Zimbabwe inflation hits new high

Zimbabwe's annual inflation rate - already the world's highest - has soared to 231,000,000%, newly released official figures for July show.

The rise - from 11,200,000% last month - was largely due to increases in the prices of bread and cereals.

A landmark power-sharing deal between President Robert Mugabe and opposition leader Morgan Tsvangirai has failed to ease the country's economic crisis.

Meanwhile, the UN says it needs $140m for food aid over the next six months.

The UN World Food Programme estimates that two million people are in need of food aid, and that the figure will rise to 5.1 million - or 45% of the population - by early 2009.

"Millions of Zimbabweans have already run out of food or are surviving on just one meal a day - and the crisis is going to get much worse in the coming months," said WFP official Mustapha Darboe.

The inflation figures are from July - before the power-sharing deal - but reports from Zimbabwe suggest that the prices of many goods has continued to shoot up, while the value of the Zimbabwe dollar is plummeting

Rupee plunges to 49.07 against US dollar in early trade

The Indian rupee on Friday fell to more than six-year low of 49.07 against the US dollar at 0940 hrs owing to deepening global financial crisis amid weak Asian stock markets.


The level was last seen in May 2002.



At the Interbank Foreign Exchange (Forex) market, the domestic unit, which fell to 48.80 and closed at 47.99/48.00 on Wednesday, on Friday lost further ground by falling by Rs 1.08 at 49.07 against the greenback.



The local unit was trading at 49.02 a dollar in early trade before trading at 49.07.



Meanwhile, exporters and economists had said that the Indian currency may fall to 50 a dollar in the next two months in the wake of global financial crisis.

CCPA approves Indo-US nuke agreement for signing today

The Cabinet Committee on Political Affairs (CCPA) last night approved the landmark accord to implement the civil nuclear deal that will be inked by External Affairs Minister Pranab Mukherjee and Secretary of State Condoleezza Rice in Washington.


Prime Minister Manmohan Singh at a meeting of his senior Cabinet colleagues in New Delhi discussed the final shape of the agreement and the accompanying statement by President George W Bush after which the go ahead was given for signing the agreement on Friday.



On Wednesday, Bush had signed into law the enabling Congressional legislation that approved the agreement.


The over two-hour long meeting, which was attended by Mukherjee, Defence Minister A K Antony, Home Minister Shivraj Patil and Railways minister Lalu Yadav is understood to have analysed Bush's statement threadbare on whether it met India's concerns, particularly over fuel supply assurances.


Addressing New Delhi's concerns on certain provisions in the US Congressional legislation on the nuclear deal, Bush assured India that the new law makes no changes on fuel supply assurance commitments or the terms of the 123 agreement.


Signing the bill into law at a ceremony in the White House, Bush said "the bill approves the 123 agreement I submitted to Congress and establishes the legal framework for that agreement to come into effect."


At the same time, he maintained that the agreement with India was consistent with the US Atomic Energy Act and other elements of the US law.


Concerns had arisen in India over fuel assurances after statements by officials in the US that these guarantees were merely political in nature and not legally binding.

Libya blocks Swiss oil deliveries

Libya has stopped oil shipments to Switzerland months after the brief arrest of Muammar Gaddafi's youngest son for assault sparked a row.

Issam Zanati, chief executive of Libyan oil firm Tamoil, said the decision had been taken "in light of recent media reports", without giving details.

Tamoil says it supplies 20% of the Swiss fuel market and has more 300 petrol stations in the country.

Charges against Hannibal Gaddafi and his wife were later dropped.

They had been accused of hitting two of their staff.

The BBC's Rana Jawad in Tripoli says the embargo is in retaliation for Switzerland's failure to meet Libyan demands that it apologise for the earlier incident.

Libya had previously threatened to halt shipments when Hannibal Gaddafi was first arrested.

He and his wife were released on bail three days later and Libya did not follow through on the threat.

The two servants dropped all charges after receiving undisclosed compensation.

Swiss authorities made no immediate comment on the latest development.

Speaking to Reuters news agency by telephone, Tamoil's Issam Zanati said that deliveries of Libyan crude oil to Tamoil refineries in Italy and Germany would not be affected.

Sensex trims early mornings losses

The Bombay Stock Exchange benchmark, Sensex, on Friday staged partial recovery after the Reserve Bank of India reduced CRR by further one percent and pared nearly half the early morning losses of over 1,000 points.


The Sensex was quoted at 10,904.13, down by 424 points at 1050 hrs after most of the heavy-weight stocks pared early losses. In early morning trade, Sensex had plummeted by 1,088 points at 10,239.76 points.


Similarly, the wide-based National Stock Exchange's Nifty was trading 99 points down at 3,334.65 after hitting a low of 3,198.95 points in early trade.



Market analysts said the Reserve Bank of India's announcement of additional one percent cut in Cash Reserve Ratio (CRR) to 7.50 percent would improve liquidity situation in the market.



The RBI's announcement to inject about Rs 60,000 crore into the cash-strapped system lifted the market sentiments, which brought some relief to the tumbling market, brokers

said.



The BSE banking index was down by 5.42 points at 5,459.25 after diving by nearly 11 percent in opening trade.

RBI cuts CRR by additional 1 pc

Taking swift action to inject about Rs 60,000 crore into the cash-strapped system, the Reserve Bank on Friday announced additional one percent cut in mandatory requirements for banks to keep cash with the central bank over and above 0.50 percent reduction announced earlier.


With this, a total 1.50 percent cut in Cash Reserve Ratio (CRR) to 7.50 percent will come into effect from Saturday.

"Accordingly, on a review of the evolving liquidity situation in the context of global and domestic developments it has been decided to reduce CRR by 150 basis points to 7.50 per cent with effect from the fortnight beginning October 11, 2008 instead of 50 basis points reduction announced on October 6, 2008," RBI said in a statement in Mumbai.





Both the measures -- a one percent and a 0.50 percent cuts in CRR -- came ahead of RBI's mid-term review of monetary policy slated for 24th October.


"In the context of the abrupt changes in the international financial environment, it is important to note that the economic fundamentals of the Indian economy are strong and resilient and that India's financial system is sound, well-capitalist and well-regulated," RBI said.



The central bank said money in forex markets in India have been operating in a relatively orderly manner.



"The current domestic market conditions are essentially a reflection of the adverse developments and extreme uncertainty in international financial markets," the statement said.



The Reserve Bank also said that it would ensure price stability along with the growth process.



"The Reserve Bank is monitoring developments closely and continuously and would respond swiftly and even preemptively to any adverse external developments impinging on domestic financial stability, price stability and inflation expectations and the continuation of the growth momentum of the Indian economy," it said.



Finance Minister P Chidambaram had already assured the nation that liquidity will be injected into the system if the need arises.



Besides RBI's measures, certain other steps like lifting of curbs on Participatory Notes by market regulator Sebi and relaxation in overseas borrowing norms by the government have already been taken to inject money flow into the system.

Iceland nationalises biggest bank

Iceland has nationalised its biggest bank, Kaupthing, and suspended trade on its stock exchange in an attempt to prevent further panic in the country.

Kaupthing is the third bank to be rescued by Iceland's government.

The OMX Nordic Exchange Iceland is closed for trading for two days because of "unusual market conditions" and will reopen on Monday.

Meanwhile, Iceland's Prime Minister Geir Haarde criticised the UK's move to freeze Icelandic bank assets.

Mr Haarde said the UK used anti-terrorism legislation to freeze assets in Landsbanki in order to protect UK savings in one of its units, Icesave.

"We do not consider this to be a particularly friendly act. But we understand that the UK authorities need to act in the interests of their citizens," he said.

Prime Minister Gordon Brown has condemned Iceland's handling of the collapse of its banks and its failure to guarantee British savers' deposits.

Mr Brown said it was "effectively illegal" and "completely unacceptable".

Unusual conditions

Mr Haarde said Iceland had not decided whether to seek help from the International Monetary Fund to weather the crisis.

The country's Financial Supervisory Authority said it took over Kaupthing to safeguard its domestic banking system.

All domestic deposits at the bank were fully guaranteed, it added.

On Wednesday, the UK Treasury arranged for ING Direct to take over the £2.5bn of deposits of 160,000 UK customers of Kaupthing's online arm, Kaupthing Edge.

The Swedish central bank had already agreed to provide a loan to the bank's Swedish arm.

Iceland's government has now seized control of all three of the nation's major banks. Landsbanki and Glitnir were taken over earlier this week.

The country of just 300,000 people has struggled to cope with the global financial crisis.

"The action taken... was a necessary first step in achieving the objectives of the Icelandic government and parliament to ensure the continued orderly operation of domestic banking and the safety of domestic deposits," Iceland's Financial Supervisory Authority said.

European markets tumble on open

Stock markets across Europe have fallen steeply on opening after earlier dramatic share price falls in Asia.

In London, the FTSE 100 share index plunged 9.8% or 426 points on the open to 3,887.23 points.

There were similar falls across Europe - Paris was down 9% while Switzerland was down 8%.

Earlier Tokyo's Nikkei index dropped 9.6% in its biggest one-day fall since 1987, while shares in Australia, Hong Kong and Singapore all plummeted.

Despite concerted government action, investors are increasingly fearful the financial crisis will prompt a global recession.

Finance ministers from the G7 leading industrial countries are set to meet in Washington to discuss the crisis.

US President George W Bush is due to make an address to the American people later in the day.

'Deeper panic'

Heavy falls were seen across Asia's markets as a climate of fear took hold on Friday.

As the Nikkei-225 index slumped in its biggest fall in a single session since the 1987 stock market crash, the global crisis claimed its first Japanese financial institution, with the insurance company Yamato Life going bankrupt.

"Selling is unstoppable in New York and Tokyo," said Yutaka Miura, senior strategist at Shinko Securities in Tokyo.

"Investors were gripped by fear."

At the end of trading on Friday, Tokyo shares had plunged 24% during the week - double their weekly fall during the 1987 market crash.

Elsewhere in Asia was a similar story.

Australian shares closed down 8.3%, Hong Kong's benchmark Hang Seng index slumped to a three-year low, in the Philippines, share prices closed down more 8.3% while Shanghai's index was down 3.8%.

In Indonesia, plans to re-open the stock market were suspended in order to prevent what the president of the exchange called "deeper panic". Trading was halted for two days earlier this week.

'Beyond fundamentals'

As well as the G7 meeting, talks will be held at the International Monetary Fund (IMF) in Washington.

The IMF has said it is ready to lend to countries hit by the global credit crunch, using an emergency lending procedure first used in the 1990s Asian crisis.

The organisation's chief, Dominique Strauss-Khan, said on Thursday this would allow the IMF to react quickly to support countries facing funding problems.

Mr Strauss-Kahn said the world was "on the cusp of recession", but could still recover.

The IMF has about $200bn immediately available to lend to countries in need but can tap other sources.

The Dow Jones - the US benchmark index - ended down 7.3% on Thursday - tumbling below 9,000 points for the first time since August 2003.

"We're way beyond fundamentals," said Chris Orndorff, head of equity strategy at Payden & Rygel, in Los Angeles.

"This is just pure panic, that's all it is."

Stocks falter as fears persist

Stock markets have lost ground, erasing earlier gains as nervous investors remained concerned that the financial crisis would lead to a world recession.

On Wall Street, the Dow Jones was down 1.63% despite opening higher.

European shares followed their US counterparts lower, with the FTSE 100 down 2.34%, France's Cac 40 down 2.1% and Germany's Dax down 1.6%.

Investors had earlier taken some comfort from Wednesday's co-ordinated rate cuts and a UK bank rescue plan.

More guarantees

As the turbulent week continued, in other developments:

The IMF head said the world economy was on the "cusp of a recession". Dominique Strauss-Kahn called on countries to work in joint action and forecast that a slow recovery would begin in the second half of 2009.
The British Bankers' Association said the interbank cost of borrowing overnight had fallen - a day after interest rate cuts and governments provided additional liquidity. However, longer-term lending rates rose to their highest this year.
Iceland suspended trading on its OMX Nordic Exchange until Monday, citing "unusual market conditions". Earlier, its largest bank, Kaupthing, became the third financial institution to be taken over by the country's government in the past week.
Ireland extended its guarantee of bank deposits to cover savings in Irish branches of five foreign-owned institutions Northern Ireland's Ulster Bank, British-owned First Active and HBOS, Belgium's IIB Bank and German-owned Postbank.
Gordon Brown wrote to G7 and EU leaders suggesting that the UK government's bank rescue plan could be a template for other nations to help unfreeze credit markets.
US Treasury Secretary Henry Paulson warned that some banks will still fail despite the $700bn (£406bn) rescue package to shore up the financial system.
Dexia shares jumped 25% after France, Belgium and Luxembourg announced they would provide state guarantees for its borrowings.
UK Chancellor Alistair Darling flew to the US to discuss the co-ordinated cutting of interest rates by six central banks.
In Asia, Japan's Nikkei index ended lower after Prime Minister Taro Aso urged more action to boost the country's economy - on top of a 2 trillion yen ($19.5bn; £11.5bn) stimulus plan already put forward.
After trading on Russian stock markets had been suspended following sharp share falls earlier this week, they were again halted - this time after stocks climbed too high after trade resumed.
'False dawns'

Seven central banks on Wednesday cut interest rates in an effort to steady the faltering global economy.

It came after the UK government's announcement of a package of measures aimed at rescuing the banking system.

This package makes available £400bn ($692bn) of fresh money.

There was "an air of cautious optimism" that such measures would have some impact on the financial crisis, said Richard Hunter, head of UK equities at Hargreaves Lansdown stockbrokers.

"Banking shares have been the main beneficiaries of the UK's rescue plan, and the interest rate cuts," he added.

"We've had a few false dawns over the past couple of months and it's too early to call a complete recovery, but there's hope that these measures will get some traction at some point."

More rate cuts

Japan's benchmark Nikkei lost 0.5% or 45.83 points to close at 9,157.5.

Shares had been ahead for most of trading after the Bank of Japan injected two trillion yen into the money markets in an effort to calm fears.

But Mr Aso's call for further action prompted a sell-off.

The Nikkei had suffered its biggest one-day drop in 21 years on Wednesday, with the index shedding nearly 10% of its value.

In Sydney, Australia's main share index fell 1.8%, but Hong Kong's Hang Seng index added 3.3% after its central bank announced a half a percentage point cut to its interest rate, taking it to 2%.

South Korea's stock market climbed after the central bank announced an interest rate cut of a quarter of a percentage point.

Central banks cut interest rates

Six central banks, including the Bank of England, have cut interest rates by half a percentage point in an effort to steady the faltering global economy.

No decision on UK rates had been expected until Thursday - and the move puts the interest rate at 4.5% from 5%.

The US Federal Reserve has cut rates from 2% to 1.5% and the European Central Bank (ECB) trimmed its rate from 4.25% to 3.75%.

The unprecedented step failed to cheer world stock markets.

The central banks of Canada and Sweden and Switzerland all took similar action in the co-ordinated move.

China also cut its rate, but by 0.27 percentage points.

European and US initially reacted well to the news but later turned lower as investors were unconvinced that the rate cuts would really solve the financial crisis.

In New York, the main Dow Jones stock index ended down 189 points or 2% at 9,258.1 after weaving in and out of positive territory.

The last time the Bank of England cut rates in a special meeting was on 18 September 2001 - when rates came down from 5% to 4.75%.

In the UK, some mortgage lenders also immediately passed on the rate cut to borrowers - trimming their variable rates.

In other major developments:

* The UK government unveiled a package of measures aimed at rescuing the banking system which could add up to £400bn ($692bn).

* US Treasury Secretary Henry Paulson said that more financial firms were expected to fail in the US despite a $700bn government bail-out programme.
* The Federal Reserve has agreed to provide insurer American International Group with a $37.8bn loan on top of the $85bn loan given to the troubled firm last month.

* Italy also unveiled details of a banking rescue plan that could involve the government taking stakes in failing banks.

* All UK savers with accounts in the closed Icelandic internet bank Icesave were told they would get all their money back.
* The Treasury arranged for more than £3bn of UK savers' money held with Icelandic banks Kaupthing Edge and Heritable Bank to be transferred to ING Direct UK.
* Iceland's prime minister said he hoped to find a "mutually satisfactory solution" to the loss of UK Icesave deposits after Prime Minister Gordon Brown threatened to sue Iceland to recover the money.

'Arrest the slide'

Responding to the interest rate cut, UK manufacturers' group the EEF welcomed the "bold and decisive move" it hoped would "arrest the current crisis and collapse in confidence".

"Coupled with the plan to shore up the financial system today's co-ordinated moves should help arrest the potential slide into depression," said the EEF's chief economist Steve Radley.

Chief international economist at Capital Economics, Julian Jessop, said that the rate cut would "provide at least a temporary boost to confidence".

But he added: "We fear that there is still a lot more work to do.

"The fact that the central banks have had to take such extreme measures underlines how bad market conditions have become."

He also warned that rate cuts were not a complete solution, pointing out the Fed had already cut rates from 5.25% in September last year to 2% before the latest move - action which happened "without rescuing either the financial system or the real economy."

The Bank of England's Monetary Policy Committee said that getting inflation down to the government's 2% target remained its goal.

The latest data puts inflation at 4.7%, and it is likely to rise above 5% in coming months before falling, the MPC said.

But analyst Peter Warburton of Economic Perspectives said the rate cut and government intervention should have come earlier.

"It has taken far too long for the government and the Bank of England to recognise the scale of threat posed by the seizing up of the credit system," he said.

'Strong support'

The Federal Reserve said that it had acted "in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures".

And the ECB said it had felt able to act because "inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices".

Although it did not cut its own rate - which is just 0.5% - the Bank of Japan expressed its "strong support" of the policy.

US warns of further bank failures

The US treasury secretary has warned some banks will still fail despite the $700bn government rescue package to shore up the financial system.

Henry Paulson called for the plan's swift implementation, but said the financial crisis would not end soon.

Seven central banks on Wednesday cut interest rates in an effort to steady the faltering global economy.

Although the moves did not fully quell investor fears, Thursday saw a calmer climate on Asia's main stock indexes.

By 0430 GMT, Japan's benchmark Nikkei index was up by 2% after the Bank of Japan injected two trillion yen ($20.1bn) into the money markets in an effort to calm fears.

Tokyo had suffered its biggest one-day drop in 21 years on Wednesday, with the Nikkei shedding nearly 10% of its value.

In Sydney, Australia's financial market lost 1.2%, but Hong Kong's Hang Seng index rallied 2.8%.

South Korea's stock market also posted 2.5% gains after the central bank announced a 0.25% interest rate cut.

Taiwan's Central Bank cut its 10-day loan rate to 3.25% from 3.5%.

Global action

In his bleak assessment, Mr Paulson warned the ongoing financial chaos had "seriously impacted" the economy.

"Even with the new treasury authorities, some financial institutions will fail," he added.

There was an equally stark warning from the International Monetary fund, which said global financial markets were facing their most dangerous shock since the 1930s.

In an unprecedented co-ordinated move on Wednesday, rates were cut by the Bank of England (to 4.5%), the US Federal Reserve (to 1.5%), and the European Central Bank (ECB) (to 3.75%), with similar cuts from the central banks of Canada, Sweden and Switzerland.

Although it did not cut its own rate - which is just 0.5% - the Bank of Japan expressed its "strong support" of the policy. In a separate move, China cut its own interest rate by 0.27%.

While European and US markets initially reacted well to the news, they later lost ground as investors were unconvinced the rate cuts were enough to solve the financial crisis.

In New York, the main Dow Jones stock index lost ground for its sixth consecutive session, ending 2% down.

The heads of the IMF and the World Bank are due to discuss the world's ongoing financial turmoil in Washington later, and finance ministers from the G7 group of industrialised nations are meeting later this week.

More work to do

The IMF's chief economist, Oliveri Blanchard, said the orchestrated rate-cuts could not solve the world's financial crisis on their own but "were clearly a step in the right direction".

But he warned "there will be tough economic times ahead".

Chief international economist at Capital Economics, Julian Jessop, said the rate cut would provide a "temporary boost to confidence", but warned there was still a lot more work to do.

"The fact that the central banks have had to take such extreme measures underlines how bad market conditions have become," said Mr Jessop.

On Wednesday, the UK government unveiled a package of measures aimed at rescuing the banking system which could add up to £400bn ($692bn).

Italy also unveiled details of a banking rescue plan that could involve the government taking stakes in failing banks.

The US Federal Reserve, meanwhile, agreed to provide insurance giant American International Group with a $37.8bn loan on top of the $85bn loan given to the troubled firm last month.