World Markets Seen Facing Jitters Monday (Reuters)

greenspun.com : LUSENET : Unk's Wild Wild West : One Thread

http://dailynews.yahoo.com/h/nm/20010708/bs/markets_global_monday_dc.html

Link

Sunday July 8 11:24 AM ET

World Markets Seen Facing Jitters Monday

By James Saft

LONDON (Reuters) - Global financial markets will come under pressure on Monday, with investor confidence shaky after a wave of U.S. and European corporate profit warnings and potentially destabilizing ructions in Turkey and Latin America.

Analysts said on Sunday that stocks and risky assets such as emerging market and corporate bonds would continue to suffer while safe haven flows buttress government debt and the dollar.

Shares in Europe and the U.S. fell by two to three percent on Friday after data storage giant EMC and microchip maker Advanced Micro Devices Inc. joined a long list of companies warning that earnings would be hurt by a global recession in technology capital expenditure.

Ugly politics in Argentina, an IMF (news - web sites) impasse with Turkey, a Brazilian (news - web sites) currency meltdown, and a trade spat between trading bloc Mercosur's biggest players snowballed into an avalanche of bad news in emerging markets.

``Clearly the equity markets are on a downward spiral,'' said Kirit Shah, chief market strategist at Sanwa International in London.

Stocks in Europe hit three month lows while the U.S. has given up more than half of the gains made in a April and May rally.

``The key concern is corporate earnings, last week we had the first evidence that Europe was as bad as the U.S., perhaps even worse.

``We are also seeing the emerging market risk coming back again -- there is simply less appetite for risk.''

Stocks ended the first week of the third quarter with a sharp selloff on Friday, as a wave of corporate profit warnings dashed hopes that an economic -- and earnings -- turnaround was at hand.

Shorter-term U.S. Treasuries rose and the dollar fell, after a rise in the U.S. jobless rate sent investors rushing to the safety of government debt.

The U.S. jobs report for June, which showed the economy was still struggling, exacerbated fears the long-awaited economic turnaround is not yet in sight.

Leaders from the Group of Seven economic powers issued a cautiously upbeat message on the prospects for pulling through the current global downturn at a weekend meeting in Rome.

U.S. Treasury Secretary Paul O'Neill said the U.S. economy, stalled since the latter half of 2000, could return to a more robust annual two percent rate of expansion by the end of this year and even three percent going into next year.

``Our expectation is that next year we will grow at a rate of something over three percent,'' O'Neill said.

His remarks framed similarly upbeat comments from the other industrial powers but failed to inspire investors.

``The clear risk is that we might see a stabilization in the U.S. and the rest of the world is not recovering quickly enough or strongly enough,'' said Lorenzo Codogno, a strategist at Bank of America.

``This coming week will be very crucial for Argentina and there may be fresh concern about stability in emerging markets,'' he said.

EMERGING MARKET CONTAGION

Turkey has become embroiled in a dispute with the International Monetary Fund over the approval of new loans, though its Economy Minister Kemal Dervis said over the weekend that a resolution might be reached on Monday.

Turkish stocks fell more than 10 percent on Friday and the lira hit a new low.

The loan is crucial for Turkey as part of a $15.7 billion aid package provided by the IMF and the World Bank (news - web sites) to help the country out of a devastating February crisis.

Argentina, meanwhile helped to touch off a region-wide run on Latin American currencies when an intergovernmental spat about provincial spending sparked fears that the government would be unable to implement its economic program.

Significantly, emerging market turmoil in Latin America and Turkey appeared to be spreading to other developing regions, notably eastern Europe.

Although Argentina, Brazil and Turkey have gone through multiple crises in the past year, confidence in the global financial infrastructure has been such that other similar countries have been relatively unscathed.

But a buildup in speculative positions in eastern European markets, combined at the end of last week with a sharp drop in the amount of risk investors were comfortable holding, to send the Polish zloty four percent lower and hurt other currencies in the region.

``There is less appetite for risk,'' said Bank of America's Codogno.

``The dollar is still the favorite currency and investors are still looking for safe assets such as bonds.

``Really the best bet at the moment is cash.''

-- (M@rket.trends), July 08, 2001

Answers

In addition to this article's content, enlightening to me was that "ruction" is a word.

-- David L (bumpkin@dnet.net), July 08, 2001.

Moderation questions? read the FAQ