Aug 07 - 13, 2000
Europe, UK hold rates
The European Central Bank and the Bank of England left their respective
interest rates unchanged Thursday, as expected, but many economists say rate increases are
likely later this year.
The ECB held rates at 4.25 per cent, but the decline in the euro is
adding to inflationary pressures as cheaper imports are sucked into the economy of the 11
counties that have adopted the common currency. Inflation rose to 2.4 per cent in June,
above the ECB's 2 per cent ceiling.
The ECB already has lifted interest rates by 1.75 per centage points
since last November including a surprise half per centage point hike in June
and the governing board will want to view all of July's data to gauge how the economy is
Earlier Thursday, the Bank of England kept interest rates on hold at 6
per cent, although a hike is also expected later in the year. Twenty-five out of 33
economists polled by Reuters had predicted the Bank of England would keep interest rates
unchanged at its latest meeting.
The Monetary Policy Committee voted to raise the cost of borrowing four
times between September and February in an attempt to slow down the economy.
The six months since then marks the second-longest period of unchanged
policy since the Bank took control of rates in May 1997.
Some analysts had expected the Bank of England to raise rates Thursday,
citing evidence that the British economy sustained healthy growth in the second quarter.
GDP rose 0.9 per cent from the previous three months, and year-over-year growth totaled
3.1 per cent, the highest since the first quarter of 1998.
Strong retail sales growth in June and Chancellor of the Exchequer
Gordon Brown's £50 billion spending plans also helped make the case for higher rates.
Japan's financial regulator to go in corruption scandal
Japanese Prime Minister Yoshiro Mori has decided to sack the top
banking regulator over a scandal involving the receipt of benefits and payments from at
least two companies, Kyodo news agency said on Saturday.
The scandal would hurt Mori, who formed his cabinet only this month
after a general election in which his dominant Liberal Democratic Party (LDP) fared
poorly, but would not be enough to topple him, analysts said.
Mori made the decision after fresh revelations earlier in the day that
Financial Reconstruction Commission chief Kimitaka Kuze received 100 million yen
($915,700) from the president of condominium company Daikyo Inc in 1991 to help him
recruit new members to the LDP, Kyodo said.
A successor to Kuze, 71, would be selected as early as Sunday, Kyodo
said, quoting ruling party sources.
"It's up to (Kuze) as a politician to make up his mind" to
leave his post voluntarily, it quoted a senior LDP politician as saying.
Opposition parties had already vowed to take up the scandal in a
special session of parliament that kicked off on Friday, and to pursue Mori's
responsibility for appointing Kuze despite knowing about his ties with Mitsubishi Trust
& Banking Corp.
The Asahi Shimbun newspaper said on Friday that Kuze had failed to
report the receipt of advisory fees from Mitsubishi Trust and Banking Corp in the 13 years
to 1996 as well as the fact that the bank had funded and staffed an office used by a study
group he chaired.
Kuze insisted the payments were not suspicious, and said he had
reported the case to the chief cabinet secretary at the time of his appointment and had
been told it posed no problem. He had vowed to stay on.
Asia mixed, HK up 1.2%
Asian markets were mixed on Friday, with Japan's Nikkei sliding amid a
mood of caution following the previous session's big tech sell-off and doubts over the
nation's fledgling economic recovery.
In Tokyo, the Nikkei average of 225 stocks fell 147.08 points, or more
than 0.9 per cent, to close at 15,667.36, led by technology stocks.
The Hang Seng in Hong Kong rose 202.77 points, or 1.2 per cent, to
17,477.05, led by conglomerate Hutchison Whampoa and interest-sensitive banking and
Singapore's Straits Times added 14.55 points, or 0.7 per cent, to
2,059.58, while Australia's S&P/ASX 200 was up just 1.2 points at 3,276.3.
In the U.S., the Nasdaq composite index rose 101.40 points, or 2.8 per
cent, to 3,759.86 Thursday after falling as low as 3,521.14, or 137.32 points in the
morning. The Dow Jones industrial average rose 19.05 to 10,706.58, its fourth gain in four
Among the region's smaller markets, Manila's PHS Composite rose 1 per
cent, the SET composite index in Bangkok gained 2.7 per cent, Jakarta's JSX rose 0.3 per
cent, Malaysia's KLSE added 0.2 per cent and Taiwan's Weighted index rose 1 per cent.
South Korea's Kospi index slipped 1.7 per cent.
Europe hit by tech slump
Blistering losses for Europe's technology sector dragged Europe's
leading markets down Thursday as investors grew cautious about profit growth prospects for
software and hardware firms following the recent slump in their U.S. counterparts.
The CAC 40 index in Paris was the biggest loser, closing down 174.98
points, or 2.7 per cent, to 6,354.93, as defense electronics systems maker Thomson-CSF
(PHO) tumbled 9.6 per cent.
London's benchmark FTSE 100 closed down 74.2 points, or 1.2 per cent,
to 6,303.2, with semiconductor designer ARM Holdings (ARM) down 12 per cent. The SMI index
in Zurich, less subject to swings in tech stocks, edged down 0.2 per cent.
Frankfurt's electronically traded Xetra Dax lost 74.54 points, or more
than 1 per cent, to 7,037.91. Epcos (FEPC) led Dax losers.
The pan-European FTSE Eurotop 300, a broad index of the region's
largest stocks, fell 1.2 per cent, with its information technology hardware component down
6.5 per cent.
Helsinki's HEX general index fell 5.2 per cent to a new low for the
Mexico-China pact seen
Mexico expects to sign an agreement with China "very soon" on
the communist nation's entry into the World Trade Organization, Mexico's foreign minister
Mexican agreement would leave Switzerland as the only WTO member that
has yet to sign off on China's 14-year quest to join global trade's rule-making club.
Mexican Foreign Minister Rosario Green gave no details on the talks but
said: "We will conclude our negotiations and sign the agreement very soon."
Once China has Mexico and Switzerland's agreement, it must negotiate
details of its membership with the WTO. China says it wants to join the body this year.
Green is visiting China along with the foreign ministers of Colombia
and Chile to further relations between the 19-nation Rio Group of Latin American countries
and Beijing. The ministers met Monday with Chinese leaders, including President Jiang
Malaysia's trade surplus rose to $1.3 billion from 4.2 billion ringgit
in May but down 0.5 billion ringgit from a year earlier, the Statistics Department said on
June exports grew 20.7 per cent year-on-year totalling 31.8 billion
ringgit, while imports were up 28.7 per cent at 26.9 billion ringgit.
South Korea's trade surplus fell to $823 million in July from $2.3
billion a month earlier due to a rise in oil import costs and lower exports of ships,
officials said on Tuesday.
Customs-cleared exports rose 23.6 per cent from a year earlier to
$14.52 billion in July, while imports expanded 40.1 per cent to $13.7 billion.
U.S. Treasury bonds posted solid gains Thursday, lifted by a favourable
economic report on the non-manufacturing sector one day ahead of key employment data. The
benchmark 10-year Treasury note rose 6/32 of a point in price to 103-29/32. Its yield fell
to 5.95 per cent from 5.97 per cent Wednesday, as yields move inversely to price. The
30-year bond gained 14/32 to 107-9/32, its yield retreating to 5.73 per cent from 5.76 per
Chip sales still soaring
Continued demand for chips used for Internet infrastructure and
consumer electronics pushed worldwide semiconductor sales in June to yet another record
level, a chip-industry trade group announced Thursday. According to data released by the
Semiconductor Industry Association, chipmakers recorded sales of $16.6 billion. That's up
48 per cent from $11.2 billion in June 1999.
Mutual funds skid in July
Most U.S. mutual funds lost ground in July, leaving many barely in
positive territory for the year and causing some industry executives to openly discuss the
possibility that the average investor will lose money in 2000. In four of the seven months
of 2000, the average U.S. diversified equity fund lost money, and year-to-date it has
returned a scant 1.85 per cent, according to figures released on Wednesday by Lipper, a
unit of Reuters Group PLC.
Disney: Walt Disney Co. reported third-quarter profit for the
entertainment conglomerate rose to $633 million. Disney reported net income up from $427
million, or 20 cents a share.
Hilton: Hilton Hotels Corp. reported second-quarter earnings of
$88 million, or 23 cents per diluted share, a 14 per cent increase from $77 million, or 21
cents per share, in the year-earlier quarter.
Deutsche Bank: Deutsche Bank AG, Europe's largest bank, said
first-half profit surged 115 per cent to 3.78 billion ($3.4 billion). Earnings per share
rose to 6.58 pence a share from 3.06 in the year-earlier period.
Royal Dutch/Shell: Royal Dutch/Shell Group reported a 95 per
cent jump in second-quarter earnings Thursday. The world's second-biggest oil company
earned $3.15 billion during the period, up from $1.61 billion in the 1999 second quarter.
Barclays: Barclays PLC posted a 90 per cent jump in first-half
profit. The U.K.'s third-biggest bank said net income rose to more than £1.3 million, or
88.9 pence a share, for the six months ended June 30, from £696 million, or 46.2 pence,
from the year-earlier period. Operating profit rose 22 per cent to £2.14 billion.
French bank Societe Generale SA reported
first-half net profit jumped 28 per cent to 1.63 billion, toward the upper end of
expectations, from 1.28 billion in the year-earlier period.
Royal & Sun Alliance:
U.K. insurer Royal & Sun Alliance
PLC said first-half operating profit was little changed from the year-earlier period.
Operating profits for the six months to June 30 rose to £320 million ($476.7 million)
from £315 million.
Telewest: British cable TV operator Telewest said first-half
profit before interest, tax, depreciation and amortization rose 12 per cent to £119
million, and its pretax loss swelled to £295.6 million from £263.8 million.
Epcos: German electronics components maker Epcos reported that
third-quarter earnings before interest and taxes rose 17 per cent from the previous
quarter to 92 million ($84 million).
British American Tobacco:
British American Tobacco PLC, reported
earnings of $351.8 million, or 23 cents a share, in the second quarter, up from $207.4
million, or 21 cents, in the year-earlier period.
U.S. gas prices fall again
U.S. retail gasoline prices fell for the sixth straight week, dipping
another 4.9 cents to an average $1.47 a gallon, the Energy Department reported, and prices
may be headed lower still.
The pump price for conventional unleaded gasoline is the lowest since
early May, but is still up 28 cents a gallon from a year ago, based on the department's
weekly survey of 800 service stations.
The national price for cleaner burning reformulated gasoline is down
3.9 cents to about $1.54 a gallon.
U.S. carmaker sales weak
Sales by U.S. automakers were lackluster in July compared with strong
results from their foreign counterparts, according to data released by the companies on
General Motors and the Chrysler arm of DaimlerChrylser saw their July
sales slump, while Ford's results were virtually flat.
By contrast, string demand kept buyers shopping for foreign cars,
despite sharply higher gasoline prices in the United States.
Euro-zone jobless at 9.1%
The unemployment rate in the 11-nation euro zone declined to 9.1 per
cent on a seasonally adjusted basis in June, according to data released Tuesday. The
numbers matched projections by economists, who said was the figures reflected the cyclical
upswing in economic growth across the region.
That compared to 9.2 per cent in May and 9.9 per cent a year ago in
June, European Union statistical agency Eurostat reported.
Jobless claims rise
The number of Americans filing new claims for unemployment benefits
totalled 276,000 for the week ended July 29, up from a revised 274,000 for the prior
period, the U.S. Department of Labor said Thursday. U.S. economists had forecast U.S.
jobless claims of 286,000 for the week.
North, South Korean talks yield
Signalling their desire for better relations, North and South Korean
officials agreed Monday during talks in Seoul to reopen border liaison offices and
reconnect a rail line across their border
Negotiators from the two sides announced the measures in a six-point
joint statement issued at the end of three days of Cabinet-level talks in Seoul.
They also agreed to hold regular high-level talks to implement an
accord reached at a summit of their leaders in June.