World Finance & Business News

Hope of deal in world trade talks

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

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

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

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

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

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

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

An 'emerging' deal

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

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

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

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

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

Caution

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

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

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

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

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

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

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

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

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

Bleak outcome?

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

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

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

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

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

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

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

Oil traders face US civil action

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

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

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

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

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

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

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

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

Serious step

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

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

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

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

UK economic growth slows sharply

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

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

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

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

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

Housing slowdown

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

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

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

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

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

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

Recession fears

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

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

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

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

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

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

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

UK warns of damage in TNK-BP row

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

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

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

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

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

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

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

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

Visa rows

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

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

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

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

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

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

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

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

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

Falling shares

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

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

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

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

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

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

Oil prices slip to seven-week low

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

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

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

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

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

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

But others are sceptical.

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

Volatile market

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

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

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

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

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

WTO ministers look to capitalise on new optimism

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Samsung chief makes legal appeal

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

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

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

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

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

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

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

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

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

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

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

Disappointing results from Yahoo

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

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

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

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

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

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

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

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

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

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

Indian stocks up after key vote

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

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

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

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

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

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

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

'Biggest challenge'

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

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

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

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

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

Oil prices extend losses as Dolly fears recede

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

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

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

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

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

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

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

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

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

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

Dollar nudges higher against yen in Asia

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

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

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

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

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

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

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

Investors generally prefer currencies offering higher yields.

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

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

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

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

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

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

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

Dollar little changed in Asia

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

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

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

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

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

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

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

Dealers were monitoring trading in the euro against the yen.

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

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

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

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

Inflation 'to hit Asian growth'

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

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

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

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

To tackle inflation fiscal authorities have been tightening credit recently.

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

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

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

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

Iran opposes Opec oil output hike

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

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

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

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

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

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

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

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

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

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

Oil prices climb, with eyes on Dolly storm

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sanofi in Australian vitamin deal

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

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

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

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

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

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

Fresh push in global trade talks

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

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

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

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

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

Sticking points

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

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

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

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

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

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

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

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

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

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

A question of politics?

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

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

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

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

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

Roche makes $43.7bn Genentech bid

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Oil prices higher in Asia after Iran nuclear talks stall

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

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

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

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

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

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

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

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

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

Zimbabwe introduces Z$100bn note

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

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

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

Independent economists believe the real rate is many times higher.

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

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

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

Daily bread

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

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

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

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

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

Zimbabwe was once one of the richest countries in Africa.

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

Kenya sued over biofuel project

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

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

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

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

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

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

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

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

Endangered

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

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

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

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

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

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

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

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

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

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

Google profits trigger concerns

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

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

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

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

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

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

'Challenging environment'

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

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

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

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

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

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

China loses WTO car parts dispute

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

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

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

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

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

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

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

Level playing field

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

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

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

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

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

Sony Ericsson to axe 2,000 jobs

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

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

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

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

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

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

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

Spending squeeze

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

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

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

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

'More agile'

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

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

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

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