INTERNATIONAL

 

Jan 06 - 12 , 2003

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF

 

US FACTORIES SURGE AHEAD

US factories operated at a faster pace in December than at any time in six months, sparking hopes that the economic recovery may not be as fragile as feared.The respected Institute of Supply Management's manufacturing activity index leapt to 54.7 in December, up from 49.2 the month before, and far ahead of expectations.

 

 

 

The reading is the best since June and this is the first time since August that it has climbed above 50 - the level which separates contraction and expansion.

Economists had feared another lacklustre reading although regional surveys in Philadelphia, New York and Chicago in recent weeks have suggested the start of a turnaround.

The surprise boost to manufacturing follows a set of contradictory indicators in other parts of the economy.

November had produced a healthy performance from the service sector, as well as a slowdown in job losses after a year of mass layoffs.

But consumer confidence - the engine of the US economy throughout the recent downturn is beginning to flag, according to one of the most closely watched surveys on the subject.

And so far, people do not seem to have been spending as enthusiastically as retailers had hoped.

"The question at this point is whether the manufacturing sector can continue to gather momentum during the first quarter of 2003," said Norbert Ore, chair of the ISM manufacturing business survey committee.

Even so, the rise in manufacturing activity overall disclosed some encouraging pointers.

In an environment where business investment has been muted for months, the new orders index leapt to 63.3 from 49.9 in November, hinting at healthy activity in the months ahead.

EUROPEAN MANUFACTURERS UNDER STRAIN

The manufacturing sector in the euro zone contracted in December, with new orders, output, and employment levels falling for the fourth consecutive month.

The Reuters Eurozone Purchasing Managers' Index fell to 48.4 in December from 49.5 in November, going against analysts expectations of a 0.2 rise.

The 50 mark in the index divides growth from contraction.

 

 

Last month's decline was the steepest fall in the eurozone manufacturing index since January last year.

"The modest recovery in manufacturing seen earlier in the year has run out of momentum," said NTC Research, which compiles the survey.

"The PMI was dragged down by a slowdown in output growth to near stagnation, an increase in the number of job losses, and the sharpest drop in new orders since January."

Europe's woes were echoed in the UK, where the manufacturing sector shrank for the first time in five months in December, the Chartered Institute of Purchasing and Supply said.

The US Institute for Supply Management report, which recorded a level of 49.2 in November.

The euro zone is being weighed down by the weakness of the region's biggest economy, Germany, the survey showed.

Germany's rating fell to 46.9 from 49.0 as manufacturers cut jobs for the nineteenth month, while output slipped and new orders dropped.

Export orders also fell, reflecting the strength of the euro, which rallied 17% in 2002 to $1.03 when the survey was conducted.

French manufacturing contracted for the third consecutive month edging down to 48.7 from 49.6 in November, while the Italian index crept up to 51.1 from November's 51.0, after 12 months of growth in orders.

WALL STREET BEGINS 2003 WITH A BANG

Wall Street has begun 2003 in buoyant mood, as traders returned from their New Year break to indications that US industry could be back on track.

The past year brought the third 12-month slide in stock prices in a row, reflecting sluggish economic growth, weak corporate profits, a spate of accounting scandals, and fears over war in Iraq.

But by the close of business on 2 January, the blue-chip Dow Jones industrial average was 265.89 points or 3.19% higher at 8,607.52, less than a point off the high for the day.

The broader S&P 500 had pushed ahead even further, up 3.32% to 909.03.

But leading the pack was the technology-rich NASDAQ Composite, 49.34 points or 3.69% firmer at 1,384.85.

MORE GLOOM FOR UK MANUFACTURERS

The UK manufacturing sector contracted in December, a survey has found, adding to fears that the sector is heading back into recession.

The Chartered Institute of Purchasing and Supply's (CIPS) latest purchasing managers' index, which provides a snapshot of conditions in the sector, fell to 49.5 in December, down from a 50.1 the previous month.

A reading below 50 indicates that manufacturing is shrinking.

CIPS said the worse-than-expected figure was down to a "marked contraction of both employment and stocks of purchases," and a big drop in the new orders index.

BT EXITS HONG KONG MOBILE MARKET

UK telecoms giant BT has struck a deal to sell its stake in Hong Kong-based mobile operator SmarTone as part of its debt reduction strategy.

The firm has agreed to sell its 21% share of SmarTone, Hong Kong's third biggest mobile operator, to property developer Sun Hung Kai Properties for about HK$1bn (84m; $132m).

The sale price is about a third of the sum that BT paid for its stake in the Hong Kong firm three years ago.

The deal is the latest in a round of overseas asset disposals launched two years ago by BT in an effort to pay off its debts, which at the time approached 30bn.

UK PETROL PRICES RISE

Supermarket chain Safeway has become the second major petrol retailer to raise its prices, in a sign that British motorists will face higher fuel bills in the New Year.

Safeway said it would put up pump prices by an average of 2p per litre from 1 January, taking the average price of a litre of unleaded to 74.9p.

The move came after petrol retail giant BP confirmed it was increasing petrol prices by 1p to an average of 74.8p a litre.

The higher pump prices reflect a sharp jump in the price of crude oil amid fears that a US-led war against Iraq could disrupt fuel supplies from the Middle East, the world's biggest oil exporting region.

BRAZIL BEGINS BALANCING ACT

As Brazil's new government began its tasks, the man in charge of the money has set himself the difficult challenge of keeping both the rich and the poor happy.

Speaking the day after Luiz Inacio Lula da Silva took over the Presidency, at a massive ceremony in the capital Brasilia, new Finance Minister Antonio Palocci passionately dedicated himself to fighting Brazil's endemic poverty.

 

 

TURKEY PUSHES FOR CYPRUS DEAL

Turkey has signalled its determination to end the 30-year stalemate over the divided island of Cyprus.

The head of Turkey's governing party sharply criticised Turkish Cypriot leader Rauf Denktash in a television interview, urging him to negotiate to reunite the island.

WAR TALK THREATENS SOUTH KOREAN GROWTH

The threat of war over North Korea's nuclear programme is the biggest threat to South Korea's economy in 2003, the head of the central bank has warned.

"The North Korean nuclear issue is the biggest problem as it may check the economic growth (of South Korea)," said the central bank's governor Park Seung.

The Bank of Korea's growth target of 5.7% would be threatened if tensions escalated too far and the economy could even contract.

US BANK SETTLES ENRON CLAIMS CASE

JP Morgan Chase has agreed a multi-million dollar settlement with 10 insurance firms that it was suing over contracts with disgraced energy firm Enron.

The insurers had provided guarantees for contracts between Enron and Mahonia, an offshore unit of JP Morgan Chase, the second biggest investment bank in the United States.

JP Morgan was suing the insurers for a total of $1bn (600m) for guarantees on Enron's future oil and gas trades.

Enron filed for bankruptcy a year ago, voiding its future energy trading contracts.

DENMARK TO HOLD SECOND EURO VOTE

Danish Prime Minister Anders Fogh Rasmussen has said his country will hold a new referendum on euro membership, despite the fact that the proposal was rejected in 2000.

THAILAND IN EARLY LOANS PAY-OFF

Thailand plans to repay the outstanding $4.8bn of a bail-out loan from the International Monetary Fund (IMF) and other lenders early in an attempt to cut interest costs and improve its image among foreign investors.

UNION UPS EURO PRESSURE

Britain's second-biggest trade union, Amicus, has called for the UK to join the single European currency sooner rather than later.

Amicus said most of its 1.1 million members would vote in favour of the euro if there was a referendum now.

NEPAL TOURIST NUMBERS FALL

The authorities in Nepal have reported a big decline in the number of tourists visiting the country.

The number went down by more than a quarter in 2002.

HOUSE PRICES 'UNLIKELY TO CRASH'

The UK's house prices rose by 25% in 2002 and are set for further rises this year, according to the Nationwide building society.

Nationwide, which produces one of the country's leading house price indices, said the average house price rose by 1.7% in December to 117,206.

SINGAPORE AVOIDS DOUBLE-DIP RECESSION

Singapore's economy has narrowly missed a double dip recession, after reporting 0.1% annualised growth in the fourth quarter.

There is expected to be little improvement in the coming six months for Asia's most export-dependent economy.

The central bank, the Monetary Authority of Singapore said the economic outlook "has become less favourable since mid-2002".

 

 

CHINA PLANS MANNED SPACE FLIGHT IN 2003

Shenzhou IV blasted off from the Gobi desert on Monday China hopes to launch its first manned spacecraft later this year, a senior official has said.

This would make it only the third country to put humans into space.

Shanghai aerospace centre director Yuan Jie said the project had already entered the overall assembly and testing phase.

The launch would take place in the second half of 2003, he said.

US CONSUMERS LOSE FAITH

Consumer confidence in the US slumped in December, adding further gloom to the outlook for the US economy.

The Consumer Confidence Index dived to 80.3 in December from a revised 84.9 in November, according to data from an influential business lobby group, the Conference Board.

The figure was in stark contrast to analysts' forecasts of a slight rise to 85.5, and was the sixth fall in the past seven months.

GERMANY BANKS ON DRINKS DEPOSIT

A new law has come into effect in Germany which makes cans and bottles subject to a refundable levy.

The measure - which has been championed by junior coalition partner Green Party - is aimed at discouraging the use of materials which harm the environment.

Under the new law, Germans have to pay an extra 0.25 Euros on most canned and bottled drinks.

In order to get the money back on the deposit, customers have to keep the original receipt for the goods which they bought.

DHAKA BANS POLLUTING 'BABY TAXIS'

The government of Bangladesh has banned thousands of two-stroke three-wheelers, sometimes known as baby taxis, from the streets of Dhaka. The authorities argue that smoke from the machines reduces air quality.

EURO STAGES ANNIVERSARY REBOUND

The euro has ended its first year as a cash currency at its highest level for more than three years, as fears of a US war against Iraq undermine the dollar.

One year after Europeans handled their first notes and coins, the euro climbed from $0.8899 on 1 January to reach $1.050 at 1159 GMT.

US BANKRUPTCIES BREAK RECORDS

For the second year in a row, the aftermath of the stock market bubble of the 1990s has pushed US corporate bankruptcies to new records.

The combination of massive accounting fraud and the free spending of the past decade has brought down a string of household names in the past year, including five of the 10 biggest collapses on record. The 186 public companies that went bust had a massive $368bn in assets, dwarfing last year's record $259bn.

SAMSUNG INVESTS IN TOP-END CHIPS

Samsung Electronics has announced a major investment in its memory chip business.

Samsung said it will invest 1.5 trillion won ($1.2bn; 745m) in building new semiconductor facilities next year.

Samsung's strategy is to see off a downturn in the semiconductor industry by stepping up its investment in top-of-the-range technology.