06 - 12 , 2001
Blair's EU warning seen as wake-up call
British Prime Minister Tony Blair's strong words in Brazil on
the pressing need for EU reforms were being seen back home on Tuesday as a
wake-up call to Brussels.
In a speech and press conference on Monday, the first day of
his official visit to Brazil, Blair warned EU leaders that it was essential that
next year's launch of single currency notes and coins was followed by swift
economic reforms. He said the economic summit in Barcelona in March of next year
— three months after the euro money starts circulating — would be make or
Analysts and press commentators here read that as code for
linking British membership of the euro with economic reforms — even though
Blair said he was doing no such thing. According to The Times, Blair's
"ultimatum" was a warning that a failure to agree such reforms, mainly
by scrapping monopolies and agriculture subsidies, would have a
"crucial" effect on London's decision.
Blair is in favour of joining the euro but most other Britons
are not, and one of the eurosceptics' main charges is that the European Union is
too large, too bureaucratic and too wasteful.
The Guardian thought Blair's speech was unexpectedly strong,
seeing it as a criticism of the common agricultural policy, which little
benefits Britain. Blair insisted he was "not laying down new
conditions" for Britain joining the euro during a press conference Monday
That was not how the Daily Telegraph saw it, interpreting his
words as warning EU leaders that they could jeopardise British euro membership
if they did not carry through economic changes.
It referred also to private comments by British finance chief
Gordon Brown that a referendum on joining the single currency is unlikely to be
held within the next four years. The Financial Times, for its part, stressed a
speech by the premier in Sao Paulo that delaying economic reform would hit the
whole enterprise of future prosperity for Europe.
BoE's surprise rate cut
The Bank of England surprised markets Thursday with a cut in
UK interest rates, but the European Central Bank held euro-zone rates steady.
The BoE cut rates by a quarter-point to 5 per cent as
economic slowdown triggered increasing numbers of job cuts. It has cut rates
three previous times this year to try to cushion the UK against possible
The ECB, as expected, kept its official rate at 4.5 per cent,
signalling that the battle against inflation took priority over warding off the
threat of economic slowdown.
Economists predict that the ECB will cut rates for the second
time this year when it meets after its summer break on August 30.
"The ECB will come through with a cut, but it will wait
to see what happens on the inflation front," Ben Rudd, market strategist at
HSBC, told CNN before the decision. "They'll wait until this year's energy
price increases come out of the (inflation) number, giving them leeway to cut
Economists polled by CNN expected the Bank of England to hold
off trimming rates until it had gathered more evidence about the outlook for
consumer spending, which has remained buoyant despite widespread job cuts.
"Indicators of world economic activity have been weaker
than expected over the past few months," the Bank of England said on
"This and the persistent strength of sterling are adding
to the pressures on the externally exposed sectors of the UK economy, and at the
same time there are signs of weakening investment growth.
"By contrast, retail spending, household borrowing and
the housing market are still robust, partly supported by recent reductions in
interest rates. On balance, the outlook, although highly uncertain, is for
aggregate demand and output growth to be weaker than previously projected."
Argentina swaps debt
Argentina's government, besieged by fears of default amid a
three year economic slump, reached an accord with local banks to swap short-term
treasury bills for longer-dated bonds to reduce its debt obligations in 2001.
The swap is targeted at cutting the size of bi-weekly
auctions of short-term treasury bills (Letes) that roll over the domestic debt
stock, with $4.2 billion coming due this year.
The economy ministry said investors will be able to carry out
the swap by buying a one-year promissory note at a floating rate or dollar bonds
with a 2004 maturity, also with a floating rate. Both would currently have rates
at about 15 per cent.
U.S. offers Argentina soothing words but no cash
The United States on Thursday offered crisis-ridden Argentina
words of strong encouragement and praise, but made clear a top Treasury official
who would visit Buenos Aires in the coming days was not taking his check book.
President George W. Bush praised Argentine President Fernando
de la Rua for his political gumption in pushing through austerity measures to
reviving the troubled economy. And a top U.S. Treasury official hailed the
decisions Argentina has made during its latest economic woes as
But any lingering hopes that the Bush administration might
pony up fresh cash or throw its weight behind a possible new International
Monetary Fund loan that could allay market-driven fears of a debt default were
well and truly dashed.
"The questions about things beyond what we've already
said are hypothetical at this point," U.S. Treasury Undersecretary for
International Affairs John Taylor told reporters, referring to speculation of a
new loan for Argentina.
Japan's economy slides
Consumer spending plunged, unemployment remained at a record
high and construction orders tumbled in June, the government said Tuesday,
signaling a deepening of Japan's economic gloom.
Top government officials warned that conditions will only
worsen in the short term with proposed cuts in public works spending and a push
to force banks to write-off bad debts.
Economic Minister Heizo Takenaka said the government will
consider fiscal steps to counter the slide, including the creation of a
"safety-net", but that it will not attempt to spur spending.
"We won't take policies to create demand," Takenaka
told reporters. "The government is willing to do what it can do soon. We'll
flexibly consider steps, including fiscal measures."
Japan gets a new regional super bank
Three Japanese banks said on Wednesday they had tied up
operations to form a regional super bank to firm up finances and become more
competitive. We would strive to improve services to our customers by building up
the management structure as a super regional bank based in the Kansai area
(western Japan), Akiyoshi Otani, managing director of Daiwa Ltd. told a press
conference in Tokyo.
The troubled Daiwa bank, which had been rumoured to be close
to collapse earlier this year, will consolidate its banking operations with
affiliated regional banks Kinki Osaka Bank Ltd. and Nara Bank Ltd.
New WTO round
The message this week from World Trade Organization director
general Mike Moore could not have been starker: Failure to launch a new round of
global trade negotiations at the WTO ministerial meeting in Doha in November
will undermine the authority of the global trade watchdog and leave poor
countries even more vulnerable to a global economic slowdown, warned Moore.
200 miners feared dead in China
More than 200 miners are feared to have died two weeks ago
when a tin mine flooded in the southern Chinese province of Guangxi, state media
said on Monday. Seventy bodies have been found since the July 16 accident in
Nandan county, the first reports in the Shanghai Youth Daily said.
US ministers meet Russian PM
US Commerce secretary Don Evans and Treasury secretary Paul
O'Neill discussed US-Russian trade relations with Russian Prime Minister Mikhail
Kasyanov on Friday, the PM's press office announced.
The talks, in which Russian deputy Premier and Finance
Minister Alexei Kudrin and Economic Development Minister German Gref also took
part, focused on Moscow's wish to see Washington recognize it as a market
economy, a move which would pave the way for Russia joining the World Trade
Organization (WTO) after eight years of trying, Russian news agencies reported.
Unilever: Unilever, the Anglo-Dutch consumer goods
company said net profits before items and amortization of goodwill in the three
months to June 30 rose to 841 million, or 0.84 per share, from 782 million, or
0.77 a share.
Rio Tinto: Anglo-Australian resources giant Rio Tinto
lifted its first-half earnings 24 per cent to a record $841 million, the company
Shell: Shell, the Anglo-Dutch company said profit for the
three months to June 30 rose to $3.6 billion from $3.2 billion a year earlier.
Earnings were in line with the forecasts of analysts polled by Reuters.
SocGen: Societe Generale, France's No. 3 bank reported on
Thursday net income for the three months to June 30 of 641 million ($565
million), or 1.6 per share, compared with 752 million, or 1.89 a share, in the
same period a year ago.
Jones: For the quarter ended June 30, Jones Apparel Group
Inc. reported earnings of $60.1 million, or 47 cents a share excluding items, up
from $55.5 million, or 46 cents a share, a year earlier. Analysts anticipated a
profit of 53 cents a share, according to First Call.
Deutsche Bank: Deutsche Bank said net profit in the half
year to June 30 dropped to 2.45 billion ($2.15 billion), or 4.51 per share, from
3.77 billion, or 6.66 a share, in the first half of 2000.
Fleming: Fleming Cos. Inc. reported net earnings of $22.4
million, or 46 cents a share, after one-time items, compared with $14 million,
or 35 cents, a year earlier.
CVS: CVS Corp. reported net income of $198 million, or 48
cents a diluted share, compared with $186.5 million, or 46 cents a share, a year
Honda: Honda Motor Co., Japan's third-largest automaker,
reported record net profit for the April-June quarter jumped 40 per cent to
¥89.38 billion ($714 million) from ¥63.80 billion a year earlier.
Metro: Germany's No. 1 retailer Metro said net profits in
the three months to June 30 rose to 27.9 million ($24.2 million), or 0.9 per
share, compared with 8.5 million, or 0.3 a share, in the same quarter a year
Nikkei slips at open
Tokyo stocks opened slightly lower on Friday with investors
ignoring an extended rally in U.S. technology issues.
The benchmark Nikkei 225 average opened 73.93 points, or 0.6
per cent, lower at 12,325.27.
The Nikkei ended Thursday more than 3.5 per cent higher at
12,399.20, bolstered by a report by Merrill Lynch on Wednesday that said the
worst may be over for global semiconductor firms.
The Nikkei hit a 16-year closing low of 11,579.27 on Monday
before making the strong comeback.
Nasdaq hits 4-week high
The Nasdaq composite index rose for the sixth time in seven
sessions Thursday, closing at its best levels in a month, as investors snapped
up chip and computer stocks after Intel said business may improve in the second
half of the year.
The Nasdaq composite index rose 19 points, or 0.9 per cent,
to 2,087.38, for its highest close since July 3. Those gains narrowed the
Nasdaq's 2001 loss to 15.5 per cent.
The Dow Jones industrial average advanced 41.17 to 10,551.18
and is down 2.2 per cent on the year. The Standard & Poor's 500 index added
4.81 to 1,220.74, narrowing its 2001 loss to 7.5 per cent.
More stocks rose than fell. On the New York Stock Exchange,
advancers beat decliners 1,784 to 1,278 as 1.2 billion shares changed hands.
Nasdaq winners topped losers 1,849 to 1,765 on volume of 1.6 billion shares.
Bonds head lower
A drop in weekly jobless claims helped send Treasury
securities lower Thursday afternoon amid signs that the weakening labor market
may finally be stabilizing.
Two-year notes were 3/32 lower at 100, yielding 3.87 per
cent, and five-year notes were down 7/32 at 100-1/32 to yield 4.61 per cent.
Benchmark 10-year notes fell 13/32 to 99-2/32, yielding 5.12
per cent, and 30-year bonds dropped 15/32 to 97-092/32 to yield 5.56 per cent.
Mergers & Acquisitions
PepsiCo—Quaker: PepsiCo Inc. completed its $13.8
billion acquisition of Quaker Oats Co. Thursday, ending a nine-month battle that
hinged on obtaining clearance form U.S. regulators.
Cendant—Galileo: Hotel and rental car firm Cendant
Corp.'s $2.9 billion bid for travel reservation firm Galileo International Inc.
ran into trouble Wednesday when European regulators declared the application for
antitrust clearance incomplete.
Ameritrade—NDB.com: Ameritrade Holding Corp. agreed
Tuesday to acquire the online brokerage unit of rival National Discount Brokers
Group Inc., a subsidiary of Deutsche Bank AG, for $154 million in stock.
Berkshire—Xtra: Berkshire Hathaway Inc., the holding
company run by billionaire investor Warren Buffett, agreed Tuesday to buy
transportation equipment leasing company Xtra Corp. for about $590 million in
Swiss—Lincoln: Swiss Re agreed on Monday to buy Lincoln
National's reinsurance operations for $2 billion.
Mortgage rates dip again
Mortgage rates continued to decline in the latest week, with
the 30-year fixed-rate mortgage reaching its lowest level in four months.
The benchmark 30-year fixed-rate mortgage (FRM) averaged 7.00
per cent for the week ending Aug. 3.
The average this week for the 15-year fixed-rate mortgage was
6.54 per cent.
One-year adjustable-rate mortgages (ARMs) bucked the downward
trend, averaging 5.74 per cent.
Europe bourses end mixed
Europe's main markets ended mixed on Thursday, with some
gains from technology stocks being offset by falls in oil shares.
London's FTSE 100 ended 0.7 per cent higher at 5,584.5,
Frankfurt's electronically traded Xetra Dax advanced dropped 0.5 per cent to
5,807.2 as did the CAC 40 blue chip index in Paris which closed at 5,088.7 Oil
stocks hit the doldrums with the sector
Among Europe's smallest market, the AEX index in Amsterdam
lost 0.4 per cent and the SMI in Zurich was 0.4 per cent higher. Milan's MIB30
index slipped 0.6 per cent.
Factory orders tumble
Orders to U.S. factories tumbled in June, the government
reported Thursday, the latest sign of weakness in the beleaguered manufacturing
sector of the world's largest economy.
Factory orders fell 2.4 per cent in June, the Commerce
Department reported, following a revised 2.2 per cent increase the month before.
Analysts polled by Briefing.com expected orders to fall by 1.1 per cent.
U.S. jobless claims drop
New claims for state unemployment benefits fell to 346,000 in
the week ended July 28 from a revised 369,000 the prior week, and were at their
lowest level since hitting 330,000 in the week ended Feb 17, the Labor
Department reported. Analysts surveyed by Briefing.com had forecast new claims
US Government borrows $51B
Signaling a reversal in borrowing plans, the government said
it will pay down less than half the amount of public debt it had projected only
three months ago, and that it will borrow $51 billion in the current quarter.
The change in plans was reflective of the slowing economy and
the need to pay for $38 billion in tax-rebate checks now being sent out to
taxpayers, the Treasury department said.
The $51 billion in the current quarter, announced earlier in
the week, is the largest single quarter of borrowing by the government since
$77.2 billion in the first quarter of 1996.