Dollar gains as Fed keeps
European stock markets closed mostly higher while the dollar gained as
U.S. Federal Reserve Chairman Alan Greenspan gave few new clues on U.S. interest rate
Initial remarks by the head of the U.S. central bank in the second part
of his testimony before a U.S. Senate Banking Committee were little changed from his
testimony last week, leaving little for traders to chew on.
Last week, before a U.S. House of Representatives panel, Greenspan
warned that the Fed would act "promptly and forcefully by raising interest rates at
the first sign of rising U.S. inflation.
The Dow Jones Industrials Average was up around 15 points at 3pm, as
dealers waited for any further hints on interest rate policy during later questioning by
the Senate panel.
The Fed next meets to discuss interest rates on August 24, and market
participants are split on whether it will hold its monetary policy course.
Greenspan repeats inflation warning
Federal Reserve Chairman Alan Greenspan repeated his warning that the
Fed would act "promptly and forcefully" if inflation appeared set to rise and
held firm in his opposition to a large tax cut.
But the world's most powerful central banker had little opportunity to
elaborate on his inflation warning, delivered last week for the first time and repeated in
identical testimony to the Senate Banking Committee.
Lawmakers, speaking ahead of a crucial Senate debate on a massive
package of tax cuts, repeatedly asked Greenspan for his views on the budget surplus and
how to use it rather than for his views on monetary policy.
"We probably would be better off holding off on a tax cut
immediately," Greenspan said, citing the need to prepare for strains on entitlement
programmes such as Social Security.
Greenspan said the Fed was keeping a close eye on the tight labour
market and other imbalances that might cause the economy to overheat.
Although he raised the threat of swift and aggressive rises in interest
rates should price pressures build, he also emphasised the central bank was in no hurry to
"If new data suggest it is likely that the pace of cost and price
increases will be picking up, the Federal Reserve will have to act promptly and
forcefully," he said.
But he tempered that statement by making clear that the Fed was not
"committed in short order" to follow up on a small rate rises.
EU seeks to outlaw states' golden share
The European Commission went on the offensive against governments
protecting their prized national companies through so-called golden shares.
The European Union executive said it was taking France to the European
Court of Justice because of the way the French government held on to its special single
share in oil giant Elf Aquitaine in order to prevent a hostile foreign takeover.
In a statement, the Commission said French law governing the special
powers of golden shares was incompatible with EU legislation on the free movement of
capital, part of the 15-nation bloc's single market policy.
In Paris, the finance ministry said the government's Elf share did not
breach EU law and was designed to protect the national energy supply. It said it would
fight the case.
DuPont: DuPont Co, the largest U.S. chemical company, said that
second-quarter profits rose 6 per cent. DuPont said earnings from continuing operations
rose to $886 million, or 78 cents a diluted share. In the same period last year, it posted
earnings of $839 million, or 73 cents a diluted share.
Cadbury: British confectionery and soft drinks firm Cadbury
Schweppes Plc said that pretax profits fell by 5.6 per cent in the first half of 1999 to
Abbey: British bank Abbey National Plc posted a 17 per cent jump
in first half profits. Pre-tax profit rose to £875 million ($1.4 billions) including 60
million from the sale of its stake in insurer Irish Permanent, from 748 million in the
same 1998 period.
Akzo: Dutch chemicals and pharmaceuticals group Akzo Nobel
posted second quarter profits down one per cent. Second-quarter earnings came in at 217
million euros ($230.8 million) at the upper end of analysts' expectations.
Deutsche Bank: Deutsche Bank AG fulfilled expectations with a
nearly 20 per cent rise in first half operating profit but beat market forecasts by
posting an 80 per cent jump in trading profit. Operating profit in the six months, which
for the first time included U.S. subsidiary Bankers Trust, rose 19.2 per cent to 2.035
billion euros ($2.16 billion) and bullish financial markets boosted trading income to
2.283 billion euros.
Argentaria: Spain's third biggest bank Argentaria reported a
17.1 per cent increase in its first half profit to 270.46 million euros, fuelled by strong
growth in its basic banking business.
Halifax: Britain's largest mortgage bank Halifax Plc reported a
five per cent rise in underlying first half profits. The mortgage bank reported pre-tax
and pre-exceptionals profits for the six months to June 30 of £885 million ($1.41
billion), up five per cent on the same half the previous year.
Donors offer $5.9b aid to Indonesia
Donor countries pledged $5.9 billion of assistance for Indonesia this
year but stressed the need for continued economic reform, a smooth political transition
and a stepped-up fight against corruption.
At the end of a two-day annual meeting of almost 30 donor countries and
international organisations, organised by the World Bank here, the donors hailed "the
significant progress," both economic and political, made by Indonesia in the past
But they stressed the need for Indonesia to stay in the course of
economic reform, step up the fight against corruption and complete political transition.
The Indonesian government needs to "persevere and continue to make
good decisions in politically difficult times," he added.
Indonesian Finance Minister Ginanjar Kartasasmita said the economy is
on the road to recovery after its economic meltdown.
But, he added, "a return to the pre-crisis days of high growth and
accelerated poverty reduction is still far from assured" and continued support from
the international community was vital.
Ginanjar on Tuesday said he expected the economy to grow at 1.5 to 2.5
per cent this year, with inflation of five per cent by the end of the year.
Japan said it would give Indonesia $1.67 billion in loans and grants in
1999, part of the $5.9 billion pledged by international creditors. :
Most of the Japanese money has already been pledged Japan
announced a $2.4-billion assistance package in February under the Miyazawa plan to help
crisis-hit Asian economies.
The package involved a $1.5 billion loan from the Export-Import Bank of
Japan and $900 million in official development assistance (ODA) loans.
Eni to invest $5.5b to tap Libyan gas
Eni SpA, Europe's second-largest natural gas supplier, will spend $5.5
billion to develop two Libyan gas fields, the biggest foreign investment since the
handover of suspects in the Lockerbie airliner bombing.
Under the contract, Eni also will build a 370-mile pipeline under the
Mediterranean Sea from Libya's northern coast to Sicily to drain gas from the Wafa field
in the Sahara desert and an offshore deposit. Talks on the plan began in 1996.
Korean banks to restructure Daewoo
Daewoo Group's major Korean creditors took control of the cashstrapped
conglomerate's restructuring programme, reassuring markets nervous about the risk of a
Foreign banks holding 20 per cent of Daewoo's $50 billion debt had been
on the verge of calling in their loans to the firm, South Korea's second-largest
conglomerate, the local banks said.
UK's euro plans unchanged, Blair
Prime Minister Tony Blair denied he had cooled on his plan to make
Britain part of a successful euro and pledged to lead a campaign to keep Britain at the
heart of Europe.
"We want the single currency to succeed. We stay fully engaged and
positive. We prepare," Blair said in an unashamedly pro-European speech at the London
"We will recommend Britain joining providing the economic
conditions are right. We do not close the door. "
Mergers & Acquisitions
Reckitt & ColmanBenckiser:
Dutch cleaning products
company Benckiser and Britain's Reckitt & Colman unveiled plans to merge to form a
world leader in household cleaning. The tie-up will give Reckitt & Colman shareholders
59.1 per cent of the new group and Benckiser 40.9 per cent. The top job has gone to the
Dutch side, with Bart Becht to take the post of chief executive officer.
NTLCWC: Nasdaq-listed NTL Inc bought the cable TV arm of
Britain's market leader Cable and Wireless Communications Plc in an £8.2 billion ($13
billions) deal which might not be its last.
ShireRoberts: Shares in Britain's Shire Pharmaceuticals
Group Plc rose, after the company confirmed it was merging with U.S. peer Roberts
Pharmaceutical Corp. Under an all share deal, Roberts will exchange each of its shares for
1.1374 Shire American Depository Receipts in a transaction valuing each Roberts share at
$30.71 and the whole of the U.S. company at around $1.0 billion.
Hicks MuseCEI Citicorp:
Private equity group Hicks, Muse,
Tate & Furst took control over one of Argentina's largest media groups, CEI Citicorp
Holdings, after agreeing to pay over $124 million for an increased stake.
Japan's domestic vehicle output hits 20-year low
Japan's domestic vehicle output shrank more than three per cent in the
first half of this year from a year earlier, falling under the five million mark for the
first time in 20 years, an industry body said.
From January to June, domestic vehicle output fell 3.3 per cent
year-on-year to 4.93 million units, the Japan Automobile Manufacturers' Association said.
The last time Japan's car industry produced less than five million
units in the first half of a calendar year was in 1979, when output totalled 4.63 million
Australia lauded as star economy of developed world
Australia has been lauded as the star economy of the developed world in
a U.S. investment bank report that forecasts sharp gains for the Aussie dollar.
The Goldman Sachs report "Australia. Never had it so
good!" predicts significantly better performances for Australian markets,
including a "relatively cheap" stock market.
Philips, LG tie up to form flat-panel display giant
European giant Royal Philips Electronics tied up with South Korea's LG
Electronics Inc to form one of the world's largest suppliers of flat-panel displays.
The $1.6 billion deal marked the first major foreign investment in
South Korea's electronics market since late 1997, when the country suffered a foreign
Under the deal, Philips Flat Display Systems (FDS), a unit of the Dutch
electronics firm will buy a 50 per cent stake held by LG Electronics in its LCD business,
the two firms said in a joint statement.
BoJ to maintain policy
Japanese economic activity rose in May, helped by an improvement in the
service sector, but the central bank said it would stay with its ultra-easy credit policy
until more convincing signs of economic recovery emerged.
"The Bank of Japan will maintain monetary policy until the threat
of deflation is gone," BoJ Governor Masaru Hayami said in remarks prepared for
delivery to a regular meeting of central bank branch managers.
U.S., Vietnam strike major trade pact
Former enemies Vietnam and the United States struck a landmark trade
pact moving closer to full commercial ties and signalling Hanoi's intent to integrate with
the world economy.
U.S. Deputy Trade Representative Richard Fisher and Vietnam's Trade
Minister Truong Dinh Tuyen reached "agreement in principle on the deal after several
days of marathon talks between negotiators, including a 17-hour session on Saturday.
Fisher said he hoped the agreement could be enacted by year-end after
some technical issues had been finalised and the U.S. Congress and Vietnam's National
Assembly had approved the pact.
Ireland plans to invest $50.7b
Ireland announced it planned to invest 38 billion punts ($50.7 billion)
Finance Minister Charlie McCreevy told a news conference that the
government would approve the plan in September but that it had already agreed a rough
figure of 38 billion punts to be spent over the next seven years.
EU imposes duties on India steel wires
The EU said it had imposed definitive antidumping and anti-subsidy
duties on imports of some steel ropes and cables from India.
The bloc imposed a definitive anti-subsidy duty ranging from 13.2 to
48.8 per cent on Indian producers of stainless steel wires with a diameter of one
millimetre or more, the EU's Official format said.
It also hit Indian producers of the same product with definitive
anti-dumping duties of between 2.4 and 55.6 per cent and imposed anti-subsidy duties of
between 8.5 and 44.4 per cent.
Coke and its bottlers may get record fines from EU
Coca-Cola and three of its bottlers could be hit by record fines if the
European Commission finds fault with their sales practices, but lawyers and analysts
struggled to quantify potential damage.
"Fines could become very high. The maximum is 10 per cent of
turnover," European Competition Commissioner Karel Van Miert, whose agents raided
Coke offices earlier this week and seized internal files as part of a probe into suspected
abuses of the firm's dominant market position, said.