By Anne D. Picker, International Economist,Econoday
Monday, March 18, 2002

Equities markets followed here eased back on profit taking after exuberant increases the prior week. The indexes were mixed on the week with eight indexes down and five continuing their upward trajectory. Investors reassessed their positions and in many cases, decided to take profits. Export dependent countries continue to use U.S. economic indicators to target their own growth. Despite positive U.S. economic data and appreciation for U.S. stocks, the dollar has weakened of late.

As expected OPEC left production quotas at their current levels to offset seasonal slowing of demand during the European and U.S. spring. Quotas will be considered again at the June meeting. OPEC president Rilwanu Lukman of Nigeria said that prices had to top $28 a barrel before members would reverse output cuts that already have lifted prices by about 24 percent this year. He said that the range for oil prices is between $22 and $28. Why should output be increased if the price is not above $28? OPEC nations from Venezuela to Saudi Arabia are seeking higher prices to shore up state budgets that rely on oil sales for as much as 90 percent of revenue. Higher prices could hurt the nascent economic recoveries in the United States, Europe and Asia by raising inflationary pressures. Below is a graph that shows the impact of the last run up in oil prices on the harmonized index of consumer prices (HICP) in the European Monetary Union.

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