18 May 2001, 11:47 HSBC's Oppenheimer sees U.S. slowdown continuing, CAC-40 at 6,500 by yr-end
PARIS (AFX) - The U.S. economic slowdown will continue, said HSBC
Holdings PLC director of strategy Peter Oppenheimer, who is credited
with forecasting in July 1999 the bursting of the technology bubble the
following spring.
In an interview with Le Figaro newspaper, Oppenheimer said the U.S.
is still suffering from the bursting of the bubble, with very little
investment in new technologies, reduced profit margins, and large-scale
lay-offs.
After the years of consumption and over-investment, one is seeing a
large and painful contraction on which monetary policy can only have a
marginal effect, he was quoted as saying.
The fall in the value of shares means that those active in the
economy have heavy debts, which they will have to repay before entering
the markets again, he told the newspaper.
He added that although parts of Europe, like France, have so far
not seen a slowdown, Europe faces a real risk that it will be affected,
because it is so dependent on exports.
Another factor is the poor return on investment for companies which
have invested heavily in the U.S. in recent years, and the drying up of
U.S. investment in Europe.
There is also a risk of the dollar weakening, said Oppenheimer,
which would affect European exports.
For these reasons, HSBC is forecasting a maximum 2 pct growth in
the Euro zone this year, and for Japan, the U.S. and Europe together
only 0.5 pct, the lowest rate since 1982, he was quoted as saying.
Oppenheimer said the ECB's strategy shows that it has fundamentally
different concerns than the Fed, ensuring mainly that boom and bust
cycles are avoided, whereas the Fed is trying to head off a recession,
even at the risk of being inflationist.
He said the bank has been in favour of European markets since
March, after being negative for 18 months.
HSBC thinks that the large European markets could gain between 20
pct and 30 pct in six months, he was quoted as saying.
He added that HSBC sees see a long period of progression which
could last two or three years.
Asked what levels he expects at year end, Oppenheimer said he
predicts the CAC-40 will reach 6,500, the FTSE-100 6,800 and the Dax,
6,700.
As for Nasdaq, HSBC has no illusions, he said, adding that it will
take 10 years for it to reach its former heights.
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