Markets slide as Fed judgment awaited

MARKETS around the globe fell yesterday in slim trading, as investors waited for today’s judgment on the US economy by Federal Reserve chairman Alan Greenspan.

As sentiment shifted to a belief that the Greenspan-led Fed will opt to leave interest rates unchanged, share prices fell on most bourses, with the FTSE down by 2.3%, but the index of Irish shares, the ISEQ, was up 0.22%, with small caps dropping marginally.

The US economy is unlikely to fall back into recession and lower interest rates are not needed to foster its recovery, according to a survey of business economists released yesterday. A survey of 193 economists by the National Association for Business Economics in the US found that 69% believe the odds of a so-called double-dip recession are under 50-50. In a March survey, 76% of the respondents viewed odds of a renewed recession as below even. A Fed cut in interest rates could be taken as a sign of weakness and loss of faith in the economy, leading to a wave of selling, which encouraged some investors to take profits yesterday on the small gains over the previous three days’ trading.

In London, dealers said low turnover of 1.3 billion shares had exaggerated share price movements, while analysts said a lack of corporate newsflow added to the downward pressure. “There’s nothing to drive the market forward and whenever there’s been a decent rally, people have sold into it,” said James Laing, fund manager at Aberdeen Asset Management. “We’re not going to see the market rise strongly in August,” he added.

Media stocks bore the brunt of yesterday’s falls. EMI was the biggest faller, dropping more than 7% on talk of weak album sales in Britain, its largest market. Pay-TV operator British Sky Broadcasting and newspaper publisher Daily Mail General Trust group both slid more than 6%. Pearson, the publisher of the Financial Times, and Anglo-Dutch publisher Reed Elsevier were down 5%, while Reuters, the world’s largest supplier of financial information, and advertiser WPP Group were both almost 5% weaker.

Goldman Sachs media analyst Vighnesh Padiachy said the media sector was affected by doubts about the strength of the advertising outlook for next year.

“People are getting concerned about the advertising outlook for 2003, because what we are seeing at the macro level is the scaling back of GDP estimates, commented Padiachy.

Oil stock BP lost 4%, while Shell dipped over 3%, as investors readied themselves for falls in crude prices amid easing Middle East tensions.

In Europe, Frankfurt’s Xetra Dax was down 2.9% and in Paris, the Cac 40 fell %.

In New York, the Dow Industrials ended started 1.6% and the Nasdaq Composite fell 1.4% after the Dow, Nasdaq and S&P 500 all rose about 5% last week. In Tokyo, the Nikkei Average ended down 252 points or 2.5% at 9,747.8.