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MARKETS & DATA – Asian shadows lengthen.

UK stockmarket[QQ] A profits warning from ICI provided a dramatic start to the interim reporting period, during which institutional investors have lowered their forecasts of profits growth to around 5% for both this year and next. The All-Share Index peaked in the middle of July, just before the start of the results season, but fell over 10% within a month. Interest rates Concerns about the possibility of further rate rises in the UK have been easing in tandem with a growing belief that economic growth is slowing. However, in its latest Inflation Report, the Bank of England indicates that it believes that the risks to its inflation forecast are still upwards. The fall in three-month interbank rates, from 7.9% to 7.7%, does not indicate any expectation of an imminent cut in official rates. Overseas equities US and European markets suffered similar falls to the UK and again the outlook for profits was crucial. Second quarter operating profits in the US were only about 3% higher than in 1997, though first-half earnings in continental Europe proved more robust. Of more concern is the perception that current growth forecasts are increasingly threatened by Asia’s economic problems. Exchange rates Investors have become rapidly disillusioned with the new Japanese government and its willingness to tackle the country’s economic problems. The yen weakened, losing the gains made since the US intervened to support it in June. This has led to fears of another destabilising round of currency depreciation in Asia, and that China and Hong Kong may be affected this time.

 SURVEYOR: GOING DOWN, LOOKING UP Talking up a slump Daily average number of UK press articles mentioning "recession", January 1998                                             17.6 Ditto, July 1998                                                      46.9 Increase in daily average, January - July 1998                        166% Source: Reuters Business Briefing  "Big money, big prizes - I like it!" Total annual sales of top 50 multinationals             $3,244,850,000,000 Number of US companies in the top 10                 3 (ave sales: $138bn) Ditto, Japanese companies                            5 (ave sales: $120bn) Ditto, UK companies                                  2 (ave sales: $124bn) Source: Waterflow Specialist Information Publishing (0171) 324 2340  He who pays the piper ... Average base salary for chief executives in top 20 US companies                                                   £760,000 Ditto for UK companies                                            £549,000 Salary of Wim Duisenberg, president of the European Central Bank                                             £152,000 Source: WM Mercer; European Commission  ... calls the toon Number of US CEOs sitting on share option gains worth more than $50m                                                          46 Disney CEO Michael Eisner's share option gains                       $600m Average value of share options for CEOs in top 20 UK companies                                                 £1.4m* *Excluding SmithKline Beecham's Jan Leschley with unexercised gain of £52m+ Source: WM Mercer (0171) 222 9121  Recession watch Number of times since the last recession that cancelled orders exceeded goods and services bought in 1998)                                          2 (Q4 1995 and Q2 Number of months to July that a Chartered Institute of Purchasing and Supply report shows the manufacturing sector contracting                                         4 Months since CIPS purchasing managers index fell as low as in July 1998                                         70 (Sept 1992) Source: Chartered Institute of Purchasing and Supply  Chips with everything Market price of the microchips made by Siemens's £1bn Tyneside plant when it first opened in 1995                            $50 Ditto, today                                                  less than $1 The plant's annual losses                                            £150m Source: Financial Times  Timewatch (18/8/98) Number of days until shop staff have to explain to tourists why they can't get euro change for euro travellers cheques             135 Number of days until people start saying: "Of course, the millennium doesn't really start until next year"                       500 Market data supplied by Britannia Investment Managers. Tel. (0141) 248 2000. Expressions of opinion contained within this document are subject to change. Britannia Investment Managers Limited is regulated in the conduct of investment business by IMRO. Sources: Yield curves: Bloomberg; other charts: Datastream/ICV

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