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Aug 28 - Sep 03, 2000

Global economy 

Top world central bankers will hole up in an exclusive Rocky Mountain resort this weekend for a high-level symposium on global economic integration and the problems it poses for monetary policy in their countries.

The scheduled topic of the meeting of policymakers, academics and bankers in Jackson Hole, Wyo., is "Global Economic Integration: Opportunities and Challenges". The meeting, the 24th such annual gathering, is organized by the Kansas City Federal Reserve Bank.

But just days after the Fed's most recent policy meeting, the question of where U.S. interest rates are headed in the near future will likely be a focus of off-the-record talks in the corridors and during coffee breaks at the remote Jackson Hole Lodge.

Fed Chairman Alan Greenspan will kick off the invitation-only event with brief opening remarks on Friday. A host of academic presentations and debates will follow until the conference wraps up on Sunday.

The potential and pitfalls of globalization have been a front-burner issue for policymakers since the world financial crisis of 1997-99 drove home the huge risks that free capital flows pose for developed and developing economies alike.

In one of the academic papers prepared for the conference, International Monetary Fund chief economist Michael Mussa argues that it is not yet clear whether the reforms launched in response to that crisis will make the world a safer place.

"It is still to be seen how much these reforms will improve the performance of the international financial system," wrote Mussa, who is responsible for closely watched IMF research on global economic prospects.

Other speakers include Andrew Crockett, head of the Basel-based Bank for International Settlements — sometimes described as the central banks' central bank — as well as Michael Moore, the director-general of the World Trade Organization, and Stanley Fischer, the IMF's deputy head.

US consumers face record winter gas prices

A sharp rise in natural gas prices - mostly driven by demand from new power plants, sagging production and low inventories — will likely jolt US consumers with record heating bills this winter, industry analysts warn.

Dave Costello, an analyst at the the Energy Information Administration in Washington, said he expected residential gas prices this winter, from October to March, to average a record $7.90 per thousand cubic feet, up by nearly 20 per cent from last year's $6.61 average.

"The probability this winter will be colder than last winter is pretty high, and where we are today (with production, storage and demand), it's going to be very tight," he said.

In its short-term energy outlook, the Department of Energy's research arm last week said home heating oil prices could spike as much as 40 to 50 per cent this winter.

Last year, about just more than half of single family homes in the United States were heated by gas, with residential consumers accounting for about 22 per cent of total natural gas demand, and power generation for about 25 per cent of the total demand pie.

With gas inventories almost 10 per cent below normal and production down this year, cash prices at Henry Hub, a key delivery point in Louisiana, already have rallied to a record $4.33 per million British thermal units (mmBtu) in June, almost double last June's $2.29 average. And more gains are forecast.

"Things could get very tight this winter, and prices could be really shocking. It would be good if we had another (mild) winter like last year," said Susan Bertsch, analyst at Houston-based consultants Honeywell Hi-spec Solutions.

Assuming a normal winter, Bertsch expected December Henry Hub gas to average $4.60, up from $2.36 last December. And she said January could climb to the $4.65-4.75 area before prices tailed off slightly in February to about $4.00.

German report hits euro

Germany's Ifo business climate index surprised markets with a sharp fall in July, indicating the recovery in Europe's largest economy is slowing and making it harder for the European Central Bank to justify the interest-rate rise that economists have been predicting.

The euro hit a two-week low against the dollar after the institute's monthly survey of business sentiment revealed a decline in the headline West German index to 99.1, its lowest level in nine months, from June's 100.4.

It was the second strong fall after June's index declined from the previous month's nine-year high of 102.0.

Ifo said the fall was surprising but added that it was too early to say if it signalled a change of trend.

Gernot Nerb, Ifo's head of research, said the ECB might be well advised to wait before hiking rates if data for other euro zone countries confirmed the negative signal contained in July's Ifo survey.

The ECB has been widely expected to raise rates as early as Aug. 31, when it holds its next council meeting, or in mid-September.

Japan recovery seen intact

Japan's economy continued its recovery in the April-June quarter, as a better-than-expected rise in industrial activity in June produced a sixth consecutive quarter of growth, the Trade Ministry said Monday.

The all-industries index, watched by many economists as a supply-side proxy for quarterly gross domestic product, rose 1.4 per cent in June from the previous month.

The rise, exceeding expectations, was led by a 1.3 per cent climb in the core component, the "tertiary" index of services, the Ministry of International Trade and Industry (MITI) said on Monday.

Both the all-industries and tertiary index had risen for the sixth consecutive quarter, the longest string of gains since an eight-quarter rally that ended in January-March 1997, he said.

Economists agreed that Monday's data boded well for April-June GDP, which is calculated from the consumption side of the economy and is due for release around September 10.

Tokyo jumps as techs climb

Tokyo's main index closed with a healthy gain Thursday as technology stocks were buoyed by the previous day's rally in their U.S. counterparts, while Asia's other main equity markets were mixed.

Japan's Nikkei average of 225 stocks rose 234.17 points, or 1.4 per cent, to close at 16,670.82.

The Hang Seng in Hong Kong rose just 12.3 to 17,439.70.

Singapore's Straits Times index declined 16.49 points, or 0.7 per cent, to 2,173.96.

Jakarta's JSX slumped 4.1 per cent, or 20.74 points, to close at a two-month low of 482.65.

Australia's S&P/ASX 200 index rose 8 points to 3,372.4, led by precious metals miner MIM, which rose more than 5 per cent.

In other markets, Taiwan's Weighted index slipped 0.2 per cent, South Korea's Kospi index fell 0.1 per cent and Thailand's composite SET index lost 0.5 per cent. Manila's PHS Composite index was unchanged at 1,491.25.

Mergers & Acquisitions

Alcoa—Luxfer: Alcoa Inc. agreed Thursday to acquire the aluminum plate, sheet and soft-alloy extrusion manufacturing operations and distribution businesses of British Aluminium Ltd., a unit of Luxfer Holdings PLC.

BB&T—BankFirst: BB&T Corp., the 18th-largest financial holding company in the United States, Wednesday agreed to acquire BankFirst Corp. in a stock swap valued at $149.7 million.

Telus—Clearnet: Telus Corp. agreed to acquire Clearnet Communications Inc. for 6.6 billion Canadian dollars (US$4.5 billion) in cash, stock and assumed debt Monday, creating Canada's largest telecommunications company.

S&L—Bank United: Washington Mutual Inc., the largest U.S. savings and loan company, Monday agreed to acquire Bank United Corp. for about $1.5 billion in stock in a move that will expand its presence in Texas.

Top Pepsi bottlers: Whitman Corp., the second-largest U.S. Pepsi-Cola bottler, agreed Monday acquire the No. 3 Pepsi bottler, PepsiAmericas Inc., for about $331.7 million in stock, bolstering Whitman's Midwest and international operations.

Shell—FCL: Royal Dutch/Shell said Monday it had applied for antitrust regulators' approval to acquire New Zealand-based oil and gas exploration company Fletcher Challenge Energy. FCL Energy has a market capitalization of NZ$2.6 billion ($1.2 billion).

Shell—CNOOC: The Royal/Dutch Shell Group is expected to sign a $4.3-billion petrochemical venture with China National Offshore Oil Corp (CNOOC) in October after 12 years of negotiations, company officials said on Wednesday.


Sycamore: Sycamore Networks Inc. said it earned $20.4 million, or 8 cents per share, excluding charges related to employee stock options. That compares with a loss of $6.4 million or 4 cents per share during the same period last year.

Westvaco: Westvaco Corp., reported income of $69.8 million, or 69 cents per diluted share, in the quarter ended July 31, up from $35.0 million, or 35 cents per share, in the year-earlier period.

Hilton: Hilton Group PLC disappointed investors Thursday by announcing a 6 per cent drop in first-half earnings. First-half pretax profit fell to £120 million from £127.5 million, while revenue dipped 7 per cent to £1.93 billion.

Hutchison: Conglomerate Hutchison Whampoa Ltd. said its first-half net income rose to HK$31.13 billion, or HK$7.30 a share, from HK$7.74 billion, or HK$1.72 a share, a year earlier.

Lufthansa: Deutsche Lufthansa AG said Wednesday its first-half profit soared 18 per cent. The company said operating profit rose to 349 million ($311.6 million) from 296 million a year earlier.

Novartis: Novartis AG, said first-half profit jumped 30 per cent. Net profit excluding one-time items climbed to 4.2 billion Swiss francs ($2.4 billion), or 64 francs per share, from 3.2 billion a year earlier.

Nestlé: Nestlé SA reported that operating earnings rose 17 per cent, and net profit rocketed to 2.79 billion francs, or 72.7 francs per share.

Treasury's finish flat

Treasury securities ended virtually flat Thursday, consolidating at current levels following a failed attempt to rally on a weaker-than-expected report on U.S. durable goods.

In the currency markets, the dollar slipped against the yen, but was little changed against the euro.

The benchmark 10-year Treasury note was flat in price at 100-6/32. The yield was unchanged from its 5.72 per cent level Wednesday.

The 30-year bond gained 5/32 to 108-13/32, its yield retreating to 5.66 per cent from 5.68 per cent, as yields move inversely to price.

Fed remains vigilant

The U.S. Federal Reserve's rate-setting committee voted 10-0 to leave interest rates unchanged in June, but many members said it might be necessary to raise rates in the future to curb inflation.

According to minutes of the U.S. central bank's Federal Open Market Committee meeting of June 27 and 28, released Thursday, Fed officials saw little risk in keeping rates steady at the time but disagreed over the prospects for inflation.

Europe dragged lower

Europe's major markets closed lower Thursday as disappointing earnings figures dragged on London's benchmark index and financial and retail sector weakness submerged market gauges in Paris and Frankfurt.

London's FTSE 100 closed down 9.2 points, or 0.1 per cent, to 6,557.

In Paris, the CAC 40 blue chip index fell 39.77 points, or 0.6 per cent, to 6,461.93. After other bourses closed, Frankfurt's Xetra Dax was down 2.52 points, or 0.03 per cent to 7,230.26.

Elsewhere among Europe's top indexes, the SMI in Zurich shed 0.3 per cent, Amsterdam's AEX rose 0.1 per cent, and the MIB30 in Milan fell 0.6 per cent.

The pan-European FTSE Eurotop 300, a broad index of the region's largest stocks, fell 0.6 per cent.

Italy counts cellular

Eight groups submitted applications on Thursday to the Italian Communications Ministry to bid for the five licenses to offer third-generation mobile-phone services, with analysts expecting the permits to cost around $5 billion each.

The companies and consortia seeking the licenses are Telecom Italia Mobile, Omnitel, Wind, Blu, Andala, Ipse, Tu Mobile and a previously unknown Anthill, the ministry said. The licenses are due to be awarded in November.

Jobless claims rise

The number of Americans filing for unemployment benefits rose for the third straight week, to 314,000, last week from a revised 310,000 the prior week, the government reported Thursday.

Nasdaq hurdles 4,000

The Nasdaq composite index breached the 4,000 mark for the first time in four weeks Wednesday as investors continued to pour money into chip stocks, led by Intel and Applied Materials.

The Nasdaq gained 52.80, or more than 1 per cent, to 4,011.01.

Meanwhile, the Dow Jones industrial average straddled breakeven amid confusion about the Federal Reserve's next move on interest rates in the wake of surging oil prices. The Dow industrials rose a modest 5.50 to 11,144.65 while the S&P 500 advanced 7.84 to 1,505.97.

EU appeals to OPEC

The European Union said Tuesday it had contacted OPEC president Venezuela to voice concern over high oil prices.

Loyola de Palacio, the European energy commissioner, expressed the European Union's concerns in a telephone call Monday to Ali Rodriguez, who is OPEC president and Venezuela's Energy and Mines Minister, a European Commission spokesman said.

Vietnam trade seen vast

U.S. Deputy Commerce Secretary Robert Mallett began a visit to Tuesday to discuss implementation of a landmark market-opening agreement, saying the potential for bilateral trade is vast.

Mallett, the most senior U.S. commerce official ever to visit Hanoi, was to meet the ministers of trade, investment, industry and finance during a three-day visit.

In an arrival statement he said the bilateral trade agreement (BTA) signed July 13 was a key step in the reconciliation between the two former Vietnam War enemies.

"But while the signing of this agreement was a significant step, the most important steps are yet to come," he said. "Implementation of the measures contained in the BTA represents Vietnam's best hopes for a vigorous and prosperous economy."

Mallett said trade between the countries totalled $900 million in 1999, with U.S. exports accounting for $291 million.