China is the world's third largest importer of oil and
its demand for oil is rising in line with its own economic growth.
Rising oil prices could push Chinese inflation higher,
discouraging consumers from spending and hitting company profits.
Already, it is expected to have to pay an extra $8.8bn
(£4.8bn) to import its usual 880 million barrels of oil this year.
Reports last week suggested that China was willing to
pay Russian rail fees to ensure it continued to get the oil it needs from
troubled oil company Yukos.
Thailand has so far insisted that the energy crisis
will not hit the country's economic growth, forecast to be 7% this year.
Nonetheless, the government has decided to take action
to cut the oil spending bill, following one estimate that the country will
have to spend 40% more on importing oil than it did last year.
In India, fears have centred on the impact on
inflation. The Indian government has cut customs and excise duties on many
petroleum products, in a bid to curb rising inflation. Finance Minister
Palaniappan Chidambaram said gasoline and diesel customs duties would be
cut from 20% to 15%.
Exports from the Philippines are still rising, but
rising oil prices contributed to the creation of a $142m trade deficit in
June. The same month last year saw a trade surplus of $132m.
CHINA INVESTMENT SPENDING JUMPS
An unexpected jump in China's fixed-asset investment
during July has raised question marks over government attempts to curb
During the first seven months of 2004, the statistical
office estimates that spending on assets such as factories and roads rose
31% from a year earlier.
The market had expected growth of closer to 20%.
The concern among some analysts is that the country's
booming economy is still in danger of overheating.
"This figure will surely puzzle investors and even
trigger questions on the effectiveness of the government's investment
cooling measures," said Jun Ma, an economist at Deutsche Bank.
The government has implemented a number of measures
aimed at cooling expansion and investment without bringing the economy to
a juddering halt.
Banks have to hold more money in reserve and to provide
fewer loans for projects, particularly in the property and automobile
There has also been a tightening of land-use rules to
slow industrial developments.
Despite the jump in July's figures, many analysts are
still optimistic about the outlook for the economy.
They point to the fact that investment figures are
often unreliable, citing possible changes in accounting methods, as well
as one-off factors such as the weather.
EUROPE JOINS CITIGROUP BOND PROBE
France and Germany's financial market watchdogs have
begun to look into Citigroup bond trades already under scrutiny in the UK.
Both Germany's BaFin and France's AMF said they were
gathering information on the trades, but had not yet launched formal
Last Wednesday, the UK's Financial Services Authority (FSA)
announced a formal probe into the matter.
It centres on a large-scale sale of government bonds by
The sale, carried out on 2 August, is reported to have
pushed down the price of the bonds, allowing Citigroup to buy them back at
a profit soon afterwards.
City sources told the Reuters news agency that
Citigroup, the world's biggest financial services company, may have made
profits of up to 30 million euros ($36m; £20m) on the deal.
IRELAND RAISES GROWTH FORECASTS
Ireland is poised to benefit from the global economic
recovery, the Department of Finance said last week as it raised its
forecast for growth.
The country's public deficit would be smaller than
expected thanks to better tax revenues than expected in 2004, the
The projected borrowing requirement was revised to
1.8bn euros ($2.2bn; £1.2bn) from a budget forecast of 2.8bn euros.
And economic expansion was revised to 4.7%, from a
previous forecast of 3.3%.
Gross domestic product grew by 3.7% in 2003.
In his 2004 Economic Review and Outlook, Finance
Minister Charlie McCreevy forecast inflation at an average of 2.2% after
3.5% last year and 4.6% the year before.
Mr McCreevy put the expected deficit at 0.4% of GDP,
compared to the previous estimate of 1.1%.
US TRADE DEFICIT SWELLS IN JUNE
The US trade deficit has unexpectedly swollen by 19% to
a record $55.8bn (£30.4bn) in June.
The country suffered the biggest drop in exports in
nearly three years, just as imports hit record levels.
Wall Street economists had expected the gap to widen,
but had predicted a gap of just $47bn.
Economists said the growing deficit was likely to force
the government to revise downwards its forecast of 3% economic growth in
the second quarter.
The deficit rise may increase the pressure on President
Bush and his handling of the economy ahead of the Republican Party
Convention later this month.
The figures are the latest in a series of worse than
expected economic reports in recent weeks.
US exports fell by 4.3% to $92.8bn (£50.4bn) in June,
their largest monthly fall since September 2001.
Imports rose 3% to $148.6bn, partly reflecting the
steady rise in crude oil prices.
EURO INDUSTRIAL PRODUCTION SLOWS
Industrial production in the eurozone fell by 0.4% in
June from May, with Germany registering the biggest fall.
The eurozone's monthly fall was smaller than forecast
and industrial production rose by 2.7% on an annual basis.
But the 2% decline in Germany renewed fears that its
economic growth could slow in the second half of this year.
Separately, German investor confidence fell to its
lowest level in 13 months in August, according to research institute ZEW's
HUNGARIAN PRIME MINISTER RESIGNS
The Hungarian Prime Minister, Peter Medgyessy, has
resigned following a row with his Socialist party's liberal coalition
Tensions arose between the prime minister and the Free
Democrats (SZDSZ) over a government reshuffle.
Mr Medgyessy sacked three ministers last week,
including the Free Democrat Economy Minister Istvan Csillag.
SOUTH KOREA IN GROWTH SPURT
South Korea's economy grew faster than expected in the
three months from April to June.
Second quarter gross domestic product (GDP) was up 5.5%
on a year earlier and 0.6% from the previous three months.
Growth continues to be driven by strong exports to
nearby China, but is still constrained by weak domestic spending.
It is unclear whether this growth will continue, given
that exports are expected to fall and high oil prices make a domestic
spending boom unlikely.
"The key for the second half is how fast private
consumption will revive to offset an expected slowdown in exports,"
Lee Dong-Su, an economist at Tong Yang investment bank, said.
South Korea imports all of its crude oil and is the
world's sixth largest oil consumer
PARMALAT SUES US INVESTMENT BANK
Italian food giant Parmalat has launched a lawsuit
against its former auditors by taking CSFB to task over a bond deal back
Parmalat said it is suing the US investment bank for
about 250m euros (£168m; $202m).
AMAZON MOVES INTO CHINESE MARKET
US internet giant Amazon.com is buying China's largest
web retailer Joyo.com, in a deal worth $75m (£41m).
Amazon is making its entry into the fast-growing
Chinese market after several months spent searching for a suitable partner
or acquisition target.
Joyo's principal activities are the sales of books,
music, movies and toys on the internet at discount prices.
WAL-MART 'TARGETS JAPAN RETAILER'
US retail giant Wal-Mart is thinking of investing in
Japanese supermarket chain Daiei, according to reports.
Shares in the heavily indebted Japanese retailer jumped
on the news and were up 27% at 235 yen by close of trading.
Wal-Mart already owns a 37.8% stake in Japan's
fourth-biggest supermarket chain Seiyu, but is thought to want a bigger
share of the Japanese market.
BANGLADESH WINS $2BN INDIA DEAL
India's Tata group is to invest $2bn (£1.1bn) in
Bangladesh, the country's single largest foreign investment ever.
Tata is to build a power plant, steel unit and
fertiliser factory after Bangladesh guaranteed a supply of gas.
The Bangladeshi government is wooing foreign investors
in an attempt to reduce its reliance on foreign aid.
Bangladesh has 15.33 trillion cubic feet of proven gas
FRENCH OUTPUT STEPS UP THE PACE
France and Germany, the bastions of the shorter working
week, are still Europe's most productive economies, a survey has found.
Growth in output per French worker came top of poll of
5,000 firms for consultancy Deloitte, and Germany was not far behind.
Meanwhile, the UK, where productivity is usually high,
suffered a reverse.
British firms registered their slowest productivity
growth in 14 months, and are now below the EU average.
SINGAPORE BAN AFTER BIRD FLU CASE
Singapore has suspended poultry imports from Malaysia
after scientists there found a potentially deadly form of bird flu in
It is the first time the H5 strain of the virus has
been found in Malaysia.
The outbreak was detected in the Malaysian state of
Kelantan at a village near the Thai border.
Malaysian eggs have also been banned and the
Singaporean authorities have warned of shortages until alternative
supplies an be found.
STEEL BOOM BOOSTS ISCOR'S PROFITS
Shares in South African steel producer Iscor surged to
a record high last Wednesday after the firm reported strong interim
Revenue for the six months to June rose 13% to 10.54bn
rand ($1.6bn, £884m). Operating profit, which strips out debt payments,
was up 31% to 2.2bn rand.
UK MORTGAGE LENDING BREAKS RECORD
Mortgage lending rose sharply in July, figures from the
Council of Mortgage Lenders (CML) have shown.
Lending rose by £29.2bn in July, up from £27.8bn in
June, fuelled by a record £14.7bn worth of loans for house purchases.
RAND FALLS ON SHOCK SA RATE CUT
Markets in South Africa are digesting the surprise
decision to cut interest rates, as the rand suffered extended losses last
week following the move.
Some analysts see the SA central bank's cut in the key
repo interest rate, by half a percentage point to 7.50%, as being forced
by political pressure.
The rand touched 6.55 against the dollar, 13 cents
weaker than August 19's close, and its lowest since 10 June.
Its depreciation against the US dollar was 5.4% in less
than 24 hours.
BHP BILLITON POSTS RECORD PROFIT
Soaring demand for raw materials from China has helped
to push Anglo-Australian mining giant BHP Billiton to record full-year
Net profits after one-off payments rose to $3.38bn
(£2.03bn) in the year to June from $1.9bn last time.
HIGH OIL COSTS HIT MORE AIRLINES
BMI, Air France and KLM are raising ticket prices to
pass on rising fuel costs to their customers.
The Portuguese airlines Tap-Air, Portugalia Airlines
and Air Luxor said they will take similar steps.
British Airways, Virgin Atlantic and Lufthansa have all
recently said they would raise passenger fuel surcharges in response to
record high oil prices.
US PRICES IN SURPRISE JULY SLIDE
US consumer prices fell by 0.1% in July, the first
monthly fall since November last year.
The slide accompanied falling gasoline prices, sparking
speculation about whether the
US central bank would raise rates when it meets in
The Federal Reserve lifted interest rates by a quarter
of a percentage point to 1.5% at its last meeting in July, its second
tightening this year.
Core prices, which exclude food and energy prices, rose
0.1% in July.
IMF GIVES JAMAICA THUMBS UP
Jamaica has succeeded in stabilising its economy and
its economic prospects are positive, the International Monetary Fund says.
In its annual review of the island's economy, the IMF
praised the government for tackling its huge debt burden and improving
Future economic growth of up to 4% a year was possible,
it said, given a recovery in tourism and mining sectors.