French Decision Could Give World Markets a Boost : Stocks: But the thin margin of approval could mute the positive reaction.

Financial markets around the world were expected to get a boost today following French approval of European political and monetary unity, although the razor-thin margin of the vote could mute the reaction, economists said.

In Japan, the Tokyo Stock Exchange’s Nikkei index opened higher Monday, gaining 118.73 points to 18,285.53 in early trading. Markets in Australia and New Zealand also were stable. Stocks in Europe and the United States were also expected to get a lift.

“This should lessen the risk of the European countries pulling apart and the economic risks that go with that. It is positive in terms of reducing the financial instability and recession risk to the world,” said economist Allen Sinai of Boston Co.

Currency markets, rocked by chaos last week, were calmer early Monday. The dollar began to fall late Sunday, giving back some of last week’s gains. Traders had bought the dollar last week, viewing it as a safe haven during the currency crisis in Europe. But the French vote eased those concerns, prompting traders to began selling it Sunday night, analysts said.

Traders last week had dumped the British pound, Italian lire and Spanish peseta, fearing that a “no” vote in France on the Maastricht Treaty would bring further chaos in Europe’s currency rates.

The French franc rose Sunday. Analysts believed a “no” vote would have led to a devaluation of the franc. But the British pound fell against the German mark on expectations that Britain would cut interest rates. Traders anticipate that other European currencies will remain depressed by continued high interest rates in Germany.

In addition to calming global currency markets, the French vote is expected to help U.S. stock and bond markets by increasing prospects for lower interest rates.

The French vote should relieve pressure on countries that have kept interest rates high to defend their currencies. Lower rates would be good news for U.S. exporters because it would boost economic activity in Europe, encouraging consumers there to buy more goods. Lower rates in Europe would also help boost the value of the dollar, and give the Federal Reserve Board greater leeway in lowering interest rates.

Economists disagree over whether the events in Europe by themselves will be enough to prompt the Fed to further push down U.S. interest rates. Fed officials have sought to downplay the impact of the European crisis here, portraying themselves as on the sidelines.

Economists believe that the performance of the domestic economy will be far more important in determining whether the Fed acts. The nation’s September jobless numbers, already expected to be dismal because of Hurricane Andrew and the end of summer jobs programs, will be much more influential.

Long term, investors are expected to remain cautious about Europe because the French vote approving the Maastricht Treaty was so narrow, passing by about 51%, and because the British pound and Italian lira stay outside the European exchange rate system. Traders and economists said the thin margin of victory will not ease fears that new problems will emerge, or that significant revisions will take place. The treaty is aimed at uniting the 12-nation European Community in economic, foreign and defense policies, with a single currency established by 1999.

In addition, the chaos of the past week has dramatized for investors how fragile Europe’s exchange rate mechanism is when economic goals vary so much, with Germany concerned about holding down its inflation rate and other countries seeking to boost their sagging economies.

“You can’t have monetary convergence until you have economic convergence, and you can’t have economic convergence until you have political convergence. The exchange rate mechanism is an attempt to put the cart before the horse,” said Irwin L. Kellner, chief economist for Chemical Bank.

Economist Sinai adds that the events of the past week show that Germany’s key role as the leader in keeping the exchange rate system together is now suspect, increasing uncertainty over the future of the treaty.

* RELATED STORIES: A1, A6