Jul 03 - 09, 2000
Richardson: US House bill to punish OPEC not the answer
The Clinton administration said Tuesday it would oppose legislation
that seeks to punish OPEC and other countries that support the producer cartel's policies
of controlling world oil supplies.
A Republican-backed proposal to allow antitrust lawsuits to be filed in
US courts against the Organisation of Petroleum Exporting Countries is among a growing
number of legislative actions aimed at calming motorists angry about high gasoline prices.
Energy Secretary Bill Richardson told members of the House
International Relations Committee that the administration is against the legislation and
instead believes the United States should maintain contact with OPEC members on oil
"We believe in engaging OPEC," Richardson testified at the
panel's hearing on the cartel's policies.
Representative Benjamin Gilman of New York, who chairs the House
committee, sponsored separate bills last week that allow US-based antitrust lawsuits
against OPEC and call for the administration to oppose World Bank and IMF loans to
countries that support OPEC's policies.
In dealing with OPEC, Richardson said it would be better for the United
States to make its arguments for more oil production on economic grounds rather than on
"It doesn't pay, I have found, to coerce or threaten," said
the former US ambassador to the United Nations.
OPEC agreed earlier this month to open its spigot somewhat and produce
an extra 708,000 barrels per day (bpd) of crude oil.
Industry experts contend the volume still falls short of the minimum
one million bpd needed to ease prices and bring global supply and demand into better
The 11 nations of OPEC control roughly one-third of the world's oil
supply of 76 million bpd.
Japan on road to recovery
Japan's industrial production inched up in May, the government said on
Wednesday, but its forecast of robust growth in June showed that the world's
second-biggest economy remained on a tentative recovery track.
Output rose 0.2 per cent in May after a 0.6 per cent dip the month
before, the Ministry of International Trade and Industry's preliminary report said. The
median forecast in a Reuters poll of 18 economists was for growth of 0.5 per cent. But
MITI raised its June forecast for manufacturers' output by nearly a full per centage point
to a 1.4 per cent increase, predicting a further 0.4 per cent rise in July.
Economists surveyed by Reuters forecast the economy would grow smartly
in the April-June period, following its best quarter in four years. The consensus for
full-year growth came in at twice the government's target.
The economists also forecast a key Bank of Japan survey due next week
would show improvements in corporate sentiment and capital spending plans. That might
persuade central bank hawks to push harder for interest rates to be allowed to rise from
The BOJ held its fire on Wednesday, as expected, sticking to the
16-month-old zero-rate policy.
On a quarterly basis, April-June output is on course to grow at a
healthy 5.8 per cent annual rate, on the heels of 3.2 per cent growth for the first
quarter of 2000, said economist James Malcolm at J.P. Morgan Securities Asia.
Some analysts, however, expect activity to slow later in the year, and
the ministry remained cautious, repeating for a sixth straight month in its official
assessment of output that: "Overall, production is on a moderate upward trend."
Industrial output, spurred on by booming export markets in Asia and
elsewhere and by steady domestic demand for computer products, has been a key engine for
Japan's recovery from its worst postwar downturn.
German data stir rate fears
A German import price report on Wednesday added to recent signs of
quickening inflation, as the rate of import price increases hit a 19-year high, fuelling
speculation that the European Central Bank may bring forward its next interest-rate
Import prices in Europe's largest economy jumped 11.7 per cent
year-on-year, compared with a 9.8 per cent rise in April. It was the biggest increase
since October 1981, the Federal Statistics Office said. Month-on-month, import prices
jumped 2 per cent in May, reversing a 0.3 per cent fall in April. The month-on-month rise
was more than double the 0.9 per cent that economists predicted.
Import prices are seen as an indicator of future pressures on consumer
prices. Economists said the acceleration was explained by a surge in world oil prices and
the after-effects of the euro's sharp depreciation earlier this year.
The report followed evidence this week that consumer inflation in
Germany and Italy rose in June, reinforcing forecasts that euro-zone inflation will breach
the ECB's 2 per cent ceiling in June, rising to 2.2 or 2.3 per cent from May's 1.9 per
Asia slips into the red
Asia's main markets fell on Friday, with technology and telecom stocks
taking a battering amid concern about the outlook for profits, after a series of earnings
reports from U.S. companies missed analysts' forecasts.
In Tokyo, the Nikkei average of 225 stocks slipped 64.85 points, or 0.4
per cent, to 17,411.05, led by declines for the country's dominant mobile-phone operator
NTT DoCoMo and cellphone component maker Kyocera.
Singapore's Straits Times index fell 2.58 points, or 0.1 per cent, to
2,047.13, led by electronics and tech stocks.
The S&P/ASX 200 in Sydney bucked the trend, rising 41.4 points, or
1.3 per cent, to 3,295.9, with mining giant Rio Tinto and banking stocks.
In other markets, the KLSE index in Kuala Lumpur fell 0.4 per cent and
Jakarta's JSX dropped 0.5 per cent. Bangkok's composite SET index rose 0.4 per cent,
Taiwan's Weighted index gained 1.8 per cent, the Kospi index in Seoul climbed 0.3 per cent
and Manila's PHS Composite edged up 0.1 per cent.
Europe moves ahead
European stock markets firmed in early trade Friday as telecom stocks
recovered some of the ground lost in a sharp sell-off in the previous session, while
technology shares also romped higher.
London's benchmark FTSE 100 index moved 0.7 per cent ahead to 6,284.1.
Mobile-phone firm Vodafone AirTouch (VOD), its largest constituent, rose 2.65 per cent
after shedding 7.6 per cent in the previous session.
The CAC 40 index in Paris was 0.64 per cent above its Thursday close at
6,441.99, though buoyed by a 4 per cent advance by chipmaker STMicroelectronics
The Xetra Dax in Frankfurt gained 0.5 per cent to reach 6,906.9, with
gains among banks and automakers leading the index ahead. Deutsche Telekom (FDTE) rose 1.1
per cent following a 6 per cent decline Thursday.
The FTSE Eurotop 300, a broader measure of the region's largest stocks,
rose 0.8 per cent to 1,569.32, with its telecom sub-index up 1.3 per cent, while its
technology segment jumped more than 4 per cent.
Mergers & Acquisitions
Semiconductor giant Texas
Instruments Inc. said Thursday it has agreed to pay $475 million for Dot Wireless Inc., a
maker of software for cell phones.
FordDaewoo: Ford Motor Co. took the lead Thursday in
efforts to buy South Korea's troubled Daewoo Motor as its bid of 7.7 trillion Korean won,
or $6.9 billion, for that country's second-largest automaker made it the preferred bidder
in the global auction.
Tyco International Ltd. agreed to buy
medical products maker Mallinckrodt Inc. for roughly $4.2 billion in stock and debt
Wednesday, boosting the industrial conglomerate's presence as one of the world's largest
distributors of medical devices.
YahooeGroups: Leading Web portal Yahoo! agreed Wednesday
to pay $432 million in stock to acquire eGroups Inc., an e-mail group communication
service that unites people who share a common interest.
Japanese cables: Japan's two largest cable television operators
agreed to merge Tuesday, creating a firm that analysts valued at around $5 billion, in a
move expected to herald more consolidation in the Japanese market for high-speed Internet
DaimlerChrysler AG agreed Monday to pay
$428 million for a 10 per cent stake in Hyundai Motor Co. and signed a pact with South
Korea's top automaker that paves the way for a joint bid for the country's next-largest
car manufacturer, Daewoo Motor Co.
Malaysia: could do better
Malaysia may earn a higher credit rating for its sovereign debt if the
country's banks and companies improve their system of financial disclosure and political
decision-making becomes less centralized, credit rating agency Standard & Poor's has
Malaysia was one of the economies hardest hit during the Asian economic
crises of 1997, and saw investment flood out of the country when the government imposed
currency controls in a bid to reduce volatile capital flows.
A boost to the country's sovereign credit rating would make overseas
investors more comfortable about investing in Malaysia and cut the cost of borrowing for
The return of economic growth and the lifting of some controls on
capital movements has improved Malaysia's economic outlook in recent months, leading to
its reinstatement in the influential Morgan Stanley Capital Index of Asian stocks, used by
many index-tracking investment funds.
Japan's debt downgraded
Concern over the health of Japan's public finances led credit rating
agency Fitch to downgrade the country's sovereign debt Thursday, though the yen's weakness
in previous days amid expectations of the announcement meant the yen rose after the
report. In its annual review of Japan's economic health, Fitch said that the country had
failed to display "convincing" signs of self-sustaining recovery even after the
government poured billions of dollars into public investment to stimulate the economy.
Inflationary effect of weak euro
The implications of the fall of the euro for prices is worrying, the
governor of the Bank of France, Jean-Claude Trichet, who is also a member of the governing
council of the European Central Bank, said on Thursday. Trichet said in his annual report
to French President Jacques Chirac: The depreciation of the euro in 1999 is worrying
because of the impact in increasing costs of production and the general price level.
Oil price hike enigma
Crude oil prices bounced back after the crucial Opec oil ministers
meeting in Vienna last week that agreed to increase production by 708,000 barrels per day.
In London, the price of benchmark Brent crude rose back above 30 dollars mark and in New
York, the cost of light sweet crude climbed back above 32 dollars a barrel before coming
down on Tuesday to $29.68 pb.
Treasury yields tumble
The price of Treasury securities rose Thursday after the latest
economic data suggested the economy is slowing enough to keep interest rates from being
raised by the Federal Reserve.
A $2 billion bond buyback by the Treasury Department also boosted
prices as investors snapped up the US government's shrinking supply of fixed-income
Fed holds rates steady
Federal Reserve policy makers opted to hold the line on interest rates
Wednesday, but issued a warning to both Wall Street and Main Street that it remains on
high alert for signs of accelerating inflation something that could lead them to
raise rates again down the road.
In a widely expected move, the Federal Open Market Committee left its
influential fed funds target for overnight loans between banks at 6.5 per cent. It also
left the discount rate the rate at which the Fed's 12 district banks lend directly
to financial institutions at 6 per cent.
French jobless falls again
French unemployment fell for the ninth straight month in May, reaching
9.8 per cent as consumer confidence close to an all-time high and strong economic growth
created new jobs in the eurozone's second-largest economy, an official report said Friday.
The number of people unemployed declined to 2,355,000, the lowest since
December 1991, from a revised 2,408,300 in April, the Labor Ministry said.
Jobless claims rise
The number of Americans filing new claims for unemployment benefits
rose to 306,000 in the week ended June 24 from a revised 304,000 the prior week, the U.S.
Department of Labor said Thursday.
U.S. economists surveyed by Briefing.com had forecast jobless claims of
295,000 for the period.
The four-week moving average of claims, which generally provides a more
accurate picture of jobless trends, rose to 305,250 for the June 24 week from a revised
301,250 for the prior reporting period.
Mutual funds lose steam
Assets in U.S. mutual funds dipped 1.9 per cent in May as Wall Street
investors turned their backs on equities amid concerns over further interest-rate
tightening by the Federal Reserve.
The combined assets of the nation's mutual funds dropped from $7.294
trillion in April to $6.908 trillion, according to the Investment Company Institute (ICI),
a Washington trade group.
Stock funds also took a dive in May, dropping $143.69 billion in
assets, and net new cash flow was $16.94 billion, compared with April's $34.02 billion.
Assets of taxable and municipal bond funds fell by $4.73 billion during
the same month, and the two had a combined outflow of $5.21 billion.
Taxable bond assets alone dipped 0.3 per cent to $516.1 billion, while
assets in municipal bonds plunged 1.3 per cent to $271.6 billion.