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India unveils anti-poverty budget
India is to boost spending on primary schools and health in a budget flagged as a boost for the ordinary citizen.
India's defence budget has also been raised 7.8% to 830bn rupees ($19bn). The priority for Finance Minister Palaniappan Chidambaram is to fight poverty and keep the government's Communist allies onside. But his options are limited by a new law which makes him cut the budget deficit, which he said would be 4.5% of GDP in the year to March 2005. The country's overall deficit is thought to be more than 10%, if the spending of India's 35 states and territories is included. Under the fiscal responsibility law, Mr Chidambaram has to trim the deficit by 0.3 percentage points each year, a target he says he has now met for the current year.
But the heavy spending on poverty reduction means the 2005-6 target for the deficit will be 4.3%, Mr Chidambaram said - falling short of the new law's requirement. "I was left with no option but to press the pause button vis a vis the act," he said. The following year, though, would have to be back on track, he warned.
"I may add that we are perilously close to the limits of fiscal prudence and there is no more room for spending beyond our means," he said. The coming year's reduction has meant bringing more of the businesses in India's burgeoning services sector into the tax system and restructuring the personal tax system, although there are numerous corporate tax and duty reductions built into the budget.
Presenting his budget in the lower house of parliament, Mr Chidambaram said the Indian economy was performing strongly and that inflation has been reined in. He said India's economy grew 6.9% in 2004. In his budget Mr Chidambaram has:
- Increased spending on primary education to 71.56bn rupees ($1.6bn)
- Increased spending on health to 102.8bn rupees ($2.35bn)
- Announced that 80bn rupees ($1.8bn) will be spent on building rural infrastructure
- Pledged 102.16bn rupees ($2.3bn) for tsunami victims
- Increased flow of funds to agriculture by 30%
- Announced a package for the sugar industry
In addition, up to 100bn rupees ($2.3bn) to be spent on infrastructure will be sourced by borrowing against the country's foreign exchange reserves, keeping budgeted spending under control. "Given the resilience of the Indian economy... it is possible to launch a direct assault on poverty," Mr Chidambaram said. "The whole purpose of democratic government is to eliminate poverty." The new Indian government, led by the Congress Party, was voted into power last May after it pledged to introduce economic reforms with a "human face".
The finance minister says he is committed to continue reforming India's tax system while expanding the tax base. As part of his reforms he has announced:
- Duty cuts on capital goods and raw materials
- Expanded service tax net
- Raised the income-tax threshold to 100,000 rupees ($2,300)
- Reduced income tax for those earning less than 250,000 rupees ($5,700) to 20%
- Reduced corporate tax rates to 30%
An annual economic survey released on Friday said India needed to ease limit restriction on foreign investment, reform labour laws and cut duties apart from widening the tax base for long-term economic growth. But Mr Chidambaram is under pressure from the Communist parties to focus on increasing social spending. The Communists are also hostile to measures seeking to increase foreign investment and allow companies to hire and fire employees at will. In recent months, they have expressed their displeasure at the government's economic reform plans including increasing foreign direct investment in telecommunication and aviation. In his last budget, Mr Chidambaram had pledged billions of dollars for improving education and health services for the poor as well as special assistance for farmers.
| But the heavy spending on poverty reduction means the 2005-6 target for the deficit will be 4.3%, Mr Chidambaram said - falling short of the new law's requirement.Presenting his budget in the lower house of parliament, Mr Chidambaram said the Indian economy was performing strongly and that inflation has been reined in."Given the resilience of the Indian economy... it is possible to launch a direct assault on poverty," Mr Chidambaram said.But his options are limited by a new law which makes him cut the budget deficit, which he said would be 4.5% of GDP in the year to March 2005.India's defence budget has also been raised 7.8% to 830bn rupees ($19bn).Under the fiscal responsibility law, Mr Chidambaram has to trim the deficit by 0.3 percentage points each year, a target he says he has now met for the current year.As part of his reforms he has announced: - Duty cuts on capital goods and raw materials - Expanded service tax net - Raised the income-tax threshold to 100,000 rupees ($2,300) - Reduced income tax for those earning less than 250,000 rupees ($5,700) to 20% - Reduced corporate tax rates to 30% An annual economic survey released on Friday said India needed to ease limit restriction on foreign investment, reform labour laws and cut duties apart from widening the tax base for long-term economic growth.But Mr Chidambaram is under pressure from the Communist parties to focus on increasing social spending.He said India's economy grew 6.9% in 2004.In his budget Mr Chidambaram has: - Increased spending on primary education to 71.56bn rupees ($1.6bn) - Increased spending on health to 102.8bn rupees ($2.35bn) - Announced that 80bn rupees ($1.8bn) will be spent on building rural infrastructure - Pledged 102.16bn rupees ($2.3bn) for tsunami victims - Increased flow of funds to agriculture by 30% - Announced a package for the sugar industry In addition, up to 100bn rupees ($2.3bn) to be spent on infrastructure will be sourced by borrowing against the country's foreign exchange reserves, keeping budgeted spending under control. |
Ad sales boost Time Warner profit
Quarterly profits at US media giant TimeWarner jumped 76% to $1.13bn (£600m) for the three months to December, from $639m year-earlier.
The firm, which is now one of the biggest investors in Google, benefited from sales of high-speed internet connections and higher advert sales. TimeWarner said fourth quarter sales rose 2% to $11.1bn from $10.9bn. Its profits were buoyed by one-off gains which offset a profit dip at Warner Bros, and less users for AOL.
Time Warner said on Friday that it now owns 8% of search-engine Google. But its own internet business, AOL, had has mixed fortunes. It lost 464,000 subscribers in the fourth quarter profits were lower than in the preceding three quarters. However, the company said AOL's underlying profit before exceptional items rose 8% on the back of stronger internet advertising revenues. It hopes to increase subscribers by offering the online service free to TimeWarner internet customers and will try to sign up AOL's existing customers for high-speed broadband. TimeWarner also has to restate 2000 and 2003 results following a probe by the US Securities Exchange Commission (SEC), which is close to concluding.
Time Warner's fourth quarter profits were slightly better than analysts' expectations. But its film division saw profits slump 27% to $284m, helped by box-office flops Alexander and Catwoman, a sharp contrast to year-earlier, when the third and final film in the Lord of the Rings trilogy boosted results. For the full-year, TimeWarner posted a profit of $3.36bn, up 27% from its 2003 performance, while revenues grew 6.4% to $42.09bn. "Our financial performance was strong, meeting or exceeding all of our full-year objectives and greatly enhancing our flexibility," chairman and chief executive Richard Parsons said. For 2005, TimeWarner is projecting operating earnings growth of around 5%, and also expects higher revenue and wider profit margins.
TimeWarner is to restate its accounts as part of efforts to resolve an inquiry into AOL by US market regulators. It has already offered to pay $300m to settle charges, in a deal that is under review by the SEC. The company said it was unable to estimate the amount it needed to set aside for legal reserves, which it previously set at $500m. It intends to adjust the way it accounts for a deal with German music publisher Bertelsmann's purchase of a stake in AOL Europe, which it had reported as advertising revenue. It will now book the sale of its stake in AOL Europe as a loss on the value of that stake.
| TimeWarner said fourth quarter sales rose 2% to $11.1bn from $10.9bn.For the full-year, TimeWarner posted a profit of $3.36bn, up 27% from its 2003 performance, while revenues grew 6.4% to $42.09bn.Quarterly profits at US media giant TimeWarner jumped 76% to $1.13bn (£600m) for the three months to December, from $639m year-earlier.However, the company said AOL's underlying profit before exceptional items rose 8% on the back of stronger internet advertising revenues.Its profits were buoyed by one-off gains which offset a profit dip at Warner Bros, and less users for AOL.For 2005, TimeWarner is projecting operating earnings growth of around 5%, and also expects higher revenue and wider profit margins.It lost 464,000 subscribers in the fourth quarter profits were lower than in the preceding three quarters.Time Warner's fourth quarter profits were slightly better than analysts' expectations. |
Ban on forced retirement under 65
Employers will no longer be able to force workers to retire before 65, unless they can justify it.
The government has announced that firms will be barred from 2006 from imposing arbitrary retirement ages. Under new European age discrimination rules, a default retirement age of 65 will be introduced. Workers will be permitted to request staying on beyond this compulsory retirement age, although employers will have the right to refuse. Trade and Industry Secretary Patricia Hewitt said people would not be forced to work longer than they wanted, saying the default age was not a statutory, compulsory retirement age. She said employers would be free to continue employing people for as long as they were competent.
Under age discrimination proposals from the Department of Trade and Industry last year workers were to be allowed to work on till 70 if they wished.
Business leaders had opposed the plan as they said it would be too costly and cumbersome. The British Chambers of Commerce welcomed the latest proposal. "This move today is the best of both worlds," it said. "Employers have the ability to define the end point of the employer-employee relationship and employees have flexibility with a right to request to work past the age of 65." But Age Concern said imposing a retirement age of 65 was "cowardly" and a "complete u-turn". "This makes a mockery of the Government's so-called commitment to outlawing ageism, leaving the incoming age discrimination law to unravel," said Gordon Lishman, director general of Age Concern England . "It is now inevitable that older people will mount legal challenges to the decision using European law." The decision will have no impact on the age at which workers can collect their state pension, the government has said.
| Trade and Industry Secretary Patricia Hewitt said people would not be forced to work longer than they wanted, saying the default age was not a statutory, compulsory retirement age.But Age Concern said imposing a retirement age of 65 was "cowardly" and a "complete u-turn".Under new European age discrimination rules, a default retirement age of 65 will be introduced.The decision will have no impact on the age at which workers can collect their state pension, the government has said."This makes a mockery of the Government's so-called commitment to outlawing ageism, leaving the incoming age discrimination law to unravel," said Gordon Lishman, director general of Age Concern England .Under age discrimination proposals from the Department of Trade and Industry last year workers were to be allowed to work on till 70 if they wished. |
News Corp eyes video games market
News Corp, the media company controlled by Australian billionaire Rupert Murdoch, is eyeing a move into the video games market.
According to the Financial Times, chief operating officer Peter Chernin said that News Corp is "kicking the tires of pretty much all video games companies". Santa Monica-based Activison is said to be one firm on its takeover list. Video games are "big business", the paper quoted Mr Chernin as saying. We "would like to get into it".
The success of products such as Sony's Playstation, Microsoft's X-Box and Nintendo's Game Cube have boosted demand for video games.
The days of arcade classics such as Space Invaders, Pac-Man and Donkey Kong are long gone. Today, games often have budgets big enough for feature films and look to give gamers as real an experience as possible. And with their price tags reflecting the heavy investment by development companies, video games are proving almost as profitable as they are fun. Mr Chernin, however, told the FT that News Corp was finding it difficult to identify a suitable target. "We are struggling with the gap between companies like Electronic Arts, which comes with a high price tag, and the next tier of companies," he explained during a conference in Phoenix, Arizona. "These may be too focused on one or two product lines."
| According to the Financial Times, chief operating officer Peter Chernin said that News Corp is "kicking the tires of pretty much all video games companies".Video games are "big business", the paper quoted Mr Chernin as saying.News Corp, the media company controlled by Australian billionaire Rupert Murdoch, is eyeing a move into the video games market.And with their price tags reflecting the heavy investment by development companies, video games are proving almost as profitable as they are fun.The success of products such as Sony's Playstation, Microsoft's X-Box and Nintendo's Game Cube have boosted demand for video games. |
Profits stall at China's Lenovo
Profits at Chinese computer firm Lenovo have stood still amid slowing demand at home and stiffening competition.
The firm is in the international spotlight after last year signing a deal to buy the PC division of personal computer pioneer IBM. Lenovo's profit for the three months to December was HK$327m (US$42m; £22m), less than 1% up on the year before. Chinese PC sales have risen by a fifth in each of the past two years, but are now growing more slowly. The company is still by far the biggest player in China, with more than a quarter of the market. But Western firms such as Dell and Hewlett-Packard are also mounting a more solid fight for market share in China, and Lenovo's sales were down 3.7% by revenue to HK$6.31bn.
If the $1.75bn agreement Lenovo signed with IBM on 8 December goes through, it will mark the end of an era. IBM pioneered the desktop PC market in the early 1980s, although strategic mis-steps helped lose it its early dominance. In any case, margins in PC market are now wafer thin, and profits have been hard to come by for most vendors except direct-sales giant Dell. But investors have been less than impressed with Lenovo's move, designed to take it out of China and further onto the world stage. Its shares are down 20% since the announcement two months ago, largely because of the unprofitability of the unit it is buying. There have been rumours that the deal could be in trouble because US government agencies fear it could offer China opportunities for industrial espionage. The reports of the possibility of an investigation into the risk sent Lenovo's shares up 6% in late January.
| But Western firms such as Dell and Hewlett-Packard are also mounting a more solid fight for market share in China, and Lenovo's sales were down 3.7% by revenue to HK$6.31bn.The firm is in the international spotlight after last year signing a deal to buy the PC division of personal computer pioneer IBM.Lenovo's profit for the three months to December was HK$327m (US$42m; £22m), less than 1% up on the year before.The company is still by far the biggest player in China, with more than a quarter of the market.But investors have been less than impressed with Lenovo's move, designed to take it out of China and further onto the world stage.In any case, margins in PC market are now wafer thin, and profits have been hard to come by for most vendors except direct-sales giant Dell. |
News Corp eyes video games market
News Corp, the media company controlled by Australian billionaire Rupert Murdoch, is eyeing a move into the video games market.
According to the Financial Times, chief operating officer Peter Chernin said that News Corp is "kicking the tyres of pretty much all video games companies". Santa Monica-based Activison is said to be one firm on its takeover list. Video games are "big business", the paper quoted Mr Chernin as saying. We "would like to get into it".
The success of products such as Sony's Playstation, Microsoft's X-Box and Nintendo's Game Cube have boosted demand for video games. The days of arcade classics such as Space Invaders, Pac-Man and Donkey Kong are long gone. Today, games often have budgets big enough for feature films and look to give gamers as real an experience as possible. And with their price tags reflecting the heavy investment by development companies, video games are proving almost as profitable as they are fun.
Mr Chernin, however, told the FT that News Corp was finding it difficult to identify a suitable target. "We are struggling with the gap between companies like Electronic Arts (EA), which comes with a high price tag, and the next tier of companies," he explained during a conference in Phoenix, Arizona. "These may be too focused on one or two product lines." Activision has a stock market capitalisation of about $2.95bn (£1.57bn), compared to EA's $17.8bn. Some of the games industry's main players have recently been looking to consolidate their position by making acquisitions. France's Ubisoft, one of Europe's biggest video game publishers, has been trying to remain independent since Electronic Arts announced plans to buy 19.9% of the firm. Analysts have said that industry mergers are likely in the future.
| According to the Financial Times, chief operating officer Peter Chernin said that News Corp is "kicking the tyres of pretty much all video games companies".Video games are "big business", the paper quoted Mr Chernin as saying.News Corp, the media company controlled by Australian billionaire Rupert Murdoch, is eyeing a move into the video games market.France's Ubisoft, one of Europe's biggest video game publishers, has been trying to remain independent since Electronic Arts announced plans to buy 19.9% of the firm.And with their price tags reflecting the heavy investment by development companies, video games are proving almost as profitable as they are fun.The success of products such as Sony's Playstation, Microsoft's X-Box and Nintendo's Game Cube have boosted demand for video games."We are struggling with the gap between companies like Electronic Arts (EA), which comes with a high price tag, and the next tier of companies," he explained during a conference in Phoenix, Arizona. |
Argentina, Venezuela in oil deal
Argentina and Venezuela have extended a food-for-oil deal, which helped the former to overcome a severe energy crisis last year.
Argentine President Nestor Kirchner and Venezuelan President Hugo Chavez signed the deal in Buenos Aires on Tuesday. Last April, Argentina signed a $240m agreement to import Venezuelan fuel in exchange for agricultural goods and this deal has now been extended. Venezuela will now import cattle, medicines and medical equipment. Last year, Argentina's severe energy crisis forced President Kirchner to suspend gas exports to Chile. Argentina fears that rising demand could spark another crisis and wants to prevent it by signing this deal. The two countries also formalised a co-operation deal between Venezuelan energy firm PDVSA and Argentina's Enarsa. Under this deal, the Argentine market will be opened to Venezuelan investment. President Chavez added that Brazil's Petrobras could join soon the co-operation deal. President Chavez is an ardent promoter of the concept of a South American oil company, which could include the state-owned companies of Venezuela, Argentina, Brazil and Bolivia. The two presidents also agreed to create 'Television Sur', a Latin American network of state-owned television channels.
| Argentine President Nestor Kirchner and Venezuelan President Hugo Chavez signed the deal in Buenos Aires on Tuesday.Argentina and Venezuela have extended a food-for-oil deal, which helped the former to overcome a severe energy crisis last year.Last April, Argentina signed a $240m agreement to import Venezuelan fuel in exchange for agricultural goods and this deal has now been extended.President Chavez added that Brazil's Petrobras could join soon the co-operation deal.The two countries also formalised a co-operation deal between Venezuelan energy firm PDVSA and Argentina's Enarsa. |
Dollar hits new low versus euro
The US dollar has continued its record-breaking slide and has tumbled to a new low against the euro.
Investors are betting that the European Central Bank (ECB) will not do anything to weaken the euro, while the US is thought to favour a declining dollar. The US is struggling with a ballooning trade deficit and analysts said one of the easiest ways to fund it was by allowing a depreciation of the dollar. They have predicted that the dollar is likely to fall even further.
The US currency was trading at $1.364 per euro at 1800 GMT on Monday. This compares with $1.354 to the euro in late trading in New York on Friday, which was then a record low.
The dollar has weakened sharply since September when it traded about $1.20 against the euro. It has lost 7% this year, while against the Japanese yen it is down 3.2%. Traders said that thin trading levels had amplified Monday's move. "It's not going to take much to push [the dollar] one way or the other," said Grant Wilson of Mellon Bank. Liquidity - a measure of the number of parties willing to trade in the market - was about half that of a normal working day, traders said.
| The US dollar has continued its record-breaking slide and has tumbled to a new low against the euro.The US is struggling with a ballooning trade deficit and analysts said one of the easiest ways to fund it was by allowing a depreciation of the dollar.The dollar has weakened sharply since September when it traded about $1.20 against the euro.The US currency was trading at $1.364 per euro at 1800 GMT on Monday.Investors are betting that the European Central Bank (ECB) will not do anything to weaken the euro, while the US is thought to favour a declining dollar. |
Gaming firm to sell UK dog tracks
Six UK greyhound tracks have been put up for sale by gaming group Wembley as part of a move which will lead to the break-up of the group.
Wembley announced the planned sale as it revealed it was to offload its US gaming division to BLB Investors. US gaming consortium BLB will pay $339m (£182.5m) for the US unit, although the deal is subject to certain conditions. BLB holds a 22% stake in Wembley and last year came close to buying the whole firm in a £308m takeover deal. Shares in Wembley were up 56 pence, or 7.6%, at 797p by mid-morning.
The sale of the US gaming unit will leave Wembley with its UK business. This includes greyhound tracks at Wimbledon in London, Belle Vue in Manchester, Perry Barr and Hall Green in Birmingham, Oxford and Portsmouth. Analysts have valued the six tracks at between £40m-£50m. The US business accounts for about 90% of Wembley's operating profit and consists of operations in Rhode Island and Colorado. BLB's purchase of the US unit is subject to the agreement of a revenue-sharing deal being struck with Rhode Island authorities. Wembley said that, once the deal was completed, it anticipated returning surplus cash to shareholders. "Whilst the completion of the sale of the US Gaming Division remains subject to a number of conditions, we believe this development is a positive step towards the maximisation of value for shareholders," said Wembley chairman Claes Hultman. Wembley sold the English national football stadium in 1999 to concentrate on its gaming operations.
| The sale of the US gaming unit will leave Wembley with its UK business.Wembley announced the planned sale as it revealed it was to offload its US gaming division to BLB Investors.US gaming consortium BLB will pay $339m (£182.5m) for the US unit, although the deal is subject to certain conditions.Six UK greyhound tracks have been put up for sale by gaming group Wembley as part of a move which will lead to the break-up of the group."Whilst the completion of the sale of the US Gaming Division remains subject to a number of conditions, we believe this development is a positive step towards the maximisation of value for shareholders," said Wembley chairman Claes Hultman.BLB's purchase of the US unit is subject to the agreement of a revenue-sharing deal being struck with Rhode Island authorities. |
Rover deal 'may cost 2,000 jobs'
Some 2,000 jobs at MG Rover's Midlands plant may be cut if investment in the firm by a Chinese car maker goes ahead, the Financial Times has reported.
Shanghai Automotive Industry Corp plans to shift production of the Rover 25 to China and export it to the UK, sources close to the negotiations tell the FT. But Rover told BBC News that reports of job cuts were "speculation". A tie-up, seen as Rover's last chance to save its Longbridge plant, has been pushed by UK Chancellor Gordon Brown. Rover confirmed the tie-up would take place "not very far away from this time".
Rover bosses have said they are "confident" the £1bn ($1.9bn) investment deal would be signed in March or early April.
Transport & General Worker's Union general secretary Tony Woodley repeated his view on Friday that all mergers led to some job cuts. He said investment in new models was needed to ensure the future of the Birmingham plant. "This is a very crucial and delicate time and our efforts are targeted to securing new models for the company which will mean jobs for our people," he said. SAIC says none of its money will be paid to the four owners of Rover, who have been accused by unions of awarding themselves exorbitant salaries, the FT reports. "SAIC is extremely concerned to ensure that its money is used to invest in the business rather than be distributed to the shareholders," the newspaper quotes a source close to the Chinese firm. Meanwhile, according to Chinese state press reports, small state-owned carmaker Nanjing Auto is in negotiations with Rover and SAIC to take a 20% stake in the joint venture. SAIC was unavailable for comment on the job cuts when contacted by BBC News. Rover and SAIC signed a technology-sharing agreement in August.
| But Rover told BBC News that reports of job cuts were "speculation".SAIC was unavailable for comment on the job cuts when contacted by BBC News.Rover and SAIC signed a technology-sharing agreement in August.Some 2,000 jobs at MG Rover's Midlands plant may be cut if investment in the firm by a Chinese car maker goes ahead, the Financial Times has reported.SAIC says none of its money will be paid to the four owners of Rover, who have been accused by unions of awarding themselves exorbitant salaries, the FT reports.Meanwhile, according to Chinese state press reports, small state-owned carmaker Nanjing Auto is in negotiations with Rover and SAIC to take a 20% stake in the joint venture. |
Indian oil firm eyes Yukos assets
India's biggest oil exploration firm, Oil & Natural Gas Corp (ONGC), says it is in talks to buy the former assets of troubled Russian crude producer Yukos.
"We are in touch with the concerned Russian entities about the Yukos assets and other opportunities in Russia," said ONGC chairman Subir Raha. Local press had reported that ONGC was looking to buy 15% of Yukos' former key oil production unit for $2bn (£1bn). Yukos is being broken up by Russian authorities to pay a massive tax bill.
It was forced to sell its key production unit Yuganskneftegas (Yugansk) last month after being hit with a bill of $27bn in unpaid taxes and fines.
State-owned Rosneft now owns Yugansk and Russia has said it will turn the oil producer into a stand-alone firm. Indian oil minister Mani Shankar Aiyar discussed ONGC's plans during a trip to Moscow last year, and the topic came up again during Russian president Vladimir Putin's recent visit to New Delhi. "It would make great sense for us to build on that," said Mr Aiyar. India's oil production has stagnated over recent years, and it is having to look abroad to secure future supplies. India imports about 70% of its total oil consumption. At the same time, India's economy is booming and the country's thirst for oil is so strong that it has helped pushed up the price of crude worldwide.
India produces about 793,000 barrels of oil per day (bpd), little changed since the start of the 1990s, according to oil industry analysts Douglas-Westwood. Consumption, meanwhile, has jumped to 2.4 million bpd, compared with 474,000 bpd in 1973.
"For countries to develop, they have to have access to energy," said John Westwood, managing director of oil industry analysts Douglas-Westwood. India is a "dramatically growing economy that must have access to oil". By buying into Yugansk, ONGC would be able to reduce its dependence on Gulf states for oil imports, Mr Westwood explained, especially as the chances of finding and exploiting resources within India are slim. "We forecast that Indian production will go into significant decline," Mr Westwood said. "By 2020, production may only be at half of today's levels." ONGC, which is majority-owned by the Indian state, already has bought petroleum assets in countries including Vietnam, Sudan and Russia. The company is a partner with Rosneft in the Sakhalin-1 oil field off Russia's Siberian coast.
ONGC is, however, not the only firm interested in Yugansk.
Chinese crude company China National Petroleum has also been mentioned as a possible investor, while on Thursday, Italy refused to rule out an interest. ONGC's interest is the latest twist in a saga that has seen one of the world's biggest oil producers brought to its knees. The dispute is partly driven by President Putin's clampdown on the political ambitions of ex-Yukos boss Mikhail Khodorkovsky, who is currently in jail on charges of fraud and tax evasion. Yukos has been battling the Russian authorities for more than a year and has filed for bankruptcy protection in the US. Analysts have questioned how long it can continue to survive without Yugansk. On Thursday, a US court said it will hear arguments for Yukos' bankruptcy claim to be thrown out on 16 February. Should that happen, Yukos will have little chance of clawing back its assets, analysts said.
| State-owned Rosneft now owns Yugansk and Russia has said it will turn the oil producer into a stand-alone firm.India's biggest oil exploration firm, Oil & Natural Gas Corp (ONGC), says it is in talks to buy the former assets of troubled Russian crude producer Yukos.Local press had reported that ONGC was looking to buy 15% of Yukos' former key oil production unit for $2bn (£1bn).India produces about 793,000 barrels of oil per day (bpd), little changed since the start of the 1990s, according to oil industry analysts Douglas-Westwood.India's oil production has stagnated over recent years, and it is having to look abroad to secure future supplies.Yukos has been battling the Russian authorities for more than a year and has filed for bankruptcy protection in the US."For countries to develop, they have to have access to energy," said John Westwood, managing director of oil industry analysts Douglas-Westwood.By buying into Yugansk, ONGC would be able to reduce its dependence on Gulf states for oil imports, Mr Westwood explained, especially as the chances of finding and exploiting resources within India are slim.India imports about 70% of its total oil consumption."We are in touch with the concerned Russian entities about the Yukos assets and other opportunities in Russia," said ONGC chairman Subir Raha.At the same time, India's economy is booming and the country's thirst for oil is so strong that it has helped pushed up the price of crude worldwide.ONGC's interest is the latest twist in a saga that has seen one of the world's biggest oil producers brought to its knees. |
Deutsche Boerse boosts dividend
Deutsche Boerse, the German stock exchange that is trying to buy its London rival, has said it will boost its 2004 dividend payment by 27%.
Analysts said that the move is aimed at winning over investors opposed to its bid for the London Stock Exchange. Critics of the takeover have complained that the money could be better used by returning cash to shareholders. Deutsche Boerse also said profit in the three months to 31 December was 120.7m euros ($158.8m; £83.3m). Sales climbed to 364.4m euros, lifting revenue for the year to a record 1.45bn euros.
Frankfurt-based Deutsche Boerse has offered £1.3bn ($2.48bn; 1.88bn euros) for the London Stock Exchange. Rival pan-European bourse Euronext is working also on a bid. Late on Monday, Deutsche Boerse said it would lift its 2004 dividend payment to 70 euro cents (£0.48; $0.98) from 55 euro cents a year earlier. "There is a whiff of a sweetener in there," Anais Faraj, an analyst at Nomura told the BBC's World Business Report. "Most of the disgruntled shareholders of Deutsche Boerse are complaining that the money that is being used for the bid could be better placed in their hands, paid out in dividends," Mr Faraj continued. Deutsche Boerse is "trying to buy them off in a sense", he said.
| Deutsche Boerse, the German stock exchange that is trying to buy its London rival, has said it will boost its 2004 dividend payment by 27%.Deutsche Boerse is "trying to buy them off in a sense", he said."Most of the disgruntled shareholders of Deutsche Boerse are complaining that the money that is being used for the bid could be better placed in their hands, paid out in dividends," Mr Faraj continued.Frankfurt-based Deutsche Boerse has offered £1.3bn ($2.48bn; 1.88bn euros) for the London Stock Exchange.Deutsche Boerse also said profit in the three months to 31 December was 120.7m euros ($158.8m; £83.3m). |
US to rule on Yukos refuge call
Yukos has said a US bankruptcy court will decide whether to block Russia's impending auction of its main production arm on Thursday.
The Russian oil firm has filed for bankruptcy protection in the US in an attempt to halt the forced sale. However, Judge Letitia Clark said the hearing would continue on Thursday when arguments in the case would be heard. Russian authorities are due to auction off Yuganskneftegas on 19 December to pay a huge tax bill sent to Yukos.
Russian prosecutors are forcing the sale of the firm's most lucrative asset Yuganskneftegas to help pay a $27bn (£14bn) back tax bill, which they claim is owed by Yukos.
Filing for bankruptcy protection in the US was "a last resort to preserve the rights of our shareholders, employees and customers," said Yukos chief executive Steven Theede. The company added it had opted to take action through American courts as US bankruptcy law gives worldwide jurisdiction over a debtor company's property and because it was seeking a judiciary willing to protect the value of shareholders' investments. However, as the firm is based in Russia and has no significant US assets, lawyers are unsure of the outcome of the case. "We are here to stop 60% of our body from being cut off on Sunday," Zack Clement, a lawyer for Yukos, told Judge Clark in an emergency hearing in Houston, Texas, on Wednesday. As well as the bid to get Chapter 11 bankruptcy - which protects firms from creditors, allowing them to continue trading as they restructure their finances - the group also made a claim for damages against the Russian government. Yukos asked the Houston court to order Russia to arbitration so that it can press claims for billions of dollars in damages over a "campaign of illegal, discriminatory and disproportionate" tax claims. Mr Clement said that under Russian law, the Russian government was obliged to enter into arbitration as set out in international law.
He added that the opening bid for the firm's Yuganskneftgas unit was $8bn - less than half of the $20bn that Yukos advisers say it is worth. "We believe the only significant bidder at the auction on Sunday is Gazprom," he said, referring to Russia's natural gas giant. Yukos maintains that the forced auction is illegal and "will cause the company to suffer immediate and irreparable harm." Many commentators believe the Russian government's aggressive pursuit of Yukos is a politically-motivated response to the political ambitions of its former chief executive, Mikhail Khodorkovsky. Mr Khodorkovsky, who had funded liberal opposition groups, was arrested in October last year on fraud and tax evasion charges and is still in jail Analysts believe that if its production unit is auctioned off, it is likely to be bought up by a government-backed firm, like Gazprom, effectively bringing a large chunk of Russia's lucrative oil and gas industry back under state control.
| Yukos has said a US bankruptcy court will decide whether to block Russia's impending auction of its main production arm on Thursday.Filing for bankruptcy protection in the US was "a last resort to preserve the rights of our shareholders, employees and customers," said Yukos chief executive Steven Theede.Russian prosecutors are forcing the sale of the firm's most lucrative asset Yuganskneftegas to help pay a $27bn (£14bn) back tax bill, which they claim is owed by Yukos.Russian authorities are due to auction off Yuganskneftegas on 19 December to pay a huge tax bill sent to Yukos.The Russian oil firm has filed for bankruptcy protection in the US in an attempt to halt the forced sale.Mr Clement said that under Russian law, the Russian government was obliged to enter into arbitration as set out in international law.Yukos asked the Houston court to order Russia to arbitration so that it can press claims for billions of dollars in damages over a "campaign of illegal, discriminatory and disproportionate" tax claims. |
US gives foreign firms extra time
Foreign firms have been given an extra year to meet tough new corporate governance regulations imposed by the US stock market watchdog.
The Securities and Exchange Commission has extended the deadline to get in line with the rules until 15 July 2006. Many foreign firms had protested that the SEC was imposing an unfair burden. The new rules are the result of the Sarbanes-Oxley Act, part of the US clean-up after corporate scandals such as Enron and Worldcom. Section 404 of the Sox Act, as the legislation is nicknamed, calls for all firms to certify that their financial reporting is in line with US rules. Big US firms already have to meet the requirements, but smaller ones and foreign-based firms which list their shares on US stock markets originally had until the middle of this year.
Over the past few months, delegations of European and other business leaders have been heading to the SEC's Washington DC headquarters to protest. They say the burden is too expensive and the timescale too short and some, particularly the UK's CBI, warned that companies would choose to let their US listings drop rather than get in line with section 404. The latest delegation from the CBI met SEC officials on Wednesday, just before the decision to relax the deadline was announced. "I think this signifies a change of heart at the SEC," CBI director-general Sir Digby Jones told the BBC's Today programme. "They have been listening to us and to many overseas companies, who have reminded America what globalisation really means: that they can't make these rules in isolation." The SEC said it had taken into consideration the fact that foreign companies were already working to meet more onerous financial reporting rules in their home countries. The European Union, in particular, was imposing new international financial reporting standards in 2005, it noted. "I don't underestimate the effort (compliance) will require... but this extension will provide additional time for those issuers to take a good hard look at their internal controls," said Donald Nicolaisen, the SEC's chief accountant.
| Many foreign firms had protested that the SEC was imposing an unfair burden.The SEC said it had taken into consideration the fact that foreign companies were already working to meet more onerous financial reporting rules in their home countries.Section 404 of the Sox Act, as the legislation is nicknamed, calls for all firms to certify that their financial reporting is in line with US rules.Foreign firms have been given an extra year to meet tough new corporate governance regulations imposed by the US stock market watchdog.Big US firms already have to meet the requirements, but smaller ones and foreign-based firms which list their shares on US stock markets originally had until the middle of this year.The European Union, in particular, was imposing new international financial reporting standards in 2005, it noted. |
Germany nears 1990 jobless level
German unemployment rose for the 11th consecutive month in December - making the year's average jobless total the highest since reunification.
The seasonally adjusted jobless total rose a higher than expected 17,000 to 4.483 million, the Bundesbank said. Allowing for changes in calculating statistics, the average number of people out of work was the highest since 1990 - or a rate of 10.8%. Bad weather and a sluggish economy were blamed for the rise. The increase "was due primarily to the onstart of winter", labour office chief Frank-Juergen Weise said.
Unadjusted, the figures showed unemployment rose 206,900 to 4.64 million - with many sectors such as construction laying off workers amid bad weather. "The three years of stagnation in the German economy came to an end in 2004. But the upturn is still not strong enough" to boost the labour market, Mr Weise added. News of the rise came as government welfare reforms came into force, a move that is expected to see unemployment swell still further in coming months. Under the Hartz IV changes, the previous two tier system of benefits and support for the long term unemployed has been replaced with one flat-rate payout. In turn, that means more people will be classified as looking for work, driving official figures higher.
"Be prepared for a nasty figure for January 2005, about five million unemployed on a non-seasonally adjusted basis," warned HVB Group economist Andreas Rees. But he did add that the numbers should "subside" throughout the year, to remain near 2004's level of 4.4 million jobless. "I don't expect a strong and lasting turnaround until 2006," German Economy minister Wolfgang Clement said. By 2010, however, the Hartz IV reforms should help cut the average jobless rate to between 3% and 5%, he added. Europe's biggest economy has been too weak to create work as it struggles to shake off three years of economic stagnation. In recent months companies such as Adam Opel - the German arm of US carmaker General Motors - and retailer KarstadtQuelle have slashed jobs.
| "The three years of stagnation in the German economy came to an end in 2004.The seasonally adjusted jobless total rose a higher than expected 17,000 to 4.483 million, the Bundesbank said.German unemployment rose for the 11th consecutive month in December - making the year's average jobless total the highest since reunification.Europe's biggest economy has been too weak to create work as it struggles to shake off three years of economic stagnation.By 2010, however, the Hartz IV reforms should help cut the average jobless rate to between 3% and 5%, he added."I don't expect a strong and lasting turnaround until 2006," German Economy minister Wolfgang Clement said.Unadjusted, the figures showed unemployment rose 206,900 to 4.64 million - with many sectors such as construction laying off workers amid bad weather. |
Booming markets shed few tears
The market, former British government minister Michael Heseltine once said, has no morality.
And indeed, stock exchange traders around Asia have wasted little time regretting the victims of this week's disaster. Stock markets in Indonesia and India have hit all-time highs this week; even in Sri Lanka, more comprehensively affected, the main index has lost only 5% since the waves hit. Bigger markets further afield have barely twitched. The MSCI World share index, a measure of global stock market performance, hit its highest level this week since early 2001; the BBC Global 30 has risen by 3% in the past week. And this at a time when - all sentiment aside - insurance costs are already estimated in the tens of billions of dollars, and countries around the region are looking at trimming their growth forecasts.
In fact, the markets are being perfectly rational.
For a start, the notional insurance cost of the disaster will have little bearing on corporate bottom lines. The overwhelming majority of the victims will have had no insurance: according to estimates from India, only one-quarter of those affected there were wealthy enough to afford insurance, and only one-quarter of that group at most will have taken out policies. Indonesia is likely to have even lower take-up rates. And where insurance certainly is in place - in, for example, the many tourist complexes affected - the costs will be borne in far-away corners of the global reinsurance market, rather than landing locally.
Second, stock markets do not trade the sort of companies likely to have been damaged. Most of the biggest companies traded on the soaring Jakarta Stock Exchange are in oil, technology and financial services - none of which have been hit by the flooding. Tourist businesses, the most likely sufferers, are either foreign-owned or too small to have their shares listed. Those that are listed have suffered: Confifi Hotel Holdings, a small Sri Lankan tourism firm, has halved in value this week. But there are winners as well as losers. Asian stock markets are heavily inclined towards property and construction companies, many of which will be rubbing their hands over the reconstruction opportunities. In Indonesia, shares in state construction companies Adhi Karya and Semen Gresik have jumped sharply this week.
More broadly, the academic consensus is that major disasters are largely neutral in their longer-term economic impact.
According to the Natural Hazards Research and Applications Information Center at Colorado State University, there is little evidence that disasters are inevitably followed by a depression. The need to find money to replace lost and damaged property is balanced by the beneficial effect of reconstruction activity; there is rarely, the centre says, any sort of rebuilding boom, but in most cases sizeable indirect losses are avoided. A study of the 1993 Des Moines floods, from the Disaster Research Center at the University of Delaware*, found that 70% of local businesses were no worse off after the disaster, and another 18% felt themselves better off. "Although it is commonly assumed on the basis of anecdotal evidence that disasters result in business failures and bankruptcies on a large scale, our research indicates that most businesses, even those that are especially hard-hit, do indeed recover," the authors concluded.
But disasters have a vast psychological impact, and markets are driven by psychological factors.
In particular, many analysts warn of panic spreading unchecked through the global financial system, as investors seek to cover themselves against the unforeseeable effects of unguessable events. In fact, again, the risks here are lower than they seem. Even the costliest natural disaster is rendered minuscule by the global capital market - currently $30 trillion and rising. A series of recent shocks, the Colorado centre has argued, have demonstrated that this seamless global contagion hardly ever happens: market tremors rarely translate into economic slumps, and economic woes rarely seriously undermine markets. The trillion-dollar debts of Japan's banks, for example, have had no effect on stock markets further afield than Tokyo. And the US stock market was on its way down long before 11 September, 2001; it rose by 20% during the six months following the attacks. "It is not that the broking community is indifferent to disasters or feelings," one Bombay trader said this week. "But the reaction would have been seen if business had been affected. Business sense probably tends to overrule everything else."
| Stock markets in Indonesia and India have hit all-time highs this week; even in Sri Lanka, more comprehensively affected, the main index has lost only 5% since the waves hit.Second, stock markets do not trade the sort of companies likely to have been damaged.The MSCI World share index, a measure of global stock market performance, hit its highest level this week since early 2001; the BBC Global 30 has risen by 3% in the past week.Even the costliest natural disaster is rendered minuscule by the global capital market - currently $30 trillion and rising.And where insurance certainly is in place - in, for example, the many tourist complexes affected - the costs will be borne in far-away corners of the global reinsurance market, rather than landing locally.The trillion-dollar debts of Japan's banks, for example, have had no effect on stock markets further afield than Tokyo.But disasters have a vast psychological impact, and markets are driven by psychological factors.In fact, the markets are being perfectly rational.And indeed, stock exchange traders around Asia have wasted little time regretting the victims of this week's disaster.Asian stock markets are heavily inclined towards property and construction companies, many of which will be rubbing their hands over the reconstruction opportunities.A study of the 1993 Des Moines floods, from the Disaster Research Center at the University of Delaware*, found that 70% of local businesses were no worse off after the disaster, and another 18% felt themselves better off.Bigger markets further afield have barely twitched.And the US stock market was on its way down long before 11 September, 2001; it rose by 20% during the six months following the attacks.For a start, the notional insurance cost of the disaster will have little bearing on corporate bottom lines. |
McDonald's to sponsor MTV show
McDonald's, the world's largest restaurant chain, is to sponsor a programme on music channel MTV as part of its latest youth market promotion.
The show Advance Warning highlights new talent and MTV reckons it will give McDonald's access to nearly 400 million homes in 162 countries. McDonald's golden arches, name and "I'm loving it" catchphrase will be used throughout the half-hour programme. The move comes amid growing concerns about obesity in Europe and the US.
The European Union has called on the food industry to reduce the number of adverts aimed at young children, warning that legislation would be introduced. unless voluntary steps were taken. In the US, food group Kraft is among firms that already have cut back on promoting sugar and fattening products to the young. McDonalds has also been taking steps to improve its junk food reputation, revamping its menu and providing clients with health-related products such as pedometers. As well as burgers like the Big Mac and Quarter Pounder with Cheese, the company now sells healthier options such as salads and fresh fruit. Chief executive Jim Skinner attributed an 8.3% increase in January worldwide sales to the "vitality of our menu", among other things.
Hooking up with MTV is expected to add extra momentum to McDonald's recent revival. MTV, which played a key role in the emergence of the music video, is to show Advance Warning on all 25 of its channels across the world. The programme can at present only been seen in the US, where it has featured artists like British stars Joss Stone and Franz Ferdinand. McDonald's has targeted the youth market in the past with its advertisements, signing up stars like jelly-legged dancer Justin Timberlake and all-woman singing group Destiny's Child.
| McDonalds has also been taking steps to improve its junk food reputation, revamping its menu and providing clients with health-related products such as pedometers.McDonald's, the world's largest restaurant chain, is to sponsor a programme on music channel MTV as part of its latest youth market promotion.McDonald's has targeted the youth market in the past with its advertisements, signing up stars like jelly-legged dancer Justin Timberlake and all-woman singing group Destiny's Child.The show Advance Warning highlights new talent and MTV reckons it will give McDonald's access to nearly 400 million homes in 162 countries.The programme can at present only been seen in the US, where it has featured artists like British stars Joss Stone and Franz Ferdinand.In the US, food group Kraft is among firms that already have cut back on promoting sugar and fattening products to the young. |
Nigeria to boost cocoa production
The government of Nigeria is hoping to triple cocoa production over the next three years with the launch of an ambitious development programme.
Agriculture Minister Adamu Bello said the scheme aimed to boost production from an expected 180,000 tonnes this year to 600,000 tonnes by 2008. The government will pump 154m naira ($1.1m; £591,000) into subsidies for farming chemicals and seedlings. Nigeria is currently the world's fourth-largest cocoa producer.
Cocoa was the main export product in Nigeria during the 1960s. But with the coming of oil, the government began to pay less attention to the cocoa sector and production began to fall from a peak of about 400,000 tonnes a year in 1970. At the launch of the programme in the south-western city of Ibadan, Mr Bello explained that an additional aim of the project is to encourage the processing of cocoa in the country and lift local consumption. He also announced that 91m naira of the funding available had been earmarked for establishing cocoa plant nurseries. The country could be looking to emulate rival Ghana, which produced a bumper crop last year. However, some farmers are sceptical about the proposals. "People who are not farming will hijack the subsidy," said Joshua Osagie, a cocoa farmer from Edo state told Reuters. "The farmers in the village never see any assistance," he added.
At the same time as Nigeria announced its new initiative, Ghana - the world's second largest cocoa exporter - announced revenues from the industry had broken new records. The country saw more than $1.2bn-worth of the beans exported during 2003-04. Analysts said high tech-production techniques and crop spraying introduced by the government led to the huge crop, pushing production closer to levels seen in the 1960s when the country was the world's leading cocoa grower.
| The government of Nigeria is hoping to triple cocoa production over the next three years with the launch of an ambitious development programme.Analysts said high tech-production techniques and crop spraying introduced by the government led to the huge crop, pushing production closer to levels seen in the 1960s when the country was the world's leading cocoa grower."People who are not farming will hijack the subsidy," said Joshua Osagie, a cocoa farmer from Edo state told Reuters.Nigeria is currently the world's fourth-largest cocoa producer.Cocoa was the main export product in Nigeria during the 1960s.But with the coming of oil, the government began to pay less attention to the cocoa sector and production began to fall from a peak of about 400,000 tonnes a year in 1970. |
Man Utd to open books to Glazer
Manchester United's board has agreed to give US tycoon Malcolm Glazer access to its books.
Earlier this month, Mr Glazer presented the board with detailed proposals on an offer to buy the football club. In a statement, the club said it would allow Mr Glazer "limited due diligence" to give him the opportunity to take the proposal on to a formal bid. But it said it continued to oppose Mr Glazer's plans, calling his assumptions "aggressive" and his plan "damaging". Many of Manchester United's supporters own shares in the club, and the fan-based group Shareholders United is strongly opposed to any takeover by Mr Glazer. About 300 fans protested outside the Old Trafford ground two days ago.
Rival local club Manchester City has pleaded with visiting fans not to protest inside its ground when the two teams play a televised match on Sunday.
Manchester United's response comes as little surprise, as the board made clear. "Any board has a responsibility to consider a bona fide offer proposal," the club said in its statement. Should it become a firm offer, it should be at a price that "the board is likely to regard as fair" and on terms which "may be deliverable". But it also stressed that it stayed opposed to Mr Glazer's proposal. "The board continues to believe that Mr Glazer's business plan assumptions are aggressive," the statement said, "and the direct and indirect financial strain on the business could be damaging." Whether or not the bid is attractive in monetary terms, in the case of Manchester United many investors hold the stock for sentimental rather than financial reasons. At present, Mr Glazer and his family hold a 28.1% stake, making them Manchester United's second biggest shareholders. They own the successful Tampa Bay Buccaneers American football team based in Florida. If the family makes a formal offer, they will need the support of the club's biggest shareholders.
Irish horse racing millionaires JP McManus and John Magnier own 29% of United through their investment vehicle Cubic Expression, and have yet to express a view on the bid approach.
A group of five MPs are calling on the Department of Trade and Industry to block any takeover of the club by the US football magnate on public interest grounds. They have signed a House of Commons motion, and Tony Lloyd, the Manchester Central MP, whose constituency includes the club's Old Trafford ground, has pledged to take the matter "to Tony Blair if necessary". The Commons motion says "any takeover designed to transform the club into a private company would be against the interests of those supporters and football". However, the DTI has dismissed the proposal. A spokesman said the department did not believe there was a case for changing the Enterprise Act so that takeovers of football clubs could be looked at on non-competition grounds. Mr Glazer's offer values the club at £800m ($1.5bn). Pitched at 300p per share, it also relies less on debt to finance it than an earlier approach from the US tycoon, which was rejected out of hand. Manchester United shares closed at 270.25p on Friday, down 3.75p on the day.
| Many of Manchester United's supporters own shares in the club, and the fan-based group Shareholders United is strongly opposed to any takeover by Mr Glazer.Earlier this month, Mr Glazer presented the board with detailed proposals on an offer to buy the football club."Any board has a responsibility to consider a bona fide offer proposal," the club said in its statement.In a statement, the club said it would allow Mr Glazer "limited due diligence" to give him the opportunity to take the proposal on to a formal bid.Mr Glazer's offer values the club at £800m ($1.5bn).Manchester United's board has agreed to give US tycoon Malcolm Glazer access to its books.At present, Mr Glazer and his family hold a 28.1% stake, making them Manchester United's second biggest shareholders."The board continues to believe that Mr Glazer's business plan assumptions are aggressive," the statement said, "and the direct and indirect financial strain on the business could be damaging."Rival local club Manchester City has pleaded with visiting fans not to protest inside its ground when the two teams play a televised match on Sunday.But it also stressed that it stayed opposed to Mr Glazer's proposal. |
Jobs growth still slow in the US
The US created fewer jobs than expected in January, but a fall in jobseekers pushed the unemployment rate to its lowest level in three years.
According to Labor Department figures, US firms added only 146,000 jobs in January. The gain in non-farm payrolls was below market expectations of 190,000 new jobs. Nevertheless it was enough to push down the unemployment rate to 5.2%, its lowest level since September 2001. The job gains mean that President Bush can celebrate - albeit by a very fine margin - a net growth in jobs in the US economy in his first term in office. He presided over a net fall in jobs up to last November's Presidential election - the first President to do so since Herbert Hoover. As a result, job creation became a key issue in last year's election. However, when adding December and January's figures, the administration's first term jobs record ended in positive territory.
The Labor Department also said it had revised down the jobs gains in December 2004, from 157,000 to 133,000.
Analysts said the growth in new jobs was not as strong as could be expected given the favourable economic conditions. "It suggests that employment is continuing to expand at a moderate pace," said Rick Egelton, deputy chief economist at BMO Financial Group. "We are not getting the boost to employment that we would have got given the low value of the dollar and the still relatively low interest rate environment." "The economy is producing a moderate but not a satisfying amount of job growth," said Ken Mayland, president of ClearView Economics. "That means there are a limited number of new opportunities for workers."
| The job gains mean that President Bush can celebrate - albeit by a very fine margin - a net growth in jobs in the US economy in his first term in office.Analysts said the growth in new jobs was not as strong as could be expected given the favourable economic conditions.The Labor Department also said it had revised down the jobs gains in December 2004, from 157,000 to 133,000.The US created fewer jobs than expected in January, but a fall in jobseekers pushed the unemployment rate to its lowest level in three years."The economy is producing a moderate but not a satisfying amount of job growth," said Ken Mayland, president of ClearView Economics.He presided over a net fall in jobs up to last November's Presidential election - the first President to do so since Herbert Hoover. |
Qatar and Shell in $6bn gas deal
Shell has signed a $6bn (£3.12bn) deal with the Middle Eastern sheikhdom of Qatar to supply liquid natural gas (LNG) to North America and Europe.
The UK-Dutch group will own 30% of the project, with Qatar's state oil firm owning the rest. The agreement is the latest in a string of deals reached by Qatar, which is trying to make itself a regional leader in natural gas. US oil giant ExxonMobil signed up for a $12.8bn deal earlier on Sunday. France's Total is expected to join the ExxonMobil scheme, dubbed Qatargas-2, on Monday, taking 5 million tonnes of LNG a year. ExxonMobil will be taking some 15 million tonnes each year for 25 years from the end of 2007 under the deal. Shell's agreement, under the name Qatargas-4, foresees the building of new facilities to handle 1.4 billion cubic feet of gas, and 7.8 million tonnes of LNG each year from 2011 onwards.
| ExxonMobil will be taking some 15 million tonnes each year for 25 years from the end of 2007 under the deal.France's Total is expected to join the ExxonMobil scheme, dubbed Qatargas-2, on Monday, taking 5 million tonnes of LNG a year.US oil giant ExxonMobil signed up for a $12.8bn deal earlier on Sunday. |
Nortel in $300m profit revision
Telecoms equipment maker Nortel Networks has sharply revised downwards its profits for the 2003 fiscal year.
In a long-awaited filing, Nortel said it had made $434m (£231m), compared to the previously reported $732m. But the figures - revised after an audit which led to the sacking of the Canadian firm's chief - showed revenue was about 4% higher than first thought. Nortel shares, which have lost nearly 50% of their value since last year, climbed 1.46% in Toronto on Tuesday. Nortel's head Frank Dunn and two other executives were fired in January last year after the company announced it had conducted the internal audit. Securities and police authorities in both the US and Canada are still conducting inquiries into the accounts.
Nortel also issued new figures for the 2001-2002 period, which they had previously indicated had understated losses. "With the completion of our restatements we have a solid foundation on which to move forward with our business," said Nortel president and chief executive Bill Owens. "The restatement has been a monumental task, both complex and demanding." The company also said 12 senior executives - none of whom were involved directly in the accounting of the revised figures - have voluntarily agreed to repay to bonuses awarded in 2003 totalling $8.6m. Nortel added: "these members of the core executive team share the board's deep disappointment over the circumstances that led to the restatement."
| "With the completion of our restatements we have a solid foundation on which to move forward with our business," said Nortel president and chief executive Bill Owens.Nortel added: "these members of the core executive team share the board's deep disappointment over the circumstances that led to the restatement."Telecoms equipment maker Nortel Networks has sharply revised downwards its profits for the 2003 fiscal year.Nortel also issued new figures for the 2001-2002 period, which they had previously indicated had understated losses.In a long-awaited filing, Nortel said it had made $434m (£231m), compared to the previously reported $732m. |
Putin backs state grab for Yukos
Russia's president has defended the purchase of Yukos' key production unit by state-owned oil firm Rosneft, saying it followed free market principles.
Vladimir Putin said it was quite within the rights of a state-owned company to ensure its interests were met. Rosneft bought 100% of Baikal Finance Group, in a move that amounts to the renationalisation of a major chunk of Russia's booming oil industry. Rosneft will now control about 16% of Russia's total crude oil output. Yukos share jumped in Moscow, climbing as much as 50% before being suspended.
Rosneft is already in the process of merging with Gazprom, the world's biggest gas company, a move that will see Gazprom return to majority state-ownership.
Baikal was the surprise buyer of oil and gas giant Yukos's main production division at a forced auction on Sunday. "Everything was done by market methods," Mr Putin said at his year-end press conference in Moscow. Shedding some light on the Kremlin's motivation, Mr Putin referred to a period of so-called "cowboy capitalism" that followed the collapse of the Soviet Union.
He said privatisations carried out in the early 1990s had involved trickery, including law breaking, by people seeking to acquire valuable state property. "Now the state, using market methods, is safeguarding its interests. I think this is quite normal," the Russian president said. A Rosneft spokesman has said the acquisition is part of its plan to build a "balanced, national energy corporation."
The latest announcement comes after more than a year of wrangling that has pushed Yukos, one of Russia's biggest companies to the brink of collapse. The Russian government put Yukos's Yuganskneftegas subsidiary up for sale last week after hitting the company with a $27bn (£14bn) bill for back taxes and fines.
Analysts say that Yukos's legal attempts to block the auction by filing for bankruptcy protection in the US are probably what caused this week's cloak-and-dagger dealings. Gazprom, the company originally tipped to buy Yuganskneftegas, was banned from taking part in the auction by a US court injunction. By selling the Yukos unit to little-known Baikal and then to Rosneft, Russia is able to circumvent a host of tricky legal landmines, analysts said. "You cannot sue the Russian government," said Eric Kraus, a strategist at Moscow's Sovlink Securities. "The Russian government has sovereign immunity." "The government is renationalising Yuganskneftegas."
Even so, analysts reckon that the saga still has a long way to go. The Rosneft announcement came just hours after Yukos accused Gazprom of illegally taking part in Sunday's auction. It has said it will be seeking damages of $20bn. The claim was made at the latest hearing in the US bankruptcy court in Houston, Texas, where Yukos, had filed for Chapter 11 bankruptcy protection. If found in contempt of the US court order blocking the auction, Gazprom could face having foreign assets seized. Yukos' lawyers had also been expected to try to have Baikal's assets frozen. Lawyers claimed the auction was illegal because Yukos - with an office in Houston - had filed for bankruptcy and therefore its assets were under the protection of US law which has worldwide jurisdiction. Further muddying the waters is a merger between Rosneft and Gazprom which authorities have said will go ahead as planned.
| Lawyers claimed the auction was illegal because Yukos - with an office in Houston - had filed for bankruptcy and therefore its assets were under the protection of US law which has worldwide jurisdiction.Russia's president has defended the purchase of Yukos' key production unit by state-owned oil firm Rosneft, saying it followed free market principles.It has said it will be seeking damages of $20bn.The Rosneft announcement came just hours after Yukos accused Gazprom of illegally taking part in Sunday's auction.Gazprom, the company originally tipped to buy Yuganskneftegas, was banned from taking part in the auction by a US court injunction.By selling the Yukos unit to little-known Baikal and then to Rosneft, Russia is able to circumvent a host of tricky legal landmines, analysts said.A Rosneft spokesman has said the acquisition is part of its plan to build a "balanced, national energy corporation."Further muddying the waters is a merger between Rosneft and Gazprom which authorities have said will go ahead as planned."Everything was done by market methods," Mr Putin said at his year-end press conference in Moscow.The latest announcement comes after more than a year of wrangling that has pushed Yukos, one of Russia's biggest companies to the brink of collapse.Vladimir Putin said it was quite within the rights of a state-owned company to ensure its interests were met."The Russian government has sovereign immunity." |
French boss to leave EADS
The French co-head of European defence and aerospace group EADS Philippe Camus is to leave his post.
Mr Camus said in a statement that he has accepted the invitation to return full-time to the Lagardere group, which owns 30% of EADS. "I will give up my role as soon as the board of directors asks me to do so," he said. Airbus head Noel Forgeard is now set to replace Mr Camus, bringing the company's power struggle to an end. Fighting between Mr Camus and Mr Forgeard has hit the headlines in France and analysts feared that this fighting could destabilise the defence and aerospace group. French finance minister Herve Gaymard is on record as saying that he "deplored" the infighting at the company. The company should now be able put this dispute behind it, with the departure of Mr Camus and with the clear support given to Mr Forgeard by the Lagardere group, the main French shareholder of EADS. The other main shareholders of EADS are the French government (15%) , who also support Mr Forgeard, and Germany's DaimlerChrysler (30%). Rainer Hertrich, the German co-head of EADS will also step down when his contract expires next year.
Mr Camus recently came under pressure as it became clear that the A380 superjumbo was running over budget. EADS - Airbus' majority owner - admitted earlier this week that the project was running 1.45bn euros (£1bn; $1.9bn) over budget. But Mr Forgeard has denied this, telling French media that there is no current overrun in the budget. "But for the sake of transparency, we told our shareholders last week that if we look at the forecast for total costs of the project up to 2010, there is a risk that we will go over by around 10%, which is about 1bn euros (£686m; $1.32bn)," he told France's LCI Television. Due to enter service in 2006, the A380 will replace the Boeing 747 jumbo as the world's biggest passenger aircraft.
| The company should now be able put this dispute behind it, with the departure of Mr Camus and with the clear support given to Mr Forgeard by the Lagardere group, the main French shareholder of EADS.The other main shareholders of EADS are the French government (15%) , who also support Mr Forgeard, and Germany's DaimlerChrysler (30%).Mr Camus said in a statement that he has accepted the invitation to return full-time to the Lagardere group, which owns 30% of EADS.Fighting between Mr Camus and Mr Forgeard has hit the headlines in France and analysts feared that this fighting could destabilise the defence and aerospace group.But Mr Forgeard has denied this, telling French media that there is no current overrun in the budget.The French co-head of European defence and aerospace group EADS Philippe Camus is to leave his post. |
Cannabis hopes for drug firm
A prescription cannabis drug made by UK biotech firm GW Pharmaceuticals is set to be approved in Canada.
The drug is used to treat the central nervous system and alleviate the symptoms of multiple sclerosis (MS). A few weeks ago, shares in GW Pharma lost a third of their value after UK regulators said they wanted more evidence about the drug's benefits. But now Canadian authorities have said the Sativex drug will be considered for approval.
Approximately 50,000 people in Canada have been diagnosed with MS and 85,000 people are suffering from the condition in the UK. Many patients already smoke cannabis to relieve their symptoms.
Now, GW Pharma's Sativex mouth spray could be legally available to MS sufferers in Canada within the next few months. This will be the first time a cannabis-based drug has been approved anywhere in the world, representing a landmark for GW Pharma and for patients with MS. Final approval in Canada should now be little more than a formality, analysts said, and the company expects full approval for Sativex early in 2005. "We are delighted to receive this qualifying notice from Health Canada and look forward to receiving regulatory approval for Sativex in Canada in the early part of 2005," said GW Pharma executive chairman Dr Geoffrey Guy.
The UK government granted GW Pharma a licence to grow the cannabis plant for medical research purposes. Satifex consists of a cannabis extract containing tetrahydrocannabinol and cannabidiol, a cocktail that has also proved effective in treating patients with arthritis. Thousands of plants are grown at a secret location somewhere in the English countryside. Despite hopes of regulatory approval last year, a series of delays has put back Sativex's launch in the UK. The latest news sent shares in GW Pharma up 8.5p, or 8.1%, to 113.5p.
| A prescription cannabis drug made by UK biotech firm GW Pharmaceuticals is set to be approved in Canada."We are delighted to receive this qualifying notice from Health Canada and look forward to receiving regulatory approval for Sativex in Canada in the early part of 2005," said GW Pharma executive chairman Dr Geoffrey Guy.This will be the first time a cannabis-based drug has been approved anywhere in the world, representing a landmark for GW Pharma and for patients with MS.The UK government granted GW Pharma a licence to grow the cannabis plant for medical research purposes.A few weeks ago, shares in GW Pharma lost a third of their value after UK regulators said they wanted more evidence about the drug's benefits.But now Canadian authorities have said the Sativex drug will be considered for approval. |
Ask Jeeves tips online ad revival
Ask Jeeves has become the third leading online search firm this week to thank a revival in internet advertising for improving fortunes.
The firm's revenue nearly tripled in the fourth quarter of 2004, exceeding $86m (£46m). Ask Jeeves, once among the best-known names on the web, is now a relatively modest player. Its $17m profit for the quarter was dwarfed by the $204m announced by rival Google earlier in the week. During the same quarter, Yahoo earned $187m, again tipping a resurgence in online advertising.
The trend has taken hold relatively quickly. Late last year, marketing company Doubleclick, one of the leading providers of online advertising, warned that some or all of its business would have to be put up for sale. But on Thursday, it announced that a sharp turnaround had brought about an unexpected increase in profits. Neither Ask Jeeves nor Doubleclick thrilled investors with their profit news, however. In both cases, their shares fell by some 4%. Analysts attributed the falls to excessive expectations in some quarters, fuelled by the dramatic outperformance of Google on Tuesday.
| Ask Jeeves has become the third leading online search firm this week to thank a revival in internet advertising for improving fortunes.Its $17m profit for the quarter was dwarfed by the $204m announced by rival Google earlier in the week.During the same quarter, Yahoo earned $187m, again tipping a resurgence in online advertising.Neither Ask Jeeves nor Doubleclick thrilled investors with their profit news, however.Ask Jeeves, once among the best-known names on the web, is now a relatively modest player. |
US economy shows solid GDP growth
The US economy has grown more than expected, expanding at an annual rate of 3.8% in the last quarter of 2004.
The gross domestic product figure was ahead of the 3.1% the government estimated a month ago. The rise reflects stronger spending by businesses on capital equipment and a smaller-than-expected trade deficit. GDP is a measure of a country's economic health, reflecting the value of the goods and services it produces.
The new GDP figure, announced by the Commerce Department on Friday, also topped the 3.5% growth rate that economists had forecast ahead of Friday's announcement. Growth was at an annual rate of 4% in the third quarter of 2004 and for the year it came in at 4.4%, the best figure in five years. However, the positive economic climate may lead to a rise in interest rates, with many expecting US rates to rise on 22 March. In the January-to-March quarter, the economy is expected to grow at an annual rate of about 4%, economists forecast. In the final quarter of 2004, businesses increased spending on capital equipment and software by 18%, up from 17.5% in the third quarter. Consumer spending grew 4.2% in the final quarter, down from the third quarter's 5.1%.
| Growth was at an annual rate of 4% in the third quarter of 2004 and for the year it came in at 4.4%, the best figure in five years.In the final quarter of 2004, businesses increased spending on capital equipment and software by 18%, up from 17.5% in the third quarter.In the January-to-March quarter, the economy is expected to grow at an annual rate of about 4%, economists forecast.The US economy has grown more than expected, expanding at an annual rate of 3.8% in the last quarter of 2004. |
Swiss cement firm in buying spree
Swiss cement firm Holcim has bid $800m (£429m) to buy two Indian cement firms and a holding company in the country.
It plans to buy Associated Cement Companies (ACC), Ambuja Cement Eastern and the holding firm, Ambuja Cement India Ltd, a Holcim statement said. Shares in ACC fell 5.5% as investors, who thought the offer was underpriced, decided to sell. Meanwhile, UK-based firm Aggregate Industries said it had agreed a £1.8bn takeover by Holcim.
The deal with Aggregates will give Holcim, the world's second-biggest cement maker, an entry into the UK market and boost its presence in the US. Peter Tom, who will remain as Aggregate chief executive, said the 138p a share offer provided "significant value" for shareholders. The Markfield, Leicestershire-based company runs 142 quarries in the UK and the US. It also has 164 ready-mixed concrete plants, 90 asphalt plants and 32 pre-cast concrete factories.
If the Indian deals go ahead, it will give Holcim a major presence in the world's fastest-growing market behind China. ACC is India's second-largest cement maker with an annual capacity of 18.2 million tonnes and a market share of 13%. "Holcim is looking to buy it (ACC) very cheap," said KK Mittal, a fund manager with Escorts Mutual Fund in New Delhi. "The market is not impressed. If they want a substantial chunk, then they should be paying a premium over the market price." Shares in Holcim rose by 2.3% on Thursday following news of the takeover.
| The deal with Aggregates will give Holcim, the world's second-biggest cement maker, an entry into the UK market and boost its presence in the US.Swiss cement firm Holcim has bid $800m (£429m) to buy two Indian cement firms and a holding company in the country.It plans to buy Associated Cement Companies (ACC), Ambuja Cement Eastern and the holding firm, Ambuja Cement India Ltd, a Holcim statement said.ACC is India's second-largest cement maker with an annual capacity of 18.2 million tonnes and a market share of 13%.If the Indian deals go ahead, it will give Holcim a major presence in the world's fastest-growing market behind China.Meanwhile, UK-based firm Aggregate Industries said it had agreed a £1.8bn takeover by Holcim. |
China keeps tight rein on credit
China's efforts to stop the economy from overheating by clamping down on credit will continue into 2005, state media report.
The curbs were introduced earlier this year to ward off the risk that rapid expansion might lead to soaring prices. There were also fears that too much stress might be placed on the fragile banking system. Growth in China remains at a breakneck 9.1%, and corporate investment is growing at more than 25% a year. The breakneck pace of economic expansion has kept growth above 9% for more than a year. Rapid tooling-up of China's manufacturing sector means a massive demand for energy - one of the factors which has kept world oil prices sky-high for most of this year. In theory, the government has a 7% growth target, but continues to insist that the overshoot does not mean a "hard landing" in the shape of an overbalancing economy. A low exchange rate - China's yuan is pegged to a rate of 8.28 to the dollar, which seems to be in relentless decline - means Chinese exports are cheap on world markets. China has thus far resisted international pressure to break the link or at least to shift the level of its peg. To some extent, the credit controls do seem to be taking effect. Industrial output grew 15.7% in the year to October, down from 23% in February, and inflation slowed to 4.3% - although retail sales are still booming.
| The breakneck pace of economic expansion has kept growth above 9% for more than a year.Rapid tooling-up of China's manufacturing sector means a massive demand for energy - one of the factors which has kept world oil prices sky-high for most of this year.Growth in China remains at a breakneck 9.1%, and corporate investment is growing at more than 25% a year.The curbs were introduced earlier this year to ward off the risk that rapid expansion might lead to soaring prices.In theory, the government has a 7% growth target, but continues to insist that the overshoot does not mean a "hard landing" in the shape of an overbalancing economy. |
Bank voted 8-1 for no rate change
The decision to keep interest rates on hold at 4.75% earlier this month was passed 8-1 by the Bank of England's rate-setting body, minutes have shown.
One member of the Bank's Monetary Policy Committee (MPC) - Paul Tucker - voted to raise rates to 5%. The news surprised some analysts who had expected the latest minutes to show another unanimous decision. Worries over growth rates and consumer spending were behind the decision to freeze rates, the minutes showed. The Bank's latest inflation report, released last week, had noted that the main reason inflation might fall was weaker consumer spending.
However, MPC member Paul Tucker voted for a quarter point rise in interest rates to 5%. He argued that economic growth was picking up, and that the equity, credit and housing markets had been stronger than expected.
The Bank's minutes said that risks to the inflation forecast were "sufficiently to the downside" to keep rates on hold at its latest meeting. However, the minutes added: "Some members noted that an increase might be warranted in due course if the economy evolved in line with the central projection". Ross Walker, UK economist at Royal Bank of Scotland, said he was surprised that a dissenting vote had been made so soon. He said the minutes appeared to be "trying to get the market to focus on the possibility of a rise in rates". "If the economy pans out as they expect then they are probably going to have to hike rates." However, he added, any rate increase is not likely to happen until later this year, with MPC members likely to look for a more sustainable pick up in consumer spending before acting.
| Worries over growth rates and consumer spending were behind the decision to freeze rates, the minutes showed.The Bank's minutes said that risks to the inflation forecast were "sufficiently to the downside" to keep rates on hold at its latest meeting.The decision to keep interest rates on hold at 4.75% earlier this month was passed 8-1 by the Bank of England's rate-setting body, minutes have shown.However, MPC member Paul Tucker voted for a quarter point rise in interest rates to 5%.One member of the Bank's Monetary Policy Committee (MPC) - Paul Tucker - voted to raise rates to 5%.However, he added, any rate increase is not likely to happen until later this year, with MPC members likely to look for a more sustainable pick up in consumer spending before acting. |
Argentina closes $102.6bn debt swap
Argentina is set to close its $102.6bn (£53.51bn) debt restructuring offer for bondholders later on Friday, with the government hopeful that most creditors will accept the deal.
The estimated loss to bondholders is up to 70% of the original value of the bonds, yet the majority are expected to accept the government's offer. Argentina defaulted on its debt three years ago, the biggest sovereign default in modern history. Yesterday Argentina's economy minister, Roberto Lavagna, said that he estimated that the results of the restructuring would be ready around next Thursday (3 March). Argentina's President, Nestor Kirchner, said on Friday: "A year ago when we started the swap (negotiations), they told us we were crazy, that we were irrational." But he added that his government was close to achieving: "The best debt renegotiation in history." The country has been in default on the $102.6bn - based on an original debt of $81.8bn plus interest - for the past three years. If the offer does not go ahead, international lawsuits on behalf of aggrieved investors could follow but analysts are optimistic that it will go through, despite the tough terms for bondholders. About 70% to 80% of bondholders are expected to accept the terms of the offer. By 18 February, creditors holding $41bn - or 40% of the total debt - had accepted the offer. Sorting out its debt would enhance the country's credibility on international markets and enable it to attract more foreign investment. Of Argentina's bondholders, 38.4% reside in Argentina, 15.6% in Italy, 10.3% in Switzerland, 9.1% in the United States, 5.1% in Germany and 3.1% in Japan. Investors in the UK, Holland and Luxembourg have about 1% each and the remainder were not broken down by country. The deal is likely to be taken up most enthusiastically by domestic investors, who will benefit if Argentina's economy becomes more stable.
| Argentina is set to close its $102.6bn (£53.51bn) debt restructuring offer for bondholders later on Friday, with the government hopeful that most creditors will accept the deal.By 18 February, creditors holding $41bn - or 40% of the total debt - had accepted the offer.The country has been in default on the $102.6bn - based on an original debt of $81.8bn plus interest - for the past three years.About 70% to 80% of bondholders are expected to accept the terms of the offer.Argentina defaulted on its debt three years ago, the biggest sovereign default in modern history.The estimated loss to bondholders is up to 70% of the original value of the bonds, yet the majority are expected to accept the government's offer. |
EU ministers to mull jet fuel tax
European Union finance ministers are meeting on Thursday in Brussels, where they are to discuss a controversial jet fuel tax.
A levy on jet fuel has been suggested as a way to raise funds to finance aid for the world's poorest nations. Airlines and aviation bodies have reacted strongly against the plans, saying they would hurt companies at a time when earnings are under pressure. The EU said a tax would only be passed after full consultation with airlines. It was keen to point out earlier this week that any new tax on jet fuel should not hurt the "competitiveness of the airlines". Ministers will also be discussing reforms to regulations governing European public spending.
Global leaders have focused attention on poverty reduction and development at recent meetings of the G7 Group and World Economic Forum. The world's richest countries have said they want to boost the amount of aid they give to 0.7% of their annual gross national income by 2015. Many EU ministers are thought to support the plan to tax jet fuel - tabled by France and Germany following the recent G7 meeting. At present, the fuel used by airlines enjoys either a very low tax rate or is untaxed in EU member states.
| European Union finance ministers are meeting on Thursday in Brussels, where they are to discuss a controversial jet fuel tax.Many EU ministers are thought to support the plan to tax jet fuel - tabled by France and Germany following the recent G7 meeting.It was keen to point out earlier this week that any new tax on jet fuel should not hurt the "competitiveness of the airlines".The EU said a tax would only be passed after full consultation with airlines. |
MG Rover China tie-up 'delayed'
MG Rover's proposed tie-up with China's top carmaker has been delayed due to concerns by Chinese regulators, according to the Financial Times.
The paper said Chinese officials had been irritated by Rover's disclosure of its talks with Shanghai Automotive Industry Corp in October. The proposed deal was seen as crucial to safeguarding the future of Rover's Longbridge plant in the West Midlands. However, there are growing fears that the deal could result in job losses. The Observer reported on Sunday that nearly half the workforce at Longbridge could be under threat if the deal goes ahead.
Shanghai Automotive's proposed £1bn investment in Rover is awaiting approval by its owner, the Shanghai city government and by the National Development and Reform Commission, which oversees foreign investment by Chinese firms. According to the FT, the regulator has been annoyed by Rover's decision to talk publicly about the deal and the intense speculation which has ensued about what it will mean for Rover's future. As a result, hopes that approval of the deal may be fast-tracked have disappeared, the paper said. There has been continued speculation about the viability of Rover's Longbridge plant because of falling sales and unfashionable models.
According to the Observer, 3,000 jobs - out of a total workforce of 6,500 - could be lost if the deal goes ahead. The paper said that Chinese officials believe cutbacks will be required to keep the MG Rover's costs in line with revenues. It also said that the production of new models through the joint venture would take at least eighteen months. Neither Rover nor Shanghai Automotive commented on the reports.
| The paper said Chinese officials had been irritated by Rover's disclosure of its talks with Shanghai Automotive Industry Corp in October.According to the FT, the regulator has been annoyed by Rover's decision to talk publicly about the deal and the intense speculation which has ensued about what it will mean for Rover's future.The proposed deal was seen as crucial to safeguarding the future of Rover's Longbridge plant in the West Midlands.According to the Observer, 3,000 jobs - out of a total workforce of 6,500 - could be lost if the deal goes ahead.The paper said that Chinese officials believe cutbacks will be required to keep the MG Rover's costs in line with revenues.As a result, hopes that approval of the deal may be fast-tracked have disappeared, the paper said. |
India's Deccan seals $1.8bn deal
Air Deccan has ordered 30 Airbus A320 planes in a $1.8bn (£931m) deal as India's first low-cost airline expands in the fast-growing domestic market.
Air Deccan was set up last year and wants to lure travellers away from the railway network and pricier rivals. The potential of the Indian market has attracted attention at home and abroad. Beer magnate Vijay Mallya recently set up Kingfisher Airlines, while UK entrepreneur Richard Branson has said he is keen to start a local operation.
The country has a population of more than a billion people and many observers feel that it is underserved by airlines. Recently however, the booming economy has boosted personal spending power and helped swell the middle classes and the corporate sector. India's government has given its backing to cheaper and more accessible air travel. "The days of flying being a symbol of only maharajas or the rich are over," the minister for civil aviation Praful Patel said earlier. Infrastructure is being built to handle the expected increase in demand and on Tuesday, Agence France Presse reported that a group led by Germany's Siemens won the contract to build a private airport near Bangalore. India's airports authority and the state government will own 13% each of the finished transport hub. For its part, Air Deccan, set up by army officer and silk farmer Gorur Gopinath, plans to increase its fleet to 60 aircraft within five years. To help finance the expansion the company may sell a 25% stake to an investor for about $50m. When it was set up the firm offered tickets that were 50% cheaper than other Indian airlines. It said it was basing its business model on European firms such as Ireland's Ryanair.
| India's government has given its backing to cheaper and more accessible air travel.When it was set up the firm offered tickets that were 50% cheaper than other Indian airlines.Air Deccan has ordered 30 Airbus A320 planes in a $1.8bn (£931m) deal as India's first low-cost airline expands in the fast-growing domestic market.Beer magnate Vijay Mallya recently set up Kingfisher Airlines, while UK entrepreneur Richard Branson has said he is keen to start a local operation.Air Deccan was set up last year and wants to lure travellers away from the railway network and pricier rivals.The potential of the Indian market has attracted attention at home and abroad. |
US firm pulls out of Iraq
A US company has pulled out of a major contract to rebuild Iraq's transport system after attacks on reconstruction efforts, Pentagon officials have said.
Contrack International, of Arlington, Virginia, heads a coalition of firms working on a series of schemes. Its withdrawal from the $325m (£170m) contract in November is thought to be the largest cancellation to date. Contrack said "the original scope of work that was envisioned could not be executed in a cost-effective manner". But the firm denied reports it was withdrawing completely from Iraq. "Members of the joint venture including Contrack are committed to the ongoing reconstruction efforts, are actively working in Iraq and continue to look for new construction opportunities in the country," it said in a statement. The Pentagon's Project and Contract Office (PCO) in Baghdad said it had taken over Contrack's management of the subcontractors working on the transportation projects.
US firms and their workers have been targets of attacks, and security concerns are said to be a major reason for the slow pace of reconstruction in Iraq. Of the $18.4bn in reconstruction funds approved by Congress, less than $2bn has been spent. Lt Col Eric Schnaible of the PCO told the Associated Press news agency Contrack's withdrawal from the transportation contract was a "mutually agreed-to separation" and did not indicate a movement by US companies to leave Iraq. "Some parts of the country are a whole lot more permissive than others," he added. "Where we can get the work done, good things are happening."
| "Members of the joint venture including Contrack are committed to the ongoing reconstruction efforts, are actively working in Iraq and continue to look for new construction opportunities in the country," it said in a statement.US firms and their workers have been targets of attacks, and security concerns are said to be a major reason for the slow pace of reconstruction in Iraq.A US company has pulled out of a major contract to rebuild Iraq's transport system after attacks on reconstruction efforts, Pentagon officials have said.Lt Col Eric Schnaible of the PCO told the Associated Press news agency Contrack's withdrawal from the transportation contract was a "mutually agreed-to separation" and did not indicate a movement by US companies to leave Iraq.Contrack said "the original scope of work that was envisioned could not be executed in a cost-effective manner". |
Amex shares up on spin-off news
Shares in American Express surged more than 8% on Tuesday after it said it was to spin off its less profitable financial advisory subsidiary.
The US credit card to travel services giant said off-loading American Express Financial Advisors (AEFA) would boost its profitability. AEFA has more than 12,000 advisers selling financial advice, funds and insurance to 2.5 million customers. Over the years it has delivered poor profits and even some losses.
"This is an excellent move by American Express to focus on its core businesses, and sell off a laggard division, which has been a problem for quite some time," said Marquis Investment Research analyst Phil Kain. Analysts estimate that a stand-alone AEFA could have a market value of $10bn (£5.3bn). The unit was acquired by American Express 20 years ago as Investors Diversified Service, of Minneapolis, at a time when firms were amassing one-stop financial empires. However, the business of selling investments was never integrated with the rest of the group.
| The US credit card to travel services giant said off-loading American Express Financial Advisors (AEFA) would boost its profitability.The unit was acquired by American Express 20 years ago as Investors Diversified Service, of Minneapolis, at a time when firms were amassing one-stop financial empires.Shares in American Express surged more than 8% on Tuesday after it said it was to spin off its less profitable financial advisory subsidiary.AEFA has more than 12,000 advisers selling financial advice, funds and insurance to 2.5 million customers. |
Brazil jobless rate hits new low
Brazil's unemployment rate fell to its lowest level in three years in December, according to the government.
The Brazilian Institute for Geography and Statistics (IBGE) said it fell to 9.6% in December from 10.6% in November and 10.9% in December 2003. IBGE also said that average monthly salaries grew 1.9% in December 2004 from December 2003. However, average monthly wages fell 1.8% in December to 895.4 reais ($332; £179.3) from November. Tuesday's figures represent the first time that the unemployment rate has fallen to a single digit since new measurement rules were introduced in 2001. The unemployment rate has been falling gradually since April 2004 when it reached a peak of 13.1%. The jobless rate average for the whole of 2004 was 11.5%, down from 12.3% in 2003, the IBGE said.
This improvement can be attributed to the country's strong economic growth, with the economy registering growth of 5.2% in 2004, the government said. The economy is expected to grow by about 4% this year. President Luiz Inacio Lula da Silva promised to reduce unemployment when he was elected two years ago. Nevertheless, some analysts say that unemployment could increase in the next months. "The data is favourable, but a lot of jobs are temporary for the (Christmas) holiday season, so we may see slightly higher joblessness in January and February," Julio Hegedus, chief economist with Lopes Filho & Associates consultancy in Rio de Janeir, told Reuters news agency. Despite his leftist background, President Lula has pursued a surprisingly conservative economic policy, arguing that in order to meet its social promises, the government needs to first reach a sustained economic growth. The unemployment rate is measured in the six main metropolitan areas of Brazil (Sao Paolo, Rio de Janeiro, Belo Horizonte, Recife, Salvador and Porto Alegre), where most of the population is concentrated.
| Brazil's unemployment rate fell to its lowest level in three years in December, according to the government.IBGE also said that average monthly salaries grew 1.9% in December 2004 from December 2003.The Brazilian Institute for Geography and Statistics (IBGE) said it fell to 9.6% in December from 10.6% in November and 10.9% in December 2003.The jobless rate average for the whole of 2004 was 11.5%, down from 12.3% in 2003, the IBGE said.The unemployment rate has been falling gradually since April 2004 when it reached a peak of 13.1%.However, average monthly wages fell 1.8% in December to 895.4 reais ($332; £179.3) from November. |
Optimism remains over UK housing
The UK property market remains robust despite the recent slowdown, according to mortgage lender Bradford & Bingley and housebuilder George Wimpey.
B&B said the buy-to-let market - in which the bank is a major player - would continue to grow much faster than the wider mortgage market. The comments came as it reported a 6% rise in profits to £280.2m ($532m). Wimpey reported a 19% rise in profits to £450.7m and said recent new home reservations were better than expected.
Recent housing market surveys have indicated that the UK property market has cooled in recent months after several years of rapid growth. Last week, figures from the Council of Mortgage Lenders (CML) indicated that the popularity of buy-to-let mortgages - a key phenomenon of the housing boom - could be waning.
But B&B - which has a 22% share of the UK buy-to-let mortgage market - said that while rates of growth were moderating, the sector "continues to grow at a rate considerably above that of the whole mortgage market". Overall, B&B said that "housing market fundamentals remain strong". "Interest rates and unemployment are both likely to remain at historically low levels, real household incomes should continue to grow and housing demand is likely to outstrip supply into the medium-term." Despite the upbeat tone, shares in B&B were down more than 4% at 325.5p in morning trade as analysts worried over future earnings growth.
Wimpey's profit figures came in at the top of expectations, with the numbers helped by buoyant sales in the US offsetting a slight slowdown in the UK. Wimpey said the UK housing market had proved "challenging" last year. "By late summer, the market in general had slowed sharply across the country and showed no real improvement during the autumn," it added. However, the first seven weeks of this year had produced promising signs, Wimpey said. "Visitor levels and interest in this period have been encouraging and reservations have been at the stronger end of our expectations." Shares in Wimpey were up 6% at 458.5p in morning trade.
| Wimpey said the UK housing market had proved "challenging" last year.But B&B - which has a 22% share of the UK buy-to-let mortgage market - said that while rates of growth were moderating, the sector "continues to grow at a rate considerably above that of the whole mortgage market".B&B said the buy-to-let market - in which the bank is a major player - would continue to grow much faster than the wider mortgage market.Recent housing market surveys have indicated that the UK property market has cooled in recent months after several years of rapid growth.Overall, B&B said that "housing market fundamentals remain strong".The UK property market remains robust despite the recent slowdown, according to mortgage lender Bradford & Bingley and housebuilder George Wimpey.Wimpey reported a 19% rise in profits to £450.7m and said recent new home reservations were better than expected. |
Warning over US pensions deficit
Taxpayers may have to bail out the US agency that protects workers' pension funds, leading economists have warned.
With the Pension Benefit Guaranty Corporation (PBGC) some £23bn (£12m) in deficit, the Financial Economists Roundtable (FER) wants Congress to act. Instead of taxpayers having to pick up the bill, the FER wants Congressmen to change the PBGC's funding rules. The FER says firms should not have been allowed to reduce the insurance premiums they pay into the PBGC fund. The FER blames this on a 2004 law, in a statement signed by several members, who include Nobel economics laureate William Sharpe. It said it was "dismayed" at the situation and wants Congress to overturn the legislation.
Cash-strapped US companies, including those in the airline, car-making and steel industries, had argued in favour of the 2004 rule change, claiming that funding the insurance premiums adequately would force them to have to cut jobs. "With a little firmer hand on the pensions issues in the US, I think that Congress could avoid having to turn to the taxpayer and instead turn the obligations back onto the companies that deserve to pay them," said Professor Dennis Logue, dean of Price College of Business at the University of Oklahoma. The PBGC was founded in 1974 to protect workers' retirement rights. Its most recent action came last week when it took control of the pilots' pension scheme at United Airlines. With United battling bankruptcy, the carrier had wanted to use the money set aside for pensions to finance running costs. The company has an estimated $2.9bn hole in its pilots' pension scheme, which the PBGC will now guarantee.
| With the Pension Benefit Guaranty Corporation (PBGC) some £23bn (£12m) in deficit, the Financial Economists Roundtable (FER) wants Congress to act.The company has an estimated $2.9bn hole in its pilots' pension scheme, which the PBGC will now guarantee.The FER says firms should not have been allowed to reduce the insurance premiums they pay into the PBGC fund."With a little firmer hand on the pensions issues in the US, I think that Congress could avoid having to turn to the taxpayer and instead turn the obligations back onto the companies that deserve to pay them," said Professor Dennis Logue, dean of Price College of Business at the University of Oklahoma.Instead of taxpayers having to pick up the bill, the FER wants Congressmen to change the PBGC's funding rules. |
Sales 'fail to boost High Street'
The January sales have failed to help the UK High Street recover from a poor Christmas season, a survey has found.
Stores received a boost from bargain hunters but trading then reverted to December levels, the British Retail Consortium and accountants KPMG said. Sales in what is traditionally a strong month rose by 0.5% on a like-for-like basis, compared with a year earlier. Consumers remain cautious over buying big-ticket items like furniture, said BRC director general Kevin Hawkins. Higher interest rates and uncertainty over the housing market continue to take their toll on the retail sector, the BRC said. But clothing and footwear sales were said to be generally better than December, while department stores also had a good month.
In the three-months to January, like-for-like sales showed a growth rate of -0.1%, the same as in the three months to December, the BRC said. "Following a relatively strong New Year's bank holiday, trading then took a downward turn," said Mr Hawkins. "Even extending some promotions and discounts and the pay-day boost later in the month could not tempt customers." The previous BRC survey found Christmas 2004 was the worst for 10 years for retailers. And according to Office for National Statistics data, sales in December failed to meet expectations and by some counts were the worst since 1981.
| In the three-months to January, like-for-like sales showed a growth rate of -0.1%, the same as in the three months to December, the BRC said.But clothing and footwear sales were said to be generally better than December, while department stores also had a good month.Stores received a boost from bargain hunters but trading then reverted to December levels, the British Retail Consortium and accountants KPMG said.Higher interest rates and uncertainty over the housing market continue to take their toll on the retail sector, the BRC said.The previous BRC survey found Christmas 2004 was the worst for 10 years for retailers. |
Quiksilver moves for Rossignol
Shares of Skis Rossignol, the world's largest ski-maker, have jumped as much as 15% on speculation that it will be bought by US surfwear firm Quiksilver.
The owners of Rossignol, the Boix-Vives family, are said to be considering an offer from Quiksilver. Analysts believe other sporting goods companies may now take a closer look at Rossignol, prompting an auction and pushing the sale price higher. Nike and K2 have previously been mentioned as possible suitors.
Rossignol shares touched 17.70 euros, before falling back to trade 7.8% higher at 16.60 euros. European sporting goods companies have seen foreign revenues squeezed by a slump in the value of the US dollar, making a takeover more attractive, analysts said. Companies such as Quiksilver would be able to cut costs by selling Rossignol skis through their shops, they added. The Boix-Vives family is thought to have spent the past couple of years sounding out possible suitors for Rossignol, which also makes golf equipment, snowboards and sports clothing.
| The owners of Rossignol, the Boix-Vives family, are said to be considering an offer from Quiksilver.The Boix-Vives family is thought to have spent the past couple of years sounding out possible suitors for Rossignol, which also makes golf equipment, snowboards and sports clothing.Analysts believe other sporting goods companies may now take a closer look at Rossignol, prompting an auction and pushing the sale price higher.Shares of Skis Rossignol, the world's largest ski-maker, have jumped as much as 15% on speculation that it will be bought by US surfwear firm Quiksilver. |
Five million Germans out of work
Germany's unemployment figure rose above the psychologically important level of five million last month.
On Wednesday, the German Federal Labour Agency said the jobless total had reached 5.037 million in January, which takes the jobless rate to 12.1%. "Yes, we have effectively more than five million people unemployed," a government minister said earlier on ZDF public television. Unemployment has not been this high in Germany since the 1930s.
Changes to the way the statistics are compiled partly explain the jump of 572,900 in the numbers. But the figures are embarrassing for the government. "With the figures apparently the worst we've seen in the post-war period, these numbers are very charged politically," said Christian Jasperneite, an economist with MM Warburg. "They could well put an end to the recent renaissance we've seen by the SPD [the ruling Social Democrats] in the polls, and with state elections due in Schleswig-Holstein and North Rhine-Westphalia, they may have an adverse effect on the government's chances there."
The opposition also made political capital from the figures. It said there are a further 1.5 million-2 million people on subsidised employment schemes who are, in fact, looking for real jobs. It added that government reforms, including unpopular benefit cuts, do not go far enough. Under the government's controversial "Hartz IV" reforms, which came into effect at the beginning of the year, both those on unemployment benefits and welfare support and those who are long-term unemployed are officially classified as looking for work. The bad winter weather also took its toll, as key sectors such as the construction sector laid off workers. Adjusted for the seasonal factors, the German jobless total rose by 227,000 in January from December.
| Germany's unemployment figure rose above the psychologically important level of five million last month."Yes, we have effectively more than five million people unemployed," a government minister said earlier on ZDF public television.On Wednesday, the German Federal Labour Agency said the jobless total had reached 5.037 million in January, which takes the jobless rate to 12.1%.It said there are a further 1.5 million-2 million people on subsidised employment schemes who are, in fact, looking for real jobs.But the figures are embarrassing for the government.The opposition also made political capital from the figures. |
Building giant in asbestos payout
Australian building products group James Hardie has agreed to pay $1.1bn (£568m) to victims of asbestos-related diseases.
The landmark deal could see thousands of people suffering from lung diseases - caused by asbestos the company once made - receive compensation. The move follows angry protests after the firm said a previous compensation fund was running out of money. A subsequent New South Wales state inquiry criticised Hardie's actions. In September, the inquiry found that the company had misled the public about the amount of money set aside to cover its asbestos-related liabilities, sparking the resignation of its then chief executive, Peter MacDonald.
Campaigners welcomed news of the preliminary agreement. "This is a momentous day in the fight for victims and their families," said asbestosis sufferer Bernie Banton, who leads a victims' association. "There is still a long way to go, but we are getting there." James Hardie chairwoman, Meredith Hellicar, said the deal provided for a funding arrangement "that is affordable, sensible and workable". "At the end of the day we are dealing with compensation for people who are terminally ill. We don't know exactly how many of them there will be, we don't know over what exact period they will fall ill," she said. However, the deal still has to receive the approval of Hardie's shareholders.
Hardie, which currently makes more than 80% of its revenues in the US, was once Australia's biggest supplier of asbestos building materials. In 2001, the company set up a fund to compensate asbestos victims, but it later admitted the fund was running short of money. A decision by Hardie to move its headquarters to the Netherlands - while remaining a listed company in Australia - provoked a damaging public outcry. Victims groups accusing it of trying to escape its responsibilities by moving abroad, a charge the company denies. Australia's securities watchdog is currently investigating Hardie's former chief executive and former chief financial officer over allegations of misleading investors and the general public.
| In 2001, the company set up a fund to compensate asbestos victims, but it later admitted the fund was running short of money.The move follows angry protests after the firm said a previous compensation fund was running out of money.The landmark deal could see thousands of people suffering from lung diseases - caused by asbestos the company once made - receive compensation.However, the deal still has to receive the approval of Hardie's shareholders.In September, the inquiry found that the company had misled the public about the amount of money set aside to cover its asbestos-related liabilities, sparking the resignation of its then chief executive, Peter MacDonald.Hardie, which currently makes more than 80% of its revenues in the US, was once Australia's biggest supplier of asbestos building materials.Australian building products group James Hardie has agreed to pay $1.1bn (£568m) to victims of asbestos-related diseases. |
Christmas sales worst since 1981
UK retail sales fell in December, failing to meet expectations and making it by some counts the worst Christmas since 1981.
Retail sales dropped by 1% on the month in December, after a 0.6% rise in November, the Office for National Statistics (ONS) said. The ONS revised the annual 2004 rate of growth down from the 5.9% estimated in November to 3.2%. A number of retailers have already reported poor figures for December. Clothing retailers and non-specialist stores were the worst hit with only internet retailers showing any significant growth, according to the ONS.
The last time retailers endured a tougher Christmas was 23 years previously, when sales plunged 1.7%.
The ONS echoed an earlier caution from Bank of England governor Mervyn King not to read too much into the poor December figures. Some analysts put a positive gloss on the figures, pointing out that the non-seasonally-adjusted figures showed a performance comparable with 2003. The November-December jump last year was roughly comparable with recent averages, although some way below the serious booms seen in the 1990s. And figures for retail volume outperformed measures of actual spending, an indication that consumers are looking for bargains, and retailers are cutting their prices.
However, reports from some High Street retailers highlight the weakness of the sector. Morrisons, Woolworths, House of Fraser, Marks & Spencer and Big Food all said that the festive period was disappointing.
And a British Retail Consortium survey found that Christmas 2004 was the worst for 10 years. Yet, other retailers - including HMV, Monsoon, Jessops, Body Shop and Tesco - reported that festive sales were well up on last year. Investec chief economist Philip Shaw said he did not expect the poor retail figures to have any immediate effect on interest rates. "The retail sales figures are very weak, but as Bank of England governor Mervyn King indicated last night, you don't really get an accurate impression of Christmas trading until about Easter," said Mr Shaw. "Our view is the Bank of England will keep its powder dry and wait to see the big picture."
| "The retail sales figures are very weak, but as Bank of England governor Mervyn King indicated last night, you don't really get an accurate impression of Christmas trading until about Easter," said Mr Shaw.The last time retailers endured a tougher Christmas was 23 years previously, when sales plunged 1.7%.A number of retailers have already reported poor figures for December.Retail sales dropped by 1% on the month in December, after a 0.6% rise in November, the Office for National Statistics (ONS) said.Clothing retailers and non-specialist stores were the worst hit with only internet retailers showing any significant growth, according to the ONS.UK retail sales fell in December, failing to meet expectations and making it by some counts the worst Christmas since 1981.Yet, other retailers - including HMV, Monsoon, Jessops, Body Shop and Tesco - reported that festive sales were well up on last year. |
GM issues 2005 profits warning
General Motors has warned that it expects earnings this year be lower than in 2004.
The world's biggest car maker is grappling with losses in its European business, and weak US sales. GM said higher healthcare costs in North America, and lower profits at its financial services subsidiary would hurt its performance in 2005. GM said it expects to meet its 2004 earnings targets "despite a tough competitive environment".
GM, whose brands include Buick, Cadillac and Chevrolet in the US and Opel, Saab and Vauxhall in Europe, is due to reveal 2004 earnings on 19 January.
It said it would deliver a shareholder payout of $6.0-$6.5 per share this year, as promised, but that next year's earnings per share would be lower, at between $4.0-$5.0. "We're following a roadmap that we believe will deliver strong results," said GM chief executive Rick Waggoner. GM said it was expecting "reduced financial losses" in Europe in 2005. It is in the midst of cutting 12,000 jobs - one fifth of the European total - in a bid to cut costs. The biggest job losses are in Germany. Its vehicle businesses have gained market share in three out of four regions in 2004, achieving record profitability in Asia Pacific and returning to profit in Latin America, the Middle East and Africa. The car maker has diversified into financial services, and is extending the reach of General Motors Acceptance Corp (GMAC), which has said it may enter the home loans market. GMAC has been a strong contributor to profits in 2004 but GM said it will do less well this year, delivering net income of $2.5bn. "Attaining earnings of $10 a share remains GM's goal," the company said, adding it believes it can achieve this in 2007.
| GMAC has been a strong contributor to profits in 2004 but GM said it will do less well this year, delivering net income of $2.5bn.GM said it expects to meet its 2004 earnings targets "despite a tough competitive environment".GM said higher healthcare costs in North America, and lower profits at its financial services subsidiary would hurt its performance in 2005.GM said it was expecting "reduced financial losses" in Europe in 2005.It said it would deliver a shareholder payout of $6.0-$6.5 per share this year, as promised, but that next year's earnings per share would be lower, at between $4.0-$5.0.The car maker has diversified into financial services, and is extending the reach of General Motors Acceptance Corp (GMAC), which has said it may enter the home loans market. |
No seasonal lift for house market
A swathe of figures have provided further evidence of a slowdown in the UK property market.
The Council of Mortgage Lenders (CML), British Bankers Association (BBA) and Building Societies Association (BSA) all said mortgage lending was slowing. CML figures showed gross lending fell by 4% in November as the number of people buying new homes fell. Elsewhere, the BBA added underlying mortgage lending rose by £4m in November, compared to October's £4.29m. The CML said that loans for new property purchases fell 25% year-on-year to 85,000 - the lowest total seen since February 2003.
Data from the CML showed lending fell to just over £25bn in November, from £25.5bn a year earlier. Separate figures from the Building Societies Association showed the value of mortgage approvals -- loans agreed but not yet made -- stood 32% lower than at the same time last year, at a seasonally-adjusted £2.98bn. The figures come hot on the heels of new data from property website Rightmove which suggested owners must indulge in a "winter sale" and slash prices by up to 8%. Miles Shipside, commercial director at Rightmove, said sellers would have to be "more realistic with their asking prices" to tempt buyers. The average asking price of a home fell by more than £600 from £190,329 in November to £189,733 in December, while the length of time it takes to sell a home rose to 81 days from 53 in the summer.
Rightmove said estate agents were set to enter 2005 with a third more properties on their books than a year ago. "Even once the quieter holiday period is over, sellers will find themselves competing with a lot of other properties on the market. In any business, excess supply and low demand means one thing - cut prices," Mr Shipside said.
"The proof is that some properties that have been appropriately discounted are selling, even in the current market." Overall, asking prices have fallen 3.3% from their July peaks as the equivalent of £6,500 has been cut from an average property. A host of mortgage lenders and economists have predicted that property prices will either fall or stagnate in 2005. "What is apparent is a picture of a slowing market, but one that should remain stable as we return to more normal volumes of lending over 2005 as a whole," CML director general Michael Coogan said. "It's a fairly consistent picture, showing that mortgage demand has fallen back again, which is consistent with a continuing correction in the housing market," Investec economist Philip Shaw said. "However, the figures do suggest only a modest weakening, and we stand by our view that the property market will remain in the doldrums for some time, though a collapse is still unlikely."
| The CML said that loans for new property purchases fell 25% year-on-year to 85,000 - the lowest total seen since February 2003.CML figures showed gross lending fell by 4% in November as the number of people buying new homes fell.A swathe of figures have provided further evidence of a slowdown in the UK property market.The Council of Mortgage Lenders (CML), British Bankers Association (BBA) and Building Societies Association (BSA) all said mortgage lending was slowing.Data from the CML showed lending fell to just over £25bn in November, from £25.5bn a year earlier."What is apparent is a picture of a slowing market, but one that should remain stable as we return to more normal volumes of lending over 2005 as a whole," CML director general Michael Coogan said.Rightmove said estate agents were set to enter 2005 with a third more properties on their books than a year ago.A host of mortgage lenders and economists have predicted that property prices will either fall or stagnate in 2005. |
Brussels raps mobile call charges
The European Commission has written to the mobile phone operators Vodafone and T-Mobile to challenge "the high rates" they charge for international roaming.
In letters sent to the two companies, the Commission alleged the firms were abusing their dominant market position in the German mobile phone market. It is the second time Vodafone has come under the Commission's scrutiny. The UK operator is already appealing against allegations that its UK roaming rates are "unfair and excessive". Vodafone's response to the Commission's letter was defiant. "We believe the roaming market is competitive and we expect to resist the charges," said a Vodafone spokesman. "However we will need time to examine the statement of objections in detail before we formally respond."
The Commission's investigation into Vodafone and Deutsche Telekom's T-Mobile centres on the tariffs the two companies charge foreign mobile operators to access their networks when subscribers of those foreign operators use their mobile phones in Germany.
The Commission believes these wholesale prices are too high and that the excess is passed on to consumers. "The Commission aims to ensure that European consumers are not overcharged when they use their mobile phones on their travels around the European Union," the Commission said in a statement. Vodafone and O2, Britain's other big mobile phone operator, were sent similar statements of objections by the Commission in July last year. Vodafone sent the Commission a response to those allegations in December last year and is now waiting for a reply. The Vodafone spokesman said a similar process would be set in motion with these latest statement of objections about its operations in Germany.
The companies will have three months to respond to the Commission's allegations and the process "may go on for some time yet", the spokesman said. The Commission could charge the companies up to 10% of their annual turnover, though in practice that sort of figure is rarely demanded. The Commission's latest move comes just a few months after national telecoms regulators across Europe launched a joint investigation which could lead to people being charged less for using their mobile phone when travelling abroad. The investigation involves regulators assessing whether there is effective competition in the roaming market.
| Vodafone and O2, Britain's other big mobile phone operator, were sent similar statements of objections by the Commission in July last year.The European Commission has written to the mobile phone operators Vodafone and T-Mobile to challenge "the high rates" they charge for international roaming.The Commission's investigation into Vodafone and Deutsche Telekom's T-Mobile centres on the tariffs the two companies charge foreign mobile operators to access their networks when subscribers of those foreign operators use their mobile phones in Germany."The Commission aims to ensure that European consumers are not overcharged when they use their mobile phones on their travels around the European Union," the Commission said in a statement.Vodafone sent the Commission a response to those allegations in December last year and is now waiting for a reply.In letters sent to the two companies, the Commission alleged the firms were abusing their dominant market position in the German mobile phone market.The Vodafone spokesman said a similar process would be set in motion with these latest statement of objections about its operations in Germany. |
Giving financial gifts to children
Your child or grandchild may want the latest toy this Christmas, but how about giving them a present that will help their financial future?
Gifts of the financial variety might have a longer lasting impact. It may encourage children to save or start a fund which could count towards university costs, for example.
The government is trying to encourage saving at an early age, through its new Child Trust Fund. The first vouchers, worth £250 or £500 for low-income families, will be distributed from January. All children born after 1st September 2002 will be eligible. Parents will need to decide which financial institution will manage this gift in time for the start of the scheme in April 2005.
Parents and relatives will be able to top up the fund with up to £1,200 a year, which will grow free of income and capital gains tax. As the Child Trust Fund will not be in force in time for Christmas, relatives could invest their gifts in a higher rate children's deposit account, and use this as a feeder fund.
There are accounts designed to start children off in the savings habit and they often pay a higher rate of interest. Some of the best instant-access accounts currently available include the Ladybird account from the Saffron Walden Building Society, paying 5.35% for a minimum balance of £1 and the Alliance & Leicester FirstSaver which pays 5.25%, also starting at £1.
Interest earned by children is subject to income tax. However, children, like adults, have a personal income tax allowance (£4,745 for the current tax year).
If the account holds money gifted by friends and relatives - but not parents - any interest earned from the savings account may be set against the allowance. As long as the total amount of interest falls within the allowance, then no tax will be payable. When the account is opened a form "R85", available from the bank or building society, should be completed. This confirms that the account holder is a non-taxpayer and allows interest to be received without the deduction of income tax.
The tax rules are different for parents who save on behalf of a child. Only £100 of interest (per parent) can be tax-free. Where interest exceeds this level, the whole of the interest will be taxed on the parent. This is to prevent parents from holding their own cash savings in their children's names and taking advantage of the tax allowances. Where both parents and other relatives are saving on behalf of a child, consideration should be given to opening separate accounts - one for parents' gifts and one for gifts from other relatives. Therefore, it may be preferable for parents to contribute to the Child Trust Fund which is tax free, with any gifts from relatives that take the total above the annual £1,200 limit being directed to a deposit account.
Another favourite solution is Premium Bonds. With the promise of riches far greater than a mere deposit account, they make great presents. The parent or guardian will be responsible for the Bonds and will receive notification of the purchase. Any prizes will be sent to the parent or child's guardian. The minimum for each purchase is £100 and Bonds are sold in multiples of £10.
There are gift opportunities beyond cash accounts and these should not be ignored.
Over the longer term, stock market funds have outperformed other types of investment, although in the shorter term they can be volatile. One of the benefits of investing for children is that investment is generally for the longer term - more than ten years - which helps to reduce the risks associated with investing in shares. One way to spread the risk is to invest in the stock market through a unit or investment trust. These are pooled investment funds which give access to a wide range of shares. These funds may be actively managed, where a fund manager picks individual stocks based on a view of their future potential, or passive, where a manager invests in all the shares that comprise a stock market index, for example, the FTSE 100. Exchange Traded Funds offer an alternative way to track a stock market. These are single shares that give the return of an underlying index (so are really another form of tracker). The difference is that the charges are quite low. The only drawback with all financial gifts is that the children gain an absolute right to the money at age 18, and parents will have no control over how it is spent. For larger gifts it may be worthwhile taking professional advice on the establishment of a suitable trust that will allow ongoing control over the capital and income.
| Therefore, it may be preferable for parents to contribute to the Child Trust Fund which is tax free, with any gifts from relatives that take the total above the annual £1,200 limit being directed to a deposit account.As the Child Trust Fund will not be in force in time for Christmas, relatives could invest their gifts in a higher rate children's deposit account, and use this as a feeder fund.If the account holds money gifted by friends and relatives - but not parents - any interest earned from the savings account may be set against the allowance.Where both parents and other relatives are saving on behalf of a child, consideration should be given to opening separate accounts - one for parents' gifts and one for gifts from other relatives.Interest earned by children is subject to income tax.The tax rules are different for parents who save on behalf of a child.There are accounts designed to start children off in the savings habit and they often pay a higher rate of interest.The only drawback with all financial gifts is that the children gain an absolute right to the money at age 18, and parents will have no control over how it is spent.This confirms that the account holder is a non-taxpayer and allows interest to be received without the deduction of income tax.The government is trying to encourage saving at an early age, through its new Child Trust Fund.Parents and relatives will be able to top up the fund with up to £1,200 a year, which will grow free of income and capital gains tax.Only £100 of interest (per parent) can be tax-free.It may encourage children to save or start a fund which could count towards university costs, for example.Where interest exceeds this level, the whole of the interest will be taxed on the parent.This is to prevent parents from holding their own cash savings in their children's names and taking advantage of the tax allowances.The parent or guardian will be responsible for the Bonds and will receive notification of the purchase. |
Winter freeze keeps oil above $50
Oil prices carried on rising on Wednesday after cold weather on both sides of the North Atlantic pushed US crude prices to four-month highs.
Freezing temperatures and heavy snowfalls took crude oil prices past $50 a barrel on Tuesday for the first time since November. Declines in the dollar have also contributed to the rising oil price. US crude was trading at $51.39 at 0710 GMT in Asian electronic trade on Wednesday. A barrel of US crude oil closed up $2.80 at $51.15 in New York on Tuesday. Opec members said on Tuesday that, given such high prices, the cartel saw no reason to cut its output.
Although below last year's peak of $55.67 a barrel, which was reached in October, prices are now well above 2004's average of $41.48. Brent crude also rose in London trading, adding $1.89 to $48.62 at the close.
Much of western Europe and the north east of America has been shivering under unseasonably low temperatures in recent days. The decline in the US dollar to a five-week low against the euro has also served to inflate prices. "The primary factor is the weak dollar," said Victor Shum, a Singapore-based analyst with Purvin and Gertz. Expectations that a rebound in the dollar would halt the oil price rise were not immediately borne out on Wednesday morning, as oil prices carried on upwards as the dollar strengthened against the euro, the pound and the yen.
Several Opec members said on Tuesday that a cut in production was unlikely, citing rising prices and strong demand for oil from Asia. "I agree that we do not need to cut supply if the prices are as much as this," Fathi Bin Shatwan, Libya's oil minister, told Reuters. "I do not think we need to cut unless the prices are falling below $35 a barrel," he added.
| Oil prices carried on rising on Wednesday after cold weather on both sides of the North Atlantic pushed US crude prices to four-month highs.Declines in the dollar have also contributed to the rising oil price.Several Opec members said on Tuesday that a cut in production was unlikely, citing rising prices and strong demand for oil from Asia.Expectations that a rebound in the dollar would halt the oil price rise were not immediately borne out on Wednesday morning, as oil prices carried on upwards as the dollar strengthened against the euro, the pound and the yen.Freezing temperatures and heavy snowfalls took crude oil prices past $50 a barrel on Tuesday for the first time since November.A barrel of US crude oil closed up $2.80 at $51.15 in New York on Tuesday. |
Home loan approvals rising again
The number of mortgages approved in the UK has risen for the first time since May last year, according to lending figures from the Bank of England.
New loans in December rose to 83,000, slightly higher than November's nine-year low of 77,000. Mortgage lending rose by £7.1bn in December, up from a £6.4bn rise in November. The figures contradict a survey from the British Bankers' Association, which said approvals were at a five-year low.
Analysts say the figures show the market may be stabilising but still point to further house price softness. "The modest rise in mortgage approvals and lending in December reinforces the impression that the housing market is currently slowing steadily rather than sharply," said Global Insight analyst Howard Archer, commenting on the BoE's figures. The BBA believes that the property market is continuing to cool down. Changes to mortgage regulation may have artificially depressed figures in November, thus flattering the December figures, analysts said. In October last year, new rules came into force, which meant some lenders were forced to withdraw mortgage products temporarily in November and defer some lending until they had made sure they had complied with the rules properly. Separately, the Bank of England said that consumer credit rose by £1.5bn in December, more than the £1.4bn expected and above the £1.4bn reported in the previous month.
| Mortgage lending rose by £7.1bn in December, up from a £6.4bn rise in November.Changes to mortgage regulation may have artificially depressed figures in November, thus flattering the December figures, analysts said."The modest rise in mortgage approvals and lending in December reinforces the impression that the housing market is currently slowing steadily rather than sharply," said Global Insight analyst Howard Archer, commenting on the BoE's figures.Separately, the Bank of England said that consumer credit rose by £1.5bn in December, more than the £1.4bn expected and above the £1.4bn reported in the previous month. |
India-Pakistan peace boosts trade
Calmer relations between India and Pakistan are paying economic dividends, with new figures showing bilateral trade up threefold in the summer.
The value of trade in April-July rose to $186.3m (£97m) from $64.4m in the same period in 2003, the Indian Government said. Nonethless, the figures represent less than 1% of India's overall exports. But business is expected to be boosted further from 2006 when the South Asian Free Trade Area Agreement starts. Both countries eased travel and other restrictions as part of the peace process aimed at ending nearly six decades of hostilities.
Sugar, plastics, pharmaceutical products and tea are among the major exports from India to its neighbour, while firms in Pakistani have been selling fabrics, fruit and spices. "If the positive trend continues, two-way trade could well cross half a billion dollars this fiscal year," India's federal commerce Minister Kamal Nath said. According to official data, the value of India's overall exports in the current fiscal year is expected to reach more than $60bn, while in Pakistan's case it is set to hit more than $12bn. Meanwhile, the Indian Government said the prospects for the country's booming economy remained "very bright" despite a "temporary aberration" this year. Its mid-year economic review forecasts growth of 6-6.5% in 2004, compared with 8.2% in 2003. Higher oil prices, the level of tax collections, and an unfavourable monsoon season affecting the farm sector had hurt the economy in April-September, it said.
| The value of trade in April-July rose to $186.3m (£97m) from $64.4m in the same period in 2003, the Indian Government said."If the positive trend continues, two-way trade could well cross half a billion dollars this fiscal year," India's federal commerce Minister Kamal Nath said.Calmer relations between India and Pakistan are paying economic dividends, with new figures showing bilateral trade up threefold in the summer.According to official data, the value of India's overall exports in the current fiscal year is expected to reach more than $60bn, while in Pakistan's case it is set to hit more than $12bn.Meanwhile, the Indian Government said the prospects for the country's booming economy remained "very bright" despite a "temporary aberration" this year. |
China had role in Yukos split-up
China lent Russia $6bn (£3.2bn) to help the Russian government renationalise the key Yuganskneftegas unit of oil group Yukos, it has been revealed.
The Kremlin said on Tuesday that the $6bn which Russian state bank VEB lent state-owned Rosneft to help buy Yugansk in turn came from Chinese banks. The revelation came as the Russian government said Rosneft had signed a long-term oil supply deal with China. The deal sees Rosneft receive $6bn in credits from China's CNPC.
According to Russian newspaper Vedomosti, these credits would be used to pay off the loans Rosneft received to finance the purchase of Yugansk. Reports said CNPC had been offered 20% of Yugansk in return for providing finance but the company opted for a long-term oil supply deal instead. Analysts said one factor that might have influenced the Chinese decision was the possibility of litigation from Yukos, Yugansk's former owner, if CNPC had become a shareholder. Rosneft and VEB declined to comment. "The two companies [Rosneft and CNPC] have agreed on the pre-payment for long-term deliveries," said Russian oil official Sergei Oganesyan. "There is nothing unusual that the pre-payment is for five to six years."
The announcements help to explain how Rosneft, a medium-sized, indebted, and relatively unknown firm, was able to finance its surprise purchase of Yugansk. Yugansk was sold for $9.3bn in an auction last year to help Yukos pay off part of a $27bn bill in unpaid taxes and fines.
The embattled Russian oil giant had previously filed for bankruptcy protection in a US court in an attempt to prevent the forced sale of its main production arm. But Yugansk was sold to a little known shell company which in turn was bought by Rosneft. Yukos claims its downfall was punishment for the political ambitions of its founder Mikhail Khodorkovsky. Once the country's richest man, Mr Khodorkovsky is on trial for fraud and tax evasion.
The deal between Rosneft and CNPC is seen as part of China's desire to secure long-term oil supplies to feed its booming economy. China's thirst for products such as crude oil, copper and steel has helped pushed global commodity prices to record levels. "Clearly the Chinese are trying to get some leverage [in Russia]," said Dmitry Lukashov, an analyst at brokerage Aton. "They understand property rights in Russia are not the most important rights, and they are more interested in guaranteeing supplies." "If the price of oil is fixed under the deal, which is unlikely, it could be very profitable for the Chinese," Mr Lukashov continued. "And Rosneft is in desperate need of cash, so it's a good deal for them too."
| The revelation came as the Russian government said Rosneft had signed a long-term oil supply deal with China."The two companies [Rosneft and CNPC] have agreed on the pre-payment for long-term deliveries," said Russian oil official Sergei Oganesyan.The Kremlin said on Tuesday that the $6bn which Russian state bank VEB lent state-owned Rosneft to help buy Yugansk in turn came from Chinese banks.The deal between Rosneft and CNPC is seen as part of China's desire to secure long-term oil supplies to feed its booming economy.The deal sees Rosneft receive $6bn in credits from China's CNPC.Reports said CNPC had been offered 20% of Yugansk in return for providing finance but the company opted for a long-term oil supply deal instead.China lent Russia $6bn (£3.2bn) to help the Russian government renationalise the key Yuganskneftegas unit of oil group Yukos, it has been revealed.But Yugansk was sold to a little known shell company which in turn was bought by Rosneft.Yugansk was sold for $9.3bn in an auction last year to help Yukos pay off part of a $27bn bill in unpaid taxes and fines. |
Fosters buys stake in winemaker
Australian brewer Fosters has bought a large stake in Australian winemaker Southcorp, sparking rumours of a possible takeover.
Fosters bought 18.8% of Southcorp, the global winemaker behind the Penfolds, Lindemans and Rosemount brands, for 4.17 Australian dollars per share. A bid at that price would value the company at A$3.1bn ($2.4bn; £1.25bn ). Fosters said it was currently in discussions "which may lead to a major corporate announcement".
In a separate statement, Southcorp confirmed the brewer had asked for talks. Both firms asked the Sydney stock market to suspend trading in their shares until Monday. Southcorp's shares were suspended at A$4.25.
Fosters bought the 18.8% stake from Reline Investments, the family investment firm for the Oatleys, who founded the Rosemount Estates label and sold it to Southcorp in 2001. Robert Oatley and his son Sandy Oatley have both resigned from Southcorp's board following the share deal. Southcorp employs 2,700 people and is the largest single investor in rural Australia, according to its website. The prospect of Fosters launching a major acquisition startled investors, as the brewer said last summer that it was not looking to expand through a big buy in the near future. It has cash available, after getting A$846m from selling property business Lensworth, but it has been widely expected to return cash to shareholders.
"People will scratching their heads over this one. Fosters has done a back-flip", said Shawn Burns, a fund manger at Deutsche Asset Management. Southcorp's shares have risen in recent months on speculation that it could become a takeover target. It spent two years in the red, returning to profit in 2004. Consolidation in the wine industry is being driven by Constellation, the world's biggest winemaker. It seized the top spot when it bought Australian firm BRL Hardy for just over $1bn in 2003. Since then, it has paid $1bn for US wine maker Robert Mondavi, bought last month. Fosters' main wine business is Beringer Blass Wine Estate. Its best known brand is Fosters lager, though it makes a clutch of beer brands, and spirits. Analysts were divided on Thursday about whether Fosters was more likely to go for a takeover or merely wanted to take a big enough chunk of Southcorp to prevent it falling to a rival. "Currently, I think the strategic position is more sensible rather than an outright takeover," said one analyst quoted by the Agence France Presse news agency. However, Matt Williams, a fund manager at Perpetual Trustees said taking the stake "is definitely a precursor to a takeover".
| Australian brewer Fosters has bought a large stake in Australian winemaker Southcorp, sparking rumours of a possible takeover.Fosters bought 18.8% of Southcorp, the global winemaker behind the Penfolds, Lindemans and Rosemount brands, for 4.17 Australian dollars per share.Fosters bought the 18.8% stake from Reline Investments, the family investment firm for the Oatleys, who founded the Rosemount Estates label and sold it to Southcorp in 2001.Since then, it has paid $1bn for US wine maker Robert Mondavi, bought last month.Fosters has done a back-flip", said Shawn Burns, a fund manger at Deutsche Asset Management.Fosters said it was currently in discussions "which may lead to a major corporate announcement".Analysts were divided on Thursday about whether Fosters was more likely to go for a takeover or merely wanted to take a big enough chunk of Southcorp to prevent it falling to a rival.The prospect of Fosters launching a major acquisition startled investors, as the brewer said last summer that it was not looking to expand through a big buy in the near future.Fosters' main wine business is Beringer Blass Wine Estate.Southcorp's shares have risen in recent months on speculation that it could become a takeover target. |
Japanese banking battle at an end
Japan's Sumitomo Mitsui Financial has withdrawn its takeover offer for rival bank UFJ Holdings, enabling the latter to merge with Mitsubishi Tokyo.
Sumitomo bosses told counterparts at UFJ of its decision on Friday, clearing the way for it to conclude a 3 trillion yen ($29bn) deal with Mitsubishi. The deal would create the world's biggest bank with assets of about 189 trillion yen ($1.8 trillion). Sumitomo's exit ends the most high profile fight in Japanese bank history.
UFJ Holdings, Japan's fourth-largest bank, has been at the centre of a fierce bid battle over the last year. Sumitomo, Japan's third-largest bank, tabled a higher offer for UFJ than its rival, valuing the company at $35bn.
However, UFJ's management was known to prefer the offer from Mitsubishi Tokyo Financial Group (MTFG), Japan's second-largest bank. Concerns were also raised about Sumitomo's ability to absorb UFJ and the former has now admitted defeat. "We believe the market and most investors accept a UFJ-MTFG merger," Sumitomo said in a statement. "Given the ongoing integration of UFJ and MTFG operations, persisting with our proposal may not be in the best interests of our shareholders or UFJ's."
Mitsubishi's takeover of UFJ - which will be Japan's largest-ever takeover deal - will still have to be approved by shareholders of the two firms. However, this is expected to be a formality. Sumitomo may now turn its attention to deepening its ties with Daiwa Securities, another Japanese financial firm. The two are set to merge their venture capital operations and there has been speculation that this could lead to a full-blown merger. Japanese banks are increasingly seeking alliances to boost profits.
| Japan's Sumitomo Mitsui Financial has withdrawn its takeover offer for rival bank UFJ Holdings, enabling the latter to merge with Mitsubishi Tokyo.Sumitomo, Japan's third-largest bank, tabled a higher offer for UFJ than its rival, valuing the company at $35bn.However, UFJ's management was known to prefer the offer from Mitsubishi Tokyo Financial Group (MTFG), Japan's second-largest bank.UFJ Holdings, Japan's fourth-largest bank, has been at the centre of a fierce bid battle over the last year.Sumitomo bosses told counterparts at UFJ of its decision on Friday, clearing the way for it to conclude a 3 trillion yen ($29bn) deal with Mitsubishi.Mitsubishi's takeover of UFJ - which will be Japan's largest-ever takeover deal - will still have to be approved by shareholders of the two firms. |
Worldcom director ends evidence
The former chief financial officer at US telecoms firm WorldCom has finished giving evidence at the trial of his ex-boss Bernie Ebbers.
Scott Sullivan admitted to jurors he was willing to commit fraud to meet Wall Street earnings projections. Mr Ebbers is on trial for fraud and conspiracy in relation to WorldCom's collapse in 2002. He pleads not guilty. Mr Sullivan has spent two days being cross-examined by lawyers for former Worldcom chief executive Mr Ebbers.
Attorney Reid Weingarten has attempted to portray Mr Sullivan as a liar and on Thursday quizzed him about his decision to commit fraud to meet analysts' profit estimates. "At that point in time," Mr Sullivan said, referring to the first false entries in late 2000, "I knew it was wrong and I knew it was against the law, but I thought we would get through it in the short term." Mr Sullivan, 42, has already pleaded guilty to fraud and will be sentenced following Mr Ebbers' trial, where he is appearing as a prosecution witness. Mr Ebbers, 63, has always insisted that he was unaware of any hidden shortfalls in WorldCom's finances. The former finance officer said Mr Ebbers knew about the improper accounting entries that were made between 2000 and 2002 to conceal soaring expenses and inflate revenue.
Mr Ebbers could face a sentence of 85 years if convicted of all the charges he is facing. WorldCom's problems appear to have begun with the collapse of the dotcom boom which cut its business from internet companies. Prosecutors allege that the company's top executives responded by orchestrating massive fraud over a two-year period. WorldCom emerged from bankruptcy protection in 2004, and is now known as MCI. On Monday, MCI agreed to a buyout by Verizon Communications in a deal valued at $6.75bn.
| Mr Sullivan, 42, has already pleaded guilty to fraud and will be sentenced following Mr Ebbers' trial, where he is appearing as a prosecution witness.Mr Sullivan has spent two days being cross-examined by lawyers for former Worldcom chief executive Mr Ebbers.Mr Ebbers is on trial for fraud and conspiracy in relation to WorldCom's collapse in 2002.Mr Ebbers, 63, has always insisted that he was unaware of any hidden shortfalls in WorldCom's finances.Attorney Reid Weingarten has attempted to portray Mr Sullivan as a liar and on Thursday quizzed him about his decision to commit fraud to meet analysts' profit estimates.The former finance officer said Mr Ebbers knew about the improper accounting entries that were made between 2000 and 2002 to conceal soaring expenses and inflate revenue. |
Israel looks to US for bank chief
Israel has asked a US banker and former International Monetary Fund director to run its central bank.
Stanley Fischer, vice chairman of banking giant Citigroup, has agreed to take the Bank of Israel job subject to approval from parliament and cabinet. His nomination by Prime Minister Ariel Sharon came as a surprise, and led to gains on the Tel Aviv stock market. Mr Fischer, who speaks fluent Hebrew, will have to become an Israeli citizen to take the job. The US says he will not have to give up US citizenship to do so.
Previous incumbent David Klein, who often argued with the Finance Ministry, steps down on 16 January. Mr Fischer will face a delicate balancing act - both in political and economic terms - between Mr Sharon and finance minister Binyamin Netanyahu, who also backed his nomination. But his appointment has also raised hopes that it could bring in fresh investment - and perhaps even an improvement in the country's credit rating Mr Fischer first went to Israel for six months in 1973, and almost emigrated there before deciding finally to return to the US. While teaching at the Massachussetts Institute of Technology he spent a month seconded to the Bank of Israel in 1979, beginning a long-time involvement in studying Israel's economy. In 1983 Mr Fischer became adviser on Israel's economy to then-US secretary of state George Shultz. At the World Bank in 1985, he participated in drawing up an economic stabilisation package for Israel.
| Mr Fischer will face a delicate balancing act - both in political and economic terms - between Mr Sharon and finance minister Binyamin Netanyahu, who also backed his nomination.But his appointment has also raised hopes that it could bring in fresh investment - and perhaps even an improvement in the country's credit rating Mr Fischer first went to Israel for six months in 1973, and almost emigrated there before deciding finally to return to the US.Stanley Fischer, vice chairman of banking giant Citigroup, has agreed to take the Bank of Israel job subject to approval from parliament and cabinet.Israel has asked a US banker and former International Monetary Fund director to run its central bank.Mr Fischer, who speaks fluent Hebrew, will have to become an Israeli citizen to take the job. |
US budget deficit to reach $368bn
The US budget deficit is set to hit a worse-than-expected $368bn (£197bn) this year, officials said on Tuesday.
The cost of military operations still needs to be factored in, with analysts saying the deficit could end up a further $100bn in the red. Past Congressional Budget Office (CBO) forecasts said there would be a $348bn shortfall in the 2005 fiscal year. In recent months, the dollar has weakened amid market jitters about the size of the budget and trade deficits. In November, the gap between US exports and imports widened to more than $60bn, a record figure. The CBO says it envisages a further "orderly" decline in the greenback over the next two years as the twin deficit drives dollar investors away. But the non-partisan fiscal watchdog notes the declines will help exporters and boost US economic growth.
The budget deficit hit a record $412bn in the 12 months to 30 September 2004, after reaching $377bn in the previous fiscal year. The CBO also forecast a total shortfall of $855bn for the years from 2006 to 2015, an improvement on previous projections. However, analysts say the new figures fail to take into account the potential $2-$3.8 trillion costs of the president's plan to revamp state pensions and extend tax cuts. The figure could also be worsened by any further military costs. Republicans have blamed the size of the deficit on slow economic conditions after the 11 September attacks and ongoing military operations in Iraq and Afghanistan. One of President George W Bush's election pledges was to halve the budget deficit within five years. But Democrats have accused the president of excluding Iraq-related costs from previous budgets to meet the aim of reducing the deficit, a charge which the administration denies. On Tuesday, the US administration asked Congress for additional funds for military operations.
| The budget deficit hit a record $412bn in the 12 months to 30 September 2004, after reaching $377bn in the previous fiscal year.The US budget deficit is set to hit a worse-than-expected $368bn (£197bn) this year, officials said on Tuesday.Past Congressional Budget Office (CBO) forecasts said there would be a $348bn shortfall in the 2005 fiscal year.The cost of military operations still needs to be factored in, with analysts saying the deficit could end up a further $100bn in the red.The CBO also forecast a total shortfall of $855bn for the years from 2006 to 2015, an improvement on previous projections.In November, the gap between US exports and imports widened to more than $60bn, a record figure. |
Industrial output falls in Japan
Japanese industrial output fell in October while unemployment rose, casting further doubt on the strength of the country's economic recovery.
Production dropped 1.6% in October, reflecting a decline in exports, while unemployment levels edged up 0.1% to 4.7%, slightly higher than forecast. The economy has grown for six quarters but growth slowed dramatically in the last quarter amid weaker global demand. Japan's government remains optimistic due to strong domestic demand.
Analysts had been forecasting a 0.1% rise in month on month industrial output.
According to figures from the Ministry of Economy, Trade and Industry (METI), the decline was led by a fall in demand for electronic parts for mobile phones and digital televisions. Although inventories fell 0.7% month on month, they were 36% higher than a year ago. "It's a sign that the economy's adjustment phase is stronger than expected," said Takashi Yamanaka, an economist with UFJ Bank. Japan downgraded its overall economic assessment earlier this month for the first time in a year.
Growth slowed to 0.3% in the quarter ending September 30, down from 6.3% in the first quarter of 2004. Experts believe the economy -which stagnated for most of the 1990s -may be entering a softer patch on the back of rising oil prices and the falling dollar. Japanese government officials played down the latest data, arguing that domestic consumer demand was still resilient. "The outlook for November is positive so I don't think one can say that conditions have worsened just because of the fall in October," said a METI official. Despite the rise in unemployment, jobless figures are still some way below historical highs of recent years. The comparatively weak economic date preyed on shares with the Nikkei down 1% in afternoon trade.
| The economy has grown for six quarters but growth slowed dramatically in the last quarter amid weaker global demand.Japanese industrial output fell in October while unemployment rose, casting further doubt on the strength of the country's economic recovery.Analysts had been forecasting a 0.1% rise in month on month industrial output.According to figures from the Ministry of Economy, Trade and Industry (METI), the decline was led by a fall in demand for electronic parts for mobile phones and digital televisions.Although inventories fell 0.7% month on month, they were 36% higher than a year ago.Japanese government officials played down the latest data, arguing that domestic consumer demand was still resilient. |
Palestinian economy in decline
Despite a short-lived increase in Palestinian jobs in 2003, the economy is performing well below its potential, said a World Bank report.
Unemployment stood at 25%, compared with 10% before the uprising against Israeli occupation four years ago. Young people are particularly hard hit with 37% out of work, compared with 14% four years ago. But 104,000 new jobs were created last year during a brief easing of violence and closures. However, during the first half of this year, the Palestinian economy lost more than 22,000 jobs. Last year's growth rate of 6% can also be attributed to this temporary gap in violence, the report said. According to the report, Intifada, Closures and Palestinian Economic Crisis: An Assessment, there is a close link between the number of closures - both border closures and internal closures between cities - and Palestinian economic problems. The closures arranged by Israel restrict the movement of Palestinian people and goods, slowing down trade.
"Closures are a key factor behind today's economic crisis in the West Bank," said Nigel Roberts, World Bank country director for the West Bank and Gaza. Nearly half of all Palestinians - some 47% - live below the poverty line and are particularly vulnerable to economic shocks. The report said even more would be on the poverty line without an average of $950m a year from international donors, some of which goes towards job creation. It also called on the Palestinian Authority to revive its reform programme and maintain financial discipline to create an investment-friendly climate. This week Colin Powell, US Secretary of State was visiting the West Bank to stress US support for a smooth Palestinian election in January.
| Despite a short-lived increase in Palestinian jobs in 2003, the economy is performing well below its potential, said a World Bank report.According to the report, Intifada, Closures and Palestinian Economic Crisis: An Assessment, there is a close link between the number of closures - both border closures and internal closures between cities - and Palestinian economic problems.However, during the first half of this year, the Palestinian economy lost more than 22,000 jobs.The report said even more would be on the poverty line without an average of $950m a year from international donors, some of which goes towards job creation.Young people are particularly hard hit with 37% out of work, compared with 14% four years ago.But 104,000 new jobs were created last year during a brief easing of violence and closures. |
Sluggish economy hits German jobs
The number of people out of work in Europe's largest economy has risen for the tenth straight month as growth remains stubbornly slow.
German unemployment rose 7,000 in November to 4.464 million people, or 10.8% of the workforce. The seasonally adjusted rise showed a smaller rise than expected, as government measures to encourage job creation began to take effect. But officials said stagnant growth was still stifling the job market. "There are clear signs of a revival in domestic demand," said Frank-Juergen Weise, head of the Federal Labour Agency, in a statement. "But growth of 0.1%... in the third quarter is still insufficient to deliver positive momentum to the labour market." High oil prices and the soaring euro - which damages the competitiveness of exporters - were also having a negative effect, he said. The brunt of the unemployment is still being felt in the eastern part of Germany, where the rate is 18.8%.
With unemployment stuck above 4 million for years, the government of Chancellor Gerhard Schroeder has put job creation at the top of the agenda. A controversial package of measures to shake up incentives to get back to work, paid for by cutting some cherished benefits, has sparked anger among some German workers. Strikes in a number of industries, notably among the country's iconic carmakers, have demonstrated the displeasure - as well as fears about further job losses as outsourcing takes hold. Among the new initiatives are the so-called "one-euro jobs" which top up unemployment benefit. The scheme's formal launch is January, but hirings for these positions are already taking place and affecting the unemployment statistics, economists said. "The deterioration of the labour market does not come as a surprise," said Isabelle Kronawitter at Hypovereinsbank. "Job creation measures probably prevented a stronger increase in the seasonally adjusted numbers."
| But officials said stagnant growth was still stifling the job market.With unemployment stuck above 4 million for years, the government of Chancellor Gerhard Schroeder has put job creation at the top of the agenda.The seasonally adjusted rise showed a smaller rise than expected, as government measures to encourage job creation began to take effect."But growth of 0.1%... in the third quarter is still insufficient to deliver positive momentum to the labour market.""Job creation measures probably prevented a stronger increase in the seasonally adjusted numbers.""The deterioration of the labour market does not come as a surprise," said Isabelle Kronawitter at Hypovereinsbank. |
Iraq and Afghanistan in WTO talks
The World Trade Organisation (WTO) is to hold membership talks with both Iraq and Afghanistan.
But Iran's bid to join the trade body has been refused after the US blocked its application for the 21st time. The countries stand to reap huge benefits from membership of the group, whose purpose is to promote free trade. Joining, however, is a lengthy process. China's admission in 2001 took 15 years and talks with Russia and Saudi Arabia have been taking place for 10 years. Membership of the Geneva-based WTO helps guarantee a country's goods receives equal treatment in the markets of other member states - a policy which has seen it become closely associated with globalisation.
Iraq's Trade Minister Mohammed Mustafa al-Jibouri welcomed the move, describing it as significant as November's decision by the Paris Club of creditor nations to write off 80% of the country's debts. Assad Omar, Afghanistan's envoy to the United Nations in Geneva, said accession would contribute to "regional prosperity and global security". There are now 27 countries seeking membership of the WTO. Prospective members need to enter into negotiations with potential trading countries and change domestic laws to bring them in line with WTO regulations. Before the process gets under way, all 148 WTO members must give their backing to applicant countries. The US said it could not approve Iran's application because it is currently reviewing relations. But several nations criticised the approach, and European Union ambassador to the WTO, Carlo Trojan, said Iran's application "must be treated independently of political issues".
| There are now 27 countries seeking membership of the WTO.The World Trade Organisation (WTO) is to hold membership talks with both Iraq and Afghanistan.But several nations criticised the approach, and European Union ambassador to the WTO, Carlo Trojan, said Iran's application "must be treated independently of political issues".Before the process gets under way, all 148 WTO members must give their backing to applicant countries.Membership of the Geneva-based WTO helps guarantee a country's goods receives equal treatment in the markets of other member states - a policy which has seen it become closely associated with globalisation.But Iran's bid to join the trade body has been refused after the US blocked its application for the 21st time. |
Bombardier chief to leave company
Shares in train and plane-making giant Bombardier have fallen to a 10-year low following the departure of its chief executive and two members of the board.
Paul Tellier, who was also Bombardier's president, left the company amid an ongoing restructuring. Laurent Beaudoin, part of the family that controls the Montreal-based firm, will take on the role of CEO under a newly created management structure. Analysts said the resignations seem to have stemmed from a boardroom dispute. Under Mr Tellier's tenure at the company, which began in January 2003, plans to cut the worldwide workforce of 75,000 by almost a third by 2006 were announced. The firm's snowmobile division and defence services unit were also sold and Bombardier started the development of a new aircraft seating 110 to 135 passengers.
Mr Tellier had indicated he wanted to stay at the world's top train maker and third largest manufacturer of civil aircraft until the restructuring was complete. But Bombardier has been faced with a declining share price and profits. Earlier this month the firm said it earned $10m (£19.2m) in the third quarter, down from a profit of $133m a year ago. "I understand the board's concern that I would not be there for the long-term and the need to develop and execute strategies, and the need to reshape the management structure at this time," Mr Tellier said in a statement on Monday. Bombardier said restructuring plans drawn up by Mr Tellier's would continue to be implemented. Shares in Bombardier lost 65 Canadian cents or 25% on the news to 1.90 Canadian dollars before rallying to 2.20 Canadian dollars.
| Bombardier said restructuring plans drawn up by Mr Tellier's would continue to be implemented.Mr Tellier had indicated he wanted to stay at the world's top train maker and third largest manufacturer of civil aircraft until the restructuring was complete."I understand the board's concern that I would not be there for the long-term and the need to develop and execute strategies, and the need to reshape the management structure at this time," Mr Tellier said in a statement on Monday.Earlier this month the firm said it earned $10m (£19.2m) in the third quarter, down from a profit of $133m a year ago.Under Mr Tellier's tenure at the company, which began in January 2003, plans to cut the worldwide workforce of 75,000 by almost a third by 2006 were announced. |
Trial begins of Spain's top banker
The trial of Emilio Botin, the chairman of Spain's most powerful bank, Santander Central Hispano, has started in Madrid.
Mr Botin is accused of misusing the bank's funds after he approved the payment of 160m euros ($208m; £111m) in bonus and pension payouts to two former executives. However, the trial was suspended when Mr Botin's lawyer introduced a new set of documents on the day testimony was set to begin. A three-judge panel gave prosecution lawyers until Monday to study the documents, when the trial will be reconvened.
The high-profile case began after two Santander shareholders filed a criminal complaint about the payments to Jose Maria Amusategui and Angel Corcostegui, who stepped down in 2001. Both executives helped Mr Botin orchestrate Spain's biggest bank merger, between Santander and Banco Central Hispano, in 1999. As he arrived at Spain's High Court earlier on Wednesday, Mr Botin greeted the waiting media, saying: "I have full faith in justice." Santander's board of governors strongly reject the charges against their chairman, saying the payouts were legal and made with their unanimous support. But if convicted, Mr Botin could face a prison term of up to six years. Mr Corcostegui, a former CEO at Santander, also asked the court for new evidence to be admitted. In spite of the allegations against him, Mr Botin continues to lead Santander, and was instrumental in the £8.5bn takeover last November of the British bank Abbey National. Since taking over the chairmanship in 1986, he has turned Santander into one of the top ten biggest banks in the world.
| Both executives helped Mr Botin orchestrate Spain's biggest bank merger, between Santander and Banco Central Hispano, in 1999.The trial of Emilio Botin, the chairman of Spain's most powerful bank, Santander Central Hispano, has started in Madrid.In spite of the allegations against him, Mr Botin continues to lead Santander, and was instrumental in the £8.5bn takeover last November of the British bank Abbey National.Mr Corcostegui, a former CEO at Santander, also asked the court for new evidence to be admitted.Mr Botin is accused of misusing the bank's funds after he approved the payment of 160m euros ($208m; £111m) in bonus and pension payouts to two former executives. |
Asian quake hits European shares
Shares in Europe's leading reinsurers and travel firms have fallen as the scale of the damage wrought by tsunamis across south Asia has become apparent.
More than 23,000 people have been killed following a massive underwater earthquake and many of the worst hit areas are popular tourist destinations. Reisurance firms such as Swiss Re and Munich Re lost value as investors worried about rebuilding costs. But the disaster has little impact on stock markets in the US and Asia.
Currencies including the Thai baht and Indonesian rupiah weakened as analysts warned that economic growth may slow. "It came at the worst possible time," said Hans Goetti, a Singapore-based fund manager. "The impact on the tourist industry is pretty devastating, especially in Thailand." Travel-related shares dropped in Europe, with companies such as Germany's TUI and Lufthansa and France's Club Mediterranne sliding. Insurers and reinsurance firms were also under pressure in Europe.
Shares in Munich Re and Swiss Re - the world's two biggest reinsurers - both fell 1.7% as the market speculated about the cost of rebuilding in Asia. Zurich Financial, Allianz and Axa also suffered a decline in value.
However, their losses were much smaller, reflecting the market's view that reinsurers were likely to pick up the bulk of the costs. Worries about the size of insurance liabilities dragged European shares down, although the impact was exacerbated by light post-Christmas trading. Germany's benchmark Dax index closed the day 16.29 points lower at 3.817.69 while France's Cac index of leading shares fell 5.07 points to 3.817.69. Investors pointed out, however, that declines probably would be industry specific, with the travel and insurance firms hit hardest. "It's still too early for concrete damage figures," Swiss Re's spokesman Floiran Woest told Associated Press. "That also has to do with the fact that the damage is very widely spread geographically."
The unfolding scale of the disaster in south Asia had little immediate impact on US shares, however. The Dow Jones index had risen 20.54 points, or 0.2%, to 10,847.66 by late morning as analsyts were cheered by more encouraging reports from retailers about post-Christmas sales. In Asian markets, adjustments were made quickly to account for lower earnings and the cost of repairs. Thai Airways shed almost 4%. The country relies on tourism for about 6% of its total economy. Singapore Airlines dropped 2.6%. About 5% of Singapore's annual gross domestic product (GDP) comes from tourism. Malaysia's budget airline, AirAsia fell 2.9%. Resort operator Tanco Holdings slumped 5%.
Travel companies also took a hit, with Japan's Kinki Nippon sliding 1.5% and HIS dropping 3.3%. However, the overall impact on Asia's largest stock market, Japan's Nikkei, was slight. Shares fell just 0.03%. Concerns about the strength of economic growth going forward weighed on the currency markets. The Indonesian rupiah lost as much as 0.6% against the US dollar, before bouncing back slightly to trade at 9,300. The Thai baht lost 0.3% against the US currency, trading at 39.10. In India, where more than 2,000 people are thought to have died, the rupee shed 0.1% against the dollar Analysts said that it was difficult to predict the total cost of the disaster and warned that share prices and currencies would come under increasing pressure as the bills mounted.
| The unfolding scale of the disaster in south Asia had little immediate impact on US shares, however.But the disaster has little impact on stock markets in the US and Asia.Shares in Munich Re and Swiss Re - the world's two biggest reinsurers - both fell 1.7% as the market speculated about the cost of rebuilding in Asia.In India, where more than 2,000 people are thought to have died, the rupee shed 0.1% against the dollar Analysts said that it was difficult to predict the total cost of the disaster and warned that share prices and currencies would come under increasing pressure as the bills mounted.Shares in Europe's leading reinsurers and travel firms have fallen as the scale of the damage wrought by tsunamis across south Asia has become apparent.The Thai baht lost 0.3% against the US currency, trading at 39.10.Shares fell just 0.03%.Investors pointed out, however, that declines probably would be industry specific, with the travel and insurance firms hit hardest.However, the overall impact on Asia's largest stock market, Japan's Nikkei, was slight.Reisurance firms such as Swiss Re and Munich Re lost value as investors worried about rebuilding costs.Travel companies also took a hit, with Japan's Kinki Nippon sliding 1.5% and HIS dropping 3.3%.Insurers and reinsurance firms were also under pressure in Europe.Germany's benchmark Dax index closed the day 16.29 points lower at 3.817.69 while France's Cac index of leading shares fell 5.07 points to 3.817.69.Travel-related shares dropped in Europe, with companies such as Germany's TUI and Lufthansa and France's Club Mediterranne sliding. |
McDonald's boss Bell dies aged 44
Charlie Bell, the straight-talking former head of fast-food giant McDonald's, has died of cancer aged 44.
Mr Bell was diagnosed with colorectal cancer in May last year, a month after taking over the top job. He resigned in November to fight the illness. Joining the company as a 15-year-old part-time worker, Mr Bell quickly moved through its ranks, becoming Australia's youngest store manager at 19. A popular go-getter, he is credited with helping revive McDonald's sales. Mr Bell leaves a wife and daughter. "As we mourn his passing, I ask you to keep Charlie's family in your hearts and prayers," chief executive James Skinner said in a statement. "And remember that in his abbreviated time on this earth, Charlie lived life to the fullest." "No matter what cards life dealt, Charlie stayed centred on his love for his family and for McDonald's."
After running the company's Australian business in the 1990s, Mr Bell moved to the US in 1999 to run operations in Asia, Africa and the Middle East. In 2001, he took over the reins in Europe, McDonald's second most important market. He became chief operating officer and president in 2002. Mr Bell took over as chief executive after his predecessor as CEO, Jim Cantalupo, died suddenly of a heart attack in April. Having worked closely with Mr Cantalupo, who came out of retirement to turn McDonald's around, Mr Bell focused on boosting demand at existing restaurants rather than follow a policy of rapid expansion. He had promised not to let the company get "fat, dumb and happy," and, according to Reuters, once told analysts that he would shove a fire hose down the throat of competitors if he saw them drowning. Mr Bell oversaw McDonald's "I'm lovin' it" advertising campaign and introduced successes such as McCafe, now the biggest coffee shop brand in Australia and New Zealand. Colleagues said that Mr Bell was proud of his humble beginnings, helping out behind cash tills and clearing tables when visiting restaurants.
| Mr Bell took over as chief executive after his predecessor as CEO, Jim Cantalupo, died suddenly of a heart attack in April.Mr Bell leaves a wife and daughter.Having worked closely with Mr Cantalupo, who came out of retirement to turn McDonald's around, Mr Bell focused on boosting demand at existing restaurants rather than follow a policy of rapid expansion.Charlie Bell, the straight-talking former head of fast-food giant McDonald's, has died of cancer aged 44.Mr Bell oversaw McDonald's "I'm lovin' it" advertising campaign and introduced successes such as McCafe, now the biggest coffee shop brand in Australia and New Zealand.Joining the company as a 15-year-old part-time worker, Mr Bell quickly moved through its ranks, becoming Australia's youngest store manager at 19.Colleagues said that Mr Bell was proud of his humble beginnings, helping out behind cash tills and clearing tables when visiting restaurants. |
Metlife buys up Citigroup insurer
US banking giant Citigroup has sold its Travelers Life & Annuity insurance arm to Metlife for $11.5bn (£6.1bn).
The sale is a further move by Citigroup away from its 1990s strategy of offering every financial service - insurance, broking and banking. Profit growth in the insurance market has not matched expansion at Citigroup's other businesses. For Metlife, the US's leading insurance company, the purchase gives it access to a much larger distribution network.
Robert Benmosche, Metlife's chairman and chief executive, said that it was a "great opportunity for the brand of Metlife to be distributed through Citigroup". Under the agreement, Metlife will be able to sell its products through Citigroup over the next 10 years. The deal includes Smith Barney retail brokerages and Citibank branches. The company will pay between $1bn and $3bn in Metlife stock with the rest being made up of cash. Travelers had sales of $5.2bn in 2004 and made a profit of $901m. It has total net assets of $96bn. "This deal employs some of Metlife's excess capital in a potentially higher-return business and gives it more distribution," said Stuart Quint, an analyst at Gartmore.
| US banking giant Citigroup has sold its Travelers Life & Annuity insurance arm to Metlife for $11.5bn (£6.1bn).The company will pay between $1bn and $3bn in Metlife stock with the rest being made up of cash.Travelers had sales of $5.2bn in 2004 and made a profit of $901m.For Metlife, the US's leading insurance company, the purchase gives it access to a much larger distribution network.It has total net assets of $96bn. |
GM in crunch talks on Fiat future
Fiat will meet car giant General Motors (GM) on Tuesday in an attempt to reach agreement over the future of the Italian firm's loss-making auto group.
Fiat claims that GM is legally obliged to buy the 90% of the car unit it does not already own; GM says the contract, signed in 2000, is no longer valid. Press reports have speculated that Fiat may be willing to accept a cash payment in return for dropping its claim. Both companies want to cut costs as the car industry adjusts to waning demand.
The meeting between Fiat boss Sergio Marchionne and GM's Rick Wagoner is due to take place at 1330 GMT in Zurich, according to the Reuters news agency.
Mr Marchionne is confident of his firm's legal position, saying in an interview with the Financial Times that GM's argument "has no legs". The agreement in question dates back to GM's decision to buy 20% of Fiat's auto division in 2000. At the time, it gave the Italian firm the right, via a 'put option', to sell the remaining stake to GM. In recent weeks, Fiat has reiterated its claims that this 'put' is still valid and legally binding. However, GM argues that a Fiat share sale made last year, which cut GM's holding to 10%, together with asset sales made by Fiat have terminated the agreement.
Selling the Fiat's car-making unit may not prove so simple, analysts say, especially as it is a company that is so closely linked to Italy's industrial heritage. Political and public pressure may well push the two firms to reach a compromise. "We are not expecting Fiat to exercise its put of the auto business against an unwilling GM at this point," brokerage Merrill Lynch said in a note to investors, adding that any legal battle would be protracted and damaging to the business. "As far as we are aware, the Agnelli family, which indirectly controls at least 30% of Fiat, has not given a firm public indication that it wants to sell the auto business. "Fiat may be willing to cancel the 'put' in exchange for money."
| Fiat claims that GM is legally obliged to buy the 90% of the car unit it does not already own; GM says the contract, signed in 2000, is no longer valid."Fiat may be willing to cancel the 'put' in exchange for money."Fiat will meet car giant General Motors (GM) on Tuesday in an attempt to reach agreement over the future of the Italian firm's loss-making auto group.However, GM argues that a Fiat share sale made last year, which cut GM's holding to 10%, together with asset sales made by Fiat have terminated the agreement."As far as we are aware, the Agnelli family, which indirectly controls at least 30% of Fiat, has not given a firm public indication that it wants to sell the auto business.In recent weeks, Fiat has reiterated its claims that this 'put' is still valid and legally binding. |
S Korean lender faces liquidation
Creditors of South Korea's top credit card firm have said they will put the company into liquidation if its ex-parent firm fails to back a bail-out.
LG Card's creditors have given LG group until Wednesday to sign up to a $1.1bn rescue package. The firm avoided bankruptcy thanks to a $4.5bn bail-out in January 2004, which gave control to the creditors. LG Group has said any package should reflect the firm's new ownership, and it will not accept an unfair burden. At least seven million people in South Korea use LG Card's plastic for purchases.
LG Card's creditors have threatened parent group LG Group with penalties if it fails to respond to their demands.
"Creditors would seek strong financial sanctions against LG Group if LG Card is liquidated," said Yoo Ji-chang, governor of Korean Development Bank (KDB) - one of the card firm's major creditors. LG Group has said providing further help to the credit card issuer could hurt its corporate credibility and could spark shareholder lawsuits. It says it wants "fair and reasonable guidelines" on splitting the financial burden with the creditors, who now own 99.3% of LG Card. The creditors have asked the government to mediate to avoid any risk to the stability of financial markets, KDB said. Analysts believe a compromise is likely. "LG Group knows the impact on consumer demand and the national economy from a liquidation of LG Card," said Kim Yungmin, an equity strategist at Dongwon Investment Trust Management.
LG Card almost collapsed in 2003 due to an increase in overdue credit card bills after the bursting of a credit bubble. The firm returned to profit in September 2004, but now needs a capital injection to avoid being delisted from the Korea Stock Exchange. The exchange can delist a company if its debt exceeds its assets for two years running. LG card's creditors fear that such a move would triggered massive debt redemption requests that could bankrupt the firm, which owes about $12.05bn. "Eventually, LG Group will have to participate, but they have been stalling to try to earn better concessions," said Mr Kim.
| "Creditors would seek strong financial sanctions against LG Group if LG Card is liquidated," said Yoo Ji-chang, governor of Korean Development Bank (KDB) - one of the card firm's major creditors.LG Card's creditors have given LG group until Wednesday to sign up to a $1.1bn rescue package.LG Card's creditors have threatened parent group LG Group with penalties if it fails to respond to their demands."LG Group knows the impact on consumer demand and the national economy from a liquidation of LG Card," said Kim Yungmin, an equity strategist at Dongwon Investment Trust Management.LG Group has said providing further help to the credit card issuer could hurt its corporate credibility and could spark shareholder lawsuits.LG Group has said any package should reflect the firm's new ownership, and it will not accept an unfair burden.Creditors of South Korea's top credit card firm have said they will put the company into liquidation if its ex-parent firm fails to back a bail-out. |
MCI shareholder sues to stop bid
A shareholder in US phone firm MCI has taken legal action to halt a $6.75bn (£3.6bn) buyout by telecoms giant Verizon, hoping to get a better deal.
The lawsuit was filed on Friday after Qwest Communications, which had an earlier offer for MCI rejected, said it would submit an improved bid. MCI's directors have backed Verizon, despite it tabling less money. They are accused of breaching their fiduciary duties by depriving MCI shareholders "of maximum value".
According the legal papers filed in a Delaware court, Verizon is set to pay an ""unconscionable, unfair and grossly inadequate" sum for MCI, which was formerly known as Worldcom. Qwest said on Wednesday that MCI had rejected a deal worth $8bn. A number of large MCI shareholders expressed unhappiness at the decision, saying that Verizon's offer, made up of cash, shares and dividends, undervalued the company. Friday's lawsuit argues that the Verizon offer makes no provision for future growth prospects and that consolidation in the US phone industry will put a premium on MCI's network, assets and clients. MCI's directors have argued that Verizon is bigger than Qwest, has fewer debts and has built a successful mobile division. Chief executive Michael Capellas spent last week meeting with shareholders in an effort to win their backing.
In 2002, investors in the then-named Worldcom lost millions when the company filed for bankruptcy following an accounting scandal. However, the firm - now renamed MCI - has put its operations in order and emerged from bankruptcy protection last April. It is a long-distance and corporate phone firm, and would provide the buyer with access to a global telecommunications network and a large number of business-based subscribers. MCI shares jumped on Friday, hitting their highest level since April 2004 amid speculation that it would be the focus of a bidding war. A takeover of MCI would be the fifth billion-dollar telecoms deal since October as companies look to cut costs and boost client bases. Earlier this month, SBC Communications agreed to buy its former parent and phone pioneer AT&T for about $16bn.
| A shareholder in US phone firm MCI has taken legal action to halt a $6.75bn (£3.6bn) buyout by telecoms giant Verizon, hoping to get a better deal.The lawsuit was filed on Friday after Qwest Communications, which had an earlier offer for MCI rejected, said it would submit an improved bid.Qwest said on Wednesday that MCI had rejected a deal worth $8bn.However, the firm - now renamed MCI - has put its operations in order and emerged from bankruptcy protection last April.A number of large MCI shareholders expressed unhappiness at the decision, saying that Verizon's offer, made up of cash, shares and dividends, undervalued the company.A takeover of MCI would be the fifth billion-dollar telecoms deal since October as companies look to cut costs and boost client bases.According the legal papers filed in a Delaware court, Verizon is set to pay an ""unconscionable, unfair and grossly inadequate" sum for MCI, which was formerly known as Worldcom. |
Mixed reaction to Man Utd offer
Shares in Manchester United were up over 5% by noon on Monday following a new offer from Malcolm Glazer.
The board of Man Utd is expected to meet early this week to discuss the latest proposal from the US tycoon that values the club at £800m ($1.5bn). Manchester United revealed on Sunday that it had received a detailed proposal from Mr Glazer. A senior source at the club told the BBC: "This time it's different". The board is obliged to consider this deal. But the Man Utd supporters club urged the club to reject the new deal. Manchester United past and present footballers Eric Cantona and Ole Gunnar Solskjaer, and club manager Sir Alex Ferguson, have lent their backing to the supporters' group, Shareholders United. They have all spoken out against the bid.
A spokesman for the supporters club said: "I can't see any difference (compared to Mr Glazer's previous proposals) other than £200m less debt. "He isn't bringing any money into the club; he'll use our money to buy it."
Mr Glazer's latest move is being led by Mr Glazer's two sons, Avi and Joel, according to the Financial Times. A proposal was received by David Gill, United's chief executive, at the end of last week, pitched at about 300p a share. David Cummings, head of UK equities for Standard Life Investments, said he believed a "well funded" 300p a share bid would be enough for Mr Glazer to take control of the club. "I do not think there is anything that Manchester United fans can do about it," he told the BBC. "They can complain about it but it is curtains for them. They may not want him but they are going to get him." The US tycoon, who has been wooing the club for the last 12 months, has approached the United board with "detailed proposals", it has confirmed.
Mr Glazer, who owns the Tampa Bay Buccaneers team, hopes this will lead to a formal bid being accepted. He is believed to have increased the amount of equity in the new proposal, though it is not clear by how much. For his proposal to succeed, he needs the support of United's largest shareholders, the Irish horseracing tycoons JP McManus and John Magnier. They own 29% of United through their Cubic Expression investment vehicle. Mr Glazer and his family hold a stake of 28.1%. But it is not yet known whether Mr McManus and Mr Magnier would support a Glazer bid. NM Rothschild, the investment bank, is advising Mr Glazer, according to the Financial Times. His previous adviser, JPMorgan, quit last year when Mr Glazer went ahead and voted against the appointment of three United directors to the board, against its advice. But the FT said it thought JP Morgan may still have had some role in financing Mr Glazer's latest financial proposal.
| Manchester United revealed on Sunday that it had received a detailed proposal from Mr Glazer.But it is not yet known whether Mr McManus and Mr Magnier would support a Glazer bid.David Cummings, head of UK equities for Standard Life Investments, said he believed a "well funded" 300p a share bid would be enough for Mr Glazer to take control of the club.But the FT said it thought JP Morgan may still have had some role in financing Mr Glazer's latest financial proposal.His previous adviser, JPMorgan, quit last year when Mr Glazer went ahead and voted against the appointment of three United directors to the board, against its advice.Mr Glazer and his family hold a stake of 28.1%.NM Rothschild, the investment bank, is advising Mr Glazer, according to the Financial Times.Mr Glazer's latest move is being led by Mr Glazer's two sons, Avi and Joel, according to the Financial Times.A spokesman for the supporters club said: "I can't see any difference (compared to Mr Glazer's previous proposals) other than £200m less debt.The board of Man Utd is expected to meet early this week to discuss the latest proposal from the US tycoon that values the club at £800m ($1.5bn).But the Man Utd supporters club urged the club to reject the new deal. |
Monsanto fined $1.5m for bribery
The US agrochemical giant Monsanto has agreed to pay a $1.5m (£799,000) fine for bribing an Indonesian official.
Monsanto admitted one of its employees paid the senior official two years ago in a bid to avoid environmental impact studies being conducted on its cotton. In addition to the penalty, Monsanto also agreed to three years' close monitoring of its business practices by the American authorities. It said it accepted full responsibility for what it called improper activities.
A former senior manager at Monsanto directed an Indonesian consulting firm to give a $50,000 bribe to a high-level official in Indonesia's environment ministry in 2002. The manager told the company to disguise an invoice for the bribe as "consulting fees".
Monsanto was facing stiff opposition from activists and farmers who were campaigning against its plans to introduce genetically-modified cotton in Indonesia. Despite the bribe, the official did not authorise the waiving of the environmental study requirement. Monsanto also has admitted to paying bribes to a number of other high-ranking officials between 1997 and 2002.
The chemicals-and-crops firm said it became aware of irregularities at a Jakarta-based subsidiary in 2001 and launched an internal investigation before informing the US Department of Justice and the Securities and Exchange Commission (SEC). Monsanto faced both criminal and civil charges from the Department of Justice and the SEC. "Companies cannot bribe their way into favourable treatment by foreign officials," said Christopher Wray, assistant US attorney general. Monsanto has agreed to pay $1m to the Department of Justice, adopt internal compliance measures, and co-operate with continuing civil and criminal investigations. It is also paying $500,000 to the SEC to settle the bribe charge and other related violations. Monsanto said it accepted full responsibility for its employees' actions, adding that it had taken "remedial actions to address the activities in Indonesia" and had been "fully co-operative" throughout the investigative process.
| Monsanto also has admitted to paying bribes to a number of other high-ranking officials between 1997 and 2002.A former senior manager at Monsanto directed an Indonesian consulting firm to give a $50,000 bribe to a high-level official in Indonesia's environment ministry in 2002.The US agrochemical giant Monsanto has agreed to pay a $1.5m (£799,000) fine for bribing an Indonesian official.Monsanto faced both criminal and civil charges from the Department of Justice and the SEC.Monsanto has agreed to pay $1m to the Department of Justice, adopt internal compliance measures, and co-operate with continuing civil and criminal investigations.Monsanto admitted one of its employees paid the senior official two years ago in a bid to avoid environmental impact studies being conducted on its cotton. |
Two Nigerian banks set to merge
Nigerian banks United Bank of Africa and Standard Trust Bank have agreed plans to merge and create the biggest bank in West Africa.
The deal is also in line with a 2004 directive from the Nigerian central bank that called for more consolidation in the nation's crowded banking sector. The merger was announced in a statement on Standard Trust's website on Tuesday, but no financial details were revealed. United Bank is the third biggest in Nigeria in terms of number of branches. Standard Trust is smaller but more profitable. "The boards of United Bank and Standard Trust, at separate meetings yesterday, approved arrangements to merge both institutions," Standard Trust said. Standard Trust is 100% Nigerian-owned, but United Bank has some foreign investors, including New York-based Global Depository Receipts (32.8%), and Banca Nazionale del Lavoro and Monte del Paschi di Siena, both from Italy, who each have a 2.4% stake.
| Nigerian banks United Bank of Africa and Standard Trust Bank have agreed plans to merge and create the biggest bank in West Africa."The boards of United Bank and Standard Trust, at separate meetings yesterday, approved arrangements to merge both institutions," Standard Trust said.Standard Trust is smaller but more profitable. |
Trade gap narrows as exports rise
The UK's trade gap narrowed in November, helped by a 7.5% rise in exports outside the European Union.
According to the Office for National Statistics, the difference between what the UK exported and imported was £3.1bn ($5.8bn), down from October's £3.6bn. Overall UK exports - including both goods and services - rose by more than 3.2% to £24.8bn, although total imports rose again to a new record of £27.9bn. The deficit for goods alone was £4.6bn, down from October's £5bn. During November the UK exported £16.9bn worth of goods, but imported £21.5bn. The cumulative deficit for the first eleven months of 2004 now stands at £36.3bn, £4.5bn higher than the same period in 2003.
November saw an improvement in export levels to both the European Union and the rest of the world, the Office for National Statistics (ONS) said. EU exports rose 2%, fuelled by an increase in sales of chemicals. Non-EU exports shot up 7.5%, with growth seen across a range of manufacturing sectors including cars, consumer durables and chemicals. The export boost offset a 1% rise in imports. Non-EU imports rose 3%, but the growth in goods entering the UK from the EU slowed to 0.5%.
The UK's deficit with the EU fell to £1.9bn from £2.1bn, while its non-EU shortfall dropped to £2.7bn from £2.9bn in October.
The country's surplus on trade-in-services remained steady at £1.5bn for the fifth month in a row. Paul Dales, UK economist for Capital Economics, said the figures represented an improvement on recent months. However, he stressed that the long-term prognosis for exports was still uncertain. "The figures are a lot better than expected but the trend still remains poor," he said. "There have been some very encouraging signs that the UK export recovery is starting to take hold. But there is a danger that this could be held back by the ongoing weakness of domestic demand on the continent."
| Overall UK exports - including both goods and services - rose by more than 3.2% to £24.8bn, although total imports rose again to a new record of £27.9bn.According to the Office for National Statistics, the difference between what the UK exported and imported was £3.1bn ($5.8bn), down from October's £3.6bn.The UK's deficit with the EU fell to £1.9bn from £2.1bn, while its non-EU shortfall dropped to £2.7bn from £2.9bn in October.During November the UK exported £16.9bn worth of goods, but imported £21.5bn.The deficit for goods alone was £4.6bn, down from October's £5bn.The cumulative deficit for the first eleven months of 2004 now stands at £36.3bn, £4.5bn higher than the same period in 2003.November saw an improvement in export levels to both the European Union and the rest of the world, the Office for National Statistics (ONS) said.EU exports rose 2%, fuelled by an increase in sales of chemicals. |
Beijingers fume over parking fees
Choking traffic jams in Beijing are prompting officials to look at reorganising car parking charges.
Car ownership has risen fast in recent years, and there are now two and a half million cars on the city's roads. The trouble is that the high status of car ownership is matched by expensive fees at indoor car parks, making motorists reluctant to use them. Instead roads are being clogged by drivers circling in search of a cheaper outdoor option. "The price differences between indoor and outdoor lots are unreasonable," said Wang Yan, an official from the Beijing Municipal Commission for Development and Reform quoted in the state-run China Daily newspaper. Mr Wang, who is in charge of collecting car parking fees, said his team would be looking at adjusting parking prices to close the gap. Indoor parking bays can cost up to 250% more than outdoor ones.
Sports fans who drive to matches may also find themselves the target of the commission's road rage. It wants them to use public transport, and is considering jacking up the prices of car parks near sports grounds. Mr Wang said his review team may scrap the relatively cheap hourly fee near such places and impose a higher flat rate during matches. Indoor parking may be costly, but it is not always secure. Mr Wang's team are also going to look into complaints from residents about poor service received in exchange for compulsory monthly fees of up to 400 yuan ($48; £26). The Beijing authorities decided two years ago that visiting foreign dignitaries' motorcades should not longer get motorcycle outriders as they blocked the traffic. Unclogging Beijing's increasingly impassable streets is a major concern for the Chinese authorities, who are building dozens of new roads to create a showcase modern city ahead of the 2008 Olympic Games.
| Mr Wang, who is in charge of collecting car parking fees, said his team would be looking at adjusting parking prices to close the gap.Choking traffic jams in Beijing are prompting officials to look at reorganising car parking charges.The trouble is that the high status of car ownership is matched by expensive fees at indoor car parks, making motorists reluctant to use them.Indoor parking bays can cost up to 250% more than outdoor ones.Indoor parking may be costly, but it is not always secure."The price differences between indoor and outdoor lots are unreasonable," said Wang Yan, an official from the Beijing Municipal Commission for Development and Reform quoted in the state-run China Daily newspaper. |
Singapore growth at 8.1% in 2004
Singapore's economy grew by 8.1% in 2004, its best performance since 2000, figures from the trade ministry show.
The advance, the second-fastest in Asia after China, was led by growth of 13.1% in the key manufacturing sector. However, a slower-than-expected fourth quarter points to more modest growth for the trade-driven economy in 2005 as global technology demand falls back. Slowdowns in the US and China could hit electronics exports, while the tsunami disaster may effect the service sector.
Economic growth is set to halve in Singapore this year to between 3% and 5%. In the fourth quarter, the city state's gross domestic product (GDP) rose at an annual rate of 2.4%. That was up from the third quarter, when it fell 3.0%, but was well below analyst forecasts. "I am surprised at the weak fourth quarter number. The main drag came from electronics," said Lian Chia Liang, economist at JP Morgan Chase. Singapore's economy had contracted over the summer, weighed down by soaring oil prices. The economy's poor performance in the July to September period followed four consecutive quarters of double-digit growth as Singapore bounced back strongly from the effects of the deadly Sars virus in 2003.
| However, a slower-than-expected fourth quarter points to more modest growth for the trade-driven economy in 2005 as global technology demand falls back.The economy's poor performance in the July to September period followed four consecutive quarters of double-digit growth as Singapore bounced back strongly from the effects of the deadly Sars virus in 2003.The advance, the second-fastest in Asia after China, was led by growth of 13.1% in the key manufacturing sector."I am surprised at the weak fourth quarter number.That was up from the third quarter, when it fell 3.0%, but was well below analyst forecasts. |
Delta cuts fares in survival plan
Delta Air Lines is cutting domestic fares by as much as 50% as part of a plan to ensure its financial survival.
Other US carriers, including United, have sought bankruptcy protection, amid high fuel costs and competition from discount carriers. Delta is restructuring in a bid to fight off insolvency. This latest move to boost business has prompted speculation other firms will be forced to match their fares, hurting revenues in the sector. Delta's new SimpliFares were trialled from August last year on tickets from Cincinnati, its second-largest hub.
The airline says no one-way economy fare will now be priced higher than $499 (£264), and no first-class fare will be priced higher than $599. It is also eliminating a Saturday-night stay requirement on discount fares and will give further reductions to customers opting for non-refundable tickets, booking in advance and online. Delta, which lost $646m in the three months to September, was forced to cut 6,900 jobs worldwide as part of its aim to slash $5bn from its costs. In October, it reached a crucial agreement with pilots on pay and conditions and it has also issued new shares to staff in return for wage cuts. Airline shares closed lower on the announcement, with Delta, Continental and American Airlines all falling by more than 7%. "We believe the whole airline industry will now have to move in this direction; this will likely hurt revenue in the short run but could be beneficial in the long run," said analyst Ray Neidl at Calyon Securities.
| Delta Air Lines is cutting domestic fares by as much as 50% as part of a plan to ensure its financial survival.Airline shares closed lower on the announcement, with Delta, Continental and American Airlines all falling by more than 7%.Delta, which lost $646m in the three months to September, was forced to cut 6,900 jobs worldwide as part of its aim to slash $5bn from its costs.The airline says no one-way economy fare will now be priced higher than $499 (£264), and no first-class fare will be priced higher than $599.It is also eliminating a Saturday-night stay requirement on discount fares and will give further reductions to customers opting for non-refundable tickets, booking in advance and online. |
Electrolux to export Europe jobs
Electrolux saw its shares rise 14% on Tuesday after it said it would be shifting more of its manufacturing to low-cost countries.
The Swedish firm, the world's largest maker of home appliances, said it is to relocate about 10 of its 27 plants in western Europe and North America. It did not say which facilities would be affected, but intends moving them to Asia, eastern Europe and Mexico. The company has two manufacturing sites in County Durham. It makes lawn and garden products in Newton Aycliffe, and cookers and ovens in Spennymoor. The Newton Aycliffe plant could also be affected by Electrolux's separate announcement that it is to spin-off its outdoor products unit into a new separate company.
Electrolux's subsidiary brands include AEG, Zanussi and Frigidaire. The company said it was speeding up its restructuring programme, which aims to save between £190m and £265m annually from 2009. "We see that about half the plants in high-cost countries - that is around 10 - are at risk," said Electrolux chief executive Hans Straberg. "It looks pretty grim," said Swedish trades union official Ulf Carlsson. "What are we going to end up producing in Sweden?"
| The Newton Aycliffe plant could also be affected by Electrolux's separate announcement that it is to spin-off its outdoor products unit into a new separate company.Electrolux saw its shares rise 14% on Tuesday after it said it would be shifting more of its manufacturing to low-cost countries.The Swedish firm, the world's largest maker of home appliances, said it is to relocate about 10 of its 27 plants in western Europe and North America.The company said it was speeding up its restructuring programme, which aims to save between £190m and £265m annually from 2009."We see that about half the plants in high-cost countries - that is around 10 - are at risk," said Electrolux chief executive Hans Straberg. |
Crude oil prices back above $50
Cold weather across parts of the United States and much of Europe has pushed US crude oil prices above $50 a barrel for the first time in almost three months.
Freezing temperatures and heavy snowfall have increased demand for heating fuel in the US, where stocks are low. Fresh falls in the value of the dollar helped carry prices above the $50 mark for the first time since November. A barrel of US crude oil closed up $2.80 to $51.15 in New York on Tuesday. Opec members said on Tuesday that it saw no reason to cut its output.
Although below last year's peak of $55.67 a barrel, which was reached in October, prices are now well above 2004's average of $41.48.
Brent crude also rose in London trading, adding $1.89 to $48.62 at the close. Much of western Europe and the north east of America has been shivering under unseasonably low temperatures in recent days. The decline in the US dollar to a five-week low against the euro has also served to inflate prices. "The dollar moved sharply overnight and oil is following it," said Chris Furness, senior market strategist at 4Cast. "If the dollar continues to weaken, oil will be obviously higher."
Several Opec members said a cut in production was unlikely, citing rising prices and strong demand for oil from Asia. "I agree that we do not need to cut supply if the prices are as much as this," Fathi Bin Shatwan, Libya's oil minister, told Reuters. "I do not think we need to cut unless the prices are falling below $35 a barrel," he added. Opec closely watches global stocks to ensure that there is not an excessive supply in the market. The arrival of spring in the northern hemisphere will focus attention on stockpiles of US crude and gasoline, which are up to 9% higher than at this time last year. Heavy stockpiles could help force prices lower when demand eases.
| Cold weather across parts of the United States and much of Europe has pushed US crude oil prices above $50 a barrel for the first time in almost three months.Several Opec members said a cut in production was unlikely, citing rising prices and strong demand for oil from Asia.A barrel of US crude oil closed up $2.80 to $51.15 in New York on Tuesday."I agree that we do not need to cut supply if the prices are as much as this," Fathi Bin Shatwan, Libya's oil minister, told Reuters."I do not think we need to cut unless the prices are falling below $35 a barrel," he added.The decline in the US dollar to a five-week low against the euro has also served to inflate prices.Freezing temperatures and heavy snowfall have increased demand for heating fuel in the US, where stocks are low. |
Tsunami slows Sri Lanka's growth
Sri Lanka's president has launched a reconstruction drive worth $3.5bn (£1.8bn) by appealing for peace and national unity.
President Kumaratunga said it was now important to find a peaceful solution to years of internal conflict. Meanwhile, the International Monetary Fund (IMF) said damage from the tsunami would cut one percentage point from Sri Lanka's economic growth this year. It estimated the wave left physical damage equal to 6.5% of the economy.
Separately, the International Labour Organisation (ILO) said that at least one million people have lost their livelihoods in Sri Lanka and Indonesia alone. It called for action to create jobs. President Kumaratunga attended a ceremony in the southern town of Hambantota. She was joined by government and opposition politicians, together with Buddhist, Hindu, Muslim and Christian clergy.
Prime Minister Mahinda Rajapakse laid the foundation stone on a new housing project intended to provide 6,000 homes for survivors of the tsunami. Mrs Kumaratunga called for the tragedy to be "the start of a new beginning to rebuild our nation". "We are a country blessed with so many natural resources and we have not made use of them fully. Instead we have been squabbling, fighting," she added. Norway's peace negotiator Erik Solheim is due to arrive on Wednesday to try to revive peace talks in the decades-long conflict between government forces and the Tamil Tigers, who want a separate state in the north east of the country. Reconstruction efforts in eastern Sri Lanka have been hampered by tensions between the two sides.
The IMF said that the Sri Lankan authorities' initial estimates have put the physical damage at $1.3 to $1.5bn, but added that the implications for the economy were much wider than this. "The broader macroeconomic impact will clearly be substantial but the details are difficult to assess at this early stage," the IMF said. Growth, inflation, the balance of payments and foreign exchange reserves are all expected to show the effects of lost businesses and reconstruction costs. "The fishing industry has been devastated, agricultural production may be affected and tourism will suffer, especially in the short term," the report said. The ILO estimated that 400,000 Sri Lankans have lost their jobs, mostly in these three industries. Earnings from tourism this year are expected to be 15% lower than last year. Economic growth this year is expected to be 4%, which is about 1% less than previously forecast. Inflation could climb to 14% compared to a previous estimate of 12%. Although major exports have not suffered, the IMF expects the reconstruction effort will require higher imports which could damage the balance of payments. Foreign exchange reserves may become strained as "Sri Lanka will be hard pressed to keep international reserves at the pre-tsunami level" which totalled more than two months worth of imports. Last week, the IMF approved Sri Lanka's request for a freeze on loan repayments.
| Meanwhile, the International Monetary Fund (IMF) said damage from the tsunami would cut one percentage point from Sri Lanka's economic growth this year.The IMF said that the Sri Lankan authorities' initial estimates have put the physical damage at $1.3 to $1.5bn, but added that the implications for the economy were much wider than this.President Kumaratunga said it was now important to find a peaceful solution to years of internal conflict.Sri Lanka's president has launched a reconstruction drive worth $3.5bn (£1.8bn) by appealing for peace and national unity.Separately, the International Labour Organisation (ILO) said that at least one million people have lost their livelihoods in Sri Lanka and Indonesia alone.The ILO estimated that 400,000 Sri Lankans have lost their jobs, mostly in these three industries.Reconstruction efforts in eastern Sri Lanka have been hampered by tensions between the two sides.Last week, the IMF approved Sri Lanka's request for a freeze on loan repayments.Growth, inflation, the balance of payments and foreign exchange reserves are all expected to show the effects of lost businesses and reconstruction costs.Earnings from tourism this year are expected to be 15% lower than last year. |
UK economy ends year with spurt
The UK economy grew by an estimated 3.1% in 2004 after accelerating in the last quarter of the year, says the Office for National Statistics (ONS).
The figure is in line with Treasury and Bank of England forecasts. The ONS says gross domestic product (GDP) rose by a strong 0.7% in the three months to 31 December, compared with 0.5% in the previous quarter. The rise came despite a further decline in production output and the worst Christmas for retailers in decades.
The annual figure marked out the best year since 2000, and was also well ahead of the 2.2% recorded in 2003. Growth in the final three months of 2004 marked the 50th consecutive quarter of expansion. "On the basis of the latest information the UK has entered 2005 on course to continue its record period of growth," said Paul Boateng, chief secretary to the Treasury in a statement.
The ONS said the services sector, which accounts for nearly three-quarters of the UK economy, grew 1.0% in the quarter. The strong services figure was welcomed by analysts, given lacklustre retail sales in December and across the Christmas holiday period. "The fact that other services components are doing so well suggests to me that we are back to trend (growth) and I am not particularly concerned about any further slowdown," said Ross Walker, UK economist at RBS Financial Markets.
However, output in the production sector contracted 0.5%, the second quarterly fall in row and a state of affairs that some economists classify as a recession. However the ONS would not comment on the definition of a recession and whether the manufacturing recovery was over. But Steve Radley, chief economist at the manufacturers' organisation EEF, said: "These figures remain at odds with what is actually happening on the ground. "Whilst companies may be experiencing tougher conditions this year, 'recession' is not a word that manufacturers would currently recognise." The ONS said a sharp fall in mining and quarrying, which was driven by oil and gas extraction, was primarily responsible for the overall contraction in manufacturing production figures.
Simon Rubinsohn, chief economist at Gerrard, said: "This outturn (of 0.7%) was well ahead of the market expectations and cast doubt on the scare stories doing the rounds surrounding the current state of the UK economy." And he said the GDP figures may help to "push interest rate expectations a little higher along the curve". "The suggestion from the money markets is that the next move is now more likely to be in an upward rather than a downward direction. This is consistent with our own thinking," said Mr Rubinsohn. The Bank of England's nine-strong rate-setting committee voted unanimously earlier this month to keep interest rates steady at 4.75%, minutes of the meeting showed on Wednesday.
| Simon Rubinsohn, chief economist at Gerrard, said: "This outturn (of 0.7%) was well ahead of the market expectations and cast doubt on the scare stories doing the rounds surrounding the current state of the UK economy."The ONS said the services sector, which accounts for nearly three-quarters of the UK economy, grew 1.0% in the quarter.The ONS said a sharp fall in mining and quarrying, which was driven by oil and gas extraction, was primarily responsible for the overall contraction in manufacturing production figures.And he said the GDP figures may help to "push interest rate expectations a little higher along the curve".The UK economy grew by an estimated 3.1% in 2004 after accelerating in the last quarter of the year, says the Office for National Statistics (ONS).The annual figure marked out the best year since 2000, and was also well ahead of the 2.2% recorded in 2003."The fact that other services components are doing so well suggests to me that we are back to trend (growth) and I am not particularly concerned about any further slowdown," said Ross Walker, UK economist at RBS Financial Markets.But Steve Radley, chief economist at the manufacturers' organisation EEF, said: "These figures remain at odds with what is actually happening on the ground. |
FAO warns on impact of subsidies
Billions of farmers' livelihoods are at risk from falling commodity prices and protectionism, the UN's Food & Agriculture Organisation has warned.
Trade barriers and subsidies "severely" distort the market, the FAO report on the "State of Agricultural Commodity Markets 2004" said. As a result, the 2.5 billion people in the developing world who rely on farming face food insecurity. The most endangered are those who live in the least-developed countries. The FAO report said that support for farmers in industrialised nations was equivalent to 30 times the amount provided as aid for agricultural development in poor countries.
The FAO has urged the World Trade Organisation to swiftly conclude negotiations to liberalise trade, easing developing countries' access to the world market. It also criticised the high tariffs imposed by both developed and developing nations. It recommends that developing countries reduce their own tariffs to encourage trade and take advantage of market liberalisation.
According to the organisation, subsidies and high tariffs have a strong impact on the trade of products such as cotton and rice. Global exports of these products are mainly in the hands of the European Union and the US, who - thanks to subsidies - sell them at very low prices. In fact, almost 30 wealthy nations spend more than $300bn (£158.8bn; 230.9bn euros) in agricultural subsidies. The market situation has divided developing nations in two groups, the FAO said. The first group have a reasonably diverse range of agricultural products while in the second group, agriculture lies largely in the hands of small-scale producers. For 43 developing countries, more than 20% of their export incomes come from the sale of just one product. These countries are mainly situated in Sub-Saharan Africa, Latin America and the Caribbean.
| The FAO has urged the World Trade Organisation to swiftly conclude negotiations to liberalise trade, easing developing countries' access to the world market.The market situation has divided developing nations in two groups, the FAO said.Trade barriers and subsidies "severely" distort the market, the FAO report on the "State of Agricultural Commodity Markets 2004" said.It recommends that developing countries reduce their own tariffs to encourage trade and take advantage of market liberalisation.For 43 developing countries, more than 20% of their export incomes come from the sale of just one product.According to the organisation, subsidies and high tariffs have a strong impact on the trade of products such as cotton and rice. |
Iran budget seeks state sell-offs
Iran's president, Mohammad Khatami, has unveiled a budget designed to expand public spending by 30% but loosen the Islamic republic's dependence on oil.
The budget for the fiscal year starting on 21 March calls for the sell-off of 20% of the state's corporate holdings. Mr Khatami's second term as president ends on 1 August, making this his last budget. But opposition from members of parliament who have attacked previous privatisations could block his plans. Elections in May 2004 ousted many of Mr Khatami's supporters in parliament in favour of more hard-line religious conservatives. Late last year, they backed a law which would give parliament a veto over foreign investment. The ruling was a response to the involvement in telecoms and airport projects by Turkish companies, which hardliners accused of doing business with Israel. It came not long after the Expediency Council - Iran's ultimate decision-maker - blessed Mr Khatami's policy of selling stakes in sectors protected by the constitution such as energy, transport, telecoms and banking. Continued obstruction of foreign investment could get in the way not only of privatisation plans, but also of Mr Khatami's hope of modestly reducing the government's reliance on oil revenues.
In an address to the Majlis, Mr Khatami predicted economic growth of 7.1% in 2005-6, up from 6.7% in the current year. He said he wanted to increase the 2005-6 budget to 1,546 trillion rials ($175.6bn; £93.6bn) from the previous year's 1,070 trillion. Within that figure, taxation would rise to $14.3bn, a rise of over 40% from what is expected from the current year. In contrast, oil revenues were expected to fall to $14.1bn from $16bn in the year to March 2005. "Current government expenditure should come from tax revenues," Mr Khatami said. "Oil revenues should be used for productive investment." Mr Khatami has already been blocked by parliament from reducing the subsidies on many products including bread and petrol, reducing his room to manoeuvre.
| Continued obstruction of foreign investment could get in the way not only of privatisation plans, but also of Mr Khatami's hope of modestly reducing the government's reliance on oil revenues.In contrast, oil revenues were expected to fall to $14.1bn from $16bn in the year to March 2005.In an address to the Majlis, Mr Khatami predicted economic growth of 7.1% in 2005-6, up from 6.7% in the current year.Mr Khatami's second term as president ends on 1 August, making this his last budget."Current government expenditure should come from tax revenues," Mr Khatami said.Late last year, they backed a law which would give parliament a veto over foreign investment.Mr Khatami has already been blocked by parliament from reducing the subsidies on many products including bread and petrol, reducing his room to manoeuvre. |
Asia shares defy post-quake gloom
Indonesian, Indian and Hong Kong stock markets reached record highs.
Investors seemed to feel that some of the worst-affected areas were so under-developed that the tragedy would have little impact on Asia's listed firms. "Obviously with a lot of loss of life, a lot of time is needed to clean up the mess, bury the people and find the missing," said ABN Amro's Eddie Wong. "[But] it's not necessarily a really big thing in the economic sense."
India's Bombay Stock Exchange inched slightly above its previous record close on Wednesday. Expectations of strong corporate earnings in 2005 drove the Indonesian stock exchange in Jakarta to a record high on Wednesday. In Hong Kong, the Hang Seng index may be benefiting in part from the potential for its listed property companies to gain from rebuilding contracts in the tsunami-affected regions of South East Asia. In Sri Lanka, some economists have said that as much as 1% of annual growth may be lost. Sri Lanka's stock market has fallen about 5% since the weekend, but it is still 40% higher than at the start of 2004.
Thailand may lose 30bn baht (£398m; $768m) in earnings from tourism over the next three months, according to tourism minister Sontaya Kunplome.
In the affected provinces, he expects the loss of tourism revenue to be offset by government reconstruction spending. Thailand intends to spend a similar sum - around 30bn baht - on the rebuilding work. "It will take until the fourth quarter of next year before tourist visitors in Phuket and five other provinces return to their normal level," said Naris Chaiyasoot, director general at the ministry's fiscal policy office. In the Maldives the cost of reconstruction could wipe out economic growth, according to a government spokesman. "Our nation is in peril here," said Ahmed Shaheed, the chief government spokesman. He estimated the economic cost of the disaster at hundreds of millions of dollars. The Maldives has gross domestic product of $660m. "It won't be surprising if the cost exceeds our GDP," he said. "In the last few years, we made great progress in our standard of living - the United Nations recognised this. Now we see this can disappear in a few days, a few minutes." Shaheed noted that investment in a single tourist resort - the economic mainstay - could run to $40m. Between 10 and 12 of the 80-odd resorts have been severely damaged, and a similar number have suffered significant damage.
However, many experts, including the World Bank, have pointed out that it is still difficult to assess the magnitude of the disaster and its likely economic impact. In part, this is because of its scale, and because delivering aid and recovering the dead remain priorities. "Calculators will have to wait," said an IMF official in a briefing on Wednesday. "The financial and world community will be turning toward reconstruction efforts and at that point people will begin to have a sense of the financial impact."
| In the Maldives the cost of reconstruction could wipe out economic growth, according to a government spokesman."Our nation is in peril here," said Ahmed Shaheed, the chief government spokesman.Expectations of strong corporate earnings in 2005 drove the Indonesian stock exchange in Jakarta to a record high on Wednesday.In Sri Lanka, some economists have said that as much as 1% of annual growth may be lost.Indonesian, Indian and Hong Kong stock markets reached record highs."It won't be surprising if the cost exceeds our GDP," he said.Shaheed noted that investment in a single tourist resort - the economic mainstay - could run to $40m.He estimated the economic cost of the disaster at hundreds of millions of dollars.Thailand may lose 30bn baht (£398m; $768m) in earnings from tourism over the next three months, according to tourism minister Sontaya Kunplome."Calculators will have to wait," said an IMF official in a briefing on Wednesday.However, many experts, including the World Bank, have pointed out that it is still difficult to assess the magnitude of the disaster and its likely economic impact. |
Millions go missing at China bank
Two senior officials at one of China's top commercial banks have reportedly disappeared after funds worth up to $120m (£64m) went missing.
The pair both worked at Bank of China in the northern city of Harbin, the South China Morning Post reported. The latest scandal at Bank of China will do nothing to reassure foreign investors that China's big four banks are ready for international listings. Government policy sees the bank listings as vital economic reforms. Bank of China is one of two frontrunners in the race to list overseas. The other is China Construction Bank. Both are expected to list abroad during 2005.
They shared a $45bn state bailout in 2003, to help clean up their balance sheets in preparation for a foreign stock market debut.
However, a report in the China-published Economic Observer said on Monday that the two banks may have scrapped plans to list in New York because of the cost of meeting regulatory requirements imposed since the Enron scandal. Bank of China is the country's biggest foreign exchange dealer, while China Construction Bank is the largest deposit holder. China's banking sector is burdened with at least $190bn of bad debt according to official data, though most observers believe the true figure is far higher. Officially, one in five loans is not being repaid. Attempts to strengthen internal controls and tighten lending policies have uncovered a succession of scandals involving embezzlement by bank officials and loans-for-favours. The most high-profile case involved the ex-president of Bank of China, Wang Xuebing, jailed for 12 years in 2003. Although, he committed the offences whilst running Bank of China in New York, Mr Wang was head of China Construction Bank when the scandal broke. Earlier this month, a China Construction Bank branch manager was jailed for life in a separate case.
China's banks used to act as cash offices for state enterprises and did not require checks on credit worthiness. The introduction of market reforms has been accompanied by attempts to modernise the banking sector, but links between banks and local government remain strong. Last year, China's premier, Wen Jiabao, targeted bank lending practices in a series of speeches, and regulators ordered all big loans to be scrutinised, in an attempt to cool down irresponsible lending. China's leaders see reforming the top four banks as vital to distribute capital to profitable companies and protect the health of China's economic boom. But two problems persist. First, inefficient state enterprises continue to receive protection from bankruptcy because they employ large numbers of people. Second, many questionable loans come not from the big four, but from smaller banks. Another high profile financial firm, China Life, is facing shareholder lawsuits and a probe by the US Securities and Exchange Commission following its 2004 New York listing over its failure to disclose accounting irregularities at its parent company.
| The other is China Construction Bank.The latest scandal at Bank of China will do nothing to reassure foreign investors that China's big four banks are ready for international listings.Bank of China is the country's biggest foreign exchange dealer, while China Construction Bank is the largest deposit holder.Bank of China is one of two frontrunners in the race to list overseas.Although, he committed the offences whilst running Bank of China in New York, Mr Wang was head of China Construction Bank when the scandal broke.Earlier this month, a China Construction Bank branch manager was jailed for life in a separate case.The pair both worked at Bank of China in the northern city of Harbin, the South China Morning Post reported.The most high-profile case involved the ex-president of Bank of China, Wang Xuebing, jailed for 12 years in 2003.Two senior officials at one of China's top commercial banks have reportedly disappeared after funds worth up to $120m (£64m) went missing.China's banks used to act as cash offices for state enterprises and did not require checks on credit worthiness. |
India seeks to boost construction
India has cleared a proposal allowing up to 100% foreign direct investment in its construction sector.
Kamal Nath, Commerce and Industry Minister, announced the decision in Delhi on Thursday following a cabinet meeting. Analysts say improving India's infrastructure will boost foreign investment in other sectors too. The Indian government's decision has spread good cheer in the construction sector, according to some Indian firms.
A spokesman for DLF Builders, Dr Vancheshwar, told the BBC this will mean "better offerings" for consumers as well as builders. He said the firm will benefit from world class "strategic partnerships, design expertise and technology, while consumers will have better choice."
The government proposal states that foreign investment of up to 100% will be allowed on the 'automatic route' in the construction sector, on projects including housing, hotels, resorts, hospitals and educational establishments. The automatic route means that construction companies need only get one set of official approvals and do not need to gain clearance from the Foreign Investment Promotion Board, which can be bureaucratic. The government hopes its new policy will create employment for construction workers, and benefit steel and brick-making industries.
Mr Nath also announced plans to allow foreign investors to develop a smaller area of any land they acquired. "Foreign investors can enter any construction development area, be it to build resorts, townships or commercial premises but they will have to construct at least 50,000 square meters (538,000 square feet) within a specific timeframe," said Mr Nath, without specifying the timeframe. Previously foreign investors had to develop a much larger area, discouraging some from entering the Indian market. This measure is designed to discourage foreign investors from buying and selling land speculatively, without developing it. Anshuman Magazine, managing director, of CB Richard Ellis - an international real estate company - told the BBC this was "a big positive step."
However, Chittabrata Majumdar, general secretary of the Centre of Indian Trade Unions (CITU), said allowing FDI in the country is compromising India's own "self reliance". He said, "No country can develop on the basis of foreign investment alone." Mr Majumdar also said an assessment should be made as to whether foreign investment is indeed beneficial to the country - in terms of employment and money generated - or just another way of international companies filling their deep pockets.
| He said, "No country can develop on the basis of foreign investment alone."India has cleared a proposal allowing up to 100% foreign direct investment in its construction sector.The government proposal states that foreign investment of up to 100% will be allowed on the 'automatic route' in the construction sector, on projects including housing, hotels, resorts, hospitals and educational establishments.Mr Nath also announced plans to allow foreign investors to develop a smaller area of any land they acquired.Mr Majumdar also said an assessment should be made as to whether foreign investment is indeed beneficial to the country - in terms of employment and money generated - or just another way of international companies filling their deep pockets.Analysts say improving India's infrastructure will boost foreign investment in other sectors too.Previously foreign investors had to develop a much larger area, discouraging some from entering the Indian market. |
China now top trader with Japan
China overtook the US to become Japan's biggest trading partner in 2004, according to numbers released by Japan's Finance Ministry on Wednesday.
China accounted for 20.1% of Japan's trade in 2004, compared with 18.6% for the US. In 2003, the US was ahead with 20.5% and China came second with 19.2%. The change highlights China's growing importance as an economic powerhouse. In 2004, Japan's imports from and exports to China (and Hong Kong) added up to 22,201bn yen ($214.6bn;£114.5bn). This is the highest figure for Japanese trade with China since records began in 1947. It compares with 20,479.5bn yen in trade with the US.
Trade with the US during 2004 was hurt by one-off factors, including a 13-month ban on US beef imports following the discovery of a cow infected with mad cow disease (BSE) in the US. However, economists predict China will become an even more important Japanese trading partner in the coming years. On Tuesday, figures showed China's economy grew by 9.5% in 2004 and experts say the overall growth picture remains strong. Analysts see two spurs to future growth as being China's membership of the World Trade Organisation and lower trade tariffs. During 2004, Japan's trade surplus grew 17.9% to 12.011 trillion yen, with more than half the surplus, 6.962 trillion yen, accounted for by its trade with the US. In December, the surplus grew 1.8% on a year ago to 1.14 trillion yen thanks to stronger-than-expected exports.
| China accounted for 20.1% of Japan's trade in 2004, compared with 18.6% for the US.During 2004, Japan's trade surplus grew 17.9% to 12.011 trillion yen, with more than half the surplus, 6.962 trillion yen, accounted for by its trade with the US.It compares with 20,479.5bn yen in trade with the US.China overtook the US to become Japan's biggest trading partner in 2004, according to numbers released by Japan's Finance Ministry on Wednesday.This is the highest figure for Japanese trade with China since records began in 1947.In 2003, the US was ahead with 20.5% and China came second with 19.2%. |
Britannia members' £42m windfall
More than 800,000 Britannia Building Society members are to receive a profit share worth on average £52 each.
Members of the UK's second largest building society will share £42m, with 100,000 receiving a windfall of more than £100. Depending on how much they borrow or invest, members earn "reward" points which entitle them to a share of the society's profits. The payouts are bigger than last year, because of stricter eligibility rules. Last year, Britannia members shared £42m, but the average payment was only £38.
To qualify for this year's payment, customers must have been members for at least two years on 31 December 2004. Britannia has also stopped making payments to members if they are worth less than £5.
To qualify for the profit share, members must have either a mortgage, or an investment account other than a deposit account. Customers can also qualify if they have Permanent Interest Bearing Shares (PIBS). The profit share scheme was introduced in 1997 and has paid out more than £370m. Britannia will unveil its results on Wednesday.
| More than 800,000 Britannia Building Society members are to receive a profit share worth on average £52 each.Last year, Britannia members shared £42m, but the average payment was only £38.Britannia has also stopped making payments to members if they are worth less than £5.To qualify for the profit share, members must have either a mortgage, or an investment account other than a deposit account.To qualify for this year's payment, customers must have been members for at least two years on 31 December 2004. |
LSE 'sets date for takeover deal'
The London Stock Exchange (LSE) is planning to announce a preferred takeover by the end of the month, newspaper reports claim.
The Sunday Telegraph said the LSE's plan was further evidence it wants to retain tight control over its destiny. Both Deutsche Boerse and rival Euronext held talks with the London market last week over a possible offer. A £1.3bn offer from Deutsche Boerse has already been rejected, while Euronext has said it will make an all cash bid. Speculation suggests that Paris-based Euronext has the facilities in place to make a bid of £1.4bn, while its German rival may up its bid to the £1.5bn mark. Neither has yet tabled a formal bid, but the LSE is expected to hold further talks with the two parties later this week. However, the Sunday Telegraph report added that there are signs that Deutsche Boerse chief executive Werner Seifert is becoming increasingly impatient with the LSE's managed bid process.
Despite insisting he wants to agree a recommended deal with the LSE's board, the newspaper suggested he may pull out of the process and put an offer directly to shareholders instead. The newspaper also claimed Mr Seifert was becoming "increasingly frustrated" with the pace of negotiations since Deutsche Boerse's £1.3bn offer was rejected in mid-December, in particular the LSE's decision to suspend talks over the Christmas period. Meanwhile, the German exchange's offer has come under fire recently. Unions for Deutsche Boerse staff in Frankfurt have reportedly expressed fears that up to 300 jobs would be moved to London if the takeover is successful. Others claim it will weaken the city's status as Europe's financial centre, while German politicians are also said to be angry over the market operator's promise to move its headquarters to London if a bid is successful. A further stumbling block is Deutsche Boerse's control over its Clearstream unit, the clearing house that processes securities transactions. LSE shareholders fear it would create a monopoly situation, weakening the position of shareholders when negotiating lower transaction fees for share dealings. LSE and Euronext do not have control over their clearing and settlement operations, a situation which critics say is more transparent and competitive.
| A £1.3bn offer from Deutsche Boerse has already been rejected, while Euronext has said it will make an all cash bid.Both Deutsche Boerse and rival Euronext held talks with the London market last week over a possible offer.However, the Sunday Telegraph report added that there are signs that Deutsche Boerse chief executive Werner Seifert is becoming increasingly impatient with the LSE's managed bid process.Speculation suggests that Paris-based Euronext has the facilities in place to make a bid of £1.4bn, while its German rival may up its bid to the £1.5bn mark.The newspaper also claimed Mr Seifert was becoming "increasingly frustrated" with the pace of negotiations since Deutsche Boerse's £1.3bn offer was rejected in mid-December, in particular the LSE's decision to suspend talks over the Christmas period.Unions for Deutsche Boerse staff in Frankfurt have reportedly expressed fears that up to 300 jobs would be moved to London if the takeover is successful. |
Record year for Chilean copper
Chile's copper industry has registered record earnings of $14.2bn in 2004, the governmental Chilean Copper Commission (Cochilco) has reported.
Strong demand from China's fast-growing economy and high prices have fuelled production, said Cochilco vice president Patricio Cartagena. He added that the boom has allowed the government to collect $950m in taxes. Mr Cartagena said the industry expects to see investment worth $10bn over the next three years.
"With these investments, clearly we are going to continue being the principle actor in the mining of copper. It's a consolidation of the industry with new projects and expansions that will support greater production." Australia's BHP Billiton - which operates La Escondida, the world's largest open pit copper mine - is planning to invest $1.9bn between now and 2007, while state-owned Codelco will spend about $1bn on various projects. Chile, the biggest copper producer in the world, is now analyzing ways of to keep prices stable at their current high levels, without killing off demand or leading customers to look for substitutes for copper. The copper price reached a 16-year high in October 2004. Production in Chile is expected rise 3.5% in 2005 to 5.5 million tonnes, said Mr Cartagena. Cochilco expects for 2005 a slight reduction on copper prices and forecasts export earnings will fall 10.7%.
| Chile's copper industry has registered record earnings of $14.2bn in 2004, the governmental Chilean Copper Commission (Cochilco) has reported.The copper price reached a 16-year high in October 2004.Chile, the biggest copper producer in the world, is now analyzing ways of to keep prices stable at their current high levels, without killing off demand or leading customers to look for substitutes for copper.Cochilco expects for 2005 a slight reduction on copper prices and forecasts export earnings will fall 10.7%.Strong demand from China's fast-growing economy and high prices have fuelled production, said Cochilco vice president Patricio Cartagena. |
Renault boss hails 'great year'
Strong sales outside western Europe helped Renault boost its profits by more than 40% in 2004 although the firm warned of lower margins this year.
France's second largest carmaker enjoyed a healthy 43% rise in net profits to 2.4bn euros ($3.1bn; £2.9bn) as sales rose 8% to 40.7bn euros. The firm said strong demand outside western Europe and the good performance of its Megane range lifted its results. Chairman Louis Schweitzer said 2004 had been a "great year" for the firm.
Renault sold more than 2.4 million vehicles in 2004, an increase of 4% on the previous year. Growth came mainly from outside western Europe, with particularly strong sales in Turkey, Russia and North Africa.
In total, sales outside western Europe - Renault's core market - rose 16.5%. Japanese carmaker Nissan - in which Renault owns a 44% stake - contributed 1.7bn euros in net income over the year. Nissan chairman Carlos Ghosn is to succeed Mr Schweitzer at the head of Renault later this year.
Renault said the outlook for the industry in Europe this year was "stable", with small growth forecast in other regions. The firm will benefit from the launch of a new Clio model in the coming year and the roll-out of the Logan in many markets. However, the firm said it expected operating margins to be lower in 2005, at 4% of sales as opposed to 5%. "In a sluggish market and an environment impacted by the rise in raw material prices, Renault intends to continue to grow its global sales," the company said in a statement.
| Strong sales outside western Europe helped Renault boost its profits by more than 40% in 2004 although the firm warned of lower margins this year.Chairman Louis Schweitzer said 2004 had been a "great year" for the firm.Renault said the outlook for the industry in Europe this year was "stable", with small growth forecast in other regions.The firm said strong demand outside western Europe and the good performance of its Megane range lifted its results.Japanese carmaker Nissan - in which Renault owns a 44% stake - contributed 1.7bn euros in net income over the year.In total, sales outside western Europe - Renault's core market - rose 16.5%. |
Soaring oil 'hits world economy'
The soaring cost of oil has hit global economic growth, although world's major economies should weather the storm of price rises, according to the OECD.
In its latest bi-annual report, the OECD cut its growth predictions for the world's main industrialised regions. US growth would reach 4.4% in 2004, but fall to 3.3% next year from a previous estimate of 3.7%, the OECD said. However, the Paris-based economics think tank said it believed the global economy could still regain momentum.
Forecasts for Japanese growth were also scaled back to 4.0% from 4.4% this year and 2.1% from 2.8% in 2005. But the outlook was worst for the 12-member eurozone bloc, with already sluggish growth forecasts slipping to 1.8% from 2.0% this year and 1.9% from 2.4% in 2005, the OECD said. Overall, the report forecast total growth of 3.6% in 2004 for the 30 member countries of the OECD, slipping to 2.9% next year before recovering to 3.1% in 2006. "There are nonetheless good reasons to believe that despite recent oil price turbulence the world economy will regain momentum in a not-too-distant future," said Jean-Philippe Cotis, the OECD's chief economist. The price of crude is about 50% higher than it was at the start of 2004, but down on the record high of $55.67 set in late October.
A dip in oil prices and improving jobs prospects would improve consumer confidence and spending, the OECD said. "The oil shock is not enormous by historical standards - we have seen worse in the seventies. If the oil price does not rise any further, then we think the shock can be absorbed within the next few quarters," Vincent Koen, a senior economist with the OECD, told the BBC's World Business Report. "The recovery that was underway, and has been interrupted a bit by the oil shock this year, would then regain momentum in the course of 2005." China's booming economy and a "spectacular comeback" in Japan - albeit one that has faltered in recent months - would help world economic recovery, the OECD said. "Supported by strong balance sheets and high profits, the recovery of business investment should continue in North America and start in earnest in Europe," it added. However, the report warned: "It remains to be seen whether continental Europe will play a strong supportive role through a marked upswing of final domestic demand." The OECD highlighted current depressed household expenditure in Germany and the eurozone's over-reliance on export-led growth.
| US growth would reach 4.4% in 2004, but fall to 3.3% next year from a previous estimate of 3.7%, the OECD said.But the outlook was worst for the 12-member eurozone bloc, with already sluggish growth forecasts slipping to 1.8% from 2.0% this year and 1.9% from 2.4% in 2005, the OECD said.Overall, the report forecast total growth of 3.6% in 2004 for the 30 member countries of the OECD, slipping to 2.9% next year before recovering to 3.1% in 2006.The soaring cost of oil has hit global economic growth, although world's major economies should weather the storm of price rises, according to the OECD."The recovery that was underway, and has been interrupted a bit by the oil shock this year, would then regain momentum in the course of 2005."If the oil price does not rise any further, then we think the shock can be absorbed within the next few quarters," Vincent Koen, a senior economist with the OECD, told the BBC's World Business Report.A dip in oil prices and improving jobs prospects would improve consumer confidence and spending, the OECD said. |
Marsh executive in guilty plea
An executive at US insurance firm Marsh & McLennan has pleaded guilty to criminal charges in connection with an ongoing fraud and bid-rigging probe.
New York Attorney General Elliot Spitzer said senior vice president Robert Stearns had pleaded guilty to scheming to defraud. The offence carries a sentence of 16 months to four years in state prison. Mr Spitzer's office added Mr Stearns had also agreed to testify in future cases during the industry inquiry. "We are saddened by the development," Marsh said in a statement. The company added it would continue to co-operate in the case, adding it was "committed to resolving the company's legal issues and to serving our clients with the highest standards of transparency and ethics".
According to a statement from Mr Spitzer's office, the Marsh executive admitted he instructed insurance companies to submit non-competitive bids for insurance business between 2002 and 2004. Those bids were then "conveyed to Marsh clients under false and fraudulent pretences". Through the practice, Marsh was allowed to determine which insurers won business from clients, and so control the insurance market, Mr Spitzer's office added. It also protected incumbent insurers when their business was up for renewal and helped Marsh to maximise its fees, a statement said. In one case, an email showed Mr Stearns had instructed a colleague to solicit a non-competitive - or "B" - quote from AIG that was "higher in premium and more restrictive in coverage" and so fixed the bids in a way that would support the present provider Chubb. The company is also still being examined by US stock market regulator the Securities and Exchange Commission (SEC). Late last month the SEC asked for information about transactions involving holders of 5% or more of the firm's shares.
| According to a statement from Mr Spitzer's office, the Marsh executive admitted he instructed insurance companies to submit non-competitive bids for insurance business between 2002 and 2004.Through the practice, Marsh was allowed to determine which insurers won business from clients, and so control the insurance market, Mr Spitzer's office added.It also protected incumbent insurers when their business was up for renewal and helped Marsh to maximise its fees, a statement said.Mr Spitzer's office added Mr Stearns had also agreed to testify in future cases during the industry inquiry."We are saddened by the development," Marsh said in a statement.An executive at US insurance firm Marsh & McLennan has pleaded guilty to criminal charges in connection with an ongoing fraud and bid-rigging probe. |
Fannie Mae 'should restate books'
US mortgage company Fannie Mae should restate its earnings, a move that is likely to put a billion-dollar dent in its accounts, watchdogs have said.
The Securities & Exchange Commission accused Fannie Mae of using techniques that "did not comply in material respects" with accounting standards. Fannie Mae last month warned that some records were incorrect. The other main US mortgage firm Freddie Mac restated earnings by $5bn (£2.6bn) last year after a probe of its books. The SEC's comments are likely to increase pressure on Congress to strengthen supervision of Fannie Mae and Freddie Mac.
The two firms are key parts of the US financial system and effectively underwrite the mortgage market, financing nearly half of all American house purchases and dealing actively in bonds and other financial instruments. The investigation of Freddie Mac in June 2003 sparked concerns about the wider health of the industry and raised questionsmarks over the role of the Office of Federal Housing Enterprise Oversight (OFHEO), the industry's main regulator. Having been pricked into action, the OFHEO turned its attention to Fannie May and in September this year said that the firm had tweaked its books to spread earnings more smoothly across quarters and play down the amount of risk it had taken on. The SEC found similar problems. The watchdog's chief accountant Donald Nicolaisen said that "Fannie Mae's methodology of assessing, measuring and documenting hedge ineffectiveness was inadequate and was not supported" by generally accepted accounting principles.
| US mortgage company Fannie Mae should restate its earnings, a move that is likely to put a billion-dollar dent in its accounts, watchdogs have said.The SEC's comments are likely to increase pressure on Congress to strengthen supervision of Fannie Mae and Freddie Mac.The other main US mortgage firm Freddie Mac restated earnings by $5bn (£2.6bn) last year after a probe of its books.Fannie Mae last month warned that some records were incorrect. |
Singapore growth at 8.1% in 2004
Singapore's economy grew by 8.1% in 2004, its best performance since 2000, figures from the trade ministry show.
The advance, the second-fastest in Asia after China, was led by growth of 13.1% in the key manufacturing sector. However, a slower-than-expected fourth quarter points to more modest growth for the trade-driven economy in 2005 as global technology demand falls back. Slowdowns in the US and China could hit electronics exports, while the tsunami disaster may effect the service sector.
Economic growth is set to halve in Singapore this year to between 3% and 5%. In the fourth quarter, the city state's gross domestic product (GDP) rose at an annual rate of 2.4%. That was up from the third quarter, when it fell 3.0%, but was well below analyst forecasts. "I am surprised at the weak fourth quarter number. The main drag came from electronics," said Lian Chia Liang, economist at JP Morgan Chase. Singapore's economy had contracted over the summer, weighed down by soaring oil prices. The economy's poor performance in the July to September period followed four consecutive quarters of double-digit growth as Singapore bounced back strongly from the effects of the deadly Sars virus in 2003.
| However, a slower-than-expected fourth quarter points to more modest growth for the trade-driven economy in 2005 as global technology demand falls back.The economy's poor performance in the July to September period followed four consecutive quarters of double-digit growth as Singapore bounced back strongly from the effects of the deadly Sars virus in 2003.The advance, the second-fastest in Asia after China, was led by growth of 13.1% in the key manufacturing sector."I am surprised at the weak fourth quarter number.That was up from the third quarter, when it fell 3.0%, but was well below analyst forecasts. |
Gold falls on IMF sale concerns
The price of gold has fallen after the International Monetary Fund (IMF) said it will look at ways of using its gold reserves to provide debt relief.
By revaluing its holdings, the IMF may be able to sell billions of dollars of gold and use the cash to cancel debts owed by the world's poorest nations. The plan was put forward by G7 finance ministers over the weekend. The price of gold fell to $413.50 an ounce in Asia, before rebounding slightly in early European trading.
IMF boss Rodrigo Rato was asked by G7 ministers to carry out a study into the feasibility of revaluing and selling gold reserves.
He is expected to present his conclusions at an IMF meeting in Washington during April. "Whatever happens the market is going to be disconcerted and on the back foot until the April IMF meetings," said John Reade, an analyst at UBS. The IMF values its gold reserves at between $40 and $50 an ounce, a price that was fixed in the 1970s and is about a tenth of the metal's current market value. The IMF has 3,217 tonnes of gold, or about 113.5m ounces. Bringing the book price of the gold in line with market value would boost the IMF's balance sheet, giving it more money to distribute.
This idea has been put forward before, but there now seems to be a more committed political drive to address the issue of global poverty. "This is the first time there has been a mention of the use of gold in a G7 communiqué for achieving debt relief," said UK Chancellor of the Exchequer Gordon Brown. At their meeting in London, G7 finance ministers backed plans to write off up to 100% of the debts owed by some of the world's poorest countries. Mr Brown said the meeting would be remembered as "the 100% debt relief summit". While debt relief seems to have jumped to the top of the global agenda, not everyone is convinced that selling IMF gold is the best way forward. The US, which can veto any plan to sell IMF gold should it so choose, said it is looking at other ways of solving the problem. "The US is not convinced that's the necessary way to do it," said Treasury Under Secretary John Taylor. Canada, a key gold producer, also expressed reservations.
| The price of gold has fallen after the International Monetary Fund (IMF) said it will look at ways of using its gold reserves to provide debt relief.While debt relief seems to have jumped to the top of the global agenda, not everyone is convinced that selling IMF gold is the best way forward.The US, which can veto any plan to sell IMF gold should it so choose, said it is looking at other ways of solving the problem.The IMF has 3,217 tonnes of gold, or about 113.5m ounces.The IMF values its gold reserves at between $40 and $50 an ounce, a price that was fixed in the 1970s and is about a tenth of the metal's current market value.IMF boss Rodrigo Rato was asked by G7 ministers to carry out a study into the feasibility of revaluing and selling gold reserves.By revaluing its holdings, the IMF may be able to sell billions of dollars of gold and use the cash to cancel debts owed by the world's poorest nations. |
Vodafone appoints new Japan boss
Vodafone has drafted in its UK chief executive William Morrow to take charge of its troubled Japanese operation.
Mr Morrow will succeed Shiro Tsuda as president of Vodafone KK, Japan's number three mobile operator, in April. Mr Tsuda, who will become chairman, was appointed president only two months ago but the business has struggled since then, losing customers in January. Vodafone had pinned its hopes on the launch of its 3G phones in November but demand for them has been slow.
While it has more than 15 million customers in Japan, Vodafone has found it difficult to satisfy Japan's technologically demanding mobile users. It suffered a net loss of more than 58,000 customers in January, its second monthly reverse in the last year. "Vodafone is going to need to put a lot of money into Japan if it wants to rebuild the business," Tetsuro Tsusaka, a telecoms analyst with Deutsche Bank, told Reuters. "I do not know if it will be worth it for them to spend that kind of money just for Japan."
| While it has more than 15 million customers in Japan, Vodafone has found it difficult to satisfy Japan's technologically demanding mobile users.Mr Tsuda, who will become chairman, was appointed president only two months ago but the business has struggled since then, losing customers in January.Mr Morrow will succeed Shiro Tsuda as president of Vodafone KK, Japan's number three mobile operator, in April.Vodafone has drafted in its UK chief executive William Morrow to take charge of its troubled Japanese operation. |
Call centre users 'lose patience'
Customers trying to get through to call centres are getting impatient and quicker to hang up, a survey suggests.
Once past the welcome message, callers on average hang up after just 65 seconds of listening to canned music. The drop in patience comes as the number of calls to call centres is growing at a rate of 20% every year. "Customers are getting used to the idea of an 'always available' society," says Cara Diemont of IT firm Dimension Data, which commissioned the survey. However, call centres also saw a sharp increase of customers simply abandoning calls, she says, from just over 5% in 2003 to a record 13.3% during last year. When automated phone message systems are taken out of the equation, where customers have to pick their way through multiple options and messages, the number of abandoned calls is even higher - a sixth of all callers give up rather than wait. One possible reason for the lack in patience, Ms Diemont says, is the fact that more customers are calling 'on the move' using their mobile phones.
The surge in customers trying to get through to call centres is also a reflection of the centres' growing range of tasks. "Once a call centre may have looked after mortgages, now its agents may also be responsible for credit cards, insurance and current accounts," Ms Diemont says. Problems are occurring because increased responsibility is not going hand-in-hand with more training, the survey found.
In what Dimension Data calls an "alarming development", the average induction time for a call centre worker fell last year from 36 to just 21 days, leaving "agents not equipped to deal with customers". This, Ms Diemont warns, is "scary" and not good for the bottom line either. Poor training frustrates both call centre workers and customers. As a result, call centres have a high "churn rate", with nearly a quarter of workers throwing in the towel every year, which in turn forces companies to pay for training new staff. Resolution rates - the number of calls where a customer's query is resolved to mutual satisfaction - are running at just 50%. When the query is passed on to a second or third person - a specialist or manager - rates rise to about 70%, but that is still well below the industry target of an 85% resolution rate.
Suggestions that "outsourcing" - relocating call centres to low-cost countries like India or South Africa - is to blame are wrong, Ms Diemont says.
There are "no big differences in wait time and call resolution" between call centres based in Europe or North America and those in developing countries around the world. "You can make call centres perform anywhere if you have good management and the right processes in place," she says. However, companies that decide to "offshore" their operations are driven not just by cost considerations. Only 42% of them say that saving money is the main consideration when closing domestic call centre operations. Half of them argue that workers in other countries offer better skills for the money. But not everybody believes that outsourcing and offshoring are the solution. Nearly two-thirds of all firms polled for the survey have no plans to offshore their call centres. They give three key reasons for not making the move:
- call centre operations are part of their business "core function",
- they are worried about the risk of going abroad,
- they fear that they will damage their brand if they join the offshoring drive. The survey was conducted by Sunovate on behalf of Dimension Data, and is based on in-depth questionnaires of 166 call centres in 24 countries and five continents. What are your experiences with call centres? Are you happy to listen to Vivaldi or Greensleeves, or do you want an immediate response? And if you work in a call centre: did your training prepare you for your job?
| The drop in patience comes as the number of calls to call centres is growing at a rate of 20% every year.Poor training frustrates both call centre workers and customers.In what Dimension Data calls an "alarming development", the average induction time for a call centre worker fell last year from 36 to just 21 days, leaving "agents not equipped to deal with customers".And if you work in a call centre: did your training prepare you for your job?There are "no big differences in wait time and call resolution" between call centres based in Europe or North America and those in developing countries around the world.Customers trying to get through to call centres are getting impatient and quicker to hang up, a survey suggests.Suggestions that "outsourcing" - relocating call centres to low-cost countries like India or South Africa - is to blame are wrong, Ms Diemont says.The surge in customers trying to get through to call centres is also a reflection of the centres' growing range of tasks.What are your experiences with call centres?However, call centres also saw a sharp increase of customers simply abandoning calls, she says, from just over 5% in 2003 to a record 13.3% during last year.The survey was conducted by Sunovate on behalf of Dimension Data, and is based on in-depth questionnaires of 166 call centres in 24 countries and five continents.As a result, call centres have a high "churn rate", with nearly a quarter of workers throwing in the towel every year, which in turn forces companies to pay for training new staff. |
US prepares for hybrid onslaught
Sales of hybrid cars in the US are set to double in 2005, research suggests.
Research group JD Power estimates sales will hit 200,000 in 2005, despite higher prices and customer scepticism. Carmakers are starting to build hybrid sports utility vehicles (SUVs), the four-wheel-drive vehicles which now dominate the US car market. Hybrids cut both petrol consumption and emissions by combining a petrol engine with an electric motor constantly kept charged by extra engine power. Several jurisdictions, notably the state of California, mandate low emissions for new cars. Equally, the rise in oil prices over the past year has sparked hopes that consumers may be tempted by potential savings of a few hundred dollars a year on fuel.
At the Detroit Motor Show, a range of manufacturers are prominently displaying their hybrid credentials. Toyota has led the market to date with the Prius, popularised by a number of celebrities keen to burnish their "green" credentials. In April it will launch a hybrid version of its Highlander SUV, with an SUV from its luxury Lexus marque due later in the year.
Honda has three hybrids on the market, and between them the two Japanese carmakers sold more than 80,000 units last year. Ford, which has sold 4,000 of its first hybrid since its launch in August, is bringing a hybrid SUV - the Mariner - to market a year ahead of schedule, with plans for three more models by 2008. GM has a hybrid pickup on the market and is showing two concept SUVs in Detroit. Even sports car maker Porsche may join the race, although it insists it is still considering whether to hybridise its Cayenne SUV.
Others remain more sceptical. Nissan has bought Toyota's hybrid technology, but plans to bring out its first model only in 2006. "We want to make sure we are not concentrating on one technology," Nissan chief executive Carlos Ghosn said. "We will not be surprised by any acceleration or deceleration in the hybrid market." Volkswagen, meanwhile, says it will focus on clean-burning diesel engines instead. And some watchers point out that the price tag on a hybrid - upwards of $3,000 above that of an equivalent normal-engined car, and suspicion of the technology - may still cool its attraction. "The average consumers aren't willing to pay that premium for a car they won't drive more than six years," said Anthony Pratt from JD Power.
| Ford, which has sold 4,000 of its first hybrid since its launch in August, is bringing a hybrid SUV - the Mariner - to market a year ahead of schedule, with plans for three more models by 2008.Honda has three hybrids on the market, and between them the two Japanese carmakers sold more than 80,000 units last year.GM has a hybrid pickup on the market and is showing two concept SUVs in Detroit.Nissan has bought Toyota's hybrid technology, but plans to bring out its first model only in 2006."We will not be surprised by any acceleration or deceleration in the hybrid market."And some watchers point out that the price tag on a hybrid - upwards of $3,000 above that of an equivalent normal-engined car, and suspicion of the technology - may still cool its attraction.Sales of hybrid cars in the US are set to double in 2005, research suggests.Carmakers are starting to build hybrid sports utility vehicles (SUVs), the four-wheel-drive vehicles which now dominate the US car market. |
Qwest may spark MCI bidding war
US phone company Qwest has said it will table a new offer for MCI after losing out to larger rival Verizon, setting the scene for a possible bidding war.
MCI accepted a $6.75bn (£3.6bn) buyout from telecoms giant Verizon on Monday, rejecting a higher offer from Qwest. Qwest chairman Richard Notebaert sent a letter to MCI's board on Thursday saying that it plans to submit a new offer after examining Verizon's bid. Formerly known as Worldcom, MCI is a long-distance and corporate phone firm. Snapping up MCI would give the buyer access to a global telecommunications network and a large number of business-based subscribers. Shares of MCI were up more than 4% in electronic trading after the close of New York markets.
Qwest said on Wednesday that MCI had rejected a deal worth $8bn. "We would like to advise you that once we have completed our review of the Verizon merger agreement, we do intend to submit a modified offer to acquire MCI," the letter from Qwest said. Verizon's offer is made up of cash, shares and dividends, and a number of investors have said that it undervalues MCI. Verizon plans to swap 0.41 of its shares and $1.50 in cash for each MCI share, as well as offering special dividends of $4.50 a share. Both company boards have backed the deal, but regulators will still need to give their approval. As well as trying to lure investors with the promise of better returns, Qwest also reckons that its offer will face less regulatory scrutiny than Verizon's.
The takeover would be the fifth billion-dollar telecoms deal since October as companies look to cut costs and boost client bases. Earlier this month, SBC Communications agreed to buy its former parent and phone trailblazer AT&T for about $16bn. There may be concerns other than cash, however, especially as MCI only emerged from bankruptcy protection last April. Verizon is far bigger than Qwest, has fewer debts and has built a successful mobile division. Also, MCI, while trading under the name Worldcom, became the biggest corporate bankruptcy in US history after admitting that it illegally booked expenses and inflated profits. Former Worldcom boss Bernie Ebbers is currently standing trial, accused of overseeing an $11bn fraud. Qwest, meanwhile, had to pay the Securities and Exchange Commission $250m in October to settle charges that it massaged earnings to keep Wall Street happy.
| Qwest said on Wednesday that MCI had rejected a deal worth $8bn.US phone company Qwest has said it will table a new offer for MCI after losing out to larger rival Verizon, setting the scene for a possible bidding war.MCI accepted a $6.75bn (£3.6bn) buyout from telecoms giant Verizon on Monday, rejecting a higher offer from Qwest."We would like to advise you that once we have completed our review of the Verizon merger agreement, we do intend to submit a modified offer to acquire MCI," the letter from Qwest said.Verizon's offer is made up of cash, shares and dividends, and a number of investors have said that it undervalues MCI.Formerly known as Worldcom, MCI is a long-distance and corporate phone firm.Verizon plans to swap 0.41 of its shares and $1.50 in cash for each MCI share, as well as offering special dividends of $4.50 a share.Qwest chairman Richard Notebaert sent a letter to MCI's board on Thursday saying that it plans to submit a new offer after examining Verizon's bid. |
Circuit City gets takeover offer
Circuit City Stores, the second-largest electronics retailer in the US, has received a $3.25bn (£1.7bn) takeover offer.
The bid has come from Boston-based private investment firm Highfields Capital Management, which already owns 6.7% of Circuit City's shares. Shares in the retailer were up 19.6% at $17.04 in Tuesday morning trading in New York following the announcement. Highfield said that it intends to take the Virginia-based firm private.
"Such a transformation would eliminate the public-company transparency into the company's operating strategy that is uniquely damaging in a highly competitive industry where Circuit City is going head-to-head with a tough and entrenched rival," Highfield said. One analyst suggested that a bidding battle may now begin for the company. Bill Armstrong, a retail analyst at CL King & Associates, said he expected to see other private investment firms come forward for Circuit City. The retailer is debt free with a good cash flow, despite the fact that it is said to be struggling to keep up with market leader Best Buy and cut-price competition from the likes of Wal-Mart, said Mr Armstrong.
| Bill Armstrong, a retail analyst at CL King & Associates, said he expected to see other private investment firms come forward for Circuit City.The bid has come from Boston-based private investment firm Highfields Capital Management, which already owns 6.7% of Circuit City's shares.Highfield said that it intends to take the Virginia-based firm private."Such a transformation would eliminate the public-company transparency into the company's operating strategy that is uniquely damaging in a highly competitive industry where Circuit City is going head-to-head with a tough and entrenched rival," Highfield said. |
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