Doubters about the staying power of the boom in home construction say it is only a matter of time before Asian investors lose their nerve and stop sending shiploads of cash in this direction.

To ensure a strong dollar, which helps their exports, China and Japan have provided enormous financial thrust in the market for U.S. Treasuries. As a side effect, that has kept mortgage interest rates at sub-basement levels.

Recently, however, Wall Street analysts have noted that the Asians are slaking their thirst for U.S. debt.

Don’t be surprised if Tuesday’s report of September housing starts shows a modest decline. Economist Sung Won Sohn is looking for slippage to a rate of 1.95 million units annually, from 2 million in August. Construction was held back partly by the three hurricanes that hit Florida, he said, but there were other factors too.

“The overall economy isn’t doing all that well, and consumers have a lot of concerns. That makes some of them reluctant to buy high-end homes,” said Sohn, of Wells Fargo & Co. in Minneapolis.

In California, there are growing backlogs of expensive houses sitting unsold, he said, as sellers refuse to lower prices.

As the next year unfolds, investors in Asia and elsewhere may be reluctant to accept low interest rates, Sohn said:

“That will make money more expensive, and mortgages will prove to be more costly.”

The Federal Reserve will carefully monitor Tuesday’s September consumer price index for signs that oil prices and other commodity pressures are starting to stir up inflation.

Chicago investment manager William Hummer says the report will show a gain of only about 0.2 percent, hardly the stuff of an overheating economy.

But Hummer, of Wayne Hummer Investments, says the Fed still intends to nudge rates higher in each of the next two months. That would bring the central bank’s short-term benchmark to 2.25 percent by year’s end from a current level of 1.75 percent.

“The Fed isn’t worried about inflation, which has surprised people on the downside. However, it wants to get rates back to a neutral level, so it won’t stop until they are around 3 percent, if then,” Hummer said.

The economy is expanding at a rate of 3.5 percent to 3.7 percent, he said, which offers no evidence that the Fed’s moves would crimp overall activity. However, Hummer added, the central bank would stop raising rates if it were to see “concrete evidence of a slowdown.”

Analysts have been scaling back their estimates for third-quarter corporate profits to a gain of about 14 percent from a year earlier. That’s respectable, but hardly bonkers. Earlier this year, profits were expanding at more than a 20 percent clip.

On Tuesday, get ready for Ford Motor Co. to report profits, in the wake of a disappointment from rival General Motors. GM, which reported Thursday, said it is chopping 20 percent of its work force in Europe, as it tries to overhaul its money-losing Opel, Saab and Vauxhall operations. The company also trimmed its forecasts.

Ford, also hard-hit in Europe, recently said it will cut 1,150 workers from a British Jaguar plant, reducing Jaguar production by 15,000 cars and backing out of Formula One racing.

The stock market, which slipped on an oil patch in late summer, has seen prices drop by more than 3 percent since Labor Day. That’s no disaster, but analysts who recommend investments in equities are finding investors unable to concentrate, as long as petroleum remains near $55 a barrel.

Meanwhile, Wall Street is awaiting Tuesday’s 19th anniversary of the Crash of 1987, when stocks fell 508 points, or more than 22 percent, in a single session. While no repeat of that debacle is anywhere on the horizon, there are few signs of any spurt for stocks until oil prices undergo a severe correction.

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(c) 2004, Chicago Tribune.

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AP-NY-10-15-04 1751EDT