Monday, January 14, 2002
Equities markets paused to catch their breath in the first full trading week despite some favorable earnings news and further signs that the U.S. economy is stabilizing. Investors decided to cash in on some of the profits that accumulated in the fourth quarter rally. They also did some beginning of the year portfolio restructuring. All indexes tracked here ended lower on the week with the exception of the Singapore straits times. Alan Greenspan's remarks Friday afternoon hit the newswires after most overseas markets had already closed for the week. He pointed to tentative signs of stabilization in the U.S. economy, although he warned that "significant risks" remain in the near term and it was "premature" to conclude that a recovery had taken hold. Though upbeat, his speech offered no clear signals on the course of U.S. interest rates.
The Bank of England as expected left their policymaking interest rate at 4 percent after their meeting on Thursday. Britain is outperforming other major world economies. Although manufacturing has been in recession for some time now, consumers have remained robust. Manufacturing has been hurt in part because of the relatively high foreign exchange rate for the British pound verses the euro. This makes British goods expensive to Europeans while making European goods relatively cheaper in Britain. The British economy has been thriving on consumer spending and housing, which has benefited from low interest rates - sound familiar? In fact, there are murmurs that if consumer spending and housing don't cool off soon, then an interest rate increase could be in Britain's future. But the two speed economy has created a problem for the Monetary Policy Committee. Consumer exuberance may warrant a rate increase, but it could prove a disaster for the manufacturing sector.
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Mixed signals
