Investments will be targeted at infrastructure, social welfare and other key sectors.
Reuters 9 November 2008
BEIJING - CHINA’S cabinet has approved a massive stimulus package worth 4 trillion yuan (S$877 billion) through 2010 to boost domestic demand, the official Xinhua news agency said on Sunday.
Investments will be targeted at infrastructure, social welfare and other key sectors as part of an ‘active’ fiscal policy, Xinhua said.
It did not say how the extra spending would be financed.
China ran a consolidated budget surplus in the first half of the year of more than $170 billion, but tax revenue growth is slowing sharply as the economy reels under the impact of the global credit crunch.
The cabinet also announced an explicit shift in monetary policy, which it now described as ‘moderately easy’.
The People’s Bank of China has already cut interest rates three times since mid-September and scrapped lending quotas in a bid to support the economy.
Lending to small and medium enterprises will be increased as part of the plan, Xinhua said.
Officials have been flagging measures to pump up demand since gross domestic product growth slowed unexpectedly sharply to 9.0 per cent in the third quarter from 10.4 per cent in the first half.
Indicators for October have been even weaker.
Giving details of the package, Xinhua said China would invest an additional 100 billion yuan in national construction this quarter and would earmark an extra 20 billion yuan next year for reconstruction in areas hit by major natural disasters.
Sector that will benefit from the extra spending include affordable housing, rural infrastructure, transport networks, environmental protection and technical innovation, Xinhua said.
The cabinet also confirmed a long-awaited reform to the way value added tax is calculated. The result will be to reduce companies’ tax bill by 120 billion yuan a year, the agency added.
G-20 seeks greater role of emerging economies, IMF reform
SAO PAULO, Brazil, Nov. 9 (AP) - The Group of 20 financial chiefs on Sunday sought a greater role to play for the 20 major industrialized and emerging economies in addressing the ongoing global credit crisis, and an overhaul of the International Monetary Fund to better reflect developing nations' standpoints.
After the two-day meeting in Sao Paulo, the G-20 finance ministers and central bank governors said in a joint statement they have "a critical role to play in ensuring global financial and economic stability," and that the IMF and the World Bank "must be comprehensively reformed so that they can more adequately reflect changing economic shifts in the world economy."
The G-20 financial chiefs acknowledged at their annual gathering, which precedes the summit of the group's leaders scheduled for Friday and Saturday in Washington, that the global economy is "facing its most serious financial crisis and economic slowdown in decades."
They said the current crisis is "largely a result of excessive risk taking and faulty risk management practices in financial markets" and vowed to "take all necessary actions...to restore normal functioning of money and credit markets."
The top financial officials of the 20 economies recognized the need for each member to improve its regulatory and supervisory regime and strengthen international cooperation to respond preemptively to systemic risks.
They said proper oversight of financial institutions, including credit rating agencies, is necessary and that those institutions should have common accounting standards.
The viewpoints of the G-20 financial chiefs are expected to be reflected in the upcoming global financial summit to be hosted by U.S. President George W. Bush.
At a press conference after the meeting, Brazilian Finance Minister Guido Mantega, who chaired the gathering, criticized the current global financial system centering on the Group of Seven major industrialized countries -- Britain, Canada, France, Germany, Italy, Japan and the United States.
The G-7 is "not sufficient" to handle crises like the one now crippling the global economy, Mantega said.
The G-20 groups the G-7 economies plus Australia, Argentina, Brazil, China, India, Indonesia, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey and the European Union.
Norio Mitsuya, parliamentary secretary of finance, who represented Japan at the G-20 meeting, told the gathering that funds at the IMF and the World Bank should be strengthened to fully support countries hit by the global credit crisis, Japanese officials said.
The G-20 financial chiefs urged the IMF to "enhance its early warning capabilities" to brace for a financial crisis and called for strengthening the Washington-based multilateral lender's surveillance and policy advice.
The 20 economies also said the Financial Stability Forum, an advisory body to the Group of Seven industrialized nations, "must expand to a broader membership of emerging economies."
The FSF chaired by Bank of Italy Governor Mario Draghi has been instrumental in analyzing the credit turmoil stemming from the U.S. subprime mortgage meltdown since last summer, and proposing ways to boost global market resilience and prevent a repeat of the crisis.
In the statement, the G-20 financial leaders aired their concerns over the impact of the financial crisis on the real economy, saying they are "seeing evidence of slower growth in emerging markets." They pledged to respectively implement necessary monetary and fiscal policy measures to sustain growth.
Next week will be light on data and high on expectations for President-elect Barack Obama, as the nation grapples with economic gloom, turbulent financial markets and a huge transition in leadership.
Investors are coming off a week in which they soaked up the election results and were barraged with reports of gloomy retail sales, surging unemployment, weak earnings and predictions for more rough times ahead.
A trade-balance report on Thursday will provide incremental evidence of how the export sector has held up with the dollar's rally and widespread economic declines across the globe. But by and large, the week is far less data intensive. Instead, investors are keeping their eyes peeled for more details from Obama on how he plans to confront the economic crisis once he takes office in January.
The past week was about how bad things are, says Alan Gayle, senior investment strategist for RidgeWorth Capital Management. The coming week is about what are we going to do about it, he says.
"It will shift from what has been a very challenging week for economic data toward the fiscal- and economic-policy response," Gayle says.
Late this week, Sen. Obama (D., Ill.) appointed Rep. Rahm Emanuel (D., Ill.), a former investment banker, to be his chief of staff and met with his top economic advisers. Obama's Transition Economic Advisory Board is staffed with experienced corporate and government leaders, including Berkshire Hathaway CEO Warren Buffett, Google CEO Eric Schmidt, Time Warner Chairman Dick Parsons and Xerox CEO Anne Mulcahy. It also includes former Treasury secretaries Robert Rubin and Lawrence Summers; ex- Federal Reserve Chairman Paul Volcker; former Securities and Exchange Commission heads William Donaldson and Roel Campos; ex- Commerce Secretary William Daley; and former Labor Secretary Robert Reich.
After meeting with his team on Friday, Obama promised that "immediately after I become President, I will confront this economic crisis head-on by taking all necessary steps to ease the credit crisis, help hardworking families and restore growth and prosperity."
One of Obama's first goals is to choose a Treasury secretary to collaborate with Henry Paulson, who currently holds that title, to take over the reins of the massive Troubled Asset Relief Program, or TARP, approved by Congress last month. The reported favorites for that role are Summers, who held the position under President Bill Clinton, and Timothy Geithner, current president of the New York Fed. For his part, Paulson has promised "a smooth and effective transition" to ensure that "the incoming team can hit the ground running in January."
Indeed, Wall Street is hoping for a seamless transition between two starkly different administrations, as well as a coherent strategy to confront a plethora of economic issues. While energy prices have come down significantly, consumers are grappling with job cuts, foreclosures and declining household wealth as home values have plunged and investments have lost significant value. With fewer bucks in the bank and holidays on the horizon, Gayle expects a short-term economic stimulus package to be unveiled under the current Congress, before a broader stimulus package is approved next year.
Such a deal might be similar to the $42 billion worth of consumer tax rebates the government approved in February. While the move was widely panned as ineffective to support the economy on a long-term basis, it helped struggling consumers make ends meet as prices surged for gasoline and food. It also propped up retail sales last quarter, helping the economy avoid a major decline in output.
There are also suggestions that struggling U.S. automakers GM, Ford and Chrysler may be granted access to low-cost government loans. On Friday, GM reported a $2.5 billion third-quarter loss and warned that it may run out of money next year unless the government steps in with assistance. Major automakers are important players in corporate America, and their potential failure would drastically hurt investor confidence, particularly for debt holders, says Edward Maraccini, portfolio manager of Optique Capital Management.
"If Ford were to go under on an equity basis, it's a nonfactor; I don't know what GM's market cap is anymore -- it's meaningless," says Maraccini. "But after what happened when Lehman collapsed, there will be far-reaching impacts on everyone that has debt in their portfolios ... [Debt holders] all took hits, and a lot of them will have Ford and GM and Chrysler."
On Friday, Obama expressed sympathy for automakers, without promising any additional help, saying he'd "like to see the administration do everything they can to accelerate the retooling assistance that Congress has already enacted."
Obama will have a full plate ahead of him, with calls to stabilize the financial system, help struggling consumers, rescue the troubled auto and manufacturing industries, and support the faltering housing market. It is unclear how he will handle the multipronged crisis, and Marc Groz, a hedge-fund manager at Topos LLC, says that uncertainty will continue to hurt stocks. Despite a pre-Election-Day rally, investors are holding out for tangible signs that the government's response will evoke an economic turnaround before delving back into the market full-force.
"It's all these news events and feared news events and people trying to guess how other people will respond to these things," says Groz, author of Forbes Guide to the Markets. "All of us are kind of at the mercy of these very hard-to-fathom political and economic forces."
In his first public appearance as president-elect, Barack Obama held a press conference in Chicago Friday afternoon after meeting for several hours with a selected group of economic advisers, comprised entirely of bankers, corporate executives and current and former government officials.
Members of Obama’s Transitional Economic Advisory Board and other economic advisers, including former Federal Reserve Chairman Paul Volcker and Clinton-era treasury secretary and current Citigroup executive Robert Rubin, were lined up behind Obama as he answered questions from reporters.
In his opening statement to the press conference, Obama underscored the gravity of the economic crisis, citing the report earlier in the day that a net 240,000 US jobs were lost in October. “In total, we’ve lost nearly 1.2 million jobs this year, and more than 10 million Americans are now unemployed,” he said. “Tens of millions of families are struggling to figure out how to pay the bills and stay in their homes. Their stories are an urgent reminder that we are facing the greatest economic challenge of our lifetime, and we must act swiftly to resolve them.”
He proposed no immediate actions, however, emphasizing that President Bush remains in the White House until next January 20. Obama was clearly seeking to divorce himself from responsibility for the rapid increase in economic distress which is expected over the next two months.
“Immediately after I become president,” he said, “I will confront this economic crisis head-on by taking all necessary steps to ease the credit crisis, help hard-working families, and restore growth and prosperity.” But he gave few details of what policies he might propose, other than including an extension of unemployment benefits in a new “economic stimulus” package.
While acknowledging the depth of the crisis, Obama was at pains to downplay expectations of any rapid economic recovery, saying, “It is not going to be easy for us to dig ourselves out of the hole that we are in.”
Obama declared, “We need a rescue plan for the middle class,” but the composition of his Transitional Economic Advisory Board belies his claim to be focusing on the economic difficulties of ordinary people. The panel consists entirely of representatives of the corporate and financial elite and the Democratic wing of the political establishment.
The 17 members of the panel include billionaire Warren Buffett, the richest man in America, the CEOs of Xerox and Google, the chairman of the board of Time Warner, Hyatt Hotels heiress Penny Pritzker, and Citigroup Vice Chairman Rubin.
Joining them in the meeting that preceded the press conference were former Clinton administration officials William Daley, Robert Reich, Laura Tyson and Lawrence Summers, as well as two former commissioners of the Securities and Exchange Commission, Volcker and former Fed Vice Chairman Roger Ferguson, former Democratic Congressman David Bonior, Michigan governor Jennifer Granholm and Los Angeles Mayor Antonio Villaraigosa.
The panel had the obligatory gender and racial diversity—two black members, two Hispanics, four women—but not even a semblance of class diversity. There was not a single individual representing workers, the unemployed, consumers, homeowners or those facing foreclosure and homelessness.
Nor were there any representatives of the labor federations—the AFL-CIO and Change To Win—which poured hundreds of millions of dollars into the Obama campaign—or of African-American, Hispanic and women’s organizations, such as the NAACP and NOW.
Some 16 years ago, the last time that a Democrat replaced a Republican in the White House, President-elect Bill Clinton was at pains to include high-ranking union officials at his economic summit in Little Rock. But so socially irrelevant have the trade unions become that Obama and his advisers do not consider it necessary to make even a pretense of consulting them in the making of economic policy.
Two indications of future Democratic policy emerged at the press conference. Obama strongly suggested that the Bush administration’s $700 billion bailout of the banks—adopted with the support of the Democratic-controlled Congress, including Obama’s own vote—would be expanded to include the auto industry.
When asked point blank whether he would stick to his campaign pledge to cut taxes for those making less than $200,000 a year and raise taxes on those with incomes of $250,000, he responded by leaving open the possibility that this policy would be reconsidered.
“I think that the plan that we’ve put forward is the right one, but obviously over the next several weeks and months, we’re going to be continuing to take a look at the data and see what’s taking place in the economy as a whole,” Obama said.
“The goal of my plan is to provide tax relief to families that are struggling, but also to boost the capacity of the economy to grow from the bottom up,” he added, in what was an implicit concession to the arguments by business groups and congressional Republicans that a tax hike on the wealthy would damage economic growth.
Obama made no criticism of the Bush administration’s handling of the bank bailout, saying only that his transition office would monitor it to make sure the Treasury was “protecting taxpayers, helping homeowners and not unduly rewarding the management of financial firms that are receiving government assistance.”
The language, in avoiding any criticism of Wall Street speculators and CEOs, is both telling and consistent with the tenor of Obama’s election campaign. As during the campaign, Obama avoids any exposure, let alone condemnation, of the social interests which are responsible for the economic crisis and which underlie the policies of the Bush administration.
Whatever Obama’s criticisms of Bush or the Republican presidential candidate John McCain, the Democratic president-elect represents the same class interests--the financial aristocracy which rules America and subordinates the social and economic life of the country to its drive for personal enrichment.
You're The Best Thing That Ever Happened To Me - By Gladys Knight & The Pips
I've had my share of life's ups and downs But fate's been kind, the downs have been few I guess you could say that I've been lucky Well, I guess you could say That it's all because of you
If anyone should ever write my life story For whatever reason there might be Ooo, you'll be there Between each line of pain and glory 'Cause you're the best thing That ever happened to me Ah, you're the best thing that ever happened to me
Oh, there have been times when times were hard But always somehow I made it, I made it through 'Cause for every moment that I've spent hurting There was a moment that I spent, ah, just loving you
If anyone should ever write my life story For whatever reason there might be Oh, you'll be there Between each line of pain and glory 'Cause you're the best thing that ever happened to me Oh, you're the best thing that ever happened to me I know, you're the best thing, oh, that ever happened to me
New $40B Infusion Boosts Total Aid To Troubled Financial Giant To $150B
Nov. 10, 2008
WASHINGTON (AP) -- The government on Monday provided new financial assistance to troubled insurance giant American International Group, including pouring $40 billion into the company in return for partial ownership.
The action was announced jointly by the Federal Reserve and the Treasury Department. All told, the moves boost aid to the company to around $150 billion.
The $40 billion infusion comes from the recently enacted $700 billion financial bailout package. The government is buying preferred shares of AIG stock, giving it an ownership stake in the company.
As part of the new arrangement, the Federal Reserve is reducing a $85 billion loan it is had made available to AIG to $60 billion. The Fed also is replacing a separate $37.8 billion loan to the insurance company with a $52 billion aid package.
The government said the actions were needed to "keep the company strong and facilitate its ability to complete its restructuring process successfully."
It marked the first time money from the $700 billion bailout package Congress enacted last month has gone to any company other than a bank.
The Treasury Department, which is overseeing the program, has promised to inject $250 billion into banks in return for partial ownership. The original notion behind the bailout package was to help financial institutions lend money more freely again, one of the main reasons the economy is in danger of getting stuck in a long and painful recession.
Until Monday, all of AIG's bailout relief was coming from the Fed.
The Fed, earlier this year, said it would loan a total of $123 billion to AIG. The insurance company was later allowed to access another $20.9 billion through the Fed's "commercial paper" program. That's where the Fed is buying mounds of companies' short-term debt often used for crucial day-to-day expenses, such as payrolls and supplies.
Backgrounder: A timeline of China's recent economic-stimulus measures
BEIJING, Nov. 9 (Xinhua)-- China will adopt an "active" fiscal policy and "moderately easy" monetary policy to support fast but steady economic growth by expanding domestic demand, an executive meeting of the State Council (cabinet) said on Sunday.
The economy grew by 9 percent in the third quarter, the slowest in five years, as the global financial crisis sapped demand for Chinese goods, and domestic industrial production waned in response to weak demand and rising raw material costs.
In response to changing conditions, the government shifted efforts from fighting overheating to seeking sound and fast development. Following are moves taken over approximately the past90 days to boost the economy:
-- On Aug. 1, China raised tax rebates for certain textile and garment exports to help producers cope with the paper-thin profit margins squeezed by the yuan's appreciation, higher costs and rising raw material prices.
Export tax rebates for some textile and garment items, including silk, wool yarn, chemical fibers and cotton products, were increased by 2 percentage points to 13 percent.
-- On Aug. 5, the People's Bank of China (PBOC), the central bank, agreed to raise the 2008 credit quota by 5 percent for national commercial banks and 10 percent for local commercial banks, aiming to ease the financing difficulties of small and medium-size enterprises.
There were minor adjustments made to reflect differing conditions among local banks.
-- The PBOC cut interest rates for one-year loans by 0.27 percentage points to 7.2 percent as of Sept. 16. It also cut the reserve requirement ratio for all but the country's five largest banks by 1 percentage point to 16.5 percent from Sept. 25.
The reserve requirement ratio was reduced by 2 percentage points for local financing institutions in areas badly hit by the May 12 earthquake.
-- On Sept. 19, the country removed the stamp tax on stock purchases, but the tax on sales remained at 0.1 percent. It was the first such move since 1991 and followed a two-thirds fall in the key stock index since October 2007.
-- Also that day, the State-owned Assets Supervision and Administration Commission said the government would support centrally-administered State Owned Enterprises in buying more stocks of their listed subsidiaries.
Central Huijin Investment Co., Ltd., a government investment arm, said it planned to buy shares of three major Chinese lenders on the secondary market to support their share prices.
-- On Oct. 5, the China Securities Regulatory Commission announced it would launch margin financing and securities lending on a trial basis. Eleven securities companies took part in a trial run on Oct. 25.
Non-financial enterprises were allowed to float mid-term bonds as of Oct. 6, which would help ease financing difficulties.
-- The PBOC cut both interest rates and the reserve-requirement ratio. Deposit and lending rates was cut 0.27 percentage points effective Oct. 8, and the reserve-requirement ratio was cut by 0.5 percentage points from Oct. 15. This was the first time in nine years that the country reduced deposit rates at all financial institutions.
-- On Oct. 17, Premier Wen Jiabao announced at an executive meeting of the State Council that the government would adopt comprehensive measures and allocate central funds in the fourth quarter to boost domestic demand, improve living standards and stimulate economic development.
-- The PBOC announced tax exemptions and downpayment cuts as of Oct. 27 to boost the falling real estate sector. The minimum downpayment for a first-time buyer of a residence smaller than 90 square meters was reduced to 20 percent from 30 percent.
Interest rates on mortgages for first-time buyers were cut 0.27percentage point. The floor for interest rates was lowered to 70 percent of the central bank's benchmark rate.
-- The PBOC cut benchmark interest rates by 0.27 percentage point as of Oct. 30, the third such move in six weeks.
The benchmark one-year deposit rate dropped to 3.60 percent from 3.87 percent, while the benchmark one-year lending rate fell from 6.93 percent to 6.66 percent.
-- China raised tax rebates for 3,486 export items as of Nov. 1. The adjustment covered such labor-intensive industries as textiles, toys, garments, and high-tech products, accounting for 25.8 percent of products covered by customs tariffs. Rebate rates run roughly from 9 percent to 14 percent.
WASHINGTON -- There will be a glut of difficult predicaments when the new president takes office.
Beijing wants to usurp Washington and shape a revised world order by 2010. As China continues to grow, American influence will be challenged by a new model of globalization.
China's statistics cannot be ignored. Of the world's population, one in every five is Chinese. Half of our clothes and shoes are made in China. And the Chinese produce more computers than anyone else.
While this has kept prices down in the United States, Chinese appetites for energy in all its forms have helped double our petrol prices.
To understand a country, sometimes it helps to know a few historical key words. When Americans speak of the "father of our country," we know that we are talking about George Washington. In England, the Battle of Waterloo conjures up images of the Duke of Wellington. China has the destruction of the old Summer Palace, an edifice that took 150 years to build and was burned down by British and French troops in 1860. Only cardboard scale models remain to mark its splendor.
Yuan Ming Yuan, or the Summer Palace, still serves as a mobilizing call whenever Beijing needs to rally its people against the West and remind them that until Mao brought communism and closed the country, many humiliations were suffered at the hands of the United States and Europe.
This Yuan Ming Yuan spirit made the construction of the Olympic Stadium possible with its huge network of new roads that could go four times around the world. It makes the building of a new town, with housing for 8 million, a yearly event and it has enabled many promises to become realities.
There is great significance in China President Hu Jintao's statement that within 12 years his countrymen will have "more extensive democratic rights" and a still booming economy that will usher in "moderate prosperity for all."
The Yuan Ming Yuan spirit is tapped by Hu's advisers to bring about political reforms and attempt to eradicate endemic corruption. We are slowly learning that already there are eight political parties operating in China and they are being encouraged to merge to form a multiparty system together with business, religious and charity groups. It won't be American democracy; it will be socialism with a Chinese face.
Conservatives won't like it but American Democrats are unlikely to complain. Yet.
Changes began in Beijing last year, but were slowed down by protests in Tibet, terrorist bombings in Xinjiang and earthquakes and floods. However, under one of the Politburo's most trusted advisers, an economist, Zhou Tianyong, reform is again on the front pages of Chinese newspapers.
But, back to the past. China protected its northern boundaries from invasions from prehistory to the three centuries of its great Ming Dynasty with 4,000 miles of wall guarded by their military.
When Deng Xiaoping opened the country to the world, the United States burst in -- and through the 1990s, U.S. economic and military power created a USA cult in China.
American cars, clothes, hairstyles, television programs, McDonald's, Starbucks and other chain stores proliferated. Thousands of Chinese kids came to the United States and the West to study in our schools and colleges.
Slowly, China's leadership came to believe that this American cult was a form of self-racism, and it is rapidly being changed to hostility toward Western influences and culture.
China's strength grew, its self-confidence augmented and with the Olympic Games, a mission to the moon and major successes throughout Africa, Asia and Europe, China is ready for international political action. But it is again building walls.
Recently, laws have been imposed preventing foreigners from easily taking control of companies, Australian and American movies are characterized as "pornographic" and banned, visa requirements have been immensely changed, and America and the West are challenged over the demand for raw materials, skills, markets and the quality of their exports.
What advice do we have for our new leadership?
Strengthen American manufacturing and exports and develop our know-how industries.
Shrug off traditional noncompetitive industries for new technologies that can make us financially less dependent on imported energy, raw materials and finished goods.
Toughen up our military, stop the outsourcing of intelligence information, visit China as equals and make friends with its president, but, for the sake of all our futures, all the while carry a very big stick.
(Dateline D.C. is written by a Washington-based British journalist and political observer.)
VIENNA, Austria (AP) - Oil prices jumped above $64 a barrel Monday as world stock markets rallied on news of a massive Chinese economic stimulus plan, which could underpin demand for crude.
Increasing evidence that OPEC production cutbacks were taking hold also helped support prices.
Light, sweet crude for December delivery was up $3.10 to $64.14 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe. The contract Friday rose 27 cents to settle at $61.04.
China's $586 billion stimulus package announced Sunday helped lift Asian stock markets Monday. The Shanghai Composite Index surged 7.3 percent, Japan's benchmark Nikkei 225 index rose 5.8 percent and Hong Kong's Hang Seng index gained 4.8 percent.
Oil traders have been looking to equity markets for signs of how severe the current global economic slowdown will be.
Crude oil prices were also bolstered by a falling dollar. Investors often use commodities such as oil as a hedge against inflation and a weaker dollar.
The euro gained to $1.2848 on Monday from 1.2715 on Friday while the dollar rose to 99.00 yen.
"Oil has been highly correlated to stocks and the dollar," said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore. "The spending plan may increase crude demand, which is already strong in China."
Another production cut by OPEC may also boost prices. The Organization of Petroleum Exporting Countries could further reduce oil output if a decision last month to slash production doesn't bolster plummeting oil prices, the group's president Chakib Khelil said Saturday.
Khelil, who is also Algeria's energy minister, said OPEC seeks prices between $70 and $90 per barrel.
"If we go toward $55, I expect OPEC to call an emergency meeting and announce another cut," Chu said. "The market expects them to cut again in December at the latest."
In another OPEC-related development aimed at bolstering prices, Vienna's JBC Energy noted that cuts agreed upon last month in Vienna by the group's oil ministers "finally hit the market last week, with Saudi Arabia, Iran and Nigeria all announcing cuts of the required magnitude, and there was speculation that Nigeria may reduce output even further."
Oil prices have fallen about 56 percent since reaching a record $147.27 in mid-July.
In the long-term, rising demand in the developing world will likely push prices higher, the International Energy Agency said last week.
According to a summary of the agency's World Energy Outlook report due to be published in full this week, the IEA has hiked its forecast for the price of a barrel of oil in 2030 to just over $200 in nominal terms, compared to last year's estimate of $108 a barrel.
In other Nymex trading, heating oil futures jumped more than 7 cents to $2.05 a gallon, while gasoline prices gained 5.5 cents to $1.41 a gallon. Natural gas for December delivery spiked 34 cents to $7.10 per 1,000 cubic feet.
In London, December Brent crude rose $3.11 to $60.46 a barrel on the ICE Futures exchange.
KUALA LUMPUR, Malaysia (AP) - Malaysia's Scomi Engineering said Monday its consortium with an Indian company has won a 1.85 billion ringgit ($523 million) state contract to build the first monorail in India.
Scomi and its consortium partner, Larsen & Toubro Ltd., received a letter of award last week from Mumbai authorities to construct a 19.54-kilometer monorail network linking the west and northeast of Mumbai, India's financial capital, the company said in a statement.
"This will be the first monorail system in India and is expected to ease the congestion in the highly crowded Jacob Circle, Wadala and Chembur areas (of Mumbai)," said Scomi's Chief Executive Shah Hakim Zain.
The monorail will connect with the existing suburban railway and planned metropolitan railway.
It will be served by 18 stations, a fleet of 15 trains, each with four cars, and will take 30 months to complete, Shah Hakim said.
Engineering firm Scomi holds a 45 percent stake in the project while Indian construction company L&T owns the remaining 55 percent, officials said.
Shah Hakim said Scomi has also submitted proposals to build monorails in Bangalore, Pune, New Delhi and Patna in India, Mekkah and Medina in Saudi Arabia, Dubai and Bahrain in the Middle East, Hanoi in Vietnam, and Lagos in West Africa.
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China’s $586b stimulus plan
Investments will be targeted at infrastructure, social welfare and other key sectors.
Reuters
9 November 2008
BEIJING - CHINA’S cabinet has approved a massive stimulus package worth 4 trillion yuan (S$877 billion) through 2010 to boost domestic demand, the official Xinhua news agency said on Sunday.
Investments will be targeted at infrastructure, social welfare and other key sectors as part of an ‘active’ fiscal policy, Xinhua said.
It did not say how the extra spending would be financed.
China ran a consolidated budget surplus in the first half of the year of more than $170 billion, but tax revenue growth is slowing sharply as the economy reels under the impact of the global credit crunch.
The cabinet also announced an explicit shift in monetary policy, which it now described as ‘moderately easy’.
The People’s Bank of China has already cut interest rates three times since mid-September and scrapped lending quotas in a bid to support the economy.
Lending to small and medium enterprises will be increased as part of the plan, Xinhua said.
Officials have been flagging measures to pump up demand since gross domestic product growth slowed unexpectedly sharply to 9.0 per cent in the third quarter from 10.4 per cent in the first half.
Indicators for October have been even weaker.
Giving details of the package, Xinhua said China would invest an additional 100 billion yuan in national construction this quarter and would earmark an extra 20 billion yuan next year for reconstruction in areas hit by major natural disasters.
Sector that will benefit from the extra spending include affordable housing, rural infrastructure, transport networks, environmental protection and technical innovation, Xinhua said.
The cabinet also confirmed a long-awaited reform to the way value added tax is calculated. The result will be to reduce companies’ tax bill by 120 billion yuan a year, the agency added.
G-20 seeks greater role of emerging economies, IMF reform
SAO PAULO, Brazil, Nov. 9 (AP) - The Group of 20 financial chiefs on Sunday sought a greater role to play for the 20 major industrialized and emerging economies in addressing the ongoing global credit crisis, and an overhaul of the International Monetary Fund to better reflect developing nations' standpoints.
After the two-day meeting in Sao Paulo, the G-20 finance ministers and central bank governors said in a joint statement they have "a critical role to play in ensuring global financial and economic stability," and that the IMF and the World Bank "must be comprehensively reformed so that they can more adequately reflect changing economic shifts in the world economy."
The G-20 financial chiefs acknowledged at their annual gathering, which precedes the summit of the group's leaders scheduled for Friday and Saturday in Washington, that the global economy is "facing its most serious financial crisis and economic slowdown in decades."
They said the current crisis is "largely a result of excessive risk taking and faulty risk management practices in financial markets" and vowed to "take all necessary actions...to restore normal functioning of money and credit markets."
The top financial officials of the 20 economies recognized the need for each member to improve its regulatory and supervisory regime and strengthen international cooperation to respond preemptively to systemic risks.
They said proper oversight of financial institutions, including credit rating agencies, is necessary and that those institutions should have common accounting standards.
The viewpoints of the G-20 financial chiefs are expected to be reflected in the upcoming global financial summit to be hosted by U.S. President George W. Bush.
At a press conference after the meeting, Brazilian Finance Minister Guido Mantega, who chaired the gathering, criticized the current global financial system centering on the Group of Seven major industrialized countries -- Britain, Canada, France, Germany, Italy, Japan and the United States.
The G-7 is "not sufficient" to handle crises like the one now crippling the global economy, Mantega said.
The G-20 groups the G-7 economies plus Australia, Argentina, Brazil, China, India, Indonesia, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey and the European Union.
Norio Mitsuya, parliamentary secretary of finance, who represented Japan at the G-20 meeting, told the gathering that funds at the IMF and the World Bank should be strengthened to fully support countries hit by the global credit crisis, Japanese officials said.
The G-20 financial chiefs urged the IMF to "enhance its early warning capabilities" to brace for a financial crisis and called for strengthening the Washington-based multilateral lender's surveillance and policy advice.
The 20 economies also said the Financial Stability Forum, an advisory body to the Group of Seven industrialized nations, "must expand to a broader membership of emerging economies."
The FSF chaired by Bank of Italy Governor Mario Draghi has been instrumental in analyzing the credit turmoil stemming from the U.S. subprime mortgage meltdown since last summer, and proposing ways to boost global market resilience and prevent a repeat of the crisis.
In the statement, the G-20 financial leaders aired their concerns over the impact of the financial crisis on the real economy, saying they are "seeing evidence of slower growth in emerging markets." They pledged to respectively implement necessary monetary and fiscal policy measures to sustain growth.
Coming Week: Lame Duck Market
Lauren Tara LaCapra
8 November 2008
Next week will be light on data and high on expectations for President-elect Barack Obama, as the nation grapples with economic gloom, turbulent financial markets and a huge transition in leadership.
Investors are coming off a week in which they soaked up the election results and were barraged with reports of gloomy retail sales, surging unemployment, weak earnings and predictions for more rough times ahead.
A trade-balance report on Thursday will provide incremental evidence of how the export sector has held up with the dollar's rally and widespread economic declines across the globe. But by and large, the week is far less data intensive. Instead, investors are keeping their eyes peeled for more details from Obama on how he plans to confront the economic crisis once he takes office in January.
The past week was about how bad things are, says Alan Gayle, senior investment strategist for RidgeWorth Capital Management. The coming week is about what are we going to do about it, he says.
"It will shift from what has been a very challenging week for economic data toward the fiscal- and economic-policy response," Gayle says.
Late this week, Sen. Obama (D., Ill.) appointed Rep. Rahm Emanuel (D., Ill.), a former investment banker, to be his chief of staff and met with his top economic advisers. Obama's Transition Economic Advisory Board is staffed with experienced corporate and government leaders, including Berkshire Hathaway CEO Warren Buffett, Google CEO Eric Schmidt, Time Warner Chairman Dick Parsons and Xerox CEO Anne Mulcahy. It also includes former Treasury secretaries Robert Rubin and Lawrence Summers; ex- Federal Reserve Chairman Paul Volcker; former Securities and Exchange Commission heads William Donaldson and Roel Campos; ex- Commerce Secretary William Daley; and former Labor Secretary Robert Reich.
After meeting with his team on Friday, Obama promised that "immediately after I become President, I will confront this economic crisis head-on by taking all necessary steps to ease the credit crisis, help hardworking families and restore growth and prosperity."
One of Obama's first goals is to choose a Treasury secretary to collaborate with Henry Paulson, who currently holds that title, to take over the reins of the massive Troubled Asset Relief Program, or TARP, approved by Congress last month. The reported favorites for that role are Summers, who held the position under President Bill Clinton, and Timothy Geithner, current president of the New York Fed. For his part, Paulson has promised "a smooth and effective transition" to ensure that "the incoming team can hit the ground running in January."
Indeed, Wall Street is hoping for a seamless transition between two starkly different administrations, as well as a coherent strategy to confront a plethora of economic issues. While energy prices have come down significantly, consumers are grappling with job cuts, foreclosures and declining household wealth as home values have plunged and investments have lost significant value. With fewer bucks in the bank and holidays on the horizon, Gayle expects a short-term economic stimulus package to be unveiled under the current Congress, before a broader stimulus package is approved next year.
Such a deal might be similar to the $42 billion worth of consumer tax rebates the government approved in February. While the move was widely panned as ineffective to support the economy on a long-term basis, it helped struggling consumers make ends meet as prices surged for gasoline and food. It also propped up retail sales last quarter, helping the economy avoid a major decline in output.
There are also suggestions that struggling U.S. automakers GM, Ford and Chrysler may be granted access to low-cost government loans. On Friday, GM reported a $2.5 billion third-quarter loss and warned that it may run out of money next year unless the government steps in with assistance. Major automakers are important players in corporate America, and their potential failure would drastically hurt investor confidence, particularly for debt holders, says Edward Maraccini, portfolio manager of Optique Capital Management.
"If Ford were to go under on an equity basis, it's a nonfactor; I don't know what GM's market cap is anymore -- it's meaningless," says Maraccini. "But after what happened when Lehman collapsed, there will be far-reaching impacts on everyone that has debt in their portfolios ... [Debt holders] all took hits, and a lot of them will have Ford and GM and Chrysler."
On Friday, Obama expressed sympathy for automakers, without promising any additional help, saying he'd "like to see the administration do everything they can to accelerate the retooling assistance that Congress has already enacted."
Obama will have a full plate ahead of him, with calls to stabilize the financial system, help struggling consumers, rescue the troubled auto and manufacturing industries, and support the faltering housing market. It is unclear how he will handle the multipronged crisis, and Marc Groz, a hedge-fund manager at Topos LLC, says that uncertainty will continue to hurt stocks. Despite a pre-Election-Day rally, investors are holding out for tangible signs that the government's response will evoke an economic turnaround before delving back into the market full-force.
"It's all these news events and feared news events and people trying to guess how other people will respond to these things," says Groz, author of Forbes Guide to the Markets. "All of us are kind of at the mercy of these very hard-to-fathom political and economic forces."
Obama reassures big business on economic policy
By Patrick Martin
8 November 2008
In his first public appearance as president-elect, Barack Obama held a press conference in Chicago Friday afternoon after meeting for several hours with a selected group of economic advisers, comprised entirely of bankers, corporate executives and current and former government officials.
Members of Obama’s Transitional Economic Advisory Board and other economic advisers, including former Federal Reserve Chairman Paul Volcker and Clinton-era treasury secretary and current Citigroup executive Robert Rubin, were lined up behind Obama as he answered questions from reporters.
In his opening statement to the press conference, Obama underscored the gravity of the economic crisis, citing the report earlier in the day that a net 240,000 US jobs were lost in October. “In total, we’ve lost nearly 1.2 million jobs this year, and more than 10 million Americans are now unemployed,” he said. “Tens of millions of families are struggling to figure out how to pay the bills and stay in their homes. Their stories are an urgent reminder that we are facing the greatest economic challenge of our lifetime, and we must act swiftly to resolve them.”
He proposed no immediate actions, however, emphasizing that President Bush remains in the White House until next January 20. Obama was clearly seeking to divorce himself from responsibility for the rapid increase in economic distress which is expected over the next two months.
“Immediately after I become president,” he said, “I will confront this economic crisis head-on by taking all necessary steps to ease the credit crisis, help hard-working families, and restore growth and prosperity.” But he gave few details of what policies he might propose, other than including an extension of unemployment benefits in a new “economic stimulus” package.
While acknowledging the depth of the crisis, Obama was at pains to downplay expectations of any rapid economic recovery, saying, “It is not going to be easy for us to dig ourselves out of the hole that we are in.”
Obama declared, “We need a rescue plan for the middle class,” but the composition of his Transitional Economic Advisory Board belies his claim to be focusing on the economic difficulties of ordinary people. The panel consists entirely of representatives of the corporate and financial elite and the Democratic wing of the political establishment.
The 17 members of the panel include billionaire Warren Buffett, the richest man in America, the CEOs of Xerox and Google, the chairman of the board of Time Warner, Hyatt Hotels heiress Penny Pritzker, and Citigroup Vice Chairman Rubin.
Joining them in the meeting that preceded the press conference were former Clinton administration officials William Daley, Robert Reich, Laura Tyson and Lawrence Summers, as well as two former commissioners of the Securities and Exchange Commission, Volcker and former Fed Vice Chairman Roger Ferguson, former Democratic Congressman David Bonior, Michigan governor Jennifer Granholm and Los Angeles Mayor Antonio Villaraigosa.
The panel had the obligatory gender and racial diversity—two black members, two Hispanics, four women—but not even a semblance of class diversity. There was not a single individual representing workers, the unemployed, consumers, homeowners or those facing foreclosure and homelessness.
Nor were there any representatives of the labor federations—the AFL-CIO and Change To Win—which poured hundreds of millions of dollars into the Obama campaign—or of African-American, Hispanic and women’s organizations, such as the NAACP and NOW.
Some 16 years ago, the last time that a Democrat replaced a Republican in the White House, President-elect Bill Clinton was at pains to include high-ranking union officials at his economic summit in Little Rock. But so socially irrelevant have the trade unions become that Obama and his advisers do not consider it necessary to make even a pretense of consulting them in the making of economic policy.
Two indications of future Democratic policy emerged at the press conference. Obama strongly suggested that the Bush administration’s $700 billion bailout of the banks—adopted with the support of the Democratic-controlled Congress, including Obama’s own vote—would be expanded to include the auto industry.
When asked point blank whether he would stick to his campaign pledge to cut taxes for those making less than $200,000 a year and raise taxes on those with incomes of $250,000, he responded by leaving open the possibility that this policy would be reconsidered.
“I think that the plan that we’ve put forward is the right one, but obviously over the next several weeks and months, we’re going to be continuing to take a look at the data and see what’s taking place in the economy as a whole,” Obama said.
“The goal of my plan is to provide tax relief to families that are struggling, but also to boost the capacity of the economy to grow from the bottom up,” he added, in what was an implicit concession to the arguments by business groups and congressional Republicans that a tax hike on the wealthy would damage economic growth.
Obama made no criticism of the Bush administration’s handling of the bank bailout, saying only that his transition office would monitor it to make sure the Treasury was “protecting taxpayers, helping homeowners and not unduly rewarding the management of financial firms that are receiving government assistance.”
The language, in avoiding any criticism of Wall Street speculators and CEOs, is both telling and consistent with the tenor of Obama’s election campaign. As during the campaign, Obama avoids any exposure, let alone condemnation, of the social interests which are responsible for the economic crisis and which underlie the policies of the Bush administration.
Whatever Obama’s criticisms of Bush or the Republican presidential candidate John McCain, the Democratic president-elect represents the same class interests--the financial aristocracy which rules America and subordinates the social and economic life of the country to its drive for personal enrichment.
You're The Best Thing That Ever Happened To Me - By Gladys Knight & The Pips
I've had my share of life's ups and downs
But fate's been kind, the downs have been few
I guess you could say that I've been lucky
Well, I guess you could say
That it's all because of you
If anyone should ever write my life story
For whatever reason there might be
Ooo, you'll be there
Between each line of pain and glory
'Cause you're the best thing
That ever happened to me
Ah, you're the best thing that ever happened to me
Oh, there have been times when times were hard
But always somehow I made it, I made it through
'Cause for every moment that I've spent hurting
There was a moment that I spent, ah, just loving you
If anyone should ever write my life story
For whatever reason there might be
Oh, you'll be there
Between each line of pain and glory
'Cause you're the best thing that ever happened to me
Oh, you're the best thing that ever happened to me
I know, you're the best thing, oh, that ever happened to me
Feds Dip Into Bailout Package To Help AIG
New $40B Infusion Boosts Total Aid To Troubled Financial Giant To $150B
Nov. 10, 2008
WASHINGTON (AP) -- The government on Monday provided new financial assistance to troubled insurance giant American International Group, including pouring $40 billion into the company in return for partial ownership.
The action was announced jointly by the Federal Reserve and the Treasury Department. All told, the moves boost aid to the company to around $150 billion.
The $40 billion infusion comes from the recently enacted $700 billion financial bailout package. The government is buying preferred shares of AIG stock, giving it an ownership stake in the company.
As part of the new arrangement, the Federal Reserve is reducing a $85 billion loan it is had made available to AIG to $60 billion. The Fed also is replacing a separate $37.8 billion loan to the insurance company with a $52 billion aid package.
The government said the actions were needed to "keep the company strong and facilitate its ability to complete its restructuring process successfully."
It marked the first time money from the $700 billion bailout package Congress enacted last month has gone to any company other than a bank.
The Treasury Department, which is overseeing the program, has promised to inject $250 billion into banks in return for partial ownership. The original notion behind the bailout package was to help financial institutions lend money more freely again, one of the main reasons the economy is in danger of getting stuck in a long and painful recession.
Until Monday, all of AIG's bailout relief was coming from the Fed.
The Fed, earlier this year, said it would loan a total of $123 billion to AIG. The insurance company was later allowed to access another $20.9 billion through the Fed's "commercial paper" program. That's where the Fed is buying mounds of companies' short-term debt often used for crucial day-to-day expenses, such as payrolls and supplies.
Backgrounder: A timeline of China's recent economic-stimulus measures
BEIJING, Nov. 9 (Xinhua)-- China will adopt an "active" fiscal policy and "moderately easy" monetary policy to support fast but steady economic growth by expanding domestic demand, an executive meeting of the State Council (cabinet) said on Sunday.
The economy grew by 9 percent in the third quarter, the slowest in five years, as the global financial crisis sapped demand for Chinese goods, and domestic industrial production waned in response to weak demand and rising raw material costs.
In response to changing conditions, the government shifted efforts from fighting overheating to seeking sound and fast development. Following are moves taken over approximately the past90 days to boost the economy:
-- On Aug. 1, China raised tax rebates for certain textile and garment exports to help producers cope with the paper-thin profit margins squeezed by the yuan's appreciation, higher costs and rising raw material prices.
Export tax rebates for some textile and garment items, including silk, wool yarn, chemical fibers and cotton products, were increased by 2 percentage points to 13 percent.
-- On Aug. 5, the People's Bank of China (PBOC), the central bank, agreed to raise the 2008 credit quota by 5 percent for national commercial banks and 10 percent for local commercial banks, aiming to ease the financing difficulties of small and medium-size enterprises.
There were minor adjustments made to reflect differing conditions among local banks.
-- The PBOC cut interest rates for one-year loans by 0.27 percentage points to 7.2 percent as of Sept. 16. It also cut the reserve requirement ratio for all but the country's five largest banks by 1 percentage point to 16.5 percent from Sept. 25.
The reserve requirement ratio was reduced by 2 percentage points for local financing institutions in areas badly hit by the May 12 earthquake.
-- On Sept. 19, the country removed the stamp tax on stock purchases, but the tax on sales remained at 0.1 percent. It was the first such move since 1991 and followed a two-thirds fall in the key stock index since October 2007.
-- Also that day, the State-owned Assets Supervision and Administration Commission said the government would support centrally-administered State Owned Enterprises in buying more stocks of their listed subsidiaries.
Central Huijin Investment Co., Ltd., a government investment arm, said it planned to buy shares of three major Chinese lenders on the secondary market to support their share prices.
-- On Oct. 5, the China Securities Regulatory Commission announced it would launch margin financing and securities lending on a trial basis. Eleven securities companies took part in a trial run on Oct. 25.
Non-financial enterprises were allowed to float mid-term bonds as of Oct. 6, which would help ease financing difficulties.
-- The PBOC cut both interest rates and the reserve-requirement ratio. Deposit and lending rates was cut 0.27 percentage points effective Oct. 8, and the reserve-requirement ratio was cut by 0.5 percentage points from Oct. 15. This was the first time in nine years that the country reduced deposit rates at all financial institutions.
-- On Oct. 17, Premier Wen Jiabao announced at an executive meeting of the State Council that the government would adopt comprehensive measures and allocate central funds in the fourth quarter to boost domestic demand, improve living standards and stimulate economic development.
-- The PBOC announced tax exemptions and downpayment cuts as of Oct. 27 to boost the falling real estate sector. The minimum downpayment for a first-time buyer of a residence smaller than 90 square meters was reduced to 20 percent from 30 percent.
Interest rates on mortgages for first-time buyers were cut 0.27percentage point. The floor for interest rates was lowered to 70 percent of the central bank's benchmark rate.
-- The PBOC cut benchmark interest rates by 0.27 percentage point as of Oct. 30, the third such move in six weeks.
The benchmark one-year deposit rate dropped to 3.60 percent from 3.87 percent, while the benchmark one-year lending rate fell from 6.93 percent to 6.66 percent.
-- China raised tax rebates for 3,486 export items as of Nov. 1. The adjustment covered such labor-intensive industries as textiles, toys, garments, and high-tech products, accounting for 25.8 percent of products covered by customs tariffs. Rebate rates run roughly from 9 percent to 14 percent.
Embrace China but be wary
Dateline D.C.
November 9, 2008
WASHINGTON -- There will be a glut of difficult predicaments when the new president takes office.
Beijing wants to usurp Washington and shape a revised world order by 2010. As China continues to grow, American influence will be challenged by a new model of globalization.
China's statistics cannot be ignored. Of the world's population, one in every five is Chinese. Half of our clothes and shoes are made in China. And the Chinese produce more computers than anyone else.
While this has kept prices down in the United States, Chinese appetites for energy in all its forms have helped double our petrol prices.
To understand a country, sometimes it helps to know a few historical key words. When Americans speak of the "father of our country," we know that we are talking about George Washington. In England, the Battle of Waterloo conjures up images of the Duke of Wellington. China has the destruction of the old Summer Palace, an edifice that took 150 years to build and was burned down by British and French troops in 1860. Only cardboard scale models remain to mark its splendor.
Yuan Ming Yuan, or the Summer Palace, still serves as a mobilizing call whenever Beijing needs to rally its people against the West and remind them that until Mao brought communism and closed the country, many humiliations were suffered at the hands of the United States and Europe.
This Yuan Ming Yuan spirit made the construction of the Olympic Stadium possible with its huge network of new roads that could go four times around the world. It makes the building of a new town, with housing for 8 million, a yearly event and it has enabled many promises to become realities.
There is great significance in China President Hu Jintao's statement that within 12 years his countrymen will have "more extensive democratic rights" and a still booming economy that will usher in "moderate prosperity for all."
The Yuan Ming Yuan spirit is tapped by Hu's advisers to bring about political reforms and attempt to eradicate endemic corruption. We are slowly learning that already there are eight political parties operating in China and they are being encouraged to merge to form a multiparty system together with business, religious and charity groups. It won't be American democracy; it will be socialism with a Chinese face.
Conservatives won't like it but American Democrats are unlikely to complain. Yet.
Changes began in Beijing last year, but were slowed down by protests in Tibet, terrorist bombings in Xinjiang and earthquakes and floods. However, under one of the Politburo's most trusted advisers, an economist, Zhou Tianyong, reform is again on the front pages of Chinese newspapers.
But, back to the past. China protected its northern boundaries from invasions from prehistory to the three centuries of its great Ming Dynasty with 4,000 miles of wall guarded by their military.
When Deng Xiaoping opened the country to the world, the United States burst in -- and through the 1990s, U.S. economic and military power created a USA cult in China.
American cars, clothes, hairstyles, television programs, McDonald's, Starbucks and other chain stores proliferated. Thousands of Chinese kids came to the United States and the West to study in our schools and colleges.
Slowly, China's leadership came to believe that this American cult was a form of self-racism, and it is rapidly being changed to hostility toward Western influences and culture.
China's strength grew, its self-confidence augmented and with the Olympic Games, a mission to the moon and major successes throughout Africa, Asia and Europe, China is ready for international political action. But it is again building walls.
Recently, laws have been imposed preventing foreigners from easily taking control of companies, Australian and American movies are characterized as "pornographic" and banned, visa requirements have been immensely changed, and America and the West are challenged over the demand for raw materials, skills, markets and the quality of their exports.
What advice do we have for our new leadership?
Strengthen American manufacturing and exports and develop our know-how industries.
Shrug off traditional noncompetitive industries for new technologies that can make us financially less dependent on imported energy, raw materials and finished goods.
Toughen up our military, stop the outsourcing of intelligence information, visit China as equals and make friends with its president, but, for the sake of all our futures, all the while carry a very big stick.
(Dateline D.C. is written by a Washington-based British journalist and political observer.)
Oil jumps above $64 on higher stock markets
By GEORGE JAHN
November 10, 2008
VIENNA, Austria (AP) - Oil prices jumped above $64 a barrel Monday as world stock markets rallied on news of a massive Chinese economic stimulus plan, which could underpin demand for crude.
Increasing evidence that OPEC production cutbacks were taking hold also helped support prices.
Light, sweet crude for December delivery was up $3.10 to $64.14 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe. The contract Friday rose 27 cents to settle at $61.04.
China's $586 billion stimulus package announced Sunday helped lift Asian stock markets Monday. The Shanghai Composite Index surged 7.3 percent, Japan's benchmark Nikkei 225 index rose 5.8 percent and Hong Kong's Hang Seng index gained 4.8 percent.
Oil traders have been looking to equity markets for signs of how severe the current global economic slowdown will be.
Crude oil prices were also bolstered by a falling dollar. Investors often use commodities such as oil as a hedge against inflation and a weaker dollar.
The euro gained to $1.2848 on Monday from 1.2715 on Friday while the dollar rose to 99.00 yen.
"Oil has been highly correlated to stocks and the dollar," said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore. "The spending plan may increase crude demand, which is already strong in China."
Another production cut by OPEC may also boost prices. The Organization of Petroleum Exporting Countries could further reduce oil output if a decision last month to slash production doesn't bolster plummeting oil prices, the group's president Chakib Khelil said Saturday.
Khelil, who is also Algeria's energy minister, said OPEC seeks prices between $70 and $90 per barrel.
"If we go toward $55, I expect OPEC to call an emergency meeting and announce another cut," Chu said. "The market expects them to cut again in December at the latest."
In another OPEC-related development aimed at bolstering prices, Vienna's JBC Energy noted that cuts agreed upon last month in Vienna by the group's oil ministers "finally hit the market last week, with Saudi Arabia, Iran and Nigeria all announcing cuts of the required magnitude, and there was speculation that Nigeria may reduce output even further."
Oil prices have fallen about 56 percent since reaching a record $147.27 in mid-July.
In the long-term, rising demand in the developing world will likely push prices higher, the International Energy Agency said last week.
According to a summary of the agency's World Energy Outlook report due to be published in full this week, the IEA has hiked its forecast for the price of a barrel of oil in 2030 to just over $200 in nominal terms, compared to last year's estimate of $108 a barrel.
In other Nymex trading, heating oil futures jumped more than 7 cents to $2.05 a gallon, while gasoline prices gained 5.5 cents to $1.41 a gallon. Natural gas for December delivery spiked 34 cents to $7.10 per 1,000 cubic feet.
In London, December Brent crude rose $3.11 to $60.46 a barrel on the ICE Futures exchange.
Malaysia's Scomi wins India monorail contract
November 10, 2008
KUALA LUMPUR, Malaysia (AP) - Malaysia's Scomi Engineering said Monday its consortium with an Indian company has won a 1.85 billion ringgit ($523 million) state contract to build the first monorail in India.
Scomi and its consortium partner, Larsen & Toubro Ltd., received a letter of award last week from Mumbai authorities to construct a 19.54-kilometer monorail network linking the west and northeast of Mumbai, India's financial capital, the company said in a statement.
"This will be the first monorail system in India and is expected to ease the congestion in the highly crowded Jacob Circle, Wadala and Chembur areas (of Mumbai)," said Scomi's Chief Executive Shah Hakim Zain.
The monorail will connect with the existing suburban railway and planned metropolitan railway.
It will be served by 18 stations, a fleet of 15 trains, each with four cars, and will take 30 months to complete, Shah Hakim said.
Engineering firm Scomi holds a 45 percent stake in the project while Indian construction company L&T owns the remaining 55 percent, officials said.
Shah Hakim said Scomi has also submitted proposals to build monorails in Bangalore, Pune, New Delhi and Patna in India, Mekkah and Medina in Saudi Arabia, Dubai and Bahrain in the Middle East, Hanoi in Vietnam, and Lagos in West Africa.
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