środa, 20 października 2010

Police move to break fuel blockades in France

By William L. Watts, MarketWatch

LONDON (MarketWatch) — French police attempted to clear protesters from fuel depots Wednesday, an effort to break a stranglehold on fuel supplies resulting from strikes and protests against the government’s plan to raise the retirement age.

Blockades of depots and strikes by refinery workers have resulted in shortages, with about a third of filling stations running dry on Tuesday, according to an Agence France-Presse report. Rail service and flights have also been disrupted.

But observers said disturbances are likely to fade after Tuesday’s widespread demonstrations, the latest in a prolonged series of strikes and protests. Tuesday’s action was the sixth day of nationwide protests in two months.

“The strike is losing momentum in the transport sector,” said Laurence Boone, economist at Barclays Capital, in a research note. “Paris pubic transport is running almost normally, international trains are running normally and about 50% to 70% of flights are maintained.”

The government has started to tap strategic oil reserves, which hold around three months of supply, and has begun reopening some refineries, Boone said. Also, college students will go on midterm vacations at the end of the week, which will likely curb their participation in any protests.

Meanwhile, the French Senate is expected to vote this week on President Nicolas Sarkozy’s proposal to raise the retirement age, to 62 from 60, while increasing to 67 from 65 the age at which retirees can claim full benefits.

The changes are needed to close a growing gap in the country’s state-run pension funds, Sarkozy has said.

“The biggest problem would be if I failed to do my duty, to make sure that we can pay for today’s and tomorrow’s pensions,” Sarkozy told journalists Tuesday, The Wall Street Journal reported.

“While positions have hardened on both sides ... the strikes which have crippled the French downstream oil sector are not likely to go on for an extended duration, and will probably be resolved by next week,” said Greg Priddy, global oil analyst at Eurasia Group in New York.

Union leaders are divided over what to do after the bill is voted on in the Senate, which is seen as virtually certain to approve the measure, the Financial Times reported.

Some unions see little point in extending protests beyond the Senate vote out of concern that further disruptions will turn the public against the protests.

But a poll by BVA published Wednesday found 59% of the French public backed a continuation of the strike even if the Senate passes the pension measure, AFP reported.

The strikes, shuttering all 11 of France’s refineries, have had a modest but contained impact on European petroleum-product markets, analysts said.

“France sources a third (around 445,000 barrels a day) of its crude imports from the FSU [former Soviet Union], but the impact of the loss of French demand on differentials for Urals and CPC blend should not be overestimated,” wrote analysts at JBC Energy in Vienna.

Both grades have weakened but remain within the band seen over the past year, they said.

William L. Watts is a reporter for MarketWatch in London.


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GLOBAL MARKETS-Equities recover from China shock, dollar slips

* Markets recover after surprise China hike

* European stocks lifted by UK QE prospects

* Dollar slips against major currencies

By Jeremy Gaunt, European Investment Correspondent

LONDON, Oct 20 (Reuters) - Financial markets on Wednesday recovered some of the composure lost after China's surprise interest rate hike, with stocks slightly higher and the dollar falling back from the previous session's sharp gains.

Wall Street also looked set for small gains following Tuesday's 1.6 percent loss on the S&P 500 index .SPX.

China triggered a global risk sell-off on Tuesday when the People's Bank of China's (PBOC) raised benchmark interest rates by 25 basis points, the first increase in nearly three years.

The move stoked fears among investors about further tightening in one of the global economy's main drivers and coincided with an increase in tensions over global currency policies ahead of a meeting of Group of 20 finance ministers this weekend.

Investors also digested news that Bank of America (BAC.N) and possibly other U.S. banks may be forced to take back billions of dollars in mortgages that should not have been bundled into bonds.

Such concerns have brought to a halt a solid risk rally that saw MSCI's all-country world index .MIWD00000PUS hit a more than two-year high last week.

The underlying driver for the rally -- the Federal Reserve's expected buying of assets under a renewed quantitative easing programme -- remains in place.

But there are also jitters about whether this will be scaled back as a result of the week G-20 meeting.

Equity markets were playing it relatively safe.

The MSCI index was up 0.1 percent while Europe's FTSEurofirst 300 .FTEU3 was up about 0.3 percent, helped by the latest Bank of England Monetary Policy Committee minutes, which boosted expectations of further UK quantitative easing.

Earlier, Japan's Nikkei .N225 closed down 1.65 percent, with exporters shaken by fears of slowing Chinese growth.


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UK's Cameron announces military austerity plan

David Stringer, Associated Press Writer, On Wednesday October 20, 2010, 9:19 am

LONDON (AP) -- Britain will lose thousands of troops, reduce its ability to fight complex missions like the wars in Iraq and Afghanistan and delay a program to upgrade its nuclear defenses, Prime Minister David Cameron announced Tuesday.

Outlining the first defense review since 1998 -- intended both to sweep away strategies crafted before the Sept. 11, 2001 attacks on the U.S. and to help clear the country's crippling national debt -- Cameron said 17,000 troops, a fleet of jets and an aging aircraft carrier would all be sacrificed.

Cameron's government has hinted for months that the cuts would be severe -- and sweeping. Communities around the country watched the announcement nervously, worried about jobs and the impact on local communities in a time of economic hardship.

The numbers were stark. Naval warships, 25,000 civilian staff and a host of bases will also be lost, while the country's stockpile of nuclear warheads will be trimmed from 160 to 120.

Two new aircraft carriers will be built at a cost of 5 billion pounds ($8 billion) -- but one will effectively by mothballed and another won't have any British fighter jets to transport until 2019.

Instead, Britain will invest in its much admired special forces and develop expertise on cyber threats to secure the country's status as a major global power, Cameron said.

"Britain has punched above its weight in the world, and we should have no less ambition for our country in the decades to come," Cameron told the House of Commons.

He said funding for the mission in Afghanistan, which does not come from the regular military budget, would not be trimmed, promising extra resources for troops there.

Military cutbacks come a day before Treasury chief George Osborne's long-anticipated announcement of a government-wide program to drastically cut department budgets and welfare bills. The largest cuts to public spending since World War II are aimed at virtually eliminating Britain's deficit, which stands at over 10 percent of gross domestic product.

Osborne's announcement will provide details of Britain's spending plans for its intelligence agencies, though Cameron confirmed there will be an extra 500 million pounds ($785 million) in funding to counter cyber threats.

Cameron said the overhaul wasn't just aimed at cutting the military budget -- saying he was breaking decisively with the strategy of predecessors Tony Blair and Gordon Brown.

"Iraq and Afghanistan have shown the immense financial and human costs of large-scale military interventions," Cameron told lawmakers. "While we must retain the ability to undertake such operations, we must also get better at treating the causes of instability -- not just dealing with the consequences."

He criticized the previous government's decision to sign contracts for two new aircraft carriers -- explaining that canceling the program would have cost more than building the vessels. "That is the legacy we inherited, an appalling legacy the British people have every right to be angry about," he said.

He said there would be an 8 percent cut to the annual 37 billion pound ($59 billion) defense budget over four years -- but insisted Britain's spending on defense would remain above a NATO-demanded benchmark of 2 percent of gross domestic product.

Cameron said some military bases would be closed -- though he didn't specify which, leaving communities anxious. In Morayshire, in the northeast of Scotland, residents warned that the closure of a Royal Air Force base there would savage the local economy.

About one in six jobs in the region, north of Aberdeenshire, including hotels, hospitals and retail are related to two threatened military bases.

"The closures will destroy the economy as we have nothing else here but the bases," said Winnie Ross, owner of the Sunninghill Hotel in Elgin, the main town near the bases. "Our hotel has been used by MoD suppliers like BAE Systems, families of RAF personnel, NATO personnel and visitors to the bases. That will all go now."

Late Monday, the British leader shared details with President Barack Obama in a phone call, hoping to assure the White House that Britain will still be equipped to fight alongside the U.S. on missions overseas.

The Pentagon's press secretary, Geoff Morrell, welcomed Cameron's defense policies Tuesday, saying the U.S. remains confident Britain will maintain its capacity to "provide top-tier fighting forces in Afghanistan and other future missions in defense of our shared interests and security."

However, Britain will be limited in the future to a force of about 30,000 personnel on major operations -- smaller than the 45,000-strong force initially sent into Iraq in 2003.

A total of 7,000 army troops will be axed, alongside 5,000 personnel each from the air force and navy. Britain's Army will number about 95,000 troops by 2015, Cameron said.

Cameron hopes a greater use of reservists and special forces will help retain British military might.

Lt. Gen. Graeme Lamb, a former adviser to U.S Gen. Stanley McChrystal and formerly director of Britain's special forces, said the cuts would not leave the military weakened.

"It's a bit like poker -- you never get the hand you want, you get the hand you're given. The art form is to play it well," said Lamb, whom Cameron has asked to review the use of reserve forces.

Cameron also announced that a planned 20 billion pound ($30 billion) program to replace Britain's four Trident nuclear missile-armed submarines would be delayed until 2016. He said the number of warheads on each boat would also be cut, helping to save about 750 million pounds ($1.18 billion).

The delay means decisions on the nuclear submarine program -- and the hefty bill -- will come after a scheduled 2015 national election, and be handled by the next defense review, due in five years time.

Some analysts accused Cameron of ducking his trickiest decision by putting off the nuclear program.

"This may be seen as passing the buck politically in the hope that an improved economic situation makes a decision easier," said Michael Formosa, of Jane's strategic advisory services.

Associated Press Writer Ben McConville, in Edinburgh, Scotland, contributed to this report.


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