By Anne D. Picker, International Economist,Econoday
Monday, January 7, 2002

Equities investors recovered from their holiday hangovers and began the New Year with good cheer. Even the euro rallied briefly when the introduction of euro currency appeared to be proceeding smoothly. All equities indexes followed here were up in the abbreviated trading week. With international markets closed for so many days the last two weeks, this will be the first real trading week of the year.

Last year equities markets for the most part were down. It had been a rough year even without the horrific events in September. The good news is that all have recovered smartly from their late September lows, while three managed to end the year on the plus side. The Australian all ordinaries rose 6.5 percent, the South Korean Kospi rebounded 37.5 percent after tumbling 50 percent in 2000, and the Mexican Bolsa, after losing 20 percent the previous year, rose 12.7 percent. U.S. economic performance and market reactions continued to dominate overseas trading.

The U.S. dollar continues to be the currency of choice despite U.S. economic troubles. Even after September 11, currency market players still looked for the U.S. to recover sooner than other economies because of proactive fiscal and monetary policy. The yen, euro, pound sterling and Canadian dollar all lost ground against the dollar during 2001 continuing the pattern of the year 2000.

On Thursday, the European Central Bank as expected left its policy making interest rate at 3.25 percent. The ECB lowered rates four times last year by a total of 150 basis points. The last reduction was in early November, when rates were cut by 50 basis points. Recent policy statements by key ECB officials continue to suggest that last year's rate cuts to stimulate the sagging economy remain sufficient for the foreseeable future. This was further underlined at President Wim Duisenberg's press briefing Thursday where once again he said that ECB monetary policy would be appropriate for some time to come.

One of the ECB's most important responsibilities has been the launch of euro bank notes and coins for use by all EMU country residents on January 1, 2002. At this early date, the exchange of euros for legacy currencies has proceeded relatively smoothly, much to the surprise of euro-skeptics. The initial boost that the euro received from the introduction of currency, however, quickly faded after the ECB left rates unchanged.

Introduction   •   Global Stock Market Indexes   •   Recap of Global Markets   •   Currencies   •  Indicator Scoreboard

The Bottom Line   •   Looking Ahead