International Business News, March 20, 1998

Examiner International Finance

Major reports expected to recommend 11 for entry to EMU

by Kevin Mills
Business Editor
TWO major reports will be released today by the European Commission and the European Monetary Institute (EMI) regarding the new European single currency, the euro.
The European Commission reports on economic and financial convergence, while the European Monetary Institute focuses on interest rates, foreign exchange and the independence of national central banks post EMU — European Economic and Monetary Union.
The reports mark another significant milestone for EMU, and are expected to recommend that 11 EU member states take part in the first phase of the single currency on January 1, 1999.
The selected countries are Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Holland, Portugal, and Spain.
International money markets will focus firmly on the release of the two reports, along with a third report to be issued later in the week by the powerful German central bank. the Bundesbank.
The European Commission and the European Monetary Institute reports will be used by the European Union to decide who will participate in the first round of EMU.
Analysts expect that the European Commission's report will be "politically correct", with the EMU and the Bundesbank likely adopt to a more austere approach, focusing on the long-term sustainability of prospective members.
The Irish Central Bank has called a press conference for this afternoon to discuss the contents of the reports and its implications.
The reports are basically a formal assessment of the EMU hopefuls to show they have satisfied the technical requirements of Maastricht — budgetary performance, debt levels, inflation performance, and currency stability.
"It is generally believed that the EMI and EC will give the green light for 11 countries to participate in the EMU," said Austin Hughes, economist with Irish International Bank. Over the last few days there have been a number of comments from EU officials to say that there should be nothing surprising in the reports.
However, there could be a few criticisms in the reports.
"We could hear a few harsh words about Germany and France and their budgetary performance.
"The big issue for the Irish market will be the tone of the reports in relation to the Irish economy. While it is generally expected that they will give Ireland the green light, they may highlight the need for a tighter budgetary policy," he said.
"To an extent, the recent valuation reflected the concerns about Irish inflation and budgetary outlook. We could expect to see some hints about these concerns in the report.
"It may be the case that the reports are harsh enough to justify the Irish Central Bank's approach to keeping interest at a high level.
"The devil will be in the detail," he said.

Rumours of bid revive life assurance sector

RUMOURS that the Alliance & Leicester could be looking to make an offer for Britannic Assurance yesterday revived the life assurance sector.
Britannic Assurance, which disclosed it had more than doubled annual pre-tax profits from £82m to £174m, lifted 43½p to £13·56, while Alliance & Leicester eased 5½p to 902p.
Renewed merger speculation also helped boost other stocks, with Legal & General up 13p to 736p, Prudential Corp 14p higher to 950p and Norwich Union up 11p to 477p.
Hopes of another round of deals buoyed the FTSE-100 Index which closed 36·7 points up at 5,983·7 after a strong day of trading with more than 880 million shares changing hands.
A late afternoon rally on the back of New York and a strong futures market helped lift the stock market towards the end of the session.
Jeremy Batstone, head of research at NatWest Stockbrokers, said: ''A feature of today's session was its strong volume and a very strong futures market as the derivatives tail has been wagging the market dog. This provided some support on top of a lift in the life assurance and engineering sectors.''
Takeover speculators also focused on GEC, up 21p to 469p, and British Aerospace, 52p higher at £20.15. The latest round of market gossip helped lift other key aerospace and engineering stocks with Siebe improving 5p to £13.10, Smiths Industries climbing 29p to 880p and Rolls-Royce strengthening 5p to 288p.
The rise on the market came despite key oil stocks slipping lower as analysts pored over agreements to limit production made between several oil producing countries and decided the cuts would only make the smallest of dents in the current oil surplus.
BP, which after Monday's rush, bubbled down 26½p to 907p, Shell lowered ½p to 452½p, Enterprise Oil fell 15½p to 557½p and Lasmo slipped 4½p to 287p.
Elsewhere, traders were lifted by the resignations of disgraced Newcastle United directors Freddy Shepherd and Douglas Hall. Shares in the club soared 5p to 100p especially after it unveiled impressive pre-tax profit growth for the half year.

Elan to market drug in US

The US Food and Drug Administration has approved Athlone-based drug delivery company Elan Corp for use of its Zonegran drug for adjunctive therapy in the treatment of epilepsy.
Zonegran will be marketed in the US by Elan unit Athena Neurosciences. Final marketing approval of the drug application is contingent on finalising the labelling for Zonegran and providing certain information requested by the FDA.
"The FDA has sought additional analyses of the date concerning the nature, severity, and course of several of the adverse events associated with the use of zonisamide, as well as a review of the Japanese experience with the drug.
"We and Dainippon Pharmaceutical Co Ltd will work to respond to the FDA's requests as soon as practical," said Jan D. Wallace, vice president, clinical and regulatory affairs for Athena.
Epilepsy is estimated to affect over two million people in the US, with approximately 30% of these experiencing seizures not adequately controlled by current therapies.
The active ingredient in Zonegran, zonisamide, is chemically distinct from other anti-epileptic products and controls epilepsy by blocking voltage-sensitive sodium and calcium channels. Zonegran demonstrated meaningful seizure control in patients enrolled in the three Phase III studies conducted in the US and Europe.
Zonisamide was developed in the US by Dainippon and has been marketed since 1989 in Japan under the brand name Excegran.
Elan chairman and chief executive Donal Geaney, said, "we are especially pleased Zonegran has achieved approvable status in the US as the first step in our collaboration with Dainippon to bring the benefits of this valuable product to North American and European markets."

Dow Jones Index

US stocks ended just shy of record territory yesterday, after the Dow Jones industrial average resumed its jagged ascent toward the 9,000 mark.
On Wall Street, the Dow rose 88.19 points - or one per cent - to close at 8,904.44, taking back nearly all of the 90.18 points it gave up on Monday.
The index of blue chip stocks set its last record on Friday, when it ended the week up 300 points to close at 8,906.43. Broad-market indexes also pushed ahead.
With no major economic reports issued, investors focused on oil futures prices, which dipped amid scepticism over whether the world's leading petroleum exporters will cut production sufficiently to strengthen the battered market.
Other commodities also lost ground, as bond prices rose.