Beyond Dow: Stock Boom Goes Global

The American bull market in stocks is now an export.

When the Dow Jones Industrial Average blasted through 8000 to a new record last week, markets overseas kept pace. The major European markets hit record highs as well.

In fact, 13 bourses and stock exchanges, from Toronto to Milan, last week, jumped into the Wall Street stampede and closed at 10-year highs.

They followed the venerable Dow, which has added 23 percent since a sharp correction last spring, although the market tumbled 130 points Friday to erase the week's gains.

The Dow closed the week at 7890.46.

Globally, markets in every developed country, except Japan, have hit record highs, many of them last week.

"The era of global capitalism has arrived with great gusto," says Robert Hormats, vice chairman of Goldman Sachs International in New York.

Economists see a close tie between strong markets, weak interest rates, and easy money.

Brian Fabbri of Paribas Capital Markets in New York observes that European central bankers have eased the money flow, allowing bank reserves to grow at double-digit rates to stimulate economies. "Interest rates have gone straight down," says Mr. Fabbri. And stock markets have gone straight up.

Europe also sits in the early stages of a massive restructuring. European Union countries have agreed to adopt a single currency in 1999, and that brings a new, and required, emphasis on market economies at the expense of social welfare.

The United Kingdom has led the way, with 3 percent growth, 6 percent unemployment, and 2.7 percent inflation - the envy of its continental cousins.

France is on the same track, sometimes reluctantly but with some stellar stock market results. Share prices for one of its biggest companies, for example, Alcatel Alsthom, have jumped 50 perent this year.

In Germany, state-owned Deutsche Telekom went partially private and brought an estimated 2 million new investors into the stock market for the first time, boosting Telekom share prices 50 percent.

The success of the Telkom offering may have inspired Pro-Sieben, a German commercial broadcaster that issued stock last month. A mass-market ad campaign delivered the message: "Everyone's buying in."

One Pro-Sieban ad featured a little girl urging, "Hurry before my daddy buys all the shares!"

If Papa snagged even 100 shares, he did well. The offering was 30 times oversubscribed and soared from 70 to 90 on its first day of trading.

Dennis Phillips, an American working at Commerzbank in Frankfurt, invested in his own bank, posting a 35 percent gain since May. The German market, he observes, is "booming."

"Such increases [worldwide] have made more people confident in equities," says Mr. Hormats of Goldman Sachs.

In Hong Kong, records on the bourse stem as much from politics as economics. The handover to China brought a speculative spike to property prices and the real-estate-heavy Hang Seng index.

Even emerging markets have stayed with the herd. Mexico's main index, the IPSA, is up about 20 percent for the year, right in line with the US.

Japan presents the major exception among developed nations. Its market lost more than half its value in the early 1990s and has yet to recover, a sluggishness Hormats attributes to a rigid economy. "They have not deregulated to the extent the US has nor are they as open an economy."

Market analysts offer mixed views as to whether the foreign markets will continue to emulate the American bull. Prudential Securities analyst Ralph Acampora sees 10000 on the Dow by next June, with foreign markets hitching a ride. "They are enjoying our success," he says.

But Douglas Johnson, senior international strategist at Merrill Lynch, urges caution among buyers of foreign stock.

He believes the European markets have outpaced their economies and now favors emerging markets, such as Mexico.

The European markets may also start to compete with the bane of many a bull market - higher interest rates.

London-based Kermit "Kim" Schoenholtz, chief economist for Salomon Brothers observes that the United Kingdom has already started to raise rates and that Germany may follow next year, once Europe resolves its issues with a single currency.

With such uncertainties starting to crop up, some advisors are starting to prune back their exposure to global stocks.

Last week, Barton Biggs, a market guru with Morgan Stanley Dean Witter was busy trying to persuade his largest client, a US pension fund, to pull out of the world's stock markets and buy bonds.

The client groaned. "This is a very bright man, and we care when he groans," he says. After all, no one wants to miss a global bull market. "We better be right."

* Staff writer Ruth Walker contribued to this story from Germany