Importantly, the deficit with China shrank by 7% to
China has been criticised for devaluing its
currency and flooding markets with cheap textiles. US producers have
been calling for limits on Chinese products
Last month, the US and European Union said they
would investigate the effects of Chinese goods on their markets and
Stephen Gallagher, an economist at SG Corporate
& Investment Banking, said that while the deficit figures may
point to an improving situation, it was too early to say if there has
been a turnaround in the trade deficit.
"It's surprising that's for sure," Mr
Gallagher said. But "there's a weak economy in Europe. There's a
weak Japanese economy."
Analysts also pointed to the negative effect of
high oil prices.
"There is no doubt this is an improvement that
beats the most optimistic expectations, but one number is not going to
convince sceptics that the deficit is going to turn around on a dime
here," said Tim Mazanec of Investors Bank & Trust.
The tumbling value of the US dollar has helped to
offset some of the problems, however, and boosted export demand,
CAUTIOUS SHOPPERS TRIM UK GROWTH
The Bank of England has trimmed its growth forecast
for the UK economy following a rise in inflation and a fall in
The Bank said it expected gross domestic product
(GDP), the measure of economic output, to rise 2.5% in 2005, down from
its 2.7% February forecast.
Inflation rose in March and is expected to remain
about or slightly above the Bank's 2% target until early 2007.
Analysts said further interest rate rises this year
The Bank left interest rates unchanged for a ninth
successive month on Monday.
Governor Mervyn King said that in adjusting its
growth forecast, the Bank had taken into account the recent rise in
the rate of inflation, which nudged up to 1.9% in March, its highest
level for more than seven years.
The Bank said inflation may rise again in the
short-term but would remain at about the government's 2% target.
Mr King said the shift in the growth outlook
represented only a "small change".
However, he acknowledged that there was uncertainty
about the strength of consumer spending which could impact on future
A succession of retailers have reported weakening
consumer spending in recent weeks.
"In the last six months we have seen slightly
weaker growth than expected," Mr King commented.
Growth rates and inflation have been
"remarkably stable (but) there are likely to be marked short-term
movements", he said.
RUSSIA MARKS WWII VICTORY
Russia has marked World War Two victory with Red
Square pageantry in front of world leaders, trumpeting its huge
wartime role but masking tensions in post-war ties with its neighbours.
World leaders, including US President George Bush and China's Hu
Jintao, then shifted into high diplomacy, holding a series of informal
meetings that touched on issues such as terrorism, North Korea and the
Russian President Vladimir Putin stood shoulder to
shoulder with Mr Bush as troops and war veterans marched and drove
across the cobbled Red Square, once the scene of Cold War displays of
Soviet military might, to the strains of martial music. For Mr Putin
the ceremony was a rare high point after a period marked by faltering
ties with Washington and ex-Soviet allies.
"Grief came to every home, every family,"
he said, declaring that the world owed "great human thanks"
to the nearly 27 million Soviet citizens who died.
Russian security forces sealed off the Kremlin area
and Red Square to celebrating Muscovites for fear of a repeat of the
Chechen attacks that have marked past May 9 celebrations.
World leaders — with German Chancellor Gerhard
Schroeder and Japanese Prime Minister Junichiro Koizumi representing
the vanquished nations — laid flowers at the Tomb of the Unknown
Soldier at the foot of the towering Kremlin walls.
LAWLESS IRAQ IS 'KEY DRUG ROUTE'
Drug smugglers exploiting internal chaos in Iraq
have turned the country into a transit route for Afghan heroin, an
influential drug agency says.
High levels of insurgent violence and porous
borders have drawn traffickers to Iraq, according to the International
Narcotics Control Board (INCB).
The board says Jordan has seized large quantities
of drugs on the Iraq border.
Authorities in Afghanistan say their drug problem
is so severe the country's existence could be threatened.
Drugs are transported through Iraq and into Jordan,
where they are moved onto traditional trafficking routes into Europe.
Apart from heroin and other opium-based drugs,
Jordan has seized significant amount of cannabis resin and
amphetamine-type pills on its borders.
The president of the INCB, Hamid Ghodse, said the
pattern of drug-trafficking in Iraq was similar to that observed in
other post-conflict situations.
"You cannot have peace, security and
development without attending to drug control," Mr Ghodse said.
"Whether it is due to war or disaster,
weakening of border controls and security infrastructure make
countries into convenient logistic and transit points, not only for
international terrorists and militants, but also for
The INCB is an independent body set up to monitor
implementation of United Nations drug control initiatives.
Mr Ghodse conceded that no concrete figures existed
for the amounts of drugs smuggled through Iraq. But he said the INCB
was "alarmed" at evidence of a growing problem.
G10 BANKS MAINTAIN GROWTH FORECAST
Top central bankers left unchanged their forecast
for modest growth in the global economy, citing the dampening effect
of high oil prices. "There is no reason to change the
perspective," said Jean-Claude Trichet, who chairs the G10 group
of central bankers, after they met in the Swiss city of Basel, last
"There are indicators and figures that are
going in both directions and that is particularly true in the
US," Trichet told journalists. "But all taken into account
the global perspective has not changed."
At current rates, economic growth this year will
reach about four per cent, said Trichet, who also heads the European
Central Bank. That matches the G10 forecast given at the past two of
its meetings, in January and March.
If oil prices decline, this would have a favourable
impact on global growth, he said. He welcomed indications from Saudi
Arabia that it is ready to increase oil output.
JAPAN, CHINA AGREE TO IMPROVE TIES
Japan and China agreed to try to improve strained
ties and meet soon to discuss a disputed gas field, but the two Asian
giants remain at odds over their wartime past, a Japanese official
said. Japanese Foreign Minister Nobutaka Machimura met his Chinese
counterpart, Li Zhaoxing, after a meeting of Asian and European
foreign ministers in the Japanese city of Kyoto, last week.
The talks followed last month's summit where
Japanese Prime Minister Junichiro Koizumi and Chinese President Hu
Jintao pulled ties back from the brink after a rare public apology by
Koizumi for suffering caused by Japan's past military aggression.
OIL DROPS BELOW $49 AS DEMAND EASING
World oil prices fell heavily below $49 a barrel
last Thursday in response to data showing high levels of US crude
inventories amid easing demand in energy-hungry China and the United
States. New York's main contract, light sweet crude for delivery in
June, slid $1.85 to $48.60 per barrel in early deals, having earlier
hit $48.50, its lowest level since February 18.
In London, the price of Brent North Sea crude oil
for delivery in June slumped $1.37 to $48.70 per barrel, after
reaching $48.58 - a low point last seen on February 24. New York
futures had slumped by $1.62 day earlier to close at $50.45 per barrel
after the latest weekly snapshot from the US Department of Energy (DoE)
showed increasing levels of US crude stockpiles.
US RETAIL SALES SHOW STRONG GAINS
US retail sales jumped 1.4% in April, their
strongest showing for seven months, according to the latest US
This was higher than the 0.7% increase expected and
8.6% higher than a year ago.
Figures for February and March were also revised,
showing that spending was higher then than previously thought.
The data showed "a sharp rebound in consumer
spending," said Sal Guatieri, economist with the BMO Financial
The strong retail sales data surprised economists
and may lead to first-quarter US growth being revised upwards from the
3.1% already reported.
The report "raises our estimate of
second-quarter GDP (gross domestic product) growth which we estimate
at 3.5%, after something above 3.5% in the first quarter," said
Sales of clothes rose 2.8% while spending on cars
and car parts was up 2.5% in April. Other areas seeing gains included
building and hardware products, which were buoyed by a strong housing
market. Petrol (gasoline) station prices rose too, probably due to
higher prices at the pump.
GERMAN MPS TO VOTE ON EU TREATY
German Chancellor Gerhard Schroeder has urged the
country's parliament to approve the EU constitution in a vote, last
"We should cultivate a restrained, reasonable
use of the term 'historic' but the EU constitution deserves this grand
term," he said.
The lower house of parliament, the Bundestag, is
expected to back the constitution by a large majority.
The upper house will vote on 27 May, two days
before France's referendum. Schroeder has said he hopes Germany
"will set something of an example for others".
All Germany's main parties officially back the
constitution, but about 20 members of parliament from government and
opposition benches are expected to vote against the constitution or
abstain. The parliament has 601 members, and the ratification requires
a two-thirds majority.
ARABS MAKE NEW FRIENDS IN BRAZIL
The first summit of Latin American and Arab states
has ended in Brazil with a vow to work together to promote economic
growth and alleviate poverty.
The two-day meeting brought together leaders and
representatives of 34 countries from Latin America, north Africa and
the Middle East.
Its closing declaration included criticism of
Israel and the US.
The countries pledged to jointly seek reform of
international trade, seen by many as favouring rich countries.
Thanking the delegates for attending, Brazilian
President Luiz Inacio Lula da Silva said the world was in a new age
and that this was a solid new relationship — part of a broader
economic and political alliance in the developing world.
Overtly political statements in the closing
declaration included a call on Israel to dismantle settlements in the
occupied territories and to withdraw to its pre-1967 borders.
MIXED SIGNALS FOR EUROZONE GROWTH
Economic growth in the eurozone picked up in the
first three months of 2005, boosted by healthy growth in Germany.
Eurozone growth was 0.5% in the January to March
period, up from 0.2% in the previous three months, Eurostat said.
Germany's economy grew 1.0% in the first quarter,
after shrinking 0.1% in the previous quarter, separate German data
But a gloomier view came from the European Central
Bank, whose advisers trimmed their 2005 and 2006 forecasts.
The European Commission has also lowered its
eurozone growth forecast.
The ECB's panel of economists predicted 2005 growth
in the 12-nation eurozone would come in at 1.6%, rather than 1.8% as
suggested in its last monthly forecast.
For 2006, they expect the eurozone to expand by
between 0.2% and 0.6%. This compares with their last forecast of 0.3%
The Commission's downgrade covered only the three
months to June 2005; it lowered its forecast to between 0.2% to 0.6%,
shaving 0.1% off both ends of the range.
INDIA PLANS SPECIAL TRADE ZONES
India is planning to set up special economic zones,
similar to those in China, to boost exports and make its industry more
A bill to set up the zones was unveiled in
parliament last Monday.
Projects in the zones will get tax concessions, and
an efficient system for approving projects will be set up.
The cabinet has backed the plan, but it needs
parliamentary approval as the zones will have a special taxation and
Investors would get 15 years tax relief for
projects that take place inside the designated areas across the
Many of the economic zones will have their own
airports, ports and rail stations to ensure projects are not bogged
down by poor infrastructure.
DOLLAR SURGES ON US DATA
The dollar surged to a six-month high against the
euro here last Thursday following publication of
stronger-than-expected US retail sales in April. The single European
currency in late-day trade was at $1.2713 against $1.2814 in New York,
day earlier. The euro at one point fell to $1.2691, its lowest reading
since November 3, 2004.
The dollar was meanwhile trading at 106.67 yen
after 105.73. Official figures showed US retail sales up 1.4 per cent
in April, the best gain in seven months and higher than forecasts of
0.8 per cent improvement.
S ARABIA PLANS SHARE OFFERING
Saudi Arabia will offer shares in its planned joint
venture export refinery in Yanbu to the public, a Saudi Aramco
official said last. The state-owned oil producer is discussing
building the multi-billion dollar, 400,000 barrels per day (bpd)
project with several potential international partners.
BA PROFITS TUMBLE
British Airways (BA) has seen a slump in quarterly
profits after record oil prices boosted the cost of jet fuel.
Pre-tax profit in the fiscal fourth quarter ending
31 March was £5m ($9.3m) compared with £45m a year earlier. Fuel
costs rose 18% in the period, BA said.
GALLOWAY ACCEPTS WASHINGTON CALL
British MP George Galloway says he is ready to face
down US senators who claim he received oil rights from Saddam
Mr Galloway denies claims by a Senate committee
that he and a former French minister were allowed to sell Iraqi oil to
reward their support for the regime.
The committee said it would be "pleased"
for Mr Galloway to appear at a hearing in Washington on 17 May. The MP
accepted, declaring he would take "them on in their own lions'
XBOX 360 KICKS OFF CONSOLE WARS
Microsoft's new console will be called the Xbox 360
and be in the shops by Christmas, it has been revealed.
The white, sleek machine was unveiled during a
glitzy show on MTV in the US, hosted by actor Elijah Wood.
Microsoft is the first company to show off its
next-generation video game console.
Rivals Sony and Nintendo are expected to provide
more details about their consoles next week at the annual games trade
show, E3 in Los Angeles.
CHINA DENIES CURRENCY RISE RUMOUR
Reports that China is to increase the value of the
yuan are incorrect, says the head of the Chinese central bank.
Zhou Xiaochuan was responding to an article on the
website of state newspaper People's Daily, which was later said to
have been incorrect.
The yuan is pegged to trade in a narrow band
against the US dollar, and Washington has long said that the Chinese
currency is artificially low. Beijing says it will make the yuan more
flexible in time, but won't be rushed.
DISNEY LIFTED BY FILM SUCCESSES
Walt Disney's quarterly profits have climbed 30%,
driven by children's comedy film The Pacifier and DVD sales of The
Net income in fiscal second quarter was $698m
(£373m) compared with $537 a year earlier. Sales gained 9% to
Struggling US carrier United Airlines has seen its
first-quarter losses more than double to $1.1bn (£589m), compared
with a $459m loss a year previously.
UAE TO REPATRIATE CHILD JOCKEYS
The United Arab Emirates has agreed with the United
Nations on a plan to repatriate some 3,000 child camel jockeys from
Help and protection will be offered to boys until
they are sent back to their homelands, mainly in Africa and Asia,
where they will get further UAE aid.
The UAE banned jockeys aged under 16 and weighing
less than 45kg (100lb) nearly a month ago.
RAFSANJANI JOINS IRAN LEADER RACE
Former Iranian President Akbar Hashemi Rafsanjan,
70 has officially confirmed he will stand for election once more.
Regarded as the front-runner in the 17 June poll,
Mr Rafsanjani had said he would not run unless supported by supreme
leader Ayatollah Ali Khamenei.
The current President, Mohammad Khatami, is barred
by the constitution from seeking a third consecutive term.
IRAN 'LOSES INTEREST' IN MG ROVER
Iran's car-makers are no longer in the running for
stricken UK group MG Rover, said the country's industry minister.
In Iranian press interviews, Eshagh Jahangiri said
MG Rover's sale to China of the rights to its 25 and 75 models meant
it was no longer attractive.
"Iran has cancelled [its interest in] buying
Rover," he told the Donya-ye Eqtesad newspaper.
MG Rover went into administration in April after
takeover talks collapsed, and is currently seeking a buyer.
BNP Paribas, the French bank with the
second-biggest stock market value among eurozone banks, has reported a
56% jump in first-quarter profits. BNP Paribas had net profits of
1.7bn euros ($2.1bn; £1.1bn).
JFE BOOSTED BY GLOBAL STEEL BOOM
Strong global demand for steel and knock-on high
prices have helped JFE Holdings, Japan's second-largest producer, see
an 84% jump in profits.
The company, the fourth-largest producer in the
world, has reported record annual profits of 467bn yen ($4.4bn;
Accounting for the year to March 2005, this
compares with profits of 254bn yen for the previous 12 months. The
latest annual profit exceeded market expectations.
BUDGET BLOW FOR NIGERIA'S LEADER
The Nigerian Senate has rejected plans by President
Olusegun Obasanjo to curb budget spending increases for 2005.
An alliance of senators said government plans to
unilaterally cut Nigeria's 1.8 trillion naira ($13.6bn; £7.1bn)
budget was "illegal and unconstitutional".
President Obasanjo signed a bill into law last
month sanctioning a 38% jump in spending, compared with 2004.
EURO-MPS BACK TIGHTER WORK HOURS
A rule which allows workers to choose to put in
more than 48 hours a week may end after MEPs voted to scrap it.
They voted to phase out over three years the right
to opt out of the Working Time Directive.
Unions said the decision was a victory for UK
employees, but business groups said competitiveness would suffer.
The plan would have to be approved by the Council
of Ministers. The UK government hopes to block it from becoming law.
WE NEED NO-GO ZONES, SAYS PUTIN
Russian President Vladimir Putin has called for
legislation limiting foreign ownership in valuable and strategic parts
of the economy to be drafted.
He has told his government to protect natural
resources such as oil and gas reserves, areas of national security and
firms that supply the military.
Giving his state-of-the-nation address, Mr Putin
said the laws would strengthen Russia's independence and security. But
some analysts and companies say the move could hamper economic growth.
GM'S $1BN DRIVES FIAT INTO PROFIT
Italy's Fiat has rebounded into profit, just as it
promised in February, thanks to a $1bn (£531m) payment from carmaker
General Motors (GM).
Fiat posted a net profit of 293m euros ($377m;
£200m) in the first quarter, up from a loss of 390m euros a year ago.
BOEING WINS LARGE 737 CHINA ORDER
Boeing has won a $2.6bn (£1.4bn) order for 45
aeroplanes from China Southern Airlines and its Xiamen Airlines
The US aeroplane maker is competing with Europe's
Airbus for Chinese contracts, as Chinese airlines increase capacity
ahead of the 2008 Olympics.
China Southern will buy 12 Boeing 737-700s and 33
737-800s, 15 of which are earmarked for Xiamen Airlines. The 45
aeroplanes are due to be delivered between 2006 and 2008.
MAHARASHTRA'S FREE POWER TO END
The government of Maharashtra, India's most
industrialised state, is to stop giving free electricity to farmers
because of acute power shortages.
The free power policy, which was implemented in
July as part of an election promise, will now be scrapped.
From 1 June the state, which has mounting debts,
will revert to its old policy of subsidising the farmers' electricity
Critics of free power praised the move, despite
high rates of farmer suicides.
The government's critics say that in the long run
the initiative will help the state account for the sale of power, and
that it was a bad idea in the first place to distribute free
BARCLAYS PAYS £2.9BN FOR SA BANK
Barclays is to pay 33bn rand (£2.9bn; $5.5bn) for
Absa, South Africa's biggest retail lender, the bank said.
South African Finance Minister Trevor Manuel has
given the go-ahead for the move by the UK's third largest bank.
UK'S RETAIL SALES DOWN
UK retail sales fell by their biggest amount in a
decade during April, the British Retail Consortium has said.
Like-for-like sales slipped by 4.7% against the
same month in 2004, partly due to the fact that the busy Easter
trading period fell in March this year.
The drop was the biggest since BRC records began in
1995, and a bigger slump than the previous worst figure of minus 4.6%
in April 1999. BRC director general Kevin Hawkins said the figures
were "worse than expected".
AUSTRALIA OFFERS GIVEAWAY BUDGET
A fiscal surplus and strong economy have allowed
Australia to outline a giveaway budget.
Coffers were boosted by corporate earnings, giving
it a surplus of 8.9bn Australian dollars (£3.7bn; $6.9bn).
The government promised income tax cuts worth
A$21.7bn over four years and to pump more than A$2bn into plans to get
people off welfare and into work.
It also announced an initial payment of A$16bn will
be put into an investment fund designed to plug its pensions gap.
The government will cut surcharges on private
pensions, benefiting the better off.
A giveaway budget is unusual after a government has
just won an election as Prime Minister John Howard has. But he faces a
potential leadership challenge from the architect of the cuts,
Treasurer Peter Costello.
UK INTEREST RATES HELD AT 4.75%
The Bank of England has left UK interest rates
unchanged at 4.75% for the ninth month in a row.
Concerns about an accelerating rate of inflation
were outweighed by evidence that the UK economy may be going through a
sticky patch, analysts said.
IRAQ PROMISES TO BOOST OIL OUTPUT
Iraq is hoping to boost its oil exports back to the
levels of a year ago in order to re-assert its role in oil cartel Opec,
its new oil minister says.
Ibrahim Bahr al-Uloum, one of the final
appointments to Iraq's new government, promised to make boosting
production his highest priority.
Frequent sabotage has handicapped Iraq's efforts to
get production back to the levels seen before March 2003. Iraq
currently pumps 1.7 million barrels a day, and exports 1.4 million.
BANKRUPTCIES REACH ANOTHER RECORD
The number of people going bankrupt in England and
Wales has hit another record high during the first three months of
2005, official figures show.
The Department of Trade and Industry said the
number of individual bankruptcies reached 10,091.
The number of bankruptcies was 24.5% higher than a
year ago and up 2.8% on the previous quarter.