Sep 2, 2010

Potential for a double-dip recession may rise in USA, says a survey

The economic outlook for nine U.S. Midwest and South-Central states slumped for a third consecutive month in August, pointing to slower growth as the potential for a double-dip recession rises, according to a survey of supply managers released on Wednesday.
Creighton University's Business Conditions Index fell to 55.8 in August from 60.8 in July. A reading of 50 is considered growth neutral, while readings above that signal expansion over the next three to six months.
Just over a third of the survey's respondents said it was likely or very likely the U.S. economy will slip back into a recession in 2011, while 44 percent said there was a 50 percent chance of that happening.

Still, the Mid-America region looks stronger than the national economy, said Creighton University Economics Professor Ernie Goss.

"Over the past several months, for example, the region has been adding jobs at a very healthy pace while U.S. job growth has been nil," he said in a statement.

"With a weak dollar supporting agriculture and energy commodity prices, I expect this gap between the regional and national economies to remain and potentially widen," Goss added.

The survey's employment index dipped to 55.2 in August from 58.8 in July.

The prices-paid index, which tracks the cost of raw materials and supplies, rose to 64.6 from 64.1 in July, marking the 15th consecutive month the inflation gauge has risen above growth neutral.

Supply managers were surveyed in Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.

The Omaha, Nebraska-based Creighton Economic Forecasting Group has conducted the monthly survey since 1994, using the same methodology as the national Institute for Supply Management.

Today's DSE News : Thursday, September 02, 2010

News:    Today's (02.09.2010) Total Trades: 204,517; Volume: 85,041,845 and Turnover: Tk. 15,217.66 million.

News:    The Company has informed that the Management of the company has decided to Demate the share of the company subject to the approval of SEC.

News:    In response to a DSE query, the company has informed that there is no undisclosed price sensitive information of the company for recent unusual price hike.

News:    Mr. Md. Rukunuddin Mollah, one of the Sponsors/Directors of the company, has reported his intention to sell 2,500 shares out of his total holdings of 10,955 shares of the company at prevailing market price through Stock Exchange within next 30 working days.

News:    The Bank has informed that the share division of the Bank has been shifted at 23 Dilkusha Commercial Area (2nd floor), Dhaka-1000 from Bengal Centre (2nd floor), 28 Topkhana Road, Dhaka-1000.

News:    In response to a DSE query dated 30.08.10 regarding setting up a production line for manufacturing Fluorescent Tube Lights, the company has further informed the following: (1) the estimated cost of the project will be Tk. 13.00 crore approximately, (2) the cost of the project will be arranged from own sources and Bank financing and (3) after completion of this project, it is expected to increase turnover of the company by 10% approximately.

News:    In response to a DSE query, the company has informed that there is no undisclosed price sensitive information of the company for recent unusual price hike. The company has also informed that the Forest Bench of Supreme Court of India shall not meet on September 3, 2010, as it is a holiday in India. The next possible working date of the Forest Bench of the Supreme Court of India is on September 10, 2010. The Hon'ble Court is expected to take up Item no. 1 of the Hearing List on that date. As informed earlier, the matter is listed as Item NO.3 in the Hearing List.
News:    Mawsons Limited, one of the Corporate Sponsors/Directors of the Company, has reported its intention to sell 5,00,000 shares out of its total holdings of 35,48,040 shares of the company at prevailing market price through Stock Exchange within next 30 working days.

News:    Mr. Riyadh Zafar Chowdhury and Ms. Aklima Begum, both are Sponsors/Directors of the Bank, have further reported that they have completed their sale of 5,000 and 3,330 shares respectively at prevailing market price through Stock Exchange as announced earlier.

News:    In response to a DSE query, the company has informed that there is no undisclosed price sensitive information of the company for recent unusual price hike.

News:    The Rating Committee of CRISL has announced the CPA (Claim Paying Ability) Rating of Janata Insurance Company Ltd. as "BBB-" based on financial statements of the company up to June 30, 2010 and other relevant quantitative as well as qualitative information up to date of rating declaration.

News:    As per regulation 30 of DSE Listing Regulations, the company has informed that a meeting of Board of Directors of the company will be held on September 05, 2010 at 4:00 p.m. to consider, among others, audited financial statements of the company for the year ended June 30, 2010.

News:    Normal trading of the shares of the Bank will resume on 05.09.10 after Record Date with new face value of Tk. 10.00 each, market lot of 100 shares and adjusted open price of Tk. 52.90 as announced earlier.

News:    Trading of the shares of the Bank will remain suspended on record date i.e., 05.09.10 for changing the Face Value and Market Lot.

News:    Trading of the shares of the Bank will remain suspended on record date i.e., 05.09.10 for EGM.

News:    The Bank has informed that the Board of Directors of the Bank has decided in principle to issue 20% Convertible Zero Coupon Bond (Sub-ordinate Debt) for Tk. 200.00 crore (issue price) for raising Bank's capital subject to permission from regulatory bodies as well as approved by the shareholders in the forthcoming EGM. Date of EGM and Record Date in this regard will be notified shortly.

News:    (Repeat): The "Investors' Awareness Program for Officials" organized by the Academy, offered to the potential investors' of the Market who by line of profession are Officials representing different entities of public and private sector is scheduled to be held very soon. For details, please logon to DSE website & browse into "DSE Training Academy" button. Registration is going on & considered on first come first serve basis.

News:    (Repeat): DSE Training Academy has initiated the following programs to train different spectrum of audience both general and professionals having interest in Capital Market affairs. 1. Training program on Internal Audit, Risk Management & Control 2. Training Program on Asset Management 3. Training Program on Merger & Acquisition 4. Regional Investors' Awareness Program For details, please logon to DSE website & browse into DSE Training Academy button. Registration is going on and considered on first come first serve basis.

News:    (Repeat): The 5th event of the program titled "Compliance in Corporate Governance" organized by the Academy, offered to the Members/Representatives of Member Companies, CEO, CFO & Company Secretary of Listed Companies, Merchant Bankers & Issue Managers is scheduled to be held very soon. For details, please logon to DSE website and browse into DSE Training Academy button. For registration, please contact DSE Training Academy (8th Floor), Modhumita Building, 158-160 Motijheel C/A, Dhaka-1000. Queries in regard to the training program may reach at Tel: 9564601, Ex-157.

News:    Mr. Ranjan Chowdhury, one of the Sponsors/Directors of the Bank, has further reported that he has completed his buy of 2,50,000 shares of the Bank at prevailing market price through Stock Exchange as announced earlier.

News:    Mr. Abu Tahir Mohammad Golam Maruf, one of the Directors of the Bank, has further reported that he has completed his sale of 14,000 shares of the Bank at prevailing market price through Stock Exchange as announced earlier.

News:    SEC has accorded its consent to the proposed change in the denomination of share value (face value) of Asia Insurance Ltd. from Tk. 100.00 to Tk. 10.00 each as well as market lot from 50 to 250 shares.

News:    Following the change of the denomination of shares and market lot with effect from 02.09.10 (record date), the new face value of the shares of the Bank will be Tk. 10.00 instead of Tk. 100.00 per share, market lot will be 100 shares instead of 50 shares and the new adjusted open price of shares will be Tk. 52.90 per share.

News:    Ms. Farhana Kabir and Mr. Shabbir Kabir, both are Sponsors/Directors of the company, have further reported that they have completed their sale of 13,000 and 11,500 shares respectively at prevailing market price through Stock Exchange as announced earlier.

News:    Enrilco Limited, one of the Corporate Sponsors/Directors of the company, has reported its intention to sell 25,000 shares (Bonus share) out of its total holdings of 26,20,676 shares of the company at prevailing market price through Stock Exchange within next 30 working days.

News:    The company has further informed that it has obtained 'No Objection' from the Chief Controller of Insurance to increase Authorized Capital of the company from Tk. 30.00 crore to Tk. 100.00 crore.

Talks between Israeli and Palestinian leaders begins today

US President Barack Obama has urged Israeli and Palestinian leaders not to let the chance of a permanent peace deal "slip away".

"This moment of opportunity may not soon come again," he said, pledging US support for the new negotiations.

Mr Obama spoke the day before a new round of direct talks between Israeli PM Benjamin Netanyahu and Palestinian leader Mahmoud Abbas was due to begin.

Mr Obama spoke at the White House on Wednesday evening after meetings with Mr Netanyahu, Mr Abbas, Jordan's King Abdullah II and Egyptian President Hosni Mubarak.

His remarks came on the eve of the first direct negotiations between Israeli and Palestinian leaders in 20 months, which he said were "intended to resolve all final status issues".

Mr Obama said the goal of the talks, which are expected to last a year, was a permanent settlement that ended the Israeli occupation that began in 1967 and resulted in an independent, democratic  Palestinian state existing peacefully beside Israel.

On Thursday, US Secretary of State Hillary Clinton is to hold discussions with the Israeli and Palestinian negotiating teams.

Mr Netanyahu and Mr Abbas are to then meet for the first face-to-face talks between Israeli and Palestinian leaders since late 2008.

US officials said they wanted to at least get agreement from the two sides to meet again, possibly in the second week of September.

Another meeting between Mr Obama, Mr Abbas and Mr Netanyahu could be held during the UN General Assembly at the end of the month.

Disagreement over Israeli settlement construction in the occupied West Bank has also threatened to cast a pall over the talks.

The Israelis have said they will not renew a partial freeze on building homes for Jewish settlers when it expires towards the end of this month, but the Palestinians say that without a freeze they will walk away from the talks.

Sep 1, 2010

Yen wins a 15-years high against doller this month

The yen rose and was on track for its fourth consecutive monthly advance against the dollar on Tuesday, its longest winning streak in 19 months, as investors shrugged off Japan's latest easing move.

Demand for the safe-haven currency rose in the past month as U.S. Treasury yields tumbled amid mounting signs the economic recovery in the United States was faltering.

The rapid advance, which pushed the yen to a 15-year high this month, prompted Japanese authorities to announce measures on Monday to curb the yen's strength to protect the country's exports.

Traders and analysts saw the central bank's moves as a symbolic gesture that will do little to halt the climb. They said that short of direct intervention in the foreign exchange markets, the yen is bound to test its all-time high of 79.75 yen set in April 1995, according to Reuters data.

"The policy action by the BoJ isn't going to change the market's mood. It would probably take intervention to shake things up a bit," said Vassili Serebriakov, currency strategist at Wells Fargo in New York.

But Serebriakov and other analysts cautioned that direct intervention may have limited impact. "We're not even sure that (intervention) would cause a sustained reversal of yen strength," he said.

Japan last sold yen in the markets to weaken it in March 2004, with mixed results.

In late afternoon trading, the dollar was down 0.8 percent at 83.96 yen, not far from its 15-year low of 83.58 set on electronic trading platform EBS last week. The euro fell 0.6 percent to 106.50 yen.

"The yen has a little further to go," said Daniel Katzive, currency strategist at Credit Suisse in New York. "We think dollar/yen can get down to 82 in the near term."

He said that with global benchmarks yields near or at record lows, Japanese investors would need more incentive to take risk in foreign markets, helping sustain demand for the yen.

Japanese Finance Minister Yoshihiko Noda repeated on Tuesday that the government would take decisive action on currencies -- usually seen as code for intervention -- when necessary.

The dollar has fallen almost 3 percent against the yen this month and is down more than 9 percent this year.

Traders say Japanese authorities are expected to buy the dollar against the yen if the dollar slides 3-4 yen in one day.

The yen could also face potential buyback pressure in cross trades such as euro/yen and Aussie/yen, which have attracted some interest because of their larger yield differentials.

U.S. economic data this week, including Friday's nonfarm payrolls report, could push the yen higher if they show further deterioration in the economy and weigh on bond yields, analysts said.

The dollar did not react to the release of minutes of the Federal Reserve's August meeting as it only reinforced the view the Fed is ready to provide additional policy stimulus if the economic outlook weakens.

Against the dollar, the euro rose 0.2 percent to $1.2684, but it slumped to a record low 1.2850 francs on electronic trading platform EBS.

Hurricane Earl to hit East Coast of U.S.: residents urged to prepare for possible evacuations

Residential area submerged due to Hurricane Earl in USA

U.S. residents urged to prepare for possible evacuations as powerful Hurricane Earl howled over open seas running toward the East Coast of the U.S.A.

The Category 4 hurricane, with winds of 135 mph (215 kilometers), was expected to remain over the open ocean before turning north and running parallel to the U.S. coast, potentially reaching the North Carolina coastal region by late Thursday or early Friday. It was projected then to curve back out to sea, perhaps swiping New England or far-eastern Canada.

"We can't totally rule out a very close approach to either of the Cape Hatteras areas or Cape Cod and southern New England as the storm progresses further," said Bill Read, director of the U.S. National Hurricane Center in Miami.
Earl delivered a glancing blow to several small Caribbean islands Monday, tearing roofs off of homes and cutting electricity to people in Anguilla, Antigua, and St. Maarten. Cruise ships were diverted and flights canceled across the region. But there were no reports of death or injury.

Gusty winds from Earl's outer fringes were whipping palm fronds and whistling through doors as Turks and Caicos Islands residents hunkered down in their homes and tied-down boats seesawed on white-crested surf.

In Puerto Rico, nearly 187,000 people were without power and another 60,000 without water, Gov. Luis Fortuno said. More than a dozen roads along the north coast remained closed as crews removed trees and downed power lines.

In St. Maarten, sand and debris littered the streets, and winds knocked down trees and electricity poles and damaged roofs. But police spokesman Ricardo Henson said there was no extensive damage to property.

In Antigua, at least one home was destroyed but there were no reports of serious injuries. Governor General Dame Louise Agnetha Lake-Tack declared Monday a public holiday to keep islanders off the road and give them a chance to clean up.

Katrina was the most destructive and costly natural disaster in U.S. history, according to the Federal Emergency Management Agency (FEMA). The National Hurricane Center (NHC) reported that the Category 5 hurricane killed a total of 1,833 people across five states, damaged more than 420,000 houses, and forced 1.2 million people to evacuate their homes.

Winds up to 135 mph tore off rooftops and four breached levees sent water gushing into the surrounding cities. Data from the U.S. Army Corps of Engineers reported that coastal cities suffered from 28-foot waves that penetrated six miles inland.

New Orleans today has been recovered after a five years combined endeavor of aid organizations, the federal government, and volunteers.But five years ago, it was a city of despair and destroyed buildings submerged under 12 feet of water, much like most of the Gulf Coast hit by Hurricane Katrina.

Aug 30, 2010

US wasted more than $5 billion in Iraq

More than $5 billion in American taxpayer funds has been wasted which is more than 10 percent of the some $50 billion the U.S. has spent on reconstruction in Iraq, according to audits from a U.S. watchdog agency.

As the U.S. draws down in Iraq, it is leaving behind hundreds of abandoned or incomplete projects. A $40 million prison sits in the desert north of Baghdad, empty. A $165 million children's hospital goes unused in the south. A $100 million waste water treatment system in Fallujah has cost three times more than projected, yet sewage still runs through the streets.

That amount is likely an underestimate, based on an analysis of more than 300 reports by auditors with the special inspector general for Iraq reconstruction. And it does not take into account security costs, which have run almost 17 percent for some projects.

There are success stories. Hundreds of police stations, border forts and government buildings have been built, Iraqi security forces have improved after years of training, and a deep water port at the southern oil hub of Umm Qasr has been restored.

Even completed projects for the most part fell far short of original goals, according to an Associated Press review of hundreds of audits and investigations and visits to several sites. And the verdict is still out on whether the program reached its goal of generating Iraqi good will toward the United States instead of the insurgents.

Col. Jon Christensen, who took over as commander of the U.S. Army Corps of Engineers Gulf Region District this summer, said the federal agency has completed more than 4,800 projects and is rushing to finish 233 more. Some 595 projects have been terminated, mostly for security reasons.

Christensen acknowledged that mistakes have been made. But he said steps have been taken to fix them, and the success of the program will depend ultimately on the Iraqis — who have complained that they were not consulted on projects to start with.

"There's only so much we could do," Christensen said. "A lot of it comes down to them taking ownership of it."

The reconstruction program in Iraq has been troubled since its birth shortly after the U.S.-led invasion in 2003. The U.S. was forced to scale back many projects even as they spiked in cost, sometimes to more than double or triple initial projections.

As part of the so-called surge strategy, the military in 2007 shifted its focus to protecting Iraqis and winning their trust. American soldiers found themselves hiring contractors to paint schools, refurbish pools and oversee neighborhood water distribution centers. The $3.6 billion Commander's Emergency Response Program provided military units with ready cash for projects, and paid for Sunni fighters who agreed to turn against al-Qaida in Iraq for a monthly salary.

But sometimes civilian and military reconstruction efforts were poorly coordinated and overlapped.

Iraqis can see one of the most egregious examples of waste as they drive north from Baghdad to Khan Bani Saad. A prison rises from the desert, complete with more than two dozen guard towers and surrounded by high concrete walls. But the only signs of life during a recent visit were a guard shack on the entry road and two farmers tending a nearby field.

In March 2004, the Corps of Engineers awarded a $40 million contract to global construction and engineering firm Parsons Corp. to design and build a prison for 3,600 inmates, along with educational and vocational facilities. Work was set to finish in November 2005.

But violence was escalating in the area, home to a volatile mix of Sunni and Shiite extremists. The project started six months late and continued to fall behind schedule, according to a report by the inspector general.

The U.S. government pulled the plug on Parsons in June 2006, citing "continued schedule slips and ... massive cost overruns," but later awarded three more contracts to other companies. Pasadena, Calif.-based Parsons said it did its best under difficult and violent circumstances.

Citing security concerns, the U.S. finally abandoned the project in June 2007 and handed over the unfinished facility to Iraq's Justice Ministry. The ministry refused to "complete, occupy or provide security" for it, according to the report. More than $1.2 million in unused construction material also was abandoned due to fears of violence.

The inspector general recommended another use be found for the partially finished buildings inside the dusty compound. But three years later, piles of bricks and barbed wire lie around, and tumbleweed is growing in the caked sand.

"It will never hold a single Iraqi prisoner," said inspector general Stuart Bowen, who has overseen the reconstruction effort since it started. "Forty million dollars wasted in the desert."

Another problem was coordination with the Iraqis, who have complained they weren't consulted and often ended up paying to complete unfinished facilities they didn't want in the first place.

"Initially when we came in ... we didn't collaborate as much as we should have with the correct people and figure out what their needs were," Christensen said. He stressed that Iraqis are now closely involved in all projects.

One clinic was handed over to local authorities without a staircase, said Shaymaa Mohammed Amin, the head of the Diyala provincial reconstruction and development committee.

"We were almost forced to take them," she said during an interview at the heavily fortified local government building in the provincial capital of Baqouba. "Generally speaking, they were below our expectations. Huge funds were wasted and they would not have been wasted if plans had been clear from the beginning."

As an example, she cited a date honey factory that was started despite a more pressing need for schools and vital infrastructure. She said some schools were left without paint or chalkboards, and needed renovations.

"We ended up paying twice," she said.

In some cases, Iraqi ministries have refused to take on the responsibility for U.S.-funded programs, forcing the Americans to leave abandoned buildings littering the landscape.

"The area of waste I'm most concerned about in the entire program is the waste that might occur after completed projects are handed over to the Iraqis," Bowen said.

The U.S. military pinned great hopes on a $5.7 million convention center inside the tightly secured Baghdad International Airport compound, as part of a commercial hub aimed at attracting foreign investors. A few events were held at the sprawling complex, including a three-day energy conference that drew oil executives from as far away as Russia and Japan in 2008, which the U.S. military claimed generated $1 million in revenues.

But the contracts awarded for the halls did not include requirements to connect them to the main power supply. The convention center, still requiring significant work, was transferred to the Iraqi government "as is" on Jan. 20, according to an audit by the inspector general's office.

The buildings have since fallen into disrepair, and dozens of boxes of fluorescent lightbulbs and other equipment disappeared from the site. Light poles outside have toppled over and the glass facade is missing from large sections of the abandoned buildings.

Waste also came from trying to run projects while literally under fire.

The Americans committed to rebuilding the former Sunni insurgent stronghold of Fallujah after it was destroyed in major offensives in 2004. The U.S. awarded an initial contract for a new waste water treatment system to FluorAMEC of Greenville, S.C. — just three months after four American private security contractors were savagely attacked. The charred and mutilated remains of two of them were strung from a bridge in the city.

An audit concluded that it was unrealistic for the U.S. "to believe FluorAMEC could even begin construction, let alone complete the project, while fierce fighting occurred daily." The report also pointed out repeated redesigns of the project, and financial and contracting problems.

The Fallujah waste water treatment system is nearly complete — four years past the deadline, at a cost of more than three times the original $32.5 million estimate. It has been scaled back to serve just a third of the population, and Iraqi officials said it still lacks connections to houses and a pipe to join neighborhood tanks up with the treatment plant.

Desperate residents, meanwhile, have begun dumping their sewage in the tanks, causing foul odors and running the risk of seepage, according to the head of Fallujah's municipal council, Sheik Hameed Ahmed Hashim.

"It isn't appropriate for the Americans to give the city these services without completing these minor details," Hashim said. "We were able to wipe out part of the memories of the Fallujah battles through this and other projects. ... If they leave the project as it is, I think their reputation will be damaged."

By contrast, the Basra children's hospital — one of the largest projects undertaken by the U.S. in Iraq — looks like a shining success story, with gardeners tending manicured lawns in preparation for its opening. But that opening has been repeatedly delayed, most recently for a lack of electricity.

The construction of a "state of the art" pediatric specialist hospital with a cancer unit was projected to be completed by December 2005 for about $50 million. By last year, the cost had soared above $165 million, including more than $100 million in U.S. funds, and the equipment was dated, according to an auditors' report.

Investigators blamed the delays on unrealistic timeframes, poor soil conditions, multiple partners and funding sources and security problems at the site, including the murder of 24 workers. Bechtel, the project contractor, was removed because of monthslong delays blamed on poor subcontractor performance and limited oversight, the special inspector general's office said. A Bechtel spokeswoman, Michelle Allen, said the company had recommended in 2006 that work on the hospital be put on hold because of the "intolerable security situation."

In an acknowledgment that they weren't getting exactly what they hoped for, Iraqi officials insisted the label "state of the art" be removed from a memorandum of understanding giving them the facility. It was described as a "modern pediatric hospital."

Hospital director Kadhim Fahad said construction has been completed and the electricity issue resolved.

"The opening will take place soon, God willing," he said.

Residents are pleased with the outcome. One, Ghassan Kadhim, said: "It is the duty of the Americans to do such projects because they were the ones who inflicted harm on people."

Aug 29, 2010

US economy grew 1.6% in the second quarter

The US economy grew 1.6% in the second quarter, revised down from a first estimate of 2.4%.The figures were better than most analysts had expected.

Recent data on the US economy had raised worries that the US was entering a double-dip recession, dragging the rest of the world with it.

The revised figure was mostly due to the largest surge in imports in 26 years, and a slower build-up of stocks by companies.

Economists had estimated the revision would be sharper for the April-to-June period, down to about 1.3%.

Nevertheless, it still marks a big drop on the growth figure for the previous three months, which stood at 3.7%.

The US economy has now grown for four straight quarters, although that annualised growth rate averaged only 2.9%.
Experts say that the economy needs to grow at about 3% just to keep the unemployment rate, currently 9.5%, from rising. Business investment in new machinery, computers and software drove much of the growth last quarter, increasing nearly 25%.

But much of that spending involved the purchase of imported goods. Imports surged 32.4%, the most since 1984. That was much larger than the 9.1% increase in exports.
However, the Commerce Department figures also showed that personal consumption by US consumers was higher than expected.
Their spending rose at a 2% annual rate, slightly higher than the first quarter's 1.9%.
In the past week, economic data has revealed deep concerns about the health of the US economy.Sales of new homes sank to the lowest levels in half a century, while the manufacturing sector cut back capital spending sharply.

On Friday, in a speech to central bankers, Ben Bernanke, chairman of the Federal Reserve, warned that the economic outlook was "inherently uncertain". The economy, he said, "remains vulnerable to unexpected developments".

He also said that the Fed was ready to pump more money into the economy, through another large-scale purchase of securities, if conditions were to deteriorate significantly.

The US economy emerged from recession with a 1.6% growth rate in the third quarter of 2009.

Volcano erupts in Indonesian island of Sumatra for the first time in 400 years today

JAKARTA: A volcano on the Indonesian island of Sumatra erupted for the first time in 400 years Sunday, spewing a vast cloud of smoke and ash into the air and sending thousands of people fleeing from their homes.

Indonesia issued a red alert after the Sinabung volcano erupted, blanketing the area in thick and acrid black smoke, disaster officials said, although no casualties have yet been reported.

"It's clearly dangerous so we've raised the warning to the highest level, or red level," said Surono, head of the nation's volcano disaster alert centre.

"From the crater, it shot smoke and volcanic ash 1,500 metres (5,000 feet) into the sky," he told AFP. "Initially we thought the ash and smoke were triggered by rain but now we know the driving pressure was from magma."

The 2,460-metre (8,100 feet) Sinabung in northern Sumatra has not erupted for more than 400 years but had shown "some volcanic activity" since Friday, Surono said.

"Our team is coordinating with district and provincial officials to monitor the situation," he added.

About 9,300 people have been evacuated from several affected villages to towns outside a six-kilometre "danger zone", search and rescue team official Mohammad Agus Wibisono told AFP.

"The ash has spread to a distance of 30 kilometres (20 miles) from the volcano. Many of the villagers evacuated were farmers and they said the ash had settled on their vegetable farms," he said.

Disaster Management Agency spokesman Priyadi Kardono told AFP that many residents in four affected villages at the foot of the volcano had fled their homes immediately after the eruption.

"Many had left their homes even before they were evacuated. They said the volcano was spewing thick black smoke, small stones and sulphur. They were so scared they decided to leave their homes and go to the city," Kardono said, adding that a rescue team has been sent to survey the area.

"The area is blanketed with thick smoke and there's a strong smell of sulphur," he added.

He said while there were no reports yet of any deaths or injuries, "many" had reported breathing difficulties.

"We have anticipated that people may have respiratory problems from inhaling dust. So, we've given them face masks and are preparing to send in medicines for respiratory infections," he added.

Tents and food are also being arranged for the evacuees and "the situation is under control," Kardono said.

Indonesia sits on the Pacific "Ring of Fire", where the meeting of continental plates causes high volcanic and seismic activity. It has more active volcanoes than any other country.

Earlier this month, four people went missing after the 1,784-metre (5,853-foot) Mount Karangetang, on the remote island of Siau in North Sulawesi province, erupted.

Mount Baru Jari on Lombok island, near the resort island of Bali, erupted in May, spewing ash and lava at least 1,500 metres into the sky, damaging crops but not threatening villagers.

Source: AFP,