Cyprus and Malta adopt the euro

A pavement is adorned with the euro in Malta's capital Valletta

Two Mediterranean island states, Cyprus and Malta, have begun using the euro, joining 13 other countries.

The countries' leaders made symbolic withdrawals of euros from cash machines just minutes into the New Year.

Major bank branches opened for a few hours in Cyprus despite the New Year holiday. The Maltese celebrated the euro's arrival with fireworks.

Cyprus and Malta have added just 1.2 million people to the number of Europeans using the single currency.

But they will have equal voting rights with the other 13 eurozone members at the European Central Bank.

Careful preparations

Both island nations prepared for the changeover thoroughly.

FACTS ABOUT MALTA Population: 407,000 Size: 316 sq km (122 sq miles), the smallest member of the eurozone GDP: 4.8bn euros (0.06% of total eurozone GDP) Biggest earners: Tourism, manufacturing but growth in financial services, IT Prime Minister Lawrence Gonzi is also Finance Minister Independent from UK in 1964

In Cyprus 300,000 currency converters were sent to households, while in Malta a euro telephone hotline has been running alongside 59 "euro centres".

The switchover in Cyprus will highlight the decades-old division between the south and the Turkish-controlled north of the island.

The Turkish lira remains the primary currency in northern Cyprus, which is outside the European Union and is recognised only by Turkey.

But Cyprus' euro coins are inscribed in both Greek and Turkish.

Aware of the previous experiences of some other eurozone members, Cyprus and Malta are watching retailers to ensure they do not use the changeover to round up their prices, contributing to inflation.

Euros will be accepted in Turkish-controlled northern Cyprus

The Cypriot government urged companies to round their prices down, while Malta signed 12 price stabilisation agreements with importers, which will last until March 2008.

Both the Maltese lira and the Cyprus pound will be legal tender until the end of January.

Commercial banks in Malta will exchange Maltese lira into euros free of charge until the end of March, and the central bank will allow exchange of lira notes until 2018.

In Cyprus, euros can be exchanged free of charge until the end of June and the central bank will allow exchange of pound notes until 2017.

Big benefits

Scrapping currency exchange costs and adopting a major currency raise hopes of a big boost to the islands' industries.

FACTS ABOUT CYPRUS Population: 778,000 (Greek Cypriots) Size (combined): 9,251 sq km (3,572 sq miles) GDP: 15.2bn euros (0.17% of total eurozone GDP) Biggest earners: Finance and tourism account for almost 80% GDP Independent from UK in 1960, Turkish northern Cyprus not part of EU

Malta is already enjoying a tourism boom, with double-digit growth expected this year, largely due to the arrival of low-cost airlines.

But it is also planning to become a magnet for hi-tech investment.

Several pharmaceutical companies have established research centres in Malta to develop generic copies of patented drugs.

And the German airline Lufthansa signed an agreement in 2007 for Malta to maintain and overhaul its planes.

The Cypriot Finance Minister, Michalis Sarris, has said the euro will benefit consumers and businesses alike because of the eurozone's low inflation, low interest rates and large market.

In the Turkish-controlled north many businesses have already begun accepting the euro and cross-border commerce is flourishing.

In 2003, the Turkish Cypriot authorities opened crossing points, prompting Turkish Cypriot shoppers to go south in search of greater choice and Greek Cypriots to head north for bargains and casinos.

The euro will also become legal tender on British military bases in Cyprus, the first part of sovereign British territory to adopt the currency.

Although the bases at Dhekelia, Episkopi and RAF Akrotiri are not officially part of the European Union, an estimated 10,000 Cypriots live or work there.

Residents use the shops, cafes and beaches on the bases, so the authorities in the sovereign base areas have decided to adopt the same rules as the Cypriot government.

Plug is pulled on Blackstone deal

Conditions for private equity buyouts are becoming trickier

A company that private equity firm Blackstone was aiming to buy for $1.8bn (£908m) has ended the deal on the basis that its suitors could not raise funds.

Blackstone and industrial giant General Electric (GE) agreed in March last year to buy PHH, a US provider of mortgages and fleet management services.

But PHH said the sale had been terminated because it could not be completed by 31 December as agreed.

In the wake of the credit crisis, funding deals has become much harder.

In recent years, firms such as Blackstone have used cheap credit from banks to fund a takeover spree that has pushed up stock markets and thrust the private equity sector into the spotlight.

We regret that the banks are now unwilling to provide financing under the terms they originally agreed to Blackstone spokesman

But higher interest rates and record mortgage defaults in the US sub-prime sector means cheap credit is now harder to access.

PHH has requested a $50m termination fee from Blackstone, citing the terms of the arrangement.

Disappointment

A successful deal would have seen GE buying PHH, retaining its fleet management services business, and then selling its residential home loan unit to Blackstone.

Mr. AB Krongard, non-executive chairman of PHH, said he was "disappointed" that the transaction could not be completed.

Blackstone expressed similar sentiments, blaming the banks, which included JP Morgan and Lehman Brothers.

According to Blackstone, the lenders had previously agreed to provide loans to support the deal but reneged on the terms of the financing arrangement.

"Blackstone was prepared to close its end of the transaction using the financing that in March was originally committed to be made available," spokesman John Ford said in an email to Reuters.

"We regret that the banks are now unwilling to provide financing under the terms they originally agreed to."

Health Officials Seek Airline Passengers Who Shared Flight From India With Tuberculosis Patient

SAN FRANCISCO — Health officials were searching Monday for dozens of airline passengers who may have come in contact with a 30-year-old woman infected with a hard-to-treat form of tuberculosis on a flight from India.

The 30-year-old woman, who authorities declined to identify, was being treated at a Bay Area hospital. Officials said the chances that she had infected anyone else were minimal.

The woman arrived in San Francisco on Dec. 13 aboard an American Airlines flight that she boarded in New Delhi. The flight stopped in Chicago before continuing to San Francisco International.

"She did have symptoms on the flight," said Santa Clara County Health Director Dr. Marty Fenstersheib. "She was coughing."

Health officials said she was diagnosed with TB in India, but boarded the flight anyway. Such passengers are typically barred from boarding flights originating in the United States, but U.S. officials have little authority over who boards incoming international flights.

About a week after the flight landed, the woman showed up at the Stanford Hospital emergency room with advanced symptoms of the disease. Hospital spokesman Gary Migdol said the woman is in isolation and is in stable condition.

The woman will remain hospitalized until she tests negative for the disease, which will take at least two weeks, Fenstersheib said. Her stay could last longer because she has a strain of the disease that resists the most common antibiotics, he said.

Officials with the Centers for Disease Control and Prevention are asking health authorities in 17 states to contact 44 people who sat within two rows of the woman and urge them get checked for tuberculosis. The risk of infection is far lower than passing on influenza or the common cold, doctors said.

"TB requires pretty constant contact with someone," Fenstersheib said. About 1 percent to 2 percent of all tuberculosis cases are of the multi-drug resistant variety, he said.

CDC spokeswoman Shelly Diaz said the agency has not received any reports back. Diaz said it will take more than eight weeks to receive definitive results.

In May, a TB patient caused an international health scare when he flew to Europe for his wedding. There has been no evidence that the man spread the disease.

Zara owner's sales disappointing

Inditex says sales in Spain were in line with the rest of the world

The world's second biggest clothing retailer, Spain's Inditex, has reported worse than expected sales but better than expected profits.

Shares in the company that owns Zara, Massimo Dutti and Pull and Bear have risen more than 23% this year, but fell more than 4% in early trading.

There is concern about the effects of the housing slump in its home market, which accounts for 38% of its sales.

But its boss said sales growth in Spain was in line with the rest of the world.

Inditex reported net profit of 825m euros ($1.21bn; £593m) for the nine months to the end of October, which was 30% ahead of the same period last year.

That figure was better than expected, as a result of a programme of cost-cutting.

Sales rose 17% in the period to 6.63bn euros, which was worse than had been expected.

Inditex has been expanding aggressively, especially in fast-growing economies such as China and Russia.

It currently has stores in 400 cities around the world.

Microsoft buys UK mapping service

Microsoft makes acquisitions to strengthen its internet business

Microsoft has bought online mapping company Multimap to expand its web business, the US firm said.

Multimap, which was established in 1996, is among the UK's top 10 visited websites, receiving more than 10 million users each month.

Microsoft hopes that the acquisition "will play a significant role in the future growth of our search business".

Web search giant Google, Microsoft's arch-rival, provides its own online mapping service, Google Maps.

'Huge opportunity'

Microsoft's internet empire also includes services such as Virtual Earth, Live Search and Windows Live.

Earlier this year Microsoft bought a 1.6% stake in social networking site Facebook for $240m (£117m) and US online advertising firm aQuantive for $6bn.

It has not revealed how much it is paying for Multimap.

Sharon Baylay, general manager of the Online Services Group at Microsoft, said that the deal with Multimap presented "a huge opportunity to expand our platform business beyond the UK and globally".

Multimap has offices in America, Australia, South Africa and Turkey, as well as in London, and has a presence in 48 countries.

US banks reveal more debt losses

Banks had been making a huge profit from sub-prime loans

Three major US banks, including Bank of America and Wachovia, have warned that losses linked to investments in soured US home loans will get worse.

Shares in all three firms fell as each separately said earnings would take a hit as the value of mortgage-backed securities continues to decline.

Wachovia said it would write down $1bn (£489m) in its fourth quarter, nearly double its original estimate.

Regional lender PNC said it would miss its fourth-quarter profit target.

The swathe of bad news indicates that banks are still suffering from a killer hangover as a result of taking on too much risk when interest rates were low in the US, Europe and UK.

Many people on low incomes or with bad credit took advantage of rock-bottom mortgage repayments to get on the property ladder.

A lucrative market sprung up whereby these sub-prime mortgages, as they are called, would be packaged along with other debt of a higher quality and then sold to investors.

But with interest rates in the US at five-year highs as recently as August, sub-prime mortgage repayments have become much less affordable leading to steep loan defaults and subsequently a drop in value in investments centred on this sector.

Downbeat

Bank of America chief executive Ken Lewis said the firm's fourth-quarter results would be "disappointing", predicting further fall-out from the problems in credit markets next year.

The bank had last month forecast that it would have to write off $3bn of soured investments, but said on Wednesday it would be more than that.

Separately, Wachovia boss Ken Thompson was equally bearish and could not say when the credit crisis might ease.

He said Wachovia, the fourth-largest US bank, was facing "as tough an environment as I've ever seen".

Pittsburgh-based PNC, the largest bank in Pennsylvania, marked down its fourth-quarter earnings after its mortgage portfolio weakened by $1.5bn.

Oil climbs on central bank plan

Oil prices have been volatile on fears over the health of the US economy

Oil prices rebounded on fresh hopes that the global economy could remain robust after unprecedented action taken by a number of key central banks.

The plan to make available billions of dollars worth of loans to cash-strapped banks pushed a barrel of New York light crude up $4.37 to $94.39 a barrel.

A US government report showing an unexpected fall in crude stocks and heating oil raised supply fears.

Brent crude also hit $94 a barrel after sinking to $88 a barrel last week.

By the end of last week, world oil prices had fallen more than $10 from their November peak of near $100 a barrel.

The sell-off came when traders took profits as the certainty that the US economy would weather the sustained housing slump and financial market turmoil snapped and the spectre of a recession dawned.

Dramatic move

But a quarter point cut in US interest rates to 4.25% from 4.5%, delivered by the Federal Reserve after its meeting on Tuesday, persuaded energy traders that the Fed was focused on relieving the pressures facing the US economy and put oil back on the front foot.

These gains were dramatically extended following the earlier announcement that the Fed would team up with other key central banks, including the Bank of England and the European Central Bank, to assuage gummed up credit markets.

It is hoped the bold move will prevent commercial banks in the US, Europe and the UK from increasing charges on credit cards, unsecured loans and mortgages, bringing spending among indebted populations to a standstill.

"Anything the Fed is doing to help out is going to support oil prices," said Brad Samples, commodities analyst at Kentucky-based consultancy Summit Energy Services.

An energy department report showing US crude oil stocks at two-year lows after falling by a greater-than-expected 700,000 barrels supported fears that supply could be tight as the northern hemisphere prepares for a cold winter.

Stocks of distillate fuel, which include heating oil and diesel fuel, were also disappointing, declining 800,000 barrels. Analysts had predicted a decline of about 500,000 barrels.

A large oil spill off the Norwegian coast where 25,000 barrels of crude poured into the North Sea as it was being piped from a loading facility into an oil tanker would also have riled a sensitive market, analysts said.

Emerging giants spur telecom boom

The emerging giants are driving mobile phone use

Mobile phone users in China, Brazil, India and Russia are driving the global telecoms boom, a report by UK telecoms watchdog Ofcom suggests.

Since 2001, these countries have added 660 million new subscribers, accounting for 40% of total new mobile phone accounts globally.

Their large populations and economic muscle mean they will continue to grow and likely dictate technical standards.

New subscriptions in India alone doubled to 150 million in 2006.

The spread of networks into smaller towns, lower voice tariffs and intense competition spurred growth in the Indian market last year, which now has twice as many subscriptions as the UK.

Half the world

With 2.8 billion people, nearly half the world's population, and rising incomes, the four countries - referred to as the BRICs - still have the potential to acquire millions of new phone subscribers.

While Russia's mobile phone penetration is 106%, Brazil's is 53%, China's is 34% and India's is just 14%.

The absence of old-fashioned land-line infrastructure means that the BRIC countries are introducing new technologies at the same pace as more mature economies, the report said.

"Growth in the number of users of communication services within the four countries will continue," the report said.

The growth will be "driven both by penetration into lower income segments, through the expansion of coverage and the continuation of falling prices, and also rising economic prosperity in smaller towns and rural areas," it added.

Chinese use of mobile phones is on the rise

The sheer size of the BRIC market makes it likely that it will be key in deciding standards and dominant technologies, it added.

Investment capital is pouring in, as firms, tiring of more mature markets, are eager to take advantage of the returns on offer, it added.

Data boom

Most mobile firms in these four countries make their money from voice services.

But in the case of China, which enjoys the most developed mobile data market, generating 20% of mobile revenue from data services, consumers have proven eager to stay in touch by text.

Last year, mobile phone users in China sent 429 billion text messages, or 967 text messages per user.

That compares with 621 per mobile user in the UK.

China is also unusual in that the number of fixed lines grew by 79%, powered by the roll-out of fixed lines outside the main cities.

Digital television remains in its infancy in the four emerging giants.

Both Russia and India have seen their television industries grow quite fast, the former driven by an advertising boom, the latter by subscriptions to services such as Star.

UK welcomes world cash injection

Weakness in sub-prime loans have destabilised the financial sector

A joint plan by five central banks aimed at easing the credit crunch in financial markets has been welcomed by UK Prime Minister Gordon Brown.

Up to $110bn (£54bn) in loans will be made available to world money markets by central banks including the Bank of England and the US Federal Reserve.

In an interview with the Times newspaper, Mr Brown said there should be more focus on such co-operation.

Analysts say the unprecedented move is a sign of the severity of the problems.

Auctions

The Federal Reserve and the Bank of England will team up with the European Central Bank and central banks from Canada and Switzerland to offer the cash loans, to be made available in auctions.

Ideally, what we are looking for is the financial institutions to have written off their problems, built up confidence and be willing to lend to each other Peter Dunay Investment bank strategist

Such a co-operative act is a first, BBC business editor Robert Peston said.

Other analysts pointed out that the actions are on a greater scale than the moves taken by the Fed to shore up the economy after the 9/11 attacks on the US.

Mr Brown, due in Lisbon for the signing of the new European reform treaty, told the Times the moves were "the co-operative effort I've wanted to see for some time.

"It signals an international desire to act in what has been a period of global financial turbulence."

'Staving off recession'

Share prices in the US rose sharply after the plan was announced on Wednesday, but have since dropped again.

Five of the most powerful central banks are taking concerted action to stop a banking crisis turning into a recession, the BBC's Mark Gregory said.

The problem is that commercial banks in rich nations have sustained huge losses on investments that have gone sour, he said

This has made them reluctant to lend any more money, especially to each other.

By acting together to pump extra funds into the system in the form of loans, the central banks hope to have a bigger impact.

But they are also putting their credibility on the line, our correspondent added.

If the plan fails, it is unclear what else they could do to restore confidence.

Capital gap

Peter Dunay, chief strategist at investment bank Leeb Capital Management in New York, said the new money could only help, but there was a broader problem to consider.

"Ideally, what we are looking for is the financial institutions to have written off their problems, built up confidence and be willing to lend to each other," he told.

"Right now... they do not want to lend - they do not want to lend to the public, they do not want to lend to each other.

"They don't have the capital, they're very concerned and they're holding a lot of debt that is still a problem for them."

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 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.

EU 'blue card' to tempt skilled

The European Commission is set to unveil a Blue Card for skilled immigrants, based on the US Green Card.

The card would allow suitably qualified people and their families to live and work within the EU.

The EU says it needs 20 million skilled immigrants over the next 20 years, and is very short of expertise in engineering and computer technology.

Correspondents say another aim of the proposal is to deter the best brains from emigrating to the US to find work.

The plan is controversial and some countries are sure to oppose it.

Critics also fear that Europe's attempt to take the best and leave the rest will only encourage a brain-drain from poorer nations.

Creating 'EU magnet'

The UK, Ireland and Denmark could opt out, but the other EU members will have to take part.

UK ministers say officially they are studying it, but our correspondent says they are not keen on the idea, preferring to develop a points system.

Under the proposals, due to be unveiled on Tuesday afternoon, a Blue Card would enable holders and their families to live, work and travel within the EU.

To be eligible for the card, new immigrants would need to show a recognised diploma, have at least three years professional experience and the offer of a job which could not be filled by an EU citizen.

"To maintain and improve economic growth in the EU, it is essential for Europe to become a magnet for the highly skilled," the European Commission said in a statement.

"...To do so, the EU must present a united front, rather than emphasise the different immigration policies of each member state."

The plan will need the approval of all member states to come into force.

Some politicians in the Netherlands and Germany are hostile and the Austrian government has condemned the plan as "a centralisation too far".

There is a real tension between politicians all over Europe, who know their voters are worried about immigration, and businesses which say they will not be able to function without the skills of graduates from India and China, our correspondent says.

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.