UK surprises markets with
key rate hike
The Bank of England shocked financial markets by raising Britain's key
short-term interest rate by a quarter point to 5.25 per cent, the first rise since June
The MPC said it was worried about strong consumption and the housing
market and said an early move could lower the level at which interest rates might
otherwise need to be set.
The BoE's Monetary Policy Committee has faced growing signs Britain's
economic recovery is picking up, but also that inflationary pressures remain subdued.
The pound jumped more than half a cent against the dollar on the news
to 1.6185 while the FTSE 100 share index closed 55.9 points lower at 6,253.6.
The nine-member MPC had cut rates seven times since last October by a
total of 2.5 percentage points and consumer and business confidence rebounded as a result.
But underlying inflation, or RPIX, remains at 2.2 per cent, comfortably below its
government-set target of 2.5 per cent.
British rates are now more double those in the euro zone but on the
same level as the U.S., following a rate rise there on August 24.
They were at 5.25 per cent between April and June this year, when they
were cut to a 22-year low of 5.0 per cent.
Economic data since the July meeting had been thought not to have given
a decisive lead to MPC members such as BoE Deputy Governor Mervyn King who has argued for
a preemptive rate hike to choke off potential inflationary dangers.
Lenders have reported house prices across the country rising at almost
10 per cent annually with prices in London and the southeast rising much faster.
But industry, which is just emerging from recession and has long
pleaded for lower rates slammed the MPC's decision.
Halifax Plc, Britain's largest mortgage bank, was the first to jump,
lifting its key variable mortgage rate by 14 basis points to 6.99 per cent.
Lloyds TSB Group Plc Citibank UK, Barclays Plc, Bank of Scotland, Royal
Bank of Scotland and HSBC Holdings Plc's Midland all said they would lift their base rates
by 25 basis points to 5.25 per cent.
IMF report warns on high-flying U.S. stocks
A drop in high-flying U.S. stock prices could hit markets around the
world, but how far and how fast the impact could spread is hard to determine, the
International Monetary Fund said.
The IMF's International Capital Markets report, in annual review of
prospect for markets, banks and financial systems, said a fall in U.S. share prices could
hurt other countries.
It warned of risks to currencies and to banking systems and said
current account imbalances between Europe and the United States could put pressure on the
dollar in the medium term.
Signet: Jewellery retailer Signet Group Plc reported its pre-tax
profits for the 26 weeks to July 31 rose to £22.9 million from £12.1 million. Sales
increased to £447.0 million from £398.5 million.
Michelin: French tyremaker Michelin reported its net
attributable profits increased to 292 million euros in the first six months of 1999 from
249 million euros for the same period last year.
Credit Suisse Group:
Credit Suisse Group, said first-half net
profit rose by 264 million Swiss francs, or 11 per cent, to 2.67 billion francs ($1.78
Fairfax: Quality broadsheet publisher John Fairfax Holdings
Ltd's net profit in the year to end-June rose 61 per cent to A$180.27 million, including
an abnormal gain of A$45.80 million arising from the sale of its stake in Vodaphone by
associate AAP Information Services, partly offset by writedowns and other costs.
RJB Mining: Britain's biggest coal producer RJB Mining Plc,
posted sharply lower half-year profits. Profit before tax and exceptionals tumbled to
£4.02 million for the six months to June 30, 1999 from £44.0 million a year earlier.
AsiaSat: Asia Satellite Telecommunications Holdings Ltd reported
a 36 per cent drop in first-half profits. The regional satellite service provider
announced a net profit of HK$167.1 million for the six months to June 30, down from
HK$262.4 million in a year-ago period.
Anglo-Swiss: Anglo-Swiss Zurich Financial Services posted a
better-than-expected 17.2 per cent rise in first-half 1999 group net income. Net earnings
at the group rose to $1.69 billion from $1.44 billion.
Arriva: British bus company Arriva Plc's pre-tax profit rose
eight per cent to £51.6 million on turnover of £833.8 million.
Seven Network: Television broadcaster Seven Network Ltd reported
earnings before interest and tax (EBIT) came in at A$108.8 million for 1998-99, down 36
per cent on the previous year's A$170.1 million.
Creditors reject Ssangyong plan
Creditors of Ssangyong Motor Co, a unit of the beleaguered Daewoo
Group, rejected a proposal to give the automaker $115 million in trade financing, the main
creditor bank said.
A spokesman for Chohung Bank said creditors voted down the proposal
submitted by the bank and that it would arrange a second meeting of creditors soon.
Creditors of six of the 12 Daewoo affiliates under a debt workout plan
were scheduled to meet separately to discuss financial steps to help maintain the
operations of individual Daewoo companies.
Microsoft in Asia telecom link venture
Global Crossing, Softbank and Microsoft announced they have formed a
joint venture company to build a telecommunications network in Asia, initially spending
Global Crossing will contribute its 57.75 per cent holding in Pacific
Crossing 1 system while Softbank and Microsoft will contribute $350 million and make a
$200 million capacity commitment.
The initial high-speed data network, the East Asia Crossing, will be
connected by Pacific Crossing 1 to the United States and the remainder of Global
Crossing's worldwide network, the companies said in a statement.
The 17,700 kilometre undersea and terrestrial network will link Japan,
China, Singapore, Hong Kong, South Korea, Taiwan, the Philippines and Malaysia.
Oil prices race to new 31-month high
World oil prices raced to their highest level for two and a half years
as the threat of an oil workers strike in key producer Venezuela deepened fears of a
potential supply crunch.
Benchmark Brent crude broke through a previous high of $21.75 and soon
stormed to a new peak of $21.99 a barrel, more than 60 cents up on the day and its highest
level since February 1997.
The gains followed news that Venezuela's largest oil union, Pedepetrol,
said it would call an indefinite strike of its members from September 14 to pressure the
government to speed up negotiations on a new wage deal for the industry.
Mergers & Acqisitions
ViacomCBS: Viacom Inc. the name behind MTV and Paramount
Pictures, moved to expand its media empire with a deal to buy U.S. television broadcasting
icon CBS Corp for $37 billion in stock a combination billed as the largest media
HiltonPromus: Hilton Hotels Corp said it would buy Promus
Hotel Corp for $4 billion in cash, stock and debt, creating a giant with 1,700 hotels and
operations in almost every segment of the industry.
National Westminster Bank Plc unveiled a
£10.75 billion agreed bid for British life insurer and fund manager Legal & General
Plc, but the deal left investors unimpressed.
Salomon Smith Barney ANZs:
Salomon Smith Barney said it
planned to become a major retail stock broker in Australia after it acquired the retail
broking business of Australia and New Zealand Banking Group Ltd on October 1.
Britain's Standard Chartered
Bank will take a controlling stake in Nakornthon Bank, a small Thai bank which collapsed
in the wake of the Thai financial crisis, shareholders and officials said.
ANZ to raise capital in New Zealand
Australia & New Zealand Banking Group Ltd could raise around NZ$800
million with a securities offering in New Zealand, expected in the first quarter of 2000.
The move follows a similar capital raising planned by ANZ's rival
Westpac Banking Corp, which plans to tap investors for NZ$800 million with a new class of
shares in New Zealand.
ANZ said it had not yet finalised how much it planned to raise, but
sources said it would probably be about as much as Westpac's issue.
The capital would be used for "general -banking- purposes",
said the group, which last year raised $375 million with a U.S. issue of trust units
exchangeable for preference shares.
Surging yen seen threatening Japan
The surging yen threatens to undo Japan's fragile recovery, Japan's
trade minister Kaoru Yosano warned.
"We have a very strong concern over the yen's rise which is going
far faster than the recovery pace of economic fundamentals," Yosano said in a speech
to businessmen in Tokyo.
Foreign investors have been pouring money into Tokyo stocks in recent
months, hoping to benefit from the growing signs of recovery in the world's second largest
That in turn has pushed up the yen to record highs against the euro and
seven-month highs against the dollar.
At 5:00 p.m. (0800 GMT) the dollar was trading at 109.60-63 yen,
against 109.73-76 yen in Tokyo late Friday.
The yen's rise was an "unstabilising source" for the economy,
particularly because it accompanied record unemployment, the minister said.
Yosano blamed the heavy U.S. trade deficit for creating weakness in the
"The current weakness of the dollar has been created by concerns
about which country may need to finance this deficit," Yosano said.
The U.S. trade deficit unexpectedly surged to $24.6 billion in June,
Washington's highest monthly deficit since 1992.
Japan expected to be back enjoying strong growth very soon, Yosano
"What we want to aim for in the fiscal year 1999 is clear economic
growth at an annual rate of 0.5 per cent," he said.
"The major economic framework by the Obuchi government is to place
the economy onto a stable growth track in the year 2001 which will be led by private
demand," Yosano said.
Strong growth figures for the early part of this year, fuelled by huge
government stimulus packages, have raised investors' hopes of a quick recovery.
Top U.S. Internet retailer plans $2b Wall Street float
Buy.com, one of America's top internet retailing companies, is thought
to be planning a $2 billion Wall Street flotation this autumn. Ahead of the float, the
company is negotiating a move into the British market with funding from e-partners, the
new media venture-capital firm backed by News Corp, ultimate owner of The Sunday Times.
The stock-market debut of the California-based Buy.com is likely to be
one of the most eagerly awaited new issues on Wall Street in recent times. The company,
advised by Merrill Lynch, is a rival to Amazon, the "etailing" pioneer. Amazon's
shares have soared from $1.40 in 1997 to $62.44, having peaked at $95.03 in April. Its
market value is now $21 billion.
Euro victim of wrong policies: ECB
European Central Bank President Wim Duisenberg said that the euro was
vulnerable to national policies and member states were increasingly recognising the need
for structural reforms.
Speaking at a financial conference in Cernobbia, Italy Duisenberg said
that for the euro to be a lasting success, national policy makers, businesses and trade
unions within the European economic and monetary union would have to adapt to the
conditions of the single currency.
U.S. data cheer financial markets
Financial markets on both sides of the Atlantic surged after
weaker-than-expected U.S. jobs data soothed fears of another rate rise soon and indicated
the red hot U.S. economy might be cooling.
European stock indexes jumped after the number of U.S. workers on
payrolls outside the farm sector rose by 124,000 last month while New York opened sharply
U.S. stocks surged to session highs at midday. The Dow Jones industrial
average was up 239, or 2.21 per cent, at 11,083 at 12 p.m. EDT.
The technology-laden Nasdaq composite was up 91 points, or 3.34 per
cent, or 2,825. The 30-year U.S. Treasury bond was up 1-15/32 to yield 6.02 per cent.
The Dow's strong gains Friday after several gloomy days has made the
average almost flat for the week.
In Europe, the German and French markets closed more than 2-1/2 per
cent higher and the FTSE in London ended up 2.2 per cent.
$3.75b to bail out Seoulbank
South Korea declared Seoulbank insolvent, clearing the way for a
$3.75-billion state bailout of the debt-ridden financial institution.
The recapitalisation follows the collapse earlier this week of
negotiations on the sale of the troubled bank to Britain's HSBC Holdings
NYSE likely to go public next year
The New York Stock Exchange inched closer toward shedding its members
only private ownership status, but the 207-year-old institution's board stopped short of
voting to convert the NYSE into a for-profit company.
Instead, the board sanctioned a study to explore the consequences of
the world's largest stock market becoming a publicly traded company.