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Jul 17 - 23, 2000

Chinese economy booms

China's economy grew a rattling 8.2 per cent in the first half of 2000, state media said Thursday. Analysts said that the year-on-year growth in gross domestic product not only confirms expectations of a good start to 2000, but also puts the economy on track to surpass the government's seven per cent economic growth target for the whole of 2000.

"The overall trend is good," said an analyst at a foreign securities firm in Shanghai. "To reach over seven, 7.5 per cent — that's definitely within the government's reach."

Qiu Xiaohua, deputy director of the State Statistical Bureau, said exports and an active fiscal policy helped the economy to 8.2 per cent growth in the first half.

Chinese Premier Zhu Rongji estimated last week that GDP rose eight per cent in the first half. The economy grew 7.1 per cent in 1999.

"If China had not adopted a positive fiscal policy, the growth rate would have been five or six per cent at the most," Qiu was quoted as saying by the official Xinhua news agency.

It was the latest in a succession of glowing economic statistics the government has rolled out this week.

On Wednesday, it announced exports surged 38.3 per cent to $114.5 billion in the first half, producing a trade surplus of $12.3 billion.

Earlier, it said industrial output jumped 11.2 per cent in the first six months, the highest first-half growth in nearly three years.

And it said actual foreign investment slid only 7.5 per cent in the first half while contracted investment soared 24.6 per cent, leading analysts to predict an end to a fall in the influx of money from overseas.

"I believe the economy has entered a positive phase," said Wu Jiangzhong, deputy director at the China Economic Monitoring Center.

Chinese Premier Zhu Rongji estimated last week that GDP rose eight per cent in the first half. The economy grew 7.1 per cent in 1999.

U.S., Vietnam sign open trade agreement

U.S. President Bill Clinton announced Thursday the signing of a major free-trade agreement between the United States and Vietnam that will clear the way for an open economic relationship between the two for the first time since the end of the Vietnam War.

The market-opening agreement, signed in Washington by U.S. Trade Representative Charlene Barshefsky and Vietnamese Trade Minister Vu Khoan after four years of negotiations, is meant to reduce tariffs on goods and services, protect intellectual property and improve investment relations.

Taking a break from the Middle East peace talks, Clinton announced the agreement at a Rose Garden ceremony.

The agreement, he said, "will dramatically open Vietnam's economy, while creating jobs ... and increased trade between our two nations."

Clinton said the trade agreement comes after years of work to ease tensions that remained after the Vietnam War, and "from the bitter past we plant the seeds" for a brighter future.

Clinton lauded the "visionary and brave leadership" of members of Congress who served in the war with Vietnam, and said the lesson is that nations can "let go of the past and embrace the future; to forgive and to reconcile."

A year ago, a similar "agreement in principle" collapsed when Vietnam's communist government balked at the market-opening provisions its negotiators had reached. The countries have worked toward a trade agreement since Clinton restored full diplomatic relations in 1995.

The deal, if approved by the U.S. Congress, would reduce U.S. tariffs on Vietnamese products from the current average of about 40 per cent to less than 3 per cent, the same rate Washington extends to most other nations.

Telecoms boost Europe

Europe's biggest markets closed mostly higher Thursday.

Frankfurt's Xetra Dax index was the best performer among Europe's biggest markets, rising 130.02 points, or 1.8 per cent, to 7,195.99. Technology and chemical stocks were the leading gainers, with Deutsche Telekom up more than 2.5 per cent on the prospect the company might make a bid for Sprint.

The CAC 40 in Paris climbed 33.85 points, or 0.5 per cent, to 6,570.36. France Telecom gained 3.9 per cent on optimism about next week's planned initial public offering of its Internet service provider Wanadoo.

London's FTSE 100 index fell in choppy trade, shedding 42.8 points, or 0.7 per cent, to 6,475.7, with retailers, drugs and food and drink companies holding the index down.

The FTSE Eurotop 300 index, a basket of the region's largest companies, rose 0.3 per cent to 1,639.91, with its computer and information technology sectors up more than 3.8 per cent.

Profits power Nasdaq

The Nasdaq composite index rallied for a second straight session Thursday, climbing to its highest point in more than three months after a spate of strong earnings from technology firms spurred expectations of more such reports to come.

The Nasdaq rose 75.29 points, or 1.8 per cent, to 4,174.88, its highest close since April 10 when it finished at 4,188.20.

The Dow gained 5.30 to 10,788.71 and the S&P 500 climbed 2.92 to 1,495.84.

Market breadth was mixed amid heavy trading volume. On the New York Stock Exchange, declining stocks outpaced advancing ones 1,454 to 1,434, as more than 1 billion shares traded. Nasdaq winners beat losers 2,118 to 1,914, as more than 1.8 million changed hands

Asian markets retreat

Asia's major markets closed lower Thursday, with Tokyo's leading index succumbing to concern triggered by the collapse of department store operator Sogo while declines for property companies depressed Hong Kong and Singapore.

Tokyo's Nikkei 225 index closed down 305.23 points, or 1.8 per cent, at 17,036.90. Sogo announced late Wednesday it had filed for bankruptcy, The Hang Seng index in Hong Kong closed down 102.76 points, or 0.6 per cent, at 17,449.50, amid weakness in the property sector, while the Singapore Straits Times dropped 1.3 per cent to 2,085.01.

In other leading Pacific Rim markets, Australia's S&P/ASX 200 index shed 0.4 per cent, with media conglomerate News Corp. dropping 1.2 per cent. But the Taiwan Weighted index in Taipei rose 2.6 per cent on strong demand for electronics shares, and the Kospi index in Seoul rose 0.7 per cent.

Elsewhere in Asia, Jakarta's JSX index slipped 1 per cent, Manila's PHS composite rose 0.45 per cent, the KLSE composite in Malaysia rose 0.2 per cent, and in Bangkok, the SET index fell 1 per cent.

Mergers & Acquisitions

BAE—Lockheed units: Lockheed Martin Corp., the world's largest defence contractor, said it signed a deal to sell its aerospace electronics business to BAE Systems North America, a wholly-owned subsidiary of Britain's BAE Systems PLC for $1.67 billion in cash, as part of a plan to strip the company of non-core assets.

Deutsche Telekom—VoiceStream Wireless: Germany's Deutsche Telekom, Europe's largest telecom company and the world's third-largest carrier, had entered advanced talks to acquire VoiceStream Wireless: Negotiations that the Financial Times said values the U.S. wireless company in excess of $30 billion.

Jones—King: Specialty pharmaceutical companies King Pharmaceuticals Inc. and Jones Pharma Inc. plan to merge in a $2.74 billion all-stock deal that gives King a stronger position in the therapeutic drug market.


Ariba: Business-to-business e-commerce software maker Ariba Inc., reported a net loss for the quarter, not including non-operating charges, of $11.3 million, or 5 cents per share, versus a net loss of $6 million, or 11 cents per share, in the same period last year.

Bestfoods: Higher sales fueled by recent acquisition helped Bestfoods, boost profitability 10 per cent in the second quarter. Net income, excluding merger-related expenses of $30 million after taxes, were $193 million, or 68 cents per share. A year ago, Bestfoods reported net income of $176 million, or 61 cents per share.

GE: General Electric Co. posted record second-quarter profits Thursday. The company had net income of $3.4 billion, or 34 cents a diluted share.

JP Morgan: Investment banking firm J.P. Morgan & Co. posted Thursday an unexpected increase in fiscal second-quarter earnings. Morgan, reported net income of $542 million, or $2.90 a diluted share, up from $504 million, or $2.52 a year earlier.

Pepsi: PepsiCo Inc. beat analysts' forecasts in the second quarter. The beverage and snack maker posted net income of $563 million, or 38 cents a share.

French inflation: 3-yr high

Rising oil prices drove France's annual inflation to 1.7 per cent in June, the highest level since January 1997, official data showed Wednesday, prompting some economists to predict the European Central

Bank would soon raise interest rates to cool the economy of the 11-nation euro-currency zone.

The consumer price index rose 0.2 per cent in June, a bigger jump than the 0.1 per cent increase economists expected, according to a survey by Reuters. That pushed the annual inflation rate up from May's level of 1.5 per cent, French statistics office INSEE reported.

Based on the seasonally adjusted "core" inflation index, which strips out tax changes and more volatile prices, inflation rose to 1.2 per cent in June from 1.1 per cent in May.

Germany risks 'tax disaster'

Allianz AG, Germany's largest insurer, warned Wednesday that the country would suffer "immense" economic damage if the parliament blocks the government's plan to reform the tax system.

Allianz Chief Executive Henning Schulte-Noelle said Finance Minister Hans Eichel's tax-cutting plans — which include the removal of companies' liability to pay tax on profits from selling big shareholdings — could turn Germany into one of the world's most attractive locations for holding companies.

The government's package of tax measures, currently due to come into force next year, would cut corporate and personal income taxes by 50 billion German marks ($24 billion) through 2005.

Japan gets Linux fever

Toshiba Corp, Sony Corp and 21 other Japanese electronic and software firms said on Thursday they have agreed to jointly develop a Linux-based operating system (OS) for digital electronics products.

The move aims to cut hefty development costs by creating an industry-standard OS for use in goods such as mobile phones and car navigation systems, a consortium spokesman said.

EU warns vitamin makers

The European Commission has sent legal warnings to 13 vitamin producers, including European companies Roche and BASF, implicated in an alleged price-fixing cartel, Switzerland's Roche said on Tuesday.

"The European Commission has issued the Statement of Objections against 13 producers of bulk vitamins, including Roche," Roche said in a statement received in Brussels.

"This investigation concerns the same vitamin cartel case which was investigated and concluded in 1999 with the U.S. and Canadian authorities," the company added.

UK-Swiss exchange born

SWX Swiss Exchange and Britain's Tradepoint Financial Networks Plc on Monday unveiled plans to create a blue-chip electronic stock exchange known as virt-x, the latest of several moves in the consolidation of the region's stock markets.

The new company, which will be based in London, hopes to offer trading in the shares that make up all the main European stock indexes by the first quarter of 2001. SWX said virt-x would become the forum for trading in all the stocks in Zurich's benchmark SMI index — currently representing transactions worth about $2.1 billion a day.

Core UK inflation hits 2.2%

Rising oil prices unexpectedly drove Britain's core annual inflation rate in June to its highest level in more than a year in, official data showed Tuesday, but economists said other signs of slowdown should keep the Bank of England from raising interest rates in the near future.

The UK retail price index excluding mortgage interest payments rose 0.2 per cent in June from the previous month, taking the annual rate to 2.2 per cent from May's figure of 2 per cent, the Office of National Statistics reported. That was higher than the 2.1 per cent rate predicted by economists surveyed by Reuters, but it was well below the 2.5 per cent target the British government has set.

Core inflation hasn't been this high since April last year, when it stood at 2.4 per cent.

Factory orders surge

Orders placed with U.S. manufacturers posted their biggest jump in more than seven years in May as orders for electronics, chemicals and other durable goods surged, government figures released Thursday showed.

Factory orders climbed 4.1 per cent in May, the Commerce Department said, topping both the 2.9-percent increase forecast by analysts polled by Briefing.com and the revised 3.8 per cent decline registered a month before. April's tally initially was reported as a 4.3 per cent decline.

Toshiba, Microsoft team

Japanese electronics maker Toshiba Corp said on Tuesday it would jointly develop liquid crystal displays (LCDs) with Microsoft Corp for portable electronic devices that can download books from the Internet.

Jobless claims increase

The number of Americans filing new claims for unemployment benefits rose to 319,000 for the week ended July 8 from a revised 292,000 the prior week, the U.S. Labor Department said Thursday.