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May 21 - Jun 03 , 2001

Senate OKs $1.35 trillion tax cut

After two days of delay caused by a flurry of amendments, the Senate, in a 62-38 vote, gave its approval Wednesday to an 11-year, $1.35 trillion tax cut compromise.

The tax cut measure — the centerpiece of President Bush's legislative agenda — will now go to a conference committee, where legislators will hammer out differences between House and Senate versions of the bill. The House had earlier approved a $1.6 trillion tax cut closer to what Bush originally proposed.

"We're dealing with a very important issue, and we're not going to deal with it in a sloppy fashion," Sen. Charles Grassley, R-Iowa, said of the work ahead for the conference committee. Grassley is chairman of the Senate Finance Committee.

"There will be a lot meetings, a lot of discussion. That's the democratic process," said Sen. Max Baucus, D-Montana, the ranking minority member of the finance panel.

The president has called for final passage of a tax cut package by Memorial Day. But the final shape of the tax cut was thrown into uncertainty Wednesday by news that Sen. James Jeffords, R-Vermont, is considering leaving the GOP, which could toss control of the chamber to the Democrats.

Senate Minority Leader Tom Daschle, D-South Dakota, who could wind up as the new Senate leader, voted against the tax cut bill. Jeffords, despite his ruminations over switching parties, supported it on the final vote.

The bill passed by the Senate is virtually identical to the measure that came out of the Senate Finance Committee, a bipartisan compromise co-authored by Grassley and Baucus.

Dozens of amendments, many designed to scale back the scope of the tax cut, were defeated. Senate Republican leaders had planned to pass the bill on Monday, but lengthy debate on the amendments delayed the final vote until Wednesday.

The bill would reduce the highest tax rate from 39.6 per cent to 36 per cent by 2007. Bush and some of his conservative allies had wanted that rate lowered to 33 per cent.

ECB hold rate, euro drops

The European Central Bank, facing up to a slowdown in growth and rising inflation, decided to leave interest rates on hold at 4.5 per cent.

The decision comes as the euro, the common currency for the 12-nations that make up the euro zone, fell to a six-month low on Wednesday after key data from the zone's biggest economies showed growth was slowing.

A Reuters poll of 45 economists showed they expected interest rates to remain unchanged at 4.5 per cent. Only one expected the ECB to cut rates but 80 per cent thought the rate cut was likely in June or July.

"It's a tough decision with a slowdown in growth and increase in inflation rates," Ralph Solveen, an economist at Commerzbank, told CNN before the rate decision. "The ECB is expected to cut rates by 0.25 per centage point by the end of June."

The central bank surprised the markets earlier this month with a quarter-point rate cut, citing faltering economic growth, while saying inflation is likely to slow next year.

Growth in Germany, Europe's biggest economy, which represents one third of the euro zone output, grew a less-than-expected 0.4 per cent in the first quarter. Germany's key Ifo business climate figure fell to its lowest level in almost two years on Tuesday.

The central bank faces a balancing act between responding to economic weakness, which in the longer run should damp price pressures, and preventing a rise in inflation expectations as current headline rates keep rising.

German inflation is expected to vault to an annual 3 per cent in May after a seven-year high of 2.9 per cent in April, the same as in the euro zone and well above the ECB medium-term 2 per cent ceiling.

France, so far the single currency bloc's main growth engine, started sputtering with Wednesday's first-quarter gross domestic product growth coming below expectations at 0.5 per cent quarter-on-quarter.

Greenspan sees weakness

Federal Reserve Chairman Alan Greenspan said on Thursday the U.S. economy is still at risk of weakening more than anticipated, but added the aggressive interest rates cuts the Fed has already ear end.

"This period of sub-par economic growth is not yet over, and we are not free of the risk that economic weakness will be greater than currently anticipated, requiring further policy response," Greenspan said in a speech to the Economic Club of New York.

"We also need to be aware that our front-loaded policy actions this year should be providing substantial support for a strengthening of economic activity later this year," he said.

The Fed has slashed rates five times this year by a total of 2-1/2 per centage points to lows not seen since 1994.

Reaction in Asian markets after the speech was released was muted but the dollar softened slightly versus the yen.

Greenspan cautioned that consumer spending, while currently soft but not "unduly" so, could weaken over the next few quarters because of declines in personal wealth.

Oil, gold prices jump

Oil prices rose in midday trade on Monday, amid concerns the U.S., the world's biggest consumer, could face gasoline shortages.

Gold prices also rose, hitting 10-month highs in London as low interest rates worldwide tempted investors, who also expected supplies to tighten as central banks ended bullion sales.

Gold shot up $14.45 to $287.45 an ounce in Europe. That was below the trading price of $296 in Asia earlier on Monday.

Brent crude futures for July delivery rose 19 cents to $29.58 on London's International Petroleum Exchange. NYMEX June unleaded gasoline was 1.46 cents up at $1.0836 a gallon, just off a high of $1.0840.

Brent surged to a four-month peak on Friday partly on fears of insufficient supplies ahead of the peak U.S. driving season on May 28.

US launches trade portal

The United States launched a global Internet portal in Asia on Tuesday aimed at boosting trade by linking American exporters with business partners around the world.

Buy USA.com, created by the US Department of Commerce and computer giant IBM, allows American companies to find international buyers and distributors for their products, officials said.

Jerry Mitchell, acting director general of the US Commercial Service, told a news conference in Manila via video link-up from Washington that the new electronic marketplace would boost trade although its larger aim was to help American exporters.

The portal would be formally introduced in Manila on Thursday at Comm Asia 2001, a regional exhibition covering the telecommunications, broadcast, electronics and information technology fields.

Singapore, US resume talks

Singapore and the United States resumed talks on a free trade agreement (FTA) on Monday in a push to wrap up Washington's first such deal with an Asian state by the end of the year, officials said.

Discussions would focus on a range of topics covering trade in goods and services, investment, electronic commerce, customs, textiles and dispute settlement, Singapore's Ministry of Trade and Industry said.

There would also be video conferencing sessions in the areas of intellectual property rights and financial services, it added.

The third round of talks, which ends on Friday, will be the first under the United States President George W. Bush who has listed free trade as a key objective and wants to "fast track" negotiations with Singapore.

Nasdaq's gains continue

Wall Street's two-month rally refused to die Thursday as the Nasdaq composite index rose for the seventh time in eight sessions.

The Nasdaq composite index rose 38.54 points, or 1.7 per cent, to 2,282.02. Before falling Wednesday, the Nasdaq rose six straight sessions, its best winning streak in more than a year.

The Dow Jones industrial average rose 16.91 points, or 0.2 per cent, to 11,122.42 and remains only 215 points below it's 16-month high hit Monday.

The S&P 500 rose 4.12, or 0.3 per cent, to 1,293.17. More stocks rose than fell. Advancing issues on the New York Stock Exchange topped declining ones 1,585 to 1,463 on trading volume of 1 billion shares. Nasdaq winners beat losers 2,132 to 1,672 as 1.8 billion shares changed hands.

Nikkei ends morning lower, HK up

Tokyo stocks surrendered early gains to end the morning session lower Friday, dragged down by falls in bank shares.

Dampened by a more than a two per cent loss in the banking sector, the benchmark Nikkei stock average dropped 67.21 points or 0.48 per cent to 13,828.58 at midday.

The broader TOPIX index lost 3.49 points or 0.26 per cent to 1,362.39.

Elsewhere in the region, the Australian S&P/ASX200 benchmark index was up 9.2 points at 3425.2, while the Korean, Hong Kong and New Zealand were all stronger at midday.


Borders: Bookseller Borders Group Inc. on Thursday said its operating income for the quarter ended April 29 was $600,000, or 1 cent a share, which is flat with the year-ago quarter.

Bass: UK leisure group Bass posted a 9 per cent fall in first-half net profit. Bass said net profit fell to £199 million ($280 million) from £219 million in the first half of 2000. The company said first-half profit before tax and major exceptional items rose 4 per cent to £337 million.

Subaru: Japan's Fuji Heavy Industries Ltd., the maker of Subaru brand cars, said Wednesday that net profit slid 30 per cent. Weak sales and a one-time loss to cover shortfalls in retirement reserves drove consolidated net profit down 27.8 per cent to ¥22.63 billion ($184.4 million), or ¥30.44 per share, in the year ended March 31, Fuji Heavy said.

Mortgage rates higher

Mortgage rates moved higher in the latest week amid signs of a sharp cool down in the U.S. housing market.

The benchmark 30-year fixed-rate mortgage (FRM) averaged 7.20 per cent for the week ending May 25. The average this week for a 15-year fixed-rate mortgage was 6.76 per cent. One-year adjustable-rate mortgages (ARMs) averaged 5.82 per cent.

Europe ends higher

European bourses ended higher on Thursday, with 'old-economy' utility and financial stocks showing the leading gains.

London's FTSE 100 rose 0.3 per cent to 5,915.9 at the close, as insurer Prudential (PRU) rose 2.7 per cent and rival CGNU (CGNU) advanced 1.9 per cent.

In Paris, the CAC 40 blue chip index ended 0.5 per cent higher at 5,656.47, with insurance group AXA (PCS) the best performer, up 2.1 per cent.

Frankfurt's electronically traded Xetra Dax advanced 1.1 per cent in late trading to 6285.07. The world's second-largest power utility E.ON (FEON) rose 4.2 per cent after Morgan Stanley said it was its top pick in the sector.

In Amsterdam, the AEX index was down 0.2 per cent, but Milan's MIB30 index gained 1.1 per cent.

The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, was up 0.2 per cent, with the life assurance sector up nearly 1 per cent.

U.S. jobless claims higher

The number of new U.S. jobless claims rose last week, the government reported Thursday, a sign of continued weakness in the labor market.

New claims for state unemployment benefits rose to 407,000 in the week ended May 19 from a revised 392,000 the prior week, the Labor Department reported.

Mergers & Acquisitions

Pride—Marine: Drilling contractor Pride International Inc. said Thursday it agreed to merge with Marine Drilling Cos. in a stock deal, valued at nearly $2 billion, creating the industry's third-largest offshore drilling contractor.

Northrop—Newport: Defense contractor Northrop Grumman Corp. made a hostile $2.1 billion takeover bid for Newport News Shipbuilding Inc. despite Newport's planned merger with rival General Dynamics Corp.

EDS—Structural Dynamics: EDS Corp., the world's No. 2 computer services company, agreed Wednesday to acquire Structural Dynamics Research Corp. for about $950 million cash, a move that will launch EDS in the collaboration software market.

P&G—Clairol: Procter & Gamble Co. agreed Monday to buy Clairol from drugmaker Bristol-Myers Squibb Co. for about $5 billion in cash in a bid to expand its hair care business and give a boost to sluggish sales.

WPP—Finsbury: The world's largest advertising company WPP said on Wednesday it acquired the UK's Finsbury, boosting its financial PR business.

GameCube to sell for $199

Nintendo is taking the console wars to a new level. The company announced Monday it will price its GameCube console system at $199, a price that's $100 lower than Microsoft's Xbox or Sony's PlayStation 2.

Games for the system will retail for a more standard $49.90 each.

Airbus invades Japan

European aircraft maker Airbus Industrie set up a subsidiary in Japan Monday to push a planned double-decker superjumbo jet and challenge the dominance of U.S. rival Boeing Co. in the Japanese market. The establishment of Airbus Japan underlines the company's determination Airbus, based in Toulouse, France, controls about half the world market in new orders for commercial aircraft, and it gets about 55 per cent of the new orders in Asia outside Japan.

IBM hikes disk drive size

The days of 400-gigabyte hard drives in desktop PCs may be closer than most computer users realize.

IBM says it has cracked a barrier in disk drive design — a breakthrough that would eventually quadruple the data density of a hard disk and give consumers improved options to store their growing amounts of digital data.