26 - Apr 01, 2001
US slowdown hitting Europe
The US economic slowdown is clearly hitting Europe, a member
of the governing council of the European Central Bank, Jean-Claude Trichet,
acknowledged on Friday, while forecasting that the United States would begin to
recover this year.
Trichet, who is governor of the Bank of France, said on
French radio: "Europe is clearly suffering from the repercussions of (the
slowdown in) the United States."
But the euro zone had many points in its favour and the
European economy is in internal and external balance, he said.
"We are unconcerned because the fundamental factors for
Europe are comfortable," he added.
A downward revision on Thursday for French growth for this
year by Finance Minister Laurent Fabius should not be a cause of concern, he
"We are growing and when we correct forecasts, they are
corrected in an environment which remains a growth environment," he said.
The French finance ministry said on Thursday that the impact
from the US slowdown meant the French domestic economy would grow by 2.9 percent instead of 3.3 percent as previously
forecast. The economy would expand by 3.0 percent in 2002, it said.
Trichet said that inflation was no longer a source of worry
for the European Central Bank, supporting remarks by ECB chief economist Otmar Issing.
"While we were very worried about inflation a month, a
month and a half ago, we are no longer today," Trichet said.
Trichet said he was not worried about the US economy,
"which has slowed down significantly but which will see an economy recovery
by the end of the year, whether it will be a V (sharp recovery) or a U (slower
"Moreover, it is clear that there is a sentiment that
there will not be a (US) recession but a period of stagnation for a
Japan's economy stalled, BOJ says
Japan's tepid recovery has ground to a halt because of
slumping exports with no sign of a revival any time soon, the Bank of Japan has
In a grim report released Wednesday, two days after the BOJ
effectively cut short-term interest rates to zero, the central bank also said
growth in corporate profits was slowing significantly.
"The recovery in Japan's economy has recently come to a
pause, reflecting a decrease in exports," the report said. "While
domestic demand remains steady, net exports are plummeting..."
The BOJ said a sharp slowdown in overseas markets, especially
the United States and East Asia, had led to a decline in industrial production
and a buildup in inventories of some materials and electronics parts.
"I think the economy will likely remain stagnant for a
while," BOJ Governor Masaru Hayami told a parliamentary panel.
The report said net exports were likely to keep decreasing
for a while until exporters start to feel the benefit of a recent depreciation
of the yen and a recovery in the United States, which is expected in the second
half of the year.
But the BOJ cautioned the economy was hostage to the fortunes
not only of America but also of sickly global stock markets.
"Attention should still be paid to the possibility of a
prolonged deceleration of overseas economies and risks of a negative impact on
the economy induced by developments in foreign and domestic capital markets
through corporate and household confidence," the report said.
In a dramatic U-turn on Monday, the central bank dropped its
objections to so-called quantitative easing by deciding to flood the money
market with surplus cash for as long as it takes to reverse a fall in core
Bush: No quick fixes to US energy 'crunch'
President George W. Bush said on Monday he saw no quick fixes
for the US "energy crunch" but found one "piece of good
news" in OPEC's decision to bolster prices by cutting oil output.
Declining to join other administration officials in
expressing disappointment, Bush told reporters the Organization of Petroleum
Exporting Countries had responded on Saturday to a forecast decrease in demand
when, despite US entreaties, they announced a production cut of 1 million
barrels a day.
"The piece of good news in the decision was that the
Saudi minister made it clear that he and his friends would not allow the price
of crude oil to exceed $28 a barrel," Bush said, calling that "very
comforting to the American consumer" and a gesture he appreciated.
Bush, a former Texas oilman, spoke during a meeting of his
national energy policy development group which is expected to make
recommendations by late Aril or early May on how to grapple with shortages and
ECB rate cut
At the end of a grim week of gloomy economic data, a storm on
global stock markets and a further battering for the euro, the ECB appeared on
Friday to be changing tack to face the ill wind with a cut in interest rates.
The economic doomsayers have been arguing all along that the
12-country euro area will not be able to escape unharmed from current global
economic downturn and that the European Central Bank should act now if it wanted
to avert the worst.
But until this week, European politicians and monetary
officials have preferred to stick their heads in the sand, standing by
over-optimistic growth forecasts and insisting that euro-zone growth would
Fed cuts by half point
The Federal Reserve cut interest rates by half a percentage
point Tuesday and signaled more cuts may be needed to prevent further weakness
in the U.S. economy.
The move, coming after two half-point cuts earlier this year,
took the rate that banks charge each other for overnight loans to 5 percent from
The Fed's latest reduction in borrowing costs came with an
unusual mention of the stock market, whose steady losses amid sagging corporate
profits have caused the first bear market since 1987.
But Wall Street, where some wanted a larger rate cut, was
unimpressed. U.S. stocks, higher before the move, fell sharply after the
BoE faces legal action over BCCI collapse
The Bank of England was facing a claim of up to one billion
pounds (1.6 billion euros, 1.4 billion dollars) on Friday for its role in the
collapse of BCCI bank nearly a decade ago.
The British central bank said that it was confident of
disproving allegations that it acted with "wilful recklessness" in its
regulation of Bank of Credit and Commerce International (BCCI).
The Emirati-financed bank, headquartered in Luxembourg, was
shut down in July 1991 on the Bank of England's order after the discovery of
huge fraud and money-laundering.
After being granted the right to sue by the British upper
parliament on Thursday, BCCI liquidators now hope to recover 550 million in
damages on behalf of BCCI depositors. With interest added this
could reach one billion pounds.
Christopher Morris of Deloitte and Touche, the liquidators,
said: "The liquidators are delighted with the judgments and hope that,
after significant delays, the proceedings can at last move ahead to an early
Dow escapes bear's lair
A late rally in technology stocks saved the Dow Jones
industrial average from its first bear market in more than a decade Thursday but
industrial and cyclical issues on the blue chip index were still sharply lower.
The Dow industrials fell 97.52 to 9,389.48. The index
rebounded from a 350-point loss that put it in bear market territory — defined
as a 20 percent drop from a high. The blue chip index is down 19.9 percent from
its Jan. 14, 2000 high of 11,722.
The Nasdaq composite index flip-flopped within a narrow range
on either side of breakeven, falling briefly fell below 1,800 for the first time
since Nov. 1998 before rising 67.47 to close at 1,897.70. The S&P 500
dropped 4.56 to 1,117.58 and is down 27 percent from its March 23, 2000 high of
High techs lift Japan
Tokyo stocks opened stronger on Friday, led by gains in
high-tech manufacturers after their U.S. peers showed a solid footing despite
sharp falls in U.S. blue chips.
The technology-sensitive Nikkei 225 stock average gained
97.25 points or 0.76 percent to 12,951.22 in the first ten minutes of trade.
The broader and capital-weighted TOPIX index edged up 12.92
points or 1.03 percent to 1,272.11.
European markets routed
European stock markets were routed on Thursday, in a
broad-based decline led by old economy stocks, after a series of profit
London's benchmark FTSE 100 index, Europe's biggest stocks
market, dropped 4.1 percent, or 227.4 points, to close at 5,313.3, its lowest
level in 29 months. Zurich SMI plunged 5.6 percent on the back of Zurich
Financial Services' profit warning. Frankfurt's late trading Xetra Dax plunged 4
percent, or 230.19 points, to trade at 5,391.90. In Paris, the blue-chip CAC 40
shed almost 4 percent, or 189.94 points, to a 17-month low of 4,824.82.
Amsterdam's AEX index fell 4.4 percent as electronics manufacturer Philips
tumbled 5.9 percent. Milan's MIB30 lost 4.8 percent. The broader FTSE Eurotop
300 index, a basket of Europe's largest companies was 4.1 percent lower.
Mergers & Acquisitions
Tyson—IBP: IBP Inc. expects Tyson Foods Inc. will
consummate its $3.2 billion takeover now that regulators have completed their
investigation into the nation's biggest meatpacker.
AT&T—NorthPoint: Bankrupt digital subscriber line
company NorthPoint Communications will sell substantially all of its assets to
AT&T for $135 million in cash.
Avnet—Kent: Electronics distributor Avnet Inc. agreed
to buy competitor Kent Electronics Corp. for $550 million in a move that will
expand its reach in North America, the companies said Thursday.
Nasdaq—Euro: U.S. stock exchange operator Nasdaq will
acquire a majority stake in ailing pan-European exchange Easdaq for 14 million
($12.6 million) and use it as a springboard for further tie-ups with bourses in
Europe, industry sources said Wednesday.
Old Kent—Fifth Third Bancorp: Shareholders of Fifth
Third Bancorp approved the company's more than $5 billion stock swap for Old
Kent Financial Corp. Tuesday, and the deal is expected to close during the
AmeriSource—Bergen Brunswig: Drug distributor
AmeriSource Health Corp. and rival Bergen Brunswig Corp. agreed Monday to merge
in a stock swap worth about $2.4 billion.
Interpublic—True: Interpublic announced Monday that it
had agreed to buy True North Communications for $2.1 billion to create the
world's biggest advertising company.
Kazakhstan to open first oil pipeline
The first dedicated pipeline to move oil from the Caspian,
the world's last great undeveloped hydrocarbon reserve, direct to international
markets will open on Monday after a decade of hype, diplomacy and drama.
As well as potentially transforming the economies of
Kazakhstan and other countries in the region, the line will also have an impact
on global markets, delivering perhaps the largest single slug of new oil to
markets for a quarter of a century.
Malaysian offshore mining project
Malaysia may revive plans to mine tin from its seabed as good
tin ore on land becomes harder to find, an industry body said on Friday.
Once the world's largest tin miner, now producing a fraction
of global supply, Malaysia is striving to retain its output of the metal and
offshore mining may be the option to pursue, the Malaysian Chamber of Mines (MCM)
"There is a chance that you may see, during this year,
the opening of an offshore mining project," Muhammad Nor, executive
secretary of the MCM, told Reuters in an interview.
HK banks cut rates
The Hong Kong Association of Banks (HKAB) said Friday it has
decided to cut deposit rates by 50 basis points to 3.25 per cent.
Banking merger to cause unemployment
Malaysia's series of banking mergers will not lead to massive
retrenchment and fewer than 10,000 employees will be affected, a senior official
said on Tuesday.
The country's 54 banking and financial houses are undergoing
a major program to merge into 10 core groups.
The National Union of Banking Employees has expressed concern
that around 17,000 out of 77,000 workers in the sector could leave the industry
in the next two years.
The yen bounced back from 22-month low points against the
dollar on Tuesday after the Bank of Japan restored its zero-per cent
interest-rate policy, and the euro also gained, breaking up through the $0.90
The yen recovered from a low point of 123.57 to the dollar,
to 122.24, while the euro pushed up to $0.9020 from 0.8972 in New York. The euro
also bought 110.69 yen from 110.32 on Friday.
Treasurys surge ahead
U.S. Treasurys surged Thursday, driving short-dated yields to
fresh 2-1/2 year lows as global stock markets nursed deep losses and the Dow
Jones industrial average fell into bear market territory.
Two-year Treasury notes were up 4/32 at 100-28/32, as their
yield, which moves inversely to the price, was at 4.14 percent. Five-year notes
were 9/32 higher at 105-21/32 to yield 4.39 percent.
Benchmark 10-year notes were up 16/32 at 102-8/32, yielding
4.71 percent. Thirty-year bonds were up 19/32 at 101-31/32, yielding 5.24
Mortgage rates still down
Long-term mortgage rates continue to hold below the 7 percent
mark, as was expected in advance of the Federal Reserve's recent rate cut. The
30-year fixed rate mortgage averaged 6.89 percent, with an average 1.0 point,
for the week ended March 23. The 15-year mortgage rate averaged 6.44 percent.
One-year adjustable rate mortgages (ARMs) that are indexed to the Treasury
averaged 6.22 percent.
Zurich: Zurich Financial Services said on Thursday
normalised net profit fell by 5.5 percent to $2.096 billion in 2000, worse than
the insurance group had forecast in a surprise profit warning in February.
France Telecom: France Telecom reported a 32 percent rise
in full-year net profit on Thursday. France Telecom's net profit for the year
ended December 31 rose 32 percent to 3.7 billion, from 2.8 billion in 1999.
Gucci: Italian luxury goods maker Gucci said operating
profit before goodwill and trademark amortization increased 49 percent to $408.4
million. Revenues soared 83 percent to $2.26 billion, but fully diluted net
income per share fell to $3.31 compared with $3.48 in 1999.
FedEx: Ex Corp. posted net income of $109 million, or 37
cents a diluted share, in the quarter ended Feb. 28, down 4 percent from $113
million, or 39 cents a share, a year earlier.
C&N: C&N Touristic, Europe's No. 2 tourism
operator, said on Wednesday 2000 net profit fell 10 percent. The German company,
said net profit for the year to Oct. 31, 2000 fell to 109 million Deutsche marks
($50 million) from 121.6 million marks a year earlier.
Clariant: said 2000 profit fell to 505 million Swiss
francs ($295 million) from 587 million francs the previous year.
Swiss cut interest rates
The Swiss National Bank unexpectedly cut its key interest
rate target by a quarter-point Thursday, citing growing uncertainty in the
global economy as major equity markets remained in the grips of a broad sell
"The risks in the international environment have
increased," it said in its quarterly statement on monetary policy that
announced the cut. It said the outlook for the domestic economy remains
favorable even though growth had slowed somewhat.
The bank lowered the LIBOR band it targets to 2.75-3.75
percent. The SNB now will target the middle of the new band, effectively 3.25
percent. Previously, it had aimed to have rates near the middle of the old band,
or roughly 3.50 percent.
Dell, Samsung in $16B pact
Dell Computer Corp. and Samsung Electronics Co. Ltd. have
entered into a $16 billion agreement for Samsung to supply the computer maker
with key parts, the companies said Wednesday.
U.S. trade gap widens
The U.S. trade deficit edged up to the second-highest level
on record in January as imports of cars and oil products jumped, the government
The deficit in merchandise trade rose 0.2 percent to $33.3
billion from a revised $33.2 billion in December, the Commerce Department
BP wins China natural-gas deal
BP Amoco has confirmed it has won development rights for a
$600 million gas terminal in southern China.
BP Amoco expects to take a 30 percent stake in the joint
venture, for the first liquefied natural-gas terminal in China. It won the bid
from China National Offshore Oil Corp. (Cnooc), which will have a 33 percent