16 - 22, 2001
Eurozone to speed up structural reforms
With growth in the 12-member European currency zone slowing
down to almost 2 per cent, eurogroup finance chiefs on Tuesday promised speedier
structural economic reforms to boost bloc-wide recovery.
"There is a decrease in growth to 2 to 2.5 per cent in
the eurozone," Belgian Finance Minister and eurogroup president Didier
Reynders admitted after a meeting of eurozone finance chiefs. "But we are
hoping it will be possible to have a better situation in 2002."
In April, the EU had forecast 2.8 per cent growth for 2001.
But with only 0.5 per cent growth in the first quarter and likely deceleration
in second and third quarters, ministers admitted eurozone economies were heading
for a sharper-than-expected slowdown.
Flagging growth put the onus on eurozone governments to work
harder on badly-needed economic reform, eurozone officials warned.
"We must use all our growth potential," cautioned
French Finance Minister Laurent Fabius while European Monetary Affairs
Commissioner Pedro Solbes warned: "structural reform must continue to be
implemented with vigour."
Euroland officials blame the bloc's sharper-than-envisaged
slowdown on 'externally induced' factors, including flagging growth in the
United States and Japan. But there is growing recognition that
higher-than-expected domestic inflation, generated by rising fuel and food
prices, are also dampening Europe's economic performance.
"Headline inflation was 3.4 per cent in the euro area in
May but this may have been the peak," said Solbes. But inflation rates were
on the way down, he predicted.
"Most recent data point to a deceleration of inflation
in the second half of the year. We expect inflation to drop below the European
Central Bank target of 2 per cent early in 2002," the EU monetary chief
Singapore economy shrinks on tech slump
Singapore's economy shrank 0.8 per cent in the June quarter
and more pain is to come, its government said Tuesday.
The contraction represents a dramatic downturn for
Singapore's export-oriented economy, which grew 4.6 per cent in the first
quarter of 2001 and a remarkable 11.0 per cent in the December 2000 quarter.
Singapore's Ministry of Trade and Industry blamed the global
slump in information technology goods and services for the setback, along with
the weakness in regional and international economies.
It said the sharp slowdown in the global electronics industry
and in all major economies, including the U.S., Japan and Europe, was
significantly affecting Singapore's outlook.
The Singapore dollar was at an 11-year low against the U.S.
dollar, falling to S$1.833 in afternoon trading.
"Growth will remain weak in the third quarter, with a
slow recovery expected in the fourth quarter," the ministry said Tuesday in
releasing its advance GDP estimates.
It said that in this "adverse environment", it was
revising its 2001 growth forecast to 0.5 to 1.5 per cent.
In April, the ministry had revised its earlier GDP growth
forecast to 3.5 to 5.5 per cent.
On Tuesday, it said advance estimates for the June quarter
showed a year-on-year decline of 0.8 per cent.
It said on an annualised quarter-on-quarter basis, real gross
domestic product declined by 10.1 per cent.
Singapore relies heavily on exports of electronics and other
technology-related items. The U.S. takes about 20 per cent of Singapore's
exports but weaker demand for integrated circuits is hurting this sector.
"Singapore's economy is more closely linked to the U.S.
technology sector than the general economy," the ministry said. "Due
to the huge excess capacity built up over the boom years, this sector is weaker
and will take longer to recover."
Singapore's goods-producing industries are estimated to have
contracted by 6.6 per cent in the June quarter.
Fed official sees recovery
The U.S. economy will likely regain strength in the second
half of 2001, though trouble spots remain that could frustrate a recovery, a
Federal Reserve policy maker said Monday.
Michael Moskow said the combination of aggressive interest
rate cuts by the Fed, tax cuts, and falling energy prices will help boost
consumer demand, shrink bloated inventories, and prop up the shaky economy this
"These factors add up to an outlook in which economic
growth gradually improves later in 2001, and continues into next year," he
said in a speech prepared for delivery to the Greater Milwaukee
Committee that largely echoed the last economic address he
delivered on May 30.
But Moskow — who is a voting member on the Fed's
policy-making committee this year, following the usual rotation among regional
Fed presidents ñ noted that further weakness in economic growth abroad and
changes in the direction of consumer confidence and energy costs could derail an
Japan economy "has deteriorated"
Japan's cabinet office on Wednesday reaffirmed its gloomy
take on the country's business prospects.
Japan's economy "has deteriorated," with personal
spending and corporate investment both weak, the government said.
For the first time in six months, the government did not
downgrade its outlook. But it toughened its tone about the decline.
Corporate profits have flattened, the report said, and
business sentiment has soured. An official said there is no sign the economy has
Takenaka blames tech cycle Economics minister Heizo Takenaka
blamed the current weakness on the slowdown in worldwide technology spending. He
hopes to see a rebound when the tech cycle rebounds, perhaps next year.
Indian growth rate seen at 6.3pc
The Centre for Monitoring the Indian Economy, an independent
body of eminent Indian economists, has projected a growth rate of 6.3 per cent
of the GDP during the current year as against 5.2 per cent set by the National
Sample Survey, a government organization only recently.
The CMIE's estimate after the current spell of monsoons which
has turned out to be far more extensive than most people had expected. According
to meteorologists, barring its scanty fall out in Tamil Nadu, the monsoon has
been normal or above normal in virtually the rest of the country. This is an
eventuality, which the national sample survey could not have possibly foreseen.
Based on its estimates of an aggregate nine per cent growth
in the agricultural sector, the CMIE has set foodgrain production to increase
8.2 per cent and that of non-foodgrain to increase by 10.3 per cent. The CMIE
has said that the kharif crop is expected to register a sharp increase this
year, a factor which the NSS had been doubtful about.
Tokyo rally runs out of puff
Tokyo stocks drifted down by midday on Friday as concerns the
high-tech rally could be a one-off event outweighed a Microsoft-inspired surge
on Wall Street.
The Nikkei 225 average ended the morning session down 0.32
per cent or 39.44 points at 12,368.51. The broader TOPIX index lost 0.22 per
cent to 1,245.93, hurt by falls in Japan's dominant mobile phone carrier NTT DoCoMo.
The Nikkei continued to fall in afternoon trade, and was down
mor than 90 points to 12,317.06.
In Seoul, the Kospi drifted into negative territory after
gains during the morning. By mid-afternoon it was down 6.62 points to 553.33.
Taiwan's Taiex also reversed course to lose more than 100 points to 4520.75.
Hong Kong's Hang Seng index also opened higher, then slipped back to be down 10
points to 12,649.40 in early afternoon trade.
Powerful rally on Wall St.
The major U.S. stock indexes rallied Thursday, as investors
seized on a slew of good corporate news as a reason to pour money into the
The Nasdaq composite index jumped 103.71 points, or more than
5 per cent, to 2,075.75. The Dow Jones industrial average rose 237.97 points to
10,478.99, while the S&P 500 gained 27.95 to 1208.13.
More stocks rose than fell in steady volume. Nasdaq winners
topped losers 2,135 to 1,322 as 1.86 billion shares traded. Advancing issues on
the New York Stock Exchange topped declining ones 1,959 to 1,163 as 1.38 billion
New Mexico, MSFT settle
New Mexico became the first state to resolve antitrust
charges against Microsoft Thursday, with the software company agreeing to pay
the state's attorney fees and costs.
As part of the settlement, New Mexico Attorney General
Patricia Madrid said in a statement her state will still share in the final
result of the four-year antitrust lawsuit, led by the U.S Department of Justice.
Seventeen states still remain in the case.
AMD: Advanced Micro Devices said it earned $17.4 million,
or 5 cents per share, during the quarter ended July 1. That compares with a
profit of $124.8 million, or 37 cents per share, during the same quarter a year
MBNA: MBNA Corp., the leading U.S. credit card issuer,
said Thursday its second-quarter profit rose 33 per cent. The company said net
income in the second quarter rose to $380.1 million, or 43 cents per share, from
$285.4 million, or 34 cents per share, a year earlier.
Enron: Enron Corp., the Houston-based company said strong
results from its wholesale and retail electric business led it to post net
income of $404 million, or 45 cents a diluted share, up from $289 million, or 34
cents a share, a year earlier.
First Union: First Union Corp., the Charlotte, N.C.-based
banking company earned $649 million, or 66 cents a share, excluding special
items in the quarter.
Tenet: Tenet Healthcare Corp., the No. 2 U.S. hospital
operator, said Wednesday its fiscal fourth-quarter profit rose 40.6 per cent as
aging baby-boomers made more visits to hospitals. Profit from operations rose to
$225 million, or 68 cents a share, in the quarter ended May 31 from $160
million, or 51 cents, a year earlier.
Mergers & Acquisitions
AOL—IPC: AOL Time Warner Inc. and British-based IPC
Media have been in talks for months, the Web site of the Financial Times said,
which pegged the deal at $1.5 billion-to-$1.75 billion.
United Airlines—US Airways: United Airlines and US
Airways Group Inc. formally asked federal regulators for a decision on their
proposed merger, a move seen as the last step before pulling the plug on the
all-but-dead $4.3 billion acquisition.
Cisco—AuroraNetics: Marking its first acquisition so
far this year, data-networking equipment maker Cisco Systems on Wednesday said
it plans to buy AuroraNetics, which designs chips used in fiber-optic networks,
for roughly $150 million in stock.
Hess—Triton: Amerada Hess Corp. agreed Tuesday to
acquire Triton Energy Ltd. for $2.7 billion in cash, in a move that will boost
the energy firm's oil and gas production.
Mars—Royal Canin: U.S. candy and pet-food maker Mars
agreed on Tuesday to buy control of French pet-food maker Royal Canin for 819
million euros ($700 million).
Deutsche Bank—SeoulBank: Deutsche Bank said Tuesday its
private-equity arm, DB Capital Partners, has submitted a letter of interest to
buy part of SeoulBank to the Korea Deposit Insurance Corp. (KDIC).
Alitalia: Italian airline Alitalia on Monday secured an
alliance with Air France and Delta Airlines of the U.S. after several thwarted
link-up bids. An alliance between the three carriers ends the Italian airline's
long search for partnerships amid consolidation of services and routes in the
industry as competition intensifies and fuel prices rise.
Argentina spurs U.S. bonds
U.S. Treasury prices surged higher in late afternoon trade on
Thursday, reacting to fears that Argentina could be forced to restructure its
debt. Such fears triggered a sharp slide in Argentine stocks and bonds and a new
wave of flight-to-quality buying of U.S. government debt.
Two-year notes were up 1/32 to 99-22/32, yielding 4.04 per
cent. Yields on two-year notes stood at 4.25 per cent just over a week ago.
Five-year notes had risen 4/32 to 99-14/32, yielding 4.75 per cent, while
benchmark 10-year notes were up 12/32 at 98-7/32, yielding 5.24 per cent.
Thirty-year bonds were up 15/32 at 96-2/32, yielding 5.65 per cent.
Mortgage rates edge up
Mortgage rates rose for the second time in as many weeks as
worse-than-expected unemployment numbers suggest a slower recovery for the
The benchmark 30-year fixed-rate mortgage (FRM) averaged 7.21
per cent for the week ending July 13. The average this week for the 15-year
fixed-rate mortgage was 6.76 per cent. One-year adjustable-rate mortgages (ARMs)
averaged 5.79 per cent.
Techs push Europe higher
Europe's main markets all closed sharply higher Thursday
after U.S. technology stocks sparked a broad rally on Wall Street.
London's FTSE 100 closed 88.6 points, or 1.6 per cent, higher
at 5,480.5, with eight of the top 10 per centage gainers all technology,
software and telecom stocks.
In Paris, the CAC 40 blue chip index ended up by nearly 1 per
cent, or 39.2 points, at 4,953.86, and Frankfurt's electronically traded Xetra
Dax climbed 73.1 points, or 1.3 per cent, to 5,874.86.
In Amsterdam, the AEX index climbed 0.6 per cent and the SMI
in Zurich was 1.5 per cent higher. Milan's MIB30 index ended flat.
The pan-European FTSE Eurotop 300, a broader index of the
region's largest stocks, was up 1.5 per cent, with the information technology
sector leaping more than 6 per cent, computing up 5.8 per cent and telecoms
rising 2.7 per cent.
U.S. jobless claims soar
New jobless claims soared in the United States last week, the
government said Thursday, topping analysts' expectations and pointing to
continued weakness in the nation's job market.
New claims for state unemployment benefits rose to 445,000 in
the week ended July 7 -- their highest level since July 25, 1992 -- from a
revised 403,000 the prior week, the Labor Department reported. Analysts surveyed
by Briefing.com had forecast new claims of only 390,000.
Calif. faces gas shortage
California, already struggling with tight supplies of
electricity, soon could face shortages of gasoline due to required use of
ethanol, according to a published report Thursday.
The Wall Street Journal reported that the California Air
Resource Board is expected to release a survey Thursday showing ethanol supplies
will be tight, which could lead to higher gasoline prices.
By the end of next year, California is to phase out the use
of methyl tertiary butyl ether, or MTBE, the fuel additive currently used to cut
auto emissions that is a source of its own environmental concerns due to leakage
into groundwater supplies.
Bush gives Olson Fed nod
President Bush said Tuesday he will nominate Mark Olson,
former president of the American Bankers Association, to fill a vacancy on the
Federal Reserve board.
Olson, a native of Fergus Falls, Minn., was president of the
American Bankers Association, a lobbying group for the banking industry, from
1986 to 1987. He is a partner in Ernst & Young LLP and has been president of
Security State Bank in Fergus Falls since 1976.