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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (7115)	5/26/2004 12:52:04 PM
From: mishedlo	Respond to of 116555

European govt bonds higher as equities falter Wednesday, May 26, 2004 3:37:45 PM LONDON (AFX) - European government bonds rose as equity prices faltered following a weaker-than-expected result in the US durable goods orders data for April The leading index of German shares retreated from levels above 3900 while in New York the Dow Jones Industrial Average opened to falls "The weak US data, and softer share prices are helping bonds," said Peter Fertig, analyst at Dresdner Bank Durable goods orders plummeted by the fastest rate in 19 months in April, partly reversing two months of stunning gains. Orders slumped 2.9 pct, the sharpest drop since Sept 2002, after gains of 3.9 pct in February and 5.7 pct in March Analysts had pencilled in a smaller 0.8 pct decline. The data dampened somewhat market expectations of a June rate hike in the US The report helped "calm market fears that the US economy is overheating and the Fed is behind the curve," said Michael Woolfolk at the Bank of New York US Treasuries were also higher after the news Separately, a well received 9 bln eur German bund auction and a strong performance by the euro also helped fuel demand for eurozone government bonds Despite the day's rises, bond prices are still stuck in a narrow range and these levels are unlikely to be breached at least until the key US labour market report next week, said Fertig. Many believe the data will have to come in very strong indeed to force the rate setting Federal Reserve into a rate increase In the UK, gilts were also higher, partly in relief that UK first quarter GDP growth was not revised up GDP growth was left unchanged at 0.6 pct from the previous quarter for a 3.0 pct year-on-year rise But RBoS economist, Ross Walker said the Bank of England "will probably continue to view the 0.6 pct outturn with a degree of suspicion and expect a rebound in growth in Q2." This in turn means that the chances of more UK rate hikes have not diminished. The Bank has already raised its benchmark repo rate three times since November -- each time by a quarter point. fxstreet.com