Jun 26 - Jul 02, 2000

Japan may raise spending

Senior Japanese officials hinted Monday they were prepared to boost government spending in the current fiscal year to reinforce the country's economic recovery, an issue at the top of voters' minds less than one week before Japan's general election.

Top financial bureaucrat Nobuaki Usui said he agreed with comments Prime Minister Yoshiro Mori at the weekend that the government would be flexible in taking extra economy-boosting steps if needed. Mori said Sunday that Japan was considering compiling a supplementary budget for the fiscal year that started in April if the economy showed signs of a downturn.

Japan has already spent heavily to pull itself out of its worst post-war slump, compiling its biggest debt budget ever for the 2000-01 fiscal year and incurring the heaviest burden of borrowings of any of the advanced countries.

Asked about Mori's comments, Usui told reporters at the premier's office on Monday: "We are in agreement that we should act flexibly, depending on the economy's condition."

Economists say that if the government decides to seek extra stimulus to support the economy, the measures should focus on structural reforms and on information technology, one of the fastest-growing sectors in the still-fragile economy.

Japan's economy grew a robust 2.4 per cent in the first three months of this year from the previous quarter, but there remain doubts about whether that growth is sustainable.

Usui's boss, Finance Minister Kiichi Miyazawa, has said he will wait to see figures on gross domestic product for the period from April to June — not due to be published until September — before deciding whether a supplementary budget would be needed.

Gas prices flirt with record

U.S. drivers continue to be hit with sticker shock at the pump, as gasoline prices jumped to new highs for the fourth week in a row, the Energy Department's statistical agency reported on Monday.

The national average retail price for unleaded gasoline rose 5 cents from last week to $1.681 a gallon (44 cents a liter), based on the Energy Information Administration's weekly survey of 800 service stations.

The pump price is up 56 cents a gallon from last year and the highest since the EIA began tracking weekly fuel prices a decade ago.

The price for gasoline has risen 16.2 cents over the last month because of high crude oil prices and tight supplies for gasoline during the summer driving season.

The national price for cleaner burning reformulated gasoline is up 2.4 cents to $1.70 a gallon (45 cents a liter).

While U.S. gasoline prices are at relative highs, they are still substantially below what drivers pay in some European and Asian countries.

The Gulf Coast states had the cheapest fuel, up 4.3 cents a gallon to $1.519 (40 cents a liter) for conventional gasoline, while reformulated gasoline jumped 4.2 cents to $1.514.

Midwest drivers continued to pay the most for fuel, with the price for conventional gasoline up 7.8 cents to $1.874 a gallon (50 cents a liter) and reformulated gasoline up 3.1 cents to $2.003 (53 cents a liter).

While gasoline is above $2 in many cities, this is the first time that gasoline topped $2 a gallon for a specific region of the country.

The Federal Trade Commission is investigating why Midwest gasoline prices are the highest in the nation. U.S. Energy Secretary Bill Richardson has said the government must determine if oil companies are gouging customers at the pump.

Europe opens in the red

Europe's leading markets opened lower Friday, with leading technology and telecommunications stocks falling in the wake of losses for the sector on Wall Street a day earlier.

London's benchmark FTSE 100 index fell 0.4 per cent to 6,387.8, as mobile-phone operator and index heavyweight Vodafone AirTouch (VOD) down 1.5 per cent.

The CAC 40 in Paris also dropped 0.4 per cent to 6,447.27, while the Xetra Dax index in Frankfurt was little changed at 7,051.27. But Zurich's SMI index bucked the trend across Europe, adding 0.1 per cent.

The FTSE Eurotop 300 index, a basket of Europe's biggest companies, fell 0.5 per cent to 1,604.46, with its computer, telecom and food companies among the leading losers.

In the currency market, the euro dropped to 93.63 U.S. cents from 94.54 cents in New York Thursday morning.

Asian markets peel back

Asia's leading markets retreated Friday, with telecommunications and Internet-related stocks losing ground in Tokyo following the first spill for the high-tech U.S. Nasdaq composite in five days.

Japan's benchmark Nikkei 225 index closed down 142.80 points, or 0.8 per cent, to 16,963.21.

Hong Kong's Hang Seng index dropped 1.2 per cent to 15,756.07 in late trading, while in Singapore the Straits Times index was up less than 0.1 per cent at 2,209.91.

Elsewhere among Asia's biggest markets, the Kospi index in Seoul fell 0.4 per cent and the Taiwan Weighted index dropped 1 per cent in Taipei.

In the currency market, the U.S. dollar edged up slightly to ¥104.66 from ¥104.40 in New York Thursday morning. The euro fell slightly against the greenback, trading at 93.84 U.S. cents, down from 94.27 cents in New York Thursday.

Nasdaq ends winning ways

The Nasdaq composite index snapped a five-session winning streak Thursday as investors dumped technology stocks that ran up through most of June.

Cisco, Intel and Oracle tumbled, pushing the Nasdaq below the 4,000 mark it cracked for the first time in two months on Tuesday.

The Nasdaq fell 127.15 points, or 3 per cent, to 3,936.87, reversing all of Wednesday's 50.65-point rise that put the index within 6 points of where it ended 1999.

The Dow Jones industrial average shed 121.62, or 1 per cent, to 10,376.12. The S&P 500 shed 26.95 to 1,452.18. Losses in Intel weighed on all three indexes.

In other markets, Treasury securities fell. The dollar rose against the euro but fell versus the yen.

Mergers & Acquisitions

Delta—Air France: U.S.-based Delta Air Lines Inc. and Air France on Thursday prepared to unveil their long-awaited plans to create the world's fourth big airline alliance, cementing their commitment to airline pacts amid talk of full-blown mergers on the horizon.

WorldCom—Sprint: A proposed $115 billion merger between U.S. telecommunications giants WorldCom Inc. and Sprint Corp. has run afoul of antitrust regulators in Europe, a development that sinks the deal unless the companies make some extraordinary, last-minute concessions.

TI—Burr-Brown: Texas Instruments agreed to acquire Burr-Brown Corp. Wednesday for $7.6 billion in stock, bolstering its efforts to establish a commanding position in the high-performance analog chip sector.

Computer Sci—Mynd: Computer Sciences Corp. said it agreed to buy insurance software company Mynd in a $568 million cash deal that will enhance Computer Science's ability to serve clients in the financial services industries.

SingPower—GPU: Singapore Power agreed to buy an Australian power-transmission network from U.S.-controlled GPU PowerNet for A$2.175 billion ($1.3 billion), the latest bid by a state-controlled Singapore firm to break out of the tiny domestic market.

ING—ReliaStar: Dutch financial services powerhouse ING Groep NV bulked up its coffers to fund the planned buyout of U.S.-based ReliaStar on Wednesday, saying it has completed the sale of a stake in insurer Aegon NV, raising 2.9 billion euros ($2.8 billion) after tax.

Nabisco—Philip Morris: Nabisco Holdings Corp. drew buyout bids from Philip Morris Cos. and a joint offer from UK-based Cadbury Schweppes Plc and France's Groupe Danone SA, as part of an auction process for the packaged food company that could fetch as much as $55 per share, or $14.6 billion, for the company, according to a published report Thursday.

Serono: Serono SA, the world's largest maker of fertility drugs, announced plans Thursday for a $2 billion global share sale to fund future expansion of the Swiss firm's operations, possibly including acquisitions.

Warner—EMI?: A group of shareholders in EMI Group Plc has asked for a delay in voting on the proposed $20 billion tie-up with U.S.-based Warner Music amid growing expectations of a counter-bid, the Financial Times reported on Friday.

Rio—North: Rio Tinto PLC on Friday offered A$3.8 billion ($2.3 billion) for Australian miner North, attempting to create the world's second-largest iron ore producer. The bid met with a hostile response from its target.

American General settles

American General Corp., the No. 3 U.S. life insurer, agreed to pay $206 million to nine million black and poor Americans to settle accusations of overcharging them for insurance policies, marking one of the largest corporate payouts in a racial bias case.

Coke invading North Korea

Coca-Cola Co. has a shipment of Coke waiting on the North Korean border and expects this week to become the first U.S. consumer products maker to crack open the communist country's market.

ECB keeps rates on hold

The European Central Bank left its key interest rate unchanged at 4.25 per cent in a widely-expected decision Wednesday following the half-percentage point hike in short-term rates two weeks ago.

Spain's GDP up

Spain's gross domestic product grew an annual rate of 4.1 per cent in the first quarter, the government reported Wednesday, in the latest sign one of the euro zone's hottest economies has continued to pick up speed.

The figure was an increase from a yearly rate of 3.9 per cent in the fourth quarter last year, the National Statistics Institute said. Domestic demand, which has contributed to one of highest inflation rates in the 11-nation euro zone, climbed 4.3 per cent, slightly up from the final quarter of 1999 but lower than the 5.5 per cent peak of the first quarter a year ago.

Greece joins euro club

Greece finally won approval on Monday from European Union leaders to become the 12th member of the region's single-currency zone, putting aside disappointment after missing the boat in January 1999.

Greece will adopt the euro from January 1, 2001, and EU finance ministers meet later to put their official seal on an official drachma conversion rate of 340.75 to the euro, an EU official said.

"Greece has been adopted, it was purely a formality," a European Union official said after the leaders passed the Greek application on the recommendation of the European Commission.

UK hit by more job cuts

Steelmaker Corus Plc completed a week of miserable news for British workers Friday by announcing plans to slash 1,400 jobs. It was the latest of a string of big job cuts announced in the past few days, highlighting a mismatch between the skills of the sacked workers and those demanded by expanding companies.

Clothes retailer C&A dumped almost 5,000 shop workers Thursday after deciding to close all 109 of its U.K. stores, while earlier in the week aircraft and armaments firm BAE Systems Plc said it would slash 3,800 positions. That takes the number of job cuts announced this week to more than 10,000.

OPEC accord good for oil stocks

Among European oil stocks early Thursday, BP Amoco (BPA) rose 2.6 per cent, Shell Transport and Trading (SHEL) jumped 2.3 per cent and French No. 1 Total Fina Elf (PFP) added 1.2 per cent after OPEC's announcement that it would raise oil production by 708,000 barrels a day.

The increase is "not nearly enough to make a significant dent in prices," Bruce Lanni, an oil analyst at CIBC World Markets, said Wednesday.

Europe's benchmark for oil prices, Brent crude oil for delivery in three months, gained 23 cents to $29.25 after the OPEC statement.

Separately, BP Amoco was reported as planning to buy a 2.2 per cent stake in Sinopec, China's second-largest oil company, when it launches an initial public offering this summer, according to the Financial Times.

French industry output dips

French industrial production fell in April amid a slowdown in the auto, consumer goods and food sectors, official data showed Thursday.

National statistics institute INSEE said its industrial production index, excluding construction, fell 0.2 per cent in April after revised gain of 0.8 per cent in March. Economists expected an increase of 0.4 per cent for April, according to a Reuters poll.

Economists suggested the figure is likely to amount to a temporary blip lower, however, saying euro-zone interest rates, the weak euro and French competitiveness should keep output robust through the remainder of the year.

On an annualized basis, production rose 4.8 per cent in the three-month period ended April 30, in line with forecasts. Manufacturing output, which excludes construction, energy, food and agriculture, was down 0.2 per cent for the month and up 5.7 per cent on the year.