There was a article in the guardian (yesterday?) that said the reduction in
US interest rate by the fed was due to the possible breakdown in our banking
system? I didn't understand it all, but apparently the Bank of America is
in serious trouble and may go bankrupt? Any ideas on this?
-Nico
-----Original Message-----
From: [EMAIL PROTECTED]
[mailto:[EMAIL PROTECTED]] On Behalf Of Charles Brown
Sent: Friday, January 05, 2001 12:49 PM
To: [EMAIL PROTECTED]
Subject: [PEN-L:6668] Slowdown
By Peronet Despeignes in Washington, Ed Crooks in London and Tony Barber in
Frankfurt
Published: January 4 2001 14:25GMT | Last Updated: January 5 2001 00:09GMT
The euphoria following the surprise interest rate cut from the Federal
Reserve faded
on Thursday as more indications appeared of the growing weakness of the US
economy.
The International Monetary Fund contributed to the gloom by saying it
planned to
reduce "meaningfully" its forecast for global growth.
Stock markets held on to their gains of the previous day, but made no
further
progress. In early afternoon trading both the Dow Jones index and the Nasdaq
were
slightly lower. The dollar slipped back against the euro, which rose back
above 95c
during the day.
Futures markets moved to price in a further 1.25 percentage point cut in the
Federal
funds rate from its current 6 per cent by next August.
Further signs of the US economic slowdown came in a surge in corporate
layoffs and
in demand for unemployment benefits, and a sharp drop in a principal
indicator of
activity in the nation's service sector.
The National Association of Purchasing Management said its index of
service-sector
activity slid to its lowest level in a year, from 58.5 to 53. The indicator
suggests
that growth in the service sector, which has so far offset the contraction
in
manufacturing, persists but at a much slower pace than a few months ago.
The Chicago-based international outplacement firm Challenger, Gray &
Christmas said
its monthly estimate of layoffs among top US corporations tripled from
44,152 in
November to 133,713 in December, with the bulk of the rise coming from
retailers and
auto companies
And the Labor Department said initial weekly claims on unemployment
insurance rose
to 375,000 in the week ending December 30: their highest level since July
1998. The
figures showed the sharpest increases in and around the Midwest, the
industrial
heartland of the US.
Unemployment insurance claims have risen fastest more quickly than in any
seven-month period since the 1990-1991 recession, although the official
unemployment
rate has risen only slightly.
Some economists have speculated that the urgency shown by the Fed in making
a
surprise rate cut ahead of the scheduled open market committee meeting on
January
30-31 may have been because policymakers had early access to the December
unemployment figures, which are due for release on Friday.
Michael Mussa, the IMF's chief economist, said he thought the chance of a
sharp
global slowdown was remote. But he said he thought the IMF's latest
forecasts, made
last year, were now over-optimistic.
He said: "The data in recent weeks suggest some general slowing across the
global
economy, most pronounced in the US and Japan, and signs of slowing among the
large
economies of Europe", he said.
The European Central Bank on Thursday kept its main interest rate unchanged
at 4.75
per cent, in line with market expectations.
The ECB is concerned about the potential inflationary impact of last year's
high oil
prices and the euro's weakness, and wants to monitor forthcoming wage
settlements in
the euro-zone carefully. But economists said the ECB might cut rates as
early as
February or March, especially if policymakers accept the Fed's analysis that
the US
is at risk of falling into a sharp downturn.
__________________________________________________
Do You Yahoo!?
Talk to your friends online with Yahoo! Messenger.
http://im.yahoo.com
