European Business News (EBN), 97-01-10

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

Page last updatedJanuary 10 1635 CET

CONTENTS

[01] U.S. non-farm payrolls figures show a 262,000 rise

[02] Volkswagen settles GM battle

[03] EMI details future European Bank

[04] Argos issues gloomy profit forecast

[05] Japan stocks continue nosedive

[06] Britain's Halifax sets 8-12 billion pounds float

[07] Bank Austria increases bid for Creditanstalt stake

[01] U.S. non-farm payrolls figures show a 262,000 rise

The increase in payroll jobs, which was led by a surge in employment in service industries, was the largest one-month increase since August and provided further evidence that the economy ended 1996 at a faster clip than analysts had expected.

'1996 went out with a bang. The labor market was strong across the board,' said Nicholas Perna, chief economist for Fleet Financial in Hartford, Connecticut.

But replaying a familiar pattern, good news on the economy translated into bad news on Wall Street as investors worried that stronger-than-expected growth will force the Federal Reserve to start raising interest rates to ward off inflation.

[02] Volkswagen settles GM battle

In exchange for GM dropping its civil suit against VW, top VW officials and Mr. Lopez, the German automaker agreed to pay $100 million to GM and committed itself to purchasing $1 billion worth of GM auto parts over the next seven years. GM officials have said they were seeking billions of dollars in damages.

In the wake of the settlement, both disputants are looking to heal the wounds. Following an exchange of letters expressing `regret', both sides said they 'look foward to a future unencumbered by the legacy of this matter.' But the letter from VW to GM also stated that VW has accepted Mr. Lopez's resignation as purchasing chief and that the German auto maker 'acknowledges the possibility that illegal activities by the individuals may have occurred.'

Relieved that Volkswagen had apparently decided to cut its losses in the affair, investors sent VW shares soaring as word of the settlement spread late yesterday. VW common shares surged 4.1% in late electronic trading in Germany, to 707.90 marks ($449.66), a record high.

Shares in GM, meanwhile, rose 12.5 cents to close at $59.25 in New York Stock Exchange composite trading.

[03] EMI details future European Bank

Five main policy instruments will guide the future European System of Central Banks, and it will have the power to make key decisions on crucial issues. It will also have the choice of using either monetary targets or inflation targets, or perhaps a blending of both as its guiding policy strategy.

In its report specifying the operational framework of the single monetary policy, the EMI said it couldn't determine a preference for either of the controversial strategies or a combination of the two. Instead, it left the choice up to the ECB when its operations begin at the start of Europe's currency union planned for January 1, 1999. The European System of Central Banks comprises the governing ECB and the national central banks of the single currency nations.

The ECB will create two standing facilities to provide and absorb overnight market liquidity when the single currency comes into play. The rates for the marginal lending and deposit facilities will be pre-set by the ECB, providing a ceiling and floor, respectively, for overnight interest rates and indicate the stance of monetary policy, the EMI said.

[04] Argos issues gloomy profit forecast

A few minutes before trading opened, Argos shares were down 83 pence, or 11%, to 649 pence a share. Earlier, the stock had been down 63 pence at 670 pence.

Argos said 1996 pretax profit is unlikely to exceed £140 million ($237 million), which is at the lower end of market expectations. Argos said a 0.3% rise in gross margins in the second half would be offset by the effect of lower sales and additional operating costs.

However, the company said pretax profit will still be 'significantly' ahead of 1995's figure of 124.4 million. In the pre-Christmas period, the retailer said sales rose 11% from the year earlier, with new space accounting for 7% of this increase and same-store gains adding 4%.

For the year to December 28, Argos said total sales were 15% ahead of the equivalent 1995 period, of which 8% is attributable to same-store growth. Argos plans to announce its 1996 results on March 17.

[05] Japan stocks continue nosedive

Japanese traders say that despite comments by government officials expressing concern over the recent plunge in equities, indications that the authorities won't take measures to stymie the fall in shares exacerbated negative sentiment. 'There is selling because there will be no measures,' said Ryoichi Ota, manager of the equity division at Tokyo Securities. 'There are no concrete policies that have emerged.'

The market's key index posted its largest one-day fall in two years, slicing 4.26% of its value. Bank shares again led the tumble as foreign investors heavily sold the stocks on worries that the market's fall will reduce unrealized profits on banks' equity holdings and delay their write- off of bad loans.

The Nikkei average of 225 selected issues fell 770.22 points to close at 17, 303.65 after a 606.51-point drop Thursday. The market gauge finished the latest fiscal year at 21,406.85 on March 29, 1996, and ended the 1996 trading year at 19,361.35.

Together with the rest of the weeks losses, the Nikkei's plunge Friday brings the stock benchmark's total declines for the first week of 1997 to 2, 057.70, or 11%. The Nikkei last closed below the 18,000-mark in November 1995 and was last below Friday's level in late October that same year.

[06] Britain's Halifax sets 8-12 billion pounds float

Halifax said it plans to give its 8 million members a minimum of 200 free shares on its flotation, which would be worth between 780 pounds and 900 pounds by DMG estimates.

'This will represent the largest single extension of private share ownership ever witnessed in the UK,' said Halifax chief executive Mike Blackburn.

The group's flotation is conditional on members' approval at a special general meeting to be held on Feb. 24.

A spokeswoman for Halifax said the conversion would go ahead if it receives more than 50% in favor from the 6.7 million investing members. A proportional number of the remaining non-investing members would also need to vote in favor of the proposals.

Also, investing members will receive bonus shares dependent on the value of the current balance.

[07] Bank Austria increases bid for Creditanstalt stake

'We have turned over an improved offer, but I can't say anything about the contents of that offer,' said press spokesman Heimo Hackel. He said the bank expects a decision on the privatization sometime between the end of a meeting between the governing parties Saturday and a special session of parliament Tuesday.

Hackel declined to elaborate on how much higher the bid Bank Austria submitted Friday was than the one it turned in Dec. 16. Its chief rival in the Creditanstalt sweepstakes, a consortium led by Austrian insurer EA Generali, has also said without elaboration that it would raise its offer.

Bank Austria had originally bid 16.7 billion schillings for the government's 70% voting stake in Creditanstalt, while the EA Generali consortium offered 13.8 billion.

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

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