INTERNATIONAL

 

Aug 16 - 22, 2004

 

1.INTERNATIONAL

2. PAKISTAN

3. GULF

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CHINESE INFLATION AT FRESH HIGH

China's annual rate of inflation reached a new seven-year high in July, as consumer prices rose a higher-than-expected 5.3% in the past 12 months.
Annual inflation was up from 5% in June and 4.4% in May, with analysts saying the figure is now close to peaking.
Food costs are rising, but prices for most manufactured goods fell because of competition and overcapacity.
Prices fell 0.2% month-on-month in July, suggesting the central bank may not need to put up interest rates.

 

 

 

 

There have been recent signs the state is managing to rein in the economy.

The latest figures show gross domestic product expanded by 9.6% in the year to June, decelerating from 9.8% in the first quarter.

China has so far avoided raising rates to cool growth, a move which could 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 car-making sectors.

China's central bank warned earlier this week that inflation was likely to accelerate in the third quarter, before slowing in the last three months of the year.

Chris Leung, an economist at DBS Bank, says he does not expect interest rates to rise as the economy slows.

"Economic cooling measures are taking effect, with industrial production, fixed asset investment, money supply and loans growth all slowing down.

"But we may see a situation where inflation remains sticky at 5%, while the economy slows. This scenario will probably persist for the next three to four months."

SINGAPORE ECONOMY GROWTH JUNE

Singapore's economy grew at a rate of 12.5% in the three months to June from the same period a year earlier.

It is the fastest quarterly expansion in a decade, and confirms the country's status as one of Asia's fastest growing economies.

The growth is flattered by poor economic performance last year, when the economy was hit by Severe Acute Respiratory Syndrome (Sars).

The economy grew 11.9% in the second quarter from the first quarter.

Last Monday, the Ministry of Trade and Industry (MTI) forecast growth of between 8% and 9% for the whole year, putting Singapore on a par with China, the fastest growing economy in Asia.

Strong export orders drove growth this year, the MTI said.

Growth is expected to slow in 2005, however, as demand for global electronics goods slows, it added.

"The very robust expansion of the economy in 2004 will imply slower growth next year, partly attributable to the high base effect," said Friedrich Wu, director of the MTI's economic division. The news had little impact on Singapore shares, with the Straits Times Index falling just 1% to end at 1,901 points.

Traders cited concerns about rising fuel prices for the subdued market performance.

US BUDGET DEFICIT SOARS IN JULY

The US government ran a larger-than-expected budget deficit in July, official figures show.

The deficit for the month was $69.16bn (37.8bn), based on revenues of $134.42bn and spending of $203.58bn, the US Treasury department reported.

July's deficit was above forecasts for a shortfall of $61bn, and wider than last year's figure of $54.24bn.

The total budget deficit for 2004 is set to hit a record high of $445bn, according to White House projections.

With just August and September left in the US federal budget calendar for 2004, the shortfall between receipts and spending has so far reached $395.78bn.

The White House has said the deficits, compared with the overall size of the US economy, remain manageable.

It has pointed to the war on terror and an economic downturn as contributory factors affecting current deficit levels.

IMF RAISES JAPAN'S GROWTH OUTLOOK

The International Monetary Fund (IMF) has raised its growth outlook for the Japanese economy.

The Washington-based lender forecast that Japan's gross domestic product would rise to 4.5% in 2004, topping a previous estimate of 3.4%.

The IMF said the world's second biggest economy would see an end to price deflation by the end of the year.

"There are clear indications that Japan's long-standing economic problems have eased," the IMF said.

The IMF said it expected Japan's consumer price index rate of inflation to fall 0.1% in 2004, with deflationary pressures "ebbing to zero" by the end of next year.

CHAMBERS WARN OF SLOWER UK GROWTH

The UK economy is growing at its fastest pace in four years, but will slow in 2005, business leaders claim.

The British Chamber of Commerce (BCC) upgraded its 2004 growth forecast to 3.4%, near the upper limit of the growth range predicted by the Treasury.

But the BCC warned that rising interest rates, terrorism fears and high oil prices will take its toll on the economy in 2005.

The organisation said economic growth would dip to just 2.6% next year.

"Growth in the UK and globally during 2004 will be at its strongest since 2000 and double the rate of the eurozone," BCC director David Frost said.

UK TRADE GAP WIDENS UNEXPECTEDLY

Lower volumes of oil exports saw the UK's trade gap widen unexpectedly in June, data from the Office for National Statistics (ONS) shows.

The UK trade deficit with the rest of the world grew to 4.97bn in June from 4.82bn a month earlier against forecasts it would shrink to 4.5bn.

The ONS said lower oil exports resulted in the UK's oil trade surplus dropping to 22m, its lowest since August 1991.

Meanwhile, the UK's trade gap with the European Union (EU) narrowed to 2.3bn.

A 2% increase in exports to the newly-widened EU, driven mainly by rising car and chemical exports, helped narrow the gap from 2.5bn in May, the ONS said.

Meanwhile, the trade gap with non-EU countries widened by 0.3bn to 2.6bn during the same period, as imports of cars and precious stones rose.

PENTAGON MOVES OVER HALLIBURTON

Pentagon auditors have criticised US firm Halliburton over its accounting of $1.8bn (0.98bn) it charged the US government for work in Iraq and Kuwait.

The company's accounting system has been disputed by Pentagon auditors for the past 18 months.

The Pentagon could withhold 15% of the money for work done by unit Kellogg Brown & Root (KBR) if it decides it is owed money, but has not acted yet.

The government has until Sunday to decide whether to hold back the money.

 

 

NEWS CORP EYES US AS PROFITS SOAR

Media giant News Corporation is stepping up plans to move its global headquarters from Australia to the US.

The news came as the company unveiled fourth-quarter net profits of $399m (218m), up from $370m last year.

YUKOS IN DEFAULT ON $1.6BN LOAN

Beleaguered Russian oil giant Yukos has received a default notice on a $1.6bn (874m) bank loan, the company said.

The loan was arranged by French bank Societe Generale, but funded by the firm's main shareholders.

The move follows a similar step in July by a syndicate of Western banks, who declared Yukos technically bankrupt on a $1bn loan.

Yukos is at the centre of wrangle with the Russian government over its failure to pay a $3.4bn tax demand.

LANDMARK CHINA COMPENSATION CLAIM

A Chinese businessman has launched the biggest compensation case ever brought against the government, according to local media.

Chen Jinhong, a Guangzhou-based entrepreneur, is suing the southern Chinese city of Foshan for $21m, the China Daily reported.

Mr Jinhong claims the city authorities replaced him as head of a successful decorating firm he had founded in 1986.

He is claiming compensation for the $24,000 he had invested in the company.

SAS IN PROFIT

Scandinavian airline group SAS has posted a profit for the April to June period. Pre-tax profit was 9m kronor (655,000; $1.2m) in the three months to June, from a 13m kronor loss a year ago.

BRAZILIANS DECODE COFFEE GENOME

Scientists in Brazil have decoded the genetic structure of the country's best-known product, coffee.

The success of a two-year government project was announced on Tuesday by the country's agriculture minister.

Roberto Rodrigues said an extraordinary horizon had opened up and the coffee would taste even better as a result.

He proclaimed that Brazil would use the genetic code to create a super-coffee, richer in taste, more aromatic and resistant to disease and frost.

NEW PLAN TO TACKLE AFGHAN DRUGS

The US Defence Secretary Donald Rumsfeld has said a new plan is being prepared to deal with the drugs trade in Afghanistan.

Mr Rumsfeld described it as serious and a threat to the democratic system in the country.

The US defence secretary is in Oman at the start of a tour of the region.

Mr Rumsfeld said a master plan was being developed by the Afghan government and the US-led coalition to deal with the problem.

US INTEREST RATES RAISED TO 1.5%

The US Federal Reserve has raised interest rates by a quarter of a percentage point to 1.5%.

The widely anticipated decision follows June's increase to 1.25%, the first upward move for four years.

The US central bank is trying to curtail inflationary pressures without obstructing economic growth.

The rise comes despite the release of weaker-than-expected US unemployment data, which raised doubts about the strength of the economy.

EU HOLDS FIRE ON ALITALIA DISPUTE

An attempt by Italian authorities to force airlines competing with Alitalia to raise their fares may be legal, the European Commission has said.

The Commission said the action appeared to be legal and doubted it could intervene in the dispute.

Alitalia has come under pressure from competing airlines and got an emergency loan from the government last month.

British Airways (BA) has complained to the Commission and the UK government about the Italian authorities' action.

SOTHEBY'S ENJOYS SURGE IN PROFITS

Auction house Sotheby's has seen its second quarter revenues rise to $169.5m (92m), from $110.4m for the same period last year.

Reporting its results for the three months to 30 June, the New York-based business saw its quarterly net income rise from $14.2m last year to $42.5m.

CABLE CHANNELS LIFT DISNEY PROFIT

Entertainment giant Walt Disney reported a rise in quarterly profits, boosted by its cable television channels and theme parks.

Net profits rose to $604m (303.6m) in the three months to 30 June, up from $502m at the same time last year.

HSBC MOVES IN ON MAINLAND CHINA

HSBC is buying a 19.9% stake in one of China's biggest banks, in an agreement worth $1.75bn (930m).

The deal with Bank of Communications is the biggest foreign investment so far in mainland China's financial sector.

It makes HSBC founded nearly 140 years ago in Hong Kong and Shanghai China's leading Western bank, ahead of rivals such as Citigroup.

The bank's presence on the mainland already encompasses holdings in Industrial Bank and Ping An Insurance.

 

 

ITALY'S PARMALAT SUES BANKERS

Italian food giant Parmalat is to sue Deutsche Bank for $20m (10.86m).

Parmalat paid Deutsche Bank the money three weeks before the troubled dairy company was declared insolvent.

Now, Parmalat says other creditors should have got the money. It also says it reserves the right to seek damages from Deutsche Bank.

PUBLIC SECTOR PENSION HOLE WIDENS

Public sector pensions will need an extra 580bn pumped into them over the coming decades, says a leading actuary.

The new estimate from Watson Wyatt is almost 50% higher than the most recently published official estimate.

Many public sector pension schemes are "unfunded", and operate on a pay-as-you-go basis.

This means any liabilities that cannot be covered with increased contributions from members has to be paid for through general taxation.

OUTPUT PRICES POINT TO RATE RISE

The price of UK-made goods rose at its fastest pace in eight years last month, prompting fears of a further increase in interest rates.

Goods prices excluding tobacco, food, drink and petrol rose by 0.3% in July compared with the previous month, the Office for National Statistics said.

It was the biggest monthly increase since September 1995, far outstripping forecasts by City analysts.

Experts said the figures made further interest rate rises more likely.

RECORD FOR PERSONAL BANKRUPTCIES

Personal insolvencies in England and Wales have surged to their highest level in 40 years, figures have shown.

The Department of Trade and Industry (DTI) said 8,740 people were made bankrupt in the three months to June up 29% on the same period in 2003.

Company insolvencies fell 17% over the same period, the DTI said.