BBC News - US durable goods orders jump 3.8% in November

Orders for US durable goods jumped by 3.8% in November, which was much more than expected.

Analysts said the underlying picture from the data was encouraging

The US Commerce Department said that orders for durable goods, including transportation equipment, rose by $7.5bn (£4.8bn) to $207bn.

Excluding transportation goods, which are seen as volatile, orders rose overall by 0.3%.

In the same announcement the previous month's figures were revised up to $199bn from $197.7bn.

Transportation goods include aeroplanes which drove most of the growth.

Plane-builder Boeing received 96 orders for aircraft in November compared with 7 in October.

However, car manufacturers saw orders fall by 0.5% in the same period after rising 5.9% in October.

'Good sign'

Analysts had expected an overall rise in US durable goods orders of about 2% in November and said the underlying picture from the data was encouraging.

"This was a positive surprise, and the prior month's number was revised upwards," said Chris Orndorff, senior portfolio manager at Western Asset Management.

"A good sign, but the rolling average of the last three months is still far below the high durable goods levels of Q1 2011.

"And the 2011 levels are below the 2010 levels, so by this measure the economy is still muddling along. However, at least it is in positive territory."

In a separate report the Commerce Department announced more positive results for the US in sales of new homes.

Sales of new single-family houses in November 2011 rose to an annual rate of 315,000, which was up 1.6% from October's revised figure of 310,000.

However, US consumer spending figures, which the Commerce Department also released on Friday, were disappointing.

Spending rose by 0.1% from October, worse than predicted. Incomes also rose by just 0.1%, the smallest rise in personal incomes since August.

BBC News - China and Japan plan direct currency exchange agreement

China and Japan have unveiled plans to promote direct exchange of their currencies in a bid to cut costs for companies and boost bilateral trade.

China has been pushing for the yuan to become an alternate reserve currency along with the US dollar

The deal will allow firms to convert the Chinese and Japanese currencies directly into each other.

Currently businesses in both countries need to buy US dollars before converting them into the desired currency, adding extra costs.

It is the latest step by China as it seeks a more global role for the yuan.

"Given the huge size of the trade volume between Asia's two biggest economies, this agreement is much more significant than any other pacts China has signed with other nations," Ren Xianfang of IHS Global Insight was quoted as saying by the Bloomberg news agency.

China is Japan's biggest trading partner. According to the Japan External Trade Organization, trade between the two countries stood at 26.5tn yen ($339bn; £218bn) in 2010.

More collaboration

The plans were announced during a visit to China by Japan's Prime Minister Yoshihiko Noda and after a meeting with Chinese Premier Wen Jiabao.

The two leaders also agreed to allow the Japan Bank for International Cooperation to issue yuan-denominated bonds in China, the first time a foreign government body has been allowed to do so.

At the same time, Japan said it was also looking to buy Chinese government bonds, a move that analysts believe may prove to be mutually beneficial to both nations.

"By adopting Chinese bonds as a part of official foreign exchange reserves, Japan is labelling Chinese bonds as an investable asset," according to Takuji Okubo of Societe Generale Tokyo.

"This should encourage Japanese private investment into Chinese bonds, as well as into other Asian emerging currencies. Such development in turn should help develop offshore currency trading in Japan," he added.

As for China, Mr Okubo explained that the move will help China further open up its financial markets.

The deal "is a manifest of a higher level of commitment from China to the open-up reform, which would add credibility to the ongoing offshore yuan experiment", he said.

Tripartite agreement?

Along with promoting bilateral business ties, China and Japan said they had also made progress on a free trade agreement between China, Japan and South Korea.

The proposed agreement is expected to boost trade between the three nations.

"On a free-trade agreement among Japan, China and South Korea, we've made a substantial progress for an early start of negotiations," Mr Noda said.

China has been pushing for the three parties to speed up talks and proceedings on the deal, especially after Japan showed a keen interest to participate in the Trans-Pacific Partnership Agreement (TPP).

The TPP, a trade pact led by the US, includes Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam.

It is aimed at eliminating tariffs and other barriers to goods and services trade and investment among the member countries to boost growth.

BBC News - LHC reports discovery of its first new particle

The Large Hadron Collider (LHC) on the Franco-Swiss border has made its first clear observation of a new particle since opening in 2009.

The LHC has been built to investigate the fundamental building blocks of nature

It is called Chi_b (3P) and will help scientists understand better the forces that hold matter together.

The as-yet unpublished discovery is reported on the Arxiv pre-print server.

The LHC is exploring some of the fundamental questions in "big physics" by colliding proton particles together in a huge underground facility.

Detail in the sub-atomic wreckage from these impacts is expected to yield new information about the way the Universe is constructed.

The Chi_b (3P) is a more excited state of Chi particles already seen in previous collision experiments, explained Prof Roger Jones, who works on the Atlas detector at the LHC.

"The new particle is made up of a 'beauty quark' and a 'beauty anti-quark', which are then bound together," he told BBC News.

"People have thought this more excited state should exist for years but nobody has managed to see it until now.

"It's also interesting for what it tells us about the forces that hold the quark and the anti-quark together - the strong nuclear force. And that's the same force that holds, for instance, the atomic nucleus together with its protons and the neutrons."

The LHC is designed to fill in gaps in the Standard Model - the current framework devised to explain the interactions of sub-atomic particles - and also to look for any new physics beyond it.

In particular, it is using the collisions to try to pin down the famous Higgs particle, which physicists hypothesize can explain why matter has mass.

Discoveries such as Chi_b (3P) are an important part of this quest because they add to the wider background knowledge, says Prof Jones, from Lancaster University, UK.

"The better we understand the strong force, the more we understand a large part of the data that we see, which is quite often the background to the more exciting things we are looking for, like the Higgs.

"So, it's helping put together that basic understanding that we have and need to do the new physics."

Prof Paul Newman, from the University of Birmingham, added: "This is the first time such a new particle has been found at the LHC. Its discovery is a testament to the very successful running of the collider in 2011 and to the superb understanding of our detector which has been achieved by the Atlas collaboration already."

And Andy Chisholm, a PhD student from Birmingham who worked on the analysis, said: "Analysing the billions of particle collisions at the LHC is fascinating. There are potentially all kinds of interesting things buried in the data, and we were lucky to look in the right place at the right time."

BBC News - Italy senate passes Monti's austerity package

Italy's senate has passed a confidence vote on austerity measures planned by Prime Minister Mario Monti.

Mario Monti took over from Silvio Berlusconi as Italian prime minister

The package includes spending cuts, tax rises and pension reforms. It had already passed in the lower house.

Although all political parties had reservations about aspects of the programme, the measures were passed with a comfortable 257 to 41 majority.

Mr Monti leads a government of technocrats tasked with leading Italy out of its debt crisis.

The 30bn euro ($39bn; £25bn) package was widely expected to be passed.

The new prime minister, who took over from Silvio Berlusconi last month in response to the crisis, says that without the measures Italy would face economic disaster like that which has affected Greece.

Mr Monti calls the austerity cuts his plan to "save Italy". The package of reforms was also passed by the lower house, the Chamber of Deputies, by a large margin last week.

The former EU commissioner has broad support in parliament: the two main parties feel they cannot sabotage the bill for fear of unleashing economic catastrophe, analysts say.

Silvio Berlusconi has said his centre-right PDL party would back the government out of a sense of responsibility, not because it agreed with the sacrifices being asked of Italians.

The BBC's Alan Johnston in Rome says that Mr Monti can expect to face mounting opposition to his plans, particularly from the unions.

They believe that too many sacrifices are being demanded of poorer families and pensioners, and that the wealthy are not sharing enough of the burden, he reports.

BBC News - Malaysia to liberalise foreign ownership of banks

Malaysia has announced plans to allow more foreign investment in the banking sector in a bid to boost economic growth.

Malaysia is keen to open up its banking sector which is currently dominated by local firms

It said the government will be more flexible in letting foreigners hold stakes in banks and will also issue banking licences to foreign firms.

Malaysia's central bank said the cap on foreign ownership will depend on the financial profile of the investor.

Foreign ownership of commercial banks in Malaysia is capped at 30% currently.

"The financial sector blueprint for the next 10 years reinforces the government's initiatives to drive Malaysia to become a fully developed nation," Prime Minister Najib Razak said.

"The financial system will have a key role in spurring new areas of growth, and facilitating our economic transformation," he added.

'A positive twist'

Malaysia has set a target of becoming a fully developed economy by 2020 and the financial sector is expected to play a key role in helping it to achieve that.

The sector is expected to grow at an annual rate of between 8% to 11% in the current decade.

In an attempt to expand the sector, authorities have already granted licences to some foreign banks, including BNP Paribas and National Bank of Abu Dhabi, to operate in the country.

Analysts said that changes to the ownership rules will help boost growth even further.

"These moves, when they materialise, would definitely attract foreign investments into Malaysia," said Gundy Cahyadi, of OCBC Bank.

"This could be taken as another step towards more liberalisation, and definitely a positive twist to the country's longer term growth."

Islamic finance

One of the fastest growing areas in Malaysia's banking sector is Islamic finance. Overseas investors are currently allowed to hold up to a 70% stake in Islamic and investment banks.

The central bank said it is planning to introduce new products and also offer new Islamic banking licences to help sustain the growth momentum.

However, analysts said, despite the growing demand for Islamic finance, foreign banks may find it difficult to penetrate the market.

"Foreign institutions will want to get into the sector, but they are likely to face tough competition from the already-established domestic players, even with a level playing field," Peter Hoflich, of The Asian Banker consultancy and research group, told the BBC.

"The Malaysian banks are clear market leaders in the sector and I am not sure if the foreign banks can bring anything different to table for the clients," he added.

BBC News - Huge demand for ECB's three-year loans

Eurozone banks have rushed to take out cheap three-year loans offered by the European Central Bank, borrowing 489bn euros ($643bn; £375bn).

It is hoped that banks will use the loans to buy eurozone sovereign bonds

The central bank had originally hoped to lend up to 450bn euros to stop another credit crunch crippling the banking system.

Over 500 banks raced to borrow from the scheme, which was far beyond market expectations.

The euro rose sharply on the news, but then fell back later.

When the plan was announced, French President Nicolas Sarkozy said banks could use the money to invest in eurozone sovereign debt.

However, analysts were uncertain if banks will use the money in this way.

"The very heavy take-up of the ECB's three-year, long-term refinancing operation provides some encouragement that banks' liquidity needs are being amply met," said Jonathan Loynes at Capital Economics.

"But while this might help to address recent signs of renewed tensions in credit markets and support bank lending, we remain sceptical of the idea that the operation will ease the sovereign debt crisis too as banks use the funds to purchase large volumes of peripheral government bonds."

'Positive number'

This was the European Central Bank's first offer of three-year loans and was the largest amount of money the central bank has injected into the financial system, beating the 450bn euros it put in with its 2009 one-year loans offer.

Although the offer was seen as a success, its impact on the eurozone economy is still uncertain.

"This is good. It's a positive number, at the top end of expectations. You have to regard it as a positive result. But it is still short of covering all of the banks' financing for next year," said James Nixon at Societe Generale.

Borrowing money though the ECB's loans and using it to buy sovereign debt has been dubbed 'Sarkozy trade' after the French president encouraged banks to use the money to buy national debts when the loan offer was announced.

However, some suggest the money will just be used to boost bank balance sheets, especially since the ECB lowered its collateral requirements when it announced the loans, enabling weaker banks to apply for the funds.

"A cash for trash mechanism allowing banks to access cheap funds and buy up more sovereign debt - or more likely just shore up their own finances," is how Justin Urquhart Stewart of Seven Investment Management described the scheme.

Carsten Brzeski at ING, said: "The good news is that banks won't have to worry about liquidity for three years and that it has already pushed down government yields, as banks are buying them to use as collateral".

"However, whether the ECB's hopes that the money will filter through to the real economy will be fulfilled remains to be seen."

The success of the offer initially had a positive impact on European stock markets, but the effect was short-lived and in afternoon trade several markets were trading lower on the day.

Turbulent times

The ECB's move comes in the wake of turbulent times for the eurozone that have hit peripheral eurozone economies such as Greece, the Irish Republic and Portugal, and started to affect major economies such as Italy and Spain.

Banks in all these countries have lent large amounts of money to their national governments, and others in the eurozone, by buying sovereign bonds which have, historically, been seen as relatively safe investments.

Interest rates for these bonds, known as yields, have been rising during the past few months, reflecting a higher risk that a country may default. Italian yields, for example, hit a record 7% in November.

The banks that are left holding large amounts of eurozone sovereign debt are in turn seen as risky by money markets who force them to pay more to borrow money.

This situation encourages banks to lend less themselves, which trickles down to consumers and small businesses, which find it harder to get loans.

The ECB's three-year loans are designed to free up lending and avoid the kind of credit crunch that saw inter-bank lending dry up in 2008.

Although the ECB has ruled out lending directly to countries, banks taking the three-year loans at 1% are being encouraged to invest in sovereign debt at 6% to 7%.

This not only provides a lucrative return for the banks, but increases demand for sovereign debt, helping countries such as Italy and Spain that need to raise money.

BBC News - EU launches youth employment plan

The European Commission has announced a plan to tackle youth unemployment in the 27 EU member countries.

Youth unemployment across the 27 EU member states is currently at 21%

The Youth Opportunities Initiative promises to create 370,000 work placements across the EU.

It proposes a youth guarantee to put young people in work, study or training within four months of leaving school.

It will be paid for by 30bn euros ($39bn; £25bn) from the European Social Fund. Youth unemployment in the EU is now 21%, the Commissions figures show.

"The current situation for young people in many EU countries today is becoming dramatic," said Laszlo Andor, EU commissioner for employment, social affairs and inclusion.

"Without decisive action at EU and national level we risk losing this generation, with a heavy economic and social cost".

The Commission estimates that the cost to society of youth unemployment is around 2bn euros per week or 1% of the entire EU's economic output.

Homegrown solutions

Critics say the initiative will not benefit the UK.

"Britain's problem with chronic youth unemployment developed before the economy got in trouble and has now become a crisis," said Matthew Sinclair from the Taxpayers' Alliance in response to the announcement.

"The solutions are here in Britain with reforms to the education system and lower taxes to help businesses grow, not the enormous European Social Fund, which soaks up billions of pounds of British taxpayers' money and is chronically misspent."

The Commission insists that the plan is funded by reallocating funds within existing budgets.

"For the UK this will mean a small but significant increase in business, apprenticeship, training and volunteering opportunities for youngsters," said Mark English, head of media at the European Commission Office in London.

"It will also help step up exchanges of best practice, which allow the UK to learn from what works elsewhere in fighting youth unemployment and to give others the benefit of what works in the UK."