THE agreement on the Court of Final Appeal should help relieve tension in the market, but is unlikely to underpin significant gains this week. It will be welcomed by investors increasingly desperate for a sign the Chinese and the British are capable of reaching agreement on any issue. The American Chamber of Commerce, for one, said the agreement would boost international confidence in Hong Kong's growth and financial status, but was unlikely to provide a platform for substantial rises in the Hang Seng Index. Investors probably will be more intrigued by what is happening in New York, where profit-taking has knee-capped recent highs on Wall Street. They also are watching the US Federal Reserve closely for clues about its intentions with regard to interest rates. Hopes of an easing were dashed last Wednesday when remarks by Fed chairman Alan Greenspan appeared to rule out any risk of a US recession in the middle term. Hopes of an interest rate cut had inflated US shares, analysts said. One factor in the US losses was a rumour that Japan's Finance Ministry recommended that Japanese investors not buy into US Government funds. This sent the Dow and the US bond market tumbling, even though a Japanese Government spokesman denied the rumour. However, fears of Japanese retribution against the US are likely to spook Wall Street again. In Hong Kong, the Hang Seng has closed lower after four consecutive sessions. It has lost 3.05 per cent of its value this month alone. Brokers said shares were expected to consolidate further this week, but volatility could increase later. 'The direction of Wall Street and US economic indicators will point the way, and Cheung Kong's sale of new flats at its remote Kingswood Villas housing project could also affect sentiment,' Kitty Tang, of Mees Pierson Securities, said. But in the absence of direction from offshore in the form of interest rate cuts or good economic news, the index is likely to languish at current levels or retreat further, while New York struggles to stem further losses in the bond and share markets. The move by Hutchison Whampoa's Li Ka-shing to take profit by selling off some warrants and shares indicates that he, for one, believes the market is unlikely to move higher in the medium term.