"This could give you no growth in the US or a
possible recession," said Gail Fosler, chief economist at the
US-based research group the Conference Board.
Industry leaders also warned that this would have a
grave impact on the rest of the world, with the fragile global economy
especially dependent on the US at present.
Security is tight at the event, with thousands of
army and police protecting the venue. Swiss authorities have declared a
no-fly zone and threatened to shoot down any aircraft making
unauthorised flights over the region.
As the forum kicked off, a survey revealed that just
under half of all chief executives rated terrorism and global war as a
significant threat to their growth prospects.
"Whether it is a short war or a long war, the
best answer is: no war," said Ujiie Junichi, chief executive of
Japanese financial services giant Nomura Holdings.
Stephen Roach, chief economist at US investment bank
Morgan Stanley, said the American economy's performance last year had
been "pathetic" and might get worse.
"If we went into war with a big [economic]
cushion, we might be able to come out of it. When you hit with a zero
growth rate, we will go into recession."
On the other side of the Atlantic in Brazil,
meanwhile, anti-globalisation protesters are gathering for a rival
summit, the World Social Forum.
EURO STRENGTH WORRIES BANKERS
A rapid rise in the value of the euro against the
dollar could have damaging consequences for Europe's economy, the German
banking federation has warned.
The euro was trading at above $1.07 on Wednesday
morning, its highest level for more than three years.
The dollar weakened after President Bush's comments
that time was running out for Iraq, suggesting that a war was imminent.
The single currency has risen almost 25% against the
dollar from its low of 86 cents just over a year ago.
A strong euro dents the competitiveness of companies
exporting from the eurozone, making their products comparatively more
Eurozone economies — and Germany in particular —
are struggling to recover from last year's weak growth.
"It's important that a possible further
strengthening of the euro should occur at a moderate pace," the
banking federation warned.
"Rapid and sharp exchange rate movements could
unnerve economic players even more," it cautioned, adding that the
current level of the euro was not high enough to lower growth forecasts.
There has been growing speculation the European
Central Bank (ECB) could counter the economic impact of the euro's
strength by cutting interest rates.
But expectations of a rate cut were being
overshadowed by war fears on the European stock markets.
Leading indexes in both France and Germany fell by
more than 1% in morning trade on Wednesday.
And investors rushed to gold, the traditional safe
haven in troubled times.
SHARES FEAR AFTER NINE DAYS OF LOSSES
There are fears that London's index of blue-chip
shares will continue its run of losses when the markets open on Friday.
The FTSE 100 closed for a record ninth day in a row
on Thursday in its worst losing streak since it was launched in 1984.
The index closed down 55.8 points at 3,622.2, and is
at its lowest level since 20 December 1995.
At its peak the FTSE 100 touched 6,930 in December
1999. Over the last nine days, the index has shed almost 9% of its
The Dow Jones Industrial Average was down 47.57
points at 8,271.16.
The technology index Nasdaq gained ground, closing up
more than 2% at 1,388.27.
FEAR STALKS WORLD, SAYS MALAYSIA LEADER
The escalating tensions between the West and
terrorist forces has tipped the globe into World War Three, Malaysian
Prime Minister Mahathir Mohamad has warned.
Victims of the September 11 atrocities in the US, and
Afghan villagers killed during the ousting of the Taleban regime, were
casualties of conflict fuelled by a global climate of fear, Dr Mahathir
"We fear cardboard boxes. We fear white powder.
We fear shoes. We fear metal cutlery," Dr Mahathir said.
Citizens in states accused of harbouring terrorists,
meanwhile, feared sanctions, starvation and military action.
JAPAN'S MONETARY POLICY UNCHANGED
The Bank of Japan (BOJ) has left its monetary policy
unchanged, despite calls for a tougher stance on deflation.
The move did not surprise analysts, who said it was
unlikely the outgoing BOJ governor Masaru Hayami would make any radical
change in policy in his final days in the post.
Mr Hayami's five year term ends in March but the
prime minister Junichiro Koizumi has not yet revealed his choice for a
The central bank said board members voted unanimously
to target reserves in the bank's current account at between 15 trillion
and 20 trillion yen ($127bn -$169.5bn ).
INDONESIA REJECTS IMF HELP
Indonesia has said it wants to free itself from the
International Monetary Fund's (IMF) restrictive economic policies.
Chief economics minister Dorodjatun Kuntjoro-Jakti
told an annual meeting of donors that he did not want to extend a $5bn
loan pact after it expires at the end of the year.
Last week, the Indonesian Government caved in to
public pressure by reversing its earlier decision to raise fuel prices
in line with market forces.
Such prices rises are a key component of economic
reforms dictated by the IMF in order to secure loans.
Indonesia's decision to go it alone without the IMF's
help came after the country won $2.7bn of loans from the Consultative
Group on Indonesia.
The multi-billion-dollar loan was approved at a
meeting of financial donors in Bali.
DOLLAR HIGHER AGAINST YEN
The dollar edged higher on Wednesday as the market
awaited fresh developments on Iraq, a day after the ratcheting up of
pressure on Baghdad sent the US unit stumbling to its lowest level in
more than three years against the euro.
The single European currency slipped to $1.0695
against 1.0727 late on Tuesday in New York. The dollar also rose to
118.34 yen from 118.08. Meanwhile, on the London Bullion Market the spot
gold price jumped to $359.25 per ounce from $353.8 late on Tuesday,
after earlier hitting a high of 360.55 — a level not seen in almost
AUSTRALIA FACES NEW BLAZE THREAT
Firefighters in Australia are bracing for a weekend
of resurgent bushfires, with temperatures forecast to soar to 40 Celsius
(104 Fahrenheit) in some areas.
Emergency teams made the most of a brief respite in
the weather to construct fire breaks in the hope of keeping existing
blazes under control.
GOLD PRICE HITS NEW HIGH
Gold prices have risen to a new six-year high on
concern about the economic consequences of an American-led military
campaign in Iraq.
The gold price was set at $364.70 an ounce in the
London afternoon session on Thursday, up from the morning's fix of
$363.30, and the highest level since 3 January 1997.
MCDONALD: McDonald, the world's
largest restaurant chain posted a net loss of $344m (£212m) for the
October to December period, compared with a profit of $272m the year
the Finnish firm made 1.05bn euros ($1.13bn; £700m) in the last three
months of 2002, compared with 450m euros a year earlier.
SIEMENS: Industrial engineering
giant Siemens made a net profit of 521m euros ($558m) in the last three
months of 2002, down from 538m in the same period a year earlier.
equipment giant Lucent reported a loss of $264m (164m; 246 euros)),
significantly lower than the $423m lost in the same three months a year
spite of a $980m (609m) net loss in 2002, car giant Ford has said it
will increase car production in the first quarter. The net loss was a
strong improvement from the $5.1bn net loss the world's second-largest
automaker reported in 2001.
VENEZUELA SUSPENDS CURRENCY MARKETS
Venezuela's will close its currency markets for five
days in an attempt to stem capital flight.
The country's currency, the bolivar, has lost almost
a quarter of its value since the start of the year, while the economy
has been crippled by a seven-week opposition strike against President
And as the political and financial turmoil increases,
more multinational firms are fleeing Venezuela.
WEST AFRICA IGNORES IMF RED FLAG
West Africa is determined to press ahead with the
launch of its single currency despite a warning that it could do more
harm than good.
"I don't think anybody can convince us that a
single African currency is not a good idea," the West African
Monetary Institute's David Asante told BBC News Online.
"The single currency used in colonial times was
beneficial, we want to recapture those benefits," he said, saying
it would enhance the region's overall production.
THAILAND IMPOSES 'LUXURY TAX'
Thailand has announced plans for an excise duty on
the entertainment industry.
Everything from karaoke bars to massage parlours and
cinemas will have to pay a new tax which could be as much as 20%.
Telecoms companies will also have to pay an excise
tax which could be up to 50%.
EU CRACKDOWN ON TAX EVADERS
Tax evaders should find it harder to escape the
authorities thanks to a new European agreement.
EU finance ministers have backed a plan to make it
harder for their citizens to hide savings in other European countries.
The new system could bring in billions of extra
pounds in tax.
After years of wrangling 12 EU members, including the
UK, have agreed to take part in a new system of banking co-operation
where they will exchange information in order to uncover hidden savings.
For the UK, the stumbling block had been the
suggestion of a Europe-wide 'withholding tax' on savings.
SOUTH AFRICANS CUT THEIR CLOTH
In the Makhatini Flats in northern KwaZulu-Natal, the
rains that should have fallen in October to moisten the ground for
cotton planting did not come.
In this dry and underdeveloped region of South
Africa, cotton is the only commodity that offers a lifeline out of
poverty and subsistence farming.
The future of some 4,000 small-scale cotton farmers
and their extended families now hinges on the Land Bank.
UK TOLD TO IMPROVE ROADS AND SKILLS
The UK needs to spend more on its roads, education
and research & development if its economy is to keep growing.
Those are the conclusions of a Harvard business
school professor appointed by the government to find out where the
country's managers are going wrong.
Michael Porter's report will be published next month.
BANK SPLIT CONTINUES ON UK RATE DECISION
Two members of the Bank of England's monetary policy
committee (MPC) voted once again to lower UK interest rates at its most
Minutes of the meeting, released on Wednesday, showed
that Christopher Allsop and Stephen Nickell voted for a quarter-point
cut in rates, for the fourth time in a row.
SURPRISE DROP IN UK INFLATION
Underlying inflation in the UK staged a surprise drop
in December, as higher petrol and housing prices were outdone by cheaper
food and clothes.
The Office of National Statistics said underlying
inflation, which excludes the volatile effects of home-loan payments,
fell to 2.7% in December, down from November's four-year-high of 2.8%.
JAPAN BANKRUPTCIES NEAR RECORD
Record numbers of Japanese companies are taking a
tumble. Nearly 20,000 firms went bankrupt in Japan during 2002, the
second-highest number of corporate failures since World War II.
And experts predict that this year even more
companies will go under, because the government is pushing Japanese
banks to adopt stricter accounting standards.
Later this month, the Financial Services Agency will
begin a second round of special inspections to examine the balance
sheets of the country's banks.