Yen soars against dollar
The yen surged to its strongest level against the dollar in three and a
half years and an all-time best versus the euro, while European stocks and bonds fell as
benign U.S. inflation data failed to quell Wall Street's fear of higher interest rates.
The dollar dropped more than 2.5 per cent to 103.25 yen at its weakest
point of the day, its lowest since January 1996, and analysts saw it dropping to 100 yen
and beyond in the absence of Bank of Japan intervention.
European stocks closed lower as U.S. shares moved into the red for the
day, while the benchmark German government bond future fell to a contract low.
"The real problem for everyone at the moment is the strength of
the yen," said Nomura bond trader Paul Eustace in London. "It is impacting on
U.S. Treasuries and on Bunds as well."
The euro hit a life low at 106.84 yen and briefly dipped to eight-week
lows at $1.0287 after benign U.S. consumer price data buoyed the dollar.
By late in the European afternoon, the yen stood at 103.84 against the
dollar and 107.83 against the euro. The euro was worth $1.0387.
The yen has gained seven per cent against the dollar and nine per cent
against the euro since news on September 9 of a second consecutive quarter of Japanese
The euro's weakness rekindling talk it could hit parity against
the dollarand heavy supply of new issues sent European government bonds falling.
The benchmark December Bund touched a contract low of 104.71, while the
yield on the 10-year Bund rose to 5.190 per cent.
Stocks and bonds on both sides of the Atlantic briefly moved higher on
news that the consumer price index (CPI), the main U.S. inflation gauge, rose by 0.3 per
cent in August.
The gain, identical to its increase the previous month matched
forecasts and was initially seen as easing the risk of another U.S. rate rise.
Goldman banker on Allianz board
German insurer Allianz AG appointed Paul Achleitner, a prominent
Goldman Sachs banker, to its management board as it seeks to boost its asset management
business and step up possible acquisitions.
Allianz said it named Achleitner, 42, currently managing director and
head of Frankfurt office of Goldman Sachs, as the head of the finance division and
co-chief financial officer.
He would share responsibilities with Joachim Faber, 49, currently chief
financial officer at Allianz domestic non-life unit. Faber in the future would lead a new
division of asset management and other financial services.
U.S. posts record deficit
The U.S. current account deficit, the broadest measure of trade with
the rest of the world, soared to a record in the second quarter, sending an already weak
dollar to a three-year low versus the yen.
The Commerce Department said that the current account deficit swelled
17.5 per cent in the three months ended in June to $80.67 billion the largest
quarterly gap on record.
That was up from a $68.65 billion deficit in the first quarter of this
year and was only the latest in a series of reports highlighting a trend of surging
imports that are far outpacing any growth in exports.
"To see these trade numbers getting worse by the day adds to the
dollar's pressures," said Anthony Chan, chief economist at Banc One Investment
Advisors in Columbus, Ohio. "To expect the dollar to recover overnight in the wake of
numbers like these is an illusion."
The dollar, which had been sliding all morning against the Japanese yen
because of fears of higher U.S. interest rates, fell further upon the release of the
current account figures.
Mergers & Acquisitions
UBSGAM: Swiss bank UBS AG said its purchase of
international investment firm GAM Global Asset Management, costing between $575 million
and $675 million was for expertise and not just a bundle of assets.
Swatch Group said it had reached an
agreement with Investcorp SA to take over all the shares of Breguet, whose origins date to
1775. No financial terms were disclosed.
powerhouse Motorola Inc expanded its reach in the cable TV industry, saying it would buy
leading set-top box maker General Instrument Corp in a stock deal valued at about $11
INAGenerali: Italian insurer INA rejected a
"hostile" bid from rival Generali and vowed to pursue its own planned alliance
with Turin bank Sanpaolo IMI, setting up another takeover battle months after Italy's
Microsoft Corp said that it planned to buy
Visio Corp, a maker of technical drawing software, for $1.3 billion in stock, with each
Visio share to be exchanged for 0.45 shares of Microsoft.
British property firm Milner Estates
agreed to a £173.4 million takeover offer from Delancey Estates Plc, a UK rival
controlled by international financier George Soros.
French oil companv TotalFina won
its takeover fight for rival Elf Aquitaine after raising its offer to appease Elf's
management and will now create the world's fourth largest oil company on its own terms.
TotalFina said it was offering 19 of its shares for 13 Elf shares up from its initial bid
of four TotalFina shares for three Elf.
British business telecoms group Energis Plc
is poised to buy the telecoms division of Racal Electronics Plc for £750-800 million, UK
Switzerland's TAG Heuer said it had agreed
to a cash bid from France's LVMH Moet Hennessy Louis Vuitton valuing the luxury watch
maker at about 1.148 billion Swiss francs ($739 million).
Rupert Murdoch's News Corp Ltd is
considering a $1.5 billion purchase of U.S. technology media and Internet company
Ziff-Davis Inc. the Observer newspaper said.
INGCCF: Dutch financial group ING added fuel to the
takeover speculation surrounding France's CCF, revealing for the first time a strategic
desire to gain full control of the French bank.
Viag AG shares jumped on a report Veba AG has
offered a 10 per cent premium to the market price for the state of Bavaria's stake in Viag
paving the way for a merger of the two utilities.
UK inflation crawls to slowest rate
British inflation slowed sharply in August to a tempo not seen for more
than 36 years, official figures showed, suggesting that last week's surprise interest rate
hike will be the last for some time.
Headline consumer prices, which include home-loan repayments, grew 0.2
per cent in August from July against forecasts of a 0.4-per cent jump. Prices were up just
1.1 per cent over the past yearthe slowest rate of growth since July 1963, the
Office for National Statistics reported.
Annual headline inflation was, by comparison, put at 1.3 per cent in
Kingfisher: Kingfisher Plc reported a near 40 per cent increase
in first half profits. Pre-tax profits for the 26 weeks to July 31 rose to £254.0 million
($407 million) from £182.6 million. Group sales increased to £4.8 billion from £3.01
Thomson-CSF: French defence electronics firm Thomson-CSF
reported a sharp rise in first half 1999 profits. The company said net profit jumped to
203.2 million euros ($209.4 million) in the first six months of the year from 41.9 million
euros last year.
Gucci: Italian luxury goods group Gucci posted a six per cent
rise in second quarter. Operating profit on strong summer sales and an 87 per cent jump in
net income thanks to interest from its $3 billion cash pile.
ADB raises growth forecasts for Asia
The Asian Development Bank said it had raised its economic growth
forecasts for Asia, but it sounded notes of caution on the political situation in
Indonesia, Y2K compliance, and the slow pace of reforms.
In its Asian Development Outlook Update, the Manila-based lending
agency said average economic growth in developing Asia, which it defined as the region
minus Japan, could reach 5.5 per cent in 1999 and 2000.
In April, the bank had forecast 4.4 per cent growth in 1999 for the
region and 5.1 per cent growth in 2000.
Globally, the ADB said there was a clear prospect the down turn in 1998
that saw world GDP growth declining to 2.5 per cent as compared to 4.2 per cent in 1997
had been arrested.
It said the rate of world GDP growth in 1999, supported by a
stronger-than-expected Asian recovery, was expected to move above 2.5 per cent and to
improve to about 3.5 per cent in 2000.
Apec unveils plans to lift tariff barriers
Asia-Pacific leaders stepped up efforts to free up trade across half
the world, announcing a package of proposals to remove tariffs barriers and make financial
markets more efficient.
New Zealand Prime Minister Jenny Shipley stood before a line of 20
presidents, premiers and other national representatives and laid out measures which they
hope will increase competition and prosperity of all their peoples.
Most of the final announcement of the annual Asia Pacific Economic
Cooperation (Apec) summit was in line with details of the written Apec communique leaked
to Reuters and reported three days earlier but Shipley managed to come up with a few
Delivering what she called "the Auckland Challenge" Shipley
said finance ministers had been instructed to work with other relevant organisations to
develop banking standards for the region. She also said Apec leaders agreed to speed up
efforts to eliminate non-tariff barriers to trade.
Speaking in the Maori court in Auckland's War Memorial Museum, Shipley
said the Asia Pacific nations were committed to a new three-year round of global trade
talks culminating in a single package and abolition of export subsidies.
The talks will begin in Seattle in November under the auspices of the
World Trade Organisation (WTO).
Apec members, representing $16 trillion in economic output were
committed to the launch of new round of global trade talks covering industrials,
agriculture and services, Shipley said.
"We will strengthen our markets and improve the international
framework governing trade and investment flows," she told the other 20 leaders, all
male, dressed in identical black polo shirts and black yachting spray jackets.
Black is New Zealand's national sporting
Banks mull pan-European bourse
A group of American and European investment banks could create their
own pan-European electronic bourse if similar efforts led by the London Stock Exchange and
the Deutsche Boerse continue to make little progress.
German banking sources confirmed there were ongoing talks among banks
about forming a pan-European bourse but said no decision had been taken yet.
A source close to Frankfurt's Deutsche Boerse said the rival plan had
to be taken seriously. The London Stock Exchange could not be immediately reached for
German business daily Handelsblatt reported that major U.S. investment
banks and UBS of Switzerland plan to form their own European stock exchange.
Handelsblatt, citing unnamed banking sources, said Goldman Sachs,
Morgan Stanley Dean Witter, J P Morgan, and Merrill Lynch along with UBS had decided to
press ahead due to slow progress with the London/ Frankfurt project.
The new exchange was likely to be set up next year and later link up
with other securities markets worldwide, it said.
Lenders hold loans to Indonesia
The World Bank and International Monetary Fund (IMF) are withholding
any new loans to Indonesia until the controversy surrounding Bank Bali is cleared up, a
senior World Bank official said.
The controversy revolves around a payment of more than $70 million by
PT Bank Bali to a firm run by Setya Novantoa leading figure in the ruling Golkar
partyfor the recovery of loans from the Indonesian Bank Restructuring Agency
Prospects slim for quick EU tax deal
The European Union admitted its plans for a Unionwide savings tax were
in deep trouble after Britain threatened to block the measure because of fears about its
impact on the Eurobond industry.
"I agree that problems are very deep and difficult," Finnish
Finance Minister Sauli Niinisto, current chairman of the EU finance ministers' council,
Finance ministers hoped to push ahead with the levy at this weekend's
meeting in Turku, Finland, where Britain submitted new proposals aiming to exempt the
London-based bond industry. Britain fears the tax would drive the multi-billion dollar
business to centres outside the EU, wiping out thousands of jobs in London's financial
British proposals were spurned by other countries, and the EU looked
set to miss its own deadline to approve the levy at a December summit in Helsinki.