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July 23 - 29, 2001

Bush suggests grants

President Bush proposed Tuesday that the World Bank and other international lending institutions dramatically increase the share of their resources provided as grants rather than loans.

In a speech at the World Bank's Washington headquarters, Bush also called on the world's lending institutions to make major increases in loans and grants aimed at boosting education in Africa and other poor and developing nations. Many of those countries are burdened with huge accumulated debts.

"The United States is and will continue to be a world leader on responsible debt relief," Bush said.

"I also propose the World Bank and other development banks dramatically increase their share of funding provided as grants rather than loans to the poorest countries," Bush said. "Specifically, I propose that up to 50 per cent of the funds provided by the developing banks to the poorest countries be provided as grants for education, health, nutrition, water supplies, sanitation and other human needs."

"It would be a major step forward," the president said.

Bush called his proposals "compassionate conservatism at an international level."

Bush's suggestion that the World Bank substitute grants for many of the heavily subsidized loans it now makes is an effort to keep the world's poorest nations, already struggling under mountains of old debt, from building new debt burdens.

But critics say unless the administration offers to provide more money to the World Bank, the bank would end up with less money to help poor nations because the bank now uses the repayments of its old loans to make new loans.

World Bank officials estimate that if the United States ended up persuading other bank members to agree to convert half of the bank's loans to grants, the United States would have to double its current $803 million annual contribution just to keep the bank's pool of aid at current levels.

Hardline group threatens G8 battle

Anti-globalisation campaigners are threatening to storm a security cordon in place around the G8 summit which opens in Italy on Friday.

The sealed off "red zone" in the heart of Genoa is expected to be the focus of protests as world leaders meet inside the cordon.

But the first major demonstration, on Thursday, passed off peacefully with an estimated 50,000 people campaigning in support of a range of causes from immigrant rights to the environment.

Police in riot gear watched as the demonstration snaked through Genoa's streets with a convoy of eight police vans in the lead, but the atmosphere remained largely festive.

March organisers had agreed with authorities earlier in the week that the demonstration would bypass the "red zone" and not attempt to enter the off-limits area.

But the hardline Italian group Tute Bianche, or White Overalls, has vowed to smash through the cordon.

Group leader Luca Casarini told the Reuters news agency thousands of demonstrators would attempt to attack the summit venue on Friday.

Huge steel fences and concrete barricades have been built to cordon off the "red zone" from the rest of the city with tight security covering all entry points.

Only security pass holders and residents are being allowed inside the "red zone" ring of steel by police for the duration of the G8 summit — an annual meeting of the leaders of the world's leading industrialised nations and Russia.

Up to 100,000 campaigners — the majority expressing a desire for peaceful protest — will be in Genoa where 15,000 police will be on duty as part of a $110 million security operation.

Surface-to-air missiles, fighter jets, and naval ships form part of the security operation, which is also responsible for defending the G8 from extremist attacks.

ECB keeps rates frozen

The European Central Bank announced on Thursday it is keeping its key interest rate steady at 4.5 per cent.

The move had been widely anticipated after the central bank's president, Wim Duisenberg, recently said the ECB believed its rates were "appropriate for some time to come", despite mounting evidence of a euro-zone economic slowdown.

John Butler of investment bank DKW told CNN: "It was unlikely that we would see dramatic action from the ECB in cutting rates such as we've seen in the United States."

"The economic slowdown in the euro zone has not been as rapid as that in the U.S., so Europe's central bank can afford to be more cautious."

Inflation figures released on Wednesday by Eurostat, the European Union's statistics office, showed the rate of consumer price rises in the region slowed year-on-year in June for the first time in five months.

Japan's debt scrutinized

The chief of Japan's financial watchdog said Thursday the amount of bad debts hobbling the country's top banks was 25 per cent more than banks have declared, but he said public money should not be used to clean up the mess.

Hakuo Yanagisawa, head of the Financial Services Agency, said that inspections by his agency had shown the size of non-performing loans held among Japan's 15 major banks at about ¥18 trillion ($145 billion).

He said this was about 25 per cent more than the banks themselves had estimated.

In a government package released in April, Japan set a deadline for top banks to eliminate loans to borrowers in or at risk of bankruptcy — totaling ¥11.7 trillion ($95.24 billion) — in two years, or three years for new such loans.

European markets tumble

Europe's main markets fell in midday trading on Friday, after downbeat U.S. forecasts rattled technology stocks.

London's FTSE 100 index fell 67.5 points, or 1.2 per cent, to 5,369.9, with software company Sage (SGE) the main loser, down 6.9 per cent, followed by one of the biggest distributor of electrical parts, Electrocomponents (ECM), down 6.2 per cent.

In Paris, the CAC 40 blue chip index fell 60.36 points, or 1.2 per cent, to 4,870.03 with Europe's top computer services group Cap Gemini Ernst & Young (PCAP) led decliners, falling 6.6 per cent.

In Frankfurt, the electronically-traded Xetra Dax fell 88.53 points, 1.5 per cent, to 5,741.16, without showing a single riser. It was led lower by one of Germany's biggest banks HypoVereinsbank (FHVM), down 4.4 per cent.

In Amsterdam, the AEX index shed 0.6 per cent while the SMI in Zurich was down 0.5 per cent. Milan's MIB30 was more than 1.4 per cent lower.

Australia, Korea lead markets down

Stock markets in Australia and Korea ended the morning lower Friday as domestic factors outweighed Wall Street's rise.

In Australia, the benchmark S&P/ASX200 was down 3.2 points to 3391.2, reflecting weakness in media and bank stocks.

In Korea, the Kospi was off 8.49 points at 537.26 after heavyweight Samsung Electronics reported a fall in revenue and said it would reduce capital spending.

Markets were up in New Zealand and Taiwan, with the Taiex picking up about 40 points to 4230.87 after a difficult week.

Results

Ericsson: Sweden's Ericsson posted a net loss of 14.2 billion Swedish crowns, or 1.81 crowns a share, in the three months to June 30. That compares to a profit of 10.2 billion crowns, or 1.28 crowns a share, in the year-ago period.

Electrolux: Electrolux, the world's No. 1 household appliance maker, said profits after one-time items fell to 3.25 billion Swedish crowns ($305 million) from 4.07 billion crowns a year ago.

Samsung: Samsung Electronics made a net profit of $675.8 million (880 billion won) in the second quarter, down from 1.24 trillion won in the first quarter.

Nortel: Nortel Networks Corp., reported net losses from continuing operations of $1.55 billion, or 48 cents a share compared to $637 million or 21 cents a share for the same time last year.

Sun: Sun Microsystems said it earned $134 million, or 4 cents per share, during its fiscal fourth quarter ended June 30. That's a sharp decline from a profit of 20 cents per share during the same quarter a year ago.

ebay: For the quarter ended June 30, ebay Inc. reported second-quarter earnings of $33.5 million, or 12 cents a share, compared with $10 million or 5 cents a share a year earlier.

Gateway: Personal computer maker Gateway Inc. reported a second-quarter loss before taxes of $9 million, or 2 cents per share, down from earnings of $118.2 million, or 36 cents per share, in the year-ago quarter.

Lilly: Eli Lilly & Co. said its net profit rose 24 per cent to $827.7 million, or 76 cents a diluted share, in the quarter, from $666.2 million, or 61 cents a share, a year earlier.

Dell: Dell Computer Corp. said it expects to report sales of $7.6 billion and earnings of 16 cents a share for its second fiscal quarter ending in August, excluding a $700 million charge for previously announced job cuts and restructuring.

Whirlpool: Whirlpool Corp., reported second-quarter earnings of $88 million, or $1.30 per share, before charges and a one-time loss. That's compared with $121 million, or $1.66 per share, a year earlier.

E*Trade: Online broker E*Trade Group Inc. reported earnings from continuing operations of $5.4 million, or 2 cents a share, compared with a loss of $0.2 million, or no earnings per share, a year earlier.

J.P. Morgan: J.P. Morgan Chase & Co. reported earnings of $690 million, or 33 cents a diluted share, down from $1.76 billion, or 89 cents a share, in the year-earlier quarter.

FleetBoston: FleetBoston reported second-quarter profit shrunk 45 per cent, earning $531 million, or 48 cents a share, compared with $971 million, or 87 cents a share, in the year-earlier quarter.

Intel: Chipmaker Intel Corp. said it earned $854 million, or 12 cents per share, during the quarter excluding acquisition-related costs.

Pfizer: Pfizer earned $1.89 billion, or 30 cents per diluted share, from continuing operations excluding special items.

Johnson & Johnson: Johnson & Johnson earned $1.58 billion, or 51 cents a share, excluding special items in its second quarter, up 16 per cent from the year-ago period.

Bonds beat a retreat

U.S. Treasurys slipped on Thursday as investors cashed in on the big rally a day earlier sparked by remarks from Federal Reserve Chairman Alan Greenspan that more interest rate cuts may be needed to bolster growth.

Two-year notes were down 2/32 at 99-27/32, yielding 3.95 per cent. Five-year notes slipped 4/32 to 99-28/32, yielding 4.65 per cent. Benchmark 10-year notes fell 4/32 to 99-6/32, yielding 5.11 per cent. Thirty-year bonds lost 6/32 to 97-25/32, yielding 5.53 per cent.

U.S. trade gap shrinks

The U.S. trade deficit fell in May to its lowest level in more than a year, the government said Thursday, while an index of future economic activity rose in June — both figures showing signs of strength in the sluggish U.S. economy.

The nation's trade gap shrank to $28.34 billion from a revised $31.99 billion in April, the Commerce Department reported. Economists polled by Briefing.com had expected a much larger deficit of $32 billion.

The trade gap is the narrowest since a $26.36 billion deficit in January 2000.

Exports rose to $87.73 billion in May from $86.93 billion in April. But imports plunged to $116.07 billion — their lowest level since February 2000 -from $118.92 billion in April.

Mortgage rates retreat

Mortgage rates dipped lower in the latest week, influenced in part by Fed Chairman Alan Greenspan's remarks about another possible interest rate cut.

The benchmark 30-year fixed-rate mortgage (FRM) averaged 7.08 per cent for the week ending July 20. The average this week for the 15-year fixed-rate mortgage was 6.65 per cent. One-year adjustable-rate mortgages (ARMs) averaged 5.62 per cent.

U.S. jobless claims lower

New jobless claims were weaker than expected and below Wall Street forecasts last week, according to a government report

Thursday, after soaring to their highest level in 9 years the previous week.

New claims for state unemployment benefits fell to 414,000 in the week ended July 14 from a revised 449,000 the prior week, the Labor Department reported. Analysts surveyed by Briefing.com had forecast new claims of 430,000.

Mergers & Acquisitions

Royal—Mellon: Royal Bank of Scotland said on Tuesday it agreed to buy the retail banking unit of Mellon Financial for $2.1 billion to expand in the U.S.

Sanmina—SCI: Sanmina Corp. agreed Monday to acquire SCI Systems for $4.5 billion in stock, a move that will create one of the world's largest electronics contract manufacturers.

USA—Expedia: USA Networks agreed Monday to buy Microsoft Corp.'s controlling interest in online travel service Expedia Inc. and to buy National Leisure Group Inc., deals USA Networks said will give it a major portion of the interactive travel market.

AT&T—Comcast: The board of AT&T Corp. on Wednesday unanimously rejected Comcast Corp.'s unsolicited $44.5 billion offer for AT&T's cable unit, opening the door to other potential bids.

BP— E.ON: British Petroleum is to buy the oil refineries and petrol stations of Germany's largest power group E.ON, the pair have announced.

Havas—Tempus: French advertising agency Havas has agreed to buy UK media-buying firm Tempus for up to £425 million ($603 million) in cash.

U.S. gasoline prices dip

Gas prices fell 13 cents during the past three weeks, dropping to a national average of $1.47 for a gallon of self-serve regular, a survey said. That's 16 cents a gallon lower than a year ago.