July 25 - 31, 2005






China has revalued its currency, the yuan, for the first time in a decade - a move welcomed by the US, a long-time critic of its exchange-rate policy.
The reform is being seen as the first step towards the liberalisation of China's tightly controlled currency.
The yuan will no longer be pegged to the dollar, but will float against a basket of currencies.
It will also appreciate against the dollar, mollifying critics who say a cheap yuan has helped Chinese exports.



"I welcome China's announcement today that it is adopting a more flexible exchange rate regime," said US Treasury Secretary John Snow in a statement.

"As we have said, reform of China's currency regime is important for China and the international financial system."

Mr Snow said the US would watch China's implementation of its new system, which will see the yuan float against a basket of currencies, rather than linking it at a fixed rate to the US dollar.

China's currency had been pegged at 8.28 against the dollar, but the new move effectively strengthens it by 2.1%, to 8.11 to the dollar.

"The Chinese have now put in place a system to allow their currency to move in tune with the global economy," Mr Snow said.

Meanwhile the International Monetary Fund (IMF) said it was ready to "work with the authorities on the continuing evolution for the exchange rate system".

After the announcement the euro came under pressure from a rallying Japanese yen, which rallied sharply across the board - including against the US dollar.

Japanese officials welcomed the yuan's revaluation, saying it would benefit both the economies of China and Japan.


The London stock market managed to close higher despite a brief tumble in response to a series of incidents on the London transport system.

The FTSE 100 index fell about 50 points as news of the incidents filtered through, before recovering to end the day 6.4 points higher at 5,221.6.

Stock markets had feared a repeat of the deadly bomb attacks that hit London exactly two weeks ago.

The fact that no major injuries were reported helped markets bounce back.

Analysts said the Footsie had been "amazingly robust".

"There is always going to be uncertainty in the first few minutes but the market has proved resilient," said Simon Buckingham at stockbroker Gerrard.

In New York, however, the Dow Jones index fell 60 points to 10,629 towards mid-session.

Traders on Wall Street said unease over the possibility of new terrorist attacks in London had overshadowed positive news of China's decision to revalue its yuan currency.

European shares were also briefly hit by the news of the incidents before recovering in line with the London market.

The Dax index in Frankfurt closed 45.37 points higher at 4,829.87, while the Cac-40 index in Paris closed 7.27 points higher at 4,425.66.


China's economy has grown more quickly than expected in the first six months of 2005 despite efforts by the government to put the brakes on.

The National Bureau of Statistics said the economy grew 9.5% from a year earlier in the first half, more than the 9.3% figure expected by analysts.

Total gross domestic product (GDP) between January and June reached 6.7 trillion yuan (466bn; $811bn).

Exports and investment in construction and factory equipment drove growth.

"Fairly good overall economic performance was recorded in the first half of this year," the statistical office said, adding that "China's high rate of bank savings, investment, robust market demand and abundant labour forces" helped to underpin growth.

In the six months through June, investment in fixed assets climbed by 25% to 3.29 trillion yuan. The statistical office called the rebound in investment "unreasonable".


The value of UK financial services exports such as insurance broking and investment banking hit a record $19bn in 2004, a study has shown.

The global stock market recovery lifted sales in the City of London and exports grew by 9%, research firm International Financial Services London said.

Insurance was the largest foreign earner, with exports totalling 6.3bn.

The UK enjoyed a surplus in financial services trade with every major EU economy as well as the US and Japan.

2004 was a buoyant year for finance firms in London and the rest of the UK, according to data compiled by International Financial Services.

Net exports of financial services increased to 19.03bn from 17.48bn in 2003 and were 40% higher than in 2000.

The recovery in European and US stock markets boosted the income of investment banks and fund managers while the rise in trade of specialist financial instruments such as hedge funds continued apace.


Strong demand for laptops, personal computers and servers helped push up fourth-quarter profits at Microsoft, the company said.

The globe's largest software maker said net profits were $3.70bn (2.11bn) for the financial period ending 30 June. That was compared to $2.69bn (1.54bn) in the same period in 2004.


US Secretary of State Condoleezza Rice had gone to the Middle-East to push for Israeli-Palestinian co-operation over Israel's planned Gaza pullout.

She was due to meet Israeli Prime Minister Ariel Sharon on Friday last, before holding talks with Palestinian leader Mahmoud Abbas.

Ms Rice's hastily arranged three-day visit follows an upsurge in violence.



It comes as Israel has said the August pullout may be brought forward to avoid further protests by Jewish settlers.

The visit was unlikely to offer anything new, a report said.

But it does show America's commitment to ensure Israel's withdrawal goes ahead as planned, the report said.



Coca Cola, the Atlanta, Georgia firm said it earned $1.72bn in the three months to the end of June, compared to $1.58bn in the same period a year ago.


Ericsson reported a profit of 8.5bn kronor (0.63bn; $1.09bn), up from 7.3bn in the same period last year.


US telecom group AT&T said profits for the three months to June jumped to $307m (254.5m) from $108m a year earlier. The surge came as revenues slipped 11.5% during the period to $6.76bn from $7.64bn during the same period in 2004.


African nations must await a global trade deal before Washington will cut farm export subsidies, the US has said.

At the G8 summit earlier this month, President Bush vowed to eventually lift the farm subsidies.

But failure to secure a global deal at the World Trade Organisation meeting in December could see the subsidies extended for years, trade chiefs said.

They were addressing member countries of the African Growth and Opportunity Act (Agoa) at a forum in Senegal.

The forum, involving workshops and networking events, was designed to encourage African countries to sell efficiently in the US marketplace.

African officials had been pushing for a timetable for the ending of farm subsidies at the meeting in Dakar.


US rates are likely to go on rising amid expectations of further solid economic growth, US Federal Reserve chairman Alan Greenspan has said.

However, he warned three factors could pose a risk to growth - rising wage costs, energy prices and house prices.

"Keeping growth sustained and inflation down will require the Fed to continue to remove monetary accommodation," he said in testimony to Congress.

US rates have risen from 1% to 3.25% in the past year to help control growth.

In its latest forecast the Fed said it expected the economy to grow by 3.5% - down slightly from its estimate of 3.75% to 4% made in February.


The world's largest property privatisation has been given the green light after a Hong Kong court dismissed a legal case brought by a pensioner.

Lo Siu Lan, a 67-year-old living on benefits, wanted the Hong Kong Housing Authority to halt a $3bn (1.7bn) sale of shops and car parks.

Her legal action argued that the assets were undervalued and rents for public housing tenants would rise after sale. The government said it would now press ahead with the privatisation.


Barclays is to move its in-house technical support centre from Cheshire, north England to India, in a move which could see many staff lose their jobs.

A total of 140 workers are affected by the move, but Barclays says it will try to redeploy as many as possible within the firm before making any job cuts.


Government borrowing in the UK has risen to its highest June level to date, putting more pressure on the chancellor's spending plans.

The public sector net cash requirement was 12.3bn, the highest figure for that month since records began in 1984.

The figures come a day after Chancellor Gordon Brown announced changes in the way he will measure the budget deficit. And they indicate that the chancellor may have a tough time meeting his budget forecasts for the year.

The current account budget deficit of 4.7bn was 1.2bn higher than the deficit in June 2004, while the public sector net borrowing figure of 5.9bn (the government's preferred measure) was 1.5bn higher on the year.


A cut in UK interest rates in August now appears more likely after the Bank of England voted to freeze rates at 4.75% this month by only a single vote.

Growth and consumer spending worries prompted four members of the Bank's rate-setting body to vote for a cut.

However, the monetary policy committee (MPC) minutes show that the other members argued it was still unclear how severe the consumer slowdown was.


The stagnating state of science and technology investment in the European Union is laid bare by new statistics.

The figures show the bloc devoted just 1.93% of its wealth (GDP) in 2003 to this important area - compared with 2.59% in the US and 3.15% in Japan.

Some emerging Asian countries, such as China, are now increasing their R&D investment to a rate where they will soon catch and overtake Europe.

One factor in the stumbling performance is a slow-down in business R&D funding.

Europe is now on track to miss the so-called Lisbon objective of boosting its spend to 3% of GDP by 2010.

"We must heed this wake-up call," EU research commissioner Janez Potocnik said at a media conference in Brussels.

"If the current trends continue, Europe will lose the opportunity to become a leading global knowledge-based economy."


China is planning a major overhaul of its steel industry as it tries to meet domestic demand and cut pollution.

By 2010, China wants to have two major domestic firms with an annual capacity of 30 million tonnes each, with a limited number of smaller producers.

Currently China has more than 800 steel firms, with only the biggest, Baosteel, coming close to the required output.

China plans to force mergers and closures after supply outstripped demand and prompted a price slump.

The country is the world's biggest producer and consumer of steel and the dip in demand has reverberated around global markets.

Firms including Mittal Steel, Arcelor and Thyssenkrupp have all announced production cuts. Steel mills sprung up to meet a surge in demand as China's economy boomed.


The French government is preparing to sell its controlling stakes in France's three main motorway operators.

The sale would happen in the next few days, triggering full takeover bids for the firms, La Tribune newspaper said.

The government said last month that it planned to sell its stakes in the firms over the next eight to 10 months, raising 11bn euros (7.6bn; $13.4bn).

Paris needs the cash to help cut France's public debt below the eurozone target of 3% of gross domestic product.

La Tribune added the first invitation to tender could be made ahead of a forthcoming initial public offering for shares in French utility giant Electricite de France.

The three motorway operators are Autoroutes du Sud de la France (ASF), Societe des Autoroutes du Nord et de l'Est de la France (Sanef) and Autoroutes Paris-Rhin-Rhone (APR).

ASF could be taken over by French construction giant Vinci, which already holds a 23% stake in the firm, La Tribune reported.