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To: Mark Adams who wrote (104612)	5/24/2001 4:46:23 PM
From: Mark Adams	Respond to of 436258

Euro Bonds down on inflation concerns, yet lower growth (and it's inflation inhibiting properties?) forseen... [B] EU DEBT ALERT: European bonds set new lows for the trend European bonds started the day trading to new lows for the current trend, sent by the fear that inflation in Europe is still rising and by the weakness of the euro in the foreign exchange markets. The new lows reinforce the downtrend signaled by the negative break in prices that was most pronounced on Tuesday and has been reinforced in subsequent sessions. European debt futures trading was limited due to the holiday in Europe to celebrate Ascension Day. European futures brokers claimed that only about 50% of their clients were at their desks. Despite the holiday, major European exchanges were still open for business so U.K., Asian and U.S. investors could still trade European bond and deposit futures. The data and events calendar in Europe has been understandably quiet. Price action in the euro has been the main incentive for trading. With the euro's recent weakness, rumors have started to circulate about European Central Bank (ECB) intervention to support the currency. Thursday's low on euro/dollar was 0.8504 and the low on euro/yen was 101.22. The intervention rumors were only one of the factors that ignited a euro rally. Technical trading and profit taking has sent euro/dollar up from the lows to as high as 0.8609 and euro/yen to an intraday high of 103.24 as of the middle of the afternoon session in Europe. A report in the Financial Times, where U.K. Chancellor of the Exchequer Gordon Brown tacitly criticized the ECB's policy and structure did not have any visible market impact. Data has been limited. Italian consumer confidence for May was 125.4, its fourth rise in succession. From the U.K., the CBI survey showed British industry was still weak, extending the current trend. The May survey showed -24% of manufacturers surveyed reported order books above normal, up from -26 in April. Thursday's most interesting event for sterling-based traders was the U.K. Debt Management Office's auction of 2.5 billion sterling of new medium-term Gilt 5% March 7, 2012. The auction results were as expected. The DMO awarded Gilts at an average yield of 5.15%. The DMO received bids totaling about 6.228 billion sterling for the 2.5 bln GBP offered for a bid-to-cover ratio of 2.49 times. EU EQUITIES ALERT: UBS downs 2001 GDP growth forecasts for EU UBS Warburg has reduced its forecasts for gross domestic product (GDP) growth in the EU area to 2.0% from 2.4% in 2001, following weaker-than-expected German and French Q1 GDP data. "While Q1 euro area GDP is likely to be close to our forecast, the composition of growth points to further weakness to come," UBS says in a special research note. The investment house deems Germany "the main culprit" as it has slashed its estimates for the country's GDP growth to 1.3%, from a previous forecast of 2.0%. However, UBS adds that "France and the Netherlands have also surprised on the downside" and analysts have consequently reduced their 2001 growth forecasts for France and the Netherlands to 2.5%, from 2.7%, and to 2.3%, from 2.8%, respectively. UBS says it does "not expect better news for high frequency data (which is largely industrial sector data) until Q3/Q4 this year." UBS has left its 2002 average GDP growth forecast of 2.6% for the EU area unchanged but has cut its figures to 2.3%, from 2.4%, for Germany, and to 3.0% from 3.4% for the Netherlands. However, France's GDP is now expected to grow by 2.9% in 2002, compared to 2.7% in previous forecasts.