May 23 - 29, 2005






Investors are growing gloomier about prospects for the world economy and are expecting weaker growth, a survey of fund managers has indicated.
Fewer than a quarter of the 339 managers questioned in the Merrill Lynch poll expected growth to increase.
It was the most negative result since 2001, reflecting a stark reassessment of economic views, the bank said.
Latest US economic data gave little cheer, with industrial production falling 0.2% in April.



Fears of a resurgence in US inflation were stoked by a 0.6% rise in producer prices, increasing the likelihood of further short-term interest rate increases.

Soaring energy costs were largely to blame, with big increases in the price of oil and higher residential natural gas prices.

Merrill Lynch researchers said their latest poll, conducted between 6 and 12 May, showed there had been a "truly breathtaking" shift in attitudes in the last two months.

A total of 56% of fund managers surveyed now expect global growth to weaken slightly or a lot over the next 12 months, while only 23% expected a stronger world economy, the investment bank said.

A clear majority also expected corporate profits to deteriorate slightly, while inflation was seen as likely to increase.

Investors expressed concern about the euro, which was seen as the currency most likely to depreciate over the coming year especially if the French electorate were to reject the EU constitution in the 29 May referendum.

Merrill Lynch said its previous month's survey had highlighted a split between investors in the US and Europe, who had expressed caution about the future, and their counterparts in Asia, who had been more optimistic.


Japan's economics minister has said his country is "heading towards recovery" after figures showing 1.3% growth in the first quarter of 2005.

Economics Minister Heizo Takenaka said it might no longer be appropriate to describe Japan's economy as being in "a soft patch".

Japan had a mild recession from April to September 2004, and zero growth from October to December.

But economists warned Japan's recovery remains fragile and may be short-lived.

The annualised growth rate was 5.3%, while the quarterly growth rate was the best since the first quarter of last year when it was 1.4%.

Japan's first-quarter growth rested on rises in consumer spending and on Japanese companies building up their inventories.

Inventory building suggests a more optimistic view of future prospects but without sizeable demand it is unlikely to continue.

Exports fell 0.2% in the January-to-March period due to slower demand for machinery from Asia.


China says it will raise export tariffs on 74 textile product categories from June, in an apparent effort to calm US and EU fears over cheap Chinese goods.

The increase could be as much as 400% for most items, the official Xinhua news agency said.

The agency quoted the finance ministry but gave no further details.

Washington and Brussels have expressed concerns about a surge in Chinese textile exports since a global quota system ended in January.

Exports of certain Chinese clothing items to Europe have risen by more than 500% since the 30-year-old Multi Fibre Agreement expired.

The US textile industry says it has lost more than 16,000 jobs since the start of this year, while the EU says its T-shirt and flax yarn makers are at serious risk.

The US has already imposed quotas on a number of different types of Chinese-made garments and the EU has threatened penalties.

Until the latest announcement, China had appeared to be standing firm on the issue, saying it would not cut textile exports.

On Wednesday, Chinese Commerce Minister Bo Xilai said his country was abiding by World Trade Organization (WTO) rules and accused the EU and US of "double standards".

Mr Bo told an audience of international business executives in Beijing: "The integration of the textile trade is a right we have gained since China joined the WTO and China will not impose curbs on its textile products."


French President Jacques Chirac has called in the leaders of Germany and Poland to boost his campaign for France to back the European Constitution.

Polish President Aleksander Kwasniewski and German Chancellor Gerhard Schroeder joined Mr Chirac in backing a "Yes" vote in the 29 May referendum.

The move is part of an all-out effort to convince sceptical French voters.

As part of the campaign, Mr Chirac also called for a review of the UK's rebate, now worth 4.6bn euros ($5.8bn; 3.2bn).

The UK won the rebate on its contribution to European Union funds in 1984 after a campaign by then Prime Minister Margaret Thatcher.

But Mr Chirac said Germany, France and Poland agreed that the need for EU budget discipline and fairness to the EU's 10 new members meant that it was time to think again.

"We concluded that to be able to incorporate all these demands (on the budget), we need to have a fairer financing of the European budget... which would incontestably demand looking again at the British rebate," he said.

British officials have said the UK pays more than twice as much as France does even after the rebate, given France's big receipts from the Common Agricultural Policy.

Thursday's demand was the second time in less than a week that Mr Chirac has used the rebate as a weapon in his campaign to get a "Yes" in Sunday's vote.

Recent polls have suggested that the "No" camp is ahead.

But the leaders gathered in Nancy were keen to back the campaign with other arguments as well.


The US turned a blind eye to the former Iraq regime's $8bn trade in smuggled oil, a new US Senate report says.

The report says the US was well aware of both the smuggling and the kickbacks Iraq solicited from players in the UN's oil-for-food programme.

Published by Democrat minority members of a key committee, it follows charges levelled against several Russian politicians and UK MP George Galloway.

Mr Galloway has flown to Washington DC to defend himself in person.

He is appearing before the Senate Permanent Subcommittee on Investigations.

Others accused of receiving oil allocations from Baghdad include French former Interior Minister Charles Pasqua, Russian ultranationalist MP Vladimir Zhirinovsky, and Russian former presidential aides Alexander Voloshin and Sergei Issakov.


Global banking giant HSBC is in talks to buy a majority stake in Iraqi bank Dar Es Salaam Investment bank.

A private bank established in 1999, Dar Es Salaam has 14 branches in Iraq, eight of them in Baghdad, and employs 450 staff.

HSBC was one of three foreign banks given permission last year to start trading in Iraq.

However, high levels of violence have so far impeded the development of the banking system.



According to published reports, HSBC is in talks about buying a 51% stake in the Iraqi company from the Khudairy family.

The deal, which must be approved by the Central Bank of Iraq and by the board of Dar Es Salaam, could be completed by July.


Morgan Stanley will have to pay $850m (462m) in damages to Revlon boss Ron Perelman after being found guilty of conspiring to defraud the financier.

A Florida court concluded that the US investment bank had acted improperly in relation to a 1998 deal in which Mr Perelman sold Coleman Inc. for $1.5bn.

Sunbeam, which bought Coleman, filed for bankruptcy in 2001 after a huge accounting fraud was uncovered.

Morgan Stanley, which advised Sunbeam, said it would appeal the verdict.

The bank is facing a total pay-out of $1.45bn, having previously been ordered to pay $604m in compensation to Mr Perelman, who is chairman of cosmetics giant Revlon.

Mr Perelman, who sought $1.8bn in punitive damages, had argued that Morgan Stanley had played a vital role as Sunbeam's advisors in attracting him to the company.


African economies grew more than 5% in 2004, their highest growth in eight years, spurred by high commodity prices, a report has said.

The African Economic Outlook, produced by the OECD Development Centre and the African Development Bank, praised "steadily prudent economic policies".

But it pointed out that Africa was still vulnerable to regional conflicts.

And it called for more debt relief, action against corruption and support for small businesses.

Growth in the region benefited from new oilfields coming on stream in Angola, Chad and Equatorial Guinea.

Central Africa saw a 14.4% rise in growth in 2004 due to the expansion of its oil production capacity. East Africa grew by 6.8%, while West Africa grew by just half that amount, 3.4%.


A more flexible Chinese currency is key to global economic growth, US Treasury Secretary John Snow has argued, in a new call for Chinese currency reform.

Mr Snow said the yuan's fixed rate of exchange against the dollar risked unbalancing world trade.

Many US politicians believe the yuan's true value is artificially depressed, helping it to export goods cheaply.

The US government said last Wednesday that it would impose quotas on further Chinese textile imports.

It introduced emergency restrictions on certain imports earlier this month after coming under pressure from US producers worried about being priced out of the market by a surge of Chinese imports.

The Committee for the Implementation of Textile Agreements which is led by the Commerce Department - now plans to expand the list of goods to include more categories of shirts and trousers.

The US Senate is due to vote on a bill later this summer which would impose a 27.5% tariff on all Chinese imports to the United States unless China removes the currency peg within six months.


Iran's foreign minister pledged last Tuesday that his country would act to stop guerillas crossing into Iraq. Foreign Minister Kamal Kharrazi, the most senior Iranian official to visit Iraq since the fall of Saddam Hussein, said he had promised the new government that Iran would cooperate on security and not provide any support to the militants.

"We will not allow terrorists to use our lands to access Iraq," Mr Kharrazi told a news conference in Baghdad. "We will watch our borders and will arrest infiltrators, because securing Iraq is securing the Islamic Republic." The Iraqi government has accused neighbouring countries of not doing enough to secure their borders.


The Bank of England's rate-setting committee lost one of its interest rate hawks this month as it voted 8-1 to keep the cost of borrowing on hold.

The minutes of May's Monetary Policy Committee (MPC) meeting revealed that Paul Tucker, who had previously voted to raise rates, backed down this time.

Only Sir Andrew Large, the Bank's deputy governor, was hawkish enough to vote for an immediate 0.25% rate rise.

Sir Andrew believed a rise was needed to meet the 2% inflation target.

Rates were kept on hold at 4.75% for the ninth month in a row.

The latest minutes come a week after the Bank released its quarterly inflation report, saying that inflation could temporarily creep above the 2% target in the near term due to the ongoing rally in oil prices.

But it said there was little sign that inflation was in danger of spiralling out of control as there was some scope to accommodate the rise in the oil price.


US President George W. Bush has proposed creating a corps of government workers to support emerging democracies.

Bush has made his call for the spread of democracy abroad a major theme of his second term.

In a speech in Washington Bush acknowledged problems with the post-war effort in Iraq and said the US must act more quickly to help new democracies.

He cited a plan in his 2006 budget to create a team which could be deployed on short notice after a crisis.

"This new corps will be on call," Bush told the International Republican Institute, which aims to promote democracy worldwide.

"If a crisis emerges and assistance is needed, America will be ready."

Bush is proposing $100m for a new conflict response fund and another $24m for a new Office of Reconstruction and Stabilisation in the State Department, accoring to the published reports.


Women in Egypt are the furthest behind men in terms of economic equality, while no country has closed the "gender gap" entirely, a new survey has found.

Sweden has the smallest difference between the sexes, followed by Norway, Iceland, Denmark and Finland, according to the World Economic Forum (WEF).

The report singled out the US for particular criticism, saying it "lags behind many Western European nations". It was a "disturbing fact" that women still trailed men, the WEF said.


World oil prices rebounded last Thursday on concern over strike action at refineries belonging to French energy giant Total in France, analysts said. Prices rallied after hitting fresh three-month low points on official data showing US crude stocks at the highest level for six years.

New York's main contract, light sweet crude for delivery in June, rose 35 cent to $47.60 per barrel at about 1600 GMT. It had struck $46.88 during Asian trading, the lowest intra-day point since February 14.

In London, the price of Brent North Sea crude oil for delivery in July gained 10 cents to $48.25 per barrel after earlier dropping to $47.80. "People are saying there could be some problems at some Total refineries in France due to the strike action," GNI-Man Financial trader Kevin Blemkin said.


South Korean scientists say they have made stem cells tailored to match the individual for the first time.

Each of the 11 new stem cell lines that they made were created by taking genetic material from the patient and putting it into a donated egg.

The resultant cells were a perfect match for the individual and could mean treatments for diseases like diabetes without problems of rejection. But the researchers told Science that there were still hurdles to overcome.


US Airways and America West, the seventh and eighth largest airlines in the US, are merging in an effort to compete better with low-cost carriers.

The merged firm, called US Airlines, will become America's sixth-biggest airline in terms of passenger miles.

It will also receive $1.5bn (816m) in new capital from a group of investors including European planemaker Airbus.


Oil explorer White Nile has disclosed details of a deal struck with ex-rebel leaders in Sudan, paving the way for its return to the UK stock exchange.

UK-based White Nile said trading in its shares would resume on Monday.

Shares in the firm, which is chaired by former England cricketer Phil Edmonds, soared in February on news of the deal in oil-rich southern Sudan.

White Nile's shares were suspended at the time, pending further details outlining the oil exploration deal.


Zimbabwe has devalued its currency by 45% in an attempt to raise foreign exchange for food imports.

The country's central bank said one US dollar would now be worth 9,000 Zimbabwe dollars, from 6,200 before.

The widely-expected adjustment remains some way below black market rates, which can command up to 18,000 Zimbabwe dollars per US dollar.

Drought has left the country in need of more than 1.2 million tonnes of food imports, at a cost of up to US$250m.


UK High Street retail sales are still in the doldrums with the latest figures showing year-on-year growth slipping to its weakest in two years.

Though monthly retail sales showed a surprise 0.5% rise in April, on a yearly basis sales slipped to 2.3% from 2.4% in the previous month.

The yearly rise was the lowest since April 2003, according to the Office for National Statistics (ONS). On a quarterly basis, sales grew 0.2%, the same as in the previous quarter.


BT has thanked a doubling in new broadband customers over the past year for a 20% rise in its annual profits.

For the year to 31 March, it made pre-tax, post-exceptionals profits of 2.3bn ($4.2bn), up from 1.9bn for the previous 12 months.

Annual turnover was up 1% at 18.6bn, but turnover at its "new wave" division, which accounts for one quarter of its business, was up 32%.

For the fourth quarter, BT saw a 35% rise in profits to 570m. Quarterly turnover was up 2% to 4.9bn.


Airline group Air France-KLM has announced a 20% rise in annual profits, despite the impact of high oil prices.

Net profit for the year to March was 351m euros (250m; $445m) as the newly-merged group continued to buck the trend of gloom in the air industry.

It was the group's first annual result as a single entity, after the two airlines came together in May 2004.


The Nationwide building society has reaffirmed its view that the UK housing market is heading for a "soft landing" as it unveiled a 21% rise in profits.

The lender saw annual pre-tax profits increase to 517m for the 12 months to 4 April from 427m for the year before. Its mortgage lending business slowed, with net advances of 10.9bn against 13.2bn a year earlier.


The Amazon rainforest is being destroyed at near record levels, according to new figures released by the Brazilian government.

The environment ministry said 26,000 sq km of forest were chopped down in the 12 months prior to August 2004.

The figure is the second highest on record, 6% higher than the previous 12 months.

Deforestation was worst in the state of Mato Grosso where vast swathes of land have been cleared to grow crops.

The loss of 26,000 sq km means almost a fifth of the entire Amazon has now been chopped down.


US tycoon Malcolm Glazer is expected to set out his formal offer to Manchester United's remaining investors in a bid to further increase his stake.

Mr Glazer now owns a 76.16% share of the Premiership football club, which is enough to take it private.

He has prepared letters to remaining shareholders setting out his 3 a share offer; if he can get 90% of their stock owners of the rest can be made to sell.


The Irish government has agreed in principle to sell a majority stake in the national airline Aer Lingus to help fund its future expansion.

Ireland's transport minister announced the plan last Wednesday while confirming that the state would retain a "significant" minority holding.

Aer Lingus has recovered from near bankruptcy in 2002 by reinventing itself as a low-cost operator. It has axed 2,000 jobs, 30% of its workforce, since 2001.


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.

The deal marks the biggest single foreign investment in South Africa, and makes Barclays Africa's largest bank.

Barclays will pay 82.50 rand a share and Absa will also pay its shareholders a dividend of 2 rand a share, Barclays said in a statement last Monday.

The UK bank has received written approval from 63% of Absa's shareholders, bringing to a conclusion talks which began in September 2004. Barclays plans to buy a 60% stake in Absa.


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.

But earlier this week the president said his government would not implement the 2005 budget in full.


Japanese carmaker Toyota has recalled 880,000 sports utility vehicles (SUVs) and pick-up trucks worldwide because of problems with the front suspension.

The vehicles affected are Tundra pick-up trucks and Sequoia, Landcruiser Prado and 4Runner/Hilux Surf SUVs built between May 2001 and December 2003.

The majority of affected vehicles were sold in the US, while the rest were sold in Japan, Europe and Australia. A Toyota spokesman said there had been one report of an accident in Japan.


The number of jobless people in the UK has fallen, according to the latest set of official figures.

In the three months from January to March, the government's preferred ILO measure of unemployment fell by 15,000 to 1.4 million.

On a monthly basis, the number of people out of work and claiming benefit rose by 8,100 to 839,400 in April.


UK consumer price inflation remained unchanged last month at 1.9%.

Falling prices for some foods were were offset by the rising cost of some household services, notably utilities.

The retail prices index, which includes some housing costs excluded in consumer prices, was also unchanged at 3.2% in April.

Inflation is tipped to rise slightly, but analysts said the figures did not alter expectations that interest rates would remain at 4.75% for some time.


Ukraine's Prime Minister Yulia Tymoshenko has accused Russian oil companies of trying to "bully" her country by causing fuel shortages.

Petrol stations began running out of fuel, 80% of which comes from Russian sources, after Ukraine froze prices.

Ms Tymoshenko said Russian firms, including Lukoil, Tatneft and TNK-BP, had suspended deliveries and created an "artificial crisis".

However, the oil companies said repair works had restricted supplies.

Russian media quoted representatives of the firms as saying that oil was still being pumped to Ukraine.

TNK-BP, which is jointly owned by UK oil giant BP, said it was supplying a smaller volume of crude because of work on one of its pipelines.


Kuwait's parliament passed a law last Monday granting women the right to vote and run in elections for the first time, after pressure from the pro-Western Arab state's government. "We made it. This is history," prominent activist Roula al Dashti told reporters. "Our target is the parliamentary polls in 2007. I'm starting my campaign from today."

Outside parliament, young women and men danced and cheered, while passing drivers hooted horns in support. Parliament speaker Jassim al Khorafi said the legislation had been passed by a majority of the all-men parliament. There were 35 in favour, 23 against and one abstention on a vote that had met fierce resistance from Islamists, conservative tribal MPs and others.


The Islamic Chamber of Commerce and Industry (ICCI) is striving to boost trade within the 57 member states of the Organization of Islamic Conference (OIC) from its current level of 13 per cent. As part of a multi-pronged drive in that direction, the ICCI intends to organize trade fairs and cultural festivals, so as to promote the intra-OIC trade.

Sheikh Saleh Kamel, the newly chairman of ICCI, in his first meeting with newsmen at the Riyadh Chamber of Commerce and Industry emphasized on the need to promote trade within the Islamic bloc and the measures his organization intended to take to ensure that. Earlier, Kamel had an audience with Saudi Crown Prince Abdullah to seek his support in overcoming the challenges facing the Islamic chamber.


Saudi Arabia said last Saturday it took a "milestone" step towards overhauling its wasteful, state-owned water sector and preparing it for complete privatization within a decade. Water and Electricity Minister Abdullah al-Husayen signed two deals with international firms to audit water distribution in Riyadh, set the stage for joint private-public ventures and mapped out a strategy for full privatization of the sector.

Studies have estimated that up to 40 per cent of Riyadh's water pumped from costly desalination plants and rapidly diminishing underground aquifers is lost through poor piping and other faults.