Apr 09 - 15, 2001

Japanese mega-banks start operations

Nine Japanese banks started operations as three megabanks on Monday to give Japan four places amongst the world's 10 largest financial institutions in terms of assets.

The world's third largest commercial bank in terms of assets, with $800 billion was created by the merger of Sumitomo Bank Ltd. and Sakura Bank Ltd., which opened for business rebranded as Sumitomo Mitsui Banking Corp.

The new bank started its operations with 578 domestic branches and 33 overseas, and about 27,500 employees, said the bank's spokesman Seiki Horiguchi.

Japan's leading commercial bank, Bank of Tokyo-Mitsubishi integrated its operations with Mitsubishi Trust and Banking Corp., Nippon Trust Bank Ltd. and Tokyo Trust Bank Ltd. under a holding company to create the world's fifth largest financial group.

The banks will trade under a parent company called Mitsubishi Tokyo Financial Group Inc with total assets of 99.9 trillion yen.

Also Monday Sanwa Bank Ltd., Tokai Bank Ltd. and Toyo Trust Banking Co. Ltd. began joint operations with a new identity as UFJ Holdings Inc.

Three banks integrated their management under UFJ Holdings, which is a holding company set up, the company's president Hideo Ogasawara said in a statement.

We will do our best to strengthen our financial base, Ogasawara said.

The total assets of UFJ's three component banks are about 90 trillion yen as of March.

In addition to three banks' announcements that we would actively process bad loans ahead of the integration, we will promote further efficiency by reduction of domestic branches and review of overseas bases, Ogasawara said.

Last September Dai-Ichi Kangyo Bank Ltd., Fuji Bank Ltd. and Industrial Bank of Japan Ltd. merged to form Mizuho Holdings Inc., the world's largest financial institution with total assets of 151 trillion yen.

UK rates cut to 5.5%

The Bank of England cut interest rates to 5.5 per cent on Thursday to make sure the economy stays clear of a global slowdown.

The bank's nine-member Monetary Policy Committee decided on Thursday to cut rates by a quarter of a per centage point amid concern the world's fourth-largest economy could soon lose momentum.

"There are downside risks to UK activity from a slowdown in the global economy, the recent fall in equity markets and in the short run, from foot and mouth disease," the bank said in a statement, referring to the animal disease that is plaguing the nation's agriculture.

"These developments could already have affected demand and output growth and may continue to do so, in particular through their impact on business and consumer confidence," the statement said

Some economists had been calling for the bank to cut rates by half a per centage point to reverse stock market weakness.

The MPC has not made such a big move since February 1999 — the last time the world economy was wobbling.

Economists argued that the bank had room to cut rates as core inflation is below the government's target of 2.5 per cent at 1.9 per cent. Inflation has been below the government's target for the last two years, in spite of robust economic growth. Inflation was expected to slow further without a rate cut.

"The bank is likely to cut rates again in the coming months," Michael Dicks, chief economist at Lehman Brothers, told CNN before the rate cut.

"The BoE is more concerned with data coming out of the U.S. and what's happening globally than domestic data."

The BoE last cut interest rates in February for the first time in almost two years, after the U.S. Federal Reserve slashed rates by 1 per centage point to kick-start a slowing economy.

The Fed has since cut rates by another 0.5 per centage point. Britain exports more than 14 per cent of its goods and services to the U.S.

'Globalization reversal will be a tragedy'

The United States must remain committed to tearing down barriers to trade, Federal Reserve Chairman Alan Greenspan said on Wednesday, telling Congress it would be a tragedy if the process of globalization were to be reversed.

"Those who protest against 'globalization' appear too often to be self-designated representatives of developing country interests," he told the Senate Finance Committee.

"These protests, however well-intentioned, are wrong-headed" said Greenspan, adding that it would be "a great tragedy were we to stop the wheels of progress because of an incapacity to assist the victims of progress."

The most effective contribution industrialized nations can take to alleviate global poverty would be to open their markets unilaterally to imports from the developing world.

"Such countries need more globalization, not less," Greenspan argued.

EU, Japan agreement will save 400m euros

A new agreement between the European Union and Japan on a mutual recognition of technical standards will save European and Japanese exporters millions of euros every year, the EU Commission said Wednesday.

The deal, covering standards in pharmaceuticals, chemicals, telecommunication equipment and electrical goods, will "contribute significantly to facilitating our bilateral trade," said European Trade Commissioner Pascal Lamy.

It will cover trade worth 21 billion euros a year and will mean annual savings for exporters of up to 400 million euros," the commission said.

Mutual recognition agreements allow exporters to test and certify products on their own territory before shipping them abroad. The EU has concluded similar agreements with the United States, Canada, Australia and New Zealand.

Big gains on Wall St.

U.S. stocks surged Thursday as investors poured money into all sectors after positive guidance from Dell Computer, strong earnings from aluminum maker Alcoa, and revived confidence in the economy rekindled optimism.

The Dow Jones industrial average rallied more than 400 points, its second-largest point gain ever. The Nasdaq composite index soared more than 140 points, gaining nearly 9 per cent, its third-largest per centage gain.

The Nasdaq rose 146.20 points, or 8.92 per cent, to 1,785. But the tech-heavy indicator still is hovering around 29-month lows and is down 65 per cent from its March 10, 2000, high of 5,048.

The Dow rallied 402.63, or more than 4 per cent, to 9,918.05. While the blue chip index set a point-gain record, the indicator is still down 15 per cent from its Jan. 14, 2000 high of 11,722. The Standard & Poor's 500 rose 48.19 to 1,151.44 and is down 25 per cent from its March 23, 2000, high of 1,527.

Senate votes to slash size of Bush tax cut

The Senate voted tentatively Wednesday to siphon $500 billion from President Bush's $1.6 trillion tax cut, but Republicans served notice immediately they would attempt to reverse the decision.

The 53-47 vote was a severe blow to Bush's budget, which moved with ease through the House last week but is bogged down in the evenly divided Senate in which Republican unity has been elusive.

The vote on the Senate floor came on a proposal by Sen. Tom Harkin, D-Iowa, to take $500 billion away from Bush's 10-year tax cut and divide it evenly between spending on federal education programs and payment on the national debt.

Majority Leader Trent Lott switched his vote to favour the amendment after it appeared to be headed for passage over the objections of most Republicans.

Under the Senate's rules, that entitles him to call for a revote, and he immediately served notice he would do that at some point.

Mergers & Acquisitions

Suiza—Dean Foods: Suiza Foods Corp. has agreed to buy rival Dean Foods Co. for about $1.5 billion in stock and cash, plus the assumption of nearly $1 billion in debt, the companies said Thursday.

AIG—AGC: American International Group Chairman Maurice Greenberg said Wednesday he is ready to sit down with American General Corp. Chairman Robert Devlin to discuss a $23 billion merger proposal, even as Prudential PLC protested AIG's rival bid for the Houston-based insurer.

Bass—Posthouse: Bass, the world's second-largest hotel operator, agreed on Wednesday to buy the Posthouse hotel chain for 810 million pounds ($1.2 billion).

Turner—NTV: Vladimir Gusinksy, part owner of the embattled NTV, Russia's only independent network, has signed the outline of a deal with representatives of Ted Turner to sell most of his stock in the company to the American media mogul.

SocGen—Deutsche: French bank Societe Generale confirmed on Tuesday it agreed to pay Deutsche Bank 980 million ($857 million) for its vehicle leasing and fleet-management units.

Aventis: Franco-German life sciences company Aventis has decided to sell its CropSciences division and not seek a stock market listing, staff-management committee sources said on Tuesday.

Microsoft denies reports of Xbox delay

Microsoft says its Xbox video game console is still on target for a fourth quarter release, disputing news reports and industry rumblings of a delay.

The Financial Times reports that Microsoft is behind schedule in software development kit shipments to third party developers, including 70 Japanese game designers. Such a delay would push back the console's release.

Microsoft is countering the report and says the Xbox is on target for a northern autumn release, with its support for gaming developers still "right on track." But gaming companies in Japan remain skeptical.

Jobless claims rise

The number of new jobless claims in the United States rose to its highest level since July 1998, the government reported Thursday, with the figure topping economists' forecasts.

The U.S. Labor Department said 383,000 new claims for state unemployment benefits were filed in the week ended March 31, up 18,000 from a revised 365,000 in the prior week.

U.S. warns Mexico on trade

The Bush administration is warning Mexico, Colombia, South Africa and Taiwan that it has "serious concerns" about their failure to open telecommunications trade. But an official in South Africa said the complaints were unfounded.

The White House on Tuesday set June deadlines for Mexico and Colombia to resolve U.S. charges that the nations are acting in violation of World Trade Organization rules. If the disputes have not been resolved by then, the administration said it would consider pushing ahead with WTO cases that could result in trade sanctions.

The administration set no deadlines for Taiwan or South Africa, but officials said they would be looking for both countries to make significant progress in the next few months.

The administration report accused South Africa's state-owned telephone company, Telkom, of violating the WTO agreement by refusing to allow foreign companies access to its network to offer such services as high-speed Internet access.

Techs fuel Europe's gains

European tech shares led markets to end higher on Thursday, after PC maker Dell confirmed sales and profit estimates and the Nasdaq surged.

London's FTSE 100 rose 1.6 per cent, or 86.1 points, to finish at 5,621.8, with cable TV firm Telewest Communications (TWT) and chip designer ARM Holdings (ARM) topping gainers.

In Paris, the CAC 40 blue chip index gained 1.7 per cent, or 86.74 points to end at 5,158.56, led by engineering software maker Dassault Systemes (PDSY) and France Telecom (PFTE).

Frankfurt's electronically traded Xetra Dax climbed 2.3 per cent, or 131.07 points, to 5,728.73 in late trade. Europe's largest software maker SAP (FSAP3) and engineering and electronics powerhouse Siemens (FSIE) posted the biggest per centage gains.

In Amsterdam, the AEX index jumped 2.9 per cent, the SMI in Zurich rose 2.4 per cent and the MIB 30 in Milan added 1.5 per cent.

BD export earnings

The export earnings of Bangladesh surpassed the target by about $170 million registering a 4.7 per cent surplus during the first seven months of the current fiscal year, according to sources related to the Export Promotion Bureau.

They said, the export target for the first seven months of the current fiscal ending in January was set at $3685.2 million. The achievement was evidently higher than the set target, they added.

Japan unveils bank stimulus package

Japan's ruling coalition on Friday unveiled its long-awaited package to stimulate the economy.

It aims to tackle Japan's decade-long slump by helping its ailing banks deal with a large amount of bad loans and unwind their stock holdings.

"The economic improvement has stalled and a move for a full recovery led by private demand has slowed," Prime Minister Yoshiro Mori told a meeting of the government and ruling coalition parties called to approve the package.

"Structural problems are behind such weak economic conditions and our priority is to get to the root of those problems," he said.

Mori also confirmed Friday that he would resign.

Mortgage rates rise

Would-be homebuyers waiting for interest rates to drop further before entering the market may have missed the boat.

The 30-year fixed-rate mortgage averaged 7.01 per cent, with an average 0.9 point, for the week ending April 6. The average 15-year fixed-rate mortgage was 6.54 per cent, with 1 point. One-year Treasury-indexed adjustable-rate mortgages, or ARMs, averaged 6.23 per cent this week, with 1 point.

Treasury prices sink

U.S. Treasury bond prices dropped Thursday as beaten-down stock markets bounced back.

Two-year Treasury notes were down 3/32 at 100-6/32, with their yield, which moves opposite to price, rising to 4.15 per cent. Five-year notes were off 7/32 at 104-29/32, yielding 4.56 per cent. Benchmark 10-year notes fell 12/32 to 100-9/32, yielding 4.96 per cent, and 30-year bonds fell 19/32 to 97-30/32 to yield 5.52 per cent.

Job cuts soared

U.S. companies announced more than 150,000 job cuts in March, capping a dismal four-month period in which more than half a million job cuts were announced, a leading outplacement firm said Thursday.