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Jan 01 - 14, 2001

Fed cuts discount rate

The Federal Reserve Thursday lowered the U.S. discount rate a quarter per centage point, a day after slashing both the discount rate and the fed funds rate amid signs of a slowing economy.

The central bank, which sets U.S. monetary policy, lowered the discount rate by another quarter per centage point to 5.5 per cent from 5.75. On Wednesday, the Fed cut the discount rate a quarter-point from 6.0 per cent to augment a half-point cut in the key federal funds overnight bank lending rate.

The central bank said its board of governors had voted on the cut in the discount rate, the rate charged on Fed loans to commercial banks, unanimously at the request of all 12 regional Federal Reserve banks. The central bank had said Wednesday it was prepared to move the discount rate if the regional banks asked it to do so.

The discount rate is the rate of interest that the Fed would charge commercial banks to borrow money if they needed it. This option is rarely exercised, however, since most U.S. banks lend money to each other.

The Fed only moves the rate at the request of the regional Fed banks.

The move will likely have a psychological effect on Wall Street, which could help boost the markets on Friday, one analyst said.

"This rate cut is more symbolic, but it also causes a great deal of a psychological benefit to the market," said Jefferies & Co. chief market analyst Art Hogan.

The Fed surprised economists and investors Wednesday by lowering interest rates in between its regular policy-making meetings. That was the first time in more than two years the Fed has cut interest rates in between meetings.

In an interview, former Fed vice chairman Alan Blinder said the surprise Fed action indicates that Greenspan is quite concerned about the economy and that additional rate cuts are imminent.

Greece joins euro club

Greece joined the European Union's single currency club as its 12th member on Monday after struggling to streamline its economy and shed its EU renegade image.

"2001 brings us to the start of a new cycle of our common effort," Prime Minister Costas Simitis told Greeks in a New Year message. "We must overcome every form of mediocrity, to leave behind us practices and attitudes of the past."

Thousands of Greeks welcomed both the New Year and the euro with midnight fireworks and late-night dancing in Athens's central Syntagma square.

"We'll get used to the euro," said Stathis Katselis, the owner of one of the Greek capital's trademark kiosks.

Shops have already started displaying prices in both drachmas and euros well ahead of a January deadline for bigger firms and March for small businesses.

Brokers at the Athens bourse said they were dusting down their calculators for Wednesday, the first trading day in euros, and most in this staunchly pro-European Union country say they won't mind bidding farewell to the drachma.

Actual euro notes will appear in the EU's only Balkan nation in January 2002 and the drachma ceases to be legal tender after March 2002.

For many, this would have been impossible to imagine only a few years ago, when Greece was left out of the first eurozone wave for failing to meet any of the EU's economic convergence criteria.

At the time most analysts predicted the EU's poorest member would have a hard time making the grade.

But in less than two years, Greece sprinted to meet targets of lower inflation and budget deficits and was accepted in the eurozone at a European Union summit in June.

From bad boy to hard-working member of the bloc's inner core, Greece has had a rocky relationship with Brussels.

ECB holds line on rates

The European Central Bank left short-term interest rates unchanged Thursday, as expected, but most economists predict a rate cut in coming months.

The 17-member ECB panel responsible for monetary policy in the euro zone decided to leave its benchmark minimum bid rate at 4.75 per cent.

After the announcement, the euro traded at 94.33 U.S. cents, little changed from 94.26 shortly before the decision.

The previous day, the ECB's counterparts at the U.S. Federal Reserve took global markets by surprise with a half-percentage-point interest-rate cut. The Fed lowered its key fed funds rate to 6 per cent to try to prevent an economic slowdown from turning into a full-fledged recession.

Australian economy set to slow in 2001

Leading economists have predicted the Australian economy will slow dramatically this year, survey results released on Tuesday said.

The quarterly Australian Financial Review survey of market economists found that the expected growth of the country's gross domestic product would contract from 4.2 per cent to 2.7 per cent during the first half of the year.

That figure is significantly below Canberra's expectations that the local economy would continue growing at up to four per cent.

Unemployment will remain at around 6.6 per cent, but the overall prospects for a full-blown recession were rated at just 15 per cent by analysts.

The inflation rate will come in at the lower end of the central bank's target range of between two and three per cent, the survey found.

Rothschilds' chief economist Dr Ric Simes said he expected inflation to remain quite subdued.

Wall St. takes a break

The Nasdaq composite index lost ground Thursday as investors, sticking to a familiar pattern, digested a recent, record-setting rally by selling stocks.

On Thursday, the Nasdaq lost 49.86 points, or 1.9 per cent, to 2,566.83, taking back a fraction of Wednesday's 324.82 gain. The Dow Jones industrial average fell 33.34 to 10,912.41, while the S&P 500 shed 14.28, or 1 per cent, to 1,333.35.

Despite these losses, more stocks rose than fell. Advancing issues on the New York Stock Exchange edged declining ones 1,601 to 1,370 as a record 2.1 billion shares traded. Nasdaq winners topped losers 2,189 to 1,792. More than 2.5 billion shares changed hands.

Asia gas oil prices stable

Singapore gas oil prices were steady on Wednesday, with market sentiment stronger on news of lower January crude runs at Shell Singapore. But while the lower runs would cap the regional oversupply, traders said it was not likely to turn the market bullish.

Shell said on Wednesday its 59,000 ton-per-day Bukom refinery would reduce runs by 12.5 per cent to 35,000 tpd in January from 40,000 tpd in December.

If the north Asian weather doesn't become a lot colder in the next few weeks, we can write off the winter demand, he said. Traders said gas oil demand from Sri Lanka and Vietnam was soaking up some extra supplies, but a lack of big buying still plagued the region.

U.S. Treasurys recover

U.S. Treasury bonds bounced back Thursday, as struggling stocks and widespread belief the U.S. economic slowdown would continue fueled hopes that Wednesday's interest-rate cut by the Federal Reserve won't be the last.

Benchmark 10-year Treasury notes were 1-1/32 higher at 105-16/32 after a fall of nearly two points Wednesday. Their yield, which moves inversely to price, fell to 5.02 per cent. Thirty-year bonds rose 29/32 to 111-27/32, yielding 5.44 per cent.

Two-year notes rallied 10/32 to 100-21/32, yielding 4.78 per cent, their lowest levels since February 1999. And five-year notes rose 23/32 to 104 even, yielding 4.82 per cent.

Mortgage rates drop

Long-term mortgage rates continued to fall this week as lenders react to signs of a weakening economic data. But those in the market for a home had better act fast.

The 30-year fixed-rate mortgage (FRM) averaged 7.07 per cent, with an average 1 point, for the week ending Jan. 5.

The average for the 15-year fixed-rate mortgage was 6.74 per cent this week.

The 15-year mortgage averaged 7.73 per cent. This is the lowest the 15-year FRM has been since the week of May 14.

Job cuts triple last month

The number of job cuts tripled in December as U.S. employers slashed 133,713 jobs due to the economic slowdown, according to international outplacement firm Challenger, Gray and Christmas Inc.

The company stated that December's job cuts were 203 per cent higher from 44,152 job cuts in November and up nearly 200 per cent from the 44,682 cuts in December 1999.

European techs surge

European bourses closed higher Thursday as the previous day's unexpected interest-rate cut by the U.S. Federal Reserve revived battered technology stocks.

London's FTSE 100 index rose 145.7 points, or 2.4 per cent, to 6,185.6, led by business phone operator COLT Telecom Group (CTM).

The blue-chip CAC 40 in Paris jumped 131.94 points, or 2.3 per cent, to 5,815.99, a day after closing at an 11-month low.

Frankfurt's electronically traded Xetra Dax, slipped 0.5 per cent to 6,401.41. The Dax had risen 2.3 per cent by the previous day's close.

Among other European markets, the AEX index in Amsterdam added 1.4 per cent. The SMI in Zurich was little changed at 8,116.8, while the MIB30 in Milan gained 1.8 per cent.

The HEX General index in Helsinki jumped almost 9 per cent. Sweden's OMX index climbed 6.8 per cent.

Asia rallies without Tokyo

Most Asian markets shot higher Thursday after the U.S. Federal Reserve sprang a rate cut on an unsuspecting market, but domestic issues depressed Japan's leading index.

In Tokyo's first trading day of the new year, the benchmark Nikkei 225 index closed down 94.20 points, or 0.7 per cent, at 13,691.49, adding to last year's 27 per cent drop as most big bank stocks slid.

The Hang Seng index in Hong Kong, where the economy is tightly connected to that of the U.S., ended up 645.45 points, or 4.4 per cent, at 15,235.03, marking the biggest one-day per centage advance in about three months.

Singapore's Straits Times index rose 58.1 points, or 3.2 per cent, to end at 1,920.75 points, as tech stocks led the way.

Australia's S&P/ASX 200 index climbed 1.8 per cent, with media conglomerate News Corp. jumping 11.5 per cent. The Taiwan Weighted index in Taipei gained 4.9 per cent and the KOSPI index in Seoul soared 7 per cent.

Apple cuts Mac prices

Apple Computer Inc., which said in December it aimed to move a glut of unsold machines, has cut prices of higher-end computers by up to $1,000, the company's Web site showed on Tuesday.

Apple said on its Web site that buyers could "save up to $1,000" with Apple's "New year's resolution." Direct seller MacConnection said the G4 Cube, which has failed to meet demand hopes, had dropped to $1,499 from $1,799 for the 450 MHz version, the top Powerbook notebook computer had been cut by $800 to $2,199, compared to a previous $200 rebate, and a G4 500 MHz server had dropped to $3,099 from $4,199.

Big 3 December sales drop

A record year for auto sales ended with a whimper for the industry's Big Three as General Motors Corp., Ford Motor Co. and DaimlerChrysler all reported a sharp drop in December sales.

For the second straight month DaimlerChrysler used the sales announcement to unveil a series of plant shutdowns in North America as it tried to adjust to falling sales at its troubled Chrysler Group, its U.S. unit. But overseas automakers, led by No. 4 Toyota Motor Corp., saw solid gains in the month and the year at the expense of the Big Three.

Singapore delays 3G sale

Singapore's delay in selling third-generation cell-phone licenses highlights the industry's waning appetite for auction battles, and may indicate operators will be offered sweeteners to bid.

Infocomm Development Authority of Singapore (IDA), the telecom regulator that has undertaken marketing trips as far afield as Europe, had planned to release auction rules by the end of last year and to hold the auction in February.

EU focuses on Bass sale

The European Union questioned Britain's right to veto any new buyer for Bass Brewers, after U.K. authorities Wednesday told Interbrew SA to unravel its 2.3 billion ($3.5 billion) purchase of the firm.

The British government said it wouldn't let Interbrew keep the brewing unit it bought last year from Bass PLC, claiming that the acquisition would have led to higher beer prices and created an effective duopoly in the U.K. brewing industry

Toyota to lift U.K. output

Toyota Motor Co. said it plans to increase its U.K. output by 30 per cent to lower average production costs, offsetting the negative effect of the strong British pound.

Japan's largest carmaker had previously indicated it would not expand further in Britain until it joined the European single currency. The strength of the British currency against the euro over the past year has kept U.K. exports expensive to buyers in the euro-zone.

Aventis sheds gases unit

Drugmaker Aventis said Wednesday it was selling its Messer Griesheim GmbH industrial gas unit to Allianz Capital Partners and Goldman Sachs Group Inc., but gave no price.

Mitsui seeks $1.4b aid

Mid-sized Japanese builder Mitsui Construction Co. Ltd. said Friday it will ask Sakura Bank Ltd. and other creditors to forgive 163 billion ($1.43 billion) in loans as part of a restructuring plan.