May 16 - 22, 2005






The US trade deficit has narrowed unexpectedly in March, hitting its lowest level for six months as a weak dollar pushed exports to record highs.
A drop in textile imports from China also helped deflate the previously ballooning trade shortfall.
The deficit was $55bn (29bn) in March, compared with a record of $60.6bn in February, the Commerce Department said. Exports of US goods and services rose by 1.5% to $102.2bn in March, while imports dipped by 2.5% to $157.19bn.



Importantly, the deficit with China shrank by 7% to $7.83bn.

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 textile companies.

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, analysts said.


The Bank of England has trimmed its growth forecast for the UK economy following a rise in inflation and a fall in consumer spending.

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 were unlikely.

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 forecasts.

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 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 Middle East.

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.


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 traffickers."

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.


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 week.

"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 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.


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 jumped 1.4% in April, their strongest showing for seven months, according to the latest US government figures.

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 Group.

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 Mr Guatieri.

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 Chancellor Gerhard Schroeder has urged the country's parliament to approve the EU constitution in a vote, last Thursday.

"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.


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.


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 showed.

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% to 0.7%.

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 is planning to set up special economic zones, similar to those in China, to boost exports and make its industry more competitive globally.

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 bureaucratic structure.

Investors would get 15 years tax relief for projects that take place inside the designated areas across the country.

Many of the economic zones will have their own airports, ports and rail stations to ensure projects are not bogged down by poor infrastructure.


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.


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.


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.


British MP George Galloway says he is ready to face down US senators who claim he received oil rights from Saddam Hussein's Iraq.

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' den".


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.


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.


Walt Disney's quarterly profits have climbed 30%, driven by children's comedy film The Pacifier and DVD sales of The Incredibles.

Net income in fiscal second quarter was $698m (373m) compared with $537 a year earlier. Sales gained 9% to $7.83bn.


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.


The United Arab Emirates has agreed with the United Nations on a plan to repatriate some 3,000 child camel jockeys from poorer countries.

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.


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'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).


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; 2.4bn).

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.


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.


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.


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.


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 has won a $2.6bn (1.4bn) order for 45 aeroplanes from China Southern Airlines and its Xiamen Airlines subsidiary.

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.


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 expenses.

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 electricity.


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 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".


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.


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 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.


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.