01 - 07, 2002
MARKETS FALL ON $3.8BN WORLDCOM SCANDAL
Shares in the London stock market took a deep
plunge on Wednesday in reaction to a massive accounting scandal from
US giant WorldCom.
More than 35 billion pounds wiped from shares in
just few hours as traders reacted to a massive accounting scandal at
The market, already racked with post-Enron nerves,
slumped after the telecoms giant reported that it disguised $3.8
billion (2.5 billion pounds) in expenses in what appears to be one of
the largest cases of accounting fraud ever.
The falls are slightly less than the slump on
September 11, when the Footsie fell 5.72 per cent — which was the
last time the index fell by more than 4 per cent in one day. The
Footsie on Wednesday was down 188.1 points at 4,442.9, a fall of 4 per
cent and its lowest since September 21. However, by midday it had
pulled back slightly, down 150.6 points at 4480.4.
Just one Footsie share managed to rise, and among
the sea of red, banks, telecoms and tech stocks were hard hit.
Vodafone, Cable & Wireless, mmO2 and BT all fell between 3 per
cent and 6 per cent.
Global markets reeled on Wednesday after US
long-distance carrier WorldCom Inc. shocked investors with its
disclosure of a $3.8 billion accounting scandal, one of the largest in
WorldCom, the second-biggest US long-distance
telecoms group, on Tuesday night fired its Chief Financial Officer
Scott Sullivan and said it would restate its results for the last five
quarters, erasing all profits from the beginning of 2001.
Stock markets reeled from Asia to Europe to the
United States, with already beleaguered telecoms stocks touching new,
historic lows. Tokyo's Nikkei stock average tumbled 4 per cent to
close at a four-month low, and the pan-European FTSE Eurotop 300 index
was off by a similar amount about 1-1/2 hours ahead of Wall Street's
opening bell. US stock indices fell on the opening bell, with the
tech-heavy Nasdaq falling 3.2 per cent to 1,378.74, and the Dow Jones
industrial averaging tumbling 2 per cent to 8,947.61.
FRANCE HOPES TO CALM BUDGET FEARS
France's new right-of-centre government has accused
its predecessor of leaving state finances in disarray, but has
promised to balance the budget by 2004 nonetheless.
According to Finance Minister Francis Mer, the
French public deficit could be up to 2.6% of gross domestic product
(GDP) this year, against the 1.8-1.9% forecast by the previous
government, ousted in elections earlier this month.
The new government, headed by Jean-Pierre Raffarin
and politically allied to President Jacques Chirac, has pledged to cut
taxes, without dramatically reining in public spending.
France's European neighbours are keenly interested
in its state finances, since it is coming close to breaching agreed
rules on budgetary discipline — a key foundation underpinning faith
in the euro.
At a European summit in Seville in mid-June, France
was given a little leeway in its budget strictures, a recognition that
political considerations were taking priority this year.
Keen to establish a reputation for fiscal probity,
Mr Mer rushed to stress that targets would still be hit.
He said that accelerating GDP growth should help
balance the budget.
The French economy has been more robust than the EU
average over the difficult past six months, and has avoided slipping
The government is counting on the economy growing
by at least 3% this year and next.
If growth does not materialise, and France fails to
balance its budget, Brussels has a range of theoretical sanctions to
force it into line.
Germany and Portugal came close to being punished
by Brussels earlier in the year, but were let off at the last minute.
WORLD'S RICHEST GIVE $1BN TO POOREST
The world's seven richest nations have agreed to
increase debt relief for the poorest countries by $1 billion.
The seven countries — which with Russia form the
Group of Eight (G8) — will reduce the debt repayments for up to 22
African states under the Highly Indebted Poor Countries initiative.
But aid agencies said the debt relief would barely
make up for the fall in prices in commodities such as coffee and
cotton on which many developing nations' economies are reliant.
The $1bn pledge came in a G8 summit in the Canadian
Rocky Mountain resort of Kananaskis, as the eight national leaders
prepare to meet African heads of state to discuss ways to help the
NO FUDGING ON EURO' - BROWN
Chancellor Gordon Brown has stressed the
government's five economic tests will still be the key factor in the
decision over whether Britain should join the euro.
In his keynote Mansion House speech, Mr Brown said
the future of the UK's economy was crucial to any decision to join,
and dismissed speculation the tests would be watered down.
The chancellor also expressed cautious optimism
about the economy — saying he believed Britain was
"well-placed" to weather the storm of business collapses.
BANK OF ENGLAND WARNS OF RISKS
The Bank of England has warned that there are
potential risks to the UK financial system from the continued fall in
share prices following a series of corporate scandals in the United
In particular, it raises concerns about the
financial health of the life-insurance industry, which it says
"has generally been adversely affected by recent equity market
And it warns that the stock market falls "have
also put pressure" on company pensions schemes.
SENEGAL AGREES EU FISHING DEAL
The European Union has agreed to pay Senegal 64m
euros (£41.2m) to exploit its fishing grounds for the next four
The deal ends months of uncertainty after a
previous agreement expired at the end of 2001.
The EU made several concessions to reach the deal,
including paying 4m euros a year more than under the previous deal.
It also bans 'pelagic' fishing, where a net is
dragged by two trawlers and results in many fish being caught that are
not wanted and then thrown overboard.
MAHATHIR TO STEP DOWN NEXT YEAR
Veteran Malaysian leader Mahathir Mohamad will step
down as prime minister and be replaced by his deputy Abdullah Ahmad
Badawi next year, his ruling party announced on Tuesday.
Party secretary general Khalil Yaacob said in a
national broadcast that Mahathir's resignation would take effect after
a summit meeting of the Organization of the Islamic Conference on
October 24-25, 2003.
ENRON FRAUD CHARGE FOR BRITISH BANKERS
The US Department of Justice has charged three
British bankers with involvement in a fraudulent investment scheme
involving failed energy giant Enron.
The three men worked for National Westminster Bank
and allegedly made secret investments in an Enron front company,
diverting proceeds amounting to $7.3m.
JAPAN UNEMPLOYMENT HEADS HIGHER
Unemployment in Japan has gone up for the first
time in five months, official figures have revealed.
The country's official unemployment rate rose to
5.4% in May from 5.2% in April, erasing hopes that the rate would fall
below the psychologically important 5% mark anytime soon — even
though industrial output rose for the fourth month in a row in May.
The number of people who had jobs fell 1.8% during
the month to 63.56 million people, the second largest monthly fall
since records begun in the 1950s.
DEUTSCHE BANK TO LAY OFF 3,800 STAFF
Germany's largest bank, Deutsche Bank, has
announced plans to cut 3,770 jobs. The reduction, which comes in
addition to 9,200 previously announced job cuts, is part of the bank's
push to slash costs in order to save 2bn euros (£1.29bn; $1.97bn) a
NIKE PROFITS CONTINUE TO SOAR
The US sportswear and trainers maker, Nike, has
reported a sharp rise in profits during the March to May quarter.
Net income for the quarter rose 28% to $208m
(£136m) from $162m a year earlier.
MOTOROLA TO CUT 7,000 JOBS
Motorola, the world's second-biggest maker of
mobile phones, has announced plans to cut 7,000 jobs and take a $3.5bn
(£2.29bn) charge to pay for a massive restructuring.
PENSIONS SCANDAL COSTS £11.8BN
The Financial Services Authority (FSA) has
announced that the pensions mis-selling scandal will have cost
insurers and financial advisers at least £11.8bn in compensation
More than one million customers who were mis-sold
personal pensions and pension top-ups are in the process of receiving
The City watchdog said 1.7m consumers will have had
their cases reviewed by the end of June and received their payments.
CAP GEMINI CUTS 5,500 JOBS
Beleaguered consultancy Cap Gemini Ernst &
Young is to axe a further 5,500 jobs, as it attempts to stem a slump
in demand in its core tech market.
BT BUYS SCOOT.COM FOR £5M
BT has agreed to buy online directory firm
Scoot.com for £5m, in a move that will bolster its own directory
Scoot.com was worth £2bn at the height of the
dot.com bubble, but its shares tumbled as the dot.com dream turned
sour and the company was due to run out of cash.
SURPRISE JUMP IN US GROWTH
The US economy grew at its fastest rate in two
years in the first quarter, revised figures show.
Gross domestic product (GDP) grew at a revised 6.1%
during the first three months of this year.
This compares with an earlier estimate of 5.6% for
the quarter, while growth in the last quarter of last year grew just
The growth can be attributed to the continued
enthusiasm of the American shopper, who spent more than had previously
Other factors at play included an increased
government spend on defense.
It had originally been estimated that business
investment fell 8.2%. The new figures show that it fell by just 6.2%.
Business spending is regarded by many as crucial to
a sustainable economic expansion.
RATING BOOST FOR SOUTH KOREA
The credit rating agency Fitch has raised South
Korea's debt rating by two notches in a move which indicates faith in
the country's economic strength.
The upgrade reflects "the international
financial community's firm belief that [the] economy will sustain
solid economic growth despite an unfavourable external economic
situation", said South Korea's ministry of finance and economy.
The rating upgrade helped lift South Korea's index
as much as 2.9% to a high of 721.97 points, though it pared some of
its gains to close 1.2% higher on the day.
ROCHE BECOMES BIG IN JAPAN
The Swiss pharmaceuticals giant Roche is set to
become the fourth largest drugs company in the world's second largest
pharmaceutical market, Japan.
The group's leap up the league table is expected
after its bid for a 51% stake in Chugai Pharmaceutical was approved by
The takeover, which would also hoist Roche back up
among the world's ten leading drugs groups, could set off a wave of
similar deals in the Japanese pharmaceutical sector, analysts
US INTEREST RATES KEPT ON HOLD
The US central bank has left interest rates on
hold, amid concerns over falling consumer confidence, and plunging
The Federal Reserve, the US central bank, retained
rates at 1.75%, their lowest for 40 years.
The Fed cited continuing concerns over the pace of
US economic recovery in a statement announcing the decision.
"The committee expects the rate of increase of
final demand to pick up over coming quarters... but the degree of the
strengthening remains uncertain," the statement said.
EURO RISES NEAR TO PARITY WITH DOLLAR
The euro has neared parity with the dollar, as the
WorldCom scandal dealt another blow to the greenback.
The euro surged 1.5% in early trade on Wednesday to
a 28-month high of $0.9944, after WorldCom's admission of accounting
fraud trashed investor confidence in the US.
LOSS-MAKING ALCATEL STUNS MARKETS
Shares in telecom equipment maker Alcatel have
plunged by more than 20%, after the firm warned it would fall into
loss this year.
French Alcatel, which had previously expected to
post a modest profit in 2002, said it would aim to slash costs by 12%
this year and next.
This programme will cause the loss of 10,000 jobs,
over and above the tens of thousands Alcatel plans to cut this year.
SOUTH KOREA BOOM ACCELERATES
South Korea's economy is likely to grow more than
6% this year, thanks to a sustained economic upturn buoyed by its
experience of hosting the World Cup.
The Finance and Economy Ministry in the capital,
Seoul, said it was boosting its estimate of likely economic expansion
from the 5% it had previously expected.
WORLD BANK FUNDS BANGLADESHI PROJECT
The World Bank has approved almost $200m (£131m)
in grants and loans for renewable energy projects in Bangladesh.
"This project will support Bangladesh's
efforts to raise levels of social development and economic growth by
increasing access to electricity in rural areas, where 85% of the
country's nearly 63m poor people live," the bank said in a
The project will promote the use of solar energy in
rural areas to improve the delivery of social services such as health