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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: macavity who wrote (5180)	12/2/2001 10:18:48 AM
From: Hawkmoon	Read Replies (3) \| Respond to of 33421

Will Argentina prove the catalyst that spooks the US markets next week and forces a retreat off that 200 dayMA? Argentines step up run on banks Financial Post - Saturday December 1, 2001 By Thomas Catan Debt fears threaten to explode into a full-blown banking crisis BUENOS AIRES - Domingo Cavallo, Argentina's economy minister, yesterday appealed for calm as nervous Argentines began to step up their withdrawals from banks. Interbank interest rates soared above 500% early in the day as banks faced difficulties meeting increased withdrawals. Talk that the government would be forced to impose capital controls next week to prevent a collapse of the banking system further spurred jitters among Argentines. "Deposits are being withdrawn and there are expectations of a devaluation, and that is terrible," Mr. Cavallo said. He blamed "irresponsible people talking about devaluation" for the fresh wave of worries engulfing the Argentine economy. "People's savings are safe," Mr Cavallo insisted. The government has also moved to restructure much of its US$95-billion in bonds at lower interest rates. Mr. Cavallo yesterday said more than US$40-billion in bonds had been tendered to the local tranche of the debt exchange, which is designed to cut the government's onerous interest payments. Notwithstanding the better-than-expected results from the swap, the country's bonds fell to new lows, with the interest premium on Argentina's borrowing rising rapidly. The country's stock market also fell to 10-year- lows and peso futures rose sharply as investors bet the country would be forced to abandon its 10-year currency peg to the U.S. dollar. For more than a year, investors have feared Argentina would be forced to default on its US$155-billion public-sector debt as a three-year recession showed no signs of abating. Cut off from credit, the country has stayed afloat by pressuring local banks and pension funds to buy government debt. Since June, banks have lost about 15% of their deposits, as crisis-wary Argentines withdrew their savings. In recent days, that process appeared to accelerate, sparking fears that the country's debt crisis was now moving toward a full-blown banking crisis. Yesterday, Fernando de la Rua, Argentina's president, also moved to calm Argentines, insisting that the government would not devalue its currency. However, analysts are increasingly concerned about the erosion of foreign currency reserves that back the country's peg with the dollar. The government recently admitted that international reserves were being used to meet payments on the foreign debt. finance.canada.com