Jan. 5 (Bloomberg) -- Confidence in the European economy stayed close to a six-year high and unemployment fell to a record low, indicating domestic demand may help sustain expansion in the euro region as export growth eases.

An index of sentiment among executives and consumers in the euro area slipped to 110.1 in December from 110.3 in November, the European Commission in Brussels said today. The region's jobless rate declined to 7.6 percent in November, the lowest since the euro-area figures were first collated in 1993.
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Jan. 5 (Bloomberg) -- European retail sales grew in December at the slowest pace in nine months, a sign that economic expansion is easing, the Bloomberg purchasing managers index showed.

An index of retail sales in the euro economy fell to a seasonally adjusted 52.1 from 53.7 in November, a survey of more than 1,000 retail executives compiled for Bloomberg LP by NTC Economics Ltd. showed today. A level above 50 indicates growth.
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Feb. 14 (Bloomberg) -- Air France-KLM Group, Europe's biggest airline, said third-quarter profit tripled on increased Asian and North American traffic and higher ticket prices.

Net income for the three months ended Dec. 31 increased to 229 million euros ($298 million), or 79 cents a share, from 77 million euros, or 28 cents, a year earlier. Sales rose 5.9 percent to 5.75 billion euros, the Paris-based company said today in a statement.

Chief Executive Officer Jean-Cyril Spinetta, who led Air France's purchase of KLM in 2004, used higher fares and oil surcharges to boost earnings. Air France attracted travelers with bases in Paris and Amsterdam for connecting flights. The airline confirmed its full-year outlook for ``very strong results.'' Some analysts expressed disappointment the forecast wasn't increased.

``Strong demand on the international flights is allowing airlines to raise their fares,'' said Yan Derocles, an analyst at Oddo Securities in Paris who has an ``add'' rating on the shares. ``That combined with stable unit costs is why their results were up.''

Shares of Air France fell as much as 72 cents, or 2.1 percent, to 34.42 euros and were down 1.1 percent as of 11:52 a.m. in Paris. The stock has risen 74 percent in the last 12 months compared with a 77 percent gain for the Bloomberg Europe Airlines Index.

Net income was boosted by 73 million euros after the company reduced provisions for Dutch taxes, Derocles said.
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Feb. 16 (Bloomberg) -- Stock investors who hunt for high yields in Europe are looking everywhere except the U.K., where companies pay the biggest dividends in the world's major markets.

Britain's FTSE 100 Index is lagging behind the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, for a third year. The pound's 13 percent rally against the dollar in the past 12 months and rising interest rates are weighing on earnings and share prices.

The slowdown in profit growth is enough to deter money managers even though FTSE 100 companies' dividend payments relative to share prices are 16 percent higher than those in the 13 countries sharing the euro, according to data compiled by Bloomberg. Dividends for the FTSE 100 are two-thirds more than those of the Dow Jones Industrial Average in the U.S. and are almost quadruple those of Japan's Nikkei-225 Stock Average.

``We are finding better opportunities outside the U.K.,'' said Wouter Weijand, who buys income-producing stocks worldwide for the $2.7 billion ABN Amro High Income Equity Fund in Amsterdam. He has an ``underweight'' position in U.K. stocks: he owns fewer shares than are represented in his benchmark, the Standard & Poor's/Citigroup High Income Index.

Companies in the FTSE 100 pay shareholders a portion of their profit equal to 3.62 percent of the share price, Bloomberg data show. The yield is the highest among Europe's stock markets and exceeds the 3.11 percent yield for the Euro Stoxx 50. Second highest is Italy.
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Feb. 23 (Bloomberg) -- German business confidence fell more than economists forecast in February, providing further evidence economic growth is slowing from the fastest pace in six years.

The Ifo institute's sentiment index, based on responses from 7,000 executives, declined to 107 from 107.9 in January. Economists expected a drop to 107.5, according to the median of 41 estimates in a Bloomberg News survey. The Munich-based institute's index reached 108.7 in December, the highest since records for a reunified Germany began in January 1991.

The euro's 10 percent appreciation against the dollar in the past 12 months may erode German export growth, which last year drove the fastest economic expansion since 2000. An increase in value-added tax on Jan. 1 also threatens to reduce consumer spending. Manufacturing growth lost momentum in January and retail sales slumped, industry surveys showed.

The Ifo's decline was ``expected and is by no means dramatic,'' said Thomas Mayer, chief European economist at Deutsche Bank AG in London. ``After enormous growth in the fourth quarter we were bound to see a slight correction, mainly driven by the VAT increase.''

The economy expanded 0.9 percent in the last three months of the year, faster than the 0.6 percent forecast by economists and the 0.8 percent growth recorded in the third quarter.

Growth may slow to 1.7 percent this year from 2.7 percent in 2006, according to government forecasts.

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the commodity drivers are at work again:

Feb. 26 (Bloomberg) -- European stocks rose for a third day, led by BP Plc, the region's second-largest energy company, and Anglo American Plc as oil gained and metals rallied to a record.

Mining shares in the Dow Jones Stoxx 600 Index are trading at an all-time high as investors bet advances in prices of industrial metals will continue to boost earnings. Energy stocks had their biggest gain in a month.

``We have an overweight exposure to both oil and mining companies,'' said Richard Robinson, who helps oversee the equivalent of $1.8 billion at Jersey-based Ashburton Ltd. ``China's growth story is still there and analysts are starting to increase their estimates for commodity prices.''

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By Sarah Thompson

March 2 (Bloomberg) -- European stocks had the worst week since the beginning of the four-year bull market as efforts by China to restrain borrowing and concern that U.S. economic growth is slowing extended a sell-off in global equities.

``China isn't really the reason, it's more of an excuse'' for the market's slump, said Justin Urquhart Stewart, director at 7 Investment Management in London which oversees just under $3 billion. ``It's acting like a catalyst for all the other issues around including concern about growth in the U.S. economy.''

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March 10 (Bloomberg) -- European stocks posted the biggest weekly advance since December after companies in the region including E.ON AG and Suez SA reported better-than-expected earnings.

E.ON, Europe's largest power company, climbed after it said fourth-quarter profit more than doubled. Suez, the world's second-biggest water utility, rose after posting a 54 percent jump in second-half profit. Alliance Boots Plc soared 17 percent after it received a buyout offer.

Stocks in the region have recouped more than a third of what they lost in a five-day global rout triggered on Feb. 27 by a sell-off in Chinese equities and disappointing U.S. economic reports.

``This week's positive earnings show that more companies might exceed analyst estimates in 2007,'' said Peter Braendle, a fund manager at Zurich-based Swisscanto Asset Management, which oversees the equivalent of $46 billion including E.ON stock.

The Dow Jones Stoxx 600 Index rallied 1.9 percent to 367.35, the biggest gain since the week ending Dec. 15, as all 18 industry groups increased. The Stoxx 50 climbed 1.7 percent, and the Euro Stoxx 50, a measure for the 12 countries using the euro, gained 2 percent.

Some 65 percent of the Stoxx 50 companies that have reported fourth-quarter results or sales have beaten analysts' estimates. In 2007, earnings for Stoxx 600 companies will rise 7.4 percent on average, according to estimates compiled by FactSet Research Systems, compared with 13.9 percent growth estimated for 2006.
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March 29 (Bloomberg) -- European retail sales rose for the first time in three months in March as German consumer spending recovered from a tax increase at the beginning of the year.

A gauge of retail sales in the 13-nation euro economy rose to a seasonally adjusted 53.4 after February's 49.8, a survey of more than 1,000 retail executives compiled for Bloomberg LP by London- based NTC Economics Ltd. showed today. A reading above 50 indicates an increase.

Faster economic growth has spurred hiring, encouraging consumers to spend even in Germany, where retail sales had slumped after an increase in value-added tax on Jan. 1. German unemployment dropped to the lowest in almost six years in March and KarstadtQuelle AG, the country's largest retailer, today reported its first annual profit since 2003.

``Today's indicator suggests that the economies of Germany and the euro region will clearly regain strength in the second quarter after a slowdown following the VAT increase,'' said Joerg Kraemer, chief economist at Commerzbank AG in Frankfurt. Retail sales ``will probably continue to show an expansion.''

Retailers are more confident about business for the coming month, NTC said. A gauge of expected sales rose to 63 from 59.6.

The euro rose to $1.3345 at 11:27 a.m. in Frankfurt from $1.3322 before the report. European government bonds fell, pushing the yield on the 10-year bund up 3 basis points to 4.05 percent, as signs of sustained economic growth underpinned the case for higher interest rates.

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March 30 (Bloomberg) -- Confidence in the European economy unexpectedly rose to a six-year high and unemployment fell to a record low, giving the European Central Bank scope to raise interest rates further in the 13-nation euro region.

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April 2 (Bloomberg) -- Europe's manufacturing growth unexpectedly slowed in March after demand for exports cooled and a tax increase in Germany reduced consumer spending in the region's largest economy.

Royal Bank of Scotland Group Plc said its index of manufacturing in the euro region fell to 55.4, the lowest since February 2006, from 55.6 a month earlier. A reading above 50 indicates growth. Economists expected the gauge, compiled by NTC Economics Ltd. from a survey of 3,000 purchasing managers, to increase to 55.7, the median of 32 estimates in a Bloomberg News survey showed.

The euro region's economy, which expanded at the fastest pace in six years in 2006, probably slowed in the first quarter as the U.S. economy cooled and Germany's Jan. 1 increase in value-added sales tax to 19 percent from 16 percent curbed household spending. Growth may regain momentum as demand in Asia encourages companies to maintain hiring and investment.

``Business activity has reached a plateau, albeit at a high level,'' said Jacques Cailloux, chief euro-area economist at Royal Bank of Scotland in London. ``The index is reassuring us that foreign demand is not falling off a cliff and that growth is not unwinding rapidly. It's still strong enough for the European Central Bank to raise rates to 4 percent in June.''

The ECB increased its benchmark rate to 3.75 percent last month, the seventh move since late 2005, and left the door open for a further increase to contain inflation, saying current interest rates are still boosting economic growth.

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April 6 (Bloomberg) -- European stocks rallied this week as mergers and acquisitions offset concern that economic growth in the U.S. is slowing, lifting the Dow Jones Stoxx 600 Index to within two points of a six-year high.

``The fact that we're seeing so much M&A across the board is a statement of confidence about growth worldwide'' and that's lifting stocks, said Mike Lenhoff, chief strategist at Brewin Dolphin Securities Ltd. in London, which manages about $36 billion. ``If the prospects for expansion get dimmer, this activity will simply vanish immediately.''

Telecom Italia SpA led telecommunications shares higher after its holding company received offers for a stake. Carrefour SA and Royal Ahold NV gained amid speculation that the retailers may be targets of takeovers by private equity firms.

Europe's Stoxx 600 Index climbed 1.6 percent this week to 380.26. The index closed on Feb. 19 at a six-year high of 382.19. The Stoxx 50 gained 1.5 percent and the Euro Stoxx 50, a gauge for the 13 nations using the euro, added 2.2 percent.
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April 17 (Bloomberg) -- Europe's trade deficits with China and Japan continued to expand in January, underscoring concerns among European officials that the yen and the yuan need to strengthen against the euro.

The 13-nation euro region's trade gap with China swelled 30 percent from a year earlier to 10.7 billion euros ($14.5 billion), while the shortfall with Japan increased 17 percent to 2.1 billion euros, the European Union's statistics office in Luxembourg said today.

``For a number of countries the appreciation of the euro is starting to be more and more painful,'' said Frederic Pretet, an economist at Societe General in Paris. This ``could be more and more of an issue for the performance of the euro area.''

The worsening trade positions with Asia's two largest economies pushed Europe into an annual trade deficit last year, its first since 2000. Both Japan and China have seen their external surpluses increase this year, helped by currencies that the International Monetary Fund says don't reflect the strength of their economies.

China's overall trade surplus almost doubled to $46.4 billion in the first quarter from a year earlier. Japan's current-account surplus, a broader measure of trade, rose 4.9 percent to 2.42 trillion yen ($20 billion) in February.

The euro area's overall trade balance fell to a deficit of 200 million euros in February on a seasonally adjusted basis, compared with a revised surplus of 1.8 billion euros for the prior month. Economists had expected a February surplus of 1.3 billion euros, according to a Bloomberg News survey. Detailed trade data are published with a one-month delay.
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April 27 (Bloomberg) -- U.K. home prices, rising at the fastest pace in two years, are ``very highly inflated'' and at risk of collapsing, said Vincent Tchenguiz, one of Britain's largest residential property owners.

A shortage of housing has driven the price of an average home up 11 percent over the past year, according to HBOS Plc, the U.K.'s largest mortgage lender, even after the Bank of England raised its benchmark interest rate three times to a 5 1/2-year high.

``It is not sustainable in the long term, prices are very high,'' Tchenguiz, 50, said in an interview. ``The bubble could burst in the event of a financial shock or terrorism.''
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May 1 (Bloomberg) -- German unemployment fell in April to 3.97 million as the pace of growth fueled hiring in Europe's largest economy, Labor Minister Franz Muentefering said.

``The growth forecasts and labor market developments show a clear trend that unemployment in sinking,'' Muentefering said in an e-mailed statement, which didn't say whether the figures were adjusted for seasonal swings. ``That will continue this year.''

Falling unemployment is helping consumers shrug off Chancellor Angela Merkel's Jan. 1 sales-tax increase after companies boosted spending and hiring to meet booming export orders. The government last week raised its economic growth forecast for 2007 to 2.3 percent from 1.7 percent and predicted an acceleration to 2.4 percent next year.

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May 1 (Bloomberg) -- U.K. manufacturing grew at the slowest pace in three months in April, a sign factory production is buckling under the burden of a stronger pound, a survey shows.

An index based on responses from more than 600 manufacturers fell to 53.9 from a revised 54.2 in March, the Chartered Institute of Purchasing and Supply and Royal Bank of Scotland Group Plc said today. Economists forecast 54, the median of 28 estimates in a Bloomberg News survey showed.

Today's report showed export order growth slowed, indicating businesses are struggling after the pound rose to the highest against the dollar since 1981. Weaker manufacturing probably won't deter Bank of England policy makers from raising interest rates on May 10 as services, which account for three-quarters of the economy, are booming.

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May 14 (Bloomberg) -- European economic growth probably slowed in the first quarter after rising interest rates and a sales-tax increase in Germany discouraged consumer spending, a survey of economists shows.

The economy of the 13 nations using the euro expanded 0.5 percent from the fourth quarter, when it grew 0.9 percent, according to the median of 38 forecasts in a Bloomberg News survey. Growth may accelerate in the current quarter, according to the European Commission.

The impact of the increase in Germany's value-added tax was short-lived as declining unemployment and rising confidence helped spending recover. The European Commission last week raised its forecast for economic growth this year to 2.6 percent, close to the six-year high of 2.7 percent reached in 2006 and ahead of the U.S. for the first time since 2001.

``A lot of the weakness in the first quarter came from Germany, where the value-added tax hike left its mark,'' said Sandra Petcov, an economist at Lehman Brothers in London. ``Momentum is not as strong as in 2006, but it's still solid.''

The euro-region GDP figures will be published at 11:00 a.m. in Luxembourg tomorrow. The commission, the European Union's executive arm in Brussels, said growth will accelerate to about 0.7 percent in the current quarter.
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May 15 (Bloomberg) -- Mergers and acquisitions, fueled by corporate deals in Europe and U.S. buyouts, reached the $2 trillion mark today, 60 percent ahead of last year's record pace.

HeidelbergCement AG's 7.85 billion pound ($15.5 billion) takeover of Hanson Plc and Thomson Corp.'s 8.7 billion pound purchase of Reuters Group Plc lifted Europe's total to $1.2 trillion, according to data compiled by Bloomberg. Cerberus Capital Management LP's $7.4 billion acquisition of the U.S. Chrysler auto unit from DaimlerChrysler AG, boosted leveraged buyouts to $366 billion, the data show.

The record pace is being driven by rising stock prices and private-equity funds that raised more than $250 billion for takeovers since the start of last year. Takeovers are on track to surpass last year's all-time high of $3.49 trillion, according to the Bloomberg data.

``Confidence remains high on the back of strong equity markets and buoyant and liquid debt markets,'' said Anthony Parsons, head of U.K. mergers at Deutsche Bank AG's investment- banking division in London. ``The pipeline remains strong.''

Citigroup Inc. is No. 1 in arranging takeovers, working on $672 billion of deals, including Barclays Plc's 64 billion-euro ($87 billion) bid for ABN Amro Holding NV in the biggest ever financial-services merger. The price may go higher because of a possible counter-bid for Amsterdam-based ABN Amro from a group led by Royal Bank of Scotland Group Plc.

Goldman Sachs Group Inc., the top adviser in 2006, is second, followed by Morgan Stanley, Lehman Brothers Holdings Inc., Merrill Lynch & Co. and JPMorgan Chase & Co. All six are based in New York. The leading European adviser this year is Zurich-based UBS AG, in seventh position.
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May 16 (Bloomberg) -- The Bank of England signaled interest rates may have to increase again to bring inflation back to target as unemployment fell to the lowest since October 2005.

The U.K. central bank estimated inflation will slow to around 1.8 percent in the middle of 2008, later than it predicted in February, before returning to the 2 percent target in two years, assuming rates rise again. Jobless claims declined 15,700 to 890,000 in April, the government said earlier today.

Policy makers raised the benchmark interest rate to 5.5 percent on May 10, a six-year high, in a fight to bring inflation back to target. Data released yesterday showed it exceeded the goal for a 12th month in April and Bank of England Governor Mervyn King said today the risks to consumer prices are tilted toward ``the upside.''

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May 23 (Bloomberg) -- Bank of England policy makers said borrowing costs may have to keep rising to contain inflation after they voted unanimously to raise the benchmark interest rate by a quarter-point this month.

``The committee agreed that, should the economy continue to develop broadly in line with the central expectation, bank rate could be raised further as necessary,'' the nine-member Monetary Policy Committee said in the minutes of the May 9-10 meeting published in London today. They lifted the rate to 5.5 percent, a six-year high, and some members considered a half-point move.
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May 25 (Bloomberg) -- Nasdaq Stock Market Inc., trailing NYSE Euronext in the race to expand into Europe, may say as early as today that it's buying Sweden's OMX AB for more than $3 billion, two people familiar with the talks said.

OMX, Europe's fifth-largest stock market, would give Nasdaq a toehold across the Atlantic three months after the New York- based company abandoned its attempt to buy the bigger London Stock Exchange Plc. Nasdaq Chief Executive Officer Robert Greifeld has been trying for at least 14 months to buy a European exchange to compete for stock listings and trading as more companies raise money outside the U.S.

``It doesn't have the same cache as the LSE, but it's a positive pickup for Nasdaq,'' said Sang Lee, a managing partner at Aite Group LLC, a Boston-based consultant to brokerages and institutional investors. ``With both Nasdaq and OMX being electronic and technology-driven, I imagine it's a pretty decent fit.''

Nasdaq and OMX were close to an agreement yesterday, said the people, who declined to be identified while the talks continued. Trading in shares of both companies was halted pending news announcements.

The Wall Street Journal reported that Nasdaq may pay about 200 kronor a share in cash and stock for OMX. That would be 11 percent higher than OMX's closing price yesterday. Silvia Davi, a spokeswoman for Nasdaq, and Niclas Lilja, spokesman for OMX, declined to comment.
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May 25 (Bloomberg) -- Google Inc., owner of the world's most popular search engine, may be violating the European Union's privacy laws by storing information on customer queries for as long as two years, advisers to EU regulators told the company.

Google's privacy counsel in Paris, Peter Fleischer, said the company received a letter this month from the EU's data-protection advisory agency asking it to explain why records of user searches are retained.

The scrutiny of policies at Google, the gateway to the Internet for tens of millions of users, has increased since it announced plans in April to buy New York-based online advertiser DoubleClick Inc. for $3.1 billion. Regulators have said that competition among Google, Microsoft Corp. and Yahoo! Inc. to deliver ads to specific users may violate civil liberties.

``Google may have initiated personalization efforts which are more advanced in some ways, but it's an industrywide issue,'' Greg Sterling, an analyst at Sterling Market Intelligence in Oakland, California, said in a telephone interview. ``It is something that the industry as a whole should tackle.''

Google's Fleischer said in a May 22 e-mail that the company will reply before the next meeting of the advisory group, called the Article 29 Data Protection Working Party, in June.

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May 29 (Bloomberg) -- A tax-cut war is spreading across Europe as leaders of the continent's biggest economies give up criticizing smaller neighbors for slashing business rates and decide to join them instead.

The move toward lower levies on corporate profits in Spain, Germany, France and the U.K. is aimed at wooing companies and reinforcing the strongest economic expansion in six years. It comes after Ireland and new European Union members from eastern Europe succeeded in attracting investment, and irking their larger rivals, with tax rates of less than 20 percent -- among the world's lowest.

``The gloves are off,'' says Erik Nielsen, chief European economist with Goldman Sachs Group Inc. in London. ``Bigger countries are now competing on taxes. This is very much something that will determine how much and where companies want to invest.''

The EU's average corporate tax rate at the end of 2006 was a record-low 26 percent and is falling even more. Gordon Brown, the U.K.'s chancellor of the exchequer and prime minister-in- waiting, in March lopped 2 percentage points off the top rate, which is now 28 percent. Germany's lower house of parliament last week backed Chancellor Angela Merkel's plan to pare its corporate rate to 30 percent from 39 percent.

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June 5 (Bloomberg) -- European Central Bank chief Jean- Claude Trichet has parried criticism from Nicolas Sarkozy, the new president of his native France. Fresh doubts from Trichet's protege at the French central bank may be harder to ignore.

As the ECB prepares to raise its key interest rate to a six-year high of 4 percent tomorrow, Trichet's faith in the importance of money supply is being questioned by Christian Noyer, 56, who succeeded him as governor of the Bank of France and sits with him on the ECB's governing council.

With Mario Draghi's Bank of Italy lining up with Noyer against Trichet and Bundesbank President Axel Weber, the Frankfurt-based ECB is debating how to interpret money-supply data for the first time since its 1999 birth. The split may make it tougher for Trichet, 64, to forge a consensus over how much further to increase rates.

``The hawks at the ECB give a lot of weight to headline money supply, and that proved useful when they wanted to tighten,'' said James Nixon, an economist at Societe Generale SA and a former forecaster at the ECB. ``The Bank of France and others now want to make it slightly harder for the ECB to raise rates.''

Money supply, as measured by M3, has expanded more than the 4.5 percent rate viewed by the ECB as non-inflationary in every month since May 2001. It increased 10.4 percent in April from a year earlier, close to the fastest pace in 24 years. M3 is the broadest gauge of money supply and includes cash in circulation, some forms of savings and money-market holdings.

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June 4 (Bloomberg) -- Deutsche Bank AG, Europe's biggest investment bank by revenue, and BNP Paribas SA, France's largest lender by market value, had their ratings cut by analysts at JPMorgan Chase & Co., who cited a lower earnings outlook.

Frankfurt-based Deutsche Bank, which generates about half of profit from fixed-income securities such as bonds and credit derivatives, was cut to ``underweight'' from ``neutral'' on expectations that fixed-income revenue may fall. The rating on BNP Paribas was reduced to ``neutral'' from ``overweight'' because of ``limited earnings upgrade potential at this point,'' analysts led by Kian Abouhossein said in a note to clients.

The investment-banking cycle may be close to its peak, the analysts said today, cutting their rating for the sector to ``underweight'' from ``neutral'' and predicting a possible slowdown in revenue from asset-backed securities. Traditional lending banks, especially in emerging markets, are a ``better value,'' they said.

``We are witnessing a `near-perfect' fixed-income market environment that is unlikely to get much better,'' the London- based analysts said in the note. This is ``reflected in a historically low interest environment, tight credit spreads, limited corporate defaults and high capital liquidity.''

Deutsche Bank shares fell 1.35 euros, or 1.2 percent, to 111.90 euros in Frankfurt. Stock of Paris-based BNP Paribas dropped 1.06 euros, or 1.2 percent, to 90.42 euros.

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June 9 (Bloomberg) -- Russia, the world's 10th largest economy, plans to be one of the five biggest by 2020, First Deputy Prime Minister Sergei Ivanov said.

Russia will join the ranks of the world's leading market economies as a full-fledged democracy within a dozen years, Ivanov told global business leaders at the St. Petersburg International Economic Forum today.

``What will Russia be like in 2020? It'll be a democratic state based on the rule of law,'' said Ivanov, who may be a candidate for president after Vladimir Putin's final term ends next year. Per capita gross domestic product will reach $30,000 by 2020 and at least half of Russians will be ``middle class.''

Ivanov rebuffed criticism from the U.S. and European Union that Putin's government is backsliding on democracy and taking greater control of the economy. Russia is finding its ``own path,'' and will be ``compatible'' with other countries of the Organization for Economic Cooperation and Development, he said.

Ivanov, a former defense minister promoted to first deputy prime minister in February, outlined a broad vision for a Russia diversifying away from its ``addiction to natural resources'' to become a leader in high technology, aerospace and the nuclear industry. The Russian government can achieve that goal by forming partnerships with private foreign and domestic investors, Ivanov said.

``This doesn't mean that we're returning to state monopolies,'' he said.
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June 19 (Bloomberg) -- German investor confidence unexpectedly fell in June as borrowing costs climbed, suggesting economic growth may have reached a plateau.

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations declined to 20.3 from 24 in May. Economists expected a reading of 29, according to the median of 38 forecasts in a Bloomberg News survey.

The European Central Bank on June 6 raised its benchmark rate for the eighth time since late 2005 and President Jean-Claude Trichet indicated further moves may be in the pipeline as Europe's strongest economic growth since the start of the decade threatens to fuel inflation. Germany's DAX Index fell 5 percent earlier this month before rebounding and the yield on the benchmark 10-year government bond rose to the highest since 2002.

``The ZEW's decline was probably caused by the correction on the bond market and some disappointing economic data,'' said Juergen Michels, an economist at Citigroup Inc. in London. ``As investors' assessment of the current situation is still very good, the data still point to strong economic growth in Germany.''

ZEW said a gauge measuring the current situation rose to a record 88.7 from 88 last month. Economists expected an unchanged reading, according to Bloomberg's survey.

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LONDON (AP) -- The Bank of England raised its benchmark interest rate by a quarter of a percentage point to 5.75 percent on Thursday, the fifth increase in less than a year as it attempts to put a lid on persistent inflation.

The widely expected move confirmed Britain's place at the top of the interest rate table of the world's seven wealthiest nations, as the European Central Bank held its own main refinancing rate unchanged at 4 percent.

British interest rates are now at a six-year high as the Bank of England struggles to contain rising prices and a booming housing market.

Anticipation of Thursday's rate rise drove the pound to 26-year highs above $2 and the currency nudged slightly higher again after the announcement to $2.02 before settling back slightly to $2.0102.

Domestic inflation has moderated somewhat since hitting a 3.1 percent peak in the year ending in March, but at 2.5 percent in the year ending in May it remains well above the government's 2 percent target.

The housing market also continues to grow, although there are signs that it is expanding at a slower pace.

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July 5 (Bloomberg) -- Rising interest rates and declining profits from real estate are pushing investors to ditch European property stocks after a four-year rally.

The Bloomberg Europe Real Estate Index just completed its worst quarter in a decade and the stocks are still expensive compared with European averages. Robert Parkes, who advises pension fund managers as a strategist at HSBC Holdings Plc, said the stocks have further to decline.

``There's a lot of negative momentum and it will continue for a while longer,'' said Parkes, who is based in London. ``Why try and catch a falling knife?''

Increases in borrowing costs -- the Bank of England raised its benchmark rate for the fifth time in a year today -- will eat further into revenue from buying and renting property. At the same time, prices of offices and malls in locations such as London are predicted to start falling.

According to Steve Bramley-Jackson, an analyst at Credit Suisse, there's no ``bounceback'' in the shares on the horizon. The two biggest U.K. property companies, Land Securities Group Plc and British Land Co., have both slumped more than 20 percent this year, trimming about $8.5 billion from their combined value.

Metrovacesa SA, Spain's largest real estate developer, has fallen by a third. British hotel manager Vector Hospitality Plc in June pulled what would have been the biggest stock sale by a real estate company in Europe.

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July 17 (Bloomberg) -- U.K. inflation slowed less than economists forecast in June after transport costs and furniture prices increased, cementing investors' expectations that the Bank of England will raise interest rates further.

Consumer prices increased 2.4 percent from a year earlier after gaining 2.5 percent in May, the Office for National Statistics said today in London. Economists expected a rate of 2.3 percent, the median of 36 forecasts in a Bloomberg News survey showed. Excluding energy, food, alcohol and tobacco, prices climbed 2 percent in June, the most in a decade.

The pound rose to a 26-year high and investors increased bets on at least one more increase in borrowing costs on concern inflation is becoming entrenched in the economy. Bank of England policy makers raised their benchmark rate for the fifth time in a year to 5.75 percent earlier this month and said risks to price stability are still on the ``upside.''

``The figures are across the board worse than the market had been expecting,'' said Matthew Sharratt, an economist at Bank of America Corp. in London. ``The data support expectations for a move in rates to 6 percent and perhaps beyond.''
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July 17 (Bloomberg) -- German investor confidence fell the most in 10 months in July, as the euro's appreciation, rising oil prices and higher interest rates threaten to crimp expansion in Europe's largest economy.

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations dropped to 10.4, the lowest since March, from June's 20.3. Economists expected a decline to 19.5, according to the median of 37 forecasts in a Bloomberg News survey.

The euro's run to a record last week may curb exports just as rising oil and credit costs squeeze companies and consumers. The European Central Bank has signaled it's ready to raise borrowing costs further to contain inflation risks after eight increases in the key rate to 4 percent since late 2005.

The decline in sentiment is ``broadly consistent with our forecast that the German expansion will lose some momentum'' in early 2008, said Silvia Pepino, an economist at JPMorgan Chase & Co. in London.

A gauge measuring investors' assessment of the current economic situation fell to 88.2 this month from 88.7 in June, ZEW said today. Economists forecast a decline to 88.

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July 21 (Bloomberg) -- European stocks dropped this week following three weeks of gains as investors speculated hedge-fund losses at Bear Stearns Cos. may signal wider problems in credit markets and the strong euro might erode earnings.

``There are fears more hedge funds might get into trouble,'' said Juergen Lukasser, who helps manage $20 billion as head of equities at Constantia Privatbank AG in Vienna. ``After months of smooth sailing the question of how much risk you're willing to take has come back. In the long run this might lead to more risk aversion, making it more difficult to finance takeovers.''

The Dow Jones Europe Stoxx Oil & Gas Index had its worst week in four months after analysts downgraded oil companies including Royal Dutch Shell Plc and Total SA.

Bayerische Motoren Werke AG and Porsche AG led automakers lower as the dollar plunged against the euro, making imported cars more expensive in the U.S.

The pan-European Stoxx 600 Index dropped 1.6 percent this week after rising to within one point of a high reached on June 1 on speculation mergers and acquisitions will increase. Takeovers in Europe have totaled $1.5 trillion so far this year, compared with a record $1.6 trillion in all of 2006, according to data compiled by Bloomberg.

The Stoxx 50 and the Euro Stoxx 50, a measure for the 13 countries using the euro, both slid 2.1 percent.

Health care stocks were little changed, while the other 17 Stoxx 600 industry groups dropped. Roche Holding AG, the world's biggest maker of cancer medicines, and Fresenius SE, the parent of the world's largest provider of dialysis, advanced.
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July 26 (Bloomberg) -- European stocks fell the most in five months on concern mergers and acquisitions will diminish as the financing of takeovers becomes more difficult.

Credit Suisse Group and Axa SA led a drop by financial companies. Atos Origin SA and Iberia Lineas Aereas de Espana SA, which have been in sale talks with buyout groups, also declined.

``It's only right and proper that investors realize credit is tightening and it's going to be much harder to get the financing for these private-equity deals,'' said Alan Borrows, who helps oversee $2.8 billion at Midas Capital Partners in Liverpool, England.

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July 31 (Bloomberg) -- Ben Craster says he'll be drinking less beer this summer, and Christine Baines is cutting back on clothes and cosmetics. They're among the millions of Britons preparing for a mortgage crunch.

Craster, a London designer, and Baines, a company director from Knutsford, England, will have to arrange new home loans as fixed-rate discounts expire on mortgages they took out two years ago. The Bank of England has raised borrowing costs five times during the past year, increasing the average monthly mortgage payment by about 100 pounds ($200), according to the Council of Mortgage Lenders.

About 2 million discounts will end during the next 18 months, the council said. The wave of refinancing threatens to slow consumer spending, which has boosted U.K. economic growth almost every quarter for the past decade, and may hurt stocks of retailers such as Tesco Plc and Marks & Spencer Group Plc.

``We have a fixed-rate squeeze coming,'' said Alan Clarke, an economist at BNP Paribas in London. ``Consumers are going to bear the brunt of a slowdown.''

Britons are more willing than any other nation in the Group of Seven to finance spending with debt, piling up a record 1.3 trillion pounds in borrowing.

To attract customers, U.K. mortgage lenders often offer a discount on interest rates for two to five years on 25-year loans. When the discount period ends, borrowers usually have the option to renegotiate or shop for a new mortgage.

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Aug. 3 (Bloomberg) -- Chancellor Angela Merkel has helped kick-start the German economy, not to mention her own political prospects, by pulling off the equivalent of a conjuring trick: banishing Germans' pessimism and convincing them the glass is half full.

Merkel has restored a rare sense of economic optimism, a prerequisite for corporate investment, hiring and consumer spending, economists and psychologists say. It's not so much what she's done that's important as what she hasn't done: Merkel has deliberately discontinued the unpopular economic-policy changes pioneered by her predecessor, Gerhard Schroeder. That's propelled her personal-approval rating to a record, to the consternation of her coalition partners.

``We're having a break from reforms; no drastic decisions have been made'' since Merkel took office, Peter Bofinger, a member of the government's council of economic advisers, said in an interview. ``The government did exactly what I called for on several occasions: namely restore some calm.''

Merkel is presiding over economic growth near a six-year high and the lowest unemployment rate since 1993. That's brought a political dividend for the chancellor, whose Christian Democrats are as many as 13 percentage points ahead of their Social Democrat coalition partners in polls, while helping seed confidence among consumers.

As the expansion broadens, the feel-good factor grows. Or is it the other way around?
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Aug. 9 (Bloomberg) -- The European Central Bank said it will launch an unlimited fine-tuning operation today to add liquidity at 4 percent after demand for cash in the European money market drove interest rates higher.

``This liquidity providing fine-tuning operation aims to assure orderly conditions in the euro money market,'' the ECB said in a statement today. ``The ECB intends to allot 100 percent of the bids it receives.''

Earlier today the bank issued a statement saying it ``notes that there are tensions in the euro money market notwithstanding the normal supply of aggregate euro liquidity.'' The Frankfurt- based bank ``is closely monitoring the situation and stands ready to act to assure orderly conditions in the euro money market.''

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FRANKFURT, Germany (AP) -- The European Central Bank injected another euro61 billion ($83.8 billion) into the banking system Friday, keeping up its efforts to soothe credit markets amid signs that problems that began with U.S. subprime mortgages were digging deeper into the world economy.

But stock markets did not seem appeased, with major indexes plunging in London, Frankfurt, Paris and Tokyo.

The latest move by the ECB, which had provided euro95 billion ($130.7 billion) in funds to banks on Thursday, came after Japan's central bank injected 1 trillion yen ($8.4 billion) into money markets and the U.S. added $24 billion on Thursday.

It was the first time the U.S., European and Japanese central banks had taken such action together since the aftermath of the Sept. 11 terrorist attacks. The Australian, Hong Kong and Canadian central banks also joined in.

"This liquidity-providing fine-tuning operation follows up on the operation conducted yesterday and aims to assure orderly conditions in the euro money market," the ECB said, pledging to keep close tabs on the situation.

But edginess in global markets -- and concern about non-U.S. companies' exposure -- was reflected in sharp declines in global stock indices on Friday. London's FTSE 100 dropped 3 percent to 6,082.10, the CAC-40 in Paris fell 2.9 percent to 5,459.36 and Germany's DAX index down 1.7 percent to 7,329.99.

"Market concerns about the U.S. subprime crisis are continuing without any apparent respite," said Joerg Kraemer, chief economist at Commerzbank AG in Frankfurt.

"Its fallout will not be limited to financial markets," he added. "The U.S. economy and with it, the rest of the world, will feel the negative consequences for quite some time, too."

Some analysts on Thursday argued that the ECB -- which sets monetary policy for Germany, France and 11 other EU nations -- was taking a risk with the first huge infusion as it could itself create a crisis in confidence.

Defaults on subprime loans, or those made to people with poor credit, have climbed sharply in the United States in recent months and have triggered concern about the impact on credit markets worldwide. Until the past few weeks, most of the banks and companies affected were in the U.S.

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LONDON (AP) -- Major world markets rebounded Monday, regaining some of the ground they lost last week in a global plunge set off by worries about banks' exposure to losses in the collapsing U.S. subprime mortgage market.

The European Central Bank, which injected another 47.67 billion euros ($65.3 billion) into the banking system Monday to soothe rattled credit markets, said conditions were "normalizing" -- but some analysts said the bounce could be a short one with continuing worries about a credit crunch.

The U.K.'s FTSE 100 Index rose 1.8 percent to 6,147.00 points, France's CAC-40 gained 1 percent to 5,504.86, while Germany's DAX Index advanced 0.8 percent to 7,404.95.

Still, some analysts were cautious. The FTSE-100 lost 3.7 percent on Friday -- its biggest percentage drop in four years -- and is down around 10 percent since its peak in June.

"It would be naive to think the worst is behind us," said David Jones, chief market analyst at CMC Markets. "It wouldn't be surprising to see the (London) market test the 6,000 barrier this week."

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Aug. 14 (Bloomberg) -- Europe's economy grew at the slowest pace in more than two years in the second quarter, hurt by weakness in manufacturing and construction.

The economy of the 13 nations that share the euro expanded 0.3 percent from the first quarter, when it grew 0.7 percent, the European Union's statistics office in Luxembourg said today. That was below the 0.5 percent median forecast of economists in a Bloomberg News survey. From a year earlier, growth slowed to 2.5 percent, compared with 3.1 percent in the first quarter.

The slowdown was led by a drop in construction in Germany and weaker investment in France. The euro's 7 percent gain against the dollar in the last year has eroded export competitiveness, while higher interest rates and a 42 percent surge in oil prices since mid-January have increased costs for companies and consumers. The European Commission today said second-half growth may be slower than previously forecast.

``With the full impact of the strong euro yet to be fully felt, the soft patch in the manufacturing sector will likely extend into the third quarter,'' said Martin Van Vliet, an economist at ING Bank in Amsterdam. ``Overall, today's weakish report does not significantly alter our cautiously optimistic outlook for the economy.''

Second-quarter growth was the slowest since the fourth quarter of 2004, when the economy also expanded 0.3 percent from the prior three months. The year-on-year growth was below the 2.8 percent median forecast of economists. The statistics office will publish a breakdown of the gross-domestic-product data on Sept. 3.

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Aug. 16 (Bloomberg) -- U.S. index futures followed stocks in Europe and Asia lower as concern deepened that a global credit crunch will sap earnings and erode economic growth. Bonds gained worldwide and the yen rallied against the dollar.

Countrywide Financial Corp., the biggest U.S. mortgage company, lost 11 percent after tapping an $11.5 billion credit line amid ``constrained'' liquidity for lenders. Deutsche Bank AG, Germany's largest bank, and BNP Paribas SA of France paced declines in Europe. Rams Home Loans Group Ltd. plunged in Australia after failing to refinance debt, while Macquarie Bank Ltd. led a drop in Asian financial stocks.

``We're in the eye of the cyclone,'' said Salah Seddik, who helps oversee about $5 billion at Richelieu Finance in Paris. ``There's now the question of what will happen with economic growth. It's too early to come back to the stock market.''

The Morgan Stanley Capital International World Index fell 1.2 percent to 1,476.09, while Standard & Poor's 500 Index futures sank 17.2 to 1,397.2 at 8:32 a.m. in New York. The MSCI World has declined 11 percent since reaching a record on July 19. The last time the measure dropped more than 10 percent in a so- called correction was in May and June of 2006, when expectations for higher interest rates rattled investor confidence.

Emerging-market shares and currencies also retreated. The MSCI Emerging Market Index lost 4.8 percent to 968.8, its steepest slide since April 17, 2000. South Korea's Kospi declined 6.9 percent, while Turkey's ISE National 100 Index slipped 7.3 percent.

The Turkish lira fell more than 4 percent against the dollar, the most since June 2006. Indonesia's rupiah, South Korea's won and South Africa's rand also retreated against the U.S. currency.

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Aug. 17 (Bloomberg) -- European stocks advanced for the first time in four days after the U.S. Federal Reserve unexpectedly lowered the rate at which it loans money to banks to ease the effects of a rout in global credit markets.

``This is good news for stocks,'' said Vafa Ahmadi, a fund manager at CPR Asset Management in Paris, which oversees $26 billion. ``This provides more liquidity to a market that needs it terribly. It's a bowl of oxygen to those who couldn't refinance.''

BNP Paribas SA, France's largest bank, and Deutsche Bank AG led a rally by financial shares. Nokia Oyj, the world's biggest maker of mobile phones, also gained.

The Dow Jones Stoxx 600 Index added 1.4 percent to 357.39 as of 3:43 p.m. in London after rising as much as 3.5 percent. The measure pared some of this week's decline after the U.S. central bank reduced the rate at which it makes direct loans to banks by 0.5 percentage point to 5.75 percent.

U.S. stocks gained and two-year Treasury notes rose, while the dollar fell against the euro. It's the first reduction in borrowing costs between scheduled meetings of the Federal Open Market Committee since 2001 and Ben S. Bernanke's first as Fed chairman.

National benchmarks advanced in all 18 western European markets except Austria. The U.K.'s FTSE 100 added 3.7 percent. France's CAC 40 rose 2.3 percent and Germany's DAX climbed 1.8 percent. The Stoxx 50 increased 2.9 percent, while the Euro Stoxx 50, a measure for the euro region, gained 2.4 percent.
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Aug. 21 (Bloomberg) -- Investor confidence in Germany, Europe's largest economy, fell more than economists forecast to an eight-month low in August as equity markets tumbled.

The ZEW Center for European Economic Research in Mannheim today said its index of investor and analyst expectations dropped to minus 6.9 from 10.4 in July. That's the lowest since December. Economists expected a decline to minus 1.5, according to the median of 36 forecasts in a Bloomberg News survey.

Today's report adds to evidence that the U.S. subprime crisis will dent confidence among executives and investors, hurting an economy already showing signs of slowing. That's bolstering expectations the European Central Bank will refrain from raising its benchmark rate from a six-year high next month.

``Analysts are concerned about the medium-term impact of the current development on financial markets and expect growth to weaken in Germany,'' said Stefan Bielmeier, an economist at Deutsche Bank AG who cut his ECB rate forecast yesterday. ``It's hard to fathom the extent and duration of the crisis. But if there is more negative news, sentiment will decline again.''
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Aug. 24 (Bloomberg) -- Growth in Europe's manufacturing and service industries slowed in August as the pace of orders cooled, indicating turmoil in world credit markets may be starting to weigh on the economy.

A preliminary estimate of Royal Bank of Scotland Group Plc's combined index, spanning industries from autos to banking and airlines in the 13-nation euro region, fell to 57.2 from 57.5 in July. A reading above 50 indicates expansion.

Manufacturing orders grew at the slowest pace since November 2005 as demand at home and abroad waned, today's report showed. Economic expansion slowed more than expected in the second quarter and may fail to pick up after a rout in the U.S. subprime mortgage market tightened credit worldwide, threatening to curb company earnings.

Confidence in the services industry ``was hit hard by financial market developments, suggesting that contagion to the real economy remains a clear risk,'' said Jacques Cailloux, chief European economist at Royal Bank of Scotland in London. ``In that context of rising uncertainty, it seems advisable for the ECB to move to a wait-and-see mode.''

The European Central Bank has indicated it wants to proceed with plans to raise interest rates again next month.

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Sept. 4 (Bloomberg) -- Deutsche Bank AG Chief Executive Officer Josef Ackermann said financial markets are stabilizing after central banks pumped more than $200 billion into the world's money markets.

``I am optimistic about the environment globally for financial institutions,'' Ackermann said today in a statement, a month after the bank described markets as ``very challenging.'' Deutsche Bank rose 2.9 percent to 94.19 euros in Frankfurt trading, while UBS AG, Europe's biggest bank, gained 1.7 percent and Credit Suisse Group advanced 1.8 percent.

``Every positive statement from a member of the financial sector helps to relieve investors,'' said Peter Braendle, who helps manage about 63 billion Swiss francs ($52 billion) in assets at Swisscanto Asset Management in Zurich.

Ackermann said ``turbulent market conditions'' in August crimped the value of holdings in the sales and trading division, which accounts for about half of revenue. UBS analysts cut their 2008 earnings estimates for European banks including Deutsche Bank by 5 percent today, citing the rout in the markets prompted by rising defaults by borrowers with weak credit or high debt.

``Market corrections, triggered in part by the drying-up of liquidity, have been significant and impacted mark-to-market valuations in our trading books and leveraged loan book,'' Ackermann said. Even so, he said he was ``pleased'' with the performance of the consumer-banking and money-management units.

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The Independent, By Sean Farrell, September 10

With the credit crunch entering its toughest week yet, concerns are growing about the division of UK banking regulation between the Bank of England and the Financial Services Authority.

Amid worldwide panic, the UK money markets have frozen up, with banks hoarding cash to avoid losses and meet potential obligations and about £70bn of short-term debt due to expire in the next 10 days. The liquidity squeeze is the first major test of the split in banking regulation between the Bank andthe FSA.

Before 1998 the Bank of England had sole responsibility for banking regulation, but in that year the Government handed the Bank's power to supervise institutions and promote orderly markets to the fledgling FSA, leaving the Bank with responsibility for the money markets and detecting and acting on threats to the wider financial system.

At the time, the Bank's then governor, Sir Edward George, was said to have considered resigning over the division of powers.

Anxious customers of British bank Northern Rock rushed to withdraw their savings Friday, forming lengthy queues in front of branches after the lender was bailed out by the Bank of England.
Shares in Northern Rock, which issued a profits warning on Friday, plunged 31.46 percent to 438 pence at the close, dragging the European banking sector lower as investors fretted over potential difficulties elsewhere.

The Bank of England (BoE) on Friday came to the rescue of Britain's fifth-biggest home loan provider, which said it was facing severe difficulties raising cash to cover its liabilities amid the ongoing global credit squeeze.

From London to Edinburgh, panicking customers were pictured on British television channels crowding outside Northern Rock branches to withdraw their savings.

"I have withdrawn all my money," said one worried customer who wished to remain anonymous outside a branch in Harrow, northwest London.

"I know everyone has been urged not to panic but I just felt safer moving the money somewhere else rather than worrying about Northern Rock's financial position over the next few days," she added.

Analysts forecast that the troubled bank was very unlikely to go bust despite the sight of queues in the street raising the spectre of a "bank run."

A bank run is when customers withdraw savings en masse because of fear a lender will become insolvent, which can force the bank into bankruptcy.

"Northern Rock's problems are a consequence of its particular reliance on the money markets to fund its mortgage activities," Global Insight economist Howard Archer said Friday.

"Furthermore, all of the indications are that it is in no danger of going bust and that it has a good quality loan book."

International ratings agencies Standard and Poor's and Fitch cut their ratings on the company and S and P warned of further downgrades if credit conditions worsened.

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Sept. 19 (Bloomberg) -- The Bank of England abandoned its opposition to emergency three-month money auctions and loosened lending standards, a week after Governor Mervyn King said such steps would encourage ``risky behavior.''

``This measure is being taken to alleviate the strains in longer-maturity money markets,'' the central bank said in a statement today. The bank said it will accept ``mortgage collateral'' at the auction of 10 billion pounds ($20 billion) in loans next week, which will have a penalty rate of 6.75 percent.

King, who testifies to U.K. lawmakers tomorrow, is facing criticism for his handling of the credit-market slump just nine months before his term expires. The Bank of England agreed to a bailout for mortgage lender Northern Rock Plc two days after the governor refused to relax the system for helping troubled financial institutions.

``This represents a U-turn,'' said Ian Kernohan, an economist at Royal London Asset Management in London, which has more than $62 billion under management. ``It's all very well to talk tough, but if you don't follow up, your credibility is damaged.''

The Bank of England said three further loans will be made at ``weekly intervals'' and their size will be decided in ``due course.''

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