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Global stock markets tumble on debt concerns

2010-02-07T14:33:00.000+05:30

European shares fell sharply for the second consecutive day as concerns about some governments' debt levels continued to weigh on investors

In Paris, the Cac index closed down 3.5% and German and UK markets also lost ground. It came as new questions were raised about European countries' ability to control their swollen budget deficits. In Portugal, opposition parties defeated a government austerity plan that would have cut spending.

Instead, they passed their own bill, allowing the country's autonomous regions to rack up even more debt.

Investors worry that if regulators can't help stem problems now, they could end up snowballing and becoming an ever bigger spread elsewhere. Concerns about these deficits are undermining faith in the region's euro currency - with Greece and Spain also grappling with massive budget shortfalls. And growing budget deficits also mean that governments cannot afford to spend much more on boosting their economies.

There was a sense that the European Central Bank did not have the situation under control, said Nicholas Colas, chief market strategist at ConvergEx.

"It's that void that concerns people, he said. "Investors worry that if regulators can't help stem problems now, they could end up snowballing and becoming an every bigger spread elsewhere."

Greece has outlined ambitious plans to reduce its deficit dramatically over the next two years, but doubts remain about whether its government will be able to deliver such swingeing cuts.

"It has been a worry for Greece for weeks, but it is now spreading like wildfire, driving equity markets lower, causing further concerns about medium-term growth prospects," said Kit Juckes at ECU Group.

Downbeat US jobs data added to gloomy predictions for the pace of recovery in the world's largest economy. Official data showed the US unemployment rate falling to 9.7% in January, from 10% in December, but this did little to ease the sell-off in shares. This was exacerbated by separate data suggesting that employers axed 20,000 jobs last month, more than the 5,000 analysts expected. However the Dow Jones pulled back in late trading to finish slightly ahead having been almost 170 points down at one point.

Earlier, London and Germany's main markets lost more than 1.5% each, Japan's Nikkei index slumped almost 3%, while stock markets in Hong Kong, Korea and China all fell sharply.

Concerns over debt levels are also tapping into wider fears about the strength of the global economy, analysts said.

Some investors believe the recovery is the direct result of governments pumping billions of dollars into their economies to stimulate demand. When they stop pumping money in, they fear, economies will begin to shrink again. Growing budget deficits mean that governments cannot afford to spend much more on boosting their economies.

'Regulator void'

There was a sense that the European Central Bank did not have the situation under control, said Nicholas Colas, chief market strategist at ConvergEx.
"It's that void that concerns people, he said. "Investors worry that if regulators can't help stem problems now, they could end up snowballing and becoming an every bigger spread elsewhere."

Greece has outlined ambitious plans to reduce its deficit dramatically over the next two years, but doubts remain about whether its government will be able to deliver such swingeing cuts.

Downbeat US jobs data added to gloomy predictions for the pace of recovery in the world's largest economy.

Official data showed the US unemployment rate falling to 9.7% in January, from 10% in December, but this did little to ease the sell-off in shares.

This was exacerbated by separate data suggesting that employers axed 20,000 jobs last month, more than the 5,000 analysts expected.

However the Dow Jones pulled back in late trading to finish slightly ahead having been almost 170 points down at one point.

Earlier, London and Germany's main markets lost more than 1.5% each, Japan's Nikkei index slumped almost 3%, while stock markets in Hong Kong, Korea and China all fell sharply.

Asset bubbles

Concerns over debt levels are also tapping into wider fears about the strength of the global economy, analysts said.

Some investors believe the recovery is the direct result of governments pumping billions of dollars into their economies to stimulate demand.

When they stop pumping money in, they fear, economies will begin to shrink again.

Growing budget deficits mean that governments cannot afford to spend much more on boosting their economies.

"The real concern is that the whole recovery is nothing more than poorly-directed government stimulus which has simply had the effect of boosting asset prices," said David Morrison at GFT.

(BBC/7-2-10)

Bankers besieged at World Economic Forum for role in global financial crisis

2010-01-31T16:15:00.000+05:30

NOT so long ago, financiers ruled the roost at the glitzy annual gathering of the global economic elite in Davos, amid the Swiss Alps. At this year's gathering of the World Economic Forum, the unofficial theme seems to be, "First, kill all the bankers".

The ire directed at bankers from all sides is palpable, acknowledged Donald Moore, chairman of Morgan Stanley in Europe, as he stood alone reading some charts amidst the hubbub at the forum's Global Village cafe. Asked which other groups of people have been similarly unpopular in Davos in the past, he said: “Terrorists.”

The quip reflects the mounting alarm with which bankers have come to view their besieged profession - even in Davos, a usually cozy gathering.

The scorn poured on the industry at this year's get-together in the Swiss ski resort is a sign of a mounting international backlash against the financial sector. Popular anger about banks' role in the financial crisis, and their behaviour in its aftermath, has spilled over to the world's elite business executives, politicians and regulators. Since gathering here Wednesday, they have been aiming sometimes bitter recriminations at the tainted masters of the banking universe.

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"I think that the relationship between government and banks has changed irreversibly," said Peter Sands, group chief executive of Standard Chartered Bank and a co-chair of the Davos meeting. "I think the banks have not helped themselves at all. We have been tone deaf, and shot ourselves in the foot," he said, adding, "We all need a little humility."

Such servings of humble pie are just a taste of a political atmosphere that has turned poisonous for banks. Many bankers are keeping a low profile, preferring private meetings to appearances on discussion panels. Under rising pressure, some bankers are even turning on their peers.

On the fringes of one of the many showy events that host the real business of Davos, a senior London-based investment banker offered this wager: Lloyd Blankfein, CEO of Goldman Sachs, would be out within two years, he said, and he was prepared to back up his bet with millions of pounds.

Mr Blankfein isn't the only target of anti-banker anger. But he presides over the world's most successful investment bank. Goldman has emerged from the financial crisis stronger than ever. And Mr Blankfein has been among the most outspoken public defenders of banks and he has paid his bankers well, though the level of bonuses was cut in the last round.

Asked about the wager over Mr Blankfein, Goldman spokesman Lucas van Praag said: "It is preposterous that The Wall Street Journal would even consider publishing such effluent."

Support is growing among governments and regulators for a more aggressive clampdown on banks' practices than looked likely only a few weeks ago. Proposals for tough new taxes and rules from the US, U.K. and other governments are feeding a growing determination among officials on both sides of the Atlantic not to let the financial sector off lightly, after banks' losses nearly caused a global economic crash.

Relief about the easing of the economic crisis is giving way to demands for far-reaching change, dismissals of banks' objections, and questioning of the value of many financial sector activities.

Top bankers, including Deutsche Bank chief executive Josef Ackermann, were due to meet behind closed doors with finance ministers, central bankers and regulators from major economies in Davos today in an attempt to win a reprieve.

"We should stop the blame game and we should start looking forward," Mr Ackermann said overnight in the Alps setting, arguing that a plethora of new taxes and proposals is damaging the banking sector

"If you don't have a strong financial sector to support the recovery, you're making a huge mistake and you will regret that later on," he said.

One European bank chairman complained that the organisers of the conference have invited too many politicians and regulators to what was formerly a friendly get-together for the business elite.

At times the atmosphere has turned downright hostile, say some. French President Nicholas Sarkozy delivered a populist broadside in the keynote address to officially open the meeting.

"There is indecent behaviour that will no longer be tolerated by public opinion in any country of the world," Mr Sarkozy told the conference. "That those who create jobs and wealth may earn a lot of money is not shocking. But that those who contribute to destroying jobs and wealth also earn a lot of money is morally indefensible," Mr Sarkozy said
A widespread view heard here is that banks have brought much of the anger upon themselves, by appearing to return to a culture of taking high risks and dishing out lavish pay as soon as they were out of intensive care.

"I think banks have misjudged the deep feelings of the public regarding the devastating effects of the crisis," said Guillermo Ortiz, until recently Mexico's central bank governor.

Bankers from outside the US, where the bonuses and risk-taking have traditionally been greatest, complain that all bankers are being tarred as villains. Even banks that acted conservatively face new regulations that could make doing business more complicated and costly.

"The banks who stayed strong are angry at the banks who had poor management," said Robert Diamond, president of the British bank Barclays, at a debate on rethinking financial-systemic risk

"I've seen no evidence that shrinking banks and making banks more narrow is the answer," Mr Diamond said, criticising the US proposals.

If regulators try to eliminate the risk of banking crises entirely, said Alessandro Profumo, chief executive of Italian lender Unicredit, the result will be "a very inefficient system, and I think we are moving towards that”.

That argument is falling on deaf ears at Davos. Jean-Claude Trichet, the president of the European Central Bank, said that the financial crisis has fundamentally changed the relationship between the banks and government because taxpayer money was used to rescue the financial system.

"We were very close to a full fledged Depression had the government not stepped in," said Mr Trichet. "We put taxpayer money at risk to guarantee loans at banks ... a gigantic amount."

Deutsche Bank's Mr Ackermann on Thursday held lengthy private talks with more than 30 top bankers on the edge of the Davos conference, to agree on a common line for today's encounter with government officials.

The hope was that a constructive offer to regulators will take some of the heat off banksThe talks lasted five hours, but the group struggled to find common ground.

"We've tried before, but we aren't going to be able to come up with an agreement," said one of Europe's top investment bankers: "We're too competitive with one another. One group enjoying the bankers' pain at the global capitalism fest in Davos is the trade-union movement.

"We were never sure if we were really welcome here. This time, we are speaking on panels, we have a seat at the table," said Philip Jennings, general secretary of the UNI Global Union. Now, bankers are "at the bottom of the totem pole”.

“They've been rumbled."

additional reporting by Emma Moody

http://www.theaustralian.com.au/

Queensland city launches Australia-India 'harmony' website

2010-01-31T16:06:00.000+05:30

MELBOURNE: Amid strains in Indo-Australia ties due to a spate of attacks on Indian students, a city in Queensland has launched a "harmony" website

aimed at telling "a lot of great stories" about the bilateral relations and facilitating people of the two countries to share their experiences.

The Aussie-India Harmony website has been established by Ipswich in conjunction with Indian IT services company Dhanush InfoTech, which recently set up its regional headquarters in the city suburb of Springfield, southwest of Brisbane.

People of both nations could use the Aussie-India Harmony forum as a platform to voice their feelings through posting good and positive comments and shared experiences, Ipswich Mayer Paul Pisasale said.

Negative events involving Indians have overshadowed the many positive personal and business relations between the two countries, he said, referring to the attacks on Indians in Australia.

"This (the website) is about making sure we tell a lot of great stories of Australia-India relations," Pisasale said.

"All this negative stuff that's happening has to be nipped in the bud. It doesn't reflect what Australia is all about. Australia is a wonderful country that embraces multiculturalism, and the website's all about working together for peace and harmony," Pisasale said.

Over 100 incidents of attacks on Indians, particularly students, were reported in 2009 in Australia and the assaults have continued this year unabated.

21-year-old Nitin Garg, who was stabbed to death by unidentified assailants while he was on his way to his part-time job in a restaurant here, was the first victim of such assaults this year.

The Australian government had given a dossier on the attacks to India, which showed that nearly half of the assailants had been juveniles. Under pressure from India, Australia also set up a high-level ministerial working group to comprehensively study the slew of attacks on Indians in the country.

PTI, 31 January 2010

Manufacturer grows marketshare to 39%, handset sales up year on year

2010-01-31T15:39:00.000+05:30

Nokia has reported a 65% rise in profits for the fourth quarter ended 31 December.The manufacturer shipped 127 million phones – an increase of 12% year on year. It shipped approximately 4.6 million Nseries devices and 6.1 million Eseries devices during theperiod.Device sales increased globally overall, but there was a decline in sales in Europe, Latin America and North America. The manufacturer increased handset sales in emerging markets such as China, Middle East, Africa and Asia Pacific.

Nokia estimated that its market share had increased by 2% from 37% to 39%, compared to the same period last year. Nokia CEO, Olli-Peka Kallasvuo said: ‘We grew our market share in smartphones in the fourth quarter, driven by the successful launch of new touch and QWERTY models. ‘Our performance in smartphones, combined with continuing success in emerging markets, helped us increase sales in our devices and services unit, both quarter-on-quarter and year-on-year.’Nokia has reported a 65% rise in profits for the fourth quarter ended 31 December. The manufacturer shipped 127 million phones – an increase of 12% year on year. It shipped approximately 4.6 million Nseries devices and 6.1 million Eseries devices during theperiod. Device sales increased globally overall, but there was a decline in sales in Europe, Latin America and North America.

The manufacturer increased handset sales in emerging markets such as China, Middle East, Africa and Asia Pacific.Nokia estimated that its market share had increased by 2% from 37% to 39%, compared to the same period last year.Nokia CEO, Olli-Peka Kallasvuo said: ‘We grew our market share in smartphones in the fourth quarter, driven by the successful launch of new touch and QWERTY models. ‘Our performance in smartphones, combined with continuing success in emerging markets, helped us increase sales in our devices and services unit, both quarter-on-quarter and year-on-year.’

Japan urges Toyota to secure consumer confidence

2010-01-29T12:16:00.001+05:30

TOKYO (AP) -- Japan's trade minister urged Toyota Motor Corp. to secure the confidence of car buyers in the wake of massive global recalls.

"The scale of the recalls is huge. The situation is serious. It points to the possible dangers a global economy can bring," Trade Minister Masayuki Naoshima told reporters Friday.

"I would like Toyota to respond properly to secure consumer confidence."

Toyota, the world's largest automaker, has recalled over 5 million vehicles in the U.S. over problems with gas pedals and floor mats. The figure accounts for models affected by more than one recall.

This week it announced the suspension of U.S. sales of eight models -- including the Camry, America's top-selling car -- to fix faulty gas pedals that could stick and cause acceleration without warning.

Toyota issued last week a recall for the same eight models, affecting 2.3 million vehicles.

The sales suspension in the U.S. -- Toyota's biggest market -- could dent the company's fledgling earnings recovery. Toyota only returned to the black for the July-September quarter with net income of 21.8 billion yen ($241 million) after three straight losing quarters.

Toyota spokesman Paul Nolasco said Friday the company has yet to determine how long the sales suspension will continue.

"We have yet to determine the best way to address the situation. We are working very hard to come up with the best solution," he said.

In China, Toyota also recalled 75,500 vehicles for the same acceleration pedal problem.

The auto giant also said it would recall vehicles in Europe due to the accelerator problem, but said the number of recalled vehicles has yet to be determined.

(This version corrects the number of recalled vehicles in the (US)

RBI hikes CRR by 75 bps to 5.75% in two stages

2010-01-29T12:13:00.000+05:30

The Reserve Bank of India has hiked its cash reserve ratio by 75 bps to 5.75% as against 5% at its credit policy meet today. (100 basis points=1%) A CNBC-TV18 poll had forecasted a 50 bps CRR hike.The move will be implemented in two stages. The first 50 bps hike will come into effect on February 13 while the next 25 bps hike will be effective February 27. The move will result in a mop-up of Rs 36,000 crore by February end. The central bank has left unchanged the reverse repo, repo, and bank rate at 3.25%, 4.75%, and 6% respectively.
Rationale for the hike:
D Subbarao, Governor, RBI, says the confidence in recovery justifies reversing the expansionary policy. He acknowledged that the recovery yet to fully take hold. "The policy at current levels was more consistent with the crisis situation. Our interest rate stance will balance price stability and support growth" Industrial production in November 2009 grew at 11.7%, the fastest in the last two years.
Expected Outcomes
- Reduction in excess liquidity will help anchor inflationary expectations.
- The recovery process will be supported without compromising price stability.
- The calibrated exit will align policy instruments with the current and evolving state of the economy.
Road ahead:
The governor says it necessary to carry forward the process of exit further. But was quick to add that strong anti-inflationary steps may undermine the recovery process. The Monetary Policy for 2010-11 will be announced on April 20.
GDP forecast:
It has revised its FY11 growth forecast of 7.5% from 6% earlier. The forecast assumes 0% agricultural growth and continued recovery in industry services.
Inflation:
The March-end inflation forecast has been upped to 8.5% from 6.5%. The governor has promised to respond to inflation swiftly via policy adjustments.
Growth forecasts scaled lower:
Credit growth forecast has been lowered to 16% from 18%. Deposit growth expectation has also been downsized to 16% from 18%. M3 growth forecast has been revised to 16.5% from 17%
Bankers say that even if the CRR is raised, they have no leeway to raise rates because nobody is demanding money much these days

IMF set for huge expansion as world finance ministers meet

2009-04-26T11:45:00.000+05:30

With a financial crisis still hammering away at the global economy, the International Monetary Fund is poised for one of its biggest expansions of power since the lender was created after World War II.
Leaders of the world's 20 largest economies earlier this month offered the IMF a $1 trillion war chest to help countries in trouble and pledged to make it the premier financial watchdog to help avoid the next global downturn।
But while IMF Managing Director Dominique Strauss-Kahn proclaimed "the IMF is back" after the Group of 20 (G20) nations summit in London, not everyone is happy about the organisation's sudden change in fortunes.
The IMF's track record in putting out previous financial fires has long been a topic of intense debate among economists and a source of strained relations between the wealthy and developing world.
This weekend, it will be up to finance ministers to iron out the details and firm up the new commitments, as the 185 members of the IMF and its sister-lender, the World Bank, hold their semi-annual summit in Washington.
The stakes couldn't be much higher: the IMF's own updated forecasts Wednesday predicted a 1.3 percent contraction of the global economy in 2009 - the deepest recession in more than 60 years.
Unemployment rates are rising into double digits in even the richest countries, while global trade is plummeting at the sharpest rate since the Great Depression. Many countries are facing huge budget gaps that could force serious cuts in government and social services.
Filling those budget holes is the main reason the G20 summit agreed to triple the IMF's lending capability to $750 billion. An IMF currency unit known as special drawing rights will also be expanded by $250 billion.
But it is no longer clear that the IMF will get what was promised, as only about half has been firmly pledged by governments.
Arvind Subramanian of the Peterson Institute for International Economics writes that the Washington meeting will be an "unambiguous success" if the IMF can get commitments on the full $500 billion for new loans.
Getting the funds is not the only problem. The IMF's history has left many governments wary of asking for loans even in the middle of a deep recession like the current one.
The IMF has been demonised in developing countries for the tough conditions it attached to past loans. Governments were forced to get their finances in order by making tough budget cuts that reduced social programmes, even while a downturn was still in full swing, according to Mark Weisbrot of the US-based Center for Economic Policy Research.
The organisation's reputation is still badly damaged by a mishandling of the Asian financial crisis of the late 1990s and a Latin American downturn a decade earlier. Brazilian President Luiz Inacio Lula Da Silva, a former labour union leader, joked last week that he used to picket the IMF and is now providing it with fresh funds.
The IMF responded to the criticisms in early April by offering a new "flexible credit line" with fewer conditions. Poland, Mexico and Colombia have already lined up and more countries are expected to follow.
But the new programme is only open to countries with a history of sound fiscal policies. That leaves out many poorer countries that can least afford to weather the global recession on their own, Weisbrot said in a conference call.
Emerging economies are hoping to change the IMF's workings by pushing for a greater voice in an institution that has historically been dominated by the US and Europe. China has made a $40 billion loan to the IMF conditional on the Asian powerhouse getting a larger share of the vote.
Wealthy countries have shown themselves open to the idea, not least by converting the once powerless G20 into the main bloc to help bring the current recession to an end.
"The bottom-line lesson of the last 18 months is that we as nations are in this crisis together," US Treasury Secretary Timothy Geithner said Wednesday

Chris Cermak (DPA)
Washington, April 23, २००९

China in 2009 - Year of the Ox

2009-01-04T16:03:00.000+05:30

Economic woes and key anniversaries portend trouble

FOR China’s leaders, a perfect storm is brewing. Economic growth, which has helped keep the Communist Party in power, is faltering. The new middle class, hitherto a pillar of the party’s support, is plunging into despondency. The coming months are studded with politically sensitive anniversaries that will focus disaffected minds on the party’s shortcomings. Having endured a year of natural disasters, riots and the organisational nightmare of hosting the Olympics, the party sees little salve ahead.
Of all the huge uncertainties that plague attempts to predict the progress of the global financial crisis, two in particular hang over China. One is the resilience of its political structure to stress of this kind. During the last several years of economic health, it has been hard to imagine anything that could dislodge the party. David Shambaugh of George Washington University, in a book published this year entitled “China’s Communist Party: Atrophy and Adaptation”, said the party had its problems and challenges, “but none present the real possibility of systemic collapse”.
APA better year behind than ahead?
Those challenges, however, are now mounting rapidly. The head of the IMF, Dominique Strauss-Kahn, has predicted GDP growth could fall to as low as 5-6% next year, half the rate of 2007 and far lower than anyone would have thought possible just a few months ago.
The other big uncertainty is how Chinese consumers will respond to the crisis. Chinese journalists say the state-controlled media were at first instructed to avoid stories even suggesting China might be affected. Then as the impact became increasingly obvious, with exports in November falling 2.2% year-on-year (the first such drop in seven years) and growing reports of factory closures and worker unrest, the orders changed. Now the media can acknowledge the impact, but are not to play it up. Keeping the middle class happy and willing to spend is as vital now in China as it is in any economy. But given China’s rudimentary social-security system and strong tendency to save even at the best of times, this could be particularly difficult.

Among the most challenging periods for the leadership in 2009 will be a number of dates already ringed in their calendars. The Chinese new year on January 26th—but effectively spanning several days on either side of that date—is one of them. Migrant workers with nothing to do as their labour-intensive factories making products for Western markets turn idle are already beginning to drift back to their villages for the holiday. Growing numbers will find their pockets empty as cash-starved employers hold back wages. Some will likely stage angry protests. After the festival, millions will return to the cities and many will find no jobs waiting. Frustrations will mount.
Early March will see attention focused on opposite ends of the country: Tibet and Beijing. The resentment that exploded in Lhasa on March 14th 2008 and spread rapidly across the vast Himalayan plateau has by no means subsided. March 10th 2009 is the fiftieth anniversary of the Tibetan uprising that prompted the Dalai Lama to flee to India.
The significance of this date will make this period even more potentially unstable in 2009 than it was in 2008. The authorities will maintain intense security across Tibet and neighbouring areas. Any miscalculation could readily produce the same kind of disapproving Western reaction and Chinese nationalist counter-reaction that for a while this year cast a dark shadow over China’s diplomacy.
Also in March, China’s parliament will hold its annual session in Beijing. These two-week events are normally rubber-stamp affairs, but this year economic woes are likely to fuel lively debate inside and outside the meeting rooms of the Great Hall of the People.
Then comes June 4th, the 20th anniversary of the bloody suppression of the Tiananmen Square protests. Many younger Chinese express indifference to this episode, but older activists will still try to commemorate it. An inkling of their organisational ability was given this month with the release of Charter 08, a document signed by some 300 intellectuals calling for sweeping political reform.
July 22nd is the 10th anniversary of the banning of Falun Gong, a quasi-Buddhist sect. The government has crushed Falun Gong with more persistent and ruthless determination even than political opposition movements (before 1999 Falun Gong had no discernible political views, but its members abroad are now virulently anti-party). The clampdown makes it extremely difficult to gauge the sect’s continuing support in China, but the anniversary will be a test of it.
The authorities will try to put on a celebratory face for the 60th anniversary on October 1st of the communist nation’s founding. It might even stage a military parade through central Beijing (as it did for the 50th and 35th anniversaries). If so, expect more repression, particularly of Tibetans and Muslim Uighurs from the far west of China, whom the authorities see as the most likely groups to try to spoil the party.
Optimists see some hope for the government amid this relentless series of potential flashpoints. It will be spending massively on infrastructure projects, and cutting taxes and interest rates to keep growth up. The World Bank’s president, Robert Zoellick, says China’s response to the Asian financial crisis in 1998 “built the basis for future growth”. It spent lavishly on infrastructure (particularly expressways) and weathered the crisis without any regime-threatening instability (although the middle class was then far smaller).
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This time, says Mr Zoellick, China’s stimulus package also features measures to encourage consumers, including more spending on social services. The World Bank’s prediction is for 7.5% growth. Several others say it could be around 8%—the level that officials often say is needed to keep employment stable.
But if the optimists are wrong, China could be in for a bumpy ride. History suggests that periods of social turbulence in China are often accompanied by tensions with the West. Trade friction could exacerbate such problems if countries engage in tit-for-tat protectionism in misguided efforts to protect their industries. Chinese officials repeatedly stress the need to keep markets open, but some officials might still be tempted to devalue the currency in the hope of boosting exports (America wants China’s currency to move in the opposite direction). China’s President Hu Jintao and the prime minister Wen Jiabao are experiencing their most trying times since they came to power more than five years ago. More than ever, stability will be their top priority.

From Economist.com

Oil deepens slide to $122

2008-07-30T12:41:00.000+05:30

Oil prices extended their steepest slide in a year and a half on Tuesday, as traders looked ahead to US oil stock data expected to show a rise in fuel inventories amid eroding demand in the world's biggest consumer. Prices, which are now at their lowest in nearly three months, were also under pressure from signs of strength in the US dollar, which held firm after rallying on a combination of weaker oil prices and an unexpected rise in US consumer confidence. US light crude for September fell 9 cents to $122.10 a barrel by 0316 GMT after slumping by $2.54 on Tuesday, hitting an intra-day low of $120.42, the lowest since May 6 and marking the deepest sell-off in prices since early 2007. London Brent crude fell 29 cents to $122.42 a barrel. "The reason prices are coming off is that there are expectations for inventory builds...on reduced demand," said Robert Nunan, a risk management executive at Tokyo-based Mitsubishi Corp US crude stocks were expected to have fallen by 1.6 mn barrels last week, but gasoline inventories were seen rising by 200,000 barrels and distillates by 1.9 mn barrels, according to a poll ahead of data due later on Wednesday. Oil has fallen more than 17 per cent from a record high of $147.27 set on July 11, pressured by signs that high prices and an economic slowdown are curbing demand, especially in the United States. The EIA said on Monday US oil demand in May was 660,000 barrels per day less than previously thought, while a separate government report said motorists drove 2.4 per cent less during the first five months of the year than the year before. A firmer dollar is also reducing the appeal of commodities to some investors playing the strong negative correlation between the markets in recent months, analysts have said. OPEC President Chakib Khelil said on Tuesday that oil prices were still abnormally high, and member nations should not cut supply as the oil market is now in balance. Khelil, who is also Algeria's oil minister, said oil prices could fall to $80 in the long term, if the US dollar continued to rise and geopolitical anxieties eased. But supply disruptions could limit losses, with traders particularly focused on Nigeria, where Royal Dutch Shell has been forced to declare force majeure on Bonny Light exports after militants blew up parts of a key pipeline.

E/N

Oil prices fall past $126 a barrel

2008-07-26T13:18:00.000+05:30

Oil prices extended their slide today after the government reported gasoline stocks rose more and crude supplies fell less than expected last week.Light, sweet crude for September delivery slipped $1.77 at $126.65 a barrel in morning trading on the New York Mercantile Exchange.
.
September Brent crude fell $2.06 to $127.49 a barrel on the ICE Futures exchange in London.The Energy Department's Energy Information Administration reported that crude supplies fell by 1.6 million barrels inthe week ending July 18, slightly less than analysts surveyed by energy research firm Platts predicted.
Gasoline stockpiles jumped by 2.9 million barrels. Analysts had expected an increase of half a million. Neither figure would appear to give traders who have been largely selling off oil in recent days reason to change theirbehavior. Oil prices came under further pressure as the dollar strengthened against the euro. The dollar's decline has been a major factor in oil's rapid ascent over the past year, as investors bought dollar-denominated crude contracts as a hedge against inflation and a weakening US currency. But when the dollarstrengthens, that currency-related buying can unwind. In other Nymex trading, heating oil futures lost 7.82 cents to trade at $3.60 a gallon, while gasoline futures shedover 8 cents to $3.0641 a gallon. Natural gas prices fell more than 11 cents to $10.183 per 1,000 cubic feet.

THE US has backtracked on its refusal to negotiate with Iran over its nuclear program, sending a senior envoy to Geneva for top-level talks.

2008-07-20T16:05:00.000+05:30

But US Secretary of State Condoleezza Rice has insisted Tehran must suspend its enrichment and reprocessing of nuclear materials before substantive talks with Washington.
"The United States doesn't have any permanent enemies," Ms Rice said, after confirming Undersecretary William Burns was to meet Iran's negotiator Saeed Jalili in Geneva.
"And we hope this signal we're sending, that we fully support the track that Iran could take for a better relationship with the international community, is one the United States stands fully behind.
"We have been very clear that any country can change course."
Rice called the move "a strong signal to the entire world that we have been very serious about this diplomacy".
She said she had endorsed the proposal from the so-called P5 Plus One - the US, France, Britain, China, Russia and Germany - on incentives to advance talks with Iran on halting its nuclear program.
She called sending Mr Burns to Geneva the "bookend" to that process, but added: "It should be very clear to everyone the United States has a condition for the beginning of negotiations with Iran and that condition remains the verifiable suspension of Iran's enrichment and reprocessing."
Asked if yesterday's meeting was a one-shot deal, Rice said: "This is."
On Friday Mr Jalili was optimistic the talks would be constructive, provided Washington went with the right approach.
"What is important for us is with what approach they come to the talks," he told the IRNA news agency.
"If it is with a constructive approach, and they refrain from past mistakes, then, for sure, we will have constructive talks."
Western countries suspect Iran is secretly trying to develop an atomic bomb.
- AFP

Gas prices 'could rise 70%'

2008-07-18T15:35:00.000+05:30

Gas prices are set to soar and then remain high for the foreseeable future, a report has revealed.
The independent report commissioned by Centrica, which owns British Gas, warns that prices could increase by 70%.
Jake Ulrich, managing director of Centrica Energy, admitted that gas price rises were likely to lead to a "potentially significant" rise in the number of people in fuel poverty.
He also predicted that people would have to change their habits to deal with higher prices.
He told Channel 4 News: "I do think we will see people change their behaviour. I think people will use less energy and I hate to go back to the Jimmy Carter days in the US but maybe it's two jumpers instead of one."
He added: "I think people will change the temperature they keep the house, they'll be more cognizant of energy waste, they'll buy better appliances."
Gas prices will continue to rise for some time, he said.
"We're part of a world economy and I don't think we can rely on UK production or cheap gas, cheap energy of any sort any more.
"I think it's a reality not only in the UK but in Western Europe and North America - energy is going to become relatively much more expensive in the future."
Gas and electricity watchdog Energywatch called on the government to act now to reduce the pressure on wholesale gas prices and force the industry to deliver affordable energy for Britain's poorest consumers.
Chief executive Allan Asher said: "The government is right to say that the link to oil is a cause of the problems but wrong to say there is nothing that can be done.
"The local impact is so catastrophic it should be leading the international drive to end the hugely damaging and entirely unjustifiable link between the prices of gas and oil.
"Rampaging oil prices are a serious and global contagion. That does not mean we should just take to our beds and hope that the fever will pass.
"Government can and should act in those areas where it can have an effect. Action to cut to the price link between gas and oil, action to improve the working of the domestic market, action to help those who can least afford to keep warm."

US government bails out mortgage giants

2008-07-14T17:21:00.000+05:30

The crisis in the US financial system has taken a major turn for the worse with the announcement on Sunday that the US Treasury and the Federal Reserve Board are to take emergency action to prop up mortgage giants Fannie Mae and Freddie Mac.

Under the rescue plan, Congress will be asked to pass legislation to increase the line of credit to Fannie and Freddie—the amount and terms to be decided later—as well as providing the authority for the government to purchase equity if needed. In addition, the Federal Reserve Board has granted the Federal Reserve Bank of New York authority to lend directly to the two companies “should such lending prove necessary.”

Announcing the measures after a weekend of hectic discussions with bankers, financial institutions and Congressional leaders, Treasury Secretary Henry Paulson said the two companies played a “central role in our housing finance system” and their “support for the housing market is particularly important as we work through the current housing correction.” There were fears that had the intervention not been made Freddie Mac may have had difficulty in a planned sell-off of $3 billion in debt scheduled for today.

Like the Bear Stearns rescue operation in March, the timing of the announcement was meant to allay fears before global markets opened for the week. Paulson said the international reach of the two “government sponsored enterprises” (GSE) necessitated the unprecedented action.

“GSE debt is held by financial institutions around the world. Its continued strength is important to maintaining confidence and stability in our financial system and our financial markets,” he said.

The emergency action came after a week of stock market turmoil that saw the stocks of the two firms plunge by up to 50 percent as fears grew that they were too poorly capitalised to meet losses incurred as a result of the collapse of the US housing market.

Between them Fannie and Freddie hold or guarantee more than $5 trillion out of the $12 trillion US mortgage market.

Fannie Mae—the Federal National Mortgage Association—was set up in 1938 by the Roosevelt administration to try to boost the housing market during the Great Depression. In 1968 it was given a new charter by Congress and became a publicly traded company that could seek funding from the private sector. Freddie Mac—the Federal Home Loan Mortgage Corporation—was created by Congress in 1970 as a competitor for Fannie.

Because they were set up by legislation, the two companies have been regarded as having an implicit government guarantee—a perception that has enabled them to borrow funds at lowered rates in the market. Over the past three decades, both firms have grown rapidly to the extent that their holdings and guarantee of mortgage debt is even larger than the $4,500 billion US Treasury market.

While they have not been directly involved in the sub-prime market, the rapid decline in US housing prices—the steepest since the Great Depression—has caused the two firms to suffer a loss of $11 billion over the past nine months, raising concerns about the adequacy of their capital.

Those concerns were heightened last Wednesday when the former St. Louis Federal Reserve President William Poole said the chances were increasing that the two mortgage companies would have to be bailed out. He said Freddie Mac owed $5.2 billion more than its assets were worth in the first quarter, making it technically insolvent. The “fair value” of Fannie Mae’s assets had fallen 66 percent and could go negative in the next quarter, he said.

On Friday, the New York Times published a report that the two companies may be put into a “conservatorship” if their problems worsened. Under a conservatorship, regulators appoint a person or an entity to run the financial institution until stability is restored.

Fear about the viability of the two firms set off a round of discussions in government, financial and banking circles about emergency action. Paulson has insisted that so far as the administration is concerned it wants Freddie and Fannie to continue in their current form as “shareholder-owned companies.”

This is because the alternative—a full-scale takeover or nationalisation by the government—would have vast implications for the financial position of the US. Taking on the debts and obligations of Fannie and Freddie would mean a more than 50 percent increase of US sovereign debt virtually overnight, bringing the total to the equivalent of the US gross domestic product.

In a bid to bolster confidence, the Democratic chairman of the Senate Banking Committee, Chris Dodd, told CNN on Sunday that Freddie and Fannie were both financially sound.

“What’s important here are facts,” he said. “And the facts are that Fannie and Freddie are in sound situation. They have more than adequate capital—in fact, more than the law requires. They have access to capital markets. They’re in good shape. The chairman of the Federal Reserve has said as much. The secretary of the treasury has said as much.”

Given the experiences of the past year, such “boosterism” will not cut much ice. As the Wall Street Journal commented caustically in response to similar remarks by Dodd last week, the senate chairman claimed that the companies were so safe that the Fed might have to rescue them.

Last Thursday Fed chairman Ben Bernanke and Paulson, appearing before the House Financial Services Committee, emphasised that the regulator of Fannie and Freddie, the Office of Federal Housing Enterprise Oversight, had found that both companies were adequately capitalised. Similar assurances were also given about Bear Stearns just days before it was taken over.

While attention has focused on Fannie and Freddie, the depth of the US housing and financial crisis has been underscored by the collapse of IndyMac Bank in California.

The Pasadena-based mortgage lender, which had $32 billion in assets, was seized by federal regulators on Friday following an 11-day $1.3 billion run on its funds. IndyMac, which specialised in Alt-A loans to borrowers who did not fully document their assets or their income, ranked as the ninth largest US mortgage lender by volume.

The collapse of the bank—the third largest failure in US banking history after the demise of Continental Illinois in 1984 and the American Saving and Loan Association of Stockton in 1988—is expected to cost the Federal Deposit Insurance Corporation between $4 billion and $8 billion. This is a sizeable chunk of its $53 billion deposit insurance fund, which is expected to be called on again as more banks go under.

Besides pointing to the sheer size of the financial crisis, the Fannie-Freddie rescue operation has underscored the speed with which it is unfolding. On Thursday, Paulson and Bernanke told Congress that they were not seeking new legislation. Just three days later, an emergency package is to be brought forward with no guarantee that further measures will not be required even in the next few days.

UPA obsessed with nuke deal, has not kept its promises: Left

2008-07-14T17:12:00.001+05:30

NEW DELHI: The Left parties on Monday launched a nationwide campaign to explain to people the reasons that prompted them to withdraw support to the UPA government which, they alleged, "failed" to keep promises due to its "obsession" with the nuclear deal. (See Ninan’s cartoon)

Top Left leaders addressed a meeting here where they cited the UPA's "failures, including rising prices and inflation, surrendering of national interest, and unkept promises with regard to the Common Minimum Programme (CMP)". ( Watch )

The leaders "vigorously" attacked the government for its "refusal" to take appropriate steps to tackle the "runaway" inflation and "back-breaking" price rise.

The campaign was launched to explain to people the reasons for withdrawing support besides "explaining the UPA's pro-American and anti-people policies which are resulting in price rise and other problems," CPM General Secretary Prakash Karat said.

The Left parties are trying to rally other democratic and secular forces "who do not want either the Congress or BJP to be the only alternative".

In the course of the campaign, he said the Left will also place before the people an alternative to meet energy requirements for development and for putting an end to the economic policies pursued by the Government which are "harmful to farmers, rural poor, workers and other sections".

Karat said the Government and the Congress wanted to fulfill their promise to US President George W Bush. "It is their primary aim and not tackling inflation or price rise."

Karat said, "Nuclear deal and price rise are the issues on which we withdrew support".

Plans are afoot to field top leaders, who will crisscross the country, to attend public meetings and rallies organised in major towns in all states.

The focus of the campaign will be on youth as the "cream of the country" needs to be educated on the "ill-effects" of the nuclear deal and other problems facing the country.

Meetings will be organised at all major centres as well as in towns and villages. Pamphlets and handbills will be published.

The false claims and assumptions made by Government will be exposed and real facts will brought before them, a senior Left leader said.

The campaign plank will be anti-imperialism and defence of the country's sovereignty, anti-communalism and defence of secular domestic polity and protection and improvement of common people's livelihood against attack of big business.

Will Left get the 'right' response?

2008-07-13T13:36:00.000+05:30

Soon after Prime Minister Manmohan Singh declared that the government would "very soon" approach the International Atomic Energy Agency (IAEA) to move forward on the Indo-US nuclear deal, an upset Left announced withdrawal of support to the UPA government. The move ended weeks of suspense on the issue. Now, with the PM declaring that there is no threat to the government’s stability, stage is set for a flurry of activities on the political scene. The Communists had also come down heavily on the government for approaching the IAEA to finalise the India-specific safeguards pact. With more and more support making the number game crucial, the big question is whether the determined Left parties will be able to rock the Indo-US nuke deal boat?

Hindustantimes.com brings together the stories that have dominated the popular mood in the recent times.

Obama reluctant to seek changes in nuclear deal

2008-07-13T13:29:00.000+05:30

Barack Obama

Democratic Party candidate for the United States Presidential election Barack Obama has said he was reluctant to seek changes in the civilian nuclear deal with India, and hoped to see the process concluded before the year-end.

The existing nuclear agreement balanced both issues – America’s strategic relationship with India and its non-proliferation concerns. “I am therefore reluctant to seek changes,” he told Outlook magazine in an interview.

He admitted to some reservations over the “original agreement” but subsequently concluded that it would “enhance our [Indo-U.S.] partnership and deepen our cooperation” to combat global warning.

Asked whether an Obama administration in 2009 would reopen or scrap the deal if it was not concluded this year, he said, “A final judgement on the deal…must await the IAEA’s approval of a safeguards agreement and changes to be agreed [upon] by the Nuclear Suppliers Group. At that point the U.S. Congress will decide whether to approve the agreement. I continue to hope this process can be concluded before the end of the year.”

Indian connections

Disclosing several Indian connections, Mr. Obama said he would continue with the tradition established by George W Bush and Bill Clinton of visiting India during their tenure as Presidents. He was fortunate to have close Indian-American friends. He pointed out that his mother did rural development work in India.

“Throughout my life, I have always looked to Mahatma Gandhi as an inspiration, because he embodies the kind of transformational change that can be made when ordinary people come together to do extraordinary things. That is why his portrait hangs in my Senate office: to remind me that real results will come not just from Washington – they will come from the people.”

Asked in what areas he would like to see U.S.-India relations grow, his reply was, “across the board would the short answer.” Specifically, he would like to focus on counter-terrorism, greater military ties, promotion of democracy in the region and beyond and combating climate change and global poverty. “I would also like to see agriculture given a higher priority in our relations, as India pursues its goal of a second green revolution.”

Mr. Obama spoke against the Bush administration’s Pakistan policy of “putting all our eggs in the Musharraf basket” and wanted the U.S. to align with “Pakistan and its people and not just oone individual.”

The Hindu

Jesse Helms

2008-07-13T13:12:00.000+05:30

Jesse Helms, a conservative American, died on July 4th, aged 86

SUPPORTERS put the best face they could on him. A real Southern gentleman, from owlish glasses to black wingtip shoes, who would hold the door for any woman and thank you, with a nod and a smile, for smoking North Carolinian tobacco in his office. A kind-hearted soul, who had adopted a boy with cerebral palsy, who bought ice-cream for his congressional pages and was delightful at dinner, both to Democrats and Republicans. A true patriot, who saw America as God’s country and the world’s hope, who defended its values against the liberal media and the “muck” of decadent artists, and who had no truck with arms-control treaties, test-ban treaties, missile reduction, or any crimp on sovereignty. An anti-communist to make all others fade, convinced that the Soviets were irredeemable cheats and liars, determined never to deal with Fidel Castro’s Cuba but to make sure the tyrant left it “in a vertical position or a horizontal position”, preferably the latter. A doughty lover of liberty, who believed government should be small, laws unobtrusive, and men left alone to take responsibility for their own lives and their own decisions. “Compromise, hell!” he wrote in 1959. “If freedom is right and tyranny wrong, why should those who believe in freedom treat it as if it were a roll of bologna to be bartered a slice at a time?” He would have said the same, with his unwavering gimlet glare, 50 years later.

Yet there was no discounting the other side. Mr Helms was a racist, who thought the Civil Rights Act of 1964 “the single most dangerous piece of legislation” ever to come before Congress; who blocked what he could of the Voting Rights Act; who made fast friends with apartheid South Africa, and turned his back on Nelson Mandela; who let his re-election campaign in 1990 send out cards telling blacks that they risked jail for voting “improperly”. When the rest of America had moved on, Mr Helms still carried in his head the mores of old Monroe, North Carolina, where he was born: the hot, quiet streets among the cotton fields, flowers on the steps of the Confederate monument, Negroes stepping into the gutter to let whites pass. No mingling occurred there. God’s dictates were observed. Good conduct was rewarded, uppityness punished, with a horsewhipping if need be. In Monroe Mr Helms learnt to play the race card, that fear of touching and that sense of suppressed disorder. “Do you want Negroes working beside you?” asked the first political campaign he worked for, in 1950. “You needed that job…but they had to give it to a minority,” ran one of the last, in 1990, as a white hand crumpled a rejection slip.

His bigotry also spread further. As a radio and TV commentator in the 1960s he railed against the welfare-scrounging poor, socialists and draft-resisters, as well as blacks. His five terms in the Senate, from 1973 to 2003, saw him set firm against government payments for the disabled, free school lunches and anything that encouraged bums in their “bum-ism”. “Senator No” was powered by contempt, as well as small-government frugality.

By the 1990s homosexuals had become his prime targets: “disgusting people”, who had brought AIDS upon themselves by their revolting behaviour. “Nothing positive”, he said, “happened to Sodom and Gomorrah.” Beyond those feckless, flouncing crowds, in the wider world he surveyed as chairman of the Senate Foreign Relations Committee, he blocked aid from going down “foreign rat holes” and resisted for years paying money that was owed to the United Nations. Old age brought a mild repositioning, but no repentance, and no yielding on the subject of race. It was hard-wired into him.

Towards the culture wars

The truth was that American conservatism owed much to Mr Helms. He demonstrated, in 12 years of peak-time broadcasts for the Tobacco Radio Network and WRAL-TV, the power of talk radio to move minds, well before Rush Limbaugh caught on to it. He developed, in his North Carolina Congressional Club and later through Richard Viguerie (a direct-mail maestro), an independent donor base that raised millions for his campaigns and became a template for the Christian right. The efforts of the NCCC in 1976 delivered North Carolina to Ronald Reagan at a point where his primary campaign was collapsing, and stiffened his spine for subsequent runs for office. Mr Helms, therefore, helped to give America its greatest conservative president. He also prefigured the Republican renaissance in the South and across the country, changing parties in 1970 and luring working-class Democrats in overalls and pickup trucks to vote for him, the first Republican senator from North Carolina for more than a hundred years.

For that assistance there was a price to pay. Mr Helms was a polariser: so much so, that he never won more than 55% of the vote in North Carolina. With such a man let loose in the Senate, there was no hope of bipartisanship. Legislation and appointments alike were blocked on conservative principle. The wounds of the Johnson and Nixon years opened again and became the culture wars: one half of the country against the other, unable to understand, sympathise or compromise. In Jesse Helms, Southern charm personified, American conservatism embraced its own dark side.

From The Economist print edition

Indian stocks worst BRIC performers in 2008

2008-07-13T12:38:00.000+05:30

NEW DELHI: With the bears strengthening their hold on the domestic stock market, Indian equities have given the worst returns to investors compared to their peers in the three other BRIC nations Brazil, Russia and China so far this year.

According to an analysis of MSCI Barra indices, a measure of returns from various stock markets across the world for foreign investors, Indian stocks have given the highest negative return among the four BRIC countries till July 11.

Indian stocks have provided a negative return of over 41 per cent so far this year, while China and Russian markets have given losses of 25.55 per cent and 10.15 per cent, each.

At the same time, investors have actually gained in Brazil, although marginally, with stocks there rising 0.13 per cent since the beginning of this year, according to an analysis of performances of MSCI Indices for various nations.

"India was among the best performing markets last year, but the correction suffered by the domestic market this year has been very severe which has sent it into a downward frenzy," Arun Kejriwal Director of Kejriwal Research and Investment Services (KRIS) told PTI.

Another reason why Indian markets have performed badly is that all the macro economic indicators which were driving the bulls last year such as strong GDP growth, strengthening of the Indian currency and inflation at controlled levels, have all back-fired this year, Kejriwal added.

Father of heart surgery DeBakey dies at 99

2008-07-13T12:36:00.000+05:30

WASHINGTON: Legendary US physician Michael DeBakey, father of modern heart surgery, is dead.

DeBakey died of natural causes Friday at the age of 99 at Houston's Methodist Hospital, a hospital spokesperson told the Houston Chronicle Saturday.

DeBakey was known for his innovative bypass operations and heart transplants.

As one of the great surgeons of the 20th Century some of DeBakey's patients were prominent like film diva Marlene Dietrich, former US president Lyndon Johnson and Russia's former president Boris Yeltsin.

"Dr DeBakey's reputation brought many people into this institution, and he treated them all: heads of state, entertainers, businessmen and presidents, as well as people with no titles and no means," said Ron Girotto, president of The Methodist Hospital System.

"He always said that Methodist is a hospital with a soul and for more than 50 years, Dr DeBakey has been the heart and soul of Methodist."

DeBakey worked at the hospital since 1949.

Perhaps the most important innovation medicine owes to DeBakey was his bypass operation, which he first accomplished in 1964. He replaced calcified coronary arteries with healthy veins, which he took from the leg - today the procedure is a common, often life-saving operation for heart-disease patients.

"He has improved the human condition and touched the lives of generations to come," Girotto said. "We will greatly miss him."

DeBakey performed more than 60,000 operations during his career.

Married to German film actress Katrin Fehlhaber, DeBakey got to know Frank Sinatra and two years ago he narrowly escaped death from a torn aorta. He was saved by the operation that he himself had invented.

In April US President George W. Bush presented the pioneer of cardiovascular medicine the Congressional Gold Medal, the nations highest civilian honour.

Spain: Boat migrants die, bodies cast into sea

2008-07-13T12:26:00.000+05:30

(CNN) -- The Spanish Interior Ministry says the death toll among migrants found packed aboard a boat trying to reach one of Spain's Canary Islands has risen to at least six.

Survivors from the boat recuperate on the foreshore after making port in Playa de Santiago.

The boat was spotted off the island of La Gomera with 59 persons from sub-Saharan Africa crumpled into its narrow hull. Four of them were dead.

Harrowing pictures from the scene show people piled on top of each other in an unfeasibly small space.

An Interior Ministry spokeswoman said Saturday that one other person died on arrival at the port of Playa de Santiago on Friday. Four seriously ill people were transferred by helicopter to hospitals on the island of Tenerife where one of them died.

National broadcaster RNE said survivors had acknowledged throwing bodies overboard after they got lost at sea.

Earlier this week the Spanish coastguard rescued 23 Nigerian immigrants off the coast near Malaga but 14 others could not be found.

Thousands of Africans are believed to have died attempting sea crossings to Spain in recent years, most of them trying to reach the Canary Islands in search of jobs.

The flood of migrants has prompted Spain's Socialist government to toughen up its policies on illegal immigrants, who now face repatriation to their home countries.