Business this week

The Federal Reserve reduced the federal funds rate by one-quarter of a percentage point, to 2%. To help ease the economic pain wrought by the credit crisis, the Fed has brought its key interest rate down from 5.25% in September. It indicated that this cut may be the last in that cycle. See article

Big financial institutions took more measures to replenish their coffers. After a recent $6 billion issue in preferred shares, Citigroup launched a $4.5 billion offering of common stock. It has now raised some $40 billion over the past few months. HBOS, a British bank, announced a £4 billion ($8 billion) rights issue. Meanwhile, Deutsche Bank posted its first quarterly loss in five years, as it took writedowns of euro2.7 billion ($4.2 billion), and Allianz, a German insurer, said it expects to report a much-reduced profit for the first quarter partly because of credit woes at its Dresdner Bank division.

The candy man

Wrigley, a maker of chewing-gum and mints, accepted a $23 billion takeover from Mars, which includes Snickers, M&M's and Uncle Ben's rice among its brands. The combined company will overtake Cadbury Schweppes to become the world's biggest confectioner. The deal was made possible by funding from Warren Buffett. See article

The surge in commodity costs hurt some food companies. Kraft Foods said its quarterly net income dropped by 13% compared with a year ago; Kellogg's saw its profit dip by 1.9%. But higher grain prices boosted Archer Daniels Midland. The agricultural processor's quarterly profit rose by 42% and its revenue increased by 64%.

Kirk Kerkorian revealed that he holds a 4.7% stake in Ford, which he wants to increase. The veteran investor is no stranger to America's car-industry boardrooms; he used his (now divested) 10% stake in GM to push for a merger with Renault-Nissan, and tried to buy Chrysler in the 1990s. Both efforts failed. However, Mr Kerkorian is apparently impressed with Ford's restructuring programme. The carmaker made a quarterly profit of $100m and says it should turn an annual profit in 2009.

General Motors reported a net loss of $3.25 billion for the first quarter because of charges that stem in part from its remaining equity in GMAC, a financial-services company. Without the charges the adjusted loss was $350m, but since sales are rising in Asia and Latin America, this was smaller than expected and GM's share price soared.

Continental Airlines decided not to seek a merger with another carrier “at this time”: it had been talking to United Airlines about the possibility. Further consolidation in the industry is the subject of much speculation, after the proposed combination of Delta and Northwest.

In a long-awaited decision Time Warner said it would spin off its cable-system business. The company is the second-largest cable operator in America but is under pressure to revive its sluggish share price by focusing on its film and television units, such as HBO. It is also pondering options for AOL, its struggling internet division.

Fuel protests

The price of oil touched almost $120 a barrel. This caused anxiety in the United States, where the presidential candidates are debating the merits of suspending the federal tax on petrol over the summer. Meanwhile, OPEC's president forecast that oil prices would reach $200 a barrel if the dollar continued to slide. Chakib Khelil said that “each time the dollar falls 1%, the price of the barrel rises by $4, and of course vice versa”.

BG Group, an energy company that stems from the old British Gas, made a A$12.9 billion ($12.2 billion) bid for Origin Energy, an Australian utility with assets in oil and gas exploration.

São Paulo's Bovespa stockmarket jumped by 6.3% to close at a record high after Standard & Poor's unexpectedly upgraded Brazil's foreign debt, which is likely to spur investment.

Stalled

America's economy grew by a tepid 0.6% at an annual rate in the first quarter. An increase in business inventories offset a slowdown in consumer spending, which rose by 1%, its lowest rate of growth since the second quarter of 2001.

Home foreclosures in America were up by 112% in the first quarter compared with a year ago, according to RealtyTrac, a property firm. Lenders are foreclosing on one in every 194 American households. The rates were higher in the sunbelt; in Nevada it was one in every 54 households and in California one in every 78. In Riverside and San Bernardino, California's Inland Empire, the foreclosure rate was one in every 38 homes.