Tuesday, September 30, 2008

UK confirms economy at standstill


The UK economy saw no growth in the second quarter of 2008, while the gap in the current account widened to its highest level in almost a year.

Data from the Office for National Statistics (ONS) showed economic output remained the same as in the first quarter, confirming previous estimates.

Growth was 0% in the second quarter - which was even lower than the 0.3% figure for the first quarter of 2008.

Some analysts think the Bank of England may cut interest rates as a result.

Output was revised up to 1.5% from a previous estimate of 1.4% year-on-year.

The new data takes into account improved methodology and was revised back to 1961. This adds £19.5bn to the 2007 gross domestic product (GDP) figures.

Gloomy forecast

The quarterly figures were the worst for sixteen years, and several analysts maintained a downbeat forecast for the UK economy.

"Overall, not much cheer here. We continue to think that the UK economy is poised for a recession and a prolonged period of weak activity as the excesses of the last decade unwind dramatically," said Paul Dales, an analyst at Capital Economics.

Separately, balance of payments information showed there was a deficit of some £11bn in the current account in the second quarter.

The current account deficit - which is the difference between imports and exports - widened by more than had been expected to £10.98bn, compared with £5.49bn in the first quarter.

This is the biggest the deficit has been since the third quarter of 2007 and it equates to 3% of GDP.

The increase has been due to increased interest payments from UK securities dealers and lower losses recorded by foreign banks operating in Britain.

Lena Komileva, an analyst at Tullett Prebon, said the figures showed the UK's weak spot.

"The negative surprise on the current account highlights the vulnerability of the UK economy to external flows. At a time of a global drain of financial liquidity, this is worrying."

US Senate to vote on N-deal on Wednesday


The US Senate plans to take up and vote on the Indo-US civil nuclear deal on Wednesday, three days after the House of Representatives approved the accord, Senate majority leader Harry Reid said on Tuesday.


The legislation on the deal will in all probability be taken up after sundown local time (early Thursday morning IST), after another pending legislation the Rail Safety Amtrak bill is voted on by lawmakers.


"... we're going to move to continue on the consideration of HR 2095, the Rail Safety Amtrak legislation debate today... there will be no roll call votes today in honour of the Rosh Hashanah holiday, but we will have votes tomorrow evening after sundown," Senator Reid said on the Floor of the Senate at the start of the day's proceedings.


"We're still working on agreement to consider the US-India nuclear agreement. I'm quite sure we can finalise that so there can be a vote on that tomorrow," Reid said before speaking on the implications of the financial stabilisation package that has been rejected by the House of Representatives.


Unlike the House of Representatives which needed a two-thirds majority, the Senate requires only a simple majority to approve the legislation.


Before the House rejected the USD 700 billion bailout package to rescue bankrupt financial institutions on Monday, Reid had said the "India nuclear agreement" will be coming up for a vote only on Wednesday along with the financial bill, when the Senate reconvenes after the Jewish holiday.


A clearance in the Senate will allow India and the US to sign the landmark accord and resume bilateral nuclear trade.



India today signed a civil atomic cooperation agreement with France today, ending 34-years of nuclear isolation.

Second Belgian bank gets bail-out


Dexia has become the latest European bank to be bailed out as the deepening credit crisis shakes the banks sector.

After all-night talks the Belgian, French and Luxembourg governments said they would put in 6.4bn euros ($9bn; £5bn) to keep it afloat.

Shares in the Belgian-French bank fell 30% on Monday before being suspended on Tuesday as the bail-out was announced.

It is the second bank rescue in days by Belgium and its neighbours. On Sunday Fortis bank was partly nationalised.

This latest move by European governments to shore up another bank under pressure came as global stock markets plunged after the US House of Representatives rejected the White House's planned $700bn bail-out package.

'Crisis situation'

Dexia is the one of the world's largest lenders to local governments, but has run up significant losses in its US operations.

In a statement the French government said the rescue was necessary to "guarantee continuity of funding for local authorities".

The Belgian government and Belgian shareholders will invest 3bn euros, the French government will also invest 3bn euros via its state investment arm, while Luxembourg will put in just under 400m euros.

Yves Leterme, the Belgian prime minister said: "Given the crisis situation around the Dexia group we took concrete and correct decisions to reinforce Dexia's health so that the group can face the events playing out in financial markets."

Borrowing problems

Last month Dexia announced it was overhauling its loss-making US bond insurance unit, Financial Security Assistance - which made a loss of $330m in the second quarter of this year because of the sub-prime housing crisis.

The group has also been hit by the collapse of the US investment bank Lehman Brothers.

Dexia - like its rival Fortis which was partly nationalised in a rescue at the weekend - has been finding it hard to borrow the money it needs, because banks have become less willing to lend to each other.

Dexia was created in 1996 from the merger of two banks which specialised in local government funding in Europe - Credit Communal de Belgique and Credit Local de France.

It was one of the first cross-border mergers in the European banking sector and the bank currently has 5.5 million customers in Belgium, Luxembourg, Slovakia and Turkey.

India, France sign civil nuclear cooperation pact


Scripting a new era in bilateral ties, India and France on Tuesday signed a landmark agreement on civil nuclear cooperation that covers supply of reactors and atomic fuel in the first concrete step to bring New Delhi back into the nuclear mainstream after 34 years of isolation.


"We expect to finalise agreements with other European partners too" on civil nuclear cooperation, Prime Minister Manmohan Singh said after holding talks with President Nicolas Sarkozy at the Elysee Palace in Paris on Tuesday.



France is the first country to open nuclear commerce with India after the 45-member Nuclear Suppliers Group (NSG) granted a waiver to New Delhi on 6th September.



The Indo-US nuclear deal is awaiting Congressional nod and an agreement on it between the two countries is expected to be inked soon.



"Today we have added a new dimension to our strategic partnership by signing an inter-governmental agreement on civil nuclear cooperation," Singh said after the Indo-France Civil Nuclear Cooperation Agreement was signed in the presence of the two leaders by Atomic Energy Commission Chairman Anil Kakodkar and French Foreign Minister Bernard Kouchner.



The agreement will form the basis of wide ranging bilateral cooperation from basic and applied research to full civil nuclear cooperation including reactors, fuel supplies, nuclear safety, radiation and environment protection and nuclear fuel cycle management.



The atomic pact is one of the three agreements signed during Singh's two-day visit to Paris. The other two relates to social security matters which will benefit Indian and French nationals staying in each others countries on short duration up to five years and a Long Term Agreement on utilisation of the Indian Polar Satellite Launch Vehicle (PSLV) launch services.



"France is the first country with whom we have entered into such an agreement after the lifting of international restrictions on civil nuclear cooperation with India by the NSG. I conveyed to President Sarkozy our gratitude for France's consistent support to our civil nuclear initiative," Singh said.



The two countries decided to give a new impetus to their cooperation for the development of nuclear energy for peaceful purposes as an expression of their strategic partnership.



A statement on the agreement said both sides recognise nuclear energy as a reliable source of sustainable and non-polluting energy, it could make a significant contribution to meeting the global challenge of achieving energy security.



It also noted that both the countries share common concerns and objectives in the field of non-proliferation of weapons of mass destruction and their means of delivery including in view of possible linkages to terrorism.



As responsible states with advanced nuclear technologies, including in the fuel cycle, the two countries are interested to promote nuclear energy with the highest standards of safety and security, the statement said.



Wrapping up his 10-day visit to the US and France, Singh addressed India-EU Business Summit, during which he said New Delhi expects to finalise agreements on civil nuclear cooperation with other European countries.



Under the social security agreement inked on Tuesday, workers on short term contract up to five years, do not have to make any social security contribution provided they continue to make social security payment in India and France respectively.



For Indians working in France, these benefits shall be available even when the Indian company sends its employees to the French Republic from a third country.



The agreement will result in benefits for Indian nationals when working in France and French nationals in India.



Indian workers would be entitled to the export of social security benefits if they relocate to India after the completion of their service in France.



Another pact was signed between ISRO Chairman G Madhavan Nair and Francois Auque, CEO of Astrium, a wholly owned subsidiary of EADS, a global leader in aerospace and defence space systems and services.



The agreement enables Astrium to offer attractive solutions in the international markets for in-orbit delivery of its earth observation satellites, using the PSLV launch services from Antrix, the commercial arm of ISRO.



Along the past six years, both companies have been successfully cooperating in the field of space activities, as evidenced by the award of two telecommunication satellite contracts, W2M for Eutelsat and HYLAS for Avanti Systems.

Lehman sees 750 Europe jobs axed


The administrators of Lehman Brothers' European division have cut 750 jobs at the firm with immediate effect.

PricewaterhouseCoopers LLP, said the move came "despite exhausting all avenues" to save the posts.

The vast majority of the cuts will be made in London, where the firm employed about 5,000 people.

Lehman Brothers, the fourth-largest investment bank in the US, filed for bankruptcy as it was hit by the credit crunch and could not be rescued.

The jobs will go from the firm's European fixed income and personal investment management units, after a buyer could not be found.

'Maximising value'

"It is extremely disappointing that despite exhausting all avenues these jobs could not be saved," said PwC partner Tony Lomas.

"We continue to be focussed on maximising the value of recoveries for creditors, whilst minimising the impact on other stakeholders as much as possible."

Shortly after the collapse, Barclays bought Lehman's US investment banking unit for £250m.

And last week Japanese bank Nomura said it was buying some of Lehman's European and Middle Eastern operations for an undisclosed sum.

Under the deal announced last week, Nomura will acquire the equities and investment banking businesses from the US bank which filed for bankruptcy protection in mid September.

The Japanese bank said it expected to save the jobs of a "significant proportion" of the 2,500 Lehman staff in those businesses.

The Nomura deal does not include any of Lehman's trading assets or liabilities, Nomura said.

It is also going to acquire Lehman's assets in Asia.

US shares rise in early trading


US shares have opened strongly after President George W Bush renewed calls for Congress to back the $700bn (£380bn) banking rescue plan.

Although Wall Street saw record falls on Monday after Congress blocked the deal, the main Dow Jones index rose 206 points or 2% in early trade on Tuesday.

Analysts said investors are hopeful a new deal can be agreed this week.

Mr Bush warned that if agreement is not reached, the US economy faces "painful and lasting damage".

'Urgent situation'

"We are in an urgent situation and the consequences will grow worse each day if we do not act," Mr Bush said at the White House.
It matters little what path a bill takes to become law. What matters is that we get a law.

"We're at a critical moment in our economy."

While the Dow Jones was up 206 points or 2% to 10,571 in early trading, the other main Wall Street index - the Nasdaq - had advanced 2.5%.

Despite their strong gains, European shares remained mixed in afternoon trading.

While the UK's FTSE 100 was up 23 points or 0.5% to 4,842, Germany's Dax was down 60 points or 1% to 5,748.

Meanwhile, Japan's Nikkei index ended Tuesday down 4.1%, while Hong Kong's Hang Seng rose 0.8%.

Analyst Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said European investors were hopeful the US would eventually pass the bail-out plan.

"This deal is not dead in the water and there are hopes that when Congress reconvenes it could still go through," he said.

There were a number of other key financial events on Tuesday:

In Russia, trading was temporarily suspended on the country's two main stock markets
In the Republic of Ireland, the government announced that all bank deposits would be guaranteed for the next two years
European bank Dexia has received a state bail-out, costing the Belgian, French and Luxembourg governments a combined 6.4bn euros ($9.2bn; £5bn)
Banking stocks leading the falls on the FTSE 100, with HBOS down 10%, and Royal Bank of Scotland losing 5%
Day of turmoil

The US rescue plan, a result of tense talks over several days between the government and lawmakers, was rejected by 228 to 205 votes in the House of Representatives.

Monday, September 29, 2008

Japan posts a rare trade deficit


Japan's trade gap slipped into the red in August as oil imports surged but exports fell, official figures show.

Excluding January - when exports usually slow in the New Year holidays - it was the country's first trade deficit since November 1982.

Imports outpaced exports by 324bn yen ($3.09bn; £1.65bn) in August.

The news has heightened fears Japan may be on the brink of recession as it comes hot on the heels of a sharp contraction in economic growth.

Figures released earlier this month showed economic output shrank at an annualised rate of 3% between April and June - its sharpest fall in almost seven years - as a result of falling exports and domestic demand.

Price pressures

The latest trade gap figures showed the resource-poor country was hit heavily by surging raw material costs.

Rising prices of oil, coal and natural gas drove import costs 17.3% higher to 7.38 trillion yen. Import costs for coal alone jumped 121% and petroleum products by 64%.

By contrast, exports grew just 0.3% to 7.56 trillion yen - mainly as a result of falling automobile shipments.

A record 21% drop in exports to the US, blamed on the current financial crisis, did little to ease fears about a looming downturn in Japan.

'Faltering'

"The data really showed that economic conditions both in Japan and overseas are weakening," Credit Suisse strategist Satoru Ogasawara said.

"Demand from not only the United States but also Europe and Asia has been faltering, and it is likely to continue at least until the end of this fiscal year."

Meanwhile, companies at home have been battling low domestic demand.

Looking ahead, economists believe the news does not bode well for the Tankan report, due out next week.

The closely-watched survey of business conditions is expected to "underscore that the economy is in a recession", said JP Morgan Securities economist Masamichi Adachi.

A country is generally considered to be in recession when it sees two consecutive quarters of declining economic output.

AIG contemplating sale of 15 buisnesses


In a bid to secure its future as an independent company, the beleaguered insurance major American International Group is contemplating sale of its 15 businesses in order to repay the USD 85 billion government loan, media report says.


"AIG, is considering selling more than 15 businesses, including its aircraft leasing unit, a stake in a large US reinsurer and billions of dollars in properties in an effort to repay USD 85 billion government loan and secure its future as an independent company," a leading financial daily reported.



The board of AIG met in New York yesterday to discuss the radical plan for asset disposals aimed at helping the company emerge from its crisis.



AIG, was de facto nationalised this month when the US administration stepped in with an emergency loan after AIG collapsed under credit related losses.



The extended government loan would give Washington the right to buy majority stake in the company.



With the US Federal Reserve's rescue loan of up to USD 85 billion to save AIG from bankruptcy, the US government will get an equity stake of 79.9 per cent of the insurance titan under the agreement.



Quoting people close to the situation the daily said, AIG, led by its new chief executive Edward Liddy, wanted crucial businesses such as its international life insurance unit and its US pension businesses to be at the core of the "new AIG".



"But apart from those, AIG was prepared to consider selling most other operations. The company and its advisers, led by Blackstone and JPMorgan Chase, are believed to have drawn up a list of about 15-20 large businesses that could be sold," the daily added.



Among the units that are most likely to be sold are International Lease Finance Corp, one of the world's largest aircraft leasing businesses, which is expected to fetch about USD 10 billion.



AIG is believed to have received expressions of interest from Asian and Middle Eastern buyers, the daily said.



AIG's 59 per cent stake in Transatlantic Holdings, a listed reinsurer, is also believed to be on the block, as are its huge property portfolio and private equity investments including one in Londons City Airport.



Bermudian reinsurers are expected to be interested in AIG's stake in Transatlantic, the daily said quoting analysts and insurers.



However, AIG, Blackstone and JPMorgan, were all unavailable for comments, the daily reported.

B&B nationalisation is confirmed


Mortgage lender Bradford & Bingley (B&B) is to be nationalised, the government has confirmed.

The government will take control of the bank's £50bn mortgages and loans, while B&B's £20bn savings unit and branches will be bought by Spain's Santander.

Under the move, all B&B savings accounts are protected, and taxpayers are being shielded from any losses.

B&B is just the latest bank that has needed rescuing in a turbulent period for British financial institutions.

It follows after the announcement two weeks ago that HBOS is being bought by Lloyds TSB, and Nationwide's takeover of smaller building society rivals Derbyshire and Cheshire.

Prime Minister Gordon Brown said the move showed the government would "do whatever it takes to ensure the stability of the UK financial system".

The move also came on another eventful day of global financial turmoil:


Wachovia, the fourth-largest US bank, was bought by larger rival Citigroup in a rescue deal backed by US authorities

Benelux banking giant Fortis was partially nationalised by the Dutch, Belgian and Luxembourg governments to ensure its survival

The Icelandic government took control of the country's third-largest bank, Glitnir, after the company had faced short-term funding problems

Shares in Europe and Asia fell sharply, while in the US, Congress voted on a $700bn (£380bn) plan which aims to bail out Wall Street and ease the credit crisis.
'Lost confidence'

"Following recent turbulence in global financial markets, Bradford & Bingley has found itself under increasing pressure as investors and lenders lost confidence in its ability to carry on as an independent institution," said the Treasury.

It added that the move would protect savers' money and that B&B's branches, call centres and internet operations would "be open for business as usual to provide continuity of service to customers".

BBC business editor Robert Peston said it was a good deal for taxpayers, and that the risk was "quite close to nil".

Under B&B's nationalisation, taxpayers are being protected from any losses because of the Financial Services Compensation Scheme.

This means that if B&B's remaining assets prove insufficient, the balance will ultimately be paid by the wider UK banking sector, although Chancellor Alistair Darling said that possible scenario remained a long way down the line.

Shadow Chancellor George Osborne told the BBC that he would study the exact details of the deal, but that protecting taxpayers had to be the main priority.

'Good news'

Abbey, which is part of Spanish banking group Santander, is paying £612m to buy B&B's savings business and 197 branches.

Abbey chief executive Antonio Horta-Osorio said the acquisition of B&B's bank's savings account was "good news" for customers.

"They can be certain that their hard-earned savings are with a bank they can trust."

To help facilitate Abbey's takeover of B&B's savings business and branches, it has been paid £14.6bn from the Financial Services Compensation Scheme - funded by the Bank of England - and a further £4.5bn from the Treasury.

This £19.1bn is to guarantee that Abbey could pay back all B&B savings account customers, if need be.
The government says it will get the money back - starting with the Treasury's £4.5bn - following the redemption and sale of B&B's mortgages, that are now in public hands.

A spokeswoman for Abbey said while it was "business as usual" for B&B's branches, it was too early to say whether any would close in the long term.

However, with Santander already owning both Abbey and Alliance & Leicester, it appears likely that there will be some branch closures.

And the B&B, which currently has about 3,000 staff, has for the time being stopped offering any new buy-to-let or self-certified mortgages through its internet business Mortgage Express.

The company told mortgage brokers it was "working through the full ramifications" of the nationalisation.

Funding problems

B&B is the second UK bank to be nationalised since the start of the global credit turmoil, following Northern Rock's move into state ownership in February this year.

Speculation had intensified in recent weeks that B&B was approaching a funding crisis, leading to a growing number of customers withdrawing their funds.

B&B got itself into financial difficulty as a result of the credit crunch removing the option of raising funds through the global wholesale money markets.

Its problems were then further intensified by its focus on the buy-to-let market, which has seen a large rise in bad debts as UK house prices have fallen.

B&B has also struggled to fund a number of takeovers.

Citigroup to buy US bank Wachovia


Wachovia, the fourth-largest US bank, is being bought by larger rival Citigroup in a rescue deal backed by US authorities.

Wachovia customers were told the action would provide "full protection for all their deposits", and that the bank would continue to operate as normal.

Under the deal, Citigroup will absorb up to $42bn (£23bn) of Wachovia losses.

US authorities said the decision to back the sale had been made "under extraordinary circumstances".

The comment came from the Federal Deposit Insurance Corporation (FDIC), the government body that guarantees the safety of banking deposits.

"This action was necessary to maintain confidence in the banking industry given current financial market conditions," said FDIC chairman Sheila Bair.

Mortgage debt

Citigroup is taking on $312bn of Wachovia loans.

Any debts on these loans above the $42bn Citigroup will absorb will be taken on by the FDIC in return for $12bn in Citigroup stock and other share options

Wachovia is just the latest bank that has needed to be rescued as a result of high levels of bad mortgage debt and the wider turmoil in the global financial sector.

Analysts said much of its problems were caused by its 2006 purchase of mortgage lender Golden West for $25bn at the height of the then US housing boom.

Rose Grant, of Eastern Investment Advisors, said it seemed a good deal for Citigroup.

"One thing that Citigroup has been wanting to do for a while is to expand its retail operations because they are in very limited areas so this would basically allow them to do that," she said.

Treasury Secretary Henry Paulson said the sale of Wachovia was necessary as its failure "would have posed a systemic risk".

Wachovia's sale comes just days after fellow US lender Washington Mutual was seized by regulators before its assets were sold to JPMorgan Chase.

US politicians have begun voting on a $700bn deal to rescue the US financial system which was agreed by negotiators on Sunday.

India-EU to ink trade pact by 2009; set 100 bl Euro target


India and the European Union (EU) on Monday agreed to conclude a broad-based Trade and Investment Agreement by 2009 and double their trade turnover to 100 billion Euros in the next five years, giving a fresh impetus to their strategic partnership.


The decision was taken during the Ninth India-European Union(EU) summit which was attended by Prime Minister Manmohan Singh and French President Nikolas Sarkozy in his capacity as chairman of the rotating presidency of the 27-member EU in this resort town of French Riveira.

Addressing a joint press conference with Sarkozy and European Commission President Manuel Barrosa at the end of the day-long summit, Singh announced that the world's two largest trading partners are expected to wrap up the ambitious Trade and Investment Agreement by 2009.

A Joint Press Communique issued at the end of the Summit said EU and India recognised the importance of conclusion of the trade agreement to fulfill the expectations of businesses on both sides and to further strengthen the bilateral economic relationship.

Towards this end, the communique said they will endeavour to achieve a balanced and ambitious outcome.

While welcoming the signing of a landmark horizontal civil aviation agreement which will allow more airlines to operate flights between India and EU countries, the communique said they are working on a maritime transport agreement that will be mutually beneficial.

Sarkozy at a joint press conference with Singh and European Commission President Barrosa said trade expansion and a new trade agreement will be important pillars to give a new dimension to Indo-EU strategic partnership.

US lawmakers publish rescue deal




House Speaker Nancy Pelosi announces bail-out package
US politicians have announced a $700bn deal to rescue America's financial system and end the credit crunch.

The move, backed by both Republican and Democratic leaders, allows the Treasury to spend up to $700bn (£380bn) buying bad debts from ailing banks in the US.

President George W Bush urged lawmakers to support the bill, which needs approval by both houses of Congress.

Some Republicans have voiced objections to massive state intervention in the financial sector.

The deal was announced after days of high-level wrangling between Republicans and Democrats in Congress over the content of the bill.

Both parties had vigorous objections to a proposal submitted last week by Treasury Secretary Henry Paulson that would have given him sweeping powers over how the money was spent.

His plan was prompted by a string of failures in large US financial institutions, including the government bail-out of insurance giant AIG.

If approved by the Senate and House, the revised plan will lead to the biggest intervention in the markets since the Great Depression in the 1930s.

Nancy Pelosi, the Democratic Speaker of the House of Representatives, said the agreement was "not a bailout of Wall Street", but designed to ensure pensions, savings and jobs would be safe.

Democratic Senate leader Harry Reid said the deal was a big improvement on the initial proposal.

"They wanted a blank cheque and we couldn't give them one... Now we have to get the votes."

'Necessary tools'

The negotiations had lasted all weekend and were so intense that at one point Treasury Secretary Hank Paulson suffered what was described as a "woozy spell".

After senior members of Congress announced the agreement, President Bush gave his backing to the draft legislation.

He said the bill would send a strong message that the US was serious about restoring confidence in its financial markets.

"This bill provides the necessary tools and funding to help protect our economy against a system-wide breakdown," he said in a statement.

The US administration had wanted a deal to be announced before markets opened in Asia, but Asian investors appear yet to be convinced about the rescue plan's impact.

By Monday afternoon trading in Japan, Tokyo's main Nikkei 225 index was down 118 points or 0.8% to 11,776.

The fall on Hong Kong's Hang Seng was even more pronounced, down 383 points or 2% to 18,230.

No golden parachutes

The deal addresses several of the key concerns raised by both Democrats and Republicans:

The government will get the money in tranches - $250bn straight away, and $100bn at the request of the White House; Congress can veto the release of the remaining $350bn
Banks that accept bail-out money will have to hand over shares in return, which allows tax payers to benefit from the banks' recovery
Top bankers, meanwhile, will see their pay limited, and "golden parachutes" - huge payments when they leave the firm - will be banned
The banking industry will have to help finance the bail-out if the money can not be recovered from the struggling banks themselves
Four agencies will monitor the deal, including an independent Inspector General and a bipartisan oversight board
Banks will be obliged to join an insurance programme to protect them against the losses of mortgage-backed securities
The bill, called the Emergency Economic Stabilization Act of 2008, faces its first hurdle later on Monday when the House votes on it, says the BBC's Justin Webb in Washington.

It goes before the Senate later in the week.

The proposed legislation was now "frozen", said Ms Pelosi, which means critics can not strike out individual provisions that they do not like.

However, several key critics of the deal called on their fellow legislators to block it.

Financial woes

The Bush administration submitted its initial proposal after several financial institutions got into trouble - unable to free up the money to keep their daily business going.

The liquidity problems have not been limited to the US.

In the United States' largest bank failure, Washington Mutual was taken over by regulators and sold on to JPMorgan Chase
Lehman Brothers collapsed, Merrill Lynch sought refuge in a takeover by Bank of America and Morgan Stanley secured a large capital injection from a Japanese rival
US insurance giant AIG had to be bailed out by the US government, which in effect took an 80% stake in the firm
In the UK, meanwhile, mortgage lender Bradford & Bingley is set to be nationalised, with the savings part of the business to be sold to Spanish banking group Santander
The governments of Belgium, Luxembourg and the Netherlands agreed late on Sunday evening to invest 11.2bn euro in huge financial services group Fortis, in effect nationalising it.

Sunday, September 28, 2008

Bank giant HSBC axes 1,100 jobs


Banking giant HSBC is to axe 1,100 jobs worldwide, blaming the current financial turmoil for the decision.

About half of the cuts, which will affect back room jobs at its global banking and markets operation, will take place in the UK.

HSBC employs about 335,000 people around the world.

Last month, HSBC said half year profits fell 28% to $10.2bn (£5.2bn), as it was forced to write-off $14bn from bad debts in the US and asset write-downs.

Meanwhile, pre-tax profits fell 35% to $2.1bn during the same period.

An HSBC spokesman said the firm had opted to reduce its workforce, "because of market conditions and the economic environment, and our cautious outlook for 2009".

Many of the job-losses will be at the headquarters of HSBC's investment banking division, which are in London's Canary Wharf.

Banks around the world have been coming under increased pressure from the credit crisis currently affecting financial markets.

The problems have forced governments to step in and boost money markets as well as bail out a number of companies.

Earlier this year, the UK government had to buy mortgage lender Northern Rock, while in the US lenders Fannie Mae and Freddie Mac have been rescued as well as insurer AIG and investment bank Lehman Brothers filed for bankruptcy.

'Great progress' in US bail-out



US congressional leaders say they have reached the broad outline of a rescue plan for the American financial system.

Democratic House Speaker Nancy Pelosi said "great progress" had been made - but details remain to be agreed.

The Bush administration wants $700bn (£380bn) to be able to buy bad debt that is freezing up financial markets.

A vote could be held in the House of Representatives as early as Sunday, with negotiators keen to reassure the markets before they reopen on Monday.

The deal proposes that the government would spend the $700bn to buy up bad mortgage-related debts from US banks, borrowing the cash from the money markets by issuing more government debt.

A White House spokesman welcomed the announcement and praised the efforts of the negotiators.

"We're pleased with the progress tonight and appreciate the bipartisan effort to stabilise our financial markets and protect our economy," said Tony Fratto.

The outline deal gives the treasury secretary powers to oversee the two-year plan, but critics have insisted on the inclusion of greater oversight and reporting.

The BBC's Justin Webb in Washington says the tentative agreement that appears to have been reached is thought to include a measure to limit the pay for executives of companies which seek financial assistance, which was a key demand of the Democrats.

At the request of Republicans, who have strongly criticised some elements of the administration's proposal, the accord is believed to include the setting up an insurance program for mortgage-backed securities.

Payoff restrictions

A statement from Nancy Pelosi's office said the new agreement would see $250bn issued immediately, and another $100bn when the president wanted to spend it.

But the the final $350m would only be released after review and approval by Congress.

There would also be measures to protect taxpayers, who would be given an ownership stake and profit-making opportunities in relation to any assets that were sold.

It also puts new restrictions on executive compensation for participating companies, including no "golden parachute" payoffs.

Earlier on Sunday it was announced that the two-year project would be supervised by a board of officials, including the Federal Reserve chairman, and scrutinised by Congress's investigative arm and an independent inspector general.

Finally, the government could use its power as the owner of mortgages and mortgage-backed securities to help more struggling homeowners modify the terms of their home loans.

'All night'

US Treasury Secretary Henry Paulson, who took part in the talks, said that Congressional leaders had been "working very hard".

"We've made great progress toward a deal, which will work and will be effective in the marketplace, and effective for all Americans," he told a news conference.

But Ms Pelosi said the deal had to be committed to paper before it could be formally agreed.

Senate Democratic leader Harry Reid said Congress hoped to be able to make an announcement on the deal later on Sunday.

"We're committing it to paper tonight and our people will work all night long," he said.

Congressional leaders are trying to finalise the deal in time for the opening of the Asian markets on Monday morning.

Saturday, September 27, 2008

House of Reps to vote on Indo-US nuke deal tonight


The House of Representatives has wrapped up the 40 minute debate on the bill on the Indo-US nuclear deal since the voting on the bill will take place later tonight.


Meanwhile, Senate Majority leader Harry Reid has indicated that the legislation on the subject in the upper Chamber will be taken up and passed only next week.

However, support for the nuclear deal came from House Foreign Affairs Committee Chairman Howard Berman.

A known opponent of the deal, Berman, supported the Senate version of the Bill saying the deal is a positive step as it will bring India into the non-proliferation regime.

House Foreign Affairs Committee Chairman Howard Berman, a known opponent of the deal, supported the Senate version of the Bill saying the deal is a positive step as it will bring India into the non-proliferation regime.

Fellow Democrat Edward Markey, who lead the charge on behalf of those opposed to the Bill, insisted on a recorded vote at the end of the debate following which the voting was postponed and it is now expected to be taken up on Sunday.

"I'm a strong advocate of closer US-India ties, including peaceful nuclear cooperation. I voted for the Hyde act which established a framework for such cooperation. The bill before us today will approve the US-India agreement for peaceful nuclear cooperation," Burman said.



"Integrating India into a global nonproliferation regime is a positive step," he said, adding Bush Administration has assured him they will push for an NSG decision prohibiting the export of enrichment and reprocessing equipment and technologies to states that are not party to Non-Proliferation Treaty (NPT).



Fellow Democrat Ellen Tauscher, however, disagreed maintaining that the Bill flies in the face of decades of American leadership to contain the spread of the weapons of mass destruction.



"The India deal would give a country with a dismal record of nonproliferation all the benefits of nuclear trade with none of the responsibilities. India has been denied access to the market for three decades and for good reason."



"India is not a signatory of the nonproliferation treaty and has not agreed to disarmament or signed the treaty," Congresswoman Tauscher said.



The debate on the House floor brought out law makers along expected lines in supporting and opposing the revised Bill introduced by Chairman Berman, who had reservations over the deal and is understood to have brought the second version after senior Bush Administration officials talked to him on the need for early nod to the civil nuclear initiative.



However, the Congressman said he still has concerns about ambiguities in the agreement and that several documents should be inserted to clarify these.



"These documents constitute key and dispositive parts of the authoritative representations described in section 102 of this bill which gives the right to disapprove a presidential decision to resume civil nuclear cooperation with any country, not just India, that tests a nuclear weapon.



"It will also ensure that India takes the necessary remaining steps to bring its IAEA safeguards agreement fully into force and include an additional protocol...I will be voting for H R 7081," the senior Democrat said at the end of his opening statement.



Ranking Republican on the House Foreign Affairs Committee Ros Lehtinen also voiced support for the legislation.



"The US-India nuclear cooperation agreement is not one we would offer to just any nation. It is a venture we would enter into only with our most trusted, democratic allies. I believe that stronger economic, scientific, diplomatic and military cooperation between the US and India is in the national interest of both countries," the Florida Congresswoman said.



"... this nuclear cooperation agreement is essential in continuing to ensure India's active involvement in dissuading, isolating, and if necessary sanctioning and containing Iran for its efforts to acquire chemical, biological and nuclear weapon capabilities," Ros-Lehtinen said.



A strong supporter of India and currently the Chair of the Sub Committee on Middle East and South Asia Democrat Gary Ackerman strongly supported the Bill.



"It (the approval of the deal) means the IAEA will be able to inspect two-thirds of India's nuclear facilities because those will be under safeguards and all civilian nuclear facilities will also be under safeguards. For the first time ever India will commit to guidelines and will adhere to the NSG guidelines," Ackerman said.



The deal will send a clear message to "rogue states" that responsible nuclear powers are welcomed by the international community, the former Co-Chair of the Congressional India Caucus on India and Indian Americans said.



"India would pursue its national interests as it's been doing outside of the nonproliferation mainstream and we get to inspect nothing. The other is to make a deal with India and the US and the international community will get a window in perpetuity into two-thirds of India's nuclear facilities...”



"The choice is clear, it's time for 21st century policy toward India and encourages India's growth as a nuclear power and solidifies our relationship for decades to come," the New York Democrat said.


But another Democrat from California Lynn Woolsey cautioned the agreement will permanently undermine decades of nonproliferation efforts.



"It sets a frightening precedent. If a country is unhappy about the rules of nuclear possession, it can simply go around them, breaking them."

"And what does it matter India ignored the international agreement? Any sanction? Any punishment? Nope. Just a lucrative deal with the US. If we approve this deal, we lose our moral high ground," she added.





For most part of the debate, the support for the Bill came along bi-partisan lines.



Massachussetts Democrat Markey, the top opponent of the Bill, questioned not only the judgement of Bush administration in going for the deal but also the non-proliferation gains.



"Most people think this is a debate about India. It is not. This is a debate about Iran, North Korea, Pakistan, Venezuela, about any other country in the world that harbours the goal of acquiring nuclear weapons. With this vote, we are shattering the nonproliferation rules, and the next three countries to march through the broken glass will be Iran, North Korea, and Pakistan," Markey said in closing comments.



"This is an all out nuclear arms race. Pakistan will respond. That is what President Bush should be working on, not fueling it, but trying to negotiate an end to it," he said.



A prominent supporter of India South Carolina Republican Joe Wilson argued a vote in favour of the nuclear deal will be a "giant step forward" in strengthening America's partnership with the people of India.



"... the two nations have a vested and shared interest in expanding opportunities to compete in the global economy. US chamber of commerce has estimated that this civilian nuclear agreement will create as many as 250,000 high-tech jobs right here in America," Wilson said.



California Republican Ed Royce called the Hyde Act as a tremendous foreign policy achievement of the 109th Congress but added the "failure by this congress to push this agreement across the finish line would be foreign policy malpractice".



"The Indian nuclear industry will overcome international restrictions and will reach their full potential to do this. Opposing this won't effect India. It will only hurt our relationship with India and US interests... other countries, notably France and Russia, can enter the Indian nuclear market with a potential USD 100 billion investment," he said.

Sensex plunges by 940 pts on global financial crisis






The delay in passage of a US bailout package for ailing financial markets and shut down of America's second largest bank caused a global meltdown with Indian bourses crumbling by a huge 940 points, biggest point-wise fall in the last 25-week, in the week under review.


Even as the US administration continued its debate on a USD 700-billion rescue package for the shattered financial system, the on-going credit crisis claimed yet another victim leading to across the board sell-off in the stock markets.



The US regulators on Thursday seized the 119-year-old Washington Mutual Inc, a leading savings and loan bank in the US, and sold its banking operations to JP Morgan Chase for 1.9 billion dollars.



In the week to 27th September, the Bombay Stock Exchange 30-share barometer tumbled by 940.14 points or 6.70 per cent to end the week at 13,102.18 against its last weekend's close.



Similarly, the broader 50-share Nifty of the National Stock Exchange nosedived by 260 points or 6.12 per cent to close the week at 3,985.25 from its last weekend's close.



Analysts said political squabbling blocked the potential deal on a bailout proposal, on which investors globally have pinned their hopes for revival in the markets.



Domestic markets witnessed a relief rally on Wednesday as the bellwether Sensex recovered by about 122 points on some short-covering of positions ahead of the expiry of derivatives series on Thursday.



Investors looked unwilling to carry forward their long positions in the light of lingering worries about an imminent US economic slowdown even as the first-time jobless data in America jumped to its highest in seven years, pointing to a recession.



IT and realty sectors were under tremendous pressure on concerns about the US recession leading to a global slowdown.



The equity markets witnessed heavy capital outflows as Foreign Institutional Investors pulled out nearly 2.0 billion dollars in September following the on-going credit crisis.



Ranbaxy Lab registered a large fall of 23.67 per cent on reports that the Canadian drug regulator expressed caution about the company's drug marketing applications after the US drug regulator blocked sale of more than 30 generic medicines.



Heavy-weights such as Wipro, Satyam Computers, DLF, TCS, Infosys Tech, HDFC, Hindalco, SBI, Maruti Suzuki, BHEL, Tata Motors, ICICI Bank and Jaiprakash Associates tumbled by about nine to 18 per cent.



Except the BSE FMCG index, which closed in the green, all other indices on the BSE and NSE registered losses in a range of 4.0 to 12 per cent.



The broad-based BSE-100 Index tumbled by 451.63 points or 6.20 per cent to end the week at 6,834.14 from 7,285.77.



The BSE-200 Index and the Dollex-200 were also quoted sharply lower at 1,590.58 and 569.61 at the weekend compared to last weekend's close of 1,695.81 and 611.44 respectively.



On the NSE, the S&P CNX Defty slumped by 224.30 points or 7.03 per cent to close the week at 2,965.50 from 3,189.80 last weekend and the CNX Nifty Junior also finished the week sharply lower by 428.85 points or 6.51 per cent to 6,162.70 from 6,591.55.

Wednesday, September 17, 2008

RBI move to reduce pressure on rupee: Citi

Reserve Bank Of India


Citigroup India, in a note released on Wednesday said the Reserve Bank measures announced last evening would help reduce the pressure on rupee.

Rohini Malkani, economist, Citigroup India said the RBI could become more active in the coming months.

She said given the volatile market situation, near term rupee weakness is likely to continue and could trade in the Rs 45-47 range. But over a longer term , ''we maintain our rupee appreciation view and expect the unit to trace back to Rs43-44 levels by March 09.'', she said.

Rupee which almost touched 47 mark on Tuesday recovered today to 46.34 levels.

According to Malkani, the key reasons for the 10 per cent depreciation in rupee in the past month were the strong dollar rally and acute dollar shortage in the local market coupled with the dis-continuation of the Special Market Operation Scheme (where RBI provided dollars to the oil companies in lieu of oil bonds).

The dollar shortage was a result of continued portfolio flows, offshore demand and demand from oil companies, she said while adding that exporters are now holding back from selling.

Global Confidence Falls as Lehman, AIG Roil Financial Markets


Confidence in the global economy fell in September as financial turmoil deepened in the U.S., a survey of Bloomberg users on five continents showed.

The Bloomberg Professional Global Confidence Index fell to 11.3, from 14.1 in August. Confidence among U.S. respondents fell to 10.6 from 18.2, while the Western European measure was at 12.6 after 12.9. A reading below 50 indicates pessimism.

A yearlong credit squeeze culminated in the past two weeks with the bankruptcy of Lehman Brothers Holdings Inc. and the bailout out of Fannie Mae, Freddie Mac and American International Group Inc. Overnight borrowing costs soared as banks hoarded cash.

``We moved from Fannie and Freddie to Lehman to AIG, and even today, one question is: who is going to be next?'' said Simon Barry, an economist at Ulster Bank in Dublin, who participated in the survey. ``A lot of these risks haven't gone away.''

The MSCI index of global financial shares has declined 10 percent since early last week. The U.S. Federal Reserve yesterday said it would lend the country's biggest insurer, American International Group Inc., $85 billion to avert the worst financial collapse in history. A day earlier, Lehman Brothers filed for bankruptcy and Merrill Lynch & Co. agreed to be taken over by Bank of America Corp.

About 3,500 Bloomberg users from Tokyo to New York posted responses between Sept. 8 and Sept. 12 as investors absorbed U.S. Treasury Secretary Henry Paulson's decision to bail out Fannie Mae and Freddie Mac, the lenders which own or guarantee $12 trillion of U.S. mortgages.

Credit Losses

Banks worldwide have tallied more than $500 billion in losses and writedowns since credit markets seized up a year ago.

``We haven't experienced anything like this since 1929,'' Former European Central Bank chief economist Otmar Issing, 72, said in a Bloomberg Television interview yesterday. ``Global growth will slow and is already slowing. But overall, the risks have mostly been confined to a few industrialized countries.''

Bloomberg users increased expectations that lower oil prices will allow central bankers to pare interest rates as the economic outlook deteriorates. In Germany, the measure for central bank- rate expectations fell to 34.1 from 42.7, signaling respondents in Europe's biggest economy now anticipate that the European Central Bank may cut its key rate in the coming six months. The gauges also declined in the U.S., Japan, and the rest of the euro region.

The price of oil fell by a third since touching a record $147.27 in July and traded at $93.26 a barrel in New York at 10:42 a.m. Central European Time today.

Timing of Recovery

``For global business confidence to improve two things are needed: the U.S. housing market to bottom out and a sign that the financial turmoil is nearing an end,'' said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo. ``That won't be until around the second quarter in 2009.''

The cost of borrowing in dollars overnight more than doubled yesterday as banks hoarded cash amid speculation more financial institutions will fail. The overnight dollar rate soared 333 basis points to 6.44 percent, its biggest jump, according to the British Bankers' Association.

The euro region and the Japanese economies both contracted in the second quarter, while the European Union says the U.K. will suffer a recession in the second half of the year. In the U.S., unemployment jumped to 6.1 percent in August, the highest in five years.

Respondents in Japan were the most pessimistic about the global outlook. Participants in Spain, which the EU says faces its first recession in 15 years, were the gloomiest about their economy, with a reading of 4.1, followed by the U.K. Participants in Brazil remained the most optimistic about their economy, at 58.2.

Rupee trades at 46.28 per dollar

Mumbai: The rupee rose by 60 paise to 46.28 against the US dollar in early trading today, paring yesterday's record loss of 90 paise on expectations that the Reserve Bank may intervene to stem the rupee fall.

The rupee resumed stronger at 46.38/40 a dollar from Tuesday's close of 46.89/90 a dollar, aided by a recovery in stock prices in other Asian exchanges and the RBI moves to augment dollar supply.

The RBI yesterday asked public sector banks to raise dollar deposit rates for non-resident Indians and said it would continue to sell dollars as the rupee continued to slide.

RBI also decided to allow banks to borrow more by relaxing the statutory liquidity ratio (SLR) to ease the liquidity crunch and bolster the sliding currency. The central bank also expanded the liquidity adjustment facility scheme.Foreign banks are also reported to have sold dollars in the forex market after the RBI's steps to cool the financial markets.

The rupee had lost Rs2.29, or 5.13 per cent, in the last six days alone amidst heavy capital outflows and heavy dollar demand.

Foreign funds have so far sold a net $8.4 billion worth of stocks, driving the rupee down more than 15 per cent so far in 2008.

The dollar's strength against other currencies also seems to have impacted the rupee value.

Yen Falls Against Dollar After Fed Rescue of AIG

The yen fell for a second day against the dollar after the Federal Reserve said it will lend as much as $85 billion to American International Group Inc., helping prevent credit markets from seizing up.

Japan's currency also dropped versus the Australian and New Zealand dollars on speculation an AIG rescue will encourage investors to resume taking out loans in Japan to buy higher- yielding assets elsewhere. The yen jumped the most in a decade against the greenback on Sept. 15 as mounting credit-market losses forced Lehman Brothers Holdings Inc. to file the biggest bankruptcy in history, sparking a global stocks rout.

The Fed's loan is ``likely to support the U.S. financial system and avert a catastrophe,'' said Kenichiro Ikezawa, who helps oversee the equivalent of about $3 billion as a fund manager at Daiwa SB Investments Ltd. in Tokyo. ``Risk-taking appetite will probably recover a bit. Sentiment toward the dollar isn't bad, and the yen may be sold.''

Japan's currency fell 0.3 percent to 106.00 per dollar at 7:35 a.m. in London, after sliding 0.9 percent yesterday and surging 3.1 percent on Sept. 15. Against the euro, the yen slid 0.9 percent to 150.64. It touched 147.04 yesterday, the strongest since August 2006. The dollar fell 0.6 percent to $1.4212 per euro.

Australia's dollar rose 3.1 percent to 84.90 yen from late in Asia yesterday, and New Zealand's dollar climbed 3.5 percent to 70.29 yen. The Nikkei 225 Stock Average advanced 1.2 percent, after a 5 percent drop yesterday.

Carry Trades

``A disorderly failure of AIG could add to already significant levels of financial market fragility,'' the Fed said, explaining its decision to lend money to AIG in return for a 79.9 percent stake.

Benchmark interest rates of 7 percent in Australia, 7.5 percent in New Zealand, 8.25 percent in Mexico and 13.75 percent in Brazil compare with 0.5 percent in Japan, making the nations' currencies favorites for so-called carry trades. The Bank of Japan today left its overnight rate unchanged for a 22nd straight policy meeting.

In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher rates, earning the spread between the two. The yen declined 0.3 percent to 58.6007 against the Brazilian real and weakened 0.5 percent to 9.910 versus the Mexican peso.

``The news is lifting shares and calming investors,'' said Toshihiko Sakai, head of trading in foreign-exchange and financial products at Mitsubishi UFJ Trust & Banking Corp. in Tokyo. ``They are selling the yen.''

Lower Volatility

Implied volatility on one-month dollar-yen options fell to 16.93 percent today from 17.65 percent yesterday when it touched 19.50 percent, the highest since March 17. Lower volatility may encourage carry trades as it indicates a smaller risk of exchange-rate fluctuations that can erode profits.

Fed Chairman Ben S. Bernanke and his colleagues yesterday rebuffed calls by some investors for an interest-rate cut after Lehman filed for bankruptcy, signaling they will continue to address market turmoil with emergency lending and aim monetary policy at a longer-term economic forecast that may still show the economy is skirting a recession. The benchmark rate was kept at 2 percent.

Further losses in the yen may be limited by speculation Japanese investors will repatriate funds ahead of the Sept. 30 halfway point of Japan's fiscal year, according to Tomoko Fujii, head of economics and strategy at Bank of America Corp. in Tokyo.

`Upside Risks'

``The approach of the Japanese fiscal half-year end will keep domestic financial institutions sidelined in their foreign asset investment or may even foster repatriation,'' Fujii wrote in a research note yesterday. ``Upside risks to the yen will probably persist in coming weeks.''

Bank of America raised its yen forecasts, predicting the currency will trade at 104 per dollar at the end of September and 107 at the end of December. That compares with previous estimates of 108 and 110, respectively, Fujii said.

The dollar may fall before government reports today that are expected to show the U.S. housing market is deteriorating, adding to evidence of a slump in the world's biggest economy.

Housing starts fell 1.6 percent in August to an annual rate of 950,000, the lowest level since March 1991, according to the median forecast in a Bloomberg News survey of 74 economists. Building permits, a sign of future construction, probably fell 1 percent to a 928,000 pace. The Commerce Department will release the two reports at 8:30 a.m. in Washington.

``The source of global financial sector concerns, that is, the U.S. housing market, has not shown signs of a recovery,'' Fujii said.

Rate Cuts

Any gains in the pound and the euro may be limited by speculation European central banks will lower interest rates in coming months as the U.S. slowdown spreads through other countries. The U.K. currency rose 0.3 percent to $1.7881.

The Bank of England will release minutes from its policy meeting ended Sept. 6 at 9:30 a.m. in London. The central bank kept its benchmark rate unchanged at 5 percent. BOE Governor Mervyn King said yesterday inflation will peak ``soon'' and then slow ``sharply'' in 2009.

Economists surveyed by Bloomberg forecast that the European Central Bank will keep its benchmark rate on hold at 4.25 percent this year before cutting it in the first quarter of 2009.

Weaker Pound, Euro

``The pound and the euro will be hit more as more weakness spreads through Europe,'' said Thomas Harr, a senior currency strategist in Singapore at Standard Chartered Plc, the U.K. bank that gets most of its profit from Asia. ``The BOE will start cutting rates quite significantly from the fourth quarter. The ECB will have to follow.''

The pound may fall to $1.58 and the euro may decline to $1.30 by the middle of next year, Harr said.

Luxembourg Finance Minister Jean-Claude Juncker, who heads a group of euro-area counterparts, said today the euro region and Germany, its biggest member, will escape recession even as economic growth weakens.

``I don't see the danger of recession in the deeper sense of the word,'' Juncker told Germany's Deutschlandfunk radio. ``Economic growth will clearly weaken.''

Monday, September 8, 2008

Congress should not rush through nuclear deal: Berman


New York, Sept 7 :: The US Congress should not rush through the Indo-US nuclear deal until the Bush Administration proved that it did not cut any "side deals" at the NSG meeting to get the India-specific waiver, Chairman of the House Foreign Affairs Committee Howard Berman has warned.
Berman, a well-known opponent of the Indo-US nuclear deal, said he would not consider any "expedited" timetable for considering the Indo-US agreement until the Bush administration provides him with more information about the negotiations held at the Nuclear Suppliers Group in Vienna.

The Democrat had raised a political storm in India by releasing the 26-page responses by the State Department to 45 questions on the Indo-US nuclear deal posed by his predecessor Tom Lantos way back in October last year.

The US position in the letter appeared at variance with New Delhi's interpretation of some key clauses of the Indo-US nuclear deal.

Berman told the New York Times that he wants to check that the Bush administration did not cut any side deals with 45-member grouping to get their backing.

He said he wanted to ensure, for instance, that the United States did not say any countries could sell nuclear technology to India that the US is currently prohibited from selling.

"Ultimately, the burden was on the White House to convince Congress that the nuclear pact needed to be authorised in a 'rushed' fashion," he said.

Barman's comments came as Secretary of State Condoleezza Rice said time was short and she has talked to the heads of the Committees of both the houses of Congress for pushing through the deal

Nuclear deal to power India Inc’s growth engine

inado us
The mood is again upbeat among engineering companies. From having to fret about losing top talent to overseas companies, this core sector feels it is all set to see a sharp increase in business contracts, thanks to the Nuclear Suppliers Group’s decision that has overturned a three-decade-long ban on India buying materials related to nuclear energy.

However, actual contracts could take more than three to four years as varied issues, such as financial assistance and legal, regulatory and safety issues, are spelt out clearly and local capability is developed. It is expected that the nuclear agreement with the US may allow India to generate 40,000 megawatts of nuclear power by 2020. The waiver and the prospects of a possible Indo-US nuclear deal has led global nuclear power majors, such as General Electric, Westinghouse, Areva and Rosatom, are expected to relaunch talks for manufacturing and supply of nuclear power equipment while also initiating parallel negotiations with the state-owned Nuclear Power Corp of India for supply of nuclear fuel and technology for existing power plants and upcoming projects, said sources close to the development. Top engineering companies such as Larsen & Toubro and are also keen.

Global uranium suppliers led by Australian, Kazakh and Canadian firms, are also eyeing fuel supply contracts with NPCIL, said the sources who can’t be named. L&T, India’s largest engineering company, expects a sharp increase in interest in nuclear energy. “Foreign companies have been in talks with us frequently to assess our expertise ever since the India-US nuclear talks started,” said a senior official with L&T. “We expect the negotiations to resume now as India has become a member of the Nuclear Club,” he added.

Recently, L&T chairman AM Naik told ET that that his company is ready for its foray into building nuclear reactors. “We will invest about Rs 1,800 crore for a forging unit through a joint venture with Nuclear Power Corp,” Mr Naik had said.

The agreement with the US is likely to generate orders of more than $10 billion for companies such as L&T and Bhel. This is expected to boost revenues for these companies and also stem flight of executives from large companies such as L&T which have seen alarming attrition levels of 15%.

“(However) the whole process will take some time,” said Kameswara Rao, India leader (power practice) at PricewaterhouseCoopers. “Apart from developing local capability, we also need to look for clarity on the financial issues as not many multilateral agencies lend to nuclear projects,” he added. The options then include tapping bilateral loan guarantees and also facilitating uranium mining, apart from developing private public partnership models. India’s nuclear reactors are operating at just 55-60% capacity due to low-uranium supplies which face restrictions after India blasted its first atom bomb at Pokhran in 1974.

State-owned Nuclear Power Corp of India (NPCIL), the monopoly nuclear power generator, has identified four reactor manufacturers — Westinghouse Electric Company (AP1000 series of reactors), GE-Hitachi (ABWR reactor series), Areva (1,000 mw European pressurised reactors) and Russia’s atomic energy agency Rosatom (VVER 1,000 reactors) — as among the frontrunners for new projects planned across the country. This is based on “suitability” of technical parameters for placement of orders that will form the first phase of the Centre’s plan to build 40,000 mw of nuclear capacity by 2020.

The nuclear space is currently dominated by leading companies from Russia and France, which have sophisticated nuclear technologies. Areva, a France-based company with a listed unit in India, has already said it plans to join hands with Indian firms for production of nuclear power equipment. “We are negotiating with Indian companies for a possible joint production in India,” Areva president Anne Lauvergeon said recently.

Private energy companies were cautious talking about the deal. Reliance Energy officials were tight-lipped. A spokesperson for the Mumbai-based electricity company that is part of the Anil Ambani group, said that the deal would be good for the country and that the company is willing to wait and see how it unfolds. Tata Power is another private company that has been waiting for India’s nuclear isolation to end so that it could foray into nuclear power. About a year ago, the company had initiated talks with Areva on sourcing of nuclear power equipment.

Tata Power recently said it was planning a minimum $3 billion investment in nuclear energy, either on its own or through joint ventures.

The local capability also needs to be developed. Tata group’s TRF executive director RC Nandrajog says that immediate benefits may not be there, “but once there are efforts to build plants, we will see lot of business on fabrication and engine making.”

While French nuclear major Areva NP and Russian state-owned firm Rosatom are among the companies keenly eyeing the Indian nuclear pie, US players such as General Electric and Toshiba Corp-owned Westinghouse Electric are other key players waiting for a ratification by the US Congress.

Russian firms are currently helping India build two 1,000-MWe (megawatt electric) light water reactors at Koodankulam in Tamil Nadu and plans for an additional six units could be speeded up.

US-based nuclear firms, meanwhile, will wait for the approval from the US Congress to resume trade with India. If this happens GE would act upon its joint venture with Hitachi for the Indian market and has recently been reported to be open to local partnerships.

Banking, capital goods stocks rally

indo us
Key benchmark indices saw strong start after the 45-nation Nuclear Supplier Group (NSG) on Saturday, 6 September 2008 reached a consensus on the crucial Indo-US nuke deal agreeing on a clean waiver for India. A solid surge in Asian stocks also aided the strong upmove on the domestic bourses.
Capital goods, telecom shares rallied on fresh buying. The market breadth was strong. All the 30-members from the Sensex pack gained. Ranbaxy Laboratories rebounded in green.
Shares of potential beneficiaries of the India-US nuclear deal surged, with NTPC, Bharat Heavy Electricals and Larsen & Toubro surging over 5% each.
Asian markets surged today, 8 September 2008, after the US government on Sunday, 7 September 2008, took over mortgage finance firms Fannie Mae and Freddie Mac to limit extensive damage of the financial crisis. Key benchmark indices in Japan, Hong Kong, Taiwan, Singapore, South Korea were up by between 3.38% and 5.57%. However, China's Shanghai Composite was down 1.95%
At 12:25 IST, the BSE 30-share Sensex was up 580.80 points or 4.01% to 15,065.13. It opened 554.23 points higher at 15,034.06 and surged to strike an intra-day high of 15,107.01 in early trade. At the day’s high, the Sensex gained 623.18 points. At the day’s low of 14,989.64 hit in mid-morning trade, the Sensex rose 505.81 points.
The S&P CNX Nifty jumped 167.70 points or 3.82% to 4,519.50
The NSG’s acceptance of the US proposal to drop a ban on nuclear trade with India will now put the Indo-US nuclear deal on the fast track. The approval came after almost three days of meeting in Vienna, ending a three-decade-long ban on India buying materials related to nuclear energy. The NSG meet was called to minimise any damage to the Non-Proliferation Treaty, which India has not joined.
However, the nuclear deal still needs to be ratified by the US Congress before it could take force. The Congress must act before adjourning in late September 2008 for US presidential elections. If that does not happen, the deal could be left to an uncertain fate under a new US administration that takes office next year.
The market breadth was strong on BSE with 1772 shares advancing as compared to 646 that declined. 83 remained unchanged.
The BSE Mid-Cap index rose 1.92% to 5,861.81 and the BSE Small-Cap index gained 1.63% to 7,017.44.
The total turnover on BSE amounted to Rs 2034 crore by 12:30 IST as compared to Rs 1510 crore by 11:30 IST.
All the 30 Sensex stocks were in the green. Ranbaxy, India’s top drug maker by sales, recovered from day’s low of Rs 438.05 and was now up 1.05% to Rs 455. The Japanese drug maker Daiichi Sankyo’s open offer to acquire an additional 20% stake at Rs 737 a share in the company ended on 4 September 2008.
India’s largest private sector power generation firm by sales, Reliance Infrastructure jumped 7.50% to Rs 1092 on 5.44 lakh shares. It was the top gainer from Sensex pack.
Capital goods heavyweights Larsen & Toubro (up 5.95% to Rs 2772), and Bharat Heavy Electricals (up 5.55% to Rs 1827.90), surged.
India’s largest private sector firm by market capitalization and oil refiner Reliance Industries (RIL) advanced 3.55% to Rs 2153.30 on 3.90 lakh shares.
Telecom pivotals were in demand on renewed buying interest. India’s second largest cellular services provider in terms of market capitalisation Reliance Communications advanced 3.82% to Rs 409 after its subsidiary Reliance Big Entertainment reportedly acquired a majority stake in the US-based cricket webcasting portal, Willow TV, for an undisclosed amount.
India’s largest cellular services provider in terms of market capitalisation Bharti Airtel rose 1.54% to Rs 817.25
India’s second largest software services exporter Infosys Technologies gained 2.06% to Rs 1748.60 and ICICI Bank, the country’s largest private sector ban by net profit jumped 6.57% to Rs 732.45
Aurobindo Pharma rose 0.95% to Rs 319.05 after the company said it has secured tentative approval from US Food & Drug Administration to manufacture and market Abacavir Sulphate/Lamivudine tablets. The company made this announcement during trading hours today, 8 September 2008.
Pratibha Industries surged 3.11% to Rs 278.60 after the company said on Monday, 8 September 2008, it has secured a contract worth Rs 44.75 crore from Delhi Jal Board for water transmission program.
New York's main contract, light sweet crude for delivery in October 2008 rose $2.37 to $108.60 per barrel today, 8 September 2008 on worries hurricane Ike will threaten production facilities in the oil-rich US Gulf Coast.
US markets ended mixed on Friday, 5 September 2008 after financial shares rebounded on hopes that concrete measures would be taken to rescue mortgage companies Fannie Mae and Freddie Mac. The Dow Jones industrial average roe 32.73 points, or 0.29%, to 11,220.96. The Standard & Poor's 500 index gained 5.48 points, or 0.44%, to 1,242.31. However the Nasdaq composite index slid 3.16 points, or 0.14%, to 2,255.88.
Back home, intense selling in index pivotals ever since the opening bell led a sell-off on the bourses on Friday, 5 September 2008. The BSE 30-share Sensex lost 415.27 points or 2.79% to 14,483.83 and the S&P CNX Nifty declined 95.45 points or 2.15%, to settle at 4352.30.

Bush Admn set for efforts to get nuclear deal approved

manmohan-bush
Washington, Sept 8 (PTI) Facing the final hurdle, the Bush Administration today geared up to get the 123 Agreement quickly approved by the American Congress to bring the landmark Indo-US nuclear deal to fruition, as a key critic raised questions on an expedited timetable.

After winning a Nuclear Suppliers Group(NSG) waiver, the US is hoping for a bipartisan support for the Agreement with India getting the green signal from the nuclear cartel for resuming nuclear commerce after it approved the waiver.

In signs that the top echelons of the State department were investing their personal energy to see the 123 Agreement through , US Secretary of State Condoleezza Rice is herself leading the charge to open talks with Congress leaders at the earliest. The Congress, which opened today, will be in session till Sept.26. Rice has admitted that the Congressional calendar is short.

Though the Administration has voiced optimism over a Congress approval, potential problems loomed large with Senator Howard Berman, the Chairman of the House Foreign Affairs Committee and a vocal critic of the deal, saying it should first convince the lawmakers on the need for special procedures to speed up the process.

The Congress is being asked by the Administration to do away with the mandatory 30-day period before it can take up the Agreement for a simple yes-no vote without a debate.

If the US administration wants to seek special procedure to quicken Congressional consideration of the accord, it should show how the NSG decision is consistent with the Hyde Act, including which technology can be sent to India and what impact a nuclear test by New Delhi would have, Berman said.

A senior U.S. Official working on the India legislation was quoted as saying in the Wall Street Journal: "We still have a lot of hurdles in front of us."

Manmohan, Bush may ratify N-deal during PM's US visit

nuclear deal
New Delhi (PTI): Prime Minister Manmohan Singh will go to Washington later this month and meet President George W Bush when the two may ratify the Indo-US nuclear deal agreed to between them three years ago following the ringing endorsement received at the 45-member Nuclear Suppliers Group.

Singh, who is to undertake a tour of the US and France, will travel to New York first for attending the United Nations General Assembly after which he will go to Washington on a day's visit.

Former Ambassador to the US Lalit Mansingh feels by that time the US Congress could approve the 123 civil nuclear cooperation agreement entered into between Bush and Singh in July, 2005 and the two could sign it in the final ratification process of the deal.

If that is not possible by the time Singh visits Washington, the deal could be signed by External Affairs Minister Pranab Mukherjee and Secretary of State Condoleezza Rice if by that time a "lame duck" session of the Congress approves it in December before the end of Bush's term in mid-January next year.

From the US, the Prime Minister is scheduled to travel to Marseilles in France for the annual Indo-EU summit and then to Paris for a meeting with French President Nicholas Sarkozy.

N-deal: The road ahead in US

indo-us nuclear deal
From Vienna the action shifts back to Washington DC, where the Indo-US nuclear deal now awaits clearance from the US Congress.

The bilateral 123 agreement, which lays down the terms of nuclear trade between America and India, still has to face a yes or no vote.

Ashley Tellis, a key advisor to Bush government on the deal, says: "The next step is for the President to get the determinations required. I think there are seven determinations to be made. Bush has to make those determinations that India has completed a set of actions. Once those determinations are made which we can do really quickly assuming that India fulfills what is supposed to do the administration intends to send this to Congress at the earliest possible opportunity."

The earliest that can be is Monday, when Congress reconvenes after summer break for the last time before the presidential elections in November.

However, US law states there has to be a continuous 30-day session in Congress once a bill is introduced, in order for it to be put to a simple up-down vote.

The 30-day period can be waived but it requires the unanimous consent of all house members.

But well-known and influential opponents of the deal could come in the way.

In which case, it's more than likely that the deal will only be taken up in a lame duck session in the winter -- after the US elections, but before the new President, and Congress assume office.

While the NSG clearance means that India can now technically trade with any of its members without awaiting this vote, there is an unwritten understanding, that India will wait for the US Congress to ratify the 123.

Sharon Squassoni, Senior Associate, Carnegie Endowment for International Peace, adds: "If Congress did not pass the deal French and Russian and Japanese and other nuclear industries would be able to pursue contracts with India and US industries will not so there is a certain logic that Congress will feel that pressure and act accordingly."

But at this stage domestic politics will become a factor -- when much will depend on whether the Democrats want to give President George Bush a foreign policy success and a legacy that may mitigate the disasters of Iraq.

US-India nuclear deal called “foolish and risky”

WASHINGTON: The US-India Civil Nuclear Agreement approved by the Nuclear Suppliers Group (NSG) in Vienna is a “foolish and risky deal” that will make every country free to sell nuclear technology to India while “asking virtually nothing from India in return”, in the process undermining the very international system that India so ardently seeks to join, according to a critical assessment published here on Sunday.
Mira Kamdar, a fellow at Asia Society, New York, writes in the Washington Post that while India needs energy, “this foolish, risky deal is not the way to get any of these things. India’s democracy has already paid a crippling price, and now the planet may too”. The Indo-US nuclear co-operation agreement was approved by the NSG at its meeting in Vienna this weekend. However, it still has to find congressional approval, an exercise that it may not be possible to complete during the short time left to do that. The deal, Kamdar argues, risks triggering a new arms race in Asia. If it passes, a “miffed and unstable Pakistan will seek nuclear parity with India, and China will fume at a transparent US ploy to balance Beijing’s rise by building up India as a counterweight next door”. The pact will gut global efforts to contain the spread of nuclear materials and encourage other countries to flout the Nuclear Non-Proliferation Treaty (NPT) that India is now being rewarded for failing to sign.
Kamdar believes that the deal will divert billions of dollars away from India’s real development needs in sustainable agriculture, education, health care, housing, sanitation and roads. It will also distract India from developing clean energy sources, such as wind and solar power, and from reducing emissions from its many coal plants. Instead, the pact will focus the nation’s efforts on an energy source that will, under the rosiest of projections, contribute a mere 8 percent of India’s total energy needs — and that will not happened until 2030. The deal will generate billions of dollars in lucrative contracts for major US and Indian companies as well as help resuscitate the moribund US nuclear power industry. France and Russia, both of which support the deal, will reap huge profits in India. According to one estimate, the deal will generate more than $100 billion in business over the next 20 years, as well as a large number of jobs in India and the United States..
Kamdar writes that India will get unfettered access to nuclear fuel and technology without doing anything in return. It will not have to open all its reactors to inspection by the International Atomic Energy Agency (IAEA), which means that both the new technologies India will now be able to acquire and the fuel it now has on hand can be ploughed into its nuclear weapons programme. “More ominously, the deal will tell other would-be nuclear powers — and nuclear rogues — that the old barriers to non-proliferation need not be taken seriously. They certainly have not been taken seriously by the US. Other, less high-minded powers will surely follow the shortsighted example being set by Delhi and Washington. Russia has emphatically signalled that it has had enough of global norms that it considers unfair and is keen to return to old-fashioned realpolitik. The prospect of meaningful steps toward disarmament by the existing nuclear powers is slim and dwindling.” The deal will not magically transform India into China’s economic or military equal. Even if India managed to match China reactor for reactor and missile for missile, it could do so only at the expense of precisely the investments in human and physical infrastructure that could make India into a truly great power, prosperous and secure. This is the real tragedy of the US-India nuclear deal, she concludes. .

Last phase of Indo-US Nuclear Deal Crucial

indo us nuclear deal
Despite shortage of Time, the US administration, business and Indian-American activists are found to be busy in pushing Congress for approval of the civil nuclear deal with India as quickly as possible but definitely before 26 September. This is the phase that US is to cross over and its important for the country’s prestige as well as business point of view, death and life question.

The Nuclear Suppliers Group has already given its okay to India giving its go-ahead signal for resumption of nuclear cooperation with India. Now the next stage is the 123 agreement, which shall now be placed before the US Congress on Monday.

There is no doubt that the deal enjoys broad support, but the time factor has to play a big part, 30 days are required to consider the deal, whereas the there are a few days short of the permissible time limit, hence there does arise a problem of time to a certain extent.

The session ends on September 26, whereas rules require 30 days for consideration of the measure, but Secretary of State Condoleezza Rice is not worried, she is confident of her spade work. She gave her mind to the reporters in Algiers on Saturday.

“We understand that the time is very short.” “I have already talked before this NSG (meeting), several weeks before, to relevant committee chairs about trying to get it done, and I will have those conversations again, most likely on Monday or Tuesday.”
It is important for President George W Bush, who would naturally see that the business goes through smoothly. Rice feels that the agreement is a part of President Bush’s legacy, which he can’t take lightly.

“We are ready,” said Swadesh Chatterjee, chairman of the US-India Friendship Council, and hope to get the deal ratified within time. The group plans to meet a large number of Congressional leaders to apprise them of the urgency.
The only way to go smooth is first to get the exemption of 30 days rule, which I feel shall be granted without much hitch even though, there is some apprehension from Howard L Berman, chairman of the House Foreign Affairs Committee, who does’t seem to be supportive.

Howard L Berman, chairman of the House Foreign Affairs Committee, has created some doubt gave his mind to The New York Times on Saturday that he might not consider any expedited timetable until the Bush administration satisfies him with proper information about Vienna’s proceeding with grounds justifying the exemption of time limit. However, that is only a formality and it may not stand in the way of ignoring the time factor of 30 days.

Since the denial at this stage shall damage certain US companies who wish to deal with India and if the time limit is overruled, Russia and France may click the deal from India and this aspect the Americans can’t afford to ignore, hence the time limit shall stand no bar, and so Howard L Berman shall not stand in the way of exemption of time.

Republican presidential nominee John McCain, however, said on Saturday that Congressional leaders should act expeditiously to pass the agreement. Democratic nominee Barack Obama also has also said he supports the agreement.

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