INTERNATIONAL

 

Jan 19 - 25 , 2004

 

1.INTERNATIONAL

2. PAKISTAN

3. GULF


WEAK DOLLAR SHRINKS US TRADE GAP

The weaker dollar has triggered a surge in US exports, reducing the country's yawning trade deficit. The US trade gap the amount by which the cost of imports exceeds export revenues fell to $38bn in December, its lowest level in 13 months. The figure, which undershot the $42bn pencilled in by forecasters, reflected a surprise jump in exports of aircraft engines and other industrial goods. Analysts said US exporters had been helped by the weaker dollar. "It's an across the board improvement in the US trade gap," said Patrick Fearon at AG Edwards & Sons.

 

 

 

 

"The US had a smaller trade deficit with every region including China. Perhaps that is in part reflecting the dollar's decline against the euro." The dollar has fallen heavily against the euro and other currencies over the last six months, pressured by concerns that the soaring trade gap and a hefty US budget deficit could destabilise the economy. The shrinking trade deficit will fuel hopes of an orderly adjustment, and raises the prospect of an export-led boost to US economic growth.

The positive trade figures pushed the dollar slightly higher against the euro in New York. They also brightened the mood on Wall Street, where the benchmark Dow Jones share index was up 64 points at 10,492 by about 1820 GMT. The US economy received another vote of confidence in the Federal Reserve's so-called beige book, a snapshot of economic conditions released eight times a year.

GERMAN ECONOMY SHRANK DURING 2003

Germany, the biggest economy in Europe, shrank by 0.1% in 2003, official statistics have shown. It was the German economy's weakest full-year performance since the 1993 recession when it shrank 1.1%. Germany's economic woes and inability to keep its budget deficit within European Union limits have triggered a legal challenge from the EU. But economists believe that Germany's recession is over the worst and expect to see growth of about 1.5% in 2004. Shoppers' reluctance to spend during 2003 sapped domestic growth, which was too feeble to make up for a slow-down in exports, the Federal Statistics Office said.

Economy Minister Wolfgang Clement predicted a brighter future with shoppers taking to the stores again and industry investing to satisfy "pent-up demand". Exports rose by a sickly 1.1% in 2003, while consumer spending shrank 0.2% and investment in German industry contracted 3.3%. "Overall, the economic development was disappointing in Germany in 2003, like in the previous two years," said Johann Hahlen, President of the Federal Statistics Office.

"There were signs of a weak recovery in the second half of the year but one can't yet speak of a sustained revival," he said. Germany's centre-left government is expecting consumers to start spending more once they get their hands on tax cuts totalling worth 7.8bn euros (5.5bn; $9.5bn) it pushed through parliament last autumn.

US REPORTS POINT TO FASTER GROWTH

US economic figures released last week provided further evidence that the world's largest economy is on course for a sustainable recovery. Retail sales climbed for a second month in December, while unemployment claims dropped and inflation stayed in check. That will give the US Federal Reserve, the country's central bank, the room it needs to keep interest rates at their lowest levels in almost 50 years. Some economists have lifted growth forecasts as a result.According to Commerce Department figures, retail sales climbed 0.5% in December, compared with a revised increase of 1.2% in November.

US TO FIGHT EU SANCTION REQUEST (BOX)

The US will fight European Union plans to impose sanctions on it for failing to scrap illegal trade rules. At issue is the Byrd Amendment, under which US companies get part of the fines levied against rivals who sell products at artificially low prices. The World Trade Organisation (WTO) found that the payments were illegal. John Veroneau, general counsel in the US Trade Representative's office, said the US would seek arbitration as the law does not hurt European exporters. EU Trade Commissioner Pascal Lamy said the US must comply with the WTO's decision or face the consequences. Mr Lamy said he hoped the US government would take action to avoid the risk of sanctions, which it had earlier asked for the right to impose.

BEIJING IMPOSES DUTIES ON STEEL

China is to impose tariffs of up to 55% on cold-rolled steel imports from five countries, which it says are hurting its domestic producers. The Ministry of Commerce in Beijing said that steel imports from Russia, South Korea, Ukraine, Kazakhstan and Taiwan were being sold below cost.The move comes against a background of bitter global steel trade disputes. China which is experiencing an industrial boom is the world's top steelmaker and user.

EU TAKES BUDGET BATTLE TO COURT

The European Commission has launched legal action to uphold the budgetary rules underpinning the euro. The institution has asked the European Union's highest court to annul a decision by EU finance ministers to temporarily suspend the rules. The move ups the ante in a row between the Commission and France and Germany, which have repeatedly breached EU limits on government spending. If successful, it could pave the way for penalties against both countries. The decision in November to suspend the budgetary rules set out in the so-called stability and growth pact partly reflected reluctance on the part of other EU countries to penalise the eurozone's two most powerful members.

PARMALAT

Italy's economy minister has questioned the failure of the country's central bank to spot problems at scandal-hit food and dairy company Parmalat.

IBM'S FOURTH-QUARTER PROFIT JUMPS

The world's biggest maker of computers IBM said fourth-quarter profit doubled as clients bought more of its hardware, software and services. Fourth-quarter profit jumped to $2.7bn (1.5bn; 2.1bn euros) from $1bn a year earlier. Sales also improved, climbing 9% to $25.9bn.

 

 

SAMSUNG UNVEILS SURGE IN PROFITS

South Korean consumer electronics giant Samsung has reported a 24% rise in net profits for the last quarter of 2003. Samsung posted net profits of 1.86 trillion won ($1.57bn; 860m), while sales also grew by a robust 21% from a year earlier to 12.8 trillion won.

INDIA RELAXES FOREIGN OWNERSHIP

India is to allow foreign companies to buy up privately-owned Indian banks and oil enterprises.The cabinet agreed last week to raise limits on foreign investment in the petroleum and banking sectors. Foreign companies can now invest up to 100% in oil refineries and retail outlets, a government spokesman said.

RAC CALLS FOR 20BN ROAD SPENDING

The government must spend at least 20bn for urgent improvements to trunk roads and motorways to avoid gridlock, according to an RAC Foundation report. The current "ad hoc and short term" approach to roads has caused "dire and growing congestion", it says. The proposed improvements could be paid for out of just half of one year's motoring taxation, the report adds. Motorways and trunk roads make up about 4% of Britain's road network but carry around 35% of traffic and most freight.

SOUTH AFRICA FACES GRAIN SHORTAGE

At least 15 million South Africans face food shortages after a severe drought. Director for Disaster Intervention Toffee Mokgethi told the BBC the government would have to provide emergency food supplies by June. Farmers' leaders say the current drought is possibly the worst to hit the country in nearly a century. South Africa will have to use its large food reserves to feed itself, sharply reducing its capacity to send relief to other countries in the region.

JP MORGAN SEALS $60BN MERGER

Wall Street legend JP Morgan Chase and US retail bank Bank One have announced plans to join forces. The deal, which requires regulatory approval, would be the biggest financial sector merger in five years. Worth some $60bn, the transaction would consolidate JP Morgan's position as the world's second biggest bank after Citigroup, owner of Smith Barney.

JOBLESS FIGURE CONTINUES TO FALL

UK unemployment fell by 29,000 to 1,460,000 in the three months to November, the latest government figures have shown. The drop brought the unemployment rate down to 4.9% of the workforce a rate last seen in early 2001, the Office for National Statistics (ONS) said.

CHRYSLER RECALLS 2.7 MILLION CARS

Chrysler is recalling 2.7 million cars following concerns about the safety of their gearboxes. The US's fourth largest carmarker says the older models could inadvertently roll out of parking positions if the gearbox was used with "abusive force".

GERMANY UNVEILS HUGE DEFENCE CUTS

Germany has announced major cuts in military spending as it aims to revamp its armed forces. Defence Minister Peter Struck says up to 26 billion euros (18bn) will be cut from the budget for arms procurement, troops and military bases. As Germany faces major financial restraints, Mr Struck said the plan was "about switching military planning from unrealistic projects back to realism". Rural towns say they will be hard hit by the possible closure of 100 bases. Mr Struck said that on top of the closures and spending cuts, the army would be cut by 35,000 troops to about 250,000.

SETBACK IN MANUFACTURING RECOVERY

UK manufacturing fell 0.7% in November, its biggest decline in over a year, according to figures released by the Office for National Statistics (ONS). The slide almost reversed October's 0.9% advance and may signal that a recovery in output is sputtering. Nine of manufacturing's 13 subsectors fell in the month, including electrical and optical equipment, pulp, paper, printing and publishing, and food. The GMB and Amicus unions warned this year that manufacturing is in "crisis".

BANK OF ENGLAND ACCUSED OVER BCCI

Bank of England officials "shut their eyes and turned away" instead of clamping down on fraudulent activity at BCCI, the High Court has been told. Liquidators of the collapsed bank are suing the UK's central bank for about 1bn for "knowingly or recklessly" failing in its supervisory role. They are acting on behalf of 6,500 UK-based depositors, who lost money when the rogue bank was shut down in 1991. The Bank of England says it plans to defend itself "vigorously".

 

 

RECORD NUMBERS USING UK AIRPORTS

Airports operator BAA reported its busiest ever Christmas as the number of passengers flying out of the UK climbed to record levels. The seven UK airports run by BAA handled more than 10 million passengers in December 2003, a 6.2% rise from the same month in the previous year.

US BEEF EXPORTS 'TO DROP BY 90%'

US beef exports will fall by 90% in 2004 after the discovery of the first case of mad cow disease, the US Department of Agriculture has said. Its forecast comes after virtually all foreign countries banned imports of US beef following the single outbreak of BSE in Washington state last month. The department also predicts a big fall for US cattle prices across the year.

UK FINANCE FIRMS 'BOUNCING BACK'

UK financial services companies enjoyed their fastest profits growth for more than three years during the last quarter of 2003, a survey says. Business volumes and optimism rose for the third quarter in a row, according to a survey by the Confederation of British Industry and consultants PwC. The survey also showed that financial services companies were taking on new staff for the first time in a year.

UK SEES DROP IN PROFIT WARNINGS

The number of profit warnings issued by top UK companies fell by 40% last year, a study has found. The Ernst & Young survey said that companies listed on the stock exchange issued 210 warnings in 2003, down from 353 in 2002.