Renewed fear over the impact of the weak Asian economies led to a sharp fall in the US stockmarket late yesterday and is likely to lead to a weak opening on European markets this morning. The Dow Jones Industrial Average closed down 209.01 points at 8,625.3 - a fall of 2.34 per cent - with much of the fall coming towards the end of the trading sessions.
Investors are increasingly worries about the impact of events in Asia on US corporate earning. These fears were heightened when a pillar of corporate America, Minnesota Mining and Manufacturing Co., issued a profit warning.
3M, which makes and markets industrial and consumer products, said it expects 1998 second-quarter earnings to be below those of the same quarter last year due to economic weakness in Japan and Asia, modest overall US growth and the strength of the US dollar.
"We have a strong presence in Japan and Asia, and our businesses continue to be affected by the economic contractions in that area," said Mr LD DeSimone, chairman and chief executive officer.
Meanwhile Japan has appealed for concerted global intervention to support the yen, which yesterday weakened against the dollar to an eight-year low of Y146.2.
Mr Koji Tanami, vice-finance minister, said: "We need to take decisive action against an excessive weakening of the yen in co-operation with other nations." His comments reflect increasing irritation in Tokyo over Washington's apparent reluctance to halt the slide in the yen.
The seriousness of the situation was underlined as European Union leaders expressed concern about the state of the Japanese economy. Mr Tony Blair, British prime minister, opened yesterday's summit of EU leaders in Cardiff, Wales, with a warning that the Asian crisis was the greatest threat to the world economy in 20 years.
Mr Blair said: "Our economies will not emerge from this turmoil without being affected by it, and we have to decide how to react."
On the markets, with the Japanese economy in recession and the yen showing no signs of snapping out of its free-fall, investors stuck to a clear preference for Government bonds and the US dollar.
"There's a lot of flight-to-quality demand from Asia," said Mr Adam Blankman, Treasury market analyst at Standard & Poor's MMS. "Equity markets are tumbling and the dollar continues to be very, very strong because prospects don't look strong for any kind of co-ordinated action to support the yen."
European stocks picked themselves in a little in late trading after being hit by sliding Asian bourses, the weak yen, and falling prices on Wall Street.
Fears that Asia's economic problems may spread got the better of markets in London, Frankfurt and Paris which ended with losses of about 1 per cent. In Dublin, the ISEQ index also fall by just over 1 per cent.
The turmoil in Asia has raised growing doubts about whether the long bull markets in European and US shares can go on.
Optimists say Asia's woes may benefit Western economies by curbing inflation, while the bears point to gloomy comments from western firms doing business in Asia.
Many of Asia's problems stem from the sagging yen which shed 1 per cent against the dollar and the deutschmark amid mounting concern about Japan's economic outlook and its impact on other Asian markets.
