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INTERNATIONAL

Jan 17 - 23, 2000

  1. International
  2. Finance
  3. Industry
  4. Policy
  5. Trade
  6. Gulf

Oil surges

High-flying oil prices rose further as news of a surprise meeting between the Saudi and Venezuelan oil ministers strengthened signals that export group Opec will prolong deep supply curbs.

World benchmark Brent crude was up 20 cents to $24.84 a barrel at the last trading session, extending a near 90 cents gain on Tuesday. Prices climbed as details emerged of an Amsterdam meeting between Saudi Oil Minister Ali Al-Naimi and his Venezuelan counterpart Ali Rodriguez, expected to agree on the need to extend the cuts beyond a planned March expiry.

The two ministers were at the vanguard of a producer alliance that more than doubled oil prices last year by cutting some five million barrels per day of supply.

Britain braces for rate hike

Britain's nine-member Monetary Policy Committee (MPC) looks set to pull the interest rate trigger, raising borrowing costs 0.25 percentage points to 5.75 per cent.

The move, widely anticipated by financial markets, will mean higher borrowing costs for home buyers and businesses but help ensure lively economic growth does not stir inflation.

In a Reuters poll, 27 economists out of 33 expected the Bank of England's Monetary Policy Committee (MPC) to raise interest rates to 5.75 per cent from 5.50, a modest move financial markets should comfortably absorb. Some economists even warned the MPC could opt for a 50 basis point rise.

The trouble for the MPC however, is that Britain's economy looks relatively inflation-free, and they are simply reacting to a potential inflation threat in coming years.

With core inflation at just 2.2 per cent and below the country's 2.5 per cent target, rate rises are often opposed by industry and union groups, particulary as rates in rival euroland countries are just 3.0 per cent.

But employers group the Institute of Directors (IoD) sparked surprise when it said it accepted the need for higher borrowing costs.

Ruth Lea, head of the IoD policy unit, suggested an interest rate rise is necessary to ensure growth is maintained over the economic cycle.

"We accept they (interest rates) need to rise in order to maintain the low inflation stability which is essential for business," Lea said.

The central bank has already raised rates twice — in September and November last l year—in a pre-emptive move to kill incipient inflationary pressures.

Price panic seen behind record gold hedging

Gold producers, panicking in a volatile price climate hedged 445 tonnes of production last year compared with 88 tonnes in 1998, industry consultants Gold Fields Mineral Services (GFMS) said.

Gold's outlook for the first half of 2000 was more positive, with stronger jewellery demand and less producer hedging expected to tone down the price impact of central bank sales and speculative short selling.

The London-based consultancy said gold should average around $280 a troy ounce in the first six months of the year, trading in a range between $265 and $305.

IBM breaks U.S. patents record

International Business Machines was awarded a record number of U.S. patents last year many in the increasingly litigious sectors of software and business processes.

The world's largest computer company was awarded 2,756 patents, 900 more than second-placed Japanese electronics company NEC, according to the Claims Patent Services. About 900 of IBMs patents included software related technologies that it said were fundamental to its e-business strategy.

Chinese oil firm to raise $7b via IPO

China National Petroleum Corporation (CNPC), China's largest petroleum company, is expected to set a price of 10 times 2000 earnings for the listing of its main business unit.

The unit coming to market is PetroChina. CNPC is expected to raise $5.5 billion-$7 billion by selling about 15 per cent of it. This would value PetroChina's equity at between $36 billion and $47 billion. It also has about $14-billion debt.

The PetroChina initial public offering is set to be the biggest by a mainland company since China Telecom Hong Kong's $4.2 billion IPO in 1997.

 

Mergers & Acquisitions

Winterthur—Japan life insurer: Swiss-based insurer Winterthur Group said it was extending its reach by entering the Japanese life insurance market with the acquisition of Nicos Life for 17.4 billion yen ($166 million).

BT—Esat: British Telecommunications Plc is to pay almost $2.5 billion for Esat, Ireland's second largest telecoms company, trumping a $1.9 billion hostile bid from Norway's Telenor.

GM—Saab: U.S.-based General Motors Corp said it would exercise an option to take over Swedish car maker Saab Automobile AB. GM, which acquired 50 per cent of Saab 10 years ago announced plans to buy the other half from the Swedish industrial holding company Investor AB by the end of the month. It did not disclose the amount.

Kyocera—Goldman: Japanese electronics group Kyocera Corp and U.S. investment firm Goldman Sachs said they would create a fund to invest in high-tech startup ventures, opening up a new path for one of Japan's traditional companies. The 30 billion yen ($285 million) fund will be formed later this month with Kyocera injecting 10 billion yen and Goldman 20 billion yen, the companies said in a joint statement.

Granada—Carlton—United: British media and leisure company Granada Group Plc said it might bid for either Carlton Communications Plc or United News and Media Plc, a move which would spoil their planned merger. The 7.8 billion ($12.9 billion) deal between Carlton and United, agreed in November.

 

Rouble sinks to new low

The Russian rouble fell to a new low and dealers said the central bank helped push it down as it replenished its hard currency reserves. The rouble's weighted average lost more than 70 kopecks to 28.4365 per dollar in one of the sharpest falls for months. The average reflects unified trading at eight of Russia's exchanges. The central bank's next day official rate, usually based on the average unified rate, was set at 28.44 per dollar compared with the previous 27.73.

EU, Japan for fresh round of WTO talks

Japan and the European Union agreed on the need to quickly launch a new round of comprehensive World Trade Organization (WTO) talks after a first effort broke down in Seattle two months ago.

The ninth annual EU-Japan ministerial meeting here also resolved to build closer trade ties between the two trading giants "across all domains in pursuit of commonly held interests".

The European side emphasized regulatory reform, added market access and transparency, and an improved climate for foreign investors and enhanced consumer choice.

HK and Singapore lead free economies

Hong Kong and Singapore have the world's most unrestricted economies, according to a report published.

The report, published by Canada's Fraser Institute, the Hong Kong Centre for Economic Research and the United Statesbased Cato Institution, was immediately welcomed by Hong Kong's government.

It vowed to maintain the territory as "the world's freest economy and a leading international financial centre."

Time Warner, AOL in $163b merger deal

Internet services provider America Online Inc will buy Time Warner Inc. the world's largest media company for about $163 billion in stocks the companies said, in what ranks as the largest merger deal ever.

Shares of both companies soared on news of a deal that will create an empire that reaches from magazines and movies into cyberspace and that promises to remake the landscape of how people communicate, are entertained and informed, around the globe.

European stock indices closed higher, boosted by merger plans between AOL and Time Warner Inc.

In London, Footsie closed up 102.9 points, or 1.6 per cent, at 6607.7. In Frankfurt, DAX index closed up 144.56 points at 6925.52.

In Paris, the CAC 40 index closed up 1.9 per cent at 5646.12 points.

The combined market capitalisation of America Online and Time Warner reached $360 billion. The enthusiasm sent shares of media stocks higher across Europe.

America Online chairman and chief executive Steve Case was named chairman of the merged companies, while Time Warner Chairman and Chief Executive Gerald Levin will be chief executive, the companies said in a statement.

The combined company will create a media conglomerate with unprecedented reach across traditional and new media, allowing the delivery of programming from Time Warner's stable of brands onto the Web and giving AOL access to Time Warner's U.S. cable television network to offer highspeed Internet access.

AOL Time Warner will bring together Time Warner's Time, CNN, Warner Bros., People, HBO, Sports Illustrated, Cartoon Network, Warner Music Group, Fortune, Entertainment Weekly, and Looney Tunes with America Online's AOL, CompuServe, Netscape ICQ instant messaging, Digital City, an d AOL Moviefone.

Results

Alcoa: Alcoa Inc. the world's largest aluminum producer, said its fourth-quarter earnings rose a higher-than-expected 33 per cent amid strong demand for its U.S. products and recovering economies in Asia. The Pittsburgh-based company, which also announced a two-for-one stock split, earned $333.9 million, or 89 cents per diluted share, up from $218.3 million, or 59 cents in the year earlier quarter.

Lehman: Lehman Bros Holdings Inc., earned $301 million, or $2.28 per diluted share, in the fourth quarter ended November 30. That was a fourfold increase from a net profit of $74 million, or 51 cents per share, in the year-ago quarter, when volatile debt markets slashed Lehman's Trading profits.

Philippine shares, peso rally

The Philippine stock market and the peso strengthened in response to President Joseph Estrada's decision to hold off on constitutional reform but analysts said foreign investment could be affected in the long term.

The main stock market index closed 2.29 per cent higher at 2,142.25 points. Brokers said the market was boosted because holding off on constitutional change removed a politically charged issue from the national agenda.

The peso was trading at 40.2 to the dollar by mid-day against Friday's close at 40.33, also cheered by lowered perceptions of political risk dealers said.

Tokyo high-tech stocks may recover

Tokyo's battered high-tech stocks are expected to regain their poise this week, boosted after U.S. markets rallied on Friday despite a stronger than expected jobs report.

Japan's high-tech stocks suffered last week after sharp falls on the Nasdaq market— which was down as much as 10 per cent at one point from last Monday's record close—and a comment by Sony Corp's president that his company's shares were overvalued, which dragged down the whole sector.

Most traders see the Nikkei trading around 17,500 to 18,500 this week.

Bank of China plans to 'sell' silver abroad

The People's Bank of China has decided to sell some of its silver reserves on the international market the China Daily Business Weekly reported.

The move intends to create a more favourable environment for domestic silver producers the newspaper reported Pan fun of the bank's Currency, Gold and Silver Administration as saying.

The move was put into effect on 1 January ahead of the deregulation of the domestic silver market, which is expected to take place in February.

U.S. rules out sale of gold reserves

The United States has not sold any of its gold reserves and has no plans to do so, U.S. Treasury Secretary Lawrence Summers said.

"I categorically deny assertions that U.S. gold reserves were being sold off or that there is any plan to sell them off," Summers told reporters on the sidelines of an economics conference.

His denial came amid talk in the gold markets that some of the weakness in the gold price over recent years may have been caused by direct U.S. sales of gold.

World Bank to sell $3b bonds on Net

The World Bank said it plans to sell a $3 billion global bond offering over the Internet, allowing individual investors to invest in the bank which provides loans to developing nations.