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MARKETS & DATA – Waiting for the Fed’s next move.

The main concern of the markets in recent weeks has been the growing expectation of a US interest rate rise and, now that this has arrived, further rises are unlikely. But no one is completely certain, says Graeme Johnston. UK STOCKMARKET The All-Share Index surpassed its previous high in the middle of June and a subsequent setback was mostly reversed after the US rate rise. Domestic factors remain supportive of the market, as interest rates continue to fall and the economic outlook brightens. Sentiment was further boosted by corporate activity, most notably a cash bid for Asda and the consummation of the Vodafone/Airtouch merger. OVERSEAS EQUITIES The US market was well prepared for an interest rate rise when it came and reacted positively. The S&P Composite Index hit a new all-time high on the day of the announcement. Bulls of the market argue that a modest increase in rates and moderation of economic growth will serve to prolong rather than derail the recent revival in corporate profits growth. INTEREST RATES The Federal Reserve’s removal of its bias to tighten monetary policy following June’s rate rise was taken by many as a sign that further significant increases are unlikely. However, this ‘neutral’ stance was also in place throughout 1994, when rates doubled from 3% to 6%. If the US economic growth does not slow from the pace of the last three years, then rates are likely to be pushed higher. SURVEYOR: DOWN TOOLS? JUST BROWSING … Ev’rybody art! Working days lost to strikes, 1979 – 29,474,000 Ditto, 1984 – 27,135,000 Ditto, 1989 – 4,128,000 Ditto, 1994 – 278,000 Ditto, 1998 – 282,000 Number of years in history when fewer days have been lost than in 1998 – 2 Source: Office for National Statistics ONE TRACK WEB Total value of paid-for content (subscriptions) on the Internet – $1.4bn Proportion of paid content which is “adult” – 69% Projected annual growth rate of adult content revenues – 26% Companies where employees surf adult sites in work hours – 62% Companies that have taken action against employees for adult surfing – 27% Source: Datamonitor; Elron Software GREECE OILS WHEELS OF COMMERCE Average annual cost of employing a Belgian (highest in Europe) – A41,533 Ditto, Briton (ranked 8th) – A35,439 Ditto, a Greek (second lowest) – A19,080 CEOs rating Greece the worst country in Europe to do business (lowest ranking) – 45% CEOs rating the UK the best country (highest ranking) – 66% Source: William M Mercer; Development Counsellors International But worth every penny Median increase in directors’ total earnings, April 1997 to April 1998 – 8.2% April 1998 to April 1999 – 8.6% Average premium above directors’ median that finance directors earn – 4.1% Workers in manufacturing receiving pay rise over 7.5% (year to end May 1999) – 0.3% Source: Monks Partnership; CBI Tough times at the top Average tenure of a CEO in UK’s top 100 quoted companies – 4yr 1mth Ditto, next 250 quoted companies – 5yr 9mths Ditto, in UK’s top 100 unquoted companies – 9yr 9mths Source: Cranfield School of Management It pays to be big Average payment delay for small firms (t/o less than £1m) – 20 days Ditto, for larger firms (t/o greater than £50m) – 9 days Year-on-year increase in first half bankruptcies among small firms – 14.2% Ditto, large companies – 6.3% Total number of business failures, first half 1999 – 21,287 European SMEs expecting a change of ownership in 1999 – 43% Source: University of Leeds; Dun & Bradstreet; Grant Thornton Telework, telerest and teleplay Workers who’d like to spend half their time in a home office – 41% Employers claiming they manage teleworkers well – 82% Teleworkers claiming to be well-managed – 54% Teleworkers with a computer at home – 99% Computer users who claim to have work interrupted once a day through crashes – 23% Source: Sulzer Infra; Compaq EXCHANGE RATES The view, prevalent last year, that significant yen depreciation was the only means of boosting the Japanese economy is now seldom heard. However, the authorities are concerned that recent signs of economic stability are still too fragile to withstand any currency strength. They intervened heavily in the middle of June to reverse a rise in the yen to 118 against the dollar. Market data supplied by Britannia Asset Management Ltd. Tel. (0141) 248 2000. Expressions of opinion contained within this document are subject to change. Britannia Asset Management Ltd is the holding company of Britannia Investment Managers Ltd (Regulated by IMRO).

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