U.S. stocks were trading little changed Thursday morning as European markets fell amid skepticism about Asia's economic prospects, despite a rally in Asian stocks after central bank intervention yanked the Japanese yen out of its doldrums.
"The problems haven't been solved yet," said Jeremy Batstone, a strategist at NatWest Stockbrokers in London.Japanese Prime Minister Ryutaro Hashimoto acknowledged as much, saying in a news conference that Japan's troubled economy will get back on track with help from a government stimulus plan.
Hashimoto also pledged to come up with a plan to solve the bad loan crisis at Japan's banks.
"Japan has fallen into a state of excessive lack of confidence," Hashimoto said, just before he planned to meet with a delegation of U.S. finance officials. "These are very hard times."
The Dow Jones industrial average was down 9.97 points at 8,819.49 in early trading.
Shares initially rose modestly on the London Stock Exchange, Europe's biggest equity market, but the blue-chip Financial Times-Stock Exchange 100-share index reversed course into negative territory.
The so-called "footsie" was down by 61.6 points, or 1 percent, at 5,771.1 by mid-afternoon.
The pattern was similar across continental Europe. Big markets in Paris and Frankfurt showed losses in the afternoon - as did smaller ones in Milan, Amsterdam, Stockholm and Zurich.
The sober dealings in the United States and Europe marked a blunt contrast to Asia's euphoria. Asian traders pushed the blue-chip Nikkei index in Tokyo up by 4.4 percent, and smaller Asian markets showed even bigger gains.
"The signs are that the Asian crisis is slowly coming under control, and the initial fears have diminished," said Guenter Burgold, a dealer at BHF Bank in Frankfurt. "But intervention in the past has always proven to be grasping at straws. The skepticism remains."
The U.S. and Japanese central banks intervened on Wednesday to prop up the yen, which has suffered a recent sharp decline against the dollar. A rally on Wall Street helped fuel the buying frenzy in Asia.
"This is exactly the type of thing that should happen," said Jean-Michel Severino, a senior World Bank official.
Others were less optimistic.
"This is definitely not a turning point in the crisis," said Carlton Poon, head of research for Worldsec International Ltd. in Hong Kong. "The fundamentals in Asia continue to deteriorate," and the markets cannot sustain the gains.
Still, a stronger yen could reduce the risk of more East Asian economies slipping into recession as the one-year anniversary of the region's financial crisis nears, Severino said.
Southeast Asian economies were thrown into turmoil after the Thai baht was sharply devalued last July, setting off more devaluations of regional currencies and big stock market plunges.