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Strategies & Market Trends : Stock Attack II - A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: JRI who wrote (19187)	9/18/2001 4:06:04 PM
From: stockman_scott	Respond to of 52237

Global Easing Rolls On, Markets Want More Tuesday September 18, 2:56 pm Eastern Time By Knut Engelmann NEW YORK (Reuters) - An unprecedented wave of economic emergency measures helped calm wobbly markets Tuesday as a defiant Wall Street marked the one-week anniversary of terror attacks on the United States with modest gains. In Washington, the White House, Congress and the Federal Reserve huddled together to consider new measures to stimulate the world's biggest economy, which had already lost much of its steam before last week's attacks. But the rebound from Monday's biggest ever point loss in the Dow Jones Industrials average was checked by fears that a looming war could shatter already fragile consumer confidence and push the world economy into recession. Financial markets kept their hopes pinned on economic policymakers to follow up an unprecedented series of interest rate cuts across all major economies with yet more monetary and fiscal stimulus designed to shore up popular sentiment. Fresh data on the U.S. economy supported those hopes, showing muted price pressures in August and a steep drop in retail sales in the wake of last week's terror attacks that suggested consumer spending has already taken a heavy hit. The prospect of lower rates helped to support U.S. stock markets on what was only the second day of trading since hijacked jetliners struck U.S. landmarks. European markets recovered some losses on the back of Wall Street's gains. Meanwhile, a global rate cut campaign rolled on. The Bank of England Tuesday became the final Group of Seven country to slash rates after the Federal Reserve cut borrowing costs by half a percentage point Monday, taking them to their lowest level in 7-1/2 years. All central banks in the Group of Seven leading industrial countries, and a raft of those outside the elite economic club, have eased monetary policy in the past two days. But analysts said the global campaign was unlikely to reverse immediately a slide toward a worldwide recession. In Europe, policymakers warned the outlook for their own economies and the rest of the world was clouded by uncertainty. A raft of companies across the world has issued warnings on results in the wake of the attacks on U.S. cities. ECONOMIC PACKAGE MULLED U.S. lawmakers considered tens of billions of dollars in new economic stimulus and an emergency bailout for the country's teetering airline industry. U.S. Transport Secretary Norman Mineta said he hoped to have an airline package ready for Congress by early next week. Congressional leaders have begun work on an economic stimulus package only days after approving $40 billion in emergency spending. President Bush said the administration could ``work with Congress to come up with an economic stimulus package if need be''. The legislation is expected to include cuts in capital gains taxes and tax breaks for key industries. U.S. transport officials met with airline executives to discuss the desperate industry's request for $24 billion in emergency aid. The attacks closed commercial aviation for two days, caused the introduction of costly new security measures and left many people too frightened to fly, sending airline revenues plunging. U.S. airlines have already announced tens of thousands of layoffs and flight cuts. The industry says that absent a federal government bailout, U.S. commercial airlines may start filing for bankruptcy protection within days. French Finance Minister Laurent Fabius urged his European counterparts to do all they could to reduce interest rates more if the world economy failed to recover from the attacks. ``The economic outlook is markedly less certain and this lack of certainty has been reinforced by the barbarity that recently struck the United States,'' Fabius said in Paris. There was no word as to when finance ministers and central bankers from the world's top economic powers would meet next after a scheduled Sept. 29-30 meeting in Washington was canceled. That gathering was to take place during the annual meetings of the International Monetary Fund and the World Bank, which were called off because of security concerns. WORLD CENTRAL BANKS UNITE Earlier on Tuesday, the Bank of Japan cut its discount rate to 0.10 percent from 0.25 percent and also said it was boosting liquidity into the banking system. The Bank of England cut its key interest rate by a quarter of a percentage point to 4.75 percent at the first emergency meeting the Bank's Monetary Policy Committee has held. ``It is too early to make an informed judgement about the scale of the impact on the UK economy. But the direction of that impact and the associated risks are clear,'' it said. But the relatively modest cut by the Bank of England disappointed the London stock market and blue-chip shares failed to rise significantly from the day's lows. Elsewhere in Europe, markets also remained under pressure amid fear the U.S. would retaliate against last weeks attacks. Tuesday's rate cuts followed Monday's half-percentage point cuts in the federal funds and discount rates by the U.S. Federal Reserve. The European Central Bank, the Bank of Canada, the Swiss National Bank and Sweden's Riksbank made similar cuts in their benchmark interest rates. The head of Australia's central bank ruled out an immediate rate cut, saying he had not seen anything urgent enough to warrant a rate cut between regular board meetings. The next meeting is Oct. 2. The Philippine central bank kept its key overnight interest rates unchanged, despite earlier suggestions it might cut rates, leaving market players disappointed. ``This is unbelievable. The market is extremely disappointed,'' a bond trader from a foreign bank said. FED EXPECTED TO CUT FURTHER Economists expect Monday's Fed rate cut to be followed by further action. That could also herald more cuts on the part of key European central banks. ``With inflation remaining dormant, additional policy prescriptions needed to shore up the economy in the wake of last week's terrorist attacks have just been made easier,'' the head of the U.S. National Association of Manufacturers, Jerry Jasinowski, said. The fed funds has already been cut eight times this year from 6.50 percent, to 3.0 percent now. It has not been under three percent since the halcyon days of the early 1960s, when high growth and low inflation were an everyday fact of life. Earlier on Tuesday, The Bank of Japan stepped into currency markets and bought dollars to help prevent a rise in the Japanese yen that could hurt its already reeling economy. The Japanese won crucial support for their stance from U.S. Treasury Secretary Paul O'Neill, who said Monday the intervention was appropriate for Japan's economy. O'Neill's tacit acceptance stirred speculation the U.S. authorities might set aside their long-standing objections to currency intervention and act to support the dollar should it suffer a disorderly decline.