Interview: Lifting the arms embargo to China
>> with the fed move and the oracle results and a programming note, larry ellison is live on the show later on to dissect the quarterly earnings report with us. but outside of the world of business, we head to ron madison for more.
>> british foreign secretary jack vaw saying momentum is shifting in the european union against lifting the arms embargo to china.
>> officials say china’s recent legislation threatening to use military force against taiwan have set back the plans to lift the ban. the french have been leading the campaign to renew military sales to china. the bush administration has asked the 25-nation bloc to keep the embargo in place to prevent an arms race in the pacific region. the governments agreed back in december to look at ending the ban. fresh hope today that north korea will return to talks aimed at dismantling the nation’s nuclear program. north korean premier met with wen jiabao in beijing on tuesday it is reported that wen jiabao said the talks were the only pragmatic way to resolve the issue. the talks come a day after north korea said it would not beg for talks with the united states. north korea said, february 10, that it has nuclear weapons and at that time rejected a fourth round of talks. the u.s. has been relying on china to bring north korea back to negotiations. arab leaders are meeting in algeria. the event had been billed as historic because of the syrian withdrawal from lebanon. the moves toward peace in israel and the pressure to convert to democracy. several arab leaders are not attending the summit, citing health reasons or disputes. the 13 attending are mostly avoiding the issue of lebanon and democratic reform. they’re also rejecting jordan’s plan to normalize relations with israel. the leaders are focusing more on reforming the arab league itself, endorsing a plan to set up an arab parliament which is an unelected body for the league’s member countries. in the united states, now, the parents of a brain-damaged woman are appealing a federal judge’s ruling not to order their daughter’s feeding tube restored. lawyers for terri schiavo’s parents filed papers in the 11th u.s. circuit court of appeals in atlanta after a federal judge ruled that schiavo’s “life and liberty interests” were protected by the florida court that ruled that the tube could be dissected. the federal judge heard arguments a day earlier. the move came after the u.s. congress and president george w. bush took extraordinary action to authorize court review on the case. that’s the latest look on world news. back to you.
>> thank you very much for that. back to corporate news. alcoa or aluminum company of america will cut 1.5% of its global work force in the next 12 months to cut operating costs and debt. they plan to sell a stake in a norwegian unit for a price tag approaching $900 million after a surge in the cost of power and raw materials led to a drop in fourth-quarter profit. shares of alcoa, last indicated, down 50 cents at $30.96, a drop of 1.59%. general mills says third-quarter profit fell 5% because of taxes from the sale of a unit. net income at the cereal maker came in at $230 million or 58 cents a share. they’re number two after kellogg of battle creek, michigan. sales at general mills rose 3%. the company paid taxes after selling a european snacks unit and changed how it booked some debt. the revenue of the unit that sells cereal to u.s. retailers was unchanged after a price increase led to a drop in shipments. general motors bonds down in new york trading overnight. the carmaker says it will lose financial statert from g.e. the yields of g.m.’s 30-year benchmark bonds widened to as much as 5.13% over comparable u.s. treasuries on par with companies that moody’s and s&p views as junk. g.e. said its credit had not been withdrawn from g.m. g.m. says earlier comments made by its spokesperson were incorrect. bearing point’s c.e.o. says his priority is fixing errors in the company’s financial reporting and that process will take several quarters.
>> the first priority is for us to get our financial reporting in order. it’s embarrassing and inexcusable and we’re going to work diligently and super hard and get these issues resolved once and for all.
>> you took over on monday as chief executive officer of the computer services company which has delayed releasing results for last year and the first quarter of this year. bearingpoint used to be part of the auditing firm, last week said it found accounting errors and weaknesses in accounting. one of the issues for larry ellison at oracle will be integrating retek without you’s help. coming up next, the u.s. dollar rose to a one-month high against the euro and yen. the fed is worried about flaetion. what should investors be concerned about.
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Listen Interview: U.S. rate hikes
in addition to our live interview with mr. ellison, we’ll have in-depth coverage of the fed’s decision and what it means for the markets . we’ll speak with a currency strategist to see if the dollar may get a further boost. the yield gap between the dollar and those of other countries is changing. today’s move by the fomc is the start of things to come, according to our guest. and yesterday we saw the biggest drop in a month on the australian stock market on concerns regarding a local airline. oracle’s third-quarter net income fell 15% to $540 million because of costs from the peoplesoft acquisition. sales, however, surged 18% to just shy of $3 billion, just under the street’s view. profits, excluding costs, beat expectations by a cent. analysts say benefits of the peoplesoft deal will kick in next year when they book a full year following integration. larry ellison, the c.e.o., closed the peoplesoft deal in january after a year and a half battle and won a second victory yesterday, beating germany’s s.a.p. to take over retek. oracle’s offer of $11.25 a share beat s.a.p.’s offer. we’ll speak with larry ellison live at the times on your gene. the dollar is up, bonds down after the fed decided to raise rates as expected and also accompanying the decision by commentary. the fed kept to the language saying it was lifting at a measured pace, lifting the fed funds rate to 2.75%. while the fed signaled its intention to keep raising rates, a more hawkish statement triggered speculation they may get more aggressive, saying pressures on inflation have picked up in recent months. the benchmark 10-year note pushed down -- the manager of the world’s largest bond fund didn’t see the fed’s new wording as shocking.
>> we have higher oil prices, obviously, higher commodity prices. we have the dominant influence of china in terms of the global economy and all of that leads to higher inflation down the road. we have large budget deficits and euroland extending those deficits. these are inflationary portents for the future and this should be no reason for investors to be surprised the fed officially recognized that threat.
>> expectations that u.s. rates will keep rising lifted the dollar for a second four in a row. the dollar quoted at 1.3282 against the euro and 105.64 against the yen. u.s. stocks turned lower after the fed cautioned of inflation risks. the dow, s&p 500 and nasdaq tech index closed down about 1%. stocks rallied early in the session and reversed course, a yo-yo session following the statement from the fed. interest-rate-sensitives fell, including financial stocks, the three biggest banks. higher interest rates cut the value of bonds owned by the banks and tend to hurt demand for mortgages and loans. oil prices down on speculation opec will increase production faster than expected. the cartel agreed last week to boost quotas half a billion barrels a day. the group is talking about a second half a million barrel-a-day increase. the saudi oil minister says that kingdom is pumping 9.5 million barrels a day but they have a million and a half barrels in additional capacity. asian stocks down on the session. chinese shares and computer stocks among the decliners. the bony indexes looked like this, the asia 50 a.d.r.’s down 1.11% and the china a.d.r.’s down about 2%. the bony japanese a.d.r.’s down.74%. the chicago merc. futures pricing in 11,730 or thereabouts. a quick look at the stocks to watch in tokyo. japan tobacco says it will get $15 million to license rights of an hi drug to gilead sciences to all countries outside of japan. fujit says it may sell stock. and kyocera raising its planned second-quarter dividend by 2/3 to 50 yen, planning to pay between 20% and 25% of net income as dividend payout. australia stock market pulled back from record highs yesterday. airlines were front and center on concerns following a virgin blue air earnings warning due to kerosene prices. we’ll head to david tweed in sydney to learn the effect the fed and greenspan may have on the market . the r.b.a. preempted the fed move with their own hike recently. is the u.s. hike that we saw, as expected, likely to affect the mood today?
>> it was the wording of the statement out of the fed where they indicated they are concerned about the prospect of inflation. there is speculation that the fed might accelerate future interest rate increases and that isn’t such good news, really, for australian stocks or for stocks that really rely on the u.s. economy, the world’s largest, and, two, as an export market , and, two, other stocks actually trading there as their main source of income. i’m thinking of companies like news corporation. its stock dropped 2.2% overnight. we saw rinker, a building company in australia, which gets 80% of its profit out of the u.s., that stock down 1.9% in australia yesterday. we want to be looking for that one. james hardie is another one. b.h.p., b.h.p. billiton lost 2.5 -- or 2.2% overnight. there is concern that an increase in interest rates might crimp demand for metals. that said, we did see j.p. morgan increase its earnings forecast for b.h.p. billiton by 4% for this year and 4.4% for next year. they’re factoring into the fact that b.h.p. profit might increase because of the nickel operations of w.m.c. resources, which it hasn’t finished acquiring yet. it does look as if they’re anticipating that acquisition.
>> and outside the issue, of course, of commodities and interest rates and yield gaps, i know there are domestic situational mays.
>> in terms of news today, we expect foodland’s first-half earnings about midday sydney time. this is the last day for fosters to extend its bid for southcorp. we expect foster’s to extend that bid. the southcorp share price is inching lower in recent days, only .6 above the foster’s bid. we have a number of stocks going ex-dividend, trading without the rights to their latest dividends. more than 20, in fact. one is multiplex, upgraded today by merrill lynch. multiplex had a share price drop after it had problems at the wembley’s stadium. but merrill lynch says it’s a buy, raising the recommendation from neutral.
>> thank you, david. we’ll check with you closer to the start of the session. japan’s trade surplus probably shrank in february. economists we surveyed say the surplus may have fallen 4.66%. slowing exports, higher prices of oil imports all contributing to the shrinkage. that trade data is released at 8:50 a.m. tokyo time. we’ll have reaction for you and an economist at hsbc will help us dissect. and inflation figures for singapore and export orders for taiwan released today. after the break, the european union may delay plans to lift its decade and a half arms embargo on mainland china.
