Equities: Since 1984, on the first rate cut equities have rallied 100% of the time over the following month but 80% of the time over the following 12 months (the exception being 2001). Hong Kong (with a dollar peg) normally outperforms and does not look expensive. The issue is that the size of the rate cut currently being discounted (75bp by year-end) has only happened during a recession or the LTCM crisis. Hence, as in 1998 we believe it might require 50bp rather than 25bp to galvanise equities and offset worse US economic newsflow..