[A-List] Thus spoke O'Neill

[Sabri Oncu <soncu@xxxxxxxxxxx>]

Top Financial News


06/15 13:58
Treasury's O'Neill Sees U.S. Stocks Reversing Decline (Update1)
By Brendan Murray


Halifax, Nova Scotia, June 15 (Bloomberg) -- U.S. stock markets
will reverse a recent slide soon, reflecting the strength of the
country's economic recovery, U.S. Treasury Secretary Paul O'Neill
said.

"Eventually it will go back up, maybe sooner rather than later,"
O'Neill said in a briefing with reporters after a meeting of
finance ministers from the Group of Seven industrial countries.

Yesterday, the Dow Jones Industrial Average fell as much as 242
points before closing down 28 points at 9474.2. The Dow is down
more than 5 percent on the year. The Treasury secretary said he
can't fathom the reasons for such large swings.

"How do you explain that kind of movement? It's beyond me," he
said. "The important thing is the fundamentals of what's going on
in the real economy, which I continue to believe are quite good,
and eventually the markets will reflect the underlying strength
in the economy."

The recent declines indicate there are "more sellers than
buyers," O'Neill said. "I don't worry about things I can't do
anything about."

He suggested the threat of another terrorist attack in the U.S.
may be undermining investor and consumer confidence, a possible
reason for the drop in equities.

"One cloud, and it's not just a cloud for the market, is the
cloud over how people feel," O'Neill said. "Something like 80
percent of the American people are concerned about another
terrorist event, and that has a weight and it affects how people
feel."

Arthur Andersen, Trade

Asked about the guilty verdict returned today against Arthur
Andersen LLP, he said the weakness in investor confidence
stemming from the bankruptcy of Enron Corp. probably will be
short-lived.

Cases of corporate malfeasance "have a weight as well, but part
of the weight is over-weighted because I think the specific
instances are not the general case," he said.

During today's meeting, the G-7 didn't discuss the growing U.S.
current account deficit, an imbalance the International Monetary
Fund and many European officials have cited as a potential risk
to global growth.

"No one ever said anything about the current account deficit in
the meeting," he said.

Nor did U.S. steel tariffs or farm subsidies emerge as a topic
during the meeting, he said.

Japan, Dollar

Although a front-page headline in today's Toronto's Globe and
Mail said Canadian Finance Minister John Manley "fired a salvo"
at the U.S. over expanded subsidies for U.S. farmers, O'Neill
said Manley didn't make a big issue about U.S. farm policy during
a meeting yesterday.

"He was very gracious and civil about it and I was not surprised
that he wanted to talk about those issues," O'Neill said. "It's
necessary here in Canada for him to be seen complaining about
things that his electorate is concerned about."

O'Neill said he was not impressed with the outlook for Japan's
economy this year and next.

Japan's finance ministry expects zero growth this year in the
world's second-biggest economy and 1 percent growth next year,
O'Neill said. So far, he said hasn't heard any additional plans
that would speed Japan's recovery.

"They need to be at 3 percent-plus," he said. "So I'd love it if
they would figure out a way to get back on a track that gives
them their potential real growth much quicker than they're
anticipating."

During the press conference, O'Neill said the U.S. policy
supporting a strong dollar hasn't changed. "Yes, we have a strong
dollar policy and we have no intention of changing it," O'Neill
said.

"I'm going to get some cards printed" to remind him of the
policy, O'Neill told reporters after the press conference. "I
can't remember all this litany you all expect me to say."