Search Now

Recommendations

Monday, July 28, 2008

World News - July 28 2008


UK economy...the slowdown continues

The British economy continued to slow in the second quarter of the year, recording a rate of growth that has not been seen in seven years. Weaker construction and production brought down the UK's Gross Domestic Product (GDP) growth down to 0.2% from 0.3% in the first quarter of 2008. The annual rate of GDP growth in the April-June quarter fell to 1.6% from 2.3% in the same period last year. The last time the UK economy grew at a lower rate on a 12-month basis was in 1993. Output from the construction industry fell 0.7% over the last three months compared to a rise of 0.4% in the first quarter of 2008, with large falls recorded in housing construction. However, high levels of growth were recorded in the transport and communication sectors - up 2.2% on the previous quarter. The slowdown was expected by economists, who think that growth rates will fall further in the rest of the year.

Japan cuts growth forecast; inflation jumps

Japan revised down its economic growth forecast for the current fiscal year to 1.3% from the previous outlook of 2%, saying that high oil prices, a stronger yen and sagging US demand would continue to hurt the world's second-biggest economy. The Cabinet Office - which also serves as a government advisory body - also said slowing growth would make it harder for Japan to achieve its self-imposed target of a balanced its core budget by 2011-12. "Very tough economic conditions have been continuing since the start of the year," Economy Minister Hiroko Ota was quoted as saying by The Wall Street Journal. Separately, Japan's consumer prices rose at the fastest pace in a decade as food and gasoline costs climbed, squeezing household budgets and slowing economic growth. Core prices, which exclude fruit, fish and vegetables, increased 1.9% from a year earlier after gaining 1.5% in May, the statistics bureau said in Tokyo.

German Ifo, euro-zone PMI drop sharply

German business confidence fell the most since the Sept. 11 terrorist attacks in 2001, signaling growth is faltering in Europe's biggest economy. The Ifo Institute's German business climate index reportedly fell to 97.5 in July, down from 101.3 in June and well below market expectations for a decline to 100.2. That's the weakest reading since September 2005. Separately, a key measure of euro-zone economic activity fell further in July, suggesting that the currency bloc is set for weak Q3 growth. The preliminary composite purchasing managers index (PMI) for the euro zone fell to 47.8 from 49.3 in June, below expectations for a decline to 48.7. A reading of less than 50 signals a decline in activity, while a reading of more than 50 signals expansion.

US approves housing aid, Fannie-Freddie plan

The US House of Representatives approved far-reaching government assistance for the nation’s housing market, including broad authority for the Treasury Department to protect Fannie Mae and Freddie Mac, the nation’s two largest mortgage finance companies from collapse. The measure also included an aggressive plan to help hundreds of thousands of troubled borrowers avoid foreclosure by refinancing their mortgages with more affordable government-insured loans. President Bush would sign the measure despite his opposition to the inclusion of nearly US$4bn in grants for local governments to buy and refurbish foreclosed properties. Bush’s support assures that the bill will become law after final passage by the Senate. The House approved the bill 272 to 152. The legislation leaves numerous questions unanswered. The biggest one is whether the move will be adequate to slow the meltdown in housing sector and help the economy recover from a prolong slump.

Ford posts US$8.7bn quarterly net loss

Ford Motor reported a second-quarter loss of US$8.7bn, or US$3.88 a share - the company’s worst quarterly results ever. The performance is a consequence of slumping sales, especially of trucks, in a sour US economy with US$4-a-gallon gasoline, as well as rising material costs. Last year during the same period, Ford reported a net profit of US$750mn, or 31 cents a share. Revenues during the April-June period declined to US$38.6bn, down from US$44.2bn a year ago. The second-quarter loss included US$8bn, or US$3.26 a share, in special charges, mostly in North America, which has been hit hard by an economic slowdown, a consequence of crises in the housing, credit and energy sectors. Ford said it will double production of hybrid vehicles, sell more European autos such as the Fiesta in the U.S. and convert three North American truck factories to make a redesigned Focus and other small cars.

Toyota takes global sales lead

Toyota sold more than 4.8mn vehicles worldwide in the first half, up 2% from the same period a year earlier, the Japanese automaker said. That exceeded General Motors' (GM) sales of 4.5mn vehicles in the same period, raising speculation that Toyota could potentially upstage GM's 77-year reign as the world's top automaker by sales. Toyota spokesman Hideaki Homma said the company sold 4,817,941 vehicles globally during the first six months of the year. GM said it sold 4,540,409 vehicles, a decline of 3% from the first half of 2007. The Detroit automaker blamed the decline on economic pressures and labor disruptions in the US. But GM said it posted record-breaking sales in other regions, including Latin America, Asia and Europe. Toyota has also been hit by softening demand in the US, western Europe and Japan. The company said last week it was reviewing its global sales target for 2008. It is expected to lower its projection from 9.85m units to about 9.5mn.

UBS hit with multibillion-dollar suit

New York State Attorney General Andrew Cuomo brought a multi-billion dollar civil lawsuit against the Swiss banking giant UBS for allegedly pushing everyday investors into buying troubled auction-rate securities. The lawsuit charges UBS with falsely marketing and selling auction-rate securities as safe, cash-equivalent investments at a time when the market for these securities was under severe strain. The state's investigation also revealed that top UBS executives sold off about US$21mn of their personal holdings of auction-rate securities, after they learned of troubles in this segment of the market. UBS said it would vigorously defend itself against civil fraud charges. "It is frustrating that the New York Attorney General has filed this complaint while we have been fully engaged in good faith negotiations with his office to bring liquidity to our clients holding auction rate securities," the Swiss bank said.

Yahoo and Icahn strike a deal

After several weeks of acrimony and intense war of words, Internet giant Yahoo! agreed to give billionaire investor Carl Icahn a seat on its Board to settle the long-running dispute. The company said its board is being expanded to 11 members, one of whom will be Icahn. Eight members of the Yahoo board will be eligible for re-election at the annual meeting, on August 1. The line-up includes CEO and co-founder Jerry Yang and chairman Roy Bostock. Current director and Activision Robert Kotick will step down. After the annual meeting, the Yahoo board will be expanded by one seat to 11 members. One seat will be given to Icahn and the two remaining seats would chosen from a list of nine candidates recommended by Icahn. Simultaneously, Icahn, who already owns about 5% of Yahoo shares, dropped his plan to put in place a rival slate of directors before the company's AGM.