By Anne D. Picker, International Economist,Econoday
Monday, March 11, 2002

Investors surged into the equities markets and the indexes followed here soared as much as 9.9 percent on the week. Only two of these indexes now remain under their December 31, 2001 levels - Nasdaq and Hang Seng. Investors jumped into the overseas markets largely because of the string of favorable U.S. economic news indicating that the recession had ended. This means that exports to the United States should pick up and profits rise. Favorable economic data out of Europe and Asia further helped the outlook for stocks. Arguing that European and Asian equities are not as overpriced as many U.S. stocks, some analysts suggested rebalancing portfolios toward overseas equities. This in turn affected the currency markets, especially dollar/yen.

As expected, the Bank of Canada, Bank of England and European Central Bank maintained their current policy making interest rates:

• The Bank of Canada kept its interest rate at 2 percent and the Bank Rate at 2.25 percent saying that recent information indicates that the overall pace of economic activity in Canada and the United States has been stronger than expected, confirming that a recovery is underway. Inflation remains well within the bank's one to three percent target range.

• The European Central Bank left its policy making interest rate at 3.25 percent. Inflation remains above the ECB target of 2.0 percent at 2.5 percent, and the M3 measure of money supply, the ECB's yardstick of future inflation, expanded 7.9 percent when compared with last year. The ECB's target is 4.5 percent growth.

• The Bank of England kept its policy making interest rate at 4 percent for a fourth month, a signal that policymakers want to see economic growth resume before raising borrowing costs. Britain's economy did not grow at all in the fourth quarter for the first time in a decade. The bank lowered interest rates seven times last year to a 38-year low in a bid to prevent the British from following the Americans, Germans and Japanese into recession.

  
  
  
  

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