SWISS ANALYSTS SAY MOOD ON MARKETS PRECARIOUS
Today's sharp sell-off of Swiss stocks and
matching falls around Europe may have been overdone, but the
mood on financial markets is precarious, Swiss securities
analysts and economists said.
    Panic selling took Swiss shares down six pct at the opening
on enormous volume, triggered by the slide on Wall Street and
the threat of renewed currency instability.
    "I have never experienced anything like this, and I've been
in the business for 20 years," said Bernhard Wyttenbach, head of
European research at Union Bank of Switzerland.
    The analysts blamed the sell-off in Europe on U.S. Monetary
authorities. This weekend, U.S. Treasury Secretary James Baker
publicly voiced his displeasure with West German monetary
policy. He said the eight-month-old Louvre accord to stabilise
currencies was still working, but added: "On the other hand, we
will not sit back and watch surplus countries jack up interest
rates and squeeze growth on the expectation that the United
States will raise rates."
    Hans Peter Ast of Societe Generale Alsacienne (Sogenal) in
Zurich said: "The situation is very dangerous. Statements by the
U.S. Authorities have fuelled anxiety about interest rates."
    Herbert Fritschi, director of Zurich Cantonal Bank's
financial research department, called the sell-off "overdone,"
but warned that the situation could worsen unless central banks
loosen their monetary policy.
    "I think the trend toward higher interest rates is over," he
said. "The Federal Reserve and the Bundesbank have to step in
with an easy money policy, or else there is going to be an
economic catastrophe. They have to act quickly."
    Wyttenbach said the "Black Monday" sell-off was clearly
exaggerated, with Swiss Reinsurance Co participation
certificates falling 20 pct in value at one point.
    But Wyttenbach said he did not believe that a correction
would come soon. First, the bad news will reach small investors
only in time for tomorrow's market, when there could be
another, smaller selling wave.
    "As soon as the dollar stabilises -- and that's the key --
then we'll get a strong movement upward," Wyttenbach said. But
that may not come soon.
    "People are simply worried that in America, where the market
has now fallen by 18 pct since August, the bull market is over,"
he said. "People are afraid that we'll have a recession in 1988."
    Baker was wrong to blame the West Germans for the current
problems and the weak dollar, Wyttenbach said. "We do not have a
mark problem, we have a dollar problem," he added, but said the
biggest culprit was the new chairman of the U.S. Federal
Reserve Board, Alan Greenspan.
    Wyttenbach recalled that Greenspan had suggested that the
dollar might be too high in the medium term and that interest
rates might have to rise. "As a central banker he shouldn't do
that," Wyttenbach said. "There is a danger that we will fall back
into the 1970s," he said. "We have a real crisis of confidence in
Greenspan. I would much rather have a Volcker."
    Paul Volcker retired as Fed chairman on August 11.
    Cantonal Bank's Fritschi said: "I'm relatively optimistic
because the situation looks too bad. The Fed certainly has to
intervene."
    He said he did not expect the Swiss National Bank to take
any significant steps, adding that the focus of attention
remains on the United States.
    "The panic started in New York, it has to end there."
    The Cantonal Bank sent an advisory to customers suggesting
they not sell into a panicked market, but wait a while before
deciding what to do.
 REUTER
