Home > Uncategorized > Business this week: 13th – 19th May 2006

Business this week: 13th – 19th May 2006

Business this week

May 18th 2006
From The Economist print edition

Financial markets had a nervous week. Higher-than-expected inflation numbers in America, released on May 17th, led to expectations that the Federal Reserve would continue raising interest rates. Soaring petrol prices contributed to consumer-price inflation of 0.6% in April. Equities and government bonds fell in turn. The dollar wobbled amid expectations that it may need to fall further because of global economic imbalances. Gold and oil prices tumbled. Metals prices, hit earlier in the week, later recovered. See articleE+

Vivendi rejected an informal bid approach of more than euro40 billion ($51.4 billion) from Sebastian Holdings, a private-equity group. Vivendi denied that an actual approach was made, but it has voiced concerns that a takeover of the company would possibly mean breaking it up.

Xstrata bid C$16.1 billion ($14.5 billion) for Falconbridge, a Canadian mining company, in an effort to thwart a merger between two rivals. The Swiss firm offered C$52.50 a share in cash for the 80% of Falconbridge it does not already own. The bid tops an earlier offer from Inco, another Canadian mining firm. The deal would create one of the world’s biggest mining companies. Analysts predicted that Inco would raise its offer, potentially leading to a takeover battle.

Amid a flurry of speculation about consolidation among financial exchanges, shareholders at Borsa Italiana met in Milan to consider the prospect of going public, a move its chief executive favours. Shareholders at the Spanish markets operator, BME, will consider a similar move on June 5th. Meanwhile, the London Metal Exchange is planning a review that could lead to a change in its ownership structure and, potentially, a future listing. See articleE+

Standard & Poor’s, a rating agency, downgraded NASDAQ, a big American financial exchange, to junk-bond status. The agency cited NASDAQ‘s debt, part of which is due to its 24% stake in the London Stock Exchange.

Some of Europe’s biggest energy groups were raided by EU competition regulators. Brussels is intensifying an antitrust investigation into alleged competition abuses in the electricity and gas industries. Co-ordinated raids were held at more than 20 sites in six countries. The raids targeted offices of e.ON, RWE, Gaz de France, Eni and OMV.

Wal-Mart said its profit rose by 6.3% in the first quarter, driven by the biggest sales gain in two years. The result exceeded analysts’ expectations, with same-store sales rising by 3.8%. But the big retailer’s chief executive, Lee Scott, gave warning that rising petrol prices could affect this quarter’s sales. Wal-Mart’s international sales rose by 23%, but profit and same sales fell at Asda, its supermarket chain.

Target, another big retailer, said first-quarter earnings rose by 12%, to $554m. Despite this, it reported the first decline in profit in the past two years. Home Depot, a big home-improvement retailer, said first-quarter profit rose by 19% from a year earlier. The result failed to meet analysts’ expectations, and Home Depot’s shares fell. See articleE+

The Securities and Exchange Commission said it will not exempt small companies from investor-protection rules in the Sarbanes-Oxley Act. It will, however, postpone implementation for them. The decision was a disappointment for business groups.

Eurotunnel, the Anglo-French group that operates the cross-channel rail tunnel, held talks with creditors and banks about restructuring its ��6.2 billion ($11.7 billion) debt to avoid bankruptcy. In April Eurotunnel said it could not guarantee its survival beyond the end of 2006.

Hewlett-Packard said sales grew by 5%, to $22.6 billion, in its second quarter from a year earlier, meeting most analysts’ projections. The printer and computer maker said operating profit was $1.7 billion, on a general accounting basis. The firm plans to consolidate 85 data centres around the world into six large facilities in America, which it projects will save about $1 billion in costs per year in future.

Economic growth in Africa should reach 5.8% this year, and 5.5% in 2007, according to a report from the OECD. Oil-exporting nations are leading growth in the region. Strong global demand for other raw materials is another factor in the economic growth. But other nations in the region continue to struggle.

Global share prices tumbled. Leading share indices have sunk in America, Britain and Japan. India’s stock index had its biggest drop ever.

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