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

To: sidney-8 who wrote (46529)	4/15/2000 4:44:00 PM
From: Crimson Ghost	Read Replies (1) \| Respond to of 99985

Does this sound like fear or capitulation? Talk about putting on a happy face! Stocks Slide May Rebalance World Economy Filed at 4:12 p.m. ET By Reuters WASHINGTON (Reuters) - A dose of stock market pain may bring global economic gain, as long as this week's slide on Wall Street does not become a rout and trigger a hard landing for the U.S. economy, policymakers and analysts said on Saturday. World financial leaders meeting here were not fazed by the selloff in highly-valued U.S. stocks. They expressed hopes that the tumble would help correct imbalances in the world economy. ``It's not surprising,' French Finance Minister Laurent Fabius said, adding that the long-running bull market could not have charged on for ever. ``Trees can't reach the sky.' Finance ministers from the Group of Seven rich nations were expected to discuss, but not commenting on in their communique, short-term stock market moves which saw Wall Street's key indices post record points falls on Friday, officials said. The Dow Jones industrial average fell by nearly six percent while the technology-heavy Nasdaq composite dived by 10 percent, putting the two indices 12 percent and 34 percent off their year highs. Stock prices slid on data showing signs U.S. inflation could take off, which stoked speculation the Federal Reserve could become more aggressive in raising U.S. interest rates. RESTORING GLOBAL BALANCE But with signs that Europe's growth is picking up strongly, stronger exports could provide a new pillar for the U.S. economy as domestic demand -- fuelled by a ``wealth effect' generated by stock market and property prices -- starts to ebb. ``We can be optimistic about a soft landing in the United States because of stronger growth in Europe,' German Finance Minister Hans Eichel said. France's Fabius was also sanguine, telling reporters: 'There's no risk of a crash for the European bourses.' Ernst Welteke, president of Germany's central Bundesbank and a key player in the European Central Bank, predicted that growth in the euro zone would overtake the pace of economic expansion in the United States next year. That matches the view in the IMF's latest World Economic Outlook, which sees U.S. growth slowing to 3.0 percent in 2001 after 4.3 percent this year, while euro zone growth holds steady over the two-year period at an annual 3.2 percent. Welteke said Germany's stock market capitalization as a share of economic output was much smaller than that in the United States, making the real economy less vulnerable to market gyrations. ``We can look at the whole thing in a more relaxed way,' he said. One G7 source said there was a widespread view that the stock market correction was beneficial as long as it did not harm the real economy and took place in an orderly way. PRESSURE EASED ON CENTRAL BANKS No comment on the likely impact of stock market developments was immediately available from the International Monetary Fund, which is hosting its spring meetings in Washington this weekend. But one private sector economist said the market tumble could actually create some leeway for leading central banks to slow down their current cycle of interest rate increases. ``This is a blessing in disguise for the U.S. if it does hamper growth without the Fed having to bludgeon the economy,'said Anthony Chan, managing director and chief economist at Banc One Investment Advisors. ``If it has a slight dampening impact on European growth then that will make things easier for the ECB,' Chan said. He added that Japan's strong hints that it may abandon its 14-month-old zero interest rate policy sooner rather than later would end up ``on the back burner'.