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July 30 - Aug  05 , 2001

UK, US ink new double taxation treaty

Britain and the United States on Tuesday signed a landmark new treaty aimed at eliminating double taxation which involves the US eliminating tax on dividends repatriated to Britain by UK companies.

The so-called withholding tax on the profits of British subsidiaries has been levied at five per cent and its scrapping will probably save UK firms up to 200 million pounds a year. Double taxation laws are designed to prevent citizens or companies in both countries paying tax twice on income earned.

British companies, which employ around a million people in the United States, have long lobbied the government to get the withholding tax on their US earnings reduced or scrapped although the new ruling will only apply to subsidiaries of which the British parent owns at least 80 per cent. British pension funds will also benefit by having the withholding tax on their dividend earnings from the United States cut to zero from 15 per cent.

The new tax treaty, signed by Chancellor of the Exchequer Gordon Brown and his US counterpart Paul O'Neill on Tuesday, also contains a provision allowing for the US tax authorities to seek information about income earned by their citizens in Britain even if those citizens are not resident here.

Until now British tax authorities were only authorised to provide such information to the US if the American citizen was resident in Britain. The treaty also has provisions aimed at ending the double taxation of capital gains and pensions.

"The economic relationship between the UK and USA is one of the most important in the world. This new treaty represents a significant step forward in that relationship," said Brown. "By removing tax-related barriers to market and employment flexibility, by seeking to eliminate double taxation, and by strengthening our defences against evasion and avoidance, the new treaty provides a framework within which UK and US business can trade and invest with certainty and confidence."

G8 pledges to fight poverty, increase aid

Shaken by three-days of violent street riots and the death of a young protester, leaders from the world's richest nations on Sunday promised unprecedented moves to fight global poverty, increase aid and ensure free trade.

Ending a blood-stained Group of Eight summit in the Italian port city of Genoa, leaders pledged "decisive global action" to tackle the economic, political and social problems of developing nations "especially in Africa". But the summit failed to find common ground on ratification of the Kyoto Treaty against global warming which the United States continues to oppose. Divergences also continued on controversial US plans for missile defence.

Unwilling to let street confrontations mar their future summits, G8 partners said next year's gathering in Albera in Canada would be a simpler, more informal affair. G8 leaders were adamant that they would not allow violent protests by a few anarchists to derail their talks.

A final G8 communique endorsed the launch of an "ambitious" new round of global trade talks in Doha, Qatar, in November, with leaders also agreeing to set up a 1.3 billion dollars global fund to fight Aids and other infectious diseases in developing countries. But the summit was dominated by images of Italian riot police firing teargas and wielding clubs against some of the tens of thousands of people who flooded Genoa to express their opposition to policies they say harm the poor.

Genoa was in shambles after three days of anarchist looting and pitched street battles which left 500 injured and led to 200 arrests. Banks, businesses and cars were trashed and set ablaze.

The final day of the summit was marred by reports that Italian police had conducted an overnight raid on the headquarters of a group co-ordinating protest action in an operation that left at least 40 protesters injured.

Bush, Putin agree to tie arms cut to missile plan

US President George W. Bush and Russian President Vladimir Putin embraced a new strategic relationship on Sunday and agreed to tie nuclear arms reductions to Washington's missile defence plans.

"The two go hand in hand in order to set up a new strategic framework for peace," Bush said after the two leaders held their second face-to-face meeting in a 16th-century mansion turned government building in this port town.

Putin described the breakthrough as "unexpected" but part of both leaders' commitment "to look forward (at) well-reasoned, well-balanced, carefully weighed approaches and solutions." Bush's national security advisor, Condoleezza Rice, was to head to Moscow this week to work on a framework and specific timetable for consultations involving foreign and defence ministers from both sides.

Bush was confident that Moscow and Washington would come up with an accord. Bush wants Russia to agree to scrap the 1972 Anti-Ballistic Missile Treaty and free Washington to deploy a shield against attacks from so-called "rogue states" like N. Korea or Iran.

Indonesia's new hope

For most of Indonesia's history, getting rich often meant controlling the spoils from corruption and forging close links with government agencies that distribute largesse. Now many Indonesians are looking to their new president, Megawati Sukarnoputri, to change the old ways of doing business.

But there are doubts that she will be able to reform a moribund banking system and convince foreign investors that the nation of 210 million people is ready to modernize its economy.

Megawati will have to do all this at a time when a worldwide downturn has severely hurt demand for Asian exports.

Nikkei down on Sony's slump

Tokyo stocks were mixed by midday Friday. Consumer electronics giant Sony Corp saw its stock tumble 11 per cent after announcing weaker-than-expected results Thursday.

By noon, the benchmark Nikkei 225 average was down 4.32 points or 0.04 per cent to 11,854.24, adding to Thursday's 0.28 per cent fall. The broader TOPIX index fell 4.3 points to 1,187.95.

Elsewhere in the region, markets in Australia, Korea and Taiwan were all higher by midday Friday, while New Zealand was slightly in the red.

Australia's S&P/ASX200 was up 15.6 points to 3299.0, while in Seoul the Kospi rose 10.49 points or 2 per cent to 539.71. Taiwan's Taiex was up about 1 per cent, gaining 46.25 points to 4346.66.

Results ease Europe's fears

Europe's stock markets ended higher on Thursday after investors expressed relief that earnings from Alcatel and others were no worse than expected.

London's FTSE 100 ended nearly 1 per cent higher at 5,278.9, led by chemical giant ICI (ICI) which jumped 6.3 per cent, after posting a second-quarter profit at the top end of analyst expectations.

In Paris, the CAC 40 blue chip index closed up by 1.4 per cent at 4,842.12, buoyed by the view the worst is over for Alcatel.

Frankfurt's Xetra Dax rose 0.8 per cent to 5,623.70, as German engineering and communications company Siemens (FSIE) climbed nearly 3 per cent to lead the advancers.

In Amsterdam, the AEX index climbed 0.2 per cent while the SMI in Zurich was flat. Milan's MIB30 index gained 0.7 per cent.

The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, was up 0.6 per cent, with the mining sector up 3.3 per cent and oil climbing 2.3 per cent.

Late rally for U.S. techs

U.S. technology stocks staged a late-day rally Thursday as investors bet that much of the bad news from leading companies has already been priced in.

By late afternoon, the tech-heavy Nasdaq composite index erased a 21-point loss and the Dow industrials recouped its 121-point drop.

The Nasdaq composite index gained 38.46 points to 2,022.78. The Dow Jones industrial average advanced 50.09 points to 10,455.76, and the S&P 500 rose 12.42 points to 1,202.91.


Lloyds TSB: Lloyds TSB, the UK's third-largest bank, posted a 12.3 per cent fall in first-half net income amid cut-throat competition in financial services. The bank's first-half net income to June 30 fell to 1.29 billion ($1.84 billion), or 23.2 pence a share, from 1.46 billion, or 26.5 pence a share in the same period a year ago. Revenue grew 12 per cent to 4.7 billion

VW: Europe's biggest automaker Volkswagen said net profit rose to 444 million ($390 million), or 1.18 a share, in the three months to June 30. That compares to second-quarter profit of 394 million, or 0.95 a share, in the year-ago period.Pretax profit rose 17.4 per cent to 805 million.

Amgen: Biotech company Amgen said it earned $322 million, or 30 cents per share, compared to $303 million, or 28 cents per share, in the year-ago period.

VeriSign: For the quarter ended June 30, VeriSign reported earnings of $52.6 million, or 25 cents a share, compared with earnings of $10.3 million, or 7 cents a share, a year earlier.

Phillips: Phillips, the No. 5 U.S. oil company, said income excluding special items rose to $601 million, or $2.33 per share, from $439 million, or $1.72 per share, a year earlier. Revenues fell to $5 billion from $5.4 billion a year ago.

Anadarko: Houston-based Anadarko said net income rose to $401 million, or $1.50 per share, from $64 million, or 48 cents a share, in the same period of 2000.

AIG: American International Group Inc., said second-quarter earnings before one-time items rose to $1.66 billion, or 70 cents per share, from $1.43 billion, or 61 cents per share, a year earlier.

Dow: Dow Chemical Co. reported Thursday that second-quarter profit plunged by more than half. The nation's No. 2 chemical maker earned $582 million, or 33 cents a diluted share, excluding special items. That's down from net income of $1.1 billion, or 72 cents a share.

BT: British Telecom, the UK's second-largest phone company, said on Thursday net income rose to 4.35 million ($6.2 million), or 57.4 pence a share, in the three months to June 30. That compares with a profit of 306 million, or 4.1 pence a share, in the year earlier period. Sales rose 15 per cent to 5.45 billion.

Cadbury: Cadbury Schweppes, the British sweets and soft drinks company posted a net profit of 201 million ($296 million), or 9.9 pence a share. That compares with a profit of 188 million, or 9.3 pence a share, in the year earlier period.

PeopleSoft: Business software provider PeopleSoft Inc. reported a second-quarter profit of $46 million, or 14 cents per share, up from $16 million, or 6 cents per share in the year-ago period.

Mortgage rates dip lower

Mortgage rates slipped for a second consecutive week, although 1-year ARMs edged higher in the latest week.

The benchmark 30-year fixed-rate mortgage (FRM) averaged 7.03 per cent for the week ending July 27. The average this week for the 15-year fixed-rate mortgage was 6.58 per cent. One-year adjustable-rate mortgages (ARMs) averaged 5.72 per cent.

U.S. jobless claims drop

New jobless claims fell sharply last week, dropping below 400,000 for the first time in over a month, suggesting that the worst might be over for the job market in the United States.

New claims for state unemployment benefits fell to 366,000 in the week ended July 21 from a revised 417,000 the prior week, the Labor Department reported. Analysts surveyed by Briefing.com had forecast new claims of 404,000.

Bonds down as stocks rally

U.S. Treasurys dipped by late afternoon Wednesday as investors eyed rising stocks and cheapened prices ahead of a $12 billion two-year note auction later in the session and burgeoning corporate debt supply.

Two-year notes were 2/32 lower at 99-26/32, pushing their yield to 3.97 per cent. Five-year notes were off 6/32 to 99-24/32, yielding 4.68 per cent. Benchmark 10-year notes fell 14/32 to 98-24/32, yielding 5.16 per cent. Thirty-year bonds were off 22/32 to 97-3/32, yielding 5.58 per cent.

U.S. reacts to OPEC cuts (Box)

U.S. Energy Secretary Spencer Abraham said Wednesday the Bush administration won't rule out using a Northeast heating oil reserve to offset a cut in OPEC oil production in order to ensure adequate heating fuel supplies this fall and winter.

"We don't rule out any options," Abraham told reporters following a speech at the National Press Club.

Abraham said OPEC's decision to cut output by one million barrels per day would not have a negative effect on the U.S. economy, which is already experiencing a slowdown. "America will do well," he said.

Time buys IPC for $1.6B

AOL Time Warner agreed Wednesday to acquire UK publisher IPC Group Ltd. from investment firm Cinven for $1.6 billion cash, expanding AOL's magazine footprint outside the United States.