OT ? - FOCUS - Oil Fear Hits Europe Stocks, Yen Strong -

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Friday January 21, 2:07 pm Eastern Time

FOCUS-Oil fear hits Europe stocks, yen strong

(Updates after close of European bourses)

By Leonard Santorelli

LONDON, Jan 21 (Reuters) - Fears of spiralling oil prices, sparked by a tough statement by key OPEC ministers, hit share prices in late European trade on Friday, with Germany's Dax index among the main victims.

Oil went through the $27 a barrel mark for the first time in nine years after ministers from Iran, Algeria and Libya agreed to propose a six month extension of existing output curbs.

The yen strengthened against the dollar and the euro as scepticism grew whether Saturday's meeting of the G7 financial superpowers would voice concern about the effect of the strong yen on Japan's fragile economic recovery.

--------------------------------------------------------------------------------------------------MARKET PRICES AT 1651

--------------------------------------------------------------------------------------------------MARKET PRICES AT 1651

GMT ----- EURO 1.0082/86 YEN 104.86/91 STERLING 1.6494/04

GOLD $288.90/289.40 +1.39 (pvs PM fix) BRENT $26.78 +0.68 FTSE 6346.3 -2.40 CAC 5,681.32 -28.42 DAX 6992.75 -119.91 --------------------------------------------------------------------------------------------------

``Higher oil prices are not helping,'' said Guy Truicko, portfolio manager at Unity Management in Garden City, New York, as Wall Street turned negative on the OPEC news.

``Higher oil prices means higher inflation, putting more pressure on the Fed to do something about interest rates.''

The Dax (^GDAXI - news) ended 1.69 percent lower and Paris' CAC index (^CAC - news) was off 0.5 percent, but in London, capital of oil producer Britain, the FTSE (^FTSE - news) escaped with a fall of just 0.04 percent.

Telecoms shares were among the weak performers in Europe in afternoon dealings.

Mannesmann AG and would-be acquirer Vodafone Airtouch Plc (quote from Yahoo! UK & Ireland: VOD.L) ended respectively three and five percent lower as investors reacted to the German company's steadfast opposition to a merger.

In Frankfurt shares in heavyweight Deutsche Telekom AG fell 3.5 percent amid reports the company had told analysts its profits would be disappointing in 2000.

``Telekom told analysts in the United States last night that profits will be down 50 percent this year,'' one trader said. Telekom could not immediately be reached for comment.

Among the bright spots, Metro AG rose 2.27 percent following a report in the Financial Times that it was considering a merger with UK-based retailer Kingfisher Plc (quote from Yahoo! UK & Ireland: KGF.L), up nearly three percent.

London was helped by a rebound in the banking sector.

The best gainers in the FTSE 100 index included banking groups HSBC Holdings (quote from Yahoo! UK & Ireland: HSBA.L), Standard Chartered (quote from Yahoo! UK & Ireland: STAN.L) and Abbey National (quote from Yahoo! UK & Ireland: ANL.L), all three having suffered sharp falls on Thursday.

BP Amoco (quote from Yahoo! UK & Ireland: BPA.L) climbed 3.78 percent, boosted by exceptionally strong results from proposed acquisition Arco (NYSE:ARC - news) and fresh hopes the planned purchase can avoid prolonged litigation.

In Paris, TotalFina , up 1.7 percent and STMicroelectronics , up 3.4 percent, lent support.

Traders said the French market seemed to be increasingly ``de-connected'' from the Nasdaq, after a honeymoon with the U.S technology-heavy index lasting months.

``The market is very volatile .... But we can see we are no longer following the Nasdaq's trend,'' one trader said.

YEN ADVANCES ON G7 UNCERTAINTY

In currencies, the dollar and euro fell against the yen amid uncertainty about the G7 meeting in Kyoto.

The G7 finance ministers were seen unlikely to step up their rhetoric on currencies, traders said. At their last meeting in September, they said only that they shared Japan's concern about the yen's export-crippling strength.

``It's looking obvious to the market that what will come out of the G7 would probably be nothing more than a restatement of what was out in September,'' said Steve Barrow, currency strategist at Bear Stearns in London.

``Even if we were to get something surprisingly aggressive from the G7, what does it mean?'' he said.

``The G7 has 'shared' Japan's concern about the yen since September, but no other central banker (besides those in the Bank of Japan) has dipped into his pocket to intervene.''

The yen rose around one percent on the day against both the dollar and the euro. Dollar/yen was around 104.9 after falling to two-week lows below 104.60, while euro/yen (EURJPY=> fell below 106.

Yen buying was initially triggered after Tokyo's Economic Planning Agency chief Taichi Sakaiya said a stronger yen was not necessarily detrimental to the Japanese economy.

In debt markets, Euro-denominated government bond yields were higher as stronger-than-expected French industrial production data piled further pressure on the market.

U.S. debt futures were mixed, with activity below the moderate to heavy levels seen earlier in the week.



-- snooze button (alarmclock_2000@yahoo.com), January 21, 2000

Answers

Can someone tell me why the Yen would be stronger, since they are a importer of oil big time.

Justthinkin

-- justthinkin com (justthink@oil.com), January 21, 2000.


The dollar is weaker due to INFLATION casued by shortfalls of oil products in the NE USA. Europe and japan appear to be reacting to the oil price movement that started and is led by the USA.

-- Bill P (porterwn@one.net), January 21, 2000.

YEN, The yen is stronger cause Japanese are selling US T-bills,and exchanging for yen.To take back home.Its only the beginning.Wait till they start unloading their US stocks,then the fun will begin..as dollar dives and AL.Greenspan.com...needs to choose US $ or bubble.com.

-- FunHasJustBegun (BuyTheDips@LookOutFor.TheBrickWall), January 21, 2000.

The Japanese are going to need all their yen...to buy oil...

-- Mad Monk (madmonk@hawaiian.net), January 21, 2000.

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