June 20 - 26, 2005






The US economy has continued to grow and inflation is coming under control, reports suggest.
The Federal Reserve, in its "beige book" summary of economic conditions, said that "business activity continued to expand" from mid-April to May.
Tourism, property and manufacturing industries strengthened, while the job market also firmed, the Fed said.
Consumer prices fell 0.1% in May, the first decline in 10 months as energy costs slid, the Labor Department said.



Analysts said the figures underpinned predictions that the Fed might not have to raise interest rates as much as was first thought.

The Federal Reserve cited concern about rising prices when it upped interest rates by 0.25% to 3% last month.

Another quarter of a percentage point increase is expected later this month, but analysts are increasingly saying that the Fed is coming to the end of its cycle of hikes.

The US central bank has increased interest rates eight times during the past year.

Fed chairman Alan Greenspan told the US Congress last week that underlying inflation had been "contained".

The Fed said that "overall price pressures were moderate".

Energy prices slipped 2% last month, their largest fall in nearly a year, with petrol prices dropping 4.4%.

Excluding food and energy prices, the core consumer price index nudged up 0.1% in May, below analysts' estimates of a 0.2% rise.

While trying to curb inflation, the Fed has also had to be mindful of signs of a softening in the US economy.

Consumer spending has slowed markedly with retail sales slipping 0.5% last month, their biggest fall in nearly a year.


Strong Chinese industrial output data has prompted predictions from some economists that the Asian giant may beat 2005 economic growth targets.

Industrial output rose 16.6% in May, compared with the same month last year, and a 16% jump in April.

Exports were a key reason, with big increases in sales of textiles, shoes and steel, official figures show.

Shares in the world's major mining firms rose, with BHP Billiton, Rio Tinto and Xstrata all higher.

Exports from industrial enterprises were up 30.2% on year-earlier, with overseas sales of both textiles and shoes both up more than 30%, China's National Bureau of Statistics said.

The European Union last week struck a deal with China to control the growth in China's exports of T-shirts and flax yarn to Europe. The US has imposed its own curbs on Chinese textile exports. China's economy grew 9.5% in 2005.

The government is trying to cool runaway growth and has set a deliberately conservative 2005 target of 8%, but Western economists may now review their predictions, which converge at roughly 9% growth this year.

Exports of items using ferrous metals were up 74.1%, according to China's official figures.

Worldwide prices for steel, copper, oil and shipping all rose last year in response to strong demand from China.

Copper prices hit a 16-year high in New York last week, as global stockpiles have been depleted by demand from factories in China.

Steel prices peaked in August 2004 and have since cooled slightly, but strong industrial growth in China could reverse that.


European Union heads of government are due to meet in Brussels to discuss the contentious issue of the bloc's budget.

The UK's 4.4bn euro (3bn) rebate remains at the centre of the debate.

The UK says it will veto any attempt to reduce its rebate unless there is reform of agriculture spending, which France refuses to discuss.

EU leaders put the union's constitution on hold by scrapping the November 2006 deadline for member states to ratify it.

The move followed the French and Dutch electorates' rejection of the constitution in recent referendums.

Denmark immediately said it was postponing a referendum on the constitution and was followed by several other countries including Ireland and the Czech Republic.

On the constitution, the Prime Minister of Luxembourg, Jean-Claude Juncker, who is the outgoing EU president, said there would be a period of reflection, explanation and debate.

Mr Juncker said there would not be a better treaty than the existing draft and it was not up for renegotiation.

"We believe that the constitutional treaty has the answers to many questions that Europeans are asking, so we believe the ratification process must continue," he said.

European Commission President Jose Manuel Barroso said it was important to consider why French and Dutch voters had rejected the constitution, but it was too early to abandon the treaty.


Opec members meeting in Vienna have agreed to lift the cartel's daily output limits by 500,000 barrels to 28 million barrels a day.

Oil prices carried on rising as traders believe the widely-anticipated move by Opec to raise production quotas will do little to cool the market.

US light, sweet crude ended the day 57 cents higher at $55.57. In London, Brent Crude climbed 77 cents to $54.50.

Opec delegates said a further 500,000 barrel increase was possible in future.

Opec members are already supplying more than 28 million barrels per day so the increase in formal production quotas ratifies the status quo.

Opec members gave the cartel's president the authority to consider another 500,000 quota increase in a few months, but they say there is not much slack in the supply chain.

"We've assessed the market and concluded that there is plentiful supply and the problem is with refining," said Saudi Oil Minister Ali al-Naimi, speaking after the quota increase.

Earlier, he urged oil-consuming nations to "build, build refineries".

Saudi Arabia is the only Opec member with sufficient surplus production capacity to make up the quota increases.

Analysts agree there is little chance of significant increases in output, believing prices are likely to remain at their current levels, supported by restrictions on access to existing oil reserves and limitations on new capacity.

"The real problem is a lack of refining capacity," Geoff Curry, head of commodity research at Goldman Sachs, was quoted as saying. "Capacity is very limited outside of Saudi Arabia right now."


The US and China have started fresh talks to try to reach agreement over a trade dispute centred on a surge in Chinese textile exports.

The negotiations are covering recent import restrictions imposed by Washington on seven categories of Chinese clothing and textile products.

Exports of such Chinese items have surged since the end of global textile quotas at the start of 2005.

China has recently reached agreement on the issue with the European Union.

Under the deal between Brussels and Beijing, China has agreed to limit export growth of certain textile and clothing products to 10% per annum until 2008.

The EU was set to impose its own limits if no deal was reached like the US it can use World Trade Organization rules to limit Chinese textile imports until 2008.


The US trade deficit widened to $57bn (31bn) in April, marked by record rises in both imports and exports, the US Commerce Department said.

The monthly trade gap was up 6.3% on the previous month, but was below forecasts for a deficit of $58bn.

US imports rose by 4.1% in April to a record $163.4bn, helped by a surge in oil prices.

At the same time, US exports rose by 3% to a record $106.4bn, boosted by increased sales of civilian aircraft.

Shipments of US goods to China reached a record $3.4bn, the Commerce Department said, but America's overall trade gap with China widened by 14% to $14.7bn.

Exports from China to the US hit $18.1bn in April, up 11.8% from the previous month.

Chinese clothing and textiles exports to the US rose 11.1%.




European Union (EU) Trade Commissioner Peter Mandelson has called for an investigation into whether Chinese shoemakers are dumping shoes in Europe.

Mr Mandelson met with representatives of Europe's footwear industry after they demonstrated in Brussels.

The EU estimates Chinese shoe exports have jumped seven-fold since the start of the year, while prices have dipped.

Mr Mandelson said that he would not "fight shy" of taking action should it be needed.

The European Commission must now approve the investigation, and should it agree, the investigation will get underway at the end of June, spokeswoman Claude Veron-Reville said.

This is the latest trade row between China and the EU since the global Multi Fibre Agreement ended on 31 December 2004.

Last week, the EU and China agreed a deal to limit exports of Chinese textiles into Europe after last-ditch talks to calm a trade row.

China has been accused of flooding European and US markets with cheap products, threatening local producers who have a more expensive workforce and higher costs.


Tony Blair says he believes there is a "real prospect" of the upcoming G8 summit making progress on reducing African debt and climate change.

The UK prime minister was speaking after securing the backing of Russian president Vladimir Putin in Moscow.

He said "hard negotiations" were still ahead on both issues, but a recent debt relief deal reached by G8 ministers had been a "good omen" for the summit.

It was his first stop in a 48 hour tour also taking in Paris and Berlin.

He arrived in Germany last week.

He was aiming to secure agreement on plans for aid to Africa and climate change ahead of the summit in Gleneagles, Scotland, in July.

Mr Putin said he supported the UK's plans to write-off African debt, although he said this must be done in conjunction with the development of democracy in those countries.

France and Germany have already agreed to double aid to the poorest countries.


Nurses' and doctors' leaders have called on the UK government to tackle the "poaching" of overseas healthcare workers, at next month's G8 summit.

They say staff migration from developing nations is killing millions and compounding poverty.

The British Medical Association and the Royal College of Nursing have written to Tony Blair demanding urgent action.

They praise the UK's stance on "ethical recruitment", but call for other G8 nations to make similar commitments.

Sub-Saharan African countries are some of the worst hit by the "brain-drain".

The World Health Organization estimates that one million more healthcare workers are needed in these countries if they are to meet basic health goals, such as reducing childhood and maternal mortality.

Last month, UK doctors warned in the Lancet that the UK was crippling sub-Saharan Africa's healthcare system by poaching its staff.


Shares in US software firm Adobe fell 6% in after-hours trading in New York after profits were worse than expected and it gave conservative forecasts.

The company, known for its Acrobat and Photoshop software, saw profits rise 37% to $149.8m in its second quarter. Sales rose to $496m, helped by sales of its Creative Suite 2 software bundle.


More than 1,000 vital UK government departments and businesses have been given fresh advice about the security threats posed by malicious hackers.

The UK National Infrastructure Security Co-ordination Centre's (NISCC) report into Trojan horses in e-mails says they are getting increasingly sophisticated.

Organised gangs are using distribution e-mail lists to cleverly engineer mails that look legitimate and relevant.

The Home Office said many of the attacks seemed to originate from Asia.

The warning is aimed at government departments and businesses that are part of the UK's Critical National Infrastructure (CNI).


Drugmaker AstraZeneca has been fined 40m (60m euros) for illegally trying to prevent generic competition to its best-selling ulcer drug Losec.

The European Commission said the firm gave misleading information about when the drug was first approved, enabling the firm to extend the patent's life.

AstraZeneca said it would appeal against the decision which it claimed was "legally and factually flawed". Losec was the best-selling prescription drug globally for much of the 1990s.


Wealthy nations must reduce their agricultural subsidies to help African producers enter new markets, World Bank chief Paul Wolfowitz has argued.

He said the World Bank would press for subsidy reform at the World Trade Organization (WTO) summit in Hong Kong this year.

His comments could put him in conflict with the US government which provides significant support to its farmers. Mr Wolfowitz is on a week-long tour of Africa, his first overseas mission.


UK High Street sales crept ahead in May, marking their weakest annual rise in more than six years and adding to fears of a consumer slowdown.

Retail sales rose 0.1%, the Office for National Statistics (ONS) reported.

Although May's figure was in line with expectations, it brought the annual rate of increase down to 1.3% - the lowest level since January 1999.

Gloom on the High Street could raise expectations that the Bank of England may start cutting interest rates.


Tata Steel has said it will invest $1.1bn to $1.2bn (0.61bn-0.66bn) in building three steel plants in Iran and developing iron ore mines there.

India's Tata Steel plans to increase output to cater for growing demand from India, China and other parts of Asia.

The deal was announced shortly after $22bn (12bn) deal under which Iran will supply India with five million tonnes of gas a year.

The deals highlight the two countries' growing dependence on each other.

India produces only half the natural gas it needs and imports 70% of the oil it requires, currently at very high cost.

The steel agreement also makes sense for Tata Steel, part of India's giant Tata group, as it expects to see a sharp rise in demand as its government has promised to spend $15bn on huge infrastructure building projects.


The number of people out of work in the UK is continuing to fall, according to official figures.

The government's preferred ILO measurement of unemployment fell by 15,000 to 1.4 million between February and April.

However, job losses at MG Rover helped push the number of people out of work and claiming benefits up by 13,200.

Claimant count unemployment reached 855,300 in May, the fourth month in a row to have seen an increase.


Shanghai is to begin rationing power supplies for industrial use on Wednesday as part of efforts to avoid electricity shortages this summer.

Thousands of firms are likely to suspend production or shift output to off-peak hours in the Chinese city.

Public areas like shopping malls will also have to set air-conditioning dials to above 26C (78.8F).

Many cities across China face similar problems as power supplies struggle to keep up with the booming economy.

The result is severe power shortages and widespread blackouts.

Things are particularly bad in the summer, when extra electricity is needed to power millions of air-conditioning units in the face of soaring temperatures.

It is thought that the energy problem may cut as much as 2% off nationwide economic growth each year.


Haier Group, a Chinese fridge and washing-machine maker, is considering sparking a bidding war for Maytag, the US firm that makes Hoover cleaners.

The group, whose slogan is 'Haier and higher', issued a statement that it was "very interested in events surrounding Maytag".

Maytag agreed to a $1.13bn (670m) offer from US investment group Ripplewood Holdings in May.

But the deal gave Maytag until 18 June to seek other buyers.

Several US private equity groups are also exploring a bid for Maytag, including Bain Capital, Blackstone and Kohlberg Kravis Roberts.

Haier said it "has not yet made an decision" on whether to try to buy Maytag.

Maytag is a 102-year-old US company whose best-known brand internationally is the Hoover cleaner but - for US shoppers, at least - it has been linked with many iconic household products.


JP Morgan Chase has agreed to settle a lawsuit arising from the collapse of Enron by paying $2.2bn (1.2bn) to investors of the former energy firm.

The US bank said it had agreed "in principle" to the deal but had not accepted any wrongdoing in doing so.

JP Morgan and other leading Wall Street banks were accused of helping to assist fraud at Enron, which collapsed with huge undisclosed debts in 2001. The deal is set to be the largest civil settlement relating to Enron's failure.


Italy is expected to push ahead with tax cuts, despite warnings from the European Union that its budget deficit is close to busting eurozone limits.

Prime Minister Silvio Berlusconi was set to reveal an 11bn euro (7bn) package of corporation tax cuts last week.

His government is looking to inject new life into Italy's economy, which is teetering on the brink of recession.

However, Italy is facing increasingly forceful calls from the EU to either trim spending or boost tax revenues.


US consumers, the main drivers of the world's largest economy, have reined in spending, the latest figures show.

According to the Commerce Department, retail sales slid by 0.5% in May, the biggest drop in almost a year. Analysts had expected a number closer to 0.2%.

Producer prices, meanwhile, had their biggest drop for two years, losing 0.6% last month, the Labor Department said.

Weak consumer demand may hit economic and corporate profit growth, and lead to fewer interest rate increases.

The US central bank, the Federal Reserve, has been steadily increasing borrowing costs as the economy showed signs of emerging from a slowdown and inflation picked up.


Bangladesh's Finance Minister Saifur Rahman has unveiled the national budget for the next fiscal year.

Effective from July, it contains some populist measures like doubling agricultural subsidies and soft loans.

Mr Rahman proposed spending a little over $10bn for government administration and to meet "development expenditures".

But the opposition parties rejected the budget as over-ambitious, predicting it would cost the government too much.


US Treasury Secretary John Snow has said that US authorities are working on increased monitoring of hedge funds.

Hedge funds are sophisticated financial instruments usually used to bet or "hedge" against falls and rises in share markets and currencies.

During a visit to Germany, Mr Snow said the US Securities and Exchange Commission was working towards ensuring hedge funds were made more transparent.

Germany's Finance Minister Hans Eichel echoed Mr Snow's call.

Mr Snow said the US financial watchdog was now working on beefing up rules for hedge funds.


US drugs company Bristol-Myers Squibb has agreed to pay $300m (165m) into a shareholders' fund, as prosecutors charged two former executives.

The firm and executives were accused of a practice called "channel stuffing" - offering incentives to get wholesalers to buy more of the company's products.

The scheme boosted earnings at the firm, which has now agreed a "deferred prosecution" with Newark lawmakers.

This means it avoids indictment, but must improve governance in two years.

Bristol-Myers Squibb will now set aside $249m in the second quarter towards the $300m for the shareholder restitution fund, after having initially set aside $51m in the first quarter.


Fledgling Indian budget airline IndiGo has ordered 100 A320 jets from Airbus, the European planemaker said.

Although Airbus did not reveal the agreed price, the catalogue value of the planes is $6bn (3.29bn).

IndiGo is not yet flying. Airbus said the new airline has "high-quality executives" and was sure to be "a successful new player".

Airbus also received orders for 20 A320s from Brazil's TAM and a further 10 from Mexico's ABC Aerolineas.

TAM also signed a non-binding commitment for 10 of the group's A350 planes which it hopes to launch later this year.

But, Indian airlines have emerged as big buyers at this year's Paris Air Show placing orders worth roughly $12bn.


The Russian government is set to gain majority control of gas giant Gazprom after agreeing to buy an extra 10.7% stake for 203.5bn roubles ($7bn; 4bn).

The Kremlin plans to raise the money by floating a minority share in state-owned oil firm Rosneft.

It hopes to secure its majority stake in Gazprom by 24 June.

The deal should mean the government is moving closer to allowing the remaining shares in Gazprom to be traded freely. Foreigners currently cannot buy them.

The $7bn Moscow paid for the 10.7% stake in Gazprom is less than expected.

Investment banks Morgan Stanley and Dresdner Kleinwort had valued the stake at $8.4bn and $11.5bn respectively.


UK High Street sales crept ahead in May, marking their weakest annual rise in more than six years and adding to fears of a consumer slowdown.

Retail sales rose 0.1%, the Office for National Statistics (ONS) reported.

Although May's figure was in line with expectations, it brought the annual rate of increase down to 1.3% - the lowest level since January 1999.

Gloom on the High Street could raise expectations that the Bank of England may start cutting interest rates.

The Bank's Monetary Policy Committee kept the cost of borrowing on hold at 4.75% last week, for the tenth month in a row.

But Bank governor Mervyn King has said that weaker consumer confidence is a major threat facing the UK economy.


Third World countries ended their summit with a call on rich nations to boost aid and the creation of a development fund with an initial $20 million contribution from host country, Qatar.

Delegates unanimously approved Qatar's proposal for setting up the "South Fund for Development and Humanitarian Aid" and welcomed Doha's contribution at the close of the two-day summit.

The final communique, dubbed the Doha Declaration, praised China and India for contributing $2 million each and appealed to other "capable nations" to give to the fund, which will be based in Doha.

The Group of 77 and China called on to rich nations to "urgently meet the internationally agreed Official Development Assistance (ODA) target of 0.7 per cent of donor countries' Gross National Product (GNP)."

The increase would pump tens of billions of dollars into poor nations, whose economies are crippled by lack of finance and huge foreign debt.


US President George W. Bush on Wednesday urged the divided US Congress to approve his long-stalled energy bill, while acknowledging that it would not soon drive down sky-high US gas prices.


The White House has ruled out the possibility of setting a deadline for withdrawing troops from Iraq, saying that it would send a wrong message to Iraqi insurgents. Lawmakers from both Republican and Democratic parties urged the Bush administration to set a deadline for pulling out US troops from Iraq.

"The president has talked about how timetables send the wrong message," said White House Press Secretary Scott McClellan when asked if President Bush was ready to give a timetable for withdrawing troops. "A free Iraq is an important part of winning the war on terrorism and transforming a dangerous region of the world. The President believes it is vital that we complete our mission."

Mr McClellan said it was also vital to train Iraqi security forces to achieve this objective and only then US "troops can return home with the honor they have deserved."