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Mar 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 said.

"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 recovery)."

"Moreover, it is clear that there is a sentiment that there will not be a (US) recession but a period of stagnation for a while."-AFP

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 said.

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 consumer prices.

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 increasing prices.

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 remain "robust".

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 5.50 percent.

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 announcement.

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 trial."

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 1,527.

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 warnings.

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 second quarter.

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) said.

"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.

Yen firms

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 level.

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 percent.

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.

Results

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 off.

"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 said Tuesday.

The deficit in merchandise trade rose 0.2 percent to $33.3 billion from a revised $33.2 billion in December, the Commerce Department reported.

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 stake.