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Oct 02 - 08, 2000

US Senate okays bill on trade ties with China

IMF and World Bank okay steps to quicken debt relief

The IMF and the World Bank approved on Sunday measures to make debt relief worth about $50 billion available to 20 of the world's poorest countries by the end of the year.

The plan, approved here by the policymaking bodies of both institutions, would begin to ease the debt burden more quickly than is now the case.

"We are moving the debt relief process forward in a way that we had pledged to do," British Chancellor of the Exchequer Gordon Brown, chairman of the IMF's International Monetary and Finance Committee, told a press conference.

"Our aim is debt reduction, leading to poverty reduction, leading to economic development."

The World Bank and the IMF had last year pledged to accelerate the pace of their Heavily Indebted Poor Countries (HIPC) initiative.

The four-year-old scheme offers debt relief to up to 40 impoverished nations that adhere to IMF economic reforms over a period of three years and commit themselves to poverty reduction action plans.

To date, however, only 10 countries — Benin, Bolivia, Burkina Faso, Honduras, Mali, Mauritania, Mozambique, Tanzania, Senegal and Uganda — have been formally declared eligible by the World Bank and the Fund for HIPC benefits.

The aim of the latest measures is to add 10 more countries to the eligibility list by the end of the year. The 20 countries would then be entitled to receive HIPC debt relief worth $30 billion.

Together with traditional debt easing mechanisms, the 20 would be in line for a total of $50 billion in relief, according to the IMF.

2Q GDP growth revised up

The U.S. economy grew faster than previously estimated in the second quarter, although there was less inflationary pressure than earlier indicated, a government report said Thursday.

The Commerce Department's final report on second-quarter gross domestic product said the nation's output of goods and services grew at an annual rate of 5.6 per cent, up from a 4.8 per cent rise in the first quarter.

The government's previous estimate for the quarter had been for a 5.3 per cent growth rate in the broadest measure of the U.S. economy. Analysts had forecasted the report to show little change at either 5.3 or 5.4 per cent.

The GDP chain deflator, which accounts for prices and is a closely watched inflation indicator, was revised down to a 2.4 per cent increase during the quarter. The previous estimate was for a 2.6 per cent increase in the period.

"This suggests the government saw more real growth and less inflation in the quarter," said Gary Thayer, chief economist for A.G. Edwards, in an appearance on CNNfn's Before Hours program Thursday.

The final second-quarter report is a relatively ancient look at the economy, and many reports looking at July and August statistics suggest the rate of economic growth has cooled off considerably since then. That mitigates the impact of this report.

"The upward revision results from the slightly lower than previously estimated trade deficit," said Mark Vitner, economist with First Union. "We've already seen in July data that trade deficit has worsened in the third quarter."

The report comes as the Federal Reserve prepares to meet Tuesday to consider its next move on interest rates. The Fed has raised rates six times over the last 15 months in a bid to slow the economy and ward off inflation.

Euro weathers Danish 'No'

The euro held its ground against the dollar Friday morning, despite the cloud covering the currency after Denmark the previous day voted against joining the euro zone.

After the Danish referendum produced a 53.1 majority against adopting the euro, the country's central bank was quick to defend the Danish crown, raising its key repo rate by half a per centage point to 5.60 per cent, although it left other official rates unchanged. There had been speculation that a "No" vote would lead to pressure on the Danish currency.

The euro stood at 88.05 U.S. cents, marginally stronger than its level in late New York trading Thursday. Traders said the market was wary of punishing the currency too much for fear of sparking a further round of central bank intervention.

Last Friday a number of central banks spent billions of dollars buying euros in an orchestrated effort to drive the currency up from all-time lows below 85 U.S. cents.

President Clinton announces

President Clinton announced Wednesday that the federal budget surplus for fiscal year 2000 amounted to at least $230 billion, making it the largest in U.S. history and topping last year's record surplus of $122.7 billion.

"Eight years ago, our future was at risk," Clinton said Wednesday morning. "Economic growth was low, unemployment was high, interest rates were high, the federal debt had quadrupled in the previous 12 years. When Vice President Gore and I took office, the budget deficit was $290 billion, and it was projected this year the budget deficit would be $455 billion."

In June, the administration predicted the surplus would be $211 billion, and would increase by as much as $1 trillion over the next 10 years.

Asian markets higher

Most Asian markets were trading higher Friday, as investors selectively bought technology shares, encouraged by the previous day's rally on the U.S. Nasdaq market, its first advance this week.

In Tokyo, the benchmark Nikkei 225 average closed up 0.8 per cent at 15,747.26. Hong Kong's Hang Seng Index was up 1.7 per cent at 15,682.20 at the end of its morning session, boosted by tech and telecom stocks.

Singapore's Straits Times index was up 0.9 per cent at 1,982.27.

The Taiwan Weighted index ended down 2 per cent at 6,432.36 as foreign investors sold shares and chipmakers fell.

In Seoul, the Kospi rose 1.2 per cent to 613.22.

Australia's S&P/ASX 200 index inched up 0.2 per cent to 3,296.2. Telstra edged up 0.7 per cent.

Bangkok's SET index slipped 0.2 per cent and Kuala Lumpur's KLSE Composite fell 0.4 per cent. Manila's PHS Composite index ended down 0.5 per cent, while Jakarta's JSX was up 1.4 per cent.

Europe techs, telecoms up

Europe's main markets edged higher at the start of trading Friday as telecom and technology shares rose, following sharp gains by their counterparts on Wall Street Thursday.

London's benchmark FTSE 100 index rose 0.2 per cent to 6,277.6, with index heavyweight Vodafone Group (VOD) up 2.5 per cent.

In Paris, the CAC 40 blue chip index rose 0.4 per cent to 6,337.58.

Frankfurt's electronically traded Xetra Dax inched up 0.1 per cent to 6,838.99, with drug maker Schering up 1.9 per cent.

The SMI in Zurich was 0.2 per cent higher and Amsterdam's AEX rose 0.3 per cent.

The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, climbed 0.4 per cent, with its technology sub-index up 1.7 per cent.

In the U.S. Thursday, the Dow Jones industrial average rose 1.8 per cent to 10,824.06 and the Nasdaq Composite index rose 3.3 per cent to 3,778.32

Airbus wins $8.6b order

Singapore Airlines said Friday it ordered 25 superjumbo A3XX aircraft from Airbus Industrie worth about $8.6 billion, but no large aircraft from Boeing Co., the archrival of Europe's Airbus

Europe to OK $135b deal

The European Commission is proposing to give its approval for America Online Inc.'s proposed $135 billion takeover of Time Warner Inc., attaching some conditions, but will block the planned joint venture between Warner Music and EMI Group PLC, a European Union source said on Thursday.

Asked if the Commission was planning to clear AOL-Time Warner and block the other deal, the source said: "Yes, that is the situation at the moment, although the Commission has not yet taken a formal decision."

Mergers & Acquisitions

Endesa—Iberdrola: Spanish power firms Endesa SA and Iberdrola SA said Wednesday they were in talks aimed at creating an electricity firm worth more than 35 billion euros ($31 billion).

Exodus—GlobalCenter: Exodus Communications Inc. agreed Thursday to buy Global Crossing Ltd.'s GlobalCenter Inc., a specialist in hosting Internet site infrastructure and managing e-commerce, for about $6.53 billion in stock.

U.S. Retail—First Washington Realty Trust: U.S. Retail Partners LLC agreed to acquire First Washington Realty Trust Inc. for about $800 million in cash and debt, marking the end of the real estate investment trust.

Nordstrom—Faconnable: Nordstrom Inc. agreed Wednesday to acquire French apparel company Faconnable S.A. for about $170 million in cash and stock in a move to expand the upscale retailer's exclusive brands.

Rodamco—Urban: Rodamco North America N.V. agreed Tuesday to acquire fellow shopping mall company Urban Shopping Centers Inc. for $3.4 billion in cash and debt assumption, making it the third-largest regional mall company in the United States.

Siemens—Acuson: Siemens AG agreed Wednesday to buy Acuson Corp., a U.S.-based maker of ultrasound systems, for about $700 million, giving another boost to the German technology company's health-care operations.

Treasurys end mixed

U.S. Treasury securities ended mixed Thursday in quiet trading, as a drop in oil prices lifted the 30-year bond while shorter maturities, such as two-year notes, were pressured by a strong rebound in equities.

The benchmark 10-year Treasury note was flat in price at 99-15/32, its yield at 5.82 per cent Wednesday.

The 30-year bond gained 6/32 of a point in price to 105-1/32. The yield, which moves in the opposite direction to price, fell to 5.88 per cent from 5.90 per cent.

Aussie No to shared money

Australia said on Thursday it did not favor the idea of a shared currency with eastern neighbor New Zealand, but might consider the possibility at a later date.

"We're not pushing it," Australian Prime Minister John Howard told a media briefing held jointly with New Zealand Prime Minister Helen Clark.

France Telecom's U.S. plans

France Telecom Tuesday said it planned to build a 15,000-mile transmission network in the United States, connecting 28 major cities. The move signals the formal end of its ties with Sprint and gives it a foothold in the market for Internet traffic.

The Paris-based telecommunications company said it plans to invest $200 million to build the network, which will be connected to its pan-European backbone network.

Euro finds a friend: Iraq

Iraq has decided to stop trading with the U.S. dollar and replace it with the euro or another currency because of "hostile American policy," the country's finance minister said Tuesday.

"The cabinet has decided to stop trading with the American currency, the dollar, and replace it with other currencies such as the euro," Deputy Prime Minister and Finance Minister Hikmat Mezban Ibrahim said in a statement carried by the Iraqi News Agency on Tuesday.

Nortel wins Asia contracts

Nortel Networks said Thursday it received contracts totaling $525 million to build next-generation wireless Internet and data service networks in Taiwan and China.

Chungwa Telecom will pay Nortel $250 million to expand its dual-band cellular network in Taiwan, which includes base stations to enable roaming, and radio software upgrades to support high-speed Internet services. And China Unicom will spend $275 million on new networks and expansions of its network in China.

Mortgage rates fall

U.S. Mortgage rates moved slightly lower despite uneasiness in the bond and stock markets, according to a report released this week by Freddie Mac.

The 30-year fixed-rate mortgage, the industry benchmark, averaged 7.88 per cent for the week ending Sept. 29.

The average for a fixed-rate 15-year mortgage was 7.53 per cent.

One-year adjustable-rate mortgages (ARMs) this week averaged 7.21 per cent.

Prague meetings ended after protests

The annual meetings of the World Bank and International Monetary fund ended on Wednesday, a day early, after police clashed with thousands of protesters on Tuesday night.

In closing statements, World Bank and International Monetary Fund officials said they hoped that despite the protests that marred the meeting that the message from the conference would be one of "reform and dialogue."