At the end of last week, official figures showed growth in the US economy bounced back to an annual rate of 2% in the first quarter of this year, almost twice as fast as most economists had predicted. This follows a five-year low of 1% in the last quarter of 2000.

Consumer spending in the US expanded at a healthy 3% for the same period. Signs of a bounce back in the US had the inevitable impact on the stock market, with Dow Jones rising by 117.70 on Friday and taking the index to 10,810,

only marginally below its high of 11,1023 for this year. In spite of a 2.01% rise on Friday, up 40.80 to 2075.68, Nasdaq or more specifically MTM sector, will be struggling this year to reach even the half mark of its peak that it reached in March last year.

The key question is whether the Federal Reserve's historic cut-backs of interest rates will prevent a fall in confidence and a retrenchment in consumer spending? The jury is still out on this but while the Fed is doing everything possible to prevent a slowdown in the US economy, the European Central bank has adamantly refused to cut interest rates and has covered up its inaction by stating that ECB sets interest rates only to fulfill its remit of achieving price stability. To suggest that the European Central bank's sole objective is to monitor and try to control the inflation rate across the euro-zone, with total disregard for the global slowdown in not only stubbornly short-sighted but a missed opportunity to place the EU alongside the US as the engines for global growth.

At the meeting of the Group of Seven leading industrial nations last weekend, the pressure on the ECB to cut interest rates was mounting from all quarters.

The Canadian and the Japanese have publicly backed the US Treasury Secretary's call for the cut in the interest rates in the euro-zone. Unfortunately, the issue has become very public and bank has been cornered into an embarrassing situation even if it wants to cut interest rates now, it would be interpreted as acting under duress!! The cut in the euro-zone interest rates is inevitable, but we might have to wait few more weeks!

Meanwhile, the Bank of England continues to take a proactive stance in protecting the UK economy against the economic slowdown. One reason for the Bank's swift action is that the UK is more vulnerable than the euro-zone to external developments, particularly from the US. With the GDP's growth of only 0.30% in the first quarter of this year, down from 0.4% in the previous quarter and the slowest growth since the winter of 1998, a further cut in interest rate in the next couple of months is not impossible. Blair & Co. are praying for one before the election date, which is not all that unlikely!

The Federal Reserve stunned the market last week by cutting interest rate for the fourth time in four months by a half-point to 4.5%. the Fed's policy-making open market committee voted in an unscheduled session to cut the interest rate, a move that signalled the US central bank's intensifying concern about the rapid deterioration of the US economy.

The move came amid more reports of sharp profit declines among high-tech companies and a sharp drop in US imports in February.

In the next couple of weeks, hundred's of US companies will report their first quarter results and and the earnings for the largest US companies are likely to show a sharp drop and judging by what we have seen so far this year, it will be the worst performance for many years.

The stock market's reaction to the interest rate cut was inevitably very positive, with both the Dow Jones and Nasdaq rising sharply and reclaiming some of the recent losses.

The near-term outlook for the US economy and corporate America remains unclear, with conflicting signals from various quarters. Last week, hopes for economic recovery emerged as industrial output in the US rose for the first time since last September, while US consumer price data in March registered the slowest increase in seven months, alongside an upward trend in the unemployment figures.

In the short-term, the question is whether the sharp fall in the interest rate is enough to reinvigorate capital spending and more importantly, the consumer spending. By cutting the interest rate by 200 basis points in less than four months and hinting at more to come, the Fed is making it easier for investors to look beyond the immediate gloom.

The US economic boom and the almost never ending bull market demanded a rethink of many of our economic assumptions. The exceptionally rapid down turn in the US economy and the Fed's prompt action is unlike anything we have seen before. We might be witnessing the end of the shortest economic downturn in the US history- the end of a recession that never happened. If so, yet again, we will be forced to re-examine the classic definition of an economic boom and bust.

Kamran Hashemi
Senior Vice President
Salomon Smith Barney

The longest bull market in the living memory has reached the end of the road and its main beneficiaries, the US investment banks, appear to be the first to feel squeeze.

The US investment banks, alongside their European banks benefited from record volume of mergers and acquisition in the last two or three years, as well as all the upside of buoyant US economy, which turned itself into global engine, helping to sustain the growth of other markets, particularly the SE Asian economies.

The party is now over and everyone is suffering from hangover. Global merger and acquisition volumes have collapsed by more than 60% this year. It is reported that the volume of M&A deals in the first two months of this year fell from $818bn. a year ago to $310bn. The primary factor is the fear about the US economic slowdown and its impact on other economies.

To make matters worse, telecom media and technology (TMT) sector, which played such a major role in driving the bull market, has seen its share prices tumble, pushing down Nasdaq Composite from its peak of 5,000 plus only a yaer ago to just under 2,000. The TMT bubble has burst. It was all about momentum investors bought the stocks that had already moved higher. That same momentum working against the sector on the way down. On the plus side, the collapse in the sector's share prices has been orderly. It started in March last year and in spite of couple of short-lived recoveries, it has dropped 60% in 12 months.

The impact of these events can be visibly seen in the share prices of the US investment banks and there is already talk of cut backs in their staff, globally. However, with the European and particularly the UK economy in a much better shape, the European offices are likely to be less effected.

Should we panic? Merchants of doom and gloom are going to tell us that we told you so! Well, I don't think anyone suggested that the party was going to last forever, but the longest ever bull market did question a lot of fundamental economic beliefs.

There is no question about slowdown in the US economy and as much as the Fed has tried to lessen the pain by some unprecedented cuts in the interest rate, the number of corporate profit warnings are too many to be ignored. However, the economic data is far from disastrous. The fundamentals of the so-called "old economies" in the US and European economies remain sound-the lowest unemployment figure in the UK since 1975, is one clear indication of this fact. Some may even argue that the US economies slowdown from growth of 5% last year to perhaps only 1% to 1.5% this year should be seen as self-correction.

There is always the danger that the widespread nervousness among investors in the US and in Europe could feed upon itself and cause a general collapse of confidence. However, the US and European economies are far more resilient than at the time of previous crisis and with sound fundamentals, there is every likelihood that the stock markets will recover in the second half of this year. However, for the US investment banks, the recovery is likely to take a bit longer.

Cyrus Ardalan joined Barclay's Capital. The former head of bonds at Paribas is the latest in a growing crop of Euromarket veterans being roped in by Barclays to help it raise its game in continental Europe.

Ardalan will be a vice-chairman of Barclay's capital alongside Euan Harkness and Sir Leonard Appleyard. All three are full-time executives.

Ardalan will have responsibility for investment banking in Scandinavia, the Netherlands and southern Europe, in addition to helping direct general client coverage across continental Europe.

He will report jointly to Naguib Kheraj, Barclays' head of investment banking, and to Hans-Joerg Rudloff, the investment bank's chairman.

Ardalan spent 12 years at the World Bank, eventually serving as its head of treasury. He went on to forge a reputation as one of the leading coverage officials in international bond markets during a 10-year career at Paribas.

But like many longstanding Paribas bankers he was disatisfied by strategy adopted after the investment bank was acquired by BNP earlier this year.