Ford to open new plant in Mexico

US giant Ford is to invest $3bn (£1.5bn) in a new car plant in Mexico, the biggest investment in the country's manufacturing sector.

The move is a blow to American car workers who had hoped the factory would be built in the United States.

Ford has lost more than $15bn (£7.5bn) over the past two years and says the new facility is crucial to its future.

Mexican President Felipe Calderon hailed the announcement as a "turning point" for his country.

The new factory, and other changes to Ford's Mexican operations, are likely to create an estimated 4,500 jobs in Mexico, where car workers earn substantially less than their American counterparts.

Mr Calderon made the announcement with Ford president Alan Mullaly at the presidential compound in Mexico City on Friday.

"We want Mexico to be an automotive country, one that is competitive and with the most advantages so that the worldwide automotive industry will establish itself here," Mr Calderon said.

Mr Mullaly said: "We are convinced the geographic location as well as Mexico's highly qualified labour force and economic stability make this decision the right one for our business."

Environmental concerns

The factory will build Ford's new Fiesta sub-compact car, which is the company's attempt to shift towards the fast-growing market for smaller, more fuel-efficient cars.

It will be located near Mexico City and the plant is expected to start delivering the Fiesta to the US market in 2010.

The BBC's Duncan Kennedy in Mexico City says Ford, the second largest car manufacturer in the US, is being hit by the slowdown in consumer spending and soaring oil prices.

Drivers are moving away from Ford's traditional stable of bigger trucks and Sports Utility Vehicles because of rising fuel prices, plummeting house prices and concerns about the environment, he says.

The decision to invest in Mexico will be a blow to the United Auto Workers union, which reached a cost-cutting agreement with Ford in a bid to make US plants more competitive.

The company had also hoped its programme of slashing cut-price vehicles to car hire companies would help ease its financial woes.

But earlier this month, Ford announced it was abandoning its goal of making its loss-making North American business profitable next year.

Ford's plans in Mexico also include moving one of its factories from large truck to small car production, and opening a new diesel engine line at another plant.

China 'discouraging France trips'

Beijing's official tourism body is urging tour operators to stop selling holidays to France, the French foreign ministry has said.

The claim comes amid souring relations between the two countries after the Paris leg of the Olympic torch relay.

Thousands of pro-Tibet protesters disrupted the event last month, and managed to extinguish the flame.

However Beijing said that it had "simply reminded Chinese tourists to be careful about their security."

Estimates suggest that about 700,000 tourists from mainland China visited France last year.

"Our embassy in Beijing is currently taking steps with the Chinese authorities to find out the reasons that could have motivated (the move)," said foreign ministry spokeswoman Pascale Andreani.

French President Nicolas Sarkozy has suggested that he may boycott the opening ceremony of the Olympics, unless China started talks with the Dalai Lama.

And Chinese nationalists have called for a boycott of French goods.

The Olympic Torch relay was also disrupted a number of cities, including London and San Francisco.

US stocks end in positive zone on economy pace-up news

Expectations regarding fall in oil prices and US economy gaining pace pushed the US stocks this week ending in the positive zone.

Dow Jones industrial average rising this week by 1.3 percent and S&P-500 index by 1.75 percent closed at 12,638 and 1,400 points respectively. Analysts attributed this buoyancy to the recent decline in oil prices and hopes for US economy making a turnabout. In the month of May, Nasdaq surged by 4.5 percent and S&P by 1 percent, while Dow recorded decline by 1.4 percent on monthly basis.

UN welcomes $1.2 billion from WB to fight food crisis

UN Secretary-General Ban Ki-moon today welcomed $1.2 billion in funding from the World Bank to help tackle the global food crisis that has emerged in recent months.

The Secretary-General welcomes the announcement by the World Bank of a $1.2 billion rapid financing facility as an important step in providing quick support to those most affected by the current food security crisis, a spokesperson for Ban said in a statement.

According to the UN, some 860 million people are suffering from hunger and malnourishment, a situation that has been worsened by recent severe price rises for food staples such as rice and wheat.

UN agencies also forecasted in a report issued earlier this week that food prices are likely to remain high over the next decade.

Ban said today that there is a need to provide a closely coordinated and coherent response to the global food crisis in the short, medium and long term.

In Rome, starting on Tuesday, Secretary-General Ban Ki-moon will chair a three-day summit on the crisis, bringing together the heads of key UN agencies, as well as the International Monetary Fund (IMF) and the World Bank, along with many Heads of State and government.

Rising oil, food prices hurting Pakistan's poor: World Bank

Praful Patel, World Bank Vice President, ended the five-day farewell visit to Pakistan on Friday, noting that tough, yet essential, reforms can ensure that high international prices for petroleum and food commodities would not derail the country's poverty reduction and economic development.

"International oil and food prices have continued to rise since then, and we are working closely on their programme to address the cost to Pakistan of high prices, and to ensure the poorest are protected," he remarked.

A statement issued by the World Bank here on Friday said that Patel had met with Prime Minister Yusuf Raza Gilani and government economic team led by Federal Minister for Finance Naveed Qamar, and discussed the economy and safety nets to protect the poor, as domestic prices are adjusted.

In this regard Patel offered World Bank support to build upon international best practices in responding to the current situation. In meetings with President Pervez Musharraf, Pakistan People's Party Co-Chairman Asif Zardari, and President of Pakistan Muslim League-N Shahbaz Sharif, Patel thanked them for the warm reception and hospitality shown to him throughout his tenure as the regional Vice President of the World Bank.

Patel is retiring from the World Bank after 35 years' service. He expressed hope that Pakistan's development partnership, with the World Bank, would continue to grow from strength to strength. During his visit, Patel once again reconfirmed the World Bank's ongoing commitment to Pakistan.

He noted that despite uncertainty in the recent months the World Bank's programmes in Pakistan would remain on track. He said that World Bank's technical assistance with targeting exercises on the social safety nets, capacity and institution-building for water management, and electricity generation and distribution efforts would help Pakistan in meeting its development priorities.

In Sindh, Patel met with Chief Minister Qaim Ali Shah and his economic team to learn of the new government's priorities and to get an update on the ongoing World Bank assisted development initiatives in the province. Patel made a good-bye visit to Keti Bunder, a community that he has come to know over the years through Bank assisted Pakistan Poverty Alleviation Fund (PPAF) project in Thatta.

The Keti Bunder community is benefiting from social mobilisation, small infrastructure projects of drinking water and street pavements, and income generation activities under the project. "Over the last five years, I have visited Pakistan very often, and have always gone back impressed with the resilience of its people," said Patel.

"Persisting and new challenges notwithstanding, I am sure that with the right policies and strong support from its development partners, Pakistan can maintain its poverty reduction path. I take very fond memories with me and wish Pakistan well."

Slow road to recovery for credit markets

Key parts of the debt market have shown signs of life in recent weeks. But further improvement will take some time.

If the credit markets improve from here, expect it to take some time.

Conditions have improved somewhat in the past two and a-half months. Back in mid-March -- the height of the credit crisis -- the near collapse of Bear Stearns (BSC, Fortune 500) sent debt buyers running for the hills.

But last week, the amount of outstanding commercial paper - a key source of short-term funding for companies - increased for the first time in two months, growing by $23 billion to $1.757 trillion, according to the Federal Reserve.

At the same time, both high-grade corporate debt and junk bonds have come roaring back to life as investor appetite for these riskier investments has returned.

Even the overhang of financing for corporate buyouts, which hovered around $200 billion towards the end of last year, has dwindled to about $83 billion, according to Standard & Poor's.

But despite these signs of improvement, today's environment still remains a far cry from the heady days of the recent credit boom when investor demand for any type of debt, risky or otherwise, was virtually insatiable.

The amount of high-yield debt issued in 2008, for example, is down nearly 77% from a year ago, while interest spreads remain sharply wider, making borrowing that much more expensive.
Hurdle to recovery

"We have come a fair way back from the depths, but we are still not anywhere near where we were last year," said Eric Takaha, director of corporate and high-yield bonds at Franklin Templeton's fixe

Experts say fears about how the current economic slowdown will impact corporate profits are still weighing on the credit markets.

Earnings growth for the S&P 500 is expected to increase just 8.5% in 2008, according to Thomson Reuters, hurt by big losses from banks and investment banks during the first half of the year. In recent years, profits grew at a double-digit percentage pace.

Those forecasts have led to expectations that corporate defaults will head even higher over the next two years.

"They are going up, the question is how much," said Sabur Moini, head of credit strategy at the investment management firm Payden & Rygel.

Historically low default rates of years past were one of the reasons lenders and investors were eager to finance buyout deals, which often involve the issuance of high-risk, high-yield bonds.

While current default rates remain below the historical average of about 5%, Moody's expects that number to reach 5% by the end of 2008 and 6% a year from now before topping out.

That may be overly optimistic though. If this economic downturn winds up being a recession along the lines of the one in the early 1990s, Moody's warned that default rates could hit 10%.
A Libor problem

"Corporate defaults are ripening on the vine," said John Atkins, credit analyst at IDEAGlobal. "Once those start to pile up, we will have a reassessment of wh

Rising corporate default rates in 2009 would clearly be problematic. But the credit markets face a more pressing concern that threatens the fragile recovery - Libor.

There have been growing concerns that banks are paying a much higher rate for short-term loans than they are actually reporting in order to avoid appearing in dire straits. That has fostered doubts about the accuracy of the London inter-bank offered rate, or Libor, which is a key measure of the health of the global financial system.

Currently, the 3-month Libor rate is 2.64%, less than half what it was just a year ago when the closely-watched rate stood at 5.36%. As such, some credit experts believe Libor is artificially low and should be higher.

The British Bankers' Association, which oversees Libor, has conducted a review of the system and is expected to announce its findings later this week.

But since rates on corporate bonds, leveraged loans and U.S. mortgages are pegged to Libor, a drastic change in how it is calculated could pose a shock to interest rates, again rattling sentiment in the credit markets.

Experts warn that regulators may be to hesitant to announce major revisions, particularly one that would boost Libor, at a time when the credit market still needs time to heal.

"We still have a long and arduous recovery ahead," said Atkins.

Microsoft not interested in renewed takeover try: Yahoo chief

Yahoo chief executive Jerry Yang said on Wednesday that Microsoft is 'no longer interested' in buying the pioneering Internet firm, but is considering 'other partnerships.'

Yang also maintained that Yahoo is "not under siege" despite a threatened stockholder revolt led by billionaire corporate raider Carl Icahn.

Yang's comments came during a speech at an "All Things Digital" conference organized by the Wall Street Journal in the Southern California city of Carlsbad.

"Microsoft is no longer interested in buying the company and they are discussing various other partnerships with us," Yang said, echoing comments made the prior evening by Microsoft chief executive Steve Ballmer.

"We are listening."

Yang implied that sparring that took place between the companies while Microsoft's nearly 50 billion dollar offer was on the table has given way to talks aimed at finding a way for them to work together.

Microsoft could have taken a "much more hostile" tact and tried to oust the Yahoo board of directors that rebuffed advances by the Redmond, Washington, based software giant, according to Yang.

Yang stressed that it was Microsoft, not Yahoo, which walked away from the bargaining table.

Microsoft says it broke off takeover talks in late April after it upped its February 1 bid of 44.6 billion dollars by three billion dollars and Yahoo's board still wanted more.

Yang defended the board's handling of failed takeover talks with Microsoft and pleaded anew the case that the struggling Internet firm is poised to recapture its former glory and a bigger share of online advertising dollars.

Microsoft wanted to buy Yahoo to better take on Google, which dominates the lucrative world of Internet search and advertising.

"They definitely have an interest in Yahoo," Yang said of Microsoft. "With the right circumstances, not only price, our board is open."

Talks between Yahoo and Microsoft may be centered on letting Microsoft handle Yahoo's online advertising in the belief it can pump more cash out of the promising revenue source.

Yahoo successfully tested just such an arrangement with Google during Microsoft's takeover try.

An alliance with Microsoft, or even Google, could be a salvation for Yahoo board members facing a showdown with Icahn.

Icahn has reportedly bought a stake of more than four percent in the California firm and says he plans to oust board members he accuses of botching takeover talks with Microsoft.

Icahn has nominated a Microsoft-friendly slate, which includes him, to replace all ten Yahoo board members at elections to be held at an annual meeting in late July.

Yahoo delayed the shareholders meeting to an unspecified date because it needs time to prepare for the threatened coup attempt.

"The perception of us being a company under siege is just not accurate," Yang said as he was peppered with questions about Yahoo's future.

Yahoo's potential to make money online stretches far beyond search, according to company president Susan Decker.

Internet search accounts for only 10 percent of the space for placing online advertising, and Yahoo boasts 500 million people that routinely use its properties, which include free email and user groups.

"It's an enormous asset," Decker said at the conference. "It's undervalued. We want to do more with it."

Shift in Asian currency strategy to fight inflation: report

Export-driven Asian economies are shifting away from a strategy of keeping currencies weak against the US dollar in an indication of troubling times for the region, a US think tank said on Wednesday.

Central banks in Indonesia, the Philippines, Taiwan and South Korea on Tuesday reportedly began selling dollars to shore up their currencies to fight inflationary concerns stemming from surging oil prices.

"The currency-strengthening move undertaken by the central banks Tuesday is a shift in policy," Stratfor, a US-based private intelligence service, told its corporate clients in a bulletin Wednesday. It raised the specter of the 1997 Asian financial crisis, when currencies in the region plunged and sent economies reeling into turmoil, the think tank said.

"While the events Tuesday do not necessarily signal the beginning of another crisis, they certainly show that at least a few East Asian countries have hit some sort of threshold," Stratfor said. "They can no longer keep up with rising commodity prices," it said.

While Indonesia, the Philippines, Taiwan and South Korea are lower- and mid-level economies in East Asia, "the decisions by their central banks are important, especially as a sign of what may come," it warned.

By moving to strengthen their currencies, the Asian economies are attempting to makes imports cheaper and contain the inflationary effects of soaring oil and other commodity costs, experts say.

Typically, Asian countries keep their own currencies weak to keep their products at lower prices which translates into higher demand from foreign markets, supporting the export-centric economies. But Stratfor pointed out that this system worked best when the dollar was strong and the price low for raw material like minerals, including oil, building supplies and food. Right now this is not the case -- oil has skyrocketed to about 130 dollars per barrel and grain prices are also at record highs and raw materials in fierce demand, hurting the largely manufacturing economies in the region. Stratfor also pointed out that "the real pain" from high commodity prices was not necessarily being felt by the countries that reportedly tinkered with their currencies Tuesday, but by China and Thailand, which operate the most manufacturing-dependent economies in the region.

In China, it said, the high cost of raw materials and energy was further shrinking already-tight profit margins. In addition, rising cost of food can quickly lead to social upheaval in the world's most populous nation, it said.

China has allowed its yuan currency to strengthen gradually against the dollar but Stratfor said if China suddenly ramped up the yuan, it risked shuttering factories that depend on exports and thus increasing unemployment. It also runs the risk of devaluing a significant portion of the approximately 1.7 trillion dollars in savings it holds in foreign exchange reserves. "Ultimately, these actions -- and those taken by the central banks Tuesday -- do not change the fact that China, like all manufacturing-heavy economies, is in for some challenging times ahead," Stratfor warned.

Dollar steady in Asia amid easing economic concerns

The dollar was range-bound in Asian trade on Thursday, supported by better-than-expected durable goods orders which helped to calm market jitters about the US economy, dealers said.
The dollar was at 104.88 yen in Tokyo morning trade, up slightly from 104.71 yen in New York late on Wednesday.

The euro was steady at 1.5646 dollars after 1.5641 while firming to 164.09 yen from 163.73.

Investors were heartened by the better-than-expected April durable goods orders in the United States, dealers said.

Washington reported that April durable goods orders fell 0.5 percent, but most of the decline was in the transport sector. Excluding that segment, orders were up 2.5 percent.

The (dollar's) latest gains against the major currencies were driven by better news on the economy rather than lower crude oil prices," NAB Capital analyst John Kyriakopoulos wrote in a note to clients.

Official figures showed German inflation accelerated sharply in May, adding to worries about Europe's largest economy and further dashing hopes of a cut in eurozone interest rates.

According to an official projection based on data from six of Germany's 16 states, consumer prices rose 3.0 percent year-on-year, up from 2.4 percent in April and well above the ECB's target of just below 2.0 percent.

The ECB has left its key short-term interest rate unchanged at 4.0 percent since June 2007 to focus on keeping prices under control.

Ian Copsey, a senior financial analyst at Global Forex Trading, said foreign exchange markets were on a knife edge.

"What is very clear is that US figures are beginning to show a semblance of modest stability while European numbers continue to become more and more volatile," Copsey said.

Some market watchers said that the dollar was expected to remain in a narrow corridor against the yen for now.

"We expect the dollar/yen to be locked in a tight range," Chiba Bank analysts wrote in a note to its clients.

"There will be a mix of dollar buying after seeing the better than expected US economic data and selling pressure from exporters," they added.

Oil retreats but stays above 130 dollars

World oil prices retreated but stayed above 130 dollars in Asian trade on Thursday amid growing jitters about falling US gasoline consumption spooked by skyrocketing pump prices, dealers said.

New York's main oil futures contract, light sweet crude for July delivery, fell 77 cents to 130.26 dollars per barrel.

The benchmark contract shot up 2.18 dollars to close at 131.03 dollars on Wednesday at the New York Mercantile Exchange.

London's Brent North Sea crude for July delivery slid 80 cents to 130.13 dollars a barrel, after settling at 130.93 dollars on Thursday. The contract had rallied 2.62 dollars at the close.

Values struck records above 135 dollars late last week.

Tony Nunan, of Mitsubishi Corp's international petroleum business in Tokyo, said the retreat was due to "regular volatility", sparked by news of lower gasoline demand in the US, the world's largest oil-consuming nation.

"Oil prices are getting to levels where they are starting to affect demand negatively," he said. Traders were looking ahead to the weekly report on US energy stockpiles due later Thursday, after a public holiday in the United States on Monday.

British Prime Minister Gordon Brown on Wednesday warned that the world was facing a "great oil shock" that requires a comprehensive international strategy to address.

The British leader's warning came a day after French President Nicolas Sarkozy urged a Europe-wide cut in consumer taxes on fuel as fears of rising energy costs spark unease around the world.

The price of oil on international markets has surged by about a third since the start of 2008 and compares with 50 dollars per barrel 18 months ago.

A top economic adviser to US President George W. Bush warned that rising oil prices could further crimp economic growth in the US.

"I think the high price of oil has already cost us a significant amount in terms of economic growth," said Edward Lazear, chairman of the Council of Economic Advisers.

Lazear said red-hot oil prices would continue to dent economic growth unless something is done about the runaway values.

Analysts said increased speculative trading in the oil markets has been driven by tight global supplies and a weaker dollar, which makes commodities priced in the US currency cheaper for buyers armed with stronger currencies.

Surging oil prices have also been underpinned by growing demand in China and other emerging economies, as well as unrest in crude-producing countries, particularly Nigeria, and Opec's reluctance to hike output, analysts said.

The Organisation of the Petroleum Exporting Countries (Opec), which pumps 40 percent of the world's oil, has proven reluctant to bend to US-led demands for it to pump more crude to help cool prices.

Brown warns of global oil 'shock' as fuel price protests spread

British Prime Minister Gordon Brown warned that the world faced an era-defining oil 'shock' that required urgent action, amid growing protests in Europe over soaring fuel prices.

"It is now understood that a global shock on this scale requires global solutions," Brown wrote in The Guardian newspaper.

Record oil prices of around 135 dollars a barrel have contributed to protests worldwide over the rise in fuel and food costs, with fishermen and truck drivers taking the lead in Europe, blocking ports and road access to oil depots.

"However much we might wish otherwise, there is no easy answer to the global oil problem without a comprehensive international strategy," Brown said, adding that the problem should be made a "top priority" at the EU summit next month and the gathering of G8 leaders in July.

"The way we confront these issues will define our era," he said.

Brown's warning came a day after French President Nicolas Sarkozy urged a Europe-wide cut in fuel taxes and Portugal's economy minister Manuel Pinho

called on the Slovenian head of the European Union to hold an urgent debate on the crisis.

French consumers pay about 19.6 percent VAT on the price of fuel.

Striking fishermen Wednesday lifted a week-long blockade of France's largest oil refinery on the channel coast, but truck drivers and farmers stepped up their own protests.

Fuel deliveries by truck resumed to the Total refinery in Gonfreville l'Orcher at around 6:00 am (0400 GMT), the site's management said. Pipeline deliveries -- which account for 80 percent of the refinery's output -- had not been affected by the protest.

But further south near Toulouse, a group of 300 farmers used their cars to block the entry to a Total fuel depot, demanding emergency measures to help the agriculture sector cope too.

And fishing fleets maintained their blockades of ports and cross-Channel ferries.

There have also been protests over fuel prices in Britain with hundreds of angry haulage truckers driving their lorries in a rolling protest through London on Tuesday.

About a hundred lorry drivers staged a similar protest in the Welsh capital Cardiff.

In Spain, lorry drivers joined striking fishermen in calling for government help to cover soaring fuel costs.

EU member states can currently give their fishermen a subsidy of up to 30,000 euros (47,167 dollars) over a three-year period without seeking the European Commission's approval.

But French and Spanish fishermen consider this too low and have demanded additional help from their governments to be able to cope with a sharp increase of diesel prices.

Italian, Greek and Portuguese fishermen may strike later this week.

At a meeting Tuesday of EU agriculture ministers in Slovenia, France and Spain led the call for direct EU economic assistance to the fishing industry.

The Netherlands and Portugal however expressed scepticism, arguing for a long-term solution for the fishermen, including modernising their fleets and increasing competitiveness.

African leaders criticise donor nations on trade

African leaders on Wednesday lashed out at rich nations for erecting trade barriers that prevent the continent's economic development even as they make lofty pledges to boost aid.

The leaders, in Japan for a major development conference, urged industrialised nations to make it easier for them to export food, coffee and other products at fair prices.

"Pursuit of unfair trade practices by the big powers as well as difficult access for African products to markets of developed countries continue to penalise our states and significantly destroy their performance in the creation of riches," said Burkina Faso President Blaise Compaore.

Forty heads of states from Africa are participating in the three-day conference to discuss economic growth, stability and climate change.

Japan pledged on Wednesday to double aid to Africa by 2012 and to help the continent boost rice production two-fold to ease food shortages.

But some African leaders said their countries were more concerned about unfair trade deals than a lack of things to eat.

"There is a big problem of food in the world now and a problem of energy. In Uganda, there is a problem of a different kind. We have too much food and no market to export it to," said Ugandan President Yoweri Musaveni.

"Why? Because of bad policies in Europe, America and even in Japan," he added.

He said his country was facing "a real struggle" to get a fair deal for its natural resources, including agricultural and mineral products.

For example, a kilo of unprocessed Ugandan coffee would be sold for one dollar at home but for 14 dollars in Britain after it has been refined, he said.

"I see some people here who are called donors," Museveni told the conference audience.

"Now, I really have a problem with that definition. Because I don't know who's helping who," he added.

Gabon's President Omar Bongo Ondimba urged Japan to boost direct investment in Africa and open up Japanese markets to African products.

"Japan can weave with Africa a strategic partnership which is mutually beneficial," he said.

Dollar supported by higher share prices in Asian trade

The dollar held steady in Asian trade on Wednesday, propped up by a Wall Street rally and a drop in world oil prices, dealers said.

They said weak German and French economic data were weighing on the euro.

The dollar was little changed at 104.19 yen in Tokyo morning trade against 104.24 in New York trade on late Tuesday.

The euro edged down to 1.5682 dollars from 1.5686 and to 163.39 yen from 163.53.

The greenback was "supported by higher share prices and oil prices that calmed down overnight," said Shigeru Nakane, senior chief manager at Resona Bank.

Positive comments on the US economy by San Francisco Federal Reserve Bank Chairman Janet Yellen also helped the greenback, dealers said.

"Market players are now keen to see the upcoming US job report," Nakane said.

Washington is due to release weekly jobless claims on Thursday, while key monthly non-farm payroll figures are due next week.

Traders were also waiting for US durable goods orders due later on Wednesday and revised US first-quarter economic growth on Thursday.

The dollar climbed in US trade overnight after oil prices fell more than three dollars a barrel in New York Tuesday, lifting the greenback against other major currencies despite weak economic data.

The US Conference Board reported Tuesday that consumer confidence plunged to a 16-year low in May in a stuttering economy and as surging oil prices pushed inflation expectations to an all-time high.

The dollar retained its firm tone in Asian trading amid a lack of fresh leads, dealers said.

Masatsugu Miyata, forex dealer at Hachijuni Bank, said the euro's recent gains appeared to be excessive, leaving room for the dollar to regain some ground.

"I feel that the European nations have failed to implement effective measures to fight inflation," he said, noting that weak German data had weighed heavily on the single currency.

Germany's GfK consumer confidence indicator fell to 4.9 points in June compared with 5.6 points in May and against analyst forecasts for an improvement to 5.8.

In France also, INSEE reported business confidence dropped four points to 102 in May, beyond estimates for a more modest fall to 104.

"In that sense, it's about time for the dollar to gain despite its vulnerability to high oil prices," Miyata said.

Oil prices slip further from peaks

Oil prices slipped further from record peaks on Wednesday on profit-taking after fresh data triggered concerns that the US economy will slow down markedly, dampening oil demand, dealers said.
In early Asian trade, New York's main oil futures contract, light sweet crude for July delivery, shed five cents to 128.80 dollars per barrel.

The benchmark contract had closed at 128.85 dollars on Tuesday, down 3.34 dollars from its closing price on Friday, the last trading day before the US Memorial Day holiday on Monday.

London's Brent North Sea crude for July slipped 12 cents to 128.19 dollars a barrel, after settling 4.06 dollars lower at 128.31 dollars on Tuesday.

The price falls came after Brent had struck an all-time high of 135.14 dollars and New York crude reached a record 135.09 dollars on Thursday amid concerns about tight supplies and strong demand.

"Traders are picking profits after a very strong rally last week over a number of bearish factors and therefore making a correction," said Victor Shum, an analyst at Purvin and Gertz energy consultancy in Singapore.

Shum said a report indicating a slump in US consumer confidence, coupled with comments by the International Monetary Fund that oil prices cannot really go up higher without causing a recession, had weighed on the market.

US consumer confidence plunged to a 16-year low in May as the economy struggled for momentum and as surging oil prices pushed inflation expectation to an all-time high, research firm The Conference Board said.

It said its index of consumer confidence, which has been on a downward trend for several months, fell to 57.2 from 62.8 in April. Most analysts expected a reading of 61.

In addition, the closely watched Standard & Poor's Case-Shiller index of national US home prices fell 14.1 percent in the first quarter compared with a year ago to the lowest mark since it was first reported in 1988.

The American economy -- the world's biggest consumer of oil -- stuttered to a 0.6 percent growth pace in the past two quarters and has been battered by a major housing slump, tight credit and record high crude prices.

Oil prices had initially picked up earlier Tuesday on the back of renewed violence in key African crude exporter Nigeria, but the gains soon faded in the wake of the latest US economic readings.

Pentagon auditors unable to keep pace with spending: report

The Pentagon's internal watchdog office has warned in a report to Congress made public on Tuesday that its auditors are unable to keep pace with a ballooning US defense budget.

The rapid growth of the defense budget to more than 600 billion dollars "leaves the department increasingly more vulnerable to fraud, waste, and abuse," the Pentagon's Office of the Inspector General said.

The March 2008 report said the office's ability to adequately cover high risk areas and defense priorities "has become strained due to the fact that our staffing levels have remained nearly constant."

"Furthermore, the demand for IG services to support the GWOT (global war on terrorism) and the ongoing operations in Southwest Asia has forced us to readjust priorities," it said.

The result has been "gaps in coverage in important areas, such as major weapons systems acquisition, health care fraud, product substitution, and defense intelligence agencies."

The agency said that to expand its work force it needed 25 million dollars more in funding in 2009 than the 247 million dollars requested by the administration.

The report was made public by the Project on Government Oversight, a private non-profit group dedicated to exposing waste and corruption in government.

Nick Schwellenbach, the group's national security investigator, said, "It's stunning that we've been spending so much for so long with so little oversight."

Whereas in 1997 there was one auditor for each 642 million dollars in Pentagon contracts, in 2007 the ratio was one auditor for each 2.03 billion dollars in contracts, according to the report.

It said 152 billion dollars in money spent on weapons acquisitions in 2007 received insufficient audit coverage.

Vodafone CEO Sarin to step down

Vodafone Group PLC Tuesday posted a $13.2 billion net profit for fiscal 2008 compared with a loss a year earlier and announced that Chief Executive Arun Sarin will step down and be replaced by his deputy Vittorio Colao.

Sarin, who has run the world's largest mobile phone operator by sales for the past five years, will retire after the company's annual general meeting July 29.

Sarin, 53, joined Vodafone's board in 1999 and became chief executive in July 2003. He went through a rocky patch two years ago, when nearly 10% of Vodafone shareholders voted against his re-election as chief executive.

But the company has since outperformed City profit forecasts and enjoyed big revenue growth in fast-growing markets such as India and Turkey.

The England-based mobile phone operator said net profit for the 12 months to end-March was $13.1billion, compared with a net loss of $9.7 billion a year earlier. Adjusted net profit, which excludes impairment losses, non-operating income from associate companies, and some currency effects, rose 6.7% to $13.1 billion, in line with analysts' estimates.

Annual sales rose 14.1% to $70 billion, driven by increased data sales, growth in emerging markets and positive currency exchange rates, in particular the strong rupee and euro against the British pound.

The sales figure slightly exceeded analysts' consensus of $69.4 billion and was above company guidance for full-year revenue of $68 billion to $69.2 billion.

Vodafone derives 60% of sales from countries where the euro is the main currency and has an extensive Indian operation in Vodafone Essar.

The results, combined with news of Vodafone's CEO succession, will likely push its shares higher at the open, according to spread betting company Cantor. It thinks Colao was groomed to replace Sarin and the timing is right. The stock closed at 321 cents Friday, giving the company a market capitalization of about $171.2billion.

"The guidance for 2009 is likely to push up people's forecasts," said John Davis, analyst at Dresdner Kleinwort. He added that Sarin's departure was unlikely to greatly affect the company's share price.

"It was well trailed and its not like either Sarin or Colao are massively disliked by the market," Davis said.

In its outlook, the company said that it expects fiscal 2009 revenue to rise to between $78.5 billion and $80.3 billion, and operating profit for 2009 between $21.7 billion and $22.6 billion.

"The group continues to drive revenue growth, particularly in respect of its communications strategy for data and fixed broadband services and in emerging markets," Vodafone said in a statement.

Earnings before interest, taxes, depreciation and amortization, or Ebitda, rose 10% to $26 billion in fiscal 2008, compared with $23.6 billion a year earlier.

Vodafone increased its total dividend per share by 11.1% to 7.51 pence, another factor likely to be welcomed by markets according to Cantor.

Brazil to invest $5B in deep water oil finds

Brazil on Monday announced plans to spend at least $5 billion to develop deep water oil finds, building new ships and hiring rigs as soaring world fuel prices boost demand for drilling equipment.

State-run oil company Petroleo Brasileiro SA, or Petrobras, will spend $5 billion to build 146 ships and plans to hire 40 deep-water drilling rigs and platforms, President Luiz Inacio Lula da Silva told shipbuilders in Niteroi, a harbor town near Rio de Janeiro's coast. Analysts said the additional equipment could cost an extra $15 billion.

Petrobras has made a series of large offshore oil finds in the nearby Santos Basin, including a possible 8 billion barrel discovery at the Tupi field in November -- the biggest in the Western Hemisphere since 1976.

But as global oil prices soar, competition for equipment to tap that oil is increasing. Petrobras now leases nearly 80 percent of all deep-water drilling vessels in the world, according to local media reports. A Petrobras spokesman declined to confirm that figure or give his name, citing company policy.

The plan to modernize Petrobras' own fleet would employ about 8,000 shipbuilders, at least 70 percent of them Brazilian, and would require an additional 3,800 crew members once the ships are complete in 2017, Petrobras said in a statement.

Silva noted that Brazil's naval industry has grown more than 20 times since he took office in 2003, from 1,900 to 40,000 workers today.

Petrobras, which Silva said has become the world's sixth largest company, announced last week that it had discovered new medium-grade crude deposits in the Santos Basin at a depth of 4.2 miles (6.8 kilometers). It did not estimate the size of the find.

Deep underwater layers of sand, rock and salt make extraction expensive.

Malaysia palm futures gain 1.5 pct on soy oil rally

Malaysian crude palm oil futures rose 1.5 percent on Tuesday, extending five days of gains as soy oil markets started to rally on a mix of weather concerns and strong crude oil prices.

Palm oil's steady rise over the week was prompted by analysts' forecasts that it may restart its rally on record crude oil prices.

The vegetable oil, used in products from bio-fuels to ice-cream, is roughly 17 percent off record highs of 4,486 ringgit in March but has gained nearly 21 percent so far this year.

By the midday break, the benchmark August contract on the Bursa Malaysia Derivatives Exchange rose 54 to 3,727 ringgit ($1,148) per tonne.

"Soy oil on CBOT and Dalian are giving support to palm oil. In fact, its weather play and rising demand that has bumped up agricultural complexes all over with crude oil in the background," said a trader with a foreign commodities brokerage.

Other traded months rose between 19 and 49 ringgit. Traded volumes stood at 3,505 lots of 25 tonnes each, easing from the usual 5,000 lots.

Unfavourable weather over the last week and in late April across Argentina's farm belt may hurt the 2007/08 soy crop, but the crop is still expected to total 48 million tonnes, the Buenos Aires Grains Exchange said.

Soy oil for July delivery at the Chicago Board of Trade rose 1.8 percent while the most-active September contract on the Dalian Commodity Exchange jumped 3.2 percent.

Malaysian crude palm oil prices may resume their rally if record crude oil prices boost demand for alternative fuels, soaking up high stocks, leading industry analysts said last week.

Top analysts Dorab Mistry and James Fry noted record crude oil's growing influence on vegetable oils like palm, thanks to the increasing biodiesel incentives and mandates in Europe and the Americas, and to some extent Asia.

Oil was little changed at around $133 a barrel on Tuesday after news of another attack on Nigerian oil facilities refocused concerns on immediate supplies.

In Malaysia's physical market, crude palm oil for May shipment in the southern region was quoted at 3,700/3,715 ringgit. Trades were done between 3,700 and 3,710 ringgit a tonne.

Oil trades above 133 dollars in Asian trade

Oil was trading around 133 dollars in early Asian trade on Tuesday after news of more violence in key African exporter Nigeria, dealers said.

New York's main oil futures contract, light sweet crude for July delivery, climbed 81 cents to 133.00 dollars per barrel after the US Memorial Day holiday on Monday.

The benchmark contract had settled at 132.19 dollars a barrel on Friday.

London's Brent North Sea crude for July delivery was trading 49 cents higher at 132.86 dollars a barrel.

On Thursday, Brent struck an all-time high of 135.14 dollars and New York crude reached a record 135.09 dollars, before both contracts plunged as investors banked profits.

A Nigerian militant group on Monday said it had attacked an oil pipeline run by Royal Dutch Shell in its main producing region, forcing it to shut some production.

The raid by the Movement for the Emancipation of Niger Delta, one of the main separatist groups in the region, came four days after the army said it had thwarted an attack on another Shell facility in the strategic region.

Shell confirmed an attack on its Nembe Creek trunk line at Awoba in Rivers state and said production had been affected but declined to say by how much.

The Anglo-Dutch energy giant said on May 10 that it was losing the equivalent of 30,000 barrels of crude oil per day because of recent attacks against its installations.

Nigeria is officially the world's eighth-largest oil exporter but over the past two years its production has been cut by a quarter to about 2.1 million barrels a day because of the insurgent attacks.

Crude futures have risen by more than a third since the beginning of 2008 when they struck 100 dollars for the first time, lifted by unrest in some of the oil-producing countries, falling energy inventories, high Asian demand for fuel and a weak dollar.

Reluctance by the Organisation of Petroleum Exporting Countries (Opec) members to hike their output has also helped keep prices high.

Opec president Chakib Khelil on Monday blamed the soaring price of oil on speculators, geopolitical problems and the weakness of the dollar, all "factors beyond the control" of Opec.

A falling dollar makes commodities such as oil cheaper for those with stronger currencies and so in part encourages demand.

"If Opec decides to raise production ... these hikes will not really lower the price," said Khelil, who is also the Algerian energy minister.

Opec, which produces 40 percent of the world's oil, has consistently said that the market is well supplied and that record prices reflect speculative investment activity rather than actual supply and demand conditions.

Dollar weaker in Asian trade

The dollar was slightly weaker in subdued Asian trade on Tuesday as traders fretted about high oil prices and the state of the US housing market, dealers said.
They said activity was muted as players waited for fresh leads after a long holiday weekend in the United States and Britain on Monday.

The dollar slipped to 103.35 yen in Tokyo morning trade from 103.43 in European trade on Monday.

The euro firmed to 1.5790 dollars from 1.5750 and to 163.20 yen from 162.89.

"There are no fresh leads in Tokyo and participants are waiting for London trade to begin," said Hidenobu Fukuhara, a strategist at Resona Bank.

Investors kept a close watch on oil prices which last week hit a record high above 135 dollars a barrel on concerns about tight supplies and strong demand.

Recent market optimism about the possibility of a recovery in the US economy has given way to renewed concerns about the outlook, said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.

"Market sentiment turned pessimistic as players are focusing on the damage higher oil prices are having on the world economy," he said.

The dollar has been pressured in recent days by worries that high oil and commodity prices could weigh on consumer spending in the US economy and hit corporate profits, hindering an economic recovery.

Surging crude oil prices "are likely to keep the dollar on the back foot this week since the US consumer looks most vulnerable to rising gasoline prices," NAB Capital strategist John Kyriakopoulos wrote in a note to clients.

Inflationary pressures have also reduced expectations of interest rate hikes by the US Federal Reserve over the next year "as any economic recovery proves tepid," he added.

Meanwhile, the euro has been supported by conjecture that the European Central Bank will not cut rates any time soon amid stubborn inflation. The ECB voted earlier this month to keep rates steady at 4.0 percent.

"The substantial and continuing increase in the price of oil has contributed to the deceleration in the rate of economic growth in the euro area," ECB Vice President Lucas Papademos said in an interview with a Greek newspaper.

"But, at the same time, it has intensified inflationary pressures," he added.

Investors were also waiting for a batch of economic data due this week in the US for fresh clues on the outlook for Fed interest rates.

New housing sales and a report on consumer confidence are due to be released later Tuesday while three Fed officials are expected to give speeches over the course of the week.

Meanwhile figures on eurozone consumer prices, German retail sales and Japanese inflation are all set to be released on Friday.

Returns of shares: India withholds payment of billions of rupees to Pakistanis

The Indian government has denied payment of billions of rupees to 18,560 Pakistanis, accumulated on returns of shares they had bought in Indian firms before 1965. India had seized such shares, bought by Pakistanis in 558 Indian companies, after the 1965 war.

Now, these shares are lying with the Office of Custodian of Enemy Properties under the Indian Ministry of Home Affairs following a notification issued by Indian government in 1968.

The Indian government is undecided about the fate of these shares of Pakistanis. Media reports, citing the record of the department, said that the capitalised amount of five shareholders in Indian companies is about Rs 109.6 billion. These companies are the high-profile Indian entities--Wipro, Cipla, five companies of Tata group, ACC and three companies of the DCM group.

Similarly, according to the data, two Pakistani stakeholders have 10 million shares of Wipro, the world's largest independent R&D services provider, valuing about Rs 50.4 billion. Thirty-four Pakistanis have shares in pharmaceutical major, Cipla, worth Rs 48.2 billion. In four companies of Tata Motors--Tata Power, Tata Steel, Tata Chemicals and Tata Coffee--Pakistanis have shares worth Rs 48 million.

Pakistanis invested in Indian companies, including Hindustan Unilever, ITC DLF, Bajaj Electricals, CSCE, Reliance Energies, EIH, Aditya Birla, Nuvo, India Cement, Dalmia Cement and Ballarpur Industries before 1965.

According to the assessment of the Custodian office, the value of the shares owned by Pakistanis in the listed 45 Indian companies is Rs 18 billion.

The Hindi edition of India's paper 'The Economic Times', while contesting the figures of the Custodian department, said that Pakistanis have far more shares in the companies than revealed by the Custodians.

The custodians have recorded 1.66 million Pakistani shares in Wipro. But, company sources say there are 10 million Pakistani shares. Similarly, there are 23 million shares of Pakistanis in Cipla, but the custodian has recorded just 1.1 million, the paper added.

Malaysia palm up as rising crude oil supports vegoils

Malaysian crude palm oil futures rose 0.9 percent on Monday, extending four days of gains as vegoils markets firmed amid crude oil's move towards record levels, traders said.

Although traders were betting on analyst's forecasts last week that palm will restart its rally on record crude prices, the market was weighed by weaker export numbers by a cargo surveyor.

Palm oil, used in products from bio-fuels to ice-cream, is roughly 17.8 percent off record highs of 4,486 ringgit in March but has gained nearly 21 percent so far this year.

By the midday break, the benchmark August contract on the Bursa Malaysia Derivatives Exchange rose 32 ringgit to 3,686 ringgit ($1,144) per tonne, after going as high as 3,705 ringgit.

"The overall shortage in commodities worldwide and strong crude oil prices have worked favourably for palm oil. Crude oil is now seen to wield a stronger influence over palm oil through soy oil," said a trader with a foreign commodities broker.

"Exports might seem disappointing but it has more or less held on to levels a month before."

Other traded months rose between 47 and 77 ringgit. Traded volumes stood at 3,730 lots of 25 tonnes each, easing a little from the usual 5,000 lots.

Malaysian crude palm oil prices may resume their rally if record crude oil prices boost demand for alternative fuels, soaking up high stocks, leading industry analysts said on Friday.

Top analysts Dorab Mistry and James Fry noted record crude oil's growing influence on vegetable oils like palm, thanks to the increasing bio-diesel incentives and mandates in Europe and the Americas, and to some extent Asia. Oil rose towards $133 a barrel on Monday, extending the previous session's gains on a supply outage at the Statfjord oilfield in the North Sea and a weak US dollar.

Soy oil for July delivery at the Chicago Board of Trade was unchanged in Asian trade after ending 1.73 cents higher at 63.56 cents per lb last week, when Argentine farmers and government officials failed to resolve their conflict over a soy export tax.

The most active September contract on China's Dalian Commodity Exchange rose 1.05 percent.

Indonesia's move late Friday to keep its palm oil export tax in June unchanged had little bearing on the market as the move was anticipated, traders said.

Exports of Malaysian palm oil products for May 1-25 fell 2.36 percent to 993,093 tonnes from 1,017,134 tonnes shipped between April 1 and 25, cargo surveyor Intertek Testing Services said on Monday.

Another cargo surveyor, Societe Generale de Surveillance, is due to release its estimates later on Monday.

In Malaysia's physical market, crude palm oil for May and June shipment in the southern region was quoted at 3,690/3,700 ringgit. Trades were done between 3,690 and 3,700 ringgit a tonne.

Oil trades above 132 dollars a barrel

Oil traded higher at more than 132 dollars a barrel on Monday as the US summer driving season kicked off, underscoring concerns that output was inadequate to meet rising demand.

Tightness in the oil market has made prices sensitive to a confluence of factors, including a weak US dollar, speculative funds, an unwillingness by oil-producers to raise production and geopolitical tensions, analysts said.

In morning Asian trade, New York's main oil futures contract, light sweet crude for July delivery, was up 37 cents to 132.56 dollars a barrel, after closing at 132.19 dollars a barrel in New York on Friday.

Electronic trading on the New York Mercantile Exchange was unaffected by the US Memorial Day holiday on Monday.

The US summer driving season, which kicked off at the weekend, is a time when Americans take to the roads on their vacations, boosting fuel demand in the world's biggest economy and affecting global prices.

London's Brent North Sea crude for July delivery was trading at 131.90 dollars a barrel, up 33 cents.

On Thursday, Brent struck an all-time high of 135.14 dollars and New York crude reached a record 135.09 dollars, before both contracts plunged as investors banked profits.

Crude futures have risen by more than a third since the beginning of 2008 when they struck 100 dollars for the first time, lifted by unrest in some of the oil-producing countries, falling energy inventories, high Asian demand for fuel and a weak dollar.

A struggling US currency makes dollar-commodities cheaper for foreign buyers.

Reluctance by the Organisation of Petroleum Exporting Countries (Opec) to hike their output has also helped keep prices high.

Opec secretary general Abdalla Salem El-Badri said last week that the cartel's members were unhappy with surging prices which he blamed on speculators and a weak dollar.

Opec, which produces 40 percent of the world's oil, is reluctant to bend to US-led demands for it to pump more crude to help cool rocketing prices.

The 13-nation cartel insists that the market is well supplied and that record prices reflect speculative investment activity rather than actual supply and demand conditions.

Dollar on defensive in Asian trade

The dollar was on the back foot in Asian trade on Monday, pressured by worries that soaring oil prices could hinder a recovery in the US economy, dealers said.

Trade was subdued with US and British markets closed on Monday for a holiday.

Investors were waiting for a batch of economic data due this week as well as speeches by Federal Reserve officials for fresh clues on the outlook for US interest rates.

The dollar slipped to 103.20 yen in Tokyo morning trade from 103.31 in New York late Friday.

The euro firmed to 1.5786 dollars from 1.5761 and was flat at 162.91 yen.

"Oil prices don't seem to be stopping their upwards march and are pressuring the (US) economy," said Kazuhiko Shibata, Tokyo branch manager at Dresdner Bank.

"Recent market optimism that the economy might be nearing the end of its slump has waned," he added.

Rising crude oil and commodities prices have stoked fears of a stagflation, a combination of slowing growth and accelerating inflation.

Crude oil hovered near its record high of 135 dollars per barrel, adding to concerns about the outlook for consumer spending, a key pillar of the world's largest economy.

Worries about the US housing market continued to weigh on traders' minds after an industry report showed existing home sales and prices fell further in April and the backlog of unsold homes on the market rose to a record high.

Even so, there is conjecture that US interest rates may have bottomed given signs of building inflation pressures, dealers said.

The euro meanwhile was supported by speculation that the European Central Bank (ECB) may need to raise interest rates at some point, after German producer prices rose in April at the fastest pace since August 2006.

"Previous expectations that the ECB would lower rates have retreated. Unless inflation calms down, rates may have to rise even if growth worsens to some extent," said Shibata.

Investors were waiting for a slew of US economic data due this week including new home sales, durable goods orders and a second estimate of first-quarter economic growth.

In Japan, inflation, unemployment and industrial production figures are due on Friday.

Asian stocks slide as inflation fears rise

Asian stocks fell on Monday, with shares in Japan suffering their biggest fall in six weeks, as investors feared rising inflation and sluggish US economic growth would seriously dent consumer demand in the region's biggest export market.

Oil prices edged higher as the dollar eased, but trade in Asia was subdued with the US and UK financial markets closed on Monday for national holidays.

Major stock indexes in Japan and China dropped more than 2 percent after US markets last week chalked up their biggest decline in three months as oil prices rocketed to record highs, heightening concern about consumer demand and company earnings.

"The market is going to start thinking about real economies. China has held up somewhat but margins are getting squeezed by higher oil and higher materials prices," said Garry Evans, pan-Asian equity strategist with HSBC in Hong Kong.

By 0600 GMT, Japan's Nikkei share average posted its largest single-day decline in six weeks, down 2.3 percent, led lower by exporters such as Canon Inc and clothing firm Fast Retailing Co Ltd

The MSCI index of Asian stocks outside Japan fell 1.4 percent.

China Mobile stock tumbled 7.5 percent, helping to knock down Hong Kong's Hang Seng index after Goldman Sachs downgraded shares of the world's largest wireless carrier to "sell" following a sector-wide restructuring plan announced last week which will increase competition.

South Korea's KOSPI slid 1.5 percent to its lowest since April 24. Shares of Samsung Electronics Co Ltd, the world's second-largest mobile phone maker, were the biggest drag on the index, tumbling 4 percent, on talk that Nokia may cut prices and re-enter the South Korean market.

Investors are also awaiting inflation data from both the euro zone and United States later in the week.

A persistent rise in commodity prices, led by oil's 38 percent climb so far this year, has spooked investors and brought an abrupt end to a rally in global stock markets that began in mid-March when the US Federal Reserve backed a deal to bail out ailing investment bank Bear Stearns & Co Inc

Still, the overarching trend since March has been a cautious shift from bonds to stocks despite higher volatility in both equity and fixed income markets.

Emerging market equity funds have received $16.7 billion in fresh investment since the beginning of April, recouping all but $3.3 billion of the losses incurred during the first three months of the year, according to data from EPFR Global, a firm that tracks global capital flows.

Meanwhile, investors have pulled money out of global bond funds for 15 consecutive weeks, racking up outflows of $10.5 billion so far this year.

BEAR MARKET IN BONDS

Inflation fears caused a stampede out of US Treasuries last week, pushing up the yield on the benchmark 10-year note by 11 basis points. The sell-off quickly spread to Asia as well.

Japanese government bond futures on Monday edged up from nine-month lows plumbed last week, but gains were tempered by many market players, especially large banks, looking to cut their holdings.

"Market sentiment is pretty bad," said Kenro Kawano, senior interest-rate strategist at Credit Suisse in Tokyo. "At least at the moment, it's a bear market."

Kawano said the surge in oil prices would ultimately hurt the Japanese economy. If so, that should cool some of the expectations for the Bank of Japan to raise interest rates in the coming year, which have weighed on the bond market.

June 10-year futures edged up 0.13 point to 134.48, up slightly from the nine-month trough of 133.93 struck on Friday.

The benchmark 10-year yield which moves inversely to the price, was steady at 1.74 percent, off the nine-month peak of 1.755 percent reached on Friday.

Oil rose towards $133 a barrel on Monday, extending the previous session's gains on a supply outage at the Statfjord oilfield in the North Sea and the weak US dollar.

US light crude for July delivery rose 54 cents to $132.73 a barrel, extending Friday's gains of $1.38. It struck a record high of $135.09 in intraday trade last week which will increase competition.

Gold prices have crept higher in May, reflecting investors' unease about inflation. Spot gold on Monday was up 0.3 percent at $927.10 an ounce.

The ailing dollar eased 0.1 percent to 71.888 against a basket of major currencies, hovering near one-month lows.

The euro rose to $1.5790 up 0.2 percent from Friday. It hit all-time highs above $1.60 last

The dollar slid 0.2 percent against the Japanese currency to 103.15 yen as a fall in Tokyo stocks prompted investors to unwind risky carry trades. In carry trades, low-yielding currencies such as the yen are used to finance purchases of assets offering higher returns elsewhere.

"The dollar continues to stay on a downward trend with many players just looking for a chance to sell it," said Tsutomu Soma, senior manager of foreign assets at Okasan Securities in Japan.

Oil prices rebound in Asian trade

Oil prices found support Friday in Asia in worries that supply can't keep up with growing global demand, after tumbling around US$4 overnight from a record above US$135 a barrel.

The July contract for light, sweet crude on the New York Mercantile Exchange rose to a record US$135.09 a barrel in electronic trade on Thursday, but then fell back sharply to settle at US$130.81 in the later floor session as the dollar strengthened and gave some investors reason to sell oil futures to lock in profits.

Midday Friday in Singapore, oil was up 35 cents at US$131.16 a barrel in electronic trading.

Mobile phone users top 3.3 billion by end-2007: report

The number of mobile phone users world soared to over 3.3 billion by the end of 2007, equivalent to a penetration rate of 49 percent, the International Telecommunications Union said in a report on Friday.
Africa showed the strongest gains over the past two years and more than two thirds of all mobile subscribers were from developing countries by the end of 2007, the ITU said.

This is "a positive trend that suggests that developing countries are catching up," the report said.

Mobile subscription growth stood at 39 percent annually in Africa between 2005-2007, and 28 percent in Asia over the same period.

India and China added 154 million and 143 million new subscribers respectively.

The global annual average growth rate stood at 22 percent, the ITU said.

Mobile phones are eclipsing traditional fixed lines and in Africa they account for nearly 90 percent of all telephone subscribers, the report said.

The continued growth in the mobile sector is matched by no-growth in the fixed-line sector. Fixed telephone penetration has been stagnating at just under 20 percent globally for the last years and growth has been below one percent between 2005 and 2007," it said.

While developing countries have made great strides in mobile growth, a significant 'digital divide' remains for Internet use and particularly the availability of broadband connections, it noted.

High-income countries account for 66 percent of all fixed broadband subscribers although they only represent 16 percent of the world's population, while developing countries have just one percent of fixed broadband users but 38 percent of the global population.

"Low-income countries, where broadband access remains very low, risk falling behind in an area that is particularly important in delivering innovative applications and services," the ITU warned.

Some countries have made progress and the ITU highlighted Chile, Senegal and Turkey as states where almost all Internet subscribers have now gone high speed.

"For more people to benefit from the potential of broadband and the applications that it can deliver, governments need to do their share to ensure that high-speed technologies become more accessible as well as more affordable," the ITU urged.

After protests, new Bangalore airport opens

India's gleaming new Bangalore international airport opened on Saturday despite protests by residents and businesses who said getting there by road could prove a nightmare.

The state-of-the-art 630-million-dollar facility sprang into life after a court threw out pleas by local people to keep the existing airport open for commercial flights.

The arrival of Indian Airlines flight IC609 from Mumbai, carrying 110 passengers and crew, signalled the opening of the airport 36 kilometres (22.5 miles) north of the choked centre of the high-tech southern city.

"The airport will be fully functional, offering world-class facilities for domestic and international passengers," said a spokesman for the Bangalore International Airport Ltd (BIAL) consortium which built the facility.

But the government has not delivered on promises to widen clogged access roads or build a dedicated rail link to and from the city -- meaning the commute could take much longer than a short-haul flight.

Many residents and companies in Bangalore voiced fierce opposition to the closing of the old state-run airport, built 50 years ago, which lies just 10 kilometres from the city centre.

From Electronic City in south Bangalore the hub of India's information technology industry it could take a four-hour drive to reach the new airport, opponents say.

"It's a pity the government didn't do anything about connectivity to the airport," said Marcel Hungerbuehler, chief operations officer at BIAL, a consortium that included Unique Zurich Airport, Siemens of Germany and Larsen and Toubro of India.

As Bangalore became India's IT hub and the world's back-office for outsourcing and off-shoring, the old airport witnessed a phenomenal rise in domestic and international passenger traffic, choking its limited capacity.

But "it will be a nightmare driving to the (new) airport," said N. Reghuraj, the head of the local chapter of the Confederation of Indian Industry, who flew out of Bangalore's old airport twice a week.

"The passengers are not happy, the cargo guys are not happy."

Trade deficit projected at $15.9 billion

Pakistan's trade deficit has been projected at $15.9 billion in 2008-09 with estimated exports growing by 15 percent to $21.6 billion while imports by 12 percent to $37.6 billion. The export estimates in 2007-08 stand at $18.8 billion. These projections were presented to the Annual Plan Coordination Committee, which met here on Friday.

The final estimates will be prepared by the commerce ministry in the coming Trade Policy. Imports will be increased by 12 percent in the next fiscal year due to higher volume of food items, oil, edible oil and fertilisers. As a result, the trade account is projected to be in deficit by $15.9 billion in 2008-09 or 8.3 percent of GDP.

Invisible account: Prospects for the invisible balance will continue to be governed mainly by the behaviour of the worker's remittances. For 2008-09, remittances have been projected at $6.9 billion against $6.5 billion estimated for 2007-08. Allowing for other invisible receipts and payments, the surplus on invisible account is anticipated at $3.4 billion against a surplus of $1.7 billion estimated for 2007-08.

Current account balance: With a deficit of $15.9 billion on the trade account and a surplus of $3.4 billion on the invisible account, the current account deficit is targeted at around $12.5 billion (6.5 percent of GDP) in 2008-09 against a deficit of $13.0 billion (7.6 percent of GDP) in 2007-08.

Malaysian palm up on crude, slow demand caps gains

Malaysian crude palm oil futures rose marginally on Wednesday on the back of record high crude oil prices, but weakening exports limited gains.

Dealers said trading was lacklustre as the market awaited leads from an industry conference in Jakarta where top industry analysts are due to give their price forecasts.

By the midday break, the benchmark August contract on the Bursa Malaysia Derivatives Exchange rose 12 ringgit, or 0.34 percent, to 3,566 ringgit ($1,100) per tonne.

"Crude oil supplies are keeping the market steady, but everyone wants to know from this conference, what will happen to prices and demand," one dealer said.

Other traded months rose between 6 and 19 ringgit. Overall trade dropped to 2,087 lots of 25 tonnes each from around 5,000 lots that change hands during the first half on a routine day. The World Palm Oil Summit and Exhibition will run from May 21 to May 23 and will feature top traders and industry analysts such as Dorab Mistry and James Fry.

Oil hovered just above $129 on Wednesday, within striking distance of the previous session's record high as OPEC again said it would not raise supply while demand rages on and a weaker dollar supports funds buying.

The palm oil market often tracks crude oil because of growing use of vegetable oils in making biodiesel, which competes with petroleum diesel.

Exports of Malaysian palm oil products for May 1-20 rose 6 percent to 830,873 tonnes, according to cargo surveyor Intertek Testing Services, against market expectations of around 900,000 tonnes.

Another cargo surveyor, Societe Generale de Surveillance, said exports during the period fell 1.5 percent to 849,767 tonnes.

A squeeze in global vegetable oil supplies is expected to start in October as the high production cycle for palm oil slows, and prices will only rally if adverse weather comes into play, leading analyst Dorab Mistry told Reuters said on Tuesday.

In Malaysia's physical market, crude palm oil for May shipment in the southern region was quoted at 3,570/3,580 ringgit. Trades were done at 3,570 ringgit a tonne.

Oil prices close in on record 130 dollars

Oil prices headed towards a record high of 130 dollars a barrel on Wednesday on anxiety about stretched supplies in the face of strong demand for energy, analysts said.

New York's main oil futures contract, light sweet crude for July delivery, rose 22 cents to 129.20 dollars a barrel. On Tuesday it reached an all-time high of 129.60 dollars.

London's Brent crude contract for July climbed 48 cents to 128.32 dollars a barrel on Wednesday after spiking to a record summit of 128.53 dollars earlier in the day.

Tony Nunan, of Mitsubishi Corp.'s international petroleum business, said concerns over supplies not keeping up with demand were driving prices higher.

"The market is technically and fund-driven right now," he said on Wednesday, referring to investors buying into oil in hopes for higher returns.

David Moore, a commodity strategist at the Commonwealth Bank of Australia, said a weaker US dollar and "the recent trend for analysts to revise higher their oil price forecasts" are helping to push up prices.

Moore added there were reports that the need for diesel-fuelled power generation in earthquake-affected areas of China was boosting demand for the fuel.

The Chinese government said on Tuesday the death toll from the 8.0 magnitude earthquake that devastated the nation's southwest on May 12 had risen to 40,075.

Despite calls by the United States for the Organization of Petroleum Exporting Countries to raise output to cool prices, OPEC president Chakib Khelil said on Monday that the oil cartel would take no decision on production before a meeting in September.

Analysts said a decision by Saudi Arabia to raise output had not done much to lower crude prices. Many OPEC officials argue that record oil prices are being driven by speculators.

Oil prices have jumped more than a quarter since the start of 2008, when they struck 100 dollars a barrel for the first time.

Asian stocks slide on record oil prices, US slump

Asian stocks tumbled on Wednesday with Japanese shares falling 1.65 percent after Wall Street took a beating in the wake of a fresh record for crude oil prices.

The Japanese market closed in the red as oil prices homed in on 130 dollars per barrel after rising overnight in New York to new records, stoking concerns that rising inflation will hit consumer spending and crimp business profits.

Worrisome inflation data, black gold's feverish onward march and a cloudy outlook for corporate earnings hit US shares Tuesday, with the Dow Jones Industrial Average sinking more than 1.5 percent.

Investors on Wall Street were "reminded of uncertainty about how the credit crisis will affect the economy," said Yoshikiyo Shimamine, the chief economist at Dai-Ichi Life Research Institute in Tokyo.

The US is battling a house price downturn and default crisis among subprime -- or riskier -- mortgages, which has inflicted huge financial losses and led to a global credit crunch, with the US expected to drag world growth lower.

Elsewhere in Asia on Wednesday, Chinese share prices tumbled 1.87 percent by afternoon trade, Australia closed down 1.4 percent and South Korea fell more than one percent.

Singapore, Hong Kong and India were pushing towards losses of one percent while Taiwan closed down 0.59 percent.

"The sharp fall on Wall Street overnight dragged down local shares," said Dickie Wong, an associate director at Friedmann Pacific Investment in Hong Kong.

The poor performance in Asia followed steep falls on Tuesday, including a tumble of nearly 4.5 percent in China, where investors are still digesting the consequences of the devastating May 12 earthquake in Sichuan.

Beijing has estimated the massive quake will cost industries based in Sichuan some 9.6 billion dollars. State media has said the deadly quake is set to cut China's 2008 economic growth by at least 0.2 percentage points.

The red numbers in Asia also come after a sharp rally since mid-March, which had raised hopes investors were becoming more sanguine about the financial crisis and the problem of surging food and fuel costs.

But experts said the difficulties in the global economy appeared to have come the fore again.

"We had a good rally and now the markets are focusing on inflation," said K Ajith, an analyst at UOB Kay Hian in Singapore. "Inflation is not a new issue but the continued rise in oil prices is making the market nervous."

Many of Asia's smaller markets also suffered Wednesday, with the Philippines ending nearly one percent lower and Indonesia trading down nearly 1.5 percent.

cketing oil prices renewed inflationary concerns," said Jose Vistan, research director at AB Capital Securities in the Philippines.

"The fundamentals point to even higher oil prices, and making matters worse is the speculative element as funds are now flowing into commodities," he said.

The IMF has estimated that losses from the credit crisis and US subprime debacle could spiral to nearly one trillion dollars.

Recent data have showed that economies in Asia, including Japan, expanded in the first three months of the year, but expectations of a US-led global economic slowdown continue to shadow investors.

Palestinian investment conference to be open today

US officials voiced optimism on Tuesday for what is being billed as a major Palestinian investment conference which is being backed by Middle East peace envoy Tony Blair and deep-pocketed investors.

Palestinian executives and investors from Britain, Greece, Jordan, Kuwait, the United Arab Emirates and the United States are due to attend the conference, which opens on Wednesday in the West Bank town of Bethlehem.

Deputy US Treasury Secretary Robert Kimmitt, who is leading a US delegation to the three-day event, said French Foreign Minister Bernard Kouchner is also expected at the international business gathering.

"The investment conference is intended to spur investor interest in the Palestinian territories by showcasing business opportunities and projects ready to be launched," Kimmitt told reporters.

He said the administration of President George W. Bush hopes the Palestine Investment Conference will bolster a push to establish a Palestinian state side-by-side with Israel.

Asked how commerce in the West Bank could prosper amid hundreds of Israeli military checkpoints which also restrict the movement of people around the Palestinian territory, Kimmitt said Washington recognizes Israel's security concerns.

"There have been some improvements in recent weeks, but more certainly is needed to tap the potential of the Palestinian economy," he said.

One conference session will debate how the Gaza Strip could benefit from investment. The Palestinian Authority is backing the gathering, but representatives of the Hamas group, who control Gaza, will not be present.

Israel brands Hamas as a terrorist organization and says its restrictions on movement into and around the Gaza Strip and the West Bank respectively are needed to protect Israelis.

The UN relief agency for Palestinian refugees has said that Israel's actions have hampered vital aid being delivered to the 1.5 million impoverished Palestinians who live in Gaza.

The business gathering, which its organizers are touting as the first of its kind, will take place after foreign states pledged 7.4 billion dollars to the Palestinians at a Paris summit in December of last year.

"The time has come to invest in Palestine. We are throwing a party and the whole world is invited," Palestinian Prime Minister Salam Fayyad said in a video posted on YouTube.

Palestinian supporters say they are hoping to seal deals, especially housing projects, that could total 1.9 billion dollars.

"There has been an incredible shortage of housing. Now we have around 30,000 units that are being considered to be built," said Ziad Asali, the president of the American Task Force on Palestine.

Asali said Israel's government was cooperating in enabling foreign investors to attend the conference at the Intercontinental Jacir Palace hotel.

Officials said the gathering will also highlight other business opportunities. A US government agency will award a 480,000 dollar grant at the conference to boost wireless Internet access across the West Bank.

Robert Mosbacher, the chief executive of the Overseas Private Investment Corporation and John Sullivan, the deputy secretary of the Commerce Department, are part of the US delegation.

Executives from Intel, the world's biggest computer chip maker, Cisco and Merrill Lynch are also expected to attend.

Blair, a former British prime minister and the envoy of the Middle East Quartet which groups the United Nations, the United States, Russia and the European Union, is due to address the opening session of the conference.