Momentum Fuels New Highs in Global Markets
Stock market records fell Friday in Hong Kong, London and Paris, extending a pre-Christmas global rally and building on the momentum of records set Thursday on Wall Street.
In Tokyo, Japan’s central bank bought dollars in the foreign exchange market to slow the yen’s surge.
U.S. financial markets were closed in advance of Christmas after staging a broad and powerful rally Thursday in which the Dow industrials, Nasdaq composite and Standard & Poor’s 500 all reached new highs.
Boosted by Thursday’s record-shattering day on Wall Street, Hong Kong stocks soared. The Hang Seng Index rose 537.20 points, or 3.3%, to close at 16,833.28, surpassing the previous record finish set on Aug. 7, 1997, just as the Asian financial crisis was flaring up.
In Paris, stock prices soared on a strong retail outlook and speculation about a bank takeover. The benchmark CAC-40 index of most-actively traded stocks jumped 2.1% to a record 5,852.50 points.
A major gainer was Credit Lyonnais, a troubled bank formerly owned by the state, whose shares jumped 9% on speculation that it could become a takeover target. Last week another French bank, Societe Generale, said it had bought a 4% stake in Credit Lyonnais.
London shares also rose, pushing the market’s benchmark index to its second straight day of record finishes. The Financial Times-Stock Exchange 100-Share Index gained 29.7 points to 6,806.5. Trading volume was extremely thin in the half-day session, with many investors already off for the holidays.
Singapore’s Straits Times index closed at a record high for a second straight session, rising 22.42 points, or 0.9%, to 2,446.57.
The Japanese benchmark 225-issue Nikkei Stock Average closed at 18,584.95 points, rising 123.02 points, or 0.67%.
Markets in Europe and Asia were energized by Thursday’s pre-Christmas gains on Wall Street, where the Nasdaq composite index briefly bobbed above 4,000 for the first time and the Dow Jones industrial average set its first closing high in four months.
In currency dealings, the dollar rose as the Bank of Japan stepped into the market, buying dollars amid concern that a further strengthening of the yen would harm Japan’s fledgling economic recovery.
The dollar bought 102.72 yen in London late Friday, up from 101.80 yen the day before and higher than its late rate Friday in Tokyo of 102.60 yen.
“The excessively strong yen is not desirable for the Japanese and global economies,” said Haruhiko Kuroda, vice finance minister for international affairs.
“We will take decisive measures if needed. It is not impossible to do so even on Christmas Eve,” Kuroda said.
The Japanese authorities’ action, the first since Nov. 30, pushed the dollar to a high of 103.15 yen in Tokyo trading.
Japanese traders estimated the volume of central bank purchases to be between $700 million and $1 billion.
Stock markets in both Frankfurt and Zurich were shut for the holidays.
The Week Ahead
The recent surge in U.S. markets was powered by sharp gains primarily in technology stocks. Many other stocks are flat or down for the year.
So can the broad participation of many stock sectors that characterized Thursday’s rally on Wall Street continue this coming week? Many analysts think not.
“You’ll get a bipolar market, with tax selling in the losing issues and buying in the winners to window-dress portfolios,” Art Hogan, chief strategist at Jefferies & Co., told CBS Marketwatch. Hogan was describing a process in which many portfolio managers buy top-performing stocks so they can show them in their portfolio at year-end to impress clients.
Hogan said the market may witness some bizarre moves as volume winds down as investors close out their positions and wait for the year 2000.
Hogan told Marketwatch that “there’s 1/8still 3/8 a ton of cash” waiting to flood the market. Some of it will stem from mutual funds and 401(k) plans, he said.
But there’s also pent-up demand from investors who chose to sit on the sidelines due to Y2K fears, he told Marketwatch.
