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To: Glenn McDougall who wrote (6968)	10/13/1998 10:13:00 PM
From: pat mudge	Respond to of 18016

Global economics: TUESDAY OCTOBER 13 1998 Markets Today Bonds up as IMF hopes rise By Nicholas Leonard <Picture: Graph>Government bonds in the US and Europe went higher on Tuesday, with hopes rising of an early agreement between the White House and Congress on the injection of $18bn into the IMF to back up its efforts to prevent global deflation and avoid a damaging devaluation in Brazil. Lawrence Summers, the deputy treasury secretary, said he expected 'an agreement that everyone can feel good about'. The mood in the EU bond markets was helped by a flow of positive news: benign inflation data in the UK, speculation about Romano Prodi, the former Italian prime minister, reversing his initial refusal to put together another coalition cabinet, and a favourable reaction in Sweden to the 1999 budget proposals. Despite the prospect of further cuts in UK interest rates, the pound was a shade higher against the dollar, helped by reports of a large corporate purchase. There was also some buying of the pound as the one EU currency that will not be in the euro. Dealers in the forex markets said sentiment was still very fragile after the traumatic surge of the yen against the dollar last week. The yen slipped a little lower against the dollar, despite the expectation that parliament will finally approved a bank rescue package by the end of this week. The details of the rescue are still extremely vague. The Fed refused to comment on a plausible UK media report that Alan Greenspan, its chairman, held a conference telephone dialogue with his key policymakers on Friday to pave the way to another cut in short-term US interest rates. The UK retail price indices for September were almost uncannily in line with consensus estimates, with both the headine and underlying annual figures, at 3.2 per cent and 2.5 per cent respectively, showing no year-on-year change from August. Bank of America predicted that short-term rates would be cut by the Bank of England from 7.25 per cent to 7 per cent by the end of this year and further to 5.5 per cent or even less by the end of 1999. However, some analysts were hedging their bets pending the employment and pay data to be released on Wednesday, October 14th. The biggest UK mortgage lender, Halifax, said that house prices in the third quarter were 5.6 per cent up on the same quarter of last year but the increases were now 'levelling off'. Other inflation data on Tuesday included France, where the year-on-year increase was only 0.6 per cent in September and China, where there was a decline of 2.5 per cent in the average rate for the first nine months of this year compared to the same period of 1997. Poland set out a monetary strategy on Tuesday aimed at enabling it to enter the European Union in 2003 and to put its currency, the zloty, into the euro in 2005. It hopes to reduce the current inflation rate of 11.3 per cent to 4 per cent by 2003. Hubert Neiss, the IMF Asia-Pacific director, said that most of the troubled Asian economies would 'bottom out' in the first half of 1999 and return to positive growth in the second half. The IMF expects the key Asian economies, other than Singapore and the Philippines, to show a decline this year. Cristobal Montoro, the Spanish economic minister, said in a media interview that the estimate of growth this year might be raised from the current figure of 3.7 per cent. The third quarter was strong while the first half showed an expansion rate of 3.9 per cent. New car registration figures in western Europe in September were heavily distorted by the timing of the expiry of government incentive measures both in France, where the headline total jumped 33 per cent from the artificially depressed level of September 1997, and in Italy, where there was a fall of almost 17 per cent after the ending of its support scheme. The overall total in western Europe was up 6.9 per cent. The biggest single gain was shown by Mercedes-Benz at 27.3 per cent. There were no surprises in the 1999 budget programmes in Belgium and Sweden. Belgian's budget deficit is projected to be held down to 1.3 per cent of gross domestic product against 1.6 per cent this year. The growth forecast for 1999 has been trimmed from 2.6 per cent to 2.4 per cent. Sweden's economic growth rates for 1998 and 1999 have been tlowered a shade from previous forecasts to 3 per cent in each year, followed by 3.2 per cent in 2000. The German trade union, IG Metall, is putting forward a proposal for metalworking and electrical employers to raise the 1999 pay of 3.4 million workers in those industries by 6.5 per cent, against rises of 1.5 per cent and 2.5 per cent in 1997 and 1998.