Recently so much talk has been made about whether the global economy is coupled, decoupled…re-coupling, decoupling, or who knows what. Do individual countries economies move alone or are they all intertwined in one big global economic cesspool?

For example, if I showed you a chart of two indexes, but didn’t tell you what they were… you could tell me if they track each other just by looking at them.

Here we’ve got two indexes that over the last year seem to be following the same pattern. While they’re not exact… they track each other pretty well. The two lines on the chart represent the S&P 500 index and the iShares MSCI EAFE index (a broad measure of 21 individual country indexes).

Are these coupled, do they move together? Well in simple investing terms, the answer is yes. The S&P 500 index over the last year is down 22% and the MSCI EAFE index is down about 26%. So are global markets coupled?

Well the answer isn’t always as clear as the example seems…some are and some aren’t.

Just because the broad U.S. markets have been heading south all year and the larger more familiar international countries’ markets have also been on a year-long losing streak…don’t think that every market is following lock-step.
There are opportunities out there in the global markets. Not everyone is facing the same crises as the United States. Some South American countries, the Middle East, parts of Africa and others offer intriguing opportunities.

It’s not just the U.S. anymore. The entire global economy is slowing down. Several countries in Europe and Asia are already either in recession or teetering on the brink of a contraction in output. But there’s one country that’s managed to remain relatively unscathed: China.

Yes, the world’s main driver of commodity consumption this decade continues to grow. That tells me that the recent decline in commodities is way overdone.

Since hitting a peak on July 3, the benchmark Reuters/CRB Index has plunged 25%. All commodities representing this index have declined sharply, including crude oil (32%), gold (22%), copper (22%) and the grains (28%).

China is still one of the more formidable factors supporting raw materials. As commodities have crashed recently, the Chinese are once again hoarding industrial metals like copper, tin, and steel scrap.

The U.S. credit problems won’t stop the Chinese from grabbing commodities - especially when the U.S. dollar inflation-adjusted interest rates are in negative territory. The U.S. Fed Funds currently stands at 2% versus 5.6% inflation through July.

China can’t afford a recession. A major contraction in output would devastate the economy and result in tens of millions of people becoming unemployed. To combat a recession, the Chinese have started to expand credit again after tightening the money-supply since 2006 in small increments. The People’s Bank of China also has the capacity to spend heavily and finance continued expansion.

If you think the Federal Reserve has muscle, think again. China is home to more than US$1.7 trillion in foreign-exchange reserves. They can literally bailout the entire American banking system with one check. They’ll do everything they can to keep this expansion going strong.

Meanwhile, commodities are now heavily oversold. In the span of just 60 days, the world has become obsessed with deflation. Just a few short months ago, inflation fears ruled the markets. That’s a major flip-flop. Commodities are not good deflation-based hedges. Like most assets, commodities decline amid deflation.

In my eyes, the U.S. government has played a big role “talking down” commodities by attacking oil trading speculation. The government blames hedge funds and other speculators for US$147 oil in July. Nonsense.

Was the government helping these same speculators when oil was trading at US$15 back in 1998? Of course not. In an election year, it’s really no surprise the Feds are targeting oil prices. They wanted lower oil prices and they got it.

The macroeconomic picture is also a factor hitting commodities.

The global economy is slowing this fall. Europe is several months behind the United States in this credit squeeze and Japan is basically in recession again. But the emerging markets should get a dose of good news as oil and food prices have plunged by about 25% since July.

These countries, including China, will continue to expand even at the expense of weaker exports. China, India and many other emerging markets are piling billions into domestic infrastructure projects. I’m expecting these and other domestic projects to keep these markets humming until the West can stabilize credit markets.

Commodities are in a brutal correction. We saw similar dramatic pullbacks in 1974-1976 before the sector resumed its historical bull market run to its peak in 1980. It isn’t over yet.

The contrast was telling: there was India’s central bank sending a strong signal that it will not tolerate high inflation by announcing a larger than expected increase in its key lending rate and threatening more measures to come.

And there was US ratings agency; Standard & Poor’s lifting China’s credit rating one notch to A-plus from A, despite all the poor publicity about the Olympics.

They are not directly related, but they do point to the de-coupling going on in the so-called cornerstones of the emerging economies. 

China, for all its problems is still travelling fairly well with growth and exports slowing, but inflation falling; India is gripped by surging inflation and falling growth.

Surging oil prices and subsidies are undermining the Government’s economic record and boosting inflation, in China firm price controls remain in place, but a black market continues and when the games finish, the question is whether the controls will be relaxed.

And if that happens, will inflation return to the upswing, from the present 7.1% annual level?

But Standard & Poor’s said it upgraded China’s debt ratings because of the improved fiscal and external positions in the world’s fastest-growing major economy.

The long-term sovereign credit rating was raised to A+, the fifth highest on its scale, from A, and the outlook is stable. The short-term rating was increased to A- 1+, the highest notch, from A-1.

That means China has the same short term rating as the heavily indebted US economy.

“The ratings upgrade is motivated by China’s improving fiscal and external position,” Standard & Poor’s said in a statement.

China’s economy grew 10.1% in the second quarter from a year earlier, but that was the fourth straight quarter of slowing growth as exports slowed.Growth ran at 11.9% last year

But in India a very different story, for all the positive news about growth and business opportunities.

The Reserve Bank of India’s increase in the benchmark “repo” rate by 0.50% to a seven-year high of 9% represents the third time in two months that the bank has raised interest rates to try and bring inflation under control.

Inflation is at a 13-year high of nearly 12%, much higher than China, or its other emerging economy rival, Brazil.

The RBI also increased the cash reserve ratio by 0.25% to 9%. 

That’s the amount of funds banks must keep on deposit at the central bank and is the same mechanism China’s central bank is using to try and slow activity. China’s rate is around 17.5%.

The Reserve Bank of India cut its forecast for economic growth this financial year by 0.50% to 8%.

Rising oil and food prices have given India a big headache with inflation that is nearly triple its levels at the beginning of the year and more than double the RBI’s target of under 5.5%.

A national election has to be held before May next year and the government has been under pressure from bans on exports of essential food items and raw materials and cancelled futures trading of important commodities to try to rein in prices. 

These moves have been done to try and hit inflation, but they seem to have backfired, as inflation has risen regardless of these attempted control measures.

RBI governor Yaga Venugopal Reddy said in the statement that it was critical to demonstrate “a determination to act decisively” against inflation.

But he said he was confident India could still sustain a relatively high rate of growth of 8%, which doesn’t seem to be possible, given what’s happening in the wider economy.

The Governor has lowered his forecast by one percentage point to 7.2% for the year ending March 2010 and the central bank conceded that it had lost ground in its battle against inflation, saying while it would prefer to see it at 5%, while a more realistic target for the end of the March 2009 financial year would be 7%.

The RBI has been raising borrowing rates since 2004 to try and control cost pressures.

India’s inflation rate is 11.91% as higher prices of gasoline and diesel fed into the economy.

The central government will pay around $US43 billion in oil subsidies, even though it has allowed prices to rise by a small amount.

Standard & Poor’s said this month that India’s BBB- credit rating, the lowest investment grade, may be cut to junk if the faster inflation and higher government spending ahead of the election increases the budget deficit.

The Indian government has waived $US17 billion of farm debt and kept those oil subsidies.

There’s a long way from India’s rating and China’s which now reflects that it is approaching advanced country status.

Aug. 1 (Bloomberg) — China is restricting approvals for share sales to keep new supply of equities from putting additional pressure on the world’s worst-performing major stock market, two people familiar with the matter said.

The China Securities Regulatory Commission is delaying the issuance of written approval documents, the final regulatory stage, to companies preparing initial public offerings, said the people. They declined to be identified because they aren’t authorized to speak publicly on the matter.

Shang Fulin, chairman of the securities watchdog, is trying to cushion a market that plunged 47 percent this year, making the CSI 300 Index the worst performer among the 20 biggest benchmarks. About a third of IPO applications were rejected last month, compared with 8.3 percent when stocks peaked in October, based on data from the regulator’s Web site.

“Controlling share sales is an important tool for CSRC, and it’s effective in the short term,” said Leo Gao, who helps manage the equivalent of $2.3 billion at APS Asset Management Ltd. in Shanghai. “More stock sales in a bear market is bad news” for investors.

There were 91 billion yuan ($13.3 billion) of IPOs in China in the first half, a 26 percent drop from the same period a year earlier, according to data compiled by Bloomberg. The CSI 300 fell 0.9 percent at 9:35 a.m. local time today.

Great Wall Motor Co., China’s largest maker of sport- utility vehicles, had its application for a secondary sale in Shanghai rejected by regulators on July 14.

Olympic Jitters

Olympic jitters may have added to the urgency of supporting the stock market, said Leslie Phang, Singapore-based head of investment at the private-client unit of Schroders Plc, which oversees about $260 billion globally.

“The CSRC is trying to stabilize the market ahead of its hosting of the Olympics this summer for reasons of face,” Phang said. “But these measures can only provide a short-term boost and it’s fundamentals, such as higher oil prices and production costs, that will affect China’s stock market.”

The Olympics, China’s $70 billion coming-out party, kick off on Aug. 8 with the opening ceremony. The run-up to the games has been marked by complaints about air pollution and restrictions on press freedom.

Shang vowed July 30, during the regulator’s semiannual supervision working meeting, to make the market more stable. He said in June that he will “rationally balance supply and demand in the capital market and adjust the pace of financing in an orderly way,” without elaborating.

A CSRC spokesman, who declined to be identified, said he had no comment.

Share Sale Queue

Stock markets around the world have been falling as global growth faltered, a 60 percent gain in the price of crude oil in the past year fanned inflation, and the subprime crisis led to about $470 billion in losses and writedowns at financial firms.

The Chinese government has implemented measures to curb inflation and rein in liquidity. The government capped the amount banks are allowed to lend this year, and the central bank raised the proportion of deposits banks must set aside in reserve five times in 2008 to a record 17.5 percent.

There is a queue of companies waiting for written approval documents from the CSRC’s general office before they can proceed with share sales, and no timetable for giving them the go-ahead, said the people. The watchdog applies these internal controls based on its perception of market performance and the outlook.

Still, the CSRC is open to letting smaller share sales proceed, one of the people said.

Tepid Demand

On top of delays to the final approvals process, the CSRC has also stepped up scrutiny of share sale clearance given by the Public Offering Review Committee, one step before the final document that allows the sale to go ahead is issued.

CSRC’s listing panel on April 14 rejected the IPO application of Jincheng Blue Flame Coal Industry Co., according to a statement posted on the regulator’s Web site. China’s second-largest anthracite coal producer by 2006 output had planned to sell shares to help fund 9.5 billion yuan of investments.

China State Construction Engineering Corp. has yet to obtain the green light to start its Shanghai IPO after gaining the CSRC listing panel’s approval June 5.

Sales that were approved have met flagging demand. Haitong Securities Co. ended up the biggest shareholder of Shanghai Pudong Road & Bridge Construction Co. last month after failing to sell three-quarters of a stock offering it underwrote.

Citic Securities Co., China’s second-biggest brokerage by market value, had to buy 407.4 million yuan of shares in Shanxi Taigang Stainless Steel Co. this week that it couldn’t sell in an additional stock offering.

* Dollar rises against yen after U.S. durable goods

* Housing, sentiment data to come

* Oil recovery, equities remain in focus (Adds comments, byline, updates prices)

By Wanfeng Zhou

NEW YORK, July 25 (Reuters) - The dollar rose against the yen on Friday after a government report showing an unexpected rise in durable goods orders eased worries over the U.S. economy.

The solid reading lifted sentiment on stocks and spurred a recovery in risk appetite, putting pressure on the low-yielding yen. The dollar also pared some of its losses against the euro.

Durable goods orders were up 0.8 percent in June, after a revised 0.1 percent gain in May, the Commerce Department said on Friday. When volatile transportation orders were excluded, orders climbed 2 percent last month, the sharpest rise since December. For details, see [ID:nN24332112].

“All in all, a strong piece of data for the U.S., in contrast with fresh signs of weakness in Europe and the UK,” said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey. “I think stocks will like it, yen crosses will too, and the dollar also.”

In early trading in New York, the dollar rose 0.3 percent to 107.72 yen

The euro traded 0.2 percent higher at $1.5700 <EUR=>, still roughly 3 U.S. cents below a record high set in mid-July.

The euro also jumped 0.5 percent to 169.05 yen <EURJPY=>.

MORE U.S. HOUSING, CONSUMER DATA

Despite getting a boost from the much-stronger-than-expected durable goods orders data, sentiment on the greenback remained cautious as market participants awaited more U.S. data later in the day, including new home sales for June and a consumer sentiment poll for July.

Against a basket of six major currencies, the dollar remained 0.2 percent lower at 72.791, retreating from Thursday’s two-week high .DXY.

The Commerce Department’s housing data will be closely watched after disappointing news on existing home sales released on Thursday sent the dollar down sharply against the yen.

But some analysts said that the scope for weak U.S. data to hurt the dollar was limited as a fairly negative U.S. picture is already priced in, and euro zone economic data has also been coming in on the weak side.

“The expectations are for lower readings across the board, but the impact of FX trade may depend on the degree of the decline,” Boris Schlossberg, senior currency strategist at DailyFX.com, said in a research note.

“With markets already so preconditioned to bad economic news from the U.S., the greenback may not weaken much further unless the data shows substantial deterioration from the prior month.”

The euro edged higher on Friday despite figures showing a slowdown in money supply growth [ID:nFAE002362].

The single currency hit a two-week low against the dollar on Thursday after data showed German business sentiment suffered its biggest drop since September 2001, while euro zone PMIs pointed to contraction in both the services and manufacturing sectors. (Additional reporting by Gertrude Chavez-Dreyfuss in New York and Naomi Tajitsu in London, Editing by Jonathan Oatis)

Bank earnings, as you can see, aren’t giving the market much inspiration. In fact, despite a good lead from Wall Street on Friday, they’ll probably help push the market lower.

Aside from Earnings, there are two other market-moving Es to keep track of: Energy and the Economy. There’s some great news about Energy further down…and it’s not even a fall in the oil price.

But the Aussie economy isn’t giving away any clues this week. Don’t camp out for any big announcements. Not in Australia anyway.

Over in the US though, house prices and unemployment numbers come through on Wednesday and Friday. They might be good or bad.

Actually, scratch that. They will be bad.

But the Dow Jones doesn’t care about quality…it only really gives a hoot or two if numbers surprise analysts. Be prepared for a chain reaction if that happens. A worse-than expected economy equals falling US stocks. Falling US stocks are, in the absence of anything important happening here, a bad omen for the ASX.

The All Ordinaries is sitting just above a key support line. That makes any big event more important than usual.

So we’d rather just watch the market this week. It doesn’t quite have a clear direction yet. And those US releases have the potential to louse things up again.

We did notice two key developments in the resource sector though.

China’s actual growth rate is now irrelevant: like all statistics it’s essentially a backward looking system of measuring growth in Gross Domestic Product. China’s growth remains solid, but it is slowing: the 10.1% annual rate in the June quarter was the slowest since 2005 and it had an immediate impact on global markets, pushing oil down to its lowest level in six weeks and under $US130 a barrel. The question we now have to wonder about is: is this temporary, structural, or simply the Chinese economy slowing after several years of pell-mell growth. And, remember, ’slowing’ is relative. China is not slowing like the Australian economy, nor will it end up like the Japanese, US or European economies. It could be just a normal reaction to a tightening of monetary policy by the authorities to prevent a highly inflationary bubble developing. It matters here in Australia because if it’s slowing sharply (to a level that will still be solid by any measurement), it will have a knock-on effect here on share prices, on economic growth, inflation and interest rates over the next year, at least. Figures released yesterday show that China’s GDP grew 10.1% in the second quarter from the second quarter of last year; down from 10.6% in the March quarter, and noticeably lower than the upwardly revised 11.9% average for all of 2007. And, as ‘leaked’ to Western newsagencies late last week, inflation slowed to 7.1% in June, from 7.7% in May and over 8% in earlier months.  However factory-gate inflation accelerated to 8.8% – the fastest annual rate since the mid-1990s – from 8.2% and possibly a more accurate signal on the price pressures in the Chinese economy, given the extensive price controls. The economy is clearly slowing and it raises the following questions: do the official numbers acknowledge this slowdown fully? And what does this slowdown mean for the sharp appreciation in the Chinese currency, which is up 21% since it floated three years ago; with a noticeable acceleration in the rate of increase in recent months. That appreciation has helped cut the cost of imports, enabling Chinese steel mills for instance to pay huge price rises for Australian iron ore and coal. RBA Governor, Glenn Stevens made the significant point in his speech this week in Sydney that emerging economies should be taking action to slow growth to help take the pressure off western economies and central banks. He said that emerging economies had been running loose and accommodating monetary policies, and even though growth was still strong, so was price inflation. That’s a view that was supported by the International Monetary Fund overnight which urged emerging economies to fight inflation by lifting interest rates. Central banks in Thailand, Vietnam, Indonesia, India, The Philippines and South Korea have all tightened policy in recent months as inflation has soared, driven by accelerating oil and fuel costs and a surge (now easing) in food prices. China has been trying to slow its economy through old-fashioned attempts to restrict credit growth through quantitative controls like increase the size of the reserve asset ratios banks must use to quarantine more assets from

Interest rates have not risen and still remain negative, even as inflation eases. Loan quotas are also being used, and outright bans have been reported.

Like its neighbours, China is walking a tightrope between slowing growth and surging inflation.

Price controls remain in place even though there are reports that China faces a tough summer of power shortages because of soaring coal prices and inadequate pricing has forced many small, polluting power stations to shut down. Lead, zinc and aluminium processors have cut production for the next quarter to try and help limit their demands on power supplies, but also to try and bolster sinking world prices.

Much might change later in the year, after the Beijing Games are over and foreigners have left China. Price controls might come off and then there’s the rebuilding of the earthquake hit parts of Sichuan which will boost the economy (which should in turn boost Australian resource suppliers because more steel will be needed).

The question for after the games is: will the Government allow China kick higher, having had the economy settled with some tightening, or will the slide continue (the stockmarket is depressed, compared to the seemingly endless boom of last year)?

If China rebounds towards the end of this year, where will oil copper and a host of other commodity prices end; higher?

We should not underestimate the fear the Chinese Government has of social unrest, driven by rising food costs and scattered examples of dissent (Tibet and Muslim separatists are the current groups of interest for the security authorities).

Those fears are why price controls were imposed last year, despite their distorting effect on oil prices, profits, demand and the market; its why controls were imposed on power charges, food prices and a host of other state costs.

Second quarter growth was the slowest since 2005. Exports are easing because of slowing demand in the US and to a lesser extent Europe and Asia. Imports are soaring because of the impact of the more expensive Yuan and price rises for oil, coal, iron ore, grain and oilseeds.

Second quarter GDP growth cooled for the fourth straight quarter.

China’s export growth slowed to 21.9% in the first half from 25.7% for all of 2007, as US demand weakened, and prospects for the rest of the year have deteriorated.

Price pressures have has eased from February’s 12-year high of 8.7% on smaller gains in food prices and those price controls.

Will the government relax controls straight away or phase them out? Phasing them out would allow a slower rebound in prices.

And, will the Games mean another slowdown in growth as businesses are closed for a month in and around Beijing?

Post-games, there could be a rebound in the 4th quarter simply for that reason, while inflation could rise as well.

Japan’s wholesale inflation rate rose to a 27-year high last month companies raised prices to counter record oil and commodity costs, the country’s trade balance narrowed; Singapore’s economy has slowed and the central bank in South Korea left its key rate steady at a seven year high…it was another mixed day economically from the fastest growing region of the world. And China’s exports slowed in June in the first of a series of updates due over the next week on how the Chinese economy is travelling. Reports on inflation, industrial production for June and the first half of 2008 are expected, along with retail sales. China’s Customers Bureau said overseas shipments rose 17.6% in June from the same month a year ago, down on the faster 28.1% growth rate of May. China’s export growth in the first half was the slowest for five years; just 7% - down from sustained growth rates above 20% in the same half of 2007. The June figure for this year for export growth was much slower than the 25%-plus rate in June of last year. Economists said the slowdown reflected the appreciation of the Yuan, which has now risen 21% against the US dollar since being allowed to float (sort of) almost three years ago.  It also reflects the slowing demand from the US and Europe for Chinese goods. The Chinese authorities are allowing the currency to move higher more quickly to help put a lid on the surging cost of raw materials like oil, coal, iron ore and grains. But this has come at a cost of slowing exports gains. The Customs Bureau said this resulted in a sharp fall in the trade surplus which shrank 20% from June 2007 to last month when a surplus of $US21.4 billion was posted. That was third monthly fall in a row and followed an acceleration in imports which rise 31% in June, compared to June last year. That was after a 40% jump in May. The Yuan has gained 21 percent against the dollar since a fixed exchange rate was scrapped in 2005. It has risen 14 percent against the yen and fallen 7 percent versus the euro. One of the more important statistics to be released in the next week or so (besides inflation) will be the quarterly growth figure and the figures for the first half of 2007. China’s economy has slowed each quarter since hitting an annual growth rate of almost 12% in the middle quarters of Calendar 2007. First quarter growth this year was 10.6% and the figure is expected to be a touch down on that rate when released next Thursday. The slowing in China’s trade can be seen from the 21.9% annual rate for the June half, and the 30.6% growth rate in imports. That knocked 11.8% from the trade surplus for the June six months which still was an impressive $US 99 billion.   In Japan producer prices surged at an annual rate of 5.6% in June, compared to June 2007, up from the 4.85% revised rise in the year to May. Higher prices for oil, wheat and soybeans, coal, iron ore, natural gas are driving the rise in costs for business: some have double din the past year: the Bank of Japan’s overseas commodity index is up 71% higher than it was in June of 2007. The higher producer costs are feeding into consumer prices, and inflation excluding fresh food will probably exceed 2% within the next month or so, according to Tokyo economists. Core consumer inflation rant at 1.5% in May. Compared to Australia, (4.2% (Europe 4%) and the US (4%), Japan’s inflation doesn’t look to be a problem. But in the context of the Japanese’s economies long battle with deflation it is. The surge in steel and other costs are likely to have fed through into the prices of cars and other goods within the next month or so and that will produce consumer inflation at the core level (without fresh food or oil) compared to the 0.1% drop in prices in May. Meanwhile the surging cost of oil and the slowing economic growth in its major markets has again squeezed Japan’s trade account.

For the third month in a row, Japan’s trade surplus shrank under the pressure of record oil prices pushed up the import bill and export growth slowed.

Imports rose 4%, compared with 13.4% in May and exports rose 4.2% compared to the 4.9% in the year to May.

Gross Domestic Product rose by 1.9% in the June quarter, sharply slower than the 6.9% annual rate in the three months to March. The figure was much slower than forecasts from the market.

Surging fuel and food costs, which have pushed Singapore’s inflation to a 26-year high, have also left consumers with less to spend.

The Bank of Korea last week raised its 2008 inflation forecast to 4.8% from December’s prediction of 3.3%. Economic growth will slow to 4.6% this year from 5% in 2007. 

Inflation hit an annual rate of 5.5% in May and yesterday the Bank of Korea left its key interest rate unchanged despite the sluggish economy and ailing trade performance.

In Malaysia the country’s central bank has warned that soaring food and energy prices may hurt household spending and restrain economic expansion in this year to below its March forecast of 6%. 

New growth estimates for Malaysia will be released later this month.

Judging by Singapore’s experience, that’s highly possible.

Singapore’s Government still expects annual growth in 2008 of between 4% and 6%, so an up turn in this half is anticipated.

Manufacturing fell in the quarter from a year ago, compared to the 12.7% rise in the first quarter.

Trade figures show Singapore’s electronics exports have fallen for 16% months in a row and pharmaceutical exports fell in April and May. 

Electronics account for about 30% Singapore’s manufacturing and drugs an estimated 22%, so when both are in trouble the sector as a whole suffers, as we saw in the June quarter.

Final growth figures will be released next month for the quarter and will include more up to date numbers for the whole quarter, with final for June included.

Elsewhere in Asia, the Philippine Economic Planning Secretary Augusto Santos warned this week that the government may lower its 2008 growth target for a second time with inflation at a 14 year high.

Bank Indonesia, which has raised interest rates for three consecutive months, has now warned that might impose extra non-cash reserve requirements on lenders to slow inflation which is now at a 21 month high.

The central bank reckons that year-on-year inflation will start dropping this month from a 21-month high of 11.03% and fall to around 6.5% by the end of 2009, if no further shocks hit the economy.

Inflation has spiked since the government raised prices for subsidised fuel by 28.7% in May in the wake of soaring global oil prices .Indonesia now imports more than half its petrol and diesel needs.

A record rice crop is expected to take pressure off inflation as well, and that will also help ease social pressures.

The Indonesian Government believes economic growth is slowing, but still running above 6% annually.

NEW YORK - Wall Street stocks fell following hefty market swings as investors fretted about the opening of the second quarter earnings season, sensing major banks could unveil further losses.
The leading Dow Jones Industrial Average declined 56.58 points, or 0.50 points, to end at 11,231.96. The Dow recovered some ground after falling over 100 points in earlier trading, partly on worries that corporate earnings may disappoint.
The tech-heavy Nasdaq composite dropped 2.06 points, or 0.09 per cent, to 2,243.32 while the Standard & Poor’s 500 index fell 10.59 points, or 0.84 per cent, to 1,252.31.

LONDON - Britain’s leading share index ended up almost two per cent as energy companies rebounded after last week’s fall, while lower crude prices boosted travel and leisure companies.
The FTSE 100 closed at 5,512.7 points, up 99.9 or 1.85 per cent.

FRANKFURT - The DAX index ended at 6,395.75 points, up 123.54 or 1.97 per cent.

PARIS - The CAC-40 index closed at 4,342.59 points, up 76.59 or 1.80 per cent.

TOKYO - The Nikkei stock average climbed 0.92 per cent on a softer yen and gains in other Asian markets, breaking its longest losing streak in more than half a century.
The benchmark Nikkei ended up 122.15 points at 13,360.04, its first gain after 12 days of losses.

HONG KONG - Shares jumped 2.28 per cent in their biggest gain in 13 weeks, on the back of strong advances in Chinese financials after positive earnings estimates from three banks.
The Hang Seng Index closed up 489.24 points at 21,913.06 after opening slightly lower.

WELLINGTON - The sharemarket toppled back into negative territory, erasing half of Friday’s two per cent bounce.
The NZSX-50 benchmark index fell 1.15 per cent, or 36.47 points, to 3121.44 on a sluggish $69 million turnover.

SYDNEY - The Australian share market is expected to open lower today after US equities declined overnight as financial companies fell on concerns they may have to raise more capital.
At 0811 AEST on the Sydney Futures exchange, the September share price index futures contract fell 47 points to 4,984.
In economic reports today, Dun & Bradstreet releases its business expectations survey for the September quarter.
National Australia Bank Ltd releases its monthly business survey for June.
In company news, Telstra Corporation Ltd group managing director public policy and communication Phil Burgess will address the American Chamber of Commerce in Australia on “two cultures re-examined.”
The local market declined yesterday as investors continued to fret over an economic slowdown and were spooked by a profit downgrade from property trust GPT Group.
The benchmark S&P/ASX200 index fell 79.6 points, or 1.57 per cent, to 5002.5, while the broader All Ordinaries dropped 78.3 points, or 1.51 per cent, to 5091.7.

NYMEX
US crude futures fell sharply Monday on a stronger dollar, profit-taking after last week’s surge above $US145 a barrel, and some optimism that Iran and the West may show some flexibility in negotiations over Iran’s nuclear program.
The view that Hurricane Bertha will avoid damaging Gulf of Mexico energy operations also was cited by traders as a factor pressuring crude oil.
On the New York Mercantile Exchange, August crude closed down $US3.92 or 2.7 per cent at $US141.37 a barrel.
A NYMEX record high price of $US145.85 was hit on Thursday.
In London, August Brent crude was down $US2.15 at $US142.27 a barrel.
The dollar hit 1-1/2 week highs against a basket of major currencies on Monday. It was up against the euro.
Iran’s foreign minister on Sunday expressed optimism about what he said was a “new environment” for talks with major powers over its nuclear program.
Hurricane Bertha should remain out of the Gulf of Mexico for at least the next five days, the U.S. National Hurricane Center said in an advisory on Monday.
August RBOB was down 8.80 cents, or 2.46 per cent, at $US3.4830 per gallon. It reached a record $3.5927 on Thursday.
August heating oil fell 11.94 cents, or 2.91 per cent, to $US3.9866 a gallon. It also reached a record $4.1350 on Thursday.

COMEX
Gold prices slipped along with oil on Monday in response to a rising dollar, but the yellow metal later trimmed those declines when the US currency erased its gains on the euro.
The dollar retreated when US equity markets extended their losses, amid falling energy shares and renewed credit market concerns.
Gold pulled off early lows to $US926.00 an ounce, though was still lower than $US932.50 an ounce in London on Friday, when US markets were closed for the Independence Day holiday.
Earlier, it touched a session low of $US914.50 an ounce, nearly two per cent below the level it traded at on Friday.
In New York, the August gold contract finished $US4.80 lower at $US928.80 an ounce on the COMEX division of New York Mercantile Exchange after falling as low as $US916.30.
Platinum group metals prices also slid, with platinum shedding 1.5 per cent to a one-month low and palladium just under one per cent weaker, as investors took profits after the metals’ recent gains, amid fears demand may slacken.
Platinum is chiefly used to make autocatalysts. Investors fear that falling car sales could hit PGM consumption, as the US economy falters.
Spot platinum was trading at $US1,973.00, its weakest level since June 5, down from $US2,009.00 in London on Friday.
Platinum has lost 13 per cent in value since hitting a record of $US2,290 in March. The metal, also used in jewellery, had rallied after a power crisis in main producer South Africa disrupted mining and sparked fears of a supply deficit.
Spot palladium slipped to $US446.50 an ounce from $US452.50 an ounce, while silver dropped to $US17.60 an ounce from $US18.07 late in London — well below an 11-week high of $US18.46 hit last week.

LONDON METAL EXCHANGE
Aluminium rallied five per cent to a fresh record on Monday as investors bet on higher prices of the energy-intensive metal amid escalating worries over power problems in the world’s biggest producer, China.
The metal used widely in packaging, transport and power jumped to $US3,327 a tonne, exceeding a previous record high of $US3,310 per tonne in May 2006. Three-month aluminium closed at $US3,310 a tonne on the London Metal Exchange, up $US142 from Friday.
The rise was triggered by Aluminium Corp of China (Chalco), which said the firm’s two aluminium smelters — with combined capacity of 500,000 tonnes — in Shanxi province had tight power supplies.
China’s aluminium smelting capacity is expected to reach 15 million tonnes by the end of the year compared with about 12 million tonnes in January, analysts say.
Copper ended at $US8,412 a tonne from a session high of $US8,590 and compared with $US8,470 a tonne on Friday. The metal used in power and construction is down nearly six per cent since hitting a record high of $US8,940 last week.
In New York, copper for September delivery ended down 10.00 cents, or 2.5 percent, at $US3.8490 a pound on the the New York Mercantile Exchange’s COMEX division.
Last week, the COMEX September contract peaked at $US4.08, its highest level since the May 5 record at $US4.22.
In other metals, zinc was up at $US1,840 a tonne from $US1,780 on Friday. Last week the metal used for galvanising steel fell to $US1,750 a tonne, its lowest since December 2005 as funds sold on expectations of rising supplies and stocks.
Lead gained to $US1,630 from $US1,565, nickel was at $US21,000 a tonne from Friday’s last bid at $US20,550 and tin was at $22,750 compared with $US22,400.

INTERNATIONAL NEWS

WASHINGTON - Singapore has shown interest in possibly buying up to 100 of Lockheed Martin Corp’s F-35 Joint Strike Fighter aircraft over coming decades, matching Israel’s tentative plans, the general in charge of the program for the Pentagon said.

WASHINGTON - Large-scale government intervention in the US housing crisis would be counterproductive and prevent a “necessary” correction in home prices, according to a Federal Reserve study released Monday.

WASHINGTON - The US Federal Reserve and the Securities and Exchange Commission said Monday that they had agreed to deepen ties to better monitor cash-strapped banks which are reeling from a credit crunch.

NEW YORK - US beer giant Anheuser-Busch said Monday a move by Belgian-Brazilian rival InBev to oust the board of the American group was a “self-serving” effort that failed to alter an inadequate takeover bid.

SAN FRANCISCO - Microsoft said Monday it is willing to reopen talks on a “major transaction” with Yahoo if the Internet giant replaces its board of directors.

BRUSSELS - Eurozone finance ministers threw their support on Monday behind the European Central Bank after it raised interest rates last week, leaving France isolated in its criticism of the ECB.

BRUSSELS - Signs of an economic slowdown are on the rise in the 15 countries sharing the euro while oil prices are likely to remain high, the head of the Eurogroup of eurozone finance ministers warned Monday.

VIENNA - Austria’s troubled grand coalition of conservatives and Social Democrats called it quits, as the vice-chancellor pushed for early elections after months of bitter wrangling.

BAGHDAD - Iraqi Prime Minister Nuri al-Maliki said on Monday he is negotiating a deal with Washington that will for the first time set a timetable for a withdrawal of foreign forces as part of a framework for a US troop presence into next year.

LIMA - Peru’s Perupetro and India’s Reliance Industries have set up a partnership to drill for oil and gas in potential oilfields in Peru, the president of Peru’s state-owned oil company said Monday.

LOCAL NEWS

PERTH - Free permits will not be a regular feature of Australia’s carbon trading scheme, West Australian Premier Alan Carpenter says.

MELBOURNE - Murchison Metals Ltd has vowed to stifle Sinosteel Corp’s $1.36 billion takeover bid for Midwest Corporation after the Chinese commodity trader refused to support a merger of the two iron ore companies.

Stocks to watch on the Australian stock exchange today:

GPT - GPT GROUP - down 36 cents, or 14.63 per cent, to $2.10
The property trust cut full-year operating income guidance by 27 per cent, sending shares in the company to a 24-year low, with the credit crisis forcing the company to put off asset sales.
Operating income for the 12 months to December will be $464 million rather than the $633 million forecast, Sydney-based GPT said.
The company also revised its distribution guidance to 20 cents per share.

BHP - BHP BILLITON LTD - down 95 cents to $39.75
Australia’s biggest oil and gas producer, has started first production from the $1.16 billion Neptune oil operation in the Gulf of Mexico, more than six months later than originally scheduled.
The 50,000 barrel per day facility was originally expected to be in production by the end of December, but that date was deferred until the end of March.

BFG - BELL FINANCIAL GROUP LTD - up 19.5 cents to $1.12
Bell has agreed to buy Southern Cross Equities for an expected $150 million in cash and scrip to create Australia’s largest independent broker.
Bell also announced that its net profit for the six months to June 30, 2008, fell 46 per cent to $9.0 million on lower corporate fee income and a reduction in brokerage revenue.

ILU - ILUKA RESOURCES LTD - down three cents to $4.49
Iulka has been granted a mineral lease for the Jacinth-Ambrosia mineral sands deposit site in the Eucla Basin in South Australia by the South Australian government.
The $420 million project, located 200 kilometres northwest of Ceduna, is expected to produce about 300,000 tonnes of zircon per year from 2010.
The granting of the mineral lease allows Iluka to proceed with various approvals to start infrastructure work, including roads and the establishment of water and power supplies.

MIS - MIDWEST CORPORATION LTD - unchanged at $6.38
Sinosteel Corp, China’s second largest iron ore trader, is close to gaining control of Midwest after increasing its stake in the iron ore miner.
The Chinese trader, which is pursuing a $1.36 billion takeover of Midwest, has upped its stake from 43.62 per cent to 45.58 per cent.

America was closed, Europe and Asia sagged, oil retreated a little, and other commodity prices were leaderless: American holidays continue to emphasise the primacy of US markets in setting global price levels in a wide range of products. European markets fell 2.7% (some individual markets were off more, some less); US markets were off around 1.2% or a bit more (but closed on Friday), Asia was down more than 3% and Australia was off 3%-plus as well, despite Friday’s rise. Our market will be flat to slightly weaker today judging by the futures market Friday night. Friday’s rise here was a bit of a ‘con job’ by punters looking to exploit higher commodity prices, and not worrying that the US markets were closed or the European markets were unsettled. There was this belief that the poor US jobs figures were ‘good news’ because the 62,000 jobs lost meant US interest rates were not rising any time soon. Jobs losses in the US are going to worsen in coming months.  US investors and some local optimists still don’t understand that 2008 earnings in the US, Europe and here are going to worsen, before they get better and that forecasts for a big rebound in 2009 are off the planet. Some forecasts have US earnings rising 20% in 2009. The AMP’s chief strategist, Dr Shane Oliver said in a note on Friday that “It’s anyone’s guess as to where it will go in the short term. If the oil price continues to surge then shares will remain under pressure, if it falls back then shares will have a great rebound. “The high and still surging oil price along with slowing growth virtually everywhere, inflation worries and high bond yields are all short term headwinds for shares. Furthermore, the period out to September/October is often rough for shares.  “As such, it remains a time for investor caution and this is likely to be the case for the next three or four months. “Although the next few months are likely to remain rough with further falls possible, we still see shares rallying sharply in the December quarter as the oil price falls back to a level more in line with supply and demand fundamentals, the economic outlook starts to improve and investors start to take advantage of attractive share valuations. The last quarter of the year is normally strong. “Australian shares are now trading on their lowest forward PE since 1996 and their highest dividend yields since 1991, when bond yields were above 10%. See the above chart.  “While industrial companies are likely to see profit downgrades, current share prices are implying a greater than 20% slump in overall profits and this seems very unlikely. Prices from their highs last year they are currently trading on an 8.8% distribution yield, which is their highest since June 1996.  “Even if average distributions are cut by 10%, this still makes for a very attractive yield. “After the sharp rise in yields in the last few months, made worse by recent inflation fears, bonds should provide better returns over the next six months as yields decline if as we expect global growth keeps slowing and inflation fears abate. “While the ride for the $A will remain volatile, Australia’s strong terms of trade and high relative interest rates are supportive of further gains.  “We remain of the view that it is only a matter of time before parity is reached. The elimination of the monthly trade deficit on higher iron ore and coal prices will also likely be a positive for the $A.” But Goldman Sachs JBWere said in a commentary during the week: “During FY08 the Energy and Resources outperformed significantly and the only sectors to post positive returns.

“The brunt of the selling was experienced in Consumer Discretionary, REIT’s, Industrials and Financials which experienced declines exceeding 25%, the majority of this occurring over the last 6 months.

“To date the share price declines have been driven largely by PE deratings in anticipation of increasing earnings risk with relatively little by way of negative earnings revisions coming through outside of those companies with excessive leverage.

“The economic data flow during June provided further evidence that the domestic economy is slowing, with retail sales, building approvals and credit growth all continuing to soften. 

“Employment growth turned negative, recording the first fall in 18 months while the RBA kept rates on hold after confirming inflation is high and demand will need to slow.

“The AUD remained strong ending the month at 96.6¢ (+1¢).

“The key issue for investors remains the trade-off between risks to corporate earnings in light of a rapidly deteriorating domestic economic outlook and increasing inflation risks; versus increasingly attractive valuations for equities.

“We continue to favour defensive sectors over domestic leverage heading into the key August reporting period, particularly given the increasing uncertainty in the domestic earnings outlook over the next 6 months. 

“The potential for the USD to find support as sentiment around credit availability improves, suggests stocks with offshore earnings could outperform during FY09.”

The UK index has fallen 19.6% from its peak in October, leaving it just short of the 20% fall from a recent high that defines a bear market. (It dipped into the bear’s den briefly, before a small recovery.)

Friday’s 1.2% fall in London though capped a miserable week for shares around the globe: earnings are under pressure, especially in retailing; the credit crunch hasn’t gone away and continues to devour housing; oil is the big imponderable and that is making inflation more dangerous than it has been for 20-30 years.

According to figures in the weekend media in London the retail investors have deserted European markets in recent months, with $A65 billion of shares sold in the first five months of this year (that was after $A70 billion was sold off in the last five months of 2007).

The Dow joined the FTSE Eurofirst 300, Japan’s Nikkei 225 and the MSCI Emerging Markets index in bear territory.

National indices fell in all 18 western European markets. Germany’s Dax Index fell 2.3% and France’s CAC 40 3%. The FTSE 100 lost 2.1% over the week.

The MSCI Asia Pacific Index was down for a loss overall for a fourth successive week that has seen the index shed more than 12% in that time.

Futures on the Standard & Poor’s 500 Index fell 0.7% in European trading.

The MSCI World Index had its fifth weekly drop. Bloomberg reckons that more than $US11 trillion has been cut from the value of global sharemarkets so far in 2008.

Credit crunch related losses from subprime failures and dodgy securities, write-downs, bonds, corporate deals and other high leverage products are estimated to have topped $US400 billion so far, but the surging oil price, high food costs, slowing economies and accelerating inflation have combined to cut market values in every corner of the world.

The MSCI Asia Pacific Index fell 3.1% last week and Tokyo’s Nikkei fell 2.3% last week, the 12 straight days of losses is the longest losing streak since 1954.

The MSCI Asia Pacific Index is down 16% so far this year.

(Oil is the August contract on the NY Mercantile Exchange (NYMEX). Gold is also the August contract on the COMEX division of the NY Mercantile Exchange, while Silver is the July contract on the COMEX.)

NEW YORK - US stocks fell on Friday, pushing the Dow to the brink of a bear market, hounded by concerns that record oil prices and the seemingly endless credit crisis will further damage the economy.
As the price of oil crossed $US142 for the first time, shares of companies that sell everything from fast food to soap slid as fears mounted that consumers will need to cut back.
The Dow Jones industrial average dropped 106.91 points, or 0.93 per cent, to 11,346.51. The Standard & Poor’s 500 Index fell 4.77 points, or 0.37 per cent, to 1,278.38, while the Nasdaq Composite Index slipped 5.74 points, or 0.25 per cent, to 2,315.63.

LONDON - UK stocks eked out a gain as record high crude boosted energy stocks, outweighing the impact of losses in supermarkets and banks sparked by concerns over the health of the UK economy.
The commodity-heavy FTSE 100 closed up 11.7 points, or 0.2 per cent, at 5,529.9 points.

FRANKFURT - The DAX index ended at 6,421.91 points, down 37.69 or 0.58 per cent.

PARIS - The CAC-40 index closed at 4,397.32 points, down 28.87 or 0.65 per cent.

TOKYO - Japan’s Nikkei stock average slipped 2 per cent to a two-month closing low in its longest losing streak in seven months, with Sony Corp and other exporters battered by growing uncertainty over the US economy, high oil prices and sharp Wall Street losses.
The Nikkei ended down 277.96 points at 13,544.36.

HONG KONG - Hong Kong shares fell 1.8 per cent to a three-month low, as the prospect of lower earnings at major US corporations and speculation of an imminent rate hike in China spooked investors.
The Hang Seng Index closed 413.32 points lower at 22,042.35.

WELLINGTON - The sharemarket plunged to its lowest in more than two years on Friday, joining other markets in hefty declines after Wall Street set a negative tone.
The benchmark NZSX-50 lost 1.98 per cent, or 65 points, to close at 3,226.9.
At 0812 AEST the NZXS-50 was down 3.243 points to 3,223.688.

SYDNEY - The Australian share market is expected to open lower after Wall Street fell on concerns that record oil prices and the seemingly endless credit crisis will further damage the economy.
Resource stocks may gain after commodities including oil, gold, copper and tin advanced.
At 0814 AEST on the Sydney Futures exchange, the September share price index was down four points to 5,258.
In economic news today, the Reserve Bank of Australia (RBA) financial aggregates data for May will be released.
TD Securities-Melbourne Institute Inflation Gauge for June and the Housing Industry Association of Australia new home sales data for May are due to be released.
On Friday, the Australian share market closed lower after a big drop on US markets and a surge in the oil price.
The benchmark S&P/ASX200 index fell 70.0 points, or 1.32 per cent, to 5,237.0 while the broader All Ordinaries lost 72.1 points, or 1.33 per cent, to 5,349.4.

NYMEX
Oil prices rose to a record near $143 a barrel on Friday as a drop in global equities markets sent fresh investors into commodities.
US crude settled 57 cents higher at $140.21 a barrel, as profit taking sent prices from the record $US142.99 hit earlier.
London Brent crude settled up 48 cents at $140.31 a barrel.
Oil prices have jumped more than 45 per cent this year, extending a six-year rally, as supply struggles to keep pace with rising demand from emerging economies, such as China and India.
Additional support has come from a flood of cash from new investors buying up commodities to hedge against inflation and the weak US dollar, which fell further on Friday.

LONDON METAL EXCHANGE
The price of copper rose to its highest level in nearly two months on Friday, boosted by declining warehouse stock levels and impending strike action in Peru, the world’s second-largest producer of the red metal.
Copper for three-month delivery on the London Metal Exchange ended the day at a quoted $8,530/8,535 a tonne after touching $8,559, its highest since May 1. The metal, used in power, packaging and transport, closed at $8,445 a tonne on Thursday.
Aluminium closed at $3,120 a tonne from $3,100 a tonne on Thursday. The metal used in power and packaging touched a three-month high of $3,169 a tonne last week.
Zinc closed at $1,930 a tonne from $1,990 a tonne on Thursday, lead closed at $1,800 from $1,815, nickel closed at $21,950 from $21,800 and tin at $23,350/23,400 from Thursday’s last quote of $23,150/23,200.

COMEX
Gold ended near a one-month high on Friday as record oil prices stirred inflation fears and wreaked havoc on global stock markets, prompting investors to pour funds into bullion.
The US gold contract for August delivery on COMEX division of New York Mercantile Exchange settled up $16.20, or 1.8 per cent, at $931.30 an ounce.
Gold climbed to $930.40 an ounce, its highest since May 27, and was at $927.20/928.20 by New York’s last quote, well above the $912.60/913.60 an ounce it was quoted late in New York on Thursday.
Spot platinum ended at $2,052.00/2,072.00 an ounce from $2,057.50/2,077.50 late in New York on Thursday. Spot palladium ended slightly higher at $465.00/473.00 an ounce from its previous finish of $464.00/472.00 an ounce.
Silver edged up to $17.48/17.56 an ounce from $17.22/17.28 late in the US market on Thursday.

INTERNATIONAL NEWS

BRUSSELS - ArcelorMittal said on Sunday it has increased its stake in Australian miner Macarthur Coal Ltd to 19.9 per cent by buying shares from another stakeholder as part of a strategy to safeguard its raw materials supply.

NEW YORK - Steel tycoon Lakshmi Mittal has joined the board of directors of Goldman Sachs Group Inc, the world’s largest securities firm said on Sunday.

NEW YORK - Even for an industry awash in bad news, the US newspaper business went through one of its most severe retrenchments in recent memory last week.

NEW YORK - Uncertainty will likely reach new highs in emerging markets this week, as concerns about soaring global inflation and a still fragile US economy leave investors walking on eggshells.

LIMA - Miners in Peru, the world’s leading silver producer and second-largest copper and zinc miner, were readying a strike for midnight on Sunday that will see walkouts at the country’s leading pits.

LOCAL NEWS

MELBOURNE - Victorian taxpayers will foot a $300,000 damage bill racked up by employees of the state’s peak road body.

MACKAY, Qld - Treasurer Wayne Swan has flagged a possible increase in the aged pension.

CANBERRA - The NSW government has threatened to pull out of Prime Minister Kevin Rudd’s computers in schools plan unless it gets hundreds of millions of dollars in secret federal funding.

STOCKS TO WATCH ON THE AUSTRALIAN STOCK EXCHANGE TODAY:

MCC - MACARTHUR COAL LTD - $18.00
ArcelorMittal SA, the world’s largest steelmaker, said it has increased its stake in Australian miner Macarthur Coal to just under 20 per cent, days after talks on a possible takeover ended without a deal.

CIY - CITY PACIFIC LTD - down five cents to 34 cents
Fund manager City Pacific cut its operating earnings outlook by as much two thirds after its exposure to the global credit crunch.
City Pacific now expects a fiscal 2008 operating earnings net profit after tax of between $30 million to $35 million.

NCM - NEWCREST MINING LTD - up $2.99 to $28.89
Newcrest Mining secured sufficient energy supplies to maintain full production at its Telfer mine in Western Australia following the explosion that disturbed gas supply from Varanus Island earlier this month.
Varanus Island operator Apache Energy expects to resume partial gas supplies from the facility by mid-August.

CTX - CALTEX AUSTRALIA - down 19 cents to $12.50
Fuel refiner Caltex Australia expected first half net profit to fall by up to 40 per cent due to flat petrol sales, lower margins and plant shutdowns.
Net profit in the first six months of calendar 2008 is forecast at between $175 million to $195 million, on a replacement cost of sales operating profit (RCOP) basis.
This will be down from $294 million in the first half of 2007.

WHS - THE WAREHOUSE GROUP LTD - down 10 cents to $3.40
The Warehouse Group cut its 2008 annual net profit guidance by about 10 per cent amid continuing tough economic conditions in New Zealand.
Auckland-based company has downgraded its expected net earnings for the year ending July 27 to between $NZ84 million ($A66.3 million) and $NZ88 million ($A69.5 million), including reversal of warranty provisions of $NZ7.2 million ($A5.7 million).

ZIM - ZIMPLATS HOLDINGS LTD - up 10 cents to $13.10
Zimplats Holdings said the expansion of the company’s Ngezi platinum mine in Zimbabwe was operating “satisfactorily” despite the political unrest in the country.
The company said it had experienced limited political activities at its operations, but the retention of skills, reliable power supplies and the rebuilding of the local supplier network remained a major challenge.

A bad week for markets around the world with three month lows explored in Australia, Europe, the US and parts of Asia.

And today won’t be any better in Australia and Asia with Wall Street’s fall of 1.8% to be taken up by local investors. Our market is forecast to open around 1.6% lower.

US stocks fell sharply on Friday as the Dow closed under 12,000 for the first time in three months. At 11,849.62, it was the Dow’s second-lowest level this year and the first time below 12,000 since March 10.

Driving the gloom was a mixture of issues: worries about rising oil prices and food price inflation, interest rate worries, concerns about the financial health of US banks and worries about the car and airline industries.

Ratings group Standard & Poor’s said it may cut the ratings on Ford, General Motors and Chrysler, as a result of the continuing impact of high oil and petrol prices which have forced the companies into restructure mode. Shares in GM and Ford both fell sharply as a result.

But concerns about the health of US banks and financial groups like the quasi-government mortgage insurers, Freddie Mac and Fannie Mae, hit sentiment: on to of the outbreak of bad news from regional banks and Citigroup’s warning of more losses in the current quarter, the S&P 500 banking sub index fell to a 12 year low.

That helped send the Dow down 220 points, or 1.83%; the S&P 500 dropped 24.90 points, or 1.85% and Nasdaq finished down 55.97 points, or 2.27%.

For the week the Dow ended 3.8% lower, the S&P fell 3.1% and Nasdaq dropped 2%. The S&P 500 has now lost more than 10% this year: at one stage around five weeks ago it was within sight of going positive for the first time this year.

In Europe shares also fell to the lowest in three months on those concerns about the health of banks and high oil prices.

Banks like UBS and Deutsche fell while food and beverage groups like Unilever and Danone dropped after brokers issued sell outlooks based on the pressures from food price inflation.

The Dow Jones Stoxx 600, the major continent wide index, fell 3.5% to bring its fall for the past three weeks to 8.4%. It finished Friday at its lowest since March 17.

Other Euro indexes for large cap stocks also fell by around 3.5%. The Stoxx 600 has fallen 19% this year

Markets fell in 16 of the 18 western European countries covered by the indexes. Germany’s DAX Index fell 2.8% over the week and France’s CAC 40 lost 3.7%; while London’s FTSE 100 shed 3.1%.

For London it was the fifth weekly fall in a row as HBOS Plc, Britain’s biggest mortgage lender led the way.

HBOS dropped 4.9% to 282.25 pence as the stock briefly went below the 275-pence level at which the bank is trying to raise $US7.9 billion in much needed capital.

It was the second time this happened in three weeks. The weakness is making London investors worried, especially after one broker forecast the bank’s share price might fall even further, to around 250 pence.

The renewed concern about the health of banks and other financial stocks on both sides of the Atlantic tended to slightly overshadow the continuing worries about high oil and food prices.

New York oil price futures rose 2% Friday to $US134.70 a barrel on Middle East tensions and a weaker dollar.

The new problems in Nigeria over the weekend will make sure oil moves back to the top of the worry list today and tonight.

US transportation giant, FedEx slid 6.3%, the lowest since September 2005, after reporting its first quarterly loss in 11 years. The company said earnings were “difficult to predict” because of volatile fuel prices and an “uncertain economic outlook’’.

General Motors shares fell 16% to $US13.79 and Ford dropped 7.3% to $US5.81. S&P said it had placed the carmakers’ credit rating, already five levels below investment grade, on negative review. The ratings group said that while car groups will be able to pay their debts this year, their cash reserves may shrink to “undesirable levels” by the end of next year.

Ford said Friday that its losses will increase this year because o $US4-a-gallon petrol’s negative impact on sales of large pickup trucks. Ford is postponing work on a major new model, as is General Motors. Ford said its earnings backbone in recent years, Ford Motor Credit, will also have a loss this year on plunging levels of new business.

The Indian market will be hammered after news that the latest annual inflation rate hit 11.05% earlier this month. It was a sharp rise from 8.72% in late May.

China’s market rose Friday after oil and most fuel prices were lifted by the government, but it was still down for the week.

The MSCI Asia Pacific Indexes eased 0.4% over the week, a big improvement on the 6.5% drop the week before. Japan’s Nikkei Index lost 0.2% and the Australian market was off 1%, all of which came in a rough day’s trading on Friday.

Pakistan’s Karachi market shed 10% last week on a surprise fall in foreign investment.

China’s CSI 300 Index rose 2.8% on Friday but was down 4.4% over the week, extending the four- week decline to 23% and 52% from the all time high last October.

BEIJING (AFP) - - China’s inflation rate was 7.7 percent in May, easing from April’s 8.5 percent, the government said Thursday, as analysts cautioned that some prices had been kept artificially in check.

Food prices have eased but, at the same time, price controls meant pent-up inflation had accumulated in the world’s fastest-growing major economy, according to economists.

“While agriculture seems now to be responding… there are other price pressures out there that are being severely repressed,” Standard Chartered economist Stephen Green said in a statement.

Inflation has become a global concern, with the US Federal Reserve now putting it on the top of its agenda in view of soaring energy and food prices.

The prices of food, a main driver of inflation in China since last year, continued to be an important factor last month, although they were rising at a less steep rate, according to the statistics bureau.

Food prices were up 19.9 percent in May from a year earlier, while the price of pork, the staple meat for hundreds of millions of Chinese, had soared 48 percent, it said.

But pork had risen a staggering 68.3 percent in April, suggesting there was now a more plentiful supply in response to government incentives.

At the same time, energy prices were being kept under control by the government, meaning local oil companies had not been permitted to pass rapidly rising global crude prices on to the consumers.

“We all know about fuel and electricity controls, but we hear reports of firms in the food and construction industries also being told not to raise prices,” said Green.

“There is a lot more bottled up inflation in this economy than meets the eye.”

In the first five months of the year, the consumer price index was up 8.1 percent from the same period in 2007, the National Bureau of Statistics said.

China has set an inflation target of 4.8 percent in 2008, an objective many observers believe will be almost impossible to achieve, given factors the government has little control over such as the price of imported goods.

The consumer price data was released a day after the government said producer prices had risen 8.2 percent in May, the fastest rate in nearly four years.

China should fight inflation by raising the interest rate at a “proper time”, the Bank of China, one of the nation’s main commercial lenders, said this week.