Soaring oil climbs past $96 mark

Oil prices have continued their unremitting climb, passing the $96 a barrel mark after figures showed a surprise fall in US crude reserves.

US light crude rose as high as $96.24 in Asian trading on Thursday morning before falling back to $96.05.

Traders were concerned by a second weekly fall in US crude stockpiles ahead of the intensive winter period.

At the current rate of increase, prices are set to top $100 a barrel during the next week.

Adjusted for inflation, prices are still below the $101 high reached in November 1980.

US supplies

US light crude closed trading on Wednesday at a record settlement high of $94.53, after prices rocketed by as much as $4 to $5 in highly volatile trade.

Brent crude was trading up at $91.63 a barrel on Thursday morning.

We are stepping into an unknown area Ken Hasegawa, Fimat Japan

The US government's figures showed that domestic crude stocks fell by 3.9 million barrels last week, worrying analysts who had forecast an increase of 100,000 barrels.

The US is the world's biggest energy consumer and the state of its inventories is a key concern for market watchers.

"We are stepping into an unknown area," said Ken Hasegawa, a broker at Fimat Japan, said of the latest price spike.

"Nobody wants to sell, given the fear of a further rise."

Upward pressure

An array of factors has been driving oil prices higher.

Oil prices have risen as the sliding greenback makes oil, which is priced in dollars, cheaper to buy outside the US.

The dollar hit its weakest levels against the pound since 1981 on Wednesday.

At the same time, oil investors have been casting a nervous eye on Turkey's threats to carry out a major military incursion into northern Iraq to attack Kurdish rebels.

In past months, there have also been concerns about the stop-start violence in Nigeria's main oil producing region, the international community's unresolved nuclear dispute with Iran and heating supplies for the US winter.

Mexico was forced to halt one-fifth of oil production at the start of the week by a tropical storm hitting its Caribbean coast, sparking further supply fears, but it has now resumed full production.

Oil producers' body Opec continues to be criticised for not doing enough to restrain prices despite agreeing to lift daily output by 500,000 barrels, an increase which came into effect on Thursday.

A senior Opec official said the organisation was not to "blame" for the price rises and insisted there was no shortage of capacity in the market.

"We never fix oil prices," said Abdullah al-Attiyah, Qatar's energy minister.

"It is market driven and it is out of control."

SAS grounds planes in safety fear

Scandinavian airline SAS is to permanently stop flying Bombardier Dash 8 Q400 planes after several emergencies caused by landing gear problems.

The decision came after a plane carrying 44 people from Bergen, Norway, to Copenhagen made an emergency landing in Denmark on Saturday.

Nobody was seriously injured in the incident, the third involving an SAS Bombardier Q400 in two months.

The SAS board decided to "immediately discontinue" using the planes.

"Confidence in the Q400 has diminished considerably and our customers are becoming increasingly doubtful about flying in this type of aircraft," said chief executive Mats Jansson.

And the airline's deputy chief executive, John Dueholm, said the Dash 8-Q400 had seen "repeated quality-related problems".

"SAS's flight operations have always enjoyed an excellent reputation and there is a risk that use of the Dash 8-400 could eventually damage the SAS brand," he said.

Lease replacements

The airline operates 27 of the 8-400s, which are used on many Nordic regional routes and for connections to destinations including the UK, Germany, Poland and Luxembourg.

SAS said that since it began using the planes in 2000, they had accounted for about 5% of all passengers carried.

The carrier, which had already cancelled more than 40 flights on Sunday after the Copenhagen incident, said it was inevitable that there would now be more flights shelved.

It would look to fill the gap in schedules by reallocating planes in its current fleet and by leasing aircraft, it said.

In September, Bombardier grounded almost half of its Q400 turboprop planes after equipment failures forced emergency landings of SAS planes in Denmark and Lithuania.

At the time of the move, the Montreal-based company said that the groundings were a "precautionary measure", adding it believed its aircraft were "absolutely safe and reliable".

The Q400 turboprop - which carries between 68 and 78 passengers - has been in use since 2000, and more than 160 of the planes have been delivered around the world.

In March, an All Nippon Airways Q400 plane carrying 56 passengers and four crew landed safely after its nose gear failed to descend.

Gap pulls 'child labour' clothing

Fashion chain Gap has withdrawn from sale children's clothing allegedly made using forced child labour in India.

A 10-year-old boy was filmed making clothes for Gap shops in the US and Europe as part of an investigation by the UK's Observer newspaper.

The boy told the Observer he had been sold to a factory owner by his family.

Gap, which has made commitments not to use child labour, said that only one item - a girl's smock blouse - was involved.

The boy said he had been working for four months without pay and would not be allowed to leave the job until the fee his family had received was repaid.

Another boy of 12 said children were beaten if bosses thought they were not working hard enough, the paper reported.

This is very upsetting and we intend to investigate thoroughly Gap spokesman Dan Henkle

Dan Henkle, a spokesman for Gap, said: "We were made aware earlier this week that a reporter had found an incident of children working in a factory that was producing for one of our brands, and this is completely unacceptable to us.

"We have a strict prohibition on child labour, and we are taking this very seriously. This is very upsetting and we intend to investigate thoroughly."

Emergency meeting

The spokesman said Gap monitors factories which make its clothing and in 2006 revoked approval for 23 factories which it said failed to comply with its standards.

Mr Henkle also said the company was calling an emergency meeting with its suppliers in the region.

The smock blouse will not be offered for sale in the company's 3,000 stores around the world, Gap said, and instead will be destroyed.

Western clothing chains increasingly get their products made in Asia, taking advantage of cheaper labour.

Fed tipped to deliver US rate cut

The Federal Reserve is widely expected to cut US interest rates once again when it meets this week, analysts say.

A slew of recent concerns - including ongoing problems in the housing market and woes at Merrill Lynch - has underlined woes in the US.

The Fed cut interest rates in September from 5.25% to 4.75% as it tried to stimulate the flagging economy.

Analysts say a further reduction to at least 4.5%, or possibly even 4.25%, is likely on Wednesday.

Inflation risk

The last rate decision was seen as sending a strong signal that the US authorities were prepared to intervene to stabilise the markets and to prevent the US economy sliding into recession.

If the Fed doesn't act decisively, the economy is at risk of calamity Peter Morici, Economist University of Maryland

But some say that risk to the economy is still very real and that further action from the Fed is needed.

Others argue a rate cut would encourage reckless spending and promote a return to conditions that led to a boom-and-bust cycle in the property market.

There is also a risk of inflation becoming a greater problem if money is made cheaper to borrow, encouraging more consumer spending and takeover activity.

'Low interest needed'

Sales of new and used homes are at record lows as lenders tighten up on who they will give mortgages to.

And up to two million US families - especially those with sub-prime mortgages - could eventually lose their homes as the credit crunch intensifies, a Congressional committee report said last week.

There is also nervousness in the markets, with uncertainty still lingering over how much exposure various big banks have to the credit crisis.

Last week Merrill Lynch reported $7.9bn (£3.85bn) in write-downs for the third financial quarter of the year - leading to its first loss since 2001.

The losses - which were much larger than it had initially forecast - were largely caused by exposure to bad mortgage-related debt.

We're not seeing the weakness in the US economy that would justify a big rate cut Richard Kelly, Economist TD Bank Financial Group

And one of the country's biggest mortgage lenders, Countrywide, said it was ready to refinance $16bn in loans after customers were unable to meet repayments.

'Goalposts moved'

University of Maryland economist Peter Morici said that the Fed needed to make another bold rates cut.

"Certainly a half-point cut would be in order in view of the revelations of Countrywide and Merrill," Mr Morici said.

"We cannot get the economy firing on all cylinders until the mortgage market reorganizes and that probably requires a low-interest environment for some time."

"If the Fed doesn't act decisively, the economy is at risk of calamity."

And Capital Economics analyst Julian Jessop said that a 50 basis point cut could not be ruled out.

"Two weeks ago it looked like they'd be able to keep rates on hold in December. Unfortunately, since then, the goalposts have moved".

Richard Kelly, an economist at TD Bank Financial Group, expects the rate to fall to 4.5% but argued that problems in housing should not be allowed to get out of perspective.

"We're not seeing the weakness in the US economy that would justify big rate cuts," Mr Kelly said.

"You won't see positive growth in residential investment until the end of 2008, but that only makes up 5% of the US economy.

"Exports are booming, and that's three times larger than the housing market."

New suitor 'preparing Rock bid'

A third potential suitor for the Northern Rock is looking at the beleaguered bank's books ahead of a possible takeover offer, a report says.

Private equity company Cerberus is putting together a bid for the bank, the Sunday Times has reported.

It is being backed by GMAC, the finance firm half owned by General Motors.

A consortium led by Richard Branson's Virgin Group and the US private equity firm JC Flowers are also keen on buying Northern Rock.

Treasury preference

The report says that GMAC, in which Cerberus owns a 51% stake, would play a pivotal role in a move for the bank.

Formed 88 years ago to offer finance for people buying cars, it evolved into a lender of other loans as well as a bank and insurance company.

Observers say that its involvement would make a Cerberus offer appeal more to the Treasury, which is keen to see the Northern Rock sold in a trade deal to another bank, rather than to a firm interested only in the financial aspects of the deal.

The Virgin-led consortium, also featuring US insurance company AIG and the Tosca hedge fund, has offered to buy a majority stake in the bank and inject "hundreds of millions of pounds" of money in exchange for taking control and rebranding the business as Virgin Money.

And last week JC Flowers stepped up its efforts to take control of the bank - putting together a management team in case a deal happens.

It includes former Marks and Spencer chairman Paul Myners as chairman of the bank and former Alliance and Leicester chief executive Richard Pym.

There have been reports that JC Flowers has secured £15bn to buy Northern Rock, the first major UK bank to be brought to its knees by the seizures in the credit markets which followed the crisis affecting US sub-prime home loans.

But according to The Sunday Telegraph, it wants the government to indemnify the bank against any litigation from shareholders, before it agrees to a deal.

Northern Rock's shares are still more than two-thirds below their price before the bank was forced to go to the Bank of England for emergency funding on 14 September.

Repayment commitment

Any future owner of Northern Rock will need to pay back hefty loans to the Bank of England which it has borrowed in emergency funds.

Over the past week, the bank is likely to have borrowed a further £4.65bn, according to the latest Bank of England data.

The figure appeared in the "other assets" category of the Bank of England's accounts, which includes any funds the Bank issues as "lender of last resort".

Analysts believe it is highly likely that this money has gone to Northern Rock.

This would indicate that Northern Rock's borrowings are now likely to total in excess of £20bn.

3 launches new Skype mobile phone

Mobile phone provider 3 has launched a new handset that will allow users to make free calls over the internet via telephony service Skype.

Users will also be able to use Skype's instant messaging service, 3 said.

But while people using Skype on their computers are able to make cheap global calls to any phone number, this will not be possible via the new 3 handset.

Skype has about 246 million registered users worldwide and is one of the firms reshaping the global phone industry.

Mobile potential

To date, mobile phone companies have been unwilling to let users freely access Skype via their handsets for fear that it would hurt their business.

While it is possible to access Skype from a number of handsets, this has involved downloading third-party software, something that has put off the majority of users.

The Skype-phone will be the first instance of a phone operator launching a mass market device that is designed to allow free calling over the internet from a mobile, 3 said.

"It takes an innovative operator... to challenge traditional thinking and offer the kind of product other operators are still shying away from," said Skype's acting chief executive, Michael van Swaaij.

"It's is now truly mobile. Skype has now taken a giant step forward in the mobile arena.

And chief executive of 3 UK, Kevin Russell, said the firm wanted to make mobile internet more accessible.

"Services need to be simple to access and affordable," he said.

"Mobile has the potential to massively increase access to internet calling."

Global reach

The service, launching on 2 November, will be accessed by a button on the handset.

As well as the UK, the 3 Skype-phone will be launched in countries including Australia, Denmark, Italy and Hong Kong.

Pay as you go customers will have to top up their account with at least £10 each month to qualify for the free Skype-to-Skype calls, 3 said.

Oil prices break through $93 mark

Oil prices have risen to yet another fresh high due to ongoing concerns over the situation between Turkey and Iraq, and general supply jitters.

In early Asian trading on Monday, US light crude broke through $93 a barrel for the first time, hitting $93.20 before easing back slightly to $93.06.

London's Brent also hit a new high of $89.90 a barrel, up $1.21.

Oil prices have risen on fears Turkey may carry out an extensive ground assault against Kurdish rebels in Iraq.

'Geopolitical tensions'

"What we see is a continuation of the trend that was in place on Friday," said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney.

"Geopolitical tensions, issues regarding tensions between Turkey and Kurdish rebels... those sort of factors have added to oil prices."

Analysts said prices had been further lifted by concerns that a tropical storm in the Caribbean could make its way to the US gulf coast, hitting key American oil facilities.

US light crude broke through the $92 a barrel price for the first time on Friday.

BP fined $373m by US government

Oil giant BP has been fined a total of $373m (£182m) by the US Department of Justice for environmental crimes and committing fraud.

The fines include $50m relating to a Texas refinery explosion in 2005 that killed 15 people and injured 170 more.

That sum is the highest fine of its kind levied under the Clean Air Act.

The largest fine - $303m - relates to a price manipulation scam between April 2003 and February 2004, over which four ex-BP workers have been indicted.

"The tragic explosion at the Texas city refinery, and the pipeline leaks in Alaska, were sad reminders that our environmental laws exist both to protect the lives and safety of the public, and also to preserve our natural resources," said Acting Attorney General Peter Keisler.

"Businesses that ignore those laws and endanger their workers and communities must be held accountable. Today's announcement shows that they will be," he added.

Manipulation schemes

The $303m relates to price-fixing charges for manipulating the propane market in 2004. It marks a record fine imposed by the Commodity Futures Trading Commission (CFTC) for market manipulation.

"BP engaged in massive manipulation - the magnitude of this settlement reflects that the Commission will not tolerate trading abuses in our open and competitive markets," said CFTC acting chairman Walt Lukken.

The four former BP workers accused of "conspiring to manipulate and corner" the US propane markets were named as Mark David Radley, James Warren Summers, Cody Dean Claborn and Carrie Kienenberger.

They had been employed by a subsidiary of BP America.

BP has committed serious environmental crimes in our two largest states, with terrible consequences for people and the environment Environment Protection Agency

BP America chairman Bob Malone said "These agreements are an admission that, in these instances, our operations failed to meet our own standards and the requirements of the law. For that, we apologize".

Mr Malone said the firm would look at ways of limiting further problems such as the "tragedy" of the Texas City disaster and the leakage of oil pipes in Prudhoe Bay, Alaska.

BP FINES $50m criminal fine for breaking the Clean Air Act $12m criminal fines, $4m to the National Fish and Wildlife Foundation, $4m in criminal restitution to Alaska for pipeline leaks $100m criminal penalty and $25m to the US Postal Inspection Consumer Fraud Fund $125m civil penalty to the Commodity Futures Trading Commission Restitution of $53m for victims of market manipulation

BP polluted a lake and land in Alaska after two oil leaks from the pipeline in March and August 2006.

'Terrible consequences'

The government said that BP would be monitored by an independent body for three years to ensure that it complied with the terms of Thursday's agreement.

In opting to pay the fines, the US Government had ended the probes regarding price manipulation. In addition the firm will not face additional criminal charges for the fatal Texas accident.

However, BP could still pay further compensation under unresolved civil lawsuits.

Prior to Thursday's announcement, BP had already spent $1.6b in compensation to victims of the Texas disaster, and has settled more than 1,600 personal injury claims.

"BP has committed serious environmental crimes in our two largest states, with terrible consequences for people and the environment," the Environment Protection Agency said.

Overhaul

Earlier in the week the oil giant announced that quarterly profits slumped by 45% after problems at its production and refinery businesses. Profits at BP fell to $3.88bn (£1.89bn) for the three months to the end of September from $6.98bn a year earlier.

Oil and gas production for the period was 4% lower after temporary shutdowns at its Whiting and Texas City refineries.

News of the fine comes after BP, under chief executive Tony Hayward, announced restructuring plans to overhaul the firm earlier this month in a bid to improve the firm's standing.

Mr Hayward assumed the leadership of the firm in May after former boss Lord John Browne resigned following a personal scandal.

US dollar touches a new euro low

The US dollar tumbled to yet another new low against the euro, as speculation mounted that US interest rates would be cut again next week.

The euro hit $1.4394 by late trade in New York, breaking the record set last Friday, when one euro bought $1.4319.

And the pound hit a three-month high against the dollar at 2.0574.

A slew of weak data - including a drop-off in durable goods sales and plummeting demand for new homes - has underlined woes in the US economy.

Rate cut risks

The Federal Reserve is due to meet next week, having last month reduced interest rates from 5.25% to 4.75% in a bid to rejuvenate the economy.

And many observers expect a further rate cut to at least 4.25% as policymakers try to lift the economy, which is showing increasing signs of suffering from a slump in house prices and higher credit costs.

"The run of downbeat economic data out of the US is underlining the fact that the Fed's last rate cut of 50 basis points clearly hasn't been sufficient to kick-start demand," said CMC Markets analyst James Hughes.

However, there are risks associated with further rate cuts, economists say.

While they can jump-start the economy, they can also weaken a currency as they encourage investors to transfer funds to currencies where they can get higher returns.

And there is a risk of inflation becoming a greater problem if money is made cheaper to borrow, encouraging more consumer spending and takeover activity.

US mortgage firm sees $1.2bn loss

US mortgage giant Countrywide Financial has reported $1.2bn (£584m) in losses during the third quarter.

The loss, the first for the firm in 25 years, comes after profits of $647.6m a year earlier. The latest quarter included $2.9bn in credit losses.

But the firm said it was through the worst of the slowdown that has dogged the US housing sector and expected to make a profit in the fourth quarter.

The improved outlook sent shares surging nearly 25% higher.

"We view the third quarter as an earnings trough, and anticipate that the company will be profitable in the fourth quarter and in 2008," said David Sambol. Countrywide's chief operating officer.

'Trough'

Rising interest rates in the US have made it harder for many borrowers to meet payments.

Earlier this week, Countrywide promised to set new terms or refinance $16bn worth of mortgages, in a bid to help those struggling to make payments.

News of the turnaround comes after the firm announced 12,000 job losses in September as part of wider restructuring plans.

The Californian firm has been one of the worst hit following contraction in the housing market that has triggered wider fears about the US economy.

During the summer, analysts had voiced fears that the firm could go bust.

Dow Jones tumbles on credit fears

The Dow Jones, the main US share index, saw shares plummet more than 360 points by the end of the week, amid concerns over the state of the US economy.

The benchmark index of blue-chip stocks shed 366.94 points or 2.64% at 13,522.02 by Friday's close of trade.

The slump followed a warning by equipment firm Caterpillar that the housing slowdown would harm the wider economy and cut its profit forecast.

Turmoil in world markets since the summer has raised fears of a recession.

'Poster child'

Caterpillar saw its shares down 5.3% to $73.57, and predicted weakness ahead after its earnings results, which missed forecasts.

"It's pretty ugly," said Bill Strazzullo, chief market strategist at Bell Curve Trading.

"A company like Caterpillar should be a poster child for global growth and benefits of the weak dollar," he said.

"It makes you question: Is global growth really that strong? Has the earnings kick from the weak dollar played itself out?"

The fall came on the twentieth anniversary of Black Monday - the day when stocks saw their biggest fall on the Dow Jones, losing some 23%.

Andy Brooks, head of trading at T Rowe Price, said: "Some of the earnings reports were a little disappointing but not that bad."

"I think we're responding emotionally to the 20th anniversary of the October 1987 stock market crash. I'd like to laugh except it hurts."

For stocks to fall by such proportions nowadays would mean a drop of around 3,000 points based on current market levels.

Global growth

The technology-laden Nasdaq fell 74.15 points or 2.65% to 2,725.16, while the broad-market Standard & Poor's 500 index declined 39.45 points 2.56% to 1,500.63.

Even though stocks have been volatile since the summer, with fears that the US housing slowdown would trigger broader problems, not long before indexes had been hitting record highs.

Finance leaders from G7 nations sought to mitigate the damage to the global economy in the wake of the credit crisis during meetings on Friday in Washington.

Ministers issued a statement pledging that they were "committed to doing our part in sustaining strong global growth," ahead of talks over the weekend involving the IMF and the World Bank.

G7 calls for stronger China yuan

Finance ministers from the G7 group of leading industrial countries have called on China to allow its currency to rise in value more quickly.

This would make Chinese goods less competitive and could help curb China's international trade surplus.

The G7 said it could also help reduce inflationary pressures in China because it would make imports cheaper.

The deputy governor of China's central bank said it was committed to gradual revaluation alongside economic reform.

But, added Wu Xiaoling, "moving the exchange rates in the absence of economic restructuring policies will hurt China".

In a statement issued after a meeting in Washington, the G7 also said their own economies remained fundamentally strong but there was an acknowledgement that oil prices and the US housing market are potential problems.

More speed sought

The yuan has in fact moved up 10% since China began to adopt a more flexible policy in 2005 and that was welcomed by the G7.

But they think it would be in everybody's interests for it to happen more quickly.

"They have always said that the reason they're not moving more quickly is they care about stability," said US Treasury Secretary Henry Paulson.

"And we care about stability. I just happen to think there's more risk in moving too slow than in moving more quickly."

A similar call was made by minsters from the Eurozone countries last week.

The G7 said that the fundamentals of their own economies remained strong but they did acknowledge that high oil prices and problems in the United States housing market are likely to cause global growth to be somewhat slower.

Mr Paulson said that the housing market and the mortgage crisis is the most significant risk to the US economy.

"We talked about the housing market, mortgage markets, sub-prime... It has been subtracting from our growth now for a number of quarters. And, despite that, the US economy is growing - very little evidence that it's spilled over into other areas."

JJB Sports acquires 10% in Umbro

JJB Sports has bought a 10.1% stake in sportswear firm Umbro in a move to protect its stake in the market for England football shirts.

Reports a day earlier said an unnamed suitor had targeted Umbro, sending its shares 27.5% higher.

The newly-acquired 10.1% stake, plus Sport Direct's existing 15% stake in Umbro, mean any suitor would have a tougher battle ahead, say analysts.

By Friday's close of trade, Umbro shares had risen by 13%.

Umbro has suffered in the wake of poor performance from the England team.

Hopes of a trading recovery are slipping as the chances of England qualifying for the 2008 European Championships drop.

On Thursday, Reuters said sources close to the matter named competitor Nike as the suitor for Umbro. The US firm would not comment on what it called "speculation".

The sportswear market has consolidated since Adidas bought Reebok in 2005.

Adidas is now the subject of takeover rumours while French retailer PPR has built up a large stake in German sportswear firm Puma.

Umbro confirmed it had received an approach but said that it "may or may not lead to an offer being made" for the firm.

As well as providing kit for the England team, Umbro also supplies the kit for six Premier League clubs.

Oil prices fall from record highs

Oil prices ended lower close of trade in New York, after investors locked in earlier profits after crude oil hit record highs earlier.

But analysts say the downward trend is likely to be temporary, as the factors triggering recent highs remain, notably supply fears and the lower dollar.

US light sweet crude fell 87 cents to $88.60 after an earlier $90.07 record.

And London Brent crude settled 81 cents lower at $83.79, after reaching an all-time high of $84.88 on Thursday.

"The petroleum markets are seeing some short-term profit taking," said Citigroup analyst Tim Evans following Friday's falls.

But the overall trends in recent days has been upwards, with oil prices setting new records in the wake of geopolitical tensions which have triggered fears that supplies could be threatened.

Another factor behind the rise has been the dollar reaching a record low against the euro, and a three-week low against the yen, not helped by weak US jobs and manufacturing data on Thursday.

Dollar weakness, caused by fears over the strength of the US economy, has made oil a more attractive investment.

This has increased expectations that the Federal Reserve will cut US interest rates further from the current 4.75% later this month.

Turkish concern

The tension in eastern Turkey centres on possible military action by the Turkish army against Kurdish rebels operating from across the Iraqi border.

Earlier this week, the Turkish parliament approved a government plan to carry out excursions across the border, although imminent military action is not expected.

Oil producers' cartel Opec has hinted that it may boost output to help reduce prices.

Nigerian Oil Minister Odein Ajumogobia said Opec leaders could now meet as early as 17 November, three weeks ahead of their next planned meeting.

Oil prices have quadrupled since 2002 because of strong demand from fast-growing economies such as China and India, allied to instability in oil-producing nations in the Middle East and Africa.

Dollar stays near record euro low

The US dollar hovered near record lows against the euro by close of trade in New York on Friday, as expectations over a US interest rate cut increased.

One euro was worth $1.4265 by mid-afternoon in the US, after the greenback sank just short of $1.4320.

Analysts said a rise in US unemployment adds to chances of an interest rate cut when The Federal Reserve meets in October, in a bid to boost the economy.

Against Japan's yen, the dollar stayed near three-week lows, at 114.77 yen.

Rejuvenate confidence

Commentators now say the Fed could well reduce rates from 4.75% to 4.5%.

The dollar has been sliding since the Federal Reserve cut rates from 5.25% to 4.75% in September to help rejuvenate confidence in the world's largest economy.

This followed a summer of turmoil in the world's credit markets, sparked by record loan defaults in the US sub-prime mortgage sector.

Since then, a raft of mostly disappointing economic news and soft inflation figures has prompted the anticipation of further rate cuts.

While lowering borrowing costs can jump start the economy, it can also have an adverse impact as investors seek to place money in economies where the returns are higher.

US trade deficit narrows further

The US trade deficit narrowed more substantially than expected in August as export levels rose to a monthly high while imports fell.

It fell 2.4% to $57.6bn (£28.3bn), the lowest monthly shortfall since January.

The politically-sensitive deficit with China narrowed by 5.3% to $22.5bn as the US sold more aircraft and soybeans while China sold fewer computers.

Despite a string of high-profile safety recalls of toys, Chinese toy exports to the US actually increased.

This was largely due to retailers ordering more stock ahead of Thanksgiving and Christmas.

Weak dollar

The value of US exports rose to a record $138.3bn in August thanks, in part, to the fall in the value of the US dollar against other major currencies which made exports more competitive.

In contrast, the value of imports fell 0.4% to $195.9bn as US firms reduced shipments of foreign-made cars and furniture.

The narrowing deficit is good news for the Bush administration which has faced sustained criticism over the country's spiralling trade imbalance in recent years.

The deficit for the first eight months of 2007 totalled $708bn, down 6.7% on the corresponding period last year.

The strength of the export sector also provides a fillip for companies worried about the state of the US economy amid the housing slump and instability in financial markets.

Wall Street responded positively to the figures, with one analyst calling it a "great number".

"The trade deficit is smaller than expected on a weaker dollar," said Michael Woolfolk, senior currency strategist at the Bank of New York Mellon.

US alleges Chinese trade barriers

The US is seeking a World Trade Organization (WTO) probe over whether Chinese rules over imports of copyrighted US goods break trade rules.

According to the US, Chinese barriers to imports of legal US films, books and music have prompted a surge in fakes.

The US is asking the WTO to set up a panel to investigate further, after direct talks with China failed.

This is the fourth time the US has asked a WTO panel to resolve what is sees as unfair Chinese trade barriers.

The latest request argues that restrictions on US imports of copyrighted goods in China break rules that apply to China as a WTO member.

Piracy complaint

The US wants to eliminate Chinese import and internal distribution barriers that "significantly hamper the ability of US publishers and producers of audio-visual products to get their legitimate products into the Chinese marketplace under normal market conditions".

As well as breaking WTO rules, the US says the limits are a breach of rules under the General Agreement on Tariffs (GAAT) and the General Agreement on Trade in Services (GATS).

The latest move comes after the WTO launched a formal probe, following a US complaint about piracy in China in September, to examine claims that Beijing failed to tackle counterfeiting.

China's failure to apply copyright laws has caused US software, music and book publishers to lose billions of dollars in sales, the US alleged.

Airbus 'insider trading' denied

French finance minister Christine Lagarde has denied the government acted improperly in relation to alleged insider trading at Airbus parent, EADS.

Giving evidence to parliament, she said her ministry was not aware of any problems at the firm before approving share sales in the Airbus owner.

Media reports claim the state knew about setbacks to the Airbus 380 and still allowed suspicious share sales.

These occurred before news about delays to the Airbus A380 emerged last June.

The services of my ministry performed their task in the most professional manner French finance minister Christine Lagarde

Ms Lagarde told a French parliamentary committee on Thursday that the government had acted "in the most irreproachable" manner with regard to EADS from the end of 2005 to May 2006, when delays to the Airbus 380 superjumbo first became public.

The announcement wiped 26% off the value of EADS, the Franco-German firm which owns the Airbus plane manufacturer.

A report from the stock market regulator AMF sent to the French prosecutor's office a week ago is understood to have examined the extensive sale of stock options before the problems with the plane were revealed.

The French press, claiming to have seen a leaked copy of the report, claim 21 former and current managers are under suspicion but stock market regulators have refused to comment on this, saying their probe is incomplete.

This prompted a parliamentary investigation into the role of the French government, a major EADS shareholder, amid allegations that ministers allowed state bank CDC to buy shares from defence firm Lagardere in April 2006 despite knowing about problems at the plane maker.

'Not aware'

Ms Lagarde said that the finance ministry's internal investigation into its conduct proved that until "at least the end of May 2006", the government was "no more aware than the public or the markets" of delays with the superjumbo A380.

"The services of my ministry performed their task in the most professional manner, the most irreproachable fashion," she said.

Thierry Breton, finance minister at the time, testified last week before the parliamentary committee that he knew nothing of the deal with Lagardere, also defending the finance ministry's actions as "beyond reproach".

President Nicolas Sarkozy has promised to investigate fully whether the government played any part in the alleged insider trading, while opposition politicians have called for a public inquiry into the matter.

Oil price hovers near record high

Oil prices surged past the $83-a-barrel level on Thursday, near record highs, after a US inventory report showed lower-than-expected stockpiles.

Supply fears sent US sweet light crude up $1.78 to $83.08 a barrel, near its $83.90 high set on 20 September.

US crude stocks fell by 1.7 million barrels last week, according to the US department of energy. A gain of one million had been expected.

The news also pushed up London Brent Crude by $1.55 to $80.15.

World oil prices have been rising since the beginning of the year on the fear that supply will be unable to cope with rising demand.

In addition, some investors have bet heavily that the price of crude oil must rise further, pushing up prices even higher.

ABN Amro head plans to step down

The head of Dutch bank ABN Amro is to step down after a consortium led by Royal Bank of Scotland successfully bid to takeover the company.

Rijkman Groenink will step down as chairman of the board once an extraordinary shareholder meeting takes place at a date yet to be set.

ABN Amro is expected to be broken up following the deal.

The 71bn-euro ($98.5bn; £49bn) acquisition marks the largest banking takeover in Europe.

The battle to buy the firm took many months, following a legal row over the future of ABN's US subsidiary.

Initially ABN had backed an offer by Barclays, but it later withdrew its support to leave Barclays and the RBS-led group on an even playing field.

Barclays withdrew its offer last week, leaving the way clear for the RBS group.