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To: Defrocked who wrote (7232)	9/30/1998 8:13:00 AM
From: Joseph G.	Read Replies (2) \| Respond to of 86076

Bulls are confused ... why I am not surprised? -g- <<LONDON, Sept 30 (Reuters) - A well-flagged U.S. interest rate cut did little on Wednesday to shake global markets out of their gloom. ''We've been looking at this situation very broadly and concluding that there's a massive amount of wealth destruction in the world,'' said Philippa Malmgren, chief currency strategist at Bankers Trust in London. ''Ultimately that means one could expect to see a rather severe global recession,'' she told Reuters Television. The U.S. Federal Reserve cut its federal funds rate by a modest quarter percentage point to 5.25 percent but investors, traders and analysts have already started to contemplate a whole series of interest rate cuts in the United States and elsewhere. The economic risks are mounting on both sides of the Atlantic as growth forecasts are slashed, corporate earnings fall and consumer confidence crumbles. ''We, and the market, still think there is more to come, although we continue to expect the Fed to do more faster than the market is pricing in,'' U.S. investment bank Chase said. In the United States, another rate cut is already expected later this year, and another one early next. Futures are pricing in a federal funds target of five percent by year end and 4.75 percent in the first quarter of 1999. In Europe, the core countries about to adopt the euro may be cautious but countries with higher-than-average rates such as Italy and Britain are thought likely to ease soon. Japanese rates are already next to nothing. What the world needs after more than a year of market upheaval and deepening financial trouble is an economic powerhouse, and it can't yet see one. ''If the U.S. can't be that engine, then the market turns to Europe. So then the question is can Europe be the engine -- and we have our doubts whether Europe can emerge from all of this unscathed,'' Malmgren of Bankers Trust said. In theory, stocks should be rising on the rate cut as it becomes cheaper for companies to borrow money. Bonds should benefit as long as people think inflation will not be stoked. The dollar should weaken as investors move into higher-yielding currencies, such as the British pound. In reality, few think stock markets will receive the boost they need, bond markets are already at sky-high levels and the dollar had already priced in a potentially larger interest rate reduction. Many simply believe the Fed is not being bold enough. ''Although the Fed's 25 basis point rate cut could eventually appear to be the more prudent policy move, there was some disappointment in the U.S. interest rate and equity markets,'' Banque Paribas told its clients. U.S. blue chip stocks initially fell sharply after the Fed on Tuesday cut its federal funds target to 5.25 percent from 5.50 percent, but left its discount rate unchanged at 5.0 percent. They later recouped some losses. European bourses were broadly lower on Wednesday. Paribas said the dollar's interest rate ''cushion'' was not as damaged as it could have been by the rate cut, and that accounted for its recent resilience. But the trend is mildly bearish. ''After all was said and done, dollar/mark remains within its recent downward sloping range, which looks likely to remain intact over the near term,'' the French bank said. The dollar was at 1.6780 marks, up about a third of a pfennig from late European levels on Tuesday before the Fed cut. Many analysts are suggesting the dollar's fortunes will be more influenced by stock prices than interest rates. The general feeling in markets is one of confusion. Few analysts feel confident enough to make strident predictions about where stocks, bonds or currencies will go.>>