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Business this week: 21st – 27th July 2007

July 26, 2007 Leave a comment

Business this week

Jul 26th 2007
From The Economist print edition

Britain’s Barclays raised its offer for ABN AMRO, a Dutch bank, to around euro68 billion ($93 billion) and added a cash component, of 37%, to its previous all-share proposal. The tender from Barclays remains lower than a rival bid for ABN AMRO from a consortium of European banks led by Royal Bank of Scotland, of which 93% is cash. In order to raise the money, Barclays sold small stakes in its business to a Chinese state-owned bank and a Singaporean government-controlled holding company, the largest overseas investments yet made by both China and Singapore. See article

Resolution struck an £8.6 billion ($17.7 billion) deal to merge with Friends Provident, so creating one of Britain’s biggest life insurers.

General Electric’s consumer-finance division unveiled the first credit card in the United States that offers “rewards dedicated to reducing cardholders’ carbon emissions”. The initiative is part of the company’s scheme to chalk up $20 billion in green sales by 2010.

Siemens ended months of market speculation about the future of its auto-parts unit when it announced a deal to sell it to Continental, a tyre manufacturer, for euro11.4 billion ($15.7 billion). It had been thought the unit, which is the biggest supplier of air-bag systems in the world, might be spun off as a separate company. As well as a sale, the German engineering group, which is in the midst of a restructuring process, made a purchase: Dade Behring, an American medical diagnostics company, for $7 billion. See article

Two oil and gas drilling companies, Transocean and GlobalSantaFe, agreed to merge in an $18 billion deal. Based in Texas, the combined company will run the world’s biggest fleet of oil rigs. The rents for oil rigs have been rising fast thanks to the scramble for deepwater oil reserves; some are leased out for as much as $500,000 a day.

Apple’s quarterly profit increased by 73% compared with a year ago, boosted partly by the sale of 9.8m iPods in the period. The company’s earnings relieved pressure on its share price, which fell earlier after AT&T reported that only 146,000 iPhones had been activated in its first weekend of sales, much lower than analysts had forecast. Apple said it sold 270,000 iPhones in the 30 hours to the end of June 30th, covered in its earnings.

TomTom, the market leader in portable mapping devices, said it would buy Tele Atlas, another Dutch company, for euro1.8 billion ($2.5 billion). TomTom has around half of Europe’s market for satellite-navigation products and a quarter of North America’s. But it could be hampered in the future by the fashion for adding built-in mapping systems to cars and phones.

Vodafone’s shareholders easily defeated a proposal from an activist investor (albeit with just 0.0004% of the company’s shares) that would have forced the mobile-phone giant to sell its 45% stake in America’s Verizon Wireless.

Amazon said quarterly net profit had more than tripled compared with a year earlier, to $78m. The online retailer’s North American sales are booming and the rate of growth of its operating profit, which slowed as Amazon invested heavily in new technology, was up. Amazon’s share price rose by 24%.

Merck also delighted investors when it reported a 12% rise in quarterly net income, compared with a year ago, and improved its profit forecast for 2007. The drugmaker is rebounding from a bad stint that saw it lose patent protection on its bestselling treatment for reducing cholesterol and fight lawsuits over the safety of Vioxx, a pain reliever. Merck is still contending some 27,000 of those suits, but sales of other drugs, including the first vaccine for cervical cancer, are soaring.

Credit markets had a wobbly week. Bankers postponed a sale of $12 billion in debt funding the buy-out of Chrysler, a sign of the difficulties Wall Street is starting to experience in raising money for leveraged buy-outs. The sale of some senior debt in Europe’s biggest LBO, of Alliance Boots, was also delayed.

There was more bad news from America’s housing market. Poor earnings from the country’s biggest independent mortgage-lender and nervousness about credit woes helped cause markets to plunge on July 24th (the Dow Jones Industrial Average had its worst one-day fall in more than four months). And figures for June showed that sales of existing homes were at their lowest level since November 2002. There was one glimmer of hope: the median price of a home rose, year on year, for the first time in 11 months, by $800, to $230,100.

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Politics this week: 21st – 27th July 2007

July 26, 2007 Leave a comment

Highlights from this week’s edition of The Economist
Demography | Sovereign-wealth funds | Five years of Sarbanes-Oxley | After Turkey’s election | Urbanisation in China | Gadgetry and aid workers | America’s prisons | Britain inundated, again | Congo threatens a return to chaos | Outsourcing grows up | How to make wind power hum | Mohammed Zahir Shah, last king of Afghanistan

Politics this week

Jul 26th 2007
From The Economist print edition

Getty Images
Getty Images

The Justice and Development (AK) Party won Turkey’s general election, handing prime minister Recep Tayyip Erdogan a second term in power and a mandate to continue with his reforms. The election had highlighted the tensions between Turkey’s secular establishment and the Islamic AK Party, but America and the European Union hailed the result as proof that Turkey’s democracy was maturing. See article

Unions in Italy accepted a pension-reform package drawn up by the government. Italy has Europe’s oldest population and the minimum retirement age will now rise to 60 in 2011. See article

A new round of negotiations on the future of Kosovo got under way after Russia stymied a United Nations Security Council vote on a plan drafted by its mediator, Martti Ahtisaari. Serbia’s parliament passed a resolution that threatened to cut ties with any country that recognised Kosovo’s independence. See article

Vladimir Putin, Russia’s president, said that the behaviour of Britain over its request to extradite the suspect in the murder of a former Russian agent in London last year was “clearly a remnant of a colonial mindset”. Russia expelled four British diplomats last week in a tit-for-tat response to the expulsion of four Russian diplomats from Britain over the Litvinenko affair. See article

Britain endured its worst flooding in decades, with towns and villages along the Severn and Thames rivers and their tributaries being particularly hard hit. It is the second bout of severe flooding in Britain this summer, caused by seemingly endless rain. See article

The Tour de France was beset by doping and other scandals. Michael Rasmussen, the Danish race leader, was dismissed by his Rabobank cycling team for allegedly lying about his whereabouts during training, which the sport’s rules require him to reveal.

Brazil’s president, Luiz Inácio Lula da Silva, sacked the defence minister after a plane crash last week killed 199 people at São Paulo’s Congonhas airport. The crash followed months of chaos in Brazil’s air traffic system, which is run by the air force. The government announced restrictions on flights at the airport, the country’s busiest, and hundreds of flights were cancelled or delayed because of safety fears over its use
in bad weather.

Venezuela’s leftist president, Hugo Chávez, said that foreigners who publicly criticised him while visiting the country would be expelled. He also said that a new draft constitution would allow indefinite re-election of the president, but not of state governors.

EPA
EPA

The Democrats held another debate. In an unusual format, the candidates took questions from video clips sent to YouTube, which co-hosted the event. Hillary Clinton was thought to have won. The only heated moment came when she disagreed with Barack Obama‘s position on talking to the leaders of hostile countries. See article

George Bush issued an executive order, required by legislation passed last October, setting out the legal boundaries of CIA interrogations. The order complies in broad terms with the Geneva Conventions’ ban against “degrading treatment”. Human-rights groups criticised it for its lack of detail about actual interrogation techniques.

The House Judiciary Committee found Joshua Bolten, Mr Bush’s chief of staff, and Harriet Miers, the former White House counsel, to be in contempt for not testifying to Congress about last year’s sacking of nine federal prosecutors. The committee’s findings will be sent to the House as a whole to vote on and could lead to a showdown with the president.

The minimum wage in America increased by 70 cents to $5.85 an hour, the first rise since 1997. The legislation was promised by the Democrats in last year’s mid-term election campaign.

Libya freed five Bulgarian nurses and a Palestinian doctor who had been sentenced to death (their sentences were recently commuted to life in prison) for, it was claimed, deliberately infecting 400-plus children with HIV/AIDS. The European Union said ties with Libya should be strengthened and encouraged its members to pay into a fund already worth $460m to help the children’s families and Libya’s health service. See article

Iran and the United States, in their second direct meeting on Iraq, agreed to set up a three-country security committee to find ways of ending the mayhem. But the Americans were cool about a suggestion from Iran’s foreign minister to involve more senior people in the talks.

Just after the start of celebrations to mark Iraq’s victory in a football match against South Korea, enabling it to reach the Asian Cup final for the first time, suicide bombs in Baghdad killed at least 50 people in two separate crowds of jubilant fans.

AP
AP

Britain’s former prime minister, Tony Blair, made his first foray to Israel and the Palestinian territories as envoy for the international quartet (America, Russia, the European Union and United Nations) trying to make peace there. See article

Ethiopia’s prime minister, Meles Zenawi, pardoned 38 opposition politicians and campaigners who had been sentenced to life imprisonment on charges such as “armed rebellion” arising from protests against flawed elections in 2005.

Cameroon’s ruling party won a landslide victory in elections. Opposition parties alleged “massive fraud”; the president, Paul Biya, is likely to stay in office.

In a blow to General Pervez Musharraf, Pakistan’s president, the Supreme Court reinstated the chief justice, Iftikhar Chaudhry, whom the general had tried to remove. Opposition parties in parliament demanded Mr Musharraf’s resignation. See article

India swore in its first female president, Pratibha Patil, an ally of the ruling Congress party and a controversial choice for a post traditionally above the political fray. See article

Taiwan formally applied for United Nations membership under its own name. The UN threw out the request on the ground that it infringed the organisation’s long-standing one-China policy.

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Business this week: 14th – 20th July 2007

July 19, 2007 Leave a comment

Business this week

Jul 19th 2007
From The Economist print edition

EADS announced that it was streamlining its management structure. The European aerospace and defence company has been hampered by meddling politicians in France and Germany, its primary backers, and the dual-management structure was criticised by many for being unwieldy. Louis Gallois will become EADS‘s sole chief executive. Tom Enders, currently EADS‘s other co-chief executive, becomes head of Airbus. See article

The board of Altadis, a Franco-Spanish cigarette company, accepted a third takeover offer from Britain’s Imperial Tobacco. The euro16.2 billion ($22.4 billion) deal gives Imperial Altadis’s continental and Moroccan operations and its profitable cigars business (it has a 50% stake in Cuba’s Habanos). Imperial’s bid trumped a rival offer from CVC Capital Partners, thus raising further questions about whether the private-equity boom was tapering off. See article

There was another big deal in the plastics industry. Basell, a private firm which is owned by Len Blavatnik’s Access Industries, agreed to meld with Lyondell Chemical, based in Houston, in a transaction valued at $19 billion. The acquisition is welcome news for Mr Blavatnik, an industrialist who sits on the boards of RUSAL, Russia’s biggest aluminium company, and TNK-BP, BP‘s joint venture in Russia. Last week Apollo Management, a private-equity firm, managed to tempt Huntsman, a chemicals company, away from an agreed takeover by Mr Blavatnik with a $10.6 billion offer.

J. Sainsbury received a preliminary approach from a property investment-fund that is owned by the government of Qatar and which already holds a 25% stake in the British supermarket chain. The retailer rejected a putative private-equity buy-out in April.

The chief executive of Whole Foods Market, America’s biggest natural- and organic-food retailer, apologised for posting derisive comments about Wild Oats Markets, a rival with which it wants to merge, on an online financial message-board. John Mackey said the remarks, which were posted under a pseudonym and are now being investigated by regulators, were an “error of judgment”. See article

EMI recommended that shareholders accept a buy-out offer from Terra Firma Capital Partners after Warner Music decided not to make a rival bid. The British and American music companies have danced around a merger several times over the past few years.

A consortium of banks led by Royal Bank of Scotland sweetened its euro71 billion ($95 billion) bid for ABN AMRO by raising the cash proportion of its offer. All eyes are on the response of Britain’s Barclays, which first unveiled a takeover plan in an all-share offer that was accepted by the Dutch bank in April.

Merrill Lynch and JPMorgan Chase reported a rise in second-quarter net profit of, respectively, 31% and 20% compared with a year earlier. The investment-banking and asset-management businesses of both firms remain robust, but worries persist about their future exposure to defaults in America’s housing market.

Rupert Murdoch came a step closer to taking over Dow Jones when the company’s board recommended to shareholders a $5 billion offer from News Corp, Mr Murdoch’s media conglomerate. The remaining obstacle to a deal is the Bancroft family, which controls 64% of the voting shares in Dow Jones. It will meet next week.

Japan’s best-known shareholder activist, Yoshiaki Murakami, a former trade-ministry official, was found guilty of insider trading and sentenced to two years in prison. His Murakami Fund was charged with receiving inside information from livedoor, whose boss, Takafumi Horie, is appealing against a separate sentence. Prison convictions in white-collar cases are rare but, unusually for Japan, both men pleaded innocent.

China’s GDP in the second quarter grew at its fastest rate in 11 years, and inflation rose to 4.4% in the year to June. Analysts debated what, if anything, the government could do to cool the economy.

The euro reached another record high against the dollar as investors shied away from American assets amid concerns about the fallout from losses in America’s subprime-mortgage market. Meanwhile, Nicolas Sarkozy continued to press the European Central Bank over its policy on the euro. The French president thinks the currency’s strength is hurting exports and growth and hinted that Germany was moving towards his position on the matter. But Angela Merkel, Germany’s chancellor, reiterated her view that the ECB should remain focused on holding inflation down.

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Politics this week: 14th – 20th July 2007

July 19, 2007 Leave a comment

Highlights from this week’s edition of The Economist
Bombs away | John Edwards and the other Democrats | The importance of Turkey’s election | Talent management | A good year at the Fed | The Pope’s diplomatic service | The Litvinenko fall-out | A legitimate bug auction | The partition of India | Lady Bird Johnson, first lady and environmentalist

Politics this week

Jul 19th 2007
From The Economist print edition

Reuters
Reuters

General Pervez Musharraf revealed that he intends to seek re-election as Pakistan’s president later this year without stepping down as army chief. He told newspaper editors that a purely civilian government would not be strong enough to control extremists. His comments came as a series of attacks, mainly on security forces in North-West Frontier Province, claimed more than 130 lives. See article

Police in Bangladesh arrested Sheikh Hasina Wajed, a former prime minister and leader of the Awami League, the main opposition to the civilian government whose term ended last year. She faces corruption charges and is accused of complicity in the killings of four political opponents. The army-backed interim government that took power in January has promised to clean up Bangladeshi politics. Sheikh Hasina’s rival, Khaleda Zia of the Bangladesh Nationalist Party, also faces charges. See article

International inspectors confirmed that North Korea’s plutonium-producing nuclear reactor at Yongbyon, north of the capital, Pyongyang, and four other facilities there have been shut off. A first instalment of fuel oil promised to North Korea in return for ending its nuclear programme arrived, and six-country talks resumed in Beijing. See article

A constitutional convention reopened in Myanmar. It has been meeting on and off since 1993, but is now likely to finish in two months and put a new charter to a referendum. The ruling junta was trounced in an election in 1990 but refused to honour the result. The main opposition National League for Democracy is boycotting the convention, which will entrench the army’s role.

An earthquake rocked Kashiwazaki in Japan, killing ten people. A nuclear plant was damaged and leaked water containing radioactive compounds, raising safety concerns about Japanese facilities.

George Bush called for a conference to relaunch a peace process to settle the Israel-Palestine conflict. He also took steps to boost the Palestinian president, Mahmoud Abbas, and his secular Fatah group in the West Bank, in the hope of weakening its Islamist rivals in Hamas, which took over the Gaza Strip last month. Mr Abbas said he would call for new elections. See article

Reuters
Reuters

At least 85 people were killed by bomb attacks in the disputed city of Kirkuk, which is controlled by Iraq’s Kurds. The biggest blast, detonated by a suicide-bomber in a lorry, hit an office of the party led by Iraq’s president, Jalal Talabani, a Kurd.

A Libyan court commuted the death sentences passed on five Bulgarian nurses and a Palestinian doctor to life imprisonment. In a trial widely condemned abroad as unfair, the six have been convicted of deliberately infecting hundreds of Libyan children with HIV.

A national reconciliation conference opened in Somalia’s embattled capital, Mogadishu, but proceedings were promptly postponed until the end of the month, with no sign of any progress. See article

In Brazil, a TAM Airbus jet on an internal flight overshot the recently resurfaced runway at São Paulo’s commuter airport and exploded on contact with a fuel and cargo warehouse, killing all 186 people on board and several on the ground. See article

Argentina’s economy minister, Felisa Miceli, resigned after prosecutors ordered her to testify about $64,000 in cash found in a bag in her office bathroom. Her replacement, Gustavo Peirano, is expected to retain the policy of an undervalued exchange rate and artificially low energy tariffs.

In Venezuela, RCTV, an opposition-supporting television station which closed down in May after its broadcasting licence was not renewed by Hugo Chávez’s leftist government, took to the air again as a cable and satellite channel. See article

Bolivia’s president, Evo Morales, said he planned to nationalise the country’s railways, which have been run for the past decade by investors from Chile and the United States.

On a visit to Latin America, Canada’s Conservative prime minister, Stephen Harper, offered to start free-trade talks with Colombia. That was in pointed contrast to the Democrat-controlled United States Congress, whose leadership has refused to ratify a trade agreement with Colombia. See article

After an all-night session in the American Senate, the Republicans easily denied the Democrats the 60 votes they needed to proceed with a plan to pull troops out of Iraq. The debate on the defence-spending bill to which the plan is attached was deferred until September.

A court in Los Angeles accepted a $660m settlement between the local Catholic archdiocese, America’s biggest, and victims who allege sexual abuse by clergy. It is the largest such payout in a string of national sex-abuse scandals over the past few years involving the church. See article

Jim Gilmore, a former governor of Virginia, pulled out of the race for the Republican presidential nomination. Very few people knew he had ever been in it.

Britain expelled four Russian diplomats. The British complained that the Russian authorities had not co-operated in an investigation into the murder of Alexander Litvinenko, a former KGB agent, by polonium poisoning in London last year. See article

An independent candidate running in Turkey’s general election was shot dead in Istanbul. The campaign for the election, on July 22nd, has been unusually tense. See article

Poland’s president, Lech Kaczynski, met his American counterpart, George Bush, in Washington, DC. Mr Kaczynski strongly defended the American plan to site a new missile-defence system in Poland over fierce objections from the Russians. See article

Athens was engulfed in thick smoke after strong winds and a heatwave set off dozens of forest fires. Ecologists said it would take 100 years to repair the environmental damage.

Rex Features
Rex Features

Britain’s pagan groups expressed outrage at the depiction of a doughnut-wielding Homer Simpson next to the Cerne Abbas Gi
ant hill-figure in Dorset, a pagan symbol of fertility. The painted Simpson is publicising a film, but the promoters promised that the persistent summer rains would wash him away.

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Politics this week: 7th – 13th July 2007

July 16, 2007 Leave a comment

Politics this week

Jul 12th 2007
From The Economist print edition

AP
AP

As more Republican senators withdrew their support from his policy on Iraq, George Bush pleaded for more time and urged people to wait for a progress report in September on the troop “surge”. Congress ignored him and began two weeks of debate on an interim progress report. See article

Meanwhile, Mr Bush’s approval rating dropped to 29%, according to Gallup. Its poll was taken after the president commuted the jail term of Lewis “Scooter” Libby, a former White House aide who was sentenced for perjury. Two-thirds of Americans thought the president should not have intervened in the case, said Gallup (6% wanted him to grant a full pardon).

It was also a bad week for John McCain. The Arizona senator’s presidential campaign received a serious blow when both of his top aides resigned. Mr McCain, who is trailing his Republican rivals for the party’s nomination in opinion polls and fund-raising, vowed to fight on. See article

Florida became the latest state to adopt tough rules on global warming, unveiling a regulation that would reduce greenhouse-gas emissions to 80% below their 1990 levels by 2050. New Jersey also adopted a similar law.

The stalemate between Pennsylvania’s Democratic governor and Republican-controlled Senate over the state budget was resolved following a brief shutdown of some government services. A row over a surcharge on electricity bills to pay for greener energy measures was deferred until the autumn.

Four Islamist terrorists were given life sentences for plotting to explode bombs on London’s transport system on July 21st 2005 (two weeks after suicide-bombers killed 56 people). All four men were originally from the Horn of Africa.

The French president, Nicolas Sarkozy, attended a meeting of finance ministers from the euro area in Brussels to explain why France might not meet its commitment to eliminate the budget deficit by 2010. Several of those attending the meeting grumbled, but there is little they can do.

European finance ministers endorsed a French candidate, Dominique Strauss-Kahn, to take over from Rodrigo de Rato as head of the International Monetary Fund.

Cyprus and Malta won approval to join the euro on January 1st 2008. They will become the single currency’s 14th and 15th members. See article

AFP
AFP

After a week-long siege of the Lal Masjid or Red Mosque in Islamabad, some 200 Pakistani commandos stormed the compound and met fierce resistance from militants sheltering inside. Nearly 100 people died in the ensuing battle, including the militants’ leader, Abdul Rashid. See article

Prosecutors in Indonesia announced a civil suit seeking the recovery of $440m from Suharto, the president who stood down in 1998. They also sought $1.1 billion in damages. In 2000 the government dropped criminal charges after doctors said Mr Suharto was too ill to face them. See article

Zheng Xiaoyu, the former head of China’s State Food and Drug Administration, was executed for corruption. He had been convicted of accepting bribes to approve medicines. There has been a rash of cases involving tainted Chinese exports, ranging from toothpaste to pet food.

Australia’s prime minister, John Howard, termed “provocative and insensitive” the appointment of Julian Moti as the Solomon Islandsattorney-general. Mr Moti faces charges of child abuse in Australia, which has a peacekeeping mission in the Solomons.

One of the most lethal terrorist bombs since the American invasion of Iraq four years ago killed at least 160 civilians, including women and children, in a village inhabited by Shia Turkomans north of Baghdad. See article

Representatives of Hamas, the Islamist movement that now controls the Gaza Strip, boycotted an emergency session of the Palestinian parliament called by President Mahmoud Abbas, who heads Fatah, the main secular party. Without Hamas’s presence, there was no quorum, thus preventing the ratification of the emergency government appointed by Mr Abbas three weeks ago.

A suicide bomber in Algeria killed at least ten people in an attack on a barracks, just before the opening of the All Africa Games, one of the continent’s big sporting events.

Libya’s Supreme Court upheld death sentences imposed in 2004 on five Bulgarian nurses and a Palestinian doctor for allegedly infecting children with HIV. But a mediating body may be near to agreeing on a financial settlement with the children’s families, which would mean that they drop their right to demand the death penalty.

In Ethiopia a state prosecutor called for the death penalty in the trial of 38 opposition leaders who were found guilty of inciting violent protests that left nearly 200 dead in the wake of flawed elections in 2005. The trial judge will pass sentence in the next few weeks. The United States, Ethiopia’s ally in the war against Islamist terrorism in the Horn of Africa, called for leniency. See article

In Colombia, the FARC guerrillas admitted that they had failed “to care for” 11 hostages killed last month, and said they would turn their bodies over to the International Red Cross. Earlier, hundreds of thousands of Colombians took to the streets in protests against the killings. See article

A small guerrilla group claimed responsibility for bomb attacks that shut down four gas and oil pipelines in Mexico, and demanded that the government release three activists arrested in the southern state of Oaxaca in May.

In a surprise decision, a judge in Chile rejected a request by Peru for the extradition of the country’s former president, Alberto Fujimori, to face corruption and human-rights charges. The case will now go to the Supreme Court. Last month Mr Fujimori had announced plans to stand in a Japanese election in an apparent ruse to escape extradition.

Canada’s prime minister, Stephen Harper, said his government would order up to eight ice-breaking corvettes to assert the country’s claim to sovereignty over Arctic seaways. See article

EPA
EPA

Snow fell in Buenos Aires, for the first time in 89 years.

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Business this week: 7th – 13th July 2007

July 16, 2007 Leave a comment

Highlights from this week’s edition of The Economist
The surprising revival of Europe | Jihad on the internet | Subprime mortgage problems shake global markets | Pakistan’s mosque showdown | George Melly, jazzman and writer | Iraq’s wobbly coalition government | The paradox of Colombia’s Uribe | Continuing arguments over Kosovo’s status | Scotland’s high-tech oil-support businesses | Germany’s economy | What computing can teach biology, and vice versa | The tale of Elizabeth Marsh

Business this week

Jul 12th 2007
From The Economist print edition

Investors reacted nervously to more bad news stemming from the slowdown in America’s housing market. Standard & Poor’s and Moody’s disclosed that they were downgrading or considering downgrading credit ratings on more than $17 billion-worth of bonds backed by subprime mortgages (aimed at low-income and poor-credit households) because they had underestimated the level of defaults. Stockmarkets in America and Europe fell sharply and the dollar continued its slide, reaching a record low against the euro. See article

Shareholders in both the Chicago Board of Trade and Chicago Mercantile Exchange voted to support their merger, ending a nine-month effort to create the world’s largest derivatives platform.

After weeks of speculation Rio Tinto, a global mining giant, formalised a $38.1 billion offer for Alcan, an aluminium producer based in Canada. Alcan was open to a deal after Alcoa, its American rival, made a hostile $27 billion bid in May. Alcan’s board unanimously recommended Rio’s offer, one of the biggest in the booming commodities sector in recent years.

Danone, a French food-group which last week sold its biscuits division to Kraft, agreed to buy Numico, a Dutch company specialising in baby food and “clinical nutrition” for the elderly and sick, for euro12.3 billion ($16.8 billion). Danone maintains that the acquisition will enhance its yogurt and bottled-water divisions (which include the Volvic and Evian brands) as it repositions itself as a leader in the fast-growing health-and-wellness market. Some analysts, however, thought it was paying too much for a business in which it had little experience and viewed Danone’s move as a defence against any potential takeover bids.

Google said it would pay $625m for Postini, a private firm best known to office workers for its web-based e-mail security and spam-sieving technology. The deal will expand the services available in the Google Apps package tailored to the corporate world, further encroaching on Microsoft’s territory.

Nielsen//NetRatings made changes to its gauge of activity on the internet by adding the number of minutes spent by browsers at websites to its criteria. The media research company wants to provide a more accurate measure of audience engagement to advertisers, which allocate spending by pages viewed.

Boeing unveiled the 787 Dreamliner in an elaborate ceremony broadcast on TV and the internet. The Dreamliner is Boeing’s first new jet in 12 years. It is partly made from light composite material, and so uses 20% less fuel per passenger than similarly sized aeroplanes. The company’s order book for the aircraft is full.

The $8.1 billion deal between General Electric and Abbott Laboratories unravelled. GE said in January it was buying Abbott’s lucrative medical-diagnostics division, but the pair couldn’t agree on terms.

Sony cut the price of its PlayStation 3 games console by $100 in America in an effort to boost sales. Sony’s device is lagging in popularity behind Microsoft’s cheaper Xbox 360. Its rival seemed unfazed by the price cut, though it has its own problems. Microsoft said last week that it would take a profit charge of more than $1 billion to cover complaints about a flaw in its console.

There were signs that Russia is softening its stance towards Western participation in its energy projects. Gazprom, the state-controlled gas monopoly, reversed course on allowing foreign firms a stake in the Shtokman field (Gazprom rejected five potential partners last autumn). And Royal Dutch Shell signed a co-operation pact with Rosneft, Russia’s state oil company. Shell was pressured into ceding co
ntrol of an energy project to Gazprom last year, but analysts say Russia is now facing up to the costs of developing its oil and gas assets alone.

The International Energy Agency issued a pessimistic outlook on the supply of oil and natural gas, predicting a “crunch” after 2010 because of slow production among non-OPEC countries. The demand for oil was forecast to rise by 2.2% a year. As a consequence the IEA does not expect much easing of oil prices, which hit an 11-month high this week.

There was some good news for George Bush. The White House’s mid-year budget review forecast that because tax revenues were higher than expected during the spring, the government’s spending deficit would be $205 billion this fiscal year, $39 billion less than had been thought. Others, including Congress’s number-crunchers, predict the actual deficit will be even less when it is made official in October.

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