11 - 17 , 2001
Pound near 15-year lows
The UK pound recovered some ground on Thursday after hitting
The currency last traded at $1.3915 after earlier weakening
to $1.3877, its lowest since early 1986.
"Markets are nervous about the outlook for euro
entry," Steve Barrow, currency economist at U.S. brokerage Bear Stearns,
told CNN. "The market is pricing in the possibility of a remote chance of
entry into the euro in the next parliament."
UK voters are going to the polls on Thursday to elect a new
government in a general election.
The Bank of England has always said that the pound would have
to fall for euro entry because it would not be good for the economy if the UK
went into monetary union with its currency at present levels.
The pound currently buys 3.35 German marks compared with 2.95
marks per pound when the UK was ejected from the European Exchange Rate
Mechanism in October 1992.
It would have to trade at around that level for the
government to give the go-ahead for entry, analysts said.
The euro rose to 60.81 UK pence but a future government would
want the pound to join the single currency at a weaker level, perhaps from 67 to
The UK's leading businessman are in favour of the country's
early entry into the euro to reduce currency conversion costs from their
While a weaker pound makes imports more expensive, it also
makes British exports cheaper and more competitive, which would boost industry.
Nervousness in currency markets over the UK election was
increased by the outside chance that the European Central Bank could spring a
surprise rate cut when it meets later on Thursday.
Most analysts believe the rate will be left at 4.5 per cent,
but the ECB has already stunned markets this year with its quarter-point rate
cut on May 10.
Bush asks trade panel to probe steel imports
In a bid to help the struggling US steel industry, President
George W. Bush said on Tuesday he will ask for an investigation into whether
cheap overseas steel was harming domestic producers, a probe that could lead to
tighter US restrictions on steel imports.
I am deeply concerned ... about the situation of the US steel
industry, Bush told reporters at the White House, announcing his decision to ask
the US International Trade Commission for a full investigation into alleged
dumping — or selling subsidized — steel. Acknowledging the potential
international ramifications of the move, Bush said he hoped his decision would
not anger European leaders ahead of his summit with them next week.
US steel producers and steelworkers blame a surge in
low-priced, unfairly traded steel imports for 18 bankruptcies in the US steel
industry since late 1997. They tried unsuccessfully to persuade former President
Clinton to launch a "section 201" investigation before he left office.
While dumping is illegal, under section 201 there is no need to prove that trade
is unfair only that the US industry has been harmed. A section 201 probe would
allow Bush to restrict steel imports for an initial period of up to four years
to give the steel industry time to restructure. Sen. Robert Byrd, a West
Virginia Democrat, said Bush's decision was long overdue, but very welcome.
The American steel industry has been decimated by wave after
wave of illegal below-cost foreign imports. If we do not act, if we do not take
advantage of every law on our books to fight against illegal trade, then we will
see our domestic steel industry disappear, Byrd said. Depending how a section
201 quota was structured, a long list of countries including the 15-member EU,
Japan, Brazil, South Korea, Mexico, China, Indonesia, Ukraine, India, South
Africa and Australia — could be affected.
Landslide win for Labour in polls
British Prime Minister Tony Blair's ruling Labour Party won a landslide victory in Thursday's general
election, according to a BBC exit poll. The BBC poll credited Labour with 44
per cent of the vote , the main opposition Conservative Party with 32% and the
Liberal Democrats with 17%.
The victory made Blair the most successful leader in his
Labour Party's 100-year history. Earlier, opinion polls had predicted that Blair
would crush the opposition despite grim warnings from former Conservative PM
Margaret Thatcher that the Britain was heading for an "elective
dictatorship" if he won easily.
China, Japan in talks to solve trade dispute
China's Foreign Trade Minister Shi Guangsheng said on
Thursday China and Japan were involved in talks to solve a simmering trade
dispute involving vegetables and cars. But Shi, who was speaking on the
sidelines of a meeting of trade ministers from the 21-member Asia Pacific
Economic Cooperation (APEC) forum, said he did not know when the negotiations
would yield a resolution.
We are in talks now, he said. But since it's ongoing
negotiations, I have no idea when there will be a result. The dispute between
Beijing and Tokyo started when Japan decided to place curbs on a number of
Chinese items such as spring onions and shiitake mushrooms. In response, China
has threatened it may restrict imports of Japanese cars.
ECB keeps rates on hold
The European Central Bank decided to keep rates on hold at
4.5 per cent on Thursday, even as economic data showed growth is slowing.
A Reuters poll of 45 analysts had 75 per cent predicting the
ECB would keep rates on hold. Many analysts now expect a rate cut in July.
The latest data from the 12 nations that form the euro zone
suggested the U.S. economic slowdown is now hurting growth. German unemployment
rose in May by a seasonally adjusted 18,000, the fifth rise in as many months.
The ECB surprised the markets on May 10 with a quarter-point
rate cut, after proclaiming such a move would be inconceivable while inflation
was above its target rate of 2 per cent. Inflation rose to 2.9 per cent in April
from 2.6 per cent in the month earlier and could gather pace in May.
BoE holds rate at 5.25%
The Bank of England left interest rates on hold at 5.25 per
cent on Wednesday, as was widely expected, a day before the general election.
All but one of 33 economists polled by Reuters expected the
rate-setting Monetary Policy Committee to hold fire on rates, which are still
the highest among the Group of Seven leading industrialised nations.
"The market thinks it is on safe ground and the MPC will
keep rates steady due to the election and the robust level of consumer
demand," economists at Bear Stearns wrote in a note to investors before the
decision. Public go to the polls on Thursday would have been seen as a political
Inflation in the world's fourth-biggest economy stood at 2
per cent in April, while the government has set a target rate of 2.5 per cent.
The MPC has cut interest rates three times this year to bolster consumer
confidence amid a slowdown in economic activity in the U.S. and Asia.
Indonesian MPs call for higher fuel prices
Indonesia's parliament is advocating further cuts to
government fuel subsidies, even if it means adding to the already steep 30 per
cent fuel price hike planned for this month, a chief legislator said on
The head of the special parliamentary budget committee, Benny
Pasaribu, said the government needed to reduce fuel subsidies from the current
$5.4 billion to 41.3 trillion to avoid a deficit blowout. If we stick to
proposed level of 60 trillion rupiah in subsidies, I'm afraid the (2001) budget
deficit will be huge and that will be a huge problem for the country, Pasaribu
Jobless rate in Japan at 4.8%
The Consul General of Japan in Karachi Kazumi Dekiba said on
Monday that the jobless rate has increased to 4.8% in Japan, which is very high
for the country.
Nasdaq lifted by chips
The Nasdaq composite index rose for the fifth time in six
sessions Thursday amid optimism that the semiconductor business, sluggish during
the last year, will improve in the months ahead.
The Nasdaq gained 46.27 points, or 2.1 per cent, to 2,264.00
while the Dow industrials rose 20.63, or 0.2 per cent, to 11,090.87. The S&P
500 gained 6.93, or 0.5 per cent, to 1,276.96.
More stocks rose than fell. Advancing issues on the New York
Stock Exchange topped declining ones 1,568 to 1,485 as 1 billion shares changed
hands. Nasdaq winners beat losers 2,100 to 1,657 as 1.6 billion shares traded.
The dollar edged lower against the euro and was little changed versus the yen.
Treasury securities fell.
Japanese techs hold onto early gains
Tokyo stocks moved higher by midday Friday after upbeat sales
projections by U.S. chip giant Intel boosted Japanese high-tech shares.
The benchmark Nikkei average ended the morning up 161.32
points or 1.21 per cent at 13,438.83, while the capital-weighted TOPIX index
rose 9.70 points or 0.74 per cent to 1,321.33.
Elsewhere in the region, Korean techs such as Samsung
Electronics and Hynix Semiconductor took the Kospi index higher, while Taiwan
and Hong Kong were also stronger.
In Australia, media giant News Corp and leading bank NAB
weakened, dragging the benchmark S&P/ASX200 down 8 points to 3428.6.
Mergers & Acquisition
DuPont—Squibb: Leading chemical company DuPont Co. shed
its drug unit Thursday, announcing an agreement to sell the operations to
drugmaker Bristol-Myers Squibb Co. for $7.8 billion in cash.
NetZero—Juno: Internet service providers Netzero Inc.
and Juno Online Services Inc. are merging in a $70 million all-stock deal to
form the second-largest ISP in the United States.
Cendant—Galileo: Cendant Corp., the world's largest
travel and hotel franchiser, said Thursday it is in takeover discussions with
electronic travel-reservations service Galileo International.
Heinz—Borden: H.J. Heinz Co. agreed Wednesday to
acquire the pasta sauce, dry bouillon and soup business of Borden Foods Corp.
for more than $270 million.
Cadbury—Orangina: Cadbury Schweppes said on Wednesday
it was close to an agreement to buy Pernod Ricard's soft drinks business for
Maytag—Amana: Maytag Corp. is buying rival Amana
Appliances for $325 million in cash and stock in a deal that would shore up
Maytag's lineup of refrigeration products.
FleetBoston—Liberty: FleetBoston Financial Corp. agreed
late Monday to acquire the asset management unit of Liberty Financial Companies
Inc. in an all-cash deal worth just over $1 billion.
Alcatel—Thomson Multimedia: French telecoms equipment
maker Alcatel has agreed to sell its Internet access modem business to Thomson
Multimedia for $389 million in shares.
Bonds slide in late trade
Most U.S. Treasury prices reversed course and traded lower by
on Thursday as dealers took profits on a brief run-up in prices that followed
government news that jobless claims rose in the past week to their highest level
Two-year notes rose 1/32 from their Wednesday closing price
to 100-9/32, pushing their yield. Five-year notes fell 4/32 to 99-1/32, yielding
4.85 per cent. Benchmark 10-year notes fell 12/32 to 97-23/32, yielding 5.30 per
cent. Thirty-year bonds fell 31/32 to 95-4/32, yielding 5.72 per cent.
Mortgage rates edge lower
Mortgage rates dipped lower in the latest week on new key
economic data pointing to continued economic weakness.
The benchmark 30-year fixed-rate mortgage (FRM) averaged 7.20
per cent for the week ending June 8.
The average this week for a 15-year fixed-rate mortgage was
6.74 per cent.
One-year adjustable-rate mortgages (ARMs) averaged 5.85 per
cent, down from last week's average of 5.89 per cent.
U.S. jobless claims jump
New jobless claims rose to the highest level in nearly nine
years in the United States last week, the government said Thursday, a sign that
the labor market is weakening further.
New claims for state unemployment benefits jumped to 432,000
last week from 419,000 the prior week, the Labor Department reported. It was the
highest since Sept. 19, 1992, when 438,000 people filed new claims for jobless
Europe ends mixed
European shares lacked direction on Thursday as major bourses
ended mixed with no change in interest rates and a quiet Wall Street start.
London's FTSE 100 ended 0.7 per cent higher at 5,940.8 with
market heavyweight Vodafone (VOD) boosting the index with a rise of 3.1 per cent
as investors considered it oversold in recent days.
In Paris, the CAC 40 blue chip index closed down 0.8 per cent
at 5,453.39. Tech stocks were hit by worries about U.S. earnings, with chipmaker
Intel due to present its outlook after markets closed .
Frankfurt's electronically traded Xetra Dax was little
changed in late trading, slipping just 0.2 per cent to 6,177.87.
In Amsterdam, the AEX index was 0.2 per cent down, while the
SMI in Zurich was 0.1 per cent higher and Milan's MIB30 index rose 0.6 per cent.
EU agrees new bid rules
The European Union reached agreement on Wednesday over
proposals for a common code on hostile takeover bids.
The new rules are part of moves by the EU to break down
barriers to cross-border mergers, while protecting minority shareholders, as the
EU aims to become the world's most dynamic economy by 2010.
"It's a victory for Europe," said Sven-Eric Soder,
a representative of Sweden, which holds the revolving EU presidency and brokered
the final part of the deal.
One of the stumbling blocks in approving the new rules was
the issue of defensive, or "poison pill", measures taken by targets of
Germany offers 3G relief
Germany will allow cash-strapped mobile phone companies the
opportunity to share the cost of rolling out high-speed wireless networks.
RegTP, the German telecoms regulator, said on Tuesday the six
third-generation mobile phone licence holders could share radio base stations
and the towers and antennae that sit on top of them.
The German auction to sell six high-speed mobile phone
licences, giving the operators the opportunity to offer video and Internet
services to handsets, raised 50.5 billion ($43 billion) for the government.
U.S. productivity tumbles
American worker productivity fell by the largest per centage
in eight years during the first quarter, the government said Tuesday, a hint
that the sharp slowdown in the world's largest economy might not end soon.
Productivity, a measure of worker output per hour, fell at a
revised 1.2 per cent annual rate in the quarter, the Labor Department said, the
steepest falloff since a 5 per cent slump during the first three months of 1993,
after growing a revised 2 per cent in the fourth quarter. Wall Street forecasts
were for a revised drop of 0.7 per cent after the initially reported 0.1 per
cent dip, according to Briefing.