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Enronitis

RUSSIA

A lot is riding on Brazil’s success. It has always been the dominant economy in south America but until Argentina collapsed it did not have to play a leadership role in sustaining investor sentiment about the region. Today Brazil must rise to its economic challenges or be held responsible not only for its own stagnation but for sinking south America as an economically significant continent.

It's a common assumption, in the US and abroad, that Americans believe they have the best financial system in the world and that it is the most open, the most progressive, and the best model for others to follow. But consider this statement from an American institutional investor. "You know, I really don't like the Vorstand-style of governance favoured in parts of Europe," he told Euromoney last month. "But maybe it does have some advantages over our system." His beef is simple: "The US CEO has become more and more the fox guarding the hen house," he explains. "And he is enriching himself and his executives in the process. More and more companies are being run for the benefit not of the shareholders but of the people running the firm."

US economic recovery is clearly under way. But is it a profitless recovery? Some bears say so. I don't agree. This year, corporate profits will not rise as much as the consensus forecasts. That's why I reckon that US Inc and the equity markets will recover at a canter rather than a gallop. But they will still rise sufficiently to support a 10% to 15% rise in equity prices by the year-end.

Let's hope John Mack is not too downhearted at his failure to lure his old friend Walid Chammah away from Morgan Stanley. It would appear to be the first setback the chief executive of CSFB has had since replacing Allen Wheat last July.

After years of complaints from regulators and private-sector rivals that Germany’s state banks are taking unfair advantage of public guarantees, the issue is in sight of being resolved. The EC has decreed that the Landesbanken will have to do without this subsidy within three years. Most state bank officials are confident that they can find new ways to compete but others are not so sure.

VENEZUELA

The US is in recession, or, at best, slowly coming out of it. As with all recessions, some things remain constant. First, company executives, bankers and investors generally don't want to admit there is a problem. They'll convince themselves that there's a new dynamic in the market that this time will make recession impossible, avoidable or at least short-lived. They'll hold off sacking people. They'll blame it on another sector of the market - in this case, they say, it started with the bursting of the tech bubble in April 2000 - and swear it won't affect them. And they'll refuse to take action to protect their companies, such as shoring up balance sheets, because they look back with nostalgia to the time when their stock prices were higher - two weeks ago, two months ago, six months ago...

David Komansky, Merrill Lynch's chairman and chief executive, has confirmed what many market commentators, and Merrill employees, have been expecting for months: he plans to step down as CEO before his official retirement date of April 2004. He does intend to stay on as chairman until that time.

Investment bank research has taken a further battering with Schroders, the asset manager, criticizing the role of analysts in the new economy bubble.