Bumbling Bankers

  • May 10, 2001
  • Marc Dupee

The European Central Bank took the world by surprise, unexpectedly cutting
interest rates by 25 basis points. One widely monitored survey of economists
showed that 37 of 38 economists surveyed got it wrong, forecasting that
the ECB would leave rates unchanged.

But the move by ECB chief Duisenberg and company shows an abruptness that the
market is interpreting as ineptness. Why would the ECB make such a drastic
change and so suddenly shift their emphasis from inflation prevention to
economic stimulation unless they’re unsure of economic conditions and what
they’re doing? This is the question being asked and puts in doubt the central
bank’s ability to man the helm of the economy to 320 million Europeans. 

For its part, the ECB said it had misinterpreted the M3
money supply and was responding to recent, weak economic data such as Germany’s
biggest decline in factory orders in 10 years and rising unemployment. The Bank
of England and Denmark followed suit in lowering their equivalent short-term
interest rates. 

Euro FX futures
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Swiss francs
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falling in the Chicago open outcry session as
June dollar index futures
(
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last night by registering on the New 10-Day Highs List
— rally.  


Canadian dollars
(
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trigger. 


T-bonds
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global economic recovery and prompt players to shift out of bonds and into
equities. Basis June is down half a point at 101 22/32.

Stock index futures gapped higher but left tails on the highs on the five-minute
charts (showing sellers on the highs of the session) before sinking to fill the
morning gap. The indexes are still positive but trading on their lows of the
session. 

Mentioned as a likelihood in past Futures Recaps and
Trading Outlooks, July wheat
(
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delayed response to a Turtle Soup Plus One Buy
 signal. The gap-up opening resulted in some immediate profit taking but
this contract could follow through after seven consecutive days of
selling. 

In the softs, July sugar
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rallying and trading just below the trigger of a five-day pullback from highs
setup. Coffee
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List, is in the second day of a pullback from a two-month high.