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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: wellab1 who wrote (21102)	7/26/1999 8:39:00 AM
From: Les H	Respond to of 99985

TALK FROM THE TRENCHES: GREENSPAN CLOUD LINGERS 11:26 EDT 07/23 By Isobel Kennedy NEW YORK (MktNews) - As expected, it is still all about Mr. Greenspan. U.S. Treasury prices remain under pressure as the Street tries to analyze his speech while dealing with their long positions. Economists' morning faxes are running about 50/50 on whether the market has overdone the Greenspan sell-off. One new age economist argues that current levels are a buying opportunity because the Greenspan headlines were more bearish than the reality -- which is the FOMC is awaiting more data before deciding on the next course of action. Another says all bets are off because Greenspan warned of an immediate tightening. European analysts say Greenspan talks tough, but Fed forecasts seem to paint a different picture. These forecasts call for U.S. GDP growth of 3.5% to 3.75% in 1999, falling to 2.5% to 3% in 2000. Unemployment was expected to remain in the current range with inflation remaining under control, 2.25% to 2.5% in 1999, 2% to 2.5% in 2000. European analysts suggest these forecasts seem to indicate a maximum 50 bps tightening this year and nothing in 2000. In a Washington Post article earlier this week, Greenspan and crew were said to be comfortable that GDP growth somewhere between 3% and 3.5% would not arouse inflationary pressures. Some analysts suggest if 1999 GDP growth does not meet the forecast and remains below 3.5%, we might not even see the 50 bps move by the end of 2000. Euro zone bonds pared losses slightly overnight, but still remain under the Greenspan cloud. Any recovery has been hindered by bearish German inflation data. Players cited the higher-than-expected German state of Hesse July CPI that triggered a sell-off which sent the September bund contract to 109.31. Hesse CPI rose 0.5% on the month and 0.8% on the year. The acceleration in German inflation was confirmed by the Baden-Wurttemberg July CPI which was up 0.4% on the month and 0.6% on the year. Asian stocks plunged overnight also on Greenspan fears. The dollar continues to weaken against the yen as the markets question the Bank of Japan's ability to keep the yen down. Japanese customers, however, were said to be scooping up cheap U.S. dollars and buying U.S Treasuries. And maybe they are right to do so. Friday, at the Japan Press Club. Economic Planning Agency chief Sakaiya said the April-June GDP figures would be negative and that the second supplementary budget plan would contain the additional JGB issuance. He said he favors the sale of 5-year government notes and reportedly prefers dollar-yen valued less than Y125.00. Back in the good old USA, many would like to stop talking about Mr. Greenspan. But it may be impossible. On Wednesday next week he comes back with the second leg of his Humphrey-Hawkins. What might pop out of that Q&A? sources ask. Lots of trading hurdles lie ahead. Next week is the two-year auction and that will be followed by the employment cost index on Thursday, July 29. The following Aug 4 week, terms of the August refunding of fives, tens and bonds will be announced. Luckily, the actual sales will not take place until after the July employment report on Friday August 6. Speaking of debt sales -- just when Asian and Latam entities seemed to be getting back on their feet, testing the global appetite for re-emerging market debt, things have gone awry. China was downgraded by S&P, Hong Kong's rating was affirmed but left on negative watch and Argentina was given a negative outlook by S&P. And the Argentine government has revised its growth forecast to -3.0% from the previous -1.5%. Can Malaysia's Petronas, Manila Elec, Argentina, Philippines, China Telecom and Brazil really come to market? After all, ever widening spreads in swaps and U.S. agency/corporate paper might affect the planned financings of household names like Wal-Mart and Sun Microsystems, sources say.