Ramsey
06-08-2002, Tue 9:07 AM
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EUROPEAN OUTLOOK:
Euro-USD 0.9784 loss 0.0017 dn 0.2%
Stlg-USD 1.5573 loss 0.0039 dn 0.3%
USD-Franc 1.4856 gain 0.0028 up 0.2%
ZURICH (Dow Jones)--European shares will open lower, with euro-zone government bonds expected to notch higher, even though the euro opens slightly weaker.
STOCKS: European shares will open lower as pessimism runs rampant. A European market strategist says even easier monetary policy may fail to cure the malaise.
Major European indices plunged Monday, as investors took money off the table on fears of a double-dip recession.
On top of that gloomy data, investor confidence was dealt another blow Monday by news that U.K. manufacturing production in June slumped a shocking 5.3% compared with the previous month.
"There's now a big question mark over what type of economic recovery we're looking at," said David Thwaites, European strategist at BNP Paribas.
Thwaites said signs of a revival in profits growth is required before any market rally can be sustained. Second-quarter earnings and, more importantly, outlooks haven't inspired a great deal of optimism, he said.
Nevertheless, recent equity market declines and the resulting strain on global economies are now heightening the prospect of interest rate cuts from the U.S. Federal Reserve Open Market Committee, the European Central bank, and the Bank of England.
"But rates alone will not suffice. Government spending will likely crank up to allow an effective reflation of the world economy," said Nomura Securities' Anais Faraj.
BONDS: Euro-zone government bonds are expected to open at least slightly higher in response to another anticipated drubbing for shares.
Euro-zone government bond prices rose Monday as stock markets continued to fall and hopes of rate cuts by Europe's central banks strengthened.
The September bund future was trading at 110.76, up 0.39 from Friday's closing, and dealers said the future may rise to 111.50-112.00 in coming weeks.
"Yields keep falling, as the market hopes that the central banks will soon cut rates. Several banks have started having liquidity problems and everybody fears a credit crunch," said a French dealer.
Dealers said euro-zone bonds could outperform Treasurys in the near term.
"Some think that the ECB could cut rates even before the Fed and, as U.S. supply is very heavy this year, we could see outperformance of euro-zone bonds versus Treasurys, despite the more favorable carry in the U.S.," said a dealer.
FOREX: The euro opens the session on a slightly weaker note that dealers believe marks only a temporary setback.
The dollar firmed against many widely-traded rivals, weathering some weaker-than-expected U.S. data and shrugging off a sinking stock market.
Currency traders said the greenback's firmer tone was partly a result of a clearing out of some speculative market positions that had been betting on a dollar decline. The dollar also drew some cheer from questions about the fragility of economic growth prospects outside the U.S.
"A leading indicator for global growth is the (Australian) dollar and that's been getting pummeled," said Paresh Upadhyaya, currency analyst with Putnam Investments in Boston.
Along with the other so-called `commodity currencies' including the Canadian and New Zealand dollars, the Australian currency has been hurt during the past few trading sessions, as analysts pare back their expectations for global growth in the wake of some disappointing data out of the U.S.
Euro zone economic data, although not as weak, also indicates a fairly lackluster recovery.
One factor chipping away at the euro was the realization that although U.S. equities have been suffering, European stocks' performance has been even more dismal of late.
The U.S. Treasury Department told the International Monetary Fund during an annual review of U.S. economic performance that the government's policy on the dollar remains unchanged.
EUROPEAN OUTLOOK:
Euro-USD 0.9784 loss 0.0017 dn 0.2%
Stlg-USD 1.5573 loss 0.0039 dn 0.3%
USD-Franc 1.4856 gain 0.0028 up 0.2%
ZURICH (Dow Jones)--European shares will open lower, with euro-zone government bonds expected to notch higher, even though the euro opens slightly weaker.
STOCKS: European shares will open lower as pessimism runs rampant. A European market strategist says even easier monetary policy may fail to cure the malaise.
Major European indices plunged Monday, as investors took money off the table on fears of a double-dip recession.
On top of that gloomy data, investor confidence was dealt another blow Monday by news that U.K. manufacturing production in June slumped a shocking 5.3% compared with the previous month.
"There's now a big question mark over what type of economic recovery we're looking at," said David Thwaites, European strategist at BNP Paribas.
Thwaites said signs of a revival in profits growth is required before any market rally can be sustained. Second-quarter earnings and, more importantly, outlooks haven't inspired a great deal of optimism, he said.
Nevertheless, recent equity market declines and the resulting strain on global economies are now heightening the prospect of interest rate cuts from the U.S. Federal Reserve Open Market Committee, the European Central bank, and the Bank of England.
"But rates alone will not suffice. Government spending will likely crank up to allow an effective reflation of the world economy," said Nomura Securities' Anais Faraj.
BONDS: Euro-zone government bonds are expected to open at least slightly higher in response to another anticipated drubbing for shares.
Euro-zone government bond prices rose Monday as stock markets continued to fall and hopes of rate cuts by Europe's central banks strengthened.
The September bund future was trading at 110.76, up 0.39 from Friday's closing, and dealers said the future may rise to 111.50-112.00 in coming weeks.
"Yields keep falling, as the market hopes that the central banks will soon cut rates. Several banks have started having liquidity problems and everybody fears a credit crunch," said a French dealer.
Dealers said euro-zone bonds could outperform Treasurys in the near term.
"Some think that the ECB could cut rates even before the Fed and, as U.S. supply is very heavy this year, we could see outperformance of euro-zone bonds versus Treasurys, despite the more favorable carry in the U.S.," said a dealer.
FOREX: The euro opens the session on a slightly weaker note that dealers believe marks only a temporary setback.
The dollar firmed against many widely-traded rivals, weathering some weaker-than-expected U.S. data and shrugging off a sinking stock market.
Currency traders said the greenback's firmer tone was partly a result of a clearing out of some speculative market positions that had been betting on a dollar decline. The dollar also drew some cheer from questions about the fragility of economic growth prospects outside the U.S.
"A leading indicator for global growth is the (Australian) dollar and that's been getting pummeled," said Paresh Upadhyaya, currency analyst with Putnam Investments in Boston.
Along with the other so-called `commodity currencies' including the Canadian and New Zealand dollars, the Australian currency has been hurt during the past few trading sessions, as analysts pare back their expectations for global growth in the wake of some disappointing data out of the U.S.
Euro zone economic data, although not as weak, also indicates a fairly lackluster recovery.
One factor chipping away at the euro was the realization that although U.S. equities have been suffering, European stocks' performance has been even more dismal of late.
The U.S. Treasury Department told the International Monetary Fund during an annual review of U.S. economic performance that the government's policy on the dollar remains unchanged.