index rose 4% to 919.62.

CHINA MOBILE STEPS UP THE PACE

China Mobile has continued its sizzling pace of growth, becoming the world's biggest mobile phone firm and again posting profits ahead of expectations.

The company, which last month expanded its network on the mainland with the acquisition of eight local operators, said it now had 105.4 million users, nosing ahead of Britain's Vodafone, which has 103.8 million worldwide.

TROUBLED MARKETS EDGE LOWER

A last-minute slump on Wall Street has soured the market mood on Wednesday morning, but the expected collapse has so far been averted.

London's FTSE 100 index, usually the closest European follower of Wall Street sentiment, opened down 84 points at 4187, wiping out the previous day's gains, but then clawed back 20 points by lunchtime.

Across Europe, markets suffered equivalent falls, with Frankfurt's Dax worst hit, losing almost 100 points to 3586.

SHELL QUITS NAMIBIA GAS FIELD

Anglo-Dutch oil firm Shell has decided to pull out of a gas exploration project in Namibia after investing $140m (91.4m).

Shell said it has concluded that the offshore Kudu field did not contain enough gas for a sustainable export business.

"We didn't find any gas in two recent drills," a Shell spokeswoman said.

BELUGA CAVIAR FACES US BAN

The United States is planning to ban the import of beluga caviar because the fish that produces the expensive eggs the sturgeon is heading for extinction.

The US currently takes 80% of the world's legally traded output of beluga the rest is sold to the European market and environmentalists say the ban offers the first real hope of saving the sturgeon species.

NORTH KOREA DEVALUES

North Korea has devalued its currency by 99% as part of a sweeping series of economic reforms, according to unconfirmed reports.

Diplomats in Pyongyang said that North Korea's won is now set at 150 against the US dollar, compared with 2.15 before the reform programme was launched last month.

PHONE COMPETITION FOR BANGLADESH

Bangladesh has unveiled plans to open up the country's fixed-line telephone service to competition.

It will end the monopoly enjoyed by the state-owned Bangladesh telegraph and telephone board (BTTB).

And it should increase the reach of telephone services in a nation which has one of the world's lowest ratios of telephones to people.

SURPRISE FALL IN UK UNEMPLOYMENT

Unemployment in the UK fell in July and stands at 3.1% the lowest rate since 1975.

The number of people out of work and claiming unemployment benefit fell 3,100 in July to 949,600, according to the Office for National Statistics (ONS).

SITUATION IN ARGENTINA SET TO WORSEN

Argentina's continuing political and economic crisis could soon get worse, according to a leading academic who follows the country's fortunes.

Professor Martin Uribe of Pennsylvania University said the current policies emanating from the International Monetary Fund (IMF) and the US government were "counter-productive".

"I think that at this point the first priority is to remove the existing financial restrictions that are in place in Argentina," he said.

"I don't see neither the IMF nor the US administration placing the removal of those restrictions at the top of the list, so until that is done I don't see Argentina moving on."

DUTCH CALL FOR ACTION ON 'EUROFLATION'

A political row has broken out in the Netherlands, after the central bank admitted that the launch of euro cash had sparked twice as much inflation as previously admitted.

Over the weekend, Nout Wellink, president of the Nederlandsche Bank, said in an interview that the currency changeover had caused a 0.7 percentage point acceleration in inflation at the beginning of the year.

WORK STARTS ON GIANT ETHIOPIAN DAM

The construction of a $224m hydroelectric dam in Ethiopia has begun, marking the start of China's largest joint-venture in Africa.

China National Water Resources and Hydropower Engineering Corporation (CWHEC) will build the main concrete dam for the Tekeze Hydro-Power Project (THPP).

The dam, which at 185 metres is 10 metres higher than China's controversial Three Gorges Dam, and installation of a 300 megawatt power plant is expected to take five years to complete.