Double dip chances fall

Friday, November 22nd 2002, 7:10AM

In its latest investment strategy paper Macquarie says that the markets are not pointing towards the dreaded "double dip" scenario where markets make another big fall.

"We believe markets are not pointing to a double dip as both cyclical currencies and equity markets have bounced."

It says that the recent equity rally may not be sustained now that the third quarter reporting season in the United States is over.

Macquaire says that the dynamics of the US economy are still consistent with a resumption of stronger economic growth.

"The factors that lead to a double dip such as aggressive employment cuts, excess inventories and fiscal retrenchment are just not present.

"If Europe can hold together and Japan does a little bit better than expected, then the chances of the global economy falling into a downward spiral will be considerably lower."

Overall Macquarie has reduced its equity weightings, although it is still slightly overweight in the in the US and Asian markets.

It is not so keen on Australia and is underweight there because earnings risks are considerably greater.

It says that the Australian economy has hit a speed hump in recent months.

"We have less confidence that this weakness will prove to be a temporary pause; it appears increasingly likely that housing construction and durable consumption will drag the economy even lower."

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