Asian Growth Will Be on Track While Inflation Threatens

S&P report says Asian economies will stay on track, but inflation threatens stability.

The economic engines of India and China will help keep Asia-Pacific economies on track amid a global slowdown, but a protracted U.S. slump and rising inflation pose possible hazards, a report said Wednesday.

The most significant threat to the region's macroeconomic stability is inflation, in particular the recent surge in food and oil prices, according to the report by Standard & Poor's Ratings Services.

"There are some visible threats to the region in the form of food and energy prices, which may adversely affect performance over the next couple of years," said S&P Asia-Pacific chief economist, Subir Gokarn, according to a statement. The most important challenge facing regional policy makers was managing inflation while sustaining economic performance, Gokarn said.

The region's economies are expected to grow more slowly this year and in 2009, although they will maintain a relatively fast pace on the back of strong regional drivers, the S&P report said. China and India, two of the three largest economies and the fastest growing, will together continue to grow at about 8 percent or more over the next two years, it said.

"This momentum will help sustain a positive growth environment for Asia-Pacific as a whole," S&P said. "The ability of the region's economies to insulate themselves against a U.S. recession is enhanced by their ability to exploit the opportunities in the region through greater economic integration."

Japan's return to positive growth is another factor in the region's resilience, although the economy is predicted to slow compared to the expansion rates of more than 2 percent in the past two years, the report said.

"Japan's growth, in turn, reinforces the growth impulses in other countries in the region," S&P said. The report forecasts Japan's real gross domestic product to be above 1 percent this year and as much as 2.2 percent next year.

The report said that Asian economies were also more resilient because they have become less dependent on exports to the U.S. as recent efforts to expand regional integration start to bear fruit.

"Asian countries have been extremely active in entering into trade and broader commercial agreements, both within and outside the region," the report said. "Fast-growing neighbors, particularly those whose growth is driven from within, offer enormous opportunities for all these countries -- and they are all trying their best to exploit those opportunities."

S&P said, however, that sustained Asian growth depended on the U.S. recession being moderate and brief. "A prolonged slump in the U.S. economy and the effect it will have on demand for imports, particularly of consumer goods from the region, will impact on wage incomes and investment activity in the region," it said.

Japan Keeps Rate Unchanged at 0.5%

Japan central bank keeps interest rate unchanged amid concerns about global slowdown.

Japan's central bank decided Wednesday to keep its key interest rate unchanged amid lingering worries about a global slowdown. The Bank of Japan policy board meeting unanimously decided to keep the rate at 0.5 percent, the bank said in a statement.

The decision was widely expected amid continued uncertainty over the U.S. economy and its impact on global markets. Japan's economy is slowing, and the bank will carefully examine downside risks at home and abroad before taking any concrete monetary policy steps, the policy board said in its semiannual outlook report released later Wednesday.

Housing and business investment "have been weaker than expected while exports have been stronger," the BOJ said, adding that capital spending will pick up gradually in fiscal 2008, which ends March 31, 2009.

The bank said uncertainty over the global economy and financial markets persists, citing "downside risks" to the U.S. economy as a potential threat to Japan. "Given the current situation where the outlook for economic activity and prices is highly uncertain, it is not appropriate to predetermine the direction of future monetary policy," the report said. It said the bank will "carefully assess the future outlook for economic activity and prices."

For next fiscal year, the board said it expected the consumer price index, which excludes fresh food prices, to rise by 1.0 percent, and real gross domestic product to rise 1.7 percent, compared with 1.5 percent growth for financial year 2008.

The market was also awaiting signs about the future direction of monetary policy from comments later in the day from new Bank of Japan Gov. Masayuki Shirakawa. Wednesday's decision is the first since Shirakawa took the helm of the central bank earlier this month. His assumption of the post followed weeks of a power vacuum after the term of his predecessor, Toshihiko Fukui, ended in March.

Much of last year, market watchers had expected the BOJ would soon start raising its key interest rate. The global economic turmoil set off at midyear by the U.S. subprime mortgage crisis has scotched that view.

US Businesses in China Call on US-China Freer Trade

US business groups in China call on Washington, Beijing to fight protectionism.

Three American business groups are appealing to Washington and Beijing to promote freer trade and reject protectionism amid slowing U.S. economic growth and a widening trade gap with China.

In an annual report on business conditions, American Chambers of Commerce for China, Shanghai and South China rejected calls by some in the United States for punitive measures over Beijing's trade surplus and currency controls. They also called on Beijing to repeal rules that limit foreign investment and competition.

"Defending and preserving the openness of the trade relationship should be a core commitment of both the U.S. and Chinese governments," James Zimmerman, chairman of the American Chamber of Commerce in China, said at a news conference Monday. "With slowing economic growth in the U.S., the focus needs to be on enhancing America's overall competitiveness rather than seeking defensive protectionist solutions," Zimmerman said.

The groups said they will send a 40-member delegation to Washington in May to deliver the report to key lawmakers. Zimmerman said they hope to meet with the U.S. presidential candidates or their aides. The United States says its trade deficit with China in February was $18.4 billion -- down 9.6 percent from the same month last year but the biggest U.S. gap with any country.

Critics of Beijing's trade record say currency controls and import barriers are partly to blame, and some American lawmakers are calling for punitive tariffs on Chinese goods. The Chambers of Commerce said U.S. companies are facing sharply rising costs in China and barriers to imports and investment. But they said 70 percent of 800 American companies that responded to a survey made money in China in 2007 and many said it is a key market. Some 64 percent said their five-year outlook for China was optimistic -- the highest rating.

The report found Chinese protectionism was cited by 17 percent of companies as their top challenge. Business groups say Beijing is trying to promote the growth of Chinese competitors in insurance and other industries by using investment barriers and other hurdles to keep out foreign rivals in violation of its free-trade commitments.

Beijing should "distance itself from regulations that inhibit competition" and repeal laws that limit foreign investment, said Harley Seyedin, chairman of the South China chamber. Other companies surveyed pointed to unclear regulations, bureaucracy and lack of transparency, according to the report.

Many companies believe China has made little progress in reducing violations of foreign trademarks, copyrights and other intellectual property rights, or IPR, said Norwell Coquillard, chairman of the American Chamber of Commerce in Shanghai. "IPR continues to be a top concern," Coquillard said.

Singapore 2008 GDP to Moderate Amid Inflation

Singapore's central bank says GDP to grow at more sustainable rate in 2008.

Singapore's economic growth will moderate in 2008 amid a global slowdown and as the city-state tries to control rising inflation, the country's central bank said Tuesday. Still, even with a tighter monetary policy, the economy will expand at a healthy level, the bank said.

The Monetary Authority of Singapore said the city-state could still achieve full-year gross domestic growth of 4-6 percent, barring a sharp downturn in the U.S. economy. Singapore's economy grew by 7.7 percent last year.

"A more severe global downturn cannot be ruled out if there is a further escalation of the financial crisis in the U.S.," the bank said. "If this occurs, Singapore's growth will be adversely affected."

Singapore is working to control inflation that is at its highest level in 26 years. Earlier in April the monetary authority unexpectedly let the Singapore dollar rise at a faster pace to keep a lid on import costs -- although prices have continued to increase.

The central bank sets its monetary policy by adjusting exchange rates in an undisclosed currency band. It last shifted the currency trading band higher at its meeting on April 10. "The re-centering of the policy band ... will help to alleviate inflation pressures and provide support to the economy as it eases to a more sustainable growth rate," the bank said.

Singapore's consumer prices rose 2.1 percent in 2007. In March, the consumer price index was 6.7 percent higher than it was a year earlier. A recent jump in food costs has been a key driver of inflation across Asia, and a further acceleration in commodity prices could not be ruled out, the authority said.

"Even if (food and oil) prices were to level off, upward pressure on wages and rentals, reflecting domestic capacity constraints, are likely to remain," it said. The central bank forecasts inflation will peak at around 7 percent in the middle of the year and average in the upper half of a 4.5-5.5 percent range for the whole year.

Fed Expected to Cut Rates Again

Fed poised to cut rates, may take a breather after that as it battles economic crosscurrents.

Battling risky economic crosscurrents, the Federal Reserve is ready to bump down a key interest rate again to brace the wobbly economy. That rate cut could turn out to be the last one for a while as zooming energy and food prices heighten inflation concerns.

Fed Chairman Ben Bernanke and his colleagues are walking a tightrope. They are trying to shore up economic growth and at the same time they are mindful that they can't let inflation get out of hand. It's a bit of an economic dilemma: The very rate reductions the Fed depends on to energize the economy can also sow the seeds of inflation down the road.

"It's a very challenging environment," said John Silvia, chief economist at Wachovia. In a nod to those conflicting forces, the Fed probably will opt for a moderate-sized rate reduction of one-quarter percentage point this week, Silvia and other economists predict.

At its previous meeting on March 18, the Fed slashed rates by a hefty three-quarters point. The action, however, drew opposition from two Fed members who favored a smaller reduction because of concerns about a potential inflation flare-up. It was a crack in the mostly unified front the Fed often shows the public.

The Fed, which has been cutting rates since last September, turned more forceful in January and March, when housing, credit and financial problems took a turn for the worse, threatening to plunge the country into a deep recession. The Fed's rate cuts in January and March alone marked the most aggressive Fed intervention in a quarter-century.

This time around, though, the Fed is likely to go with a smaller rate cut at the end of its two-day meeting on Wednesday. A quarter-point reduction would drop the Fed's key rate for influencing national economic activity to 2 percent. This rate, called the federal funds rate, is what banks charge each other on overnight loans and affects a wide range of interest rates charged to people and businesses.

In turn, the prime lending rate for millions of consumers and businesses would fall by a corresponding amount, to 5 percent. The prime rate applies to certain credit cards, home equity lines of credit and other loans. Both rates would be the lowest since late 2004.

Economists think the Fed may be inclined to leave rates at such low levels possibly through the rest of this year and maybe into next year -- as long as the country is not hit with another blow to economic growth.

"We are entering the stage where it is time for the Fed to wind down and move to the sidelines," said Greg McBride, senior financial analyst at Bankrate.com. "A quarter-point reduction is a nice segue to that transition. Short-term interest rates could stay low longer than many currently expect," he added.

The Fed's rate cuts -- which take months to work their way through the economy and affect activity -- along with the government's $168 billion stimulus package of tax rebates for people and tax breaks for businesses -- should help strengthen the economy in the second half of this year, Fed officials said.

It's the first half of this year where damage from the housing, credit and financial debacles could be the worst. The economy may grow little, if at all, during this period and could actually shrink, Bernanke told Congress earlier this month. A recession, he said, was possible. It was Bernanke's first public acknowledgment of such a scenario.

A growing number of economists now believe the economy probably will contract in the current April-to-June quarter. Many analysts also now think the economy will manage to eke out a barely noticeable 0.4 percent growth rate during the first three months of this year as opposed to falling into negative territory as some had previously thought. The government reports on the first quarter's performance on Wednesday -- the same day the Fed's decides its next move on interest rates.

Even if the economy heals in the second half of this year and into 2009, the unemployment rate, now at 5.1 percent, is likely to rise, perhaps reaching close to 6 percent early next year, analysts said. Job losses for the first three months of this year neared the staggering quarter-million mark.

The Fed's rate cuts ordered thus far would help to cushion the fallout. On inflation, Bernanke said rising prices are a source of concern and must be monitored closely. Still, he is hopeful inflation will moderate in coming quarters.

Gasoline prices have shot up to record highs in recent days and could hit $4 a gallon this summer. Food prices are up 5.3 percent on an annualized basis in the first three months of this year, outpacing the 3.1 percent rise in overall inflation.

If the Fed does drop its key rate to 2 percent and holds it there for some time, that would still be low enough to provide relief to stressed homeowners facing a rate reset to their adjustable-rate mortgages, McBride said.

Trying to get the economy back to full throttle after its last recession in 2001, the Fed ratcheted down its key rate to 1 percent -- the lowest in more than four decades. Then-chairman Alan Greenspan held the rate at that super-low level for a year, before the Fed began to bump it up. That action has since fueled criticism that Greenspan helped to create the very housing boom that has now gone bust, wreaking havoc on the economy. Foreclosures have surged to record highs, financial companies have wracked up multibillion losses and all the fallout has sent the economy reeling.

Even as economists predict the Fed is likely to wind down its rate-cutting campaign this year, they said the Fed would lower rates again if there were worrisome signs that the economy was faltering even more than expected. "If the news is unremittingly bad, it will go down again. So the Fed has got plenty of ammunition if its needs it. But my guess is this will be about it," said Bill Cheney, chief economist at John Hancock Financial Services.

Oil Hits New Record Near $120

Oil prices hit new trading record near $120 with UK pipeline shut down and Nigerian unrest.

Oil prices hit an all-time high near $120 a barrel Monday after a weekend refinery strike closed a pipeline system that delivers a third of Britain's North Sea oil to refineries in the U.K. The shutdown comes amid supply outages in Nigeria that have helped to support oil against a strengthening dollar.

"We've got a confluence of a number of events that have really disrupted crude oil supply," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "That's what's driving oil to a new record even though the U.S. dollar actually strengthened a bit."

Light, sweet crude for June delivery rose to a record $119.93 a barrel in electronic trading on the New York Mercantile Exchange. The contract eased back to $119.04 a barrel by noon in Europe, up 52 cents from Friday's close of $118.52.

BP PLC on Sunday shut down the Forties Pipeline System that carries more than 700,000 barrels of oil a day to the U.K. because of a 48-hour walkout by employees at a refinery in central Scotland.

Workers walked out of the Grangemouth refinery vowing not to give ground in their dispute with refinery owner Ineos over plans to close a generous pension scheme to new employees. Ineos chief executive Tom Crotty said it could take a week for the plant to return to production once the strike ends on Tuesday. BP said its pipeline could be up and running within 24 hours.

BP's Kinneil plant, the onshore processing center for the pipeline system, is powered from the Grangemouth site. "With the refinery being shut down, it will affect supplies from the North Sea and that has a potentially significant impact," said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney. "That comes at the same time that there's production disruptions from Nigeria so the combined effect of those is the immediate factor that's put pressure on oil prices."

Analyst Stephen Schork also attributed the bullish market to the combination of events stoking supply concerns. "News that BP shut-in 40 percent of the Forties Pipe compounded the latest headline out of Nigeria regarding a rebel attack near that country's largest oil and gas export terminal on Bonny Island," he said, in his Schork Report. "Thus, all of that 'bubble talk' aside, the market looks stronger than ever."

In Nigeria, the Movement for the Emancipation of the Niger Delta, or MEND, said its fighters hit an oil pipeline late Thursday, the fourth conduit the group has attacked in the past week. MEND said the pipeline belongs to a Royal Dutch Shell PLC joint venture. A Shell spokesman confirmed one of its pipelines had been hit, but provided no additional details. Separately, workers at an ExxonMobil Corp. joint venture there cut production by an unspecified amount to demand more pay.

Demand is high for Nigeria's light, sweet crude, which is easily refined. After years of militant attacks, however, Nigeria's output is dropping and the country can produce only about 75 percent of its official production capacity of 2.5 million barrels per day. This week, the oil market is also expected to closely watch the outcome of the U.S. Federal Reserve's policy meeting on Tuesday and Wednesday.

The central bank's policymakers will meet to decide whether to lower interest rates again and to issue an updated assessment of the U.S. economy and financial system. Most investors believe the Fed will lower rates by another quarter percentage point -- and that it will also suggest it may temporarily halt its round of recent cuts.

"There are a lot of expectations that the Fed will make an announcement that they will take a pause in interest rate cuts," Shum said. "If that's the case, then the U.S. dollar may bottom out and that could cause some pullback in oil pricing."

Many analysts believe the weakness of the dollar is a bigger factor than supply and demand because the soft dollar draws investors worried about inflation into commodities such as oil and gold. It also makes commodities less expensive for buyers operating in other currencies.

Weekend's Special: Sahara Desert, the Ocean of Sands

The Sahara is the largest desert in the world and occupies approximately 10 percent of the African Continent. The ecoregion includes the hyper-arid central portion of the Sahara where rainfall is minimal and sporadic. Although species richness and endemism are low, some highly adapted species do survive with notable adaptations.

Only a few thousand years ago the Sahara was significantly wetter, and a large mammal fauna resided in this area. Climatic desiccation over the past 5000 years, and intense human hunting over the past 100 years, has obliterated these faunas. Now only rock, sand and sparse vegetation exist over huge areas. The remnant large mammal fauna is highly threatened by over-hunting.

Huge and Wild

The Sahara, with a size of 8.6 million km², is the world's largest desert, covering large parts of North Africa. Around 4 million people live here. Its maximum length is 4,800 km, running from west to east, and up to 1,200 km from north to south. Sahara covers most of Mauritania, Western Sahara, Algeria, Libya, Egypt, Sudan, Chad, Niger and Mali, and touches Morocco and Tunisia.

To the north, Sahara is bordered by the Atlas Mountains and the Mediterranean Sea; in the west by the Atlantic Ocean; in the south, the desert zone reaches 16º northern latitude; in the east it is bordered by the Nile. Still the desert continues to the east of the river until it reaches the Red Sea, but this is not considered a part of the Sahara.

Sahara is very dry but there is an annual rainfall in most regions, although just a few dozens of millimetre. Sahara has a subtropical climate in its northern parts, and a tropical one in the south. Winters in the north are cold to cool; in the south, mild. Summers are hot all over the desert. The highest temperature every recorded is 58ºC in Aziziyah, Libya. There is very little rain in the northern parts, virtually nothing in the east, although more in the south. Most rain falls throughout the summer, followed by some scarce winter rain.

About a quarter of Sahara consists of mountains. The highest peak reaches 3415, being Emi Koussi in Chad. Some mountain peaks may even have snow in the winter. The main mountain ranges are Hoggar in Algeria; Aïr/Azbine in Niger; and Tibesti in Chad. The Sahara's lowest point lies in the Qattara Depression in Egypt, at about 130 metres below sea level.

Sand sheets and dunes represent about 25% of the Sahara; the other parts are mountains, stoney steppes and oases. Pyramidal dunes can be as high as 150 metres, while mountainous sand ridges as high as 350 metres.

There are several rivers running through the Sahara, of which the Nile River and Niger River are the only permanent ones. The rest being seasonal, involves that most of the time, there is only a dry river bed, which may carry water for brief periods following uncommon rainfalls. There may be years in between this happening.

Metallic minerals are very important to most Saharan countries. Algeria and Mauritania have several major deposits of iron ore, while smaller deposits are found in Egypt, Tunisia, Morocco, Western Sahara and Niger. Copper is found in Mauritania and manganese in Algeria. Small deposits of uranium are widely distributed in the Sahara, while Niger has the largest deposits. Phosphates are found in great quantities in Morocco and Western Sahara, and are already well-exploited. Algeria's phosphate production is smaller, but large enough for exports. Oil is mainly found in Algeria, and is of great importance to the economy of the entire country. While the mineral exploitation has led to economic growth in Sahara, this has rarely helped the indigenous population, as skilled workers have been brought in to the different fields.

Of the Sahara's around 4 million people, most live in Mauritania, Western Sahara, Algeria, Libya and Egypt. Dominant groups of people are Sahrawis, Tuareg and Negroids. The largest city is Nouakchott, Mauritania's capital. Other important cities are Tamanrasset in Algeria, and Sebha and Ghat in Libya.

Biodiversity

The flora of the central Sahara Desert is very poor and estimated to include only 500 species. This is extremely low considering the huge extent of the area. It mainly consists of xerophytes and ephemeral plants (called also locally Acheb), with halophytes in moister areas. The flora has one near endemic family, a number of isolated monotypic genera of both wide and narrow distribution, and perhaps as many as 162 endemic species. The monotypic genera suggest a Tertiary origin with probable extinction of linking forms. Vegetation is very contracted along the wadis and the dayas with Acacia sp, Tamarix sp., and Calotropis procera., Where there is sufficient ground water, hammadas are covered by Anrthirrnum ramosissimuma and Ononis angustissima.

Considering the hyper-arid conditions, the fauna of the central Sahara is richer than is generally believed. Within this ecoregion there are 70 species of mammal, 20 of which are large mammals. There are also 90 species of resident birds, and around 100 species of reptiles. Arthropods are also numerous, especially ants. One of the bird species (Oenanthe monacha) is regarded as endemic to the ecoregion, and there is one strictly endemic currently undescribed worm snake (Leptotyphlops sp nov. "L"). However, given the vast size of the ecoregion, the number of endemic species is very small.

In the past the critically threatened addax (Addax nasomaculatus) would probably have occurred in this ecoregion, but this species is likely to be extirpated. Small numbers of scimiter-horned oryx (Oryx dammah, EX) may have also occurred in the past. Other desert antelopes may still be found in small numbers, such as slender-horned gazelle (Gazella leptoceros, EN), dama gazelle (Gazella dama, EN) and the red-fronted gazelle (Gazella rufifrons, VU).

The plants and animals of the Sahara are more threatened by desiccation than the fauna and flora in other areas. Plant leaves may dry out totally and then recover; animals may loose 30-60% of their body mass and are still able to recover. Many of the animals get their water only through metabolic processes. These kinds of adaptations have allowed them to survive in such an inhospitable environment.

Weekend's Featured: China Calls for Help to Fight Climate Change

China called on the international community Thursday to increase the flow of technology to developing countries to help them fight climate change.

Minister of Science and Technology Wan Gang said developed nations "need to establish a mechanism for technological transfer" of environmentally friendly technology so developing countries can afford them.

China — which rivals the United States as the world's largest emitter of greenhouse gases — has pledged to raise energy efficiency but has declined to sign up to internationally agreed emissions reductions.

Along with other developing countries such as India, China says their economies should not be penalized by binding cuts in emissions of carbon dioxide and other heat-trapping gases when their per capita emissions are much below those in developed countries.

Wan, who was speaking at the start of a two-day international conference on climate change in Beijing, said the solution to global warming lies in international cooperation and technology. "Science and technological innovation will not only discover the nature of the problem we face, but also provide possible solutions ... to the climate change problem," Wan said at the Forum on Climate Change and Science and Technology Innovation.

Government officials and scientists from developing and developed countries, as well as from international organizations such as the United Nations were taking part in the meeting. China has said it supports the international agreement reached in Bali, Indonesia, last year on fighting climate change.

The Bali "roadmap" is intended to lead to a more inclusive, effective successor to the 1997 Kyoto Protocol, which commits 37 industrialized nations to cut greenhouse gases by an average of 5 percent between 2008 and 2012.

A report released last month in California said the growth in China's carbon dioxide emissions was far outpacing previous estimates. China's projected annual increase in emissions was greater than the total now produced each year by either Great Britain or Germany, said the report by economists from the University of California at Berkeley and the University of California at San Diego.

Climate change will likely be on the agenda when European Commission President Manuel Barroso leads a large delegation for economic and trade talks in Beijing on Friday.

Wall Street Eyes Consumer Spending

Wall Street moves past earnings of banks and brokerages, now focused on consumer companies.

Wall Street has so far had a mostly subdued reaction to corporate earnings released in the past few weeks, but that could be about to change.

Just about halfway through the first-quarter reporting season, most of the blue chips that make up the Standard & Poor's 500 index have not pulled any surprises. In fact, stripping out the gloom coming from financial companies like Merrill Lynch & Co. or Citigroup Inc., profits are up 11 percent year-over-year.

With this generally good performance, the market hasn't had the kind of turbulence that some feared before the start of earnings season, and the S&P 500 index has risen about 4 percent in the past two weeks.

But the coming week might change the market's dynamics, as a string of consumer-oriented companies including electronics stores and food companies are scheduled to release their results. Wall Street is worried about slowing consumer spending, and these companies might give investors their best indication yet about how much Americans are willing to spend these days.

"We've pieced together a decent earnings season so far, and everybody handicapped the financials out of the market," said Chris Johnson, president of Johnson Research Group. "Now the companies that represent the activities of the consumer are going to fall in the crosshairs, and that can tell us more about where this economy is heading."

Still, Wall Street has some newfound strength going for it -- even when investors have encountered disappointing results in recent weeks, the market has been able to right itself. When General Electric Co. reported an unexpected 6 percent drop in profit, the news unnerved investors worried that the financial crisis that gutted investment banks had begun to spread. GE is considered a good indicator of the economy because it has businesses across a number of big sectors.

The Dow Jones industrials tumbled in response to the report on April 11, but in the following two weeks, investors have stepped back and have been able to examine earnings results as a whole. Though financial companies have so far left the S&P 500's profit growth at a negative 13 percent, there are still more companies beating Wall Street projections then not.

"We really have two sides to this earnings season between the financials and everyone else," said Howard Silverblatt, Standard & Poor's senior index analyst. "And, if we continue this positive news across the board people are going to feel a lot better that we'll have a much better second half. But, we have to get through those consumer discretionary companies."

Indeed, these companies are closely watched because they give Wall Street a glimpse consumer spending, which contributes to two-thirds of the U.S. economy. Any sharp pullback could have disastrous effects. Right now, the companies in this sector that have already reported results show a 6.8 percent decline in profits. This is shaping up to be their fifth-straight quarter of down earnings.

Some of the big names due to report this coming week include Tyson Foods Inc. on Monday; Office Depot Inc. and Avon Products Inc. on Tuesday; Kellogg Co. and Kraft Foods Inc. on Wednesday; and Burger King Corp. and CVS Caremark Corp. on Thursday. Silverblatt and other analysts said the key will be about what these companies predict for the third and fourth quarters, which is when most economists feel the economy may begin to swing higher.

"These are the companies that help you on the way up, and the hope is that the markets will move higher once people begin spending money in the second half," Silverblatt said. "There's even stores out there that are willing to take your stimulus package checks and give you a 10 percent discount if you spend it at their stores. Consumer spending is that important."

The Treasury Department is expected to begin making the first electronic deposits to taxpayers for the stimulus package on Monday -- five days sooner then expected. The thought on Wall Street is that these checks will boost profit at retailers during the second quarter.

Bush Expects Coming Tax Rebates to Aid Economy

Bush says tax rebates going out Monday will help people afford rising gas, food prices.

President Bush said tax rebates will start going out Monday, earlier than previously announced, and should help Americans cope with rising gasoline and food prices, as well as aid a slumping economy.

Democrats said they were glad the rebate checks were about to go out, but suggested that multinational oil companies were not among the businesses the stimulus package was originally designed to help.

"Starting Monday, the effects of the stimulus will begin to reach millions of households across our country," Bush said Friday in remarks on the South Lawn of the White House. Those first rebates will be directly deposited into people's bank accounts. The Internal Revenue Service had been saying direct deposits wouldn't start until next Friday. Bush said paper checks would begin going out on May 9, a week earlier than previously announced.

"The money is going to help Americans offset the high prices we're seeing at the gas pump, the grocery store, and also give our economy a boost to help us pull out of this economic slowdown," Bush said.

Bush's emphasis on fuel and food prices differed from other comments he's made since signing the economic stimulus legislation, intended to aid the economy by boosting overall consumer spending -- which accounts for roughly two-thirds of the nation's economic activity.

Bush has suggested the rebates could trigger a spending spree. "When the money reaches the American people, we expect they will use it to boost consumer spending," he said last month. By saying expressly that people could use these one-time checks to pay for such necessities as food and gas, Bush underscored the deepening challenges facing the economy.

Democrats were quick to pick up on the change of focus. "It's galling to think that taxpayers' stimulus checks will be lining the pockets of OPEC. The sad truth is that the average American family will spend almost their entire stimulus check on higher gas prices this year," said Sen. Charles Schumer, D-N.Y., chairman of the Joint Economic Committee of Congress.

OPEC is the Organization of Petroleum Exporting Countries. "Unless the administration gets OPEC to increase oil supply, American consumers are going to be in for a scorching summer of $4 gasoline with no relief in sight," Schumer said.

House Speaker Nancy Pelosi, D-Calif., agreed that people "need this rebate to cope with the rising cost of gas and groceries." She said that, while the rebates would help to get the economy moving, there was a need for a second stimulus package "and we have begun some conversation with the administration and Republicans."

As he had earlier in the week, Bush used the word "slowdown" to describe the state of the economy. He has denied that the nation is in a recession, although many economists say it is. "It's obvious our economy is in a slowdown. But, fortunately, we recognized the signs early and took action," Bush said.

The rebates -- up to $600 for an individual, $1,200 for a couple and an additional $300 for each dependent child -- are the centerpiece of the government's $168 billion stimulus package, enacted in February. Roughly 130 million households are expected to get them.

Bush made the comments before boarding his helicopter at the start of a day trip to Connecticut. People must file a tax return for their 2007 income to be eligible for a rebate check. The IRS now says all checks for those who filed tax returns on time are scheduled to be deposited or mailed by July 11.

The economy -- burdened by the collapse of home prices, a financial and credit crisis, and now rising energy and food prices -- grew at an anemic 0.6 percent in the final three months of last year and is believed to have gotten even weaker in the first three months of this year.

The government will report on the first quarter's performance next week. With the economy faltering, the nation's unemployment rate has climbed to 5.1 percent, the highest since September 2005, when it suffered from the devastating blows of the Gulf Coast hurricanes. Job losses in the first three months of this year neared the quarter-million mark.

Foreclosures have surged to record highs and financial companies have taken multibillion losses on mortgage investments that soured. The situation has sent a tremor through Wall Street and has sent the administration, Congress and presidential contenders looking for ways to provide relief.

China and EU Meet to Discuss Trade Tensions

China, EU leaders meet on trade tensions, amid friction over Tibet.

Chinese and European Union leaders launched a high-level dialogue Friday on tensions over China's swelling trade surplus with Europe amid disagreements over how to tackle climate change.

"Our meeting today marks a significant step towards the strengthening of the strategic partnership between China and Europe," European Commission President Jose Manuel Barroso told Premier Wen Jiabao as they met in the Great Hall of the People, the seat of China's legislature.

The 27-nation EU is stepping up pressure on Beijing for action over its trade surplus, market barriers and currency controls -- areas where Washington long took the lead. China's trade surplus with the EU surged 23 percent to $34.1 billion in the first quarter, surpassing the gap with the United States, according to government data.

Barroso gave no details but said the sides agreed to work on narrowing that gap. "But there are major imbalances and we both agree on the necessity to rebalance our bilateral trade," he said.

European businesses say China keeps its currency undervalued, giving their Chinese competitors an unfair price advantage. Europe also echoes U.S. complaints about Chinese product piracy, saying 80 percent of counterfeit goods seized at its ports originated in China.

The EU-China meeting mirrors similar dialogue being carried on by Beijing and Washington. Barroso's delegation includes nine EU commissioners -- one-third of the EU executive -- including trade chief Peter Mandelson.

Barroso said that Chinese and EU officials had discussed cooperation on fighting climate change and other environmental issues. "As far as climate change is concerned, we had a very deep exchange of views, particularly on the vital international negotiations," he said.

Barroso said China had repeated its long-established position that it was willing to discuss emission reductions as part of a global agreement on climate change. "We welcome indications of Chinese readiness to include its domestic emission reduction policies in an international agreement, provided that developed countries commit to midterm reduction targets for 2020." He said Beijing also repeated calls for "an effective financial mechanism is put in place to promote technology transfer."

Japan CPI Highest in Decade

High oil costs send Japan's consumer prices up 1.2 pct in March -- fastest pace in decade.

Japanese consumer prices rose at their fastest pace in a decade in March due to sharp increases in energy and food costs, the government said Friday, deepening worries that inflation will worsen already shaky consumer sentiment.

The core consumer price index, which excludes volatile fresh food prices, rose 1.2 percent on year in March, following a 1 percent climb in the previous month, the Ministry of Internal Affairs and Communications said. That was the fastest rise since the index increased 1.8 percent in March 1998. The CPI has risen for six straight months, and March's figure was in line with private economists' forecasts.

For the Japanese central bank, the months ahead will require that policy-making be handled especially delicately. That's because inflation worries might make it hard for the Bandk of Japan to loosen monetary policy even if the economy slows. The bank's benchmark rate is at a low 0.5 percent.

Japanese officials and analysts have expressed concern that recent inflation trends don't bode well for the nation's economy, because prices are going up for the wrong reasons. "The current rise is of an undesirable nature. It is not being caused by stronger consumption demand but by higher costs," Economy Minister Hiroko Ota told a news conference Friday. "Consumption demand is likely to remain weak because workers' wages are not picking up," she said.

Shinko Research Institute economist Norio Miyagawa said that Japan's rising prices are an example of "cost-push-type inflation" caused by higher expenses rather than stronger demand, and that it's likely to persist at least this year.

The data showed that food and energy costs went up sharply, reflecting the global run-up in commodity and energy prices. Food product prices rose 1.8 percent on year, while energy prices gained 9.5 percent, the data showed.

The core index covering the Tokyo metropolitan area for April, considered a leading indicator for nationwide consumer prices, also grew a preliminary 0.7 percent on year after climbing 0.6 percent in March, the data showed. The reading beat economists' forecasts of a 0.5 percent rise.

China Ties US for Largest Web Users

China's Internet population ties US for world's largest at 221 million people.

China's fast-growing population of Internet users has soared to 221 million, tying the United States for the largest number of people online, according to government data reported Thursday.

The figure, reported by the Xinhua News Agency, reflects China's explosive growth in Web use despite government efforts to block access to material considered subversive or pornographic. It was a 61 percent increase over the 137 million Internet users reported by the government at the start of 2007.

China lags the United States, South Korea and other markets in online commerce and other financial measures. But e-commerce, video-sharing and other businesses are growing quickly and companies have raised millions of dollars from investors.

"We'll see this growth continuing," said Duncan Clark, chairman of BDA China Ltd., a Beijing technology company. "Even though China might overtake the United States in total (Internet) population, it still lags in the size of its Internet industries, and there will be a lot more opportunities," Clark said.

China's Internet penetration is still low, with 16 percent of people online, compared with a world average of 19 percent, Xinhua said. Beijing promotes Internet use for business and education but operates extensive online censorship. Web surfers have been jailed for posting or e-mailing material that criticizes Communist rule or is deemed a violation of vague national security laws.

Most recently, Chinese Web surfers have been blocked from seeing foreign sites -- including YouTube.com -- with videos about protests in Tibet and the security crackdown there. The Xinhua report cited data from the government's China Internet Network Information Center. An agency spokeswoman, who would give only her surname, Zhang, declined to give more details. She said the agency, also known as CNNIC, would release a report in July.

The United States had 221 million Internet users in March, according to Nielsen/NetRatings, a leading industry measurement service. The U.S. growth rate is lower, suggesting that when March figures for China are released they may show that the country has already overtaken the United States.

Some 75 percent of American adults already are online, and the rate for teenagers is even higher, according to the U.S.-based Pew Internet and American Life Project. By contrast, BDA's Clark said China's Web population should keep growing by 18 percent annually, reaching 490 million by 2012 -- a number larger than the entire U.S. population.

The boom has produced Chinese success stories such as games site Tencent.com and search engine Baidu.com, which are competing with foreign rivals for market share. Internet entrepreneurs have hit bumps along the way, including having to contend with censors trying to keep pace with rapid change in the industry. A key development has been video-sharing, a newly popular area where some sites say they get 100 million visitors a day -- equal to the audience for the biggest state TV channels.

In March, the government said it would shut down 25 video sites and punish 32 others for violating new rules against carrying content that is pornographic, violent or a threat to national security.

The Internet's mushrooming popularity has been driven in part by a regulatory quirk: Fixed-line phone companies are losing potential new customers to mobile phone services but are barred from getting into that market themselves. So they are trying instead to bring in new revenues by promoting low-cost broadband Internet access, which has brought high-speed service to millions of homes. Phone companies also are experimenting with Internet-based cable television.

Web businesses are looking for another boost when Beijing takes the long-anticipated step of issuing licenses for third-generation, or 3G, mobile technology to support video, Web-surfing and other services. No date has been set. With the world's largest mobile phone market, at 520 million accounts, China has a vast potential pool of wireless Internet users. "There will be a lot more opportunity to move online," Clark said.

EU Warns China on Products' Boycott

European business officials warn China over consequences of boycott.

European business officials warned Wednesday that calls in China for a boycott of French products since the raucous Olympic torch relay in Paris could spark a backlash against Chinese exports.

France and high-profile French retailer Carrefour have been singled out by Chinese nationalists who saw the April 7 protests against the torch relay by pro-Tibetan groups and others as an insult to their national pride.

Anger climaxed this past weekend with protests at the French Embassy in Beijing and at Carrefour outlets in at least nine Chinese cities. Calls to boycott French products have circulated mainly on the Internet, the realm mainly of college students and young urban Chinese, buoyed by the government's initial blessing of the protests.

Joerg Wuttke, president of the European Union Chamber of Commerce in China, said any large-scale boycott would likely hurt Chinese workers and companies and could be met by similar action against Chinese products in Europe. "This kind of thing is a slippery slope downhill. Once you start talking about boycotts, there will always be retaliation on the other side. Where do you stop?" Wuttke told reporters in Beijing.

The number of protesters outside Carrefour outlets was estimated to range from several dozen to 1,000. They waved Chinese flags, unfurled anti-French and anti-Carrefour banners, sang patriotic songs and burned French flags. In the southern city of Zhuzhou, protesters reportedly attacked a young American teacher after he emerged from a local Carrefour, although details were sketchy.

Accounts on numerous Internet boards said the man was punched, pushed and chased and was only rescued by police after taking refuge in a taxi. The U.S. Embassy in Beijing said it had no information it could release about the incident under rules requiring a privacy waver.

Perhaps concerned over its image ahead of the Olympics, China's government began signaling this week it was ready to put the dispute to rest. On Tuesday, Foreign Ministry spokeswoman Jiang Yu said the Carrefour demonstrations were "encouraging and touching," but added that "we do not agree with some people's radical actions."

China's Ministry of Commerce also welcomed recent statements by Carrefour denying that it supported exiled Tibetan spiritual leader the Dalai Lama. "We also noticed that recently the French government and enterprises have taken actions that improve and preserve the mutual relationship," the ministry said. "We welcome their expression."

Chinese newspapers on Wednesday pointed out that 95 percent of the products sold by Carrefour in China are produced domestically, and that it directly employs 40,000 Chinese. "European supermarkets in China mainly sell Chinese products and mainly employ Chinese people. This is worth bearing in mind," said Michael O'Sullivan, secretary general of the EU chamber.

Though protesters also disrupted torch relay runs in London, San Francisco and a few other cities, the Paris leg has been a lightning rod for criticism by Chinese largely because of images of a pro-Tibetan protester attempting to snatch away the torch from a Chinese wheelchair fencer.

The female torchbearer, Jin Jing, has been hailed as a national hero, praised on the Internet as the "smiling angel in a wheelchair." Scrambling to tamp down tensions, French President Nicolas Sarkozy sent an emotional letter to "Mademoiselle Jin Jing," praising her "remarkable courage" and extending an invitation to visit as his personal guest in the coming weeks. Jiang, the ministry spokeswoman, praised the president's gesture as a "friendly move."

Beijing's move to rein in the budding nationalism follows a familiar pattern. Authorities used state media to order students back to class and put a quick end to past protests and spasms of intense nationalism such as those that followed the 1999 bombing of the Chinese Embassy in Belgrade and the 2001 collision between a U.S. spy plane and a Chinese fighter jet. Even amid the changed tone, China reasserted its hard line against the Dalai Lama, whose supporters it accuses of instigating deadly riots in Lhasa, Tibet's capital, on March 14.

The state-controlled China Daily newspaper ran a front-page story Wednesday labeling a move by the Paris city council on Monday to bestow the title of "honorary citizen" on the Dalai Lama as a "severe provocation." "Paris has recently made a series of hostile gestures toward China," the newspaper said.

Beijing has labeled the Lhasa riot and related protests in Tibetan areas an attempt to split the region from China and to sabotage the Beijing Olympics.

Biodiversity Loss Hurts Medical Research

Biodiversity loss hampers medical discoveries, says UN environment official.

The world risks losing new medical treatments for osteoporosis, cancer and other human ailments if it does not act quickly to conserve the planet's biodiversity, a senior United Nations environmental official said Wednesday.

Earth's organisms offer a variety of naturally made chemical compounds with which scientists could develop new medicines, but are under threat of extinction, said Achim Steiner, executive director of the U.N. Environment Program.

"We must do something about what is happening to biodiversity," Steiner told reporters. "We must help society understand how much we already depend on diversity of life to run our economies, our lives, but more importantly, what are we losing in terms of future potential."

Steiner was announcing the conclusions of a new medical book, "Sustaining Life," on the sidelines of a UNEP-organized conference in Singapore. The book is the work of more than 100 experts, its key authors based at Harvard Medical School's Center for Health and the Global Environment, and it underscores what may be lost to human health when species go extinct, Steiner said.

"Because of science and technology ... we are in a much better position to unlock this ingenuity of nature found in so many species," he said. "Yet, in many cases, we will find that we have already lost it before we were able to use it."

One example is the southern gastric brooding frog, or Rheobactrachus, which raises its young in the female's stomach. It was discovered in the Australian rainforests in the 1980s. In other animals, the young would have been digested by enzymes and acids in the stomach. But preliminary studies show the baby frogs produced a substance or a range of substances that inhibited acid and enzyme secretions and prevent the mother from emptying her stomach into her intestines while the young were developing.

Research on this species of frog could have led to new insights into preventing and treating human peptic ulcers, but such studies could not be continued because the two species of Rheobactrachus had become extinct, according to the book.

Steiner said the book looks at seven groups of threatened organisms for potential or known medical value: amphibians, bears, cone snails, sharks, non-human primates, horseshoe crabs and gymnosperms, a type of plant life. Last year, more than 16,000 species were labeled as threatened with extinction on the Swiss-based International Union for Conservation of Nature's Red List of Threatened Species.

Another Record for Oil at $118

New supply worries, new record for oil as a barrel fetches more than $118 per barrel.

Oil prices rose Tuesday to a all-time highs above $118 a barrel on concerns over supplies from some key producers. Light, sweet crude for May delivery rose as high as $118.05 a barrel in electronic trading on the New York Mercantile Exchange, eclipsing Monday's all-time high of $117.83.

By midday in Europe, the contract had risen to $117.77, up 29 cents on Monday's close of $117.48 a barrel. The May contract expires at the end of trading Tuesday. In London, Brent crude futures added 28 cents to $114.71 a barrel on the ICE Futures exchange.

A Royal Dutch Shell PLC joint venture in Nigeria said Monday it may have to cut crude deliveries some 169,000 barrels a day in April and May because militants sabotaged a pipeline last week in the country's south.

The company, Shell Petroleum Development Co., declared force majeure on its April and May oil delivery contracts from its 400,000-barrel-a-day Bonny fields, effective April 22, a move that protects it from litigation if it fails to deliver on contractual obligations to buyers.

Militancy and lawlessness have spread in Nigeria's south, and attacks on oil infrastructure have become common. "The disruption in Nigeria with Royal Dutch Shell is serious," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "It is light, sweet crude, which is much desired by the U.S. market during the summer gasoline season, so that certainly has affected the market," Shum said.

Nigeria is a major supplier to the United States. Attacks there in the past two years have cut nearly a quarter of the African country's oil output. Crude oil set a record above $117 Monday after the 150,000-ton tanker Takayama was attacked off the coast of Yemen as it headed for Saudi Arabia. Kyodo News agency said there were no injuries, but the the rocket punctured a tank, spilling hundreds of gallons of fuel.

Analysts said comments Tuesday by the head of the Organization of Petroleum Exporting Countries about plans to boost oil production target capacity by 5 million barrels a day by 2012 would not have an immediate effect on oil prices.

Speaking at an energy forum in Rome, OPEC Secretary-General Abdalla Salem el-Badri told reporters that issues of supply and demand were being discussed but he did not expect any agreement on whether prices are too high or too low.

"This is not anything new and it will not help ease oil prices," said Ehsan ul-Haq, head of research at JBC Energy in Vienna, Austria. "The oil futures market is very strong, but the physical markets are not so strong."

Other supply developments also factored into the market. In Mexico, oil production slipped 7.8 percent in the first quarter to 2.91 million barrels a day as output at the country's traditional oil fields wanes, state oil company Petroleos Mexicanos said. In Scotland, workers at Ineos PLC's 196,000 barrel-a-day Grangemouth refinery and petrochemical plant have threatened to strike for 48 hours from April 27 over changes to an employee pension plan.

The weak U.S. dollar has continued to support oil prices despite strengthening some this week against the yen and euro. Commodities such as oil and gold are still attractive hedges to investors seeking hedges against further drops in the currency.

Bank of England Offers $100 Billion Debt Swap

Bank of England offers banks $100B program to swap mortgage-backed securities for UK issues.

The Bank of England, aiming to deal with the crippling impact of the U.S. subprime mortgage crisis, on Monday announced a $100 billion plan to allow banks to swap mortgage-backed securities for British Treasury bills.

The bank's aim is to unblock the interbank lending market and restore normal lending practices to banks and home buyers hampered by the subprime credit crisis. The asset swaps are for one year, but renewable for up to three years -- and only for assets which existed at the end of last year, the central bank said. The risk of losses on the swapped assets remains with the commercial banks, not the taxpayers, the Bank of England said.

"The Bank of England's special liquidity scheme is designed to improve the liquidity position of the banking system and raise confidence in financial markets while ensuring that the risk of losses on the loans they have made remains with the banks," said central bank Governor Mervyn King. The Bank of England is offering the swaps starting Monday and continuing for six months.

Banks will be able to swap a range of high-quality assets, including AAA-rated securities backed by UK and European residential mortgages for Treasury bills. Even though the assets have value, banks can't use them to raise money because such securities are tainted by the crisis over lower-quality securities backed by mortgages to people with weak credit.

The swap gives the banks assets they can use to operate, in hopes they will then resume lending more -- and support the housing market and the overall British economy. Britain's biggest casualty of the credit cruch was mortgage lender Northern Rock, which had to turn to the Bank of England for emergency funding and eventually wound up in public ownership.

"Given its scale, the scheme is indemnified by the Treasury, but is designed to avoid the public sector taking on the risk of potential losses," the Bank of England said. "Banks will need, at all times, to provide the Bank of England with assets of significantly greater value than the Treasury bills they have received. If the value of those assets were to fall, the banks would need to provide more assets, or return some of the Treasury bills."

The Bank said the size of the liquidity injection would depend on market conditions, but it said the commercial banks suggested that they were likely to subscribe for about 50 billion pounds in swaps.

The Bank of England's announcement came as property website Rightmove reported that asking prices in England and Wales have fallen by 0.1 percent over the past month as sellers accept their homes are no longer worth as much as they once were.

The fall in asking prices between March 16 and April 12 followed a 0.8 percent rise in March and a 3.2 percent jump in February. The annual rate of price growth has also slowed sharply, falling to just 1.3 percent during the year to April 12, down from 5 percent a month earlier.

The British Bankers' Association said the plan was an "an innovative and unique policy response." "The banks expect it to make a significant contribution to alleviating the pressures in the U.K. money markets. Restoring confidence in the wholesale funding market will strengthen the financial system and the stability of our economy," the association said.

IMF Expects Slower EU Growth

IMF sees slower European growth due to credit crisis, gloom over US economy.

The International Monetary Fund said Monday that the global credit crisis and persistent gloom over the U.S. economy have dampened the outlook for European economic growth. "Europe has so far been relatively resilient to the U.S. slowdown and the global financial turbulence, but the historical record suggests these will increasingly take their toll," said Michael Deppler, director of the IMF's European Department.

The IMF forecast that the fallout from the credit crisis would combine with the near-record strength of the euro and soaring food and energy prices to knock inflation-adjusted GDP growth across Europe to 2.6 percent this year from 3.9 percent last year "with growth rates in the advanced economies projected to fall well below potential for some time."

The IMF broke down its forecast in two categories. The first was advanced European economies, including the 15-nation euro zone, Denmark, Sweden and Britain. The second was emerging European economies, including Russia, Croatia, Albania, Turkey and Ukraine, among others.

The agency said that the advanced European economies would see a decline in real growth to 1.5 percent this year from 2.8 percent in 2007. The emerging economies' GDP would drop to 5.5 percent from 6.9 percent in 2007.

In the euro zone, GDP is expected to be at 1.4 percent this year and 1.2 percent in 2009. "The sharp rise in inflation, which has already dampened consumer confidence and spending in Europe, is a further source of weakness," Deppler said.

The IMF outlook, in an annual report, comes with inflation in the 15-nation euro zone -- which is home to more than 317 million people and accounts for more than 15 percent of the world's global domestic product -- running at 3.6 percent, its highest level in 16 years.

The IMF cautioned that a "further appreciation of the euro" and the threat of the credit squeeze exploding into a full-blown crunch were issues, though the risks should not be exaggerated. Among the most vulnerable countries are those that are seeing a cooling of once-hot real estate markets, particularly Britain and Spain.

"Risks are greater in countries that are going through a correction in housing prices, though this factor is mitigated in Europe by the limited reliance of households on borrowing against home equity collateral," the IMF said.

Also vulnerable are emerging economies -- such as eastern European countries -- with large current account deficits and high external debt because they would be "especially vulnerable to shifts in investor confidence."

ADB Blames Biofuels for Soaring Food Prices

Asian Development Bank: Governments should remove biofuel subsidies to help ease soaring food prices.

Developed nations should stop paying agricultural subsidies to encourage biofuel production because the payments are making staple foods more expensive, the Asian Development Bank said Monday.

Biofuels should also be re-examined by governments around the world as it is increasingly unclear how environmentally friendly they are, ADB Managing Director General Rajat Nag said in an interview with The Associated Press. The production of biofuel leads to forests being destroyed and reduced land area for growing crops for food, he said.

"We feel that the developed countries should seriously rethink the whole issue of biofuel, particularly the biofuel subsidies," Nag said. "Giving subsidies for biofuels ... basically acts as an implicit tax on staple foods." Paying farmers to grow oilseed and other crops to produce biofuels means they grow fewer food crops, resulting in higher prices for such staples as palm oil and corn.

Nag did not give examples, but countries that subsidize biofuel include the U.S., the world's largest producer of ethanol, which is made mostly from corn and other grain crops. The country's farm subsidy programs include payments for ethanol production. "We believe it is more important to let the developed country farmers decide on what they will plant, based on the relative prices, based on the international prices, but not subsidized prices," he said.

Surging food prices, stoked by rising fuel costs that have increased production and transport costs, have triggered protests around the world in recent weeks. Riots have erupted over food shortages in the Caribbean and Africa and hunger is approaching crisis stage in parts of Asia.

Nag said rising food prices will be top on the agenda of the ADB's annual board of governors meeting in Madrid next week. He urged governments faced with rising food prices not to impose price caps or export bans, as the measures could prove counterproductive. Price controls are disincentives for farmers amid the rising costs, he said.

"The cost of production is going up, so the obvious, rational reaction (to price caps) of the farmer is to reduce planting, which is exactly the opposite of what we want. We want production to increase, not decrease," he said.

Nag said governments should instead consider targeted cash income transfers to the poor. The Manila-based bank was ready to provide loans to governments to help ease the situation, he said, but added that no country has made any specific requests yet. "If the governments go for the targeted income support, obviously this will add to the fiscal burden of the governments, so ADB will be very responsive and willing to consider budget support for the government, and providing program loans," he said.

In Asia, Nag said, the supply of rice to the region remained adequate even though stocks have slipped to their lowest in decades. "We want to get the focus away from being dramatized or an overreaction to the supply situation. It is tight, no doubt about it," he said. "But it is not a situation when rice is not available in the region as a whole."

Nag said, however, that the rapid increase in the price of rice had a "very serious impact" on the region's poor, who spend a large proportion of their income on food. "The prices have increased very dramatically, almost three times in the last one year and almost twice in the last three months," he said.

Nag said the hardest hit by rising food prices in the Asia Pacific include 600 million people who survive on a dollar a day or less, and about the same number who live on just above a dollar -- making up a group of about 1.2 billion who are vulnerable. The region's poor usually spend about half of their budgets on food, but recent increases have pushed that proportion to about 80 percent in some parts of South Asia, he said.

Weekend's Special: Mount Tambora, the Earth's Giant Hole in Sumbawa, Indonesia

Mount Tambora is one of the active mount in Indonesia which located in Peninsula of Sumbawa upstate and geographically resides in on course 080 15' Parallel South and 1180 00' Longitude East, regional of Sub-Province Administration of Bima and Dompu, and the entire of the top of itself administratively includes Sub-Province Region of Bima. Mount Tambora lays in earth breaking band, its wide cauldron includes as one of the biggest active crater in the world.

According to the history record, Mount Tambora had erupted several times, especially the bigbang explosion in 1815 caused a commotion in the whole world and 92.000 deaths or annihilated 3 empires residing in Sumbawa.

From biotic aspect, Mount Tambora has variously properties of biotic which needs the existence of effort. Based on the opinion above, the government according to commendation of Laws no. 5 year 1990 about nature variety through the Minister of forestry, plantation and agriculture realized the management of Tambora mount to management units based on the Laws no.41 year 1999 about forestry which is suitable with the function and specification destine in one management, the Management of Hall Natural Resources Conservation of west Nusa Tenggara. Three regional units of the management are Southern Mount Tambora Preservation, Southern Mount Tambora Game Reserve, and Southern Mount Tambora Hunting Park. Besides the three management conservation units, there are management units surronding the conservation areas of forest management covering a function of forest production managed by sub-province of Bima and Dompu.

Eruptions History

Tambora volcano is one of the active volcanos in Indonesia which caused a commotion because it’s explosion on 10 November 1815 and caused that counted about 92.000 people. According to other record, noted the explosion of tambora in the year of 1812, 1815, 1819, and among 1847-1913, eruption in 1913, at the base of caldera which is the result of eruption in 1815 formed a trapeze with crater pipe in the base of south-western caldera called Doro Api Toi which has diameter 100 m and 10 m height which become the center of activity.

Tambora volcano represents active mount type strato A with 2.851 m of height, and has a caldera which diameter is rather than 7 km and cauldron base size 3.500 x 4000 m, and also have 950 m of depth. In West side caldera there is a lake with 800 m diameter unfold from north to south, 200 m unfold from east direction till west, having 15 m of depth which lay in 1300 mdpl of height. In the south base of cauldron there is parasite trapeze which has 100 m of diameter, 10 m of height, called Doro Api Toi (small volcano).

The observation result (mining) reports that there are activities in the form of blowing fumaroles and solfatara, that form brimstone sublimation at part of cauldron wall and base. seismic data (earthquake) and visual data which noted from post observation of Tambora volcano in October 1999 until September 2000 did not show improvement, so that this volcano still stay in normal active condition.

As forested area Tambora has the biggest water area which becomes the life hope of human beings in this area and also for human communities which live around it. Tambora also has become a habitat of flora and fauna.

Lost Civilization Unearthed

The eruption of Mount Tambora on the Indonesian island of Sumbawa in 1815, the largest volcanic eruption in human history, killed 117,000 people and extinguished the tiny kingdom of Tambora. After 20 years of research, a scientist from the University of Rhode Island’s Graduate School of Oceanography has located the first remnants of a Tamboran village under 10 feet of ash and has unearthed the first clues about its culture.

In a six-week archaeological dig in the summer of 2004, URI Professor Haraldur Sigurdsson and colleagues from the University of North Carolina and the Indonesian Directorate of Volcanology excavated a Tamboran home where they found the remains of two adults as well as bronze bowls, ceramic pots, iron tools and other artifacts. The design and decoration of the artifacts suggest that the Tamboran culture was linked to Vietnam and Cambodia, and its language was related to that of the Mon-Khmer group of languages that are now scattered across Southeast Asia.

“There’s potential that Tambora could be the Pompeii of the East, and it could be of great cultural interest,” said Sigurdsson, who believes the village includes a large wooden palace that he hopes to find on a future expedition. “All the people, their houses and culture are still encapsulated there as they were in 1815. It’s important that we keep that capsule intact and open it very carefully.” (Pompeii was similarly wiped out by the eruption of Mt. Vesuvius, and a treasure trove of artifacts from the Roman culture were discovered encapsulated in the ash.)

During the eruption, Mount Tambora ejected up to 100 cubic kilometers of magma and pulverized rock, and it spewed ash and 400 million tons of sulfurous gases 44 kilometers into the atmosphere. The gases that lingered in the atmosphere caused a year of global cooling in 1816 that is now known as “the year without a summer” and which caused disease epidemics and worldwide food shortages due to crop failures. The growing season in New England declined by 100 days that year, which led to the start of a movement by farmers to abandon farming in the region and move west.

Sigurdsson made his first visit to Mount Tambora in 1986 with URI colleague Steven Carey to calculate the size of the eruption. They returned two years later to explore the volcano’s 1,250-meter-deep caldera or crater.

“It’s a remote island with very little access, so it has been little studied over the years,” Sigurdsson said. “My primary motivation was to study the effects the eruption had on society.”

A guide hired by the URI scientists during their second visit to the island told them about ancient objects the local people had found in the jungle 25 kilometers west of the caldera. When Sigurdsson returned to visit the site in 2004, he explored a gully that cut through a 10-foot thick deposit of volcanic pumice and ash where he soon found the first evidence of the village – pottery shards and carbonized lumber. Using radar to look deep into the ground, the scientist quickly found and unearthed a small house built on stilts that rest on foundation stones.

“Everything we found had been carbonized,” Sigurdsson said. “It had turned to charcoal from the heat of the magma.”

Based on the artifacts he found, particularly the many bronze objects, Sigurdsson believes that the Tamborans were “not poor people at all. They were actually quite well off.” Historical evidence supports that belief, as Tamborans had been famous in the East Indies for their honey, horses, sappan wood for producing red dye, and sandalwood used for incense and medications.

According to Sigurdsson, the village was located 5 kilometers inland, where the residents were safe from pirates that frequently captured coastal residents and forced them into slavery. The site had also been highly productive for growing crops.

Sigurdsson intends to return to Tambora in 2007 to find the palace and the rest of the village. He will conduct a detailed radar survey of the site using modern, non-destructive techniques to establish the extent of the town and identify target sites for future excavations.

A native of Iceland who now resides in Wakefield, R.I., Sigurdsson is best known for his studies of the eruption of Mount Vesuvius and the destruction of the Roman cities of Pompeii and Herculaneum. In 1991 he discovered tektite glass spherules in Haiti, proving that the massive impact of a meteorite caused the extinction of the dinosaurs.

Two centuries of mystery

The civilization on Sumbawa Island has intrigued researchers ever since Dutch and British explorers visited in the early 1800s and were surprised to hear a language that did not sound like any other spoken in Indonesia, Sigurdsson said. Some scholars believe the language more closely resembled those spoken in Indochina. But not long after Westerners first encountered Tambora, the society was destroyed.

“The explosion wiped out the language. That’s how big it was,” Sigurdsson said. “But we’re trying to get these people to speak again, by digging.”

Some of what the researchers found may suggest Tambora’s inhabitants came from Indochina or had commercial ties with the region, Sigurdsson said. For example, ceramic pottery uncovered during the dig resembles that common to Vietnam.

Origins are unclear

John Miksic, an archaeologist at the National University of Singapore, has seen video of the dig and said he believes Sigurdsson’s team did find a dwelling destroyed by the eruption. But he doubts the Tamborans were from Indochina or spoke a language from that area. If Vietnamese-style ceramics reached the island, it was probably through trade with intermediaries, Miksic said.

During the dig, Sigurdsson’s team found the charred skeleton of a woman who was most likely in her kitchen. A metal machete and a melted glass bottle lay nearby. The remains of another person were found just outside what was probably the front door.

The team included researchers from the University of North Carolina and the Indonesian Directorate of Volcanology.

Weekend's Featured: Housing-Credit Crisis Calls For More Regulations

Housing crises spur demands for return to greater federal regulation and oversight.

A heavier federal hand is reaching into American life as politicians in both parties demand an overhaul of government financial regulation and more protection for homeowners in the face of mortgage woes and a weakening economy.

This rush to regulate also was apparent in the recent crackdown on the airlines, resulting in thousands of grounded flights for safety inspections as the government beefs up its enforcement of existing laws. There have been mounting proposals for tougher government rules to address climate change. High corporate salaries have come under attack on Capitol Hill, as have oil industry profits and rising food costs.

Advocates of more aggressive government action see it as a boon to ordinary Americans struggling in hard economic times. But those favoring a lighter federal touch worry that the pendulum will swing too far toward regulation, stifling economic growth and efficiency. "There's always that danger," said Jack Kemp, former New York congressman, housing secretary in the first Bush administration and 1996 Republican vice presidential nominee. "We do have to be concerned about over regulation."

But even the conservative Kemp, now an economic adviser to John McCain, has come down on the side of more federal involvement to help struggling homeowners. He argues for a plan -- being advanced by the GOP presidential candidate -- to help homeowners under water on their mortgages to restructure their loans. Lenders would have to write off part of the principal and, in exchange, the new loan would be backed by the federal government through the Federal Housing Administration. Designed to help 200,000 to 400,000 people, it is similar, if less ambitious, to plans supported by Democratic candidates Barack Obama and Hillary Clinton. Ideology aside, "I want to keep people in their homes," Kemp said in an interview.

Although President Bush a month ago urged Congress not to overreact to the housing crisis, he has since extended the Federal Housing Administration's reach and empowered mortgage-finance giants Fannie Mae and Freddie Mac to make up to $200 billion more in loans. Treasury Secretary Henry Paulson, unveiled a "blueprint" to increase and consolidate regulation of the financial industry, giving more power to the Federal Reserve -- and possibly creating a new financial-regulation agency with broad reach.

Regulation-overhaul proposals abound in Congress. Allen Sinai, chief global economist for Decision Economics, said the calls for more regulation are a response to anger on the part of ordinary Americans at seeing the value of their homes decline and, in many cases being faced with foreclosure and an inability to refinance, while a big investment bank like Bear Stearns can be helped by the government.

"Our society does often over-respond to such anger with more regulation and it has interfered with the free working of the market," Sinai said. "We need to get some balance -- but we need a changed regulatory framework in the financial arena without a doubt."

Washington policymakers have a history of being slow to recognize a brewing crisis and to let down their guard when times are good. "Politicians are always cheerleaders on the way up," then switch to hunting for culprits when the cycle changes, observed Lawrence Lindsey, a former Bush economic adviser.

If history is a guide, Congresses and presidents don't just tackle problems. They turn them into programs, departments and new regulatory regimes. Huge buildings stand around the nation's capital as monuments to past crisis-management efforts.

- The energy crisis of the 1970s following the Arab oil boycott resulted in the creation of the Department of Energy.
- The Sept. 11, 2001, terror attacks gave birth to the Department of Homeland Security.
- The Great Depression led to a slew of New Deal federal social programs. Many of their successors remain today.
- The Federal Reserve was a response to bank runs in the early 1990s, the Pentagon was a crash construction project to put services fighting World War II under one roof, the Department of Housing and Urban Development owes its 1960s origins to President Johnson's war on poverty and concern about growing inner-city crime.

President Reagan, championing a smaller and more hands-off government, led an effort in the early 1980s to slash regulations and transfer public functions to the private sector. This slackening of regulation continued under the first Bush presidency and the administrations of Democrat Bill Clinton and the current President Bush as the economy kept expanding -- except for recessions in 1990-91 and 2001 -- and more and more people obtained homes.

But that has all changed. Emboldened Democrats who rule Congress and are gunning to reclaim the White House are seeking to put an end to the days of ever-easier standards. Conservative economists argue that free markets do tend to be self-correcting, and government intervention often makes things worse.

"The best thing for taxpayers and for the budget deficit would be if the economy does start pulling out of this recession and starts doing well. Hopefully, maybe that will be the only thing to stop the stampede to do something in Washington," said Chris Edwards, director of tax policy for the libertarian Cato Institute.

Such views are clearly in the minority in a presidential election year where polls show the economy is the No. 1 concern of voters. Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, is the author of a proposal -- headed for a vote before his panel in the coming week -- that would create a new insurance fund guaranteeing up to $300 billion in refinanced mortgages. Backers say it could help between one million and two million people. Could Congress be overreaching? "There's a theoretical danger," said Frank. But he added that "I can't see it happening" given the seriousness of the current situation.

Dollar's Fall Helps Boost Profits

US companies use weak dollar to help boost profits overseas, make quarterly numbers.

The dollar's plunge might be preventing Americans from taking that European vacation this summer, but it could be the very thing saving their 401(k)s from buckling.

Some of the nation's biggest corporate powerhouses -- across all industries -- have used the greenback's retrenchment to shield themselves from slumping profit margins. Declines against world currencies make U.S. products look cheap overseas, and translate into big returns when sales are converted back into dollars.

Take Coca-Cola Inc. for example. Buying a can of Coke cost $1 in the United States, but the equivalent of about $2 in the U.K. -- one reason the beverage giant was able to sail past Wall Street profit projections earlier this week. And they aren't alone: International Business Machines Corp., Google Inc., Caterpillar Inc., and eBay Inc. all rallied this week because of strong overseas profits.

"If you look at some of the companies that had good quarters, they're doing half or more business abroad," said Phil Orlando, chief equity market strategist at Federated Investors. "The weakness in the dollar is a significant benefit in currency translation, and for those companies that are developing products that will create a boost for export activity."

Orlando points out that economic growth in the U.S. will slow to about 1 percent during 2008 -- down from about a 4 percent last year. Economists believe growth is now at its worst rate since the 2001 recession, and don't expect things to pick up until the last half of the year.

By comparison, countries in Europe and along the Pacific Rim are showing robust growth. And many companies, like IBM, have even adjusted their strategy to focus more of the business in areas like China and Brazil to take advantage of the situation.

The dollar is down about 8 percent against the 15-nation euro, and has touched lows against the yen and Great British Pound. One reason for the slide is that the Federal Reserve continues to lower interest rates -- and that makes the dollar less valuable.

Atlanta-based Coca-Cola reported said revenue jumped 21 percent to $7.38 billion during the first quarter. It attributed 9 percent of the increase coming from the dollar's decline against other currencies.

President and Chief Operating Officer Muhtar Kent, who will become Coca-Cola's next CEO, told analysts that he plans to expand the company's overseas operations to help offset some of the sluggishness in its U.S. operations.

Google surprised Wall Street by delivering a 30 percent rise in profit to $1.31 billion, and marked the 12th quarter out of the 15 since the search engine went public that its performance has topped projections. Sales, excluding revenue passed on to partner sites, climbed 46 percent to $3.7 billion. The company said that sales would have been about $202 million lower without business coming from overseas.

Meanwhile, Caterpillar said strong international sales of the company's bulldozers and other heavy construction equipment overcame weakness in North America. Sales grew by 30 percent outside of the U.S., and represented 58 percent of total revenue.

Some economists believe this boost to big companies' earnings won't last too long. Much of the dollar's recent slide is because interest rates have fallen since last year -- and there is speculation the Fed might soon signal an end to rate cuts.

The Fed has cut interest rates by three percentage points since mid-September -- and some economists project they will lower rates by a quarter-percentage point when it next meets on April 30, and hold it there until year end. Economists say the Fed may be worried that lower rates could exacerbate inflation already seen in rising food and fuel prices, and that would hurt everything from consumer spending to corporate earnings.

"There's a lot of strength in the global market, and that's been the ongoing story, but I think we're probably in the final stage of the dollar's decline," said Peter Cardillo, chief market economist for New York-based brokerage house Avalon Partners. "If the dollar strengthens, it will only be to our benefit," he said. "We'll see money flow into the U.S. instead of exiting. And companies will then see sales shift."

Gas Prices Near $3.5 a Gallon, Oil Hits Another Record $117

Gas prices push closer to $3.50 a gallon, while oil hits $117 on Nigeria attack.

Retail gas prices set new records Friday on their seemingly relentless march toward $3.50 a gallon, and diesel prices pushed further above $4 a gallon. Crude futures, meanwhile, surged to a new record of $117 a barrel.

The price of crude oil was pushed higher after a militant group in Nigeria said it had sabotaged a major oil pipeline operated by a Royal Dutch Shell PLC joint venture and promised further attacks on the country's petroleum industry.

A spokeswoman for Shell confirmed that the pipeline was leaking, and said the damage appeared to have been caused by explosives. Nigeria is a major supplier of oil to the U.S. The escalation in crude prices threatened to further boost gasoline costs.

At the pump, the national average price of regular gas rose 2.7 cents overnight to a record $3.445 a gallon, according to a survey of stations by AAA and the Oil Price Information Service. Diesel fuel added 2.2 cents to a record national average of $4.168 a gallon.

The spike in the cost of fuel is hurting consumers already feeling the effects of a slowing economy, a sluggish job market and falling home values. Soaring prices of diesel, which runs most of the world's trucks, trains, ships and heavy equipment, is a major factor pushing food prices higher.

Some analysts expect gas prices to peak near $3.80 a gallon; the Energy Department, in a recent forecast, said prices could average $4 a gallon nationally at times. "I would say that energy prices are having the most profound effect on the economy in recent memory," said Phil Flynn, an analyst at Alaron Trading Corp., in Chicago, in a research note.

Oil, meanwhile, pushed to new records. Light, sweet crude for May delivery rose to a new trading record of $117 in after-hours electronic trading Friday after settling up $1.83 at a record $116.69 a barrel on the New York Mercantile Exchange. It was the fifth day in a row crude prices set new records.

Attacks since early 2006 on Nigerian oil infrastructure by the Movement for the Emancipation of the Niger Delta have cut nearly one-quarter of the country's normal petroleum output, boosting oil prices.

Oil's gains on Friday were limited by the dollar, which strengthened against the euro, sending oil prices lower earlier in the day. A stronger dollar makes commodities such as oil less attractive to investors as a hedge against inflation, and it makes oil more expensive to investors overseas. Analysts believe the weaker dollar is the primary reason oil has soared well past $100 a barrel this year.

Analysts expect the Federal Reserve to cut interest rates several more times this year -- moves that tend to further weaken the dollar -- and reason that those cuts will help propel oil to new records.

Oil is not the only factor driving gas prices, which are also rising because refiners are switching from producing winter grade gasoline to the more expensive, but less polluting, version of the fuel they're required to sell during summer. When they do that each spring, they tend to draw supplies down to low levels as they try to sell off all their winter fuel.

Short supplies of alkylate, a blending component key to the creation of summer-grade gas, also have pushed prices higher. Contributing to the price spike, refiners have been cutting back on their production of gasoline, which has a low profit margin. Refiners have to buy the crude they process into gasoline, and soft demand for gas has prevented them from boosting pump prices fast enough to keep up with soaring crude futures.

"The refining margins were poor last month and, as a result, we've seen these voluntary ... or discretionary refining run cuts," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Ill.

Ritterbusch estimates that the average difference between what refiners pay for oil and receive for the gasoline they make from it stands somewhere between $13 and $15 a barrel. But in some areas, this difference has actually gone negative at times in recent weeks, meaning that refiners "were losing money on each barrel of gasoline produced," Ritterbusch said.

Citigroup Posts $5.1 Billion Loss on Write-Downs

Citi posts another loss on soured debt, but Wall Street relieved it's not worse.

Citigroup Inc. lost $5.1 billion during the first quarter as poor bets on mortgages and leveraged loans lopped billions of dollars from its investment portfolio. Write-downs related to mortgages and turmoil in the credit markets reached about $12 billion, and costs stemming from consumers' credit problems surpassed $3 billion, the bank said Friday.

The most recent quarterly shortfall at the nation's biggest bank by assets was not as massive as the nearly $10 billion loss it suffered in the fourth quarter of last year, though. Shares of Citigroup rose 7 percent in pre-market trading and helped pull other stock futures higher, as many investors had been bracing for even more dismal results. Citigroup's stock has fallen 18 percent since the beginning of the year.

Still, Citigroup essentially lost in the first three months of the year, $1.02 per share, what it made in the same period in 2007 -- $5 billion, or $1.01 per share. Analysts, on average, had expected the New York bank to lose 95 cents per share, according to a Thomson Financial survey.

With big exposure to mortgages and leveraged loans, Citigroup remains at risk for further write-downs. The credit ratings agency Moody's Investors Services on Friday changed its ratings outlook on Citigroup to negative, citing write-downs that were on the high side of its estimates.

In the first quarter, before taxes, Citigroup took $6 billion in write-downs and credit costs on exposure to subprime mortgages; $3.1 billion in write-downs on funded and unfunded highly leveraged finance commitments; a downward credit value adjustment of $1.5 billion related to exposure to bond insurers; $1.5 billion in write-downs on auction-rate securities; and $3.1 in credit costs for consumers around the world.

Still, those write-downs were smaller than the $18.1 billion in write-downs it marked after the fourth quarter. And in another positive sign for investors, total revenue came to $13.2 billion -- about half what the bank pulled in during the first quarter of 2007, but more than the average analyst forecast for $12.8 billion. The bank's revenues were padded by its global consumer segment and its global wealth management business.

The bank ousted CEO Chuck Prince late last year and promoted Vikram Pandit, a former Morgan Stanley investment banker, as it scrambles for cash.

In December and January, Citi raised over $30 billion through sales of assets and stock to outside investors, some of which have been funds run by Asian and the Middle Eastern governments. It also has slashed costs -- with 4,200 job cuts announced in January -- and reorganized the bank's various businesses.

"We are taking the necessary steps to make Citi more efficient while fostering a culture of accountability and teamwork," Pandit said in a statement. "As we move into the second quarter and beyond, we will continue to divest non-strategic assets and allocate capital to the products and regions that will drive increased revenues, enhance the value of our franchise, and ultimately, maximize shareholder value."