By Anne D. Picker, International Economist,Econoday
Monday, October 15, 2001

Equities markets succeeded in recouping all or most of their losses one month after September 11, but they continue to follow the ups and downs of developments. Biological warfare added to investors' insecurities after cases of anthrax turned up in Florida and New York. All indexes followed here (except the Hong Kong Hang Seng which barely broke even last week) rose for the third straight week. The dollar also rose as investors large and small regained some confidence after the launching of U.S. attacks against Afghanistan, which have yet to be followed by reprisals from the terrorists. The markets appear to have accepted bad news and are looking to move onward and hopefully upward.

The European Central Bank left their policymaking interest rate at 3.75 percent. Prior to the meeting, the ECB had been suggesting they wouldn't rush to lower borrowing costs again to spur the economy. This was pretty much confirmed during the press briefing that followed Thursday's meeting. Despite gathering economic storm clouds, the bank seems to be returning to its more cautious role as inflation fighter. The ECB is probably waiting for September price figures and a key business confidence report this week, as they look for more proof that inflation is under control before cutting rates. The ECB cut rates 50 basis points on September 17, moving in concert with the U.S. Federal Reserve to shore up consumer and business confidence after the terrorist attacks in New York and Washington. But, like last Thursday, the ECB left its key rate untouched at its September 27 meeting. Rate cuts stimulate growth by making it cheaper for companies to borrow and expand, but also risk driving prices higher.

The Bank of Japan's Monetary Policy Board met Thursday and Friday - the first time since it eased policy shortly after the terror attacks. As expected the board left rates unchanged. Bank Governor Masaru Hayami warned parliament that an excessively loose monetary policy could lead to a dangerous bout of inflation. The Bank of Japan is preferring to wait for clearer signs that Prime Minister Junichiro Koizumi will push ahead with plans to curb state borrowing and force banks to write off bad loans before boosting money supply. Hayami is running out of ways to help pull the Japanese economy out of recession. And this lack of options hampers the bank's ability to cushion Japan from the loss of exports to the United States, which has suffered a disruption in business and a slowdown in consumer spending.

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

The Bottom Line   •   Looking Ahead