LONDON, June 15 - Financial markets will look to appearances by Federal Reserve Chairman Alan Greenspan next week for clues on monetary policy and watch for further signs of waning confidence in France, the second largest euro zone economy.
The relative dearth of economic reports and indicators out of the U.S. next week was all the more likely to make Greenspan more of a focus ahead of the two-day meeting of the Federal Open Market Committee ending June 27.
"Given that market expectations are particularly strong for another (Federal Reserve) rate cut, the question mark now is whether they go for 25 (basis points) or 50, I think he might actually give an indication in the speech," said Bank of American head of economics Lorenzo Codogno.
On Wednesday, Greenspan was to appear twice in Washington. The Fed chief was to join a breakfast meeting at the U.S. Labor Department, then testify on the state of the banking industry before the Senate Banking Committee.
Just the same, Andrew Bevan, senior bond economist at Goldman Sachs in London, said Greenspan may not choose to divulge much more about the Fed's plans in the traditional "blackout period" ahead of the FOMC.
John Shepperd of Dresdner Kleinwort Wasserstein said weekly U.S. jobless claims and the monthly Philadelphia Fed survey for June, both due on Thursday, would provide some news on economic activity.
Bevan said a continuing flow of corporate news on second quarter performance and projections for the second half of the year would remain very important for markets.
"One of the messages we have taken from this week if you look across all asset classes is the way the markets have begun to lose a bit of confidence in this quick rebound story in the U.S.," Bevan said.
SIGNS OF FURTHER WEAKNESS IN FRENCH CONFIDENCE A WORRY
In Europe, a meeting of the European Central Bank's council was not expected to provide much of a surprise. Economists forecast in a poll the ECB was expected to leave interest rates unchanged but cut them in July as inflation passes its peak.
In the survey, taken between June 12 and 15, the economists gave a 70 percent likelihood that the ECB's key minimum bid rate would remain at 4.50 percent when its council meets next Thursday, according to the median of 53 forecasts.
The ECB would be meeting after the release on Monday of the May EU-harmonised cost-of-living index for the euro zone. A poll forecast euro zone harmonised inflation in May at 3.3 percent year on year, compared to a previous reading of 2.9 percent.
Temporary factors such as spikes in energy and food prices are fanning inflation and the ECB said on Thursday it had to stay vigilant on price risks even though it expected inflation to start falling this year and drop below two percent in 2002.
Among the first indicators of June inflation in the euro zone should come on Thursday from Italy, which publishes provisional Consumer Price Index figures from regional capitals.
Both Bevan and Codogno highlighted French May consumption figures due on Thursday for confirmation of spreading economic gloom in Europe.
"Recently we have seen quite a steep fall in confidence and we are heading toward a sharp slowdown in consumption in France, which has been perceived as the bastion of euro zone consumption so far, and now it is giving up," Codogno said.
For Bevan the French figures should show "whether we need to be more seriously concerned about the slowdown in Europe", Bevan said