LOUVRE REAFFIRMATION NOT ENOUGH - U.K. ANALYSTS
  U.S. And West German reaffirmation of
  support for the Louvre Accord cannot cure the fundamental
  problems bedevilling the world economy which lie behind the
  current collapse in stock markets, London economists said.
      "There's going to have to be some acknowledgement that the
  dollar is going to be allowed to slip," said Richard Jeffrey of
  Hoare Govett. "If not, there is going to be continued fear that
  when pressure emerges on the dollar, the Fed will be forced to
  tighten. This throws up the economic abyss of recession in the
  U.S. With obvious knock on effects on the rest of the world."
      But some economists added that Wall Street's crash, which
  dragged other major markets down with it, may help curb the
  very problems that sparked the turmoil - namely world inflation
  fears and the massive and persistent U.S. Trade deficits.
      "If there is a benefit from a 23 pct fall in Wall Street
  ...It's some sort of resistance to inflation worldwide," said
  Geoffrey Dennis of brokers James Capel, echoing comments from
  other London and Tokyo analysts.
      Lower personal wealth from lower stock prices and fears of
  further falls should dampen credit growth, curbing inflationary
  pressures and import demand in the U.S., They say.
      Such considerations may be helping bond markets resist the
  equity crash, according to Mike Osborne of Kleinwort Grieveson.
      "It would be suicidal for any government in the context of
  what happened in the last couple of days to jack up their
  interest rates," he added.
      Stocks surged after news Chemical Bank cut its prime
  lending rate half a point to 9.25 pct Tuesday and U.S. Fed
  chairman Alan Greenspan pledged support for the financial
  system.
      The news eroded the most immediate fears that the stock
  collapse would spill over into the economy, via a banking
  crisis for example, thus precipitating recession.
      It also helped the dollar rally sharply, to a high of
  1.8200 marks from a European low of 1.7880. But economists said
  today's whiplash moves do not have long term significance and
  that markets should try to keep the underlying fundamentals in
  mind.
      "The United States has been able to live on borrowed time.
  If the effect of this (crash) is to produce slower economic
  growth not recession...It contains good news (and) provides a
  more realistic assessment of the U.S. Economy," said Capel's
  Dennis. But he added that markets are still very much in
  danger.
      "The liquidity doesn't disappear...All it's doing is
  disappearing from the equity markets," Dennis noted.
      David Morrison of Goldman Sachs International said world
  market turbulence will be exacerbated if the Group of Seven
  (G-7) leading western nations confirms a base for the dollar,
  as implied by West German Finance Minister Gerhard
  Stoltenberg's remarks that intervention to support currencies
  is still on.
      Last week's dollar fall was partly triggered by
  expectations that the Germans were more worried about the money
  supply impact of such intervention than maintaining currency
  stability.
      But rigid adherence to dollar ranges would be bad, said
  Morrison. "The Louvre Accord is fundamentally misconceived. To
  stabilise the dollar at too high a level is wrong," he said.
  

