IMF predicts faster
The world economy is recovering faster than expected in the wake of
crises in Asia, Russia and Brazil, but is at risk from an abrupt slowdown in U.S.
momentum, the IMF said.
"For the first time in two years ... we are reporting an upgraded
assessment" of world growth prospects, International Monetary Fund research director
Michael Mussa told a news conference.
The IMF now expects the world economy to grow 3.0 per cent this year
and 3.5 per cent in 2000, up from forecasts of 2.3 and 3.4 per cent in April and compared
with growth of just 2.5 per cent in 1998 it said in its twice-yearly World Economic
"Global economic and financial conditions have improved
markedly" since the emerging market crises of 1997 and 1998 "and most of the
economies recently in crisis have begun to recover," the IMF said.
It revised upward its forecast for Asian growth this year to 5.3 per
cent from 4.7 in April, with growth next year at 5.4 per cent, down from an April forecast
Latin American growth is now seen at 0.1 per cent this year and 3.9 per
cent in 2000, up from April forecasts of negative growth this year and 3.5 per cent growth
in 2000, with Brazil's recession looking "significantly less sever than was widely
anticipated only a few months ago," Mussa said.
And Russia's economy is also seen turning around, with zero growth this
year rather than a shrinking economy and 2.0 per cent growth in 2000. The IMF also warned
of "the economic and financial consequences worldwide if the eventual demand slowdown
in the U.S. turns out to be sharper than is generally expected at present."
The Outlook revised up its forecasts for U.S. economic growth by 0.4
per centage points for this year and next, to 3.7 per cent this year and 2.6 per cent in
2000, compared with euro area growth this year at 2.1 per cent and next year at 2.8.
Japan has seen two quarters of growth "signalling a clear end to
recession ... we believe that a Japanese recovery is under way," Mussa said, with a
return to positive growth this year at 1.0 per cent, rising to 1.5 in 2000.
Opec keeps cutbacks
Opec oil producers agreed to maintain a stranglehold on exports,
raising the prospect of a sharp rise in the West's oil import costs this winter.
An Opec communique said oil ministers had endorsed existing curbs on
five per cent of their output at least until April because they wanted to make sure they
had eliminated the glut that caused last year's price crash.
China takes new step to spur markets
China finally announced that bank credit taps would be opened to some
brokers and fund managers, the latest step in government efforts to boost the stock
The central bank, in an announcement awaited for months, said seven
brokerages and 10 fund management firms could enter the interbank market and conduct
T-bill spot and repurchase trading.
The government has been trying to boost the stock markets to allow a
smooth listing of large state enterprises and drum up market euphoria ahead of the 50th
anniversary of the People's Republic of China on October 1.
Morgan Stanley: Morgan Stanley Dean Witter & Co posted a 55
per cent gain in third-quarter profit to $970 million. The company, earned $1.65 a share
in the third quarter ended August 31. That compared with a $626 million net profit, or
$1.01 a share, in the year-ago quarter.
Goldman: Goldman Sachs Group Inc. one of the leading U.S.
investment banks, posted a better-than-expected $638 million profit in the third quarter,
driven by fat fees from advising companies on mergers and helping them sell stock to
investors. Goldman, earned $1.32 per share in the quarter ended August 31.
Japanese tremor rocks Asia marts
Japanese share prices took a tumble, weighing on other Asian markets,
after the Bank of Japan's surprise decision to spurn calls for a monetary easing triggered
a sharp rise in the yen. Major stock markets in the region lost grind, dragged down by
yen-related jitters and a two 4 per cent tumble in Wall Street shares overnight.
Tokyo's benchmark Nikkei average of 225 shares slid more than three per
cent in the morning, led by global manufacturers like Canon, Honda and Fujitsu amid
worries the yen's rally would erode the yen value of their overseas income.
The yen resumed its upward climb after the Bank of Japan's Policy Board
defied expectations on Tuesday and said it would leave monetary policy unchanged, denting
hopes of joint U.S.-Japan intervention to weaken the yen.
By midday in Tokyo the dollar was around 104.90 yen after briefly
sliding to an overnight low of 103.83 in New York trade and compared with 107 yen just
before the BoJ policy announcement on Tuesday.
The Nikkei closed at 17,325.76, down,607.03 points or 3.39 per cent
from Tuesday's close but above the early low just under 17,250.
Hong Kong's Hug Seng index was off 1.65 per cent at 13,198.84, hit by
the slide on Tokyo and Wall Street, and Singapore's Straits Times Index shed 1.34 per cent
to 2,080.73 by 0400 GMT.
In the Philippines, Manila's 33-share main index lost 0.88 per cent to
2,107.7, snapping a three-day gaining streak, while Korea's composite index was down 0.76
per cent at 950.12 after an earlier test into positive territory.
Malaysia's composite index eased 1.41 per cent lower to 728.86,
squeezed by Wall Street and weakness in Japan, while New Zealand's NZSE-40 Capital Index
slipped 0.96 per cent to 2,064.98.
UK auction sends gold prices soaring
Gold surged nearly $5.00 an ounce to one-month highs as unexpectedly
strong demand greeted Britain's controversial auction of a second chunk of its gold
North American and South African gold shares recovered from recent
falls to be several per cent up on the result, though some miners remained critical of
Britain's plan to switch over half its gold into dollars, euros and yen to rejig its
The gold fetched $255.75 a troy ounce at auction, down on the $261.20
received at the first sale in July but above recent market levels as bids exceeded the 25
tonnes on offer eightfold.
The auction, part of UK plans to cut gold reserves by 415 tonnes in the
coming years, netted $206 million.
Gold rose immediately after the auction, then again when New York
opened, breaking resistance levels at $256.50, $258.00 and $260.00 before settling back.
Dow slides on wave of worries
The Dow dropped more than 210 points in early trading, prompting the
New York Stock Exchange to impose curbs on index arbitrage, a kind of programme trading,
at 1804 GMT.
The Dow's slide was linked to Wall Street's worries about a record U.S.
trade deficit, a strong Japanese yen, and the economic impact of the deadly Taiwan quake.
News of the earthquake, which measured 7.6 on the Richter scale,
rattled semiconductor stocks, since Taiwan accounts for 5 per cent of the world's market
for dynamic random-access memory (DRAM) chips.
The Dow Jones industrial average slid 211 points to 10,613 shortly
after 1800 GMT.
Mergers & Acquisitions
BellVodafone: Bell Atlantic Corp and Vodafone AirTouch Plc
said they would fuse their U.S. wireless businesses in a joint venture worth over $70
billion, creating the country's biggest mobile phone network.
Norway's Christiania Bank welcomed a $3.1
billion takeover bid from Swedish-Finnish MeritaNordbanken, saying it was the best
alternative for Norway's second largest bank.
British engineer Rolls-Royce Plc
launched a surprise £576 million ($933 million) agreed cash offer for Vickers Plc in a
move aimed at making it the global leader in marine power systems.
French luxury goods group LVMH said it had
acquired 50.1 per cent of Swiss watchmaker TAG Heuer in a move analysts see as just one in
a long line of acquisitions yet to come.
Malaysia slashes tax
Malaysia cut a tax on short-term foreign profits to draw back overseas
investors who fled when it imposed capital controls one year ago.
The central bank announced a flat 10 per cent tax on foreign capital
gains would, with immediate effect, replace a graduated system of exit taxes ranging from
10 to 30 per cent.
Beforehand, capital gains taken out of the country before one year drew
a 30 per cent tax, while those held longer than one year were taxed at 10 per cent.
Now all gains will attract the 10 per cent rate.
The announcement unleashed a flood of buy orders on the Kuala Lumpur
Stock Exchange where the main index surged 1.12 per cent in an emphatic endorsement of the
It was the second time in a year Malaysia has tinkered with capital
controls in response to criticism from foreign investors.
South Korea plans $9.57b bond issue
South Korea will issue government bonds worth $9.57 billion to cover
the deficit in its budget for next year, officials said.
The bond issue of 11.5 trillion won ($9.57 billion) comes on top of
12.9 trillion won raised to cover this year's budget deficit, the Budget and Planning
Thais not to draw more IMF money
Thailand has decided to wean itself from the International Monetary
Fund and will not draw down the last $3 billion of a $17.2 billion bailout arranged by the
IMF, a senior finance ministry official said.
Thailand, at the epicentre of the Asian financial crisis when it began
in 1997, is convinced it can now sustain economic recovery without more IMF loans, the
The official, who declined to be identified, cited a build-up in
foreign reserves to over $32.2 billion, improving economic indicators and a brake in
capital outflows from the country.
S. Korea unveils $17b package
South Korea announced a 20 trillion won ($17 billion) package to revive
demand in the slumping bond market, curb rising interest rates and prevent corporate debt
problems from derailing the country's economic recovery.
Finance and Economy Minister Kang Bong Kyun, Financial Supervisory
Commission chief Lee Hun Jai and other senior officials held an emergency meeting to
discuss steps to restore stability in the financial markets, shaken by the Daewoo Group's
inability to pay its $57 billion of debt.
"The government is determined to contain the fallout of Daewoo's
problems," said Kim Jong Chang, a commissioner at the Financial Supervisory
Commission. "The central bank will further provide abundant liquidity into the
financial system and keep interest rates low."
Pound soars to new high against euro
Sterling surged to its highest level against the euro since its launch
this year after a key policymaker suggested the Bank of England may be prepared to accept
a higher long-term exchange rate.
Although the pound retreated later in the session, amid some
speculation the central bank may have entered the market to keep a lid on the currency,
traders and analysts said the outlook over the coming months was improving.
Analysts said the supportive comments late on Thursday from Sushil
Wadhwani, a member of the Bank of England Monetary Policy Committee, were trigger for
fresh sterling gains and added to the recent upbeat picture of the UK economy painted by
the Chancellor of the Exchequer Gordon Brown.
South Korea sells bank to U.S. fund
South Korea said it had reached final agreement with a U.S. investment
fund to sell off a bank, winding up nine months of tough talks and easing concerns about
its commitment to financial restructuring.
Financial Supervisory Commission's director-general Nahm Sang-duck told
a news conference Newbridge Capital would pay 500 billion won ($415.3 million) to acquire
51 per cent of equity in Korea First Bank.
He also said the government held the right to acquire five per cent of
the bank's equity three years after the takeover is concluded.