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

To: Les H who wrote (37895)	1/24/2000 5:16:00 PM
From: Les H	Respond to of 99985

US MOODY'S:'00 SOVEREIGN,CORP CREDIT LOOKS GOOD;INFL BIG RISK WASHINGTON (MktNews) - Moody's ratings agency reported Monday it is "cautiously optimistic" about the prospects for improved overall credit quality of sovereign nations and for corporate borrowers this year, but warns that the greatest risk on the horizon is possible inflation. In its Global Outlook 2000, Moody's says credit trends will likely be boosted by accelerating economic growth and favorable commodity price trends. "Also positive for the credit strength of debt issuers outside the U.S. are rising commodity and product prices, the continued recovery of trade and increasing investor confidence that the worst of the global economic crisis is over," Moody's says. In addition to reporting a general turnaround for both sovereign and corporate credit in 1999, Moody's noted that in the final quarter of 1999 credit rating trends in markets outside the U.S. turned positive with 103 upgrades versus 72 downgrades. The report shows favorable regional trends in Western Europe and Eastern Europe and most impressively in Asia, excluding Japan, where ratings upgrades led downgrades 54 to 28 in 1999. Japan had 12 upgrades and 79 downgrades in 1999, continuing its negative trend, Moody's said. The inflation outlook for 2000 poses "the greatest risk," Moody's analysts said, in that "excessive inflation pressures in the U.S., or throughout the world in general as demand strengthens, might trigger considerable upward pressure on interest rates. That could curtail growth in East Asia as well as Eastern Europe and Latin America." Moody's also noted heavy debt burdens and high levels of non-performing loans as cautioning against an overly optimistic view of some emerging markets. On balance, however, Moody's said, "the most likely scenario must favor a relatively benign economic environment that will be supportive of credit ratings." The analysts said most central banks handled their respective economies well in 1999, "a track record that bodes well for the financial markets this year." The ratings agency pointed to improvement in Italy and Germany, which have lagged recently as signs that better credit quality in the Euro area diminish the likelihood of a liquidity squeeze there. Continued growth in Europe and the U.S. is expected to bolster the recovery in East Asia, and although "Japan is not expected to grow much this year," Moody's says "the government's massive new stimulus package should keep the economy from any sharp decline." Moody's sees a relatively benign credit climate in Latin America, which could provide a backdrop for greater commodity demand, "which, over time, could further strengthen the economic turnarounds presently under way in a number of Latin American nations." economeister.com