Business this week: 3rd – 9th March 2007

Free articles from this week’s edition of The Economist
China’s property law | Producing ethanol from trees | Scary markets | Fall-out from Scooter Libby’s conviction | Japan’s floundering prime minister | Democracy for Britain’s upper house | Turkish nationalism on the march | Hugo Chávez’s Venezuela | Diplomacy over Israel and Palestine | Energy and nationalism | Aviation in India | Regulators clamp down on insider trading | That might be the Higgs boson | Oxford and the Cowley Road | Arthur Schlesinger junior, historian and liberal

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Business this week

Mar 8th 2007
From The Economist print edition

America’s economy betrayed signs of slower growth. Labour costs rose and factory orders hit a six-year low, with orders for big-ticket items falling. Meanwhile, the government reported that productivity gains slowed, with an increase in the final quarter of 2006 of about half of what economists had previously expected.

Alan Greenspan, former chairman of the Federal Reserve, said there is a “one-third probability” of an American recession this year. He also predicted (before the latest economic data were released) that the current economic expansion will not last as long as the previous one. But Mr Greenspan, who has been particularly outspoken lately, stands in contrast with his successor, Ben Bernanke, who recently told Congress the Fed believes that the American economy will strengthen this year. See article

Meanwhile Mr Bernanke continued the Fed’s campaign to rein in the mortgage portfolios held by two government-sponsored enterprises, Fannie Mae and Freddie Mac. Mr Bernanke suggested that the companies’ sizes and structures posed a risk to financial markets. He called for stronger regulation and supervision of the institutions.

Oil prices jumped after the American government reported an unexpected drop in crude-oil stocks amid the lowest import levels since 2005. Analysts had been expecting an increase.

Investigations into trading in the shares of New Century Financial, a big lender in the subprime-mortgage market, highlighted ongoing problems in the industry. Several big lenders have suffered from a growing number of defaults and late payments. See article

New limits on tax relief offered on shareholder loans in highly leveraged deals will reportedly be reviewed by Britain. The proposed change could have an effect on booming—and controversial—private equity.

Claims discounted

Eliot Spitzer, the former attorney-general of New York state, was criticised by a panel of retired judges. After a review, the group discounted his charges that Maurice Greenberg, the boss of American International Group, a big insurance company, had a conflict of interest that hurt his charitable foundation while benefiting AIG. Mr Spitzer is now New York’s governor.

Thousands of Airbus employees went on strike in France to protest against a radical company restructuring that has drawn criticism from candidates in France’s fiercely contested presidential race. The European aircraft-maker plans a total of 10,000 job cuts across the region in the next four years, including 4,300 in France. Politicians have made competing offers to save jobs.

Luc Vandevelde, the chairman of Carrefour, resigned in a feud with its controlling family. He was replaced by a member of that family. Meanwhile, a pair of activist investors, including Bernard Arnault, France’s richest man, bought a big stake in the French-based retail chain.

Britain faced heavy lobbying from the European Commission to accept an “open skies” agreement that it struck with America. About 40% of US-European air traffic goes through London’s airports. But Britain objects to the provisional air-travel accord, contending that America has failed to give European airlines sufficient access to its own market. See article

Citigroup announced a bid of ¥1,350 ($12) per share for Nikko Cordial, a Japanese brokerage firm. The deal values Nikko at up to ¥1.3 trillion. Citigroup was also reported to be in talks with the Bank of Overseas Chinese about buying a stake in the Taiwanese financial institution.

Slower motion

Research in Motion said Jim Balsillie was resigning as chairman of the technology company. The news came after the firm, which makes the BlackBerry, reported accounting errors on stock options of more than $250m. Mr Balsillie will stay on as a director and co-chief executive of the company.

Federal regulators charged that investors pocketed more than $5.3m in illegal profits from insider trading before TXU, an American utility, said it had agreed to be sold for $45 billion by a group led by big private-equity firms. The Securities and Exchange Commission, the market regulator, said the insider trading was undertaken through foreign brokers to conceal the investors’ identities. See article

Bouncing back

The yen continued its volatile swings against the dollar. The Japanese currency had climbed rapidly against the dollar after falling slowly in January, but later gave up some of its gains.