Monday, November 26, 2001
All equity indexes followed here continued their upward trajectories and rose last week (with the exception of the Paris CAC which slipped slightly). The indexes are rising because investors are getting more confident about a turnaround in the U.S. economy next year. Market players are ignoring tepid to cold earnings reports and economic indicators - in large part because this is "old news." Instead they are focusing on growth prospects from central bank and fiscal stimulus that should kick in by the second half of 2002.
Expectations that interest rates are low enough to revive global economic growth are mounting amid optimism the war in Afghanistan is nearing an end. Falling crude oil prices, which reflect slackening worldwide economic growth, also are cheering investors. Cheaper oil reduces companies' costs and at the same time boosts consumers' purchasing power on both sides of the Atlantic.
Britain, Germany and France reported third quarter gross domestic product last week. Germany's declined slightly for the second straight quarter confirming Ifo survey predictions that growth was stagnant to falling. France surprised with an increase of 0.5 percent thanks to consumer spending, while Britain revised down their preliminary GDP estimate to 0.5 percent from the initial 0.6 percent because of a weaker than estimated service sector. (See indicator scoreboard below.)
The currency markets continue to be more sensitive to current events. The euro dropped to a three and a half month low against the dollar because of comments from European Central Bank board members suggesting there will be no more interest rate cuts. Bundesbank President Ernst Welteke, Bank of France Governor Jean-Claude Trichet and ECB Vice President Christian Noyer all suggested the rate reductions are sufficient for now.
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Getting positive vibes
