Oil rises on Middle East tensions

Crude oil prices have climbed on concerns that Israel's attacks on Hamas could disrupt oil production and threaten supplies from the Middle East.

Light, sweet crude rose $1.22 to $37.89 a barrel in New York, below a session high of $42.20.

Meanwhile London Brent added $1.39 to $38.70 a barrel, after reaching a high of $43.18.

Oil has fallen more than $100 from its peak of $147.27 a barrel on 11 July as slowing economies have dented demand.

"Geopolitics had disappeared from the oil scene for the last couple of months but will regain some price premium with the latest Israeli attack in Gaza," Olivier Jakob, of consultants Petromatrix, said in a research note.

Meanwhile upgraded figures from the US Energy Information Administration showed that US demand in October was down by 833,000 barrels per day (bpd) from a year earlier.

The demand of 19.643 million bpd was 4.07% less than the demand of 20.476 million bpd a year earlier.

Russian rouble slides to new low

The Russian rouble has hit a low after its central bank allowed the currency to devalue for the twelfth time - including nine falls this month.

It fell to 41.6 against the euro - an all time low - and to 29.3 against the dollar, the lowest level since 2005.

The currency has lost more than 20% of its value against the dollar - largely due to the slumping price of oil on which Russia's economy heavily relies.

The Kremlin has been using reserves to try and support the currency.

However concern that Russia is pumping too much cash into supporting the rouble prompted ratings agency Standard and Poor's to cut the country's credit rating earlier this month for the first time in nine years.

Borrowing plans

The rouble has also touched a new low of 34.8 roubles against the basket of euros and dollars which is its official measure within the country.

Russia's central bank, which sets the official exchange rates, does not normally allow the currency to lose more than 1% percent of its value in one day against the basket of currencies.

But it has gradually been devaluing the rouble by allowing deeper falls, with it sliding 1.5% on Monday.

Oil revenues have been the main driver of the boom enjoyed by the Russian economy in recent years.

But the sharp declines in the price of crude oil means Russia is facing economic challenges.

Its budget has been calculated on the basis if it getting at least $70 a barrel for its Urals crude - the country's main export blend. It is currently worth about $32 a barrel.

Last week the economic adviser to President Dmitry Medvedev said that the country would probably draw on further reserves and borrow from abroad to bridge the shortfall.

The central bank's first deputy chairman Alexei Ulyukayev said last week that it had opted to allow the rouble to devalue gradually instead of allowing a single, much larger devaluation.

The worsening economic outlook and the fall in the price of oil has left the government with little option.

Further falls

Russia's central bank has spent more than $100bn (£68bn) defending its currency since the summer.

Despite the fall in oil revenues, Russia possesses the world's third largest reserves of gold and foreign exchange reserves.

And the central bank is prepared to continue to defend the rouble in order to avoid a repeat of the 1998 financial crisis, when Russians rushed to withdraw their savings as the currency plummeted.

The Kremlin has warned that the global economic slowdown is continuing to take its toll - predicting that the number of people registered as unemployed would rise to about 2.2 million by the end of 2009, from the current level of 1.5 million.

Pound hits new low against euro

The pound has hit a new record low against the euro as the grim outlook for the UK economy continues to put downward pressure on the currency.

Weak house price data and figures showing that homeowners are choosing to repay their mortgages rather than spending, pushed the currency lower.

Low trading levels in the foreign exchange markets also helped to force sterling down to 1.0198 euros.

Many analysts believe parity with the euro is now only a matter of time.

The rate for tourists buying their currency before they travel has almost reached parity, where one pound buys one euro. At one major High Street currency exchange, 100 euros currently costs £99.11.

Downward pressure

Property consultants Hometrack predicted a 12% fall in UK property prices in 2009, while figures from the Bank of England showed that households were more keen to pay off their mortgages than borrow money against the value of their homes for spending.

Towards the end of October, one pound bought 1.287 euros. But a string of bad news about the prospects for the UK economy caused sterling to fall.

In December last year, a pound would have bought more than 1.4 euros. At its peak in 2000, the pound was worth more than 1.7 euros.

There are two main factors putting downward pressure on the pound, analysts suggest.

First, interest rates in the UK are lower than those in the eurozone, which makes the pound less attractive to foreign investors.

Analysts believe the economic slowdown in the UK will be more severe than in the eurozone, which means the Bank of England could be forced to lower interest rates from their current level of 2%.

Interest rates in the eurozone currently stand at 2.5% and the European Central Bank has hinted that further rate cuts are unlikely early in the New Year.

Second, trading levels over the holiday period are low, which means that any moves in exchange rates are exaggerated.

"Actual liquidity levels are painfully thin," said Daniel Baker at Informa Global Markets.

He believes parity with the euro is almost inevitable.

"The path to parity is self-fulfilling," he said.

Japan's industrial output plunges

Industrial output in Japan dropped just over 8% in November compared with the previous month, the biggest fall on record, government figures show.

At the same time, unemployment rose to nearly 4% of the population.

More than 2.5m people were out of work in Japan in November, a rise of 100,000 compared with the year before. Those on temporary contracts are worst affected.

Factories were closed and jobs cut as demand for manufactured goods slumped amid the global financial downturn.

Production at major Japanese manufacturers fell by 3.1% in October.

November's 8.1% drop was the largest since records of such output statistics began.

Dismal data

The new numbers released by Japan's Ministry of Economy, Trade and Industry, suggest industrial output will continue to decline, perhaps by about 8% in December.

The biggest falls came in production of autos, machinery and electronics and followed announcements of large cutbacks by companies including Toyota and Sony.

"Overall, production is rapidly falling," the ministry said.

The BBC's Duncan Bartlett in Tokyo says Japan's factories are usually busy and efficient but at the moment many are sitting idle because there are no customers for their goods.

In the car industry, many companies have decided to stop building new vehicles until they have sold the ones they have already made.

Separately, the Ministry of Health, Labour and Welfare said 2.56 million people were unemployed in Japan in November, an increase of 100,000 from a year earlier.

Those hardest hit are people on temporary or limited contracts - job losses in this group doubled in a month.

Consumer prices rose 1% from a year earlier, driven by higher costs of basic necessities such as food, fuel and electricity.

'No growth'

The Japanese government has already predicted that the economy will not grow in 2009.

Business confidence has plummeted in recent months.

Interest rates are pegged at just 0.1%, lower than US rates. The government has announced several economic stimulus measures.

Japan is the world's second-largest economy, and Asia's largest, so has been directly hit by the slump in demand caused by spreading global recession.

Economists say that the continuing bad news suggests that Japan's recession is getting worse, our correspondent says, despite the attempts by the government and the Bank of Japan to help by increasing public spending and cutting interest rates.

Oil falls back below $39 a barrel

More bad economic news from the US has sent oil prices falling back below $39 a barrel.

US light, sweet crude for February delivery fell to $38.53 a barrel in electronic trading on Nymex.

Data on Tuesday showed that US new home sales had fallen to a near 18-year low in November.

Bad economic data in the US has been making traders worry about how much the demand for oil will fall in the world's biggest economy.

Attention now turns to the weekly inventories figures from the US Energy Department, which are due out later on Wednesday.

The inventories figures give an indication of how much consumption of oil has declined.

Oil prices have fallen 74% from their peaks in July.

China to allow freer yuan trades

China has said it is to allow some trade with its neighbours to be settled with its currency, the yuan.

The pilot scheme was announced in a package of measures designed to help exporters hit by the global downturn.

It means if the two parties to a trade have yuan available, they need not enter world exchange markets to pay.

Most of China's foreign trade is settled in US dollars or the euro, leaving exporters vulnerable to exchange rate fluctuations.

The yuan is not yet a freely convertible currency.

Officials did not say when the trial scheme would start.

When it does, the yuan could be used to settle trade between parts of eastern China (Guangdong and the Yangtze River delta) and the territories of Hong Kong and Macau, and between south-west China (Guangxi and Yunnan) and the Asean group of countries (Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam).

Spreading yuan

Analysts told Chinese media that the yuan was already being used in some South East Asian countries and that China was happy to see such use extended.

They also agreed that the measure was intended to help companies cope with the global financial meltdown, even though buying and selling the currency requires the presentation of legitimate trade documents to banks.

The latest measure follows Beijing's announcement earlier this month of a 30-point directive in which it vowed to "support the development of yuan business in Hong Kong" and expand the use of the currency to settle trade with neighbouring countries.

Central bank governor Zhou Xiaochuan was quoted by the South China Morning Post as saying: "The US dollar is unlikely to be stable next year and later.

"And the likelihood of the United States issuing more money in the near future adds to the depreciation risk in US-dollar-denominated assets and trade settlements."

He also reportedly said that Guangxi, a province in southern China, had already been settling trade with Vietnam in yuan for some time.

Spurs to spend

A document released after a meeting of China's State Council on Wednesday announced more measures to stimulate domestic consumption.

These include subsidies to rural households for the purchase of household appliances and other goods, and the setting up of new stores and distribution centres in rural areas.

The document called for the renovation of urban food markets, the provision of more variety of goods on sale, the setting up of more second-hand markets, incentives for distribution companies to merge and consolidate, and support of small and medium-sized enterprises.

The state news agency Xinhua said the government intended to raise export tax rebates for high-technology products, to encourage foreign investment, extend customs and inspections services, lower inspection fee for exports and strengthen trade relations in emerging markets.

Analysts said the ideas, though vague, indicated growing concern among China's policy makers about the domestic impact of the current global financial turmoil.

Powered by exports, China's economy has grown by double digits in recent years.

In November, official figures showed a 2.2 percent drop in exports, the first decline in more than seven years.

Cessna company loses 2,200 jobs

US firm Textron, world's leading maker of corporate jets, has expanded its job cuts to 2,200 amid global downturn.

The maker of Cessna aircrafts and Bell helicopters said the figure included previously announced cuts in its Cessna and Bell divisions.

Textron, which employs 44,000 workers worldwide, did not rule out "further headcount reductions" and other cost-saving measures.

The company also said it would narrow its finance operations.

Textron now expects profit from its manufacturing segment to be in the range of $300m (£200m) to $330m in the fourth quarter, down from previously forecasted $400m.

For the whole company, it forecasts a net loss of 81 to 91 cents per share.

Many companies around the world have been forced to announce huge job cuts and revise down their outlooks amid falling demand as customers pare all but essential spending.

Oil falls on slowing demand signs

Oil prices have fallen on negative corporate reports and new signs that the global energy demand is deteriorating further.

News that crude imports to China, the world's second biggest energy consumer, fell in November to the lowest level this year, has dampened the mood.

Reports, such as Japanese carmaker Toyota's forecast of a historic annual loss, also put pressure on oil prices.

US light, sweet crude for February delivery fell $2.45 to trade at $39.91.

London Brent crude fell $2.55 to $41.45.

"I think the concerns about economic weakness still seem to be overshadowing the entire complex," said Phil Flynn, an analyst at Alaron Trading.

Delayed effect

Opec, the oil cartel, said last week it was going to cut production by 2.2m barrels per day to boost crude prices.

But some analysts say markets are sceptical about whether members of the cartel will be able to comply.

Oil prices have fallen more than $100 a barrel since July, when they reached a peak of $147.

"There's so many prompt barrels sitting around that that's really sitting on the market right now, especially the near contracts," said Michael Lynch, president of Strategic Energy & Economic Research.

"The cuts are really going to have an effect somewhere around February, March."

Irish move to recapitalise banks

The Irish Government has announced plans to recapitalise the country's three biggest banks.

A total of 5.5bn euro will be injected into the Allied-Irish Bank, the Bank of Ireland and the Anglo-Irish Bank in return for shares.

Anglo-Irish will receive 1.5bn euro in return for 75% shares with an annual fixed dividend to government of 10%.

The government will give 2bn euro each to Bank of Ireland and Allied Irish Bank for an annual dividend of 8%.

They will also receive 25% voting rights on their respective boards.

There have been widespread calls for the scheme to be dependent on changes to the management of the banks.

However, Taoiseach Brian Cowen said that would not be a precondition.

A lack of liquidity has made it increasingly difficult for the three banks to lend money to their customers.

Mr Cowen said the scheme would send a strong signal to the markets about the stability of the Irish financial system.

Tata 'to inject cash into Jaguar'

Tata Motors, the owner of Jaguar Land Rover, is to inject "tens of millions" of pounds into the British carmaker, according to the Financial Times.

A spokesman for Tata Motors did not deny the report.

A cash injection by the Indian owner would give the UK government more time to decide whether to use public money to bail-out the company.

Business Secretary Lord Mandelson had cast doubt on a bail-out, saying the state was a "lender of last resort".

Debasis Ray, head of corporate communications for Tata, did not not deny the report but would not say how much money would be injected.

"It is our company and we are running a business," he said.

"Discussions with the government, however, are confidential and cannot be revealed. We have to run the company and are doing so to the best of our abilities."

State aid

The carmaker has asked the government for financial support and its case has been backed by unions which say the industry needs help.

Labour peer Lord Bhattacharyya had suggested ministers were discussing a £667m loan package for Jaguar.

But Lord Mandelson said that Tata group must "look to their own resources."

Jaguar Land Rover has been hit hard by a dramatic slump in sales that has affected carmakers across the world.

In the US, the government has agreed to a $17.4bn (£11.6bn; 12.4bn euros) bail-out package for its auto industry.

In the UK, the Confederation of British Industry has said urgent government loans are needed to preserve 800,000 UK jobs in the carmaking industry. The Unite union says tens of thousands of skilled jobs are "hanging by a thread".

Toyota braced for historic loss

Japan's biggest carmaker Toyota has forecast its first annual loss in 71 years due to plummeting sales and a surge in the value of the yen.

The firm said it expected a loss of 150bn yen (£1.1bn) in yearly operating profits - from its core operations.

Japan also posted a trade deficit of $2.5bn (£1.7bn) in November as exports fell at a record rate.

The rising yen saw export levels down 26.7% from a year earlier, the ministry of finance said.

The carmaker recorded an operating profit of 2.27 trillion yen last year.

Toyota said it still expected to make a profit on a net level for the year ended March but has cut its forecast sharply to 50bn yen, down from a previous estimate of 550bn yen.

It is the second profit warning by Toyota in less than seven weeks.

The latest estimate is far lower than its net profit of 1.7 trillion yen earned the previous year.