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Monday, June 16, 2003

US Recovery Worries

Preoccupations that the US recovery may not be as 'robust' as anticipated is sending reverberations around the globe. Classical business cycle theory may not be a good guide here.

Japanese stocks fell, causing the Nikkei 225 Stock Average's biggest drop in seven weeks. Exporters such as Sony Corp. slid as a U.S. report on consumer confidence tempered optimism that growth in the world's largest economy will accelerate. The Nikkei lost 140.81, or 1.6 percent, to 8839.83 at the 3 p.m. close in Tokyo. The average's biggest percentage decline since April 25 snapped a three-day, 2.2 percent gain. The Topix index shed 8.77, or 1 percent, to 872.53. Computer-related stocks and automakers accounted for more than two-fifths of its drop.

The Nikkei had rallied 18 percent in the past six weeks on signs the U.S. economy may pick up in coming months. Last week, economists in a Blue Chip Economic Indicators survey raised their growth forecast for the first time in a year. A U.S. jobs report earlier this month showed the world's largest economy lost fewer jobs than some economists expected. "Stocks have gained in anticipation of a U.S. recovery and so far it's all been on expectations,'' said Wee Ban Yew, who helps manage the equivalent of $2.1 billion as a fund manager at OCBC Asset Management Ltd. in Singapore. Unless we can really see consumer confidence turning around, the rally is just speculation.'' He declined to comment on his holdings. Nikkei futures for September delivery fell 1.7 percent to 8830 in Osaka and shed 1.5 percent to 8840 in Singapore. Some 579 billion yen in shares traded, 9 percent less than the daily average for the past three months.
Source: Bloomberg

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