Europe awaits ECB decision

August 25, 2001 Posted: 1427 GMT

LONDON (CNN) -- European markets will be focusing on the European Central Bank this week, as investors hope for a cut in interest rates.

Some analysts say the time is now right for a quarter point reduction in the key lending rate, and eyes will be fixed on the ECB's meeting on Thursday.

If a cut is forthcoming, fund managers say although the European and global economies remain rocky, markets could enjoy a further recovery in the week ahead.

Hans Guenter Redeker, of BNP Paribas, is hopeful rates will go down.

He told CNN: "We believe the time is right because of the recent indication given by the European Central Bank in its monthly report and other statements which suggest they are pretty much satisfied the peak in inflation is behind us.

"The is no inflationary pressure at the moment, given that oil and other raw material prices are declining."

ECB rate cut expected

CNN's Todd Benjamin said: "The ECB acknowledged in its monthly report that the economy has been hit harder than expected by the U.S. slowdown.

"But in general, economists expect a quarter point cut by the ECB in the third quarter and another in the fourth. Some even think a total of 75 basis points is possible by the year's end."

Jeff Currington, of Morley Fund Management, told Reuters news agency: "After a couple of bad weeks, markets are looking for a reason to turn around, and anything positive from a company like [U.S. tech giant] Cisco will help for a start."

Resurgent hopes of a recovery in demand for high-tech goods fueled sharp gains across European markets on Friday.

London's FTSE 100 index rose 1.4 percent to close at 5,471.9 while the CAC 40 in Paris ended up 2.2 percent at 4,916.56.

Frankfurt's Xetra Dax charged 3.1 percent higher to 5,350.02 in late trading, led by a blazing 9 percent gain for Deutsche Telekom.

Fund managers are hopeful the bourses could build on Friday's gains next week, boosted by more solid volumes in share trading as investors and traders return from their holidays.

Morley's Currington told Reuters: "People are beginning to come back to work and they are finding that the leading indicators data in the U.S. and Europe are improving and pointing to the fact that the economy is close to the bottom.

"We haven't got much in the way of earnings, and that's a good thing. It still doesn't take much to put investors off."

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