July 19 - 25, 2004






The US trade deficit has narrowed unexpectedly in May as a weaker dollar and improving global economic growth boosted exports to record levels.
According to the Commerce Department, the trade gap was $46bn (24.8bn) in May from $48.1bn in the previous month.
Exports rose 3%, driven primarily by demand for goods such as aircraft, industrial engines, oil drilling equipment and computers.





Analysts said the rise in foreign sales is likely to safeguard the US recovery.

There had been concerns a recovery in the world's largest economy would wane unless export sales picked up.

Jim Glassman, a senior economist at JP Morgan Securities, said the improving trade figures may now prompt some observers to increase US growth forecasts for the second quarter.

The market is tipping expansion of about 3.5% during April, May and June.

The Commerce Department's report on Tuesday also indicated the US still has a keen appetite for imported goods.

The total value of imported goods during May rose slightly to $143.1bn, compared with $97.1bn-worth of exports.

The increase in imports is partly down to a surge in oil costs which in turn pushed up the value of vehicle-related products - as well as food, drinks and animal feeds.

Despite the first narrowing of the trade deficit for six months in May, the shortfall is still on track to reach record levels this year.

After five months, the trade gap totals $231bn compared with $208.7 billion in the same period a year earlier.


UFJ, Japan's fourth biggest bank, has confirmed it is seeking a takeover by Mitsubishi Tokyo Finance Group (MTFG), to create the world's biggest bank.

The combined assets would be worth 188 trillion yen ($1.74 trillion; 0.94 trillion) - bigger than Citigroup.

A merger would be part of the ongoing process of restructuring the nation's ailing financial system.

It would act as a rescue plan for UFJ, say analysts, after three years of heavy losses.

By contrast, MTFG, Japan's second largest bank, is one of Japan's healthiest.

In a statement, MTFG said it has not yet received any approach regarding business integration from UFJ.

If the deal goes ahead it would help MTFG gain ground on Mizuho Financial Group, currently Japan's largest bank, by boosting its retail business, said analysts.

UFJ is a relative laggard in clearing up its bad loans position.

UFJ reported large losses for the last financial year and was criticised by the Financial Services Agency in June for being evasive when inspections by regulators were taking place.

In May this year, UFJ reported a loss of 402.8bn yen, making three straight years of losses.

Its bad debts rose to 3.95 trillion yen, up 6.5% in six months, and its president announced he will resign.

The merger talks have yet to begin but it has emerged from a UFJ official, who wishes to remain anonymous, that the planned sale of UFJ's trust-banking operations to Sumitomo Trust will be scrapped.

Shortly after the plan was announced, Sumitomo threatened to take legal action against UFJ's proposal.


Economic growth slowed unexpectedly in the second quarter in China, with GDP up 9.6% on a year ago, compared to a 9.8% rise in the first quarter.

It suggests government limits on borrowing, and other measures to curb investment, may be working.

Banks have been told to hold more money in reserve, providing less for lending.

Inflation was up 5% in the year to 30 June, but fell 0.7% in June from May, suggesting the central bank may not need an interest rate rise.

Any hike would be the first in nine years.

China has avoided raising rates to cool growth, over worries it would make it harder for state firms to repay their debts.

Instead, the financial authorities have curbed lending and investment projects, particularly in the property and automobile sectors.

There has also been a tightening of land-use rules to slow industrial developments.

Analysts had been expecting GDP to grow around 10.5% year-on-year.

Earlier it was revealed that the flow of foreign investment into China shows no sign of slowing down.

Despite the efforts by China's government to cool its fast-growing economy, the country drew in almost $8bn (4.3bn) of foreign direct investment last month.

June's $7.97bn figure was up 14% on the previous high of $7.66bn set in the same month last year.

Foreign firms are attracted by China's vast pool of cheap labour and growing economy.


Relief efforts for millions of people in South Asia affected by floods are being badly hit by continuing bad weather and organisational problems.

In the Indian state of Bihar, 400 soldiers are struggling to help four million victims. Thousands are still without food or drinking water.

Up to 80 more people were reported missing in separate incidents in India and Bangladesh.

Scores have already died in India, Nepal and Bangladesh in recent days.

Accurate figures for the devastation are hard to come by. Conservative estimates suggest at least 10 million people are affected in the three countries.


Trade among African countries accounts for only about 10% of their total exports and imports, according to a report.

The study by the Economic Commission for Africa (ECA) blames the continuing low level of trade on poor transport links among African countries.

Instead it suggests that colonial-era patterns remain, with most trade still to and from the former colonial powers.



It says Africa has a long way to go before reaching EU-style integration.

As a result the full potential of a vast market has clearly not been realised, it said.

"Many of the countries are small so we need to have regional integration, larger markets," said the ECA's executive secretary, K.Y. Amoako.

The report makes many recommendations on how to accelerate the integration process.


Confidence levels in UK industry have been hit by worries about higher inflation and interest rates, a leading business lobby has said.

The divide between services and manufacturing has also widened during the second quarter of the year, the British Chambers of Commerce (BCC) said.

Services performed strongly, but trade was more mixed for manufacturers.

Rising concerns about prices and the cost of borrowing in both services and the manufacturing sector was making life more difficult as the general economic recovery matured, business leaders said.

David Frost, director general of the British Chambers of Commerce, said: "The slight fall in confidence balances is a potential warning."

"We are concerned that the focus on house prices may result in damaging interest rate overkill," he added.


President Jacques Chirac says France will hold a referendum next year on the European Union constitution.

The new constitution agreed by 25 EU leaders last month must win approval in each member state either by a vote in parliament or by public referendum.

Mr Chirac made the announcement during a Bastille Day television interview.

Other countries to have said they will hold a referendum are the UK, Ireland, the Netherlands, Portugal, Luxembourg, Spain, the Czech Republic and Denmark.

Others have decided to hold a vote in parliament while some are still undecided.

The EU constitution sets out the powers of the national governments of the member states and the EU's various institutions as well as including a charter of fundamental rights.

Mr Chirac said he thought his traditional Bastille Day interview was a good occasion to announce the referendum.


The Bank of France has said its latest business survey indicated a 0.6% growth in French GDP in the second and third quarters of this year.

That is 0.1 percentage points higher in both quarters than previously expected, making growth over nine months of 2.3%, although no yearly figure is available.

The business sentiment indicator also rose to 106 in June from 105 in May.

The French economy grew by a stronger-than-expected 0.8% in the first quarter of 2004, according to official figures.

The Bank of France surveys some 12,000 companies each month.

"Industrial activity clearly increased in June," the central bank said in a statement. "Production should continue to increase in the coming months."

The French economy is the second largest in the eurozone area. President Jacques Chirac said economic growth was returning to the country, but not as strongly as in the United States and Asia.


US retail sales fell by their largest amount in 16 months in June, down 1.1%, the Commerce Department has said.

The decline, the biggest drop since February 2003 was led by a 4.3% crash in car sales caused by the recent high price of petrol at US pumps.

Sales of food, drink and clothing also dipped after US job creation figures came in below expectations in June.

Yet the Federal Reserve said the US economy was still growing and is now strong enough for a possible rate rise.

This would be the second rise in US interest rates in four years.

The 1.1% drop in retail sales in June was ahead of the 0.7% predicted by economists; while US employers took on an extra 112,000 new workers last month, less than half the 250,000 predicted by analysts.

Economists said the higher petrol prices effectively acted as an extra tax; but despite June's 1.1% retail sales fall on May, the year on year figure is still plus 6.3%.


One of America's largest nuclear weapons research laboratories has suspended its activities after secret information data went missing.

Officials are not saying what data has gone missing from the Los Alamos National Laboratory in New Mexico, but it is thought to be highly sensitive.

This is said to be the first time in living memory that Los Alamos has suspended part of its operations. The laboratory was the birthplace of the first atomic bomb.


The Liberal Democrats have overturned a big Labour majority to win the by-election in Leicester South.

Parmjit Singh Gill became the first Liberal Democrat MP from an ethnic minority in a 21% swing from Labour.

In his victory speech, Mr Gill said the people had spoken for Britain and "the message is that the prime minister has abused and lost their trust" over Iraq.


Computer giant IBM has seen its profits grow for the sixth straight quarter.

The company known as "Big Blue" made a $1.99bn (1.07bn) profit in the second quarter of 2004, compared with $1.71bn for the same period last year.

Sales across all the company's geographical regions rose to total $23.2bn, up from $21.6bn in 2003.




Electronics firm LG Philips has raised $1bn (0.54bn) in an initial public offering (IPO) designed to fund further development of flat screens production.

However the size of the share sale was cut, and the sum fell short of the $1.95bn maximum it had hoped to raise.

The firm will start trading on the New York Stock Exchange and the Korea Stock Exchange on 23 July.

LG Philips LCD is a 50-50 joint venture between South Korea's LG Electronics and Dutch firm Philips Electronics.


Bonuses awarded to workers in the City are helping to boost the government's tax revenues, the chancellor has said.

"Tax revenues have started to rise because of bonuses in the City," Gordon Brown told a committee of MPs.

The government also remains on target to meet its fiscal rules, Mr Brown told the Treasury Select Committee.

The rules state that Mr Brown may only borrow to invest over the current economic cycle and that public debt must be kept below 40% of GDP.


The world's biggest mobile phone maker, Nokia, has seen its market share shrink as second quarter sales were down 5% on 2003 to 6.6bn euros ($8.18bn; 4.4bn).

The Finnish firm said it estimated its market share in the May to June period was 31%, down from 32% in the first quarter of the year and 39% a year ago.

Pre-tax profit was up 9.5% year-on-year at 1.04bn euros, but Nokia said profits would be under pressure later in 2004.

Nokia shares were down 14% to 9.75 euros, a level not seen since 1998.


Apple Computer has said that quarterly profits more than tripled, driven by demand for its iPod music player.

Profit in the three months ending 26 June jumped to $61m (33m) from $19m a year earlier. Sales, meanwhile, surged to just over $2bn from $1.55bn.


Japanese-Swedish mobile phone maker Sony Ericsson has reported higher than expected second-quarter profits.

Pre-tax profit in the period May to June was 113m euros ($139.6m; 75.4m), after a loss of 102m euros a year ago.

The world's fifth-biggest mobile maker said the increase was thanks to strong demand for camera phones, and revised up its global handset sales forecast.

Sales of phones were up to 1.5bn euros, from 1.1bn euros a year earlier, up 34%, and ahead of market expectations.


Sony has said a deal to take over film and TV studio Metro Goldwyn Mayer may be facing some "complications".

Talks began in April on a possible deal worth up to $5bn (2.8bn).

However Sony chief executive Nobuyuki Idei told Reuters news agency: "There are some complications... It's up to the MGM management now."

Earlier this month it was reported that Time Warner, the world's biggest media group, had also stepped into the MGM fray with a bid of around $4.7bn.


Bankrupt United Airlines has said it is deferring $72.4m (39m) in quarterly pension payments as it seeks to "manage resources and preserve its options".

UAL Corp, the airline's parent, said the move would enable it to organise its funds to exit bankruptcy.

In late June the company failed in its attempt to get a $1.1bn US government handout.




The European Commission wants to boost spending between 2007 and 2013, a move that is likely to prove unpopular with some of the EU's biggest members.

The EU's executive arm plans to lift spending over that period to more than 900bn euros (601bn; $1.1 trillion).

The EU's six largest members, including France, the UK and Germany, last year called for cap on spending.

EC president Roman Prodi, however, said that more money was needed after the trade bloc admitted 10 new members.

The new members are mostly from eastern Europe and the Baltic area, and include Poland, Hungary, the Czech Republic, Lithuania, Latvia and Estonia.

Under the new plan, the EU's 25 member states would each contribute an average 1.14% of gross national income to the budget.

That is more than 1% limit proposed by the EU's main players back in December.


Intel, the world's largest chipmaker, has reported a surge in second-quarter profits, driven in part by increasing demand for mobile phone processors.

Sales of chips for desktop computers are slowing and Intel has been tapping into the faster growing market for laptops and wireless communications.

Profit for the three months ending 26 June was $1.8bn (969m) compared with $896m a year earlier.


Unemployment increased by 6,000 between March and May to 1,432,000, according to official data.

But the number of people claiming unemployment benefit last month fell by 9,600 to 850,900, the Office for National Statistics (ONS) said.

Average earnings growth in March to May was 4.3% compared with a year ago, unchanged on the previous figure.


McDonald's new range of salads and other healthier options may be starting to win back both customers and profits.

The fast food giant said in a trading statement that it expects to report a 27% rise in second quarter profits after improved sales around the globe.

In a trading statement ahead of its results on 22 July, it said sales were up 7.8% during the period, the highest second quarter rise since 1987.

McDonald's said the US market did best, with sales twice that in Europe.


India's largest biotechnology firm, Biocon, has sent a positive signal to investors with a doubling of profits for the first quarter ending in June.

Biocon shares rose 5.7% after it said net profits rose 112% to 486m rupees, ($10.6m; 5.7m), from a year ago.


Gordon Brown has said he will not allow strike threats to derail his plans to axe 104,000 civil service jobs.

The Public and Commercial Services Union (PCS) says the cuts will cause "carnage" and warns it cannot rule out industrial action as a result.

But defending his spending review, the chancellor urged those talking of strikes to "think again".

"We will not be diverted from what's got to be done to get more resources to the front line," he told BBC Breakfast.


The Bank of Japan's nine-member policy board has voted unanimously to keep its almost zero interest rates on hold.

As expected, it shows the central bank continuing to stimulate the country's economic recovery while trying to turn past deflation into mild inflation.

In April the bank said Japan's economic growth would range between 3% and 3.2% in the year to March 2005.


Singapore's economy is growing at its fastest rate since 1996, official figures have shown.

The country's GDP was 11.7% higher in the second quarter of 2004 compared with the same period last year.

Quarterly growth was up 9.1% on an annualised basis as manufacturing and service sectors saw double digit rises.

The figures provide clear evidence of Singapore's recovery from last year's downturn, which was prompted by the outbreak of the Sars virus.

The figures, based on preliminary data for April and May, represent Singapore's strongest growth since the first three months of 1996, when its GDP rose 12.4%.