ECB jacks up rates to
prop up ailing euro
The European Central Bank raised its leading interest rates by 1/4
percentage point in a bid to boost the weak euro and counter an expected rise in inflation
as Europe's economic recovery takes hold.
The central bank, announcing its third interest rate decision since it
took policy control in the euro zone in January 1999 said it was raising its main money
market interest rate, the refinancing rate, to 3.25 per cent from 3.00 per cent.
The marginal lending rate, the ceiling for money market rates, was
raised to 4.25 per cent from 4.0 per cent and the deposit facility rate to 2.25 per cent
from 2.0 per cent.
Euro zone stocks surged, with the Paris and Frankfurt bourses hitting
record highs, and the euro staged a spirited rally after a surprise quarter-point rise in
European Central Bank interest rates.
The euro fell as much as half a cent against the dollar to set new lows
for the day at $0.9709 immediately after the ECB rates announcement, but later surged to
London's FTSE-100 index finished up 0.34 per cent. In contrast the
pan-European Eurotop index of 300 shares was up 0.8 per cent while the narrower Euro Stoxx
index of 50 blue chip euro zone shares was up 2.88 per cent.
Frankfurt's DAX ended 2.54 per cent higher, and Paris's CAC was up 3.41
ECB President Wim Duisenberg said the euro's weakness had been an
important factor in the interest rate decision but stressed that data on the bank's two
main policy pillars also indicated that a move was on the cards.
S&P and NYSE to launch index fund
Standard & Poor's and the New York Stock Exchange, the world's No 1
stock market, will unveil an index fund that will trade around the world and consist of
100 companies whose business is truly global in nature, sources familiar with the issue
The "S&P Global 100" index fund would be the first of its
kind in that it would flee the night, as shares trade around the clock on the New York
Stock Exchange, the Tokyo Stock Exchange and the Deutsche Boerse in Frankfurt, the sources
Standard & Poor's is expected to hold a press conference on the
NYSE trading floor to publicise the new index.
Clinton eases PC export controls
President Bill Clinton eased some U.S. computer export controls to
relax what the White House called "unnecessary regulatory burdens" on the
high-performance computer industry.
"This decision reflects my commitment to a control system that
will enhance U.S. national security by implementing controls on computer exports that are
effective and enforceable," Clinton said in a statement.
Bowing to the wishes of manufacturers, the administration relaxed a
series of export limits. Unless Congress takes action to block the changes, most will take
effect within about six months.
Clinton announced in an executive order that the United States would
decontrol the export of all computers operating below 12,300 Millions of Theoretical
Operations Per Second (MTOPS) to all countries except for so-called rogue nations.
That would be a computer capable of 12.3 billion operations per second,
several times faster than ordinary desktop PCs or laptops but in the range of computer
Servers used in offfices or to host Web sites.
Mergers & Acquisitions
Mannesman: Mannesmann AG was ready to agree a friendly merger
with Vodafone AirTouch Plc giving Mannesmann 49.5 per cent and ending a three-month
battle for dominance of mobile communications in Europe.
NatWest: Royal Bank of Scotland and Bank of Scotland stepped up
their campaigns to win the hearts and top the spreadsheets of National Westminster Bank
Plc's shareholders, arguing their offers were the best.
CarnivalStar: American Carnival Corp, the world's leading
cruise operator, and Malaysia's Star Cruises surprisingly joined forces in a battle for
Norwegian cruise firm NCL Holding.
LSE: The London Stock Exchange (LSE) held out the prospect of a
possible merger with a competing stock market as it unveiled plans to poll members on
conversion to a public company next month. The announcement that LSE members will decide
on March 15 whether or not to ditch its mutual status came as the latest move to safeguard
London's standing gas Europe's trading hub.
Cable operator Telewest and programme
maker Flextech have agreed to join forces, forming a £10 billion ($16.4 billion) company
to battle it out in a rapidly changing UK television industry.
BSCHSocGen: Spain's Banco Santander Central Hispano (BSCH)
and French partner Societe Generale announced a broad strategic banking alliance that
calls for each to acquire a significant stake in the other.
El Paso Energy Corp has agreed to buy the
natural gas and natural gas liquids businesses owned by PG&E Corp for about $900
million, most of it in assumed debt, the companies said.
French glassmaker SaintGobain bought a
big piece of Britain's consolidating building materials industry picking up Meyer
International for £1.04 billion.
Deutsche: Deutsche Bank has pulled out of a deal to buy a
controlling 36 per cent stake in South Korea's KorAm Bank through the purchase of
depository receipts (DRs), KorAm said.
ZurichAbbey: Anglo-Swiss Zurich Financial Services,
Britain's fifth largest non-life insurer and one of its leading life groups, markedly
increased its distribution capacity by buying Abbey Life's network.
BT: British Telecommunications Plc said third-quarter pre-tax
profits slumped 24 per cent to £651 million because of accelerating competition in
Britain and hefty staff costs.
Qwest: Qwest Communications International Inc. said profits,
excluding one-time items, rose to $29.4 million or 4 cents a share, from pro forms
earnings of $10.4 million, or 1 cent a share, a year earlier.
Nokia: Nokia, the world's top mobile phone maker, posted a 52
per cent increase in fourth-quarter pre-tax profits to 1.27 billion euros ($1.23 billion)
on the back of booming handset sales.
Union Carbide: Chemicals company Union Carbide Corp, which is
being acquired by rival Dow Chemical Co, said its fourth-quarter profits rose to $94
million, or 68 cents per share, from $67 million, or 49 cents per share, in the same
period a year earlier.
Nomura: Japan's biggest brokerage Nomura Securities Co Ltd
benefited from deregulation and a stronger stock market to post a net profit of 128.9
billion yen ($1.2 billion) in the last nine months.
Ericsson: Sweden's Ericsson, posted just a 10 per cent fall in
pre-tax profit to 16.4 billion crowns ($1.90 billion) compared to an average forecast of
15.5 billion in a Reuters poll of 25 analysts. Sales rose 17 per cent to 215.4 billion
Japan banks write off $473b loans
Japan's 17 largest banks have written off ¥51,000 billion ($472.6
billion) of bad loans in the last eight years in an effort to clean up the country's
financial system, according to data collected by the Financial Supervision Agency, Japan's
The figure is equivalent to about 10 per cent of Japan's gross domestic
product. It is slightly larger than South Korea's economy, slightly smaller than Canada's
or about equivalent to the economies of Belgium and the Netherlands combined.
The huge write-offs provide a powerful illustration of the degree of
damage Japan's 1980s asset price bubble and ensuing collapse in the 1990s have inflicted.
Donors throw $4.7b lifeline to Indonesia
International donors pledged up to $4.7 billion in loans to Indonesia
in bid to support the country's 2000 budget but deferred a decision on rescheduling $2.2
billion in debt.
"Indonesian donors committed strong support to the government of
Indonesia, pledging to disburse up to $4.7 billion for the fiscal year 2000," the
World Bank said in a statement at the end of a two-day meeting of the 33-member donor
forum, the Consultative Group on Indonesia (CGI), in Jakarta.
The bank said the largest donor was Japan, which offered $1.56 billion,
followed by the World Bank itself with $1.5 billion and the Asian Development Bank with
But Indonesian Finance Minister Bambang Sudibyo, asked about an
Indonesian request to CGI members to reschedule some $2.2 billion in debt, said:
"This matter must be discussed in the second Paris Club" later in the year.
The World Bank statement said the next CGI meeting would be in Tokyo in
It added: "Donors representing 33 countries and international
agencies lauded Indonesia for completing the political transition in a way that has
received strong support at home and abroad.
"Donors noted with satisfaction the stabilisation of the economy
and early signs of recovery."
The bank added the CGI welcomed an economic recovery programme put
forward by the government of President Abdurahman Wahid and contained in a letter of
intent to the IMF.
The Indonesian government last month released the letter out lining the
programme and a new budget for April-December 2000.
The bank said the government and the donors agreed to speed up
corporate and bank restructuring to revitalise the private sector and job creation.
Japan beefs up arsenal
Japan's government and central bank vowed again to keep supporting the
fragile economy, saying the level of the yen is a threat to recovery despite its recent
fall against the dollar.
The Finance Ministry beefed up its arsenal for combating the yen's
strength through market intervention and the Bank of Japan said it would continue driving
short-term interest rates to near zero while watching out for adverse effects from the
Despite a jump by the dollar to more than three month highs against
the.yen, the still-strong Japanese currency inflames deflationary pressures and erodes the
yen value of Japanese companies' overseas earnings.
Malaysia banks meet deadline
Malaysia's 55 financial institutions met a deadline for submitting
merger plans and now must tackle the sticky issues of pricing and funding as they seek to
tie up their marriages by the end of the year.
Bank Negara Malaysia (BNM) governor Ali Abul Hassan Sulaiman said the
central bank had received merger proposals from all of the local banking institutions.
"The deadline for all banking institutions to revert to BNM on
their merger proposals has been met," he said. "BNM will make further
announcement on the merger groupings that will emerge from the current consolidation
exercise in due course."
Ten institutions had filed plans, and they were all believed to be
aspiring core banks. Analysts said the banks will likely be bogged down in the weeks ahead
with negotiations over pricing and how to finance their purchases.
Philippine growth above estimates
The Philippines said the economy grew 3.2 per cent in 1999, and
although the figure was above forecasts the rebound from the region's financial crisis was
well below what is anticipated in neighbouring countries.
Socio-economic Planning Secretary Felipe Medalla told reporters gross
domestic product grew 4.6 per cent year-on-year in the fourth quarter of 1999, leading to
full-year growth of 3.2 per cent after a contraction of 0.5 per cent in 1998.
A Reuters poll of economists had predicted earlier in the week that the
fourth quarter figure would come in at 4.12 per cent and the full 1999 growth at 3.02 per
South Korea vows to stabilise forex market
South Korea's Ministry of Finance vowed to take steps to stabilise the
foreign exchange market if necessary, but analysts said the warning did little to rein in
the feisty won.
"The government believes that stability in the foreign exchange
rate is very important for economic recovery," the Ministry of Finance and Economy
said in a statement.
"The government will take appropriate action if necessary."
The ministry's pledge came early in the morning as the won looked
poised to strengthen further against the dollar on dollar supplies from exporters and
foreign equity investors.
EU states defend euro, but keep options open
Finance ministers of the 11 EU states that use the euro reaffirmed
their confidence in the single European currency, but left wide open the prospect of
intervention by the European Central Bank (ECB).
In a statement issued at the year's first meeting of EU finance
ministers, the socalled "euro 11" and the ECB insisted that growth in Europe now
is "very robust" and increasingly rooted in domestic demand.
"As a consequence, the euro has the potential for appreciation,
firmly based on growth and internal price stability," they said. "A strong
economy goes along with a strong currency. "
European Central Bank President Rim Duisenberg voiced concern over the
slumping euro, saying for the first time that further weakening could pose a risk to
inflation in the euro zone.