"There is a good chance of recession in the US in 1999," asserts Mr Magnus.Outlook: no Wall Street crash. But a better than even chance that the once-mighty US economy will fade, leaving the world economy with no engine to pull it out of recession.Japan. But there could be an unpleasant surprise.The US stock market. The fear is that the 40 per cent of US households with a stake in Wall Street will panic and dump shares, causing a 1929- style crash. While the City agrees that Mr Cardoso has made reassuring noises about reducing government spending, it is waiting to see the fine print. "Brazil must reduce its government deficit from 7 per cent to 2 or 3 per cent," says Mohamed El-Erian, emerging markets guru at Salomon Brothers Smith Barney.

"To achieve this Cardoso must do a deal with the powerful states in Brazil. It is not clear what sort of deal he can do."Outlook: it seems the emerging market debt crisis will finally be tamed in Brazil. But they will have little effect on market sentiment unless they are part of a broad anti-crisis package including other initiatives to raise confidence.Brazil. Since July Brazil has lost $25bn (pounds 14.5bn) of its $70bn in dollar reserves. If this outflow continues, Brazil could go the way of Thailand, Indonesia and South Korea.To stop the emerging market debt crisis spreading to Latin America, the G7, the Inter-national Monetary Fund, and other international agencies signalled during the Washington meetings last week that they were pulling out all stops to stabilise the Brazilian economy.But the key to restoring stability lies with Fernando Henrique Cardoso, re-elected as Brazil's president last week.

But they wonder if continental Europe would join in."The European Central Bank meets on 22 December," says Mr Magnus "It could set its first rates then. I think the setting of those rates could send out an important signal to the world."Outlook: more rate cuts will come. "Old traders are telling me they haven't seen anything like this in 25 years," says Pippa Malmgren, London currency strategist at Bankers Trust Alex Brown.The City consensus is that the volatility will work itself out with damage to more institutions, but not to the financial system itself. Roman Schmidt, head of syndication at Barclays Capital, says: "I still believe the market is a self-regulating mechanism. I believe the volatility is part of a huge process of de-leveraging.