Oil price and dollar plunge as American growth stalls

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· Wall Street urges Fed to hold off from rate rise · Economy was boosted by spending after Katrina Oil prices plunged and the dollar fell sharply last night amid fears that the US economy is buckling under the weight of rising interest rates and the threefold increase in oil prices. Wall Street was urging the Federal Reserve to hold back from an expected rise in interest rates next month after the commerce department in Washington reported that the growth rate in the world's biggest economy more than halved in the second quarter of 2006. Evidence of a marked slowdown in the housing market - the mainstay of the economy in recent years - and an end to the government spending spree to rebuild the southern states devastated by Hurricane Katrina meant the economy was expanding at an annual rate of 2.5% in the three months to June. In the first quarter, growth was an annualised 5.6%. Growth in the first three months of the year was inflated by the billions spent by Washington on repairing the damage caused by the hurricane that left New Orleans under water last August, but non- military federal spending fell at an annual rate of 8% in the second quarter, wiping out the first quarter's gain. With analysts expecting a further weakening of the economy, share prices were boosted last night by anticipation that the Fed would call an end to the ratcheting up of interest rates that has seen borrowing costs rise from 1% to 5.25% in 17 quarter-point jumps. By lunchtime in New York, the Dow Jones average was up more than 130 points at 11,232 points on the hope that the Fed would reassure consumers next month that interest rates had now peaked at 5.25%. However, many analysts believe the Fed will raise rates again next month in order to be sure of tackling rising core inflation, which rose from 2% to 2.9% in the second quarter. Rob Carnell, of ING Financial Markets, said: "Inflation is still running above levels the Fed will be comfortable with, so although this release adds further weight to calls for a Fed pause in August, there is still a risk management argument for one final rate hike, though this is looking harder to justify." A protracted period of low interest rates made borrowing cheap for Americans and prompted a property and consumer boom, but yesterday's figures suggested that US citizens have started to tighten their belts in response to dearer borrowing and rising energy costs. Consumption growth slowed from an annualised 4.8% in the first quarter to 2.5% in the second quarter. Spending on consumer durables was slower in the second quarter as the housing market stalled and the cost of heating a home and running a car rose. Investment in residential property fell by 6%, while capital investment was also much weaker than the markets had been predicting. Concern that the US economy would slow down still further prompted a $1.50 drop in the price of oil, which was trading at just over $73 a barrel in New York at around lunchtime yesterday. On the foreign exchanges, the dollar lost around 1% of its value against the Japanese yen and was down 0.5% against the euro at $1.2765. "Growth was sharply lower than expected and we've got a knee-jerk reaction down in the dollar," said Korman Tam, chief forex analyst at MG Financial. "It confirms suspicions and raises expectations that the Fed will actually pause in August." In the New York futures markets, the chances of an increase in interest rates dropped as low as 24%, having stood at 46% before the downbeat report from the commerce department. "This report makes a compelling case for no further rate hikes," said Chris Low, chief economist with FTN Financial in New York.

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U.S. Shares Blame for Trade Talk Collapse

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Note from admin: Au revoir, globalization! The primary reason behind the demise of globalization will be the cost of energy.

A cautionary note to the advocates of liberalization and globalization: You guys (and gals) better find the best burrows to hide in -- there are going to be lots of pissed off people walking around soon.

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World Trade Organization negotiations known as the Doha round collapsed this week in Geneva. First begun in 2001, this round of talks aims to help countries in various economic circumstances achieve greater prosperity through better rules governing trade. As the talks disintegrated, a death knell simultaneously sounded for the administration's strategy of "competitive liberalization." This concept claims that the pursuit of smaller bilateral free trade agreements with lesser economic powers will unlock liberalized agreements at the regional level (think the Americas or the EU) and ultimately at the worldwide, multilateral levels where economists believe that trade benefits are broadest. These multilateral agreements are the goal of the Doha round. Click here to read the rest of the article.

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Azerbaijan will produce 1% of world oil

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During July 27 Baku presentation “Strategic Review of World Power Engineering,” British Petroleum expert Mark Henstridge said that with the constantly growing demand for fuel in the world, Azerbaijan plays a special role in ensuring energy security, particularly, because of the oil produced in the Azeri-Chirag-Gunashli fields and supplied to the world markets through the Baku-Tbilisi-Ceyhan pipeline, reports REGNUM correspondent. Presently the share of Azerbaijan in the global oil reserves is 0.3%. This figure is based on the present volume of oil production. As the production and, consequently, the export will grow, this figure will rise to 1%. Somebody may say that this is a small figure, but Azerbaijan still plays a very important role in two directions, Henstridge said. First, the world demand for fuel is constantly growing, and, by increasing its oil production, Azerbaijan will be able to make its contribution in the matter. If, for example, the world oil demand makes 1.2mln barrels a day and BTC transfers 300,000 tons, in one year Azerbaijan will ensure 25% of the world demand growth. Second, because of the growing demand, the world is considering diversifying fuel supplies and, in this light, Azerbaijan is considered as a new source for ensuring the world energy security, says Henstridge.

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World Leaders Cower Before U.S. Power - By HELENE COOPER

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Diplomats Back Troops, but Not Cease-fire, for Mideast 07/27/06 "New York Times" -- --- ROME, July 26 — In the face of United States opposition, an international conference here today stopped short of calling for an immediate cease-fire in the Lebanon crisis. The conference instead adopted more nebulous language that reflected America’s desire to give Israel time to continue its bombardment of Hezbollah targets. In a statement, diplomats from the United States, Europe, Egypt, Jordan and Saudi Arabia expressed their “determination to work immediately to reach with the utmost urgency a cease-fire that puts an end to the current violence and hostilities.” The diplomats also called for an international military force to be deployed in southern Lebanon under the auspices of the United Nations, after NATO members said their alliance was already overstretched. And they called for a regional conference, including Syria and Iran, to discuss security issues. The release of the diplomats’ prepared statement was delayed by almost two hours by wrangling over its contents. The key sticking point was the phrase concerning a ceasefire, according to two European diplomats who were in the room. Most of the officials in the room were seeking, at the very least, a phrase that said the group would “work towards an immediate ceasefire,” one of the diplomats said. But Secretary of State Condoleezza Rice refused, and won, he said. “She insisted it say ‘work immediately to bring a ceasefire,’ not ‘work to bring an immediate ceasefire,’” the diplomat said. He said that the group argued about that for more than 30 minutes before ceding the point to the United States. The change reflects the Bush administration’s view that the conflict will not be settled in a lasting way unless Israel is given the leeway to diminish Hezbollah’s military capabilities. “This is a region that has had too many broken cease-fires,’’ Ms. Rice said at the conference’s conclusion. Hanging over the discussion was the killing of four members of the United Nations peacekeeping force in southern Lebanon on Tuesday by Israeli artillery. On Tuesday night, Israel called the incident a mistake but United Nations Secretary General Kofi Annan said it was “apparently” deliberate. Asked about the incident today, Mr. Annan said that while he accepted the apology of Israeli Prime Minister Ehud Olmert, he wanted a separate U.N. investigation into the incident. “Mr. Olmert definitely believes it was a mistake,” Mr. Annan said. But, he added, “the shelling of the U.N. positions began early in the morning, and carried on all day” despite repeated calls to the Israelis from the United Nations that the posit, which Mr. Annan said was “long established and clearly marked’’ was being shelled. “You can imagine the anguish of the” U.N. peackeepers over the death of their colleagues, said a clearly angry Mr. Annan. The observers were from Austria, Canada, Finland and China. In Beijing today, officials said that President Hu Jintao had condemned the killings and demanded an investigation and an immediate cease-fire, Reuters reported. The conference here did not reach a decision on the makeup of an international force that would be sent to occupy southern Lebanon once a ceasefire package is reached, but did agree that the force would fall under U.N. auspices, and not NATO. European envoys said that France and Germany both balked at the idea of using NATO forces because of its commitments elsewhere. Ms. Rice said that the prime purpose of the force will be to support the Lebanese government in disarming Hezbollah, a position that Lebanon’s prime minister, Fouad Siniora, said he supported. While agreement was reached on the need for the international force and a follow-up conference on aid for repairing the damage done to Lebanon, perhaps the most stark aspects of the meeting were how isolated the United States appears, and the growing impatience, particularly in the Arab world, over the delay in calling for a ceasefire. While France and other European countries have delayed calling for an immediate ceasefire, in support of the U.S. position, some daylight is now starting to show between Europe and America. A senior U.S. official denied that America stood alone on the issue, saying that “there was broad agreement in the room over the urgent need for a ceasefire.” In Washington, White House Tony Snow rejected a suggestion that the United States had blocked a desire by the other nations at the conference to push for cease-fire. “If the talks broke down, they wouldn’t have come out with a joint statement that showed they are knitted up on the key items,’’ he said, The Associated Press reported. During the closed door session, diplomats said, Mr. Siniora gave a heartrending speech which left many in the room calling for immediate action. “Is the value of human life less in Lebanon than that of citizens elsewhere?” Mr. Siniora asked. “Are we children of a lesser God? Is an Israeli teardrop worth more than a drop of Lebanese blood?” Mr. Siniora said Lebanese will begin “legal proceedings” against Israel, and appeared to accuse Israel of war crimes. He said he would “spare no avenue to make Israel compensate the Lebanese people for the barbaric destruction it has inflicted on us.” He ended his remarks with a quote from the Roman historian Tacitus, which he said describes well what Israel is doing to Lebanon and the region today. “They created a desolation and call it peace,” Mr. Siniora said. Diplomats said there was visible emotion around the room after Mr. Siniora’s comments. During her remarks after the conference, Ms. Rice acknowledged Mr. Siniora’s “very impassioned’’ speech, saying he had “put a human face’’ on the crisis. While still pressing for an immediate halt to the fighting, Mr. Siniora in his remarks after the conference seemed to accept the prospect of negotiations over the conflict’s end. He said that as part of any negotiations, he would press several conditions first put forward by Hezbollah: that Israel withdraw from a disputed slice of border territory it continues to occupy, that it release Lebanese prisoners, and that it turn over a map showing the locations of land mines it placed in southern Lebanon. Ms. Rice called on Syia and Iran to do more to rein in Hezbollah, and said that Mr. Annan had pledged to use his “good offices’’ to reach out to Damascus and Tehran. The United States has no diplomatic ties with Iran and limited representation in Syria. She singled out Syria in particular as needing to take action to end the crisis. After she spoke, the senior administration said that the crux of the matter for the United States is making sure that any ceasefire will last, and that Hezbollah won’t emerge after all still able to rain rockets down on Israel. Exasperated, he said: “What’s a ceasefire?” A reporter answered: “People stopping killing each other.” “We’re for people stopping killing each other,” the official said. “but how do we do that? Do we do it by walking into a room and saying, ‘everybody stop?’ That’s what happened before. What’s going to make them stop?” Helene Cooper reported for this article from Rome and John O’Neil from New York. Contributing reporting were: Greg Myre from Jerusalem, Jad Mouawad from Beirut, and Elaine Sciolino from Paris. Copyright 2006 The New York Times Company

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