Goldman Sachs reports huge loss

Goldman Sachs has reported a $2.12bn (£1.41bn) quarterly loss, its first since going public in 1999.

The US banking giant's loss for the three months to the end of November was still smaller than had been expected and its shares rose 4% in New York.

During the same period in 2007, Goldman Sachs reported net income of $3.22bn.

Goldman Sachs and rival Morgan Stanley are the only two of Wall Street's original five investment banks still in independent existence.

In September, they changed their status to become bank holding companies, allowing them to take deposits from investors.

Difficult year

"The fear in the market was, the results would be much worse than they were. So the stock is rallying," said Walter Todd, portfolio manager at Greenwood Capital Associates.

"I think going forward, what kind of business does Goldman Sachs have? There's a huge question mark at this point," said Robert Lutts, at Cabot Money Management.

This year has been a difficult one for US financial institutions, as they suffered billion-dollar losses and had to cut jobs, while some of them were taken over by the government or rivals.

Seeking to stabilise the financial system, the US government has bailed out Citigroup, Bear Stearns, Fannie Mae, Freddie Mac and American International Group and injected hundreds of billions of dollars into the financial system.

Another of Goldman's rivals, Lehman Brothers, went bankrupt in September.

US inflation falls still further

US consumer prices dropped by a record amount in November as petrol prices and other energy costs continued to fall.

The Consumer Price Index (CPI) dropped by 1.7% in November, according to the US Labor Department, following a decline of 1% in October.

October and November's falls were the two biggest since monthly data first started being recorded in 1947.

And the annual rate of inflation was just 1.1% in November, down from 3.7% the previous month.

Energy prices fell 17% last month, double October's 8.6% dip.

Oil price falls

These latest big declines reflect the recession in the US and will raise the pressure on the Federal Reserve - the central bank - to act decisively to guard against a debilitating bout of deflation.

Paul Ashworth, at Capital Economics, said: "The headline inflation rate is now guaranteed to fall deep into negative territory next year."

"If this was just a decline in the relative price of commodities then it would be a little easier to live with," he said.

"However, the rapid moderation in core inflation suggests that there is a real risk of a sustained decline in the general price level. In short, the US economy could slip into a deflation within the next 12 months."

Much of the headline inflation fall was taken up by the continuing drop in crude oil prices, reflected in the further fall in the energy index.

Energy prices are now 32.4% below their peak in July earlier this year.

The gasoline index fell 29.5% in November and petrol prices are now 47% below their July peak.

Food prices increased 0.2% in November, following a 0.3% rise in October.

Excluding food and energy, core prices were virtually unchanged in November, after declining 0.1% in October, and are up 2.0% since November 2007.

Later on Tuesday the Federal Reserve is widely expected to cut its key federal funds rate, already at a low of 1%, by another half percentage point in an effort to keep the recession from worsening.

Apple to ditch Macworld gathering

In a surprise move, Apple said it is to abandon its annual tech gathering Macworld after this January's event.

Meanwhile news that the keynote address will not be given by CEO Steve Jobs has reignited speculation about his health following cancer four years ago.

Concern was raised earlier in the year when Mr Jobs appeared at the firm's developer conference looking gaunt.

Apple spokesman Steve Dowling refused to discuss the issue and said shows like Macworld were no longer relevant.

"Apple is steadily scaling back on trade shows and in recent years is reaching more people in more ways than ever before," Mr Dowling told BBC News.

"Every week 3.5 million people visit our retail stores. And like many companies, trade shows are a minor part of how Apple reaches its customers."

Mr Dowling also said that as the company had scaled back on such shows, it had ramped up "stand-alone launch events like the September iPod launch seen by millions of people on the internet".

IDG which runs the show put a brave face on things.

"We are on track for a terrific show with strong attendance numbers and nearly 500 exhibitors showcasing their products," Paul Kent, general manager of Macworld Expo told the BBC.

"The conference and expo has thrived for 25 years due to the strong support of tens of thousands of members of the Mac community worldwide. We are committed to serving their interests," he said.

Call for record Opec output cut

Leaders of the oil producers' cartel Opec are gathering in Algeria where they are under pressure from Saudi Arabia to make a record cut in output.

Saudi Arabia, the world's largest oil producer, predicts the cartel will reduce production by two million barrels a day at the meeting.

Saudi oil minister Ali al-Nuaimi said he expected Opec non-members to cut output by 600,000 barrels per day.

Oil giant Russia, a non-member, will also be represented at the meeting.

A combined cut of 2.6 million barrels per day represents 3% of global output.

Oil prices have slumped from a peak of $147 a barrel in July to about $44 a barrel, as demand has weakened amid the global economic downturn.

Cutback hopes

Expectation is high that oil producers are ready for co-ordinated actions to boost crude prices.

The Iraqi oil minister, Hussain al-Shahristani, said that at least two million barrels a day of oil production needed to be cut.

In terms of prices, he said he was hoping for a target oil price of "somewhere between $80 to $100".

Nigeria's oil minister, Odein Ajumogobia, said he too would support a cut of two million barrels a day.

"I would give such a proposal serious consideration. It's in everyone's interest for supply and demand to be better aligned. They are clearly not at the moment."

The International Energy Agency recently forecast that global demand for oil would fall this year, the first decline since 1983.

However, the fall in the price of oil has been helpful for central banks, especially in the developed countries.

It has eased their concerns about inflation and left them free to tackle their slowing economies by cutting interest rates.

The BBC's economics correspondent Andrew Walker said: "Opec's problem is the result of the worldwide economic downturn."

"Oil use has declined in the developed countries, and is growing more slowly in developing economies," he said.

On Tuesday, US light, sweet crude fell 18 cents to trade at $44.33 a barrel.

Brent crude rose 55 cents to $45.15 a barrel.

Watchdog 'ignored' Madoff warning

The top US financial regulatory body has ordered an in-house investigation into why it did not detect the $50bn (£33bn) Madoff fraud case sooner.

The Securities and Exchange Commission (SEC) head, Christopher Cox, launched an inquiry into what he called a serious agency breakdown.

It has been revealed the SEC received warnings about Wall St figure Bernard Madoff almost 10 years ago, in 1999.

Mr Madoff has been charged with fraud in one of the biggest-ever such cases.

Investors, banks and charities across the world fear they may have lost billions of dollars since Mr Madoff's arrest.

It is thought that Mr Madoff was running what was essentially the world's largest pyramid scheme, the BBC's Andy Gallacher reports from Washington.

Now serious questions are being asked about the SEC's role in not preventing it in the first place, our correspondent says.

'Credible and specific'

The SEC chairman said he was "gravely concerned by the apparent multiple failures" of SEC staff to look into claims about Mr Madoff.

Satyam takes steps back on shareholders' resistance

Hit by the adverse market reaction, homegrown Satyam Computers called off its proposed USD 1.6-billion acquisition of two companies on Wednesday promoted by the IT major Chief Ramalinga Raju's son.

Announcing the decision to call off the acquisition of Maytas Properties and Maytas Infrastructure "in light of the setback received from the investors community", Raju said: "We have been surprised by the market reaction to this decision even though we were quite positive about the merits of the acquisition."



"However, in deference to the views expressed by many investors, we have decided to call off these acquisitions," he said.



The reversal comes within a day of the Satyam board approving the decision to acquire Maytas Properties for USD 1.3 billion and a majority 51 per cent stake in Maytas Infrastructure for USD 0.3 billion.



Shortly after the announcement was made on Tuesday evening, the US-listed company had plummeted more than 55 per cent on the American bourses reflecting rejection of the deal by the shareholders.



Even during the investors conference held after the board's approval for acquisition, Raju faced tough questions from Institutional Investors in Satyam such as Reliance Mutual

Fund, SBI Mutual Fund, Templeton Mutual Fund and CLSA, with some of them even threatening to oppose the deal.

Rupee appreciates 61 paise against dollar

The Indian rupee strengthened by 61 paise against the US currency on Wednesday in opening trade on increased capital inflows by foreign funds amidst firming Asian equity markets, dollar selling by exporters and weakening of dollar against other currencies.

At the Interbank Foreign Exchange (Forex) market, the domestic currency traded at 47.30 against the greenback, a smart rise of 61 paise over the previous close of 47.91/92.



Forex dealers said that the rupee gained on dollar selling by banks and exporters after an upward trend in Asian equity markets raised hopes for strong opening on domestic bourses.



Asian markets on Wednesday opened higher with Hong Kong's Hang Seng going up 2.7 per cent, while Japan's Nikkei 225 was up nearly one per cent in early trade.



The rupee, appreciated by 13 paise at 47.91/92, a one-month high in the last trading session.



Meanwhile, the BSE Sensex closed 144.59 points higher at 9976.98 on Tuesday.

Dollar falls as Fed slashes rates

he dollar has fallen sharply against other currencies after the US Federal Reserve slashed its key interest rate to an all-time low.

Many analysts expected a cut to 0.5%, rather than the Fed's move to 0.25%.

The dollar stood at $1.4094 against the euro, $1.5511 against the pound and 88.43 yen versus the Japanese currency.

Meanwhile sterling fell to another record low against the euro amid expectations the Bank of England may cut its interest rates further.

The US interest rate is now the lowest among developed countries.

"This clearly hadn't been priced into markets with the dollar tumbling as a result," said James Hughes, a currency analyst at CMC Markets.

'Very negative'

At the beginning of December, the Bank of England reduced its rate to 2% from 3%, and notes from its monetary policy committee showed it considered an even deeper cut.

Separately, it was reported that the number of people out of work rose to the highest level since June 1999, while those claiming unemployment beneift hit a 17-year high.

"Sterling is coming under pressure after the claimant count figures were well above market expectations," Ian Stannard at BNP Paribas in London.

"It shows the UK is moving toward recession and this is very negative for sterling".

The pound stood at 1.1003 euros after hitting a record low of 1.0980 euros in earlier trading.

Fed cuts rate to virtually zero

The Federal Reserve slashed its base lending rate from 1.0 percent to virtually zero, saying its target federal funds rate would be a range of zero to 0.25 percent.

The unprecedented low rate announced by the Federal Open Market Committee is aimed at fighting off deflation and a crippling global credit crunch.

Additionally, the Fed said it would take other steps to stimulate lending and economic activity, including large purchases of mortgage securities to help unblock credit.