U.S. budget surplus tops
In a report likely to fuel the election-year debate over tax cuts
versus higher federal spending, the Congressional Budget Office said on Friday it expected
the U.S. budget surplus will exceed $200 billion this fiscal year, up from its previous
estimate of $179 billion.
The CBO, Congress' budget analyst, said the portion of the surplus
excluding Social Security reserves should top $40 billion, up from its previous $26
billion estimate for fiscal 2000 that ends Sept. 30.
The non-Social Security portion is the money in play in the
election-year tug-of-war over how best to use surpluses to defray tax cuts, speed up
payment of the national debt and meet spending priorities.
The forecasts, included in a monthly CBO report, were the first since
experts evaluated April federal tax returns. The CBO is to issue detailed budget
projections for fiscal years 2000 through 2010 in the early summer.
"It now appears likely that the total surplus for the year will
exceed $200 billion and the on-budget surplus will exceed $40 billion," the CBO said.
Tax returns in April and early May "were unexpectedly
strong," the agency said, with the booming economy boosting receipts almost 11 per
cent higher this April than a year ago.
Private analysts who studied tax returns through April had anticipated
the CBO would raise this year's non-Social Security surplus to at least $40 billion, or
double it to more than $50 billion.
The CBO's last full estimate in January put Social Security's share of
the surplus at $153 billion, a figure that was expected to show little change this summer.
Republicans and Democrats have agreed that Social Security reserves
should be used solely to pay down debt until they are needed for retiring baby boomers,
and should be put off-limits in the budget fight over tax cuts versus spending.
Japan economy improving
Japan's economy is keeping up a moderate improvement, with moves
towards a self-sustaining recovery gradually appearing, a government report said.
"The nation's economy has not yet got out of a severe situation as
recovery in demand remains weak," the Economic Planning Agency (EPA) said in its
"But the economy continued to improve moderately, with the effects
of various policy steps and recovery in Asian economies appearing as well as movements
towards self-sustaining recovery, mainly in corporate sector activity," it added.
The assessment was little changed from the agency's April report,
except that a switch in the order of the wording put greater emphasis on the economy's
movement toward a self-sustaining recovery.
Japan's economy has been limping towards a recovery with an upturn in
capital spending, the second-largest area of the economy after personal consumption,
driven by rising industrial output and corporate profits.
Nasdaq takes a tumble
The Nasdaq composite index fell for the second straight session
Thursday as investors unloaded technology stocks while moving money into "old
economy" shares such as General Motors, Coca-Cola, and Johnson & Johnson.
This asset shift sent the Dow Jones industrial average higher for the
fifth time in six sessions.
Analysts link the recent Nasdaq slide to fears that interest rates,
which were raised by a half-percentage point this week, are heading higher. The economic
slowdown that could follow has sent investors into consumer staples stocks that often
perform well in a downturn.
Those fears sent the Nasdaq down 106.25 points, or 3 per cent, to
3,538.71, extending Wednesday's 72.66-point slide.
But the Dow gained 7.54 to 10,777.28.
Indeed, the Dow, which under-performed the Nasdaq in 1999, has
outperformed it in 2000. The Dow is down 6.3 per cent this year while the Nasdaq is off 13
The broader S&P 500 fell 10.59 to 1,437.21.
Core UK inflation at 1.9%
Britain's underlying inflation rate slid in April to its lowest level
since records began more than a quarter of a century ago, official figures showed on
The government's consumer inflation measure excluding the cost of home
loan repayments fell to 1.9 per cent, well below the Bank of England's target of 2.5 per
cent and undershooting economists' expectations of an unchanged rate of 2.0 per cent.
The Office of National Statistics said the wider retail price index,
including housing costs, rose to 3.0 per cent, driven up by an increase in tobacco duty
and dearer mortgage interest payments after the government last month phased out tax
relief on mortgage interest payments.
UK caught in currency jam
The pound fell to a new six-year low against the dollar in morning
trade Thursday, though U.K. policymakers remain more concerned with its continuing
strength against the euro, which is undermining the competitiveness of British exports.
The pound was at $1.4830 at midday, having earlier fallen as low as
$1.4817, knocked back by a report Thursday that showed retail sales in March were weaker
than analysts expected. The pound has fallen some 8 per cent against the dollar so far
Apple software delayed
Apple Computer Inc. delayed the release of the final version of its
eagerly awaited next-generation operating system software until next year to give software
developers and customers more time to work with the new system.
China trade fight under way on Capitol Hill
The march toward the possible approval of permanent normal trade
relations (PNTR) with China by the House and Senate picked up its pace significantly
Wednesday, as two key committees approved versions of the bill that will be reported to
their respective chambers' floors for votes next week.
At mid-afternoon Wednesday, the powerful House Ways and Means Committee
approved its bill which would eliminate the need for Congress to approve
"normal" trade status for China on a yearly basis by a vote of 34-4.
Ways and Means, which regularly deals in tax and social aid policy
matters, also oversees trade pacts.
Eleven of the committee's Democrats voted with the panel's Republican
majority to approve the bill, including three key Democrats who had been previously
undecided: Richard Neal of Massachusetts, Benjamin Cardin of Maryland and Lloyd Doggett of
Texas. Only three members of the committee were not present for the vote: Michael McNulty
(D-New York), Philip Crane (R-Illinois) and Jennifer Dunn (R-Washington).
The full House will likely vote on the Ways and Means version of the
China trade bill next Wednesday or Thursday.
In addition to bringing an end to the yearly, nail-biting process that
surrounds congressional approval of normal trade relations with the People's Republic of
China, the bill is intended to grease the skids toward China's entry into the World Trade
Approval of the China trade pact, President Bill Clinton has said in
recent days, opens up its sprawling, relatively untapped markets to a host of American
goods, most notably those that are agricultural in origin.
Mergers & Acquisitions
DeutscheNDB: German financial services company Deutsche
Bank AG will take up to a 19.3 per cent stake in U.S. online broker National Discount
Brokers Group Inc. as part of deal to create jointly owned online brokerage capabilities
outside of the U.S., the companies said Thursday.
Hartford Financial Services Group
Inc. announced that it will buy the rest of life insurance company Hartford Life Inc. that
it does not already own for $1.31 billion.
M&T Bank Corp. said it would buy
Pennsylvania-based Keystone Financial Inc. for about $1 billion in cash and stock,
expanding beyond its New York State home territory.
U.K. media and leisure conglomerate
Granada Group announced it would merge with food service company Compass Group in an
all-share deal, creating a firm worth more than £15 billion ($22.8 billion).
Lycos Terra Networks SA:
Spanish Internet service provider Terra
Networks SA agreed to pay about $12.5 billion in stock for the U.S. Web portal Lycos Inc.,
giving Terra a valuable source of online content and ending more than a year of
acquisition discussions surrounding Lycos.
Online medical supply company
Neoforma.com Inc. announced Tuesday that it is in talks to possibly scrap its $1.37
billion deal to acquire Eclipsys Corp. and its affiliate Healthvision Inc.
HSBC, a London-based international bank,
said it would pay 36.6 billion Thai baht ($940 million) for a 75 per cent stake in Thai
Bangkok Metropolitan Bank.
WormsArjo Wiggins Appleton:
Worms et Cie is in talks Tuesday to make a £1.3 billion ($1.95 billion) offer for control
of British paper and packaging firm Arjo Wiggins Appleton.
Africa trade deal 'on track'
Plans to create a free-trade area across eastern and southern Africa by
October are on course, and should help to triple regional trade over the next five years,
Kenya's Trade Minister Nicholas Biwott said.
Trade between the council's 21 members has increased by an average of
21 per cent a year over the last 15 years and reached an estimated $5 billion last year.
The elimination of all internal tariffs should boost levels of intra-regional trade to $15
billion by 2005, said Comesa officials.
Marconi: British telecom equipment maker Marconi said net income
for the fiscal year ended Mar. 31 fell to £522 million ($772 million), or 19.1 pence a
share, from £607 million, or 22.2 pence, a year ago.
Net earnings at Germany's Dresdner Bank halved to
133 million ($120 million) for the three months ended Mar. 31.
SocGen: French bank Societe Generale earned net profit of 883
million ($791.9 million), or 2.20 per share, up from 576 million, or 1.40 a share, a year
British Telecom: British Telecommunications, said its
fourth-quarter profit fell 22 per cent. Net income for the three months ended Mar. 31 fell
to £443 million ($662 million), or 6.7 pence a share, from £568 million, or 8.6 pence, a
Nets, telcos reel in Europe
Europe's largest markets headed lower early Friday, with Internet
sector stocks sinking in London and telecom shares again weighing on indexes in Paris and
Frankfurt following another decline on the U.S. tech-heavy Nasdaq composite index amid
lingering interest-rate fears.
The CAC 40 blue chip index in Paris led the way down, dropping 138.30
points, or 2.1 per cent, to 6,313.67 with media, technology and telecom issues dragging
the index lower.
Frankfurt's electronically traded Xetra Dax dropped 115.49 points, or
1.6 per cent, to 7,066.09. London's benchmark FTSE 100 index fell 62.5 points, or 1 per
cent, to 6,170.4, with "old-economy" retailers and banks limiting the index's
The pan-European FTSE Eurotop 300,a broader index of the region's
largest stocks, fell 1.1 per cent to 1,607.91, with its telecommunication and information
technology sub-indexes each down more than 3 per cent.