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Asian Stocks Succumb to Fresh Bout of Pessimism

Financial markets: Region's key issues tumble, dollar surges as traders cite concern Japan's new leaders won't rouse change.

July 28, 1998|From Times Staff and Wire Reports

Key Asian stock markets tumbled anew Monday on fresh pessimism about Japan's tottering economy, sending the dollar surging as well.

Meanwhile, on Wall Street blue-chip stocks shook off an early sell-off to end higher. But the broad market remained exceedingly weak, with losers swamping winners by 2 to 1 on the New York Stock Exchange.

While the Dow Jones industrial average ended up 90.88 points, or 1%, at 9,028.24, key small-stock indexes surrendered the last of their year-to-date gains.

The Russell 2,000 index of smaller stocks, for example, tumbled 5.42 points, or 1.2%, to 433.16, below the year-end 1997 close of 437.02.

In Tokyo, the benchmark Japanese stock index, the Nikkei-225, fell 417.53 points, or 2.6%, to 15,944.2, a one-month low.

Traders cited expectations that Japan's next premier and his likely appointee for finance minister won't be able to rouse the nation from its economic slump.

Banks such as Sumitomo Bank and top exporters, including Sony Corp., paced the decline.

Keizo Obuchi, the new Liberal Democratic Party president and shoo-in for the new premier, will probably tap former Prime Minister Kiichi Miyazawa for the key finance minister's position.

"Miyazawa is too tied in to the problem to be a credible part of the solution," said Fiachra Mac Cana, director of research at WestLB Securities Pacific. "A Miyazawa appointment will lead to a weak currency and a declining market."

The Nikkei's drop was its biggest one-day decline since April 16. The index has fallen four of the last five days as Obuchi came to the fore as Japan's new leader.

The broader Topix index of all companies listed on the first section of the Tokyo Stock Exchange slid 24.03 points, or 1.9%, to 1,233.98.

Obuchi's victory as ruling party leader came after the close of trading Friday.

Monday's sell-off reflected dismay at the unimaginative choice of leaders in light of Japan's economic woes, traders said.

"The market's firing one or two shots over Mr. Obuchi's bow, warning, 'Do something or we will send your currency lower and we will send your markets lower,' " said Martin Keeble, joint head of dealing at Schroders Japan.

Other Asian markets followed Tokyo lower. Hong Kong's market slumped 3.3%, Singapore lost 0.2% and the China World stock index tumbled 4.8%.

Major European markets also fell, with German shares sliding 2.5%.

On Wall Street, a strong earnings report from American Express helped fuel a 170-point turnaround by the Dow, but most stocks fell again Monday amid continuing worries about last week's rash of profit warnings.

The Dow, down 400 points last week, fell 81 points early. But American Express' rise of $5.75, to $112.81, helped fuel broad-based blue-chip buying.

The Nasdaq composite, down as much as 43 points, closed up 2.27 points at 1,933.26.

"We're continuing to be penalized by very poor advance-decline readings, which implies that we have a little more medicine to take," said Gregory Nie, technical analyst at Everen Securities in Chicago, asserting that investor demand remains strong enough to cushion any sell-off "before it can accelerate markedly to the downside."

U.S. stocks were pressured by Japan's fresh decline overnight.

Traders also said stocks were hurt early in the day by news that President Clinton received a subpoena to testify before the grand jury investigating his relationship with Monica Lewinsky.

"People are just looking for excuses to sell, and this is a pretty good one," said Robert Froehlich, chief investment strategist at Scudder Kemper Investments, which oversees $210 billion.

But computer-guided trading buoyed the market in the afternoon. Seven buy programs and six sell programs added a net 62 points to the Dow, according to Birinyi Associates Inc., a Greenwich, Conn., market research firm.

Elsewhere, the bond market saw a modest sell-off, with long-term yields rising.

Bonds were pressured despite the dollar's strength: The dollar ended up nearly 1 yen, at 142.41 yen in New York.

Among Monday's highlights:

* Blue chip winners included GM, up $2.06 to $73.13; J.P. Morgan, up $1.94 to $127.94; and United Technologies, up $2.63 to $97.31.

* Boeing, one of several big names that stepped forward last week with discouraging earnings news--including a warning about Asia's continuing negative effect--led the Dow's early decline, and ended down $1.31 to $39, a 52-week low.

Also, Union Carbide slumped $2.13 to $48.88 despite meeting most Wall Street forecasts with its second-quarter profit report.

* The Nasdaq index's rebound from a four-session slide was helped by Dell Computer, which rose $5.38 to $110.25 after trading as low as $101.50. Microsoft also helped, gaining $2.94 to $116.75.

*

Market Roundup, D14

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