INTERNATIONAL

 

Jan 12 - 18 , 2004

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF


US DEFICIT MAY POSE 'GLOBAL RISK'

Excessive fiscal deficits in the US could hurt the long-term sustainability of the American and global economies, the International Monetary Fund warned. Recession, tax cuts and high spending for the war on terrorism have resulted in large deficits, the IMF said. That could place upward pressure on interest rates, and pose risks for the US economy and rest of the world. IMF Deputy director Charles Collyns, said international investors could also lose confidence in the dollar. That, he said, could force them to consider investing elsewhere.

 

 

 

 

Noting the dollar's recent slide against the euro, UK pound, and yen, the IMF said an unrestrained drop could have serious consequences at home and abroad. The IMF report said the dollar has been affected by the mushrooming US current account and budget deficits. "This trend (of deficits) is likely to continue to put pressure on the US dollar, particularly because the current account deficit increasingly reflects low saving rather than high investment.

"Although the dollar's adjustment could occur gradually over an extendedperiod, the possible global risks of a disorderly exchange rate adjustment, especially to financial markets, cannot be ignored," the IMF said. "Episodes of rapid dollar adjustments failed to inflict significant damage in the past, but with US net external debt at record levels, an abrupt weakening of investor sentiments vis-a-vis the dollar could possibly lead to adverse consequences both domestically and abroad."

GOLD HITS 14-YEAR HIGH ABOVE $420

Gold started the first week of 2004 as it ended 2003 charging to its highest since February 1990 as the dollar crumbled against the euro and the yen and speculative funds maintained their appetite for precious metals. Spot gold was at $420.75/ 421.45 an ounce at 1447 GMT, well up from $416.25/416.75 at European opening and what had been a long-standing objective at $417.70. "The precious metals are all off to the races they are all up on the US opening," analyst Kamal Naqvi of Barclays Capital said. New York futures markets re-opened for the first time since December 31 on Monday, and all the precious metals leapt higher. Silver jumped to its highest since April 1998, while platinum rose some $20.

Bullion peaked at $422.20, and analysts said they expected the metal to notch up further gains given voracious fund purchasing, the trends on foreign exchanges and gold's close inverse relationship with the dollar. Analysts said gold could touch $450, the highest in 16 years, because of dollar weakness, fears of fresh attacks on the United States and persistent violence in Iraq.

The dollar fell to a three-year low against the yen, slipping below 106.50 as broad selling took it through key technical support. The dollar was under pressure as comments by Federal Reserve governor Ben Bernanke reinforced a view that US interest rates will stay low for some time. The dollar traded at a low of 106.48 yen, while against the euro it had dropped to $1.2695 on persistent worries about a widening US current account deficit. "With analysts predicting a test of $1.30 in the euro by the end of the month further gains in gold seem likely," James Moore of TheBullionDesk.com said.

 

 

CHINA MOBILES OUTSTRIP LANDLINES

China now has more mobile phones than it has landlines, new figures show. According to the data from the Ministry of Information Industry, subscriber numbers were up by more than 30% in 2003 to 269 million. Over the same period, the number of fixed-line phones rose to 263 million in a population of 1.3 billion people. The rapid growth mirrors the mobile's explosive growth in Europe in the 1990s although there landlines were already much more common. Growth in China has slowed sharply from the 60% annual subscriber expansion seen in 2002, but analysts say the size of the urban market still offers room for solid growth in years to come.

DOLLAR PAUSES AFTER RECENT SLIDE

The US dollar edged back on Jan 7 as investors took stock of the record lows it has hit in recent days. Traders said the dollar was plagued by concerns the US will no longer be able to finance a huge trade gap if foreign investors tire of low interest rates. The dollar was up 0.1% on the yen, but still trading around three-year lows, at 106.14 yen. In New York, the euro fell to $1.2637 after topping $1.28 for the first time on Jan 6. The pound fell to $1.8162. But traders said the pause was little more than a temporary respite for investors to lock in profits from their backing of the greenback's slide. With the US government apparently content to let the dollar slide, they said, the decline was far from over.

EU BUDGET DEAL 'MAY BE ILLEGAL'

Suspending EU budget rules last year in order to avoid punishing France and Germany may have been illegal, European Commission lawyers have said. Pedro Solbes, the commissioner for economic and monetary affairs, has hinted he is in favour of legal action to overturn the decision.Taking the case to the Court of Justice could be "a useful option," he said. Last year, the debate split the EU's executive arm and the row is set be rekindled at a meeting next week.

Under the Growth and Stability Pact, members of the eurozone are not supposed to run up budget deficits of more than 3% of gross domestic product (GDP). France and Germany, battered by rising unemployment and slowing economic growth, had bust out of those limits arguing that capping spending would hamper a recovery.

NASDAQ'S SOARING START FOR 2004

The technology-heavy stock index which chronicled the hi-tech boom and bust of the past decade has leapt on the first full-scale trading day of 2004. The Nasdaq Composite index climbed more than 2% to a two-year high comfortably above 2,000. The Dow Jones index of bluechip stocks, meanwhile, added 1.3% or 134 points. Investors took heart from a speech by Federal Reserve Governor Ben Bernanke, who promised low interest rates for the foreseeable future. Strong sales of chips added to the bullish mood surrounding tech stocks, as did advice from software maker Siebel that its profits for the last quarter of 2003 would be 50% higher than expected. The euphoria on Wall Street had earlier ensured gains for major markets in Europe, despite yet another slide in the value of the dollar against both the euro and the pound.

AILING LEVI CLOSES LAST US PLANT

Iconic clothing firm Levi Strauss has finally departed the US, with the closure of its last American plants. The closing of two San Antonio factories marks the end of 150 years of making jeans and other items in the US. The decision to leave the US, taken last year, is part of Levi's drastic attempt to slash costs in the face of slumping demand for its core products.

GOLD FIRM ADMITS SMUGGLING CHARGE

One of the biggest gold refiners in the US is to plead guilty to participating in a $4.5m (2.5m) smuggling operation.Metalor USA Refining, a subsidiary of Swiss Metalor, faces a $9m fine after admitting one charge of engaging in illegal financial transations. The case followed tip-offs from Metalor staff, who noticed couriers repackaging gold in shampoo bottles. Money-launderers were purchasing US gold with drug money, and then smuggling the metal to South America. The smuggled gold was then reworked and sent back to the US, where it was refined and shipped back to South America, in some cases even collecting export subsidies.

US JUDGE APPROVES ENRON PLEA DEAL

A US judge has approved a plea bargain from the wife of the former chief financial officer of collapsed energy firm Enron. The development helps pave the way for prosecutors to persuade Andrew Fastow himself to plead guilty and help their investigation. Lea Fastow would spend five months in jail under the proposed deal.

VIETNAM PLANS GOLD BUYING SPREE

Vietnam's central bank has given the go-ahead for the country to import up to 10 tonnes of extra gold in the first quarter of 2004. The diving dollar pushed gold prices to a 15-year high on world markets two days ago, hurting business and savers in Vietnam. Gold is used as hard currency for big business deals in Vietnam, which has a thriving black market for the metal.

UK INTEREST RATES REMAIN ON HOLD

The Bank of England has decided to keep UK interest rates on hold last week. As expected, the Bank's monetary policy committee voted to keep the base rate at 3.75% for the second month in a row. There has now been no change since the quarter percentage point increase in November, itself the first upward move for nearly four years.

EUROZONE RATES REMAIN UNCHANGED

Eurozone interest rates have been kept at 2% by the European Central Bank. The ECB's decision not to change interest rates was widely expected by economists, though some believe a cut could help to stem the euro's rise. The euro's rise to record levels against the dollar prompted Germany's Economics Minister Wolfgang Clement to call for a rate cut on last week.

 

 

NIGERIA BANS TEXTILE IMPORTS

Nigerian government officials say they have decided to ban imports of textiles, pork, pork products, mutton, apples, flowers and some other items. They say the action is being taken to protect Nigerian producers from competition. They say that there are provisions in World Trade Organisation rules which allow them to take such action for a period of up to five years. The BBC's economics correspondent says that the relevant WTO provisions also require countries taking such action first to have an investigation and give an opportunity for interested parties to express their views. It was not immediately clear whether such an exercise had been conducted.

STRONG MOBILE DEMAND LIFTS NOKIA

Shares in Nokia, the world's largest mobile phone maker, have jumped after the firm delighted investors with an upbeat trading statement. The Finnish company said both its sales and profits for the fourth quarter would be "significantly higher" than it had previously estimated. Thanks to strong demand the firm said mobile phone sales had increased by 4% to 7bn euros ($8.9bn; 4.9bn).

CLAIMANTS SEEK 20% OF SA FARMLAND

South Africans who lost land during the apartheid era are claiming back 20% of the country's commercial farmland, a land claims official has said. In some provinces, that figure may rise to as much as 50%, according to chief lands claim commissioner Tozi Gwanya. Where owners refuse to sell, a new law will allow the government to move in.

US TO OVERHAUL IMMIGRATION LAW

George W. Bush has called for a major overhaul of US law to give legal status to millions of illegal workers. The plan would allow some of America's undocumented immigrants at least eight million, 60% Mexican to work legally in the US for a fixed period.Many see the plan as a bid by President Bush for the Hispanic vote in this year's presidential election.

UNION FEARS NISSAN MOVE TO FRANCE

Trade union bosses representing workers at Nissan car plant in Sunderland, are seeking talks over remarks made by the Company president Carlos Ghosn. At the Detroit Auto show he warned the Wearside plant could lose production of one of its most important cars if the UK continues to stay outside the euro. The plant makes the mid-sized Almera model, but Nissan says it may make the forthcoming replacement in France.

RECORD UK CAR SALES DURING 2003

Motorists bought a record number of new cars last year, industry figures show. A total of 2.58 million new vehicles left the forecourts in 2003, according to the UK wide study by the Society of Motor Manufacturers and Traders (SMMT). The record figure was helped by an end of year sales surge, with 155,000 new cars registered in December, a 7% increase on the same month in 2002.Led by Ford, Vauxhall and Renault, eight foreign makers topped the sales list, with MG Rover in ninth place.

SCHWARZENEGGER'S 'NO TAX' PROMISE

Arnold Schwarzenegger, California's governor, has sworn he will not use new taxes to sort out the state's finances. In his annual "state of the State" address, Mr Schwarzenegger said that if legislators did not back his plans, the state would run out of money. He insisted there was not a "budget crisis" but a "spending crisis". But his Democrat critics said the hole in the state's books which some estimates put at $12-$14bn could not be bridged solely by slashing spending.

BUSINESS PROFIT AT FOUR-YEAR HIGH

The profitability of UK companies has reached its highest level in four years, according to official figures. The net rate of return by non-financial firms in the third quarter of 2003 was 12.6%, compared to 12% in the second. This is the largest rate since 13% was achieved in the fourth quarter of 1999, the Office for National Statistics said in its latest report. The new figure for the manufacturing sector was 7.4%, but the service sector managed a return of 14.7%.