Bank of America bail-out agreed

Bank of America will receive $20bn (£13.4bn) in fresh US government aid and $118bn worth of guarantees against bad assets.

The emergency funding will help the troubled bank - the US's largest - absorb the losses it incurred when it bought Merrill Lynch.

In return for the money, the US Treasury will take a stake in the bank.

Just hours after the aid package was announced, Merrill Lynch posted a fourth-quarter 2008 loss of $15.31bn.

Bank of America reported a loss of $1.7bn, compared with a profit of $268m for the same period a year earlier.

Bank of America had been seen as one of the strongest US banks, at least until its decision to take over Merrill.

"They were probably one of the best banks out there, balance sheet-wise, until they did the Merrill deal," said Cassandra Toroian at Bell Rock Capital.

Financial stability

The government stepped in after fears that the deteriorating capital base threatened the viability of the bank and could have posed a threat to the financial sector and the wider economy.

India's economy to grow by 7-7.5 pc in 08-09: Finmin

A key finance Ministry official projected India's growth rate at 7-7.5 per cent in the current fiscal, lower than projected by the Reserve Bank as well as the growth recorded in the first half of this fiscal.

"India, after remaining in high growth trajectory continuously for the last four years is now projected to grow between 7 and 7.5 per cent during the current financial year," Economic Affairs Secretary Ashok Chawla said at the Third India China Financial Dialogue in New Delhi on Friday.


Indian economy grew at the rate of 7.8 per cent in the first half of the current fiscal compared with 9.3 per cent in the same period last fiscal.


However, growth is expected to lower much after the first half, as industrial growth turned negative in October and stood at just 2.4 per cent in November.


The RBI has estimated Indian economy to grow at 7.5-8 per cent, but it may also lower its growth forecasts.


RBI Governor D Subbarao had recently indicated that the central bank may revise down the GDP projections at its third quarterly review of the credit policy, slated for 27th January.


Chawla said India has taken a number of steps to inject liquidity into the financial system, recapitalised banks and other systemically important institutions to tide over the crisis.


He identified banking sectors and capital markets as areas where the expert teams of India and China would jointly work and evolve a time-bound strategy for closer engagement.


The Economic Affairs Secretary said that both India and China have to work together to ensure that reform initiatives ushered in tangible results for developing nations.

Crunch 'cost Arabs $2.5 trillion'

The global economic crisis has cost Arab countries $2,500bn (£1,690bn) in the last four months alone, according to Kuwait's foreign minister.

Sheikh Mohammed al-Sabah told reporters in Kuwait City that oil-rich Gulf Arab states had postponed or cancelled 60% of development projects.

He did not give details for his figures, which were released days before an Arab Economic Summit.

Stock market falls and a low oil price have contributed to the losses.

The biggest loss was an estimated 40% drop in the value of Arab investments abroad, which had previously totalled around $2.5tn, AFP news agency reports.

"The Arab world has lost $2.5 trillion in the past four months," Mr Sabah said after meeting fellow foreign and finance ministers.

Kuwait City is due to open a two-day Arab Economic Summit on Monday, the first of its kind.

Arab League Secretary General Amr Moussa earlier described the meeting of 22 heads of state as "the largest and most important" Arab event of 2009.

Microsoft is accused by EU again

The European Commission has accused Microsoft of harming competition by bundling its Explorer web browser with its Windows operating system.

The commission said it had reached the preliminary view that the US software giant had undermined consumer choice and infringed EU rules.

Microsoft and the European Union have engaged in legal battles over competition issues for years.

Last year, the EU fined Microsoft 899m euros ($1.4bn; £680.9m).

Browser battle

In its statement on Friday the Commission said: "Microsoft's tying of Internet Explorer to the Windows operating system harms competition between web browsers, undermines product innovation and ultimately reduces consumer choice."

Microsoft that it was studying the commission's preliminary finding, and did not rule out requesting a formal hearing.

It has been given eight weeks to reply.

The US software firm controls the majority of the web-browsing market through its Explorer browser.

Analysts say the company has diversified enormously and is now no longer so reliant on its Windows operating system, with revenue coming from Xbox sales and server software.

In February 2008, the EU fined Microsoft 899m euros for defying sanctions imposed on it for anti-competitive behaviour.

The penalty - which was then one of the largest imposed by the European Commission - came after Microsoft failed to comply with an earlier 2004 ruling that it had abused its market position.

Citigroup to split as losses grow

Struggling US banking giant Citigroup has announced plans to split the firm in two, as it reported a quarterly loss of $8.29bn (£5.6bn).

It said it would realign into two new firms, Citicorp and Citi Holdings.

Citicorp will handle the company's traditional banking work, while Citi Holdings will take on the firm's riskiest investment assets.

Last autumn, Citigroup had to be rescued by the US government in a bail-out deal totalling $45bn.

The government also agreed to guarantee up to $306bn (£205bn) of risky loans and securities on Citigroup's books.

'Ongoing efforts'

"Given the economic and market environment, we have decided to accelerate the implementation of our strategy to focus on our core businesses," said Citigroup chief executive Vikram Pandit.

"This will help in our ongoing efforts to reduce our balance sheet and simplify our organisation.

"We are setting out a clear roadmap to restore profitability."

Citigroup's net loss for the last three months of 2008 works out at $1.72 per share, worse than analyst expectations of $1.31.

Its quarterly revenues were down 13% to $5.6bn, which Citigroup said reflected "the impact of a difficult economic environment and weak capital markets".

"I think people knew it was going to be bad, but I'm surprised it's this bad," said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel in Cincinnati.

Good and bad

Analysts say the split essentially puts Citigroup's solid and profitable consumer banking interests in the hands of the new Citicorp, while the bad investment debts that forced it to seek government help go into Citi Holdings.

This will enable Citicorp to return to profitability much quicker than would have been possible for Citigroup as a single firm.

Oil prices fall in Asian trade

World oil prices fell in Asian trade on Thursday on worries of a supply glut amid weak demand after the latest US data showed a rise in the country's energy stocks, analysts said.

New York's main contract, light sweet crude for February delivery shed 38 cents to USD 36.90 a barrel on the New York Mercantile Exchange.



Brent North Sea crude for February delivery dropped 28 cents to USD 44.80.



"Weak demand is still overpowering supply in the oil markets," said Jonathan Kornafel, a Singapore-based director with Hudson Capital Energy trading firm.



He was referring to the latest energy data released on Wednesday by the US government which showed crude reserves rising 1.2 million barrels in the week ending on 9th January.



Distillates, which include heating fuel and diesel, increased by 6.4 million barrels.



"This week's stats clearly go to the bears," said Morgan Stanley Research, adding the data highlighted "the tension in the market between bulls looking to OPEC cuts and bears pointing to collapsing demand."



Since September, the Organisation of the Petroleum Exporting Countries has cut a total of 4.2 million barrels per day from its production to address the fall in crude oil prices.

Inflation eases to 5.24 pc

Inflation declined for the tenth consecutive week on Thursday to 5.24 per cent for the week ended 3rd January, primarily due to decline in prices of food articles.

Inflation, measured by movements in wholesale prices, dipped by 0.67 percentage points from 5.91 per cent in the previous week. It stood at 4.26 per cent a year ago.



The index of the food articles group declined by 0.6 per cent as prices of fruit and vegetables fell by three per cent, and gram, barley, condiments and spices by one per cent each.



However, the index of manufactured goods declined one per cent. Among manufactured items, paper and paper products declined by 0.4 per cent, and chemicals and chemical products fell by 1.2 per cent.



The index of fuel declined by 0.2 per cent due to lower prices of aviation turbine fuel (8 per cent) and light diesel oil (3 per cent).



However, naphtha became expensive by three per cent, and among food items jowar, tea, urad moong and rice moved up by one per cent each, and masoor by two per cent.



Inflation has been declining after it touched a peak of 12.91 per cent in August last year.

Govt rules out any bailout package for Satyam

The government has ruled out any bailout package for crisis-ridden Satyam Computer, but assured to do everything required to save jobs under the framework of its responsibilities.

"This is a decision that the new board of Satyam would take. This government is not going to directly or indirectly subsidise wrong doing and fraud in Satyam," Minister of State for Industry Ashwani Kumar told reporters on the sidelines of a Petrotech-2009 conference on Thursday.



When asked, is government not in favour of bailout package for Satyam as such, Kumar said that the new Satyam board "... are the ones to decide. The government would try and support within the framework of its responsibilities and do whatever it can to preserve and save jobs and to protect the good name of India in corporate sector".



He said, "The government will try to ensure to the extent possible that the brand equity of the country and Stayam in terms of its intellectual capital is preserved and the jobs are secured to the extent possible".



The minister said, "I do believe that Satyam aberration should not in any way take away from the great success story of India in the IT sector."


Earlier speculation was rife that the government is considering a package of up to Rs 2,000 crore to bail out Satyam Computer. But shortly after the Prime Minister Manmohan Singh's review meeting on Satyam on Tuesday, there was media speculation that government would be considering a financial assistance ranging between Rs 500 crore and Rs 2,000 crore but the PMO office declined to comment on it.

Judge rejects Madoff jail appeal

A US judge has rejected an appeal from prosecutors that Bernard Madoff should be sent to jail while they continue to probe his alleged $50bn (£33bn) fraud.

Prosecutors had lost an argument earlier this week that his bail should be revoked because he violated a court order freezing his assets.

Mr Madoff will remain on bail after a judge confirmed that decision.

Mr Madoff posted more than $1m-worth of jewellery and valuables to relatives and friends before Christmas.

But his lawyer has maintained that his client had not realised this violated the freezing of his assets.

Judge Lawrence McKenna said prosecutors had been unable to make a compelling argument that Mr Madoff was a danger to the community or was at risk of leaving the country - which are the two main requirements for bail decisions.

Complicated

Mr Madoff, 70, a former chairman of the Nasdaq stock market, was arrested and charged on 11 December in what would be Wall Street's biggest Ponzi scheme, one in which early investors are paid-off with the money of new clients.

If convicted, he faces up to 20 years in prison and millions of dollars in fines.

The investment adviser has not appeared in court to formally answer the charge and an 11 February deadline to indict him meaning that he will remain free for at least another four weeks, provided he does not breach the terms of his bail.

Fraud experts have said the purported scheme was too complicated and went on too long to have been carried out by Mr Madoff alone.

The investment adviser, who has been a Wall Street figure for more than 40 years, is the only person accused in the scandal surrounding his firm, Bernard L Madoff Investment Securities.

Motorola to cut 4,000 more jobs

Mobile phone giant Motorola has said it is to cut 4,000 jobs, roughly 6% of its workforce, in the face of the economic downturn and waning demand.

It also warned it would make a fourth-quarter loss as sales of mobile phones were weaker than expected.

The firm had cut 6,700 jobs in 2008. Its latest cuts includes about 3,000 posts in the mobile-devices business and 1,000 jobs from other units.

Motorola said the move brought planned cost savings in 2009 to $1.5bn (£1bn).

That figure includes $700m of new savings on top of a previously announced plan to cut $800m in expenses.

'Faring worse'

Motorola said it sold about 19 million handsets in the fourth quarter of 2008, down from 40.9 million in the fourth quarter of 2007. It put the poor handset sales down to weakness in consumer demand.

The firm had dropped to fourth place in the global handset market in the third quarter with sales of 25.4 million.

Avian Securities analyst Matthew Thornton said: "I'm sure they're faring a bit worse than some of the other tier-one manufacturers.

"It's not going to get any easier in the next couple of quarters."

Euro inflation hits 26-month low

Eurozone inflation fell to a 26-month low in December, thanks to a big decline in the price of energy bills, official figures have shown.

Inflation in the 15 countries that were using the euro in December - before Slovakia joined this month - fell to an annual rate of 1.6%.

This compares with 2.1% in November, and came after energy bills, including the price of petrol, fell 3.7%.

The data comes as the European Central Bank is expected to cut interest rates.

Widely tipped

The ECB is widely tipped to trim rates by at least half a percentage point from the current 2.5% when it announces its January decision later.

Analysts said the latest fall in inflation was expected, giving the ECB room to cut rates further and help lift the economy without fear of lifting prices.

"The ECB will do 50 basis points today and we think rates will go down to 1% in the second quarter," said Stephane Deo of UBS Bank.

Excluding energy and food bills, core eurozone inflation declined to 1.8% in December from 1.9% in November.