New Hopes in WTO Meeting on New Global Trade Pact

A new sense of optimism surrounded WTO negotiations on a new global trade pact Saturday amid hopes of a breakthrough after seven years of deadlock.

Ministers from 35 leading nations headed for meetings hoping to finally bridge their differences, with pressure piling on emerging market countries India and Argentina which have signalled opposition to a proposed deal.

"This afternoon's session will be important. India will be looking to see what it can get out of the session to decide whether to ditch discussions," a diplomatic source told AFP on condition of anonymity.

Ministers from 35 leading economies have been meeting at the World Trade Organization since Monday to discuss cuts in subsidies and import tariffs with the aim of mapping out a new deal under the so-called Doha Round of WTO talks.

The Doha Round was launched in the Qatari capital seven years ago but has stalled because of disputes between the rich developed world and poorer developing nations on trade in farm and industrial products.

The talks this week looked doomed -- like so many others since Doha began in 2001 -- until a breakthrough late Friday saw the biggest powers find common ground on a draft agreement. "I think the situation looks strong. I think we can be very hopeful now," said European Trade Commissioner Peter Mandelson as he left talks late on Friday.

The United States warned that a handful of countries could still torpedo the exercise and Argentina said the draft agreement was unacceptable. "There are a handful of large emerging markets that quite frankly risk unravelling the entire package," said United States Trade Representative Susan Schwab. She added, however, that while there was "more work to do, it is a path forward."

Indian Commerce Minister Kamal Nath has insisted all week that he will protect his country's millions of subsistence farmers and nascent industry, which are shielded from imports by tariffs levied on foreign goods. "We're not very happy with the package, primarily on agricultural issues," said Indian ambassador to the WTO, Ujal Singh Bhatia, on Saturday.

Indian newspaper Business Standard reported Saturday that Nath had threatened to walk out of negotiations on Friday. "We have come with many goodies. We expect to return with many goodies. If not, we'll return with the same goodies we brought," said Bhatia, underlining that India was still ready to walk away.

Mandelson said Friday that he thought the Asian giant would eventually come on board, telling reporters: "I don't think India will be the one to break a world trade round. I really don't." The talks Friday focused on trade in farm and industrial products -- the two main sticking points of a deal -- but attention is set to turn Saturday to the services sector.

The gathering is due to over-run its original programme, which foresaw an end on Saturday, and continue throughout the weekend and early next week, sources said. "My opinion is that the chances of reaching an accord have risen to 65 percent from 50 percent," said Brazil's trade negotiator, Foreign Minister Celso Amorim, who said he had accepted the draft agreement.

The marked turnaround Friday emerged after meetings between seven key trading powers -- the United States, the European Union, Australia, Brazil, China, India and Japan. The talks then widened to a ministerial conference of all 35 key nations invited to Geneva to broker the pact. Anything approved by the 35 parties would still have to be cleared by all 153 WTO member states. A new pact can only be adopted with unanimity.

WTO Director-General Pascal Lamy had warned earlier on Friday that the talks faced failure unless countries showed flexibility and determination. Among new proposals he put forward Friday was a further cut in the US annual farm subsidies to 14.5 billion dollars (9.2 billion euros) and a clause to prevent developing countries from shielding entire sectors from tariff cuts. Diplomats and negotiators had said that Friday would be make-or-break at the end of gruelling week of bargaining that had produced scant evidence of progress.

Weekend's Featured: Fed Unlikely to Raise Interest Rates Despite Hawkish Stance

The tough talk on inflation from Federal Reserve chairman Ben Bernanke and his colleagues is unlikely to lead to a boost in interest rates for now.

Even as central bank officials step up hawkish rhetoric, base rates will likely be held steady at 2.0 percent at a two-day meeting opening Tuesday of the Federal Open Market Committee, most analysts predict.

The Fed appears to be in a box with inflation pressures heating up even as the economy teeters on the brink of recession. The central bank has slashed rates since last September by 3.25 percentage points in an effort to fire up growth, but officials appear to be signaling that cycle of cuts is over, and that inflation is now the biggest threat.

"The Fed is approaching a danger point, in our opinion," said Ethan Harris, senior economist at Lehman Brothers. "It is very unusual for it to contemplate hiking rates when the unemployment rate is steadily moving above its inflation-neutral level. Moreover, the rise in inflation expectations is clearly due to surging commodity prices, not an economic overheating."

David Kotok, chairman of Cumberland Advisors, said the Fed "will not raise interest rates this year, at least not until after the (November presidential) election." Kotok said the US economy is facing a commodity-driven inflation surge rather than a wage-driven push, and that monetary policy would do little to check these prices.

"The energy price shock is not something that the Fed can control," he said. Moreover, he said that because more consumer income is going to pay fuel bills, the effect of high oil prices is "deflationary, not inflationary." Similarly, Kotok said higher food prices would see little impact from rate hikes.

The analyst also said the Fed does not want to risk being seen as injecting itself in politics during a presidential campaign and will most likely refrain from any major actions until the election is over.

"The Fed normally does not raise interest rates preceding a national election," he said. "This time they are a beleaguered body and threatened by politics unlike in any recent period of history. Politics has injected a wild card into the Fed decision making. We expect that the Fed will stay on hold until after the election and keep its profile low in September and October."

From a purely economic perspective, many analysts argue that conditions are too fragile for higher interest rates. The housing crisis remains in full swing and credit markets are still vulnerable to a shock, some argue.

"If the Fed now regrets having lowered the federal funds rate while providing so much liquidity, might raising the federal funds rate now exacerbate the credit crisis and the recession? I think so," said Ed Yardeni at Yardeni Research.

Still, Bernanke and other Fed officials have been signaling they will take steps to keep inflation expectations from getting out of control. Bernanke said earlier this month that any shift in public expectations in inflation could be self-fulfilling by prompting workers to demand higher wages and businesses to pass on price increases.

"It's 'high noon' and Sheriff Bernanke is waiting with gun holstered, waiting for rapid inflation," said Scott Anderson, senior economist at Wells Fargo. "The problem is he may actually have to do battle if oil prices do not recede or stabilize soon. I call this a problem, because I'm not sure if the town is ready for this event, so soon after Sheriff Bernanke had to chase off the financial market crisis gang from taking over the town."

Some say the Fed is trying to "jawbone" public expectations in what amounts to a bluff on hiking rates. "The Fed is now battling inflation expectations, not inflation itself," said Joel Naroff at Naroff Economic Advisors.

"The first step in that war is jawboning, which is going on like crazy. We will not likely see the next action, rate hikes, until late in this year at the earliest." Naroff said the latest economic data "do not tell us the economy has stabilized to the point where the Fed would have any cover to raise rates."

Weekend's Featured: Oil Summit Looks for Oil Prices Solution

Oil Powers and Consumer Nations Meet on Sunday to Tackle Rising Oil Prices.

Leaders of global oil powers and consumer nations gathered in Jeddah on Sunday seeking ways to control spiralling oil prices seen as a mounting threat to the world economy. Saudi Arabia vowed on the eve of the meeting to release more crude as the price of a barrel hurtles toward 140 dollars, compounding inflation fears of countries reeling from record prices for staple foods.

Oil markets have lurched by up to 10 dollars a day in recent weeks, falling last week after China increased fuel prices, but many analysts expect new attacks in Nigeria to add to tensions this week.

While governments have highlighted refining shortages and increased demand, producer nations say action has also got to be taken to rein in "speculators" who they say have played a key role in the doubling of a price of a barrel over the past year.

"What is bringing us together is a sincere wish to be responsible," Saudi Arabia's Deputy Petroleum Minister Prince Abdulaziz bin Salman told a press conference late Saturday. Saudi Arabia has already announced it will increase output by 200,000 barrels a day to 9.65 million a day. "We will meet demand," the prince vowed. "If demand requires more crude, we shall sell it."

But Saudi Arabia is one of the nations that wants action against "speculators" and its gesture in increasing production has not been matched by other members of the Organization of Petroleum Exporting Countries (OPEC) which accounts for about 40 percent of world output.

OPEC president Chakib Khelil said even that increased production was "irrational and illogical". A Saudi source said there is scope for other countries to follow however. "Some people believe there is one million barrels of spare capacity within OPEC outside Saudi Arabia," the source told reporters. "Saudi Arabia has two million so all together that is three million." World production is currently just over 80 million barrels a day.

But more pressure for increased supplies is expected at the summit. German Economy Minister Michael Glos has called for a speedy increase in supplies. "We need more oil in the world market quickly in order to stop the spiralling prices at the gas pumps" which have passed a "limit" acceptable to consumers, the minister wrote in an article in the Sunday newspaper Bild am Sonntag.

British Prime Minister Gordon Brown, the senior western leader at the summit, has called for a "new deal" between consumers and producers. He wants producer nations to "invest in countries like ours, and oil consumers like us with good companies, with good technology and skills can invest in the oil-producing countries."

Brown said in an interview with The Guardian newspaper that the world was going through "the biggest of all three oil shocks" and called it "the downside of globalisation." He predicted that "the world is going to have to build 1,000 nuclear power stations."

US Energy Secretary Samuel Bodman insisted meanwhile that there is nothing to back accusations that "speculators" had pushed oil prices to their record levels. "There is no evidence that we can find that speculators are driving futures prices," Bodman told a press briefing in Jeddah.

"It is clear that financial markets have seen unprecedented movement of capital into commodities in recent years. Our view is that this capital is following the market upward, it is not leading that movement."

OPEC has argued that speculation and the weak dollar are behind the record prices. Bodman said: "Fundamentally tight market conditions in our view are the major driver of the dramatic price increases that we have seen over the last five years, and particularly in recent months."

Weekend's Featured: Wall Street Awaits Hawkish Fed Message

Struggling Wall Street Is Bracing for Hawkish Fed Message.

Whipsawed by fresh worries on the financial sector, Wall Street enters the summer season with investors in a sour mood ahead of a meeting of increasingly hawkish Federal Reserve policymakers.

Market jitters have risen amid high oil prices, troubles in the banking sector and the prospect of higher interest rates despite soft economic conditions. Auto sector troubles also have intensified. In the week to Friday, the blue-chip Dow Jones Industrial Average skidded 3.77 percent to end at 11,842.69, closing below 12,000 for the first time since March. The Standard & Poor's 500 broad-market slumped 3.10 percent to 1,317.93 and the tech-heavy Nasdaq composite fell 1.97 percent on the week to 2,406.09.

Sentiment faces yet another test in the coming week, when the Federal Open Market Committee headed by Fed chief Ben Bernanke is expected to signal a tougher position on inflation that could eventually mean higher interest rates.

"All eyes will be on the FOMC which is slated to announce its latest policy decision on Wednesday," said Meny Grauman, economist at CIBC World Markets. "The markets seem convinced that the Fed will hold rates at 2.00 percent, but there is considerably more uncertainty about whether the Fed will signal a tightening bias."

The Fed's shift in tone has been closely watched by analysts. After slashing rates by 3.25 points over the past few months in an effort reignite growth, the Fed has signaled that it is unlikely to cut rates further and may boost rates if inflation gets out of hand.

"The Fed is approaching a danger point, in our opinion," said Ethan Harris, senior economist at Lehman Brothers. "It is very unusual for it to contemplate hiking rates when the unemployment rate is steadily moving above its inflation-neutral level."

Market troubles over the past week were fueled by growing worries about the banking sector. Citigroup's warning of more writedowns from real-estate losses and a need for fresh capital from regional bank Fifth Third fueled fears about the sector.

"Each day the Street is seeing similar news -- such as higher energy costs, financial losses, worries of inflation, and continuing housing slumps. The bleak news is keeping investors from stepping into the market," said Colleen King at Schaeffer's Investment Research.

Gerard Cassidy at RBC Capital Markets said bank stocks are headed for a "dead cat bounce" or a brief rebound from their troubles as they recognize losses from real-estate investments. "Though we expect the bank stocks to rally as much as 20 percent into second-quarter earnings announcements, we believe the fundamental trend is still bearish for banks stocks," he said. "Credit problems are expected to deteriorate over the next 12 months, which should drive stock prices lower in the second half of 2008, in our opinion."

Fred Dickson at DA Davidson & Co. said the troubles for banks are being watched because credit needs to flow to help any economic rebound. "Wall Street is growing more concerned over deteriorating profits and weakening balance sheets at not only the regional banks but also at global banks as more institutions 'fess up and state their need for additional capital or their view that the current credit market crisis hasn't materially begun to wind down," he said. Bank stocks, he added "need to bottom out before the broader stock market can begin a meaningful sustainable rally."

To make matters worse, the auto sector is facing its own troubles as Ford and General Motors slash output of profitable but fuel-hungry trucks to adapt to changes in demand in light of record fuel costs. Standard and Poor's cut its credit rating on the two along with privately held Chrysler. "We have renewed concerns about all three automakers' future cash outflows in light of the prospects for US sales for the rest of 2008 and into 2009," said S&P analyst Robert Schulz.

Bonds rallied as investors set aside inflation concerns and looked for safety. The yield on the 10-year Treasury bond fell to 4.137 percent against 4.261 percent a week earlier and that on the 30-year bond eased to 4.702 percent against 4.802 percent. Yields and prices move in opposite directions.

In the coming week, the Fed meeting is the main attraction but markets will also see data on new and existing home sales, durable goods orders and the final estimate of US economic growth in the first quarter.

Weekend's Featured: UN and Saudi to Tackle Oil and Food Prices

UN Chief and Saudi King reach agreement to tackle rising oil and food prices.

UN chief Ban Ki-moon and Saudi King Abdullah reached common ground here Saturday on the need to tackle rising prices of oil and food, and the problem of climate change, a UN spokesman said. The UN secretary general flew into this Red Sea city earlier Saturday for a 24-hour visit and met with the king for one hour after being welcomed by Saudi Foreign Minister Saud al-Faisal.

Farhan Haq, a member of Ban's delegation, described the discussions as "very positive." One one of the main issues raised was "the related crisis involving rising food costs, rising fuel costs and climate change," he said. The two leaders agreed that the three issues "should be dealt with comprehensively," he added.

He restated Ban's view that "rising fuels costs can contribute also further to rising food costs." He added: "What you want to avoid is a cascade of these sort of challenges that affect a wide range of social and economic sectors and then start also creating political problems."

There was no word from the Saudi side on what was discussed. Haq could not confirm press reports that Riyadh was planning to hike its crude production next month by about a half a million barrels per day (bpd) to calm market jitters.

But Ban, on his second visit to Saudi Arabia since March 2007, expressed hope that a Saudi-hosted meeting of oil producers and consumers here on June 22 would yield a productive outcome. The king invited Ban in an apparent bid by the kingdom to burnish its international image as a responsible oil power at a time when it is facing criticism, particularly in the United States, over skyrocketing crude prices.

Saudi Arabia, by far OPEC's biggest oil producer and exporter, decided to convene the June 22 meeting talks after crude struck a record high of nearly 140 dollars last week, stoking fears of surging global inflation and weaker economic growth.

Reports on Friday suggested that the oil giant -- which currently produces 9.45 million bpd -- could decide to raise its crude production to 10 million bpd when it hosts the meeting next week. The New York Times linked the expected plan to what it said were fears by Saudi Arabia that soaring oil prices might trigger a worldwide economic slump and lead to lower oil demand.

Last month, Saudi Arabia announced an increase of 300,000 bpd after a visit by US President George W. Bush, but the kingdom has been under pressure to step up its output further. After Riyadh announced the June 22 meeting, US Senator Charles Schumer, the lead sponsor of a resolution in Congress to block four pending arms deals with the Saudis, said: "We don't need a meeting. We need to pump more oil."

Ban's visit to Saudi Arabia also comes as Group of Eight finance ministers warned in Japan that high oil and food prices posed "a serious challenge to stable growth worldwide" and may worsen poverty and stoke global inflation.

Haq also noted that the UN boss expressed gratitude for Saudi Arabia's contribution of 500 million dollars to the UN World Food Programme appeal to battle the global food price crisis. Other topics that came up during the meeting include regional issues such as the Middle East peace process, Lebanon and the recent peace deal initiated by Somalis's transitional government and its rebel foes, Haq said..

The recent Saudi initiative to foster dialogue among Christians, Jews and Muslims was also raised. In March, Abdullah proposed inter-faith talks among the three religions in a first for the ultra-conservative kingdom, which is home to two of the three holiest shrines in Islam.

A dinner with the Saudi foreign minister was cancelled and instead Ban met with Organization of the Islamic Conference Secretary General Ekmeleddin Ihsanoglu. The UN chief was to wrap up his visit on Sunday with meetings with the Saudi foreign minister and Crown Prince Sultan Abdul Aziz al-Saud.

Weekend's Featured: Speculators Blamed for High Oil Prices

OPEC President Insists That Speculators Cause Steep Rise in Oil Prices, Not Supply.

OPEC president Chakib Khelil again blamed speculators for the steep rise in oil prices Saturday, insisting that supply was not a problem. "There is no problem of supply, the problem is much more linked to speculation," he told a press conference with visiting French ecology and energy minister Jean-Louis Borloo.

He also said the price of oil was closely linked to the exchange rate of the US dollar, which has fallen steeply against other major currencies. "The consensus is that the crisis is not over and there is going to be a continuing impact on the prices of oil because of speculation," he added.

Khelil, who is also the Algerian energy minister, had made similar remarks on Monday in an interview with Spanish national radio. "If OPEC decides to raise production ... these hikes will not really lower the price," he said then. He said Saturday that the cartel of producer nations would not review the situation again until it meets in Vienna on September 9.

Oil prices are still extremely volatile, closing in New York at 127.35 dollars a barrel Friday for light sweet crude for July delivery, up 73 cents on the day but well short of earlier in the week, when crude surged beyond 135 dollars on concerns about tightening energy supplies.

Khelil also linked the diesel fuel market to the rise in oil prices. "This crisis originates from the introduction of ethanol onto the market, which contributed to reduced diesel production," said Khelil. Less diesel fuel production in turn increased oil prices across the board, said Khelil, highlighting the impact of biofuels on oil markets.

OPEC, which pumps 40 percent of the world's oil, is reluctant to bend to demands that it produce more to dampen the red-hot market. Analysts said recent speculative oil trading had been driven by tight global supplies, the weak dollar, unrest in key crude producers like Nigeria, and OPEC's unwillingness to boost output.

FAO and OECD Expect High Food Prices to Sustain

High Global Food Prices Are Expected to Sustain: Report.

High global food prices are a new fact of life, a major report warned on Thursday as 22 countries, mostly in Africa, were listed as being at severe risk from record food and fuel costs. At the same time, there were calls for an end to restrictions on the export of food, with open trade said to be vital in any solution to the record prices which have sparked protests in many countries.

The cost of feeding the family will remain far higher than in the past decade, even though prices should ease in coming years, the Organisation for Economic Cooperation and Development and the UN Food and Agriculture Organisation said in a report on the global agriculture outlook for the next 10 years.

The study was published against a background of protests in countries in Asia, Africa and the Caribbean in response to soaring food prices. The jump in prices has added to the number of people in extreme hunger and some humanitarian aid is "urgently required," said the OECD and FAO joint report. "Current high prices will hit the poor and hungry people hardest," it said.

OECD chief economist Angel Gurria added: "The way to address rising food prices is not through protectionism but to open up agricultural markets." The director general of the FAO, Jacques Diouf, told a press conference that "coherent action is urgently needed by the international community to deal with the impact of higher prices on the hungry and poor."

And in Yokohama, Japan, the head of the UN World Food Progamme, Josette Sheeran, urged "all nations to allow us to purchase food, even if they have controls for humanitarian purposes. This is very critical." "Many nations have imposed export controls. Today we buy 80 percent of our humanitarian food in the developing world," Sheeran noted. In Rome, the FAO listed 22 countries, most of them in Africa, which had high levels of "chronic hunger" and were "especially vulnerable" to rising food and fuel prices.

The OECD-FAO report said hundreds of millions of people were already going hungry before the price increases but that "the numbers of people suffering from extreme hunger have (now) increased even further. "In the short term, humanitarian aid for the populations in countries most severely affected is urgently required," the report said.

Several factors had coincided to drive the "exceptional increases in prices" and some of the pressure would ease in the next few years. But the two bodies warned that food subsidies and trade protection were not the answer, saying that high prices might even be part of the solution by stimulating neglected investment in agriculture in poor countries.

Raising food supplies in poor countries also depended on improved government, infrastructure and property rights, the OECD and the FAO said. The report warned that rising prices had endangered the UN Millennium Development Goal of eradicating hunger and it was strongly sceptical about the benefits of agriculture-based biofuels, which have contributed to higher costs.

However, the "transitory nature" of some of the factors behind the recent trend meant that prices would fall in due course from record peaks. The report pointed to "adverse weather conditions in major grain-producing regions of the world, with spillover effects on crops and livestock that compete for the same land.

"These conditions are not new. They have happened in the past and prices have come down once more normal conditions prevail and supply responds over time." There was "no reason to believe that this will not recur over the next few years," it said, while adding that commodity prices will continue "substantially above" the levels of the past 10 years.

Comparing average prices for 2008 to 2017 with 1998 to 2007, it said beef and pork could be 20 percent higher; wheat, maize and skim milk powder 40-60 percent; butter and oilseeds more than 60 percent, and vegetable oils more than 80 percent.

The report cited changing diets, urbanisation, rising populations and economic growth as underpinning demand in developing countries. The most-threatened countries listed by the FAO are Eritrea, Niger, the Comoros, Botswana, Haiti and Liberia.

They are followed in order of severity by Burundi, Tajikistan, Sierra Leone, Zimbabwe, Ethiopia, Zambia, the Central African Republic, Mozambique, Tanzania, Guinea-Bissau, Madagascar, Malawi, Cambodia, North Korea, Rwanda and Kenya.

British PM Brown Warned of World Oil 'Shock'

British PM Brown Warned Wednesday of World Oil 'Shock' Amid Rising Protests Over Soaring Fuel Prices.

British Prime Minister Gordon Brown warned Wednesday that the world faced an era-defining oil "shock" that required urgent action, as European leaders argued how best to contain protests over soaring fuel prices. "It is now understood that a global shock on this scale requires global solutions," Brown wrote in The Guardian newspaper.

Record oil prices of around 135 dollars a barrel have contributed to protests worldwide over the rise in fuel and food costs, with fishermen and truck drivers taking the lead in Europe, blocking ports and road access to oil depots.

"However much we might wish otherwise, there is no easy answer to the global oil problem without a comprehensive international strategy," Brown said, adding that the problem should be made a "top priority" at the EU summit next month and the gathering of G8 leaders in July. "The way we confront these issues will define our era," he said.

Brown's warning came a day after French President Nicolas Sarkozy urged a Europe-wide cut in consumer taxes on fuel. French consumers pay about 19.6 percent VAT on the price of fuel and Sarkozy renewed his reduction proposal on Wednesday during a visit to Warsaw.

"Should we really apply the same tax rate when the price of a barrel of oil has doubled in one year and tripled in three years? I don't think this is a crazy question to be asking," Sarkozy told reporters in the Polish capital.

But Austrian Finance Minister Wilhelm Molterer gave the idea short shrift. "What will you do when prices fall again, reintroduce the tax? I'd like to hear the political discussions then," said Molterer.

Portugal's economy minister Manuel Pinho called on Slovenia, as current head of the European Union, to hold an emergency debate on the crisis, but Slovenian Prime Minister Janez Jansa said it would have to wait for the scheduled EU summit next month. "There's no sense in calling an urgent meeting since we'll discuss the issue at our regular June session," Jansa said, while adding that the issue would be placed high on the agenda.

While fishermen called off strikes in key French ports on Wednesday, lifting a week-long blockade of the country's largest oil refinery, truckers and farmers stepped up their own protests over soaring fuel prices.

A group of 300 farmers used their cars to block the entry to a Total fuel depot near Toulouse, while around 40 protesting truck drivers slowed traffic to a near-halt on Bordeaux's main ring road. And a policeman and a protestor were slightly injured when riot police using tear gas battled farmers blocking an oil depot near Sete on France's Mediterranean coast.

In Bulgaria, where annual monthly salaries are among the lowest in the EU and inflation rates among the highest, around 150 trucks drove slowly along capital Sofia's ring road, disrupting traffic. Bulgarian bus companies were preparing to launch a nationwide one-hour strike on Friday. In Spain, the main trucking union has called for an indefinite strike beginning June 8.

At a meeting Tuesday of EU agriculture ministers in Slovenia, France and Spain led the call for direct EU economic assistance to the fishing industry. EU member states can currently give their fishermen a subsidy of up to 30,000 euros (47,167 dollars) over a three-year period without seeking the European Commission's approval.

But French and Spanish fishermen consider this too low and have demanded additional help from their governments to be able to cope with the sharp increase of diesel prices. Italian, Greek and Portuguese fishermen have threatened to strike later this week.

The Netherlands and Portugal however expressed scepticism, arguing for a long-term solution for the fishermen, including modernising their fleets and increasing competitiveness. "Short-term solutions are the most popular in political terms, but they have no lasting effect," said Portuguese Agriculture Minister Jaime Silva.

Weekend's Featured: Carbon Trading Could Reach 2 Trillion Euros by 2020

Global Market in CO2 Emission Rights Could Be Worth 2 Trillion Euros by 2020.

The global market in CO2 emission rights could be worth two trillion euros (3.14 trillion dollars) by 2020 if the United States joins the scheme, analysis group Point Carbon said on Thursday.

The United States, which has not ratified the Kyoto Protocol that calls for the mechanism, could in 2020 account for 67 percent, or 1.25 trillion euros, of emissions rights if it decided to introduce a US emissions trading system, the Point Carbon study said.

Carbon dioxide (CO2) is one of the main greenhouse gases blamed for climate change. The carbon market is aimed at encouraging industries to invest in clean technology and buy emissions rights from others that have a surplus.

The second-biggest market would be the European Union -- so far the only one in existence -- and would account for 23 percent of emissions rights, the study showed. The total transaction volume forecast would be 38 billion tonnes of carbon dioxide equivalent for the United States and nine billion tonnes for the EU.

The calculations are based on an assumed carbon price in 2020 of 50 euros per tonne, twice the current price in Europe. They also assume that a so-called cap-and-trade scheme will have been introduced in the United States by 2020 and that the EU will have introduced a 25 percent reduction target for emissions, including those from aviation.

The calculations assume that trading schemes will have become operational in Australia, New Zealand, Canada, Japan, Korea, Mexico and Turkey.

Weekend's Featured: Biofuels Must Not Threaten World Supply of Food

EU Official: Biofuels Must Not Deprive the World's Poor of Food, More Environmentally Friendly Biofuels Are Needed.

Biofuels must not deprive the world's poor of food, a senior European official said, as he proposed a greater focus on second-generation biofuels that would be more environmentally friendly.

Guenter Verheugen, a vice president of the European Commission, was speaking against a background of growing doubts about whether the European Union should continue a policy of elevating biofuels to an environmental priority.

"It makes no sense to make car fuel from plants that ought to provide human and animal food," said Verheugen in the Bild am Sonntag newspaper, extracts of which were made available Saturday.

The accent should be instead on research into second-generation biofuels, "for example technology using hydrogen," added Verheugen, who is the EU commissioner responsible for enterprise and industry.

The biofuel industry fears the controversy could inhibit research into second-generation biofuels which are environmentally more friendly since they would be made from non-edible agricultural waste such as straw. "What matters to the commission is sustainable development," Verheugen said. "It will not work if production of basic foodstaffs is hindered or tropical forest is cut down" for biofuels.

The 27-nation European Union wants biofuels to make up 10 percent of all EU vehicle fuel by 2020, but the target has come under fire in the face of soaring global food prices that have hit poor countries particularly hard. Biofuel development is part of a wider package to reduced EU greenhouse gas emissions by 20 percent by 2020 and to reduce dependence on fossil fuels.

Japan Giving Loans Up to $4.8 Billion

Japan plans to extend up to 500 billion yen (4.8 billion dollars) worth of low-interest loans to developing countries over the next five years to help them fight global warming, a report said Thursday.

The first batch of the new loans would go to Indonesia and total some 20-30 billion yen, the Nikkei economic daily said, adding Nigeria and Guyana are also candidates of aid recipients in the future.

Japan's government plans to provide the loans for alternative energy projects such as wind and solar power generation, the installation of energy-saving equipment at power plants and forestation projects, it said.

The new yen loans would carry annual interest rates of 0.4-0.5 percent, substantially lower than the already low interest rates of some 1.0-1.2 percent now charged on 40-year loans provided by Japan, the Nikkei said.

Japan is hoping to shape the course of negotiations on a new climate treaty, which would cover the period after the Kyoto Protocol's obligations expire in 2012, when it hosts July's summit of the Group of Eight rich nations.

The Nikkei said Tokyo hoped to win support for its plan from nations receiving the yen loans. In talks on a post-Kyoto treaty, Japan has pushed hard for a "sectoral" approach to global warming, in which each industry would have its own efficiency targets.

Weekend's Featured: Biodiversity Loss Wipes Out 6% World GNP, Reducing Wildlife Populations

Biodiversity Loss is Costing the World $3.1 Trillion a Year or 6% of Its GNP.

The destruction of flora and fauna is costing the world two trillion euros (3.1 trillion dollars) a year, or six percent of its overall gross national product, according to a report trailed by German news weekly Der Spiegel.

The European Union and German environment ministry-led research, entitled "The Economics of Ecosystems and Biodiversity," will be presented on Monday at the ninth conference of the UN Convention on Biological Diversity in Bonn.

In its edition out Monday, Der Spiegel will present extracts from the paper, with the study's lead author, Pavan Sukhdev, a senior figure with Deutsche Bank in India, writing that "the world's poor bear the brunt of the cost."

Der Spiegel also says that German Chancellor Angela Merkel will announce a sharp increase in German funding to combat deforestation in line with Norway, which ploughs 500 million dollars annually into forest retention.

Deforestation -- a huge factor in species loss and global carbon emissions contributing to climate change -- is a central theme of this year's conference in Bonn, formerly the capital of West German.

One in four mammal species, one in eight among birds, a third of amphibian creatures and 70 percent of all plant life made the most recent endangered list issued by another UN agency, the World Conservation Union (WCU).

Wildlife Populations Fall Globally

In the meanwhile, the world's wildlife populations have reduced by around a quarter since the 1970s, according to a major report published Friday by the WWF conservation organization. Marine species have been particularly hard hit as the human population booms, while numbers of birds and, fish and animals have also gone down, said the WWF in a report.

The study comes ahead of next week's UN convention on biological diversity in the former West German capital Bonn, which will discuss aims to achieve a "significant reduction" in the current rate of biodiversity loss by 2010.

The WWF, the world's largest independent conservation body, said it was "very unlikely" that the UN would meet its targets, despite the decline appearing to flatten off in recent years. The WWF's Living Planet Index, which tracks the fortunes of nearly 4,000 populations of 1,477 vertebrate species from 1970 to 2005, showed an overall decline of 27 percent.

Over-fishing and hunting, along with farming, pollution and urban expansion, were blamed. WWF director general James Leape warned: "Reduced biodiversity means millions of people face a future where food supplies are more vulnerable to pests and disease and where water is in irregular or short supply.

"No one can escape the impact of biodiversity loss because reduced global diversity translates quite clearly into fewer new medicines, greater vulnerability to natural disasters and greater effects from global warming."

The marine LPI showed a 28-percent decline with a dramatic drop between 1995 and 2005. The overall freshwater LPI fell by 29 percent between 1970 and 2003. Swordfish numbers plummeted by 28 percent in the decade from 1995, while ocean birds suffered a 30 percent decline since the mid 1990s.

"Biodiversity underpins the health of the planet and has a direct impact on all our lives so it is alarming that despite an increased awareness of environmental issues we continue to see a downward trend," said Colin Butfield, head of campaigns at WWF-UK.

The British-based conservation charity also warned that a failure to halt biodiversity loss would have negative impacts for humans. In the next 30 years, climate change is expected to become a significant threat to species, said the WWF. The declines come at a time when humans are consuming ever more natural resources, and are now using 25 percent more than the planet can replace, it said.

The WWF urged governments to take urgent action to reduce the rate of biodiversity loss by 2010, calling for cross-ministry protection plans. They should also set up financial incentives to support the establishment and maintenance of protection zones, it said.

"The fact that human activities have caused more rapid changes in biodiversity in the last 50 years than at any other time in human history should concern us all," said Britain's Biodiversity Minister Joan Ruddock.

"Supporting wildlife is critical to all our futures and the UK will continue to give strong support to international action. The rate of wildlife loss needs to be slowed both in the UK and internationally. International action is needed to tackle the worldwide decline in wildlife, with all countries working together," he said.

Weekend's Featured: 2008 Olympics Increases China's Energy Demand

The 2008 Beijing Olympic Games will boost China's rampant demand for energy, threatening to push world oil prices beyond current record heights, according to industry analysts.

Crude prices surged last week to strike a record high above 126 dollars per barrel, boosted by tightening supplies, underinvestment in global production and ongoing unrest in key producer Nigeria. Runaway oil prices were also partly fuelled by "stockpiling in China to prevent shortages ahead of the Olympics," said Lehman Brothers analyst Edward Morse.

Asian economic powerhouse China, the world's second most voracious energy consumer after the United States, stages the Summer Olympics from August 8-24. Industry experts reckon that China, which enjoys record-breaking economic growth, will need even more crude oil to provide the facilities, transportation and energy supplies that are required to power a successful Olympic Games.

"In the lead-up to the Games you are going to see pretty heavy spending in infrastructure -- building roads, residential property, hotels -- and this is typically energy intensive," said BNP Paribas analyst Harry Tchilinguirian.

Demand for kerosene, or jet fuel, was also expected to rocket as spectators and athletes fly in and out of the Chinese capital city along with untold numbers of tourists. "The other aspect is increased demand for transport fuel -- jet fuel for getting people there (to Beijing), not just from the outside but also from within China," Tchilinguirian said.

China, the world's fourth-largest economy, grew at a breakneck pace of 11.9 percent in 2007 and chalked up quarterly growth of 10.6 percent in the first three months of 2008. "China has been spending quite a bit on infrastructure to accompany its record-breaking growth but on top of that, some of this is related to the preparation of the Olympics," Tchilinguirian added.

Philip Andrews-Speed, professor of energy policy at Dundee University, said the Chinese authorities would be desperate to avoid oil shortages during the Games when the world's eyes will be on Beijing.

"They do not want China to be seen to be having shortages of supply of oil products across the country during the Olympics for a matter of image and (this is) tied to social stability because people might get a bit upset.

"They are going to make every effort to make sure that the refineries are operating to the full extent and that there are no blockages to imports," he said. "They will use ... any reasonable tax incentives like removing taxes in oil imports to make sure there is enough oil in the country during the coming months."

According to the International Energy Agency, China is on course to become the world's biggest energy consuming nation shortly after 2010. "China is a driver for world oil demand," said Andrews-Speed, adding that "everything is pointing to more pressure on demand."

Dollar Plunges While Oil and Gold Hit New Records

US Dollar Plunged to a Record Low Against the Euro While Oil and Gold Hit New Records.

The dollar slumped to a fresh record low point against the euro on Friday and a near three-year trough versus the yen on increasing worries about the weakness of the US economy, traders said.

In early European trading, the euro reached a historic peak of 1.5239 dollars. It later stood at 1.5205 dollars compared with 1.5197 in New York late on Thursday. The dollar on Friday dropped to 104.23 yen -- the lowest level since May 2005. It later stood at 104.39 yen compared with 105.30 late Thursday.

The weakness of the dollar also benefited commodities, with oil and gold prices striking record highs, dealers said. New York crude reached a record 103.05 dollars per barrel and gold hit a best-ever 976.32 dollars per ounce.

A weak US currency boosts demand for dollar-denominated raw materials because it makes them cheaper for buyers using stronger currencies. However the increased demand eventually leads to higher prices.

US central bank chief Ben Bernanke had warned on Thursday that the American economy faced more complex problems than before the last recession. "Following Bernanke's testimony yesterday, which implied deeper and more sustained real rate cuts may be required, concerns have mounted over US growth and there has been a shift back towards the safer haven currencies," said ABN Amro analyst Melinda Smith.

Federal Reserve chairman Bernanke said the US economy faced a different and more complex set of issues than before the recession of 2001. "We are facing a situation where we have simultaneously a slowdown in the economy, stress in the financial markets and inflation pressure coming from these commodity prices abroad," Bernanke told Congress.

"Each of those things represents a challenge. We have to make our policy in trying to balance these different risks in a way that will get the best possible outcome for the American economy," he added.

Financial markets have been turbulent since last year over rising mortgage defaults by Americans with poor credit histories, raising concerns over a credit crunch as financial institutions cover their losses.

But Bernanke's remarks surprised some dealers after a month dominated by positive signs. The market had been digesting hefty rate cuts by the Fed and news that credit ratings for major bond insurers would remain steady. "The market's insecurity over the US economy strengthened" after Bernanke's comments, said Masaki Fukui, a senior market economist at Mizuho Corporate Bank.

Over $13.4 Billion in Deals Reached in Singapore Airshow

Singapore Airshow Organizers Say the Exhibition Sees Over US$13.4 Billion Turnover in Aircraft and Related Equipment This Week.

The Singapore Airshow saw more than 13.4 billion US dollars in sales of aircraft and related equipment this week, thanks to a booming aviation market, organisers have said. Another 2.6 billion dollars was generated from contracts for facilities and other services, they said in a statement issued late Friday, at the inaugural event.

The small but wealthy city-state decided to host its own airshow after organisers of the Asian Aerospace fair moved the event to Hong Kong after a long presence here. The biggest deal announced at the airshow was an order for 56 Boeing 737-900ER aircraft worth more than 4.4 billion dollars by Indonesian low-cost carrier Lion Air. Indonesian flag-carrier Garuda ordered four Boeing 777-300ERs worth 1.0 billion dollars and business jet operator BJets signed a 600-million-dollar contract for 40 Cessna and Hawker jets.

US-based Boeing's European rival said it had secured orders for five A330-200F cargo planes from BOC Aviation, an aircraft leasing firm fully owned by Bank of China. The deal is worth a total of 877 million dollars at catalogue prices.

Brazilian aircraft-maker Embraer said US aircraft leasing firm Jetscape Inc has ordered 10 E190 jets, with options for another 10 and purchase rights for 10 more. The deal is worth 375 million US dollars at list price. It could be worth up to 1.1 billion dollars if all the options and purchase rights are confirmed, Embraer said at the airshow.

Embraer also said Australia's Virgin Blue has signed a contract to exercise four purchase rights for E190 jets worth 150 million US dollars. This takes the number of firm orders from Virgin Blue to 24, consisting of six E170s and 18 E190s.

"The new deals announced at the airshow demonstrate once again that Asia is the world's fastest-growing aerospace market," said Jimmy Lau, managing director of the event's organisers. He said 70 percent of the exhibitors have already confirmed bookings for the biennial event in 2010 being held at a new seaside location near Changi Airport.

Lau promised "an even bigger and better" show in 2010, saying this year's event already had 40 percent more exhibition area than Asian Aerospace which was last held in Singapore in 2006 and saw 15.2 billion dollars in deals. More than 30,000 accredited industry professionals visited the airshow and numbers were expected to was opened to the public at the weekend.

Organisers have dubbed the Singapore Airshow as Asia's biggest aerospace event because it has civilian and defence components, while Asian Aerospace has focused on commercial aviation after its shift to Hong Kong.

More than 800 exhibitors from 42 countries, including US defence firms Lockheed Martin and Northrop Grumman, took part in the airshow that featured the latest warplanes, unmanned aerial vehicles and executive business jets.

"Asia is a vital market for us and it has been our constant endeavour to establish and strengthen our ties with this dynamic region," said Bernard Buisson, Singapore managing director for European aerospace giant EADS which owns Airbus.

Joe Song, Asia Pacific vice president for business development at Boeing's defence arm, said the presence of "sophisticated customers", emerging security threats and military air transport requirements for humanitarian operations make the region an attractive market.

Gulf States Urged to Cut Money Supply

IMF Official Said Gulf Arab States Need to Tighten Money Supply to Curb Inflation on Wednesday.

Gulf Arab states must apply strict fiscal policies by tightening money supply to curb inflation, which has soared because of supply constraints in housing and commodities, an International Monetary Fund official said on Wednesday.

"Fiscal policy is the only effective instrument" to control inflation in Gulf Cooperation Council states, Gene Leon, deputy chief of the IMF's GCC division, told a conference on inflation in the oil-rich region. GCC partners Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates should "reduce the amount of money available to spend," Leon said.

The IMF expects overall GCC inflation to rise to six percent in 2008, but consumer prices in some member states, like the UAE and Qatar, have run at higher levels, registering 9.3 percent and 11.8 percent respectively in 2006. Most final inflation figures for 2007 have not been released, but the IMF had expected inflation to drop to eight percent in the UAE and increase slightly to 12 percent in Qatar.

Leon said that GCC countries, currently enjoying windfall oil revenues on the back of record-high crude prices, are experiencing "high aggregate demand resulting from domestic investments and increased government expenditure," in addition to high credits available to the private sector. This high demand faces supply constraints caused by "tightness in the housing market and a rapidly increasing population due to an inflow of expatriates," he added.

The rising cost of housing has been the driving force behind inflation in the UAE and Qatar, while the increase in prices of non-food goods and services were the major factors fuelling inflation in Saudi Arabia and Kuwait, he said.

Saudi Arabia saw inflation officially exceed four percent in 2007 -- in contrast to several years of almost stagnant low inflation. Five of the six members of the oil-rich Gulf bloc also have their currencies pegged to the US dollar, which limits classic monetary policy tools like increasing interest rates, Leon said.

The peg to the weakening US currency has also forced monetary authorities in most GCC countries to track the US Federal Reserve in cutting interest rates despite their robust economies, unlike the slowing US economy.

UN Development Programme regional representative Khaled Alloush slammed the decision of GCC countries -- except Kuwait -- to maintain the currency peg to the dollar, saying it forced unwise monetary policies. "Central banks just follow the Fed in cutting interest rates when they need to increase interest rates to reduce demand," he told the conference.

But Leon said that the choice of an exchange rate regime "should be motivated by more than just the need to reduce inflation." He pointed out the need to bear in mind the exchange rate regimes used by trade partners, implying that they are mostly dollar-pegged.

The IMF official argued that a revaluation of local currencies -- an option being discussed following the dollar's depreciation -- would have a short-lived effect on prices adding inflation was fuelled by supply-side factors.

Several GCC countries have introduced dramatic wage hikes -- up to 70 percent in UAE federal government departments -- in a bid to combat the impact of inflation, but there are fears this could push up demand and add to inflationary pressures.

Oil Prospect at $100 a Barrel in 2008

Oil prices of near 100 dollars per barrel caused alarm in consuming countries in 2007 and analysts forecast another tense crude market this year with triple-figure records a real prospect.

Despite a murky outlook for the world economy, crude prices are seen settling at elevated levels, spelling more pain for consumers and a steady flow of petrodollars for the world's oil exporters. From a low point of just below 50 dollars per barrel in January, prices doubled in 2007, hitting 99.29 dollars a barrel on November 21, an all-time record.

Oil forecasting is a notoriously difficult business, but few had expected such a run-up -- besides an analyst at investment bank Goldman Sachs who famously foresaw early in 2005 a "super spike" in prices to 105 dollars.

At the start of 2008, geopolitical risks, with unrest in Pakistan foremost among them, are driving prices back towards the 100-dollar level, with a colder-than-usual winter in the northern hemisphere another danger. "Political unrest around the world has once again become a major factor" for the oil market, said David Johnson, an analyst with Macquarie Securities.

Tension between the United States and Iran, the second-biggest producer in OPEC, had helped push prices higher in the last two years with traders fearful of US military action against the Islamic republic. But Iran was expected to fade as a concern in 2008 after a recent US intelligence assessment said the country had shelved its disputed nuclear weapons programme in 2003.

Oil prices ended the year Monday with a modest dip on the eve of the New Year's Day market holiday amid concerns about instability in Pakistan after last week's assassination of former Pakistani opposition leader Benazir Bhutto. New York's main contract, light sweet crude for February, fell two cents to close at 95.98 dollars, while in London, Brent North Sea crude for February delivery slipped three cents to 93.85 dollars.

Goldman Sachs, one of the most active banks in the energy market, raised its price forecasts for 2008 by 10 dollars on December 12, with average benchmark US prices now seen at 95 dollars. The price could reach 105 dollars by the end of 2008, it said.

The London-based Centre for Global Energy Studies sees an average of about 90 dollars in the first half of the year, with a spike to 100 dollars a possibility. "There are conditions in which we would see well over 100 dollars per barrel, such as a cool winter, tightness of OPEC supplies, or non-OPEC supply not growing as much as predicted," said CGES analyst Leo Drollas.

Analysts at investment bank Merrill Lynch pointed to upside risks to prices in early 2008 in research published on December 13 and they predicted average oil prices this year of 82 dollars. Some analysts said softening global economic growth, particularly in the United States, could help temper price gains, however.

"I do have some concerns about demand," said a Washington-based analyst for oil consultancy PFC Energy, David Kirsch "The global economy is weak ... and that's going to be the worry that potentially keeps you from 100 dollars," he said. The United States has been battling crises on two fronts. In the housing sector, prices are falling sharply and an increasing number of people are defaulting on home loans.

The 13-member Organisation of the Petroleum Exporting Countries is likely to remain under pressure to bring down prices this year, but the cartel shrugged off calls for more crude at a December meeting in Abu Dhabi. It is held responsible by many for the surge in prices in 2007 by restricting supplies to reduce stock levels in industrialised countries. "OPEC has not been pumping enough. It's as simple as that," said Drollas.

Kirsch at PFC said 2007 was the year of "the reemergence of OPEC" after many had said the influence of the organisation, which pumps 40 percent of world oil, had waned. He also said the "financialisation of oil," or the use of oil as an investment product for speculators and even pension funds, was a key theme of 2007 that was set to continue in 2008.

"It started late last year. We're now seeing different types of investors," he said. "Before it was primarily hedge funds, now we're seeing pension funds, which are very conservative investors, taking long-term positions in oil as part of a larger portfolio strategy." OPEC members have railed against the role of "speculative" money, which they blame for volatility and high prices.

IMF: 2008 Global Growth Forecast to be Revised

The International Monetary Fund said Thursday it would likely revise lower its 2008 estimate of world economic growth due to financial market turmoil and surging oil prices.

"Global growth in 2008 will likely be lower than we anticipated in the World Economic Outlook," IMF spokesman Masood Ahmed said at a news conference. In its twice-yearly World Economic Outlook (WEO), published in October, the IMF predicted the world economy would grow by 4.8 percent next year.

"Recent developments in both oil and financial markets have further dampened the global outlook since the release of the World Economic Outlook in October because some of the downside risks that we had identified then have materialized," he said. The revisions will be made in December and announced in early January, he said.

The forecasts for 2007 will likely be revised upward, he suggested, citing strong performances in several emerging-market countries in the third quarter. The latest WEO forecast global growth at a robust 5.2 percent pace.

Asked about the US Federal Reserve's monetary policy and the possibility of a new interest rate reduction at the next meeting of Fed policymakers, on December 11, the IMF spokesman hinted that such a move was unnecessary. "The Fed's cumulative 75 basis-point easing so far has been well-timed and we think should support growth while maintaining low inflation," he said.

PetroChina Becomes World's Top-Valued Company

PetroChina became the world's largest company by market value Monday, worth about one trillion dollars -- double the value of ExxonMobil -- as its shares surged in their debut on the Chinese mainland.

The milestone underlined the ongoing boom on Chinese markets, which have been flooded with ready cash brought by hungry investors who have disregarded warnings that the China bubble is destined to burst eventually.

Asia's top oil and gas producer already traded in Hong Kong and New York, but PetroChina's new shares made their debut Monday on the Shanghai bourse after the largest initial public offering ever on the Chinese mainland.

The shares, priced at 16.7 yuan for the IPO, touched a high of 48.62 yuan (6.5 dollars) shortly after the market's opening, an increase of 191 percent that valued the firm at about 600 billion dollars more than ExxonMobil. Its shares closed at 43.96 yuan -- still up 163 percent, but in Hong Kong a broader market slide left PetroChina down 6.63 percent to 18.30 Hong Kong dollars (2.44 US dollars) at mid-day.

PetroChina's market capitalisation shot past the 1.1 trillion dollar mark in early trade before broader market losses of 2.48 percent in Shanghai prompted a retreat to one about trillion dollars.

In terms of earnings, however, PetroChina does not even make it into the top 50 companies of the world, raising a red flag both about the valuation of the firm and the overall sustainability of the Chinese stock boom.

"Stock prices are rising too fast," said Yi Linming, Shanghai-based analyst with Industrial Securities.

PetroChina's share price skyrocketed despite a warning from Premier Wen Jiabao that the Chinese government would adopt the necessary policies to rein in the sizzling stock market.

"The government will take measures to prevent asset bubbles and avoid huge fluctuations in the stock market," Wen told reporters, according to the China Daily website. "It is the government's responsibility to ensure a fair, healthy and transparent stock market," he was quoted as saying.

The key Shanghai index surged 130 percent last year and is up nearly 120 percent so far this year. Many companies are trading up to 60 times earnings, much higher than many shares on other international bourses.

Zhu Zhiyong, analyst with Golden Sun Securities based in Shanghai, said investors had chased the firm's price too high. "I think it's a bit risky for individual investors to buy in at the moment because we don't see much growing space," Zhu said.

Wu Feng, an analyst at TX Investment Consulting Co, said a more "reasonable" valuation for PetroChina shares was around 35 yuan. "Its opening price exceeded our estimates," he said.

Despite the massive surge in PetroChina shares on Monday, the Chinese state will maintain a firm hand in the company, controlling an 86 percent stake via parent China National Petroleum Corporation. Regulators have encouraged strong Chinese firms to list on home markets in the hope they can improve the quality of listed companies and deflate stock prices which have risen too fast.

"Through these listings, the intention of the government to try to control the market is quite clear," Guo Feng, an analyst with Northeast Securities based in Shanghai, said ahead of Monday's opening.

The IPO of PetroChina, which raised nearly nine billion dollars in its sale of four billion shares, is the world's biggest this year and the largest in mainland China's history.

Stocks Slide as Fears Stalk Markets

Asian stocks suffered heavy losses in early trade Friday after initial euphoria on Wall Street over a US interest rate cut faded quickly as fresh credit jitters rattled global markets.

Indices around the region fell by as much as nearly three percent after tumbles in New York and Europe on renewed worries about the fallout from the mortgage and credit woes that wreaked havoc on world markets in August. In early trade, Hong Kong slumped 2.9 percent, Tokyo fell 1.7 percent, Shanghai shed 2.0 percent, Sydney dropped 1.8 percent and Singapore was down 2.0 percent.

The downturns came after oil giant ExxonMobil missed Wall Street profit forecasts and analysts at CIBC World Markets downgraded Citigroup and Bank of America, the two biggest US banks, on worries about a credit squeeze. CIBC said Citigroup needed to raise 30 billion dollars in capital over the near-term, also dampening the market sentiment.

"As the fallout from the subprime loan problems will likely linger for a while, the market may remain jumpy on reports related to these problems," said Kazuhiro Takahashi, a manager of equities marketing at Daiwa Securities SMBC.

Elsewhere in the region, Jakarta slumped 2.1 percent, Kuala Lumpur shed 1.0 percent and Taipei dropped 2.1 percent.

Signs that major US banks may be more severely affected by the subprime loan crisis that previously expected took a heavy toll on financial stocks. A surge in crude oil prices above 96 dollars a barrel for the first time Thursday only added to the market's nervousness despite a later pullback.

New York's Dow Jones index lost 2.6 percent Thursday, more than erasing the previous day's gains sparked by the Federal Reserve's latest move to try to contain the fallout from the mortgage and credit market troubles.

Analysts said that Citigroup's woes, following a massive third-quarter loss at Merrill Lynch, underscored concerns that the financial sector will feel more pain from the housing crisis and its spillover.

"The downgrade of Citigroup today was a stark reminder that the full extent of exposure to the loan problems may not be known," said US-based analyst Gregory Drahuschak at Janney Montgomery Scott. "The market hates this kind of uncertainty. This probably assures that volatility will remain high."

Oil traded higher in Asian trade on Friday but was below record peaks as investors took profit and global stock markets weakened. New York's benchmark light sweet crude was up 47 cents at 93.96 dollars a barrel.

Wall Street's losses wiped out Wednesday's gains triggered by the Fed's quarter-point interest rate cut, which followed a half-point reduction in September to try to cushion the economy from the credit and housing woes.

While most investors welcomed the move, the Fed's accompanying statement dampened expectations for further rate cuts, which usually have an immediate psychological impact on stocks and gradually stimulate economic growth.

Some analysts even questioned whether the Fed should be cutting rates after a strong showing for the US economy in the third quarter and with inflation still a concern and stock prices near record levels. The Federal Reserve injected 41 billion dollars in temporary reserves into the US money markets Thursday to help ease ailing credit markets.

The market will get a better picture of the health of the world's largest economy with the release Friday of a key monthly US labour market report that Wall Street expects to show 80,000 new jobs were created in October.

"Investors are keenly awaiting the jobs data to gauge the outlook for the economy," said Takahashi at Daiwa Securities SMBC. "If economic conditions are solid, they would pave the way for the resolution of the subprime loan problems."

Weekend's Featured: IMF Vows to Move with Times, Boost Role of Developing Countries

The IMF, under pressure to move with the times, backed reforms Saturday to give low-income countries a stronger voice in its decision-making and defended its response to recent financial market upheaval.

Policymakers from the International Monetary Fund also bowed to insistence from member contries that the Fund shore up its shaky finances, pledging to cut costs and boost efficiency.

The commitment came in a final statement issued after a meeting here of the IMF's steering committee, held as the 63-year-old Fund was being pressed to accord greater representation to currently under-represented non-Western countries.

The committee said reforming the IMF "should enhance the representation of dynamic economies, many of which are emerging-market economies, whose weight and role in the global economy have increased."

Such countries should see their voting share increased, the committee said, adding that "the voice and representation" of poor countries would also be strengthened.

It said all elements for an internal reform package, including an increase in the quotas that determine a member's voting rights, should be in place by the time of its next meeting in April 2008.

The IMF in September took an initial step toward overhauling its management structure by raising the quotas for four rising economies, China, South Korea, Mexico and Turkey.

The Fund is now in the midst of a second round of reforms, which was under discussion here.

While the action taken Saturday was hailed by some IMF officials as a clear advance, outgoing IMF Managing Director Rodrgio Rato cautioned that "we are in an interim moment."

"Today there has not been any final agreement," he said, adding that details of the reform still needed to be thrashed out.

Brazilian Finance Minister Guido Mantega earlier in the day implied that the IMF had in fact been slow to act on reform, attributing the hold-up to "resistance to change on the part of developed countries, which are over-represented in terms of voting power."

The distribution of quotas is determined according to complex mathematical formulas. Moves to adjust the share-out have been the subject of sometimes bitter debate, with certain industrialized nations reluctant to give ground to emerging-market members.

The Fund also came in for criticism from the Group of 24 developing countries for what it said was the Fund's failure to foresee the recent meltdown on financial markets, which erupted following a collapse of the US high-risk -- or subprime -- mortgage market.

The G24 said the IMF should perhaps spend as much time monitoring advanced economies, where the turbulence originated, as it does the economies of less developed countries.

"Allow me to point out the irony of this situation," Mantega of Brazil said.

"Countries that were references of good governance, of standards and codes for the financial systems, these are the very countries that are facing serious problems of financial fragility putting at risk the prosperity of the world economy," he said, referring to major industrialized nations such as the United States.

"The Fund had little to say that was practical about this crisis," he said. "It has been excessively cautious in its recommendations. It justifies this caution by pointing to the unprecedented nature of the problems."

But Rato countered that the Fund last April was "already very clearly stating our worries about the subprime segment in the United States."

And at the Group of Eight summit in Germany in June, he said, he spoke in the name of the Fund and had made it clear the IMF was "worried about the complacency and the quality of some of the deals that were being done at the time in the markets."

The IMF, whose mission is to promote international financial stability, is also struggling with its own finances as many newly cash-rich countries repay debt, leaving it without critical interest payments.

The current situation had sparked calls from several committee members, notably from the Group of Seven industrialized powers, for the Fund to streamline its finances.

The committee said Saturday it "recognized" the need for more predictible and stable sources of Fund income, notably from a reduction in administrative costs and greater management efficiency. It said "a new income model" should be drafted for debate at its April meeting.