The Bank of England is a little more cautious but even the MPC voted in February for a rate cut as

The Bank of England is a little more cautious, but even the MPC voted in February for a rate cut, as ‘insurance’ and a boost to confidence, even though the British economy is growing robustly. The merit of swift action is that a little now means there is less need for remedial action later For the time being, the ECB seems set in its laggardly ways. Business confidence is a tremendously fragile thing, and right now it’s on a knife edge, even in Europe. The ECB fails to address the problem at its peril.Steel yard bluesThe Corus line gets more alarming every time Sir Brian Moffat takes the stage. In February when the axe fell on the company’s UK carbon steel-making business, everyone had been briefed to expect the worst (except Tony Blair and Stephen Byers, who could not be trusted to keep the secret). Losses of £1m a day, a declining UK customer base, steel dumping on a grand scale and, of course, that wretchedly strong pound, which wiped out profits faster than the molten iron could flow from the blast furnaces.It was a wonder that any jobs survived at all after the Corus chairman had finished his gruesome account of the death of UK manufacturing. The kitchen sink operation that Corus has conducted on its results for the first 15 months has predictably left them overflowing with red ink.

A bottom line loss of £1.4bn is going it even in an industry like steel, where shareholders of all descriptions, be they governments or private investors, are used to shockingly large losses.The carnage suffered in the UK was expected. What came as a nasty surprise, however, was the deterioration in performance in the Dutch half of the business. This was not in the script when British Steel and Hoogovens consummated their marriage 15 months ago. The two ex-chief executives, John Bryant and Fokko van Duyne, told unions and investors alike what a wonderful hedge the merger would prove against fluctuating markets and the vicissitudes of the foreign exchange markets. When the pound was high and the euro was low, Hoogovens would keep the profits rolling in, and when the exchange rate reversed, south Wales would come back into its element.It has not worked like that and the cash cow that used to be Hoogovens mighty Ijmuiden plant on the Dutch coast has dried up, with profits slowing to a trickle in the second half of last year.The Corus line now is that while massive capacity reductions were the answer in the UK, a step change in productivity is what is needed in Holland.

The only trouble is that the Dutch don’t have the same appetite as the Brits for slashing jobs, and in any case the balance sheet might not stand it. Perhaps that is why the only time Sir Brian’s face lit up yesterday was when he was asked whether a merger with someone else might be on the cards. The best hope of salvation for Corus shareholders is that the process of consolidation among steel companies is allowed to continue unchecked until there are only a few of them left.j.warner independent.co.uk. An early warning of trouble in the European economy is just starting to appear on radar. If it proves justified, there could be profound consequences, not just for financial markets but for the UK launch of the euro at the beginning of next year.

An early warning of trouble in the European economy is just starting to appear on radar. If it proves justified, there could be profound consequences, not just for financial markets but for the UK launch of the euro at the beginning of next year.
The story runs like this. A couple of months ago, the widely accepted view was that this year Europe would grow faster than America There were a range of reasons for this view. For a start, the US cycle seemed to be running a couple of years ahead of Europe’s. More specifically: the US was more vulnerable to a fall in share prices; it had a larger hi-tech sector; and the macro-economic fundamentals – in particular the negative household savings rate, the drum-tight labour market and the current-account deficit – were less favourable.Europe, by contrast, had adequate spare capacity, particularly in the labour market, and home consumption looked able to replace exports to the US as a source of demand. True, falling share prices would worry companies, but European consumers had high savings and would not be much affected by global market weakness.