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.