World Semiconductor Trade Statistics (WSTS) for February, released this week show a small decline in all regions, more pronounced in Europe and Asia Pacific (respectively -2.4% and -2.3%), milder for Americas (- 0.8%). However, on an annual basis, chip sales were strong. The results are in line with the expected seasonal trends and therefore are not regarded with particular concern by the industry at this point, according to the European Semiconductor Industry Association.
ChevronTexaco, one of the world's biggest oil companies, has announced an agreement to acquire Unocal, a leading independent natural gas and crude oil exploration and production company. . In the aggregate, ChevronTexaco will issue approximately 210 million shares of ChevronTexaco stock and pay approximately $4.4 billion in cash. ChevronTexaco will also assume estimated net debt of $1.6 billion.
The International Monetary Fund (IMF) released a report on Thursday on the oil market, which considers the impact of a surge in oil prices past $80 per barrel.
Among its key findings the IMF said that the recent oil price increases have been substantial, but should be kept in perspective. The average price of crude oil has risen by more than 40 percent since the beginning of 2004 to $44.95 in January 2005, surpassing the record nominal high set during the Iraq invasion of Kuwait in 1990. In real terms, however, the price is still well below the real price of $90 in today's prices that was reached in 1990 $39.50 per barrel in nominal terms). Simulation results (based on the MULTIMOD model) suggest that a rise in oil prices to about $80—although very unlikely barring a major unforeseen event—would have considerable adverse effects on most countries, but also illustrate that such an increase is unlikely to throw the world economy into a recession comparable to that following the 1970s shocks. Given the balance of global supply and demand, it would require a large supply shock to drive prices to $80 per barrel.
Kuwaiti Oil Minister and President of the Organization of Petroleum Exporting Countries (OPEC), Sheik Ahmad Fahd al-Sabah, is consulting colleagues in the oil cartel on providing an additional 500,000 barrels a day (bpd) to moderate soaring oil prices. Saudi Arabia is the most significant global producer with production capacity of about 1 million barrels per day. Most of the 11 OPEC members and the leading producers of the 60 percent non-OPEC world oil output, are also pumping at capacity.
IATA, the International Air Transport Association, has warned that high oil prices will result in airline losses of US$5.5 billion this year, bringing total losses to US$40 billion in the five year period from 2001. "The livelihood of 28 million people in aviation and aviation related activities and US$1.8 trillion of economic activity are at stake. Governments must act quickly in areas that are their responsibility and then get out of the way. We need to get on with business," said Director General and CEO of IATA Giovanni Bisignani at the opening of the Air Finance conference in New York.
Its been a bad week for the world’s largest drug maker, Pfizer Inc. On Tuesday the company forecast 2005 earnings at the low end of Wall Street expectations at $2 per share excluding one-time items, compared with analysts' expectations of between $1.99 and $2.35.
Then on Wednesday Pfizer was ordered to suspend the sale of their COX-2 painkiller drug, Bextra, at the request of the U.S. Food and Drugs administration. The FDA concluded after investigations into the drug that side affects such as increased risks of rare, but serious skin conditions warranted its removal from the market. At the request of European regulators, Pfizer will also suspend sales of Bextra in the European Union.
In a further blow to the company, the FDA decided on Thursday that Pfizer has to expand risk information on labels of their Celebrex drug, a COX-2 selective Non-Steroidal Anti-Inflammatory Drug (NSAID ). The decision came as the FDA announced on Thursday that it will require boxed warnings of potential cardiovascular risk for all COX-2 pain relievers and all NSAIDs, including older non-specific drugs such as ibuprofen and naproxen.
Robert Zoellick, the US Deputy Secretary of State and chief US trade negotiator on commercial aircraft subsidies, lost his cool on Tuesday and lashed out at European Trade Commissioner Peter Mandelson, accusing him of using “spin” in the dispute over aircraft subsidies and compared him unfavourably with his EU predecessor, Frenchman Pascal Lamy. The undiplomatic reaction from America's No. 2 diplomat, added oil to the fire over state aid for both Airbus and Boeing. Zoellick broke off talks with Mandelson on the EU's support for Airbus two weeks ago. If no agreement is reached by next Monday, the US said that it will refer the issue to the World Trade Organization (WTO).
In response to a flood of Chinese textile imports in the first three months of 2005, the Bush Administration announced on Monday that it has begun a process that is likely to result in quota limits on imports of Chinese shirts, trousers and underwear.
The European Union is also reviewing the impact of the huge growth in Chinese clothing imports. Some industry analysts have forecast that China will capture as much as 70 percent of the United States clothing market. If an agreement cannot be reached between the US and China, it is likely that Chinese textile imports will be limited to to 7.5 per cent annual growth.
The World’s third largest spirits group, French Pernod Ricard, which owns the Irish Distillers' brands such as Jameson and Old Bushmills Irish whiskies announced this week that it has teamed up with U.S. conglomerate Fortune Brands for a potential deal, to buy rival UK Allied Domecq, confirming months of market and media speculation.
Analysts said Allied, whose brands Beefeater gin and Malibu coconut rum, could fetch around 7.2 billion pounds ($13.5 billion), or 650 pence a share, and would help Pernod close the gap on market leader Diageo.
The Australian government said this week that it will not get involved with the dispute between Chinese steel makers and Australian mining company BHP Billiton over shipping fees of iron ore. A group of 16 major Chinese steelmakers has rejected a request from BHP Billiton for an additional US$7.5 to US$10 (€5.8 to €.7) for shipping per ton of iron ore, the China Iron & Steel Association said. Australian Trade Minister Mark Vaile said he expected the dispute would be raised when Prime Minister John Howard visits China this month, but added that his government would not intervene.
Despite high oil prices and the devastating tsunami, developing countries in Asia will experience robust growth in 2005 and continue a healthy expansion in 2006-2007, the Asian Development Bank (ADB) said in a major report released this week.
The major Asian industrial economies grew at their strongest rate in many years in 2004. In turn, the economies of developing Asia and the Pacific achieved their highest growth since the Asian financial crisis as aggregate gross domestic product expanded by 7.3%. Domestic demand was buoyant and average inflation remained subdued. The strong economic momentum in most regional economies, together with a continued benign external environment, augurs well for growth over 2005–2007. Average real growth is expected to be between 6.5% and 6.9%, supported by more buoyant domestic demand and strengthening interregional trade.
New research from the US-based Yankee Group's Multi-Discipline BPO Practice Research has found total global expenditure on HR BPO (human resources business process outsourcing) will increase by 27% this year to surpass $4.6 billion. Forecasts show this rampant growth is expected to continue throughout the next 4 years, at a compound annual growth rate (CAGR) of more than 30%, to reach $14 billion by 2009.
In other research released by the Yankee Group this week it was found that the majority of US SME and enterprise customers deploying Windows Server 2003 find its quality, performance and reliability equal to or better than Linux, the open source software. This perception, combined with Microsoft’s extensive installed base, makes it difficult for Linux to displace Windows Server, Windows XP or Office in the SME or enterprise markets. However, Yankee Group’s survey shows Linux gaining momentum as a complementary server presence in Windows networks. More than 50% of companies surveyed said they plan to install Linux in parallel with, or in addition to, existing Windows operating systems.
The world’s most recognised company for online music, Napster raised its quarterly revenue forecast this week, for the second time in about a month due to a big jump in subscribers and stronger-than-expected sales of music downloads.
Shares of Napster rose 12 per cent in remarket trade on the Inet electronic network.
Napster said it ended the fiscal fourth quarter with more than 410,000 subscribers, adding 143,000 during the period, representing sequential subscriber growth of more than 53 per cent.
While the soap opera continued to unfold at Morgan Stanley this week it was reported that Bob Scott, one of the former Morgan Stanley executives leading the campaign against Chairman and CEO Phil Purcell, has been proposed by the group of former executives to replace Purcell.
Mr Scott pointed out that the group had sent a private letter to Morgan Stanley's board expressing their concerns about Purcell and their fear that he could react to the challenge to his leader-ship by removing more senior executives. "The only answer we received to that letter was for Phil to act out our worst fears by retaliating against very senior people in the firm. Only then did we make our concerns public," Scott said, according to the FT.
Meanwhile, Purcell has said in a memorandum to staff that the "Sturm und Drang"* generated by the media campaign against him, being orchestrated by the eight former executives, was making it difficult to explain the management shake-up that has brought his leadership to a crisis.
Morgan Stanley made the news again this week when Judge Elizabeth T. Maass of the Florida Circuit Court in Palm Beach, granted part of Mr. Perelman's request for a judgment against Morgan Stanley without trial, saying that Morgan Stanley violated court orders to turn over documents. A trial jury will have to decide if billionaire Ronald Perelman relied on the false numbers during his 1998 acquisition of the Coleman company and is entitled to any damages.
Federal Reserve chairman Alan Greenspan said that oil and natural gas markets were under the heaviest strain in a generation and suggested that prices might remain high for some time, in a speech on energy to the National Petrochemical and Refiners Association Conference, San Antonio, Texas (via satellite). However, he was optimistic about the long-run outlook for energy supplies, and he warned against efforts to "distort" or "stifle" prices set in global markets.
The latest analysis of the soft commodity markets by the Economist Intelligence Unit, suggests that 2005 will be a mixed year. Although beverages and sugar prices are rising, grain and oilseeds prices are weakening. The latter two jointly command a larger weighting within the Economist Intelligence Unit's food, feedstuffs and beverages (FFB) index. As a result, the FFB index will be dragged lower by 6.5% in 2005. The decline will reverse much of the 9% rise in the index of 2004. A further modest fall is forecast for 2006; this time due to losses in the beverages market, sugar and to a lesser extent, oilseeds.
Sony Corporation announced the signing of a global partnership program contract with FIFA (Fédération Internationale de Football Association) this week. Under the new contract, Sony will exercise various rights as an official sponsor of over 40 FIFA events, including the FIFA World Cup due to take place in South Africa in 2010 and South America in 2014. The contract will run from 2007 to 2014 with a contract value (excluding services and product leases) of US$305 million (approximately ¥33.0 billion).
A new report says global economic growth reached 3.8 percent in 2004, with developing countries recording their fastest growth in more than a decade. The World Bank’s annual Global Development Finance 2005 report says much of the momentum came from more rapid growth in the United States and China, along with a pickup in Latin America and Japan and a modest recovery in the European Union. However the report says the global growth momentum has peaked. It warns developing countries may need to make adjustments because of the risks posed by ballooning global imbalances – particularly the United States current account deficit.
In a speech in Washington on Wednesday, Rodrigo de Rato Managing Director of the International Monetary Fund (IMF) said that global growth should remain robust this year. Supportive policies, strengthening corporate balance sheets, and benign financial conditions are contributing to a favorable global environment.
US initial jobless claims fell 19,000 to 334,000 in the week ending April 2nd, from the previous week's revised figure of 353,000, according to the US Labor Department. The 4-week moving average was 336,500, a decrease of 250 from the previous week's revised average of 336,750.
Popular mobile phone handset producer, Nokia announced that it will set up a manufacturing facility for mobile devices at Chennai in India. The manufacturing unit in Chennai will be Nokia's tenth global mobile device production facility. Nokia said it anticipates investing an estimated between US$100 and US$150 million in the India production plant. The company is currently the market leader in mobile devices in India.
China's largest foreign exchange lender, which is planning an IPO, said on Thursday that it was in discussions with foreign banks on a strategic investment. The State-owned Bank of China (BOC) disclosed that it was talking to Germany’s Deutsche Bank AG and Switzerland’s UBS AG, among several others, on a strategic investment.
A federal jury in New York has ordered UBS, Europe's largest bank. to pay $29 million in damages to a former sales executive who sued the bank for sex discrimination.
Following a three-year trial, Laura Zubulake, 44, was awarded $20.1 million in punitive damages plus $9.1 million in compensatory damages after the jury decided that the bank mistreated her because she was a woman and then sacked her after she brought a complaint to the Equal Employment Opportunity Commission.
Internet usage among business travellers is on the up. According to results of a survey released today more than half of business travellers’ use the Internet as their primary means of arranging business travel, as well as using other technology, time saving devices while travelling.
The survey carried out by Accenture, a global management consulting, technology services and outsourcing company questioned more than 450 business travellers in the United Kingdom.
The survey found that:
- 53 per cent of the travellers book their business travel primarily online, compared to 47 per cent who did so in 2003, when Accenture first fielded the survey.
- In contrast, only 27 per cent of respondents reported that their preferred booking method is by telephone with a live agent, down from 41 per cent in 2003.
- Additionally, 46 per cent of respondents say they have used airport kiosks to check in, and almost three-quarters (72 per cent) of those who have used kiosks said they did so largely for their convenience.
It was also reported this week that the US Airline service industry is getting worse in terms of customer service and satisfaction according to a report released this week. Airlines generally arrived later, lost more luggage and caused more consumer complaints in 2004 than they did the year before, according to an annual study of aviation quality compiled from figures from the US federal Bureau of Transportation Statistics.
Only four of the 14 major airlines rated in both 2003 and 2004 improved, according to the report. They were AirTran, Atlantic Southeast, JetBlue and United. Only 78.3 per cent of flights arrived on time, down from 82 per cent in 2003. Complaints about airline service rose 27 per cent last year, a much higher increase than the 3.3 per cent growth in passengers.
Siemens Communications, Inc. (Siemens), announced today that it has acquired leading US Internet protocol television (IPTV) software company Myrio. Siemens has said that the acquisition will increase its commitment to the rapidly growing home entertainment market. Seimens and Myrio combined business will centre on new applications for the television, and the expanding interaction with other devices and media types in the home. These include interactive television with options for calling up movies, personal video recording services, online services, and communication applications such as Multimedia Messaging Service (MMS), Short Messaging Services (SMS) and video telephony.
Warren Buffett, the legendary chairman of Berkshire Hathaway is due to be interviewed on Monday by regulators from the US Securities and Exchange Commission (SEC), the Office of the New York Attorney General, the Department of Justice and the U.S. Attorney. The meeting with the regulators relates to transactions between Berkshire Hathaway’s General Re unit and insurance giant American International Group (AIG), which were used by the latter to fraudulently boost its reported reserves.
