12/4/00
And political undercurrents don't help
Investors and traders were sure happy to see last week end! Markets were down worldwide, with the exception of the Japan Nikkei 225 and Hong Kong Hang Seng. And on the year, only two indexes tracked here - Toronto Stock Exchange composite 300 and the Australia all ordinaries - remain above their January 1, 2000 levels. In the United States, the Nasdaq continued its free fall, down 8.92 percent on the week and 35 percent on the year.
What has investors really worried is the perceived pace of the U.S. economic slowdown. Economies around the world are reliant on their exports to the United States to keep their countries going. And while virtually everyone thought that the United States was growing at an unsustainable rate and was hoping it would cool off, the magnitude of the third quarter slowdown surprised. The equities markets slump has exacerbated these worries.
Political uncertainties continued to addle investors and many are sitting on the sidelines waiting for their resolution. In Japan, prime minister Mori is still hanging on (despite an all time low approval rating of under 20 percent) but the bet is that he will be gone soon so that the ruling liberal democratic party (LDP) can get its act together before the upcoming parliamentary election. Meanwhile, Mori is shuffling his cabinet in efforts to appease his critics. And in the United States resolution to the presidential election is moving with glacial speed.
As expected, the European Central Bank left its key policy making interest rate unchanged at 4.75 percent. Recent comments from officials suggest that the ECB is in no hurry to raise rates again after six moves this year. The ECB's decision to keep rates unchanged followed news of a slowdown in German third quarter growth along with easing EMU money supply growth, which is a sign of reduced inflationary threat. However, the ECB has not yet acknowledged that grow is slowing, but rather continues to focus on rising inflation. The ECB is concerned that inflationary increases related to soaring crude oil prices will translate into larger wage demands in next year's labor contract negotiations. The euro, whose weakness has also contributed to inflationary pressures, has strengthened over the past few days on signs that the gap in growth between the United States and the European Monetary Union may be closing.
Economic growth slows and worries investors
