Global business

UBS, one of the biggest victims of the credit crunch, opened an old can of worms by announcing that it would run its investment bank separately from its wealth-management and asset-management arms. Speculation mounted that the bank may consider a sale of the troubled division, largely formed from acquisitions including O'Connor & Associates, SG Warburg, Dillon Read and Paine Webber.

Credit Suisse was fined by Britain's Financial Services Authority for mispriced trades. The regulator said the bank's traders had been treated with "too much deference."

Despite tricky markets, mergers and acquisitions continued. Continental, a German tire and car parts maker, said it would carry on talks with Schaeffler, a privately held ball-bearing maker. Schaeffler has controversially accumulated control of more than one-third of Continental's shares, mainly using derivatives. Volkswagen, the two firms' largest customer, supports a tie-up.

UnionBanCal rejected a $3 billion offer from Mitsubishi UFJ Financial for the 35 percent of the Californian bank it does not own. UnionBanCal said it was prepared to talk.

Roche, a Swiss drug company, also received a frosty reception for its $44 billion bid for the 44 percent of Genentech it does not already own. The directors of the American biotech company argued that the offer fails to reflect the firm's portfolio of cancer drugs. Genentech's share price continues to trade well above Roche's original $89 per share offer, indicating investors expect a revised bid.

Political economy

The Bank of England struck a gloomy note when its governor, Mervyn King, warned of a "difficult and painful adjustment" for the British economy. The central bank is now predicting that growth will stall in the first quarter of 2009. Perhaps as a result, the bank seemed less concerned about inflation, which it forecast would fall back below the 2 percent target within two years if interest rates remain unchanged.

Evo Morales, Bolivia's socialist president, convincingly won a recall referendum. He was backed by two-thirds of the 84 percent of voters who turned out. The vote paves the way for the approval of a new constitution. But voters also gave their backing to four regional governors from eastern Bolivia who are Morales' main opponents, so the country's regional divide may persist.

Mexico's government set up a new police anti-kidnap squad after an outcry over the abduction and murder of a businessman's son in June. More than 430 kidnappings were reported in 2007, many carried out by police officers.

Venezuela's leftist government relaxed some of its price controls, raising the price of beef and bread by up to 50 percent and lifting controls on some other foodstuffs. This may ease shortages but will boost inflation, which reached an annual rate of 34 percent in July.

The euro-area economy slumped in the second quarter, with negative growth reported by each of the three biggest economies. The news raised fears that Europe might soon tip into recession.