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Stocks, rates and videotape
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September 18, 1998: 5:21 p.m. ET
President's grand jury testimony, global market volatility will rule Wall Street
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NEW YORK (CNNfn) - Battered by global economic turmoil and a gripping sex scandal enveloping Washington, D.C., weary Wall Street investors are bracing for more volatility next week, some analysts said.
Investors are likely to be glued to their TV sets on Monday to watch President Clinton's videotaped grand jury testimony about his affair with former White House intern Monica Lewinsky.
The House Judiciary Committee decided to release the tape at 9 a.m. Monday after a bitter partisan debate dragged on for two days amid heightened calls for Clinton's resignation and a likely impeachment hearing.
"Starting Monday, I think we're going to get into a downturn," said Ken Ducey, vice president and head of trading at BT Brokerage, a division of Banker's Trust in New York. "There's so much confusion in the market. The world economies are in turmoil. Washington is in turmoil. There's too much out there for the market to ignore."
The Dow Jones industrial average closed 21.89 points higher at 7895.66 Friday, with trading fueled by a "triple witching," the simultaneous expiration of stock futures and options that occurs every three months.
World markets have been rattled by interest rates concerns, banking problems, devaluation fears and stock market dives.
In Japan, leaders proposed putting one of the country's largest banks under temporary state control in hopes of stemming the current banking crisis.
Beleaguered Russia halted ruble trading Friday after the currency slipped to record lows. On Thursday, Russia said it would print money to help wipe out old debts.
Stock markets in Tokyo, Sao Paolo and New York tumbled on Thursday as investors worldwide wondered about a global recession.
A look ahead
Much of the world's focus next week will be on whether U.S. interest rates will fall, despite U.S. Federal Reserve Chairman Alan Greenspan's speech this week that negated the possibility of a globally-coordinated easing.
A key question for markets is whether the deepening financial crises around the world are enough for central banks in the Group of Seven industrial nations to cut rates to avert a global recession.
"Markets have now recognized that easier rates require weaker G7 economies to justify them," said Eric Fishwick, international economist at Nikko Europe. "That said, the performance of equity markets over the last couple of days suggests they may well be getting that."
Investors will continue to seek "safe havens" for their assets as they watch Latin America, in particular Brazil, cope with the emerging market wash-out.
"Markets are very wary of event risk, very wary that there is going to be probably a lot more bad news coming out," said Iain Lindsay, head of capital markets at Bank of Montreal in London.
In Russia, plans to print more money could lead to more ruble plunges, said Michael Barr, a Russian markets analyst at Harold Rivkin & Co.
"The situation is dire in Russia," Barr said. (291K WAV) or (291K AIFF)
On Tuesday, Japanese Prime Minister Keizo Obuchi and Clinton will meet in New York, and any solutions to Japan's recession and bad loan problem will certainly help lift world markets.
"The market is looking back to Japan as a major fundamental source of an awful lot of problems in the world," Lindsay said.
And on Thursday, the final figure for the second quarter U.S. Gross Domestic Product (GDP) will be announced. Britain also has second-quarter final GDP numbers due on Thursday, with a forecast for an unchanged 0.5 percent growth.
More uncertainty?
"The market next week is anybody's guess," said Alan Ackerman, senior vice president and market strategist of Fahnstock & Co. in New York. "World nations are watching the United States."
Ackerman said he's confident Greenspan and Treasury Secretary Robert Rubin are doing a good job to calm investors' fears.
While Greenspan this week offered no move to cut interest rates, Ackerman said he thinks a reduction will come by the end of the year.
"The promise of a cut in interest rates before the year's end is a safety net under the market," Ackerman said.
Not everyone is convinced the Clinton videotape will rock Wall Street. Peter Cardillo, director of research at Westfalia Investments, thinks the market has already reacted to the scandal.
"Unless some real news comes out that could accelerate impeachment talks, it's probably already been discounted," Cardillo said. "Big deal, we're going to see the president get angry, say a few curse words." 
-- by staff and wire reports
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