groups together the world's 30 leading economies, "the recession that began in March 2001 was among the mildest on record." An OECD report forecast economic growth this year of 2.4% and of 2.7% in 2003.

While these figures are well below the average of the later 1990s, they compare with a 0.3% trough recorded in 2001.

The organisation warned, however, that the Federal Reserve should be ready to cut interest rates yet further if the recovery flags — although the longer-term trend was towards higher rates.

The OECD's optimism is in contrast to the prevailing view that any recovery will be slow and fragile.

Predictions that the US would bounce back quickly after a sharp economic dip at the end of last year have proved unfounded, and recent data has been at best mixed.

But the OECD said that growth was being driven by "remarkable" productivity gains advances in technology that have made it possible to squeeze more output from the same amount of economic activity.

It also praised US consumers, whose willingness to spend had not seriously faltered, and argued that management of interest rates had been "skilful".

CHINESE ECONOMIC GROWTH MARCHES ON

China's economy grew 7.9% in the first nine months of 2002, thanks to strong international demand for its products and heavy government spending.

Figures from the National Bureau of Statistics (NBS) indicated that Asia's second largest economy would beat its 7% target for the whole year as exports surged 19.4% in the period.

"The national economy has maintained fast and healthy growth and momentum and the overall situation is better than expected," the bureau said.

The data comes ahead of next month's Communist Party Congress, at which China's leadership, including President Jiang Zemin are expected to hand over power to a new generation.

Government spending helped push growth to 8.1% year-on-year in the July to September quarter alone.

"The state policies of expanding domestic demand and market demand have become the two major driving forces of economic development," an NBS spokesman said.

Infrastructure investment — on roads, property and power grids — rose 21.8% in the nine months to September from last year.

The government hopes the fiscal stimulus will create jobs and lay the building blocks for further economic growth.

The evolving private sector has been absorbing unemployed former public sector workers and China could attract $55bn in foreign direct investment this year, the NBS said.

Stalking the Chinese economy is deflation, with consumer prices falling 0.8% over the nine months, which can hurt company profits and lead to lower investment.

The lower prices helped retail sales up 8.7% in the period, but were not enough to help them reach the government target of 9%.

ROW OVER 'STUPID' EU BUDGET RULES

The system under which Brussels regulates EU member states' budgets is at the centre of a growing row, after the president of the European Commission called it "stupid".

Romano Prodi told Le Monde newspaper that the EU needed rules to keep individual countries from running up huge deficits and undermining investor confidence in the euro.

But he added that current rules were "rigid".

Mr Prodi's remarks, which have been played down by the commission, come at a time when Europe's budgets are under almost unbearable strain.

The German government admitted for the first time that it would probably breach EU budget guidelines this year, and France, Italy and Portugal are believed to be in a similar position.

Politicians around Europe have for years called for amendments to the so-called "stability and growth pact" budget rules, but Brussels has resisted change.

ASIAN STOCKS CELEBRATE MICROSOFT GAINS

Stock market across Asia skipped upwards after Microsoft, the world's largest software firm, outstripped expectations for third quarter profits.

Microsoft's news that it had outperformed profits estimates by 16% came on the same day as other strong performances in the technology sector, such as that of mobile phone maker Nokia.

The Nikkei closed up 1.4% at 9,086 points having risen 2% earlier in the session.

In Korea, the Kospi index jumped 4.05% to 670.79, its strongest close since 24 September.

In Taiwan, the Taiex closed up 4.1% at 4,458 points and stocks in flat screen makers and phone key pad makers rose, including suppliers to Nokia.

In Hong Kong, the benchmark Hang Seng was 1.4% higher at midday local time. Shares also closed higher in Sydney.

BANK GOVERNOR HINTS AT RATE CUT

Bank of England governor Sir Edward George has hinted that interest rates might need to be cut to protect the economy from the effects of falling stock markets.

In a speech to business leaders in Manchester he said there had been a "nervous breakdown" in the international markets.

He said this was due in part to fears of international terrorism, high profile corporate collapses in the US and concerns about the impact of a war on Iraq.

Sir Edward said that as a result the Bank's Monetary Policy Committee (MPC) — which sets interest rates — would have to consider whether to cut rates to inject fresh confidence into the markets.

OPTIMISM LIFTS WORLD MARKETS

Wall Street was boosted by a strong earnings update from technology giant IBM, and a government report of a lift in housing construction.

European markets also welcomed news of robust profits from mobile phone group Nokia, which forecast a steady end to the year.

On Wall Street, the Dow Jones index of leading US shares closed up 235 points or almost 3% at 8,271.

The German Dax index closed over 5% higher at 3,172 while the French Cac index ended up 3.7% at 3,183.

In the UK, insurance group Prudential helped the leading FTSE 100 index continue its rally, closing up 113 points at 4,170.

ANGOLA'S 'MISSING MILLIONS'

An internal report by the International Monetary Fund (IMF) has found that nearly $1bn disappeared from Angolan Government finances last year.

The sum is far greater than the value of humanitarian assistance sent to the country this year and the report adds that over the past five years a total of over $4bn are unaccounted for.

PROFITS SOAR AT SAMSUNG

Samsung Electronics, the world's biggest manufacturer of memory chips, has posted a jump of almost 400% in net profits for July, August and September.

SUN CUTS 11% OF WORKFORCE

Computer maker Sun Microsystems has announced another round of job losses, after failing to make a profit in the last three months. The US group said it would cut around 11% of its workforce, its second major cut in its workforce in just over a year.

STRIKE SET TO CHOKE ITALY

Italy is bracing itself for a general strike which looks set to cause major havoc with transport.

The second general strike in six months follows a series of smaller protests held throughout this week, including a march by workers at the troubled car maker, Fiat, in Rome.

INDONESIA'S TOURISM 'TOTALLY DAMAGED'

A top Indonesian tourism official has said the country's travel industry could be "totally damaged" if the police fail soon to catch those responsible for the Bali bombing.

At least 200 people, mostly holiday makers, died when a car bomb exploded outside a nightclub on the island of Bali.

About one third of all tourists top Indonesia go to Bali, making it "the soul of tourism" in the country, said Setyanto Santosa, chairman of the Indonesian Tourist Board.

Bali receives 1.7 million tourists a year, or 35% of the 5.2 million people who holiday in Indonesia, Mr Santosa told.

US COMPANIES WEATHER THE STORM

A string of results from US technology companies have met expectations and compounded suggestions that the worst of the gloomy corporate news could be over.

Online auction group ebay confidantly predicted it could sustain its strong growth rate into next year, while Nortel, the Canadian telecom equipment maker, said it expects to break even by the middle of 2003.

There was less optimism from technology groups Siebel and Gateway, which both posted losses for the last three months amid ongoing struggles in the sector.

PRIVATE FINANCE SPENDING TO FALL

The government's reliance on private finance for funding the building of public hospitals, roads and schools is set to fall.

The value of projects commissioned under the controversial private finance initiative (PFI) will drop from £3.5bn this year to £2.9bn by 2005/6, Geoffrey Spence, head of the Treasury's Private Finance Unit, said.

'BLACK HOLE HUNTER' TELESCOPE LAUNCHED

A Russian space rocket has blasted off from a base in Kazakhstan carrying a powerful new telescope into orbit to observe some of the Universe's most violent events.

The Integral gamma-ray observatory — described as Europe's "black hole hunter" blasted off from Baikonur cosmodrome.

It will focus in on the exotic: not just black holes but supernovae, neutron stars, pulsars and so called gamma-ray bursters as well.

ENRON AUDITOR FINED $500,000

Arthur Andersen, the accountancy firm at the centre of the Enron accounting scandal, has been sentenced to five years probation and given a $500,000 (£322,000) fine.

GERMAN INSURER WINS CHINA DEAL

Giant German insurer Allianz has won permission to set up an asset management joint venture in China, becoming the first foreign firm to be allowed to operate in the sector, said its partner, Guotai Junan Securities.

Allianz will own 33% of the business, which has been given the go-ahead by the China Securities Regulatory Commission (CSRC).

China is in the midst of opening up its banking, stock broking, insurance and fund management industries to foreign firms as part of its commitments as a member of the World Trade Organisation.

Allianz is to own the maximum permitted share of the business, while its partner, Guotai Junan Securities will hold the remaining 67%.

GERMANY ADMITS BUDGET FAILURE

German Finance Minister Hans Eichel has admitted for the first time that Germany's budget is likely to fall short of EU standards this year. EU member states are obliged to keep their budget deficit to below 3% of economic output.

Only a few weeks ago, Germany said its deficit would meet the desired target. But the cost of clearing up after the floods, and the weakening German economy have taken their toll on public finances.

The European Commission said that if Germany did overshoot the limits it would have to start disciplinary action.

MERGER

Granada and Carlton have agreed a £2.6bn ($4bn) merger.

UK UNEMPLOYMENT FALLS

Unemployment in the UK has fallen for the third month in a row, and wage growth has slowed down.

The number of claimants of unemployment benefit edged 200 lower to 946,000 — 3.1% of the workforce — the Office for National Statistics (ONS) said.

BRUSSELS PROBES FRENCH POWER AID

The European Commission has launched an investigation into potentially anti-competitive state aid given to Electricite de France (EdF).

The state-owned energy company, which owns London Electricity in the UK, has received low interest rates on loans backed by the French government, giving it a competitive advantage in the sector.

The Commission said it would propose that the French government remove EdF's unlimited state guarantee, a facility that allows the firm better access to finance than its private-sector rivals.

TOP DEMOCRAT BLASTS BUSH ON ECONOMY

One of the US' leading Democratic lawmakers has proposed an $200bn (£130bn) economic revitalisation programme in a challenge to Bush administration policies.

Hoping to draw on the growing unease among Americans with the economy, the House Minority Leader Richard Gephardt proposed new spending and tax cuts as a way to spur the fledgling US economy.

Members of Mr Gephardt's Democratic party have been harshly critical of Republican George W Bush's economic policies and advisors, saying they have done more harm than good.

BRAZIL LIFTS INTEREST RATES TO 21%

Brazil's Central Bank has raised interest rates by three percentage points to prop up the weakening currency and halt inflation.

After a special meeting of the bank's governing council, it lifted rates to 21% but gave no indication of future moves.

INFLATION SPARKS SOUTH AFRICAN RATE FEAR

Latest inflation figures for South Africa have led to fears that the government could raise interest rates again, the fifth rise this year.

Food prices are still leading the increase in prices, hitting the poorer population hardest.

The consumer price index rose by 11.8% in September, its highest rate of growth for 10 years, and up from 10.8% in August.

EUROPE BANS NON-GREEK FETA CHEESE

The European Commission has decided that only cheese made in Greece can now be sold under the name of feta.

The decision is a victory for Greece, where feta cheese is believed to have been produced for about 6,000 years.

It is a blow to Denmark, France and Germany — the source of much cheese sold as feta in European supermarkets.