The weak U.S. dollar and oil
speculators took centre stage as Group of Eight finance
ministers gathered in Japan on Friday to grapple with surging
inflation and a slowing global economy.
As soaring energy costs stirred protests from Malaysia to
Spain, the world's most powerful governments talked up a link
between a dollar slide and a doubling of oil prices in 12
Their communique at the end of their meeting on Saturday
will describe commodity prices as a "serious challenge" to
economic growth, a G8 source told Reuters.
The G8 countries, mostly importers of crude, wield little
influence over oil markets that are driven by demand from India
and China and concerns about supplies. But they can try to
arrest a slide in the U.S. currency that has prompted investors
to buy oil futures and other commodities to hedge dollar risks.
"On top of the (oil) barrel there is a magnum of
speculative champagne," Italian Economy Minister Giulio
Tremonti said, floating a plan to make speculation in oil
futures more costly. "There are more contracts than barrels,"
he told reporters.
The G8 will ask the International Monetary Fund to study
the rise in commodity prices, Tremonti said.
Other officials put the focus on currency markets.
A Japanese official called for a defence of the dollar to
contain commodity prices. France welcomed the U.S. currency's
rebound of the past week, after Washington signaled it was
worried enough about the dollar's long decline to raise the
prospect of intervening in markets.
Japanese Finance Minister Fukushiro Nukaga said he had
discussed currencies with U.S. Treasury Secretary Henry
Paulson, who refused last week to take intervention off the
table. Nukaga declined to say if they had talked about the
"Markets will be sensitive to any sign that G8 officials
are sanctioning intervention to strengthen the U.S. dollar,"
analysts at Calyon Capital Markets Research said in a note.
With central bankers absent, currencies had not been top of
the agenda for the two-day meeting of G8 financial leaders in
the Japanese city of Osaka. Officials had said the talks would
focus on commodities and inflation.
"Elevated commodity prices, especially of oil and food,
pose a serious challenge to stable growth worldwide...may
increase global inflationary pressures," the G8 draft says,
according to the source.
But French Economy Minister Christine Lagarde said
commodity prices and inflation were inextricably tied to the
"The strengthening of the dollar I find satisfying,"
Lagarde said in Osaka, Dow Jones Newswires and other media
The dollar edged higher after her comments, as it closed in
on its biggest one week rally against the euro in three years.
Oil prices have rallied in tandem with a slide that has
seen the dollar nearly halve in value against the euro in six
"Defence of the dollar has become an urgent issue," Kyodo
news agency quoted Japan's Financial Services Minister Yoshimi
Watanabe as saying on Friday.
The Dallas Federal Reserve said in a paper last month the
U.S. currency's slide had contributed about one-third of a $60
increase in oil prices between 2003 and 2007.
Italy will propose increasing the size of the deposit
required to trade oil futures to make speculation more
difficult, Tremonti said, warning that failure to act would
have political consequences.
"The impoverishment of the middle classes in Europe can
have only one outcome: fascism," he said.
Anger over oil prices near a record $140 per barrel has
spilled on to streets around the world. Trucker strikes turned
violent in Spain, Malaysians marched against the government and
authorities from Thailand to the Netherlands face protests over
rising pump prices.
Those prices are also percolating through the global
economy, crimping growth, stoking inflation and dampening
consumption. Data released on Friday showed U.S. inflation and
euro wage growth accelerating.
The Bank of France cut its second-quarter economic growth
forecast by a third to 0.2 percent. The Bank of
Japan downgraded its view on exports and corporate profits.
Markets have long interpreted U.S. dollar policy as one of
"benign neglect" -- speaking of the virtues of a strong
currency while profiting through export growth from its
Last week Federal Reserve Chairman Ben Bernanke flagged a
change in Washington by linking the weaker dollar to inflation
and saying that he was watching the currency closely with the
Treasury. Paulson then refused to rule out intervention.
The last coordinated intervention among G8 states came in
September 2000 when the Fed, European Central Bank and Bank of
Japan acted to stem the euro's decline.
The G8 groups the United States, Japan, Britain, France,
Italy, Germany, Canada and Russia.
(Additional reporting by Eric Burroughs in Tokyo, Glenn
Sommerville in Osaka; Writing by Dayan Candappa; Editing by
Pfizer Inc (PFE.N) may bid for Ranbaxy
Laboratories Ltd (
Japan's Daiichi Sankyo Co Ltd (4568.T) for the Indian generic
drug maker, the Business Standard newspaper said.
Ranbaxy's shares jumped more than 4 percent on the report
while Daiichi Sankyo's shares dropped 2 percent.
Pfizer, the world's largest drug maker, may bid for the
about 65 percent of Ranbaxy held by institutions and public
shareholders, the newspaper reported on Friday, citing
unidentified sources familiar with the development.
Daiichi Sankyo struck a deal on Wednesday worth up to $4.6
billion to take control of Ranbaxy, with the two companies
seeking to become a pharmaceuticals powerhouse that sells both
branded drugs and generics.
Japan's third-biggest drugmaker agreed to acquire 34.8
percent from Ranbaxy's founding Singh family and then make an
open offer for up to an additional 20 percent in line with
The newspaper said Pfizer held talks with the Ranbaxy
founders for a possible acquisition a year earlier and may now
offer to buy out the stake held by lenders and other investors.
"That is speculation," a Ranbaxy spokesman said. "We have a
binding contract with Daiichi. It is a final contract."
On Thursday, when asked in Tokyo what he would do if
another bidder appeared at a higher price, Ranbaxy Chief
Executive Malvinder Singh said, "This is a firm and binding
agreement between the two sides."
Daiichi Sankyo declined to comment on the report. A Pfizer
spokesman said the company does not comment on market rumors
According to calculations by Nomura Securities analyst Ryo
Urushihara, if Daiichi Sankyo's bid failed, the Japanese drug
maker could acquire up 44 percent of Ranbaxy's shares as it
intends to buy new shares issued it by Ranbaxy, as well as gain
shares from new-share warrants.
GlaxoSmithKline PLC (GSK.L) had also weighed a deal with
Ranbaxy, sources told Reuters on Thursday.
An Indian television channel reported that Glaxo's offer
had been stalled by conditions linked to the process, while
also saying Sanofi-Aventis SA (
Ranbaxy has been battling Pfizer over patent rights for the
U.S. company's blockbuster cholesterol-lowering drug, Lipitor,
in several countries and has been successful in certain cases.
Ranbaxy's shares rose 4.3 percent to 566.9 rupees, while
Daiichi Sankyo's shares ended down 2.4 percent to 2,910 yen.
Nomura Securities acted as the exclusive financial adviser
to Daiichi Sankyo, while Religare Capital Markets, which is
controlled by the Singh family, advised Ranbaxy.
(Reporting by Bharghavi Nagaraju and Edwina Gibbs in Tokyo;
Editing by Ranjit Gangadharan and Steve Orlofsky)
European equity prices dropped on Friday as oil and mining majors lost ground, but losses were limited by gains to banking share prices, traders said.
In late morning trade, London's FTSE 100 index of leading shares fell 0.51 percent to 5,846.80 points.
Frankfurt's DAX 30 index lost 0.46 percent to 6,684.16 points and the Paris CAC 40 index decreased by 0.72 percent to 4,638.48 nearing the half-way mark.
The Euro Stoxx 50 index of top eurozone shares shed 0.45 percent to 3,526.53 points.
The European single currency stood at 1.5327 dollars in foreign exchange trading.
US stocks held their gains in volatile trade Thursday after hefty losses a day earlier, as
Japanese share prices closed up 0.61 percent on Friday as the market welcomed an overnight rise in the dollar, which stands to benefit domestic exporters, dealers said.
The Tokyo market finished in positive territory after a topsy-turvy day amid caution as Group of Eight industrial powers' finance chiefs gathered for talks in Osaka.
In London on Friday, the FTSE 100 shares index was weighed down by falling energy stocks, which lost ground owing to falling oil and metals prices.
British oil giant BP shed 1.60 percent to 584.75 pence and rival Royal Dutch Shell declined by 1.40 percent to 2,039 pence.
Anglo-Swiss miner Xstrata gave up 1.75 percent to 4,158 pence and peer BHP Billiton fell by 1.74 percent to 1,812 pence.
Losses on the FTSE were largely offset by gains for heavyweight banking shares. HBOS, the leading provider of home loans in Britain, surged by 13.1 percent to 320 pence, building on Thursday's recovery.
Its stock had slumped on Wednesday after HBOS had attempted to reassure investors about its planned rights issue and trading.
HBOS shareholders will vote later this month on plans for a rights issue totalling 7.9 billion dollars (5.0 billion euros).
The bank is asking investors for extra cash to strengthen its balance sheet after experiencing more heavy credit-crunch writedowns.
HBOS's recovery on Friday lifted its peers, with Royal Bank of Scotland jumping 3.28 percent to 236.5 pence. RBS said on Friday that it had agreed to sell Angel Trains Group, the largest rolling stock leasing company in Britain, to a consortium of investment funds for 3.6 billion pounds (4.5 billion euros, 7.0 billion dollars).
Earlier this week RBS said that its 12 billion-pounds rights issue, aimed at shoring up its finances after huge write-downs and the blockbuster takeover of Dutch bank ABN Amro, had received a take-up rate of more than 95 percent.
Its offer of new shares at a heavily discounted price was the biggest ever rights issue launched in Britain.