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

Equities markets continued to be rattled by a myriad of uncertainties. Ongoing concerns about accounting practices spread further beyond Enron with U.S. regulators digging into artificial revenues at other companies. The hope that the market had seen the worst of 'Enronitis' found support in the earlier part of the week. But the continuing blare from Congressional hearings into Enron and its accounting problems once again took a toll on investor confidence, pushing European and American markets lower on Friday. Asian markets, when they were not celebrating the New Year, were buoyed by good news in U.S. retail sales numbers on Wednesday. Market players translated better U.S. consumer data into stronger exports from South Korea, Singapore and Hong Kong. All equities indexes followed here with the exception of the Nasdaq and Toronto composite 300 rose on the week.

EU-15 finance ministers (Ecofin) reached political compromise and avoided a formal budget warning for Germany and Portugal. A statement from the Ecofin Council said it welcomed a commitment by Germany to ensure that its deficit-to-GDP ratio would not breach the 3 percent limit of the EMU Stability and Growth pact. (Ironically, Germany had insisted upon including the debt ceiling in the treaty fearful that others would be tempted to exceed the limit.) The sidestepping of formal budget warnings has called into question the future effectiveness of the Stability and Growth Pact but has been greeted with indifference by financial markets. Still, this may reflect the markets' already deep skepticism about the workings of the pact, doubts that are already priced in.

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