www.japantimes.co.jp

Finance ministers and central bankers from the Group of Seven industrialized countries held one of their regular meetings last weekend in Paris. Two days of discussions produced a statement promising efforts to stabilize and stimulate their economies and a pledge to convene again in the event of an emergency. The European Central Bank indicated that it might be ready to provide additional stimulus, but this message of reassurance was undercut by the representatives' unwillingness to use the words "war" or "Iraq," and their failure to come up with a concrete program of cooperation in the event that fighting breaks out.

The G-7 communique said that member-states were "confident in the underlying strength of our economies," but cautioned that "geopolitical uncertainties" loomed over the horizon. That is banker-speak for war, and while the prospect is unpleasant, it looks increasingly probable. Their reluctance to say as much is not encouraging.

Economists are already factoring in the impact of war. The Organization of Economic Cooperation and Development said the world's 30 largest economies should grow 2.2 percent in 2003, an increase of 0.7 percentage points over last year, but a significant downward revision of last June's forecast of 3-percent growth. The International Monetary Fund worries that war could cut global growth in half, from 3 percent in 2002 to 1.5 percent in 2003. Without a conflict, the IMF believes growth could reach 3.5 percent (which is less than the 3.7 percent forecast offered last year). A recent study by an Australian think tank argues that protracted war with Iraq could cut 2 percent from global growth by 2005 and cost major economies up to $3.6 trillion by 2010. Even a short war could cut world gross domestic product 1 percent a year over the next few years; in the seven years to 2010, the estimated loss would be $491 billion for the United States, $122 billion for Japan and $157 billion for Europe.

War is not the only concern. Oil prices are climbing. Brent crude averaged $30 a barrel last month, the highest price since the fall of 2000. Each dollar increase reduces economic growth in East Asia (with the exception of Japan) by 0.1 percent directly and another 0.1 percent through a drop in export demand. Even though the war premium is estimated to add $5-6 a barrel, the real pressure on demand is being exerted by Asia's economic recovery and slumping oil production in Venezuela.

Alarms were also sounded over the U.S. tax cut, which could reach $695 billion and threatens the U.S. with substantial fiscal and trade deficits well into the future. These shortfalls will be difficult to sustain and their impact will be felt well beyond the U.S. itself. Finally, there is ongoing concern about corporate performance. Revelations of the past year have eroded confidence in international accounting; to no one's surprise, stock markets worldwide have been declining since 2000, and another year like the last one would represent the worst performance since the Great Depression.

The G-7 representatives declared that they are "prepared to respond as appropriate" if the economic outlook weakens. While the statement listed various reforms that could strengthen growth, there is "no hidden plan," as French Finance Minister Francis Mer confessed. The clearest indication came from ECB President Wim Duisenberg, who said he was prepared to act if required. The ECB has come under increasing pressure to cut interest rates to stimulate euro-zone economies. The U.S. has aggressively cut its own interest rates, and Japanese rates have hovered around zero for several years -- but have had little impact on the nation's economic prospects.

Europe's room to take action is constrained by agreements that strictly limit budget deficits. There is no indication that European nations are willing to entertain the kind of large fiscal stimulus measures that the U.S. has implemented. Some governments, however, like Italy's, have engaged in creative accounting to make the limits, and might be willing to do more to "shoulder the burden," cloaking political weakness in the language of shared responsibility.

As the world's two largest economies, Japan and the U.S. have a special duty to work together. U.S. Treasury Secretary John Snow told his Japanese counterpart, Mr. Masajuro Shiokawa, that "the world economy will not improve unless (the U.S.) joins hands with Japan." That, too, sounds nice, but it is essentially meaningless until either government takes substantive action. The past -- and last week's meeting -- gives little reason for optimism.

The Japan Times: Feb. 25, 2003

cbs.marketwatch.com

By Emily Church, CBS.MarketWatch.com Last Update: 8:42 AM ET Feb. 24, 2003

Bulls were largely sidelined in early trading with market tracker stocks unchanged as implosion in Royal Ahold (AHO: news, chart, profile) on earnings overstatement brought down European stocks. Against the grain, General Electric (GE: news, chart, profile) rose on positive mention in Barron's over the weekend and home retailer Lowe's Companies (LOW: news, chart, profile) rose on a bullish outlook for growth. The dollar held the euro below $1.08. Market expectations are growing for an interest rate cut in Europe in March to prompt flagging growth in the eurozone following comments from the European Central Bank chief in an otherwise disappointing meeting of the G7 nations in Paris. Brent crude rose 20 cents to $32.54 in London.

European markets were lower after the Ahold warning. U.K. stocks were flat as advertising giant WPP (WPPGY: news, chart, profile) stuck to its cautious outlook for 2003 and buyout firm KKR pulled out of the running for supermarket Safeway (UK:SFW: news, chart, profile). Tokyo stocks rose on expectations for a new head of the Bank of Japan.

SG Cowen raised Finnish handset maker Nokia (NOK: news, chart, profile) to outperform from market perform. Bear Stearns downgraded the truckload sector to "market weight" from "market overweight," citing short-term fuel, war and weather concerns.

See Internet's most complete source for analyst comments

Breaking News - See Market Pulse for breaking news

• AOL Time Warner (AOL: news, chart, profile) is in preliminary talks to sell a majority stake in its Warner Music unit to Britain's EMI (UK:EMI: news, chart, profile) Group in a deal that could bring in $3-$4 billion to the media and entertainment giant, the Wall Street Journal reported, citing people familiar with the matter.
• Devon Energy (DVN: news, chart, profile) announced an agreement to buy Ocean Energy (OEI: news, chart, profile) for $3.5 billion in stock, or $5.3 billion including assumed debt and other obligations. Under terms of the agreement, each Ocean Energy share will be exchanged for 0.414 shares of Devon. Based on Friday's closing prices, the deal values Ocean shares at $19.97 each, representing a 3.6 percent premium. Devon's stock closed Friday up $1.75 at $48.23
• Lowe's Companies reported fiscal fourth-quarter net earnings of $319.4 million, or 40 cents a share, up from 28 cents a share in the year-earlier period, and well-above the average analyst estimate compiled by Multex of 33 cents a share. Revenue increased 17 percent to $6.1 billion, in line with analyst expectations. "In 2002, amidst a backdrop of economic uncertainty, Americans continued to invest in their largest asset, their homes," said Robert Tillman, the home improvement retailer's chairman. Looking ahead, the company expects to report earnings of $2.16 to $2.20 for the current fiscal year, above analyst projections of $2.11.
• Global semiconductor sales are expected to grow 8.9 percent in 2003 to $167 billion, estimates Gartner Dataquest, as a return of information technology spending in the second half of the year is expected to offset the slowdown that began at the end of 2002. The market research firm said the cell phone handset segment will continue to be the major driver for chip sales, but added that a healthier PC market was needed to ensure growth.
• U.K.-listed metals-mining group Bhp Billiton (BHP: news, chart, profile) said that prices continued to show some improvement in the opening weeks of calendar 2003. "Prices for oil have risen as a result of the ongoing uncertainty in the Middle East and Venezuela, while steel making raw materials are well positioned to benefit from strong North East Asian and, in particular, Chinese demand."
• American Tower (AMT: news, chart, profile) reported a fourth quarter net loss of $52.4 million, or 27 cents a share, less than the 77 cents a share it lost in the year-earlier period. Excluding non-recurring items and the effect of a change in accounting, losses were 24 cents a share.
• United Rentals (URI: news, chart, profile) reported fourth-quarter net income of $8.2 million, or 9 cents per share, compared to $32.2 million, or 34 cents per share, in the year-ago period. The latest EPS figure fell short of the forecast of 11 cents per share in a survey of analysts by Thomson First Call. The company cited a 2.7 percent drop in same-store rental revenue.
• U.K. Internet online bank Egg (UK:EGG: news, chart, profile) posted a 16.6 million pound loss before tax in 2002, driven by a loss in France, but results show that its U.K. operations swung to profits for the year. It said it added 610,000 net new customers in the year. Looking ahead, it said: "We have been exploring potential entry strategies for the U.S. market and have embarked on some qualitative and quantitative consumer research in the first quarter of 2003 to establish the scale of the opportunity available."
• Buyout firm Kohlberg Kravis Roberts & Co has withdrawn from the race to buy U.K. grocer Safeway. "KKR has decided for the time being not to progress its potential offer for Safeway any further, but will continue to monitor the situation and keep its position under review," KKR said in a statement. Safeway shares fell 1.9 percent, and rival suitors Wm Morrison, Tesco and Sainsbury were also trading lower

Before the Bell is a daily e-mailed newsletter. You can subscribe to this free email service here. Emily Church is London bureau chief of CBS.MarketWatch.com.

 www.nationalpost.com Peter Morton Financial Post Monday, February 24, 2003

WASHINGTON - As they did just before the last Iraq war a decade ago, the world's leading finance ministers have decided to sit on the sidelines while vowing to step in if the global economy takes a turn for the worst after any conflict is over.

Finance ministers from the G7 group of countries, including Canada, wrapped up their weekend meeting in Paris with no co-ordinated plan to steer the economy through the turmoil that may follow a U.S.-led attack against Saddam Hussein.

"We have no hidden plan," said Francis Mer, the French Finance Minister. "We decided that it was useless to go into details on the possible scenarios."

"Each G7 nation must take its own steps -- appropriate to its own respective sets of conditions -- to spur growth," John Snow, the U.S. Treasury Secretary, said at his first meeting of international finance ministers and their central bankers. The G7 countries are Canada, the United States, Japan, Germany, Britain, France and Italy. Russia was also included.

The final communiqué from the finance ministers, including Canada's John Manley, talked generally about the "geopolitical uncertainties" hanging over the global economy. The ministers avoided any direct reference to an Iraq-U.S. showdown, presumably because of the split between France and the United States over military intervention.

The finance ministers were given a private briefing by Alan Greenspan, the U.S. Federal Reserve chairman, about the impact of sharply higher oil prices -- up 33% to US$37 per barrel in the past three months -- on global economic growth.

World growth is cut by 0.5% for each US$10 per barrel rise in prices.

The good news from Mr. Greenspan was that industrialized countries have cut in half their use of oil relative to the size of their economies over the past decade. As a result, "the ability to adjust [to oil price spikes] is pretty significant," said Mr. Snow, paraphrasing the Fed chairman.

As an example, Mr. Greenspan told the finance ministers oil refineries are able to postpone maintenance schedules, while consumption also falls in response to high prices. "There's flex in the system -- I think the judgment was we'll be able to manage our way through this," Mr. Snow said.

At the same time, it is no longer in the interest of oil-producing countries to keep prices high "because it makes their market more unstable," he said.

Mr. Greenspan did admit to finance ministers that high oil prices, mainly stemming from the labour problems in Venezuela, were having an effect on the United States and other G7 economies. "It's like a tax," said Mr. Snow.

Economists are worried about the impact of high oil prices, especially on the struggling U.S. economy.

John Silva, chief economist at Wachovia Securities, said on Saturday he has cut his assessment of second-quarter growth in the United States to 1% from 3.1% as the impact of soaring gasoline prices -- now averaging US$1.66 per gallon, near the May, 2000, record -- begins to ripple through the economy.

"Higher gasoline prices are clearly taking a toll on already jittery consumers," he said. "We cut equipment spending, lowered inventory gain and increased our estimate of the nation's trade deficit." The U.S. deficit soared to a record US$435-billion last year.

Merrill Lynch & Co. said late last week that Mr. Greenspan's expectations of a 3.5% to 3.75% growth in gross domestic product were optimistic. "It will probably take a 4% annualized growth in the second half of the year to get the 'official' forecast of 3.5% to 3.75% on a fourth quarter to fourth quarter basis."

The U.S. economy, with its growing trade and government deficits, prompted some debate during the two-day meeting.

While Mr. Snow attempted to defend the US$674-billion tax cut plan of George W. Bush, other finance ministers worried about U.S. government spending.

"We have been witnessing a rapid deterioration of the U.S. current account position as well as the U.S. general government deficit, especially over the past two years," said Nikos Christodoulakis, the Greek Finance Minister. Greece is currently head of the European Union.

"Large twin deficits may create sustainability risks, which in case they materialize would have significant ramifications beyond the U.S.," he warned.

But Mr. Manley, with the economy most closely linked to the U.S., disagreed. "For the moment, we accept the view of U.S. authorities that neither deficit is as of yet a problem," he said .

Mr. Manley can afford to be more charitable than his G7 counterparts. Not only did Canada have a trade surplus with the U.S. of US$49-billion last year, it is expected to have a healthy growth rate of 4% this year, well ahead of the 3% expected by Wall Street economists for the U.S. and 1% for the European zone.

The finance ministers, however, did note in their communiqué that the G7 economies "are experiencing slower growth, yet they remain resilient." The ministers expressed confidence in the global economy, just as they did in New York days before the 1991 U.S.-led coalition attack on Iraq.

On an optimistic note, Horst Koehler, head of the International Monetary Fund, said that a short conflict in Iraq could be a positive for the global economy. In addition, most energy economists expect oil prices to drop by at least US$10 per barrel during the second half of this year if an Iraqi war is short.

What worries the ministers the most, however, is what happens in the weeks and months following a war in Iraq. The U.S. and the rest of the world slipped into a recession after the 1991 war. It took nearly two years to recover.

Anxious to avoid a repeat, the ministers attempted to offer reassurances they would take some steps, likely through lower interest rates and increased liquidity.

"We will not hesitate to act," said Wim Duisenberg, president of the European Central Bank. "The high level of uncertainty remains a key concern for growth prospects, and geopolitical concerns play a key role in this perspective."

So far, the pledges are not very reassuring.

pmorton@nationalpost.com

cbs.marketwatch.com By Steve Goldstein, CBS MarketWatch.com Last Update: 12:04 PM ET Feb. 24, 2003

LONDON (CBS.MW) - The U.K. market eased on Monday, as a leading ad agency forecast a difficult 2003 and on-the-block supermarket chain Safeway lost one of its suitors.

The FTSE 100 index (UK:1805550: news, chart, profile) ended down 25.03 points, or 0.7 percent, to 3,701.80, coming off two straight positive sessions. European markets were lower after Royal Ahold reported accounting irregularities and the resignation of top management. See full story on European markets.

The U.S. market was off to a weaker start, as the Dow Jones Industrial Average fell 1.05 percent. See full story on U.S. markets.

U.K. based advertising-marketing group WPP (UK:WPP: news, chart, profile) fell 1.2 percent after initial gains. The ad group on Monday posted a 3 percent decline in 2002 revenue to 3.9 billion pounds. Earnings per share for the year dropped 19 percent at 24.9p, it said. See full story on WPP financials.

Looking ahead, it estimated net new billings of over 2.4 billion pounds ($3.6 billion). It said North America showed revenue growth for the first time for seven quarters of almost 2 percent in the fourth quarter. Yet it cited uncertainty regarding Iraq, and it said it expects "another difficult year" in 2003.

"Overall, we believe that forecasts have now largely caught up with the reality in the case of WPP, leaving the stock more attractive," said Sean Eddie, analyst at Banc of America Securities in London, in a note.

U.K. grocer Safeway (UK:SFW: news, chart, profile) fell 1.3 percent after buyout firm Kohlberg Kravis Roberts & Co withdrew from the bidding for the chain.

"KKR has decided for the time being not to progress its potential offer for Safeway any further, but will continue to monitor the situation and keep its position under review," KKR said in a statement.

Of Safeway's fellow suitors, Wm Morrison (UK:MRW: news, chart, profile) fell 1.5 percent, Tesco (UK:TSCO: news, chart, profile) dropped 1.6 percent and Sainsbury (UK:SBRY: news, chart, profile) improved 0.3 percent.

Wal-Mart Stores (WMT: news, chart, profile), owner of the Asda chain of British supermarkets and also a potential bidder for Safeway, fell 1.6 percent in early trade in the U.S.

Metals-mining group Bhp Billiton (UK:BLT: news, chart, profile) (BHP: news, chart, profile) gained 4.5 percent. The company reported sales in its half year ending Dec. 31 rose 5 percent to $8.048 million but profit attributable to holders dropped 19 percent to $931 million, in part reflecting adverse currency movements. See full story on Bhp financials.

It said that prices continued to show some improvement in the opening weeks of calendar 2003. "Prices for oil have risen as a result of the ongoing uncertainty in the Middle East and Venezuela, while steel making raw materials are well positioned to benefit from strong North East Asian and, in particular, Chinese demand."

Another large gainer was EMI Group (UK:EMI: news, chart, profile), which improved 5 percent after it was said to be in preliminary talks with AOL Time Warner (AOL: news, chart, profile) over buying a majority stake in Warner Music in a deal that could bring in $3-$4 billion to the media and entertainment giant, the Wall Street Journal reported, citing people familiar with the matter

Financials mostly higher

Financials were mixed.

Legal & General (UK:LGEN: news, chart, profile) gained 2.4 percent after Goldman Sachs upgraded its shares to outperform. Goldman said it upgraded the insurer "following the group's 13 percent relative underperformance to the U.K. life insurance sector year to date, and our view that fears over dividend growth have been overly discounted."

Internet online bank Egg (UK:EGG: news, chart, profile) - a subsidiary of Prudential plc - earlier gained 1.5 percent, as it posted a 16.6 million pound loss before tax in 2002, driven by a loss in France, but showed that its U.K. operations swung to profits for the year. It said it added 610,000 net new customers in the year, and that it is eyeing the U.S. for a possible entry.

South African-based insurer Old Mutual (UK:OML: news, chart, profile) improved 0.3 percent. It said its group operating profit for 2002 was up 8 percent in the South African rand, but down 15 percent in sterling to 724 million pounds. Its new business sales were 557 million pounds on an annual premium equivalent basis; the figure is not comparable as F&G Life was purchased in the second half of 2001. Its dividend was unchanged at 4.8p for the year.

Pension injection does not faze BT investors

BT Group (UK:BT.A: news, chart, profile) (BTY: news, chart, profile) improved 0.6 percent. The company may inject 1.5 billion pounds ($2.4 billion) on top of existing commitments to plug a hole in its pension deficit, the Financial Times said on Monday, citing people close to the company. The payments will be announced in May, and more than double the telecommunications group's existing commitments, the report said.

CIC Securities in Paris said the pension deficit should not deflect from BT's other strengths. "Partly because of its weak growth prospects, BT has low multiples compared with its European rivals. However, the operator is paying out more and more dividends and generates strong cash flow," it said.

Packaging and services group Bunzl (UK:BNZL: news, chart, profile) gained 0.6 percent. It said sales from continuing operations rose 5 percent in 2002 to 2.7 billion pounds, and profit before tax rose 4 percent to 196 million pounds.

A bid from entrepreneur Hugh Osmond for Six Continents (UK:SXC: news, chart, profile) will be worth 5.6 billion pounds, the Financial Times said on Monday, and which use combined cash and shares worth 650p per share, versus Friday's closing price of 625p. Six Continents management on Monday assailed Osmond's intentions once again and is expected to reject the bid.

Its shares fell slightly by 0.3 percent. Steve Goldstein is a reporter for CBS MarketWatch.com in London.

www.newsday.com By ANNE D'INNOCENZIO AP Business Writer

February 23, 2003, 1:52 PM EST NEW YORK -- Spring is looking like another tough sell for the nation's ailing retailers. Merchants' hopes for brighter days as spring sales get under way were dimmed by heavy snow that blanketed the Northeast during President's Day weekend, wiping out the much-anticipated sales bonanza needed to jump-start the season. Add the looming uncertainty about war with Iraq and a sluggish job market, and retailers are likely to stay in the doldrums. The latest blow came as department and mall-based apparel stores were grappling with the government's heightened terrorist alert, which made consumers even edgier and sent many on buying sprees for batteries and duct tape at such places as Home Depot Inc. and Wal-Mart Stores. "Consumers are having a hard time getting into spring, not knowing what is going to happen in March and April," said C. Britt Beemer, chairman of America's Research Group in Charleston, S.C. "It's been a yo-yo." In fact, consumers like April Mason and Andrea Tortora said such factors have made them less interested in buying spring apparel, like micro-miniskirts. "It seems too cold and snowy to think about spring clothes. I haven't walked into a department store since right after Christmas when I returned some gifts," said Mason, a 29-year-old public relations executive from New York City. And even though she feels her job is secure, she's sticking to basics because of the political uncertainties. "I won't be buying a pair of expensive sandals," she added. Tortora said she, too, has maintained "a wait-and-see attitude" when it comes to spending on frivolous items, although she did buy a dishwasher, garbage disposal and new faucets for her Cincinnati home. February is when stores clear out winter leftovers and do some regular-price selling of spring merchandise, but this month is winding up to be a wash for many retailers after a weak holiday and January period. Michael P. Niemira, vice president at Bank of Tokyo-Mitsubishi Ltd., now expects same-store sales for February to be up a modest 0.5 percent from a year ago. Same-store sales are sales at stores open at least a year, and are considered an important indicator of a retailer's health. Niemira noted that last weekend's snowstorm, the worst in the Northeast since 1996, shaved about 0.5 percentage points from the monthly sales pace. The bulk of the nation's retailers will be reporting their same-store sales on March 6. President's Day weekend is one of the most important sales days of the year. Niemira estimates that last year, the holiday weekend accounted for 13.1 percent of the total month's sales in the Northeast. And while stores like Macy's, which closed 25 of its 100 stores in its Eastern division on Monday, are repeating President Day sales this weekend, many analysts don't expect merchants to recoup lost business. "A little bit of the business will be recovered, but you never make up the business," said Richard Jaffe, an analyst at UBS Warburg Securities. "Are you going to shop twice (as much) this Saturday? You will or you won't shop." Snowstorm or not, political and economic uncertainties continue to plague retailers, as evidenced by this week's earnings reports from several major merchants. While the good news is that merchants preserved fourth-quarter profits with lean inventory and cost-cutting measures, they still face the problem of inspiring consumers to spend. Robust sales in Wal-Mart Stores' international division helped boost fourth-quarter results, beating analysts' expectations, while increased earnings from its credit card division helped Target Corp. match Wall Street estimates of modest earnings growth. J.C. Penney Co. Inc., which is in the midst of a turnaround, saw profits double in the fourth quarter, helped by strong sales of jewelry, home goods and clothing. Results beat Wall Street expectations. Still, Allen Questrom, chairman and chief executive officer, remained cautious. "As we begin the third year of a very complex turnaround, we face internal challenges and many uncertain external factors, but we believe that each of our businesses will continue to improve," Questrom said in a statement.