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

To: Lee Lichterman III who wrote (31657)	10/28/1999 9:16:00 AM
From: Lee Lichterman III	Respond to of 99985

INSTANT VIEW-Q3 US GDP up 4.8 pct, ECI up 0.8 pct NEW YORK, Oct 28 (Reuters) - Following are comments from economists and market experts after the U.S. Commerce Department announced an advance estimate of an annualized 4.8 percent Gross Domestic Product (GDP) growth rate and the U.S. Labor Department said its Employment Cost Index (ECI) rose 0.8 percent in the third quarter. GDP grew by an annualized 1.9 percent while the ECI gained 1.1 percent in the prior quarter. Economists polled by Reuters had predicted, on average, 4.7 percent GDP growth and a 0.9 percent ECI increase in the third quarter. The U.S. Treasury 30-year bond, which had been up about 1/2 point, extended gains to a full point after the data. JOSHUA FEINMAN, CHIEF ECONOMIST, DEUTSCHE ASSET MANAGEMENT AMERICAS: ``The bottom line is the ECI is the most important number here and it was very well behaved. It's very good news for the financial markets. The inflation story is very benign. The GDP number showed growth is still strong, but we already knew that. The labor market is very tight. (Weekly) jobless claims were very low. But the inflation story is great and that's reassuring.' PHIL HILL, ECONOMIST, BRIEFING.COM: "It's a pretty strong GDP number but the Employment Cost Index number is pretty friendly. Despite the strong headline growth number -- it's very strong as far final sales, too -- but it's good news because of the productivity implications. We're seeing about a two percent or more growth in the aggregate hours worked index. That can only mean a pretty big productivity number for the quarter. With the benchmark revisions as well, it means productivity is higher than previously estimated. ``The market will react more to the Employment Cost Index. The fed funds contract has improved a little bit, we were 69 percent going into this. We'll have to see what Greenspan says tonight. If they're going to do anything, he's probably going to say something about it tonight.' KEVIN FLANAGAN, MONEY MARKET ECONOMIST, MORGAN STANLEY, DEAN WITTER & CO.: "For the most part, I think the bond market is reacting to the ECI statistics. There were some concerns that you could get about 1.0 percent on a quarter over quarter basis, suggesting pickup in compensation cost pressures. But the market is breathing a sigh of relief. "On GDP, there were estimates that were quite high, above the 5-1/2 percent level. Instead, the GDP inflation measures continue to show a lack of any upward momentum or pressure. The figures don't live up to our worst fears. ``You're seeing a short-covering rally as a result, resulting from an oversold condition in the bond market. The Fed could still tighten, but we were looking for the worst and we didn't get it.' MICHAEL MORAN, CHIEF ECONOMIST, DAIWA SECURITIES AMERICA INC.: "The ECI is the more important figure and I'm viewing it as an exceptionally good figure on labor costs. It's not breaking out of the range that we've seen in the last year or two. It's implying that inflation is still likely to stay in check and that there are no problems emerging on the wage and price side at this time. It could put the Fed on the sidelines. "There's still the October employment report coming out next week which could change the picture. But this was an encouraging report and it will ease concerns at the Federal Reserve. ``The third-quarter GDP looked very good with growth of 4.8 percent. It suggests brisk growth in the economy.' TED AKE, BOND TRADER, FIRST UNION, CHARLOTTE, N.C.: ``This is a nice relief trade. The market was fearing 9/10ths on the ECI. ... The market is feeling this takes the Fed off the table for now. It's taking back some of the negative tone it has put in in the past few weeks. But we still have a lot of data coming out in the next few weeks we need to watch.' A key trading level for Thursday is 112-10/32 resistance on the December bond futures contract, he said. (Note: this article is ``in progress'; there will likely be an update soon.) biz.yahoo.com So basically it wasn't good but it wasn't as bad as we had nightmares about so we are going to rally because although we spilled the milk, thereare a few drops left in the glass. Nuts !!!! Lee