European Business News (EBN), 96-11-20

European Business News (EBN) Directory - Previous Article - Next Article

From: The European Business News Server at <http://www.ebn.co.uk/>

Page last updated November 20 1730 CET

CONTENTS

[01] German economy is recovering faster than expected

[02] Britain shows signs economy is well on the way to recovery

[03] WTO agrees to arbitrate dispute over U.S. Cuba law

[04] US September deficit widens to $11.34 billion

[05] Newt Gingrich renominated Speaker by Republicans

[06] C&W earnings rise 19% in the half, surpassing expectations

[07] Merck earnings climb 17% in the nine months

[08] Merger partners UAP and Axa post differing 9-month sales

[09] Netscape to further escalate the battle for the Internet

[10] American Airlines is expected to order $6 billion in Boeing jets

[11] Granada profits jump, but come in below expectations

[12] Entergy calls off takeover talks with London Electricity

[01] German economy is recovering faster than expected

The Bundesbank said that the broad M3 money supply expanded at a seasonally adjusted 8.4% annual rate in the first ten months, exceeding expectations of 8% growth.

The Bundesbank warned that growth in its main economic indicator -- which has consistently grown beyond target this year -- had gained pace on average in the month. It said that domestic public lending in particular had added to the expansion.

Separately, the respected German Ifo economics institute said its October survey showed a sharp jump in the business climate index last month to 97.4 percent from 95.7.

In the money-supply report, the Bundesbank also an 'unusually strong rise' in sight deposits as investors parked assets ahead of the Deutsche Telekom privatisations. Bank lending to private sector enterprises and individuals, also accelerated again, with short-term credit to industry rising after stagnating in the previous month.

October's money supply growth was unchanged from the growth rate reported for September. In absolute, seasonally-adjusted terms, M3 rose by some 7.7% from its fourth-quarter base through October, the Bundesbank noted.

M3, which consists of cash in circulation and various deposits, is the German central bank's leading inflation indicator and widely perceived to have a strong influence on the Bundesbank's monetary policy.

The data leave the M3 aggregate still above the growth range of 4%-7% which the Bundesbank has judged to be consistent with sub-2% inflation this year. Senior Bundesbank officials have conceded that the aggregate will probably overshoot the target range in 1996, but have consistently argued that this doesn't reflect any undue inflationary pressure.

Viewed over a longer period, the pace of credit growth has slowed substantially, however. The Bundesbank reported that bank-lending grew by a seasonally adjusted, annualized 5.6% in the six months through October, down from a rate of 6.3% through September and 7.1% through August.

The rise in business confidence was the fourth consecutive rise since July and takes the index to its highest level since July 1995 when the index was also at 97.4.

[02] Britain shows signs economy is well on the way to recovery

The U.K. Office for National Statistics said retail sales rose 0.4% in October from September. On an annual basis sales rose at a 4.1% pace. Meanwhile, the Bank of Engliand said that M4 money supply growth, a broad measure used as an inflation indicator, jumped to an annual 10.3% rate in October, beyond the government's target range of 3% to 9%.

The U.K. Treasury said the rise relected increased consumer confidence. 'Rising high street sales show that people have the cash to spend and the confidence to do it,' said Economic Secretary to the Treasury Angela Knight.

But the figures were slightly weaker than forecast in financial markets where economists were expecting sales to have risen 0.5% between September and October. And some analysts worry that the data could reflect an overheating economy, suggesting that rates will be raised again soon. Britain raised interest rates three weeks ago in an attempt to head off risks of a rise in inflation.

And others suggest that the data make it unlikely that Kenneth Clarke, Chancellor of the Exchequer, will cut taxes to any substantial degree when he presents his new budget next week.

[03] WTO agrees to arbitrate dispute over U.S. Cuba law

A WTO spokeswoman said the agency decided to convene the panel at the E.U.'s request.

The so-called Helms-Burton law allows U.S. citizens or firms to sue non- U.S. companies trading in Cuba using assets confiscated from U.S. companies when Cuba was taken over by Fidel Castro in 1959.

The E.U. first demanded a panel to review the legislation in October, but its demand was rejected by the U.S. Under WTO rules a country can only reject a demand for a panel once.

Meanwhile, E.U. members states are currently implementing a law which allows E.U. companies attacked under the U.S. law to recoup damages assessed by U.S. courts in suits brought by American companies.

The EU told the WTO dispute settlement body that it had noticed no change in the U.S. position since filing its complaint earlier this year.

U.S. Ambassador Booth Gardner said the U.S. had made clear the Helms-Burton act reflects 'long-standing U.S. foreign policy and security concerns with regard' to Cuba. 'In light of the common interests we share with our European friends in regard to Cuba, the U.S. is surprised and concerned to find our differences over Cuba raised before a multilateral forum.'

Cuban Ambassador Eumelio Caballero Rodriguez said that since the U.S. based its arguments on national security concerns, he wanted to remind the body that Cuba has never invaded the U.S. while the U.S. has invaded and occupied Cuba and still has a naval base on Cuban soil.

Cuba, he claimed, has never carried out a hostile or terrorist act against the U.S. Canada and Mexico, which have close business ties to Cuba and join the U.S. in the North American Free Trade Association, said they wanted to participate in the procedures as third parties.

New Zealand and Norway said they hoped the dispute could be solved quickly.

The two sides now have about 20 days to decided on three panel members. Once established the panel will have up to nine months to make a ruling. In the event of an appeal, the appellate body will have two months to make a final, binding ruling.

[04] US September deficit widens to $11.34 billion

The widening provided ''a mystery about what's happening in the third quarter,'' said James Glassman, chief economist at Chase Securities. The production side of the economy - based on low level of jobless claims, the increase in the number of hours worked, and increases in industrial production - appears stronger than the demand side of the economy, Glassman and other economists said.

''The broad economy is doing fine,'' Glassman said. ''It's a reminder we are not getting a lot of lift from our trading partners.'' Exports fell 1.4% in September to $68.79 billion, while imports rose 0.1% to $80.13 billion. Many economists had been looking for just the opposite - a slight pick-up in exports with a drop in imports.

In its advance report on third-quarter GDP, the Commerce Department estimated that the September trade deficit would be about $9.5 billion. Because of the wider than expected trade deficit and other recently released third-quarter economic indicators, economists are predicting that growth in third-quarter GDP will be revised downward to about 1.6% from 2.2% when the Commerce Department releases its report next Wednesday.

[05] Newt Gingrich renominated Speaker by Republicans

The vote all but ensures that the 53-year-old Georgian will lead the House again in the new Congress following an initial two years in which he was at once the GOP's philosophical leader and chief tactician as well as lightning rod for Democratic attacks.

The full House will formally vote on the speaker and other party posts when Congress convenes on Jan. 7. At that point, the only foreseeable hindrance to Gingrich's election would be if a House ethics committee report about him, which is expected to be released by January, contained additional, damaging revelations.

[06] C&W earnings rise 19% in the half, surpassing expectations

'We have delivered a strong competitive performance during the first half, and I remain confident about the outlook,' chief executive Richard Brown said.

In an interview with AP-Dow Jones, Brown said he has stressed growth, identity and efficiency since joining Cable & Wireless in July. 'We're focusing on growing the company, but without taking our eye off efficiency, ' he said.

On relations with China, Brown said the October opening of C&W's representative office in Beijing has led to discussions about a number of ventures with the Chinese though he refused to be drawn on details. 'It damages what we might want to do as partners if we talk in the press,' he said.

Brown also was tight-lipped about possible changes to Hong Kong Telecom's equity ownership in which C&W has a 58% stake. 'All I can tell you is that it's a well managed business,' he said. 'It doesn't do us any good to talk about what we're planning for the future.'

C&W is currently finishing two undersea cables linking Hong Kong with Beijing and with North America. It has also developed a joint management structure with China to manage multinational business accounts located in Beijing and to train Chinese management.

Brown, who has visited Hong Kong four times since joining C&W, said all sides in Hong Kong are working to achieve a smooth transition. 'Whatever it is we elect to do, we'll do in the interest of all our international shareholders.'

[07] Merck earnings climb 17% in the nine months

Net profit in the period rose to 365 million Deutsche marks ($242 million) on a 10% gain in sales to 5.2 billion marks. The German pharmaceuticals company said it expects to report clearly higher earnings for the full year.

Management board chairman Hans Joachim Langmann said 'There is no question that we will again report increased earnings in full-year 1996. Even if we just added one third of what we've earned already this year that would be a growth of around 30%.'

Langmann said that the group was also confident for 1997, as the pharmaceutical sector was registering above-average growth.

Merck said most of its sales gains came from its North American activities, where sales jumped 18%. Turnover in Europe and Asia were more modest, both rising about 7%, the company said.

[08] Merger partners UAP and Axa post differing 9-month sales

UAP's sales remained about unchanged in the period at 114.1 billion francs ($22.82 billion), while Axa showed a 22.7% jump in revenue to to 119.98 billion francs. UAP also announced that its board has approved the terms of the proposed merger with Axa.

UAP noted that excluding asset sales and aquisitions, revenue rose 3.9%. In France, nine-month revenue fell 0.3% to 48.7 billion francs on a 1.6% drop in life insurance premium income. In the U.K. and Ireland, revenue jumped 20.8% to 15 billion while revenue from central and eastern Europe operations rose 4.4% to 26.9 billion francs. Axa said that its sales rise was due mainly to the inclusion in 1996 of Australia's National Mutual revenue. On a comparable basis, revenues were up 8.8%, the company said.

[09] Netscape to further escalate the battle for the Internet

At the Comdex technology trade fair in Las Vegas, Netscape is expected to announce that it plans to introduce software that will organize a computer's desktop, making Microsoft's software just one of many programs inside. The software would be shipped starting in the middle of next year. That would be a 180-degree switch from today's look, in which Microsoft's Windows operating system organises 90% of PC desktops and controls other software.

Netscape has begun positioning its software as a way to navigate through corporate databases, the current hottest corporate market. But Microsoft has done the same thing. Netscape's planned product, called Constellation, is an attempt to shift the battlefield again.

Instead of trying to get rid of Microsoft, Netscape is now hoping to position itself as a kind of middleman on the desktop that can grab and organise data from all kinds of places - not just from the Internet or corporate networks, but from office software like Microsoft-made word processors and spreadsheets.

Constellation makes the computer screen look like a television with a row of buttons down one side. By clicking on one button, users could jet to a particular site on the Internet. By clicking on another, users could launch a desktop program. If Netscape's plan succeeds, Constellation could become a de facto operating system. That means software developers could write programs to run with Constellation instead of Windows.

But for that to happen on a grand scale, Netscape must overcome daunting odds. As is the case with its current software, Netscape must persuade corporate buyers to invest in Netscape technology instead of getting free or cheaper competing software from Microsoft.

Microsoft plans to introduce software for integrating Internet and desktop data, called Active Desktop, in the second half of next year.

Netscape is hoping to make Constellation more appealing by emphasising that it runs on many operating systems, including the older, but still popular, versions of Microsoft's Windows, as well as Apple Computer Macintosh. The first version of Active Desktop will run only on Microsoft's newer operating systems.

Capitalising on the technology industry's latest craze, Netscape said Constellation will work with 'push' software, which can be customised to automatically retrieve and update data from the Internet. Specifically, PointCast and Marimba's 'push' software will work with Constellation, Netscape said.

'The mark of this new wave is that information finds you, rather than you finding information,' said Jim Barksdale, Netscape's president and chief executive, according to remarks from a speech he plans to make at Comdex today in Las Vegas.

[10] American Airlines is expected to order $6 billion in Boeing jets

The order will refurbish the carrier's fleet through the next decade, people familiar with the plan told The Wall Street Journal.

The order for Boeing 777 and 767 wide-bodies, plus narrowbody 757 and 737 jets, will be contingent on ratification by pilots of a new six-year contract.

The board of the Allied Pilots Association met Tuesday to consider the contract and vote on it before a deadline today set by the National Mediation Board. If the union board gives its approval, American's 9,100 pilots will vote on the contract next month.

In addition, the aircraft order still must be approved by AMR's board of directors, which will take it up at a meeting today.

The purchase, which will be at a deep discount off list prices, includes firm orders for at least 12 777s, about 75 737s and a smaller number of both the 767 and 757. The order signals American's plan to step up international expansion in 1998, when deliveries will begin, but keep domestic expansion to a minimum.

A spokesman for American wouldn't confirm the carrier's plans. A Boeing spokeswoman declined to comment. The order for the new 777, a 359-passenger plane, along with some additional 200-passenger 767s, will give American capacity to expand international routes.

The carrier has a strong presence across the Atlantic, where it hopes to merge its operations with British Airways, and is the dominant U.S. carrier to Latin America. But American is weak across the Pacific, where it is restricted to only a few routes to Japan by treaty. If newer engines on the 777 are able to give it longer range, the plane could allow American to economically open new routes to Asia.

At the same time, by purchasing 150-seat 737s, the carrier has decided to replace rather than refurbish most of its fleet of 727 jets. If American decides to step up growth more than its modest domestic projections, it still could decide to hang on to the 727s, thus expanding capacity, a person close to the deal said.

[11] Granada profits jump, but come in below expectations

Chief Executive Charles Allen said the company still expected to boost profits at Forte by more than £100 million starting next year. Granada acquired family-controlled hotel and catering empire Forte for £3.9 billion in January after a bitter takeover battle.

Allen noted that Granada has `already improved (Forte) profitability by approaching £40 million.'

Granada said it would shed 17 of Forte's luxury hotels by early 1997. Chairman Gerry Robinson said there was substantial interest from a wide range of potential buyers. Granada sold the first of the 17 properties this week, when Mandarin Oriental International bought London's Hyde Park Hotel for £86 million.

[12] Entergy calls off takeover talks with London Electricity

The U.S. energy company said it might be considering a bid for London Electricity that it considers the U.K. an attractive market. 'We continue to evaluate attractive markets and investment opportunities worldwide and consider the UK market to be in that category,' a spokesman for Entergy said.

The Wall Street Journal had reported that according to documents obtained by AP-Dow Jones News Services, Entergy was considering a £1.2 billion bid ($2 billion) for London Electricity. London Electricity had declined to comment on the report but Entergy had declined to rule it out, adding that any talks were at too early a stage to be 'really meaningful'.

Britain's regional electric corporations have seen a flurry of renewed bid fever in recent weeks as two of the last five remaining independent companies have attracted offers. Northern Electric is fending off U.S.- based CalEnergy and East Midlands has agreed to a takeover by Dominion Resoures.

From the European Business News (EBN) Server at http://www.ebn.co.uk/

European Business News (EBN) Directory - Previous Article - Next Article