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Marsh executive in guilty plea
An executive at US insurance firm Marsh & McLennan has pleaded guilty to criminal charges in connection with an ongoing fraud and bid-rigging probe.
New York Attorney General Elliot Spitzer said senior vice president Robert Stearns had pleaded guilty to scheming to defraud. The offence carries a sentence of 16 months to four years in state prison. Mr Spitzer's office added Mr Stearns had also agreed to testify in future cases during the industry inquiry. "We are saddened by the development," Marsh said in a statement. The company added it would continue to co-operate in the case, adding it was "committed to resolving the company's legal issues and to serving our clients with the highest standards of transparency and ethics".
According to a statement from Mr Spitzer's office, the Marsh executive admitted he instructed insurance companies to submit non-competitive bids for insurance business between 2002 and 2004. Those bids were then "conveyed to Marsh clients under false and fraudulent pretences". Through the practice, Marsh was allowed to determine which insurers won business from clients, and so control the insurance market, Mr Spitzer's office added. It also protected incumbent insurers when their business was up for renewal and helped Marsh to maximise its fees, a statement said. In one case, an email showed Mr Stearns had instructed a colleague to solicit a non-competitive - or "B" - quote from AIG that was "higher in premium and more restrictive in coverage" and so fixed the bids in a way that would support the present provider Chubb. The company is also still being examined by US stock market regulator the Securities and Exchange Commission (SEC). Late last month the SEC asked for information about transactions involving holders of 5% or more of the firm's shares. | business |
US interest rate rise expected
US interest rates are expected to rise for the fifth time since June following the US Federal Reserve's latest rate-setting meeting later on Tuesday.
Borrowing costs are tipped to rise by a quarter of a percentage point to 2.25%. The move comes as a recovery in the US economy, the world's biggest, shows signs of robustness and sustainability. The dollar's record-breaking decline, meanwhile, has spooked markets and along with high oil prices has raised concerns about the pace of inflation. "We are seeing evidence that inflation is moving higher," said Ken Kim, an analyst at Stone & McCarthy Research. "It's not a risk, it's actually happening." Mr Kim added that borrowing costs could rise further.
The Fed has said that it will move in a "measured" way to combat price growth and lift interest rates from their 40-year lows that were prompted by sluggish US and global growth.
With the economic picture now looking more rosy, the Fed has implemented quarter percentage point rises in June, August, September and November. Although the US economy grew at an annual rate of 3.9% in the three months to September, analysts warn that Fed has to be careful not to move too aggressively and take the wind out of the recovery's sails. Earlier this month figures showed that job creation is still weak, while consumer confidence is subdued. "I think the Fed feels it has a fair amount of flexibility," said David Berson, chief economist at Fannie Mae. "While inflation has moved up, it hasn't moved up a lot." "If economic growth should subside... the Fed would feel it has the flexibility to pause in its tightening. "But if economic growth picked up and caused core inflation to rise a little more quickly, I think the Fed would be prepared to tighten more quickly as well." | business |
WorldCom bosses' $54m payout
Ten former directors at WorldCom have agreed to pay $54m (£28.85m), including $18m from their own pockets, to settle a class action lawsuit, reports say.
James Wareham, a lawyer representing one of the directors, told Reuters the 10 had agreed to pay those who lost billions when the firm collapsed. The remaining $36m will be paid by the directors' insurers. But, a spokesman for the prosecutor, New York State Comptroller Alan Hevesi, said no formal agreement had been made.
Corporate governance experts said that if the directors do dip into their own pockets for the settlement, it will set a new standard for the accountability of bosses, when the firms they oversee face problems.
"Directors very rarely pay," said Charles Elson, chairman of the Center for Corporate Governance at the University of Delaware. He added that the settlement "sends a pretty strong shockwave through the director world". A formal agreement on the payout is expected to be signed on Thursday in a US district court in Manhattan. Earlier, the New York Times had reported that the personal payments were required as part of any deal at the start of negotiations. The ten former outside directors are James Allen, Judith Areen, Carl Aycock, Max Bobbitt, Clifford Alexander, Stiles Kellett, Gordon Macklin, John Porter, Lawrence Tucker and the estate of John Sidgmore, who died last year. It has not yet been determined how much each director will have to pay. "None of the 10 former directors was a direct participant in the accounting machinations of the WorldCom fraud," said the Wall Street Journal (WSJ).
Two other outside former directors, Bert Roberts and Francesco Galesi, remain defendants in the lawsuit, said the newspaper. According to the WSJ, which cites people familiar to the case, the settling directors are expected to deny wrongdoing and state they are settling the case to eliminate the uncertainties and expense of further litigations. The second-largest US long-distance telecoms operator filed for bankruptcy in 2002 when an $11bn accounting scandal was unearthed. The company emerged from Chapter 11 protection last year and changed its name to MCI Inc. Former WorldCom chief executive Bernard Ebbers is to face trial this month on criminal charges that he oversaw the fraud. | business |
Continental 'may run out of cash'
Shares in Continental Airlines have tumbled after the firm warned it could run out of cash.
In a filing to US regulators the airline warned of "inadequate liquidity" if it fails to reduce wage costs by $500m by the end of February. Continental also said that, if it did not make any cuts, it expects to lose "hundreds of millions of dollars" in 2005 in current market conditions. Failure to make cutbacks may also push it to reduce its fleet, the group said. Shares in the fifth biggest US carrier had fallen 6.87% on the news to $10.44 by 1830 GMT. "Without the reduction in wage and benefit costs and a reasonable prospect of future profitability, we believe that our ability to raise additional money through financings would be uncertain," Continental said in its filing to the US Securities and Exchange Commission (SEC).
Airlines have faced tough conditions in recent years, amid terrorism fears since the 11 September World Trade Centre attack in 2001. But despite passengers returning to the skies, record-high fuel costs and fare wars prompted by competition from low cost carriers have taken their toll. Houston-based Continental now has debt and pension payments of nearly $984m which it must pay off this year. The company has been working to streamline its operations - and has managed to save $1.1bn in costs without cutting jobs. Two weeks' ago the group also announced it would be able to shave a further $48m a year from its costs with changes to wage and benefits for most of its US-based management and clerical staff. | business |
House prices rebound says Halifax
UK house prices increased by 1.1% in December, the first monthly rise since September, the Halifax has said.
The UK's biggest mortgage lender said prices rose 15.1% over the whole of 2004, but by only 2.8% in the second half of the year. The average price of a house in the UK now stands at £162,086, Halifax said. The survey seems to fly in the face of recent evidence that the UK housing market has been slowing substantially in response to interest rate rises.
Last week, the Nationwide said that house prices fell 0.2% in December, with annual inflation running at a three year low.
On Tuesday, figures from the Bank of England showed that the number of mortgages approved in the UK has fallen to the lowest level for nearly a decade. New loans in November fell to 77,000, from 85,000 in October, the lowest rate since September 1995, the Bank of England said. Growth in unsecured lending, such as personal loans and credit cards, also slowed last month. Capital Economics, which has in the past predicted a sharp fall in UK house prices, branded Halifax's findings a "temporary surprise," which would be reversed over the coming months. "The month by month volatility of the Halifax house price data should not distract from the fact that there is a clear downward trend in house prices," a Capital Economics statement said.
Experts believe five interest rate rises since November 2003 are cutting borrowers' appetite for debt.
Despite recording a price rise in December, the Halifax survey concluded that there was "continuing signs of a genuine slowdown in the housing market." Martin Ellis, Halifax chief economist, said that there was no need to revise the bank's prediction, made last month, that prices would fall by 2% in 2005. "Sound housing market fundamentals will continue to underpin the market in 2005, ensuring that the market remains healthy and that house prices fall only slightly," Mr Ellis said. If the bank's prediction of a 2% price drop comes true, it will be the first annual fall in nine years.
The bank said that the recent pattern of house prices rising the fastest in the north of England continued in December. In the North West and Yorkshire and the Humber, Halifax said prices rose by 3% and 1.2% in the two regions respectively during the month. At the other send of the scale, prices in the South East and London fell by 1.6% and 0.5% respectively. The biggest decline was seen in Wales where prices fell by 6.2%, an area that had experienced strong house price growth during most of 2004. Overall, Halifax said prices in the final quarter of 2004 were 0.1% higher than in the previous quarter. This was the smallest quarterly rise since the second quarter of 2000, the bank said. As a result, annual house price inflation dipped below 20% during the final few months of 2004. | business |
Mixed Christmas for US retailers
US retailers posted mixed results for December - with luxury retailers faring well while many others were forced to slash prices to lift sales.
Upscale department store Nordstrom said same store sales were 9.3% higher than during the same period last year. Trendy youth labels also sold well, with sales jumping 28% at young women's clothing retailer Bebe Stores and 32.2% at American Eagle Outfitters. But Wal-Mart only saw its sales rise after it cut prices. The company saw a 3% rise in December sales, less than the 4.3% rise seen a year earlier.
Customers at the world's biggest retailer are generally seen to be the most vulnerable to America's economic woes.
Commentators claim many have cut back on spending amid uncertainty over job security, while low and middle-income Americans have reined in spending in the face of higher gasoline prices. Analysts said Wal-Mart faced a "stand-off" with shoppers, stepping up its discounts as the festive season wore on, as consumers waited longer to get the best bargains. However, experts added that if prices had not been cut across the sector, Christmas sales - which account for nearly 23% of annual retail sales - would have been far worse. "So far, we are faring better than expected, but the results are still split," Ken Perkins, an analyst at research firm RetailMetrics LLC, told Associated Press. "Stores that have been struggling over the last couple of months appear to be continuing that trend. And for stores that have been doing well over the last several months, December was a good month." Overall, December sales are forecast to rise by 4.5% to $220bn - less than the 5.1% increase seen a year earlier.
One discount retailer to fare well in December was Costco Wholesale, which continued a recent run of upbeat results with a better-than-expected 8% jump in same store sales. However, the losers were many and varied. Home furnishings store Pier 1 Imports saw its same store sales sink by a larger-than-forecast 8.8% as it battled fierce competition. Leading electronics chain Best Buy, meanwhile, missed its sales target of a 3-5% rise in sales, turning in a 2.5% increase over the Christmas period. Accessory vendor Claire's Stores also suffered as an expected last minute shopping rush never materialised, leaving its same store sales 5% higher, compared to a 6% rise last year. Jeweller Zale also felt little Christmas cheer with December sales down 0.7% on the same month last year. "This was not a good period for retailers or shoppers. We saw a dearth of exciting, new items," Kurt Barnard, president of industry forecaster Retail Consulting Group, said. However, one beneficiary of the desertion of the High Street is expected to be online stores. According to a survey by Goldman Sachs & Co, Harris Interactive and Neilsen/Net Ratings sales surged 25% over the holiday season to $23.2bn. | business |
India's Deccan gets more planes
Air Deccan has signed a deal to acquire 36 planes from Avions de Transport Regional (ATR).
The value of the deal has not been revealed, because of a confidentiality clause in the agreement. But Air Deccan's managing director Gorur Gopinath has said the price agreed was less than the catalogue price of $17.6m (£9.49m) per plane. Recently, India's first low-cost airline ordered 30 Airbus A320 planes for $1.8bn.
Under the agreement, Air Deccan will buy 15 new ATR 72-500 and lease another 15. ATR will also provide six second hand airplanes. In a statement, ATR has said deliveries of the aircraft will begin in 2005 and will continue over a five-year period.
Mr Gopinath said the planes will connect regional Indian cities. "After an evaluation of both ATR and Bombardier aircraft, we have chosen the ATR aircraft as we find it most suitable for our operations and for the Indian market for short haul routes." Filippo Bagnato, ATR's chief executive, has said that his firm will also work with Air Deccan to create a training centre in Bangalore.
The potential of the Indian budget market has attracted attention from businesses at home and abroad. Air Deccan has said it will base its business model on European firms such as Ireland's Ryanair. Beer magnate Vijay Mallya recently set up Kingfisher Airlines, while UK entrepreneur Richard Branson has said he is keen to start a local operation. India's government has given its backing to cheaper and more accessible air travel. | business |
South African car demand surges
Car manufacturers with plants in South Africa, including BMW, General Motors, Toyota and Volkswagen, have seen a surge in demand during 2004.
New vehicle sales jumped 22% to 449,603 from a year earlier, the National Association of Automobile Manufacturers of South Africa (NAAMSA) said. Strong economic growth and low interest rates have driven demand, and analysts expect the trend to continue. NAAMSA said it expects sales to top 500,000 in 2005. During 2004 "South Africa was one of the best performing markets internationally" for car sales, NAAMSA said. While domestic demand is set to continue to enjoy rapid growth, foreign sales could come under pressure, analysts said. The vehicle industry accounts for about 13% of South Africa's total exports. However, the world auto market has its problems and analysts warn that overcapacity and the strength of the rand could hit exports. | business |
UK bank seals South Korean deal
UK-based bank Standard Chartered said it would spend $3.3bn (£1.8bn) to buy one of South Korea's main retail banks.
Standard Chartered said acquiring Korea First Bank (KFB) fulfilled a strategic objective of building a bigger presence in Asia's third largest economy. Its shares fell nearly 3% in London as the bank raised funds for the deal by selling new stocks worth £1bn ($1.8bn), equal to 10% of its share capital. Standard Chartered expects about 16% of future group revenue to come from KFB.
The South Korean bank will also make up 22% of the group's total assets. The move, a year after Citigroup beat Standard Chartered to buy Koram bank, would be the South Korean financial sector's biggest foreign takeover. This time around, Standard Chartered is thought to have beaten HSBC to the deal. KFB is South Korea's seventh largest bank, with 3 million retail customers, 6% of the country's banking market and an extensive branch network.
The country's banking market is three times the size of Hong Kong's with annual revenues of $44bn. Standard Chartered has its headquarters in London but does two thirds of its business in Asia, and much of the rest in Africa. "We're comfortable with the price paid...the key here has been speed and decisiveness in making sure that we won," said Standard Chartered chief executive Mervyn Davies at a London press conference. Standard Chartered said KFB was a "well-managed, conservatively run bank with a highly skilled workforce" and represented a "significant acquisition in a growth market". In London, Standard Chartered's sale of 118 million new shares to institutional investors pushed its share price down, and contributing to the FTSE 100's 0.3% decline. Standard Chartered's shares were 28 pence lower at 925p by midday. Some analysts also queried whether Standard Chartered had overpaid for KFB. The deal, which requires regulatory approval, is expected to be completed by April 2005 and to be earnings accretive in 2006, Standard Chartered said.
Rival banking giant HSBC, which is based in London and Hong Kong, was also in the running. Standard Chartered is believed to have gained the initiative by putting together a bid during the Christmas break. "They were able to move so quickly it caught HSBC by surprise," the Financial Times newspaper quoted an insider in the talks as saying. HSBC will now have to wait for the next South Korean bank in line to be sold off - thought likely to be Korea Exchange Bank, also currently in the hands of a US group. Standard Chartered said it was buying 100% of KFB, an agreement that would bring an end to the bank's complex dual ownership. The South Korean government owns 51.4% of KFB, while the remaining shareholding, and operational control, are in the hands of US private equity group Newbridge Capital. Newbridge bought its stake during the government's nationalisation of several banks in the wake of the 1997 Asia-wide currency crisis which crippled South Korea's financial institutions.
South Korea's economy is expected to grow by 4.5% this year. Although often thought of an export-driven economy, South Korea's service sector has overtaken manufacturing in the last decade or so. Services now make up roughly 40% of the economy, and consumer spending and retail banking have become increasingly important. In the aftermath of the Asian financial crisis, the government encouraged the growth of consumer credit. Bad loan problems followed; LG Card, the country's biggest credit card provider, has been struggling to avoid bankruptcy for months, for instance. But analysts believe South Korea's financial services industry is still in its infancy, offering plenty of scope for new products. Standard Chartered sees "the opportunity to create value by the introduction of more sophisticated banking products". Since 1999, KFB has been restructured from a wholesale bank into a retail bank focused on mortgage lending, which makes up 45% of its loans. | business |
DaimlerChrysler's 2004 sales rise
US-German carmaker DaimlerChrysler has sold 2.1% more cars in 2004 than in the previous year, as solid Chrysler sales offset a weak showing for Mercedes.
Sales totalled 3.9 million units worldwide during 2004, the company said at the Detroit Motor Show. A switch to new models hit luxury marque Mercedes-Benz, with sales down 3.1% at 1.06 million. Chrysler avoided the fate of US rivals Ford and General Motors, both of whom lost ground to Japanese firms. Its sales rose 3.5% to 2.7 million units.
Similarly on the up was the Smart brand of compact cars, with the division's sales jumping by 21.1% during 2004 to 136,000. The future of the brand - which is controlled by the Mercedes group within DaimlerChrysler - remains in question, however. Smart has consistently lost money since it started trading in 1998, and new model launches are now "on hold", said Mercedes chief executive Eckhard Cordes. In Europe, the Smart will now go on sale through regular Mercedes dealerships as well as its own dealer network, Mr Cordes said. | business |
Tsunami cost hits Jakarta shares
The stock market in Jakarta has seen its biggest slide in a month, after the country doubled the likely cost of rebuilding from the Asian tsunami.
The fall came as Indonesia said it expected debt repayments of up to 30 trillion rupiah ($3.2bn; £1.7bn) to be frozen to help pay for the recovery. By Monday's close, the Jakarta Stock Exchange was down 2.1% at 1,011.15. Bar a slight dip at the New Year, The JSE had risen steadily by 4.7% since the tsunami hit on 26 December. Construction and property companies in particular have gained ground, although banks were among the main fallers on Monday.
So far, more than 100,000 people are believed to have been killed in Indonesia, the country closest to the earthquake which triggered the great wave.
On Friday, the government said its five-year estimate of rebuilding costs for Banda Aceh province - much of which was flattened by the quake and the tsunami - was 20 trillion rupiah ($2.2bn; £1.1bn), twice what it had previously estimated. That cost could be defrayed by temporary debt relief. On Monday, Indonesian economy minister Aburizal Bakrie told reporters that the Paris Club group of creditor countries was expected to freeze 20-30bn rupiah in payments due in 2005 and 2006. "We hope we can resume the repayments at least from 2007," Mr Bakrie said. French finance minister Herve Gaymard said on Sunday that the Paris Club had already agreed to a moratorium on repayments for tsunami-hit countries ahead of its meeting on 12 January. | business |
Iran budget seeks state sell-offs
Iran's president, Mohammad Khatami, has unveiled a budget designed to expand public spending by 30% but loosen the Islamic republic's dependence on oil.
The budget for the fiscal year starting on 21 March calls for the sell-off of 20% of the state's corporate holdings. Mr Khatami's second term as president ends on 1 August, making this his last budget. But opposition from members of parliament who have attacked previous privatisations could block his plans. Elections in May 2004 ousted many of Mr Khatami's supporters in parliament in favour of more hard-line religious conservatives. Late last year, they backed a law which would give parliament a veto over foreign investment. The ruling was a response to the involvement in telecoms and airport projects by Turkish companies, which hardliners accused of doing business with Israel. It came not long after the Expediency Council - Iran's ultimate decision-maker - blessed Mr Khatami's policy of selling stakes in sectors protected by the constitution such as energy, transport, telecoms and banking. Continued obstruction of foreign investment could get in the way not only of privatisation plans, but also of Mr Khatami's hope of modestly reducing the government's reliance on oil revenues.
In an address to the Majlis, Mr Khatami predicted economic growth of 7.1% in 2005-6, up from 6.7% in the current year. He said he wanted to increase the 2005-6 budget to 1,546 trillion rials ($175.6bn; £93.6bn) from the previous year's 1,070 trillion. Within that figure, taxation would rise to $14.3bn, a rise of over 40% from what is expected from the current year. In contrast, oil revenues were expected to fall to $14.1bn from $16bn in the year to March 2005. "Current government expenditure should come from tax revenues," Mr Khatami said. "Oil revenues should be used for productive investment." Mr Khatami has already been blocked by parliament from reducing the subsidies on many products including bread and petrol, reducing his room to manoeuvre. | business |
EC calls truce in deficit battle
The European Commission (EC) has called a truce in its battle with France and Germany over breaching deficit limits.
The move came after France and Germany vowed to run their budget deficits below the EU cap in 2005 - for the first time in four years. But, the EC did warn the two were under close scrutiny and it would act if their fiscal situations deteriorated. Under EU rules, member countries must keep their deficits below 3%. France and Germany will breach that this year. It will be the third year in a row that the two countries have broken the European Union's Stability and Growth Pact rules.
The eurozone's two biggest economies left the pact in tatters in November 2003 when they persuaded fellow EU members to put the threat of penalties for deficit breaches on hold.
The commission then took the pair to the European Court of Human Justice - which ruled EU countries could not put the pact "in abeyance", and confirmed the EC's right to launch "excessive debt procedures". After announcing its decision to erase France and Germany from its list of deficit rule breakers, the EU said that the time lag created by the ruling meant that 2005 should be the target year for the pair to bring their budget's below 3%. "The commission concludes that the two countries appear to be on track to correct their excessive deficits by 2005," it said in a statement. The EU expects the German deficit to fall to fall to 2.9% of GDP next year from 3.9% this year, while France's is forecast to drop to 3% from an expected 3.7% this year. The forecasts are based on EC predictions of GDP growth of 1.5% in Germany next year and 2.2% in France.
Berlin welcomed the decision, with finance minister Hans Eichel saying it showed that the EC recognised Germany's fiscal policy was "on the right track even amid very difficult economic conditions". However Paris was more subdued, with finance minister Herve Gaymard telling parliament: "We must continue along this path of saving money." However, the move still had its critics, with the European People's Party (EPP) attacking the EC for backing down from punitive action. "The Commission is buckling under the pressure from Germany and France, " EPP spokesman Alexander Radwan said. "The scary fact is that budget sinners, despite having repeatedly exceeded the 3% deficit limit, do not have to fear any sanctions." Despite the commission delivering its decision on the two biggest eurozone economies, it refused to comment on similar action against Greece which has also broken the 3% deficit ceiling. Monetary Affairs Commissioner Joaquin Almunia said that it was a matter for next week. | business |
Enron bosses in $168m payout
Eighteen former Enron directors have agreed a $168m (£89m) settlement deal in a shareholder lawsuit over the collapse of the energy firm.
Leading plaintiff, the University of California, announced the news, adding that 10 of the former directors will pay $13m from their own pockets. The settlement will be put to the courts for approval next week. Enron went bankrupt in 2001 after it emerged it had hidden hundreds of millions of dollars in debt.
Before its collapse, the firm was the seventh biggest public US company by revenue. Its demise sent shockwaves through financial markets and dented investor confidence in corporate America.
"The settlement is very significant in holding these outside directors at least partially personally responsible," William Lerach, the lawyer leading the class action suit against Enron, said. "Hopefully, this will help send a message to corporate boardrooms of the importance of directors performing their legal duties," he added. Under the terms of the $168m settlement - $155m of which will be covered by insurance - none of the 18 former directors will admit any wrongdoing. The deal is the fourth major settlement negotiated by lawyers who filed a class action on behalf of Enron's shareholders almost three years ago. So far, including the latest deal, just under $500m (£378.8m) has been retrieved for investors.
However, the latest deal does not include former Enron chief executives Ken Lay and Jeff Skilling. Both men are facing criminal charges for their alleged misconduct in the run up to the firm's collapse. Neither does it cover Andrew Fastow, who has pleaded guilty to taking part in an illegal conspiracy while he was chief financial officer at the group. Enron's shareholders are still seeking damages from a long list of other big name defendants including the financial institutions JP Morgan Chase, Citigroup, Merrill Lynch and Credit Suisse First Boston. The University of California said the trial in the case is scheduled to begin in October 2006. It joined the lawsuit in December 2001alleging "massive insider trading" and fraud, claiming it had lost $145m on its investments in the company. | business |
UK house prices dip in November
UK house prices dipped slightly in November, the Office of the Deputy Prime Minister (ODPM) has said.
The average house price fell marginally to £180,226, from £180,444 in October. Recent evidence has suggested that the UK housing market is slowing after interest rate increases, and economists forecast a drop in prices during 2005. But while the monthly figures may hint at a cooling of the market, annual house price inflation is still strong, up 13.8% in the year to November. Economists, however, forecast that ODPM figures are likely to show a weakening in annual house price growth in coming months. "Overall, the housing market activity is slowing down and that is backed up by the mortgage lending and the mortgage approvals data," said Mark Miller, at HBOS Treasury Services. "The ODPM data is a fairly lagging indicator."
The figures come after the Bank of England said the number of mortgages approved in the UK has fallen to the lowest level for nearly a decade. The Halifax, meanwhile, said last week that house prices increased by 1.1% in December - the first monthly rise since September.
The UK's biggest mortgage lender said prices rose 15.1% over the whole of 2004, but by only 2.8% in the second half of the year. It is predicting a 2% fall in overall prices in 2005 as the market stabilises after large gains in recent years. The ODPM attributed the monthly fall of prices in November to a drop in the value of detached houses and flats. It said annual inflation rose between October and November because prices had fallen by 1.1% in the same period in 2003.
The ODPM data showed the average house price was £192,713 in England; £139,544 in Wales; £116,542 in Scotland, and £111,314 in Northern Ireland.
All areas saw a rise in annual house price inflation in November except for Northern Ireland and the West Midlands, where the rate was unchanged, the ODPM said. The North East showed the highest rate of inflation at 26.2%, followed by Yorkshire and the Humber on 21.7%, and the North West on 21.1%. The East Midlands, the West Midlands and the South West all had an annual inflation rate of more than 15%. In London, the area with the highest average house price at £262,825, annual inflation rose only slightly in November to 7.1% from 7% the previous month. | business |
Steady job growth continues in US
The US created fewer jobs than expected in December, but analysts said that the dip in hiring was not enough to derail the world's biggest economy.
According to Labor Department figures, 157,000 new jobs were added last month. That took 2004's total to 2.2 million, the best showing in five years. Job creation was one of last year's main concerns for the US economy. While worries still remain, the conditions are set for steady growth in 2005, analysts said. The unemployment rate stayed at 5.4% in December, and about 200,000 jobs will need to be created each month if that figure is to drop.
"It was a respectable report," said Michael Moran, analyst at Daiwa Securities.
"Payroll growth in December was a little lighter than the consensus forecast, but we had upward revisions to the prior two months and an increase in manufacturing employment." "Manufacturing is a cyclical area of the economy and if it's showing job growth, it's a good indication that the economy is on a solid growth track." That means that the Federal Reserve is likely to continue its policy of raising interest rates. The Fed lifted borrowing costs five times last year to 2.25%, citing evidence the US economic recovery was becoming more robust.
Job creation was one of last year's main concerns for the US economy, and proved to be a main topic of debate in the US presidential election. While demand for workers is far from booming, the conditions are set for steady growth. "Overall, compared to the previous year it looks great, it just keeps going stronger and stronger and I expect that to be the case" in 2005, said Kurt Karl, economist at Swiss Re in New York. Meanwhile, economists cautioned against reading too much into data from the Federal Reserve showing an unexpected $8.7bn drop in consumer debt in November. A fall in consumer spending, which makes up about two-thirds of all US economic activity, could help limit the extent of any future interest rate rises. But economists said there could be a number of reasons for a fall in the borrowing, which include credit cards and personal loans, while noting that such figures can vary on a month-to-month basis. | business |
Barclays shares up on merger talk
Shares in UK banking group Barclays have risen on Monday following a weekend press report that it had held merger talks with US bank Wells Fargo.
A tie-up between Barclays and California-based Wells Fargo would create the world's fourth biggest bank, valued at $180bn (£96bn). Barclays has declined to comment on the report in the Sunday Express, saying it does not respond to market speculation. The two banks reportedly held talks in October and November 2004.
Barclays shares were up 8 pence, or 1.3%, at 605 pence by late morning in London on Monday, making it the second biggest gainer in the FTSE 100 index. UK banking icon Barclays was founded more than 300 years ago; it has operations in over 60 countries and employs 76,200 staff worldwide. Its North American divisions focus on business banking, whereas Wells Fargo operates retail and business banking services from 6,000 branches. In 2003, Barclays reported a 20% rise in pre-tax profits to £3.8bn, and it has recently forecast similar gains in 2004, predicting that full year pre-tax profits would rise 18% to £4.5bn. Wells Fargo had net income of $6.2bn in its last financial year, a 9% increase on the previous year, and revenues of $28.4bn. Barclays was the focus of takeover speculation in August, when it was linked to Citigroup, though no bid has ever materialised. Stock market traders were sceptical that the latest reports heralded a deal. "The chief executive would be abandoning his duty if he didn't talk to rivals, but a deal doesn't seem likely," Reuters quoted one trader as saying. | business |
US firm 'bids for Lacroix label'
A US firm has said it is in final negotiations with luxury goods group LVMH to buy the loss-making Christian Lacroix haute-couture house.
Paris-based LVMH has been selling non-core businesses and focusing on its most profitable labels including Moet & Chandon champagne and Louis Vuitton. Privately-held Falic Group bought two cosmetics brands, Hard Candy and Urban Decay, from LVMH in early 2003. The Florida company also own a chain of 90 duty free stores in the US. LVMH refused to comment on the reports. But one of the three brothers behind the Falic Group said the firm had also held talks with the designer Christian Lacroix, and wished to retain him. "We are buying his name," Simon Falic told the Reuters news agency. "We have plans to increase the exposure of the brand and increase the volume of business." | business |
$1m payoff for former Shell boss
Shell is to pay $1m (£522,000) to the ex-finance chief who stepped down from her post in April 2004 after the firm over-stated its reserves.
Judy Boynton finally left the firm on 31 December, having spent the intervening time as a special advisor to chief executive Jeroen van der Veer. In January 2004, Shell told shocked investors that its reserves were 20% smaller than previously thought. Shell said the pay-off was in line with Ms Boynton's contract. She was leaving "by mutual agreement to pursue other career opportunities", the firm said in a statement. The severance package means she keeps long-term share options, but fails to collect on a 2003 incentive plan since the firm has failed to meet the targets included in it.
The revelation that Shell had inflated its reserves led to the resignation of its chairman, Sir Phil Watts, and production chief Walter van der Vijver.
An investigation commissioned by Shell found that Ms Boynton had to share responsibility for the company's behaviour. Despite receiving an email from Mr Van de Vijver which said the firm had "fooled" the market about its reserves, the investigation said, she did nothing to inquire further. In all, Shell restated its reserves four times during 2003. In September, it paid £82.7m in fines to regulators on both sides of the Atlantic for violating market rules in its reporting of its reserves. | business |
India and Iran in gas export deal
India has signed a $40bn (£21bn) deal to import millions of tonnes of liquefied natural gas from Iran.
Firms led by the Oil & Natural Gas Corporation (ONGC) will also assist in the development of Iranian oil fields. Ministers, eager to gain access to energy supplies to meet the demands of a booming economy, secured a similar deal to one between Iran and China. The announcement comes as ONGC said it was in talks to buy former assets of troubled Russian oil firm Yukos. The agreements with Iran were sealed after talks in New Delhi between Middle East producers and Asia's biggest energy consumers - China, India, Japan and South Korea.
Iran - Opec's second-biggest oil producer and one of the world's top gas producers - has been pursuing a series of deals, rewarding LNG buyers with participation in development of its oil fields. Under the agreement, it will supply India with 7.5 million tonnes of LPG annually over a 25 year period from 2009. ONGC and the National Iranian Oil Company (NIOC) reached a preliminary deal for Indian firms to take part in the development of the Yadavaran and Jufeyr oilfields, both countries said in a statement. India's oil production has stagnated over recent years, and it is having to look abroad to secure future supplies. India imports about 70% of its total oil consumption. Consumption has jumped to 2.4 million barrels per day, compared with 474,000 bpd in 1973. | business |
LSE 'sets date for takeover deal'
The London Stock Exchange (LSE) is planning to announce a preferred takeover by the end of the month, newspaper reports claim.
The Sunday Telegraph said the LSE's plan was further evidence it wants to retain tight control over its destiny. Both Deutsche Boerse and rival Euronext held talks with the London market last week over a possible offer. A £1.3bn offer from Deutsche Boerse has already been rejected, while Euronext has said it will make an all cash bid. Speculation suggests that Paris-based Euronext has the facilities in place to make a bid of £1.4bn, while its German rival may up its bid to the £1.5bn mark. Neither has yet tabled a formal bid, but the LSE is expected to hold further talks with the two parties later this week. However, the Sunday Telegraph report added that there are signs that Deutsche Boerse chief executive Werner Seifert is becoming increasingly impatient with the LSE's managed bid process.
Despite insisting he wants to agree a recommended deal with the LSE's board, the newspaper suggested he may pull out of the process and put an offer directly to shareholders instead. The newspaper also claimed Mr Seifert was becoming "increasingly frustrated" with the pace of negotiations since Deutsche Boerse's £1.3bn offer was rejected in mid-December, in particular the LSE's decision to suspend talks over the Christmas period. Meanwhile, the German exchange's offer has come under fire recently. Unions for Deutsche Boerse staff in Frankfurt have reportedly expressed fears that up to 300 jobs would be moved to London if the takeover is successful. Others claim it will weaken the city's status as Europe's financial centre, while German politicians are also said to be angry over the market operator's promise to move its headquarters to London if a bid is successful. A further stumbling block is Deutsche Boerse's control over its Clearstream unit, the clearing house that processes securities transactions. LSE shareholders fear it would create a monopoly situation, weakening the position of shareholders when negotiating lower transaction fees for share dealings. LSE and Euronext do not have control over their clearing and settlement operations, a situation which critics say is more transparent and competitive. | business |
News Corp makes $5.4bn Fox offer
News Corporation is seeking to buy out minority investors in Fox Entertainment Group, its broadcasting subsidiary, for about $5.4bn (£3.7bn).
The media giant, run by Rupert Murdoch, owns 82% of the shares in the company, home to the Fox television network and the 20th Century Fox film studio. The move follows News Corp's decision to register its business in the US. 20th Century Fox's recent film releases include I Heart Huckabees and I, Robot, while Fox puts out hit TV series 24.
Under the terms of the offer, minority Fox shareholders will receive 1.90 News Corp shares in return for each Fox share they hold. Analysts said the decision to list News Corp in the US - which will result in the firm's shares trading in New York rather than Sydney- nullified the need to retain a separate stock market listing for Fox Entertainment shares. News Corp investors voted in October to approve the transfer of the company's corporate domicile from Australia to the US state of Delaware. The move is designed to help News Corp attract more investment from the largest US financial institutions, and make it easier to raise capital. Fox Entertainment Group generated revenues of $12bn last year. News Corp shares fell 25 cents to $17.65 after the share offer was announced while Fox shares were up 19 cents at $31.22. | business |
Israel looks to US for bank chief
Israel has asked a US banker and former International Monetary Fund director to run its central bank.
Stanley Fischer, vice chairman of banking giant Citigroup, has agreed to take the Bank of Israel job subject to approval from parliament and cabinet. His nomination by Prime Minister Ariel Sharon came as a surprise, and led to gains on the Tel Aviv stock market. Mr Fischer, who speaks fluent Hebrew, will have to become an Israeli citizen to take the job. The US says he will not have to give up US citizenship to do so.
Previous incumbent David Klein, who often argued with the Finance Ministry, steps down on 16 January. Mr Fischer will face a delicate balancing act - both in political and economic terms - between Mr Sharon and finance minister Binyamin Netanyahu, who also backed his nomination. But his appointment has also raised hopes that it could bring in fresh investment - and perhaps even an improvement in the country's credit rating Mr Fischer first went to Israel for six months in 1973, and almost emigrated there before deciding finally to return to the US. While teaching at the Massachussetts Institute of Technology he spent a month seconded to the Bank of Israel in 1979, beginning a long-time involvement in studying Israel's economy. In 1983 Mr Fischer became adviser on Israel's economy to then-US secretary of state George Shultz. At the World Bank in 1985, he participated in drawing up an economic stabilisation package for Israel. | business |
EU-US seeking deal on air dispute
The EU and US have agreed to begin talks on ending subsidies given to aircraft makers, EU Trade Commissioner Peter Mandelson has announced.
Both sides hope to reach a negotiated deal over state aid received by European aircraft maker Airbus and its US rival Boeing, Mr Mandelson said. Airbus and Boeing accuse each other of benefiting from illegal subsidies. Mr Mandelson said the EU and US hoped to avoid having to resolve the dispute at the World Trade Organisation (WTO).
"With this agreement the EU and US have confirmed their willingness to resolve the dispute which has arisen between them," Mr Mandelson said. "I hope our negotiations in the next three months will lead to an agreement ending subsidies to development and production of large civil aircraft." Last year, the US terminated an agreement with the EU, reached in 1992, which limits the subsidies countries can hand over to civil aircraft makers. The US filed a complaint against Brussels with the WTO over state aid to Airbus, prompting a retaliatory EU complaint over US support for Boeing. However, both sides agreed to suspend their requests for WTO arbitration at the beginning of December, to allow bilateral talks to continue. EADS and BAE Systems, the European defence and aerospace firms which own Airbus, welcomed Mr Mandelson's announcement. "It has always been preferable that any differences between the US and Europe on this matter be overcome through constructive discussion rather than through legal recourse," the companies said in a joint statement.
Separately, the world's largest package delivery company, UPS, said it had placed an order for 10 Airbus A380 superjumbo freight-carrying jets, with an option to buy 10 more of the triple-decker aircraft. The US company said it needed to expand its air freight capacity following strong international growth, and would begin receiving deliveries of the A380s from 2009. However, UPS said it was cutting a previous order for smaller Airbus A300s from 90 planes to 53. So far, Airbus has delivered 40 A300s to UPS. Airbus overtook Boeing as the world's largest manufacturer of commercial airliners in 2003. | business |
Nortel in $300m profit revision
Telecoms equipment maker Nortel Networks has sharply revised downwards its profits for the 2003 fiscal year.
In a long-awaited filing, Nortel said it had made $434m (£231m), compared to the previously reported $732m. But the figures - revised after an audit which led to the sacking of the Canadian firm's chief - showed revenue was about 4% higher than first thought. Nortel shares, which have lost nearly 50% of their value since last year, climbed 1.46% in Toronto on Tuesday. Nortel's head Frank Dunn and two other executives were fired in January last year after the company announced it had conducted the internal audit. Securities and police authorities in both the US and Canada are still conducting inquiries into the accounts.
Nortel also issued new figures for the 2001-2002 period, which they had previously indicated had understated losses. "With the completion of our restatements we have a solid foundation on which to move forward with our business," said Nortel president and chief executive Bill Owens. "The restatement has been a monumental task, both complex and demanding." The company also said 12 senior executives - none of whom were involved directly in the accounting of the revised figures - have voluntarily agreed to repay to bonuses awarded in 2003 totalling $8.6m. Nortel added: "these members of the core executive team share the board's deep disappointment over the circumstances that led to the restatement." | business |
Minister hits out at Yukos sale
Russia's renationalisation of its energy industry needs to be reversed, a senior government figure has warned.
Economy minister German Gref told the Kommersant newspaper that direct state involvement in oil was "unjustified". His comments follow the sale of much of oil giant Yukos to cover back taxes - a deal which effectively took most of the firm's assets into public ownership. On 28 December, another senior economic adviser called the sale "the swindle of the century". Yuganskneftegaz, the unit which produced 60% of Yukos' output, had been seized and sold in December for less than $10bn to a previously unknown firm called Baikal.
Baikal promptly passed into the hands of state-controlled firm Rosneft, itself shortly to merge with state gas giant Gazprom. "We used to see street hustlers do this kind of thing," Andrei Illarionov - then economic adviser to President Vladimir Putin - told a press conference. "Now officials are doing it." Within days, he was stripped of most of his responsibilities.
Mr Gref, a well-known opponent of nationalisation in competitive parts of the market, was keen to distance himself from Mr Iliaronov's comments. The privatisation of companies such as Yukos in the 1990s had been badly handled, he said. But he stressed that the government needed to get out of oil. "I think that Rosneft and Yuganskneftegaz, should it become a state-owned company, must be privatized," he said.
"Today our government is ineffective and state companies, as a result, are for the overwhelming part ineffective as well." And he warned that using back taxes to deal with firms like Yukos - a technique now being applied by the Kremlin to several other firms - was a mistake. "If we follow that logic, we should nationalise all businesses," he said. Many large Russian companies, particularly in the energy sector, use complex webs of offshore companies to avoid taxes.
Mr Gref also poured cold water on President Putin's promises of doubled economic growth within a decade. The assault on Yukos' assets has been widely blamed for a slowdown in economic growth in recent months. "The task is not simply to double GDP; instead it is to use GDP to qualitatively improve people's lives," Mr Gref told Kommersant. "We don't need simply to increase GDP, but to improve its structure." Instead of focusing on headline growth figures, Russia needed to focus on better institutions, such as a more efficient - and less corrupt - court system. | business |
Chinese exports rise 25% in 2004
Exports from China leapt during 2004 over the previous year as the country continued to show breakneck growth.
The spurt put China's trade surplus - a sore point with some of its trading partners - at a six-year high. It may also increase pressure on China to relax the peg joining its currency, the yuan, with the weakening dollar. The figures released by the Ministry of Commerce come as China's tax chief confirmed that growth had topped 9% in 2004 for the second year in a row. State Administration of Taxation head Xie Xuren said a tightening of controls on tax evasion had combined with the rapid expansion to produce a 25.7% rise in tax revenues to 2.572 trillion yuan ($311bn; £165bn).
According to the Ministry of Commerce, China's exports totalled $63.8bn in December, taking the annual total up 35.4% to $593.4bn. With imports rising a similar amount, the deficit rose to $43.4bn. The increased tax take comes despite healthy tax rebates for many exporters totalling 420bn yuan in 2004, according to Mr Xie. China's exporting success has made the trade deficit of the United States soar even further and made trade with China a sensitive political issue in Washington. The peg keeping the yuan around 8.30 to the dollar is often blamed by US lawmakers for job losses at home. A US report issued on Tuesday on behalf of a Congressionally-mandated panel said almost 1.5 million posts disappeared between 1989 and 2003. The pace accelerated in the final three years of the period, said the report for the US-China Economic and Security Review Commission, moving out of labour-intensive industries and into more hi-tech sectors. The US's overall trade deficit with China was $124bn in 2003, and is expected to rise to about $150bn for 2004. | business |
Karachi stocks hit historic high
The Karachi Stock Exchange (KSE) has recorded its largest single day gain, surging 3.5% to a new high.
The index rose 225.79 points in four hours of furious trading, with many investors optimistic that political stability could bring an economic boom. The KSE index closed at 6709.93 - an overall gain of nearly 400 points in the first two trading days of the week. Energy and telecommunication stocks performed particularly well, recording an 8%-10% rise since Monday morning.
In 2002, the KSE was the world's best performing stock market, with the index rising 112%.
Pakistani investors are expecting the KSE to repeat, if not improve on, its 2002 performance. Jubilant investors danced on the streets as the market closed for the day on Tuesday, confident that the boom will continue at least until the public holiday on 22 January. Others, however, who had stayed out fearing an imminent collapse because of prices overheating, continued to warn that the "bubble may burst any time". "That's rubbish," KSE chairman Yaseen Lakhani told the BBC News website. "Whenever the market reflects Pakistan's true economic reality, it is described as a bubble." Mr Lakhani feels that the market has risen on the basis of solid economic growth and its current level rests on sound foundations.
Market analysts are inclined to agree with Mr Lakhani, arguing that there are a number of major factors behind the KSE's performance. Analysts argue that a steady improvement in Pakistan's credit ratings by international credit rating agencies has finally begun to register in the market. Standard & Poor's upgraded Pakistan a few weeks ago. There are indications of yet another upgrade by the end of February.
Then, say analysts, there is corporate profitability in the current fiscal year, which has gone up by 27% from last year. "Coupled with the 7% GDP growth expected by June this year, I am least surprised at the market's performance," says Mr Lakhani. One leading Karachi broker said the real reasons may be political. "If you file a $1.3 trillion case against Saudi money after 9/11, Arab money will not go to the US any more." A lot of Arab money, he says, has already gone to Malaysia and Indonesia. Pakistanis are now hoping that energy and telecoms, two of the strongest sectors in Pakistan, draw some of the Arab money to the KSE.
Locally, too, say analysts, recent political developments have worked to the market's advantage.
An anti-Musharraf campaign threatened by the MMA, a countrywide alliance of religious parties, has fizzled out. The release of Asif Zardari, former Prime Minister Benazir Bhutto's husband, has eased political tensions between the military-backed government and the opposition Pakistan People's Party. Most importantly, say analysts, the failure of talks between India and Pakistan on the Baglihar dam in Indian-administered Kashmir has not automatically led to heightened tensions. This, they say, indicates that neither country is interested in raising the temperature at this stage, irrespective of the state of their disagreements. The market is abuzz with speculation that substantial investment may now start to flow in from the US, a country seen locally as deeply interested in defusing tensions between the South Asian neighbours. "You can call it a peace dividend," smiles one broker. "Let us see how long one can reap its benefits." | business |
US trade gap ballooned in October
The US trade deficit widened by more than expected in October, hitting record levels after higher oil prices raised import costs, figures have shown
The trade shortfall was $55.5bn (£29bn), up 9% from September, the Commerce Department said. That pushed the 10 month deficit to $500.5bn. Imports rose by 3.4%, while exports increased by only 0.6%. A weaker dollar also increased the cost of imports, though this should help drive export demand in coming months. "Things are getting worse, but that's to be expected," said David Wyss of Standard & Poor's in New York. "The first thing is that when the dollar goes down, it increases the price of imports. "We are seeing improved export orders. Things seem to be going in the right direction."
Despite this optimism, significant concerns remain as to how the US will fund its trade and budget deficits should they continue to widen. Another problem highlighted by analysts was the growing trade gap with China, which has been accused of keeping its currency artificially weak in order to boost exports. The US imported almost $20bn worth of goods from China during October, exporting a little under $3bn. "It seems the key worry that has existed in the currency market still remains," said Anthony Crescenzi, a bond strategist at Miller Tabak in New York. The trade deficit and the shortfall with China "are big issues going forward". The Commerce Department figures caused the dollar to weaken further despite widespread expectations that the Federal Reserve will raise interest rates for a fifth time this year. Borrowing costs are tipped to rise by a quarter of a percentage point to 2.25% at a Fed meeting later on Tuesday. | business |
US prepares for hybrid onslaught
Sales of hybrid cars in the US are set to double in 2005, research suggests.
Research group JD Power estimates sales will hit 200,000 in 2005, despite higher prices and customer scepticism. Carmakers are starting to build hybrid sports utility vehicles (SUVs), the four-wheel-drive vehicles which now dominate the US car market. Hybrids cut both petrol consumption and emissions by combining a petrol engine with an electric motor constantly kept charged by extra engine power. Several jurisdictions, notably the state of California, mandate low emissions for new cars. Equally, the rise in oil prices over the past year has sparked hopes that consumers may be tempted by potential savings of a few hundred dollars a year on fuel.
At the Detroit Motor Show, a range of manufacturers are prominently displaying their hybrid credentials. Toyota has led the market to date with the Prius, popularised by a number of celebrities keen to burnish their "green" credentials. In April it will launch a hybrid version of its Highlander SUV, with an SUV from its luxury Lexus marque due later in the year.
Honda has three hybrids on the market, and between them the two Japanese carmakers sold more than 80,000 units last year. Ford, which has sold 4,000 of its first hybrid since its launch in August, is bringing a hybrid SUV - the Mariner - to market a year ahead of schedule, with plans for three more models by 2008. GM has a hybrid pickup on the market and is showing two concept SUVs in Detroit. Even sports car maker Porsche may join the race, although it insists it is still considering whether to hybridise its Cayenne SUV.
Others remain more sceptical. Nissan has bought Toyota's hybrid technology, but plans to bring out its first model only in 2006. "We want to make sure we are not concentrating on one technology," Nissan chief executive Carlos Ghosn said. "We will not be surprised by any acceleration or deceleration in the hybrid market." Volkswagen, meanwhile, says it will focus on clean-burning diesel engines instead. And some watchers point out that the price tag on a hybrid - upwards of $3,000 above that of an equivalent normal-engined car, and suspicion of the technology - may still cool its attraction. "The average consumers aren't willing to pay that premium for a car they won't drive more than six years," said Anthony Pratt from JD Power. | business |
Mitsubishi in Peugeot link talks
Trouble-hit Mitsubishi Motors is in talks with French carmaker PSA Peugeot Citroen about a possible alliance.
On Tuesday Mitsubishi, the only major Japanese car firm in the red, confirmed earlier reports of negotiations. But a spokesman refused to comment on speculation that Mitsubishi could end up building cars for PSA and perhaps its Japanese rival Nissan. Mitsubishi has been hit by a recall scandal and the withdrawal of support from shareholder DaimlerChrysler. The US-German firm, once a majority shareholder, decided last April to stop providing financial backing. Mitsubishi's sales have slid 41% in the past year, catalysed by the revelation that the company had systematically been hiding records of faults and then secretly repairing vehicles. Mitsubishi is due to unveil a recovery plan later in January. Analysts said that alliances with other carmakers would be a necessary part of whatever it came up with, not least because its own slow sales have left its manufacturing capacity under-used. | business |
BA to suspend two Saudi services
British Airways is to halt its flights from London Heathrow to Jeddah and Riyadh in Saudi Arabia from 27 March.
The airline said the decision was a commercial one due to reduced passenger demand for the services. BA currently operates four flights per week from Heathrow to Jeddah, and three weekly journeys to Riyadh. It suspended flights to Saudi Arabia for three weeks in autumn 2003 after a government warning about a "threat to UK aviation interests in Saudi Arabia".
BA will now suspend the Saudi flights - which it says will remain "under constant review" - from 27 March. "The decision to suspend flights between the UK and Saudi Arabia is a difficult one to make as we have enjoyed a long history of flying between the two countries," said BA director of commercial planning, Robert Boyle. "However, the routes don't currently make a profitable contribution to our business and we are unable to sustain them while this remains the case." Passengers with flights booked after the suspension date will be contacted by BA for alternative arrangements to be made. | business |
Cairn Energy in Indian gas find
Shares in Cairn Energy rose 3.8% to 1,088 pence on Tuesday after the UK firm announced a fresh gas discovery in northern India.
The firm, which last year made a number of other new finds in the Rajasthan area, said the latest discovery could lead to large gas volumes. However, chief executive Bill Gammell cautioned that additional evalution was first needed at the site. Cairn has also been granted approval to extend its Rajasthan exploration area. This approval has come from the Indian government.
A spokesman said the company's decision to carry out further investigations at the new find showed that it believed there was significant gas. But he added: "It's still too early to say what the extent of it is." Cairn's string of finds in Rajasthan last year saw it elevated to the FTSE 100 index of the UK's leading listed companies. The company had bought the rights to explore in the area from oil giant Shell. Mr Gammell is a former Scottish international rugby player. | business |
Asia quake increases poverty risk
Nearly two million people across Asia could be thrown into poverty because of the Indian Ocean tsunami, the Asian Development Bank (ADB) has said.
In its first overview of the disaster, the ADB said the impact on economic growth would be slight because major cities and factories escaped damage. But the blow to many low-income people could be "enormous". The Paris Club of rich creditor nations on Wednesday offered to freeze debts owed by tsunami-hit countries.
The move was aimed at helping South Asian governments find budgets to rebuild devastated coastal areas, though so far only Sri Lanka, Indonesia and the Seychelles have indicated that they will take it up.
Other countries believe their economies are strong enough to cope or wish to avoid being viewed as credit risks. "Poverty is potentially the most important impact of this natural disaster," said ADB chief economist Ifzal Ali. Donor nations have promised to give $717m (£379m) in disaster relief over the next six months, according to the United Nations.
Mr Ali added his voice to those warning that aid pledges must be promptly delivered, saying the number of people at risk of poverty hinged on "concerns over sanitation and health conditions, and other basic needs" being "properly and quickly addressed".
There are 1.9 billion people in Asia living on less than $2 a day. The ADB fears that 1 million Indonesians could join them, while in India just over half a million people - 645,000 - are at risk of falling into poverty. A quarter of a million Sri Lankans and 23,500 people in the Maldives are also facing poverty. In the Maldives, where 43% of the population already lives on less than $2 a day, this could rise to half. Sri Lanka and the Maldives are the two countries the ADB fears are most at risk of suffering lasting economic damage from the tsunami. Sri Lanka's government has estimated reconstruction costs at nearly $3bn. A government task force held meetings to discuss an emergency rebuilding plan with the ADB, World Bank and Japanese aid agencies on Wednesday, and promised to publish the plan within 10 days.
Indonesia, Malaysia, Thailand and India have enjoyed strong economic growth in recent years, which should cushion them against reconstruction costs. Although Indonesia's northern province of Aceh suffered the worst death toll, the region's oil and natural gas production facilities "have survived intact", the report said. However, it remains too soon to asses the damage to poor people's livelihoods in Aceh because it would depend on how much farm land had been flooded by seawater. "This is a profoundly tragic event for the region and for the millions who are suffering. But the economies of the affected countries except Sri Lanka and the Maldives should emerge with minimal damage," the ADB report said. Some businesses may even gain from the reconstruction efforts, thereby creating jobs. At a meeting in Thailand, ABD president Thadao Chino said he was confident of the country's "own capabilities to restore normalcy to the affected areas and meet the rehabilitation requirements". Thailand has said it does not wish to opt for a debt repayment freeze, while India has also rejected international aid, saying it can cope on its own resources. Debt repayment holidays carry the risk of credit ratings downgrades, making it more expensive to borrow money in future. Indonesia, however, is pressing for greater help with its debts than the current freeze would bring. It is one of the world's most indebted countries. | business |
Fosters buys stake in winemaker
Australian brewer Fosters has bought a large stake in Australian winemaker Southcorp, sparking rumours of a possible takeover.
Fosters bought 18.8% of Southcorp, the global winemaker behind the Penfolds, Lindemans and Rosemount brands, for 4.17 Australian dollars per share. A bid at that price would value the company at A$3.1bn ($2.4bn; £1.25bn ). Fosters said it was currently in discussions "which may lead to a major corporate announcement".
In a separate statement, Southcorp confirmed the brewer had asked for talks. Both firms asked the Sydney stock market to suspend trading in their shares until Monday. Southcorp's shares were suspended at A$4.25.
Fosters bought the 18.8% stake from Reline Investments, the family investment firm for the Oatleys, who founded the Rosemount Estates label and sold it to Southcorp in 2001. Robert Oatley and his son Sandy Oatley have both resigned from Southcorp's board following the share deal. Southcorp employs 2,700 people and is the largest single investor in rural Australia, according to its website. The prospect of Fosters launching a major acquisition startled investors, as the brewer said last summer that it was not looking to expand through a big buy in the near future. It has cash available, after getting A$846m from selling property business Lensworth, but it has been widely expected to return cash to shareholders.
"People will scratching their heads over this one. Fosters has done a back-flip", said Shawn Burns, a fund manger at Deutsche Asset Management. Southcorp's shares have risen in recent months on speculation that it could become a takeover target. It spent two years in the red, returning to profit in 2004. Consolidation in the wine industry is being driven by Constellation, the world's biggest winemaker. It seized the top spot when it bought Australian firm BRL Hardy for just over $1bn in 2003. Since then, it has paid $1bn for US wine maker Robert Mondavi, bought last month. Fosters' main wine business is Beringer Blass Wine Estate. Its best known brand is Fosters lager, though it makes a clutch of beer brands, and spirits. Analysts were divided on Thursday about whether Fosters was more likely to go for a takeover or merely wanted to take a big enough chunk of Southcorp to prevent it falling to a rival. "Currently, I think the strategic position is more sensible rather than an outright takeover," said one analyst quoted by the Agence France Presse news agency. However, Matt Williams, a fund manager at Perpetual Trustees said taking the stake "is definitely a precursor to a takeover". | business |
ECB holds rates amid growth fears
The European Central Bank has left its key interest rate unchanged at 2% for the 19th month in succession.
Borrowing costs have remained on hold amid concerns about the strength of economic growth in the 12 nations sharing the euro, analysts said. Despite signs of pick-up, labour markets and consumer demand remain sluggish, while firms are eyeing cost cutting measures such as redundancies. High oil prices, meanwhile, have put upward pressure on the inflation rate.
Surveys of economists have shown that the majority expect borrowing costs to stay at 2% in coming months, with an increase of a quarter of a percentage point predicted some time in the second half of the year. If anything, there may be greater calls for an interest rate cut, especially with the euro continuing to strengthen against the dollar. "The euro land economy is still struggling with this recovery," said economist Dirk Schumacher. The ECB "may sound rather hawkish but once the data allows them to cut again, they will." Data coming out of Germany on Thursday underlined the problems facing European policy makers. While Germany's economy expanded by 1.7% in 2004, growth was driven by export sales and lost some of its momentum in the last three months of the year.
The strength of the euro is threatening to dampen that foreign demand in 2005, and domestic consumption currently is not strong enough to take up the slack. Inflation in the eurozone, however, is estimated at about 2.3% in December, above ECB guidelines of 2%. ECB President Jean-Claude Trichet has remained upbeat about prospects for the region, and inflation is expected to drop below 2% later in 2005. The ECB has forecast economic growth in the eurozone of 1.9% in 2005. | business |
China bans new tobacco factories
The world's biggest tobacco consumer, China, has said it will not allow any new tobacco factories to be built.
China already has more than enough cigarette-making capacity, according to a spokesman for the tobacco industry regulator quoted in China Daily. The ban threatens to reignite tensions between the regulator and British American Tobacco, which plans to become China's first foreign cigarette maker. A spokeswoman for Bat declined to comment on the report.
"China won't allow any new tobacco factories to be built, including joint ventures", said Xing Wangli, a spokesman for the State Tobacco Administration Monopoly quoted in China Daily. He also said that the state would retain its monopoly on cigarette distribution. China has 350 million smokers who consumer 1.7 trillion cigarettes a year. Smoking is fashionable in China, where it is seen as an essential - and manly - sociable touch for some jobs, such as salesmen. More young, urban woman are taking up smoking too. In July 2004, Bat announced it had won approval for to build a $1.5bn (£800m) joint venture factory in China which would make it the first foreign cigarette maker to manufacture there.
The State Tobacco Monopoly Administration said a week later that it had not approved the deal, leading to an embarrassing public row. Bat told the BBC at that time that it had not negotiated with the STMC, and secured approval from "the highest levels of government". Since then, the row has flared occasionally, most recently at a forum in November. Bat consistently declines to comment. "Xing's statement comes as especially bad news for British American Tobacco", the China Daily newspaper said of the latest development. The Bat spokeswoman said: "There is nothing for us to add...since our announcement in July last year. The central government of China is the authority that approved our strategic investment." The decision to ban further tobacco factories does not apply to deals made before 2005, according to the French news agency AFP. The joint venture factory was expected to take till 2006 to build. The Bat spokeswoman would not comment on its progress. However, if the STMA continues to take a tough stance, expansion opportunities could be limited.
China's tobacco market is increasingly valuable as anti-smoking campaigners target public smoking in the West. China Daily said the market was currently enjoying steady growth, making more than 210bn yuan ($25.4bn) in pre-tax profits last year, almost double the figure in 2000. The paper made no mention of health concerns. The STMA is trying to restructure the domestic tobacco industry, closing some factories, though such moves can be unpopular with local governments. | business |
UK interest rates held at 4.75%
The Bank of England has left interest rates on hold again at 4.75%, in a widely-predicted move.
Rates went up five times from November 2003 - as the bank sought to cool the housing market and consumer debt - but have remained unchanged since August. Recent data has indicated a slowdown in manufacturing and consumer spending, as well as in mortgage approvals. And retail sales disappointed over Christmas, with analysts putting the drop down to less consumer confidence.
Rising interest rates and the accompanying slowdown in the housing market have knocked consumers' optimism, causing a sharp fall in demand for expensive goods, according to a report earlier this week from the British Retail Consortium. The BRC said Britain's retailers had endured their worst Christmas in a decade.
"Today's no change decision is correct," said David Frost, Director General of the British Chambers of Commerce (BCC). "But, if there are clear signs that the economy slows, the MPC should be ready to take quick corrective action and cut rates. "Dismal reports from the retail trade about Christmas sales are worrying, if they indicate a more general weakening in consumer spending."
Mr Frost added: "The housing market outlook remains highly uncertain. "It is widely accepted that, if house prices start falling more sharply, the risks facing the economy will worsen considerably." CBI chief economist Ian McCafferty said the economy had "slowed in recent months in response to rate rises" but that it was difficult to gauge from the Christmas period the likely pace of activity through the summer. "The Bank is having to juggle the emergence of inflationary pressures, driven by a tight labour market and buoyant commodity prices, against the risk of an over-abrupt slowdown in consumer activity," he said. "Interest rates are likely to remain on hold for some time."
On Thursday there was more gloomy news on the manufacturing front, as the Office for National (ONS) statistics revealed British manufacturing output unexpectedly fell in November - for the fifth month in the past six. The ONS said manufacturing output dropped 0.1% in November, matching a similar unrevised fall in October and confounding economists' expectations of a 0.3% rise. Manufacturers' organisation, the EEF, said it expected the hold in interest rates to continue in the near future. It also said there was evidence that manufacturers' confidence may be waning as the outlook for the world economy becomes more uncertain.
"So far the evidence suggests that last year's rate increases have helped to rebalance the economy without damaging the recovery in manufacturing," said EEF chief economist, Steve Radley. "However, should the business outlook start to deteriorate, the Bank should stand ready to cut rates." Some economists have predicted rates will drop later in the year, although others feel the Bank may still think there is a need for a rise to 5% before that happens. The Bank remains concerned about the long-term risks posed by personal debt - which is rising at 15% a year - if economic conditions worsen. | business |
German economy rebounds
Germany's economy, the biggest among the 12 countries sharing the euro, grew at its fastest rate in four years during 2004, driven by strong exports.
Gross domestic product (GDP) rose by 1.7% last year, the statistical office said. The economy contracted in 2003. Foreign sales increased by 8.2% last year, compared with a 0.3% slide in private consumption. Concerns remain, however, over the strength of the euro, weak domestic demand and a sluggish labour market. The European Central Bank (ECB) left its benchmark interest rate unchanged at 2% on Thursday. It is the nineteenth month in a row that the ECB has not moved borrowing costs. Economists predict that an increase is unlikely to come until the second half of 2005, with growth set to sputter rather than ignite.
"During 2004 we profited from the fact that the world economy was strong," said Stefan Schilbe, analyst at HSBC Trinkaus & Burkhardt. "If exports weaken and domestic growth remains poor, we cannot expect much from 2005." Many German consumers have been spooked and unsettled by government attempts to reform the welfare state and corporate environment. Major companies including Volkswagen, DaimlerChrysler and Siemens have spent much of 2004 in tough talks with unions about trimming jobs and costs. They have also warned there are more cost cutting measures on the horizon. | business |
US trade deficit widens sharply
The gap between US exports and imports has widened to more than $60bn (£31.7bn), an all-time record.
Figures from the Commerce Department for November showed exports down 2.3% to $95.6bn, while imports grew 1.3% to $155.8bn on rising consumer demand. Part of the expanding deficit came from high prices for oil imports. But the numbers suggested the sliding dollar - which makes exports less expensive - has had little impact, and could indicate slowing economic growth.
The trade deficit - far bigger than the $54bn widely expected on Wall Street - prompted a rapid response from the currency markets.
By 1650 GMT, the dollar was trading against the euro at $1.3280, almost a cent and a half weaker than before the announcement. Against the pound, the dollar was down about 0.7% at $1,8923. "The dollar's fall has been sudden, violent and appropriate given this number," said Brian Taylor of Wells Fargo in Minneapolis. "Recent exchange rate movements certainly haven't had any impact yet." Treasury Secretary John Snow put a brave face on the news, saying it was a sign of strong economic expansion. "The economy is growing at such a fast rate that it is generating lots of disposable income... some of which is used to buy goods from our trading partners."
Although the White House officially still backs the US's traditional "strong dollar" policy, it has tacitly indicated that it would be happy if the slide continued. The dollar has fallen by 50% against the euro - as well as by 30% against the yen - in the past three years. The main catalyst, most economists accept, is the large budget deficit on the one hand, and the current account deficit - the difference between the flow of money in and out of the US - on the other. The trade deficit is a large part of the latter. In November, the fall in exports was largely due to a decline in sales of industrial supplies and materials such as chemicals, as well as of cars, consumer goods and food. One small bright spot for US policy-makers was a slight decline in the deficit with China, often blamed for job losses and other economic woes. Although China's overall trade surplus is expanding, according to Chinese government figures, the Commerce Department revealed the US's deficit with China was $19.6bn in November, down from $19.7bn the month before. But the deficit with Japan was at its worst in more than four years. | business |
Trade gap narrows as exports rise
The UK's trade gap narrowed in November, helped by a 7.5% rise in exports outside the European Union.
According to the Office for National Statistics, the difference between what the UK exported and imported was £3.1bn ($5.8bn), down from October's £3.6bn. Overall UK exports - including both goods and services - rose by more than 3.2% to £24.8bn, although total imports rose again to a new record of £27.9bn. The deficit for goods alone was £4.6bn, down from October's £5bn. During November the UK exported £16.9bn worth of goods, but imported £21.5bn. The cumulative deficit for the first eleven months of 2004 now stands at £36.3bn, £4.5bn higher than the same period in 2003.
November saw an improvement in export levels to both the European Union and the rest of the world, the Office for National Statistics (ONS) said. EU exports rose 2%, fuelled by an increase in sales of chemicals. Non-EU exports shot up 7.5%, with growth seen across a range of manufacturing sectors including cars, consumer durables and chemicals. The export boost offset a 1% rise in imports. Non-EU imports rose 3%, but the growth in goods entering the UK from the EU slowed to 0.5%.
The UK's deficit with the EU fell to £1.9bn from £2.1bn, while its non-EU shortfall dropped to £2.7bn from £2.9bn in October.
The country's surplus on trade-in-services remained steady at £1.5bn for the fifth month in a row. Paul Dales, UK economist for Capital Economics, said the figures represented an improvement on recent months. However, he stressed that the long-term prognosis for exports was still uncertain. "The figures are a lot better than expected but the trend still remains poor," he said. "There have been some very encouraging signs that the UK export recovery is starting to take hold. But there is a danger that this could be held back by the ongoing weakness of domestic demand on the continent." | business |
Lesotho textile workers lose jobs
Six foreign-owned textile factories have closed in Lesotho, leaving 6,650 garment workers jobless, union officers told the AP news agency.
Factory Workers Union secretary general Billy Macaefa blamed the closures on the end of worldwide textile quotas. The quotas for developing nations, ended on 1 January, gave them a set share of the rich countries' markets. They also limited the amount countries like China could export to the big markets of the United States and EU.
"We understand that some (owners)... were complaining that the South African rand was strong against the US dollar, and they were losing when exporting textiles and clothing to the United States," Mr Macaefa said at a news briefing in the capital, Maseru. Lesotho's currency, the maloti, is fixed to the rand. "But we suspect that they left the country unceremoniously because of the end of quotas introduced by the World Trade Organization." He said the six factories were Leisure Garments, Modern Garments, Precious Six Garments, TW Garments, Lesotho Hats and Vogue Landmark. The owners - two from Taiwan, two from China, one from Mauritius and one from Malaysia - left over the December holiday period without informing or paying their employees, he said.
Union leaders and trade campaigners have been warning that developing nations such as Lesotho, Sri Lanka, and Bangaldesh could lose thousands of jobs once the quotas were lifted. In the mountainous country surrounded by South Africa, it is feared as many as 50,000 textile workers could lose their jobs, and Mr Mafeca said he expected more companies to leave. The assistance of a US law had given Lesotho's textiles duty-free access to North American markets. The African Growth and Opportunity Act (AGOA), gave sub-Saharan countries preferential access to the US market for apparel and textile products as well as a wide range of other goods. A Lesotho government news briefing is expected on Wednesday. | business |
Kraft cuts snack ads for children
Kraft plans to cut back on advertising of products like Oreo cookies and sugary Kool-Aid drinks as part of an effort to promote healthy eating.
The largest US food maker will also add a label to its more nutritional and low-fat brands to promote the benefits. Kraft rival PepsiCo began a similar labelling initiative last year. The moves come as the firms face criticism from consumer groups concerned at rising levels of obesity in US children. Major food manufacturers have recently been reformulating the content of some calorie-heavy products.
Kraft's new advertising policy, which covers advertising on TV, radio and in print publications, is aimed at children between the ages of six and 11. It means commercials for some of its most famous snacks and cereals shown during early morning cartoon shows on TV will now be replaced by food and drink qualifying for Kraft's new "Sensible Solution" label. But the firm said it would continue to advertise all its products in media seen by parents and "all family" audiences. "We're working on ways to encourage both adults and children to eat wisely by selecting more nutritionally balanced diets," said Lance Friedmann, Kraft senior vice president. | business |
Khodorkovsky quits Yukos shares
Jailed tycoon Mikhail Khodorkovsky has transferred his controlling stake in oil giant Yukos to a business partner.
Mr Khodorkovsky handed over his entire 59.5% stake in holding company Group Menatep - which controls Yukos - to Leonid Nevzlin. A close ally of the ex-Yukos boss, Mr Nevzlin is currently based in Israel. Mr Khodorkovsky handed over his stake after the forced sale of Yukos' core oil production unit, Yuganskneftegaz to pay a giant tax bill.
Yuganskneftegaz was sold off at auction in December last year, eventually falling into the hands of state oil firm Rosneft in a deal worth $9.4bn (£5bn). "Since the sale of Yuganskneftegaz, I have been delivered of (all) responsibility for the business that remains and the group's money as a whole," Mr Khodorkovsky said. "It is all over. As before, I see my future in public activity to build a civil society in Russia." Mr Nevzlin is Yukos' largest shareholder but is living in self-imposed exile in Israel. Yuganskneftegaz pumps around 1 million barrels of oil a day. It was sold by the Russian authorities to recover government tax claims against Yukos totalling over $27bn. Previously considered to be Russia's richest man, with an estimated fortune of $15bn, Mr Khodorkovsky is currently on trial for fraud and tax evasion following his arrest in October 2003. However, the charges are widely seen as politically motivated and part of a drive by Russian President Vladimir Putin to rein in the country's super-rich business leaders, the so-called oligarchs. It is also believed that Mr Khodorkovsky was particularly targeted because he had started to bankroll political opponents of Mr Putin. | business |
Executive trio leave Aer Lingus
Three senior executives of Ireland's state-owned airline, Aer Lingus, are set to leave early on 28 January after accusations of a conflict of interest.
The trio are chief executive Willie Walsh, chief financial officer Brian Dunne and chief operations officer Seamus Kearney. The three have refused to confirm reports they plan to launch a private airline in competition with Aer Lingus. They announced in November they would quit in May, but did not give a reason. That decision had followed an announcement by Irish Prime Minister Bertie Ahern - who is still considering the future of the airline - which ruled out a proposed management buy-out of Aer Lingus. Mr Walsh denied they had been forced out early because of the reports claiming they were set to launch a competitor airline.
"What I do after I leave Aer Lingus is still too early to say," Mr Walsh told AP news agency on Wednesday. "I have opportunities open to me. Brian and Seamus are in the equally fortunate position." He said he had received more than 40 business proposals, mostly aviation-related, since the trio announced their resignations two months ago. Mr Walsh said there was no conflict of interest, and, if he was to launch a rival airline or join an existing competitor, "this thing happens in every business". "There's absolutely no question of a conflict of interest. I've been completely focused on my responsibilities at Aer Lingus," he told AP.
This week opposition politicians had called on the Irish government to make an urgent decision on the future of the airline. On Wednesday Irish Transport Minister Martin Cullen said in a statement: "A conflict of interest cannot, should not and will not be allowed to arise between their current roles at Aer Lingus and their future career intentions." Last Friday the minister had announced he was to advertise for three senior executives for Aer Lingus. Mr Walsh, who took charge in 2000, and his team have earned praise for turning Aer Lingus around, by cutting air fares and staff, and re-positioning it as a low-fare airline to rival Ryanair. The company is 85% owned by the government and 15% by its staff. | business |
US in EU tariff chaos trade row
The US has asked the World Trade Organisation to investigate European Union customs tariffs, which it says are inconsistent and hamper trade.
The EU's own institutions have noted the uneven way EU customs rules are applied but failed to act, the US Trade Representative's Office said. Small and mid-sized US firms were worst-hit, it added. The EU expanded from 15 to 25 member states in May. The US said it filed the complaint after talks failed to find a solution.
The move came in the same week that the US and EU stepped back from confrontation in a tense dispute over aircraft subsidies to European manufacturer Airbus and US firm Boeing. New EU trade commissioner Peter Mandelson said on Tuesday that the two sides had agreed to reopen talks in the aircraft subsidies row, which led to tit-for-tat WTO filings in last autumn.
Explaining why it has asked the WTO to set up a dispute settlement panel on customs barriers, the US Trade Representative's Office said that it wants to tackle the issue "early in the EU's process of dealing with the problems of enlargement". Ten countries, mostly in Eastern Europe, joined the EU in May. The US said its trade with the 25 EU member countries was worth $155.2bn (£82.8bn) in 2003. "Although the EU is a customs union, there is no single EU customs administration," a statement issued on behalf of Robert Zoellick, US Trade Representative, said. Lack of uniformity, coupled with lack of procedures for prompt EU-wide review can hinder US exports, especially for small to mid-sized businesses", An EU spokesman in Washington dismissed the US complaint. "We think the US case is very weak. They haven't come up with any evidence that US companies are being harmed," said Anthony Gooch. It could take several months for the WTO's dispute settlement panel to report its findings. | business |
News Corp eyes video games market
News Corp, the media company controlled by Australian billionaire Rupert Murdoch, is eyeing a move into the video games market.
According to the Financial Times, chief operating officer Peter Chernin said that News Corp is "kicking the tires of pretty much all video games companies". Santa Monica-based Activison is said to be one firm on its takeover list. Video games are "big business", the paper quoted Mr Chernin as saying. We "would like to get into it".
The success of products such as Sony's Playstation, Microsoft's X-Box and Nintendo's Game Cube have boosted demand for video games.
The days of arcade classics such as Space Invaders, Pac-Man and Donkey Kong are long gone. Today, games often have budgets big enough for feature films and look to give gamers as real an experience as possible. And with their price tags reflecting the heavy investment by development companies, video games are proving almost as profitable as they are fun. Mr Chernin, however, told the FT that News Corp was finding it difficult to identify a suitable target. "We are struggling with the gap between companies like Electronic Arts, which comes with a high price tag, and the next tier of companies," he explained during a conference in Phoenix, Arizona. "These may be too focused on one or two product lines." | business |
US Ahold suppliers face charges
US prosecutors have charged nine food suppliers with helping Dutch retailer Ahold inflate earnings by more than $800m (£428m).
The charges have been brought against individuals as well as companies, alleging they created false accounts. Ahold hit the headlines in February 2003 after it emerged that there were accounting irregularities at its US subsidiary Foodservice. Three former Ahold top executives last year agreed to settle fraud charges.
Ahold has admitted that it fraudulently inflated promotional allowances at Foodservice, improperly consolidated joint ventures and also committed other accounting errors and irregularities.
The nine now charged, who worked as suppliers to Ahold, are accused of signing false documents relating to the amount of money they paid the retailer for promoting their products in its stores. Food companies pay supermarkets and retailers for prime shelf space. The suppliers in question are said to have inflated the amount of money they paid, providing auditors with signed letters that allowed Ahold to inflate its earnings. US Attorney David Kelley said he expects the nine vendors will plead guilty to the charges. He added that there may be more court actions in the future. "I don't want to leave you with the impression that these were the only ones involved," he said. Among those facing charges are John Nettle, a former employee of General Mills; Mark Bailin of Rymer International Seafood; Tim Daly of Michael Foods and Kenneth Bowman, who worked as an independent contractor for Total Foods.
Others include Michael Hannigan of Sugar Foods; Peter Marion of Maritime Seafood Processors and First Choice Foods; Gordon Redgate of Commodity Manager and Private Label Distribution; Bruce Robinson of Basic American Foods and Michael Rogers, formerly of Tyson Foods. Pasquale D'Amuro of the FBI called the nine vendors the key ingredients in "the process of cooking the books" at Ahold. At the time of the scandal, Ahold was seen by many as Europe's Enron. Ahold shares tumbled on the news and many market observers predicted that the fall out could damage investor confidence across Europe. It was less severe than many had envisaged, however, and since then Ahold has worked hard at rebuilding its reputation and investor confidence. Ahold is the world's fourth-largest supermarket chain. Its other US businesses include Stop & Shop, and Giant Food. | business |
Wal-Mart fights back at accusers
Two big US names have launched advertising campaigns to "set the record straight" about their products and corporate behaviour.
The world's biggest retailer Wal-Mart took out more than 100 full page adverts in national newspapers. The group is trying to see off criticism over it pay deals, benefits package and promotion strategy. Meanwhile, drugs group Eli Lilly is planning a campaign against "false" claims about its product Prozac. Wal-Mart kicked off the battle with adverts in newspapers like the Wall Street Journal, using an open letter from company president Lee Scott saying it was time for the public to hear the "unfiltered truth".
"There are lots of 'urban legends' going around these days about Wal-Mart, but facts are facts. Wal-Mart is good for consumers, good for communities and good for the US economy," Mr Scott said in a separate statement.
Its adverts - and a new website - outlined the group's plans to create more than 10,000 US jobs in 2005. Wal-Mart's average pay is almost twice the national minimum wage of $5.15 (£3.90) an hour, while employees are offered health and life insurance, company stock and a retirement plan, the adverts say. Unions accuse Wal-Mart of paying staff less than its rivals do, with fewer benefits. In California, the company is fighting opposition to new stores amid allegations it forces local competitors out of business. Lawmakers in the state are also examining allegations that the firm burdens the state with an unfair proportion of employee health care costs. "I think they are going to have a tough time suddenly overcoming the perceptions of some people," said Larry Bevington, chairman of Save Our Community - a group fighting to prevent Wal-Mart opening a store in Rosemead, California. Wal-Mart is also fighting two lawsuits - one accusing it of discriminating against women and another alleging it discriminates against black employees.
Meanwhile Eli Lilly is launching a series of adverts in a dozen major newspapers, to present what is says are the true facts about its anti-depressant drug Prozac.
The move is in response to a British Medical Journal article that claimed "missing" Lilly documents linked Prozac to suicide and violent behaviour. In the averts, entitled An Open Letter from chief executive Sidney Taurel, the company says the article continues to "needlessly spread fear among patients who take Prozac". "It was simply wrong to suggest that information on Prozac was missing, or that important research data on the benefits and possible side effects of the drug were not available to doctors and regulators," the letter added. Eli Lilly's chief medical officer Alan Breier said that the article was "false and misleading" as the documents it referred to were actually created by officials at the US Food and Drug Administration (FDA) and presented to an FDA meeting in 1991. Later, FDA medical advisors agreed the claims were based on faulty data and there was no increased risk of suicide. | business |
US retail sales surge in December
US retail sales ended the year on a high note with solid gains in December, boosted by strong car sales.
Seasonally adjusted sales rose 1.2% in the month, compared to 0.1% a month earlier, boosted by a surge in shopping just before and after Christmas. Sales climbed 8% for the year, the best performance since an 8.5% rise in 1999, the Commerce Department added. The gains were led by a 4.3% jump in auto sales as dealers used enhanced offers to get cars out of showrooms. Dealers were forced to cut prices in December to maintain sales growth in a tough quarter when the usual end-of-year holiday sales boom was slow to get started.
The increase in sales during December pushed total spending for the month to $349.4bn (£265.9bn). Sales for the year also broke through the $4 trillion mark for the first time - with annual sales coming in at $4.06 trillion However, if automotives are excluded from December's data, retail sales rose just 0.3% on the month. Home furnishings and furniture stores also performed well, rising 2.2%. But as well as hitting the shops, more US consumers were going online or using mail order for their purchases - with non-store retailers seeing sales rise by 1.9%. However, analysts said that the strong figures were unlikely to put the Federal Reserve Bank off its current policy of measured interest rate rises. "Consumers for now remain willing to spend freely, sustaining the US expansion. Given that attitude, the Fed remains likely to continue boosting the Fed funds rate at upcoming meetings," UBS economist Maury Harris told Reuters.
Retail sales are seen as a major part of consumer spending - which in turn makes up two-thirds of economic output in the US. Consumer spending has been picking up in recent years after slumping during 2001 and 2002 as the country battled to recover from its first recession of the decade and the World Trade Centre attacks. During that time, sales grew a lacklustre 2.9% in 2001 and 2.5% a year later. Looking ahead, analysts now expect improvement in jobs growth to feed through to the High Street with consumer spending remaining strong. The belief comes despite the latest labor department report showing a surprise rise in unemployment. The number of Americans filing initial jobless claims jumped to 367,000, the highest rate since September. However, long-term claims slipped to their lowest level since 2001. | business |
Winemaker rejects Foster's offer
Australian winemaker Southcorp has rejected a takeover offer worth 3.1bn Australian dollars ($2.3bn; £1.8bn) from brewing giant Foster's Group.
Southcorp, whose brands include Penfolds, Rosemount and Lindemans, dismissed the offer as inadequate. The two companies held four days of talks after Foster's bought an 18.8% stake in Southcorp on 13 January. A merger would create a global player with worldwide annual sales of 39m cases and revenues of A$2.6bn.
Southcorp said Foster's A$4.17-a-share takeover proposal offered a "excellent strategic fit" but undervalued the company. "Southcorp's board has informed Foster's that it is not prepared to recommend the offer as it does not adequately reflect the strategic value of the company," said Southcorp chairman Brian Finn.
Southcorp said Foster's takeover offer was "opportunistic". However, it said that the offer may represent an 'opening bid', opening up the possibility of Foster's returning with an improved offer.
Foster's said a combination of the two companies would create a global player with an "unrivalled" collection of premium wine brands. Despite being best known for brewing Foster's Lager, Foster's is already one of Australia's largest wine producers, owning the Beringer and Wolf Blass brands among others. "The combination of Foster's and Southcorp will transform the global wine industry and significantly enhance Australia's competitive position on the global stage," said Trevor O'Hoy, Foster's chief executive officer. Foster's spent A$584m on buying an 18.8% stake in Southcorp from the Oatley family, which founded the Rosemount Estates business and later merged it into Southcorp. Shares in both companies were suspended while the two held talks about a deal. Southcorp's shares rose 12% to A$4.76 on news of the offer but Foster's shares fell 3.7% to A$5.44. | business |
McDonald's boss Bell dies aged 44
Charlie Bell, the straight-talking former head of fast-food giant McDonald's, has died of cancer aged 44.
Mr Bell was diagnosed with colorectal cancer in May last year, a month after taking over the top job. He resigned in November to fight the illness. Joining the company as a 15-year-old part-time worker, Mr Bell quickly moved through its ranks, becoming Australia's youngest store manager at 19. A popular go-getter, he is credited with helping revive McDonald's sales. Mr Bell leaves a wife and daughter. "As we mourn his passing, I ask you to keep Charlie's family in your hearts and prayers," chief executive James Skinner said in a statement. "And remember that in his abbreviated time on this earth, Charlie lived life to the fullest." "No matter what cards life dealt, Charlie stayed centred on his love for his family and for McDonald's."
After running the company's Australian business in the 1990s, Mr Bell moved to the US in 1999 to run operations in Asia, Africa and the Middle East. In 2001, he took over the reins in Europe, McDonald's second most important market. He became chief operating officer and president in 2002. Mr Bell took over as chief executive after his predecessor as CEO, Jim Cantalupo, died suddenly of a heart attack in April. Having worked closely with Mr Cantalupo, who came out of retirement to turn McDonald's around, Mr Bell focused on boosting demand at existing restaurants rather than follow a policy of rapid expansion. He had promised not to let the company get "fat, dumb and happy," and, according to Reuters, once told analysts that he would shove a fire hose down the throat of competitors if he saw them drowning. Mr Bell oversaw McDonald's "I'm lovin' it" advertising campaign and introduced successes such as McCafe, now the biggest coffee shop brand in Australia and New Zealand. Colleagues said that Mr Bell was proud of his humble beginnings, helping out behind cash tills and clearing tables when visiting restaurants. | business |
US industrial output growth eases
US industrial production continued to rise in November, albeit at a slower pace than the previous month.
The US Federal Reserve said output from factories, mines and utilities rose 0.3% - in line with forecasts - from a revised 0.6% increase in October. Analysts added that if the carmaking sector - which saw production fall 0.5% - had been excluded the data would have been more impressive. The latest increase means industrial output has grown 4.2% in the past year. Many analysts were upbeat about the prospects for the US economy, with the increase in production coming on the heels of news of a recovery in retail sales. "This is very consistent with an economy growing at 3.5 to 4.0%. It is congruent with job growth and consumer optimism," Comerica chief economist David Littman said of the figures.
The US economy grew at a respectable annual rate of 3.7% in the three months between July and September, while jobs growth averaged 178,000 during the same period. While the employment figures are not spectacular, experts believe they are enough to whittle away at America's 5.4% jobless rate. A breakdown of the latest production figures shows mining output drove the increase, surging 2.1%, while factory output rose 0.3%. But utility output dropped 1.4%. Meanwhile, the amount of factory capacity in use during the month rose to 77.6% - its highest level since May 2001. "Many investors think that product market inflation won't be a problem until the utilisation rates are at 80% or higher," Cary Leahy, senior US economist at Deutsche Bank Securities, said. "So there is still a lot of inflation-fighting slack in the manufacturing sector," "Overall I'd say manufacturing at least away from autos continues to improve and I would bet that it improves at a faster rate in coming months given how lean inventories are," Citigroup senior economist Steven Wieting added. | business |
LSE doubts boost bidders' shares
Shares in Deutsche Boerse have risen more than 3% after a shareholder fund voiced opposition to the firm's planned takeover of the London Stock Exchange.
TCI, which claims to represent owners of 5% of Deutsche Boerse's (DB) shares, has complained that the £1.35bn ($2.5bn) offer for the LSE is too high. Opposition from TCI has fuelled speculation that the proposed takeover could fail. Rival exchange operator Euronext has also said it may bid for the LSE. Euronext operates the Paris, Amsterdam, Brussels and Lisbon bourses, while Deutsche Boerse runs the Frankfurt exchange.
BBC News spoke to a number of analysts on Monday morning about shareholder worries over Deutsche Boerse's bid for LSE. Although none were prepared to speak on the record, most thought it was unlikely that TCI's opposition would halt the deal
"Obviously we'll have to wait and see, but I don't think it will make much difference. Deutsche Boerse appears very committed," said one London-based broker. He forecast the takeover bid would succeed and was more concerned to see improvements in the daily running of the LSE. In voicing its opposition to the planned takeover, TCI said it would prefer to see Deutsche Boerse return $500m (£350m) to shareholders. The Deutsche Boerse was prepared to pay for the LSE "exceeds the potential benefits of this acquisition", said TCI.
Another Deutsche Boerse shareholder on Monday also appeared to back TCI's call. Another investor in Deutsche Boerse has supported the view that a payout to shareholders would be preferable to Deutsche Boerse overpaying for the LSE, Reuters news agency reported. "We prefer a sensible entrepreneurial solution at a price that is not too high," said Rolf Dress, a spokesman for Union Investment. "If that cannot be achieved, then we would wish for a distribution of liquid assets to shareholders." The Financial Times also reported a third Deutsche Boerse shareholder as opposed to the deal. It quoted a spokesman for US-based hedge fund Atticus Capital complaining that the planned takeover appeared to be motivated by "empire-building" rather than the best interests of shareholders.
TCI has called for Deutsche Boerse to hold an emergency general meeting to discuss the bid for LSE. Yet under German business law, DB does not have to gain shareholder approval before making a significant acquisition. Deutsche Boerse said TCI's opposition would not change its bid approach. "Deutsche Boerse is convinced that its contemplated cash acquisition of the London Stock Exchange is in the best interests of its shareholders and the company," it said. DB's shares were up 3.4% to 45.25 euros by 1030 GMT, the highest gainer in Frankfurt. | business |
Qantas considers offshore option
Australian airline Qantas could transfer as many as 7,000 jobs out of its home country as it seeks to save costs, according to newspaper reports.
Chief executive Geoff Dixon was quoted by The Australian newspaper as saying the carrier could no longer afford to remain "all-Australian". Unions criticised the possible move - which may affect cabin and maintenance staff - saying Qantas was profitable. More than 90% of the airline's staff are based in Australia.
Qantas confirmed it was looking at whether it might recruit and source products overseas - potentially through joint ventures - but said it would continue to create jobs in Australia.
Despite making a record Australian dollars 648m ($492m) profit last year, Qantas has argued that it needs to make considerable savings if it is to remain competitive. "We're going to have to get the lowest cost structure we can and that willmean sourcing things more and more from overseas," the newspaper quoted Qantas chief executive Geoff Dixon as saying. Early this year, Qantas increased the number of flight attendants based in London from 370 to 870. If Qantas were to follow the lead of other airlines moving staff 'offshore' 7,000 jobs could shift overseas, the newspaper reported. In a statement, Qantas said it was looking to build its operations overseas. However, it stressed this would not result in large scale redundancies in its home market, where most of its 35,000 staff are employed. "We are totally committed to continuing to grow jobs in Australia," Mr Dixon said. "We are, however, operating in a global market and there is no room for complacency simply because we are currently profitable and successful."
Unions reacted angrily to the reported disclosure, arguing that Qantas was profitable and did not need to take such action. "We could understand if Qantas was a struggling airline about to go under," Michael Mijatov, international division secretary of the Flight Attendants Association, told Agence France Presse. "Qantas announced a record profit last year and is on course this year for an even greater profit so it is totally unnecessary." In an effort to meet the challenge posed by low cost carriers, Qantas sought a tie-up with Air New Zealand last year However, the deal was thrown out by the New Zealand High Court on competition grounds. | business |
Gazprom 'in $36m back-tax claim'
The nuclear unit of Russian energy giant Gazprom is reportedly facing a 1bn rouble ($35.7m; £19.1m) back-tax claim for the 2001-2003 period.
Vedomosti newspaper reported that Russian authorities made the demand at the end of last year. The paper added that most of the taxes claimed are linked to the company's export activity. Gazprom, the biggest gas company in the world, took over nuclear fuel giant Atomstroieksport in October 2004. The main project of Atomstroieksport is the building of a nuclear plant in Iran, which has been a source of tension between Russia and the US.
Gazprom is one of the key players in the complex Russian energy market, where the government of Vladimir Putin has made moves to regain state influence over the sector. Gazprom is set to merge with state oil firm Rosneft, the company that eventually acquired Yuganskneftegas, the main unit of embattled oil giant Yukos. Claims for back-taxes was a tool used against Yukos, and led to the enforced sale Yuganskneftegas. Some analysts fear the Kremlin will continue to use these sort of moves to boost the efforts of the state to regain control over strategically important sectors such as oil. | business |
Germany calls for EU reform
German Chancellor Gerhard Schroeder has called for radical reform of the EU's stability pact to grant countries more flexibility over their budget deficits.
Mr Schroeder said existing fiscal rules should be loosened to allow countries to run deficits above the current 3% limit if they met certain criteria. Writing in the Financial Times, Mr Schroeder also said heads of government should have a greater say in reforms. Changes to the pact are due to be agreed at an economic summit in March.
The current EU rules limit the size of a eurozone country's deficit to 3% of GDP. Countries which exceed the threshold are liable to heavy fines by the European Commission, although several countries, including Germany, have breached the rules consistently since 2002 without facing punishment. The European Commission acknowledged last month that it would not impose sanctions on countries who break the rules.
Mr Schroeder - a staunch supporter of the pact when it was set up in the 1990s - said exemptions were now needed to take into account the cost of domestic reform programmes and changing economic conditions. "The stability pact will work better if intervention by European institutions in the budgetary sovereignty of national parliaments is only permitted under very limited conditions," he wrote. "Only if their competences are respected will the member states be willing to align their policies more consistently with the economic goals of the EU."
Deficits should be allowed to rise above 3%, Mr Schroeder argued, if countries meet several "mandatory criteria". These include governments which are adopting costly structural reforms, countries which are suffering economic stagnation and nations which are shouldering "special economic burdens". The proposed changes would make it harder for the European Commission to launch infringement action against any state which breaches the pact's rules. Mr Schroeder's intervention comes ahead of a meeting of the 12 Eurozone finance ministers on Monday to discuss the pact. The issue will also be discussed at Tuesday's Ecofin meeting of the finance ministers of all 25 EU members. Mr Schroeder also called for heads of government to play a larger role in shaping reforms to the pact. A number of EU finance ministers are believed to favour only limited changes to the eurozone's rules. | business |
Parmalat founder offers apology
The founder and former boss of Parmalat has apologised to investors who lost money as a result of the Italian dairy firm's collapse.
Calisto Tanzi said he would co-operate fully with prosecutors investigating the background to one of Europe's largest financial scandals. Parmalat was placed into bankruptcy protection in 2003 after a 14bn euro black hole was found in its accounts. More than 130,000 people lost money following the firm's collapse. Mr Tanzi, 66, issued a statement through his lawyer after five hours of questioning by prosecutors in Parma on 15 January.
Prosecutors are seeking indictments against Mr Tanzi and 28 others - including several members of his family and former Parmalat chief financial officer Fausto Tonna - for alleged manipulation of stock market prices and making misleading statements to accountants and Italy's financial watchdog. Two former Parmalat auditors will stand trial later this month for their role in the firm's collapse.
"I apologise to all who have suffered so much damage as a result of my schemes to make my dream of an industrial project come true," Mr Tanzi's statement said. "It is my duty to collaborate fully with prosecutors to reconstruct the causes of Parmalat's sudden default and who is responsible." Mr Tanzi spent several months in jail in the wake of Parmalat's collapse and was kept under house arrest until last September. Parmalat is now being run by a state appointed administrator, Enrico Bondi, who has launched lawsuits against 80 banks in an effort to recover money for the bankrupt company and its shareholders. He has alleged that these companies were aware of the true state of Parmalat's finances but continued to lend money to the company. The companies insist they were the victims of fraudulent book-keeping. Parmalat was declared insolvent after it emerged that 4 billion euros (£2.8bn; $4.8bn) it supposedly held in an offshore account did not in fact exist. The firm's demise sent shock waves through Italy, where its portfolio of top-selling food brands and its position as the owner of leading football club Parma had turned it into a household name. | business |
'Golden economic period' to end
Ten years of "golden" economic performance may come to an end in 2005 with growth slowing markedly, City consultancy Deloitte has warned.
The UK economy could suffer a backlash from the slowdown in the housing market, triggering a fall in consumer spending and a rise in unemployment. Deloitte is forecasting economic growth of 2% this year, below Chancellor Gordon Brown's forecast of 3% to 3.5%. It also believes that interest rates will fall to 4% by the end of the year.
In its quarterly economic review, Deloitte said the UK economy had enjoyed a "golden period" during the past decade with unemployment falling to a near 30 year low and inflation at its lowest since the 1960s.
But it warned that this growth had been achieved at the expense of creating major "imbalances" in the economy. Deloitte's chief economic advisor Roger Bootle said: "The biggest hit of all is set to come from the housing market which has already embarked on a major slowdown. "Whereas the main driver of the economy in recent years has been robust household spending growth, this is likely to suffer as the housing market slowdown gathers pace."
Economic growth is likely to be constrained during the next few years by increased pressure on household budgets and rising taxes, Deloitte believes. Gordon Brown will need to raise about $10bn a year in order to sustain the public finances in the short term, the firm claims. This will result in a marked slowdown in growth in 2005 and 2006 compared to last year, when the economy expanded by 3.25%. However, Deloitte stressed that the slowdown was unlikely to have any major impact on retail prices while it expected the Bank of England to respond quickly to signs of the economy faltering. It expects a series of "aggressive" interest rate cuts over the next two years, with the cost of borrowing falling from its current 4.75% mark to 3.5% by the end of 2006. "Although 2005 may not be the year when things go completely wrong, it will probably mark the start of a more difficult period for the UK economy," Mr Bootle. | business |
Jobs go at Oracle after takeover
Oracle has announced it is cutting about 5,000 jobs following the completion of its $10.3bn takeover of its smaller rival Peoplesoft last week.
The company said it would retain more than 90% of Peoplesoft product development and product support staff. The cuts will affect about 9% of the 55,000 staff of the combined companies. Oracle's 18-month fight to acquire Peoplesoft was one of the most drawn-out and hard-fought US takeover battles of recent times. The merged companies are set to be a major force in the enterprise software market, second only in size to Germany's SAP.
In a statement, Oracle said it began notifying staff of redundancies on Friday and the process would continue over the next 10 days. "By retaining the vast majority of Peoplesoft technical staff, Oracle will have the resources to deliver on the development and support commitments we have made to Peoplesoft customers over the last 18 months," Oracle's chief executive Larry Ellison said in a statement.
Correspondents say 6,000 job losses had been expected - and some suggest more cuts may be announced in future. They say Mr Ellison may be trying to placate Peoplesoft customers riled by Oracle's determined takeover strategy. Hours before Friday's announcement, there was a funereal air at Peoplesoft's headquarters, reported AP news agency. A Peoplesoft sign had been turned into shrine to the company, with flowers, candles and company memorabilia. "We're mourning the passing of a great company," the agency quoted Peoplesoft worker David Ogden as saying. Other employees said they would rather be sacked than work for Oracle. "The new company is going to be totally different," said Anil Aggarwal, Peoplesoft's director of database markets. "Peoplesoft had an easygoing, relaxed atmosphere. Oracle has an edgy, aggressive atmosphere that's not conducive to innovative production." On the news, Oracle shares rose 15 cents - 1.1% - on Nasdaq. In after-hours trading the shares did not move. | business |
Beijingers fume over parking fees
Choking traffic jams in Beijing are prompting officials to look at reorganising car parking charges.
Car ownership has risen fast in recent years, and there are now two and a half million cars on the city's roads. The trouble is that the high status of car ownership is matched by expensive fees at indoor car parks, making motorists reluctant to use them. Instead roads are being clogged by drivers circling in search of a cheaper outdoor option. "The price differences between indoor and outdoor lots are unreasonable," said Wang Yan, an official from the Beijing Municipal Commission for Development and Reform quoted in the state-run China Daily newspaper. Mr Wang, who is in charge of collecting car parking fees, said his team would be looking at adjusting parking prices to close the gap. Indoor parking bays can cost up to 250% more than outdoor ones.
Sports fans who drive to matches may also find themselves the target of the commission's road rage. It wants them to use public transport, and is considering jacking up the prices of car parks near sports grounds. Mr Wang said his review team may scrap the relatively cheap hourly fee near such places and impose a higher flat rate during matches. Indoor parking may be costly, but it is not always secure. Mr Wang's team are also going to look into complaints from residents about poor service received in exchange for compulsory monthly fees of up to 400 yuan ($48; £26). The Beijing authorities decided two years ago that visiting foreign dignitaries' motorcades should not longer get motorcycle outriders as they blocked the traffic. Unclogging Beijing's increasingly impassable streets is a major concern for the Chinese authorities, who are building dozens of new roads to create a showcase modern city ahead of the 2008 Olympic Games. | business |
GM issues 2005 profits warning
General Motors has warned that it expects earnings this year be lower than in 2004.
The world's biggest car maker is grappling with losses in its European business, and weak US sales. GM said higher healthcare costs in North America, and lower profits at its financial services subsidiary would hurt its performance in 2005. GM said it expects to meet its 2004 earnings targets "despite a tough competitive environment".
GM, whose brands include Buick, Cadillac and Chevrolet in the US and Opel, Saab and Vauxhall in Europe, is due to reveal 2004 earnings on 19 January.
It said it would deliver a shareholder payout of $6.0-$6.5 per share this year, as promised, but that next year's earnings per share would be lower, at between $4.0-$5.0. "We're following a roadmap that we believe will deliver strong results," said GM chief executive Rick Waggoner. GM said it was expecting "reduced financial losses" in Europe in 2005. It is in the midst of cutting 12,000 jobs - one fifth of the European total - in a bid to cut costs. The biggest job losses are in Germany. Its vehicle businesses have gained market share in three out of four regions in 2004, achieving record profitability in Asia Pacific and returning to profit in Latin America, the Middle East and Africa. The car maker has diversified into financial services, and is extending the reach of General Motors Acceptance Corp (GMAC), which has said it may enter the home loans market. GMAC has been a strong contributor to profits in 2004 but GM said it will do less well this year, delivering net income of $2.5bn. "Attaining earnings of $10 a share remains GM's goal," the company said, adding it believes it can achieve this in 2007. | business |
US economy still growing says Fed
Most areas of the US saw their economy continue to expand in December and early January, the US Federal Reserve said in its latest Beige Book report.
Of the 12 US regions it identifies for the study, 11 showed stronger economic growth, with only the Cleveland area falling behind with a "mixed" rating. Consumer spending was higher in December than November, and festive sales were also up on 2003. The employment picture also improved, the Fed said.
"Labour markets firmed in a number of districts, but wage pressures generally remained modest," the Beige Book said. "Several districts reported higher prices for building materials and manufacturing inputs, but most reported steady or only slightly higher overall price levels." The report added that residential real estate activity remained strong and that commercial real estate activity strengthened in most districts. "Office leasing was especially brisk in Washington DC, and New York City, two of the nation's strongest commercial markets," the Fed said. | business |
Wall Street cool to eBay's profit
Shares in online auction house eBay fell 9.8% in after-hours trade on Wednesday, after its quarterly profits failed to meet market expectations.
Despite seeing net profits rise by 44% to $205.4m (£110m) during October to December, from $142m a year earlier, Wall Street had expected more. EBay stock fell to $92.9 in after-hours trade, from a $103.05 end on Nasdaq. EBay's net revenue for the quarter rose to $935.8m from $648.4m, boosted by growth at its PayPal payment service.
Excluding special items, eBay's profit was 33 cents a share, but analysts had expected 34 cents.
"I think Wall Street has gotten a bit ahead of eBay this quarter and for the 2005 year." said Janco Partners analyst Martin Pyykkonen. For 2004 as a whole, eBay earned $778.2m on sales of $3.27bn. EBay president and chief executive Meg Whitman called 2004 an "outstanding success" that generated "tremendous momentum" for 2005. "I'm more confident than ever that the decisions and investments we're making today will ensure a bright future for the company and our community of users around the world," she said. EBay now forecasts 2005 revenue of $4.2bn to $4.35bn and earnings excluding items of $1.48 to $1.52 per share. Analysts had previously estimated that eBay would achieve 2005 revenues of $4.37bn and earnings of $1.62 per share, excluding items. | business |
WorldCom trial starts in New York
The trial of Bernie Ebbers, former chief executive of bankrupt US phone company WorldCom, has started in New York with the selection of the jury.
Mr Ebbers, 63, is accused of being the mastermind behind an $11bn (£6bn) accounting fraud that eventually saw the firm collapse in July 2002. His indictment includes charges of securities fraud, conspiracy and filing false reports with regulators. If found guilty, Mr Ebbers could face a substantial jail sentence. He has firmly declared his innocence.
Under Mr Ebbers' leadership, WorldCom emerged from Mississippi obscurity to become a $160bn telecoms giant and the darling of late 1990s investors. Yet as competition intensified and the telecoms boom petered out, WorldCom found itself under growing financial stress. When WorldCom finally collapsed, shareholders lost about $180bn and 20,000 workers lost their jobs. Mr Ebbers' trial, which is expected to last two months, is the latest in a series of attempts by US prosecutors to pursue senior executives for fraud. It will coincide with the retrial of former Tyco International chief Dennis Kozlowski and his top lieutenant, accused of looting the industrial conglomerate to the tune of $600m. Trail preparations are also preparing for former executives of shamed US energy firm Enron. | business |
High fuel costs hit US airlines
Two of the largest airlines in the US - American and Southwest - have blamed record fuel prices for their disappointing quarterly results.
American Airlines' parent AMR reported a loss of $387m (£206m) for the fourth quarter of 2004, against a $111m loss for the same period a year earlier. Meanwhile, Southwest Airlines saw its fourth-quarter 2004 profits fall 15% to $56m, against $66m a year earlier. Both said high fuel bills would continue to pressure revenues in 2005. American, the world's biggest airline by some measures, said it expected to report a loss for the first quarter of 2005. Southwest, which has the highest market value of any US carrier, said it would remain profitable despite high fuel prices.
AMR's shares were flat in Wednesday morning trading on the New York Stock Exchange, as the results were slightly better than analysts had anticipated. AMR's chief executive Gerard Arpey said the airline's difficulties reflected the situation within the industry. "AMR's results for the fourth quarter of 2004 reflect the economic woes that plagued the airline industry throughout 2004 - in particular, high fuel prices and a tough revenue environment," he said. For the full year, AMR posted a loss of $761m, lower than 2003's $1.2bn loss and an indication that the airline has successfully cut costs. AMR added that as part of its cost cutting measures, it is postponing the delivery of 54 Boeing jets. Shares in Southwest fell 65 cents to $14.35 as analysts voiced their disappointment. "The results came in below our already conservative estimate for the quarter," said Ray Neidl, an analyst at Calyon Securities. Both American and Southwest have been squeezed by cut-throat competition in the US airline industry, as a glut of available seats has led to fierce price reductions. | business |
European losses hit GM's profits
General Motors (GM) saw its net profits fall 37% in the last quarter of 2004, as it continued to be hit by losses at its European operations.
The US giant earned $630m (£481.5m) in the October-to-December period, down from $1bn in the fourth quarter of 2003. GM's revenues rose 4.7% to $51.2bn from $48.8bn a year earlier. The fourth-quarter losses at General Motors Europe totalled $345m, up from $66m during the same period in 2003. GM's main European brands are Opel and Vauxhall.
Excluding special items, GM's global income from continuing operations totalled $569m during the quarter, down from $838m a year earlier. The results were in line with Wall Street expectations and shares in GM rose by about 1% in pre-market trade. For the whole of 2004, GM earned $3.7bn, down from $3.8bn in 2003, while its annual revenue rose 4.5% to $193bn. GM said its profits were also hit by higher healthcare costs in the US. "GM reported solid overall results in 2004, despite challenging competitive conditions in many markets around the globe," GM chairman and chief executive Rick Wagoner said in a statement. The company recently announced that it expected profits in 2005 to be lower than in 2004. | business |
EU to probe Alitalia 'state aid'
The European Commission has officially launched an in-depth investigation into whether Italian airline Alitalia is receiving illegal state aid.
Commission officials are to look at Rome's provision of a 400m euro ($495m; £275m) loan to the carrier. Both the Italian government and Alitalia have repeatedly denied that the money - part of a vital restructuring plan - is state aid. The investigation could take up to 18 months. However, Transport Commissioner Jacques Barrot said he wanted it to be carried out as swiftly as possible. "The Italian authorities have presented a serious industrial plan," said Mr Barot. "We now have to verify certain aspects to confirm that this plan contains no state aid. I would like our analysis to be completed swiftly."
The matter of possible state aid was brought to the Commission's attention by eight of Alitalia's rivals, including Germany's Lufthansa, British Airways and Spain's Iberia. While Alitalia needs to restructure to bring itself back to profitability, the rival carriers say it has both violated state aid rules and threatened competition. Alitalia lost 330m euros in 2003 as it struggled to get to grips with high costs, spiralling oil prices, competition from budget carriers and reduced demand. It plans to split into AZ Fly and AZ Services, which will handle air and ground services respectively. Alitalia already enjoyed state aid in 1997. EU rules prevent that from happening again in what is known as the "one time, last time" rule for airlines. Otherwise, EU regulations on state aid stipulate that governments may help companies financially, but only on the same terms as a commercial investor. The airline declined to comment on the Commission decision. | business |
IMF agrees fresh Turkey funding
Turkey has agreed a draft proposal with the International Monetary Fund to borrow $10bn (£5.19bn), extending its ongoing financial support until 2007.
Turkey's current $18.6bn loan agreement with the IMF expires in February and the new deal would see it receive added support between 2005 and 2007. In return for the funding, Turkey would be expected to keep inflation under control and introduce market reforms. Turkey's economy has steadily recovered from a severe crisis in 2001.
Economic growth has average 6-7% in the past three years, ahead of IMF forecasts, while inflation fell below 10% this year for the first time in 30 years. However, Turkey has a huge debt burden - already owing $23bn to the IMF - while its current account deficit has swelled to $10.7bn this year.
The Turkish economics minister, Ali Babacan, said the two sides had reached general agreement on a new three year funding program. Rodrigo de Rato, the IMF's managing director, said the loan agreement would help to improve Turkish economic prospects by cutting its debt and stimulating growth. "I believe the new programme, if implemented successfully, will help Turkey create the conditions for sustained growth and employment creation, reduce inflation toward European level and enhance the economy's resilience," he said. The agreement must still be ratified by IMF directors at a meeting expected to take place next month.
The agreement would also enable Turkey to defer payments on previous loans worth $3.7m until 2006.
As part of the draft agreement, Turkey has signed a "letter of intent" stating its determination to push through far-reaching reforms to its tax and benefits system and its banking sector. Such reforms are considered vital for Turkey if it is to fulfil its ambition of joining the European Union. The EU will decide on 17 December whether to begin entry talks with Turkey. The US, the largest of the IMF's 184 members, is a strong supporter of continued financial support for Turkey. | business |
Saudi investor picks up the Savoy
London's famous Savoy hotel has been sold to a group combining Saudi billionaire investor Prince Alwaleed bin Talal and a unit of HBOS bank.
Financial details of the deal, which includes the nearby Simpson's in the Strand restaurant, were not disclosed. The seller - Irish-based property firm Quinlan Private - bought the Savoy along with the Berkeley, Claridge's and the Connaught for £750m last year. Prince Alwaleed's hotel investments include the luxury George V in Paris. He also has substantial stakes in Fairmont Hotels & Resorts, which will manage the Savoy and Simpson's in the Strand, and Four Seasons. Fairmont said it planned to invest $48m (£26m) in renovating parts of the Savoy including the River Room and suites with views over the River Thames. Work was expected to be completed by summer 2006, Fairmont said. | business |
Tsunami slows Sri Lanka's growth
Sri Lanka's president has launched a reconstruction drive worth $3.5bn (£1.8bn) by appealing for peace and national unity.
President Kumaratunga said it was now important to find a peaceful solution to years of internal conflict. Meanwhile, the International Monetary Fund (IMF) said damage from the tsunami would cut one percentage point from Sri Lanka's economic growth this year. It estimated the wave left physical damage equal to 6.5% of the economy.
Separately, the International Labour Organisation (ILO) said that at least one million people have lost their livelihoods in Sri Lanka and Indonesia alone. It called for action to create jobs. President Kumaratunga attended a ceremony in the southern town of Hambantota. She was joined by government and opposition politicians, together with Buddhist, Hindu, Muslim and Christian clergy.
Prime Minister Mahinda Rajapakse laid the foundation stone on a new housing project intended to provide 6,000 homes for survivors of the tsunami. Mrs Kumaratunga called for the tragedy to be "the start of a new beginning to rebuild our nation". "We are a country blessed with so many natural resources and we have not made use of them fully. Instead we have been squabbling, fighting," she added. Norway's peace negotiator Erik Solheim is due to arrive on Wednesday to try to revive peace talks in the decades-long conflict between government forces and the Tamil Tigers, who want a separate state in the north east of the country. Reconstruction efforts in eastern Sri Lanka have been hampered by tensions between the two sides.
The IMF said that the Sri Lankan authorities' initial estimates have put the physical damage at $1.3 to $1.5bn, but added that the implications for the economy were much wider than this. "The broader macroeconomic impact will clearly be substantial but the details are difficult to assess at this early stage," the IMF said. Growth, inflation, the balance of payments and foreign exchange reserves are all expected to show the effects of lost businesses and reconstruction costs. "The fishing industry has been devastated, agricultural production may be affected and tourism will suffer, especially in the short term," the report said. The ILO estimated that 400,000 Sri Lankans have lost their jobs, mostly in these three industries. Earnings from tourism this year are expected to be 15% lower than last year. Economic growth this year is expected to be 4%, which is about 1% less than previously forecast. Inflation could climb to 14% compared to a previous estimate of 12%. Although major exports have not suffered, the IMF expects the reconstruction effort will require higher imports which could damage the balance of payments. Foreign exchange reserves may become strained as "Sri Lanka will be hard pressed to keep international reserves at the pre-tsunami level" which totalled more than two months worth of imports. Last week, the IMF approved Sri Lanka's request for a freeze on loan repayments. | business |
China suspends 26 power projects
China has ordered a halt to construction work on 26 big power stations, including two at the Three Gorges Dam, on environmental grounds.
The move is a surprising one because China is struggling to increase energy supplies for its booming economy. Last year 24 provinces suffered black outs. The State Environmental Protection Agency said the 26 projects had failed to do proper environmental assessments. Topping the list was a controversial dam on the scenic upper Yangtze River. "Construction of these projects has started without approval of the assessment of their environmental impact... they are typical illegal projects of construction first, approval next," said SEPA vice-director Pan Yue, in a statement on the agency's website.
Some of the projects may be allowed to start work again with the proper permits, but others would be cancelled, he said. Altogether, the agency ordered 30 projects halted. Other projects included a petrochemicals plant and a port in Fujian. The bulk of the list was made up of new power plants, with some extensions to existing ones. The stoppages would appear to be another step in the central government's battle to control projects licensed by local officials. However, previous crackdowns have tended to focus on projects for which the government argued there was overcapacity, such as steel and cement. The government has encouraged construction of new electricity generating capacity to solve chronic energy shortages which forced many factories onto part-time working last year. In 2004, China increased its generating capacity by 12.6%, or 440,700 megawatts (MW). The biggest single project to be halted was the Xiluodi Dam project, designed to produce 12,600 MW of electricity. It is being built on the Jinshajiang - or 'river of golden sand' as the upper reaches of the Yangtze are known. Second and third on the agency's list were two power stations being built at the $22bn Three Gorges Dam project on the central Yangtze - an underground 4,200 MW power plant and a 100 MW plant.
The Three Gorges Dam has proved controversial in China - where more than half a million people have been relocated to make way for it - and abroad. It has drawn criticism from environmental groups and overseas human rights activists. The damming of the Upper Yangtze has also begun to attract criticism from environmentalists in China. In April 2004, central government officials ordered a halt to work on the nearby Nu River, which is part of a United Nations world heritage site, the Three Parallel Rivers site which covers the Yangtze, Mekong and Nu (also known as the Salween), according to the UK-published China Review. That move reportedly followed a protest from the Thai government about the downstream impact of the dams, and a critical documentary made by Chinese journalists. China's energy shortage influenced global prices for oil, coal and shipping last year. | business |
Two Nigerian banks set to merge
Nigerian banks United Bank of Africa and Standard Trust Bank have agreed plans to merge and create the biggest bank in West Africa.
The deal is also in line with a 2004 directive from the Nigerian central bank that called for more consolidation in the nation's crowded banking sector. The merger was announced in a statement on Standard Trust's website on Tuesday, but no financial details were revealed. United Bank is the third biggest in Nigeria in terms of number of branches. Standard Trust is smaller but more profitable. "The boards of United Bank and Standard Trust, at separate meetings yesterday, approved arrangements to merge both institutions," Standard Trust said. Standard Trust is 100% Nigerian-owned, but United Bank has some foreign investors, including New York-based Global Depository Receipts (32.8%), and Banca Nazionale del Lavoro and Monte del Paschi di Siena, both from Italy, who each have a 2.4% stake. | business |
Virgin Blue shares plummet 20%
Shares in Australian budget airline Virgin Blue plunged 20% after it warned of a steep fall in full year profits.
Virgin Blue said profits after tax for the year to March would be between 10% to 15% lower than the previous year. "Sluggish demand reported previously for November and now December 2004 continues," said Virgin Blue chief executive Brett Godfrey. Virgin Blue, which is 25% owned by Richard Branson, has been struggling to fend off pressure from rival Jetstar. It cut its full year passenger number forecast by "approximately 2.5%". Virgin Blue reported a 22% fall in first quarter profits in August 2004 due to tough competition. In November, first half profits were down due to slack demand and rising fuel costs. Virgin Blue was launched four years ago and now has roughly one third of Australia's domestic airline market. But the national carrier, Qantas, has fought back with its own budget airline, Jetstar, which took to the skies in May 2004. Sydney-listed Virgin Blue's shares recovered slightly to close 12% down on Wednesday. Shares in its major shareholder, Patrick Corporation - which owns 46% of Virgin Blue - had dropped 31% by the close. | business |
Watchdog probes Vivendi bond sale
French stock market regulator AMF has filed complaints against media giant Vivendi Universal, its boss and another top executive.
It believes the prospectus for a bond issue was unclear and that executives may have had privileged information. AMF has begun proceedings against Vivendi, its chief executive Jean-Rene Fourtou and chief operating officer Jean-Bernard Levy. Vivendi advisor Deutsche Bank was also the subject of a complaint filing. Deutsche Bank, which was responsible for selling the convertible bonds to investors, could face penalties if the complaint is upheld.
Vivendi has said it believes there is "no legal basis" for the complaints. The watchdog is said to believe the executive pair were party to "privileged information" surrounding the issue of the bonds. Both men bought some of the bonds, the Associated Press news agency reported. AMF is investigating claims that the duo were aware of an interest in Vivendi's US assets from investor Marvin Davis, at the time of the bond sale. Vivendi, however, has said that the information was public knowledge as Mr Davis' offer for the US assets had already been rejected by Vivendi's board. AMF is also looking into whether the executives knew that Vivendi was considering exercising its right to buy British Telecom's shares in Cegetel. Vivendi has rejected the charge, saying the decision to buy the Cegetel shares was "no more than a possibility, of which the public was perfectly aware" at the time of the bond issue. Back in December, Vivendi and its former chief executive Jean-Marie Messier were each fined 1m euros ($1.3m; £690,000) by AMF. The fines came after a 15-month probe into allegations that the media giant misled investors after a costly acquisition programme went wrong. | business |
Saudi NCCI's shares soar
Shares in Saudi Arabia's National Company for Cooperative Insurance (NCCI) soared on their first day of trading in Riyadh.
They were trading 84% above the offer price on Monday, changing hands at 372 riyals ($99; £53) after topping 400 early in the day. Demand for the insurer's debut shares was strong - 12 times what was on sale. The listing was part of the country's plans to open up its insurance market and boost demand in the sector. Deregulation is expected to boost demand for accident and damage cover.
Previously, only NCCI has been legally allowed to offer insurance products within Saudi Arabia. However, the authorities have turned a blind eye to the many other firms selling insurance. Saudi Arabia now wants a fully functioning insurance industry and is introducing legislation that will clamp down on unauthorised companies. Policy-makers also want to make having insurance more of a requirement, but first have to take steps to boost public confidence in the system, analysts said. As a result, NCCI is being developed as the industry's flagship firm - publicly-listed, with audited accounts. Saudi Arabia sold 7 million NCCI shares, or about 70% of the company's total capital last month. More than 800,000 applicants got 9 shares each for 205 riyals apiece. | business |
JP Morgan admits US slavery links
Thousands of slaves were accepted as collateral for loans by two banks that later became part of JP Morgan Chase.
The admission is part of an apology sent to JP Morgan staff after the bank researched its links to slavery in order to meet legislation in Chicago. Citizens Bank and Canal Bank are the two lenders that were identified. They are now closed, but were linked to Bank One, which JP Morgan bought last year. About 13,000 slaves were used as loan collateral between 1831 and 1865.
Because of defaults by plantation owners, Citizens and Canal ended up owning about 1,250 slaves. "We all know slavery existed in our country, but it is quite different to see how our history and the institution of slavery were intertwined," JP Morgan chief executive William Harrison and chief operating officer James Dimon said in the letter. "Slavery was tragically ingrained in American society, but that is no excuse." "We apologise to the African-American community, particularly those who are descendants of slaves, and to the rest of the American public for the role that Citizens Bank and Canal Bank played." "The slavery era was a tragic time in US history and in our company's history." JP Morgan said that it was setting up a $5m scholarship programme for students living in Louisiana, the state where the events took place. The bank said that it is a "very different company than the Citizens and Canal Banks of the 1800s". | business |
Egypt and Israel seal trade deal
In a sign of a thaw in relations between Egypt and Israel, the two countries have signed a trade protocol with the US, allowing Egyptian goods made in partnership with Israeli firms free access to American markets.
The protocol, signed in Cairo, will establish what are called "qualified industrial zones" in Egypt. Products from these zones will enjoy duty free access to the US, provided that 35% of their components are the product of Israeli-Egyptian cooperation. The US describes this as the most important economic agreement between Egypt and Israel in two decades.
The protocol establishing the zones has been stalled for years. There has been deep sensitivity in Egypt about any form of co-operation with Israel as long as its peace process with the Palestinians remains blocked. But in recent weeks an unusual warmth has crept into relations between the two countries. Both exchanged prisoners earlier this month, with Egypt handing back an Israeli who has served eight years in prison after being convicted for spying.
Egyptian President Hosni Mubarak has described Israeli Prime Minister Ariel Sharon as the best chance for the Palestinians to achieve peace. The government in Cairo now believes Mr Sharon is moving towards the centre and away from the positions of right wing groups. It also believes the US, pressed by Europe, is now more willing to engage seriously in the search for a settlement. But there are also pressing economic reasons for Egypt's decision to enter into the trade agreement. It will give a huge boost to Egyptian textile exports, which are about to suffer a drop after new regulations come into force in the US at the beginning of the year. | business |
Ford gains from finance not cars
Ford, the US car company, reported higher fourth quarter and full-year profits on Thursday boosted by a buoyant period for its car loans unit.
Net income for 2004 was $3.5bn (£1.87bn) - up nearly $3bn from 2003 - while turnover rose $7.2bn to $170.8bn. In the fourth quarter alone Ford reported net income of $104m, compared with a loss of $793m a year ago. But its auto unit made a loss. Fourth quarter turnover was $44.7bn, compared to $45.9bn a year ago.
Though car and truck loan profits saved the day, Ford's auto unit made a pre-tax loss of $470m in the fourth quarter (compared to a profit of £13m in the year-ago period) and its US sales dipped 3.8%.
Yesterday General Motor's results also showed its finance unit was a strong contributor to profits. However, Ford is working hard to revitalise its product portfolio, unveiling the Fusion and Zephyr models at the International Motor Show in Detroit. It also brought out a number of new models in the second half of 2004. "In 2004, our company gained momentum, delivering...more new products, and more innovative breakthroughs, such as the Escape Hybrid, the industry's first full-hybrid sport utility vehicle," said chairman and chief executive officer Bill Ford."
"We also confronted operating challenges with our Jaguar brand and high industry marketing costs," he added. But Ford declined to provide guidance for first quarter 2005. It will do so at a presentation in New York on 26 January. In addition, the company said 2004 net income was affected by a fourth-quarter pre-tax charge taken to reduce the value of a receivable owed to Ford by Visteon, a former subsidiary. Recent new models introduced by Ford include the Ford Five Hundred and Mercury Montego sedans, the Ford Freestyle crossover, the Ford Mustang, the Land Rover LR3/Discovery, and Volvo S40 and V50 in North America and Europe. Total company vehicle unit sales in 2004 were 6,798,000, an increase of 62,000 units from 2003. Fourth-quarter vehicle unit sales totalled 1,751,000, a decline of 133,000 units. For the full year, Ford's worldwide automotive division earned a pre-tax profit of $850m, a $697m improvement from $153m a year ago. | business |
Wipro beats forecasts once again
Wipro, India's third-biggest software firm, has reported a 60% rise in profit, topping market expectations.
Net income in the last quarter was 4.3bn rupees ($98m; £52m), against 2.7bn a year earlier. Profit had been forecast to be 4.1bn rupees. Wipro offers services such as call centres to foreign clients and has worked for more than half of the companies on the Fortune 500 list. Wipro said demand was strong, allowing it to increase the prices it charged.
"On the face of it, the results don't look very exciting," said Apurva Shah, an analyst at ASK-Raymond James. "But the guidance is positive and pricing going up is good news." Third-quarter sales rose 34% to 20.9bn rupees. One problem identified by Wipro was the high turnover of its staff. It said that 90% of employees at its business process outsourcing operations had had to be replaced. "We have to get that under control," said vice-chairman Vivek Paul. Wipro is majority owned by India's richest man Azim Premji. | business |
Christmas sales worst since 1981
UK retail sales fell in December, failing to meet expectations and making it by some counts the worst Christmas since 1981.
Retail sales dropped by 1% on the month in December, after a 0.6% rise in November, the Office for National Statistics (ONS) said. The ONS revised the annual 2004 rate of growth down from the 5.9% estimated in November to 3.2%. A number of retailers have already reported poor figures for December. Clothing retailers and non-specialist stores were the worst hit with only internet retailers showing any significant growth, according to the ONS.
The last time retailers endured a tougher Christmas was 23 years previously, when sales plunged 1.7%.
The ONS echoed an earlier caution from Bank of England governor Mervyn King not to read too much into the poor December figures. Some analysts put a positive gloss on the figures, pointing out that the non-seasonally-adjusted figures showed a performance comparable with 2003. The November-December jump last year was roughly comparable with recent averages, although some way below the serious booms seen in the 1990s. And figures for retail volume outperformed measures of actual spending, an indication that consumers are looking for bargains, and retailers are cutting their prices.
However, reports from some High Street retailers highlight the weakness of the sector. Morrisons, Woolworths, House of Fraser, Marks & Spencer and Big Food all said that the festive period was disappointing.
And a British Retail Consortium survey found that Christmas 2004 was the worst for 10 years. Yet, other retailers - including HMV, Monsoon, Jessops, Body Shop and Tesco - reported that festive sales were well up on last year. Investec chief economist Philip Shaw said he did not expect the poor retail figures to have any immediate effect on interest rates. "The retail sales figures are very weak, but as Bank of England governor Mervyn King indicated last night, you don't really get an accurate impression of Christmas trading until about Easter," said Mr Shaw. "Our view is the Bank of England will keep its powder dry and wait to see the big picture." | business |
Businesses fail to plan for HIV
Companies fail to draw up plans to cope with HIV/Aids until it affects 20% of people in a country, new research says.
The finding comes in a report published on Thursday by the World Economic Forum, Harvard and the UN aids agency. "Too few companies are responding proactively to the social and business threats," said Dr Kate Taylor, head of the WEF's global Health Initiative. Nearly 9,000 business leaders in 104 countries were surveyed for Business and HIV/AIDS: Commitment and Action?
Dr Taylor described the level of action taken by businesses as revealed by the report as "too little, too late". The issue will be highlighted to business and world leaders at the World Economic Forum, which meets in Davos, Switzerland, next week. The WEF report shows that despite the fact that 14,000 people contract HIV/Aids every day, concern among businesses has dropped by 23% in the last 12 months. Most (71%) have no policies in place to address the disease. Nor could over 65% of the business leaders surveyed say or estimate the prevalence of HIV among their staff. The UN programme tackling Aids, UNAIDS, pointed out that having a clear strategy for dealing with HIV/Aids was a good investment as well as being socially responsible.
One company that does have a plan is Anglo-American, the international mining company, which estimates an HIV prevalence of 24% among its 130,000-strong Southern African workforce.
Over the last two years the company has implemented extensive voluntary counselling and testing for HIV infection, coupled with anti-retroviral therapy for employees progressing to Aids. Over 90% of the 2,200 employees who have accessed and remained on treatment are well and have returned to normal work. "Effective action on HIV/Aids is synonymous with good business management and leads to more profitable and sustainable operations," said Brian Brink, senior vice-president, health, at Anglo-American.
"Companies should encourage all workers to know their HIV status, making it as routine as monitoring blood pressure or cholesterol," he said. "Providing access to treatment is a critical part of this." Across sub-Saharan Africa, even in countries with an HIV prevalence of 10-19%, only around 7% of companies have formal HIV/Aids policies in place, according to the report. The gap is even wider in China, Ethiopia, India, Nigeria and Russia, the so-called "next wave" countries, which are predicted to experience the highest numbers of new HIV/Aids cases worldwide by 2010. The report adds "an important building block to our understanding of how the business community is experiencing the HIV/Aids epidemic and to whether and how it is reacting," said David Bloom, professor of economics and demography at the Harvard School of Public Health.
The WEF report concludes that businesses need to understand their exposure to HIV/Aids risks and come up with good local practices to manage them. A key priority, in both high and low-prevalence settings, said the WEF is to establish a policy based on non-discrimination and confidentiality. | business |
Ailing EuroDisney vows turnaround
EuroDisney, the European home of Mickey Mouse and friends, has said it will sell 253m euros (£175m; $328m) of new shares as it looks to avoid insolvency.
The sale is the last part of a plan to restructure 2.4bn euros-worth of debts. Despite struggling since it was opened in 1992, EuroDisney has recently made progress in turning its business around and ticket sales have picked up. However, analysts still question whether it attracts enough visitors to stay open, even with the restructuring.
EuroDisney remains Europe's largest single tourist attraction, attracting some 12.4 million visitors annually. A new attraction - Walt Disney Studios - has recently opened its site near Paris. The company's currently traded stock tumbled in Paris on the latest news, shedding 15% to 22 euro cents. EuroDisney will sell the new shares priced at 9 euros cents each. The US Disney Corporation and Saudi Arabian prince Al-Walid bin Talal, the firm's two main shareholders, will buy the new stock. The restructuring deal is the second in the firm's troubled financial history; its finances were first reorganised in 1994. | business |
UK young top Euro earnings league
British children enjoy the highest average annual income in Europe - more than double that of Spanish or Italian youngsters, a report suggests.
Children in the UK between the ages of 10 and 17 had an annual income of £775, said market analyst Datamonitor. They use "pester power" to get their parents to stump up nearly a third of this income, the report said. As for how they spend their cash, the bulk goes on personal care, soft drinks and food, Datamonitor said.
Datamonitor adds that British teenagers are keen on personal care because it helps them combine two seemingly contradictory emotional needs - the desire to fit in and the desire to express their individuality.
British teenage girls, compared to their counterparts in seven European countries, are the most keen to use make-up products. Nearly three out of four girls said they used make-up. According to the Datamonitor report the trend marked British teenagers out as "particularly important to cosmetics manufacturers as they are likely to experiment more with brands and products and form long-term beauty routines". And the good times are likely to keep rolling for British children, as the report predicts that they will still be topping the earnings table in 2008. | business |
Swiss cement firm in buying spree
Swiss cement firm Holcim has bid $800m (£429m) to buy two Indian cement firms and a holding company in the country.
It plans to buy Associated Cement Companies (ACC), Ambuja Cement Eastern and the holding firm, Ambuja Cement India Ltd, a Holcim statement said. Shares in ACC fell 5.5% as investors, who thought the offer was underpriced, decided to sell. Meanwhile, UK-based firm Aggregate Industries said it had agreed a £1.8bn takeover by Holcim.
The deal with Aggregates will give Holcim, the world's second-biggest cement maker, an entry into the UK market and boost its presence in the US. Peter Tom, who will remain as Aggregate chief executive, said the 138p a share offer provided "significant value" for shareholders. The Markfield, Leicestershire-based company runs 142 quarries in the UK and the US. It also has 164 ready-mixed concrete plants, 90 asphalt plants and 32 pre-cast concrete factories.
If the Indian deals go ahead, it will give Holcim a major presence in the world's fastest-growing market behind China. ACC is India's second-largest cement maker with an annual capacity of 18.2 million tonnes and a market share of 13%. "Holcim is looking to buy it (ACC) very cheap," said KK Mittal, a fund manager with Escorts Mutual Fund in New Delhi. "The market is not impressed. If they want a substantial chunk, then they should be paying a premium over the market price." Shares in Holcim rose by 2.3% on Thursday following news of the takeover. | business |
India's Reliance family feud heats up
The ongoing public spat between the two heirs of India's biggest conglomerate, Reliance Group, has spilled over to the board meeting of a leading company within the group.
Anil Ambani, vice-chairman of India Petrochemicals Limited (IPCL), stayed away from a gathering of senior managers on Thursday. The move follows a decision earlier this month by Anil - the younger brother of Reliance Group president Mukesh Ambani - to resign from his post. His resignation was not accepted by his brother, who is also the boss of IPCL. The IPCL board met in Mumbai to discuss the company's results for the October-to-December quarter.
It is understood that the board also considered Anil's resignation and asked him to reconsider his decision. However, Anil's demand that Anand Jain - another IPCL board member accused by Anil of creating a rift in the Ambani family - be thrown out, was not met. Anil has accused Anand Jain, a confidant of his brother Mukesh, of playing a negative role in the Ambani family, and being responsible for the trouble between the brothers. On Wednesday, the board of Reliance Energy, another Reliance Group company, reaffirmed its faith in Anil, who is the company's chief. Reliance Group acquired the government's 26% stake in IPCL - India's second-largest petrochemicals company - in 2002, as part of the privatisation drive. Meanwhile, the group's flagship company, Reliance Industries, has its board meeting on Friday to consider its financial results. Mukesh is the company's chairman and Anil its deputy, and it is expected that both brothers will come face to face in the meeting. The Ambani family controls 48% of the group, which is worth $17bn (£9.1bn; 745bn Indian rupees). It was founded by their father, Dhiru Bhai Ambani, who died two years ago. | business |
World leaders gather to face uncertainty
More than 2,000 business and political leaders from around the globe are arriving in the Swiss mountain resort Davos for the annual World Economic Forum (WEF). For five days, they will discuss issues ranging from China's economic power to Iraq's future after this Sunday's elections. UK Prime Minister Tony Blair and South African President Thabo Mbeki are among the more than 20 government leaders and heads of state leaders attending the meeting. Unlike previous years, protests against the WEF are expected to be muted. Anti-globalisation campaigners have called off a demonstration planned for the weekend.
The Brazilian city of Porto Alegre will host the rival World Social Forum, timed to run in parallel with the WEF's ritzier event in Davos.
The organisers of the Brazilian gathering, which brings together thousands of campaigners against globalisation, for fair trade, and many other causes, have promised to set an alternative agenda to that of the Swiss summit. However, many of the issues discussed in Porto Alegre are Davos talking points as well. "Global warming" features particularly high. WEF participants are being asked to offset the carbon emissions they cause by travelling to the event. Davos itself is in deep frost. The snow is piled high across the mountain village, and at night the wind chill takes temperatures down to minus 20C and less.
Ultimately, the forum will be dominated by business issues - from outsourcing to corporate leadership - with bosses of more than a fifth of the world's 500 largest companies scheduled to attend.
But much of the media focus will be on the political leaders coming to Davos, not least because the agenda of this year's forum seems to lack an overarching theme. "Taking responsibility for tough choices" is this year's official talking point, hinting at a welter of knotty problems. One thing seems sure, though: transatlantic disagreements over how to deal with Iran, Iraq and China are set to dominate discussions. Pointedly, only one senior official from President Bush's new administration is scheduled to attend. The US government may still make a conciliatory gesture, just as happened a year ago when Vice President Dick Cheney made a surprise appearance in Davos.
Ukraine's new president, Viktor Yushchenko, is to speak, just days after his inauguration, an event that crowned the civil protests against the rigged first election that had tried to keep him from power.
The European Union's top leaders, among them German Chancellor Gerhard Schroeder and European Commission President Manuel Barosso, will be here too. Mr Blair will formally open the proceedings, although his speech will be pre-empted by French President Jacques Chirac, who announced his attendance at the last minute and secured a slot for a "special message" two hours before Mr Blair speaks. The organisers also hope that the new Palestinian leader, Mahmoud Abbas, will use the opportunity for talks with at least one of the three Israeli deputy prime ministers coming to the event, a list that includes Shimon Peres. Davos fans still hark back to 1994, when talks between Yassir Arafat and Mr Peres came close to a peace deal. Mr Blair's appearance will be keenly watched too, as political observers in the UK claim it is a calculated snub against political rival Chancellor Gordon Brown, who was supposed to lead the UK government delegation.
Microsoft founder Bill Gates, the world's richest man and a regular at Davos, will focus on campaigning for good causes, though business interests will not be wholly absent either. Having already donated billions of dollars to the fight against Aids and Malaria, Mr Gates will call on world leaders to support a global vaccination campaign to protect children in developing countries from easily preventable diseases. On Tuesday, Mr Gates pledged $750m (£400m) of his own money to support the cause. Mr Gates' company, software giant Microsoft, also hopes to use Davos to shore up its defences against open source software like Linux, which threaten Microsoft's near monopoly on computer desktops. Mr Gates is said to be trying to arrange a meeting with Brazil's President Lula da Silva. The Brazilian government has plans to switch all government computers from Microsoft to Linux. At Davos, global problem solving and networking are never far apart. | business |
US budget deficit to reach $368bn
The US budget deficit is set to hit a worse-than-expected $368bn (£197bn) this year, officials said on Tuesday.
The cost of military operations still needs to be factored in, with analysts saying the deficit could end up a further $100bn in the red. Past Congressional Budget Office (CBO) forecasts said there would be a $348bn shortfall in the 2005 fiscal year. In recent months, the dollar has weakened amid market jitters about the size of the budget and trade deficits. In November, the gap between US exports and imports widened to more than $60bn, a record figure. The CBO says it envisages a further "orderly" decline in the greenback over the next two years as the twin deficit drives dollar investors away. But the non-partisan fiscal watchdog notes the declines will help exporters and boost US economic growth.
The budget deficit hit a record $412bn in the 12 months to 30 September 2004, after reaching $377bn in the previous fiscal year. The CBO also forecast a total shortfall of $855bn for the years from 2006 to 2015, an improvement on previous projections. However, analysts say the new figures fail to take into account the potential $2-$3.8 trillion costs of the president's plan to revamp state pensions and extend tax cuts. The figure could also be worsened by any further military costs. Republicans have blamed the size of the deficit on slow economic conditions after the 11 September attacks and ongoing military operations in Iraq and Afghanistan. One of President George W Bush's election pledges was to halve the budget deficit within five years. But Democrats have accused the president of excluding Iraq-related costs from previous budgets to meet the aim of reducing the deficit, a charge which the administration denies. On Tuesday, the US administration asked Congress for additional funds for military operations. | business |
Criminal probe on Citigroup deals
Traders at US banking giant Citigroup are facing a criminal investigation in Germany over a controversial bond deal.
The deal saw the sale of 11bn euros ($14.4bn; £7.6bn) of government bonds in a few minutes on 2 August, with 4bn euros-worth then bought back later. The move was widely criticised at the time, and now the German regulator has said it has found evidence of possible market manipulation. Citigroup said it would continue to co-operate fully with the authorities. "We are disappointed that the BaFin has referred to the prosecutor the question of whether action should be brought against individuals involved," Citigroup said. If the traders are found guilty, they could face a five-year jail term or a fine, Reuters reported BaFin as saying. However, under German criminal law, prosecutors cannot pursue Citigroup itself.
Germany's financial watchdog BaFin told BBC News it had now transferred the investigation to the public prosecutor. "I can confirm that BaFin has passed through the case to the public prosecutor," a BaFin spokeswoman said. "It is now a criminal investigation." "We found clues of possible market manipulation," the spokeswoman said, which included signs of linked bond trading ahead of the main trades on 2 August. "Germany's Securities Trading Act says that if BaFin finds such clues, it has to put the case in the hands of the prosecutor." Regulatory investigations are still going on in France, the UK and elsewhere. Some Citigroup operations elsewhere in the world came under regulatory criticism in 2004. Its private banking operation in Japan was closed down by regulators in Tokyo after an "aggressive sales culture" led the bank to flout anti-money laundering rules. | business |
Brazil jobless rate hits new low
Brazil's unemployment rate fell to its lowest level in three years in December, according to the government.
The Brazilian Institute for Geography and Statistics (IBGE) said it fell to 9.6% in December from 10.6% in November and 10.9% in December 2003. IBGE also said that average monthly salaries grew 1.9% in December 2004 from December 2003. However, average monthly wages fell 1.8% in December to 895.4 reais ($332; £179.3) from November. Tuesday's figures represent the first time that the unemployment rate has fallen to a single digit since new measurement rules were introduced in 2001. The unemployment rate has been falling gradually since April 2004 when it reached a peak of 13.1%. The jobless rate average for the whole of 2004 was 11.5%, down from 12.3% in 2003, the IBGE said.
This improvement can be attributed to the country's strong economic growth, with the economy registering growth of 5.2% in 2004, the government said. The economy is expected to grow by about 4% this year. President Luiz Inacio Lula da Silva promised to reduce unemployment when he was elected two years ago. Nevertheless, some analysts say that unemployment could increase in the next months. "The data is favourable, but a lot of jobs are temporary for the (Christmas) holiday season, so we may see slightly higher joblessness in January and February," Julio Hegedus, chief economist with Lopes Filho & Associates consultancy in Rio de Janeir, told Reuters news agency. Despite his leftist background, President Lula has pursued a surprisingly conservative economic policy, arguing that in order to meet its social promises, the government needs to first reach a sustained economic growth. The unemployment rate is measured in the six main metropolitan areas of Brazil (Sao Paolo, Rio de Janeiro, Belo Horizonte, Recife, Salvador and Porto Alegre), where most of the population is concentrated. | business |
Indonesia 'declines debt freeze'
Indonesia no longer needs the debt freeze offered by the Paris Club group of creditors, Economics Minister Aburizal Bakrie has reportedly said.
Indonesia, which originally accepted the debt moratorium offer, owes the Paris Club about $48bn (£25.5bn). Mr Bakrie told the Bisnis Indonesia newspaper that a $1.7bn donors' aid package meant that the debt moratorium was unnecessary. This aid comes on top of a previously-pledged $3.4bn package. Most of this 'normal aid' would be used to finance the country's budget deficit. The Indonesian Economics Minister explained that the money - $1.2bn in grants and $500m in soft loans - was for the rebuilding of Aceh province, which was badly hit by the tsunami of 26 December. Nevertheless, one of Mr Bakrie's deputies, Mahendra Siregar, told AFP news agency that Indonesia was still considering the offer by the Paris Club of rich creditor nations to temporarily suspend its debt payments. "What is true is that we are still discussing... the Paris Club decision to find out more details such as how much of our debt will be subject to a moratorium. That's how far we are at this stage," said Mr Siregar.
The 19 member countries of the Paris Club are owed about $5bn this year in debt repayments by nations affected by the Indian Ocean tsunami. Indonesia, Sri Lanka and the Seychelles accepted the Paris Club offer, which was criticised by some aid groups as being too little. Thailand and India have however declined the offer, with Thailand prefering to keep up with its payments while India said it would prefer to rely on its own resources rather than on international aid. Putting off payments may lower a country's rating among financial organisations, making it more expensive and more difficult for them to borrow money in the future, analysts said. Separately, the Indonesian government has said it will announce monthly how much it has received in foreign donations and how it has spent the money. Welfare Minister Alwi Shihab told AP news agency that this announcement should allay suspicion of official corruption in relief operations. | business |
Parmalat bank barred from suing
Bank of America has been banned from suing Parmalat, the food group which went bust in 2003 after an accounting scandal.
The bank - along with investors, auditors and the group's managers - wants damages for being a victim of fraud at the hands of the Italian firm. But a judge has barred Bank of America and two auditors from the case. The bank, and Italaudit - formerly the Italian arm of auditor Grant Thornton - face lawsuits and possible prosecution. A second auditor, Deloitte & Touche, has also been banned from the case. Grant Thornton - now rid of the Italian unit at the centre of the case - is still being permitted to sue, as are Consob, Italy's stock market regulator, hundreds of small investors and Parmalat's new managers. Parmalat collapsed in December 2003 after it emerged that the 4bn euros ($5.2bn; £2.8bn) it supposedly held in a Bank of American offshore account did not in fact exist. | business |
China continues rapid growth
China's economy has expanded by a breakneck 9.5% during 2004, faster than predicted and well above 2003's 9.1%.
The news may mean more limits on investment and lending as Beijing tries to take the economy off the boil. China has sucked in raw materials and energy to feed its expansion, which could have knock-on effects on the rest of the world if it overheats. But officials pointed out that industrial growth had slowed, with services providing much of the impetus. Growth in industrial output - the main target of government efforts to impose curbs on credit and investments - was 11.5% in 2004, down from 17% the previous year.
Still, consumer prices - at 2.4% - rose faster than in 2004, adding to concern that a sharp rise in producer prices of 7.1% could stoke inflation. And overall investment in fixed assets was still high, up 21.3% from the previous year - although some way off the peak of 43% seen in the first quarter of 2004. The result could be higher interest rates. China raised rates by 0.27 percentage points to 5.8% - its first hike in nine years - in October 2004.
Despite the apparent rebalancing of the economy the overall growth picture remains strong, economists said. "There is no sign of a slowdown in 2005," said Tim Congdon, economist at ING Barings.
China's economy is not only gathering speed thanks to domestic demand, but also from soaring sales overseas. Figures released earlier this year showed exports at a six-year high in 2004, up 35%. Part of the impetus comes from the relative cheapness of the yuan, China's currency. The government keeps it pegged close to a rate of 8.28 to the US dollar, - much to the chagrin of many US lawmakers who blame China for lost jobs and competitiveness. Despite urging to ease the peg, officials insist they are a long way from ready to make a shift to a more market-set rate. "We need a good and feasible plan and formulating such a plan also needs time," National Bureau of Statistics chief Li Deshui told Reuters. "Those who hope to make a fortune by speculating on a renminbi revaluation will not succeed in making a profit." | business |
SEC to rethink post-Enron rules
The US stock market watchdog's chairman has said he is willing to soften tough new US corporate governance rules to ease the burden on foreign firms.
In a speech at the London School of Economics, William Donaldson promised "several initiatives". European firms have protested that US laws introduced after the Enron scandal make Wall Street listings too costly. The US regulator said foreign firms may get extra time to comply with a key clause in the Sarbanes-Oxley Act.
The Act comes into force in mid-2005. It obliges all firms with US stock market listings to make declarations, which, critics say, will add substantially to the cost of preparing their annual accounts.
Firms that break the new law could face huge fines, while senior executives risk jail terms of up to 20 years. Mr Donaldson said that although the Act does not provide exemptions for foreign firms, the Securities and Exchange Commission (SEC) would "continue to be sensitive to the need to accomodate foreign structures and requirements". There are few, if any, who disagree with the intentions of the Act, which obliges chief executives to sign a statement taking responsibility for the accuracy of the accounts. But European firms with secondary listings in New York have objected - arguing that the compliance costs outweigh the benefits of a dual listing. The Act also applies to firms with more than 300 US shareholders, a situation many firms without US listings could find themselves in.
The 300-shareholder threshold has drawn anger as it effectively blocks the most obvious remedy, a delisting. Mr Donaldson said the SEC would "consider whether there should be a new approach to the deregistration process" for foreign firms unwilling to meet US requirements.
"We should seek a solution that will preserve investor protections" without turning the US market into "one with no exit", he said. He revealed that his staff were already weighing up the merits of delaying the implementation of the Act's least popular measure - Section 404 - for foreign firms. Seen as particularly costly to implement, Section 404 obliges chief executives to take responsibility for the firm's internal controls by signing a compliance statement in the annual accounts. The SEC has already delayed implementation of this clause for smaller firms - including US ones - with market capitalisations below $700m (£374m).
A delegation of European firms visited the SEC in December to press for change, the Financial Times reported.
It was led by Digby Jones, director general of the UK's Confederation of British Industry (CBI) and included representatives of BASF, Siemens and Cadbury Schweppes. Compliance costs are already believed to be making firms wary of US listings. Air China picked the London Stock Exchange for its secondary listing in its $1.07bn (£558m) stock market debut last month. There are also rumours that two Chinese state-run banks - China Construction Bank and Bank of China - have abandoned plans for multi-billion dollar listings in New York later this year. Instead, the cost of Sarbanes-Oxley has persuaded them to stick to a single listing in Hong Kong, according to press reports in China. | business |
BBC poll indicates economic gloom
Citizens in a majority of nations surveyed in a BBC World Service poll believe the world economy is worsening.
Most respondents also said their national economy was getting worse. But when asked about their own family's financial outlook, a majority in 14 countries said they were positive about the future. Almost 23,000 people in 22 countries were questioned for the poll, which was mostly conducted before the Asian tsunami disaster. The poll found that a majority or plurality of people in 13 countries believed the economy was going downhill, compared with respondents in nine countries who believed it was improving. Those surveyed in three countries were split. In percentage terms, an average of 44% of respondents in each country said the world economy was getting worse, compared to 34% who said it was improving. Similarly, 48% were pessimistic about their national economy, while 41% were optimistic. And 47% saw their family's economic conditions improving, as against 36% who said they were getting worse.
The poll of 22,953 people was conducted by the international polling firm GlobeScan, together with the Program on International Policy Attitudes (Pipa) at the University of Maryland. "While the world economy has picked up from difficult times just a few years ago, people seem to not have fully absorbed this development, though they are personally experiencing its effects," said Pipa director Steven Kull. "People around the world are saying: 'I'm OK, but the world isn't'." There may be a perception that war, terrorism and religious and political divisions are making the world a worse place, even though that has not so far been reflected in global economic performance, says the BBC's Elizabeth Blunt.
The countries where people were most optimistic, both for the world and for their own families, were two fast-growing developing economies, China and India, followed by Indonesia. China has seen two decades of blistering economic growth, which has led to wealth creation on a huge scale, says the BBC's Louisa Lim in Beijing. But the results also may reflect the untrammelled confidence of people who are subject to endless government propaganda about their country's rosy economic future, our correspondent says. South Korea was the most pessimistic, while respondents in Italy and Mexico were also quite gloomy. The BBC's David Willey in Rome says one reason for that result is the changeover from the lira to the euro in 2001, which is widely viewed as the biggest reason why their wages and salaries are worth less than they used to be. The Philippines was among the most upbeat countries on prospects for respondents' families, but one of the most pessimistic about the world economy. Pipa conducted the poll from 15 November 2004 to 3 January 2005 across 22 countries in face-to-face or telephone interviews. The interviews took place between 15 November 2004 and 5 January 2005. The margin of error is between 2.5 and 4 points, depending on the country. In eight of the countries, the sample was limited to major metropolitan areas. | business |
Europe asks Asia for euro help
European leaders say Asian states must let their currencies rise against the US dollar to ease pressure on the euro.
The European single currency has shot up to successive all-time highs against the dollar over the past few months. Tacit approval from the White House for the weaker greenback, which could help counteract huge deficits, has helped trigger the move. But now Europe says the euro has had enough, and Asia must now share some of the burden.
China is seen as the main culprit, with exports soaring up 35% in 2004 partly on the back of a currency pegged to the dollar. "Asia should engage in greater currency flexibility," said French finance minister Herve Gaymard, after a meeting with his German counterpart Hans Eichel. Markets responded by pushing the euro lower, in the expectation that the rhetoric - and the pressure - is unlikely to ease ahead of a meeting of the G7 industrialised countries next week. Early on Tuesday morning, the dollar had edged higher to 1.3040 euros. The yen, meanwhile, had strengthened to 102.975 against the dollar by 0730 GMT. | business |
FBI agent colludes with analyst
A former FBI agent and an internet stock picker have been found guilty of using confidential US government information to manipulate stock prices.
A New York court ruled that former FBI man Jeffrey Royer, 41, fed damaging information to Anthony Elgindy, 36. Mr Elgindy then drove share prices lower by spreading negative publicity via his newsletter. The Egyptian-born analyst would extort money from his targets in return for stopping the attacks, prosecutors said. "Under the guise of protecting investors from fraud, Royer and Elgindy used the FBI's crime-fighting tools and resources actually to defraud the public," said US Attorney Roslynn Mauskopf.
Mr Royer was convicted of racketeering, securities fraud, obstruction of justice and witness tampering. Mr Elgindy was convicted of racketeering, securities fraud and extortion.
The charges carry sentences of up to 20 years. When the guilty verdict was announced by the jury foreman, Mr Elgindy dropped his face into his hands and sobbed, the Associated Press news agency reported. He was led weeping from the court room by US marshals, AP said. Defense lawyers contended that Mr Royer had been feeding information to Mr Elgindy and another trader in an attempt to expose corporate fraud. Mr Elgindy's team claimed that he also was fighting against corporate wrongdoing. "Elgindy's conviction marks the end of his public charade as a crusader against fraud in the market," said Ms Mauskopf. One of the more bizarre aspects of the trial focused on the claims that Mr Elgindy may have had foreknowledge of the 11 September terrorist attacks in New York and Washington. Mr Elgindy had been trying to sell stock prior to the attack and had predicted a slump in the market. No charges were brought in relation to these allegations. | business |
Millions go missing at China bank
Two senior officials at one of China's top commercial banks have reportedly disappeared after funds worth up to $120m (£64m) went missing.
The pair both worked at Bank of China in the northern city of Harbin, the South China Morning Post reported. The latest scandal at Bank of China will do nothing to reassure foreign investors that China's big four banks are ready for international listings. Government policy sees the bank listings as vital economic reforms. Bank of China is one of two frontrunners in the race to list overseas. The other is China Construction Bank. Both are expected to list abroad during 2005.
They shared a $45bn state bailout in 2003, to help clean up their balance sheets in preparation for a foreign stock market debut.
However, a report in the China-published Economic Observer said on Monday that the two banks may have scrapped plans to list in New York because of the cost of meeting regulatory requirements imposed since the Enron scandal. Bank of China is the country's biggest foreign exchange dealer, while China Construction Bank is the largest deposit holder. China's banking sector is burdened with at least $190bn of bad debt according to official data, though most observers believe the true figure is far higher. Officially, one in five loans is not being repaid. Attempts to strengthen internal controls and tighten lending policies have uncovered a succession of scandals involving embezzlement by bank officials and loans-for-favours. The most high-profile case involved the ex-president of Bank of China, Wang Xuebing, jailed for 12 years in 2003. Although, he committed the offences whilst running Bank of China in New York, Mr Wang was head of China Construction Bank when the scandal broke. Earlier this month, a China Construction Bank branch manager was jailed for life in a separate case.
China's banks used to act as cash offices for state enterprises and did not require checks on credit worthiness. The introduction of market reforms has been accompanied by attempts to modernise the banking sector, but links between banks and local government remain strong. Last year, China's premier, Wen Jiabao, targeted bank lending practices in a series of speeches, and regulators ordered all big loans to be scrutinised, in an attempt to cool down irresponsible lending. China's leaders see reforming the top four banks as vital to distribute capital to profitable companies and protect the health of China's economic boom. But two problems persist. First, inefficient state enterprises continue to receive protection from bankruptcy because they employ large numbers of people. Second, many questionable loans come not from the big four, but from smaller banks. Another high profile financial firm, China Life, is facing shareholder lawsuits and a probe by the US Securities and Exchange Commission following its 2004 New York listing over its failure to disclose accounting irregularities at its parent company. | business |
China Aviation seeks rescue deal
Scandal-hit jet fuel supplier China Aviation Oil has offered to repay its creditors $220m (£117m) of the $550m it lost on trading in oil futures.
The firm said it hoped to pay $100m now and another $120m over eight years. With assets of $200m and liabilities totalling $648m, it needs creditors' backing for the offer to avoid going into bankruptcy. The trading scandal is the biggest to hit Singapore since the $1.2bn collapse of Barings Bank in 1995. Chen Jiulin, chief executive of China Aviation Oil (CAO), was arrested by at Changi Airport by Singapore police on 8 December. He was returning from China, where he had headed when CAO announced its trading debacle in late-November. The firm had been betting heavily on a fall in the price of oil during October, but prices rose sharply instead.
Among the creditors whose backing CAO needs for its restructuring plan are banking giants such as Barclay's Capital and Sumitomo Mitsui, as well as South Korean firm SK Energy. Of the immediate payment, the firm - China's biggest jet fuel supplier - said it would be paying $30m out of its own resources. The rest would come from its parent company, China Aviation Oil Holding Company in Beijing. The holding company, owned by the Chinese government, holds most of CAO's Singapore-listed shares. It cut its holding from 75% to 60% on 20 October. | business |
Low-cost airlines hit Eurotunnel
Channel Tunnel operator Eurotunnel has seen sales fall in the face of the upsurge in European low-cost airlines.
The firm said sales were down 4% in 2004 to 789m euros ($1.03bn; £548m). "The impact of the development of no-frills airlines is being felt ever more strongly," said chief executive Jean-Louis Raymond. Income from its vehicle-carrying shuttle services fell 7%, although 15% more passengers meant a 2% rise in railway revenue.
The cross-Channel truck market is improving, Eurotunnel said, but warned that it was not benefiting since much of the traffic was in containers destined for ports. The passenger-only trains which use the tunnel are run by a separate company, Eurostar.
Eurotunnel is still struggling with debts of more than 6bn euros. The company is currently kept afloat by the 200-plus banks to whom it owes the money. A shareholder revolt threw out the old board in 2004. But the BBC's business editor, Jeff Randall, said the banks could yet step in and take over altogether. "At the moment it can't even service the interest on its debt," he said. "This is a company in the departure lounge of life." | business |