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Rates come down

America’s Federal Reserve made a surprise cut in interest rates, trimming the fed funds rate half a point to 6%. The Fed also said it would cut rates again if that were necessary to ward off recession. Recent bad news included a sharp fall in the National Association of Purchasing Management’s index of manufacturing activity in December: it hit its lowest level since April 1991. The Conference Board’s index of consumer confidence also fell, for the third month running, reaching a two-year low.

See article: Greenspan’s big surprise On the first day of trading in the new year, America’s high-tech Nasdaq Composite index fell 7.2% as investors worried about falling profits and the state of the economy. But it rebounded almost twice as far on news that the Fed had cut interest rates. See article: After the Fed’s rate-cut

America’s travails gave a boost to the euro, which reached a five-month high against the dollar, of just below 95 cents. And it rose above ¥108—a level not seen since last February. The euro-zone also welcomed a new member: Greece became the 12th country to adopt the single currency.

Saudi Arabia responded to sliding oil prices by calling for OPEC to cut production at its meeting on January 17th by 1.5m barrels a day. It convinced oil markets that quotas would be cut and briefly caused the oil price to rally.

Credit where due
A sharp fall in the prices of investment-grade and junk bonds looks likely to continue in America, according to Standard & Poor’s, a credit-rating agency. It added that defaults would probably increase as America’s economy slowed. S&P also said that the number of credit downgrades had exceeded upgrades for the tenth quarter in succession.

As part of last year’s messy divorce settlement with Arthur Andersen, Andersen Consulting adopted a new name, accenture. Despite hoping to emphasise an “accent on the future”, the logo will adopt what is now a rather old-fashioned look: lower-case lettering throughout. Corporate freebies with the old name could become collectors’ items.

Edson Mitchell, a top executive at Deutsche Bank and a leading figure in its investment-banking arm’s push for elite “bulge bracket” status, died in a plane crash. Mr Mitchell had been tipped as the next head of Deutsche’s investment-banking unit.

Chase Manhattan completed a takeover of J.P. Morgan to become J.P. Morgan Chase, but lost a senior executive. Joe MacHale—J.P. Morgan’s chief executive for Europe, the Middle East and Africa—announced that he would quit the enlarged investment bank. Other departures are expected soon.

Trouble brewing
Britain’s government told Belgium’s Interbrew that it must sell the brewing interests that it acquired from Britain’s Bass for £2.3 billion ($3.5 billion) last year. Interbrew, the world’s second-largest brewer, had not expected such tough regulatory intervention; its shares fell sharply.

Wal-Mart, the world’s biggest retailer, said that the December shopping season had been disappointing and that sales would be below its projections. But it also announced plans to follow Carrefour, the world’s number two retailer, into Japan. The French company opened a store in Japan late last year and plans another dozen. Wal-Mart is hoping to open its first store next year.

Glaxo Wellcome and SmithKline Beecham completed their merger to form the world’s second-largest drug company. GlaxoSmithKline’s birth had been delayed by American regulatory concerns over market dominance in some product lines.

Tyson Foods, the world’s biggest chicken company, is to buy IBP, America’s largest beef-processing operation, for a meaty $3.2 billion in cash and shares. A rival all-share bid from Smithfield Foods, an American pork company, got the chop.

Aventis, a Franco-German drug company, announced that it would sell its 66% stake in Messer Griesheim, an industrial-gas firm, to Allianz Capital Partners and Goldman Sachs at a price thought to exceed euro1.5 billion ($1.4 billion). Aventis, like other drug firms, is moving away from the broad life-sciences business to concentrate on drug making.

Endesa, a Spanish power firm, expanded its pan-European activity with the acquisition of Remu, the fourth-largest gas and electricity distribution company in the Netherlands. The euro1.1 billion ($1 billion) purchase will give Endesa a 9% share of the Dutch market.

Online off-load

Letsbuyit.com, a European online group-buying concern, won temporary bankruptcy protection. It also announced that it would take no new orders as it hunts around for a cash injection to keep it solvent. When market trading resumed, its shares fell by over 50% in one day. See article: Another Internet star falls

Intershop Communications, Europe’s foremost supplier of e-commerce software, issued a profits warning. The German company blamed cutbacks in Internet spending by big companies as gains promised by e-commerce remained an ever distant prospect. Its shares plummeted.

EToys, a struggling American online toy shop, is to close all its European operations later this month after disappointing sales over Christmas.

Napster, a free service for downloading music from the Internet, struck a deal with Edel Music, a European music company, to make Edel’s music available on the web. Napster, which is developing the new service with Bertelsmann, a German media giant, hopes that other record companies will follow suit.

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Rates as of Fri Feb 29 18:05:03 EST 2008
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