World Finance & Business News

Hope of deal in world trade talks

2008-07-26T03:51:00.000-07:00

Progress has been made at global trade talks and a deal looks possible, negotiators have said.

Earlier, Pascal Lamy, the head of the World Trade Organization warned that the long-running Doha round would fail unless a compromise could be reached.

Delegates from the EU, US, Brazil and Australia said signs were encouraging although others were more cautious.

Talks have been extended until Wednesday. There are still sticking points that could hold up a deal.

"I think the situation looks strong. I think we can be very hopeful now," said Mr Mandelson said.

"What is emerging is a deal that is not perfect, not beautiful, but is good for the global economy and good for development."

An 'emerging' deal

After four days of deadlock, the compromise emerged from a five-hour meeting of representatives from the US, European Union, Australia, Brazil, India, China and Japan. It was then reviewed by ministers from some 35 countries.

The proposed settlement, brokered by WTO chief Pascal Lamy, calls for cutting limits of European farm subsidies by 80% and US payments by 70% to about $14.5bn.

However, this would not mean the US would have to cut its actual spending on support to farmers, which totalled about $9bn last year.

The compromise proposal also involves cuts in tariffs on agricultural imports and on industrial goods.

However, it would still provide developing countries with some loopholes to protect strategic industries such as automobiles.

Caution

Developing countries like Brazil and India say the US and EU are failing to offer big enough cuts in subsidies and import tariffs, particularly in agriculture.

However, Washington and Brussels both say they have ceded ground and want emerging economies to further open their markets to imports of manufactured goods and services.

US Trade Representative Susan Schwab said ministers had reached tentative agreement on the way forward but struck a cautious note.

"I think the biggest concern that we have is that a handful of large emerging markets really threaten this round for the rest of us."

Argentina rejected the proposal drawn up by the countries, saying it "was not acceptable in its current form".

Indian Commerce Minister Kamal Nath, whose tough position has been blamed for the deadlock, said "there are certain areas of concern, certain areas of consensus".

"There's still a lot of work to be done because for instance we didn't deal with cotton, which is a central issue," said Brazilian Foreign Minister Celso Amorim.

Mr Mandelson is due to present the emerging deal to EU member states on Saturday. France has previously disagreed with the trade commissioner's negotiating stance, while Irish Prime Minister Brian Cowen faces pressure to reject the deal.

In Saturday's talks, negotiators will also look at the liberalisation of services such as banking and telecoms.

Bleak outcome?

John Hilary, executive director of the anti-poverty charity War on Want, said that proposed settlement could lead to "a bleak outcome for the world's poor".

He said the proposal allowed developed countries to get away with minimal cuts to their farm subsidies, while at the same time opening up developing country markets to both agricultural and industrial imports.

"Stitching together an agreement between seven states while shutting out all others exposes the lack of legitimacy at the heart of the world trade talks," he said.

"The deal threatens disaster for millions as developing country markets are forced open in the interests of corporate profits."

Trade ministers from around the world began talks on Monday aimed at saving the Doha round, which began in 2001 and aims to liberalise world trade rules by reducing tariffs on imports and industry subsidies.

If negotiators fail to find common ground after this week's meeting, many think the Doha round would be doomed.

It is also not clear that any pledges made by the Bush administration at these talks would be honoured by the new US president who will be elected in November - especially if the Democratic candidate, Barack Obama, wins.

Oil traders face US civil action

2008-07-26T03:50:00.000-07:00

The US energy regulator has taken civil action against a Dutch-based oil trading firm and three top employees for manipulating crude oil prices.

The US Commodity Futures Trading Commission complaint relates to Optiver Holding and two subsidiaries.

As the price of oil has risen sharply since last year, the watchdog has turned its focus on the activities of speculators.

It is feared that traders have contributed to swings in oil prices.

Bastiaan van Kempen, the boss of Chicago-based Optiver, a subsidiary of Optiver Holding, was named as a defendant along with trader Christopher Dowson and Randal Meijer, a supervisor of Optiver.

The CFTC alleges that they attempted to manipulate the price of different types of oil during 11 days in March 2007.

Out of 19 attempts, five were successful earning the accused about $1m (£502,000).

Serious step

"These charges go to the heart of the CFTC's core mission of detecting and rooting out illegal manipulation of the markets," said CFTC acting chairman Walt Lukken.

In a statement, Optiver Holding said: "We have learned that the US Commodity Futures Trading Commission has filed a civil lawsuit against Optiver.

"We have received a copy of the complaint and are reviewing it. We take the CFTC's action very seriously and are treating it with the utmost attention and care."

The lawsuit comes as US lawmakers review a plan put forward by the CFTC to prevent speculators trading on the London oil market to escape strict US rules on trading.

UK economic growth slows sharply

2008-07-26T03:47:00.000-07:00

The UK economy grew 0.2% in the second quarter of the year, as the credit crunch took its toll on the housing market and consumer spending.

The figure is the lowest growth quarter-on-quarter for three years.

It grew 1.6% on the same quarter a year ago, also the weakest growth for three years, and much lower than the 2.3% growth seen in the first quarter.

Economists had expected GDP growth to slip to 0.2%, and some are warning that a recession is likely.

Housing slowdown

The Office for National Statistics (ONS) said the slowdown was driven by the 0.7% fall in construction output, the biggest drop since the third quarter of 2005.

Construction companies have announced several thousand job cuts in recent months as the housing boom has stumbled to a halt.

The construction sector only accounts for 6% of the economy.

Industrial production has also fallen 0.5% in the quarter, the second successive drop.

And crucially, the service sector, which constitutes 74% of GDP, has also slowed. Output in the services sector rose 2.1% on the same period a year ago, the weakest annual growth since 1992.

Within the services sector, the transport, storage and communications category rose 2.2% on the quarter, the biggest rise since 2000.

Recession fears

The latest data heightens fears that the UK economy could enter a recession, and recent surveys by the CBI indicate that manufacturing output is likely to fall further.

Paul Dales, UK economist at Capital Economics, said: "An outright recession is now our central scenario. With industrial production having fallen in both Q1 and Q2, industry is already in recession.

"Looking ahead, the more up-to-date surveys suggest that in Q3 so far, overall economic growth has ground to a complete halt."

Interest rates will eventually need to fall, he added. "The recent drop in the oil price and the price wars on the petrol forecourts support our view that the next rate cut could come late this year, but this will be too late to prevent a recession," he said.

Added ING's James Knightley: "In terms of the outlook, we look for even weaker growth and possible contraction in Q3 and Q4."

Future decisions on interest rates also hinge on inflation, with rising oil and food prices pushing costs up across the world.

Alan Clarke, at BNP Paribas, said: "Growth has been much worse than (the Bank of England) expected. What really counts is what that does to the two-year ahead outlook for inflation."

UK warns of damage in TNK-BP row

2008-07-26T03:44:00.000-07:00

The British embassy in Moscow has warned of the damage being done by the dispute between TNK-BP's shareholders.

The oil company is half-owned by BP, with the other half owned by a group of Russian billionaires known as AAR.

The embassy said that their spat was damaging the economies of both Britain and Russia as well as harming the global energy market.

It also accused AAR's members of using parts of the Russian government to help them in their fight with BP.

"The way shareholders have manipulated elements of the Russian state bureaucracy and the way this has been allowed to continue is very disappointing," an embassy spokesman said.

"We will continue to stress to the Russian government the importance of a resolution between the shareholders in full accordance with the rule of law."

The Russian shareholders deny they want control of TNK-BP.

Visa rows

They insist their only goal is to remove Robert Dudley as chief executive of TNK-BP because they say he's not running the company in the interests of all those involved.

On Thursday Mr Dudley, said he was temporarily leaving Russia because of "sustained harassment".

This year TNK-BP has faced lawsuits, visa rows and industrial spying claims, as well as arguments about investment and the future role of Mr Dudley.

BP has withdrawn 150 of its foreign specialists from the country.

The Russian shareholders said the claims of harassment were "insulting", but still want Mr Dudley replaced because they claim that he is only running the joint venture in the interests of BP.

Another businessman who has had problems doing business in Russia is Bill Browder from Hermitage Capital.

He was barred from the country three years ago, having become the biggest foreign investor in Russia.

He told the BBC that the high asset prices in Russia combined with the sort of problems BP is having makes Russia a bad place to invest at the moment.

"At this point you have no rule of law, no property rights and the prices are high - that's kind of a sucker's bet," he said.

Falling shares

The dispute between AAR and BP was one of the reasons for the fall in share prices on the Moscow Stock Exchange.

The benchmark Micex exchange had fallen 5% by mid-afternoon.

Many investors are concerned about the effect that the TNK-BP dispute will have on potential foreign joint ventures.

Sentiment was also hit by recent falls in the price of oil, with energy being such a big part of the Russian economy.

"The last train carrying the optimists out of Russian equities has just left the station," said Chris Weafer, chief strategist at UralSib.

"Let's hope it's just for a vacation rather than emigration."

Oil prices slip to seven-week low

2008-07-26T03:41:00.000-07:00

Oil prices have tumbled to seven-week lows amid concerns that the slowing US economy will weaken demand.

US sweet, light crude fell $2.23 to settle at $123.26 a barrel - more than $20 off their peak earlier in July, when prices reached a record $147.27.

Brent crude in London also fell, dropping $1.92 to $124.52.

The oil market has been volatile as traders assess whether there will be enough supply to meet demand, with some predicting further price falls.

Analysts at Lehman Brothers predict oil prices could drop below $100 by the end of the first quarter of 2009.

But others are sceptical.

"Nothing in the fundamental drivers has changed," said Harry Tchilinguirian, an oil analyst at BNP Paribas.

Volatile market

Since last September, traders have been betting that the need for oil from economies, such as China, would continue to power the demand for oil.

Earlier this month, the International Monetary Fund (IMF) upgraded its economic forecasts for these countries.

At the same time, tensions between politically unstable oil-producing nations and the West sparked fears that supply would be constrained.

The weakening US currency has also encouraged investors to switch into commodities, which have been seen as a more attractive investment as the US economy falters.

A slight rebound in the dollar after a smaller-than-expected decline in new housing sales helped to give oil prices some relief, analysts said.

WTO ministers look to capitalise on new optimism

2008-07-26T03:39:00.000-07:00

A new sense of optimism surrounded WTO negotiations on a new global trade pact on Saturday amid hopes of a breakthrough after seven years of deadlock.

Ministers from 35 leading nations headed for meetings hoping to finally bridge their differences, with pressure piling on emerging market countries India and Argentina which have signalled opposition to a proposed deal.

"This afternoon's session will be important. India will be looking to see what it can get out of the session to decide whether to ditch discussions," a diplomatic source told AFP on condition of anonymity.

Ministers from 35 leading economies have been meeting at the World Trade Organization (WTO) since Monday to discuss cuts in subsidies and import tariffs with the aim of mapping out a new deal under the so-called Doha Round of WTO talks.

The Doha Round was launched in the Qatari capital seven years ago but has stalled because of disputes between the rich developed world and poorer developing nations on trade in farm and industrial products.

The talks this week looked doomed -- like so many others since Doha began in 2001 -- until a breakthrough late Friday saw the biggest powers find common ground on a draft agreement.

"I think the situation looks strong. I think we can be very hopeful now," said European Trade Commissioner Peter Mandelson as he left talks late on Friday.

The United States warned that a handful of countries could still torpedo the exercise and Argentina said the draft agreement was unacceptable.

"There are a handful of large emerging markets that quite frankly risk unravelling the entire package," said United States Trade Representative Susan Schwab.

She added, however, that while there was "more work to do, it is a path forward."

Indian Commerce Minister Kamal Nath has insisted all week that he will protect his country's millions of subsistence farmers and nascent industry, which are shielded from imports by tariffs levied on foreign goods.

"We're not very happy with the package, primarily on agricultural issues," said Indian ambassador to the WTO, Ujal Singh Bhatia, on Saturday.

Indian newspaper Business Standard reported Saturday that Nath had threatened to walk out of negotiations on Friday.

"We have come with many goodies. We expect to return with many goodies. If not, we'll return with the same goodies we brought," said Bhatia, underlining that India was still ready to walk away.

Mandelson said Friday that he thought the Asian giant would eventually come on board, telling reporters: "I don't think India will be the one to break a world trade round. I really don't."

The talks Friday focused on trade in farm and industrial products -- the two main sticking points of a deal -- but attention is set to turn Saturday to the services sector.

The gathering is due to over-run its original programme, which foresaw an end on Saturday, and continue throughout the weekend and early next week, sources said.

"My opinion is that the chances of reaching an accord have risen to 65 percent from 50 percent," said Brazil's trade negotiator, Foreign Minister Celso Amorim, who said he had accepted the draft agreement.

The marked turnaround Friday emerged after meetings between seven key trading powers -- the United States, the European Union, Australia, Brazil, China, India and Japan.

The talks then widened to a ministerial conference of all 35 key nations invited to Geneva to broker the pact.

Anything approved by the 35 parties would still have to be cleared by all 153 WTO member states. A new pact can only be adopted with unanimity.

WTO Director-General Pascal Lamy had warned earlier on Friday that the talks faced failure unless countries showed flexibility and determination.

Among new proposals he put forward Friday was a further cut in the US annual farm subsidies to 14.5 billion dollars (9.2 billion euros) and a clause to prevent developing countries from shielding entire sectors from tariff cuts, a source told AFP.

Diplomats and negotiators had said that Friday would be make-or-break at the end of gruelling week of bargaining that had produced scant evidence of progress.

Samsung chief makes legal appeal

2008-07-23T04:27:00.000-07:00

Chairman of South Korean firm Samsung, Lee Kun-hee, has filed an appeal over his suspended prison sentence and multi million dollar fine for tax evasion.

The charges followed a three-month investigation into alleged corruption at South Korea's biggest conglomerate.

Prosecutors have also appealed for a heavier sentence for Lee, who led South Korea's biggest business for 20 years.

Lee, 66, quit Samsung in April, less than a week after he was charged with tax evasion and breach of trust.

He was convicted this month for not paying about 47bn won ($46m; £23m) in taxes.

The court handed him a fine of 110bn won, but did not send him to jail even though tax evasion carries a potential life sentence.

But it found there was not enough evidence to convict him for the breach of trust charges.

At the time of his arrest, prosecutors said Samsung had a lot of "structural problems", including "illicit transfer of management control", in relation to transferring control of the company to his son.

Mr Lee, himself the son of the founder of Samsung, took over as head of the business in 1987, and it has since grown to become the world's largest producer of memory chips.

Samsung, which has a global workfore of 254,000, is best-known for its electronics unit, but it is also one of the world's largest shipbuilders and one of South Korea's leading companies.

Disappointing results from Yahoo

2008-07-23T04:26:00.001-07:00

Internet company Yahoo has reported worse-than-expected results for a three-month period in which it fought off a takeover approach from Microsoft.

Net income fell 18.6% to $131m (£65.8m) in the three months to the end of June.

Microsoft offered $31 a share for Yahoo in February but Yahoo has said it will only consider an offer of $37 a share.

The results came the day after Yahoo reached an agreement with Carl Icahn to stop him trying to replace its entire board at next month's annual meeting.

Mr Icahn and two of his appointees have been given seats on an enlarged Yahoo board in return for agreeing to withdraw his slate from election at the 1 August annual meeting.

Mr Icahn, who owns about 5% of Yahoo, felt that the search engine company should have accepted Microsoft's $31 a share offer - its shares closed on Tuesday at $21.58.

Another set of disappointing figures will increase pressure on Yahoo to reach a deal.

"The results, I would say, were relatively mediocre," said Ryan Jacob, a portfolio manager from Jacob Internet Fund.

"Given concerns about a slowdown in the display ad market, expectations were very low."

Indian stocks up after key vote

2008-07-23T04:08:00.000-07:00

Indian stocks have risen by more than 5% after the government won a vote of confidence that could pave the way for key economic reforms.

The Bombay Stock Exchange's benchmark Sensex index climbed 5.2% to 14,840.8 points, before slipping to 14,616.91.

The broader National Stock Exchange, rose 4.5% to 4,432.

Officials said the vote would clear the way for the liberalisation of rules on foreign investment in private banks and insurance firms.

As well as ensuring the survival of the ruling coalition, the vote of confidence also paves the way for a controversial civilian nuclear reactor deal with the US.

Indian shares have been fluctuating in recent weeks, prompted by investor fears over inflation and the uncertainty over the survival of the federal government.

'Biggest challenge'

"The market never likes uncertainty, so in that sense the end of the political uncertainty has brought in a feel good factor," said Arun Kejriwal, strategist at research firm KRIS.

"The government now has an opportunity to push through some reforms but whether they will actually be able to do it, I am not too sure."

According to the BBC's Sanjoy Majumder in Delhi the nuclear deal is expected to unlock billions of dollars in investment over the next two decades.

However, he said that attempts by Manmohan Singh's government to push through crucial economic bills, which will permit greater foreign investment in banking and insurance, would be tougher.

He added that the government's biggest challenge would be to manage voter discontent over growing inflation, now at nearly 12%, prompted in part by rising oil prices.

Oil prices extend losses as Dolly fears recede

2008-07-23T04:03:00.000-07:00

Oil prices fell further on Wednesday as the market expected Hurricane Dolly to avoid energy installations in the Gulf of Mexico, traders said.

The market was also awaiting the latest weekly update on the health of crude stockpiles in the United States, which is the world's biggest consumer of energy. Falling inventories could see prices rebound, they added.

New York's main contract, light sweet crude for September delivery, dropped by 1.57 dollars to 126.85 dollars a barrel in electronic deals. The August contract expired on Tuesday at 127.95 dollars, a long way off its historic high of 147.50 dollars that had been set on July 11.

Also Wednesday in early London trading, Brent North Sea crude for September delivery shed 1.77 dollars to 127.78 dollars.

Hurricane Dolly churned over the Gulf of Mexico on Wednesday towards the US-Mexican border, forcing thousands in Mexico to evacuate their homes as US oil rigs put staff ashore and the US Navy sheltered aircraft.

Packing sustained winds of 130 kilometres (80 miles) per hour, the second hurricane of the season was about 140 kilometres southeast of the Texas border town of Brownsville, the US National Hurricane Center said.

The storm was moving northwest at 15 kmph (nine mph), the centre said at 0600 GMT.

Some oil drilling companies in the area have evacuated personnel from their offshore rigs as a precaution.

The US Department of Energy was meanwhile to publish weekly energy stockpiles data at 1430 GMT.

Dollar nudges higher against yen in Asia

2008-07-23T04:00:00.000-07:00

The dollar rose slightly against the yen in Asian trade Wednesday, propped up by a drop in oil prices and renewed speculation about possible US interest rate rises, dealers said.

The US currency gained to 107.33 yen in Tokyo afternoon trade from 107.25 in New York late Tuesday.

The euro edged up to 1.5788 dollars after 1.5781 and to 169.44 yen from 169.27.

"A fall in oil prices is the main reason for the stronger dollar, along with hawkish comments by the Philadelphia Fed," said Kanako Oikawa, a currency strategist at Traders Securities.

Philadelphia Federal Reserve president Charles Plosser warned in a speech that a hike in US interest rates was unavoidable in the short-term in the face of inflation pressures.

While Plosser is seen as one of the most hawkish members of the Fed's rate-setting committee, his remarks rekindled speculation about possible US rate hikes that could boost the dollar, dealers said.

Investors generally prefer currencies offering higher yields.

US stocks staged a late rally Tuesday on easing worries about high energy costs and renewed interest in the battered financial sector.

The dollar also found support from US Treasury Secretary Henry Paulson, who reiterated Washington's preference for a strong currency and renewed his backing for troubled US mortgage finance giants Fannie Mae and Freddie Mac.

Markets were watching to see whether the euro will strike fresh record highs above 170 yen.

"The recent trend of the euro's steady rise against the yen is not likely to change anytime soon," Mitsuru Sahara, a senior dealer at Bank of Tokyo-Mitsubishi UFJ, told Dow Jones Newswires.

"The euro may rise to 175 yen over the next few weeks."

Against Asian currencies, the dollar fell to 1,013.70 South Korean won from 1,017.1 on Tuesday, to 9,147.50 Indonesian rupiah from 9,165.00, to 44.05 Philippine pesos from 44.65 and to 33.35 Thai baht from 33.36.

But it rose to 1.3594 Singapore dollars from 1.3524 and to 30.375 Taiwan dollars from 30.37.

Dollar little changed in Asia

2008-07-22T04:07:00.000-07:00

The dollar was steady in Asian trade on Tuesday as worries about resurgent oil prices offset relief that major US banks' earnings were not as bad as feared, dealers said.

The US currency was little changed at 106.37 yen in Tokyo morning trade compared with 106.41 in New York late Monday.

The euro rose slightly to 1.5932 dollars from 1.5921 and to 169.46 yen from 169.42.

"I don't think the dollar will move much this week against the Japanese currency," said Masatsugu Miyata, forex dealer at Hachijuni Bank. "We don't see many factors to support the yen."

Traders returning to work in Tokyo after a long weekend opted to wait for fresh leads after a rebound in oil prices counter-balanced easing concern about problems in the US financial sector, dealers said.

"The direction of the dollar against the yen remains unclear," said Saburo Matsumoto, chief forex strategist at Sumitomo Trust Bank.

Dealers were monitoring trading in the euro against the yen.

"We're interested in watching when the yen will hit a new low" beyond 170 per euro, said Matsumoto.

The euro continued to be supported by the higher level of interest rates in the eurozone compared with those in the US and Japan because investors generally prefer currencies offering better yields, dealers said.

Overnight the greenback got a boost after Bank of America posted a quarterly profit well above expectations, further soothing jitters about US financial woes after last week's smaller-than-expected loss at Citigroup.

But gains in the dollar were short-lived as oil prices, which plunged more than 16 dollars a barrel in New York last week, surged higher as a tropical storm barrelled through the Gulf of Mexico, threatening oil installations.

Inflation 'to hit Asian growth'

2008-07-22T03:59:00.000-07:00

Food and oil inflation and volatility in financial markets will cut growth in Asia to 7.6% this year from 9% in 2007, says the Asian Development Bank (ADB).

The Manila-based organisation said inflation in the region was expected to rise to 6.3%, more than double the average rate of the past 10 years.

Inflation has been rising in countries across the region, where half of family expenditure is on food and fuel.

To tackle inflation fiscal authorities have been tightening credit recently.

"Rising inflation is a serious threat to the region's sustained, strong growth as high import costs of food and fuel threaten to trigger a price/wage spiral, unleashing more inflation," ADB economist Jong-Wha Lee said in the bank's semi-annual report.

Economic growth in China is expected to slow to 9.9% in 2008 and 9.7% in 2009, from a growth rate of 11.9% in 2007.

The slowdown in China is seen as being due to a gradual appreciation of the yuan, monetary tightening policies and weakening external demand, the bank said.

Growth in the 10-member Association of Southeast Asian Nations (Asean) is forecast to ease by 1 percentage point to 5.5% in 2008, the bank said.

Iran opposes Opec oil output hike

2008-07-22T03:55:00.000-07:00

Iran, the number two oil producer in Opec, reaffirmed on Tuesday that it was against any hike in the cartel's output quota despite continued high crude prices.

"The market is in a good situation," Oil Minister Gholam Hossein Nozari told reporters in Tehran on the sidelines of a petrochemical conference.

"In the next Opec meeting we are heading towards winter. I think that preserving the current situation is the most appropriate one," he added.

The Organisation of Petroleum Exporting Countries is scheduled to hold its next regular meeting on September 9 in Vienna.

Algerian Energy Minister and President Chakib Khelil said on Monday that Opec states possess "considerable excess oil capacity that would be able to satisfy any increase in demand for crude."

Iran receives the majority of its foreign currency earnings through oil exports and has vehemently resisted calls from consumer countries like the United States for a hike in the Opec output quota.

The Islamic republic has also been at odds with the West over its nuclear programme, which it says is only aimed at producing electricity but the West fears could be used to produce nuclear weapons.

Oil prices struck record highs above 147 dollars earlier this month, boosted by weakness in the US dollar and simmering tensions over the nuclear standoff.

Iran, which borders the Gulf and the Strait of Hormuz through which around 40 percent of the world's oil supply crosses, has not ruled out blocking the passage in case of an attack.

Oil prices climb, with eyes on Dolly storm

2008-07-22T03:51:00.000-07:00

World oil prices rose on Tuesday as US forecasters issued a hurricane warning as Tropical Storm Dolly swirled through the Gulf of Mexico, where many US energy facilities are based.

Brent North Sea crude for September delivery added 1.03 dollars to 133.64 dollars per barrel in morning London trade.

New York's main contract, light sweet crude for August delivery, gained 99 cents to 131.97 dollars a barrel.

"Dolly is one of the factors. The situation is not so serious at the moment, but (the storm's) direction is hard to predict," said Ken Hasegawa, a broker at Newedge Japan.

The market had rebounded on Monday, after falling more than 16 dollars last week, as Dolly bounded into the Gulf of Mexico and the international community tightened pressure on oil producer Iran to halt its nuclear programme.

Forecasters issued a hurricane warning on Tuesday as Tropical Storm Dolly threatened to grow into a hurricane within 24 hours near the Mexico-Texas border.

"A hurricane warning is in effect for the coast of Texas from Brownsville to Port O'Connor. A hurricane warning is also in effect for the northeast coast of Mexico from Rio San Fernando north to the border with the United States," the Miami-based National Hurricane Center said at 0600 GMT.

The warning means hurricane conditions are expected in the area in the next 24 hours.

"Preparations to protect life and property should be rushed to completion," the NHC warned.

At 0600 GMT, the center of the storm was about 320 miles (515 km) southeast of Brownsville, Texas, as it moved westward near 17 mph (28 km/hr), it said, noting that "the center of Dolly should be very near the western coast of the Gulf of Mexico on Wednesday."

It was packing maximum sustained winds near 50 mph (85 km/hr) with higher gusts.

US energy major ExxonMobil has started evacuating non-essential personnel from some offshore oil production facilities expected to be in Dolly's path, but the company said there had been limited impact on production thus far.

Chevron and Royal Dutch Shell have also moved non-essential staff from their operations in the western part of the Gulf of Mexico.

The Atlantic hurricane season, which began in June and lasts until the end of November, usually peaks from September onwards and has been largely uneventful until now.

Investors are also watching closely for any developments in the Iran nuclear talks aimed at getting Tehran to halt its uranium enrichment programme, dealers said.

Sanofi in Australian vitamin deal

2008-07-21T03:30:00.000-07:00

French drugs giant Sanofi-Aventis is to buy Australia's largest distributor of vitamin supplements.

It will pay 560m Australian dollars ($545m; £274m) to Primary Health Care for the company.

Primary acquired the distributor when it bought Symbion Health in February and Primary said the sale would pay off debt from funding the Symbion deal.

Primary added the sale would help it to focus on core businesses and integrate the rest of the Symbion business.

Primary said that the "employees and customers will benefit under the new ownership of Sanofi-Aventis with its dedicated focus on the manufacture and marketing of healthcare products".

Fresh push in global trade talks

2008-07-21T03:28:00.000-07:00

Negotiators from more than 30 countries will meet in Geneva on Monday to inject fresh impetus into long-running efforts to agree a global trade deal.

Discussions have so far foundered over the extent of acceptable cuts to farm subsidies and how far trade in services such as banking should be liberalised.

US officials are desperate to finalise a deal before President George W Bush leaves office in January.

Supporters say a deal could boost the world economy by up to $100bn a year.

Sticking points

But sceptics say any agreement is unlikely to fully address distortions and inequalities in trading relationships between the world's richest and poorest countries.

Officials from the US, EU and emerging economic powers such as China, India and Brazil are under fierce pressure to try and reach agreement before the end of the year.

With a new US president coming into office early in 2009, observers believe countries need to capitalise on existing momentum to obtain a deal before then.

Chief US trade negotiator Susan Schwab has said she believes a historic deal in the coming days is "doable".

European Commission president Jose Manuel Barroso said the talks were "perhaps the last great opportunity" to achieve a deal.

But he added: "There is a lot of work to do on all sides."

But huge obstacles remain in the way of agreement, with little progress made on the key sticking points in recent months.

Several European nations, including France and Ireland, have warned that the EU is giving away too much ground in negotiations over proposed cuts to agricultural subsidies sought by developing countries.

French President Nicolas Sarkozy said last month that "conditions" were not right for a deal.

At the same time, the EU and US have become frustrated by the slow rate of progress in efforts to open up overseas markets to trade in business services and non-manufactured goods such as retail and insurance.

A question of politics?

Under the auspices of the World Trade Organization, officials will discuss draft texts on agriculture and non-farm goods - seen as the blueprint for a comprehensive deal - which were first released last summer.

Ahead of the meeting, Brazilian President Luiz Inacio Lula da Silva said he was keen to negotiate and was hopeful of an agreement that could give "poor nations better opportunities in international trade".

Experts said the hurdles to be overcome were now essentially political rather than technical.

"The details of the agreement are known," said David Hartridge, a former deputy director of the WTO.

"The question is whether governments are now ready to move on the political field."

Roche makes $43.7bn Genentech bid

2008-07-21T03:26:00.000-07:00

Swiss drugs firm Roche has offered to buy all outstanding shares in its US partner Genentech for $43.7bn(£22bn).

Roche - which makes the antiviral drug Tamiflu - acquired a majority stake in Genentech in 1990 and currently owns 55.9% of all outstanding shares.

It has offered $89 per share to buy up the remaining stake, a 8.8% premium to Genentech's Friday closing share price.

Meanwhile Roche's first-half net profit fell 2% to 5.73bn Swiss francs ($5.59 bn; £2.8bn), slightly above forecasts

Group sales increased by 10% to 22bn Swiss francs, with the firm saying that double-digit growth of key products outweighed lower sales of Tamiflu.

Roche expects a high single-digit sales increase this year.

It also says that if Genentech shareholders approve Roche's approach then the move will deliver annual pre-tax savings of $750 to $850m.

Franz Humer, chairman of the board of Roche, said: "Combining the strengths of Roche and Genentech will create significant value and result in benefits for patients, employees and shareholders."

British economic 'horror movie' to continue: think-tank

2008-07-21T03:24:00.000-07:00

Britain's economic 'horror movie' will continue in the months to come, with growth slowing considerably, while unemployment will rise and inflation will remain above government targets, an influential economic forecasting group said on Monday.

The Item Club, which is backed by accounting giant Ernst and Young, predicts Britain's economy will grow by one percent in 2009, much slower than finance minister Alistair Darling's own forecasts of 2.25-2.75 percent, made when he delivered the annual budget in March.

Its report comes after Darling himself said in a newspaper interview published Saturday that the economic downturn here would be more "profound" than he expected, adding that the economic picture was "at the bottom end" of his range.

The forecasting group said that while the picture was not as bleak as the struggles that preceded a recession in the early 1990s, it was imperative that wages be kept in check so as not to let inflation, already at a 16-year high of 3.8 percent annually, get out of control.

"As with any horror movie, there is an escape route but it is not an easy one," the report read.

"It is imperative that wage increases remain restrained, despite the tremendous pressure from food and energy cost inflation... A general outbreak of wage inflation would spell disaster, requiring much higher interest rates and a recession in output to get inflation back under control."

According to the Item Club, house prices will drop on average by about 10 percent through this year, and a further six percent through 2009, and year-on-year inflation will remain above the government's two percent target for the coming 12 months.

Unemployment, meanwhile, will rise to two million by 2010, compared to 1.6 million at the end of last year.

"Both on the high street and in the housing market, it is going to get a great deal worse before it gets better," Item Club Chief Economist Peter Spencer said.

He added: "Consumers will inevitably cut back on non-essential spending in the face of the impact of rising food and energy prices on their discretionary incomes."

Oil prices higher in Asia after Iran nuclear talks stall

2008-07-21T03:21:00.000-07:00

Oil prices were higher in Asian trade on Monday after weekend talks in Geneva aimed at convincing Iran to halt its nuclear programme made little progress, dealers said.

In early morning trade, New York's main contract, light sweet crude for August delivery rose 82 cents to 129.70 dollars a barrel.

Brent North Sea crude for September delivery added one cent to 130.20 dollars.

Investors are focused once again on the geopolitical situation in the oil-rich Middle East after efforts to make Iran halt its nuclear programme stalled Saturday during talks in Geneva over the weekend.

"It was a constructive meeting, but still we didn't get the answer to our questions," EU foreign policy chief Javier Solana said after the talks that aimed to get Tehran to give up its disputed atomic plans in return for incentives.

"There is always progress in these talks, but insufficient," he said, adding that the Iranians were expected to respond to the latest negotiations within two weeks.

He did not overtly address the question of further sanctions, but the US State Department after the talks warned Iran to accept the incentives or face "further isolation."

"We hope the Iranian people understand that their leaders need to make a choice between cooperation, which would bring benefits to all, and confrontation, which can only lead to further isolation," spokesman Sean McCormack said in a statement.

Zimbabwe introduces Z$100bn note

2008-07-20T03:14:00.000-07:00

Zimbabwe is to introduce a bank-note worth Z$100bn in response to rampant inflation - but the note will barely cover the cost of a loaf of bread.

Some Zimbabweans are already calling for higher denominations in a country where the official annual inflation rate has exceeded 2,200,000%.

Independent economists believe the real rate is many times higher.

Zimbabwe's meltdown has left at least 80% of the population in poverty, facing mass shortages of basic goods.

The country's central bank has introduced several new notes already this year in response to the hyperinflation.

In January, a Z$10 million note was issued, followed by a Z$50 million. By June the denominations had reached tens of billions.

Daily bread

In a notice in the state-controlled Herald newspaper, central bank governor Gideon Gono said the Reserve Bank of Zimbabwe would introduce the new notes - known as special agro-cheques - to help consumers.

"This new $100 billion special agro-cheque will go into circulation on Monday," the notice said.

But Zimbabwe residents say the latest note is already worthless, and does not even cover their daily lunch.

"Nowadays, for my expenses a day, I need about Z$500 billion," one resident said.

"So Z$100 billion can't do anything because for me to go home I need Z$250 billion, so this [note] is worthless."

Zimbabwe was once one of the richest countries in Africa.

But it has descended into economic chaos in recent years, with many international observers blaming the policies of President Robert Mugabe.

Kenya sued over biofuel project

2008-07-20T02:57:00.000-07:00

Environmental and community groups have taken Kenya's government to court over a controversial project to grow sugar in the River Tana Delta.

The $369m project aims to grow sugarcane to produce ethanol and generate power.

The project was approved last month, despite concern of possible negative impact on the fragile coastal wetlands.

But last week, a judge ordered work on the project to be halted while the case was being heard.

The lawsuit claims that at least five laws and the Kenyan constitution would be broken if the project goes ahead.

The court action is backed by Kenyan Nobel Laureate and environmentalist Wangari Maathai, who warned that the country would regret failing to protect its environment.

"We cannot just start messing around with the wetland because we need biofuel and sugar," Ms Maathai told the AFP news agency.

Endangered

The area, about 190 km (120 miles) north of the port city of Mombasa, is home to 350 species of birds, including the globally threatened Basra reed warbler and Tana River cisticola, according to the UK's Royal Society for the Protection of Birds (RSPB).

It also hosts lions, hippos, elephants, rare sharks and reptiles including the Tana writhing skink, as well as endangered primate species.

Nature Kenya says the project would have serious effects on the 20,000 hectare site.

"We want the project stopped because it's likely to make the region an ecological disaster," Enoch Kanyanya, the organisation's conservation manager told the BBC.

Sugarcane needs considerable irrigation and its cultivation would cause substantial drainage of the wetland, conservationists say.

Although the project's backers say the project will boost the area's economic growth and provide thousands of jobs, environmental groups say it is not economically viable and its growth potential has been massively overestimated.

A report commissioned by Nature Kenya and the RSPB showed the project's costing had ignored the costs of water, land and the loss of community livelihoods.

The Tana River Delta is a popular tourist attraction and environmentalists argue that the project would also lead to the loss of earnings from tourism, and want the wetlands to be declared a protected area.

The global race to produce biofuels has been blamed for rising food prices and shortages by diverting resources from the cultivation of food crops.

UK aid agency Oxfam says the push for biofuels has dragged more than 30m people worldwide into poverty.

Google profits trigger concerns

2008-07-20T02:54:00.000-07:00

Google's profits rose by less than expected between April and June, raising concerns of a slowdown in the online advertising market.

The internet giant posted a 35% rise in second quarter net profit to $1.25bn (£626m) - slightly below forecasts.

The company said its business had held up well despite a more challenging economic environment.

But investors, used to Google outperforming, sent shares tumbling 9.4% to $483.67

"There's the initial shock of this being the best company in the space and it just fell short, said Colin Gillis, analyst at Canaccord Adams.

'Challenging environment'

Google reported a 39% rise in revenue to $5.37bn in the three months to 30 June.

"Strong international growth as well as sustained traffic increases on Google's web properties propelled us to another strong quarter, despite a more challenging economic environment," said Eric Schmidt, Google's chief executive.

The company blamed its below-forecast performance on lower returns from investing its $12.7bn cash pile as a result of volatile interest rates.

The number of paid clicks on websites operated by Google and its partners fell 1% from the first quarter.

Stanford Group analyst Clayton Moran said it was evidence "there is a slowdown in internet advertising that's affecting Google".

Google employed another 448 people during the quarter - the fewest hired since the fourth quarter of 2004.

China loses WTO car parts dispute

2008-07-19T04:24:00.001-07:00

China has been told its tariffs on foreign car parts break World Trade Organization (WTO) rules.

At least 60% of components used in Chinese cars must be made in China or firms pay higher taxes under Beijing's current system.

The international trade body said the practice was protectionist and called on China to change its import caps.

The US, Canada and the European Union complained to the trade body that Beijing had broken the WTO's rules.

The US Trade Representative Susan Schwab said enforcing trade rules through dialogue or litigation was a critical part of the US trade agenda.

"The panel report leaves no doubt that China's discriminatory treatment of US auto parts has no place in the WTO system," she said.

Level playing field

Chinese officials had argued that the country's tariffs were aimed at preventing foreign companies importing whole cars as spare parts to avoid paying taxes.

Analysts said the row over car parts had been a hot issue in the US, because carmaking - already hit by fierce foreign competition and an economic slowdown - is an important American industry.

"We will continue our efforts to ensure that US manufacturers and workers in this and other industries enjoy the benefits of open markets and a level playing field," Ms Schwab said.

The ruling in Geneva brings the global dispute to an end.

In February, the WTO made a preliminary ruling saying foreign-made car parts were in a less favourable position than Chinese-made alternatives.

Sony Ericsson to axe 2,000 jobs

2008-07-19T04:22:00.001-07:00

Mobile phone maker Sony Ericsson has said it will shed 2,000 jobs worldwide over the coming year to cut costs.

The news came as Sony Ericsson reported an operating loss of 2m euros ($3.1m; £1.59m) for the second quarter, against a profit of 315m euros a year ago.

Sony Ericsson said it was aiming to cut operating costs by £300m a year.

In June, the company had warned its profits would be less than previously forecast as demand for expensive handsets waned.

Sales in the quarter fell by 9.4% to 2.82 bn euros.

A company spokesman said a review of all operations, including those in the UK, would be taken before any decisions were made about where jobs would be cut.

Spending squeeze

The company is a joint venture between electronics firm Sony and telecoms equipment maker Ericsson.

Consumer demand has been hurt by a credit crunch that has prompted banks to withdraw many loans and mortgages.

As a result, many consumers have had less money to spend and have had to cut back on their outgoings.

The slowdown in many of the world's largest economies such as the US, UK and Japan has hit both consumer and corporate spending.

'More agile'

Sony Ericsson has been trying to do more business in emerging markets, as European trade reaches near-saturation levels.

That has meant the sale of more low-end, less costly, phones.

"Our target is to achieve a reduction in operating expenses of 300m euros annually, with the full effect expected to appear within a year," Sony Ericsson chief executive Dick Komiyama said.

"The measures we are taking are aimed at becoming a faster, more agile and more cost efficient organisation that can continue to create innovative products that excite consumers."

Pakistan shares end 15-day slump

2008-07-19T04:13:00.000-07:00

Pakistan's main share index closed slightly higher on Friday, breaking a run of 15 consecutive days of falls.

It followed Thursday's emergency late session at which brokers bought 4.5bn rupees ($64m; £32m) of shares from investors desperate to exit the market.

There had been violent protests earlier on Thursday from angry investors who smashed stock exchange windows while calling for a temporary trading halt.

The KSE 100 share index ended Friday up 21.8 points, or 0.2%, at 10,234.78.

Pakistani shares have been falling steadily since the new government came to power three months ago.

Investors are concerned about whether the government will be able cope with the country's inflation, or its trade and budget deficits.

The KSE 100 index has fallen 12.5% this week and is down 35% from its record high reached in April this year.

Oil price drop in volatile market

2008-07-19T04:06:00.000-07:00

The price of oil has recorded its biggest weekly drop, slipping under $130 a barrel on Friday.

Crude prices have fallen more than 11% over the past four days, knocking $15 off a barrel of oil in that period.

Fears of high prices weakening the US economy set oil off on one of the biggest weekly falls since 1983.

Sweet crude for August delivery fell 41 cents to settle at $128.88 in New York - far off the record of more than $147, reached one week ago.

A key reason for this week's decline was evidence of falling demand for gasoline in the US, despite it being the peak summer driving season, analysts said.

Another key factor was the easing of tensions in the Middle East and Nigeria, both major production points for crude.

"From both a demand and supply perspective, the fundamental picture has turned more bearish," said Walter de Wet, an analyst at Standard Bank in Johannesburg.

It has been a volatile month for commodities. Oil prices edged up after the IMF raised its global economic forecast for 2008 earlier this week.

And although a pipeline in Nigeria belonging to Italian energy group Eni was blown up, another pipeline belonging to Chevron in the country has been repaired after sabotage in June.

Also, the US said on Wednesday it was sending an envoy to Geneva to join nuclear talks with Iran for the first time.

Military action against Iran could lead to the closure of the Straits of Hormuz, through which nearly half of the world's traded oil moves.

Roy Mason, of oil consultancy Oil Movements, estimated on Thursday that Opec oil exports, excluding Angola and Ecuador, would rise by 560,000 barrels per day in the four weeks to the beginning of August.

Protest over Pakistan share slump

2008-07-17T03:20:00.000-07:00

Angry investors have attacked the Karachi Stock Exchange (KSE) in protest at plunging Pakistani share prices.

More than 200 people took part in the demonstration at the country's main stock exchange in the southern city.

A number of windows were broken and at least two people injured, Reuters news agency reports.

The protesters demanded a temporary closure of the KSE to stop further slides. It is down 14% since Monday and reached an 18-month low this week.

There were smaller protests in the cities of Islamabad and Lahore, where demonstrators burned tyres near the local exchanges.

A growing company and consumer debt burden and surging inflation have led to a crisis of confidence in Pakistan's economy, analysts say.

Concern has also been fuelled by political infighting between the new coalition government and its allies, as well as growing US pressure on the authorities to crack down on Islamic militancy in the country.

Smashed windows

The small investors who gathered in the main hall of the Karachi Stock Exchange were alarmed by stock prices falling for the 14th day in a row.

By about midday (0600 GMT) on Thursday share values on the KSE had fallen more than 4%, or 433.51 points, to 10,058.37.

The rupee also dropped by 1.3%, continuing a slide which has seen it lose 16.9% of its value against the dollar so far this year.

Investors in Karachi demanded a temporary halt to trading.

When this was denied, some went on the rampage, smashing windows and lights until they were dispersed by police.

"We are looking at the situation and there is no question of suspending the market," Razi-ur-Rahman, chairman of Securities and Exchange Commission of Pakistan (SECP), told Reuters.

The BBC's Barbara Plett in Islamabad says there has been a slump in investor confidence amid doubts that Pakistan's newly-elected government can deal with economic challenges like run-away inflation and wide trade and budget deficits.

The authorities have inherited much of the problem from the previous government, and that has been compounded by high world oil and food prices, our correspondent says.

But economists say lack of leadership from the weak coalition is one of the main risks to macroeconomic stability.

"What is needed at this point, is aggressive action from the government to lift sentiment," Shuja Rizvi, director of broking operations at Capital One Equities, told Reuters.

Oil prices higher in Asian trade

2008-07-17T03:17:00.000-07:00

World oil prices rebounded in Asian trade on Thursday after sharp falls on a bigger-than-expected rise in US crude reserves, analysts said.

New York's main futures contract, light sweet crude for August delivery, had dropped more than 10.50 dollars over two days.

On Thursday the benchmark contract rose 23 cents to 134.83 dollars a barrel after closing Wednesday at 134.60, off 4.14 dollars, at the end of US trading hours.

That fall followed a dive of 6.44 dollars on Tuesday, its sharpest daily decline since January 1991.

Brent North Sea crude for September delivery gained 49 cents to 136.30 dollars.

The Brent August contract expired on Wednesday, down 2.56 dollars at 136.19 dollars in London.

The US Energy Information Administration said Wednesday that crude inventories rose by 3.0 million barrels to 296.9 million barrels in the week ending July 11, confounding market expectations for a decline of 2.2 million barrels.

Oil prices had soared after breaking through 100 dollars at the start of 2008, and hit peaks above 147 dollars last Friday. The record prices sparked protests around the world, and fears for economic growth.

Dollar eases in Asian trade as financial worries linger

2008-07-17T03:16:00.001-07:00

The dollar reversed gains against the euro and yen in Asian trade Thursday as markets remained on edge for surprises in US banking earnings despite a rally on Wall Street, dealers said.

The dollar eased to 105.01 yen in Tokyo morning trade from 105.12 in New York late on Wednesday.

The euro firmed to 1.5839 dollars from 1.5821 but was flat at 166.31 yen.

"The dollar's overnight rally was limited as markets are cautious ahead of more banking results and have priced in that they will be negative," said Hideaki Inoue, chief forex manager at Mitsubishi UFJ Trust and Banking Corp.

Major US investment banks JPMorgan and Merrill Lynch are set to reveal their balance sheets later Thursday. Citigroup, which has been hit hard by the subprime loan crisis, reports earnings on Friday.

The greenback had firmed against other major currencies on Wednesday on falling oil prices and a surge in US shares triggered by a better-than-expected second quarter earnings reports by Wells Fargo and chip-maker Intel.

The US unit was also supported by speculation that the Federal Reserve may be forced to raise interest rates after a jump in consumer inflation.

"Inflation is currently too high," Fed chairman Ben Bernanke said in a second day of testimony to Congress, speaking after consumer prices rose 1.1 percent in June from May for an annual pace of 5.0 percent.

The monthly jump in the consumer price index was the sharpest since June 1982, while a 0.3 percent rise in core CPI excluding energy and food was the strongest since January.

Meanwhile the euro continued its downward trend against the dollar, falling from its all-time high reached earlier this week on mounting worries over a cooling European economy, dealers said.

"Currently, the overall European economy is doing better than the US economy, but there is no doubt that Europe will worsen. It's only a matter of time that markets will shift their focus to that," Inoue said.

McDonald's franchisee fined $1m for hiring illegal immigrants

2008-07-17T03:13:00.000-07:00

A company that owns 11 McDonald's restaurants in Nevada was fined one million dollars on Wednesday after pleading guilty to employing 58 illegal immigrants.

The company, Mack Associates Inc., knew the employees were illegal immigrants and had offered them names and social security numbers belonging to other people, the US Justice Department said.

The company pleaded guilty in federal court in Las Vegas to conspiracy to encourage and induce an alien's unlawful residence in the United States and aiding and abetting an alien to remain in the country, the department said.

The company's director of operations also pleaded guilty to aiding and abetting an alien to remain in the country.

And the former vice president of Mack Associates pleaded guilty to inducing an illegal alien to remain in the United States and faces a possible sentence of up to five years in prison and a 250,000 dollar five.

About 30 of the illegal workers have returned to their native countries while the rest were allowed to stay in the United States until the case closes.

World Bank, Pakistan in talks on funding package

2008-07-17T03:10:00.000-07:00

The World Bank is in talks with Pakistan on a broad economic package that could include government-agreed reforms and financing by the bank to stabilize the economy, a bank official said on Wednesday.

Rob Floyd, the World Bank's program manager for Pakistan, denied media reports that the development lender had approved a $500 million emergency loan for Pakistan, which like other developing countries faces budget constraints due to soaring fuel and food prices.

"The World Bank has been in discussions with Pakistan on a stabilization package that may include reforms from their side and financing from ours, but we have not come to closure on that," Floyd told Reuters.

He said discussions had been under way for several months.

Media reports said the $500 million was agreed in talks between the World Bank and Pakistan's Finance Minister Naveed Qamar in Islamabad on July 14, and would be considered by the bank's board in August. The loan would help restore confidence in Pakistan following months of political turmoil.

New civilian government of Pakistan is under pressure to deal with slowing economic growth, inflation that is running at over 20 percent, exchange rate instability, and dwindling currency reserves.

Faced with a dire situation, the new government is banking on budget support from foreign and multilateral lenders to help it cope.

Decision-making in Pakistan was paralyzed during the last months of Musharraf's government, and during a caretaker administration that held the reins until the new civilian government was formed after an election in February.

Prime Minister of Pakistan Yousuf Raza Gilani said on July 1 the government wouldn't flinch from unpopular measures to put the economy on sounder footing, including raising gas prices and phasing out subsidies entirely.

UK fund will accept Japan rebuff

2008-07-15T02:41:00.000-07:00

A British hedge fund, whose request to up its stake in a Japanese utility was rejected by the Japanese government, has said it will accept the decision.

The Children's Investment Master Fund wanted to increase its stake in Japan's Electric Power Development company - or J-Power - from 9.9% to about 20%.

But the Japanese government rejected it citing national security reasons.

The fund has said it will instead concentrate on improving corporate governance at J-Power.

"Disconcerting" decision

Japanese law states government approval is needed if foreign companies want a stake of over 10% in some sensitive sectors such as utilities or weapons manufacturing.

The government was worried that an increased stake would give the fund greater sway over decision-making at J-Power, which could have an adverse effect on the overall functioning of the country's utilities sector.

Despite the Children's Investment Master Fund disagreeing with the government's reasons, it has now said it will not be opposing it as the government is unlikely to change its mind.

"It is disconcerting that legitimate investors who want to improve corporate governance of privatised and listed companies can be so hastily characterised as threats to public order," said fund director John Ho.

Fears have now been raised about Japan's ability to attract foreign investment as several foreign takeover attempts have recently been rebuffed.

One recent example of Japan stalling foreign investment was the case of condiment company Bull-Dog Sauce.

American firm Steel Partners had wanted to take over the sauce company, but Bull-Dog employed the "poison-pill" tactic of threatening to dilute any Steel Partners' holding by issuing fresh shares of its own.

The US company appealed but its complaint was later rejected by Japan's Supreme Court.

US concerns prompt market falls

2008-07-15T02:37:00.000-07:00

Global shares have fallen with analysts blaming mounting concerns about the health of the US economy and its impact on the rest of the world.

A sell-off in Asia hit Hong Kong's Hang Seng index which fell 4%, while Japan's Nikkei index lost 2% and Chinese shares fell by 3%. London's FTSE 100 lost 1%.

There are concerns about slowing growth denting company earnings.

Meanwhile, US attempts to bail out its two largest mortgage lenders have left investors even more anxious.

The government-backed rescue of Freddie Mac and Fanny Mae - in the aftermath of the collapse of another lender IndyMac - had initially been well received but analysts say optimism appears to have faded.

Inflation climbs to 3.8% in June

2008-07-15T02:34:00.000-07:00

Rising food and fuel costs pushed UK inflation up to 3.8% in June from 3.3% in May, official figures have shown.

The rise means inflation is now well above the 2% target, and may reduce the chance of a cut in UK interest rates.

The Bank of England, which has already said inflation may top 4% this year, has to balance the need to control inflation with worries over growth.

The RPI inflation measure - often used as a benchmark in pay negotiations - rose to 4.6% in June from 4.3% in May.

Rate dilemma

The figures, which came in above forecasts for the third month in a row, mean the Bank of England will now have less breathing space to cut interest rates.

The Bank is currently trying to balance growing evidence of an economic slowdown against the problem of rising inflation.

"The Bank of England can't cut rates until it is convinced inflation is moving downwards," said James Knightley, economist at ING.

Food and non-alcoholic drinks were the main factors fuelling the rise, with prices increasing by a record 2.1%, the ONS said.

Meanwhile, surging oil prices have driven up the cost of fuel with the average price of petrol increasing by 5.3p a litre

Japan keeps interest rate on hold

2008-07-15T02:27:00.000-07:00

Japan's central bank has left interest rates on hold and cut its forecast for growth amid concerns about rising costs and signs of an economic slowdown.

The Bank of Japan voted to keep the benchmark rate at 0.5% - the same level it has been at since February 2007.

At the same time it lowered its economic growth forecast for the year to March 2009 to 1.2% from 1.5%.

Soaring gas and food prices and rising material costs are weighing on the world's second-largest economy.

There are also worries that Japan's heavy dependence on exports means it is vulnerable to the slowdown in the US.

"Economic growth is slowing further reflecting weaker growth in business fixed investment and private consumption against the backdrop of high energy and material prices," the BoJ said.

"With regard to risk factors, global financial markets remain unstable and there are downside risks to the US and the world economy," it added, saying that global inflationary pressure was increasing.

The BoJ said that growth in 2009/10 would be 1.5%, compared with 1.7% in April.

Oil prices lower on stronger dollar

2008-07-15T02:24:00.000-07:00

World oil prices eased in Asian trading on Tuesday on the back of a slightly stronger US currency, dealers said.

New York's main contract, light sweet crude for August delivery, was off 41 cents to 144.77 dollars a barrel from Monday's close of 145.18 dollars at the end of US trading hours.

Brent North Sea crude for August delivery dropped 24 cents to 143.68 dollars a barrel.

"The dollar rally has put some downward pressure on oil," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz.

A strengthening greenback can make oil less affordable for buyers using other currencies, potentially curbing demand and crude prices.

But dealers expect a limited dip in crude prices because of supply concerns and geopolitical tension in the oil-rich Middle East over Iran's uranium enrichment programme.

Tehran insists its nuclear drive is aimed solely at generating energy, but some Western nations fear it could be aimed at making an atomic bomb and have called for a freeze of its uranium enrichment.

Dealers fear potential supply disruption from Iran in the event of conflict with the United States or Israel. Iran is the second-biggest crude oil producer in the Organisation of the Petroleum Exporting Countries (Opec) cartel.

"There is limited downside risk to oil pricing in the coming weeks because of supply-side concerns.... the situation over Iran remains fluid," said Shum.

A five-day strike by oil workers in Brazil against the state-run company Petrobras is also expected to exacerbate supply concerns, dealers said.

Petrobras said oil output was cut seven percent as the strike affected platforms offshore from Rio de Janeiro in the Campos basin, which provides 82 percent of the firm's daily 1.8-million-barrel output.

Brazil is the world's 12th largest crude producer.

"Recently, the oil complex has been driven by supply threats," analysts from Societe Generale said in a report, adding "tensions and rhetoric over the Iran nuclear programme continue to run high."

Oil prices have almost doubled over the past year and have soared since breaking through 100 dollars at the start of 2008. The record prices have sparked protests around the world amid fears for economic growth.

Plane maker invests £500m in NI

2008-07-14T01:54:00.000-07:00

Bombardier Aerospace is investing half a billion pounds in Northern Ireland, which will sustain over 800 jobs.

A total of £519.4m will be used to design and manufacture wings for their 110 to 130 seat C-Series aircraft at the Shorts factory in east Belfast.

It is the largest single investment in Northern Ireland by any company.

Northern Ireland First Minister Peter Robinson said: "I don't believe this would have happened if it hadn't been for devolution."

He added: "I just know, without giving away too many of the commercial issues involved, that this simply would not have happened if there had not been devolved institutions in Northern Ireland."

Mr Robinson said he and Deputy First Minister Martin McGuinness had been working on the deal "almost on a daily basis for these past months".

The government has also agreed to provide £52m to the project at Bombardier's east Belfast plant as part of a wider £155m government investment package in the Canadian firm.

Mr McGuinness said: "The investment will also see the development of state of the art technology as well as developing the manufacturing and engineering skills of our workforce that will benefit our economy for years to come."

Economy Minister Arlene Foster said: "Undoubtedly, the expertise in advanced design and innovative composite materials which Bombardier has developed in Belfast has been instrumental to today's decision."

Northern Ireland Secretary Shaun Woodward said the decision was proof that "devolution is winning for Northern Ireland".

Announcing the investment on the eve of the Farnborough air show, Bombardier said greener fuel-efficient technology used in the C-Series would "revolutionise" the 100 to 149 seater market.

The long-running project was dropped two years ago, but the Canadian aerospace firm resurrected it last year amid amid rising fuel costs globally.

Lufthansa has provisionally ordered 30 planes with an option for 30 more.

Nigeria seeks to end 'blood oil'

2008-07-14T01:52:00.000-07:00

An international cartel of oil smugglers steals billions of dollars in "blood oil" from Nigeria, trading it for guns, the president has said.

Speaking at the G8 summit in Japan, President Umaru Yar'Adua drew comparisons between oil "bunkering" and the trade in "blood diamonds".

He said an international effort must be made to stop the trade, which fuelled unrest in the Niger Delta.

The conflict means Nigeria is no longer Africa's largest oil exporter.

Militant attacks in the Delta have reduced production by around a quarter, allowing Angola to overtake Nigeria.

But no-one really knows exactly how much oil is pumped out of the ground, according to a Senate inquiry set up in March.

The smuggling cartel includes officials at the Nigerian state oil company, government, the military and international oil companies, according to Delta activists.

Cheap oil

Trying to stop the trade must be an international effort, the president says, because the people driving the market are companies looking for cheap crude to feed international markets.

"Stolen crude should be treated like stolen diamonds because they both generate blood money," President Yar'Adua said.

"Like what is now known as 'blood diamonds', stolen crude also aids corruption, violence and can provoke war."

The trade in diamonds helped fuel the conflicts in Sierra Leone and Angola, prompting campaigners to put pressure on the industry to tighten regulations.

A Rivers State government spokesman told the BBC it was time to crack down on the international members of the cartel.

"Some smart alec comes to Nigeria with a vessel partly loaded with guns, partly with cash," said Ogbonna Nwuke.

"In return, he gets cheap oil and delivers the weapons to some boys who think they're fighting the Niger Delta cause."

"The result is confusion."

Tankers

But activists in the Delta say there is no way oil smuggling could be done without the compliance of corrupt elements of the Nigerian state.

"I have never seen this bunkering business as an illegal thing," says Anyakwee Nsirimovu, a Port Harcourt-based human rights lawyer.

"For God's sake, the waters around Nigeria are not a free area, where you can just pass without anyone asking any questions."

In order for tankers to dock and receive oil from boats coming from the creeks, there must be a high level of involvement from government and the military, he says.

"They are making billions of dollars and they don't want this thing to end."

Brazil oil workers begin strike

2008-07-14T01:50:00.001-07:00

A five-day strike by workers at Brazil's state-run oil company, Petrobras, is under way, raising fears of further pressure on oil prices.

The firm is playing down the potential impact of the dispute, which is over offshore working conditions.

The management say there is a contingency plan to maintain output.

But a union spokesman said while management would do everything they could to maintain production workers would do their best to disrupt it.

The strike by employees at the 42 oilfields in the Campos basin off the coast of the state of Sao Paulo went ahead ahead after talks last week ended without agreement.

At the heart of the dispute is a union demand that a day spent travelling from oil platforms to the mainland should be counted as work.

At the moment employees are paid for a shift of 14 days followed by 21 days of rest.

Bigger slice

The Campos basin accounts for 80% of Petrobras' daily production of 1.8 million barrels of oil.

But the company president, Jose Sergio Gabrielli, has been playing down the impact of the dispute saying that daily variations in oil prices do not have a great significance.

World oil prices on Friday hit a new record high, rising above $147 a barrel because of a range of factors, such as tensions over supplies from Iran and Nigeria.

But analysts said the potential strike at Petrobras was also having an impact.

The situation has the potential to escalate as further disruption is being discussed at all Petrobras facilities, including refineries and terminals, as part of union demands for a bigger share of profits for employees.

The company has recently announced a number of major oil finds offshore, which have attracted huge international attention.

But these are deep beneath the seabed and the costs of production, which is still several years away, are expected to be high.

Yahoo rejects new break-up offer

2008-07-14T01:48:00.000-07:00

Yahoo has angrily rejected a joint takeover offer from Microsoft and the investor Carl Icahn.

Microsoft would have bought Yahoo's search engine while Mr Icahn would have ended up with the rest of the business.

Yahoo objected to being given only 24 hours to consider the offer and there being no opportunity to negotiate the terms of the deal.

"It is ludicrous to think that our board would accept such a proposal,"

Yahoo said in a statement.

"This odd and opportunistic alliance of Microsoft and Carl Icahn has anything but the interests of Yahoo!'s stockholders in mind," Roy Bostock, chairman of Yahoo, said.

Still for sale

The proposal involved the immediate removal of the Yahoo board as well as its top management.

The statement from Yahoo repeated the offer to sell the entire company to Microsoft for at least $33 (£16.5) a share and suggested that a takeover of the entire company would be much simpler than the proposed restructuring.

Microsoft offered $31 a share for Yahoo in February. On Friday the shares closed at $23.16.

The latest offer comes weeks before Yahoo's 1 August annual meeting, when Mr Icahn will be trying to replace its board with his own slate of directors.

Mr Icahn owns about 5% of Yahoo.

Microsoft has said it is no longer interested in negotiating with the current directors, but will enter talks if a new board is in place in August.

Oil prices down in Asia trade

2008-07-14T01:43:00.000-07:00

Oil prices fell by more than 1.50 dollars in Asia on Monday after supply worries helped push prices to a record high last week.

New York's main oil contract, light sweet crude for August delivery, fell 1.65 dollars to 143.43 dollars a barrel.

The contract hit an intra-day peak of 147.27 before closing at 145.08, up 3.43 dollars on the New York Mercantile Exchange Friday.

Brent North Sea oil for August delivery fell 1.24 dollars to 143.25. On Friday Brent jumped as high as 147.50, a new intra-day record, before settling up 2.46 dollars at 144.49 in London.

Tensions between the West and Iran, along with unrest in Nigeria, have helped to support the high prices, according to dealers.

Oil prices have almost doubled over the past year and have soared since breaking through 100 dollars at the start of the year. The record prices have sparked protests around the world amid fears for economic growth.

Global energy needs 'to grow 50%'

2008-07-13T02:23:00.000-07:00

World demand for oil will grow by 50% between now and 2030 as people in developing countries drive more cars, oil producers' group Opec says.

In its 2008 world outlook, Opec said that adequate oil reserves and new methods of exploiting them would allow supply to keep up with demand.

The group blamed sky-high oil prices on the weak US dollar and speculators.

But critics say it is Opec's refusal to increase oil supply that is causing sky-rocketing crude prices.

Opec said that years of relatively low oil prices had led to under investment in oil production, leaving the industry unable to meet increased demand driven by booming economies such as China.

"Low prices were bad for the oil industry, and in the longer term they were also bad for consumers," the report said.

Pumping enough

Speaking after the report was released, Opec secretary general Abdullah al-Badri said that Opec was pumping more than enough oil but would review supply at the group's next meeting in September.

However, Opec also said that demand for its oil could fall to 31 million barrels per day in 2012, below current production levels as Europe and the US move to cut oil dependence.

Crude oil rose to a record high of just below $147 a barrel in London last week.

On Thursday, US sweet light crude was trading at $137.12 a barrel and London Brent crude was at $137.70 a barrel.

Meanwhile, the International Energy Agency, the energy adviser to 27 nations, raised its forecast for 2008 global oil demand, ending five months of downward revisions.

It increased its forecast by 0.1%, or 80,000 barrels, to 86.85 million barrels per day, citing rising consumption in developing countries.

FTSE 100 ends week in bear market

2008-07-13T02:17:00.000-07:00

London's index of key shares, the FTSE 100, has closed in "bear market" territory after another tough day for shares in Europe and the US.

The FTSE 100 lost 145 points, or 2.7%, to end at 5,261.6 points. A bear market is often defined as a 20% fall from a stock index's recent peak.

Friday's closing price is more than 20% below its June 2007 peak of 6,732.

Markets have struggled amid concerns about the world economy and the impact of slower growth on company earnings.

"The movement this afternoon was a clear indication that we haven't reached the bottom and the bears are still fully in control," said Angus Campbell, head of sales at Capital Spreads in London.

Banks hit

High oil prices, which hit a fresh record above $147 a barrel earlier on Friday, have also undermined investor confidence.

In Paris, the Cac 40 share index ended the day down 3.1% at 4,100.64 points, while in Frankfurt the Dax finished 2.4% lower at 6,153.30.

On Wall Street, the blue-chip Dow Jones index ended down 1.14% at 11,100.54 points on heightened fears over the financial health of the nation's two largest mortgage firms.

Shares in Fannie Mae and Freddie Mac ended down 22% and 3% respectively in volatile trading, with both counters plunging as much as 50% shortly after the open.

In London, banks were among the biggest losers, with Royal Bank of Scotland down 8.5%, Standard Chartered sliding 7.8%, and HBOS shedding 1.8%.

China’s algae spread to resorts

2008-07-13T02:09:00.000-07:00

The algae outbreak that threatened the Olympic sailing competition in Qingdao has spread hundreds of kilometres up the coast to popular tourist areas, even as Chinese officials on Friday claimed near-victory over the thick green sludge.

The long stretch of beach at Baishatan, 150km north of Qingdao, has been lined in recent days with 10-metre-wide slicks of algae that gave out a noxious odour to the few tourists who braved the sand, causing panic among tourist operators. Xu Xin, who has a stall selling seashells near the beach at Baishatan, said that the boardwalk would usually be packed at this time of year. “But look at it now, there is almost no one here,” she said. In front of her stall, two large earth-moving machines were scooping up chunks of the green algae that covered most of the beach. “They have cleaned the beach twice already, but it keeps coming back.”

“We are just coming into the summer holiday period,” said Ms Li, duty manager at the Jinxiang Villa Hotel, near Baishatan, who declined to give her full name. “If this continues for much longer then we will have big problems over the summer.”

The algae outbreak first appeared in Qingdao, the Shandong port city that is hosting the Olympic sailing competition next month. With many of the athletes already in the city to begin preparations, the city government has been working flat out to clear the algae from the competition area, calling in thousands of volunteers and soldiers and using hundreds of boats.

Officials said on Friday that only 1.37 per cent of the area was now covered in algae – they have pledged to clear it by July 15 – and a 32km-long net will keep out new outbreaks.

Just as the algae problem appears to be worsening, Xinhua news agency said this week pest-killers were trying to prevent a plague of locusts in Inner Mongolia from descending on Beijing – adding to the sense of near-biblical woes afflicting China.

State media have quoted a number of scientists playing down the health risks from the algae, which they said was a natural phenomenon.

Zhou Mingjiang, a researcher at the Institute of Oceanology in Beijing, said the algae in the sea was very different from the toxic blue-green algae that appeared in Taihu Lake in eastern China last year and forced the city of Wuxi to shut its water supply.

But, some environmental activists said the size of the algae outbreak was due to pollution from industry and fish farms.

“The natural ecosystem of the ocean has been destroyed, which is why strange events such as this can happen,” said Wen Bo, co-ordinator of Save China’s Seas Network.

ARSENIC FEARS

Burma’s cyclone-hit Irrawaddy delta and Indonesia’s Sumatra island face high risks of arsenic contamination in ground water that could cause cancer and other diseases in residents, according to a study released on Friday, reports AP from Bangkok.

Using a digitalised model that examines geological features and soil chemistry in south-east Asia, researchers writing in the peer-reviewed journal Nature Geoscience mapped several likely hot spots that had never been assessed for arsenic risks.

Arsenic, especially in drinking water, is a global threat to health, affecting more than 70 countries and 137m people.

The country worst affected is Bangladesh, where hundreds of thousands of people are in danger of dying from cancers of the lung, bladder and skin.

Odourless and tasteless, arsenic enters water supplies from natural deposits in the ground or from agricultural and industrial practices

UAE's oil reserves to last 92 years: Report

2008-07-13T01:49:00.000-07:00

The UAE's oil reserves of 97.8 billion barrels, which make 7.9 per cent of the world's total stocks, would last 92 years at current production levels, according to a report.

The UAE's crude oil output on an average rose 1.53 per cent to 2.66 million barrels per day (bdp) for the quarter ended June as compared to the January-March quarter, latest data by the International Energy Agency (IEA) shows.

The Middle East's oil reserves stood at 755 billion barrels, or 61 per cent of the world's total, while the global oil reserves amounted to 1.24 trillion barrels, said the data.

The UAE's oil consumption rose 7.7 per cent to 450,000 barrels per day in 2007, registering the highest growth rates in the Middle East.

The UAE's proven oil reserves of 97.8 billion barrels make 7.9 per cent of the world's total reserves, said the 2008 BP Statistical Review of World Energy.

Chinese exports slow during June

2008-07-12T02:38:00.001-07:00

China's exports grew at their slowest pace in four months in June, causing its trade surplus figure to fall by more than 20% from a year earlier.

The government may now try to slow the growth of China's currency, which is making Chinese exports more expensive.

Exports grew to $121.5bn (£62bn), an 18.2% year on year rise but lower than the 28% rise seen in May.

Beijing has let the yuan rise against the dollar to slow incoming export revenue, which is driving up prices.

The surplus of $21.4bn was still China's biggest so far this year since a surplus of $22.7bn in December.

Meanwhile, the growing demand for overseas resources to fuel the country's expanding economy pushed imports up 23.7%, to $100.1bn in June.

Balancing act

The slowdown in the export figures reflects the downturn in global growth and may indicate the world's largest economy, the US, is on the edge of a recession.

The US is China's second biggest export market after the European Union.

The Chinese government has recently allowed the yuan to grow against the dollar as it seeks to tackle inflation in China which is near 12-year highs.

A stronger yuan would help squeeze the export revenue coming into China and which is pushing up prices and fuelling inflation.

But the rise of the yuan has made exports more expensive in dollar terms and is affecting export growth, and the Chinese government may now decide to ease back the yuan's growth against the dollar.

Despite the yuan growth, the US has accused the Chinese government of keeping its currency artificially low in order to give Chinese exporters an unfair advantage in global markets.

Japanese confidence at record low

2008-07-12T02:34:00.000-07:00

Japanese consumer confidence slumped to its lowest level for 26 years in the quarter to June, official figures show.

The government's quarterly index fell to 32.3 from 36.5 the period before.

Rising costs for energy and food have hit sentiment, with wholesale prices hitting a 27-year high in June on surging oil and commodity prices.

Japanese households had become used to falling prices after years of deflation and creeping inflation has damaged confidence, say analysts.

Consumers were more reluctant to buy more expensive durable goods, with their willingness to buy items such as cars and household appliances, falling to a record low.

"This is a very bad number," said Azusa Kato, an economist at BNP Paribas, referring to the Japanese Cabinet Office quarterly index figure.

"People are less willing to buy than after we had a hike in the consumption tax in 1997. Even the Beijing Olympic Games don't seem to be helping at all," she added.

The monthly index, which - unlike the quarterly index is not seasonally adjusted - fell to an all-time low of 32.6 in June from 33.9 in May.

Core consumer prices, excluding fresh food and energy costs, rose 1.5% in May - the biggest increase for a decade.

Analysts said inflation may rise to around 2% in the coming months.

Consumers are feeling the rise in the cost living all the more because wage growth in Asia's largest economy has been so weak.

The economy has shown further signs of weakness over the past few months.

Retailers reported weak earnings in the three months to June, while industrial firms posted disappointing output in May.

The unemployment rate currently stands at 4% and the central bank has cut its 2008 growth forecast.

It expects growth of 1.5%, down from 2.1%, amid continuing worries about the impact of the US slowdown on global markets.

The US slowdown means demand for Japanese cars and machinery continues to fall.

Indian inflation approaches 12%

2008-07-12T02:33:00.001-07:00

Wholesale prices in India grew by 11.89% in the year to the end of June, the fastest rate since the measure began in 1995.

Inflation has tripled over the last six months, driven by the soaring cost of food and fuel.

Figures also showed that the output of India's factories grew by its slowest rate in six years.

Industrial output rose 3.8% in May, compared to the same month in 2007, a sharp drop on the April's 6.2% growth.

"The industrial output numbers ... are a reflection of manufacturers anticipating a slowdown in consumer spending as high inflation bites into incomes and some scale-back of fresh production plans," said economist Shuchita Mehta, from Standard Chartered Bank.

The Reserve Bank of India has been increasing interest rates to try and dampen inflation. Last month, it increased its main lending rate twice in two weeks to 8.5%.

But higher interest rates could cause economic growth to slow further, analysts predict.

Economists suggest the economy is unlikely to grow at 8-8.5% this year, as the government has predicted.

Oil hits new high on Iran fears

2008-07-12T02:30:00.000-07:00

Crude oil has jumped to new record highs above $147, driven by ongoing geopolitical concerns over Iran.

US light sweet crude rose to highs of $147.27, before dipping back to $145.08. In London, Brent crude climbed to $147.02, before settling at $144.49.

Market experts put the increase down to concerns about Opec member Iran's recent missile tests, concerns about global supplies and the weak dollar.

As a result, oil prices have jumped more than $10 in the past two days.

On Thursday, oil prices surged by almost $6 on the back of worries about missle tests by Iran - the second largest member of oil producing cartel Opec.

A day earlier, the country successfully test-fired long and medium-range missiles adding to concerns about Tehran's disputed nuclear programme.

Violence fears

Traders are also said to be concerned about global supplies after a Nigerian militant group said it would call off a ceasefire following a UK offer to help quell violence in the oil-rich Delta.

The group - the Movement for the Emancipation of the Niger Delta (Mend) - has been behind a series of high profile attacks on oil installations and kidnaps of expatriate oil workers in the past which has contributed to oil production in the country falling by around a quarter.

Meanwhile the weaker dollar has also made oil an attractive prospect for market players as it is cheaper for buyers using stronger currencies, analysts said.

Saudis agree to defer Pakistan's oil payments: report

2008-07-12T02:26:00.000-07:00

Saudi Arabia has agreed in principle to defer payments for crude oil sales to Pakistan expected to be worth about $5.9 billion during Pakistan's present July-June financial year, The Financial Times reported on Saturday.

The agreement would provide a significant boost to the south Asian country's economy just when it is coping with fast-mounting political and economic difficulties, the FT said.

"There is an agreement in principle to defer oil payments. The modalities are being worked out," Pakistan's de facto finance minister Naveed Qamar was quoted as saying in an FT interview on Friday night.

Qamar would not discuss the timespan for which payments on Saudi oil shipments would be deferred, but an official from the petroleum ministry in Islamabad separately told the FT that the agreement involved deferring payments until at least June 2009 when the financial year ended.

It was not clear if the deferred payments would be paid back.

One western diplomat familiar with Saudi ties to Pakistan said the Saudis in 1998 began supplying crude oil under a deferred payment plan after Pakistan carried out its maiden nuclear tests and came under international sanctions.

"In that previous case, after three years of deferred payments, the Saudis practically wrote off the payments. It would be interesting to see if there is going to be a write-off in future of the deferred payments now under discussion," he said.

The Pakistani rupee has fallen about 18 percent against the dollar this year as annual inflation accelerated to a three-decade high above 19 percent and fiscal and current account deficits have widened, due largely to a soaring oil import bill.

Foreign exchange reserves have fallen sharply, largely because of the oil payments and withdrawals from Karachi stock market, but some funds have begun flowing back into the country in the form of loans from multilateral lenders and friendly governments.

The benchmark KSE-100 index on the Karachi Stock Exchange (KSE) has fallen about 25 percent from an all-time high in April this year.

According to Pakistani officials, Saudi Arabia sells about 110,000 barrels of crude oil daily to Pakistan or about 40 million barrels a year, which at Friday's new record above $147 a barrel would be worth about $5.88 billion, the Financial Times report said.

French firm 'quits Iran gas deal'

2008-07-10T03:36:00.000-07:00

The head of French energy giant Total has said it will not invest in Iran because it is too politically risky.

The company had been planning to develop the huge South Pars gas field, but Christophe de Margerie told the Financial Times it would not go ahead.

The announcement comes a day after Iran test-fired a series of missiles amid weeks of rising tensions with Israel and the US over its nuclear ambitions.

Analysts say Total's move will be a big blow to the Iranian energy industry.

It means Iran is now unlikely to significantly increase its gas exports until late into the next decade, they add.

In further response to the test missiles, US Secretary of State Condoleezza Rice said on Thursday that Washington would defend the interests of America and those of its allies from attacks by Iran.

Sanctions

Total has a memorandum of understanding with the state-owned National Iranian Oil Company to develop Phase 11 of Iran's half of the South Pars field in the Gulf.

In May, Total said it was still interested in working on the project together with the Malaysian company, Petronas.

But Mr De Margerie's comments now cast serious doubt on whether the French firm will invest in the Islamic Republic in the near future.

"Today we would be taking too much political risk to invest in Iran because people will say: 'Total will do anything for money'," he said.

The remarks follow increasing tension between Iran and Israel over Tehran's nuclear programme.

The US has also recently stepped up the pressure to impose tougher sanctions on the Iranian government and companies that do business with it.

Total was the last major Western energy group to have seriously considered investing in the country's huge gas reserves.

It was also one of the few companies in the world to have the technology needed to exploit Iran's huge, but untapped gas reserves.

The BBC's Jon Leyne in Tehran says it has been particularly galling for Tehran to watch as Qatar pumps vast amounts of gas from the South Pars field to its side of the Gulf, helping it become one of the world's major energy suppliers.

But observers say it is not just sanctions or political pressure - international banks simply are not prepared to put up the billions of dollars needed for such investments in Iran.

'Provocative' missile test

Mr De Margerie's remarks come a day after state media reported that the Iranian Revolutionary Guards test-fired a updated version of the Shahab-3 missile, said to have a range of 2,000km (1,240 miles).

Gen Hoseyn Salami, the Guards' air force commander, said the tests demonstrated Iran's "resolve and might against enemies who in recent weeks have threatened Iran with harsh language".

State media quoted him as saying: "Our hands are always on the trigger and our missiles are ready for launch."

Tehran has tested the Shahab-3 before, but the latest launch comes amid rising tensions in the region.

William Burns, the top official handling Iranian issues at the US state department, said the launch was "very disturbing, provocative and reckless".

But US officials played down suggestions that the move had brought military confrontation with Iran any closer.

"The reality is there is a lot of signalling going on, but everybody recognises what the consequences of any kind of a conflict would be," said Defence Secretary Robert Gates.

Japan's wholesale inflation rises

2008-07-10T03:34:00.001-07:00

Japanese wholesale prices reached a 27-year high in June, spurred by high crude oil prices and the rising cost of raw materials such as steel and grain.

Prices rose 0.8% from May and grew 5.6% year-on-year, marking the biggest annual hike since February 1981.

Despite rising prices, the central bank is wary of increasing interest rates and sparking an economic slowdown.

The Bank of Japan policy board is due to meet next week to make a decision on interest rates.

However analysts said they expected the rate to be held at 0.5%

Deepening gloom

"We still think the recent rise in price data are unlikely to prompt the bank of Japan to raise rates," said economist Junko Nishioka at RBS Securities.

"The Bank of Japan is focused more on the negative impact of the price rises on demand, rather than the possibility of continuous inflation pressure," he said.

The latest data has deepened the gloom surrounding many of the country's firms which have seen their profit margins hit hard in recent times.

Last week a quarterly survey by the Bank of Japan showed that in June, Japanese manufacturers were at their least confident in five years.

Several companies have found it difficult to pass on higher prices as Japanese consumers worry about higher fuel and food prices and keep a careful eye on spending.

Japan is the world's second-largest economy after the US.

EADS hit as tanker deal reopened

2008-07-10T03:31:00.000-07:00

Shares in EADS have fallen 3% on news that the US government has reopened a $35bn (£17bn) contract to supply the US Air Force with refuelling tankers.

The deal had been given to EADS, which owns Airbus, and its partner Northrop Grumman, but the US said mistakes had been made when the bids were evaluated.

US plane maker Boeing will now get the opportunity to rebid.

Analysts say it could prove difficult for EADS to win the contract and some fear it could lead to job losses.

'Significant errors'

The Air Force's decision to award the contract to EADS and Northrop Grumman has been controversial in the US.

Northrop's aerial refuelling tankers would be assembled in the US using components largely made in Europe.

When the decision went against Boeing, the company and a number of US senators campaigned to get the tender process reopened.

The US Government Accountability Office (GAO) reassessed the Air Force's decision and last month said "significant errors" had been made, including the evaluation of which of the two proposals was cheaper.

The initial evaluation had suggested that the Northrop Grumman bid would probably work out cheaper over the life of the deal. But when re-examined, Boeing looked to be the cheapest, the GAO said.

Tough challenge

The decision to re-open the bid was expected but still represents a serious blow to EADS's hopes to expand in the US.

"The new competition will be doubly difficult for any non-American challenger, i.e. EADS, to actually win because politics will decide who will win this competition," Howard Wheeldon, aerospace analyst, told the BBC.

"It alters the perspective on their ability to grow in the US, which is a very important market for them."

An Airbus plant in Flintshire, which employs 7,400 people, was expected to build the wings and the deal had been expected to safeguard these jobs.

However, Mr Wheeldon doubted that the loss of the contract would lead to job losses.

"It does not signal an increase in the number of jobs the company will shed," he said. "If they had won it... it would have created new jobs."

Huge deal

Boeing welcomed the decision to reopen the competition, but expressed concern that the selection criteria might be different.

"It's encouraging that the Defense Department intends to take steps to ensure a fair and open competition that, among other things, fully accounts for life-cycle costs, such as fuel, to provide the most capable tanker at the best value for the American taxpayer," Boeing said in a statement.

The deal - one of the biggest in the Air Force's history - is the first of three contracts to supply up to 600 new refuelling tankers. The 30-year deal could be worth up to $100bn.

Northrop Grumman, which was awarded the contract along with EADS in February, said the "best tanker" had already been picked.

"We are reviewing the decision to ensure the re-competition will provide both companies a fair opportunity to present the strengths of their proposals," the company said in a statement.

The Pentagon is expected to decide by the end of the year who will be awarded the contract. It has taken over responsibility for the process from the Air Force.

Dollar edges up in Asian trade

2008-07-10T03:28:00.001-07:00

The dollar edged up in Asian trade on Thursday amid caution after a Wall Street slump and ahead of the Bank of England's interest rate decision, dealers said.

The dollar rose to 106.76 yen in Tokyo from 106.72 in New York late Wednesday.

The euro slipped to 1.5726 dollars from 1.5754 and to 167.89 yen from 168.04. The British pound slipped to 1.9814 dollars from 1.9826.

"Currencies are directionless while markets are paying close attention to stock markets," said Saburo Matsumoto, chief forex strategist at Sumitomo Trust Bank.

The yen was higher in earlier trade following an overnight plunge on Wall Street, but the Japanese currency stabilised by noon trade as Japanese shares edged back up, he added.

The blue-chip Dow Jones Industrial Average slumped a hefty 236.77 points (2.08 percent) to close at 11,147.44, entering into "bear market" territory as investors fretted over the health of corporate America.

An unnamed trader in a major Tokyo bank told Dow Jones Newswires that "market conditions are a little unstable and players are reluctant to push the dollar much higher."

But "looking at yesterday's moves, the dollar could have fallen further given all the negative news and the stock market's fall, but it didn't. So it seems players are not that nervous at the moment," he added.

An interest rate decision is due later Thursday by the Bank of England (BoE). British borrowing costs are expected to stay unchanged at 5.0 percent amid economic turmoil, dealers said.

"The BoE faces a tough task in balancing the evident sharp slowing in activity against a background of high and rising headline consumer price inflation," wrote NAB Capital strategist John Kyriakopoulos in a note.

"We expect them to leave interest rates on hold in July, as they seek to ensure that higher short-term inflation does not get embedded into longer-term underlying inflationary pressures," he added.

India, Sri Lanka to expand free trade pact: diplomats

2008-07-10T03:25:00.000-07:00

India and Sri Lanka will expand their free trade agreement with a new pact to be signed on the sidelines of a South Asian summit in Colombo, diplomats said on Thursday.

The two countries entered a free trade deal in 1998 limiting tariff concessions to goods, but the new Comprehensive Economic Partnership Agreement (CEPA) covers services such as banking and also allows greater cooperation between customs administrations.

They will conclude the pact during the two-day South Asian Association for Regional Cooperation (SAARC) summit starting on August 1, a diplomat said.

Sri Lanka's exports to India increased from 49 million dollars in 1999 to 516 million last year while Indian exports rose to 2.7 billion dollars last year, up from 549 million dollars in 1999.

Siemens plans to cut 16,750 jobs

2008-07-09T04:29:00.000-07:00

Siemens plans to cut 16,750 jobs worldwide as the German conglomerate streamlines its operations to weather the economic downturn.

The company employs around 400,000 staff worldwide. The cuts amount to about 4% of the workforce.

Siemens issued a profit warning in March and its shares have fallen almost 35% since the beginning of the year.

The firm plans to eliminate 5,250 jobs in Germany, where around 136,000 of its workforce is located.

The Munich-based engineering group said the cuts will include 12,600 mostly administrative jobs.

"Against the backdrop of a slowing economy, we have to become more efficient," said Peter Loescher, president and chief executive.

The job cuts are part of a scheme to reduce costs by 1.2bn euros ($1.9bn; £0.95bn) by 2010.

Siemens said it would only make forced dismissals as a last resort and would offer staff early retirement.

The company has also been grappling with an alleged corruption scandal that involved accepting bribes to win overseas contracts.

Inflation in some countries 'getting out of control': IMF chief

2008-07-09T04:27:00.000-07:00

Inflation in some emerging countries ‘is getting out of control’ and higher interest rates may be required to rein in prices, International Monetary Fund head Dominique Strauss-Kahn said Wednesday.

Inflation is now the biggest threat to the global economy, he told reporters on the sidelines of a summit of the Group of Eight rich nations in northern Japan.

"In some emerging countries and in some low income countries inflation is getting out of control. That means that monetary policy has probably to be tightened," he said.

He did not say which countries he was referring to but indicated that it included some nations in Latin America and Africa.

"The growth question is important but inflation is probably today the biggest threat to the world economy," the IMF chief said.

Pakistan could tighten more to fight inflation

2008-07-09T04:23:00.000-07:00

Pakistan is ready to tighten monetary policy further to fight inflation, a senior finance official said on Wednesday, stressing the authorities' commitment to getting inflation down from a three-decade high above 19 percent.

"Some people argue that further monetary tightening may not be very useful, but the whole problem is that we are not willing to compromise on inflation," said Hina Rabbani Khar, special assistant to the prime minister on finance and economic affairs.

"So if that requires more tightening, yes," she told Reuters in an interview in the Malaysian capital, Kuala Lumpur.

Many analysts believe an interest rate rise is imminent, but she declined comment.

"All I am saying is that there are certain things that you are committed to. And more than cheap money and cheap credit, we are more committed to holding on to inflation."

In May the Pakistani central bank increased its discount rate to 12.0 percent from 10.5 percent to counter inflation and widening fiscal and current account deficits.

It then announced an increase in the cash reserve requirement (CRR) -- the ratio of cash banks must keep in reserve with the central bank -- to 9.0 percent from 8.0 percent of deposits up to one-year maturity.

BALANCE OF PAYMENTS

For the 2007/08 fiscal year that ended on June 30, the government expects its budget deficit to be 7.0 percent of gross domestic product (GDP), while the current account deficit is likely to be between 7.3 percent and 7.8 percent of GDP.

Reflecting this, the rupee is near an all-time low.

"The rupee's problem is a balance of payments problem more than anything else," Khar said.

"We will try our very best to hold the slide," she said, mentioning a tightening of regulations on foreign exchange transactions announced by the State Bank of Pakistan on Tuesday.

The rupee firmed on Wednesday in response to the measures, which included a temporary suspension of forward booking of foreign exchange for imports. It rose 2 percent to 71.40/60 per dollar.

The rupee's close on Tuesday of 72.85/90 to the dollar was its weakest ever. At that level it had fallen 6.6 percent since July 1, the start of Pakistan's fiscal year, and 18.3 percent since Jan. 1, due to the deteriorating economic fundamentals.

Khar blamed the caretaker government that took charge temporarily before general elections in February for most of the trouble.

"Within the caretaker set-up, within just three months, because of the huge oil price bill, the sliding down was immense," she said.

"Whereas your current account deficit was looking OK, your budget deficit was within reach, everything just went haywire."

But she was hopeful that things would improve.

"I see this problem settling down within a year. This year would be a year of stabilisation for the Pakistani economy."

Oil prices rally as G8 promises transparent market

2008-07-09T04:21:00.000-07:00

Oil prices rebounded slightly on Wednesday after falls of more than five dollars a day earlier, as world leaders pledged to make the crude market more transparent.

Brent North Sea oil for August delivery jumped 1.88 dollars to 138.30 dollars a barrel in electronic deals.

New York's main oil contract, light sweet crude for August delivery, won 1.60 dollars to 137.64 dollars.

Oil prices had nosedived Tuesday as falling global equities and resurgent concerns about an economic slowdown stoked fears about future energy demand, traders said.

Group of Eight leaders pledged Wednesday to improve transparency and the supply and demand balance in the oil market by boosting dialogue between producing and consuming nations.

"In response to the sharp rise in oil prices, we agreed to improve balance in supply and demand through efforts and dialogue by both producing and consuming countries to improve transparency," they said in the final statement following their summit in Japan.

Asian stocks close mostly down on credit crisis, inflation woe

2008-07-08T04:23:00.000-07:00

Asian stocks tumbled Tuesday as concerns about the global credit squeeze and surging inflation flared again, with the G8 industrial powers warning soaring food and fuel prices threaten world growth.

Taiwanese shares fell the most, sliding nearly four percent, closely followed by a slump of over three percent in Hong Kong. South Korea was down nearly 3.0 percent and Asia's biggest bourse, Japan, skidded some 2.5 percent.

The falls came after Wall Street retreated Monday on renewed fears about the global credit squeeze following the default crisis among so-called "subprime" -- or riskier -- US homeloans.

Investors were nervous ahead of key second quarter earnings reports from major US banks, which have lost billions of dollars on securities whose value is linked to subprime loans.

Meanwhile, the Group of Eight industrial powers called Tuesday at their

annual meeting in Japan for efforts to cool sizzling oil prices, warning soaring fuel and food costs were a threat to world economic growth.

Investors worry surging inflation will crimp business profits, hit consumer spending and lead to higher borrowing costs.

Elsewhere in Asia, Chinese shares bucked the trend to rise 0.81 percent, but Indian and Singaporean shares fell more than one percent. The region's smaller markets also closed down, generally by more than one percent.

The economic slowdown in the US following the subprime crisis also continued to rattle investors. The US is the world's biggest economy and a key buyer of Asian goods and services.

TOKYO: Japanese shares closed 2.45 percent lower on fresh jitters over the US financial sector, after briefly falling below 13,000 for the first time in nearly three months, dealers said.

The Tokyo Stock Exchange's benchmark Nikkei-225 index tumbled 326.94 points to end at 13,033.10, briefly falling below the psychologically important 13,000-level for the first time since April 15.

The broader Topix index of all first-section shares fell 29.29 points or 2.23 percent to 1,283.51.

"The Nikkei may find support above 12,890 if the Dow (Jones Industrial Average) holds above 10,800," Yutaka Yoshino, a technical analyst at Nikko Citigroup, told Dow Jones Newswires.

Mitsubishi UFJ Financial Group dropped 3.4 percent to 934 yen, Mizuho Financial Group fell 3.7 percent to 493,000 yen while Sumitomo Mitsui Financial Group shed 4.1 percent to 771,000 yen.

Sony shed 4.1 percent to close at 4,420 yen. Nintendo lost 3.3 percent to finish at 59,400 yen.

HONG KONG: Hong Kong share prices tumbled to close down 3.16 percent, dealers said.

The Hang Seng Index ended down 692.25 points at 21,220.81. Turnover was 63.74 billion Hong Kong dollars (8.17 billion US).

"Investors don't have confidence to hold stocks for any period of time given the continued volatility in global markets," Ben Kwong, chief operating officer at KGI Asia, told Dow Jones Newswires.

Some analysts said the stock market's decline had made valuations for most Hong Kong-listed stocks attractive.

"Any way you look at it, the market is not expensive," said Eugene Law, an analyst at Celestial Securities.

Handset maker Foxconn International Holdings plunged more than 10 percent after a broker downgrade. Hong Kong Exchanges and Clearing (HKEx) lost nearly 5.9 percent.

The city's fifth largest lender Bank of East Asia, which has an exposure to subprime-related assets, dropped 5.86 percent.

SYDNEY: Australian shares closed down 1.4 percent, dealers said.

The benchmark S&P/ASX 200 index was down 69.6 points at 4,932.9, its weakest close since August 2006, while the broader All Ordinaries fell 69.3 points to 5022.4. Volume was 5.0 billion dollars (4.8 billion US).

"It is mainly the financial sector that has dragged most of the market down, which was a continuation of the theme out of the US last night," said CMC Markets senior dealer Dominic Vaughan.

Among major banks, ANZ lost 60 cents to 18.60 dollars. Investment firm Babcock & Brown dropped 6.5 percent to 6.51. Allco Finance Group added 4.4 percent to 36 cents after selling its interest in Singapore real estate assets.

BHP Billiton fell 25 cents to 39.50 while its takeover target Rio Tinto rose 20 cents to 123.45.

Iron ore miner Murchison Metals fell 6.6 percent to 2.71 after admitting that China's Sinosteel had beaten it in a race to gain control of fellow iron ore miner Midwest Corp.

Midwest Corp was steady at 6.38, the price that Sinosteel is offering.

SHANGHAI: Chinese share prices closed up 0.81 percent, dealers said.

The benchmark Shanghai Composite Index, which covers both A and B shares, closed up 22.55 points at 2,814.95 on turnover of 87.5 billion yuan (12.8 billion US dollars.)

"The market lacks upside momentum," Greatwall Securities' analyst Zhang Yong told Dow Jones Newswires. "Strong earnings forecasts have been priced in, which can't lift stock prices further."

Airlines led the gains with Air China up 6.83 percent to 10.17 yuan, while China Southern Airlines gained 2.15 percent to 8.09 yuan. Shanghai Airlines edged up 0.97 percent to 6.24.

Coal mines were also strong with China Shenhua Energy, the country's largest coal producer, rising 3.01 percent to 33.93 yuan.

But Industrial and Commercial Bank of China, the country's largest bank, was down 1.21 percent at 4.91 yuan.

China Minsheng Banking bucked the trend, up 2.03 percent to 6.03 yuan after the bank projected first half net profit was likely to rise over 110 percent year-on-year.

TAIPEI: Taiwan share prices closed 3.94 percent lower, dealers said.

The weighted index fell 289.26 points to 7,051.85 on turnover of 105.10 billion Taiwan dollars (3.46 billion US).

"Share prices fell sharply due to profit-taking from yesterday's rebound and an apparent lack of support from government-related funds," said Allen Lin of Concord Securities.

Surging food and fuel prices pushed Taiwan's inflation rate in June to an eight-month high of 4.97 percent, government data showed Monday.

"The high consumer price inflation reading hits consumption, and will cause the central bank to hike rates," said Henry Miao of Hua Nan Securities Investment Management. Cathay Financial closed down 6.36 percent at 60.40 Taiwan dollars. Taiwan Semiconductor Manufacturing Co. dropped 2.00 percent at 58.90 and United Microelectronics Corp. fell 5.43 percent at 14.80.

Nan Ya Plastics fell 4.95 percent to 53.80. AU Optronics plunged 5.77 percent to 44.90. China Airlines was limit-down 7.0 percent at 11.75.

SEOUL: South Korean shares closed 2.9 percent lower, dealers said.

The KOSPI index fell as much as 4.5 percent to an intra-day low of 1,509.20 before closing at 1,533.47, down 46.25 points. Volume was 5.2 trillion won (5.03 billion dollars).

"Inflation fears are escalating, producing greater uncertainty over how policymakers will handle interest rates and forex," said Ryu Yong-Seok, a Hyundai Securities analyst.

"The KOSPI may fall further to as low as 1,460 points."

Kookmin Bank plummeted 8.6 percent to 55,000 won. Samsung Electronics slumped 3.4 percent to 593,000 won. Kia Motors plunged 6.3 percent to 11,200 won.

Hyundai Engineering Construction plummeted 8.5 percent to 55,000 won.

SINGAPORE: Singapore share prices closed 1.62 percent lower, dealers said.

The blue-chip Straits Times Index fell 47.50 points to 2,886.62. Volume totalled 1.12 billion shares worth 1.28 billion Singapore dollars (941 million US).

"People are feeling increasingly cautious ahead of the results season both here and in the US and ck Exchange of Thailand (SET) composite index fell 8.06 points to close at 722.50 points, while the blue-chip SET 50 lost 6.77 points to close at 512.89.

"The Thai market today fell in line with other regional markets," said Viriya Lappromrattana, senior vice president at Kiatnakin Securities.

"But, our market lost due mainly to growing concern over political uncertainty, especially regarding two court cases today (Tuesday)."

PTT fell 8.00 baht to close at 282.00 baht. Bangkok Bank fell 2.00 to 476.00. Kasikorn Bank edged down 0.50 to 66.50.

JAKARTA: Indonesian shares closed 1.1 percent lower, dealers said.

The Jakarta Composite Index dropped 24.85 points to 2,278.97.

A trader told Dow Jones Newswires that banking shares pulled the index up from an intra-day low of 2,263.77.

"Buying in most bank blue-chips... lifted the main index from its low," he said.

Nickel miner Inco closed 6.2 percent lower at 5,300 rupiah and rival Antam also dropped 2.5 percent at 2,975, while heavyweight Telkom also ended 1.4 percent lower at 7,300.

MANILA: Philippine shares closed 1.5 percent higher, dealers said.

The composite index added 35.89 points to 2,450.55. The all-share index rose 11.04 points to 1,548.81.

Astro del Castillo of First Grade Holdings told Dow Jones Newswires: "This could just be a dead cat bounce. The light turnover suggests everyone remains cautious."

PLDT rose 2.8 percent to 2,425 pesos, while Manila Electric added 6.7 percent to 48 pesos. Ayala Land gained 2.2 percent to 9.20 pesos.

WELLINGTON: New Zealand shares closed up 1.25 percent, dealers said.

The NZX-50 gross index rose 39.14 points to close at 3,160.59.

"It's really only the quality stocks that are coming in for attention," said Grant Williamson of Hamilton Hindin Greene.

Fletcher Building climbed 31 cents to 6.53 dollars. Telecom rose nine cents to 3.47 dollars. Contact Energy gained 12 cents to 7.72.

MUMBAI: Indian shares closed 1.3 percent lower, dealers said.

The benchmark Mumbai 30-share Sensex index fell 176.34 points to 13,349.65.

"Increasing global credit concerns pulled the markets down. We expect quarterly earnings to become the next trigger," said Advait Date, dealer with brokerage BHH Securities.

Coca-Cola defends Olympics deal

2008-07-08T04:18:00.000-07:00

The chairman of soft drinks giant Coca-Cola has defended the firm's Olympic sponsorship in Beijing despite protests about China's role in Tibet.

Neville Isdell told the BBC the firm supported the "credo of the Olympic movement", and agreed deals well before it knew where each Games would be held.

The company, whose Olympic involvement dates back to 1928, was also a sponsor for the 1936 Games in Berlin.

Mr Isdell said he would have agreed to that deal too, had he been in charge.

"The sponsorship would have been committed four or five years ahead of that, and don't forget Neville Chamberlain was in Berlin on a very popular mission to talk to Hitler," he said.

"Not everything was known in 1938 and the Olympics were in 1936."

Coca-Cola's relationship with the Games began with the 1928 event in Amsterdam.

Other big brands associated with the Games include Adidas, McDonald's, Kodak and VW.

Tibetan protesters

This year sponsors have had to deflect negative publicity after some of the international legs of the Olympic torch relay suffered violent protests over Chinese rule in Tibet.

Reebok, which is owned by Adidas and is kitting out 250 Games participants, has decided against making its athletes available for press conferences or one-on-one interviews during the event.

Mr Isdell said Coca-Cola sponsored each event before knowing where the Games would be held.

"What we support is not actually individual governments but the whole aura that surrounds the Olympics and the credo of the Olympic movement," he said.

Despite the widespread protests about China's stance on Tibet and its role in the crisis in Darfur, Coca-Cola did not reconsider its Olympic pact, he said.

"What we are about is the broader context of what the Olympics brings to every country that it takes place in."

Mr Isdell believes the Beijing Olympics will help China open up to the world and bring about change.

"Look back in history, and you will see that China stagnated when it closed itself off to the world," he added.

'Symbol of peace'

With one month to go, Mr Isdell said the company remained committed to China's Games and he aims to carry the symbolic torch on the opening day.

"The Olympic torch was a symbol of peace. It was developed originally around the Greek Olympics to stop the warring that was going on between different factions in Greece at that time.

"There are people who want it to communicate something different and are trying to use that symbolism for issues that may have a very fair resonance. But I don't believe it is right to use those symbols of peace for another cause."

Mr Isdell said Coca-Cola's sponsorship strategy was based on moral principles.

"I believe the Olympics are a force for good and if they were not a force for good, we would not sponsor them."

The firm also rebuffs claims about the healthiness of its drinks, blaming a lack of exercise in the developed world for serious obesity problems.

"It is about physical activity and if you look at the overall calorie intake around the world it has not increased in the developed world. What has happened is that the level of physical activity has decreased," Mr Isdell said.

Coca-Cola argues that, as one of the world's biggest brands, public perception of its social and environmental credentials is often wrong.

"We have 1,000 factories around the world," Mr Isdell said. "We are a local business with a very, very high level of local input - normally 85%. Therefore that minimises our carbon footprint."

The company is tackling rising food costs and is also considering price rises to absorb the impact of higher commodity costs, such as corn syrup used in its drinks.

D-8 nations warn of disaster from food, fuel crisis

2008-07-08T04:05:00.000-07:00

Warning that escalating food and fuel prices could lead to disaster, a group of developing Muslim nations called on Tuesday for urgent measures to lift food and oil output and a rethink on bio-fuels.

Malaysia and Indonesia, the world's largest producers of palm oil, told the summit of eight developing Muslim-majority countries (D8), that they wanted to see an end to the conversion of arable land for bio-fuel production.

Palm oil is used as a feedstock to produce biofuel and also widely consumed in the region as cooking oil.

Leaders of the eight nations comprising nearly one billion people said at the summit in Kuala Lumpur that the twin problems of food and energy security were putting a severe strain on their countries, especially on the poor.

The group of Developing Eight (D-8) countries -- Iran, Indonesia, Egypt, Malaysia, Turkey, Pakistan, Nigeria and Bangladesh -- represent about one billion people, or 14 percent of the world's population.

"We must act on it once and in concert. To delay action on this great challenge of our time is to court disaster," Indonesian President Susilo Bambang Yudhoyono told the meeting.

Yudhoyono's popularity in his country has slumped because of a fuel price hike which also sparked numerous street protests.

Other leaders, including host Malaysian Prime Minister Abdullah Ahmad Badawi, also painted a gloomy picture of the crisis, which has seen crude oil prices at record highs and food prices rising by more than 75 percent since 2000.

"There is also the danger of the food crisis creating political unrest in many societies," Abdullah said. "I think this meeting must come out with a clear message on the need to boost food production in the world."

Abdullah's popularity has also taken a beating after his government hiked up fuel prices.

The leaders are expected to discuss a Malaysian proposal for joint investments in food-related projects such as a fertilizer plant.

"If we can have a big economic project, a big fertiliser project as a D-8 project to cater for the needs of its members as well as for exports, I think that will be very good," Abdullah told Reuters in an interview on Monday. "Some of the D-8 countries are also oil producing countries, that can assist us."

Most fertiliser plants use gas and naphtha as feedstock.

Iran's President Mahmoud Ahmadinejad and Pakistan Prime Minister Yousaf Raza Gilani are also attending the one-day summit.

Yudhoyono and Abdullah told the meeting that the bio-fuel frenzy has worsened the global food crisis.

"We must not allow the zeal for energy security to come into direct conflict with the basic needs for food production," Abdullah said.

An estimated 1 percent of the world's arable land is used for biofuels, a figure that will rise to between 2.5 and 3.8 percent by 2030, depending on policy incentives in different countries, according to International Energy Agency figures.

And use of food such as maize, palm oil and sugar to produce biofuel has been blamed in part for record high commodity prices which are driving millions of people into hunger.

But the expansion of Malaysia and Indonesia's palm oil driven biodiesel industry has been hampered by sky-high prices of the commodity which is also used in hundreds of food products and in a wide range of consumer goods from soap to cosmetics.

Oil prices dip amid G8 warning on sky-high crude

2008-07-08T04:03:00.001-07:00

World oil prices fell further on Tuesday as leaders of the Group of Eight rich nations warned on soaring crude costs and appealed for more production to dampen the market.

Brent North Sea oil for August delivery slid 45 cents to 141.42 dollars a barrel in electronic deals.

New York's main oil contract, light sweet crude for August delivery, shed 32 cents to 141.05 dollars.

"It seems to me like oil traders are looking with some interest at the headlines coming out of the G8 meeting," said Dave Ernsberger, Asia director of global energy information provider Platts in Singapore.

The London Brent contract hit an all-time peak of 146.69 dollars and New York crude struck a record high of 145.85 dollars last Thursday.

Soaring oil and food prices pose a "serious challenge" to stable worldwide economic growth, Group of Eight (G8) leaders from Britain, Canada, France, Germany, Italy, Japan, Russia and the United States warned on Tuesday.

At their meeting in Japan, they also called for an increase in oil production and refining capacity to help stem soaring prices.

"The G8 leaders are clearly trying to talk this market down," Ernsberger added.

Oil had slumped on Monday, losing almost four dollars in New York, on the back of easing geopolitical tensions over Iran's nuclear program and a strengthening US dollar.

However, jitters about key crude producer Iran returned to haunt the market on Tuesday.

Iran would "set on fire" Israel and the US navy in the Gulf as its first response to any American attack over its nuclear programme, an aide to supreme leader Ayatollah Ali Khamenei warned on Tuesday.

"The first US shot on Iran would set the United States' vital interests in the world on fire," said Ali Shirazi, a mid-ranking cleric who is Khamenei's representative to the naval forces of the elite Revolutionary Guards.

"Tel Aviv and the US fleet in the Persian Gulf would be the targets that would be set on fire in Iran's crushing response," he said, according to the Fars news agency.

The United States and its top regional ally Israel have never ruled out attacking Iran over its nuclear drive, which the West fears could be aimed at making nuclear weapons.

There has been concern an attack against Iran could be imminent after it emerged Israel had carried out manoeuvres in Greece that were effectively practice runs for a potential strike against Iranian nuclear facilities.

Shirazi said that "the Zionist regime is pressuring the White House leaders to plan a military assault on Iran" and Iran would react "if they commit such a stupidity."

Crude futures had scaled record heights last week owing to simmering tensions over Iran, the weak US dollar and tightening global supplies, traders said.

Rising costs dominate G8 summit

2008-07-07T04:04:00.000-07:00

Rising food and fuel prices are topping the agenda for leaders of the world's major industrialised nations as they start a three-day summit in Japan.

Group of Eight (G8) leaders held talks with African leaders on the first day.

UN Secretary General Ban Ki-moon called on the G8 to tackle the "interconnected challenges" of rising food prices, development, and climate change.

Many Western leaders have also used the summit to express concern about the situation in Zimbabwe.

Food focus

The G8 summit opened at a resort on the northern island of Hokkaido.

Leaders from member nations - Britain, Canada, France, Germany, Italy, Japan, Russia and the United States - will be joined by counterparts from some 15 other countries, including eight African states.

apan has spent a record sum of money and deployed about 20,000 police to seal off the remote lakeside town of Toyako for the three-day talks.

As the summit began, the UN secretary general urged donor nations to keep their promises, to help poorer countries achieve the UN Millennium Development Goals.

Mr Ban also told reporters that urgent action was needed to guarantee food safety.

"High food prices are already turning back the clock on development gains," he said.

The impact on the global economy of price rises and other shocks such as the credit crunch have eclipsed other concerns, correspondents say.

The BBC's political editor, Nick Robinson, who travelled to the summit with the UK prime minister, says Gordon Brown will join other leaders in calling for the doubling of food production in Africa.

Our correspondent says the G8 may call for the creation of a panel of international experts to advise on how to predict and avoid another crisis like this.

The EU has already been spelling out plans to alleviate the food crisis.

European Commission President Jose Manuel Barroso told reporters on the sidelines of the summit that the proposed 1bn euro ($1.6bn, £800m) fund to help poor farmers in developing countries would come from unused EU subsidies.

It could help improve farmers' access to seeds and fertilisers, and could provide "safety net measures for the most vulnerable", he said.

The G8 leaders may also face tough questions on aid commitments to Africa. Three years ago they promised to double aid to the continent by 2010 - but campaigners say they are falling far short of that target.

Zimbabwe election

As well as discussing development issues in Africa, the G8 leaders have been discussing Robert Mugabe's controversial re-election in Zimbabwe last month.

US President George W Bush said: "I am extremely disappointed in the elections which I labelled a sham election."

Tanzanian President Jakaya Kikwete, who is also head of the African Union, said the whole continent shared President Bush's concerns but that there was some disagreement over what to do about it.

President Kikwete called for a unity government, said discussions would continue and was optimistic that, "as friends at the end of the day we'll come to an understanding". A number of other bilateral meetings are taking place on the sidelines of the summit.

Mr Bush, attending his last G8 summit, and Russian President Dmitry Medvedev, attending his first, made little progress on the issue of the US plan for missile defence installations in the Czech Republic and Poland.

The two leaders instead cited areas where they had found common ground - preventing Iran from obtaining nuclear weapons and ending North Korea's nuclear weapons programme.

Mr Brown will also have talks with Mr Medvedev.

Meanwhile, the charity Water Aid has told the G8 that the single most effective measure it could take to prevent the deaths of millions of children in poor countries would be to build toilets and provide clean water.

Hundreds of protesters again marched through Sapporo on Sunday, the city closest to the venue, to demand G8 leaders take action on global warming, poverty and rising food prices. The demonstration, which followed a similar protest on Saturday, was heavily policed and ended peacefully.

Violent anti-globalisation marches have marred past G8 meetings.

As the G8 got under way in Japan, leaders of the world's largest Islamic nations assembled for what is being billed as the D8 summit in Malaysia's capital, Kuala Lumpur, with the issue of inflation also high on the agenda there.

EU plans tax cuts for local firms

2008-07-07T04:02:00.000-07:00

The European Commission has unveiled plans to allow EU states to lower VAT rates for local service businesses, including restaurants and builders.

The 27 member states will be able to apply lower value added tax to all housing services - from construction to cleaning - if the proposal is adopted.

Currently the minimum standard rate of VAT in the EU is 15%, although there are many derogations and exemptions.

The Commission believes the new rates will also help boost energy efficiency.

The proposal covers home improvements carried out to increase energy efficiency, such as installation of thermal insulation and double glazing.

The proposal scraps a current restriction whereby member states can only apply reduced VAT rates for labour-intensive services in a maximum of two sectors.

Standardising rates

EU Tax Commissioner Laszlo Kovacs said he wanted to "provide certainty about the application of reduced rates beyond 2010 for labour-intensive sectors and provide all member states with the same options".

"There is no reason why restaurant services, for example, should be allowed to benefit from a reduced rate in one half of the European Union but not in the other half."

The proposal requires the unanimous agreement of member states to become law.

The main locally supplied services included in the proposal are:

* All housing services, notably construction, maintenance and cleaning

* Restaurant and catering services, excluding alcoholic beverages

* Domestic care services, such as home help for the elderly

* All personal care services, such as hairdressing, beauty treatments

* Gardening

* Repairs of consumer goods, including bikes, computers, clothes.

The normal minimum VAT rate across the EU is 15%, but states can apply lower rates of not less than 5% to goods and services on a restricted list.

Yet there is huge variation in VAT rates across the EU. For example, a reduced rate applies to restaurant services in 11 states, but not in the other 16.

For years France has been calling for the rate for restaurant services to be slashed EU-wide.

France and the UK have also been urging the EU to cut VAT rates on energy-efficient home appliances.

Mr Kovacs said a wider proposal on environmentally friendly taxation was under review.

According to the Commission, the current proposal should encourage economic growth and shift more work from the do-it-yourself and black economy areas to the formal economy.

The Commission says cutting VAT in locally supplied services will not disrupt the proper functioning of the EU's internal market.

NBC agrees Weather Channel deal

2008-07-07T04:00:00.001-07:00

NBC Universal and private equity firms Bain Capital and Blackstone Group have agreed to buy The Weather Channel from Landmark Communications.

The terms of the deal have not been revealed, but the price tag is reported to have been almost $3.5bn (£1.8bn).

The channel will be run as a separate business from the company's other channels, which include MSNBC and CNBC.

The Weather Channel was put up for sale in January, but its owner was reported to be hoping to sell it for $5bn.

It is the third most distributed US cable channel, reaching 97% of US homes with cable, while its website is accessed by nearly 40 million users per month.

NBC- which is part of General Electric - and its partners announced last month that they were in exclusive talks to buy the company.

The agreement is one of the largest private equity deals of the last 12 months. Such acquisitions have dried up as banks have become reluctant to lend money as part of the credit crunch.

Dollar firms ahead of G8 talks, Bernanke speech

2008-07-07T03:55:00.000-07:00

The dollar firmed in Asian trade on Monday as the market waited to see if leaders of the world's industrialised nations sent a message to support the sliding greenback at the G8 summit, analysts said.

Market players were also treading cautiously ahead of speeches later this week by US monetary officials, they said.

The dollar was changing hands at 107.04 yen in Tokyo in late morning trade, up from 106.63 in Europe late Friday.

The euro bought 1.5642 dollars, down from 1.57 dollars, while holding steady at 167.41 yen. The US markets were closed on Friday for the Independence Day holiday.

Leaders of the Group of Eight (G8) richest nations are starting talks Monday in the northern Japanese town of Toyako.

US President George W. Bush on Sunday reaffirmed the United States' "strong dollar" policy, saying the US economy's fundamental strength would ultimately support the flagging currency.

"The US believes in a strong dollar policy and believes that the strength of our economy will be reflected in the dollar," he said on the eve of the summit.

Osamu Takashima, chief currency analyst at Bank of Tokyo-Mitsubishi UFJ, said even though Bush was only reflecting the official US position, "it bears importance that he repeated the policy on a summit occasion".

"We believe nothing surprising will come out from the summit.

"We know it would be historical, but it is unlikely that the leaders would say (in a summit statement) they are united to prevent a weak dollar. Nonetheless we have to be careful," Takashima said.

There also is caution in the market as senior monetary officials are to speak later this week, including congressional testimony by Federal Reserve chairman Ben Bernanke on Thursday, he said.

Oil prices pull lower

2008-07-07T03:52:00.000-07:00

Oil prices eased on Monday but remained at elevated levels after a long US holiday weekend, as traders mulled an offer from crude producer Iran to hold talks on its nuclear drive.

Brent North Sea oil for August delivery slid 17 cents to 144.25 dollars a barrel in electronic deals. That was not far off the record high 146.69 that was struck last Thursday.

New York's main oil contract, light sweet crude for August delivery, shed 1.66 dollars to 143.63 dollars on Monday. The contract had punched a life-time high of 145.85 on July 3.

US floor trading was shut last Friday but electronic trade continued amid the Independence Day holiday.

Oil blazed a record-breaking trail last week, driven by geopolitical tensions over Iran, the weak US dollar and tightening global supplies, traders said.

Sky-high oil prices -- which ramp up the cost of petrol, jet fuel, and domestic electricity and gas -- have triggered fears about higher inflation and slower economic growth. They have also sparked protests around the world.

Over the weekend, Iran offered to negotiate on its nuclear drive but without a freeze on uranium enrichment, in its first comments since responding to an international package aimed at ending the standoff.

EU foreign policy chief Javier Solana said Monday he hoped to meet later this month with Iran's top nuclear negotiator, after Tehran gave its response to a package of incentives to halt uranium enrichment.

"There is some kind of relaxing on the part of Iran," said Tony Nunan, a manager with Mitsubishi Corp's international petroleum business in Tokyo.

"So any kind of reduction in tension there will take some of the price pressure off."

Iran is locked in a standoff with the West over its nuclear energy programme. The Islamic republic claims it is for generating electricity while Western nations fear the development of nuclear weapons.

Elsewhere, the United States and Japan called Sunday for urgent action on red-hot oil and food prices that could derail the global economy.

Japanese Prime Minister Yasuo Fukuda said he and US President George W. Bush agreed on the need for urgent efforts to tackle the issue. Both are attending the G8 summit, which began in Japan earlier on Monday.

Bush raises North Korea concerns

2008-07-06T02:32:00.000-07:00

US President George W Bush has said America remains concerned about North Korea's uranium enrichment activities, which the North has denied.

But, speaking after talks with Japanese PM Yasuo Fukuda ahead of Monday's G8 summit in Japan, he acknowledged North Korea had addressed some concerns.

Mr Fukuda said he would attend the Beijing Olympics opening ceremony, which other leaders have vowed to miss. The G8 summit is being held at a resort on the northern island of Hokkaido.

North Korea handed over a long-delayed list of its nuclear activities to Washington on 26 June.

But Tokyo is worried that plans by the US to remove North Korea from its list of states sponsoring terrorism will undermine attempts to free some of its citizens, allegedly abducted by North Korea in the 1970s and 80s.

Mr Bush promised Mr Fukuda that he would "not abandon" the question of Japanese citizens abducted by North Korea.

Asked by reporters about the ailing US economy, the American leader said he was committed to a strong dollar.

"Our economy is not growing as robustly as we'd like..." he said.

"The United States believes in a strong dollar policy and believes the strength of our economy will be reflected in the dollar."

Speaking at their joint news conference, Mr Fukuda officially announced he would attend the opening of the Olympic Games in Beijing in August.

The Group of Eight (G8) consists of Britain, Canada, France, Germany, Italy, Japan, Russia and the United States.

Leaders began arriving on Sunday. Mr Bush arrived in time to celebrate his 62nd birthday in Japan.

China, India and South Africa will be among other key nations attending.

Braced for protests

Japan has spent a record sum of money and deployed about 20,000 police to seal off the summit at the remote lakeside resort of Toyako.

Several thousand demonstrators marched through Sapporo, the city closest to the venue, on Saturday, demanding that G8 leaders take action on global warming, poverty and rising food prices.

Four people were arrested in minor scuffles with police.

Violent anti-globalisation marches have marred past G8 meetings.

Last year, Japanese officials said this summit would be about climate change and reaching agreement on a post-Kyoto Accord framework to cut greenhouse gas emissions.

Mr Fukuda had said he would like to get agreement on 50% overall reductions in greenhouse gases by 2050.

But the rising food and oil prices and their effect on the global economy and the world's poorest nations have moved up the agenda.

Mugabe talks

South African President Thabo Mbeki will attend the summit, fresh from crisis discussions in Zimbabwe on Saturday with President Robert Mugabe about last month's disputed election.

He has been the chief regional negotiator on the Zimbabwe crisis, and has been trying to persuade Mr Mugabe to form a government of national unity.

The main opposition party, the Movement for Democratic Change, pulled out of last month's second round presidential election vote, citing campaign violence.

On the way to Japan, a White House official said that the G8 would "strongly condemn what Mugabe has done".

A small group of African states has joined the European Union, the US and other Western nations in criticising the way the election was run.

S Korea sets fuel-saving measures

2008-07-06T02:29:00.000-07:00

South Korea has announced the first in a series of measures intended to tackle the cost of rising fuel prices.

Thousands of public sector vehicles will only be allowed on the road on alternate days and government buildings air conditioning will be restricted.

Prime Minister Han Seung-soo said that if oil prices continued to rise, more extreme measures would be taken.

Correspondents say the move is largely symbolic as it covers only a limited number of vehicles and buildings.

South Korea has to import all its crude oil supplies and expects to spend $111.2bn (£56bn) on oil this year, up from $60.3bn (£30.4bn) last year.

Mr Han told a press conference: "Even oil-producing countries are tightening their belts to save energy in the era of the ultra high oil prices."

"To take concrete measures to save energy is not a matter of choice but a matter of survival."

'Mandatory'

The restrictions, which will be introduced on 15 July, will apply to 15,000 public-sector vehicles and more than 800 public offices and institutions.

Office thermostats are to be adjusted by 1C in both summer and winter.

There are also plans to replace half the fleet of public sector vehicles by compact or hybrid versions by 2012, reports state media.

Finance Minister Kang Man-soo said that if global oil prices reached $170 (£86) a barrel, mandatory savings in the private sector might be introduced as well.

He also suggested that the government could revise its economic forecast, if oil prices rise above $150 (£76) a barrel.

Analysts say that price might not be far away, after the price of crude oil hit an all-time high of $145.85 (£73) last Thursday.

UN to urge revamp of Afghan aid

2008-07-06T02:21:00.000-07:00

The United Nations' envoy to Afghanistan is to outline a new plan on spending foreign aid, amid fears that millions of dollars have been wasted.

Kai Eide told the BBC that too much aid money was spent on salaries and goods in the countries that provided it.

"I think... we spend too much of our money in our home countries instead of spending it in Afghanistan," he said.

Mr Eide advocates spending aid money through the Afghan government in return for a crackdown on corruption.

Last month, 80 countries pledged a further $22bn (£11bn) for Afghanistan.

Now the donors and the Afghan government are being told to deliver - to get schools, clinics, agriculture and electricity to the people who need it.

'Weak institutions'

Millions in development money have notoriously gone to waste in the seven years since the fall of the Taleban, the BBC's Alastair Leithead reports from Kabul.

US loses 62,000 jobs during June

2008-07-05T03:50:00.000-07:00

US firms cut workers for a sixth month in June, official figures show, stoking fears that the world's largest economy was heading towards a recession.

The economy lost 62,000 non-farm payrolls in June, the Labor Department said. It follows a newly revised figure of 62,000 jobs also lost in May.

Despite the reduction in payrolls, the unemployment rate was steady at 5.5%.

US companies have been reluctant to add staff amid higher oil and food prices, and slowing economic growth.

Gary Thayer of Wachovia Securities said that the payroll figures showed that the labour market was still very soft.

"We're not seeing dramatic job cuts, but clearly companies are trying to hold the line on costs," he said.

"It suggests that it's still a rough economy."

The US economy has shed jobs at an average rate of 73,000 a month, marking a total of 438,000 job losses so far this year.

Some economists are already predicting the unemployment rate will climb to 6% or higher in early 2009.

'Hard landing'

The majority of job losses in June came in the construction, financial services and manufacturing areas though retailers also shaved staff numbers.

These losses overshadowed the gains seen by the health service, education and leisure and hospitality and government sectors.

Consumer spending accounts for two-thirds of US economic activity and companies are worried that consumers are continuing to tighten their belts amid spiralling food costs and fuel costs.

On Thursday, the price of oil powered to a new record, hitting a fresh peak of $146.34 a barrel.

Many analysts are predicting that these factors will continue to dampen consumer demand and have a negative impact corporate profits.

At the same time, there is growing evidence that US firms are seeing a decline in demand for their services and goods.

On Wednesday, figures showed that factory orders climbed by the smallest amount for three months during May.

According to the Commerce Department, factory orders rose 0.6% in May, less than half the increase seen in April and March.

Without the support of transportation orders, which rose 2.5% on the back of rising orders for aircraft, the fall in orders would have been more dramatic. Excluding transportation orders, factory orders rose by 0.4%.

"The economy is at risk of a hard landing," said Brian Bethune of Global Insight.

Air France eyes move to railways

2008-07-05T03:49:00.000-07:00

Air France is holding talks on a joint venture that could lead to it offering high-speed rail travel.

The airline confirmed reports it was discussing a possible tie-up with Veolia, a French utility firm that also runs several rail services.

Commentators suggest such a deal would enable the airline to cut fuel costs by moving some services onto the railways.

Under the plans Veolia would run trains from Air France's hub airport in Paris to other European destinations.

"We are reviewing the feasibility and possibility of such a project, but it is too early to discuss its terms," an Air France spokesman told the Reuters news agency.

Competition plans

The joint venture is likely to remain focused on international travel as, under European Union plans, legislation is set to free up the international rail passenger market in 2010.

Veolia has previously run public rail franchises in several countries worldwide under the now-defunct Connex brand. It now runs continental Europe's largest private freight service and several rail connections.

With significant improvements being made to the network of high speed rail routes in Europe the potential of such services is improving.

As it confirmed reports of the talks, Air France added it had been looking at launching its own rail links over the past four years as it had been unhappy with the service provided when it had bought rail seats off existing train operators.

Fresh record for Indian inflation

2008-07-05T03:47:00.000-07:00

Indian inflation set another record in the third week in June as prices of food, fuel and steel continued to rise.

Wholesale prices rose by a larger-than-expected 11.63% in the 12 months to 21 June compared with the same period the previous year.

The new record raises the chance of another interest rate rise, following two last month.

The inflation figure was up from 11.42% in the previous week, and is the highest since the series began in 1995.

Wholesale prices are more closely watched in India than consumer prices because the figures are published weekly and include more products.

Inflation jumped in the first week of June from 8.75% to 11% after the government reduced its fuel subsidies.

Interest rates will come under focus when the Reserve Bank of India (RBI) holds its next rate-setting meeting on 29 July.

"The momentum in inflation continues to accelerate and that is a worrying sign," said Sonal Varma, at Lehman Brothers in Mumbai.

"We expect the RBI to hike the repo rate by 25 basis points at the July policy [meeting]."

Meanwhile, rising food and fuel price increases pushed the Philippines' . inflation rate in June to its highest in 14 years.

Acting socio-economic planning secretary Augusto Santos said "continuous price increases of cereals and fuel" had raised annual inflation in June to 11.4% from 9.5% a month earlier.

The new figure is the biggest since May 1994, when consumer prices rose 11.5%.

Former Austrian bank boss jailed

2008-07-05T03:44:00.000-07:00

The former head of one of Austria's biggest banks, Bank Fuer Arbeit und Wirtschaft (Bawag), has been jailed for nine-and-a-half years for fraud.

Helmut Elsner, 73, Bawag's ex-general director, was one of nine people who were convicted in a case linked to the collapse of US brokerage Refco.

Judge Claudia Bandion-Ortner found the defendants responsible for 1.4bn euros ($1.9bn; £1.1bn) of losses at Bawag.

All had denied charges of breach of trust, fraud and false accounting.

The prison term was just short of the 10-year maximum for his crimes.

As well as his prison sentence Elsner was ordered to repay Bawag 6.8m euros in pension benefits.

Witnesses called during the year-long trial included a former Austrian chancellor, an ex-finance minister and a member of the executive board of the European Central Bank.

Bankruptcy filing

Bawag had been under investigation for lending ex-Refco chief executive Phillip Bennett several hundred million dollars before the US brokerage filed for bankruptcy.

Elsner was the key defendant in the case in Austria, and had fled to France in 2006 when Bawag's difficulties became known.

Bennett was sentenced to 16 years in prison in the US on Thursday.

The other eight defendants were made up of Bawag board members, the ex-supervisory board chief, the former secretary general, an auditor and an independent hedge fund manager.

They received total fines of more than 72m euros, as well as sentences ranging from an 18-month suspended sentence to five years in prison, for a variety of crimes including breach of trust, falsification of accounts, and aiding and abetting a breach of trust.

All but one of them said they would appeal against their convictions.

Iran inflation tops 26 percent

2008-07-05T03:38:00.000-07:00

Iran's inflation rate, which has provoked intense criticism of the government, topped 26 percent in June, according to a central bank statement published in the press on Saturday.

"During the Iranian month of Kordad (to June 20) inflation reached 26.4 percent compared with the same month a year ago," according to the statement published in the economic newspaper Sarmayeh.

The previous month, annual inflation was running at 25.3 percent.

President Mahmoud Ahmadinejad has been blamed by many economists for directly fuelling the price rises by ploughing huge amounts of cash into the economy to fund local infrastructure projects.

There has been a sharp increase in money supply growth -- a key indicator of future inflation trends -- to almost 40 percent during the years of the Ahmadinejad presidency.

He was elected in 2005 on a platform of making the poor feel the benefits of the OPEC member's massive oil wealth, and he has made implementation of economic "justice" the main government slogan.

Fifa to pay in ex-media firm case

2008-07-03T03:44:00.000-07:00

Football body Fifa has been told to pay costs of 117,000 Swiss francs ($114,500; £57,000) after a trial into the collapse its ex-media partner ISL.

The finding of the Zug court was one of a series of decisions involving six former executives of ISL/ISMM.

A fraud trial in Switzerland prosecuted the six on charges including embezzlement and forging documents.

Fifa had made an initial criminal complaint against ISL, but withdrew and said it wanted to pursue a civil claim.

Three of the six ISL executives were found partially guilty by the court.

Former ISMM general director Jean-Marie Weber was found guilty of embezzlement in relation to a secret bank account used by the firm to win television and sponsorship deals, and fined 84,000 Swiss francs.

Board members Hans-Juerg Schmid and Hans-Peter Weber were found guilty of obtaining documents by false pretenses and sentenced to fines of 30,000 Swiss Francs and 12,000 Swiss Francs.

More serious charges were dismissed and the three were awarded compensation payments greater than the fines handed out.

The six were awarded damages ranging from 17,000 Swiss Francs to 190,000 Swiss Francs.

'Control account'

Prosecutors had accused ISL/ISMM of channelling 18m Swiss francs in bribes through Liechtenstein.

Prosecutors alleged that the six paid off people involved in negotiating the rights deals to major sporting events.

ISMM, the parent company of ISL, owned the television and marketing rights to the 2002 and 2006 World Cups.

ISL ran Fifa's marketing and television rights for 20 years but collapsed in May 2001 with estimated debts of $330m.

The judge in the Zug trial said Fifa was aware of the financial difficulties before its former partner went bust, but had failed to carry out checks of the "control account".

The defendants had argued that Fifa knew of the firm's financial difficulties and had accelerated its demise by breaking off agreements with the marketing firm.

China to increase grain output

2008-07-03T03:40:00.000-07:00

China's cabinet has approved a plan to ensure grain production keeps pace with strong domestic demand and overcomes challenges such as climate change.

China aims to reach and maintain annual grain output of 500 million tonnes by 2010, and to increase output to more than 540 million tonnes a year by 2020.

Harsh weather and the development of arable land are hurting grain output.

Despite this, the government said China would be self-sufficient in the future and could meet rising consumer demands.

In order to achieve its goals, China has set out a "red line" defining 120 million hectares (296 million acres) of land as a necessary minimum to ensure at least 95% self-sufficiency in grain supply.

Future challenges

China has the world's largest population, with more than 1.3 billion people.

As its economy grows, so do the demands and desires of its population, boosting demand for food, commodities and consumers goods.

While the country's supply and demand are more or less equal at the moment, the Chinese government has forecast that meeting demand will be tight in future.

Rapidly increasing urbanisation, a growing population and industrialisation across the country all pose major challenges to future grain production.

Water shortages and extreme weather conditions such as the recent floods are also hampering food production.

In a bid to further combat the problems, the government has also decided to increase farmer subsidies and ramp up China's grain reserve system.

Food prices have almost doubled within the past three years and have led many countries to curtail exports in order to ensure enough stocks remain for domestic consumption.

Higher prices have also led to widespread unrest across Asia and Northern Africa.

India truckers strike over fuel

2008-07-03T03:36:00.000-07:00

Nearly four million trucks are off India's roads after their owners began an indefinite strike to protest against rising fuel bills.

The soaring global price of crude oil has led the Indian government to cut subsidies and raise prices.

Truck operators say they have been hit hard by oil prices which have risen by 40% since the beginning of the year.

Trucks carry food and other essential commodities in India. The strike is likely to push up their prices.

'No loading'

Correspondents say that with 70% of goods being transported by truck across India, a prolonged strike will have a serious affect on the country's economy.

Television footage showed goods that would normally have been transported by the vehicles being stacked at farmers markets, docks and warehouses.

"As of now, no orders are being booked, no loading or delivery is in progress," Mukesh Dave, the head of the lorry drivers' association in the western state of Gujarat, told the Press Trust of India.

Truck depots across the country were jammed with stationary vehicles parked in long lines throughout Wednesday.

"Because of the increase in the diesel prices our cost of operation has gone up, but the traders who send their stuff through us are not ready to pay more," truck owner Sachin Sehgal said.

Hundreds of protesters held a rally on Wednesday in the southern city of Madras, where there were also reports of panic buying of potatoes and other staple foods.

Analysts say that the dispute will add to double-digit inflation and slow down growth in India.

A similar week-long strike in 2004 slowed down the annual growth in industrial output to 7.9% from 8.4% in the previous month as the strike disrupted shipments.

'No choice'

Truck operators "have no choice but to stay off the roads", Charan Singh Lohara of the All India Motor Transport Congress told

"We are already running under huge losses. The cost of diesel is so high that we have nothing left to live on.

"The government must reduce the multiple taxes to compensate for the increasing cost of fuel."

Mr Lohara said the operators hoped to meet Finance Minister P Chidambaram to discuss their demands, but correspondents say no progress had been made in negotiations so far between the two sides.

The operators are also protesting against road tolls imposed by the government.

In June, India raised fuel prices by 10%, the second such increase this year, because of the rising cost of oil globally.

India imports nearly 75% of its crude oil requirements and controls the price of domestic fuel products to help contain inflation and protect the poor.

Meanwhile, Transport Minister TR Baalu urged the lorry-drivers to call off the strike.

He said the government was considering more tax relief for them.

Difficult to replace Iranian oil output, says Opec: report

2008-07-03T03:28:00.000-07:00

The secretary general of the Opec oil exporting group said that it would difficult to replace the crude output of Iran if the country was attacked, in comments published on Thursday.

"If something happened in Iran, it is difficult to replace 4.1 or 4.2 million barrels a day," Abdallah el-Badri told the daily newsletter of the World Petroleum Congress here, referring to Iran's daily output. "The price (of crude) of course will go up."

Oil surged past 145 dollars per barrel for the first time on Thursday on the weak US dollar and Middle East tension.

Asked about fears that Iran would close the straits of Hormuz if attacked, a key shipping route through which 40 percent of Middle Eastern oil pass, he replied: "When you are in a war, you are in a war. You can use anything."

There has been a surge in speculation recently that Israel might be planning a military strike against Iran's nuclear sites after it emerged that Israeli fighter planes had carried out practice runs.

Iran has been locked in a five-year standoff with the West over its nuclear programme, which it says is for generating electricity while Western powers fear the development of nuclear weapons. "Iran, if there were any kind of activity of any sort, is not going to be quiet and would react fiercely," Iranian Oil Minister Gholam Hossein Nozari said here when asked what Tehran would do in the event of an attack.

The Organization of Petroleum Exporting Countries (Opec) has been under pressure from consumer countries to increase supplies to lower prices, but members contend that supply is not the cause of 145-dollar oil.

Oil prices strike record high $146 per barrel

2008-07-03T03:24:00.001-07:00

The price of oil has continued to climb - with Brent crude rising above $146 a barrel for the first time.

Brent crude rose by $2.08 to $146.34 a barrel in London. US light, sweet crude rose by more than $1 to $145.22.

Oil prices have risen significantly since the US government announced on Wednesday that its crude stockpiles had fallen by more than expected last week. A spokesperson for the motoring organisation the AA called the rate of increases "eye watering".

A barrel of Brent crude has risen by almost $4 since the beginning of the week.

The AA estimates that a $2-a-barrel rise in crude oil means an extra penny on fuel prices at the pump. This takes a number of weeks to feed through to the fuel stations.

"The market can absorb a little bit of the increase on the forecourt, but nothing like this," the AA's Paul Watters told the BBC.

Currently, unleaded petrol is currently 118.95 pence per litre on average and diesel 132.20p, according to Experian.

An AA survey in April showed that almost two thirds of motorists were either doing fewer trips by car or cutting back on other spending as a result of higher fuel prices.

"This is only going to happen more. This is very very bad news for the economy," Mr Watters added.

Fuel prices

Oil prices are expected to rise even further.

Russian President Dmitry Medvedev, speaking ahead of next week's G8 meeting of leading industrialised nations, predicted that prices would climb to $150 a barrel.

"Unfortunately, rising oil prices create problems for the world's economy," he said.

Companies across the world have been suffering under the strain.

Air New Zealand has become the latest airline to say it cannot continue to absorb the rising cost of jet fuel, which is now more than $170 a barrel.

The carrier announced on Thursday that domestic fares would rise by 3% and international fares by 5%.

That followed a profit warning from Hong-Kong based airline Cathay Pacific on Wednesday.

Supply concerns

Some observers have blamed speculators for pushing oil prices higher.

However, Prime Minister Gordon Brown, speaking to a committee of MPs, said he thought an imbalance in supply and demand was the primary reason for the spike in prices.

"You can't put down to speculation the whole of the problem we are dealing with at the moment," Mr Brown said.

The president of oil group Opec has blamed the weakening of the dollar, which makes oil a more attractive investment.

Dr Chakib Khelil told the BBC that a rise in eurozone rates would weaken the dollar further, and could cause oil prices to rise even further.

The European Central Bank is due to give its latest rate decision at 1245 BST, and there is speculation that the main borrowing cost may increase by a quarter of a percentage point to 4.25% from 4%.

Overnight, the dollar traded at its lowest level against the euro for more than two months, falling to $1.5891 per euro.

"The current market is being driven by the weaker dollar and with the equity markets a disaster, investment money is looking for a more profitable market," said Tetsu Emori, a Tokyo-based fund manager.

Opec head sees new oil price rise

2008-07-02T04:10:00.000-07:00

The president of the oil producers' group, Opec, has warned that crude prices could rise further this week if eurozone interest rates go up.

Dr Chakib Khelil told the BBC that he expected a rise in rates to lead to a further weakening of the dollar which would push oil prices higher.

Dr Khelil blamed the fall in the value of the dollar for recent record highs.

He rejected calls to increase the supply of oil, saying a boost by Saudi Arabia had failed to temper prices.

"What happened was that instead of coming down, they increased, because the perception of the market is that the dollar will continue weakening in future," Dr Khelil told the BBC's World Business Report at the Petroleum Congress in Madrid.

The price of oil hit another record level last week, when US light, sweet crude traded at $143.67.

In late morning trading in London, Brent crude was up almost $1 at $141.58. The European Central Bank has hinted that it may increase its main interest rate from 4% in an effort to control accelerating consumer price inflation.

However, it has not made any firm commitment to lifting borrowing costs at its rate setting meeting on Thursday. A decision will be announced at 1245 BST.

Some analysts have predicted that the bank may lift interest rates by a quarter of a percentage point to 4.25%.

Samsung faces crisis after chairman quits: executive

2008-07-02T04:08:00.000-07:00

South Korea's largest business group Samsung faces a leadership crisis after its chairman quit in the wake of a scandal, the acting chairman said on Wednesday.

"Without a captain or rudder, Samsung now faces a complex crisis, with each unit meeting cut-throat competition independently," said Lee Soo-Bin.

"The group was able to ride out a previous crisis together thanks to former chairman Lee Kun-Hee's strong leadership and the guidance of the Strategic Planning Office. Now we cannot do so."

Special prosecutors this year mounted a three-month probe into corruption allegations against the multinational and charged Lee Kun-Hee in April with tax evasion and breach of trust.

He quit the group later that month after almost 20 years at the helm and is now on trial.

Samsung announced management changes, scrapping the 90-strong Strategic Planning Office. It acted as the "control tower" of the loose-knit group, which has 59 affiliates, but was implicated in the scandal.

The group has created two decision-making committees of chief executives from various affiliates to address fears of a vacuum in decision-making.

Acting chairman Lee Soo-Bin, the chairman of Samsung Life Insurance, was speaking after holding the first meeting with chief executives of affiliates since Lee Kun-Hee's departure.

When his trial began on June 12, Lee Kun-Hee accepted blame for any lapses at the group, which employs 250,000 people and accounted for more than 20 percent of the nation's exports last year.

But his lawyers are contesting the specifics of the charges.

The key point is whether Lee instigated and planned the controversial transfer of control over the group from himself to his son Lee Jae-Yong.

Both father and son appeared in court Tuesday, with the son a defence witness for his father.

Lee senior denied authorising the issuance of low-priced bonds, the basis of the breach of trust charge, so that his son could take over.

He is also charged with evading a capital gains tax bill of 112.8 billion won (110 million dollars) and could technically face life in prison if convicted.

Most other Korean tycoons brought to court on criminal charges have escaped severe punishment, with judges citing a negative impact on the economy.

Oil prices hold above 142 dollars ahead of US energy report

2008-07-02T04:06:00.000-07:00

Oil prices breached 142 dollars per barrel again on Wednesday, nearing recent record heights, as traders awaited the latest weekly snapshot on energy stockpiles in the United States.

New York's main oil contract, light sweet crude for August delivery, jumped 1.06 dollars to 142.03 dollars a barrel in early European trade.

Brent North Sea oil for August delivery climbed 1.34 dollars to 142.01 dollars a barrel.

Prices rocketed to record highs on Monday on the back of tensions over oil producers Iran and Nigeria, and as the dollar remained weak against other major currencies, traders said.

London Brent oil scored an all-time high of 143.91 dollars and New York crude enjoyed a life-time peak of 143.67.

Concerns over geopolitical tension in the Middle East, the struggling US dollar and unrest in Nigeria continued to drive the market, dealers said.

"They are talking about the usual stuff like the weak dollar, Iran and Nigeria," said Clarence Chu, a trader with Hudson Capital Group, a New York-based energy trading house.

"I would say people are still leaning towards the bullish side but they are looking for new news."

He added that the market would seek fresh direction from the US Department of Energy's oil inventories report that was due for publication later Wednesday.

The weekly US update is crucial for the market because the United States is the world's biggest energy consuming nation, followed by number two China.

A weak US currency, meanwhile, makes dollar-denominated raw materials like oil cheaper for buyers using stronger currencies, and therefore tends to stimulate demand.

Microsoft seeks partners for new bid for Yahoo: WSJ

2008-07-02T04:04:00.000-07:00

Microsoft is considering a new attempt to buy part of Yahoo in a deal with other media companies that would likely see a break-up of the Internet firm, the Wall Street Journal reported Wednesday.

Microsoft has approached Time Warner and News Corp, among other media companies, to assess their interest in different parts of Yahoo, according to sources close to the discussions quoted by the newspaper.

The software giant has in the past suggested an arrangement under which it would acquire Yahoo's search engine business and another partner would join forces with what was left of the Internet firm, the Journal reports. According to the same sources, Microsoft Chief Executive Steve Ballmer asked Yahoo president Roy Bostock for a meeting to discuss a new idea involving other partners. The meeting, set for Monday, was subsequently cancelled by Microsoft.

Microsoft has ruled out making another bid for the whole of Yahoo, after it withdrew a nearly 48-billion-dollar offer in May, and Yahoo announced June 12 that discussions with the software giant on a tie-up had ended.

Yahoo has since launched several moves to persuade investors that it made the right decision, including a new advertising deal with rival Google.

However, the market appears unconvinced. Yahoo shares have dropped 28 percent since February 1, the day that the Microsoft offer was announced.

US authorities probe UBS over tax

2008-07-01T04:14:00.000-07:00

US authorities have stepped up a probe into allegations that offshore accounts were set up at Swiss bank UBS to help wealthy clients avoid tax.

The Justice Department is seeking court approval for the Internal Revenue Service (IRS) to issue a civil summons against UBS to obtain key information.

A former UBS banker admitted last month to conspiring to help US clients avoid paying tax.

UBS said it took the matter "very seriously" and was co-operating fully.

'Diligence'

UBS said it was "aware" of the summons request, made to the Federal District Court in the Southern District of Florida.

"UBS takes this matter very seriously and is working diligently with both Swiss and US government authorities, consistent with Swiss law and the legal frameworks for intergovernmental co-operation and assistance," it said in a statement.

Swiss officials held talks with their US counterparts about the allegations last week.

This followed the admission by Bradley Birkenfeld, a former director of UBS private banking division, that he helped US clients avoid paying more than $7m in tax by hiding more $200m in an elaborate web of fraud.

According to the Justice Department, Mr Birkenfeld claimed more than $20bn was sitting in "undeclared" accounts at the Swiss bank controlled by US taxpayers.

Media reports have suggested that up to 20,000 US citizens may be involved.

The IRS said its probe would enable it to "detect wealthy individuals who don't pay their taxes as well as provide details about how advisers facilitate this abuse".

The Swiss bank's reputation for financial prudence has been recently damaged by the sub-prime crisis which has seen it make losses of more than $37bn.

The firm made an $11bn loss in the first quarter of 2008 and is cutting 5,500 jobs.

Iraq seeking help to develop oil

2008-07-01T01:56:00.000-07:00

Iraq has begun the process of opening up its oil industry to foreign investment in an effort to boost output of the country's key income earner.

Iraq is seeking external help to boost output from six key oil fields and has attracted interest from leading US, Asian and European producers.

Oil production is currently at its highest since the 2003 invasion.

But political wrangling has so far prevented agreement over who should agree deals and how income is shared.

Political problems

Iraq has reserves of about 115 billion barrels, the world's third largest, and the development of its oil facilities is essential to help to fund the country's long-term reconstruction.

But huge investment is needed to modernise its infrastructure and Iraq's Parliament has so far failed to agree a legal basis for who should agree contracts and how the country's oil should be shared among different groups.

The authorities in Baghdad have long been at odds over the issue with the semi-autonomous Kurdistan regional government in the north of the country.

Production currently totals 2.5 million barrels a day and Iraq hopes to increase output to 2.9 million barrels by the end of 2009.

Iraq confirmed on Monday that it was seeking foreign investment to develop six of its most important oil fields - Rumaila, Kirkuk, Zubair, West Qurna, Bai Hassan and Maysan.

It has identified 35 foreign firms which are qualified to tender for the contracts, to be awarded next summer.

Amid concerns about foreign firms reaping huge financial rewards, Baghdad said the successful firms would have to have an Iraqi partner and give 25% of the value of contracts to locally owned firms.

Significance

The BBC's Nicholas Witchell in Baghdad said the move was highly significant since it paved the way for large foreign firms to re-enter a market they have been effectively barred from since Saddam Hussein nationalised Iraq's main oil company in 1972.

"It is not possible for Iraq, which has large oil reserves, to stay at the current level of production," said oil minister Hussain al-Shahristani.

"Iraq should be the second or third source of oil exportation."

Iraq's courting of foreign investment is at an early stage but has already attracted controversy due to claims that some contracts might be awarded without competitive bids.

Reports suggested that officials were hoping to announce short-term service agreements - an interim measure pending political agreement over a national oil law - with Exxon Mobil, Shell, Total and BP on Monday.

The AFP news agency said Iraqi officials were unwilling to share revenue from oil sales with the firms, as reportedly sought by them, preferring instead to pay them consultancy fees.

However, negotiations over contract terms are believed to be continuing.

The reduction in violence in much of the country over the past year has helped the oil sector achieve greater stability.

On Saturday, Iraq announced it was setting up a third state-owned oil business to expand production from the Maysan region in the south east of the country.

With oil prices at record levels and, according to many experts, set to rise further, the prospect of increased output from Iraq will provide some comfort amid growing worries about whether global supplies can meet long-term demand for oil.

Officials hope the presence of multinational oil firms in Iraq will stimulate more foreign investment in Iraq, our correspondent added.

Tesco to end trade with Zimbabwe

2008-07-01T01:51:00.000-07:00

Supermarket chain Tesco has announced it will stop sourcing products from Zimbabwe while "the political crisis persists" there.

The retail giant buys about £1m ($1.9m) worth of goods a year, including vegetables, from Zimbabwe.

Tesco said it was looking for other ways to support workers there.

The move comes a day after a Foreign Office minister urged firms trading with Zimbabwe to "look carefully" at their investments.

The international community has expressed concern at the presidential election re-run, which saw Robert Mugabe claim victory as the sole candidate after opposition leader Morgan Tsvangirai withdrew citing pre-poll violence.

The UN has urged African leaders to try to negotiate a solution to the Zimbabwe's crisis.

Foreign Office Minister Lord Malloch Brown told UK firms that they would find it harder to operate there as sanctions tightened.

'Continued support'

Tesco said it had been "a difficult decision" to end its trade with Zimbabwe.

"We cannot ignore the escalating political crisis in Zimbabwe, and the growing consensus in the international community - including from UK politicians on all sides - that further action must be taken to maximise the pressure for change," the company said in a statement.

It added that it was urgently seeking to ensure workers who supplied the retailer and their families were affected as little as possible.

"We cannot continue to support them through trade, but are urgently finding ways to support them by other means," Tesco said.

The retailer had used its concern for Zimbabwean workers as a reason for maintaining its commercial ties with the troubled African nation.

Last week, it said it would be "irresponsible" to withdraw from the country.

Former Africa minister, Peter Hain MP, welcomed Tesco's decision.

"I hope it will give a lead to other British and global companies to freeze or suspend ties with Zimbabwe under Mugabe's tyranny," Mr Hain said.

"This is a decisive time when everybody and every institution in a position to take a stand should do so."

Rival retailers Waitrose and Sainsbury's both buy fish from Zimbabwe.

Waitrose said it supported international efforts to restore democracy and to help the Zimbabwean population.

"We believe our limited relationships with two Zimbabwean suppliers actually enhances these efforts rather than undermining them," Waitrose said.

"In addition, withdrawing our small amount of trade would greatly affect the workers and their extended families."

Yen wobbles after drop in business confidence

2008-07-01T01:50:00.001-07:00

The dollar was slightly higher against the yen in Asian trade on Tuesday after a sharp fall in Japanese business confidence and continued efforts by Washington to talk up the greenback, dealers said.

The dollar was at 106.35 yen in Tokyo morning trade, compared with 106.13 in New York late on Monday.

The euro slipped to 1.5733 dollars from 1.5745 but edged up to 167.24 yen from 167.15.

Japanese business confidence slumped to the lowest level in almost five years in June, the central bank said in its closely watched Tankan survey, but the figure was slightly better than the market had expected.

The dollar gained support after China asked the US to try to steady the greenback amid a cooling global economy, said Saburo Matsumoto, chief forex strategist at Sumitomo Trust Bank.

Premier Wen Jiabao asked Washington to take steps to stabilise the dollar and prevent a further slowdown of the global economy in talks with visiting US Secretary of State Condoleezza Rice on Monday, Chinese state media reported.

US Treasury Secretary Henry Paulson meanwhile reiterated his support for a strong dollar, which he said was "a good thing" for the US economy.

"Every economy is going to have some ups and downs. We are going through a tough period in the US right now," he told Russian radio on Monday.

Markets were looking ahead to the release later in the day of the latest snapshot of the US manufacturing sector from the Institute for Supply Management, ahead of key US jobs data for June due on Thursday.

"We expect the US will jawbone against a much weaker dollar if a sliding stock market and weaker news on the economy continues to trigger unwinding of rate hike expectations," NAB Capital strategists wrote in a note to clients.

"For the Fed (US Federal Reserve) to change its tune on the dollar after suggesting it didn't want to see any further decline less than a month ago would be a significant blow to its credibility," they added.

Markets were waiting for a European Central Bank (ECB) meeting on Thursday when interest rates are expected to rise by 25 basis points to 4.25 percent to try to curb inflation that hit 4.0 percent in the eurozone in June.

But analysts said European officials may also start to be more attentive to slowing growth in the eurozone economies.

"The outlook for European growth remains uncertain and there are areas that are already experiencing economic slowdowns," said Sumitomo's Matsumoto.

Oil prices rise above 141 dollars after Opec comments

2008-07-01T01:46:00.000-07:00

Oil prices jumped beyond 141 dollars a barrel on Tuesday after the president of Opec said there was uncertainty surrounding future investment in facilities to boost crude output.

New York's main oil contract, light sweet crude for August delivery, was up 1.40 dollars at 141.40 dollars a barrel at about 0820 GMT.

Brent North Sea oil for August delivery climbed 1.50 dollars to 141.33 dollars a barrel.

On Monday, crude futures had struck record high levels close to 144 dollars, as the US currency remained weak against the euro, traders said.

Brent soared to an all-time high of 143.91 dollars and New York crude to a historic peak of 143.67.

On Tuesday the president of Opec, Chakib Khelil, said the oil producers cartel had concerns about future demand which led to uncertainty investing in capacity to increase production.

"The concern we have is about the security of demand," Khelil, who is also Algeria's energy minister, told an energy conference in Madrid.

He told the World Petroleum Congress that there were "big uncertainties" about making huge investments in infrastructure to increase output from members of the Organization of Petroleum Exporting Countries, which pump about 40 percent of world oil.

Global oil prices have doubled in the past year and have risen by almost 50 percent since the start of 2008, when they breached 100 dollars for the first time, triggering fears over inflation and slower economic growth.

Consumer countries blame record prices on tight supplies amid strong demand and unrest in producer countries such as Iran, Iraq and Nigeria. In particular, they accuse OPEC of not producing enough crude.

The 13-nation cartel, however, insists that the weak US currency is at fault, as it drives up demand for dollar-denominated oil from foreign buyers.

Taiwan eases China currency rules

2008-06-30T03:19:00.000-07:00

Taiwan has lifted some restrictions on Chinese currency exchange, in another sign of improving bilateral ties.

The move is part of a number of financial liberalisation measures agreed by the government last week.

It follows a pledge by Taiwan's new President, Ma Ying-jeou, to promote better economic ties with China, which sees Taiwan as part of its territory.

For the first time, Chinese bank notes will be officially available at authorised Taiwanese banks.

They will also be available at foreign-currency trading counters at tourist hotels, airports and gift stores.

Tourist influx

The move comes just a few days before the start of regular direct weekend charter flights between Taiwan and China - marking a new chapter in relations between the two political rivals.

But the step is also considered a virtual necessity, since from next month up to 3,000 Chinese tourists will be allowed to visit Taiwan each day.

The move will provide a legal channel for them to exchange their money for local currency to spend in Taiwan.

The absence of a currency exchange service between Taiwan and China had led to rampant black market currency trading.

Under the new regulations, anyone will be able to buy or sell Chinese yuan at authorised institutions, although the government has initially set a cap of 20,000 yuan - just under $3,000 (£1,500) - for each transaction.

Yuan conversion by institutions and companies will still be barred.

In the longer term, it is hoped that officials from Taiwan and China will be able to negotiate currency settlement agreements to provide mechanisms for normalising cross-strait currency clearance.

Until now, the conversion of Chinese currency could only take place on Taiwan's outlying islands of Matsu and Kinmen.

Dollar flat against euro in Asia

2008-06-30T03:16:00.000-07:00

The dollar was steady against the euro in Asian trade on Monday as traders weighed prospects for higher interest rates in the eurozone ahead of a key European Central Bank policy meeting, dealers said.

They said that while markets expect the ECB to raise rates on Thursday to try to contain inflation, there are doubts about whether it will be the start of a series of rate rises given concerns about slowing economic growth.

The dollar regained some of last week's losses against the Japanese currency, firming to 106.40 yen in Tokyo morning trade from 106.11 in New York late Friday.

The euro was unchanged at 1.5790 dollars but edged up to 168.05 yen from 167.22.

Traders have already priced in a 25-basis-point interest rate hike by the European Central Bank on Thursday to 4.25 in response to simmering inflation.

Markets will be looking for clues from ECB chief Jean-Claude Trichet on the future direction of rates in the 15-member eurozone, with the rate rise expected to be a one-off for now as the economy loses steam, dealers said.

"The dollar's weakness was limited by receding expectations of a series of rate hikes in Europe amid uncertainty over the economic outlook," said Yuya Koike, forex strategist at Hachijuni Bank.

The interest rate gap between the eurozone and the United States -- where the Federal Reserve's key rate is at 2.0 percent -- has weighed on the dollar, which has also been weakened by lacklustre US economic growth.`

The dollar was pressured by Friday's sell-off on Wall Street amid fresh jitters over the economic outlook, as oil prices shot above 142 dollars a barrel.

The market is also skittish ahead of Friday's monthly labour market report for June in the United States, particularly after a much bigger-than-expected jump in the unemployment rate in May to 5.5 percent.

But the US currency's fall has been curbed by speculation that Washington may take steps to try to bolster the greenback, either by trying to talk up the currency or perhaps even with market intervention, dealers said.

"There are expectations that (US officials) may need to do something to support the dollar as the economic outlook is worrying," said Koike.

He said US authorities were expected to reiterate support for a stronger dollar, while intervention to buy the US currency -- while possible -- would require cooperation from European nations to be effective.

G8 leaders to set up task force on food crisis: report

2008-06-30T03:09:00.000-07:00

Leaders from the Group of Eight industrial powers will agree to establish a task force at their summit next month to tackle the world food crisis, a report said on Monday.

The group will aim to address the immediate problem of food shortages in poorer countries as well as address longer-term challenges such as boosting food production, the Yomiuri Shimbun said, citing unnamed government sources.

The working group is also expected to discuss removal of export restrictions and directing global food stockpiles to those most in need, the daily said.

The report came after UN Secretary-General Ban Ki-moon said he would press G8 leaders at their July summit in Japan to tackle the world food crisis, as well as climate change and the flagging fight against global poverty.

The G8 is made up of Britain, Canada, France, Germany, Italy, Japan, Russia and the United States.

G8 leaders are expected to issue a statement on the food crisis at the summit in the northern Japanese resort town of Toyako, senior Japanese official Masaharu Kohno has said.

G8 finance ministers warned at their meeting earlier this month that soaring oil and food prices pose "a serious challenge to stable growth worldwide" and may worsen poverty and stoke global inflation.

Iraq to award oil contracts to foreign companies

2008-06-30T03:04:00.000-07:00

Iraq on Monday will award oil contracts to dozens of foreign companies in a bid to boost production that could also give multinationals a foothold in the country's huge but underdeveloped oil fields.

The oil ministry is to hold a press conference to announce the deals which include five technical support agreements with companies such as Shell, ExxonMobil, Chevron, Total and BHP Billiton, ministry spokesman Asim Jihad said.

The ministry also plans to sign contracts with 41 other foreign companies for extracting oil, Jihad had told AFP last week. These are expected to be short-term arrangements.

The contracts do not allow investments by the foreign companies in the oil sector but do pave the way for global energy giants to return to Iraq 36 years after executed dictator Saddam Hussein chased them out.

The move is also seen as a first step to access the third largest proven crude reserves on the planet.

Jihad had said the selected companies will have the first right to develop the fields once competitive bidding comes after the nation's long-delayed hydrocarbons law is passed by parliament.

Iraq wants to ramp up output by 500,000 barrels per day from the current average production of 2.5 million bpd, about equal to the amount being pumped before the US-led invasion in March 2003.

Exports of 2.11 million bpd currently form the bulk of the war-torn nation's revenues, and the oil ministry is keen to raise capacity over the next five years to 4.5 million bpd.

Iraq's crude reserves are estimated at about 115 billion barrels, but it is sorely lacking in infrastructure and the latest technology to which it was denied access under years of international sanctions after the 1991 Gulf War.

Oil prices close in on record-high 143 dollars

2008-06-30T03:02:00.000-07:00

World oil prices rose to within touching distance of a record-high point of 143 dollars on Monday, as French truckers protested at high fuel costs and energy leaders met to discuss soaring crude.

New York crude oil had hit an all-time record of 142.99 dollars on Friday as the US currency remained weak. The ailing dollar has fuelled demand for oil, which is priced in dollars, from traders holding stronger currencies.

In early European trading on Monday, London's Brent crude struck a record high 142.98 dollars a barrel, one cent above its previous high reached last Friday.

Brent North Sea oil for August delivery later stood at 142.60 dollars a barrel, a rise of 2.29 dollars from Friday's close.

Meanwhile, New York's main oil contract, light sweet crude for August delivery, jumped by 2.35 dollars to 142.56 dollars per barrel on Monday, after an intra-day peak of 142.94.

Crude futures have doubled in the past year, triggering fears over inflation and slower economic growth.

On Monday, high fuel prices sparked protests among hundreds of truckers across France, blocking main highways and snarling commuter traffic around Paris.

Leading figures in the oil world gather in Madrid on Monday for one of the industry's biggest events that will focus on the future of the sector at a time of unprecedented crude prices.

A week after failing to deflate the price of crude at a summit in Saudi Arabia, the world's biggest oil producers and consumers will get another chance during talks here to explore ways of calming tense global energy markets.

More than 3,000 delegates, including leading corporate and political figures, are attending the four-day World Petroleum Congress (WPC), which runs from Monday to Thursday after an official opening reception on Sunday.

US pays $2.5 million for NKorean nuclear demolition: official

2008-06-29T01:26:00.000-07:00

The United States said Friday it contributed 2.5 million dollars for the demolition of the cooling tower of North Korea's key nuclear reactor as part of a denuclearization effort.

A US official, speaking on condition of anonymity, confirmed the sum but could not verify reports that the total cost of the 30-metre (99-foot) tower's demolition was five million dollars as claimed by the North Koreans.

The New York Times said in a report Friday that conservative hard-liners in Washington skeptical of the nuclear deal with North Korea felt the US contribution was too much.
TV footage showed the tower engulfed in a huge cloud of smoke as a landmark piece of the country's nuclear history collapsed in ruins.

"It was a significant and very important step," US State Department official Sung Kim told a reporter at the scene Friday.

Dollar falls as ECB rate hike expectations mount

2008-06-29T01:20:00.000-07:00

The dollar weathered fresh losses Friday, despite a stronger-than-expected snapshot on consumer spending, amid expectations that euro zone interest rates will be hiked next week.

The gap in US and euro zone rates, US rates are considerably lower, has already weighed on the dollar, which has also been weakened by lackluster economic growth in the United States.
Traders generally prefer to hold currencies in countries where rates are higher so they can reap higher yields on their investments.

The euro was changing hands at 1.5790 dollars around 2100 GMT, up from 1.5756 late Thursday.

The dollar also fell against the Japanese yen, to 106.11 from 106.73 Thursday.

The US currency came under renewed pressure this week after the Federal Reserve brought its rate-cutting campaign to a halt Wednesday as it opted to keep its key base rate pegged at 2.0 percent in the face of mounting inflation pressures.

The dollar lost ground Friday despite a government report showing that consumer spending rose 0.8 percent in May, as Americans spent the proceeds of one-off tax rebate checks.

The financial markets follow the monthly snapshot closely because consumer spending is the main driver of US economic activity, which has been sapped, by a lengthy housing downturn and a related credit squeeze.

Oil prices hit Japanese inflation

2008-06-29T01:15:00.000-07:00

Rising oil and commodity prices sent Japanese inflation rising to the highest for a decade in May.

Core inflation, which excludes volatile fresh food prices, rose 1.5% from the same month in 2007.

Household spending fell 3.2% in the month, according to the Ministry of Internal Affairs and Communications.

Japan struggled with deflation until last year, but Friday's figures showed consumers reining in their spending as the prices of basic items rose.

Non-fresh food prices soared, with spaghetti up 32.2%, instant noodles up 20.7% and white bread rising 12%.

Japanese drivers were hit particularly hard as the government reinstated a fuel tax that had been suspended in April.

"The impact of higher raw material prices on corporate earnings and consumer sentiment still warrants close attention," said Japanese Economics Minister Hiroko Ota.

Huge Kashagan oilfield development put off until 2013

2008-06-29T01:14:00.000-07:00

Kazakhstan and a consortium of Western oil companies, developing the huge Kashagan oilfield, have agreed to put off the start of production until 2013, a senior Kazakh government official said on Saturday.

The agreement paves the way for Kashagan's further development after a year of tension between the consortium and the Kazakh government over production delays and cost overruns at the world's biggest oil discovery in 30 years. In May, Kazakhstan threatened to impose sanctions if the consortium decided to delay production from the $136 billion project, but on Saturday, Energy Minister Sauat Mynbayev struck a more conciliatory tone.

"Yes, we have put it off," he told reporters. Earlier he had told a government meeting that Kazakhstan and the Kashagan group had signed a new memorandum on Friday setting out details of Kashagan's future development and fixing the start of its commercial production at October 2013. "I think this time it will be the last delay," he said.

The stand-off over Kashagan started in August 2007 when the government accused its shareholders of allowing costs to spiral to $136 billion from $57 billion, and missing the original 2005 production start target.

The consortium unites Eni, Royal Dutch Shell Plc, Exxon Mobil Corp, Total, ConocoPhillips, Kazakh state oil company KazMunaiGas and Japan's Inpex Holdings Inc Kashagan holds an estimated 38 billion barrels of oil-in-place and production is expected to increase from an initial 75,000 barrels per day to peak production of 1.2 million bpd in the second half of the next decade.

Apart from fixing the schedule, Mynbayev said the memorandum stipulated the consortium would not be able to use proceeds from oil production to compensate for costs sustained after October 2013--a move designed to prevent further cost rises. He said Kazakhstan also rejected the consortium's proposal to extend its production sharing agreement (PSA) beyond 2041. "The final year, 2041, will stay intact," Mynbayev said.