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Monday, June 7, 2004

WHAT TO WATCH
Will the G-8 Look Beneath the Surface?
By KENNETH N. GILPIN







When the leaders of the Group of 8 industrial nations meet this week, financial markets are likely to be most interested in what isn't discussed.

President Bush will be host for the session, the group's 29th annual meeting, at Sea Island, Ga., from Tuesday through Thursday.

There is always the chance of a surprise, but analysts say the meeting, which will encompass a range of financial and political subjects, will probably include a lot of mutual congratulations about the state of the world economy.

John Lipsky, chief economist at J.P. Morgan Securities, noted that expansive monetary and fiscal policies in many of these countries had bolstered their economies.

"Global growth in the first half of the year will be the strongest in the last 16 or 17 years," he said. "In that sense, the outlook for the principal economies is much better than it was a year ago."

But the markets should pay closer attention to a structural problem, said Stephen Roach, chief economist at Morgan Stanley.

"The big issue they are missing is that imbalances matter," Mr. Roach said. "We have massive trade and budget deficits in the United States and huge surpluses in Asia. I am not trained to wave a wand over these huge imbalances and say this is the way the world works now."

If Mr. Roach had his way, the leaders would focus on two things: "The United States needs to be called to task for running reckless monetary and fiscal policies and fostering an environment that has allowed consumers to live well beyond their means. And the rest of the world has to be called to task for failing to stimulate domestic demand."

By accentuating the positive and ignoring or playing down the negative, he said, the leaders are "whistling past the graveyard."

AN UNPLEASANT REMINDER

On Friday, a day after the summit meeting ends, markets will get their monthly reminder of the depth of the nation's merchandise trade deficit.

Consensus estimates call for a slightly smaller deficit - $44.9 billion for April, compared with $46 billion for March. Matters would be worse if not for the weak dollar, though it does little to ease the nation's reliance on foreign capital to finance its trade bill.

INFLATION UPDATE

The decline in oil prices, among other changes in economic barometers in recent days, has blunted some of the financial markets' concerns about inflation.

Still, the markets will probably react unfavorably if a report due on Friday for May producer prices shows higher-than-expected increases.

The consensus forecast is for a gain of 0.5 percent in the overall Producer Price Index, and an increase of 0.2 percent for the core rate, which excludes prices of food and energy.


YOUR MONEY
Digital Domain: What's Google's Secret Weapon? An Army of Ph.D.'s
By RANDALL STROSS
With a Ph.D.-centered culture, Google has assembled the industry's most unorthodox portfolio of human capital since Microsoft began intense recruiting of computer science majors at top undergraduate schools in the 1980's.

Investing: Is It Time to Lighten Up on American Stocks?
By CONRAD DE AENLLE
Many financial advisers say that it is now sensible for Americans as well as foreigners to be looking for opportunities in stock and bond markets outside the United States.

The Agenda: Walk Away. Keep the Prize.
By PATRICK McGEEHAN
It is not unusual for people to quit their jobs after winning the lottery. But as Mel A. Karmazin's departure from Viacom reminded investors last week, only senior executives can win the jackpot by quitting.

Economic View: Adding Value to Immigrants' Cash
By ELIZABETH BECKER
Money sent back home by immigrants is one of the biggest transfers of wealth from rich countries to poor ones. At the upcoming Group of 8 industrialized nations meeting, leaders will discuss ways to reduce the cost of sending this money home.

More Your Money
Go to Business


IN SUNDAY'S TIMES
Sunday BusinessLockboxes, Iraqi Loot and a Trail to the Fed
By TIMOTHY L. O'BRIEN
Why UBS was hit with the second-largest penalty ever levied by the Federal Reserve.
Go to Your Money

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FROM THE GLOSSARY
Spot Price
The current market price of the actual physical commodity. Also called cash price.
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ECONOMIC CALENDAR:
JUNE 7 TO 11


Monday, June 7
3 p.m. April Consumer Credit. Last: $5.7 Billion

Tuesday, June 8
7:45 a.m. ICS-UBS Store Sales Index for June 5 Week. Last: -0.5 percent
8:55 a.m. Redbook Retail Sales for June 5 Week. Last: 0.5 percent
9:15 a.m. Federal Reserve Chairman Alan Greenspan participates in an International Monetary Conference panel discussion via satellite.

Wednesday, June 9
10 a.m. April Wholesale Trade. Last: 0.6 percent

Thursday, June 10
7:30 a.m. Initial Jobless Claims for June 5 Week. Last: -6,000
8:30 a.m. May Import Prices. Last: 0.2 percent
10 a.m. Federal Reserve Chairman Alan Greenspan testifies before the U.S. Senate Banking Committee on his renomination.

Friday, June 11
8:30 a.m. April Trade Deficit. Last: $45.96 Billion
8:30 a.m. May Producer Price Index. Last: 0.7 percent
8:30 a.m. May Producer Price Index Ex-Food and Energy. Last: 0.2 percent
9:45 a.m. June Preliminary University of Michigan Sentiment. Last: 94.2

Source: Dow Jones
READERS' OPINIONS
News From the Markets
With the latest strong jobs report, analysts expect the Federal Reserve to increase interest rates at the end of June? Is this the right time?

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