Apr16 - 22, 2001

Bush fleshes out $2 trillion budget

US President George W. Bush on Monday reveals the details of his nearly $2 trillion budget request for fiscal 2002, featuring cuts in areas including police hiring and a renewed call for a $1.6 trillion tax cut.

White House officials said the budget would maintain Bush's proposed 10-year, $1.6 trillion tax cut, which the Senate rejected on Friday in favuor of a $1.2 trillion compromise proposal that includes an additional $85 billion for an immediate tax stimulus this year.

That ($1.6 trillion) is what the president thinks is the right amount to have as a tax cut, and that's what he is going to present to the Congress in his detailed budget, White House budget office spokesman Chris Ullman told Reuters on Sunday.

The $1.9 trillion fiscal 2002 budget will be released on Monday. It provides line-by-line details to flesh out a budget outline Bush proposed on Feb. 28, less than six weeks after taking office. The 2002 fiscal year begins on Oct. 1, 2001.

The budget seeks to limit the growth in discretionary spending to 4 per cent, or $26 billion, compared with 8.7 per cent in fiscal 2001.

Among the most notable cuts is a scaling back of former President Bill Clinton's pet programme to hire 100,000 new police officers, and changes in health programmes for the poor and uninsured, as Bush reshapes assistance in this area to tax credits.

But White House officials said they were not taking a big axeDaniels told Reuters on Thursday. We didn't propose to zero out any department. There are no major reductions anywhere.

While critics will pore over the budget looking for cuts, Daniels said. The examples that have so far emerged, they are almost laughably small.

Clashes at Turkish crisis rally

Turkish police have used batons, water cannons and tear gas as violence broke out at a huge demonstration over the country's financial crisis.

A group of protesters broke away from the 50,000 demonstrators gathered in Ankara's Tandogan Square and threw stones and sticks at police before attempting to storm the parliament.

The protesters, who were mainly small trade businessmen, were calling for the resignation of Prime Minister Bulent Ecevit and his government amid accusations of economic mismanagement.

A number of people were injured in the demonstrations, the biggest and most turbulent since Ecevit's public disagreement with his president, Ahmet Necdet Sezer, in February sparked the financial crisis.

The Turkish lira collapsed, falling by 45 per cent against the dollar, and an $11 billion International Monetary Fund reform plan had to be abandoned after the currency was floated.

The government is currently renegotiating a package, and new economic chief Kemel Dervis is expected to announce a new economic programme at the end of the week.

The government announced plans to ease the burden on small traders on Monday, including an extension of the period in which to apply for phased payments of unpaid taxes and to keep interest rates on loans from the state-run Halkbank at pre-crisis levels.

Turkey's military said on Wednesday it had postponed 32 modernisation projects worth $19.5 billion to try to ease the financial crisis, NTV television said.

The spending plans of the military, NATO's second largest, include purchasing 1,000 tanks and 145 attack helicopters.

The protests are being led by tradesmen and small business owners angry at soaring prices, rising unemployment and the collapse of businesses in Turkey. Trade unions have called for further demonstrations on Saturday.

EU, U.S. end banana row

The United States will lift $191 million in sanctions on European Union exports under an agreement to end a long-running trans-Atlantic banana war, the EU said Wednesday.

The agreement should end an eight-year row over the EU's banana import rules, which Washington says favour growers in EU territories and former European colonies in the Caribbean over Latin American producers and U.S. marketing companies such as Chiquita Brands International (CQB: Research, Estimates) and Dole Food Co. (DOL: Research, Estimates).

On July 1, the United States will suspend punitive duties it imposed on $191 million of EU exports in 1999 after it won a World Trade Organization case against the EU's banana import rules. The sanctions have hit European goods ranging from handbags, cardboard boxes, bed linen and batteries.

ECB holds interest rates

The European Central Bank on Wednesday left its key interest rate unchanged at 4.75 per cent.

The ECB, the guardian of the euro, has been holding out on a rate cut, even as central banks in the UK, U.S. and Japan lowered the cost of borrowing in recent months.

Officials from the European Central Bank, which sets interest rates for the 12 nations that make up the eurozone, had been giving mixed signals, leading many analysts to forecast a cut in interest rates as early as today.

Bundesbank President Ernst Welteke on Tuesday said in the foreword to the Bundesbank's annual report that eurozone monetary policy was not restrictive and that he favoured "a steady hand policy" on rates. Other bank officials had expressed concern that eurozone inflation remains above its 2.0 per cent target.

But Bank of France governor Jean-Claude Trichet, meanwhile, had said that there is less upward pressure on prices.

Singapore cuts GDP forecast

Singapore has been forced to slash its full-year economic forecast for 2001 as the worsening global economic slowdown hits its export-oriented economy.

In its flash estimate for first quarter gross domestic product growth issued on Tuesday, the Ministry of Trade and Industry surprised market observers with a figure of 4.6 per cent year-on-year growth in the first three months.

The Singapore dollar was at 1.8147 late on Tuesday, having fallen to a one-week low of 1.82 on the growth data earlier.

The stock market largely shrugged off the lower growth estimates to focus more on the U.S. earnings reporting season. The key share index ended the day up 10.17 points at 1605.12.

Despite the muted immediate reaction to the Tuesday figures, stock market analysts expect further weak data in coming months to weigh on the bourse, which is at its lowest level in more than two years.

Chips keep Tokyo on a high

Tokyo stocks ended higher for a second straight day on Thursday, powered by Advantest Corp and other chip-related firms after a rally in their U.S. peers.

The benchmark Nikkei average finished 1.35 per cent, or 177.51 points, higher at 13,352.44, after jumping 2.11 per cent earlier in the session. The capital-weighted TOPIX index gained a more modest 0.82 per cent, or 10.60 points, to 1,301.33.

Elsewhere in the region, markets in Korea, Australia, Hong Kong and Taiwan all ended higher.

In Hong Kong, the Hang Seng index ended 283.04 points higher at 12989.47, with modest gains across the board.

In Australia, the benchmark S&P/ASX200 was up about 0.5 per cent, gaining 17.2 points to 3276.8. Bluechip BHP and retailers Coles and Woolworths made gains, while leading telco Telstra ended the day unchanged at A$6.80.

Nasdaq shines on Wall St.

The Nasdaq composite index capped off its best week this year Thursday as investors shrugged off three economic reports and went on a buying spree, betting the worst may be over.

The Nasdaq composite index gained 62.46, or more than 3 per cent, to 1,961.41. The indicator is up 241 points, or 14 per cent, for the week. From the start of the year, the Nasdaq is still down more than 20 per cent.

And the Dow Jones industrial average surged 113.47, or more than 1 per cent, to 10,126.94. The blue chip index is up 335 points, or 3.4 per cent, for the week. From the start of the year, the Dow is down 6.1 per cent.

The Standard & Poor's 500 gained 17.62 to 1,183.51 and is up 55 points, or 4.8 per cent, for the week. From the start of the year, the S&P is down 10 per cent.

$300m loan

A $300 million World Bank poverty reduction loan due to be released to Indonesia at the end of last year, will not be disbursed as most of the projects it was earmarked for have ended , a Bank official said on Thursday.

It was a joint decision between Indonesia and the World Bank and was made because the loan was linked to a number of programmes that ended on December 31, 2000, the official, who declined to be identified, told.

Oil firms sign gas deal

Three foreign oil companies signed production sharing contracts (PSC) for a prospective gas block in Bangladesh on Wednesday after protracted negotiations, energy officials said.

They said Chevron Corp and Texaco Inc of the United States and Tullow Oil Plc of Ireland signed the deal for Block 9 with Petrobangla, Bangladesh's state-owned oil and gas company giving them a 30-per cent stake each. The remaining stake was owned by state-owned Bangladesh Petroleum Exploration Company (BAPEX).

Mergers & Acquisitions

DBS—Dao Heng: Singapore-based DBS Group will buy a controlling stake in Dao Heng Bank in a deal that values the Hong Kong bank at $5.4 billion.

Crown—Hallmark: Crown Media Holdings Inc. said Thursday it plans to acquire a majority of the titles in Hallmark Entertainment Inc.'s film library for about $820 million.

Volvo —Mitsubishi: Swedish carmaker Volvo confirmed on Wednesday it would sell its 3.3 per cent stake in Japanese car maker Mitsubishi Motor Corp. to DaimlerChrysler AG for $297 million.

SocGen—TCW: French bank Societe Generale said on Wednesday it was buying 70 per cent of California fund manager TCW Group to give it global reach in the asset management business.

Napster—Gigabeat: Internet song-swapping service Napster said Tuesday it has acquired the technology of Gigabeat to add new music search and indexing features to Napster's service.

AIG—AGC: Prudential PLC vowed Tuesday to remain in the race for American General Corp., even as American International Group was set to begin merger talks with AGC that will pave the way for a $23 billion takeover.

Kana—Broadbase: E-business software maker Kana Communications Inc. and Broadbase Software Inc. on Monday announced a definitive merger agreement valued at about $75.8 million in stock.

Calif.—Edison: California Governor Gray Davis and Southern California Edison reached an agreement Monday on the state's bid to buy the cash-strapped utility firm's transmission lines for $2.76 billion.

ABB—Entrelec: Swiss-Swedish engineering group ABB said it offered 310 million euros ($280 million) to acquire French factory automation company Entrelec.

GE—NBCi: General Electric Co. said Monday it is buying the portion of Internet portal NBCi that it does not already own for $85 million.

Powergen—E.ON: German utility E.ON has made an agreed bid for its British counterpart Powergen, valuing the UK company at 15 billion euros ($14 billion).

Swiss Sulzer—InCentive Capital: The battle for Switzerland's Sulzer intensified on Monday as the engineering group urged shareholders to reject a hostile bid by Swiss investment company InCentive Capital.

Treasurys fall again

Shorter-dated U.S. Treasury bond prices fell for a fourth straight day Thursday as investors, shrugging off a slew of economic reports pointing to a weakening economy, sold bonds and bought technology stocks.

Two-year Treasury notes were down 5/32 to 99-24/32, yielding 4.38 per cent. Five-year notes finished 9/32 lower at 104, yielding 4.77 per cent, for a 0.30 per centage point, or 30 basis point, rise on the week. Benchmark 10-year notes ended down 9/32 to 98-24/32, yielding 5.16 per cent, up 27 basis points on the week. Thirty-year Treasury bonds rose 4/32 to 96-20/32, yielding 5.61 per cent, but their yield rose 15 basis points since last Friday.

Mortgage rates inch higher

Long-term mortgage rates were slightly higher this week as market sentiment remains poised in anticipation of the release of key economic data next week. One-year adjustable rate mortgages (ARMs) took a fall, dipping to a one-year low.

The benchmark 30-year fixed-rate mortgage (FRM) averaged 7.04 per cent for the week ending April 13, slightly higher from last week's average of 7.01 per cent. The average this week for a 15-year fixed-rate mortgage was at 6.55 per cent, up from the previous week's average of 6.54 per cent. One-year adjustable rate mortgages (ARMs) hit a one-year low since October 1, 1999, averaging 6.15 per cent, down from last week's average of 6.23 per cent.

Europe markets close mixed

Europe's main markets ended mixed in lacklustre trade Thursday ahead of the holiday weekend.

London's benchmark FTSE 100 index fell 0.4 per cent, or 20.8 points, to touch 5,767.3, with network service provider Dimension Data (DDT) and software maker Logica (LOG) the top two decliners.

In Paris, the blue-chip CAC 40 gained 0.3 per cent, or 14.65 points, to reach 5,376.18, with consumer electronics firm Thomson Multimedia (PTMM) and the world's largest biscuit maker Danone (PBN) leading gainers.

Frankfurt's electronically traded Xetra Dax rose 0.5 per cent, or 28.62 points, to 5,979.78, with sporting goods firm Adidas Salomon (FADS) top of the leader board.

Amsterdam's AEX index slipped 0.2 per cent, Zurich's SMI was up 0.2 per cent and Milan's MIB30 rose 0.5 per cent.

The broader FTSE Eurotop 300 index, a basket of Europe's largest companies, fell 0.28 per cent.

Jobless claims rise

The number of new jobless claims in the United States rose to its highest level since March 1996, the government reported Thursday, with the figure topping economists' forecasts.

The U.S. Labor Department said 392,000 new claims for state unemployment benefits were filed in the week ended April 7, up 9,000 from 383,000 in the prior week.

Results

Biogen: Biogen Inc., reported earnings of $72 million, or 47 cents a share, compared with a profit of $64.7 million, or 41 cents a share, a year earlier.

Juniper: Network equipment maker Juniper Networks Inc. said its pro forma net income rose to $85.4 million, or 25 cents a share, from $10.5 million, or 3 cents a share, a year ago.

Abbott Labs: Abbott Laboratories met first-quarter earnings expectations Thursday. The company earned $734.9 million, or 47 cents a share, excluding one-time charges related to the acquisition.

Willamette: Willamette Industries Inc., reported Thursday that first-quarter earnings fell 21 per cent. Net earnings were $66.6 million, or 61 cents per diluted share, down from $85.3 million, or 76 cents a share, in the year-ago quarter.

Pepsi: Pepsi Bottling Group Inc. earned $26 million, or 17 cents per share, for the quarter, ended March 24 — in line with the high end of analysts' expectations and compared with a profit of $17 million, or 11 cents a share, a year earlier.

Safeway: No. 3 U.S. grocery chain Safeway Inc. reported a 17 per cent increase in first-quarter earnings. Net income in the quarter ended March 24 rose to $283.9 million, or 55 cents a diluted share, from $241.9 million, or 48 cents a diluted share, a year earlier.

Tesco: The UK's largest food retailer Tesco on Tuesday posted annual pretax profits above the 1 billion pound ($1.4 billion) mark for the first time. The supermarket chain said profit before tax for the year ended February 24 rose 13 per cent to £1.05 billion from £933 million last year.

U.S. import prices tumble

U.S. import prices took their sharpest plunge in over eight years in March as costs for both imported oil and other products fell, the government said Wednesday.

The Labor Department said import prices fell 1.6 per cent in March — the largest decline since a 1.7 per cent drop in December 1992 — after a revised 0.6 per cent fall in February. Economists polled by Reuters had expected a modest 0.2 per cent drop in March import prices.

German economic call

German Finance Minister Hans Eichel has said his government will push for coordinated action by "European and international forums" to overcome a slowdown in the world economy.

Eichel, who was reacting to a cut in a forecast for German growth by the country's six leading economic institutes, called for action "as soon as possible".

He did not elaborate, however, on what kind of action Germany wanted to see.

The six earlier said they now expected Europe's largest economy to grow by 2.1 per cent this year, compared with an earlier forecast of 2.7 per cent.