02 - 08, 2001
ADB sees fragile BD growth prospects
Bangladesh has produced foodgrains in excess of domestic
requirements for the last two consecutive years while the manufacturing sector
has sharply recovered during the current fiscal year.
Despite these encouraging developments, the Asian Development
Bank (ADB) in its latest quarterly update on Bangladesh said that the country's
growth prospects "are fragile" in the medium term due to mounting
pressures on fiscal and external balances. The Quarterly Economic Update (QEU)
for June 2001 was formally released this evening in Dhaka.
It said that at the beginning of FY2001, growth prospect for
the year appeared somewhat bleak because of serious flooding in the
south-western region of the country but the overall impact on the national
economy was limited. The economy remained robust and GDP growth rate in FY2001
is estimated to be about 6 per cent, close to 5.9 per cent growth rate achieved
Depending on the final output of the boro rice crop, the QEU
pointed out, overall foodgrain production is conservatively estimated at between
26.4 to 27 million tons, implying a growth rate of 6 to 8.4 per cent over the
preceding year. The foodgrain production, therefore, expected to be about two
million tons more than domestic requirement (455-gm/daily/per capita).
There is, however, one negative aspect. During July 2000 -
March 2001, the price of coarse rice declined by 17 per cent in nominal terms
compared to the corresponding period of FY1999. In some parts of the country,
farmers are selling paddy below production cost. This low price, though
benefiting poor, could induce some amount of diversion of production towards
other crops in the coming years.
Industrial growth estimated at 8.7 per cent in FY2001 as
against 6.7 per cent in FY2000, due mainly to surge in manufacturing output.
Growth in manufacturing sector is estimated at 9.1 per cent - substantially
higher than 4.8 per cent in the previous year.
Fed saw weakness in May
Federal Reserve policy makers saw lingering sluggishness in
the U.S. economy when they voted to cut short-term interest rates by half a per
centage point in May, according to minutes of the meeting released Thursday.
"In the Committee's discussion of current and
prospective economic developments, members commented that the slowdown in [U.S.
economic] expansion ... was likely to be more prolonged than they had
anticipated earlier," said the minutes of the May 15 meeting. "(I)ndeed
... it was not entirely clear that the slowing in the growth of the economy had
Given economic conditions at the time — especially a
slowdown in industrial production and softness in the labor market — all Fed
policy makers agreed it was necessary to cut the central bank's target for the
federal funds rate, an overnight bank lending rate.
The only point of contention was the size of the cut. Nine of
the 10 policy makers voted to cut rates by half a per centage point, from 4.5
per cent to 4.0 per cent, while Kansas City Fed Governor Thomas Hoenig preferred
a quarter-point cut.
The Fed is charged with the task of encouraging U.S. economic
activity while keeping inflation in check, and it does this by manipulating the
fed funds rate. On Wednesday, it cut the rate again by a quarter-percentage
point to 3.75 per cent. Minutes of this week's meeting are not yet available.
Though Fed policy makers said they saw some risk of inflation
from all the money it's pumped into the economy this year — slashing interest
rates from 6.5 per cent to 3.75 per cent — they also thought strong
competition would help keep prices and inflation down.
Policy makers thought the economy would most likely begin to
recover later in 2001, but it would be important for businesses to unload the
backlog of unsold goods currently clogging up their warehouses and for consumers
to keep spending as confidently as they have so far.
IMF seeks tougher Russian monetary policy
The International Monetary Fund has called on Russia at the
end of a five-day mission to tighten monetary policy to check inflation and keep
closely to spending plans in its current budget.
An IMF statement issued in Moscow late on Friday said the
mission's main purpose was to discuss Russia's macroeconomic outlook for the
rest of the year and plans for the 2002 budget. As to 2001, the mission was
primarily concerned with modifications to policies needed to reduce inflation,
which is running above what the mission considers consistent with the
authorities' target for the year as a whole, it said.
In this regard, the mission recommended some tightening of
monetary policy, as well as maintaining expenditures within the limits in the
2001 budget. President Vladimir Putin's top economic adviser, Andrei Illarionov,
has said that the government will have difficulty staying within a 14-16 per
cent inflation forecast for 2001 — already higher than the original target of
12-14 per cent.
Korea to fight steel limits
A South Korean trade official said Wednesday the nation is
considering taking action with Japan and the European Union against Washington's
move to restrict steel imports from abroad.
The three accounted for 32 per cent of U.S. steel imports
"We're in close consultations with related countries,
including Japan and the European Union, and we'll cooperate with them in areas
where we have common interest," said Noh Kun-ki, an official at the
Ministry of Commerce, Industry and Energy.
Noh did not elaborate. But his ministry said Monday that it
was checking whether the U.S. moves violate rules set by the World Trade
Organization, which regulates trade rules among most of the world's major
Early this month, President Bush ordered an investigation
under a U.S. trade regulation known as Section 201 to determine if U.S.
producers are being seriously harmed by imported steel. Friday, U.S. Trade
Representative Robert Zoellick formally asked the U.S. International Trade
Commission to initiate the investigation.
French No. 3 bank formed
French financial services group CDC and savings bank CNCE
will announce a banking alliance on Monday, a report said.
CDC (Caisse des Depots et Consignations) and CNCE (Caisses
d'Epargne) will create a joint holding company with 17 billion ($14.6 billion)
of shareholder funds, the Wall Street Journal reported.
The combined bank will become France's No. 3 bank behind
Credit Agricole and BNP Paribas (PBNP). The merger would create an integrated
banking group spanning retail banking, investment banking and insurance.
The merger will give the new group greater power to negotiate
tie-ups with other banks around Europe. CDC will own 50.1 per cent of the new
group and Caisse d'Epargne would own the remaining 49.9 per cent, the paper
Consolidation among European financial companies has gathered
pace over the last few months, especially between banks and insurance companies.
In March, German insurer Allianz bought Dresdner Bank and
last year Abbey National acquired Scottish Provident.
Overseas rate cuts sought
The Bush administration wants to see Europe and Japan cut
interest rates — even if it means a stronger value of the dollar in the short
term, according to a published report Thursday.
The Wall Street Journal said administration officials hope
that cuts in Japan and Europe will eventually invigorate currently slack markets
for U.S. products overseas. But the story said the officials realize the likely
immediate effect of such cuts would be a rise in the value of the dollar versus
euro it more difficult for U.S. companies to compete in those markets.
The lower rates would make U.S. investments relatively more
attractive, which in turn would lift the value of the dollar. But the article
quoted unnamed administration officials as saying they would prefer to let
markets set exchange rates and plan no steps to curb the rise in the value of
Court vacates MSFT ruling
A federal appeals court on Thursday overturned a lower
court's ruling that Microsoft be broken into two companies as a remedy for
The U.S. Court of Appeals for the District of Columbia
vacated in full the lower court's final judgment and remanded the case to a new
Broad rally on Wall St.
U.S. stocks rallied Thursday on renewed optimism in the
economy, one day after an interest rate cut by the Federal Reserve, while news
that a federal appeals court voided the breakup of Microsoft stoked the gains.
The Dow Jones industrial average, snapped a four-session
losing streak, gaining 131.37 points to 10,566.21. The Nasdaq composite index
rose for the fourth straight session, advancing 50.90 points, or more than 2 per
cent, to 2,125.64, while the S&P 500 advanced 15.16 to 1,226.23.
More stocks rose than fell. Nasdaq winners topped losers
2,323 to 1,404 as 1.95 billion shares traded. Advancing issues on the New York
Stock Exchange topped declining ones 1,886 to 1,214 as 1.3 billion shares
Tokyo buoyant on Wall St gains
Tokyo stocks jumped more than 2 per cent by midday Friday
following good gains on Wall Street. Other Asian markets also rose.
The benchmark Nikkei 225 average ended the morning up 2.12
per cent at 12,948.30 after rising as high as 12,985.21. The capital-weighted
TOPIX index rose 1.53 per cent to 1,298.37.
Hang Seng index to a 1.15 per cent gain by midday. It put on
150 points to 12,981.54.
In Australia, the benchmark S&P/ASX was briefly lifted
into record territory by advances in heavyweight media group News Corp and
resources giant BHP Billiton. The index was up 0.5 per cent or 17.2 points at
3437.7, after reaching a record 3449.5 earlier in the day.
In Southeast Asia, markets in Malaysia and Singapore also
were up strongly by midday Friday.
Refineries blackout exempt
California regulators, heeding oil companies' pleas and a
request from Gov. Gray Davis, on Thursday approved a plan exempting refineries
from rolling blackouts during power emergencies.
Bonds down in late trade
U.S. Treasurys fell sharply on Thursday after the minutes
from the Federal Reserve's May 15 meeting revealed dissent among policy makers
and signaled to investors that the central bank could be even closer to wrapping
up its interest rate-cutting campaign.
Two-year notes fell 9/32 to 99-8/32, yielding 4.26 per cent.
Five-year notes fell 18/32 to 98-21/32, yielding 4.94 per cent. Benchmark
10-year notes fell 23/32 to 97-14/32, yielding 5.34 per cent. Thirty-year bonds
fell 29/32 to 95-16/32, yielding 5.69 per cent.
Mortgage rates hold steady
Mortgage rates held steady following another interest rate
cut — the sixth this year — by the Federal Reserve on Wednesday.
The benchmark 30-year fixed-rate mortgage (FRM) averaged 7.11
per cent for the week ending June 28.
The average this week for the 15-year fixed-rate mortgage was
6.63 per cent.
One-year adjustable-rate mortgages (ARMs) averaged 5.77 per
Mergers & Acquisitions
Yahoo!—Launch Media: Yahoo! Inc. said Thursday it is
buying Internet music site Launch Media Inc. in a deal valued at some $12
million, a move to boost its entertainment content.
Tyson—IBP: Poultry processor Tyson Foods Inc. agreed to
acquire IBP Inc. in a cash and stock transaction under similar terms to a
previous agreement, creating the largest U.S. meat company, the companies said
Deutsche: Deutsche Bank is in talks with three cable
network operators that could lead to the sale of its cable business for $2
Washington—Dime: Washington Mutual, the nation's
largest savings and loan, agreed Monday to acquire Dime Bancorp in a $5.2
billion stock and cash deal. The move will give the thrift access to the
nation's biggest metropolitan market.
Barrick—Homestake: Barrick Gold Corp. agreed to buy
U.S. gold mining rival Homestake Mining Co. in a $2.3 billion stock deal that
will create the world's second-largest gold producer.
Misys—Sunquest: British software company Misys agreed
on Monday to buy Sunquest Information Systems of the U.S. for $404 million in
DBS—OUB: Singapore-based DBS Group made an unsolicited
$5.2 billion stock and cash bid for Overseas Union Bank (OUB) Friday to cement
its position as the biggest lender in the city state.
U.S. jobless claims fall
Fewer Americans lined up for unemployment benefits last week,
the government said Thursday, a possible sign of stabilization in the job
New claims for state unemployment insurance benefits fell to
388,000 from a revised 404,000 the prior week, the U.S. Labor Department
reported. Wall Street economists polled by Briefing.com had forecast a reading
of about 420,000.
Gasoline prices slide
The millions of U.S. motorists planning to hit the roads this
July 4 holiday may have a new reason to light up fireworks: Gasoline pump prices
have fallen 10 per cent ahead of the peak summer vacation season.
The national average price of gasoline fell 17 cents from
record highs last month to $1.55 a gallon, or 11 cents below last year,
according to the AAA survey of 60,000 service stations.
Europe stocks end mixed
Europe's major bourses ended mixed Wednesday as investors on
both sides of the Atlantic awaited an interest rate decision by the Federal
Reserve at the end of a two-day policy-setting meeting.
London's FTSE 100 rose 52-point, or 0.9. per cent, to
5,607,90, off its 12-week low, buoyed by a rebound in banks.
In Paris, the blue chip CAC-40 finished down 0.65 per cent to
5.057.72, with winners and losers were nearly evenly matched.
Frankfurt's electronically traded Xetra Dax closed 0.3 per
cent lower at 5,830.22.