Interview: Asia & European markets
>> speaking of asia, our tokyo bureau has a preview of what might move market there is next week.
>> some of asia’s leading technology companies report earnings in the coming week with the overriding theme likely to be rising inventories and falling prices. sony reports fiscal third quarter earnings thursday and it’s already given investors an idea of what to expect. the world’s second biggest consumer electronics maker says full-year profit will be about 31% lower than its initial estimate. sony says prices of its audio players and tvs have been falling. liquid crystal display maker l.g. phillips has also seen flat screen prices drop after overestimating demand. it send l. c.d. prices down 29% in december from a year earlier. analysts surveyed by bloomberg say l.t. phillips probably lost 2.9 billion won in the fourth quarter. and the following day, l.t. electronics reports earnings. south korea’s second largest he can maker may say profits rose after it sold more mobile phones . japan’s biggest mobile phone operate to has been wooing subscribers with handsets that work as an electronic wallet. users of ntt docomo phones can buy goods in convenience stores, and increasing profit in the fiscal third quarter. slowing chip demand caused profit gains to taiwan semiconductor manufacturing. they may say on thursday that net income rose 37.5% in the fourth quarter. third quarter profits rose 84%, still the slowest growth since 2003. customers have been reducing inventory and chip prices have been falling. china’s economy probably grew at its sloast pace in 1.5 years in the last three months of 2004. gross domestic product likely grew 8.9% after a 9.1% in the third quarter. figures which were expected last thursday are now set for release on tuesday. and japanese manufacturers may have raised out put for a second month in december. industrial production probably rose 1.7% from a year earlier as overseas and domestic demand increased. figures are out on friday. and those are some of the stories we’ll be following here in asia. back to you.
>> and to find out what they’re going to be following in london, mark barton put together this preview on european action next week.
>> now earnings will again set the tone for the markets as some of the world’s biggest companies are expected to release quarterly results both here in europe and in the u.s. a string of disappointing numbers from companies like sony, novartis, ebay, ford and motorola raising concerns corporate profits are slowing down more than anticipated. to kick the week off on monday, we’ll get more details from infineon after earlier this month the chipmaker warned that profit and sales for the last quarter missed estimates. it’s likely to say it will cut costs and reorganize to cope with high inventory and the falling u.s. currency. quarterly earnings due from s.a.p., the business software maker, spanish bank bbva on wednesday, see men, phillips, notebook yarks astrazeneca will have to wait until thursday. european stocks have been outperforming their u.s. counterparts over the last five months. thomson financial says earnings growth in the final three months of 2004 probably slowed to 16.2%, compared with 16.8% in the previous quarter. prospects for higher revenue are less. the chief executive of many of the companies reporting will be in davos this week and we’ll try to get a sense of whether there’s a consensus among them about the outlook for this year. and a speech in frankfurt, european central bank president is expected to say falling oil prices have improved the out look for economic growth and inflation this year. that’s in the 12 countries that use the euro. only significant data on monday comes from italy with retail sales for november and from the where we have the latest on car sales and the ernst & young report on the u.k. economic and u.b.s. may tell investors in a conference call that costs will rise this year. that’s’ all coming up next week.
>> a dramatic finish from mark barton in our london bureau. well, in this week’s “money and sports,” the biggest, baddest bowl of them all, the super bowl. we’ll tell you why futures traders, sports futures traders are changing their bets on who’s going to win. all that and more in “money and sports.” that is a good catch. you have to give it to him.
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Listen Interview: Medicare & Medicaid services
>> welcome back to the “world financial report.” i’m matt nesto. let’s show you what happened on wall street today. three losers for the dow, the s&p and the nasdaq. in fact, three weekly losses as well. we’ll focus on today. your seven, six, and five tents of a percent lower respectively. and social security reform may whether getting all the headlines, but analysts say that medicare and medicaid are an even bigger and costlier problem. medicare truss tees say it could be brunt in less than 15 years. yet just starting up. there is a new medicare drug benefit that will add billions in costs. michael mckee spoke with mark mcclellan, the administrator for the centers for medicare and medicaid services.
>> we’re really focused on getting the drug benefit and the other improvements in medicare implemented successfully this year. medicare spent the last 40 years getting behind modern medicine. it has been behind on preventive care, it has been behind on coordinating care with people with chronic illnesses and has been behind on drug coverage. you can’t have a long-term sustainable coverage that’s not delivering care that reflects modern medicine. so, why we have medicare benefits up to date and that will help us make the program more sustainable for the long run. and that is our first focus for the year. i do want to emphasize that the medicare law has provisions in it to get congress and the president to work together on steps on making sure the program is sustainable. but the first thing we need to do is get those benefits up to date. so, it is a truly modern program.
>> one of the things that has been proposed is testing. they say that people that have money don’t necessaryly need the government to pay for their prescriptions. do you think that’s fair?
>> we can’t afford to pay for first dollar coverage for everyone. we want to make sure we have access to modern medical care for all seniors and all people with disabilities, but increasingly that means that we need to work with the beneficiaries themselves who have means in order to get the coverage that they need. the new law includes provisions for an income-related premium in medicare. that’s going to start in 2007 and the new medicare drug benefit is much more comprehensive for low-income beneficiaries. all beneficiaries are going to get access to drug coverage, but the higher income beneficiaries can use it to wrap around or coordinate with their employer coverage or use it to coordinate with crixes they’re making themselves. we’re already taking steps in this direction to get seniors access to comprehensive coverage but rely more on help from the seniors themselves as the means to do so to help pay for that coverage.
>> we’ve seen in the past that when medicare offers a new benefit, companies sometimes cut back on what they offer in their pension programs for retirees. what are you doing to try to prevent that?
>> what we’ve seen over the last decade or so, mike, is companies cutting back on retirement benefits generally and one of the key goals of the medicare law is to provide some support for a partnership with employers to continue high-quality retiree coverage. in the new medicare ruleses that we’re issuing today, we provide a lot of details on how we can work with companies in many ways to help them continue high-quality coverage that has been on its way out. and we project that many millions of medicare beneficiaries are going to be able to take advantage of some new subsidies for more affordable comprehensive care, coverage that has been threat nnled recent years.
>> the regulations you put out today essentially set the stage for companies to start participating in the program. one of the questions that’s come up, though, is would you reject companies that don’t offer big enough discounts?
>> we are looking for companies that offer big discounts on the medicines that beneficiaries need. they provide access to a comprehensive set of brand name drugs and generic medicines. we’re setting up a competitive system, one that works very much like the federal employees health system does today and we think that the competition is going to drive down the prices. not just our view, it is the view of independent analysts at the congressional budget office, our actuaries’ view, many others who look at this program, it is the best way to get low prices t. companies that are going to succeed in offering these drug benefits will be the ones that give seniors the medicines they need at the lowest possible cost.
>> just have less than a minute here. some people have said that the president can’t do anything on social security unless he makes this program work. are you confident going into it?
>> we are confident. we met every milestone in just the 13 months that this law was passed. we now have a clear pathway in place for getting the drug benefit delivered in 2006. we’re getting preventive benefits, we’re getting a new prevention-oriented medicare program in place in january 2006. it’s a great foundation to build on with social security benefits that are up to date and coverage that’s up to date generally for seniors.
>> all right. that was, of course, the administrator, mark mcclellan of medicare, speaking to mike mckee. well, one earnings―in fact, two earnings stories combined into one here. sovereign bancorp and wilmington trust both reporting better than expected profits as the regional banks benefited from rising interest rates, which allowed them to charge more for loans.
>> we exceeded our net interest margin goals, grew net interest income about $24 million from third quarter level and that certainly helped us make our earnings numbers for the fourth quarter.
>> rising stocks also helped them earn more from their investment portfolios.
>> our investment portfolio is designed to produce liquidity for our organization and about one third of it rolls over every 12 months. so, if you get into a rising rate environment, you have the ability to reinvest those maturities at higher yields.
>> he forecasts that rising rates will increase the profitability of loans even more this year. well, labranche company turned in a profit in the fourth quarter thanks to 57% increase in trading volume at the new york stock exchange. labranche, of course, the biggest market maker or specialist firm at the big board. official lynette income, 15 cents a share, double―more than doubled expectations. in fact, went up from a huge loss a year ago that was sparked from writing down goodwill and settling a regulatory probe. revenue up 18% to $83 million. well, earnings season is gathering steam here. we’re going to have a preview of what’s likely to move markets in the asia pacific region. they watch us, we watch them. details on that next.
