04 - 10, 2000
GDP growth slower in 3Q
The U.S. economy grew at the slowest pace in four years in
the third quarter, the government said Wednesday, scaling back its initial
reading of a month ago. The report was the latest sign that the Federal
Reserve's interest rate increases are slowing growth in the world's largest
The Commerce Department said gross domestic product, the
country's total output of goods and services, grew at an annual rate of 2.4 per
cent in the quarter, down from the 2.7 per cent rate estimated a month ago.
Analysts were looking for a revised reading of 2.2 per cent, according to
The economy has slowed sharply from the second quarter's 5.6
per cent rate of growth. The department attributed the decline to downturns in
investment and in federal government spending as well as less inventory building
Economists said the Fed is basically getting what it wanted
after it raised rates six times since mid-1999 and that the central bank may
officially shift its position away from raising rates again.
Investors mostly liked what they saw and sent the Dow Jones
industrial average up about 105 points, or 1 per cent, to 10,613 at mid-session.
The Nasdaq composite was little changed.
Spending on computers and software was lower than previously
calculated. Also, businesses added to inventories at a slower $73.5
billion-a-year rate instead of the $79.9 billion pace of the third quarter,
further shaving from the rate of GDP advance.
Personal spending by consumers grew 4.5 per cent in the
quarter, up from a 3.1 per cent increase in the second quarter, the department
said. Imports rose 17.4 per cent, a bit slower than in the second quarter, while
exports rose 15.4 per cent, up from the previous quarter.
German growth slows
The pace of German economic growth fell to 0.6 per cent in
the third quarter as higher interest rates and oil prices hit consumer spending,
backing the view that the European Central Bank will keep interest rates on hold
for the time being.
The Federal Statistics Office said Tuesday that growth in the
quarter slowed to a seasonally-adjusted 0.6 per cent from the second quarter,
when the economy had expanded at a rate of 1.1 per cent. Year over year,
adjusted for seasonal and calendar factors, growth slowed to 3.4 per cent from
3.7 per cent in the second quarter.
The slowdown was in line with economists' expectations that
growth in Europe's largest economy, which accounts for a third of output in the
region, was well past its peak.
Economists said the ECB, whose policy-makers council next
meet Thursday, was now likely to keep interest rates unchanged for the time
They said slowing growth and moderate underlying inflation
— stripping out the impact of higher oil prices — was offsetting recent oil
price-induced increases in overall inflation figures to well above the ECB's 2
per cent ceiling.
The bank is likely to refrain from interest rate rises while
it assesses the impact of its seven rate hikes since last November which moved
its benchmark interest rate up by 2.25 per centage points to 4.75 per cent,
"It shows that interest rate increases by the European
Central Bank have had a dampening impact," said Klaus Schruefer, an
economist at BfG Bank in Frankfurt.
ECB holds rate at 4.75%
The European Central bank voted to maintain its key
short-term rate at 4.75 per cent Thursday, in line with economists' predictions.
Amid signs that economic growth in the 11-nation euro zone
may be going off the boil, the ECB is expected to have no more than one or two
interest rate increases in its locker, before it starts easing monetary policy
to stimulate growth.
Although inflation remains above the ECB's target level of 2
per cent, the central bank appears happy with the view that elevated oil prices
are the principal culprit, something it can do nothing about.
Klaus Baader, European economist at Lehman Brothers in
London, said that although recent inflation numbers have been disappointingly
high, "the growth outlook is a lot more uncertain".
He predicted the ECB's last rate increase in this economic
cycle would come in the first quarter of 2001, taking the short-term rate up to
5 per cent.
Global warming talks fail
The failure of U.N. climate talks has dashed business hopes
for clear rules over potentially lucrative technology transfer to the developing
world and the emerging market of trading greenhouse gas emissions.
"Business is disappointed with the outcome," said
Nick Campbell, chairman of the Climate Change Working Group at the International
Chamber of Commerce.
"We came here expecting a decision which would have
clarified the rules and guidelines of the Kyoto Protocol. We now walk away as
empty handed as everyone else and leave as confused as when we arrived about the
role we might play in contributing to solutions."
The two-week conference ended without agreement on measures
to fight global warming, after the United States and the European Union failed
to settle a bitter wrangle over ways to cut greenhouse gas emissions implicated
in climate change.
Europe ends lower
European bourses ended lower Thursday as high-tech shares
dived following profit warnings from key U.S. computer hardware firms while
losses spread to the auto, financial and telecom sectors.
London's benchmark FTSE 100 index fell 23 points, or 0.4 per
cent, to 6,141.9, with Anglo-American fund manager Amvescap (AVZ) and
fiber-optic component maker Bookham Technology (BHM) posting double-digit
The blue-chip CAC 40 in Paris fell 133.57 points, or 2.2 per
cent, to 5,928.08, led by information technology consultant Cap Gemini (PCAP)
and telecom equipment maker Alcatel (PCGE).
The electronically traded Xetra Dax in Frankfurt dropped
171.82 points, or 2.6 per cent, to 6,426.50.
Among other European markets, the AEX index in Amsterdam shed
1.9 per cent. The SMI in Zurich, less exposed than others to tech stocks, shed 1
per cent, while the MIB30 in Milan sank 2.7 per cent.
The broader FTSE Eurotop 300 index, sank 1.9 per cent,.
Asian markets strengthen
Despite a major slide on the Nasdaq and a lagging Dow, stock
markets in Asia rose Friday.
Japan's benchmark Nikkei Stock Average rose 34.66 points to
end the morning session at 14,683.17. In Hong Kong, the Hang Seng index was up
71.26 points, at 14,055.65 by midmorning. Australia's S&P/ASX 200 index was
up 12 points at 3,286.6.
In New York trading Thursday, the Dow Jones industrial
average lost 214.62 points to close at 10,414.49.
The Hang Seng index was up 0.51 per cent, or 71.26 points, at
14,055.65 at 10.05 a.m. (0205 GMT).
The S&P/ASX 200 index was up 12 points at 3,286.6, and at
one point had managed a 36-point turnaround from its poor start to the session.
Mergers & Acquisitions
Citigroup—Associates: Citigroup Inc., the No. 1 U.S.
financial services conglomerate, on Thursday completed its purchase of
Associates First Capital Corp., the nation's largest publicly-traded finance
company, shortly after winning final regulatory clearance for the deal.
DoCoMo—AT&T: NTT DoCoMo, Japan's leading wireless
telephone provider, agreed Thursday to pay $9.8 billion to acquire a 16 per cent
stake in AT&T Wireless, gaining a long-sought foothold in the U.S. wireless
Wellpoint—Cerulean: Cerulean Cos, the parent of Blue
Cross and Blue Shield of Georgia, on Wednesday said it agreed to be bought by
WellPoint Health Networks Inc. for $700 million in cash, as WellPoint countered
an unsolicited $675 million cash offer from Trigon Healthcare Inc.
Agilent—Objective: Technology test equipment maker
Agilent Technologies Inc. agreed Monday to acquire Objective Systems Integrators
Inc. for about $665 million in cash, in a bid to expand its focus on the
communication services provider market.
NEC—Hitachi: A joint venture between Japanese
electronics companies NEC Corp. and Hitachi Ltd. announced plans to invest ¥160
billion ($1.45 billion) to build a computer memory chip production plant in
Nokia—AT&T: Nokia Corp., the world's
largest mobile phone supplier, said on Thursday it had inked a deal with
AT&T Corp. Wireless Group to supply the U.S. telecom operator with
high-speed network systems, expanding the Finnish firm's reach in the U.S.
Granada: Granada Media, Britain's biggest terrestrial TV
broadcaster, said operating profit for the year ended Sept. 30 rose 8 per cent
to £253 million ($354 million).
Marconi: British telecom equipment maker Marconi PLC
reported a 9 per cent jump in first-half profit. Pretax profit before goodwill
and exceptional items grew to £276 million ($392.3 million) from £253 million
a year earlier.
Imperial: Britain's Imperial Tobacco Group PLC reported a
13 per cent rise in annual profit. Pretax profit for the year ended Sept. 30
rose to £450 million ($630 million), from £400 million a year earlier.
U.S. Treasurys still rising
U.S. Treasurys shot higher Thursday as plunging stock
markets, rising unemployment claims and a weak manufacturing report boosted
prospects a steadily slowing economy will spur Federal Reserve interest rates
Two-year Treasury notes were up 1/32 at 100-2/32, as their
yield fell to 5.58 per cent. Five-year notes were up 12/32 at 101-16/32,
yielding 5.40 per cent.
Benchmark 10-year notes climbed 18/32 to 102-6/32, yielding
5.45 per cent. Thirty-year bonds gained 23/32 to 109-15/32, yielding 5.59 per
cent, their lowest yield in 19 months.
Jobless filings up
The number of Americans filing new claims for unemployment
benefits last week was the highest in more than two years, the government
The Labor Department said the number of first-time claims
climbed to 358,000 for the week ended Nov. 25 from a revised 339,000 the
previous week. That's the highest total since the 384,000 claims in the July 4,
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If you have a question about insurance, here's your chance to
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Mutual fund assets drop
Assets in U.S. mutual funds headed south in October, dropping
1.1 per cent to $7.196 trillion, according to a trends report Wednesday by the
Investment Company Institute, a Washington-based trade group.
Stock funds' assets overall took the biggest hit, falling 2.5
per cent to $4.289 trillion. But the drop was due mainly to volatility, ICI
spokesman John Collins said. That's in part because stock funds received the
greatest amount of net new cash flow from investors — $19.1 billion — than
any other fund group. And, Collins noted, year-to-date through October, equity
funds have received $291.4 billion, more than twice the amount received during
the same period in 1999.
Heating oil drops 6%
Forecasts of mild weather sliced nearly six per cent off U.S.
heating oil prices and more than a dollar of crude oil on Tuesday, despite
continued worries over thin pre-winter supplies.
December heating oil futures on the benchmark New York
Mercantile Exchange (NYMEX) dropped 6.15 cents to $1.0237 a gallon, while
January crude oil ended $1.16 lower at $34.22 a barrel.
Gas prices fell the equivalent of 6.5 cents a gallon, or 35.2
cents per million British thermal units — a decline which set off selling in
the heating oil and crude oil markets, despite low supplies.
Dollar loses strength
The dollar slumped across the board Monday, slipping away
from nine-month peaks against the yen and tumbling more than 1.5 per cent
against the euro as protracted uncertainty surrounding the U.S. presidential
election began to take its toll.
The dollar, which surged to fresh nine-month peaks near
111.50 yen in Europe — its highest level against the Japanese currency since
Feb. 22 — turned tail after running into stiff resistance at its peaks,
extending losses in midday trading to hit fresh session lows near 110.55 yen.
EU to align tax rules
European Union finance ministers on Monday agreed to a
package to curb tax evasion in the 15-nation trading bloc, a French official
said, in a move that may pave the way to the adoption of an EU-wide savings tax.
A spokeswoman for the French finance ministry said objections
raised by several members toward the withholding tax plan were resolved in the
early hours of Monday morning, leading to a tentative accord.
"There is full agreement," she told reporters.
French Finance Minister Laurent Fabius was expected to make a
formal statement later Monday. France currently holds the EU presidency, which
changes hands every six months.
Income falls, spending up
Americans' incomes fell in October for the first time in
nearly two years while consumer spending barely edged higher, pushing the
savings rate to a record low, the government said Thursday — the latest signs
of slower economic growth in the United States.
The numbers, combined with lower durable goods orders,
declining consumer confidence, and shaky retail sales, leave many analysts
believing the Fed is getting ready to either lower interest rates or at least
move toward a neutral stance on inflation when it meets Dec. 19.
Daewoo preps for sale
Creditors of South Korea's Daewoo Motor on Wednesday agreed
to provide 727.9 billion won ($613.7 million) in fresh loans to the insolvent
automaker to help pave the way for its sale to General Motors Corp.
"The fresh loans would help put the operation of Daewoo
Motor back on track and ease financial crunches at its subcontractors,"
state-run Korea Development Bank (KDB), Daewoo's main creditor, said in a
Toyota to sell Fords?
Officials of Toyota Motor Corp. and Ford Motor Co.'s Japan
unit are considering selling Ford cars at Toyota dealerships in Japan as a way
to boost sagging Ford sales there, according to a published report.
Americas investors worry
Stocks in Latin America and Canada experienced major
sell-offs Thursday but Toronto held steady with a rally by the end of the day
that helped recover earlier losses.
In Brazil, the Bovespa index lost 3.6 per cent ending at
In Mexico, the IPC index gave back 4.31 per cent, or 254.61
points, at 5652.63 points.
The Toronto Stock Exchange's 300 Composite index closed down
1.18 points, or .01 per cent, at 8819.92.
Interbrew raises $2.5bn
Belgian beer giant Interbrew said on Thursday it had set an
offer price of 33 euros ($28.79) per share for the 88.2 million shares, or 21
per cent of its capital, it plans to list on Euronext Brussels on Friday.
Boeing gets $1.6B order
Boeing Co. capped a strong sales year for its 777 wide-body
jets Monday by selling eight of that aircraft to Japan Airlines, bringing its
sales for the year for the model to at least 113.
Philips in TV tube alliance
Dutch-based Royal Philips Electronics NV and South Korea's LG
Electronics announced Monday plans to merge their TV and computer monitor tube
businesses in a joint venture with more than $6 billion in annual revenue.