reuters.com Mon March 10, 2003 01:18 PM ET By Hugh Bronstein

NEW YORK, March 10 (Reuters) - Emerging market bond prices fell on Monday as investors grew jittery about the threat of a U.S.-led war against Iraq, but analysts said the market was holding onto an impressive chunk of its recent gains despite the geopolitical angst.

"It's surprising that we're not weaker than we are," one trader said. "Emerging markets continue to be resilient."

Brazilian bonds lost more than one percentage point, according to total returns measured by JP Morgan's Emerging Markets Bond Index Plus. But the dip still left Brazilian total returns more than 15 percent higher so far this year.

The index as a whole fell 0.32 percent, after rising more than 7 percent since Jan. 1.

Following an early-year rally driven in part by Wall Street's approval of the policies articulated by Brazil's new government, many analysts expected investors to flee risky emerging market assets as the United States set the stage for a war against Iraq that could depress global economic activity.

"But that appears to have been offset by inflows into the asset class," said Matt Ryan, an emerging markets portfolio Manager at MFS Investment Management, based in Boston.

As global stock markets wobble, he added, "We've seen allocations from equities into fixed income, and within fixed income there's a demand for the higher yields that are offered by emerging market bonds."

Emerging market bond spreads widened by five basis points to 695 over U.S. Treasuries, according to the EMBI-Plus. Brazil's portion of the index widened 20 basis points to 1139.

Wider spreads reflect the perception of increased risk as measured against safe-haven U.S. Treasury bonds. Yet Brazil remained much tighter, and much more popular with investors, than at the beginning of the year, when the country's spreads hovered in the range of 1450 basis points over Treasuries.

Despite the fact that Brazilian bonds have already rallied strongly this year and the risk that anticipated structural reforms may take a long time to implement, Latin America's biggest country remained a logical spot for new emerging market investors to put money, Ryan said.

"If you think Brazil's fundamentals are reasonably constructive, it has a good risk/reward so long as the government continues to say the right things," Ryan said.

In addition to pursuing long-elusive social security and tax reforms, Brazil's new government wooed Wall Street by increasing its primary surplus target to 4.25 percent of gross domestic product from the 3.75 percent set by the previous government.

While Brazilian total returns, which include price movements and accrued interest, have risen 3 percent so far this month, troubled Latin American countries like Ecuador and Venezuela have lagged.

In the wake of a national strike, organized by a coalition of opposition groups bent on forcing leftist President Hugo Chavez from office, Wall Street is worried about the governability of Venezuela.

And while investors like the policies articulated by Ecuador's new president, Lucio Gutierrez, implementation of those policies depends on the country's fractious Congress.

As investors search for higher-yielding bonds, such Latin American trouble spots tend to help make Brazil look good.

"If Brazil was at 800 (basis points) over, you could say the market is pricing in too many positive expectations," the trader said. "So if you are a portfolio manager with new money to invest, where are you going to put it? You are not going to put it in Venezuela or Ecuador."

Russia, which has seen its bonds clock total returns of more than 10.3 percent so far this year after a dramatic rally in 2002, "looks expensive," the trader added.

"Mexico is OK, but the upside in Mexico is not anywhere near what it is in Brazil. Plus Brazil has liquidity, so it's a logical candidate for money coming into the market," the trader said.

reuters.com Mon March 10, 2003 01:13 PM ET

NEW YORK (Reuters) - NYMEX crude oil futures trimmed losses midday on Monday on news that Baghdad has placed explosives at oil fields in northern Iraq to prevent them from being taken over if the U.S. attacks, traders said.

The market earlier retreated as the United States faced an uphill battle to gain support for a new U.N. resolution authorizing war against Iraq.

At 12:45 EST, NYMEX April crude CLJ3 traded 18 cents lower at $37.60 a barrel, as it traded in a tight range from $37.30 to $37.75.

"The news of the explosives placed in Iraq oil fields is taking us further away from the day's lows," said a NYMEX floor trader.

Iraq has placed explosives at the Kirkuk oil fields in northern Iraq so they won't come under U.S. control in the event of a U.S. invasion, a U.S. official told Reuters on Monday, adding the Iraqi action took place "recently."

Traders were also watching OPEC, ahead of a formal meeting on Tuesday in Vienna, as the group was split over plans to suspend output limits should the U.S. strike Iraq.

News that Venezuela's refined oil products output could return to full capacity "within 10 days" according to Energy Minister Rafael Ramirez, also factored into the day's prices, they said.

"Taken together the early news in the oil front today was bearish, but the war could dislodge a significantly large amount of Iraqi barrels... and it is uncertain whether OPEC can fill that up," said a NYMEX floor trader.

An early Monday comment from U.S. Energy Secretary Abraham Spencer that the U.S. would act "instantaneously" to release oil from strategic reserves, if national supplies were threatened, had been digested, traders said.

"In any case, Abraham said any decision to release would only made in case of 'severe disruption' in supply, which repeats his position from last week," one trader said.

Despite a new Russian veto threat, President Bush worked the phones to foreign leaders on Monday in an effort to win support in the U.N. Security Council for a resolution authorizing war against Iraq. A vote could come as early as Tuesday.

Bush needs nine votes out of the 15-member U.N. Security Council to win support for the resolution that would give Iraq a final deadline of March 17 to disarm or face military action.

But veto-holders France, Russia and China have said they want more U.N. arms inspections, rather than war at this time.

Britain said on Monday it may modify the draft resolution in an attempt to gain a critical mass of support on the council. Prime Minister Tony Blair's official spokesman suggested that the deadline set in an amended resolution could be moved, although not by much.

The United States and Britain have amassed about 300,000 troops in the Gulf, along with dozens of warships and nearly 600 strike aircraft, in preparation for an attack.

In Vienna, Gulf OPEC powers Saudi Arabia and Kuwait are hoping to get backing at Tuesday's meeting to set aside production quotas if war stops Iraqi exports, currently at about 1.7 million barrels per day (bpd).

Iran said it opposed a bid by Western-friendly OPEC states for a policy that Tehran says implies support for a U.S. attack, by controlling oil prices.

NYMEX April heating oil HOJ3 was up 1.25 cents at $1.1210 a gallon, trading $1.0930 to $1.130.

Temperatures in the heating oil-dependent U.S. Northeast will be 8-15 degrees below normal on Monday, gradually working to 2-4 degrees below normal by Friday, private forecaster Meteorlogix said. It said readings in the next six to 10 days after that would be near normal.

NYMEX April gasoline HUH3 traded 0.92 cent lower at $1.1475 a gallon, moving $1.1270 to $1.1550.

www.unstrung.com 03.10.03

ROME -- The Board of Directors of TIM (Telecom Italia Group), chaired by the Chief Executive Officer Marco De Benedetti, has today examined the results for fiscal year 2002.

TIM Group

It should be noted that the income and financial aggregate values of the former company Blu S.p.A. (merged by incorporation into TIM S.p.A in January 2002 for accounting and fiscal purposes) are only included in the consolidated results of the TIM Group as of the date of acquisition (October 7, 2002).

In the 2002 fiscal year the consolidated revenues of the TIM Group amounted to euro 10,867 million representing a 6% growth with respect to the 2001 fiscal year (euro 10,250 million). This growth actually reached 11.9% if cleaned off of the effect of exchange rate devaluations in 2002 mainly in Brazil and Venezuela.

Gross operating profit amounted to euro 5,039 million, representing a 5.9% increase with respect to the preceding fiscal year (euro 4,760 million). Net of the foregoing exchange rates devaluation, the increase in the gross operating profit stands at 8.6%. The gross operating profit/revenues ratio, at 46.4%, is in line with the figure recorded in 2001.

Operating income amounting to euro 3,358 million grew by 7.1% compared to the 2001 fiscal year (euro 3,136 million). The gross operating profit/revenues ratio has improved to 30.9% against 30.6% recorded for the 2001 fiscal year.

Consolidated net income pertaining to the parent company TIM amounted to euro 1,165 million and recorded a 22.6% increase with respect to the 2001 fiscal year (euro 950 million). This result reflects non-recurrent earnings for euro 1,182 million relative to extraordinary capital gains produced from the disposal of minority shareholdings in the operators Bouygues Telecom, Mobilkom Austria and Auna, mainly for tax benefits equal to euro 337 million deriving from prepaid taxes and the tax deductibility of the losses posted by the former Blu S.p.A. in the fiscal year 2002 Non-recurring charges net of the relative tax benefits, amount to euro 1,424 million of which approximately euro 1,410 million are due to the write-off of the balance sheet value and allocations to provisions for risks and charges for the associate company Aria - IS TIM while the remaining amount is ascribed to the write-down of Digitel Venezuela, Maxitel Brasil and other adjustments.

Comparing the 2002 fiscal year results before extraordinaries and taxes to the corresponding result posted in 2001, an improvement of euro 483 million (+19.3%) can be observed.

TIM Group's investments amounted to euro 2,359 million with respect to euro 5,154 million for the 2001 fiscal year. The 2001 results reflected significant investments made for the acquisition of licences by foreign subsidiaries. In the 2002 fiscal year investments mainly referred to technology and improvements to the network; industrial investments amounted to euro 1,715 million while financial investments and investments in goodwill amounted to euro 644 million.

Operating free cash flow (Operating income+Amortization/Depreciation- Industrial Investments- Variations in working capital), at euro 2,932 million, has shown an improvement of euro 639 million with respect to the 2001 fiscal year as a result of the increase in operating income (+7.1%) and a reduction in industrial investments made in 2002 with respect to 2001. Net borrowings amounted to euro 1,922 million (euro 1,532 as of 31.12.2001) following the payment dividends for euro 3,617 million, inclusive of the anticipated payment made in December 2002. The number of mobile lines of the TIM Group stood at about 39.1 million representing a 12.2% increase on a like for like comparison with December 31, 2001 (34.9 million) excluding the mobile lines of Bouygues Télécom, the Mobilkom Austria Group and Amena. (Auna's subsidiary mobile operator).

The TIM Group's personnel amounts to 18,702 units, an increase of 1,981 units with respect to December 31, 2001.

TIM S.p.A.

It should be noted that the results posted in the financial statements of TIM S.p.A.. .f.or the 2002 fiscal year include, in conformity to law, the income and financial results of the entire 2002 fiscal year of the former company Blu S.p.A..

In the 2002 fiscal year revenues stood at euro 8,915 million (euro 9,022 million including the contribution of the former Blu S.p.A.), compared to euro 8,357 million posted in the 2001 fiscal year, representing a 6.7% growth. Value-added service (VAS) revenues amounting to euro 752 million, are 41% higher than in 2001.

ARPU (Average Revenue per User)in 2002 stood at euro 28, an increase of 1% with respect to the same indicator in 2001.

Gross operating profit reached euro 4,529 million (euro 4,404 million considering the contribution of the former Blu SpA) representing a 7.2% growth with respect to the preceding year (euro 4,225 million). The gross operating profit/ revenues ratio stands at 50.8%, (50.6% in 2001).

Operating income amounted to euro 3,323 million (euro 3,153 million including the contribution of the former Blu S.p.A.) representing a 2.8% increase (euro 3,231 million in 2001), while as a ratio to revenues it reached 37.3% (38.7% in 2001).

These results are net of the fiscal amortisation of the UMTS licence, which began in January 2002 (euro 121 million).

Net income stated in the statutory financial statements amounted to euro 264 million (euro 1,907 million in 2001) after deduction of non-recurrent charges for euro 1,733 million, net of the relative tax benefits. Such charges mainly refer to the write-downs of the subsidiary TIM International N.V. and to the allocations to provisions for risks and charges made in respect of the associate company Aria IS-TIM.

The net income reflects tax benefits from the incorporation of the former Blu SpA relative to the use of prepaid taxes and to the deductibility of carried forward losses from preceding years for a net gain of euro 283 million in 2002 statutory accounts.

Investments in the period (net of variations in fixed assets following the incorporation of former Blu S.p.A.'s balance sheet totalled euro 1,842 million, of which euro 1,065 million for industrial investments and euro 777 million for financial investments in subsidiaries.

Net borrowings as of 31.12.2002, net of the effects of the former Blu S.p.A. amounted to euro 1,492 million. TIM, confirms its position as domestic market leader with about 25.3 million lines as of December 31, 2002 (+5.7% with respect to December 31, 2001)

TIM S.p.A.'s personnel as of December 31, 2002 following the incorporation of former Blu S.p.A. totalled 10,261 units

Telecom Italia Mobile SpA

sg.biz.yahoo.com Tuesday March 11, 1:25 AM By Fred Pals Of DOW JONES NEWSWIRES

VIENNA (Dow Jones)--How much oil is Venezuela pumping? And how much spare capacity does it have?

OPEC ministers want to know, because the numbers could be essential in preparing any contingency plan for dealing with a supply disruption when the war in Iraq starts.

Delegates from the members states of the Organization of Petroleum Exporting Countries are, of course, hearing numbers.

Venezuela's Oil Minister Rafael Ramirez publicly says that output of state-owned Petroleos de Venezuela (E.PVZ), or PdVSA, is at 2.65 million barrels a day, and that Venezuela will reach its OPEC output target of 2.819 million b/d by the end of the month. In the event of an Iraq war, the country could push output to around 3.5 million b/d by sometime in April.

But given the crippling impact of the two-month oil strike on PdVSA, Ramirez's figures are hardly credible, some OPEC sources say. During the strike, PdVSA's production dropped to as low as 150,000 b/d from the usual level of 3 million b/d as key staff walked off their jobs. A total of around 35,000 workers abandoned offices and oil fields in an effort to force Venezuela's President Hugo Chavez to resign.

"It's hard to believe Venezuela got back to those levels that soon and that they will hit their OPEC target by the end of this month," one senior OPEC delegate said. "It is just too good to be true. We estimate it stands at around 1.5 million b/d and they may get to 2 million within a month or so."

Spare Capacity Key To OPEC War Response

Although OPEC ministers are expected to leave the formal output ceiling of 24.5 million b/d unchanged at their meeting here Tuesday, they are eager to deliver the message that they'll pump as much as is needed to cool sizzling world oil prices.

But among market watchers there are serious doubts over the amount of spare capacity OPEC can call on if Iraqi exports - in excess of 1.7 million b/d - go offline. And if the war drags on or escalates, further supply disruption in the region is likely.

Only Saudi Arabia is seen capable of adding significant oil, with a little more than 1 million b/d of spare capacity. But that would leave the OPEC kingpin producing at full throttle, and producers prefer to leave at least 10% of total capacity idle in order to continue maintenance operations.

For Venezuela's part, secondary sources see current production at 1.8 million b/d, while average production in March is seen at 1.7 million b/d. Output level over the month of February stood at around 1.5 million b/d and will reach 1.8 million b/d, according to the U.S. Energy Information Administration department. The International Energy Agency, or IEA, has estimated a permanent loss in potential output capacity of 400,000 b/d.

Most analysts agree Venezuela won't get back to its pre-strike level of 3 million b/d anytime soon because of the loss of human capital and the multibillion dollar loss in oil revenue.

"It's difficult to determine the exact production level, but I'm not buying production is over two million b/d given the impact the strike had on PdVSA," Jan Stuart, energy analyst at ABN AMRO in New York, said. "The only thing OPEC can do in this matter is just send out the message that they will do anything they can to ease prices."

Analysts say PdVSA will struggle to reach the 2 million b/d production level. After focusing on fields that don't require much added pressure to get the oil flowing, PdVSA will face difficulties as mature oil fields are more labor- and capital-intensive.

While it's not clear whether Ramirez holds up the 2.65 b/d production level in private bilaterals with his OPEC colleagues, Venezuela isn't likely to give its real and potential output levels as market share needs to be guaranteed, even if it is only on paper. During January's oil output agreement - in the midst of Venezuela's crisis - Ramirez and PdVSA president Ali Rodriguez fought hard to get an OPEC guarantee its market share would be respected.

Meanwhile, even though the current emphasis is on the possible lack of spare capacity among OPEC members in the case of a severe disruption, fears of a sharp drop in oil prices are also embedded in OPEC minds. And that could a create a different set of problems for Chavez.

By the time Venezuela comes close to its 2002 output level of 2.5 million b/d, the Iraqi war may be over and the joy of reaping additional oil revenue from high prices could be gone with it.

OPEC members might then be forced to rein in production to avoid a serious price crash - and that could leave Venezuela's fragile fiscal state of affairs even more vulnerable.

The economy is seen contracting by 15%-20% while the fiscal deficit is seen 8%-10% of gross domestic product. Venezuela's oil revenues account for half the government's income, 80% of exports and a third of GDP.

-By Fred Pals, Dow Jones Newswires; 0043-664-544-6846; fred.pals@dowjones.com

sg.biz.yahoo.com Tuesday March 11, 1:24 AM

CARACAS -(Dow Jones)- Venezuelan retailers marked up some essential goods by as much as 40% after the government published a decree Friday lifting price controls recently imposed on them, local daily El Nacional reported Monday.

The goods, including imported pasta and cheeses, were on a list of around 200 products and services the government last month set prices for in a bid to stem soaring inflation.

Retail chamber officials couldn't be reached for further comment.

Annualized inflation is currently around 40%, as the bolivar's roughly 70% depreciation against the dollar over the last 15 months has pushed prices higher for imports, which make up about 60% of consumption.

While the official rate for the bolivar is VEB1598 to the dollar, the currency's real value has weakened to around VEB2500 per dollar in a private secondary market.

El Nacional Web site: www.el-nacional.com

-By Jehan Senaratna, Dow Jones Newswires; 58212-564-1339; jehan.senaratna@dowjones.com