McDonald's warns of revenue drop

US fast-food chain McDonald's warned that the stronger dollar and commodity costs will squeeze its first-quarter revenues and earnings per share.

First quarter revenues could be at least $600m (£434m) lower, it said.

McDonald's sales have remained steady in the economic downturn, helped by its low prices and the ubiquity of its fast-food outlets.

It posted a 1.4% rise in sales in February, compared with a year earlier, at outlets open at least 13 months.

The small increase in sales came despite having one fewer day in February this year than in last year's Leap Year.

But the rates of increase are substantially lower than last year when, with McDonald's reporting an increase of 11.7% in February 2008.

Sales were up 2.8% in the US, helped, it said, by the chicken menu, particularly the quarter pounder. Sales were down 0.2% in Europe compared with the year before .

"If foreign currency rates remain at current levels, currency translation is expected to negatively impact first-quarter revenues by at least $600m and earnings by at least $0.07 to $0.09 per share," the company said in a statement.

"In addition, as previously stated, commodity cost pressures are expected to have a greater impact during the first half of the year."

Pound slides as bank shares hit

The pound has sunk back below $1.40 to a six-week low, as confidence in the UK economy took yet another knock following falls in bank shares.

The pound was down almost four cents at $1.3776. Sterling touched its lowest levels in 24 years in mid-January, nearing $1.35.

UK financial shares fell in Monday trading after the government increased its stake in Lloyds Banking Group.

Against the euro, the pound was down over two cents at 1.0927 euros.

Shares in Lloyds fell more than 10%, before recovering during afternoon trading to end the day up 4.1%.

Barclays lost 13% before bouncing to end down 5.3%.

Other banking stocks among the day's biggest losers included HSBC, down 3.3%, and RBS, which fell 4%.

'Downward pressure'

"What's going on in UK shares at the moment is putting pressure on sterling," said Geraldine Concagh at AIB Group Treasury.

She added that the Bank of England's programme of quantitative easing will put further downward pressure on sterling.

The taxpayer will soon own 65% of Lloyds Banking Group - up from the current 43%.

Chinese prices record rare fall

Chinese consumer prices showed an annual fall in February for the first time since 2002, figures have shown.

The consumer price index fell 1.6% from a year earlier, dragged down by falls in food prices but officials downplayed the threat of a deflationary spiral.

Consumers welcome falling prices, but a prolonged drop undermines company profits as people put off purchases.

Growth in China has slowed sharply as its exports have been hit hard by the global economic downturn.

"Deflation is a symptom of a weak real economy and industrial capacity, which has left companies with little pricing power," said Jing Ulrich, an analyst at JP Morgan.

She added that China's bout of deflation was likely to be temporary as government measures to kick-start spending take effect.

Slowdown

China's inflation rate hit a 12-year high of 8.7% in February 2008 because of shortages of grain and pork.

Officials said this high base for comparison partly explained February's fall.

In the first two months of 2009, prices were down just 0.3% from a year earlier.

In the final three months of last year, China's economy expanded by 6.8% from a year earlier - below the 8% that officials view as the level needed to keep unemployment in check and avoid social unrest.

Overall growth in 2008 stood at 9% - the first time since 2002 that the economy has expanded at a single-digit pace.

Airbus company returns to profit

European aerospace group EADS, the parent company of Airbus, made a profit of 1.57bn euros ($2bn; £1.45bn) in 2008 despite the uncertain economic climate.

In 2007, EADS made a loss of 446m euros. The firm said it expected 2009 profits to be lower than 2008's amid doubts about future aircraft demand.

Airbus delivered a record 483 aircraft in 2008, beating main rival Boeing.

However, EADS said that setbacks in the production of its A400M military transporter would continue.

The A400M's first flight has been postponed because of problems with its engines.

Reshaping

In the fourth quarter of 2008, EADS made a net profit of 490m euros, up 89% from a year earlier.

EADS said the robust profits were in part down to cost cutting.

"We made significant headway in reshaping the company," said Louis Gallois, EADS chief executive.

Although 2009 would be "challenging", he said that 2009 profits would be "significantly positive".

Unlike many companies that have been forced to cut payments to shareholders because of the economic downturn, EADS said it would pay a dividend of 0.20 euros per share, up from 0.12 euros a year ago.

Ford staff accept working changes

Workers at US carmaker Ford have voted to accept changes to their contracts and other benefits, the United Auto Workers union (UAW) says.

The changes include freezing wages, eliminating cost-of-living increases as well as some paid holidays and bonuses.

The deal, which is aimed at helping the firm remain competitive, also involves a new funding arrangement for a health care trust.

Ford's rivals GM and Chrysler will now face pressure to do similar deals.

Ford is the first US carmaker to come to an agreement with the UAW. US carmakers have struggled with a slump in demand as the economic crisis continues. Ford is also the only one of the so-called Detroit Three that has not asked the US government for any emergency loans.

Ford claims it currently has enough money to survive the downturn but says the deal will help it address a fall of income as car sales collapse.

The deal with the UAW is one of several steps Ford has taken to cut costs as part of a turnaround plan that the company initiated four-years-ago.

Sacrifices

The union said 59% of production workers and 58% of skilled-trades workers voted for the agreement.

"We are facing an unprecedented loss of sales and revenue at Ford," said UAW Vice-President Bob King.

"The voting results show that our members are prepared to make painful sacrifices in order to be part of the solution to the problems facing Ford and the US auto industry."

The deal will also save Ford billions of dollars in health care costs. The company will now pay up to half of its obligation to a trust fund for retired workers in stock rather than cash.

The announcement came as members of the Obama administration task force were touring General Motors and Chrysler facilities in the Detroit area.

GM and Chrysler have already received $17.4bn (£12.6bn) between them in federal support, and have asked for a further $21.6bn.

Similar agreements with the UAW are needed as a requirement of their bailout packages.

IMF predicts a global recession

The world economy is likely to shrink for the first time in decades this year, the head of the International Monetary Fund (IMF) has warned.

Dominique Strauss-Kahn's prediction is gloomier than that the IMF's current official forecast of 0.5% growth.

He added that trade was falling at an alarming rate and business and consumer confidence had collapsed.

He was speaking at a conference in Dar-es-Salaam, Tanzania, to discuss how Africa should respond to the crisis.

"The IMF expects global growth to slow below zero this year, the worst performance in most of our lifetimes," Mr Strauss-Kahn said.

The World Bank, the IMF's sister institution, on Monday said it also expects the world economy to shrink in 2009.

'Severe'

Mr Strauss-Kahn also warned that Africa's economic growth will be affected by the continuing world downturn. The IMF predicts that growth in sub-Saharan Africa will slow to about 3% in 2009, half the growth rate it previously thought.

Mr Strauss-Kahn said even this rate may be "too optimistic".

"Even though the crisis has been slow in reaching Africa's shores, we all know it is coming and its impact will be severe," he said.

"We must ensure that the voice of the poor are heard. We must ensure that Africa is not left out."

The conference will discuss what external support the IMF and other Western donors may be able to provide to help mitigate the impact of the crisis on Africa, which has the highest poverty rate of any region in the world.

Not at fault

The IMF's managing director, Dominique Strauss Kahn, told the BBC on Monday that the conference would be a "milestone" and that he wanted to build a different kind of partnership with Africa, as well as providing additional funds.

Africa has little direct exposure to the credit crisis. Its banks have not invested much, if at all, in the problem financial assets at the heart of the crisis.

But the global downturn has undermined demand for many industrial commodities, which are important exports for several African countries. - including oil in Nigeria, Angola and Equatorial Guinea, and copper in Zambia.

Less than a year ago, the IMF's forecast for sub-Saharan Africa was economic growth of 6.7% in 2009, an increase on the 5% growth enjoyed in 2008.

Now the low growth forecast means that many African countries are likely to see very little increase in living standards, and could fall further behind in meeting poverty targets.

It says that 15 of the 21 countries which it judges most vulnerable to the crisis are in Africa.