Jul 10 - 16, 2000
Blair pushed on euro
One of U.K. Prime Minister Tony Blair's senior officials has warned the
premier that Britain's manufacturing industry faces a "meltdown" unless he
declares that joining the 12-nation euro zone is inevitable, published reports said
Several British newspapers reported that Andrew Fraser, the government
official responsible for attracting inward investment to the U.K., sounded the warning to
Blair in a report that had been leaked to the media.
French Foreign Minister Hubert Vedrine put further pressure on Blair by
signaling that France would use its six-month spell as president of the European Union,
which started July 1, to press the bloc to give a bigger role to those EU states that have
adopted the euro.
The leaked memo and Vedrine's comments threw down the European gauntlet
once more to Blair, just days after he tried to play down reports of rifts over the euro
among his ministers, and of differences with Germany and France over the EU's future
Fraser, head of the Invest in Britain Bureau, warned that the current
strength of the pound against the euro would lead to a "significant level of
high-profile" factory closures, according to the reports.
Ministers must "challenge the euro-skeptics head on politically,
and express the view that entry into the euro is indispensable if we are to secure the
future of Britain's manufacturing base," Fraser said.
He said in the memo sent to Trade and Industry Secretary Stephen Byers
widely regarded as one of the Labor government's leading pro-euro supporters
that there was a "growing loss of confidence" among investors.
German tax reform stalls
Germany's effort to limit the impact of capital-gains tax on companies,
hailed across corporate boardrooms as a watershed when announced last year, now appears
destined to be delayed for at least a year until 2002.
Government officials last December proposed as part of the federal
budget that capital gains taxes for companies selling equity stakes be slashed from 50 per
cent to zero. But on Friday Finance Minister Hans Eichel and his center-left coalition
said he would postpone that change until 2002, in the face of political opposition.
The proposed tax cut could trigger the sale of shares worth hundreds of
billions of euros that German companies and financial institutions hold in fellow German
businesses. For example, the insurer Allianz (FALZ) and reinsurer Munich Re (FMUV) hold
big chunks of each other's stock and Allianz has holdings in Deutsche Bank (FDBK),
Dresdner Bank (FDRB) and HypoVereinsbank (FHVM), among others.
The holders of the big equity stakes have said for years that it wasn't
worth their while selling the shares, in view of the huge the tax bills they would face on
the realized gains.
Center-right Christian Democrat opponents of the Socialist-led
government have clamoured in parliament for deeper, broader reforms to the tax system than
the government has put forward. The Christian Democrats say they are championing small and
mid-sized businesses, which they say that won't benefit as much as large corporations will
from the planned tax cut.
The new formulation that the government unveiled Friday would delay
until 2002 the plans to free up corporate share sales from the 50-percent tax bite, and
also offered to cut top-rate income tax for companies to 43 per cent by 2005 rather than
the 45 per cent first envisaged. The top rate is now 51 per cent but the Christian
Democrats want even deeper cuts.
Asian markets led by techs
Asia's main markets rose on Friday as technology stocks returned to
favor after the tech-heavy U.S. Nasdaq index rebounded Thursday from the previous day's
In Tokyo, the Nikkei average of 225 stocks rose 115.87 points, or 0.7
per cent, to close at 17,398.24, with internet Investor Softbank and chipmakers Hitachi
and Toshiba among the leading gainers.
The Hang Seng in Hong Kong jumped 262.09 points, or 1.6 per cent, to
16,751.68 in afternoon trade, led by telecom operator China Mobile and property firm Sun
Hung Kai Properties.
The Straits Times index in Singapore advanced 37.45 points, or 1.8 per
cent, to 2,102.2, as banking stocks advanced amid speculation there will be more mergers
and restructuring. In Australia, the S&P/ASX 200 was little changed at 3,307.5 with
telecom, banking and mining stocks making small gains.
In other markets, the KLSE index in Kuala Lumpur slipped 0.3 per cent,
Jakarta's JSX fell 0.8 per cent and Taiwan's Weighted index dropped 1.4 per cent.
In Bangkok, the composite SET index rose 1.3 per cent, Manila's PHS
Composite gained 0.5 per cent, and the Kospi index in Seoul rose 0.5 per cent
Japan's Mori says economic growth top priority
Prime Minister Yoshiro Mori vowed Wednesday that Japan's continued
economic growth would be his newly appointed Cabinet's top priority, and that the
government would maintain its spending policies to achieve that goal.
"It is more important to put the economy on a full fledged
recovery path first" before tackling the nation's debt, Mori said in his first news
conference since being re-elected Japan's prime minister. Mori and his Cabinet were sworn
in on Tuesday.
The previous administration under Keizo Obuchi, Mori's predecessor who
died in May after suffering a stroke and slipping into a coma, began trying to spend Japan
out of recession. Obuchi spent tens of trillions of yen to try to spur the ailing economy
during the Asian financial crisis during the late 1990s.
The initiative has had modest success. Japan's economy grew 0.5 per
cent in fiscal 1999, and the government had pledged to maintain that growth. Mori also
said that realizing the real growth of both Japan's economy and structural reform will be
key objectives of his administration.
Europe edges up at start
Europe's major bourses edged up at the start of trading Friday, with
technology and telecom stocks advancing after the U.S.-Nasdaq market rebounded Thursday
from losses in the previous session.
London's benchmark FTSE 100 index was little changed at 6,422.3, with
software and technology stocks among the gainers, while drug companies declined.
In Paris, the CAC 40 blue chip index rose 0.3 per cent to 6,475.25, led
by chipmaker STMicroelectronics and France Telecom.
Frankfurt's electronically traded Xetra Dax climbed 0.5 per cent to
6,984.85, with chipmaker Infineon and electronic components maker Epcos topping the
leaders board. The SMI in Zurich was little changed at 7,916.4.
The pan-European FTSE Eurotop 300, a broader index of the region's
largest stocks, rose 0.2 per cent to 1,602.23, with its computer and electronics
sub-indexes up more than 1 per cent.
In the U.S. on Thursday, the Nasdaq composite index rose 97.47 points,
or 2.5 per cent, to 3,960.57, while the Dow Jones Industrial Average slipped 2.13 to
Malaysian trade surplus shrinks
Malaysia recorded a trade surplus in May for the 31st consecutive month
but the figure was lower than a year earlier as imports grew, the Statistics Department
Analysts welcomed the rise in imports as a sign that domestic demand
was improving and the economic recovery was becoming more broad-based.
The department said in a statement that the May surplus was 4.5 billion
ringgit ($1.5 billion), up from 3.4 billion ringgit in April but lower compared to a
surplus of 6.5 billion ringgit in May 1999.
May exports grew 19.7 per cent year-on-year to total around 30.7
billion ringgit while imports were up 36.7 per cent to total about 26.1 billion.
Exports of electrical and electronics products amounted to 17.6 billion
ringgit, up 19.2 per cent year-on-year and up from 16.9 billion in April.
Imports of capital and intermediate goods represented almost 89 per
cent of the total.
For the first five months the country recorded a trade surplus of 24.5
billion ringgit against 28.2 billion in the same period last year.
Mergers & Acquisitions
CVS Corp., the No. 1 U.S. drugstore chain,
agreed Wednesday to buy Bergen Brunswig Corp.'s struggling specialty pharmacy business for
$124 million cash.
NTTVerio: Nippon Telegraph & Telephone's planned
acquisition of Internet service provider Verio has come under scrutiny by the U.S.
government, which is worried the deal could compromise national security.
Japanese mobile phone company NTT DoCoMo and
Dutch ally KPN Mobile are expected to invest about 2.8 billion ($2.6 billion) in a UK
mobile-phone joint venture led by Hong Kong telecom company Hutchison Whampoa, as they
form a new venture to tap other markets across Europe.
Qwest Communications International Inc. began
its pursuit of U.S West in June of 1999 when it sparked a bitter takeover battle for its
telecom rival, but the gambit appears to have paid off. Last Friday Qwest completed the
$43.5 billion merger deal with Denver-based U S West, and the new company, which carries
the Qwest name, will replace U S West on the closely watched S&P 500 index.
NEC: Japan's NEC Corp. announced plans Wednesday to invest ¥600
billion ($5.7 billion) over three years on overseas acquisitions to boost the personal
computer maker's position in chip design and optical network systems.
RioNorth: Rio Tinto PLC said on Friday conditions of its
A$2.8 billion ($1.7 billion) bid for North Ltd. had been breached by the mining and
forestry group's plan to pump more investment into its Canadian iron ore business.
Japanese Internet investor Softbank Inc. won
final government approval Friday to buy failed Nippon Credit Bank (NCB), marking the first
entry by a non-financial firm into Japan's rigid banking sector.
Deutsche Telekom AG is set to launch a
takeover bid of more than $50 billion for Britain's Cable & Wireless PLC, according to
a published report Wednesday.
Manufacturing index slips
U.S. manufacturing eased for the fourth straight month in June to the
slowest pace in a year and a half, while prices paid for materials fell, a private
industry report released Monday showed. The numbers suggest industrial activity may be
starting to feel the effects of higher interest rates.
The National Association of Purchasing Management (NAPM) said its index
of manufacturing activity fell to 51.8, below the 53.0 reading expected by economists
polled by Briefing.com, and the 53.2 registered in May. June's reading was the lowest
since January 1999, when manufacturing began to rebound on renewed demand for
American-made goods from Asia and Latin America.
Euro zone to grow at 3%
European Central Bank President Wim Duisenberg said on Wednesday he
expects growth in the euro zone to exceed 3 per cent a year, although a quickening of
inflation "is not on the cards" just yet.
It amounts to the best economic outlook for the euro-currency zone for
25 years, Duisenberg said in answers to questions in a debate in the European Parliament.
Six interest-rate hikes since April 1999 have kept inflation in check, meaning the rate of
price rises should remain below the central bank's 2 per cent-a-year ceiling in the coming
months, although "upside risks" existed.
French confidence hits high
Consumer confidence in France unexpectedly returned to an all-time high
in June, official data showed Wednesday, suggesting that a recent decline in joblessness
has taken root and indicating that consumer spending is likely to remain brisk in the
The index rose to 2 in June from 1 the previous month, equaling the
record high set in April, the government statistics agency INSEE said. Economists polled
by Reuters expected the confidence gauge to remain at 1.
UK to hold interest rates
Fresh economic data released Wednesday heightened market expectations
that the Bank of England would leave its key interest rate unchanged at 6 per cent as
inflationary pressures continue to recede.
UK gasoline tax under fire
Two of Britain's most widely read newspapers on Friday called on the
U.K. government to slash duty on gasoline as prices at British pumps hit record highs of
86 pence a liter, or about £4 ($6) a gallon, most of that represented by fuel tax.
The Sun focused its attack on Gordon Brown, the British Chancellor of
the Exchequer, or finance minister, in a front-page headline that screamed "Get it
down Brown" and described current prices as "highway robbery". The paper
urged readers to protest by sending Brown its cut-out coupon or an email to back the
Marriott checks in a profit
Marriott International Inc., said its earnings for the quarter ended
June 16 rose to $126 million, or 50 cents a share, from $114 million, or 42 cents a share,
a year earlier. Sales rose to about $2.4 billion from $2.0 billion.
Boeing may seal $5.5bn deal
Boeing Co. is close to selling 30 of its 777 aircraft worth about $5.5
billion to International Lease Finance Corp., a major global leasing company, the Wall
Street Journal reported Wednesday.
Glaxo-SmithKline to debut
Glaxo Wellcome PLC and SmithKline Beecham PLC said Wednesday they
expect to complete their merger Aug. 21, creating the world's biggest drug maker.
The two British companies, which announced their intention to merge in
January, posted documents to shareholders ahead of extraordinary meetings of both
companies, which will vote on the deal July 31.