Stocks in Japan, Far East React to U.S. Plunge by Taking Fall
Stocks in Japan and elsewhere in the Far East fell in early trading today, the first investor reaction to the plunge that jolted American stock and bond markets Friday.
“There isn’t a sector that’s up right now,” said James Fiorillo, an analyst at ING Barings Securities. “The best performing sector is insurance, and that’s defensive.”
Meanwhile, Australia’s main stock index dropped as much as 2.4%, led by banks and insurers. “There’s a little bit of blood on the streets,” said Simon Catt, trader at brokerage Hartley Poynton.
Tokyo’s key 225-share Nikkei average was down 234.20 points, or 1.16%, at 19,921.67 after less than an hour of trading. It had fallen as far as 19,884.19 points earlier in the morning.
But analysts were buoyed slightly by bits of good news they say should help the market. News of a stronger dollar over the weekend and balance of payments figures showing a current account deficit will take the pressure off the yen, said Jason James, a strategist at James Capel Pacific Ltd.
“People are obviously worried about a further fall in the U.S. this evening and don’t want to be involved in a general crash.” But, he said, the Tokyo market was firming by midmorning, and it should not have too much of a negative influence on today’s trading in New York.
The Dow Jones industrial average crumbled 171 points Friday and the 30-year bond lost 3 5/32 points, pushing the bond’s yield up to 6.72%--the highest in six months.
Although the slide in Japan was clearly sparked by the problems in New York, Tokyo also has problems of its own. Concerns about using public funds to solve the continued housing loan crisis, and anxieties about heightening tensions between China and Taiwan, also dampen the market.
Analysts said the prolonged standoff over plans for backing up bad loans by failed lenders continue to affect stock prices. Opposition Diet members have turned proposals to use $6.52 billion in taxpayer money to bail out seven insolvent banks and housing lenders into a symbolic issue.
Meanwhile, while analysts in New York were bracing for more losses, none foresaw anything like a repeat of “Black Monday” in 1987, when the Dow fell more than 500 points.
William LeFevre, a senior market analyst at Ehrenkrantz King Nussbaum, predicted the Dow may fall 80 points today before it stabilizes. “There’s going to be a lot of consternation at the open but it won’t be a meltdown Monday,” he said.
Michael Metz, chief investment strategist at Oppenheimer & Co, said stocks are about one-third through their correction and bonds are about three-fourths through their pullback. “I think the long bond yield will back up to 7%,” Metz said.
Philip Orlando, chief investment officer at Value Line Asset Management, which has $5.75 billion of assets under management, said the Dow might fall 100 points today before stabilizing.
He also sees bond yields rising to 7% before leveling off, although he said bond yields may test that level if Thursday’s producer price and Friday’s consumer price data show inflation is rising.
One analyst predicted the bull market in stocks has still a ways to run, and that smart investors will buy on the dips.
“While Friday was pretty nasty, we’re still in a bull market,” said Tony Dwyer, chief market strategist at Josephthal Lyon & Ross. He views the greater risk as being “institutions preparing for the individual to panic and raising cash.”
Times wire services contributed to this report.
