INTERNATIONAL

 

Aug 25 - 31 , 2003

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF


FRENCH ECONOMY IN TROUBLE

New fears have been raised over the health of Europe's economy after France reported negative growth. The French economy shrank by 0.3% during the April to June period, official figures revealed. France's economy, the second largest in the eurozone, steadily weakened during 2002. However, marginally more upbeat figures in the first three months of 2003 had raised hopes of an improvement. But the latest contraction will dash hopes of a turnaround and is likely to weigh heavily on investor sentiment.

 

 

 

Earlier this month, both Germany and Italy announced they had fallen into recession after recording two consecutive quarters of contraction. "We are very disappointed with this figure.... this is very negative for France," said Irina Topa, an economist at Societe Generale. France's Prime Minister Jean-Pierre Raffarin said last month he expected the economy to grow 0.1% during the second quarter. And the unexpected contraction spells trouble for the government, which desperately needs growth to generate more tax revenues in order to try to rein in the public sector deficit.

"We expected better figures than this but it seems that, despite the drop in inflation, the bad state of the job market has weighed on consumers," said Jean-Louis Mourier, an economist at Aurel Leven. Amongst France's economic difficulties, exports dropped by 0.6% and consumer spending eased by 0.2%. Despite the first half year's poor performance, Mr Raffarin still predicts an expansion of 0.8-1.5% for the year as a whole. "The second quarter was exceptional owing to the consequences of the war in Iraq, the poor international economic climate and recession affecting several of our partners. It does not represent a trend," a ministry statement said.

UK'S MANUFACTURING ORDERS PICK UP

An increase in orders has provided manufacturers with a "glimmer of hope", the Confederation of British Industry (CBI) has said. The CBI's latest industrial trends survey revealed order books reached a nine-month high in August, due to higher demand at home. But the CBI did say that total orders in August remain well below normal levels, despite being the highest since November 2002. Export orders remained just as far below normal as they did in July, the CBI added.

Its monthly poll found 36% of manufacturers said their order books were below normal, while 12% said they were above normal. That gave a balance of minus 24%, up from minus 37% in July.Doug Godden, head of economic analysis at the CBI, said: "Conditions facing manufacturers have proved disappointing throughout this year. "This survey provides a glimmer of hope for a revival in fortunes. The big question now is will this prove another false dawn?"

Mr Godden added that manufacturers are still facing tough conditions with weak overseas markets leaving them unable to benefit from sterling's decline. Meanwhile, in the UK they seem to have been missing out on domestic demand generated by consumers and the government.

Paul Dales, UK economist at Capital Economics, poured cold water on the idea that the latest figures could signal a recovery for manufacturers. He said: "We are doubtful that this is the first step on the way to meaningful recovery. The negative view was compounded by Office for National Statistics (ONS) data that showed business investment between April and June fell 1.1% on the previous three months to stand 3.5% lower on the same period last year.

EURO SINKS AGAINST DOLLAR

The euro has hit new four-month lows against the dollar, as investors fret about the state of the European economy. The euro's fall was made worse by a string of upbeat economic data coming from the US, which helped the dollar. In late US trade the euro stood at $1.0919, down nearly 2% on the day.

The euro has lost 8% of its value against the dollar since June, partially reversing a sustained 33% increase since early last year.Of the world's three major currencies, it has suffered most from the exodus from government bond markets by traders who previously preferred European bonds prior to the Iraq war. The euro also fell against the yen on August 21, slumping more than 2% to 128.64 yen, its weakest level since 9 April.

DOW JONES HITS 14-MONTH HIGH

US stocks raced upwards on August 18, pushing the Dow Jones index to close at its highest level for 14 months. Investors shrugged off worries about the economic damage inflicted by power cuts across a huge swathe of the eastern and central US to focus instead on signs of underlying economic recovery.

The Dow Jones Industrial average rose nearly 1% to close at 9,412.45, its highest level since 20 June 2002. The tech-based Nasdaq index soared 2.2% to finish at 1,739.49. The broader Standard and Poor's 500 index also put on almost 1% to 999.74.

In the last few weeks, US firms have published details of their earnings during the second quarter of 2003 and overall the picture has been better than expected.

UK BUYERS PUT BRAKE ON CAR IMPORTS

Britons have put the brake on importing cars, largely because they can get better deals in the UK.

A total of 44,000 cars were brought into the UK by individuals in the first six months of the year, figures from the Society of Motor Manufacturers and Traders (SMMT) have shown.

In the same period last year 72,000 vehicles were imported. Economists say the fall is partly due to the falling cost of new cars, and partly down to the increasing strength of the euro against the pound which has made importing cars from the eurozone less profitable.

JAPAN'S NIKKEI TOPS 10,000

The Japanese stock market has risen above the psychologically important 10,000 level for the first time in a year. The Tokyo Stock Exchange's Nikkei 225 index of leading shares gained 169.50 points on August 18 to end the day at 10,032.97 the first close above the symbolic level since August 26, 2002, when it reached 10,067.74 points. Japanese stock markets have been depressed for the last year because of economic weakness at home and in Japan's largest export market the United States.

AIRBUS WINS US ORDER

European plane maker Airbus has said the US low-cost airline Frontier Airlines has placed an order for 15 of its A319 aircraft. The new planes will be delivered to the Denver-based carrier between 2004 and 2008. The planes have a list price of $55m (34.7m) each but Airbus gave no details of any discount that Frontier may have negotiated on the deal.

TAIWAN THREAT TO CANCEL BOEING

Taipei has threatened to terminate an order its main air carrier China Airlines (CAL) made with Boeing after the company cancelled a visit by the Vice President Annette Lu. Ms Lu said Boeing cancelled her visit to its headquarters in Seattle scheduled for August 18 under pressure from China.

AUSTRALIA CLEARS PATH FOR TELSTRA SALE

The Australian parliament has passed legislation to enable the controversial privatisation of the national phone company Telstra. But the bill could still, however, fail to win approval in the Senate where the Liberal-led coalition government is in a minority. The sale of the government's 50.1% stake in Telstra which would be Australia's biggest ever privatisation is expected to raise about A$35bn ($23bn; 14.5bn) .

UK RETAIL SALES WILT IN JULY

UK High Street sales fell by less than expected in July after the previous month's heat-induced surge, official figures showed. The Office for National Statistics (ONS) said retail sales fell by 0.4% during July, leaving them 4.4% higher than a year earlier. The latest fall is the largest seen since the beginning of the year.

US BLACKOUT SPOTLIGHTS WARNING SYSTEMS

Investigations into North America's worst ever power failure are focusing on an early warning system of telephone hotlines. But US Homeland Security Secretary Tom Ridge has said the power cuts showed that emergency response procedures put in place since 11 September 2001 "worked pretty well".

Regional power firms said they were checking their records of conversations with Ohio-based FirstEnergy about problems in the hours ahead of the blackout. The head of the US Federal Energy Regulatory Commission (FERC) has said it would take "days and weeks" to establish the cause of the power cuts.

 

 

MOZAMBIQUE AIMS FOR TITANIUM WEALTH

Mozambique could become a major producer of the rare metal titanium as the result of a mining project that has just won $20m backing from the World Bank. For Mozambique to take its place among the world's key world mineral producers would be a massive step forward given that it is one of the poorest countries in Africa.

An Irish mining company, Kenmare Resources, is putting the finishing touches to a $200m mineral sands project in one of its poorest regions, Nampula Province in the north-east of the country. Mineral sands comprise mainly rare rutile, from which titanium is derived, and zirconium.

All three metals are in demand in many industries, but especially in electronics.

CHAVEZ FOES PUSH FOR EARLY POLL

Tens of thousands of people march last week in the Venezuelan capital, Caracas, in support of a referendum to force President Hugo Chavez out of office. Opposition groups delivered a petition to the electoral authorities signed by more than 2.5 million people to demand the early vote.

ARNOLD TO SWING BUDGET AXE

California governor hopeful Arnold Schwarzenegger has given the first indication of how he would attempt to ease the state's economic crisis if elected. The Hollywood film star said his first act as governor would be to organise an independent audit of California's budget to identify the problems. Mr Schwarzenegger vowed to cut spending but not raise taxes he did not give details about where he would make the budget cuts.

NEW ROW OVER US MEDIA CONTROL

The chief media regulator in the US is fighting back against accusations that he wants to strengthen media giants and hamstring local broadcasting. In a news conference at the Washington DC headquarters of the Federal Communications Commission its Chairman, Michael Powell son of Secretary of State Colin Powell set out plans to deal with what he called a "deep-seated anxiety" about threats to local content.

DELL MAKES GRAB FOR MARKET SHARE

Dell, the computer giant known for its aggressive pricing, has again slashed its prices in an attempt to reinforce its global market lead. Dell's prices will now fall by up to 22%, taking its best-selling desktop computers down as low as $550.

BRAZIL SLASHES INTEREST RATES

Brazil's central bank has slashed the cost of borrowing money in response to falling inflation, raising hopes that the authorities are taking seriously the fragile state of the huge country's economy. The 2.5 percentage point fall the third decrease in as many months, after rapid increases earlier this year still leaves interest rates at 22%, high by developed country standards.

DEUTSCHE BANK FINED OVER HP VOTE

A unit of Deutsche Bank has agreed to pay $750,000 (472,000) to settle charges that it failed to disclose its conflict of interest when advising on the merger of Hewlett Packard and Compaq. Deutsche Asset Management recommended its customers should vote in favour of last year's merger of the computer giants. But the US financial watchdog claims the bank neglected to tell its clients that one of its investment divisions was working for Hewlett Packard (HP) at the time.

HP paid Deutsche Bank $1m for "market intelligence" during the takeover, with another $1m to be awarded on the deals' success.Deutsche Asset Management's vote eventually helped HP succeed in its $18bn takeover of Compaq, despite the best efforts of the HP family to block the deal.

 

 

BRITISH FAILURE HITS AUSTRALIAN INSURER

Australian insurer AMP has reported one of the largest losses in the country's corporate history after a disastrous investment into the UK's life insurance market took its toll. AMP lost 2.16bn Australian dollars ($1.4bn; 880m) in the first six months of the year, a radically different story from the A$303m profit made in the same period a year earlier.

ZURICH PROFITS MARK SHARP RECOVERY

The Swiss insurance giant Zurich Financial Services made net profits of $701m (442m) during the first six months of this year.

BANK UNITED ON RATE FREEZE

The Bank of England's monetary policy committee (MPC) voted unanimously to keep interest rates on hold this month, according to the official record of its meeting on 6 and 7 August. All nine members of the panel voted to freeze rates at their current 48-year low of 3.5%, the minutes of their meeting stated.