By Anne D. Picker, International Economist,Econoday
Monday, April 29, 2002

Equities indexes followed here slipped as so-so earnings reports continued to pound down on investors. Economic data didn't help either. Growth in key U.S. indicators eased after their hectic climb and stocks were punished on the news. While some analysts decided that Japan had reached the bottom of its economic decline, investors there found that domestic demand continued to be weak. A bounce from the bottom, such as it is, will rely primarily on increased exports to their number one market - the United States. At times, investors seem to forget that recovery isn't a one-way street upward, rather an ebb and flow as things move onward. All equities indexes followed here declined on the week with the exception of the Nikkei and the Hang Seng.

The currency markets were most responsive to economic news. There suddenly seemed to be a perception of a "dollar problem." Early exuberance about a strong U.S. recovery has changed to concern that U.S. growth won't be as strong as expected. Market participants are worried that the huge U.S. current account deficit may cause problems down the road, especially as overseas markets begin to attract funds at the expense of U.S. investments. This, in turn, would diminish the funds available to offset the enormous U.S. merchandise trade deficit. But despite the pessimism, the U.S. is still likely to see faster growth than most other countries.

Of the Group of Seven countries, only Britain and the United States have released advance first quarter estimates of GDP. Other recently released GDP estimates honed fourth quarter numbers. Both French and German GDP declined while Japan's fell for the third straight quarter. Britain managed to skirt by with no negative growth (39 consecutive quarters of growth and counting), while Canada seems to have rebounded sharply from its one negative quarter. In the United States, a first quarter spike hasn't eased investor worries about the magnitude and longevity of this recovery.

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