Stocks Roll to a Halt After Opening Bounce

European markets were slightly lower after an opening rally fizzled.
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FRANKFURT -- Stocks felt mild pressure, slipping off early highs on concern over emerging markets, the cloudy outlook for company profits and the slowing European economy.

Those worries prompted the market to ignore several positive factors, including a strong dollar against the euro, slightly better-than-expected 1998 results from business software giant

SAP

(SAP) - Get Report

and a bidding war to buy U.K. auto-components maker

LucasVarity

(LVA)

.

In Frankfurt, the

Xetra Dax

was off 28 points at 4960, while in London the

FTSE

was off 21 at 5859 and in Paris the

CAC

was down 7 at 4043.

Traders were fretting again about Wall Street, saying gains Monday in New York weren't convincing.

S&P 500

futures were higher early before crumbling, last down 4.20 points at 1239.30. The dollar remained firm, with the euro trading at $1.1583, but the greenback was a bit weaker at 113.79 yen. The U.S. long bond was yielding 5.10%.

SAP jumped 5.1%, topping Monday's 5% gain, on news fourth-quarter pretax profit fell 15% on weak demand in Japan and that 1998 pretax profit rose 14%. The results were slightly better than expected after SAP this month issued a profit warning that sparked a sharp selloff in the shares. SAP today also painted a fairly postive outlook for 1999, saying it expected 1999 sales to rise 20-25%.

LucasVarity was the volume leader in London, up 16% on news that U.S. auto parts maker

TRW

(TRW)

will bid for the U.K. company.

Federal-Mogul

(FMO) - Get Report

has already made an offer to buy LucasVarity for $6.5 billion.

Stocks across Europe popped higher on the open, but with no spirit. Buying dried up quickly at the higher levels, with indices slipping well off session highs. Once near unchanged levels, stocks reflected market sentiment: Investors are decidedly undecided. While the technical and fundamental outlooks are tilted toward negative, liquidity continues to flood in. And strategists do not want to place bearish bets and then be drowned in a flood of cash.

Joerg Schreiweis, head of institutional sales at

DG Bank

in Frankfurt, expects stocks to resume rallying, but he is uncertain enough that he wants to see stocks bounce before he becomes a buyer.

"There is still risk in this market," he said. "It looks

technically bearish."

Nick Glydon, technical analyst at

Robert Fleming Securities

in London, agrees: "If I were forced to either buy or sell today, I would be a seller."

He believes that a big drop on Wall Street poses the biggest near-term threat to European markets. And he says: "I don't like the way the U.S. market is acting, especially the Internet stocks." He is closely watching what he believes are key support levels, at 4800 in the DAX, at 5800 in the FTSE and 1200 in the

S&P 500

cash index.

But, like Schreiweis, Glydon is not ready to bang on the sell buttons. At least not yet. "We are now at a crucial time, a make-or-break time," he said. "If we can hold these levels, then everything will be OK. But if we break below support, we are going to have bad times for the next three months."