Monday, August 12, 2002
Equities rallied last week despite so-so economic data everywhere. Equities rose amid a swirl of opinion whether the Federal Reserve would lower interest rates Tuesday or even indicate a change of bearing in their policy statement. But the increases were far from smooth as volatility continues to wrack markets. Jittery investors are looking for bargains but haven't put aside worries about corporate behavior and the looming SEC deadline for CEOs to certify financial statements. Of the indexes followed here, only two ended the week on the minus side - the South Korean Kospi and the Singapore Straits. The increases in the other indexes ranged from 0.2 percent (the Hong Kong Hang Seng) to 6.5 percent (the Frankfurt DAX).
Both the Reserve Bank of Australia and the Bank of Japan chose to keep monetary policy unchanged. Governor Ian Macfarlane and his eight board colleagues left the target rate for overnight loans between banks at 4.75 percent after 25 basis point increases in May and June. The Reserve Bank can afford to leave rates unchanged because inflation has slowed. The bank aims to keep the annual inflation rate between 2 and 3 percent. The central bank estimated core inflation at 2.5 percent in the second quarter compared with 2.9 percent in the first quarter.
The Bank of Japan, with interest rates at zero, continues to leave monetary policy unchanged in order to keep plenty of cash flowing into the financial system and to help the nation's still fledgling recovery. Although Japan's fragile, export-led economic recovery has yet to spark domestic demand, the government insists the downturn has bottomed out and that signs of better times have appeared. The central bank has kept short-term interest rates at zero for about two years to help revive Japan's economy, which has been trapped in a slowdown for more than a decade.
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Will they or won't they
