Market briefing---Matt (slow)
NYSE board---Su (fast)
NYSE---Deb (fast)
Currency markets
Interview: IDEAglobal--- Delano, Andrew--- Currency Strategist
>> welcome to “world financial report.” i’m matt nesto. well, tomorrow members of the new york stock exchange vote on a new board of directors. the proposed eight-person board is the centerpiece of interim chairman john reed’s efforts to eliminate conflicts of interest, yet three of the candidates serve on boards of companies which may create a new set of conflicts. su keenan here to straighten it all out. su?
>> well, matt, three of the candidates of the new new york stock exchange board of directors also serve on companies traded on the exchange, which creates a potential list of conflicts. the candidates are marshall carter, a member of honeywell’s board of directors, robert shapiro, who sits on the board of directors for citigroup after being with pharmacia, and shirley jackson, president of rensselaer polytechnic institute and sombs on the board of eight new york stock exchange-traded companies. now, one candidate says the new new york stock exchange board is supposed to oversee regulation of the exchange and its listing standards. she says, “sitting on the board of companies having to meet the standards creates a potential conflict of interest.” the new eight-person board is a key component of john reed’s plan to eliminate the conflicts of interest that were brought to light this past summer when details of former chairman richard grasso’s pay package became public. the board had approved a $1780 million -- $180 million compensation plan, so excessive it led to his ousting. a new york stock exchange member says as part of the rules exchange employees are banned from serving on boards of listed companies and also said the exchange has not yet addressed the issue of whether to impose the same rules on outside directors. tomorrow the exchange’s more than 1,300 members cast their votes, and, matt, we’ll continue to follow the story.
>> i know we will, su. thank you very much for that. well, the dow made a huge recovery late in the day, about 85 points. it still wasn’t enough, though, to push the dow up on the day. it did finish lower. for a look at what moved the markets, we go to deborah kostroun at the big board. deb?
>> once again, matt, we saw the market lower, so for the sixth day in seven we saw it lower. in addition, the overseas markets in asia and europe started out the day low e and that really kind of built the sentiment as we started out. of course as you mentioned we saw the recovery in the last hour of trading. also, concerns about terrorism, you saw the bomb in turkey, some concerns about that really kind of creeping into the market. and that really had an impact on airline stocks . we’ll get to that in just a moment. but according to jack holden with fort washington investment advisors in cleveland, with $26 billion under management, he says a lot of managers have seen pretty good gains of about 20% return. he said that’s a pretty good year given what we’ve had in the last couple years and if you can lock in 20%, that’s not a bad thing. so many traders are focusing in on the fact the week had some pretty good gains. as we look at the rest of this year, only a month and a half left, people really kind of are looking at those gains and smiling about them. the good news was ignored today. take a look at that. we had the empire manufacturing number coming in pretty good, and that tells us the economy is chugging along. the new york state empire manufacturing was actually one of the best we’ve seen in quite some time. and that really kinds of gives us an idea that the i.s.m. number on december 3 will also likely show that ch however, there’s a lot of concern as we get towards the first half of 2004 that we could see things slowing down. however, that’s really kind of very well-known. take a look at the semiconductors. this was one area of the market that was sharply lower. obviously, a lot of nasdaq stocks a part of this. but you had many that were traded at the new york stock exchange sharply lower. you can see many of those stocks lower. and very interesting in today’s market, you had crude oil lower, you had gold the biggest drop in a couple of weeks, however, the dollar was stronger against the euro and the yen, and natural gas was lower. so, typically we do see generally a few things moving up, a few things moving down, but today, generally all lower except the dollar, very strong. back to you in the studio.
>> well put, deborah kostroun. thank you very much. as a courtesy, let’s sum up those market numbers here today that we talked about. the dow and the s&p both down .6%, 57 points for the dow jones industrial average, six for the s&p, and the nasdaq down a full percentage point today, 20-point decline there. new york stock exchange volume right on the six-month average, 1.3 billion. there’s your nasdaq, 1.8 billion. a little less than the average two billion we’ve done in the last six months. wilshire down and also the russell. the bonds are on the rise, the renewed concerns over terrorism particularly pointing to japan as we’ve been discussing, a factor in the treasury markets here today, as it was in the currency markets. the yen also down today. you see your dollar buying less yen this morning―or this is a late trade, so the yen is cutting some of those losses it made during the day, and you see the euro and the pound both up on that particular situation. well, in new york, the yen, as i said, had its biggest drop against the dollar in two weeks after al qaeda said that it might target japan for its role in helping the u.s. in the war against iraq. meanwhile, the dollar gained for the first day in five versus the euro after an index of new york-area manufacturing rose to a record. joining us to discuss all the day’s currency markets and how they impacted things, andrew delano, currency strategist at ideaglobal right here in new york city. andrew, how much of an effect does this terrorism story in japan have on currency markets?
>> there are definitely some tremors from the drop in the nikkei overnight, felt in the exchange rates today, although it seems the japanese yen was not as adversely affected as the nikkei. clearly, i think there is still a burden on the dollar that will play out over longer term. but i would also point out that a lot of the markets that rebounded today or sold off today were ones that had been trendsing for a long time. i think a significant element to what we’ve seen today in gold and currencies has been simply profit-taking rather than a change of fundamentals.
>> so, the long-term or the medium-term forecast for the yen still intact or the dollar weakness still intact?
>> yeah. i think either you accept that the fundamentals have changed, which i don’t believe, or the dollar’s fundamentals have changed. i don’t think either is the case. once this bout of short covering passes, i think the dollar will be beset by quite a few burdens that are on it now. over time, i think we should expect a lower dollar.
>> the new york fed today reporting the empire index, the new york state manufacturing index, at an all-time high. what do you make of that?
>> it’s one more piece of evidence that the recovery is happening quickly and maybe more than expected. but it’s not helping the dollar a great deal. we can look at the weaker dollar and see it’s acting as a form of stimulus, albeit a minor one in helping this recovery gain a little bit of steam.
>> as a strategist, how do you make a forecast when things aren’t performing correctly? the u.s. economy is strengthening, clearly, as you say, yet the dollar is misbehaving.
>> actually, i think the model that’s most appropriate is the balance of payments model. it creates a very compelling argument that the u.s. current accounts deficit which has been discussed add nauseam over the last several months, we see the dollar adhering to the model. going forward, i think that will be one part of what actually corrects this imbalance that policymakers are talking about worldwide.
>> let’s talk about the fed. you talk about policymakers. what is your forecast for rates by the middle and end of next year?
>> we’re looking for fed funds to remain approximately steady until about that time. it looks like the futures market is leaning towards at least early in the second quarter possibly late in the second quarter, but certainly the federal reserve―remarks from fed officials have indicated that there isn’t any concern when it comes to inflation right now that would necessitate jumping the gun, if you will, and tightening that fed funds rate. i think the fed is very pleased to see the recovery finally gaining steam and the labor market with it.
>> andrew delano from ideaglobal right here in new york city. stick with us. we talked about the stocks falling here today, slumping markets in asia and europe down amid concerns over terrorism. and that has sparked speculation in the market that perhaps the stocks have gotten too far ahead of themselves. we’ll take a look at where stocks might be headed, the billion-dollar question, with crit thomas of national city investment management.
