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Dec 06, 1999

  1. International
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Gold prices fall sharply in Europe

Gold shed more than $2 in late European trade, reaching levels not seen in three weeks as market sentiment turned negative after this week's British gold auction, dealers said.

Spot gold was bid as low as $287.90 an ounce, its lowest since November 8 and down $2.60 on Tuesday's New York close at $290.50/$291.50, after U.S. markets opened.

"I think it is general negativity spilling over from events earlier this week," one dealer said.

The strength of the dollar against the euro, which saw the U.S. currency reaching a fresh session peak of $1.0071, also put pressure on the gold price, dealers said. They saw gold supported at $288, but below that they expected little support.

"I do think that $288-$290 is a bit of a support area but if it breaks $288, I don't think there is a lot of support," the dealer said.

Gold came under further pressure from options players amid selling of short-dated call options which indicated that market participants did not expect bullion to move higher towards $300.

U.S. traders said two bullion banks were featured sellers, taking out sell stops before the downward move lost momentum.

With the end of the year looming and many traders preparing to square their books, gold market sentiment had turned negative. Disappointment over the lack of participation at Monday's Bank of England gold sale had further eroded sentiment.

The Bank of England sold 25 tonnes of British gold reserves at $293.50 a troy ounce amid lacklustre demand, driving the bullion price down several dollars an ounce after the auction.

The Bank of England said the auction was 2.1 times oversubscribed, a significant drop from the previous auction in September when the sale was 8.0 times oversubscribed.

Russia, banks fail to seal $32b debt deal

Russia and its creditor banks failed to agree on the restructuring of $32 billion of Soviet-era debt, prompting Russia to withhold a $550 million coupon payment.

Russian Finance Minister Mikhail Kasyanov, emerging from two days of talks at Deutsche Bank AG's head office in Frankfurt, said talks would resume within 10 days and that he still expected an agreement in principle by Christmas.

"Talks are progressing but there are still a number of different issues that have to be resolved," Kasyanov said. "We're moving but not as fast as we would like."

Kasyanov declined to say what the sticking points were and gave no details of the what progress had been made.

Deutsche Bank, which hosted the talks in its role as chair of the Bank Advisory Committee of the London Club of commercial Creditors, declined to comment on the outcome of the talks.

Kasyanov's comments scotched rumours overnight that a deal had been reached. Russia's Soviet-era bonds fell after the news and traders said prices could fall further.

Markets had pushed the bonds up 50 per cent over the past month on hopes Russia would reach agreement, when a $550 million coupon payment on the bonds falls due.

"There is some disappointment. Prices had been driven by speculative money on the hope of a quick deal and they will probably head further south for a while," said a trader at one European bank.

Kasyanov said: "We still believe that by Christmas time we have good chances to get an agreement in principle."

Asked if Russia would pay the coupon, he said: "No. No coupon payment, because the payment is part of the overall package."

Rouble sinks to new low

The Russian rouble sank to a new low as the central bank withdrew from the market in a bid to save its gold and foreign exchange reserves ahead of upcoming foreign debt payments, dealers said. The rouble averaged at 26.7450 per dollar of eight exchanges after a previous 26.5280. The central bank set its official rouble rate FXSU at 26.75 per dollar after a previous 26.53.

Yen batters euro, dollar

Europe's single currency remained near record lows and the Japanese yen showed no signs of relinquishing its gains in early New York trading.

The euro plumbed fresh lows for the day near 102.25 yen, and dealers said the market was gunning for stop-loss orders set around 102 yen, below the euro's lifetime low.

The yen's strength also battered the dollar and the greenback slumped near 101.50 yen.

Despite nervousness that the Bank of Japan might intervene to rein in the yen after it bought dollars for yen overnight, "the market is still very willing to sell dollar/yen," said John Cholakis trader at Dai-ichi Kangyo Bank.


Mergers & Acquisitions

United News—Cariton: United News & Media Plc and Carlton Communications Plc announced plans for a 7.8 billion ($12.6 billion) merger, the next stage in the consolidation of Britain's ITV commercial TV network.

Newtel—Esat Telecom: Newtel AB, the Scandinavian telecommunications group formed by the merger of Norway's Telenor AS and Sweden's Telia AB, announced a 36 usd per share cash offer for Esat Telecom Group PLC of Ireland, valuing the latter's share capital at 1.59 bln usd.

Vodafone—Mannesmann: Several of Mannesmann AG's investors are backing Vodafone AirTouch PLC's hostile offer, the Wall Street Journal Europe reported, citing fund managers.

Saatchi & Saatchi—True North: Saatchi & Saatchi PLC is not in merger discussions with either True North Communications Inc or Grey Advertising Inc, both of the U.S., according to group chairman Robert Seelert.

Corus—Polish Huta Katowice: Corus PLC is now unlikely to buy a stake in Polish state-owned steel concern Huta Katowice, as it is unwilling to invest an estimated 400-450 mln usd in a new flat steel plant, Het Financieele Dagblad reported.

Amazon.com—Ashford.com: Amazon.com said it is to pay 10.0 mln usd for a 16.6 pct stake in Ashford.com, an internet retailer of luxury and premium products, as part of a marketing initiative and strategic alliance with the company.

Exxon—Mobil: The Federal Trade Commission will approve the proposed 81 bln usd merger of Exxon Corp and Mobil Corp, requiring in the process that the two companies sell their interests in 2,400 service stations nationwide, the Washington Post reported, citing people close to the case.

TotalFina—Elf: The proposed merger between TotalFina and Elf Aquitaine will require significant revisions to guard against possible monopoly positions, especially the sale of gasoline to industrial consumers and independent retailers, in order to receive approval from the European Commission, according to unnamed sources in French daily Liberation.

British Aerospace—Marconi Electronic: British Aerospace PLC and Marconi Electronic Systems, which completed their merger, said the new group will be named BAe Systems.

ANZ—St George Bank: ANZ Banking Group Ltd has taken a 4.9 pct stake in St George Bank Ltd, St George announced in a statement to the Australian Stock Exchange.


Banks finalise plans for key Daewoo units

Creditors of South Korea's embattled Daewoo Group managed to finalise restructuring plans for most of the 12 Daewoo firms under workout programmes by a self-imposed deadline of November 25.

Comprehensive blueprints for eight out of 12 affiliates have been approved by local creditors in what foreign bankers have described as one of the largest and most complex corporate debt workout programmes ever attempted.

But a wild card remains, in the form of foreign creditors who have expressed continuing unhappiness with the process.

Among the eight Daewoo firms with workout plans agreed is Daewoo Corp which was unexpectedly rescued on Thursday by local creditors.

The plans for Daewoo Corp, flagship of what was once the country's second-largest conglomerate, remain subject to endorsement by foreign creditors, who are owed $5.5 billion by Daewoo firms, most of it by Daewoo Corp.

Domestic creditors placed 12 core Daewoo affiliates under a debt rescheduling programme in August after rescuing the chaebol, with its $73 billion in debts from imminent bankruptcy.

Singapore eases rules on currency

Singapore is further liberalising the use of its currency to promote the development of its domestic bond and equity markets, Deputy Prime Minister Lee Hsien Loong said.

Four new measures have been announced, in addition to a review of guidelines on the use of the Singapore dollar unveiled in August 1998, which made it easier for foreign entities to list shares and issue bonds denominated in Singapore dollars.

"We hope the changes will increase international participation in our Singapore dollar capital markets and add to their depth and critical mass," said Lee, who is also chairman of the Monetary Authority of Singapore (MAS).

Mobile phone with TV receiver

Samsung Electronics Co Ltd said it has developed a wireless phone handset fitted with a television receiver which will allow users to both talk and watch while on the move.

EU Commission expected to rule on Rover aid package

The European Commission is expected to rule before Christmas on whether a 152 mln stg UK government aid package planned for the redevelopment of Bayerische Motoren Werke AG's Rover plant at Longbridge complies with European Union regulations, according to the Financial Times.

The newspaper said the agreement, under which Longbridge will benefit from a total 1.7 bln stg investment to bring a new family of medium-sized cars into production from 2002, was called into question several months ago by Karel Van Miert, former competition commissioner.

Van Miert called for a closer investigation into whether BMW had seriously considered Hungary as an alternative site, as the German cars group claimed, or whether it had made only token inquiries.

Canon maintain profit

Canon Inc is expected to post net profit of 75 bln yen in calendar 1999, fulfilling its profit forecast and representing a 32 pct year-on-year rise, the Nihon Keizai Shimbun reported.

BoJ statement on liquidity marks semantic change; policy stable

The Bank of Japan's statement outlining a flexible approach to providing money market liquidity, including funds used in foreign exchange market intervention, is more of a semantic shift than a policy change, analysts said.

They said the statement marks a more flexible operational approach by the central bank and reinforces support for the Ministry of Finance's position that sharp swings in the value of the yen are unfavourable.

However, the wording of the statement seems aimed mainly at sending a signal to the financial markets, with the impact on policy limited, analysts said.

In a printed statement, BoJ governor Masaru Hayami said: "The Bank has been flexibly providing ample funds to the short-term money market, taking account of factors including yen liquidity arising from foreign exchange intervention, and under this operational framework, continued to supply substantial amount of liquidity."

In its routine money market operations, the BoJ left the amount of surplus funds in the short-term money market at 1.0 trln yen, in line with recent levels.

Showdown in Seattle

Officials, ministers of trade and bureaucrats from 130 countries prepare to launch a new round of trade liberalization talks in the US city of Seattle at the opening of the WTO conference.

The conference is unleashing an unprecedented amount of protest and controversy mainly among environmentalists and labour activists world wide, arguing for the protection of jobs, workers and the environment.

Meanwhile the Arab is preparing to present its own agenda at the conference hoping to advance the interests of the developing world within the context of the larger global economy.

The major trading powers were as far apart as ever over efforts to cut agricultural trade subsidies, on the eve of the Seattle WTO conference.

The United States, with support from the newly expanded Cairns Group of farm exporting nations, continued to demand that the trade round expected to be launched in Seattle include negotiations on the elimination the subsidies.

Japanese economy set to plod along for years

The moribund Japanese economy is likely to muddle along for years in the absence of a serious political commitment to reform, according to analysts.

The benefits of massive state spending on infrastructure projects are likely to wear off and, worryingly, companies show little sign of taking the lead to spearhead growth, they say.

Corporate results out over the past fortnight underlined that Japan Inc. has some way to go to match the profitability of its US and European rivals.

Bottom lines improved in the six months to September for the fortunate few, including Nippon Telegraph and Telephone Corp. and Hitachi Ltd.

Major lenders led by Bank of Tokyo-Mitsubishi Ltd. benefited in part from gains made on the stronger stock market to post higher profits, but warned they still had to account for huge levels of non-performing loans.