INTERNATIONAL

 

Aug 18 - 24 , 2003

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF

 

GERMANY FALLS INTO RECESSION

Germany is officially in recession, after recording a 0.1% economic contraction in the three months to June. The figure combines with a 0.2% fall in the previous quarter to produce six straight months of shrinkage the technical definition of a recession. Germany's economy has effectively been at a standstill for a year, after seeming to recover from a modest recession at the end of 2001.

 

 

 

Now, economists say that Germany is already on the mend, and the latest monthly employment figures have started to show a much-desired uptrend. "Our expectation is that we'll see a slight improvement in the second half," said Rainer Guntermann of Dresdner Kleinwort Wasserstein bank. "On the whole, we expect zero growth this year." Economic growth has weak this year across the eurozone's biggest economies.

Italy also fell into recession in the first half of 2003, while France is expected to reveal weak economic growth figures next week amid an unemployment rate of nearly 10%. The European Commission, however, insists that economic growth will pick up at the end of the year and during 2004 although it has cut its economic growth forecast for the whole of the eurozone to just 0.7% in 2003.

Growth would be helped if the European Central Bank were to cut interest rates further, after finally reducing rates to 2.5% earlier in the year. In Germany, the main reason for medium-term optimism is the series of reforms put in place by the government of Chancellor Gerhard Schroeder, who has staked his career on reinvigorating the stagnant economy.

FED POINTS TO SIGNS OF RECOVERY

The US Federal Reserve has explained it delivered a smaller-than-expected cut in interest rates in June because it believed the US economy was on the mend. The Fed cut the cost of borrowing to a 45-year low of 1% at its 25 June meeting by 11 votes to one. Many economists had expected a deeper half-point cut to 0.75%.

The Fed's policy making panel took into account "the emergence of firmer signs of a possible upturn in economic activity", according to the minutes of the 25 June meeting released. Publication of the Fed's thinking coincided with healthy figures on trade, jobs and wholesale prices that seemed to support its gamble. New claims for unemployment benefits stayed below 400,000 for the fourth week in a row, US Labor Department data showed.

There were 2,000 new claims in the last week, taking the total to 398,000. The US trade balance was $39.5bn in June, helped by exports climbing to their highest level in two years thanks to stronger economic growth abroad, the Commerce Department said. Imports held steady. Wholesale prices rose by 0.1% in July, a separate Labor Department report showed. The Fed has been worried that falling prices could hurt the fragile economic recovery by making shoppers reluctant to spend, favouring a wait-and-see attitude instead. The latest wholesale price data appeared to provide reassurance against this threat.

FRENCH HEAT DEATHS 'UP TO 3,000'

The French health ministry has said the deaths of up to 3,000 people in recent weeks could be attributed to the European heat wave. The announcement came as the government extended throughout the country an emergency hospital plan originally introduced in the Paris region to deal with the medical crisis.The move was ordered by Prime Minister Jean-Pierre Raffarin, who cut short his holiday to head a crisis meeting of his cabinet in Paris.

The "Plan Blanc", which is normally reserved for epidemics, disasters or terrorist attacks, provides for the recall of doctors from holiday and making available extra staff, hospital beds and temporary mortuaries.

UK SHARES HIT 12-MONTH HIGH

The FTSE 100 index of leading UK shares has closed at 4,238 a high not seen since August last year. Analysts attributed the latest rise to investors' general mood of optimism about corporate earnings and the economy. The top gainers during August 14 trading included Intercontinental Hotels, Standard Chartered Bank and chemicals firm ICI. All rose by about 4% while the index of the top 100 companies was up 1.4%. The bluechip FTSE 100 has risen steadily in recent months and is now up 29% from its 2003 low of 3,287 touched on 12 March.

BLACKOUTS CAUSE NORTH AMERICA CHAOS

Work has been going on through the night to restore power after massive blackouts hit major cities in the eastern United States and Canada. The power failures caused chaos as they spread from New York to Detroit, and Toronto to Ottawa.

Traffic lights failed, underground railways were evacuated and people were trapped in lifts in offices and apartments. Canadian officials said a fire at a power plant near the upstate New York town of Niagara caused the outage at about 1610 local time (2110 GMT) which then cascaded across the country. The US Department of Homeland Security said it was investigating the cause of the blackouts but US officials who dispute the Niagara theory have said there is no evidence terrorism is to blame. Power is slowly returning to the affected areas thought to encompass more than 50m people but full restoration will take much longer, officials say.

 

 

EU-US STRIKE FARM TALKS DEAL

The European Union and the US have agreed a joint position from which to negotiate with developing countries over controversial agricultural subsidies. The subsidy of agriculture has been a key area of difference between the two biggest trading blocs in the world, as well as a source of ire from developing countries who say they are shut out of Western markets.

The new framework a "common vision" rather than a detailed plan, as an EU spokesman put it will be used as a base for negotiations at the summit of World Trade Organisation (WTO) members in Cancun, Mexico in September. But it has already been rejected by India, the biggest WTO member bar China and the loudest voice among developing countries.

GO-AHEAD FOR GIANT OIL MERGER

Russia's mergers and monopolies regulators have approved a deal between the oil giant Yukos and its rival Sibneft which will create the world's fourth-largest oil producer. The deal, announced four months ago, has been hanging in the balance ever since Yukos became the focus of a high-profile criminal investigation, believed by many to be politically motivated.

PENSION SCHEME CLOSURES SLOW

The rate at which firms are closing their employees' final salary pension schemes has slowed, according to a new survey from consultancy firm Watson Wyatt. A study of 290 companies with final salary schemes found that while half had reviewed their pension provisions during the past year, only a third of these had shut their schemes to new members. The figure is down sharply from a 55% closure rate this time last year.

UK UNEMPLOYMENT FALLS AGAIN

UK unemployment rate has fallen to a fresh two-year low as the service sector remains buoyant.

Data from the Office for National Statistics (ONS) showed the number of people out of work in the three months to June fell by 42,000 to 1,458,000, leaving the jobless rate at 5%.

UK SPENDS ITS WAY TO RECOVERY

The British economy is showing no signs of taking a tumble, despite troubles among some of its main trading partners, the Bank of England has predicted. In its quarterly inflation report, a key platform for economic forecasting, the Bank of England said that a modest recovery was the most likely prospect.

FED KEEPS US RATES ON HOLD

The US Fed has left interest rates unchanged at 1% following the latest meeting of the central bank. Policymakers at the Federal Reserve have decided to keep US interest rates unchanged as evidence of an economic recovery gathers pace.

GERMAN CABINET BACKS REFORM

The German cabinet has approved an overhaul of the country's welfare system in an effort to bolster Europe's largest economy. The proposals to reorganise the jobless benefit system and reform local business tax form part of Chancellor Gerhard Schroeder's "Agenda 2010" reform programme. The decision follows recent government figures showing the German labour market had deteriorated further in July, with more than one in 10 people now looking for work.

WEAK CHIP PRICES HIT HYNIX

Weak memory chip prices have increased losses at South Korea's struggling chipmaker, Hynix.

The financially-challenged firm racked up losses of 530.2bn won ($450m; 270m) in the three months which ended in June. That is a 27% larger loss than suffered during the same three months a year earlier, dashing hopes that the semiconductor industry is on the road to recovery.

 

 

GROWTH GATHERS PACE IN JAPAN

Japan's economy picked up speed between April and June as more investment by companies and an unexpected increase in personal spending underpinned the best growth for nine months.

Figures issued by the government showed that in the three months to June the economy grew 0.6%, well ahead of the 0.2% forecast by economists. Stock prices responded strongly to the news, as investors piled into property companies and the big banks.

The two sectors are among those worst hit by Japan's decade-long downturn, the one hit by slumping prices and the other burdened by trillions of yen in bad debts.

FRESH BID FOR GHANA GOLD MINE

The competition to take over Ghana's biggest gold miner hotted up as London-listed Randgold confirmed reports that it is entering the race with an initial bid worth almost $1.5bn.

The new offer jumps well ahead of the main one currently on the table, which sees South Africa's AngloGold part of Anglo American, the world's third largest mining concern offering shares worth $1.1bn.

AUSSIE RATE CUT 'OFF THE CARDS'

A booming housing market and soaring business confidence means that borrowing in Australia is unlikely to get cheaper any time soon. The National Australia Bank's monthly survey of how optimistic businesses are about the future hit a 15-month high in July, as Australia's non-farm economy outpaced the sluggishness seen elsewhere in the world.

CHINA SEES FACTORIES BOOM

China's economy is continuing to defy the gloom felt elsewhere in the world, according to official figures, with production soaring and foreign trade at record levels. The first month of the second half of the year showed factory output up 16.5% on the previous year according to the State Statistical Bureau, as China shrugged off the after-effects of the Sars respiratory virus.

The figure for July is slightly above the total gain for January to July, and is concentrated on electrical and machinery products. But the breakneck performance coming at the height of the summer heat and the consequent upsurge in air conditioner power demand has heightened pressure on the electricity sector, leading to ongoing power shortages.

AXA PROFITS SLUMP

The group made a profit of 209m euros ($237m; 148m) in the six months to June, down 75% on the previous year.

US FIGHTS BACK IN STEEL WAR

The US has appealed against the World Trade Organisation's (WTO) decision that its steel tariffs flout international trade rules. A WTO panel decided in July that US steel tariffs were without justification and ordered the US to either remove the tariffs or face sanctions.

UK TRADE GAP WIDENS

Britain's trade deficit has recorded a surprise increase, due to a sharp slowdown in exports to countries outside the European Union. The Office for National Statistics (ONS) said the total value of imports exceeded the value of exports in June by 4.5bn ($7.2bn), up from 4.1bn in May.

The figure wrong-footed City economists, who had been expecting the trade gap to narrow to 3.8bn.

The unexpected increase partly reflected a steep drop in the value of non-EU exports, which fell by 13.1% compared with the previous month.The total trade deficit with non-EU countries climbed to 2.7bn, up from 2.3bn in May.

 

 

ITALY SLIDES INTO RECESSION

Italy has officially entered recession, after preliminary figures indicated that its economy shrank in the April to June period. Italy's economy contracted by 0.1% over the three months, according to the national statistics agency statement. An identical performance in the first three months of the year means Italy has now met the traditional definition of recession an economy shrinking over two successive quarters for the first time in 11 years.

'ENCOURAGING' SIGNS FOR UK TOURISM

The number of tourists visiting the UK from abroad is showing signs of reviving, according to the latest official figures. A total of 2.41 million people visited the UK in June this year, an 8% rise on the same period last year, figures from the Office for National Statistics (ONS) showed.