Oil drops as speculators jump ship

World oil markets took a nosedive as speculators decided the rally, which doubled prices since March, had gone far enough.

London benchmark Brent blend futures dipped 83 cents to $19.80 a barrel at close after overnight U.S. data indicated slower than expected demand growth for gasoline in the world's biggest oil consuming nation.

Weekly government data showed U.S. gasoline inventories rose in the week to August 20 when dealers were expecting a large decline.

"Gasoline supplies appear plentiful," said Prudential Bache broker Nauman Barakat.

Traders said the investment hedge funds which have led this year's price rise, in the wake of Opec supply cuts, sold heavily.

Paribas chief quits after BNP takeover

The president of French investment bank Paribas, Andre Levy-Lang, announced his resignation after his bank was taken over by BNP in France's biggest takeover battle.

His resignation comes just two days before French regulators are to give a final ruling on the outcome of the bidding war, in which BNP scuppered a friendly merger between Paribas and Societe Generale (SG) by launching a hostile bid for both banks.

GM vetting Daewoo's car business

A fact-finding team from General Motors Corp has begun assessing the car business of South Korea's debt-laden Daewoo Group in the first step toward forging an alliance, a GM spokesman said.

"Some 20 offficials from GM's worldwide operations will see various aspects of Daewoo's vehicle business in the next two or three days," said Lee Kisup spokesman for GM's Seoul office.

Malaysian recession ends but other concerns arise

Malaysia said its deepest recession in decades is all but ended, but the news is overshadowed by controversial bank mergers and the expected September 1 exodus of foreign funds.

"Growth recovery is on track; our concerns now are more on the policy-making," said Neil Saker, head of economic research at SG Securities.

"Specifically, the rapid pace of bank mergers could be impediment to the real economy," he said.

The central bank said Malaysia's gross domestic product grew a robust 4.1 per cent in the second quarter, confirming an end to the most severe recession since independence in 1957.

The sharp rebound prompted the central bank to say its longstanding forecast of one per cent GDP growth in 1999 was not optimistic enough.

Results

SAirGroup: Swiss aviation conglomerate SAirGroup warned it could not match its strong 1998 earnings after a 31.5 per cent fall in first-half profit. The company said in reporting net profit fell 31.5 per cent in the first half to 87 million Swiss francs ($57.24 million).

MNB: Finnish-Swedish banking group MeritaNordbanken reported a flat January-June operating profit excluding gains on disposals. Comparable operating profit for the group was 655 million euros ($683.2 million), flat on last year's adjusted 653 million euros.

Matsushita: Matsushita Electric Industrial, whose products are sold worldwide under the Panasonic and National brands, chalked up consolidated operating profit of 14.35 billion yen ($128.13 million) for the April-June quarter, down 57 per cent from the same period last year.

Toronto-Dominion Bank: The Toronto-Dominion Bank has made financial history in Canada becoming the first financial institution to earn more than $1 billion in a quarter. In announcing the $1.47 billion profit for the three months ending July 31, TD Bank said it had beaten a previous quarterly profit record of $533 million set by Bank of Nova Scotia in 1997. It also bettered its own annual profit record of $1.12 billion set in 1997.

Foster: Foster's reported a net profit of A$364.8 million ($233.5 million) for the year ended June 30, before a one-off gain of A$4 million, well ahead of analysts' forecasts, which averaged about A$327 million.

NetCom: Norwegian telecoms firm NetCom ASA said that pre-tax profits more than tripled in the first half. NetCom, said pre-tax profits leapt to 135 million crowns ($17.42 million) from 43 million in the same period of 1998.

ABN Amro: ABN Amro, the Netherlands' largest bank, unveiled a 30 per cent increase in 1999 first-half net profit. First-half net, at 1.44 billion euros ($1.52 billion), pipped analysts' expectations of 1.16 to 1.4 billion euros. Earnings per share rose by 28 per cent to 0.97 euros.

Fed jacks up key rates to curb inflation

The U.S. Federal Reserve's policymaking body raised the federal funds rate by one quarter point to 5.25 per cent, in a move the Open Market Committee said should diminish the risk of inflation.

The Fed also raised the discount rate by a quarter point to 4.75 per cent, in the first increase in the rate since February 1991.

The increase in the Fed funds rate is the second in the past seven weeks, as the central bank moves to prevent a buildup of inflationary pressures.

Some analysts said an increase in the largely symbolic discount rate would be a signal that the Fed is prepared to raise short-term interest rates again perhaps as soon as the next meeting of the Open Market Committee on October 5, in order to keep the economy from overheating.

The dollar snapped higher against the Japanese yen and European single currency after the Federal Reserve announced it had raised the key federal funds rate by a quarter of a point.

Buoyed by an initial positive reaction by the U.S. stock market, the U.S. currency jumped around half a yen to 111.40 yen shortly after the announcement, while the euro slipped nearly half a cent to $1.0475, traders said

The Fed's rate increases were expected to be followed quickly by announcements from commercial banks that they were boosting their prime lending rate by a similar quarter point from the current 8 per cent to 8.25 per cent.

The prime rate is a key benchmark for millions of loans, from home equity and credit card balances to short-term loans for small businesses.

Although the economy has slowed in recent months, it is still expected to grow almost four per cent this year, a brisk pace that has pushed unemployment down to its lowest level in three decades.

LSE set to launch Nasdaq rival

The London Stock Exchange (LSE) will next month reveal plans for a separate market for technology stocks modelled on the hugely successful U.S. Nasdaq Stock Market, industry sources said.

Techmark—as the new market is likely to be known—will have its own index initially consisting of at least 100 quoted companies, and will be aimed at promoting London-listed technology stocks among international investors.

Growing interest in British high-tech stocks was recently underlined after shares in Freeserve, the country's largest Internet company soared nearly 40 per cent on its market debut in July with some 95 million shares changing hands.

London is the world's third largest market behind the New York Stock Exchange and the Nasdaq. But the 200-year-old institution has been slow to embrace New York's lead on technology stocks.

The Nasdaq is now 28 years old with a market capitalisation of $3 trillion and Germany has followed suit with its highly successful Neuer Markt.

Japan to sell $1 1.5b NTT stake

NTT, Japan's telecommunications giant, put in train the sale of an $11.5 billion tranche of its shares as the finance ministry started meeting investment banks chasing underwriting roles in the transaction.

Japan is selling 952,000 NTT shares—the fifth tranche of stock to be sold since privatization began more than a decade ago.

Officials have received written submissions from 13 banks chasing the underwriting mandate, one of the most lucrative in the equity underwriting business. Investment banks taking the lead roles in underwriting equity issues typically earn up to 2.5 per cent of the value of the transaction. Fees have fallen sharply in recent years but big transactions like NTT are the most sought-after and remain the most valuable.

The sale of the shares, the biggest from Japan this year, is expected to take place in November depending on market conditions, although officials may want to take advantage of the Tokyo stock market's current strength to sell the shares sooner. Much of the market's advance is being driven by foreign investors and the Nikkei average is hovering above 18,000

Japan banks back at top with a bang

Three of Japan's biggest banks announced a broad alliance, giving birth to the world's first trillion-dollar financial group and heralding Japan's long-awaited entry into the era of global mega-bank mergers.

"Even as dynamic realignments take place across the globe and across borders, Japanese banks had been left out in the cold while we tried to resolve our bad loan problems," Industrial Bank of Japan President Masao Nishimura said.

"The three of us agreed that we wanted to be the front-runner in revitalising Japan's financial system," Nishimura said.

The three—Dai-lchi Kangyo Bank, Fuji Bank and IBJ—said they will form a joint holding company by the autumn of next year and integrate their business operations by the spring of 2002.

The combined group will have assets totalling $1.3 trillion, surpassing the current world banking leader Deutsche Bank and nearly twice as large as Citigroup.

Deutsche acquired Bankers Trust Corp last year in the largest takeover of a U.S. bank by a foreign firm, while in France Banque Nationale de Paris is currently battling to absorb rivals Paribas and Societe Generale.

Investors applauded alliance announcement, lifting all three banks' shares by their daily allowable limits on the Tokyo Stock Exchange. IBJ's shares closed 100 yen higher at 1,084 yen, while DKB was up 100 at 1,009 and Fuji Bank was up 90 at 1,043.

Setsuko Akiba, analyst at Deutsche Bank Group, said the shares could rise to around 1,300 to 1,500 yen, with the new banking group expected to grab a healthy 14 per cent share of bank lending to fisted Japanese firms.

Japan's financial regulators who have pushed hard for consolidation in the nation's battered banking industry, were quick to welcome the banks' move and urged others to follow suit.

Basf inches closer to $2.8b China deal

Basf is a step closer to building a five billion mark ($2.79 billion) petrochemical complex in China which would constitute Germany's largest-ever investment in the country, a company executive said.

"We have nearly finalised the feasibility study," the executive said. "Both sides are getting into the final stages."

Basf signed a letter of intent in 1996 with a subsidiary of Chinese state giant Sinopec to build an integrated petrochemical plant in the southern city of Nanjing.

Money laundering may deal blow to Russia

The Russian mafia's apparent billion dollar money-laundering scheme at the prestigious Bank of New York could further damage Western investors' confidence in the Russian market, security analysts said.

There are suspicions in Europe and the United States that some Russian government officials have mob ties, which makes it easy for criminals to break the law with impunity, the analysts said.

Thai stocks soar

Thai stocks surged more than five per cent in their heaviest trade in six weeks, aided by the return of foreign institutional funds and enthusiastic retail buyers, brokers said.

The composite SET index closed up 22.51 points or 5.39 per cent at 440.51 on a heavy 14.35 billion baht turnover.

Gainers outnumbered losers by 223 to 44 with 32 issues finishing unchanged.

 

Mergers & Acquisitions

Suez—United Water: French conglomerate Suez Lyonnaise des Eaux said it had made a friendly, $1.0 billion takeover bid for the second-largest water distributor in the United States, United Water Resources (UWR).

Carolina Power—Florida Progress: Carolina Power & Light Co, the second-largest utility in North Carolina, has agreed to buy Florida Progress Corp for about $5.3 billion in cash and stock, creating the ninth largest U.S. energy utility.

Centura—Triangle: Centura Banks Inc will buy Triangle Bancorp Inc. a smaller in-state rival, for stock valued at $608.4 million in a move to expand market share in growing areas of North Carolina, Centura said.

Alcoa—Reynolds: Alcoa Inc. the world's largest aluminum producer, said it reached an agreement to buy Reynolds Metals Co, the No. 3 player, in a $4.4 billion all-stock deal that ends Alcoa's short-lived hostile bid for its smaller rival.

 

Siemens, Fujitsu in joint venture

Germany's Siemens AG and Japan's Fujitsu Ltd tied the knot on a new joint venture which aims to become the largest personal computers firm in Europe by 2001.

Fujitsu Siemens Computers said it wants annual unit sales growth of 40 per cent and revenue growth of 25 per cent positioning it to compete with world number one Compaq Computer Corp in the European market.

The 50/50 joint venture, to be based in the Netherlands and combining Fujitsu's European computer business with Siemens' computer systems division, expects European sales of more than six million units in 2001 and 7.5 billion euros in revenues.

Seoul in bid to stabilise marts

South Korea secured pledges from financial firms to cooperate in stabilising edgy financial markets; still apprehensive about how the restructuring of the debt-laden Daewoo Group is progressing.

The Financial Supervisory Commission said institutions promised to refrain from taking their investments out of bond funds exposed to Daewoo debt and to stabilise interest rates.

Brokers and analysts said the financial regulator's announcement had little impact on jittery financial markets, although the stock market showed a dramatic turnaround after a surprise ratings report by Moody's Investors Service.

Moody's said it was reviewing for possible upgrade Korea's Baa3 long-term foreign currency ceiling for bonds and notes, the Ba2 country ceiling for foreign currency bank deposits and the non-prime short-term foreign currency ceiling.

Samsung agrees final debt payment scheme

South Korea's Samsung Group bowed to creditors of its loss-making affiliate Samsung Motors Inc, and agreed to a final debt repayment schedule which virtually guarantees creditors their money back.

Korea's third largest conglomerate Samsung agreed on a final debt payment scheme under which it would pay the full 2.45 trillion won ($2.04 billion) owed to creditors not affiliated to Samsung by end2000, an executive at leading creditor Hanvit Bank said.