Britain and Europe
Equity markets were not as volatile last week and ended marginally on the plus side. Since the Federal Reserve lowered interest rates on January 3, equity markets have calmed down. TMT's (technology, media and telecommunications) stocks improved, as did some old economy stocks. The London FTSE reacted positively to the possibility of lower interest rates both in the United States and possibly Britain soon.

Investors celebrated the prospect of a cut in domestic interest rates, possibly as soon as the next meeting of the Bank of England's monetary policy committee scheduled for February 7 and 8. The clincher for London was the publication of the January 10 and 11 minutes when rates were left on hold for an 11th successive month. The minutes, however, revealed that the committee voted by the closest possible margin - 5 to 4. The market thinks that a cut after the February meeting is now a very strong prospect.

Asia
Hong Kong, Singapore and South Korean markets were closed for most of the week celebrating the lunar New Year - the year of the snake. The action was in Japan, where the Nikkei continued its slide after a brief recovery last week. Economic data continue to suggest that the economy is perilously weak. (See indicator scoreboard below.) Even the Bank of Japan indicated that it would consider measures other than lowering interest rates to help the economy stay afloat.

New accounting changes take effect in April, requiring banks to calculate their equity holdings on market value rather than purchase value and may force lenders to post bigger losses than expected. Under the new accounting rule, if net hidden gains in banks' security portfolios turn into hidden losses, banks' distributable profit as defined by Japan's commercial code would be reduced.

Traders said the overseas markets seem to be stabilizing with the telecommunications and technology stocks in Hong Kong continuing to benefit from a more stable Nasdaq performance. In addition, the prospect of another rate cut augers well for Hong Kong. Their currency is pegged to the U.S. dollar and U.S. monetary policy is followed by immediate interest rate adjustments here.

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

The Bottom Line   •   Looking Ahead