INTERNATIONAL

 

July 07 - 13 , 2003 

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF

 

SLOWEST UK GROWTH IN 11 YEARS

The UK economy grew at its slowest pace for 11 years during the first three months of the year. Revised figures released last week showed that growth was 0.1%, weaker than the original estimate of 0.2%. Economists blamed the run-up to the war in Iraq, as consumers and businesses reined in their spending. "It does confirm our view that the economy was pretty weak in the first quarter and we don't think it's going to improve much in the second," said Alan Castle, UK economist at Lehman Brothers. 

 

 

 

The last time the UK experienced such anaemic growth was in the second quarter of 1992, when the economy was struggling to pull itself out of recession. The year-on-year figure for the UK's gross domestic product (GDP) was also revised downwards from 2.2% to 2.1%, the weakest in a year.

The main cause for the revisions was fresh data on the construction industry from the Department of Trade and Industry. However, household spending a key driver of growth was also corrected downwards to a rate 0.2% on the quarter.

This is the slowest growth in household spending since the third quarter of 1997. There was some positive news, however, as data from analysts Martin Hamblin GfK showed a small rise in consumer confidence.

  The researchers described June as "a month of cautious optimism" after their key index saw an increase of one point, from minus three in May to minus two in June. This is the third consecutive month that the index has risen.

CONFIDENCE BOOST FOR JAPAN

Companies in Japan are betting on a brighter future according to new figures, reinforcing hopes that the Japanese economy may finally be turning the corner.

Less than a week after Japanese factories showed their best rise in output in a year, the closely-watched Tankan quarterly survey of business confidence has showed optimism at its strongest in two years.

The markets' response was immediate, pushing the benchmark Nikkei 225 index to a close of 9,278.49 points up 2.15% on the day for a nine-month high.The yen, meanwhile, climbed slightly, offsetting recent falls against the dollar.

But despite the healthy Tankan reading for the April-June quarter, buried in the Bank of Japan's survey of thousands of businesses across the country were less encouraging signs.

While sentiment among large corporations for the quarter just finished rose from minus 10 to minus 5, the quarter still marked the tenth in a row during which the headline Tankan figure has remained negative.

And the confidence was much weaker among small companies, which have been squeezed by cost-cutting at the bigger firms to which they supply goods and services.

Meanwhile, the forward-looking element of the survey, measuring expectations for the next three months, was flat. Still, observers were determined to see the upside, to be found in expectations of profits at large firms rising more than 11% this year.

"Corporate sentiment went down at the start of the second quarter reflecting the slowdown in exports but in May and June, exports started to pick up on the back of early signs of a recovery in the US economy," said Masaaki Kanno, chief economist at JP Morgan.

UK POWER CUTS 'IN 20 YEARS'

Britain could face power cuts within the next 20 years as the country imports the bulk of its energy needs, a report says.

The Institution of Civil Engineers (ICE) says 80% of the gas needed to fuel power stations will come from what it calls "politically unstable" countries thousands of miles away. The report says that if the supply was interrupted the lights would start to go out within hours.

 

 

The institution said emission constraints mean that the UK's coal-powered generating plants will close shortly after 2016 and only one nuclear power station will remain operational beyond 2020.

At present, renewable energy sources such as solar, wind and wave can only provide a fraction of the total requirement.

Therefore Britain will be forced to import fuel by 2020, initially from Norway, but as demand across Europe exhausts supplies, Britain will be forced to source gas supplies from West Africa, the Middle East and the former Soviet Republics, it said.

RUSSIAN BILLIONAIRE ARREST HITS MARKET

Russia's Prosecutor General has arrested one of the country's richest men, the billionaire Platon Lebedev a move being interpreted as a sign that the Kremlin is warning so-called 'oligarchs' to stay out of politics.

Mr Lebedev was detained by prosecution service officers at the hospital where he was receiving treatment.

He forms part of a the country's super-rich elite - the oligarchs who made their fortunes in the early days of Russia's wild privatisation and is suspected of embezzling more than $280m worth of stock in a state-owned maker of fertilisers back in 1994.

GERMANY 'HEADING FOR RECESSION'

Germany may be slipping into recession despite government intervention to stimulate growth, according to a German think tank, DIW.

"Germany is in an economic crisis," the research institute said in its summer report which cut its forecast for German growth to -0.1% from a previous 0.6% rise.

The warning comes after Chancellor Gerhard Schroeder announced tax cuts in an attempt to boost consumer spending. Figures released last week show German retail sales fell in May.

BANGLADESH PASSES BUDGET

Bangladesh's parliament has approved a budget which aims to aid economic development, combat poverty and reduce the country's dependence on foreign assistance.

But it only did so after the government agreed to ditch controversial proposals for substantially higher tariffs on sugar and salt imports.

For the year to June 2004, "the duty on salt now will be 60% instead of 75% and on sugar [it] will be 30% instead of 40%", Finance Minister M. Saifur Rahman told parliament.

During the previous budget year, a 20% import duty had been levied on sugar, while the duty on salt had been 60%. The budget aimed to bring in 361bn taka (3.75; $6.18bn) against expenditures of 290bn taka.

BAE TIES UP 2.6BN ITALIAN DEAL

BAE Systems has signed a joint venture agreement with Italian defence group Finmeccanica. The electronics partnership, which will have combined sales of 3.8 billion euros (2.6bn; $4.3bn), is be known as Eurosystems. The companies have been looking to consolidate their defence systems businesses for some months.

US UNEMPLOYMENT RATE LEAPS

Unemployment in the US rose much faster last month than economists had predicted, sending the official jobless rate to 6.4%. The rate in June reached its highest level for nine years, confirming fears that the economic slump in the US is far from over.

SINGAPORE AIRLINES

Singapore Airlines (SIA) staff have agreed to pay cuts of 11% after the company confirmed record losses due to the Severe Acute Respiratory Syndrome (Sars) crisis.

The cuts come after the airline's 1,600-member pilot union accepted a 16.5% pay cut and 24 days of compulsory unpaid leave per year.

CRISIS FOR WEST AFRICAN FARMERS

Farming communities on the Mauritanian and Senegalese sides of the Senegal river valley are under threat because of drought, the US-based famine early warning agency Fews Net has said.

In Mauritania farmers have been reduced to collecting wild plants and almost all are eating only once a day, the agency said. And the prices of imported wheat and rice have risen sharply.

In Senegal, peanut and millet production has dropped, leaving farmers increasingly reliant on money sent to them by family members living in towns, Fews Net's local representatives have said. The World Food Programme (WFP) is about to re-assess the situation in the area.

WALL STREET POSTS SPRING RALLY

Wall Street is enjoying its biggest and most sustained rally since the end of the dot.com boom, according to the broadest measure of US shares. In the three months to the end of June, the Standard & Poor's index of 500 leading shares was up an impressive 14.9%.

BOOM IS OVER, SAYS NEW BANK CHIEF

The new governor of the Bank of England has warned the consumer spending boom is over and sterling's rising value on currency exchanges could hit the economy.

Mervyn King, on his first day as successor to Sir Edward George, has also pledged to change the Bank's management style.

He told the Times newspaper he would spend less time making speeches to the City and more time meeting people and businesses around Britain.

SCHROEDER DEMANDS BERLUSCONI APOLOGY

German Chancellor Gerhard Schroeder has demanded a public apology from Italian Prime Minister Silvio Berlusconi over remarks comparing a German politician to a Nazi guard.

To applause from the German parliament in Berlin, Mr Schroeder said he expected Mr Berlusconi to "apologise fully for this unacceptable comparison". "This comparison, this remark, is a mistake in form and content and totally unacceptable," he declared.

NEW EU LAW OVER AIR MISERY

An EU law guaranteeing big payouts for passengers left stranded by airlines is to be voted in despite opposition from budget airlines.

 

 

Passengers sick of being bumped off flights because of over-booking or cancellation will be given greatly enhanced rights to cash compensation. The European Parliament will back the tougher rights for air travellers in a formal vote later.

WORLDCOM: SHARES TO FRAUD VICTIMS

The bankrupt telecoms firm, due to be renamed MCI, has offered investors who lost money from the $11bn (6.6bn) WorldCom fraud scandal an additional $250m in common stock.

The proposed settlement, which has been agreed with the US stock market regulator, would come in addition to an already agreed record $500m payment to investors. If the gesture gets court approval, it could help lift the company out of bankruptcy as early as this autumn.

AUSSIE POWER DEAL AT RISK

An Australian power station and coal mine, Loy Yang A, has accepted a 3.5bn Australian dollars (1.4bn; US$2.4bn) takeover bid from an international consortium despite opposition from the country's competition watchdog.

The Great Energy Alliance Corporation (GEAC) consortium is led by Australian Gas Light (AGL) and Tokyo Electric Power Company which have agreed to acquire a 35% stake each. The remaining shares would be snapped up by a group of investors led by Commonwealth Bank of Australia.

BOEING LANDS $6BN JET ORDER

Boeing has beaten off competition from its European rival Airbus to win an order for up to 110 jets from US low-cost carrier AirTran. The airline said it had placed an order for 50 new Boeing 737 jets with an option for 50 more.

FORD FINANCE DEAL UNLOCKS CHINA

One of China's top four state-owned commercial banks has agreed to provide finance to Ford car buyers. The deal, with China Construction Bank (CCB), represents a major breakthrough for Ford in China, vastly improving its ability to sell cars in the world's fastest growing market.

Car makers are forced to enter into agreements with local banks to enable Chinese customers to buy their products because only commercial banks are allowed to offer auto financing.

GUCCI PROFITS CRASH TO EARTH

Designer wear group Gucci has suffered a 97% fall in net profit during the first three months of the year.

AUSTRALIA CALLS FOR RATE CUT

Australia's central bankers are facing calls to cut interest rates after new numbers showed industry stagnating. The Reserve Bank of Australia is meeting shortly to consider whether to follow the lead of Europe and the US in reducing rates, which have remained at 4.75% for over a year.

Economists say that a rising Australian dollar and the stubbornly  sluggish world economy are threatening the solid growth the country has experienced, and that markets have already factored in a quarter-point cut.

JAPAN FIGHTS FOR RUSSIAN PIPELINE

Japan has offered to help Russia develop Siberian oil fields in return for the building of a pipeline to the Pacific port of Nakhodka. The Nakhodka pipeline would pump Siberian oil from Angarsk, near Lake Baikal, over a 4,000 kilometre route to the sea of Japan.

 

 

Japan is keen to provide incentives for Russia to build the pipeline in preference to a rival project to pump oil to north eastern China.