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Financial Markets : Dollar Dives Against Mark; Stocks Mixed

October 18, 1994|From Times Wire Services

The dollar plunged to two-year lows against key European currencies Monday as the election victory of German Chancellor Helmut Kohl's center-right coalition prompted a surge of funds into the German mark.

The stock and bond markets finished mixed.

The U.S. currency also dipped to a four-week low against the Japanese yen. Analysts said the German election served as the catalyst for a venting of disenchantment with the dollar and U.S. assets.

News that Kohl's pro-business Christian Democrats edged out left-of-center challengers in Sunday's elections sent the mark sharply higher in early Tokyo trading.

"The dollar ended quite weak in New York on Friday, and the Asian market was just waiting for the German results," said Belal Khan, senior dealer for the Bank of Tokyo in New York. "It gave a green light to sell dollars."

But the Christian Democrat-led coalition's narrow margin of victory left it with just a slight majority in Parliament. Kohl is likely to have trouble advancing his conservative economic policies. "The election results weren't that encouraging," Khan said. "The market was clearly looking for an excuse to buy marks."

Dave Glowacki, senior currency dealer at NBD Bank in Detroit, noted that technical trading and speculation added to the dollar's weakness as the currency crashed toward two-year lows against the mark, Swiss franc and British pound.

"When those targets get close, the market tends to go after them," he said.

In late New York trading, the dollar was quoted at 1.4990 marks--the lowest level since October, 1992--down from 1.5195 on Friday.

The British pound hit $1.6100 in New York, up from $1.5940. The dollar was also changing hands in New York at 97.65 yen, down from 98.20 and near a postwar low.

In U.S. stocks, the Dow Jones industrial average rose 13.46 points to 3,923.93. But declining issues edged advancers by about 11 to 10 on the New York Stock Exchange. Broader indexes were mostly lower. Trading was moderate, with about 238 million shares changing hands on the Big Board.

"People are losing conviction about the sustainability of the upward momentum for the market," said Rao Chalasani, chief strategist at Kemper Securities Group in Chicago.

A new-home sales report is due later in the week, and most major blue-chip companies report earnings this week.

The yield on the Treasury's main 30-year bond fell to 7.82% from 7.83% on Friday.

Among the market highlights:

* Eastman Kodak fell 1 3/8 to 48 1/8. The camera and photo equipment firm said in an internal memo that it will freeze hiring and reduce expenditures because profits are under pressure.

General Electric closed unchanged at 50 3/8 on the Big Board. The company agreed to sell its troubled Kidder Peabody brokerage subsidiary to PaineWebber for $670 million.

On the Nasdaq, California Micro Devices was down 6 3/8 to 7 1/2 in active trading. The company said it launched an investigation into accounting irregularities that could result in restated earnings.

Shares of drug maker Gensia fell 5 1/4 to 5 1/2 after the company's heart attack drug failed human tests.

On the Amex, Greyhound Lines shares rose 1/4 to 2 1/2 after the bus company said it was negotiating new agreements with creditors.

* Overseas markets closed mixed. In Frankfurt, the DAX 30-share average finished down 14.85 points at 2,090.88. In Tokyo, the Nikkei 225-share average ended 11 points lower at 19,958.29. London's Financial Times 100-share average closed 13.5 points higher at 3,120.2.

* The December coffee contract traded in a wide range, falling early based on predictions of more scattered rains in afflicted areas of Brazil. But the market rebounded swiftly after a private weather forecaster emphasized the severity of the drought.

The forecaster, Weather Services Corp., said its data showed the current Brazilian drought to be substantially more severe than the 1985 drought.

December coffee jumped 15.50 cents to 203.85 cents a pound, rebounding from a session low of 179 cents.

Market Roundup, D8

Interest Rates

30-year T-Bond: 7.82%

1-year T-Bill: 6.02%

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