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Although global stock markets have restored a degree of stability, skepticism abounds over what is in store for the months ahead. On Wall Street, worries remain over company profits and the U.S. Federal Reserve’s stated aim to engineer a soft landing. Earnings reports for the January-March quarter, due out next month, will be a major determinant for New York share prices. Once it becomes evident that U.S. corporate profits will bottom out in the April-June quarter, investors will move in, providing a major lift to share prices.

Otherwise, as far as the New York stock market is concerned, things could steadily slide in the months ahead. Investors are also trying to obtain a cue on whether the European Central Bank is willing to cut interest rates, following the lead of the Fed. The Fed has cut its key money market rate by a half percentage point on three occasions so far this year and the ball is now in the ECB’s court.

A widening gap in interest rate differentials between the United States and the euro zone could fuel a shift in investor preference away from U.S. securities and into euro-based instruments. Faced with mad cow and foot-and-mouth diseases, however, the ECB is finding it hard to lower interest rates. The spread of the diseases in the euro zone is threatening to wreak havoc with economic plans. The ECB’s refusal to cut interest rates will no doubt be a real letdown for investors worldwide.

Worries also linger over Japanese economic prospects. Recent developments on the political and economic fronts in Japan have perhaps been perplexing to U.S. and European investors. Although they have rated highly the Bank of Japan’s recent moves to pump more money into the financial markets and keep the economy from sliding into a deflationary spiral, when it comes to Japanese policymakers’ intent to accelerate banks’ disposal of nonperforming loans and provide a floor for falling stock prices, they remain unconvinced. In short, the Tokyo market could take time to stage a strong rally.

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