ANALYSTS SEE BULLS LEADING WAY ON BOTH SIDES OF ATLANTIC.

Byline: Nick Olivari Bloomberg News

Never before this year have benchmark stock indexes in the United States, United Kingdom, France and Germany fallen into a bear market, only to end the year with gains of more than 15 percent.

``It was the best-ever comeback in the history of the Dow and stocks globally,'' said Robert Froehlich, managing director and chief investment strategist at Scudder Kemper Investments Inc., which oversees $200 billion.

Heading into the last week of the year, the Dow Jones industrial average has advanced 14 percent in 1998, after going from up 18 percent to down 5 percent. The Bloomberg European 500 Index erased a 35 percent advance before roaring back to a 25 percent gain for the year in dollar terms.

Russia was the flash point for market declines worldwide, as its August currency devaluation and debt default caused billions of dollars of losses for hedge funds and banks and a worldwide flight from risk. The benchmark Russian stock index dived 85 percent, after leading the world last year with a 98 percent gain. Major Latin American markets sank 35 percent or more. Asia was mixed.

The United States and Europe are the best places to put money in 1999, money managers say.

``We should see 10,000 on the Dow in the first quarter,'' said J. Thomas Madden, chief investment officer at Federated Investors Inc. in Pittsburgh, which manages $103 billion. That would translate into a gain of 10 percent in the next three months.

Madden's picks for 1999 include tobacco companies UST Inc. and Philip Morris Cos., food company Archer-Daniels-Midland Co., Swiss drug maker Novartis AG, France's Societe Generale SA and German engineering firm Mannesmann AG.

While investors aren't expecting the heady gains that sent the Standard & Poor's 500 Index up more than 20 percent for four straight years, few are concerned stocks will slide so long as interest rates remain low and the economy keeps growing. The recoveries on both sides of the Atlantic came after the Federal Reserve began a series of three interest-rate cuts in September, followed by similar moves by central banks in Europe and Canada.

``The market does not generally fall when the Fed primes the pump'' by lowering interest rates, said Henry Cavanna, a money manager with J.P. Morgan Investment Management, which oversees $300 billion. Cavanna's picks for next year are Sun Microsystems Inc., Monsanto Co. and Kmart Corp.

Patrick Carisch, who helps manage $160 billion of assets at Swiss-based Credit Suisse Asset Management, says European stocks will gain 11 percent in dollar terms, compared with 8 percent for U.S. stocks. European companies have more room to rise as they streamline their businesses, said Carisch, who maintains a neutral weighting on U.S. equities and is overweight in European stocks. ``But we will not bet against the U.S. market.''

Europe's economies are expected to slow next year, and as in the United States, investors are counting on lower interest rates to stoke consumer spending and increase corporate profits. The debut of a single currency for 11 European countries could benefit stocks, as it eases the flow of goods and services across borders.

Europe's big winner in 1998 was Finland, which advanced 92 percent in dollar terms. Nokia Oyj, which tripled this year, accounts for two-thirds of the Finnish index. Indexes in Greece, Belgium, Italy, Spain, France and the Netherlands registered 35 percent-plus advances, although they never regained their July highs.

In Asia, the big winner was South Korea's Kospi Index, which topped the world with a 98 percent gain. Investors aren't expecting a repeat performance in 1999, because Korean companies must work in an economy that shrank by 7 percent this year.