Although signs of economic recovery are still difficult to detect in Japan, the equity market has bounced back as investors have taken encouragement from recent policy changes and bright prospects for electronics giant Sony. UK STOCKMARKET The overall impact of the Budget on the equity market was modest. Because the fiscal relaxation may lead to a deferral of interest rate cuts, it was perceived to favour consumer sectors slightly over manufacturers. However, the latter continue to be supported by the general increase in economic optimism and by a results season that is at least matching expectations. OVERSEAS EQUITIES A 10% rally in the broad TOPIX Index early in March took Japanese equities to their highest level for seven months. Foreign investors were attracted by a modest easing of monetary policy, which took overnight interest rates below 0.1% and contributed to further yen weakness. Sony performed particularly well, following product and restructuring announcements. INTEREST RATES The Bank of England’s Monetary Policy Committee left rates unchanged in March, bringing the five-month run of reductions to an end. A pause may be appropriate to allow time to assess the impact of the recent cuts, but the market consensus view is that rates will fall further before the end of the year. Euro conversion rates: EUR1 = DM1.95583 FFr6.55957 L1936.27 I£0.787564 Fl2.20371 BFr40.3399 LFr40.3399 Pta166.386 Es200.482 ASch13.7603 FM5.94573 EXCHANGE RATES The US dollar lost some of this year’s gains against sterling and the euro in the first half of March as expectations of an imminent interest rate rise receded. The latest release of monthly labour data indicated that wage inflation remains subdued.
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