Week of uncertainty ahead for US financial markets

Published October 16th, 2000 - 02:00 GMT

US financial markets face a week of uncertainty, at risk of being shaken by weak corporate earnings and number of economic indicators. 

 

Driven practically to their knees the previous week by investor fear of weak corporate earnings, increasing violence in the Middle East and skyrocketing oil prices, the markets made a spectacular recovery on Friday. 

But the rebound does not hide the hazards. 

 

"Superimposing Mideast tensions on a market already reeling from a cascade of earnings warnings sure didn't do much for sentiment," said Merrill Lynch chief economist Bruce Steinberg. 

The specter of oil supply -- with the price per barrel currently at its highest in 10 years -- being interrupted has been thrown into focus with the upsurge of Israeli-Palestinian violence. 

 

But, said Steinberg: "The US economy remains in fundamentally fine shape. Risk of an oil disruption, while still quite low, has gone up and the general level of uncertainty is higher now than just a few days ago." 

"The risk of a hard landing in 2001 is low," he said. 

 

A downward trend in the pace of growth is noted by Abby Joseph Cohen of Goldman Sachs.  

"It would appear that investors' fervent wish of last winter for a less robust economy has been fulfilled," she said. "We believe that economic and profit expansion can persist for longer at the moderate pace we project." 

Joseph Cohen's view is that Standard and Poor's 500 is undervalued by 15 percent. Visible conclusions, at least, to be drawn from performance of S and P 500 are evident in the fact it has been down 6.5 percent since the start of this year. 

 

Salomon Smith Barney analyst Kermit Schoenholtz, meanwhile, notes: "Key global markets are signaling increased worry about a sharp slowdown of economic growth. 

"We have argued that global growth is slowing to cruising speed, and that high oil prices present a marked risk of a sharper deceleration." 

 

Meanwhile, market traders are set to continue cautiously, as the US inflation figures are published Wednesday and the foreign trade figures are issued Thursday. 

They are also awaiting figures from a number of less than pleasant surprises might just be round the corner as companies, among them Citigroup, Chase Manhattan, Ford, IBM, Coca Cola and AOL, release their results. 

 

"Never plan a birthday party in October, because some uninvited guests always seem to show up," is the advice of chief economist and senior market strategist for Bank of America Capital Management Lynn Reaser. 

"October 11 marked the tenth year of the bull market, but concerns over the conflict in the Middle East, possible repercussions of escalating energy prices, and third-quarter warnings cast a pall over the party," she added. – (AFP) 

 

by Marc Braibant 

 

© Agence France Presse 2000 

 

 

© 2000 Mena Report (www.menareport.com)

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