European Business News (EBN), 97-05-02

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

Page last updated Fri, May 02 7:14 PM CET

CONTENTS

[01] Lowest U.S. jobless rate in over 23 years

[02] Labour Party sweeps to landslide victory in Britain Click here for audio interviews

[03] US authorities continue talks on budget deal

[04] Unilever profit hit by weak conditions, edges up 7%

[05] News Corp. head of US satellite TV operations quits

[06] Swiss Re posts 33% profit gain, beating analysts' projections

[07] Glaxo Wellcome says new products will drive company's growth

[08] French car sales fall for fourth month in a row

[09] Corporate & Economic Briefs

[01] Lowest U.S. jobless rate in over 23 years

The stunning drop reported by the Labor Department on Friday, from a seasonally adjusted 5.2% a month earlier, came despite a second month of modest growth in payrolls. They increased by 142,000 jobs in April after a downwardly revised gain of 139,000 in March.

The rate, propelled by decreased joblessness for both white and black people, was the lowest since December 1973, years before workers now in their twenties and thirties obtained their first full-time jobs.

This year the U.S. economy has virtually exploded, with a decade-high growth rate of 5.6% in the first quarter and large additions to payrolls of 314,000 in February and 259,000 in January. And the growth has been accomplished without a noticeable acceleration in inflation in consumer goods prices.

Initially markets didn't quite know what to make of the report. Bond prices rallied at first in reaction to the smaller-than-expected payroll gain but quickly sank back. Equities have risen in early trade.

In other economic data out today the University of Michigan's report on its April consumer sentiment index was said to have edged up to 101.4 from the 101.0 reading in its preliminary report at mid-month, and from 100.0 in March, according to market sources who have seen the report.

The university's index for consumer expectations was said to have risen to 92.5 in April from 90.9 in the mid-month report. The March level was 93.6.

Strong growth has prompted the Federal Reserve to begin tightening monetary policy to pre-emptively quash inflation pressures before they emerge. It raised short-term interest rates by a 0.25% point on March 25 and is widely expected to engineer a similar increase when Fed policy-makers meet next on May 20.

Despite the relatively modest job growth for April, which is derived from a survey of businesses, signs of a booming job market abounded. At factories, the average workweek edged a tenth of an hour higher to 42.2 hours, matching the post-World War II low of January 1995. Overtime at factories inched to five hours, the highest level since the government's began tracking that figure in 1956. And some of the factors dampening the growth of employer payrolls were temporary, including heavy spring snows in the Northeast and Upper Midwest and flooding in Plains states. As a result, construction payrolls lost 44,000 jobs in April but could be expected to rebound later in the spring.

An auto strike temporarily depressed manufacturing by 14,000 jobs overall. But from September through March, factories added 75,000 jobs and job growth continued in industrial machinery, fabricated metals and aircraft.

Growth in service industries totalled 199,000 jobs, reflecting gains in engineering, health, social services and data processing.

Meanwhile, the report showed average hourly earnings for non-supervisory workers fell a penny to $12.14. But that was up 3.6% from $11.72 a year earlier.

[02] Labour Party sweeps to landslide victory in Britain Click here for audio interviews

Blair named John Prescott as Deputy Prime Minister in the new Labour government. Prescott's role will be much bigger than that of former Tory deputy Prime Minister Michael Heseltine. Prescott will now head a 'super ministry,' also with responsibilities for transport and the regions.

Gordon Brown has been named as Chancellor of the Exchequer (Finance Minister). Brown takes over from former Chancellor Kenneth Clarke, who is now a contender to replace John Major as leader of the Tory Party.

Robin Cook becomes Foreign Secretary in the new government. Cook was Blair's foreign affairs spokesman prior to Labour's victory in Thursday's general election.

In other appointments, Blair named Lord Irvine Lord Chancellor and Jack Straw as the new Home Secretary.

The Confederation of British Industry, the British Retail Consortium and the British Chambers of Commerce all hastened to congratulate Labour, but also were generous giving advice - on inflation, taxation and the European Union's Social Chapter. The British Chambers of Commerce was the most forthright, issuing Prime Minister Tony Blair a 'six point challenge'.

At the top of the BCC's agenda is an early decision on joining the single currency at the planned 1999 launch, followed by a call to 'use fiscal policy, if necessary adjusting income tax' rather than interest rates, to control inflation.

Following the landslide result John Major said that he will resign as leader of the Conservative Party.

Talking outside No. 10 Downing Street, Major said he would be advising members of his party it would be ''appropriate for them to consider a new leader of the Conservative Party to lead the party through opposition in the years ahead.''

"When the curtain falls it is time to get off the stage," he told reporters massed outside his Downing Street office.

Former U.K. Chancellor of the Exchequer Kenneth Clarke was the first former cabinet minister to declare his candidacy for the leadership of the Conservative Party after former Prime Minister John Major said he'd step down.

Meanwhile, Britain's European partners welcomed the Labour Party's landslide general election victory and expressed hope a new government under Tony Blair would be an easier partner in European integration.

[03] US authorities continue talks on budget deal

'We're going to try and do it right now,' White House legislative liaison John Hilley said as he exited a Capitol Hill meeting between key budget negotiators. 'We've got to go and shop it around.' Hilley said the 'last big piece' to the budget agreement concerns the cost of the tax cuts in the second five years from enactment. The tax reduction package in the tentative budget agreement costs $135 billion in the first five years but would cost more almost $300 billion in the second five.

President Clinton has been concerned about the ballooning costs of the tax reductions and negotiators have been pushing to limit how much the cost of tax cuts would cost.

[04] Unilever profit hit by weak conditions, edges up 7%

The company said sales in Europe were slightly ahead and profits rose sharply, but profits in North America fell by 11% as foods and prestige businesses made a slow start to the year after a strong end to 1996.

In the Asia-Pacific region, sales advanced and profits were much higher, but in Latin America, trading profits were affected by increased marketing investment and higher costs in Brazil.

Europe was the group's star performer with trading profits before exceptional items leaping to £360 million £254 million, driven by sales of foods and personal care products.

'Benefits from restructuring and portfolio management contributed to the profit improvement, which was further boosted by a different phasing of central costs,' the group said.

The contribution to group profits, however, from Africa and the Middle East almost halved to £17 million due to a decline in sales after a major shake- up of distribution in Turkey.

Trading profit before exceptional items rose 16% to £661 million. Total exceptionals for the quarter jumped to £76 million from £15 million, mainly due to restructuring in foods businesses in Europe including the charge for a head office in Bristol.

[05] News Corp. head of US satellite TV operations quits

Preston Padden, head of News Corp.'s ASkyB U.S. satellite-TV business and for years a stalwart and trusted top adviser to Murdoch, is leaving just two days after News Corp. and EchoStar Communications Corp. (DISH) announced a delay in their proposed satellite-TV joint venture.

The billion-dollar deal has been viewed as bold gambit to offer a national direct-to-home satellite service to compete with the cable-TV industry.

Murdoch also strongly denied speculation that he might be backing away from the satellite business altogether in the U.S., given the setback with EchoStar, unforeseen costs of entering the market, and violent opposition from cable operators, broadcasters and others.

'No way,' Murdoch said. 'We're going ahead, either on our own or with (EchoStar Chairman Charlie Ergen) if he meets the terms of the contract.'

Murdoch declined to comment on whether he might seek to link up with cable operators including Tele-Communications Inc. and Time Warner Inc. in their rival service called Primestar Partners.

But people familiar with the situation said that while Murdoch has had discussions about joining the Primestar Partnership, Time Warner Vice Chairman Ted Turner is opposing such a deal. Murdoch had a meeting with Time Warner chief executive Gerald Levin, but it didn't go well, the people said.

[06] Swiss Re posts 33% profit gain, beating analysts' projections

The company also boosted its dividend for 1995 to SF30 a share from SF22.50, also higher than many forecasts.

Most analysts had called for a rise in net profit of around 25% and predicted a dividend of around SF27.

Swiss Re said the rise in net profit was due mainly to continued improvement in the technical result and a much higher return on investment activities.

Gross premiums rose to SF14.2 billion from SF12.9 billion the prior year. The increase was attributed to a weaker Swiss franc. In original currencies, there was a decrease of 3%, Swiss Re said. Mercantile & General Re, acquired by the Swiss Re Group in December 1996, isn't included in the profit and loss account, Swiss Re said.

Those parts of the balance sheet that included M&G Re were, however, substantially affected. Technical provisions increased 46% to SF43.6 billion, investments rose 40% to SF58.5 billion, while capital and reserves at balance sheet value grew 8% to SF9.9 billion.

[07] Glaxo Wellcome says new products will drive company's growth

Chief executive Sir Richard Sykes said the new product portfolio ''will drive the short and long term growth of the company, reinforcing our prediction made earlier this year that in 1999 we expect sales growth in double digits.''

Glaxo's respiratory business, which in 1996 had sales of £1.8 billion ($2.9 billion), has now succeeded gastrointestinal - mainly Zantac - as its largest therapeutic sector.

A further positive for the respiratory business was that no significant competitive entries into the market are foreseen for five years, Glaxo Wellcome said.

Also, the company is developing a combination of the respiratory drugs Flixotide/Flovent and Serevent under the name Seretide.

Dr. Rick Fuller, a senior clinical physician at Glaxo, said initial trials of this cocktail indicate that its effect is greater than the benefits from using the two products separately. Glaxo plans to make regulatory filings for Seretide in 1998.

Elsewhere, the company is about to launch its first non-chlorofluorocarbon metered-dose inhalers, with other regulatory filings pending, he added.

Glaxo plans to make regulatory filings for zanamivir, its novel treatment for influenza, during 1998, Fuller said. Regulatory submissions will also be filed shortly for a combination tablet of Epivir and Retrovir, the group's HIV treatments. Glaxo has two other promising compounds in this area, for which regulatory filings are planned in 1998.

''It's good news; the new product line is looking good, but the news was already fully discounted and the stock is drifting down with the market,'' said a market maker at one leading brokerage.

[08] French car sales fall for fourth month in a row

On a comparable-day basis, the decline was 14.4% from a year ago. Sales fell to 164,392 last month from 183,244, while sales for the first four months of the year totalled 571,228, down 22.5% in the same period last year.

Among domestic car markers, the total number of unit sales for Peugeot Citroen fell 18.6% to 46,896 in April while the total for Renault was down 2.3% to 42,569.

Car sales this year no longer benefit from government incentives to car- buyers as they did for most of the comparable periods last year. Those incentives ended at the end of last September, although carmakers have continued offering large rebates of their own. Analysts expect sales in France for all of 1997 to fall about 10%.

For Peugeot, sale were worst at its Peugeot division, which saw sales fall off 22.5%, while Citroen division sales were down 13.2%. Most foreign carmakers also saw large declines in sales, hough Mercedes sales were up a sharp 31.5% in the month to 2,787 units and Ford saw its sales rise 4.0% to 13,938 units, according to the provisional data.

French carmakers held 54.4% of the French market at the end of April, the association said.

[09] Corporate & Economic Briefs

Paper and packaging company Jefferson Smurfit's executive vice president and chief operating officer, Eric Priestley resigned, effective immediately. Jefferson Smurfit said 54-year-old Priestley's duties will be assumed by President and Chief Executive Richard W. Graham, 62. Priestley joined Jefferson Smurfit in August 1996, the company said.

Cordiant named Kevin Roberts chief executive and executive director of Saatchi & Saatchi Advertising Worldwide unit, effective May 21. In a press release Cordiant said Roberts, 47, was chief operating officer of Lion Nathan Ltd., a brewery group in New Zealand. The company said Roberts replaces Ed Wax, 60, who will remain chairman until the end of 1997. Effective January 1998, Wax will become chairman emeritus of Saatchi & Saatchi.

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

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