By Anne D. Picker, International Economist, Econoday
Monday, June 30, 2003

In observance of the Fourth of July holiday in the U.S., International Perspective will be published on Monday afternoon, July 7.

Last Week's Highlights
There were two major central bank meetings last week - the Bank of Japan and the Federal Reserve. The hoopla surrounding the Fed meeting all but drowned out any news from Japan. In any event, on Wednesday, the Bank of Japan refrained from pumping more money into the economy for the first time since Governor Toshihiko Fukui took charge in March. Rising stock prices are helping to ease pressures on policymakers. The monetary policy board left the bank's monthly purchases of government bonds from lenders unchanged at ¥1.2 trillion ($10.2 billion) and kept the upper limit of the reserves it makes available to lenders at ¥30 trillion. The decision was unanimous. The Nikkei has risen over 19 percent from a 20-year low on April 28, boosting hopes that Japan's seven biggest banks will meet forecasts for a return to profit this year. In May, the government agreed to a $17 billion bailout of Resona Holdings Inc., the country's fifth largest bank, after sliding stock prices and bad loan disposals eroded its capital.

The Fed, of course, decided upon a 25 basis point cut to the already low Fed funds rate. The rate now stands at 1 percent. The action itself seemed like an anticlimax after all the histrionics beforehand. The currency market, though, was pleased with the move. The dollar, despite the widening yield gap between EMU and U.S. investments, gained against the euro. The dollar rallied against the yen as well. Investors continue to believe that the Fed is more pro-active in stimulating growth than the ECB.

Equity markets were jittery ahead of the Fed meeting and uninspired afterward. Profit taking from recent sharp gains and end-of-quarter squaring were on investor's radar once the Fed meeting was out of the way. On the week, of the indexes followed here only the Topix was up while the Bolsa was virtually unchanged. With one trading day left in the second quarter, all indexes will enter the new quarter above 2002 year-end levels!

Last Week's Highlights   •   Global Stock Market Indexes   •   Recap of Global Markets   •   Currencies   •  Indicator Scoreboard

The Bottom Line   •   Looking Ahead