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May 01 - 07, 2000

  1. International
  2. Finance
  3. Industry
  4. Policy
  5. Trade
  6. Gulf

Ailing euro braces for further fall

Europe's battered single currency was back on the ropes, setting a new record low against the yen and struggling to stay above Tuesday's lifetime lows against the dollar and sterling.

Analysts warned that the weak euro could fall further.

They said even a decision by the European Central Bank (ECB) to raise its central refinancing rate when it meets would probably not provide support and that they did not see any positive news on the horizon.

Against the dollar, the euro swung around near $0.92, not far from its life low of 91.60 cents set on Tuesday.

It fared slightly better against the yen, standing near 98 yen, a full yen above the 97 yen lifetime low hit in Tokyo earlier, and against sterling it traded at 58.40 pence, within striking distance of the all-time low of 58.04 set on Tuesday.

Comments by German Chancellor Gerhard Schroeder saying that a strong Europe merited a higher euro and that European leaders did not want a weak euro were ignored.

A wobble in U.S. share prices unsettled the gains made in European markets earlier but U.S. losses were limited by another good run of results from technology companies and continuing confidence in the strength of the U.S. economy only added to the euro's problems.

The pan-European Eurotop index of 300 shares was up 11.38 points or 0.71 per cent at 1619.05 while the narrower Euro Stoxx index of 50 blue chip euro zone shares was up 86.98 points or 1.69 per cent at 5245.1 1.

London's FTSE 100 was down 0.4 per cent, Frankfurt's DAX was up 1.4 per cent, and Paris's CAC was up 1.1 per cent.

Japan may launch additional budget

Japan's government may launch a pump-priming extra budget this year if the economy shows signs of sagging again, the nation's economic planning chief said.

"I do not rule out the possibility of launching a supplementary budget in the latter half of this year," Economic Planning Agency Director-General Taichi Sakaiya said in a television debate.

But Sakaiya knocked back a controversial proposal to pour nearly $10 billion into the bearish stock market, in contrast to Hiromu Nonaka, secretary-general of the ruling Liberal Democratic Party (LDP).

It would be "absurd to bolster stocks", Sakaiya said on private Television Asahi. "We will not do such a thing."

Nonaka, defending a proposal to pump one trillion yen ($9.5 billion) into the stock market, told the same programme it was important to show people that policymakers would spare no effort in revamping the economy.

Seoul to invest $4.6b in investment trusts

South Korea decided to inject five trillion won ($4.6 billion) more into two ailing investment trust companies to help stabilise financial markets, officials said.

The government will funnel the public funds to Korea Investment Trust Co Ltd and Daehan Investment Trust Co Ltd. head of the Financial Supervisory Commission, Lee Young-Keun, said.

The two investment companies had already received a total of three trillion won.

Toys R Us Japan makes solid debut

Investors gave a warm welcome to Toys R Us Japan Ltd. a unit of the world's largest speciality toy retailer, on its debut on Japan's over-the-counter market, citing bullish earnings prospects.

Defying a recent souring towards global initial public offerings (IPOs), investors were quick to snap up the toy group's shares, knocking the stock up 25 per cent above its offering price of 12,000 yen.

IMF hopeful on aid

The International Monetary Fund said it was confident Indonesia would finally win a delayed loan payment ahead of a June 5 deadline which must be met if a key debt rescheduling deal is to go ahead.

Acting IMF head Stanley Fischer, in Jakarta for talks with top Indonesian officials, said the country had made good progress in implementing economic reforms in recent weeks, and the Fund's executive board may be able to decide by end-May on whether to release the stalled payment.

Indonesia clinched a deal earlier this month with the Paris Club of creditors to reschedule $5.8 billion in debt. But the agreement hangs on the IMF board approving its next loan payment of $400 million to Indonesia by June 5.

Ukraine's foreign debt down to $10.9bn

Ukraine's external debt has shrunk to $10.9 billion from $12.5 billion at the start of this year, the ex-Soviet state's finance ministry said on Thursday.

External debt totals $10.5 billion. This is due to mutual debt write-offs with Russia, worth a total of $1 billion, and some other payments we have made, Vitaly Lisovenko, head of the ministry's foreign debt department, told reporters.

Justice Department briefs

The U.S. Justice Department briefed President Bill Clinton's economic team on its proposal to break up Microsoft Corp in its effort to promote competition in the software industry.

White House spokesman Joe Lockhart told reporters shortly after the meeting had begun, but said he would not provide a report on it afterwards. Joel Klein, who heads the Justice Department's antitrust division, and other department officials left after the meeting ended without talking to reporters.

Blair in talks with Ford over UK plant

Prime Minister Tony Blair, battling to save jobs in Britain's troubled carmaking industry has held talks with Ford's Detroit-based chief executive Jac Nasser about its Dagenham plant, officials said.

News of the meeting emerged amid reports that Ford was planning to stop making cars at Dagenham in southeast England, endangering more than 3,000 jobs at its largest British plant and triggering union warnings of strike action.

The officials said Blair's talks with Nasser took place in recent weeks but were not prompted by specific closure fears.

"The Prime Minister meets with senior businessmen from time to time and along with the Department of Trade and Industry, is in dialogue with them over Ford's review plans," a spokeswoman for Blair said. No comment was available from Ford.

The Times newspaper said it was understood Blair had also telephoned Nick Scheele, chairman of Ford Europe, on a number of occasions.

On Saturday, the Financial Times reported that Ford—the world's second largest automaker—would announce the closure of Dagenham in mid-May as part of a major restructuring that would affect other Ford European plants.

Transport and General Workers Union negotiator Tony Woodley said a decision to end car assembly at Dagenham would lead to strike action.

"Will we do something about it if they try to close production at Dagenham? The answer is yes," he said, warning that strike action at Dagenham's engine manufacturing plant would have wide-reaching effects.

"Once again Britain is being used as the soft touch of Europe. We're quick, cheap and easy to sack. It's time both the government and employees put a stop to this disgrace," he said.

Mergers & Acquisitions

Renault—Samsung: Creditors of South Korean automaker Samsung Motors agreed to accept a 620 billion won ($560 million) deal in which Renault SA would take a 70.1 per cent stake in the company.

Intel—Hinduja: India's Hinduja Finance Corp Ltd said U.S. microchip maker Intel Corp had offered to buy a 49 per cent stake in its subsidiary Grant Investrade Pvt Ltd for $49 million.

Sony—Fuji TV: Sony Corp is reportedly close to buying a 10 per cent stake in Fuji Television Network, one of Japan's five nationwide TV broadcasters.

BSCH—SocGen: Spanish banking group Banco Santander Central Hispano and French bank Societe Generale have created a joint venture for buying investment funds, sources close to BSCH said.


Corning: Fibre optic maker Corning Inc reported a 78 per cent rise in its first-quarter profits before items. Corning said its profits excluding special items rose to $178.1 million, or 64-cents per share, from $92.5 million, or 36 cents, a year earlier.

Pharmacia: Pharmacia Corp said first-quarter profits before merger-related costs rose 27 per cent. The drug company, formed by a merger between Monsanto Co. and U.S.-Swedish drug maker Pharmacia & Upjohn, said income before a $460 million merger-related expense rose to $425 million, or 33 cents a share.

Merck: Merck & Co. Inc., the No. 1 U.S. drug company, said its first-quarter net income rose 15 per cent. Merck said net income rose to $1.5 billion, or 63 cents per share, from $1.3 billion, or 54 cents, in the year-ago quarter.

American Express: Financial services company American Express Co. said its first-quarter profits rose 14 per cent to a record high. The New York-based company, earned $656 million, or $1.44 per diluted share, in the quarter, up from $575 million, or $1.26 a share, in the yeare-arlier period.

Nasdaq up 143.96 points

The Nasdaq composite index jumped 143.96 points, or 3.97 per cent, to 3,774.05—ending at its session high and erasing Wednesday's loss. The Dow Jones ended down 57.40 points, or 0.52 pc, at 10,888.10.

London, Frankfurt bourse merger talks

Merger talks between the London Stock Exchange (LSE) and Deutsche Boerse enter a make-or-break stage this week as the Frankfurt exchange operator insists on a conclusion well ahead of its May 4 shareholder meeting.

"We expect these discussions to come to an end this week," an industry source familiar with the talks said. The Frankfurt exchange "has to have a plan for May 4," the source added.

If no merger is agreed, the Boerse will push ahead with an existing proposal to float itself.

Bourses face tougher competition from electronic upstarts and overseas rivals such as the Nasdaq in the United States. Exchanges in Paris, Brussels and Amsterdam have already announced plans to merge and form Euronext, Europe's second-largest stock exchange after London.

ECB raises interest rates

The European Central Bank (ECB) raised euro-zone interest rates for the fourth time for five months, bringing them to a level which is 1.25 percentage points higher than in November last year.

The ECB increased its central "refi" refinancing rate by a quarter of a percentage point to 3.75 per cent from 3.50 per cent previously.

The bank had previously raised the refi by a quarter of a percentage point on March 16, by a quarter of percentage point on February 3 and by half a percentage point on November 4.

The other two key rates, the marginal lending rate and the deposit rate, have also been increased by 1.25 per cent in four separate moves since November and now stand at 2.75 per cent and 2.75 per cent respectively.