To: John Pitera who wrote (3917 ) 5/24/2001 3:01:38 PM From: John Pitera Read Replies (1) | Respond to The Weak Euro and other currencies plus economic downturn in Germany and France should mean weakerInteresting comments yesterday from Dupont, which noted that for the first time since the economic downturn began, demand from Europe had begun to soften . While we have warned about the deepening of US contagion for some time now, we question the extent to which it has been priced into the V-shaped recovery expectations, particularly when considering the overwhelming strength of the dollar. Remember, both Germany and France reported weaker than expected Q1 GDP growth yesterday, leaving the risks for overall 2001 growth to the downside half of global earnings for US multinationals come from Europe. So, while a combination of fiscal and monetary stimulus has fueled the euphoria surrounding recovery expectations here at home, such optimism is not supported by a sharply deteriorating global backdrop . Just for kicks, take a look at the chart of the S&P Chemical Index. The index has performed quite well despite the overall equity carnage we have seen, as its positive correlation with the cyclical indexes supports the faith in the Fed. However, the index has now begun to turn lower after bumping into trendline resistance stemming all the way back to the summer of 1998. Of interest, this resistance fits nicely with the 61.8% retracement of the late-May 1998 to October 2000 decline.
