Econ Paper 1

This essay has a total of 583 words and 3 pages.

Econ Paper 1

Lagging Earnings, Interest Rates Make Year-End Rally Unlikely

Many European fund managers aren’t going to find anything good this Christmas to be merry about. In most years, particularly lackluster ones, there seems to always be the year-end rally that puts the fund managers performance up to the standard. And makes the woes of the year’s financial problems on either side of the Atlantic a little easier to swallow. To be sure, this hasn't been a year for the books. The DJ Stoxx 50 has inched up a miserly 0.8%, and the DJ Stoxx index is down 0.5%, with European stocks largely stuck in a trading range since March. Some investors had been hoping summertime concerns over interest-rate increases and disappointing corporate earnings might dissipate in the autumn, but the fourth quarter has so far squelched such expectations.
“Year-end rallies are very popular,” says George Hodgson, a European equity strategist for ABN Amro in London. "People think that they always happen and are bound to happen, especially this year because of the dull start to the fourth quarter. But they are more notable for their absence than anything else."
From what I gather, the main concern is the interest rates. Many had been hoping that by the end of the year, there would be a possible rate cut in early 2001. But instead, experts expect the rates to continue to rise into early first quarter of next year. In turn, this is smothering the European equity markets and is putting upward pressure on bond yields. The central banks are greatly surprised by inflation and aren’t in any rush to cut the rates. Acutally, when the U.S. Federal Reserve meets this week, it is expected that they are going to r

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