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Sep 03 - 09 , 2001

ECB says euro will unify Europe

The European Central Bank has officially launched the new euro single currency.

ECB president Wim Duisenberg said on Thursday: "In 100 days time the euro will be in our pockets, it will be our money — a tangible reality and not just the virtual market currency that it has thus far been perceived to be by many, if not most, Europeans.

"The euro is much more than just a currency. It is a symbol of European integration in every sense of the word.

"In terms of economic integration, the euro is a symbol of successful enterprise and initiative which has crossed borders and removed barriers to people working, trading and living together.

"In terms of political integration, the euro is a symbol of stability and unity. Countries from a continent which, throughout the ages, has so often been ravaged by war, have together vowed to uphold the values of freedom, democracy and human rights."

He added: "In addition to the economic and political benefits which the euro brings, it will, I believe, help to change the way in which we think about one another as Europeans."

The seven different denominations of banknote will become legal tender on January 1, 2002.

On that date more than 14 billion banknotes and 50 billion coins will be used in currency among 12 member states of the European Union — Austria, Belgium, Finland, France, Germany, Greece, Italy, Ireland, Luxembourg, Holland, Portugal and Spain.

Two months later, on March 1, traditional currencies such as the franc, the mark, the lire and the peseta will cease to be legal tender and be abolished.

Duisenberg added: "With the new single currency the people of Europe have one more fundamentally important thing in common — their money!

IMF to cut global outlook

The International Monetary Fund will cut its global economic growth forecast for this year to 2.8 per cent, but the outlook for 2002 remains subject to vigorous internal debate, IMF sources said Tuesday.

Sources inside the international lender said the IMF plans to cut its global growth forecast for 2001 to 2.8 per cent when it publishes its World Economic Outlook in September, down from the 3.2 per cent it forecast in April.

The IMF is also set to lower its 3.9 per cent forecast for 2002 global growth.

But whether or not growth will pick up next year as earlier expected remains a subject of debate.

Some at the IMF predict the U.S. economy, which has braked sharply over the past year, will slow further next year, while others paint a more optimistic picture.

IMF management and the fund's research department, responsible for compiling the WEO, are calling for a rebound next year to more robust global growth of 3.2 per cent, predicated on a U.S. pickup to 2.5 per cent growth after a 1.5 per cent U.S. expansion this year, the sources said.

But the Western Hemisphere department, the group inside the lender most attuned to the United States, expects a deeper slowdown in 2002 with global growth of just 2.5 per cent.

That gloomier forecast is based on the U.S. economy slowing further next year, with output expanding by a paltry 1.1 per cent. The IMF maintained its earlier forecast of a 1.5 per cent U.S. expansion this year.

The sources said the final WEO prediction of U.S. 2002 growth would fall somewhere between 1.1 per cent and 2.5 per cent.

With only about a month left before the IMF releases its flagship WEO publication, which takes the pulse of economies around the world, all forecasts remain subject to almost constant revision as data become available.

ECB cuts rate to 4.25%

The European Central Bank lowered interest rates by a quarter point to 4.25 per cent, its second cut this year, to shore up economic growth.

Germany's economy, the biggest in Europe, stagnated in the second quarter, prompting companies such as chemicals maker BASF and chipmaker Infineon Technologies to slash thousands of jobs.

"Germany is singing out for a rate cut," Henk Potts, a strategist at Barclays Stockbrokers, said before the ECB published its verdict. Most economists polled by CNN had expected a quarter of a per centage point cut.

The ECB has been stung by criticism that it has done little to fight slowing growth. The U.S. Federal Reserve has cut rates seven times this year to try to boost investment and the sluggish economy, while the Bank of England has made four cuts in 2001.

China, U.S. in dispute

A U.S. trade panel on Tuesday ruled unanimously that imports of a low-cost molten iron ingredient from China have materially harmed U.S. producers, setting the stage for the Commerce Department to impose anti-dumping duties of up to 215 per cent.

In a case brought by the United Steelworkers union and five domestic firms, the U.S. International Trade Commission voted 6-0 in favor of duties for foundry coke. Foundry coke is used both as a fuel and an ingredient for making molten iron.

In late July, Commerce wrapped up a 10-month investigation with a final determination the Chinese foundry coke was being sold in the U.S. market at 51-to-215 per cent below fair value.

China accounted for all U.S. imports of foundry coke in 2000 for a total of 132,747 tons, valued at $18.7 million.

The shipments represented 11.5 per cent of U.S. foundry coke consumption last year, the ITC said. Before 1997, U.S. imports of foundry coke from China were zero.

Taiwan to ease trade curbs with China

Taiwan's president has signaled a radical change in its policy towards rival China, embracing trade as a way of improving ties and boosting an ailing economy.

President Chen Shui-bian sided Sunday with a team of economic advisers who urged him to make a historic policy change and boost economic ties with China — the island's biggest security threat.

Chen has embraced the panel's advice as he seeks to rebuild a crumbling economy, which has slipped into its first recession in three decades.

2Q GDP still positive

The U.S. economy grew in the second quarter at the weakest pace in more than eight years, the government reported Wednesday, but avoided falling into negative territory, easing fears that the world's largest economy could be in a recession.

U.S. gross domestic product (GDP) — the broadest measure of the nation's economy — grew at a 0.2 per cent annual rate in the quarter, the Commerce Department reported. It was the government's first revision of second-quarter GDP, compared with its initial estimate of 0.7 per cent growth. Economists surveyed by Briefing.com expected GDP to come in flat.

If GDP had been flat or negative, it would have raised fears that the economy was in a recession, technically defined as two consecutive quarters of negative GDP.

Still, GDP was the weakest since it shrank at a 0.1 per cent rate in the first quarter of 1993, and the number will be revised once more Sept. 28, so there's still a possibility it could be negative.

Dow falls below 10,000

Another round of profit warnings and job cuts hit Wall Street Thursday, igniting a selloff that sent the Dow Jones industrial average tumbling below 10,000 for the first time in nearly five months.

The Dow industrials fell 171.32 points, or 1.7 per cent, to 9,919.58, while the Nasdaq lost 51.49 points, or 2.8 per cent, to end the day at 1,791.68. Nasdaq finished as low as 1,638.80 on April 4.

Nikkei stays below 11,000 mark

The slide on Wall Street sent Tokyo's benchmark Nikkei 225 average plunging to a fresh 17-year low on Friday morning before it rebounded to 10,803.16 by midday. This was still a drop of 135.29 points or 1.24 per cent on Thursday's close.

Elsewhere in the region, key market indicators in Australia, Korea, Taiwan and Hong Kong also fell in the morning session.

Australia's S&P/ASX200 was down 36.2 points or 1.1 per cent to 3287.7 on continued weakness among heavyweights News Corp, Telstra and BHP Billiton. In Seoul the Kospi slipped 16.7 points or almost 3 per cent to 547.57.

Microsoft: New EU attack

The European Commission Thursday said it has expanded its investigation into Microsoft Corp.'s business practices to see whether it is acting illegally by incorporating digital streaming media technology into its Windows operating systems.

China bans CSFB

Investment bank Credit Suisse First Boston has been blocked from doing business in China, according to a report.

CSFB was due to underwrite a stock offering later this year for Unicom Group, China's second-largest telecom. But it has been dropped from the deal.

Bonds mixed at close

Shorter U.S. Treasurys held firm on Thursday while long-dated securities fell, as investors dumped stocks in droves and some shifted funds into risk-free government securities.

New two-year notes sold Wednesday were flat at 100 even, yielding 3.62 per cent. Five-year notes were also flat, at 101-4/32, yielding 4.35 per cent. Benchmark 10-year notes fell 5/32 to 101-20/32, yielding 4.79 per cent. Thirty-year bonds fell 5/32 to 99-31/32 to yield 5.38 per cent, near their lowest yield since March.

Chrysler to cut prices

Chrysler said Thursday it was cutting prices on its 2002 models to spur sales and take a small step back from ever-increasing incentives.

Mortgage rates inch up

Long-term mortgage rates advanced slightly in the latest week, reversing their recent trend downward. But 15-year fixed-rate mortgages stayed put, and adjustable-rate mortgages fell.

The benchmark 30-year fixed-rate mortgage was at 6.92 per cent for the week ending Aug. 31.

The average this week for the 15-year fixed-rate mortgage was 6.47 per cent. One-year adjustable-rate mortgages (ARMs) averaged 5.67 per cent.

Japan's jobless rate hits record

Japan's stagnant economy has taken another hit with the release of figures showing a record jobless rate of five per cent last month.

The bleak jobs outlook is a further indicator of the "no pain, no gain" reform agenda being pursued in the world's second largest economy by Prime Minister Junichiro Koizumi.

Europe bourses end mixed

Europe's main bourses ended mixed Wednesday, with better-than-expected U.S. GDP figures being offset by anxiety about the impact of a slowing U.S. economy on the rest of the world.

London's FTSE 100 ended 0.3 per cent lower at 5,417 while the blue chip CAC 40 index in Paris closed 0.4 per cent higher at 4,834.89. Frankfurt's electronically traded Xetra Dax was little changed at 5,312.17.

Among smaller markets, the SMI in Zurich fell 1.3 per cent to 6,580.6, while Milan's MIB 30 was 0.6 per cent higher at 35,591. Amsterdam's AEX rose 0.3 per cent to 535.54.

The FT Eurotop 300, a broader based index of the region's largest stocks, dropped 0.2 per cent, with its information technology and automotive sectors among the worst-performing industry groups.

Cell phone orders fall

Shipments of mobile phones fell sharply in the second quarter while manufacturers Motorola and Ericsson grabbed market share from leader Nokia, research group Gartner Dataquest said Wednesday.

Mergers & Acquisitions

AES—CANTV: Global power company AES Corp. and one its subsidiaries said Wednesday they planned to offer about $1.4 billion in cash for a 43 per cent stake in Venezuelan telecommunications company CANTV.

Mead—Westvaco: Mead Corp. and Westvaco Corp. agreed Wednesday to merge in a $3 billion stock swap, adding to the ongoing consolidation in a forest-products industry beset with excess inventory from weakening demand and falling prices.

AirGate—iPCS: AirGate PCS Inc. said Wednesday it will buy iPCS Inc. for $802.8 million in stock, becoming the largest affiliate of Sprint PCS Group, the No. 4 U.S. wireless telecommunications provider.

Citigroup—Nikko: Citigroup Inc. has agreed to acquire a 50 per cent stake in Nikko Trust and Banking Corp., a unit of Japan's third-biggest brokerage house, Nikko Securities Ltd., the company said Tuesday.

Roche—Bayer: Swiss pharmaceutical company Roche Holding rejected a report that it offered to buy the drug unit of German rival Bayer for $20 billion.

Ericsson—Sony: Swedish telecom equipment maker Ericsson and Japanese consumer electronics group Sony Corp. have agreed the terms of a merger of their mobile phone businesses into a joint venture, Ericsson said Tuesday.

Tyson—IBP: Tyson Foods Inc. expects to complete its acquisition of IBP Inc. near the end of September.

RWE—U.S.: Germany's RWE is considering a $3.6 billion bid for American Water Works, the largest U.S. regulated water business, a report said.

Hyundai Securities: The U.S. group that is buying three Hyundai financial companies will walk away if it doesn't see progress on the price.

IBM research

Reaching a long-sought goal in computing research, scientists have created a computer circuit based on a single molecule, which could lead one day to far smaller and faster computer chips that use less power.

International Business Machines Corp. said Monday that its researchers have built a logic circuit based on a tiny cylindrical structure made up of carbon atoms that is about 100,000 times thinner than a human hair.