By Anne D. Picker, International Economist,Econoday
Monday, February 19, 2001

The markets meandered around for most of last week looking for direction - that is, until Friday when they plummeted on Nortel's disappointing earnings forecast. This only added to the already negative news from other high profile new economy firms. Investors continue to change their minds hourly from optimism to pessimism and back again as each new piece of economic or company news hits the tape. The economic news, for the most part, isn't as bad as might be expected, but companies looking forward are seeing weaker business than they had anticipated only a short time ago.

The Toronto Stock Exchange composite 300 index closed at its lowest level in 13 months. Clobbered by Nortel's earnings warning, the index plummeted 574 points or 6.4 percent on Friday. Nortel, which accounts for 18 percent of the index's weighting, took other like stocks down with it. Investors became frantic worrying about the impact of the U.S. downdraft on the Canadian economy, which up to this point has shown few signs of weakening. The Canadian dollar also felt the pain, dropping to its lowest level in 10 weeks.

The Bank of Japan kept its overall assessment of the nation's economy unchanged in its February Monthly Report, saying the economy continues to recover gradually though the pace is slowing due to decelerating export growth. The bank warned that overseas economic growth might slow further, taking a more cautious view toward the United States and other key export markets for Japan. Politicians and government officials turned up the heat on the nation's central bank, pressing it to cut borrowing costs to shore up the economy. The Bank would prefer growth stimulus to come from restructuring.

The Group of Seven met over the weekend in a 12th century fortress in Palermo, Italy. It was the first G-7 meeting for the new Washington administration, with several participants meeting for the first time. Treasury Secretary Paul O'Neill's statements, as he is ruefully finding out, will be dissected and parsed, looking for changes in the strong dollar and globalization policies compared with the previous administration. Participants' comments suggested the G-7 is not worried that the U.S. slowdown and shrinking Japanese economy will pull down the rest of the world. Currencies, usually a major topic, received cursory attention. The only comment was that the relative values of the yen, euro and dollar were not threatening growth.

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

The Bottom Line   •   Looking Ahead