GUVYCY
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STOCK MARKET
„h All US indices fell heavily last week. Continued fears over tensions in the Middle East and on the India/Pakistan border left investors very nervous and sent indices to their lowest levels this year. The market though was spooked even further after Intel Corp, which has 80 percent of the computer microprocessor market, plunged 19 percent on Friday after the company announced disappointing sales and a considerable reduction in revenue for this quarter. The share price of the industrial company, Tyco Intl Ltd, also plunged after their CEO was ousted and a day later indicted on tax charges. On the economic front, investors will be focusing this week on retail sales and the Federal Reserve¡¦s Beige Book, which gathers anecdotal information on the health of the economy.
„h European indices had their worst week since the Sept. 11 terrorist attacks as investors dumped shares of companies including Nokia and Total Fina on concern the economic recovery is failing to boost corporate earnings. The markets will be focusing this week on a mid-quarter update from Nokia, the world¡¦s biggest mobile phone maker, and industrial production reports due from Germany, France and Italy. Thirteen companies in the Dow Jones Stoxx 50 are trading below the worst levels they reached after Sept 11. even as the US economy, the world¡¦s biggest, grew at a 5.6 percent annual rate in the first quarter.
„h The UK Markets hit new lows in a three-day trading week, with all sectors coming under pressure. TMT and drug stocks though were the main losers. Oil stocks were also under pressure after inventory data from the US and concerns over the global economy pushed crude oil to a six-week low. Also on the slide were the UK¡¦s biggest insurance companies, after finding themselves on the wrong end of stock downgrades to ¡¥underweight¡¦.
„X The Irish market fell last week but outperformed relative to the global equity markets. Elan was one of the heaviest fallers on concerns that the drug-maker is running out of cash. Technology companies, Iona and Riverdeep, were also heavy fallers on the week. Waterford Wedgwood rose after the company indicated that demand for its products are starting to pick up.
„h Japanese markets fell last week but outperformed again relative to their international peers. On the economic front, the eagerly awaited first quarter GDP figures came in at 1.4 percent as exports rose at the fastest pace in 21 years. However, as officials said the worst of the recession is over, spending on equipment fell 3.2 percent after dropping 12 percent in the fourth quarter, raising concerns the economy may shrink again later this year.
„h Index Moves: Dow ¡V3.38%; S&P; ¡V3.71%; NASDAQ ¡V4.97%; DJ STOXX 50 -5.81%; CAC ¡V5.95%; DAX ¡V4.32%; FTSE ¡V3.24%; ISEQ ¡V1.75%; NIKKEI ¡V2.76%; TOPIX ¡V1.83%.
BOND MARKET
„h Equity markets took a battering last week resulting in another strong performance by Treasuries. The fall in stock prices reflected continuing concerns over Leading Corporate integrity coupled with cautious comments from Federal Reserve Chairman Alan Greenspan about the strength of the US economic recovery. In a panel discussion with other central bankers, Greenspan noted that the Fed.¡¦s outlook has not materially changed since January and that the US economy was currently going through a soft spot. Overall, the economic data releases were mixed for the week, reinforcing Greenspans view. On the strong side the ISM manufacturing and non-manufacturing indices were both strong and reflected an expansionary sector. In addition, initial unemployment claims fell below the relevant 400,00 level for the first time in 11 weeks. On the weaker side, consumer spending seems to have slowed in May and sales of domestic motor vehicles also fell. Lastly, the unemployment report on Friday was mixed, with the unemployment rate unexpectedly falling to 5.8% (from 6%) and total non farm payrolls increasing a smaller than expected 41,000 (expected 60,000).
„h In Europe, both the ECB and the MPC left rates unchanged. European Bonds saw gains on the back of weak stock markets, strong US Treasuries and the continued rise of the Euro. However, bonds were held back on stronger than expected Eurozone PPI data. At Thursday¡¦s ECB press conference, Duisenberg extended the theme of upside risks to price stability, though the recent increase in the Euro has interrupted the process.
CURRENCIES
„h The US dollar sank for a ninth week in ten against the Euro. The currency dropped by just under 1 percent to 94.35 cents per Euro. The focus of attention this week again will be whether the dollar will continue to slide and the fate of US stocks may well be the most important factor for the currency this week..
„h Against the Yen, the dollar rose for the first time in four weeks, by 0.1 percent to 124.33 yen, propped up be expectations Japan will sell yen to cheapen its currency. The Bank of Japan has already intervened four times in the past three weeks.
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10 June 2002
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