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Strategies & Market Trends : Angels of Alchemy -- Ignore unavailable to you. Want to Upgrade?

To: Jim Baker who wrote (3481)	6/25/2000 12:41:00 AM
From: puborectalis	Read Replies (2) \| Respond to of 24256

Avanex (AVNX:Nasdaq - news), a maker of photonic processors that pack streams of data traffic onto a single fiber-optic path. Avanex shares have moved up ever since Gilder pronounced its PowerMux "the single most promising new product in the industry."

To: Jim Baker who wrote (3481)	6/25/2000 4:49:00 AM
From: 2MAR$	Read Replies (2) \| Respond to of 24256

Markets too relaxed on U.S. slowdown -UBS economist By Nick Edwards HONG KONG, June 22 (Reuters) - Equity markets have not adequately priced in the sharp slowdown the U.S. economy faces next year, but the downside risk could be a boon for euro assets, a top economist said on Thursday. ``It is very unlikely to be the soft landing that everybody hopes for where nobody gets hurt,'' George Magnus, global chief economist at UBS Warburg, told reporters. ``It's a much harder landing that the markets are currently discounting,'' he said, adding that his global economic analysis team had overnight revised down its forecast for U.S. Gross Domestic Product (GDP) growth in 2001 to two percent from 3.2 percent previously. UBS Warburg says the U.S. Federal Reserve will hike interest rates by 100 basis points by April 2001 and sees the overnight Fed funds rate at seven percent by the end of this year. The Fed raised rates 50 basis points to 6.5 percent in May. ``What is the point at which financial markets begin to discount this more significantly? I don't know when that will be, but it isn't going to be this summer,'' Magnus said, in Hong Kong to visit clients in Asia. ``It is probably not a bad idea to take a little bit more of a defensive posture to own some reasonably high yielding, highly graded -- in other words triple-A or double-A -- public sector or corporate bonds,'' he added. Magnus said U.S. productivity growth had slowed sharply since the end of 1999 while capital expenditure had overtaken cash flows and internal funds, creating a $100 billion financing gap. That was diminishing investment returns, creating over capacity and risking unproductive investment which would be reined in eventually with painful consequences for Asian economies dependent on U.S. demand for electronics imports. ASIA TO FEEL PAIN ``This can't have a zero impact on Asia... there will be some pain,'' said Magnus, adding that a dramatic U.S. slowdown would drag on global growth. ``I don't think it's going to completely unhinge the global economy -- global growth still looks like it's going to come in at about three percent this year -- but it's significantly below trend,'' Magnus said. He forecasts global growth at 2.5 percent in 2001. High oil prices were also seen as a negative. "People have not taken into account properly that the rise in energy costs, as large as it has been, actually represents a tax on growth and is a charge on productivity. ``I'm guessing, but if global growth slows from 4.5 (percent) to three (percent) over the next year, I would probably say you could trace about a third of that decline to the impact of rising energy costs,'' Magnus said. That downward adjustment would spell a cyclical decline for the U.S. dollar which would see the Japanese yen strengthen to between 92-95 to the greenback over the next six to nine months from about 105 presently, he said. EURO SEEN REBOUNDING It would also trigger a reversal of fortunes for the sagging euro , boosting it past parity to the dollar -- not seen since February -- to 105 by the year end and higher still into 2001, Magnus said. That would open a cyclical window of opportunity for portfolio flows into euro-denominated assets. ``I'm not necessarily saying that European equities are going to go up if U.S. equities are going to go down... but I think the currency kicker is going to be quite an interesting angle for investors,'' Magnus said. And while the immediate outlook for the global economy was dominated by risks, there were encouraging future pointers. The structural backdrop to the global economy was strong, inflation was not a problem, the trade picture was good while globalisation and new technology were also positive. ``The negatives are all about a cyclical end game. From a secular point of view, I'm not very bearish at all,'' Magnus said.