Bosnia Rings Few Bells On Fed-Gazing Wall St.

Unlike 1990 Gulf crisis, global oil supplies not at stake

THE Clinton administration appears to have won breathing room on its Bosnia policy from Wall Street as well as from the the Republican-dominated Congress - which has declined to disapprove the sending of American ground troops to the former Yugoslavia.

Financial markets, as measured by the Dow Jones industrial average and other indexes, have repeatedly shown no concern about the dispatching of American troops to Eastern Europe. Barring a major conflict there, that situation is not likely to change.

"On the radar screen of important news, Bosnia is just a tiny blip" for Wall Street, says Robert Hormats, vice chairman of the investment house Goldman Sachs International in New York.

It's not that members of the financial community are personally indifferent to the peace process in Bosnia or the welfare of US and NATO forces, he says. Financial markets are now focusing on two overriding concerns: the congressional-White House budget debate and the direction of US interest rates, Mr. Hormats says.

Somalia, Haiti parallels

The current market passivity regarding the NATO action is similar to what happened when President Clinton sent American ground forces to Somalia and Haiti, financial experts say. In both cases, the market reacted with a yawn.

By contrast, the market registered great turbulence during the Persian Gulf crisis in 1990. Indexes fell sharply, following the invasion of Kuwait by Iraqi strongman Saddam Hussein. Within months the markets rebounded as American ground forces stormed into the region.

Hormats says the difference between then and now is explained by one word: Oil. Wall Street saw "a direct threat" to Western economic growth with the Iraqi-invasion. There is "nothing comparable in the Bosnia crisis."

No surprise factor

Moreover, the Bosnian conflict has snuck up on no one.

"Bosnia has been a continuing problem for over three years," says Larry Wachtel, a vice president of Prudential Securities Inc. in New York. "The introduction of US troops is not really any major change in what has been expected by financial markets."

"If there were to be a full-scale offensive war, then the market might react," Mr. Wachtel says. But barring that - and even if there were to be small-scale incidents involving US personnel - the stock market is expected to remain passive.

"The market reacts to surprise," adds Hans Stoll, director of the Financial Markets Research Center at Vanderbilt University, in Nashville. The Iraqi invasion of Kuwait came as a surprise, and involved a global strategic issue, oil supplies.

European markets affected more

Still, European financial markets are less immune to long-range policy in Bosnia than US markets, Professor Stoll says.

"European stock markets have not been looking all that strong in recent months," he says. The Continent faces "continued high unemployment, the labor strike in France, and concerns about the rate of economic growth in Germany. There are real questions about the future economic strength of Europe. So what happens regarding Bosnia could have an impact on European markets."

But that would mainly occur only if the European financial community expected untoward developments, Stoll says, such as a collapse of the peace settlement. So far, there does not seem to be an expectation of failure, he says.

If there is any major unease on Wall Street, expert say, it stems largely from concerns about slightly lower-than-expected profit margins at a number of major corporations and the degree of slowing of the American economy. Some analysts believe a stock market correction is likely in the months ahead, given the huge run-up in share prices during 1995.

The market would be expected to react positively - probably with euphoria - to both a budget deal and additional interest-rate cuts by the Federal Reserve, Hormats says. The Fed's Open Market Committee is expected to take up the issue of a possible rate cut when it meets tomorrow.

Expecting rates to fall, bond and financial markets in the United States have continued to ring up impressive gains in recent weeks, despite Washington's rising preoccupation with Bosnia.

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