INTERNATIONAL

 

June 21 - 27, 2004

 

1.INTERNATIONAL

2. PAKISTAN

3. GULF

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US TRADE DEFICIT HITS FRESH HIGH

The US trade deficit grew 3.8% to hit a fresh record of $48.3bn (26.6bn) in April, the Commerce Department said.
The trade gap widened because of high oil prices and the recovering US economy's appetite for imported goods.
Imports rose 0.2% in April to $142.3bn, while exports failed to live up to expectations, sinking 1.5% to $93.9bn.
The trade deficit took economists by surprise as many had expected it to shrink slightly after hitting a record in March.

 

 

They had expected growth in the world economy to lead to more export sales for US firms.

The consensus among economists was for April's trade gap to shrink to just under $46bn, according to a Reuters poll.

America's politically sensitive trade deficit with China grew to $12bn in April, the biggest since October 2003.

The shortfall with Japan, however, narrowed to $6.4bn from $6.7bn in March.

"If US consumers are buying, they are buying a lot of foreign goods," said Mark Zandi, chief economist at research firm Economy.com.

A separate survey from the Commerce Department helped dispel any concerns that US consumers were not venturing to the shops.

According to the figures, retail sales increased by 1.3% in May, yet another sign that the US economic recovery is continuing.

The figure topped both the 1% rise predicted by many economists and the 0.6% drop in retail sales during April.

The car industry was the best performing retail sector, with sales rising 2.7% in May, compared with April's 2.1% decline.

CHINA CAR SALES GO INTO REVERSE

Figures have shown that Chinese car sales fell by nearly a fifth in May, in a sign that efforts to cool China's booming economy are taking effect.

Just 177,500 vehicles were sold last month, down by more than 19% from April, the China Association of Automobile Manufacturers said.

The decline reflected tighter credit terms designed to help prevent the fast-growing economy from overheating.

It comes just as global car firms are expanding rapidly in China.

Last week, GM, the world's biggest carmaker in terms of sales, said it planned to spend $3bn in an effort to double its Chinese production capacity over the next three years.

Altogether, foreign car makers have pledged to spend a total of $13bn by the end of the decade, an investment which will triple the country's total car manufacturing capacity.

This has stirred fears that the supply may soon outstrip demand, with the Chinese government warning that capacity could reach 14 million vehicles a year against demand of just 7 million by 2007.

Fears that the bottom could be falling out of China's booming car market now ranked the third biggest in the world forced auto stocks sharply lower last week in Hong Kong.

However, analysts remained confident, pointing out that the latest sales figure for May, while down sharply on the previous month, were still 21% up on the same period one year ago.

"Judging from what we know now, the next couple of months' sales are probably going to be down," said Christopher Lee at Standard & Poor's Asian Equity Research.

"If I took a 12-month view, I think maybe you'd see car sales picking up at the end of the year."

POOR NATIONS PLAN TO BOOST TRADE

A group of developing countries have launched negotiations intended to stimulate trade with one another.

The move was announced at a meeting of the United Nations Conference on Trade and Development in Brazil.

The proposed negotiations are intended to build on an existing scheme known as the Global System of Trade Preferences.

Under that arrangement, 44 countries have already been negotiating better access to one another's markets.

That means lower tariffs imposed by importing countries on goods from others in the group.

The Sao Paulo announcement proposes extending this arrangement to another 40 developing countries.

Removing barriers to what is sometimes called south-south trade does have the potential to create new opportunities for economic growth.

Some developing countries have already registered strong increases in incomes in the last few decades and so created an enlarged market for others to sell their goods to.

In many cases the barriers developing countries face in exporting to others are higher than those imposed by rich countries, so removing them can make a big difference.

Most, however, would not see this initiative as an alternative to better access for their goods, especially farm produce, to the markets of the rich countries.

Negotiations on that are underway in the World Trade Organisation and, after a period of deadlock, seem to be making progress again.

BLAIR FACES TOUGH EU NEGOTIATIONS

Tony Blair faces another day of difficult negotiations over the proposed European constitution.

French President Jacques Chirac accused the UK prime minister of trying to water down the constitution.

He was complaining about the UK Government's 'red lines' over issues like tax, defence and foreign policy.

With talks already under way, there are also splits between leaders at the summit over the choice of a new EU President to succeed Romano Prodi.

France is opposed to former Conservative minister Chris Patten getting the job and is backing Belgian Prime Minister Guy Verhofstadt, whose candidature is being blocked by Mr Blair.

PUTIN OFFERS YUKOS OLIVE BRANCH

Russian President Vladimir Putin has said the authorities do not wish to see embattled oil giant Yukos go bankrupt.

"The government will do its best to prevent the collapse of the company," Mr Putin said.

"Russian authorities, the government and economic authorities, are not interested in the bankruptcy of such a company as Yukos."

Yukos' future has been in doubt since the Kremlin presented it with a $3.4bn (1.8bn) tax demand earlier this year.

US DATA POINTS TO STRONG RECOVERY

A fresh batch of US economic data has signalled that recovery in the world's biggest economy is powering ahead.

A closely-watched index of leading indicators and producer price figures both beat market expectations.

Price growth also continued to pick up and many observers are warning that the Federal Reserve will have to raise interest rates in coming months in order to combat inflation.

The threat of higher borrowing costs has dented the stock and bond markets.

FRANCE STARTS PRIVATISATION PLAN

The first phase of an ambitious French privatisation programme has got under way with the partial sell-off of aero engine firm Snecma.

Trading in the shares will start, after investors bought a 35% stake in the firm earlier this week.

It is the first in a series of privatisations aimed at plugging a gap in France's public finances.

However, proceeds from the sale look set to fall short of the government's initial hopes.

On Snecma's share price analysts betting on a range of between 15.4 and 16 euros (10.10 - 10.50).

That is at the bottom end of the government's target range of 15.45 - 17.2 euros, reflecting fears that rising oil prices may deter aircraft makers, Snecma's main customers, from placing new orders.

US INDUSTRIAL OUTPUT GAINS PACE

US industrial production surged in May, posting its biggest rise since August 1998, Federal Reserve figures show.

Total industrial production jumped 1.1% in the month, after April's 0.8% rise, to stand 6.3% up on May last year.

While the Fed explained "unseasonably warm weather" had pushed up utility production, the rise was wide spread with factories continuing their revival.

Manufacturing production, which makes up more than four fifths of total output jumped 0.9% in May.

The increase, the biggest since February, came despite the third consecutive monthly fall in automotive and auto parts production.

BROWN VOWS TO RESIST EU TAX MOVES

Chancellor Gordon Brown has vowed to preserve the government's "red lines" on tax and the economy from Brussels.

In a speech to the City he warned he would resist any efforts from the European Union to push through "fatally flawed" tax harmonisation plans.

At London's Mansion House, Mr Brown also said the EU needed to face up to the need for economic reform.

"It is right that the conduct of fiscal policy remains the responsibility of member states," he told key financiers.

"That is why Europe must avoid endorsing a federal-style fiscal policy which would make the Commission and not member states responsible for fiscal discipline," he added.

GREENSPAN GETS FIFTH US FED TERM

The US Senate has confirmed Alan Greenspan as chairman of the Federal Reserve for a fifth and final term.

The unanimous vote came just days before Mr Greenspan's current term was due to expire and after he was re-nominated by President Bush last month.

Mr Greenspan, 78, first became chairman in 1987 and has served under Presidents Reagan, Bush Sr and Clinton.

Mr Bush made the nomination earlier than expected because of the US presidential election campaign.

MUSIC MERGER

A controversial tie-up between Sony Music and BMG has won the support of the European Union's top competition official, according to media reports.

EU anti-trust chief Mario Monti decided to back the merger after talks with the firms last week, news agencies reported, citing unnamed sources.

JAPAN TECH GURU PREDICTS SLUMP

Japan's top-rated technology analyst has said waning demand for computers will trigger a fresh slump in tech stocks next year.

Deutsche Securities' Fumiaki Sato told Reuters the downturn could force the Nasdaq index of technology shares more than 20% lower.

Japan's Nikkei index, heavily exposed to tech stocks, is also vulnerable.

Mr Sato said investors should consider selling computer, microchip, and liquid crystal display (LCD) shares.

ADOBE PROFIT RISES

Adobe, the world's biggest maker of graphic design software, said quarterly earnings beat market forecasts.

Profit in the fiscal second quarter was $109.4m (60m) compared with $64.2m a year earlier. Sales jumped to $410.1m from $320.1.

VW CUTS PRICES FOR CHINESE BUYERS

Volkswagen is to slash the price of its Chinese-made models in an effort to stimulate flagging demand.

The firm plans to introduce discounts of between 1.2% and 11% on selected models, Chinese media reported.

The price-cutting strategy comes days after industry data showed that Chinese car sales fell by 19% last month compared with April.

SRI LANKA PLANNING 100% LAND TAX

Sri Lanka will re-impose a 100% tax on foreigners buying land, claiming that locals are being priced out of the domestic market.

According to the BBC's correspondent in Colombo, Frances Harrison, the tax has been a hot topic both during and after recent elections.

Resentment and house prices have risen as expatriates from India, Hong Kong, Singapore and Europe buy holiday homes.

The government claims the sales do little to boost Sri Lanka's economy.

INDIA'S TATA TO TARGET TELECOMS

India's vast conglomerate Tata has said it will increase spending on telecoms and may even enter the world of biotechnology.

A leading Tata director J.J. Irani said cash raised from a flotation at Tata Consultancy Services would be primarily invested in telecoms.

"The most important one is telecoms... We may go into any new area, biotech for example" Mr Irani said.

The IPO at India's largest firm will be India's biggest sell-off.

DAILY MAIL ENDS ITS TELEGRAPH BID

The Daily Mail has confirmed it has pulled out of the bidding for rival newspaper the Daily Telegraph.

It said the price had now risen too high for it and bid partner, venture capital firm CVC Capital Partners.

The Daily Mail's withdrawal leaves just two remaining bidders, media tycoons the Barclay brothers and a consortia led by venture capital firm 3i.

The final price for the Daily Telegraph and sister title the Sunday Telegraph may reach as much as 700m ($1.3bn).

UN CHIEF URGES FAIR TRADE ACTION

United Nations Secretary-General Kofi Annan has called on trading nations to do more to help the poor benefit from international commerce.

Opening the UN Conference on Trade and Development in Sao Paulo, Mr Annan urged participants to create a "development based approach to trade".

"Let us help developing countries take full advantage of trading opportunities," he said.

The talks are seen as a chance for poor nations to get a better deal.

BUNDESBANK HIT BY FRESH PERKS ROW

Germany's central bank has found itself mired in a fresh scandal, only weeks after its chief was forced to resign for accepting unauthorised perks.

Axel Weber, the new Bundesbank head, is to testify to the parliamentary budget committee later.

Lawmakers want him to explain why the bank bought and built some 4,700 flats and houses for its staff.

Germany's Government is on an austerity drive, and wants to avoid accusations of wasting taxpayers' money.

HYUNDAI TO GET BIGGER IN CHINA

South Korea's Hyundai has become the latest car maker to announce a big expansion in China.

Hyundai said it planned to spend $740m (414m) in an effort to boost production at its Chinese operation.

The move will increase Hyundai's output potential in China more than fourfold, to 600,000 vehicles a year by 2007.

Separately, Hyundai's Kia subsidiary is to spend nearly $360m raising its Chinese capacity to 430,000 cars a year, from 130,000 currently.

The investment programme will lift Hyundai's total output potential in China to more than 1 million vehicles a year.

REGULATORS RAID JAPAN TYRE FIRMS

Japan's fair trade watchdog has searched the offices of Bridgestone and 10 other tyre makers as part of a probe into rigged military supply contracts.

The investigation centres on alleged collusion aimed at pushing up the price of tyres supplied to the Japanese army and air force.

Bridgestone said it would not comment as the inquiry was still under way.

Japan's Defence Agency orders about 2 billion yen ($18m) of tyres every year, according to local media reports.

MILLIONAIRES' CLUB GETS BIGGER

The number of dollar millionaires in the world grew by 500,000 to 7.7 million last year, helped by resurgent stock markets, a report claims.

Their combined wealth grew by 7.7% in 2003 to $28.8 trillion (16 trillion), recouping losses incurred during the market downturn of 2001/02.

And their cash pile is set to soar to $40.8 trillion by 2008, authors Merrill Lynch and Capgemini predicted.

The bullish forecast reflects a growing appetite for high-return investments.

SUNNY WEATHER BOOSTS RETAIL SALES

High street sales have raced ahead as the sunny weather encouraged shoppers to continue spending.

Sales rose 0.8% in May as consumers bought clothing, sportswear and garden furniture, official figures show.

On the year, retail sales rose 7.4% the fastest rate since April 2002 indicating that higher interest rates have so far not curbed spending.

The Bank of England has raised rates by a percentage point since November, in a bid to rein in consumer spending.

UK JOBLESS FIGURE STILL FALLING

UK unemployment fell by 9,000 in the three months to April to 1.43 million compared with the previous three months, official figures have shown.

The Office for National Statistics also showed the number claiming unemployment benefit dropped by 12,000 to 862,000 in May, the lowest level since 1975.

Average earnings growth fell to 4.3% in the three months to April, down from the previous figure of 5.2%.

The earnings growth dip was due to City bonuses dropping out of the figures.

FIRST MOBILE PHONE VIRUS CREATED

The first ever computer virus spread by mobile phones has been sent to anti-virus firms.

No infections have been reported and the worm is harmless but it is proof that mobiles are at risk from virus writers.

The worm, known as Cabir, infects phones and devices running the Symbian operating system.

Anti-virus firms are divided on whether it will open the floodgate to similar viruses.

SMITHS WINS NEW 873M BOEING DEAL

UK defence group Smiths has won a new multi-million pound deal to supply technology for Boeing's Dreamliner jet.

The London-based group said its aerospace division had won a deal worth more than 873m ($1.6bn) to supply landing gear systems for the aircraft.

The contract comes on top of an agreement in February to supply the 7E7 jet's "backbone" or Common Core System.

Total revenues on the deals are expected to near 1.64bn ($3bn) during the aircraft's lifetime, Smiths added.

THAI FIRM TO LEAD LIVERPOOL BID

Thai entertainment group GMM Grammy is putting together a consortium to buy a 30% stake in Liverpool football club, according to company officials.

The bid will replace a previous offer made by Thailand's Prime Minister, Thaksin Shinawatra.

GMM Grammy said it would need about five billion Thai baht (66.7m) for the stake in Liverpool.

Mr Thaksin announced plans to buy a stake in the English Premiership club earlier in the year.

INFLATION GAINS GROUND IN THE US

Inflation appears to be gaining ground in the US, fuelling expectations that the US central bank will raise interest rates sooner rather than later.

Consumer prices surged by 0.6% in May the biggest rise since January 2001 on the back of surging oil prices.

Despite the higher prices, consumers showed no sign of reining in their spending, and there was a surprise upturn in sentiment.

The Fed has not raised interest rates for four years.

Meanwhile, a third report showed business inventories in April rising 0.5% to $1.212 trillion a record high and the eighth monthly increase in a row.

OIL PRICES FUEL UK INFLATION RATE

The UK inflation rate has surged to its highest level in over a year as high oil prices pushed up transport costs.

The consumer price index (CPI) rose to 1.5% last month, official figures showed, up from 1.2% in April.

Worries over inflationary pressures have led the Bank of England to raise interest rates to 4.5%, with two rate rises in the past two months.

Although the CPI remains below the 2% target, many analysts expect the Bank to raise rates further.