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
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
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.
JAPANESE GROWTH CONFIRMS RECOVERY
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
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
Inventory building suggests a more optimistic view
of future prospects but without sizeable demand it is unlikely to
Exports fell 0.2% in the January-to-March period
due to slower demand for machinery from Asia.
CHINA GIVES GROUND IN TEXTILE ROW
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
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
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
Until the latest announcement, China had appeared
to be standing firm on the issue, saying it would not cut textile
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."
LEADERS CALL FOR FRENCH 'YES'
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
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.
US 'IGNORED IRAQ OIL SMUGGLING'
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
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.
HSBC IN TALKS TO BUY IRAQI BANK
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
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
The deal, which must be approved by the Central
Bank of Iraq and by the board of Dar Es Salaam, could be completed by
MORGAN STANLEY FACES $850M PAYOUT
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 GROWTH AT EIGHT-YEAR HIGH
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%.
SNOW SAYS YUAN IS KEY TO GROWTH
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
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
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, IRAQ DECIDE TO MEND FENCES
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.
BANK VOTED 8-1 TO FREEZE UK RATES
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 PLEDGES TO AID NEW DEMOCRACIES
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
"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
'GENDER GAP' IS BIGGEST IN EGYPT
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.
OIL PRICES REBOUND
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.
STEM CELLS TAILORED TO PATIENTS
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 AIRLINES ANNOUNCE MERGER DEAL
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.
SUDAN DEAL REVIVES UK OIL COMPANY
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 DEVALUES CURRENCY BY 45%
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.
HIGH STREET TREND REMAINS GLOOMY
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.
BROADBAND HELPS BUOY BT PROFITS
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
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.
BIG RISE IN AIR FRANCE-KLM PROFIT
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.
NATIONWIDE CAUTIOUS AS PROFITS UP
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.
AMAZON DESTRUCTION ACCELERATING
The Amazon rainforest is being destroyed at near
record levels, according to new figures released by the Brazilian
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.
GLAZER SET TO UNVEIL MAN UNITED OFFER
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.
DUBLIN TO SELL AER LINGUS STAKE
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 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.
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.
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.
But earlier this week the president said his
government would not implement the 2005 budget in full.
TOYOTA RECALLS 880,000 VEHICLES
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
On a monthly basis, the number of people out of
work and claiming benefit rose by 8,100 to 839,400 in April.
CONSUMER INFLATION STAYS AT 1.9%
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%
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 RAPS RUSSIA OIL 'BULLIES'
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
However, the oil companies said repair works had
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.
KUWAITI WOMEN GET RIGHT TO VOTE
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.
ICCI TO BOOST INTRA-OIC TRADE
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
S ARABIA TO PRIVATIZE WATER SECTOR
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