Japan upgrades economic outlook

Japan's central bank has upgraded its economic outlook, saying the worst of the recession might be over.

The move came after the bank's two-day policy meeting, at which it opted to keep interest rates on hold at 0.1%.

While domestic demand is expected to remain low, the bank said exports, on which Japan is heavily reliant, were forecast to pick up.

Data on Thursday showed Japan's economy shrank in the first quarter at its fastest rate since records began.

Output contracted by 4% during the first three months of the year, or by 15.2% on an annual basis, as exports fell, according to official figures.

Recovering

"The pace of deterioration in the Japanese economy will likely moderate," the Bank of Japan said.

"Going forward, although domestic private demand is likely to continue to weaken, exports and production, after levelling out, are expected to start recovering and public investment to increase."

The latest outlook is more optimistic than the bank's forecast in April, when it said economic conditions had "deteriorated significantly".

While the bank did not provide new growth forecasts with numbers, it said it would expand the types of collateral on offer in order to encourage lending.

High costs fuel record loss at BA

British Airways has announced the biggest loss since the company was privatised in 1987.

BA reported a loss before tax of £401m for the year to 31 March, after seeing its results hit by a weak pound and higher fuel costs.

BA made a revised profit of £922m in the previous year.

Although revenues increased to almost £9bn, BA faced a near-£3bn fuel bill. Chief executive Willie Walsh said he saw "no signs of recovery anywhere".

Fuel costs rose 44.5% after the price of oil soared last year. The weaker pound also contributed to rising costs as fuel is bought in US dollars.

The results included redundancy-related costs of £78m.

BA said it had cut more than 2,500 jobs since last summer and added that it was in talks with unions about "pay and productivity changes".

"The prolonged nature of the global downturn makes this the harshest trading environment we have ever faced and, with no immediate improvement visible, market conditions remain challenging," Mr Walsh said.

PM for pushing reforms, jobs and investment

Set to begin a new term in office, Prime Minister Manmohan Singh on Tuesday spoke of the need for reforms and reverse the slowing down of investment and employment generation caused by global economic slowdown.

Shortly after he was elected leader of the Congress Parliamentary Party paving way for him to become the Prime Minister for the second term, Singh said, "There is some slowing down of investment and employment generation. We have to reverse this. We have to revive growth and make it even more inclusive."

The Prime Minister said sustaining growth requires new investment and better management of government finances. This also "requires reform of the economy... Revitalisation of agriculture and acceleration of industrial development".

After growing by an average annual nine per cent for the last four years, the Indian economy came under pressure of the global meltdown and expanded at a slower pace of around seven per cent in 2008-09.

"...The global economic slowdown has hurt us.," Singh said. He said he would ask every minister to set time-bound targets for implementation of the election promises of the Congress Party and policies of the each ministry. "We will undertake quarterly review of the programme implementation by each ministry," he said.

The savings and investment rates have to be kept high to remain globally competitive in the face of economic challenges, he said.

Pound strengthens against dollar

The pound has strengthened against the dollar, after Bank of England minutes revealed that policymakers considered boosting money supplies.

The prospect of the move, which could encourage lending - stimulating the economy - boosted sterling.

By Wednesday afternoon, one pound could buy $1.5514, up from Tuesday's close of $1.5350. A day earlier, sterling had reached a five-month high of $1.5525.

The dollar was also weaker against both the euro and the yen.

At noon, the euro was trading at 88.16p.

Meanwhile, the yen was hit by the announcement that the Japanese economy had shrunk by more than 4% in the first quarter of 2009.

With analysts seeing indications of economic recovery, there are signs that investors are moving away from the greenback, often deemed a safe haven.

In January, the pound hit a 23-year low of $1.35 against the dollar.

Last July, the pound was worth more than $2 but its value plunged as signs emerged over the degree of the downturn in the UK.

The May minutes also showed members had unanimously voted in favour of keeping interest rate unchanged at 0.5%.

The Bank of England's minutes showed the bank was open to increasing its quantitative easing plan by the maximum £75bn permitted, which would help encourage lending.

Oil prices rise to six-month high

Oil prices have hit six-month highs, breaking through $60 a barrel as investors wait for key US inventory figures later on Wednesday.

US light crude rose to $60.70 a barrel, while London Brent climbed to $59.18.

US crude slipped below $60 on Tuesday, dragged lower by official data showing a record fall in the number of new homes built in the US.

Investors are hoping to see a fall in US inventories that would indicate an increase in demand for oil.

But some analysts believe the price will climb, even if inventories rise.

"I expect the market to push higher even if there's a build in the inventories, just because that's where the momentum is," said Jonathan Kornafel at Hudson Capital Energy.

Oil prices have risen from $50 a barrel over the last three weeks, as optimism about the state of the world economy has grown.

And it has jumped from $32 levels seen in January, though remains well below the record high of $147 touched last July.

Toyota unveils new Prius hybrid

Toyota, the world's biggest carmaker, has revealed the latest revamp of its Prius petrol-electric hybrid in Japan.

The carmaker said it has had 80,000 advance orders in Japan. It is aiming for sales of 400,000 a year globally.

Incoming president Akio Toyoda, the grandson of the company's founder, said the future of cars rests on this model.

Prius is the world's best-selling hybrid, but Toyota's dominance of the sector has been challenged by rival Honda's cheaper Insight model.

The new Prius gets a combined 50 miles per gallon, compared with 46 mpg for the 2009 model, Toyota said.

It has not yet announced when the new version will be available outside Japan.

Worst loss

The carmaker is pinning its hopes on a new Prius boosting sales, after this month reporting its worst annual loss of 436.94bn yen ($4.4bn; £2.9bn) in the year to 31 March, due to the deepening recession and strong yen.

The Prius, launched in 1997, is now in its third generation.

By the end of April, Toyota said it had sold 1,028,000 of the cars worldwide, more than half of them in North America.

Toyota said its Japan prices for the Prius would start at just over 2m yen, or about £13,800 ($20,900), which is cheaper than the current Prius.

It also announced it will cut the price of the second-generation model on sale now, to 1.89m yen, the same price as Honda's Insight.

Stock market into buying frenzy; trading suspended for day

Hailing the decisive mandate to the Congress-led UPA, investors went into a buying frenzy, resulting in an unprecedented surge in the BSE Sensex, which rose by nearly 2,100 points and forced the authorities to suspend trading for the day.

Trading was suspended for two hours within seconds of opening of the market after the BSE surged by over 1,300 points and the authorities closed the floor immediately after trading resumed at 1155 hours. The BSE sensex closed 17 percent higher at 14,272.63.

Echoing the sentiment, the NSE index also rose by 20 percent, prompting the authorities to suspend trading for the day.



In two bursts, the 50-share Nifty rose over 712 points, a buoyancy that led to an all-round appreciation in share prices, which marketmen say is the first of its kind.

The BSE 30-share index zoomed to close at 14,272, up by nearly 2,100 points. The NSE index surpassed all the three upper limits of 10, 15 and 20 percent, forcing the authorities to suspend trading for the day.

With the UPA getting near a clear majority in the 15th Lok Sabha, economic reforms are set to get pace in all the sectors, a leading broker said.

Venezuela seizes US pasta company

Venezuelan officials accompanied by soldiers have seized "temporary" control of a US-owned pasta producer.

Venezuela says the plant, owned by the big US firm Cargill, had violated regulations on price controls intended to guarantee cheap food for the poor.

The move further increases President Hugo Chavez's hold on the economy, after a series of recent take-overs of private and foreign-owned businesses.

They include a Cargill rice plant, and services companies in the oil industry.

Deputy Food Minister Rafael Coronado said the government would run the factory for 90 days, and would reassess the situation after that.

He said it has not been producing sufficient quantities of a type of pasta sold at cheap, government-established prices.

Price control

A rice mill owned by Cargill was taken over earlier this year, on the grounds that it was not producing rice at government-set prices.

Cargill had said it did not break the government's pricing rules on rice because the mill did not produce the plain rice which is regulated.

Venezuela has set quotas and prices for 12 basic foods including rice, powdered milk, cheese and tomato sauce.

Under the measure, 80% of all rice produced must be basic white rice. The measure also includes 95% of all cooking oil, coffee and sugar.

Last week Mr Chavez sent troops to take over oil service companies including hundreds of supply boats, and two American owned gas facilities.

He nationalised Venezuela's oil reserves, one of the largest in the Americas, two years ago.

GM to close up to 1,100 dealers

General Motors (GM) has announced plans to close up to 1,100 of its dealerships in the US as it desperately tries to cut costs and stave off bankruptcy.

It also plans to cut ties with another 470 Saturn, Hummer and Saab dealers.

Closures announced today represent one quarter of the dealership network. GM plans to cut the total number of dealers by 42% by the end of 2010.

On Thursday, rival Chrysler said it would be closing 789 US dealers as part of a massive restructuring programme. GM is also in negotiations with unions to reduce wage costs.

Oil prices fall towards USD 58

Oil prices fell towards USD 58 on Friday as news of a deepening recession for Europe further dampened hopes of a quick rebound in energy demand, analysts said.

New York's main futures contract, light sweet crude for delivery in June, dropped 27 cents to USD 58.35 a barrel after rising earlier on Friday in line with firmer stock markets.



Brent North Sea crude for July delivery shed 52 cents to USD 58.07. The June contract expired yesterday priced at USD 56.69.



"Markets were a little lower ... after data from Europe disappointed," said Nimit Khamar, energy analyst at Sucden brokers in London.



The 16 nation eurozone economy contracted a record 2.5 per cent in the first quarter as Europe lurched deeper into recession while Germany suffered its biggest blow for 40 years.



Accounting for a third of eurozone output, Germany contracted 3.8 per cent in the first three months compared to the final quarter of 2008, when the economy shrank 2.2 per cent, the statistics office said.



France, Germany's main partner and the second-biggest eurozone economy, meanwhile entered recession as output fell 1.2 per cent after a 1.5 per cent drop in the last quarter of 2008.

Suzuki boosted by sales in India

Suzuki Motors has avoided reporting a loss for the January to March quarter, helped by growth in India, but was downbeat about future sales.

The carmaker made a net profit of 5.8bn yen ($59m; £39m), during its fiscal fourth quarter, down 27% on a year ago.

Suzuki controls about half of the car market in India through its local unit Maruti Suzuki, which has seen sales rise for four months in a row.

The firm now expects global profits to fall 82% in its current financial year.

Suzuki predicts they will decline to 5bn yen due to the global slump in demand for new cars.

It also expects it will be affected by the continuing strong yen, which eats into its overseas earnings.

Indian boom

In India, Maruti's sales rose to 64,857 vehicles in April, helped by its bestselling Alto car and new models such as the A-Star and Swift DZire.

The rise in Indian sales contrasts with falling demand in the US, Europe and Japan, which Suzuki's rivals Toyota and Honda have been more exposed to.

On Friday Toyota said it forecast an annual loss of 550bn yen and expected to sell one million fewer cars this year.

Suzuki's revenues for the January to March period declined 27% to 670bn yen.