05 - 11, 2001
Bush to unveil 2002 budget
President George W. Bush is to unveil on Wednesday a $1.9
trillion budget for 2002 which includes a hefty income tax cut opponents believe
would put the government back in the red.
Highlights of the budget proposal were included in Bush's
first speech before a joint session of Congress late Tuesday, in which he
suggested there was financial room in the next few years to increase spending in
education, health care and the environment, continue paying down the debt and
give Americans a big tax break.
The people of America have been overcharged and, on their
behalf, I am asking for a refund, Bush told lawmakers in plain, homespun
Slashing income taxes by some $1.6 trillion over 10 years was
the right medicine for an ailing economy, he declared.
While it had put the nation on track to generate a 10-year,
$5.6 trillion surplus, the long economic expansion that began almost 10 years
ago is faltering, Bush said in his first address to a joint session of the US
Reactions to Bush's blueprint were mixed: Republicans
applauded, Democrats shook their heads in silence, while all eyes were on the
American public for whom polls show a tax cut is not a top priority.
He stressed that the $1.9 trillion 2002 budget blueprint he
will unveil Wednesday morning keeps overall spending growth to just four per
cent but will boost funds for education, health care, and the environment.
Recent public opinion polls show lukewarm support for making
the tax cut the number one priority, with most respondents saying they favour
investing in education, health care and the environment, traditionally
A budget's impact is counted in dollars, but measured in
lives, said Bush, who followed the tradition of inviting ordinary Americans to
attend the speech and introduced a few he said would benefit from his plans.
Asian LDCs to benefit from EU trade package
The European Union's zero-tariff, zero-duty trade package for
the world's poorest nations agreed on February 26 may not be the 'milestone' in
north-south trade relations that EU officials claim is. But Asian and other
developing nations would be wrong to scoff at the EU's offer to lift import
barriers on 'everything but arms' exported by 48 least developed countries.
The deal marks a watershed shift in Brussels's long-standing
reluctance to liberalize trade in farm products. It is a significant sign that
after years of pro-third world rhetoric, the EU is taking real action to ensure
that trade policy is used to meet global development objectives. And there's no
denying: This is the first time that third world nations 'albeit the poorest
ones' are being offered full duty and quota-free access to Western markets.
EU Trade Commissioner Pascal Lamy, the brains behind the
innovative scheme, and Swedish Trade Minister Leif Pagrotsky, who as current
chairman of the EU Council of Ministers engineered its adoption by EU trade
ministers, are also hoping the trade package will bring wider gains, including
developing nations' support for the launch of a new round of global trade
The EU move will have an important impact on Asia's poorest
nations, including Afghanistan, Bangladesh, Myanmar, Maldives, Nepal, Bhutan,
Laos and Cambodia. Many of these countries are already important exporters of
textiles, rice, sugar and cereals to world markets, including the EU.
The possibility of selling more of their products in Europe
at higher prices will encourage many governments to increase their export
capacity. The EU is also confident that foreign investors, encouraged by the
prospect of 'predictable' access to European markets, will pump more funds into
the least developed nations.
Both Lamy and Pagrotsky are hoping that the EU move will set
a standard that will force other industrialized countries to consider their own
policies towards least developed nations before the autumn meeting of the World
Trade Organization in Qatar.
ECB holds rates
The European Central Bank left its key interest rate
unchanged at 4.75 per cent on Thursday, as expected.
European economic growth is chugging along at a faster rate
then North America and Japan, meaning the ECB is under less pressure to ease
monetary policy than its peers at the U.S. Federal Reserve and the Bank of
The BoJ cut rates on Wednesday, and the Fed reduced
aggressively in January, though chairman Alan Greenspan appeared to tone down
the prospect of more reductions in comments to Congress on Wednesday.
The euro was little changed after the ECB announcement at
92.71 U.S. cents, from 92.66 cents in midday trade, and 92.31 cents in late U.S.
trading on Wednesday.
Turkey's impact on funds
A lot can happen in a week, especially in emerging markets.
Last Monday, a very public row between Turkey's prime minister and its president
shook the country's rickety financial markets. Then, the central bank was forced
to announce the devaluation of the Turkish lira. That sent the country into a
tailspin; investors abandoned the currency, interest rates soared as high as
5,000 per cent, and the country's equity market lost over a third of its value.
But Turkey's troubles aren't likely to generate prolonged
losses for emerging-markets investors. That's partly because the country is
geographically isolated from, and has fewer trade links with, other emerging
markets. More important, the country has played only a minor role in the
portfolios of emerging-markets funds lately.
Europe vets to extend UK meat ban
European vets are set to extend a ban on all British exports
of animals, fresh meat and milk as the foot-and-mouth crisis spreads in the UK.
The European Union announced a ban until March 1 as a
precautionary measure following the discovery of the first cases last week.
But as the number of confirmed cases in Britain reached 12,
the ban was expected to be hardened when EU vets meet on Tuesday to discuss the
No cases have yet been confirmed across the English Channel
but Britain's EU partners remain on full alert — particularly those that
imported thousands of animals from the UK in the last few weeks — and some are
taking unilateral action to protect their farming industry.
Nikkei crashes 420 points
Tokyo's top market gauge fell 3 per cent on Friday, plumbing
a new 15-year low as a warning by U.S. firm Oracle spooked investors.
The benchmark Nikkei 225 average plunged 419.86 points, or
3.3 per cent, to end at 12,261.80, the lowest level since August 1985. Chip
maker NEC fell 6.5 per cent, while leading bank stocks also closed lower.
In late Hong Kong trading, the Hang Seng index was down 2 per
cent to14,068.52, as fears of a price war in the cellular-phone market punished
China Mobile, driving it down more than 10 per cent.
Singapore's Straits Times index was down 1 point to 1,910.77
in late trading and the S&P/ASX index closed down 0.5 per cent in Sydney, as
media conglomerate News Corp. shed 2.8 per cent.
Seoul's KOSPI index dropped 3.2 per cent, with chip
powerhouse Samsung Electronics falling 3.5 per cent. Taipei's Taiwan Weighted
index fell only fractionally.
On the currency market, the U.S. dollar fetched ¥117.77,
compared to ¥117.40 in late New York trading a day earlier.
Wall Street sidesteps loss
A late blitz of bargain hunting Thursday saved U.S. stocks
from losses that nearly handed Wall Street its first official bear market in
more than a decade.
The Nasdaq composite index, lower by more than 3 per cent
earlier Thursday, finished with its first gain in three days. And the Dow Jones
industrial average almost dug itself out of a 193-point hole.
The Nasdaq rose 31.54 points, or 1.4 per cent, to 2,183.37.
Despite the gains, the first in three sessions, the index is still off 56.7 per
cent for its peak last March.
The Dow Jones industrial average dropped 45.14 to 10,450.14,
while the S&P 500 rose 1.20 to 1,241.14.
Manufacturing still slow
U.S. purchasing managers reported Thursday that manufacturing
activity slowed for the seventh consecutive month in February, but suggested
there are signs that the worst may be over. Separately, the government reported
increases in consumer spending, personal incomes and construction spending in
Mortgage rates fall
Mortgage rates retreated this week as consumers reined in
their spending and confidence in the U.S. economy slipped.
The 30-year fixed rate mortgage averaged 7.03 per cent, with
an average 0.9 point, for the week ending March 2, 2001. The 15-year fixed-rate
mortgage stood at 6.58 per cent, with 1 point. One-year adjustable rate
mortgages indexed to the Treasury averaged 6.39 per cent with an average of 0.9
per cent, down from last week's average of 6.43 per cent.
Treasurys still charging
Longer-dated Treasury bond prices continued a weeklong rally
Thursday, as major U.S. stock indexes fell to fresh two-year lows a day after
Federal Reserve Chairman Alan Greenspan threw cold water on hopes for an
interest rate cut this week.
Two-year Treasury notes were unchanged at 100-14/32, yielding
4.39 per cent. Five-year notes gained 3/32 to 104-21/32, yielding 4.64 per cent.
Benchmark 10-year notes were up 9/32 at 101-3/32, yielding 4.86 per cent, while
30-year bonds gained 12/32 to 101-9/32, yielding 5.29 per cent.
VeriSign, U.S. reach accord
VeriSign Inc., which dominates the world's master list of Web
addresses, reached a preliminary agreement with federal regulators that would
allow VeriSign to keep its valuable domain name registry in tact at least
through 2007, the company said Thursday.
Jobless claims increase
The number of American workers filing new claims for
unemployment benefits jumped by 39,000 last week, the government reported
Thursday, indicating the labor market continued to soften.
The Labor Department said the increase pushed the total
number of newly laid-off workers seeking benefits to 372,000 for the week ended
Feb. 24 from a revised 333,000 in the previous week.
Mergers & Acquisitions
AT&T—TWE: As expected, AT&T Corp. requested
Wednesday that its 25.5 per cent stake in its Time Warner Entertainment joint
venture be registered with the Securities and Exchange Commission so it can be
Jet Group—TWA: An independent investor group offered to
buy Trans World Airlines Inc. on Wednesday, challenging the previous lock
American Airlines' parent AMR Corp. had on cash-short TWA's assets.
Charter: Charter Communications Inc. agreed Wednesday to
buy cable systems from AT&T Broadband, a unit of AT&T Corp., for $1.79
Finova: Warren Buffett's Berkshire Hathaway Inc. and
Leucadia National Corp. are set to take control of struggling finance firm
Finova Group Inc. as it prepares to declare bankruptcy.
UAL—Atlantic: UAL Corp., parent of United Airlines,
Monday confirmed reports Monday that it is in talks about the possible sale of
three commuter carriers that are wholly owned by US Airways Group Inc.
Fed: Slowdown not over
Federal Reserve Chairman Alan Greenspan told Congress
Wednesday that the "retrenchment" hitting the U.S. economy "has
yet to run its full course," but he gave no indication that the central
bank has any immediate plans to lower interest rates again to stimulate growth.
Greenspan's comments, in testimony to the House Financial Services Committee,
signalled that the Fed remains watchful about the extent of the economic
slowdown and is ready, if need be, to enact another interest rate cut to ward
off recession. Earlier in the day, the government revised gross domestic product
figures for last year's fourth quarter showing that the economy grew at its
slowest pace in more than five years.
GDP growth revised down
The U.S. economy grew more slowly in the fourth quarter than
initially estimated, showing the slowest expansion rate in 5-1/2 years, the
government reported Wednesday.
Gross domestic product, the broadest measure of the world's
biggest economy, grew at a 1.1 per cent annual rate in the quarter, a bit slower
than the 1.4 per cent rate estimated a month ago, the Commerce Department said.
BAT: British American Tobacco, the world's No. 2 listed
cigarette maker, posted an 11 per cent rise in its full-year pretax profit on
BAT said cost savings from the integration of Rothmans helped
increase its profit to £1.52 billion ($2.207 billion) in the year ended
December 31, up from £1.37 billion in the previous year.
CMG: CMG, said pretax profits grew to £117.0 million
($170 million), while operating profit before goodwill amortisation rose 47 per
cent to £125.5 million.
Rolls-Royce: Aero-engine maker Rolls-Royce said 2000
profit fell 71 per cent on Friday. Rolls-Royce, said net profit fell to £83
million ($120 million), or 5.3 pence a share, compared with £284 million, or
18.6 pence a share, a year ago.
Europe in software slump
European markets trickled lower early on Friday, with
software makers retreating in the wake of a profit warning by U.S. counterpart
London's benchmark FTSE 100 index fell 0.4 per cent to
5,886.8, with information technology group Logica (LOG) dropping 4.2 per cent.
Frankfurt's Xetra Dax fell 0.2 per cent to 6,109.97. Europe's
biggest software maker SAP (FSAP3) lost 6.2 per cent.
In Paris, the CAC 40 blue-chip index fell 0.7 per cent to
Amsterdam's AEX index dropped 0.2 per cent and the SMI in
Zurich shed 0.1 per cent. Helsinki's HEX General added 2.5 per cent as mobile
phone maker Nokia jumped 3.9 per cent.
The pan-European FTSE Eurotop 300, a broader index of the
region's largest stocks, was down 0.1 per cent, with the computer software and
services sub-index dipping 3.4 per cent.
Mitsubishi cuts 9,500 jobs
Mitsubishi Motors Corp. has said it will cut its workforce by
9,500 — 14 per cent of its 65,000 workforce. The company said it aims to
complete the cuts by 2003.
Ford and GM sales fall
General Motors Corp. and Ford Motor Co. both said Thursday
that U.S. sales of cars and trucks declined during February, and both attributed
the decline to the slowdown in the U.S. economy.
General Motors, the world's No. 1 automaker, said its car
sales fell 9 per cent to 213,121 vehicles, while its light truck sales were down
10 per cent to 193,186 from the year-ago month. The results include sales of
GM's Saab unit.
Ford saw its February U.S. sales decline 11 per cent, after
the company set a February sales record last year of 354,380 cars and trucks.
Ford's February sales this year totaled 303,657 cars and trucks to domestic
customers. The sales figures exclude U.S. results for Ford imports Jaguar, Volvo
and Land Rover.