Dollar Soars Again; Dow Adds 11 : Market Overview
* The dollar soared anew against the German mark, British pound and other currencies, as the United States continued to be a safe haven for traders and investors rocked by Europe’s financial crisis.
* Stocks staged a gradual advance as the market churned through a quarterly “triple witching hour” of options expirations. The Dow Jones industrials rose 11.35 points to 3,327.05; for the week the Dow was up 21.35 points.
* Gold and silver prices renewed their climb, helped by the European financial chaos.
Currency
After a calm session Thursday, traders on Friday bought the U.S. dollar at a startling rate, attracted by America’s relative stability while Europe’s crisis raged.
Traders were squaring positions ahead of the key vote Sunday by France on whether to accept the Maastricht treaty on European economic integration.
With the vote up in the air, many traders opted to flee already weak European currencies for the safety of the dollar. If the French vote “no,” many traders believe that the weakened European currencies will plunge further next week.
Britain injected more uncertainty into the markets by saying it is in no hurry to rejoin the European exchange rate system, which until this week had kept currencies’ values stable against one another.
Prime Minister John Major said the pound won’t return to the exchange system until it is run “in the interest of all the countries of Europe and not veered towards national interest in any individual country”--a clear swipe at Germany’s policy of high interest rates, which is considered to be the root of Europe’s financial crisis.
Central banks maintained order during Friday’s trading, but couldn’t halt most currencies’ declines against the dollar:
* The U.S. currency rocketed to 1.504 German marks in New York, up from 1.479 Thursday.
* The British pound, set free to float on Wednesday as Britain surrendered to pressure from speculators, plunged to $1.73 from $1.79 Thursday. The pound also fell to a new low of 2.605 German marks.
* The dollar surged to 5.130 French francs from 5.065 Thursday and 4.893 a week earlier.
Elsewhere, the Bank of Greece raised interest rates on loans between banks to 40%, following Sweden and other European nations that have raised rates sky-high to support their currencies.
Meanwhile, traders were bracing for the opening of currency trading in Asia on Monday, which will be the first market to react to the French vote on Maastricht. Asian trading begins around 5 p.m. West Coast time Sunday.
Stocks
Trading volume soared at the close because of the quarterly expiration of key stock options and futures contracts, but Wall Street otherwise seemed mostly confused by Europe’s turmoil.
Most stock indexes closed with small gains, as winners topped losers by 11 to 6 on the New York Stock Exchange. Volume came to 237.44 million shares, up from 189.59 million Thursday.
With many investors still focused on the U.S. presidential election and the weak economy, Europe’s currency crisis this week merely added to the feeling of uncertainty, traders said.
In London, however, shares rocketed as investors bet that falling British interest rates will outweigh the negatives of a plunging pound. The Financial Times 100-share average zoomed 83.1 points or 3.2% to 2,567.00.
In fact, stocks moved higher in most key European markets. Frankfurt’s DAX average rose 10.66 points to 1,589.33, and Paris’ CAC-40 index gained 30.20 points to 1,882.94.
In Tokyo, the Nikkei average inched up 50.28 points to 18,166.80 after Prime Minister Kiichi Miyazawa said the government will consider new measures to boost the market and the economy if needed.
Among U.S. market highlights:
* Auto stocks were higher, paced by Chrysler, which surged 1 7/8 at 23 1/4 after a PaineWebber analyst boosted his third-quarter earnings estimate to 40 cents a share from 15 cents. GM gained 3/4 to 34 1/8, and Ford was up 5/8 to 42 1/8.
* Northrop rose 1 3/8 to 25 5/8 after the Senate approved funding for 20 B-2 bombers.
* Some biotech stocks jumped. Amgen gained 1 1/4 to 67 3/4, Biogen rose 1 1/8 to 33 3/4, and Immunex surged 2 1/4 to 42 1/2.
* Among technology issues, software firm Borland plunged 4 3/4 to 41 7/8 after it said it won’t release its new database software until next year. Another software firm, Irvine-based State of the Art, slumped 2 to 4 3/4 after saying weaker orders will mean lower third-quarter earnings.
Credit
Bond yields closed mostly unchanged for a second day in a row, as the flood of money into dollars failed to boost the bond market.
The price of the Treasury’s main 30-year bond was up 1/16 point, or 63 cents per $1,000. Its yield eased to 7.32% from 7.33% Thursday.
An old rumor--that the Treasury might stop selling 30-year bonds--may have helped demand for those issues late in the day, some traders said.
The fed funds rate, the rate on overnight loans between banks, fell to 3.063% from 3.25% Thursday.
Commodities
Gold soared again as some investors fleeing European currencies opted for hard money as a haven.
On New York’s Comex, gold for September delivery rose $3.30 to $351.20 an ounce. The net gain for the week: $10.10.
September silver futures surged 8.1 cents to $3.85 an ounce. October platinum climbed $2.10 to $365.60 an ounce on the New York Merc.
Meanwhile, oil prices fell on the Merc amid signs of disunity among OPEC members. Light, sweet crude oil for October slumped 32 cents to $21.98 a barrel.
