Markets continue to disappoint

USA

The U.S. market initially tumbled 4% on the weaker ISM Index and the higher job reduction data. But, the declining pattern was broken on Friday by the better-than-expected employment report and a smaller-than-expected reduction in Intel's 3Q sales forecast.

One area that we can remain relatively more upbeat about is oil sector. Oil futures briefly breached the $30 level on Friday as developments between the U.S. and Iraq rekindled concern of a possible supply disruption.

In addition, highlighting the supply side, the American Petroleum Institute reported that U.S. oil inventory was declining, currently falling below the 5-year average.


Europe

Economic news disappointed recently. But, markets later recouped some losses on the back of the U.S. employment report and good corporate news from Nokia and Vivendi Universal. Nokia (+4.5%) launched new handsets with color screen, video camera, and video player last Friday. Vivendi Universal (+3.1%) is in talks to sell its publishing unit that could raise $5 billion.

Investors are still sceptical over the cyclical recovery amid weak macro newsflow.

Japan

Recent data suggests that domestic demand is weaker than previously expected and is exerting rising deflationary pressure. MoF's 3Q survey also showed that corporate sentiment of large firms weakened for the first time in three quarters.

This suggests that the economic recovery is losing momentum. Under the increased deflationary scenario, forecasts of real consumption and private capital investment in FY 2003 have been revised down to modest declines. Industrial production has been revised down to flat growth.

The government is likely to announce its stock market policy around 20 September. While cross-shareholding activities should be minimal at the currently low market levels, buying interest remains weak.