Home > Uncategorized > Business this week: 19th – 25th August 2006

Business this week: 19th – 25th August 2006

The pace of existing home sales in America fell by 4.1% in July, to its lowest level since January 2004. The drop deepened worries about the overall economy. Increases in house prices also slowed. The median price for existing homes was $230,000 in July, up 0.9% from a year earlier and the slowest annual gain in more than a decade. Shares fell on the news, with housebuilders particularly hard hit. See articleE+

An American central-bank official suggested that interest rates may rise further. Michael Moskow, president of the Federal Reserve Bank of Chicago, said further increases may be needed to slow inflation. There have been 17 increases in interest rates in the past two years.

BHP Billiton, the world’s largest mining company, said attributable profit in the year ended June 30th rose 63%, to $10.45 billion. Although the firm plans a $3 billion share buyback, its shares fell on its concerns about rising wages and equipment costs. The results, spurred by strong prices for metals, come amid a strike at the Escondida copper mine in Chile, in which BHP is the biggest shareholder.

Banca Intesa and Sanpaolo IMI, Italy’s second- and third-largest banks, said they had proposed talks on a possible merger. Such a deal, if completed, would create a stronger rival to UniCredit, Italy’s largest bank. Intesa and Sanpaolo said they would hold board meetings by the weekend to discuss a merger. Before the announcements, their market capitalisations were euro28.1 billion ($35.9 billion) and euro23.3 billion, respectively. The Bank of Italy has encouraged consolidation in the banking sector.

Applications for corporate mergers in Europe are being filed at a record rate, European Commission statistics show. If the pace continues, merger filings this year will exceed those in 2000, the highest total to date.

New worries were raised about the proposed merger of Gaz de France and Suez. European officials are said to have concerns about their dominant positions in the gas and electricity markets of France and Belgium. See articleE+

VNU, a Dutch media company bought earlier this year by a group of private-equity firms, recruited David Calhoun as its chairman and chief executive. The veteran of General Electric was thought to have been offered compensation of at least $100m, which is double what he received at GE.

Prosecutors struck a deal with Frank Quattrone, a once-high-flying banker in Silicon Valley, to drop charges against him. Mr Quattrone, who has denied wrongdoing and will not face a fine, said he would resume his career as soon as possible.

Felix Rohatyn, a prominent figure in the financial world and a former American ambassador to France, will join Lehman Brothers as a senior adviser to the chairman and chief executive. See articleE+

Oil workers in Nigeria threatened to pull out of the Niger Delta because they fear for their safety, after a string of kidnappings and attacks. A union vote has been called for August 30th. Disruptions in oil supply from Nigeria have helped to push up oil prices.

Apple Computer will pay Creative Technology, a Singapore firm, $100m to settle a patent dispute over the iPod digital music-player.

China raised a benchmark interest rate in an effort to slow a boom in credit and investment. The People’s Bank of China raised banks’ one-year deposit and lending rates by 0.27 percentage points, the central bank’s second such move in the past four months.

Weyerhaeuser will merge its copier-paper business with Domtar, a Canadian firm. The $3.3 billion transaction is the latest restructuring in the paper industry. Under the deal, Weyerhaeuser will receive $1.35 billion in cash.

Net profit at Nestl��, the world’s biggest food company, rose by 11.4% in the first half, to SFr4.2 billion ($3.3 billion) on sales of SFr47 billion. The result, which surpassed many analysts’ predictions, was partly achieved through hedging and price increases to offset higher costs in energy and commodity inputs.

Confidence among German investors and financial analysts fell to a five-year low in August. A survey by ZEW, an economic-research centre, showed confidence at the lowest point since June 2001 on worries about higher taxes and higher borrowing costs. But a survey of business sentiment by Ifo, a research institute, showed that confidence did not fall as much as expected. The euro rose on the news.

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