20 October 2005 07:59 [Source: ICIS news]
A summary of political, economic, trade, business and product news affecting the chemical and related industries.?xml:namespace>
International Economics and Politics
Stock markets turn bearish
The London stock market suffered its worst one-day performance this year on Wednesday, mirroring similar downgrades in the main global markets on varying timescales.
European markets suffered their biggest fall since the 7 July London bombings and Asian stocks continued their longest losing streak for five months. The S&P 500 index has fallen 4% so far this month.
Concerns about rising inflation and higher US interest rates lay behind Wednesday's retreat on the London and Asian markets. The fear is that the Federal Reserve, which has already increased interest rates 11 times since the summer (Q3) of 2004, may have to raise rates well above the current 3.75%, leading to slower global growth and a squeeze on corporate earnings.
Financial Times page 1, 2, 21
Fed must raise rates, says board member
The Federal Reserve needs to continue raising interest rates to keep inflation under control, and has little to gain from a pause in the tightening campaign, an influential Fed policymaker said on Wednesday.
Don Kohn, a member of the Fed's board, said that economic activity and prices would be affected for some time by the hurricane disruption on the Gulf coast, making it difficult to assess underlying trends, but there were no obvious implications from this for monetary policy.
"Pausing or slowing down a rise in policy interest rates would not itself help to reduce uncertainty because the way in which policy might affect spending or inflation is not in question," he told a conference. Kohn said the Fed should stick to its forecast of solid growth and of inflation that would remain in check as the central bank tightened policy further.
Financial Times page 9
US executives turn pessimistic
US company executives have become more pessimistic about domestic economic prospects than business leaders in any other country, according to a McKinsey survey of business confidence.
In September, just 44% of US business leaders held positive views about the economic outlook, compared with 69% in March.
The US result was the weakest in the 18 months the survey has been conducted and showed US business leaders moving from their normal position of optimism about their home economy to relative pessimism.
Financial Times page 10
'Unbundling' - the unseen economic hand
The "unbundling" of the production process across the world is set to have a dramatic effect on the eurozone labour force, competitiveness and political strategies.
The Financial Times looks at the implications for the European economies of a new term it coins for what has become an old one: globalisation of the world economy.
Financial Times page 8
Surprise jump in eurozone industrial output
Eurozone factory output rose 0.8% in August - the biggest increase since April - and rose 2.6% over 12 months, according to seasonally adjusted figures from Eurostat.
The data showed firm growth in industrial activity in France, Italy and Spain, but in Germany output declined by 1.8% over the month, reversing a recent recovery trend.
The figures will strengthen the hand of hawks at the European Central Bank (ECB) who wish to raise interest rates from their current level of 2% to deal with rising inflationary pressures from high oil prices. Comments from Jean-Claude Trichet, the ECB president, that the Bank is "strongly vigilant" to inflationary pressures have cemented the view that it is keen to raise rates sooner than later.
The Times page 54 (Need to Know), 56
Financial Times page 10 (World Economy Watch)
Delay for cuts in German corporate taxes
A cut in the German corporate tax rate, the highest in Europe and third highest in the world, is to be postponed by a year, in a fresh sign that the budget deficit is a top priority for the country's incoming government.
The Social Democrat party (SPD), in meetings with the Christian Democratic Union partner in the "grand coalition" government, will offer to postpone the planned cut from next January until 2007, SPD officials told the Financial Times.
Under the proposal, the cut would become part of a broader reform of Germany's complex corporate taxation, which includes a mixture of federal and local levies and discriminates between incorporated enterprises and one-person businesses.
Separately, Germany's recovery from the oil shock will be sluggish, according to the country's six leading economic research institutes. In their autumn (Q4) survey, the institutes revised their growth forecasts for 2006 from 1.5% to 1.2%. They expect the German economy to grow 0.8% this year.
Financial Times page 7, 11
UK rates to remain on hold
The Bank of England's monetary policy committee (MPC) voted 9-0 to keep interest rates on hold at 4.5% at its October meeting, the minutes showed.
Analysts said that the minutes weakened the chances that rates would fall in November as the committee did not discuss a cut.
Separately, the average forecast by independent economists for UK growth this year dropped below 2% for the first time. The consensus view among 41 institutions surveyed by the Treasury this month is for growth of just 1.8%, down from an average projection of 2% reported in September.
The Times page 54 (Need to Know), 56
Financial Times page 1, 2, 10 (World Economy Watch)
The Guardian page 25
UK age laws mean higher costs
Age discrimination legislation set to come into force in Britain next October could mean companies are saddled with big increases in costs as older workers insist on remaining at work until the official retirement age of 65.
Concerns have been expressed by the representative bodies of the traditional professions - law and accountancy. The Confederation of British Industry (CBI), the employers' body, has urged that any changes should be cost neutral. The British Chambers of Commerce said businesses would be extremely concerned that they could be landed with unexpected costs.
Financial Times page 4
Russia reports 6.6% growth
Russia's economy ministry reported that gross domestic product (GDP) grew by 5.9% in the first nine months of this year compared with the same period in 2004. GDP in September was 6.6% higher than in September 2004.
Financial Times page 10 (World Economy Watch)
Mandelson issues warning on support
Peter Mandelson, European Union (EU) trade commissioner, has warned large trading countries that EU member states will not back him in trade talks unless the focus shifts away from agriculture.
As the core negotiating group in the Doha round of world trade talks - including the EU, US, Brazil, India and Australia - met in Geneva on Wednesday, Mandelson said his negotiating authority was under pressure. In a letter to ministers of the so-called "five interested parties" he said farm talks would stall without better offers of liberalising trade in goods and services. His warning came as France voiced its strong opposition to Mandelson's offer to cut farm tariffs and subsidies in the Doha round, despite EU states backing the trade commissioner earlier in the week.
Financial Times page 10
Rewards on offer for green energy policies
Companies investing in environmentally sound energy projects in developing countries can expect to start reaping rewards under the Kyoto protocol, as the first "carbon credits" are set to be issued today (Thursday).
The development will boost the supporters of the United Nations-brokered treaty on climate change who are facing tough negotiations at a meeting to discuss its future in Montreal, Canada next month.
The US, which has not ratified the treaty, wants to block discussions on its next phase after the current provisions expire in 2012, while developing countries want to avoid any obligation to reduce their greenhouse gas emissions after that date.
Klaus Topfer, executive director of the UN environment programme, acknowledged that the meeting would be difficult but added: "Luckily, we can now talk about negotiations beyond Kyoto, not instead of Kyoto. That is very important."
Financial Times page 10
UK seeks 120m flu doses
The UK government is asking drugs manufacturers to tender for a "sleeping contract" to supply 120m does of pandemic influenza vaccine.
Sir Liam Donaldson, chief medical officer, announced the invitation to tender on Wednesday, at the same time as he published the Department of Health updated pandemic influenza contingency plan.
The announcement came as concerns about bird flu in Asia and Europe continued to spread with officials identifying further outbreaks of the deadly disease and stepping up quarantine and culling measures in Russia, north China and Macedonia.
Separately, Roche, the Swiss pharmaceutical group, is limiting supplies to chemists of Tamiflu, its antiviral flu drug, in order to meet demands from government for stockpiles as fears grow of a possible pandemic.
The British Association of Pharmaceutical Wholesalers, the trade body that handles most drug distribution, said Roche had stopped supplying it over the past three months, giving priority to pandemic stockpile requests from government.
The Times page 37
The Independent page 12
Financial Times page 5
The Guardian page 9
Animal research opens its secrets
UK universities are becoming more open about their animal research programmes, according to a survey by the Financial Times.
It found that in response to increased support from the government and police, research institutions are abandoning "collective silence" in the face of animal rights activism.
The newspaper evidences the survey with reports on site visits to GlaxoSmithKline (GSK), the UK drugsmaker, and Huntingdon Life Sciences (HLS). The primary business of HLS is carrying out animal research and it has borne the brunt of animal rights activism.
Financial Times page 3
Company News and Results
Roche boosts Q3 sales by 17%
Third-quarter sales at Roche Holdings, the Swiss drugs maker, rose 17% to SF8.8bn ($11.4bn/Euro9.4bn), beating expectations, thanks to sales of cancer drugs and demand for Tamiflu, its flu treatment.
Tamiflu sales more than doubled in the third-quarter to SF279m, and analysts said the "Tamiflu bubble" could last more than two years. But the flu treatment remains a relatively small contributor to Roche's overall sales. In total, sales of all Roche's drugs were up 17% in the third quarter, with new cancer drugs contributing particularly strongly.
The Times page 54 (Need to Know), 62
The Independent page 62
Financial Times 29
The Daily Telegraph page B2 (Business Section)
The Guardian page 21
Abbott profits drop $100m plus
Abbot Laboratories saw its third-quarter profits fall to $680.7m (Euro564m) from $804.1m last time as a number of charges more than offset the increased sales of its prescription drugs and medical devices.
The Times page 54 (Need to Know)
Akzo warns of job cuts to protect margins
Akzo Nobel, the Dutch paint, chemicals and drugs group, has warned that it will have to make job cuts to maintain margins hit by higher raw material costs.
The group cites a 9% rise in raw material costs at its paints unit - the world's largest - to support the warning. Akzo employs over 60,000 people, nearly half at the paint division.
The company exceeded expectations although operating margins fell from nearly 11% to 9.5% in the third quarter, on earnings before interest and tax of Euro315m ($380m), 7% lower than a year ago. Sales grew 6% to Euro3.3bn.
Akzo reiterated acquisition plans in coatings, the largest of its four divisions, and the sale of non-core chemicals units. Growth came in emerging markets, notably China where the company hopes it can capitalise on increasing consumer affluence in areas such as car refinishes and decorative paints.
Financial Times page 29
Elementis offloads rubber business
Elementis, the world's biggest chromium chemicals producer, has agreed to sell its speciality rubber business to Navis Capital Partners, the private equity group, for £17.6m ($31m/Euro25.6m).
Proceeds from the sale will be used to pay £7m into Elementis' pension fund, with the remaining cash paying down net debt. The company, which is undergoing a strategic review of its business, is expected to book a £7m loss on the sale.
Financial Times page 26 (Small Cap Briefing)
We're worth it: Guidant tells J&J
Guidant was forced to defend its reputation and business on Wednesday, responding to Johnson & Johnson's (J&J) threat of paying a lower price for the drugmaker's planned $25.4bn (Euro21bn) acquisition of the US device maker.
Questions have mounted on whether J&J would renegotiate or change its deal following Guidant's recalls this summer (Q3) of up to 100,000 pacemakers and defribillators.
Financial Times page 31
(Some of the stories may not appear in all editions of the relevant newspapers.)
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