European Stocks Rise, but Most Markets Slip as Yen Weakens

The dollar rose to a nearly seven-year high against the yen Monday, sending Asian stock markets lower.

South Korea’s stocks were hit especially hard, with the key Kospi stock index tumbling 6.8% to an 11-year low on fears labor unrest will intensify.

U.S. markets were closed Monday for Memorial Day.

Major Latin American markets also finished lower, reflecting investors’ continuing worries over the effects of Asian economic distress.

Mexican stocks fell for the fifth time in six sessions on increasing concern that greater competition from Asian exporters will erode domestic companies’ profits.

Brazilian stocks fell to their lowest level in almost four months, led by state utilities.

Sao Paulo’s Bovespa index closed down 2.1%, or 219 points, to 10,021, its lowest level since early February.

Analysts noted that repeated delays in the sale of Brazil’s state-owned utilities are having an effect on the market.

“Electric utilities are among the worst performers of the year,” said Antonio Carlos Rodrigues, who manages $65 million in equities at Banco Cidade in Sao Paulo. “The confusion and the delays on their privatization program made investors switch to other stocks, such as telecommunications and steel.”

Brazil’s markets have also been upset by election-year polls showing that the popularity of President Fernando Henrique Cardoso, a free-market champion, is waning.

European markets, as they frequently have this year, provided the day’s bright spot.

Germany’s DAX stock index set a record in Frankfurt, closing up 0.2% at 5,57516. The Paris CAC-40 stock index finished up 1.5% at 4,108.71. London’s markets were closed for a holiday.

The continuing decline in the Japanese yen came amid speculation about U.S. sentiment toward the currency.

According to unnamed sources in a report appearing in the latest issue of U.S. News & World Report, U.S. Treasury Secretary Robert E. Rubin may be willing to let the dollar rise to as high as 150 yen if that will help keep Japan’s economy afloat. If the dollar strengthens, Japanese-made products are less expensive, helping increase the country’s exports.

However, in remarks Sunday to reporters in Kananaskis, Canada, where finance ministers from the Asia-Pacific Economic Cooperation forum were ending a two-day meeting, Rubin declared that U.S. policy on the dollar is “absolutely unchanged.”

The dollar was at 137.14 yen in late afternoon trading Monday in Tokyo. That’s up 1.17 yen from late Friday in Tokyo and also above its rate Friday in late New York trading, when it stood at 135.90.

Japanese Finance Vice Minister Koji Tanami suggested Monday that the Bank of Japan may step in to the currency market to take “decisive” action to stem weakness in the yen, but such action would be less effective without a joint effort with the United States, traders said.

Discouragement over the weakening yen helped push Tokyo’s main stock indexes slightly lower, with the 225-issue Nikkei average falling 18.53 points, or 0.12%, to close at 15,783.12.

Hong Kong markets were closed.

South Korean stocks stumbled after the militant Korea Confederation of Trade Unions reiterated that it will go ahead with a nationwide strike Wednesday in response to reports that the number of jobless has more than doubled to 1.5 million over the last several months. The union plans to start with walkouts by auto, shipbuilding and other metalworkers.

Layoffs aimed at restructuring South Korea’s inefficient industries are a key condition of the loans and guarantees made by the International Monetary Fund late last year to help bail out the country’s economy.

South Korea’s main Kospi stock index fell 24.15 points to 331.90, its lowest close since Feb. 26, 1987, when it hit 330.11. Stocks were also affected by the weaker yen.

Fears of a flood of cheap Asian imports helped push Mexico City’s Bolsa index lower by 36.97 points, or 0.80%, to 4,611.46.

Broadcaster Television Azteca and Telefonos de Mexico were among the stocks leading the retreat.

“There are fears about higher sales by Asian companies to our country and to other countries where we also sell products, like the U.S.,” said Gerardo Copca, an analyst and money manager for Valores Finamex. “That makes the demand for some Mexican products fall.”

Russia’s stock market tumbled as foreign investors continued to abandon a country faced with chronic economic problems. The government had predicted that this year the economy would show its first substantial growth in the 1990s, but most indicators now suggest continued stagnation.

The Russian Trading System closed 5.3% lower Monday. There also was bad news in the bond market, where yields on one-year treasury bills soared to 50%, up from 45.3% on Friday.