WALL Street may have recovered from an early 140 point loss last Friday to close less than 1 per cent down on the day, but the reverberations from what has been dubbed "Wobbly Friday" means that both bond and equity markets will open nervously this morning.

Federal reserve chairman Mr Alan Greenspan's comments about the "irrational exuberance" of stock markets was a clear indication that the Fed is concerned at what it sees as unrealistic valuations for US stock prices.

Meanwhile US Treasury Secretary Mr Robert Rub in has played down the importance of last week's steep slide. "What people really ought to be looking at is not these kind of day to day fluctuations but what they think economic conditions are going to be like over time," he said.

Mr Rub in said the central bank chief was merely asking a question about the level of the stock market, not saying that it had risen too far.

Mr Rubin, who meets weekly with Mr Green span to discuss the economy and other issues, said he had not been surprised by the Fed chairman's remarks but made clear that the central banker spoke on his own.

But there is no real agreement on whether the Fed chairman's comments mean that interest rates are going up, or taking a more benign approach, whether he is signalling that interest rates are not going to fall any further.

The non farm payroll figures published hours after the Fed chairman made his comments - do not suggest that the American economy is overheating or that inflation is getting out of hand. On that basis alone, some market analysts believe that Mr Greenspan's remarks have been treated in some quarters as lacking logic.

Mr Greenspan was, on the face of it, merely restating central bank policy that due weight should be given to the movement of asset prices when forming monetary policy judgements. But it was the timing of his remarks that made them so critical.

For almost a year US monetary policy has been on hold. Occasional fears that the Fed might raise interest rates to restrain inflation have proved unfounded. The main reason the Fed has not acted is that, in spite of continuing growth in demand and tightening labour markets, there has been little evidence from the main indicators that prices are beginning to accelerate.

The rate of increase in the consumer price index has hovered around the 3 per cent mark for most of 1996 and there has been little significant upward movement in the factors that feed it wholesale prices and labour costs.

But Mr Greenspan has now given warning that those traditional measures of inflation are not the only ones the Fed is considering as it determines the next move in interest rates, and that asset prices will increasingly be considered.