www.arizonarepublic.com David Karp/Associated Press Wire services Jan. 28, 2003

Thomas Scavone grimaces as prices declined Monday at the New York Stock Exchange for the seventh time in eight sessions.

It may be a month or two before the first shots are fired in Iraq, but for all intents and purposes a war has already begun on financial markets.

On Wall Street, stock-price declines over the past two weeks have wiped out the gains built up earlier in the month on expectations of an economic rebound later in the year. On Monday, the Dow Jones industrial average dropped below the 8,000 mark, the blue chip index's first close under that bench mark since the middle of October.

A steady stream of downbeat corporate earnings reports and forecasts has added to the sell-off, but most analysts blame jitters about war for the market's downbeat mood.

War jitters have spread overseas as well, with the dollar dropping to new lows against the euro. The greenback is down about 8 percent to the European currency over the past two months. Shaken by what they see as President Bush's willingness to have the United States bear the full political and economic cost of a war to oust Saddam Hussein, some European investors have concluded that the dollar and dollar-denominated stocks and bonds may not be the havens in a time of geopolitical crisis that they are usually thought to be.

The dollar's fall mirrors the steady increase in the price of crude oil. The shut down of supply from strike-ridden Venezuela and fears that an Iraq war could disrupt shipments from Iraq and other Middle Eastern countries have combined to drive up the price of crude to more than $32 per barrel. Higher energy prices are another reason some forecasters think economic growth will be sluggish in the coming months and hurt consumer and business confidence, which will translate to less spending for goods, services and factory expansion.

Some investors fear that even a quick end to the Iraq crisis won't put the market's broader worries to rest. Concerns are building among investors that history's normal pattern, in which war typically is good for stocks, might not apply this time.

The worry is that even if the United States defeats Iraq quickly, or somehow prevails without war, U.S. investors will continue to face a host of world problems that could weigh on stocks for some time to come. In addition to continuing economic and corporate troubles here, investors worry about North Korea's nuclear threat, which some consider an even bigger problem than Iraq. Others think that continuing instability in the Middle East could keep oil prices high.

Also, America's war against terrorism won't be over after an Iraq war, meaning that the risk of further attacks will continue to hang over the stock market.

"Even if you beat Saddam, do you beat terrorism?" asks Henry Herrmann, chief investment officer at mutual fund group Waddell & Reed in Overland Park, Kan. "Terrorism is a weight on the market."

Plenty of investors are still hoping stocks return to the historical pattern, in which they weaken just before a war, then rebound strongly soon after the gunfire begins. That is what happened during World War II, the Korean War and the Gulf War.

It seemed to be happening in fall 2001, when stocks fell after the Sept. 11 attacks, but then rose strongly once the U.S. began its war on Afghanistan's Taliban.

But the war in Afghanistan didn't produce the same result. Instead of sparking a continuing bull market, that fighting led to more investor disappointment. All the stock gains from that war have unraveled, not just because of Iraq, but also because of Enron Corp.'s meltdown, anemic corporate earnings and Wall Street scandals.

Contributing to the declines is a worry that victory in Afghanistan and a potential victory in Iraq don't represent an end to the conflict. Terrorism not only remains a concern but could grow as a result of the fallout from any U.S. move against Iraq.

Not all wars are good for stocks, says Tim Hayes, global stock strategist at market research firm Ned Davis Research in Venice, Fla., who has made a study of past international crises' effects on stock markets.

"If (an Iraq invasion) just muddies things up in the Middle East and things look worse, maybe Vietnam is a better comparison" than World War II, he says.

Compiled from reports by the Washington Post and the Wall Street Journal.

news.ft.com By Canute James in Kingston Published: January 28 2003 4:00 | Last Updated: January 28 2003 4:00

P&O has ordered four cruise ships not to call at Trinidad and Tobago after reports that a radical Muslim group in the Caribbean state was planning to attack US and British interests with biological weapons if war is launched against Iraq.

The shipping line acted after a warning by the Foreign and Commonwealth Office to Britons against travelling to Trinidad and Tobago because of the threat of terrorism and a claim by a former prime minister of links between Trinidad's government and al-Qaeda.

The police in the country, located off Venezuela, said it was not aware of the group that had threatened attacks, which has not been named. Local journalists said they had been blindfolded and taken to a location to be shown the chemicals.

US and UK interests in Trinidad and Tobago include oil and gas installations valued at several billion dollars. Senior army officers said that there were contingency plans to deal with biological attack. The health minister met officials yesterday to discuss responses to attack.

Trinidad and Tobago has a small Muslim community, representing 5.8 per cent of a 1.3m population. In 1980 Jamaat al Muslimeen, a radical Muslim sect, attempted a coup.

The Foreign and Commonwealth Office said that while most visits to Port of Spain, Trinidad and Tobago's capital, were trouble-free, "UK nationals worldwide should be aware of the risk of indiscriminate attacks on civilian targets in public places, including tourist sites.

"We believe Trinidad and Tobago to be one of a number of countries where there may be an increased terrorist threat. British nationals should exercise vigilance, particularly in public places frequented by foreigners such as hotels, restaurants and shopping malls."

P&O Princess Cruises said it had kept the four cruises from calling at Trinidad "for security reasons". A spokesman said: "We took the decision after considering advice from a number of sources, including the Foreign Office."

The government said that the travel warning was based on an "exaggeration of local events". However, Basdeo Panday, a former prime minister and leader of the main opposition party, said that local groups were connected to al-Qaeda and that "the government was in association with those elements".

Patrick Manning, the prime minister, rejected Mr Panday's claim, saying it was "one of the worst examples of irresponsibility and irrationality I have seen in my long political career".

www.forbes.com Reuters, 01.27.03, 9:13 PM ET

CARACAS, Venezuela, Jan 27 (Reuters) - Venezuela's Finance Minister said on Monday that the government had extended its suspension of foreign exchange trading until Feb. 5 as it studies how to implement currency curbs to counter an eight-week opposition strike.

"The suspension that was scheduled to be lifted Wednesday will be prolonged one week precisely so we can fine tune this process, until Wednesday, Feb. 5," Tobias Nobrega told local television in an interview.

Venezuela's government, whose vital oil income has been slashed by the strike against President Hugo Chavez, last week suspended currency trading for five days. The government said the measure was intended to halt the slide of the bolivar and slow capital flight.

The opposition strike, started on Dec. 2 to force Chavez to resign and call elections, has driven Venezuela's economy deeper into recession, sent the bolivar tumbling against the U.S. dollar and cut into the nation's international reserves.

new.stockwatch.com 2003-01-27 18:10 PT - Street Wire by Stockwatch Business Reporter

Letter writer Robert Bishop, perhaps more philosophical given the years that have passed since his strong support (and lavish coverage) of Crystallex International in 1997 and 1998, says he cannot go to an investor conference without getting a question about the one-time high-flying court case promotion.

"I wonder why," he said dryly.

Mr. Bishop recommended Crystallex International in August, 1997, at $5.60 largely on the basis of what he viewed as Crystallex's strong legal claim to mineral rights at the gold-rich Las Cristinas 4 and 6 concessions.

The stock peaked in March, 1998, at $11.85 intraday.

In June, 1998, Mr. Bishop expressed shock and dismay when the Venezuelan supreme court threw out Crystallex's administrative-based application, with the country's chief justice writing that the then-Vancouver-based junior not only had no case, but that it had no legal standing to bring forward a complaint in the first place.

Mr. Bishop's support for Crystallex extended to his June 10 Fax-Alert, issued just as the stock went into free fall from the $6 level to the $1 level, "A suitcase full of money can solve a lot of problems in a lot of countries around the world, and Venezuela certainly used to be, and in many respects, may still be on the list." He later said that his comment was not meant as a veiled reference to the courts having been bribed.

www.morningstar.ca 27 Jan 03(6:48 PM) |  E-mail Article to a Friend

By Jeffrey Jones

CALGARY, Alberta (Reuters) - Canadian Pacific Railway <CP.TO> said on Monday its fourth-quarter profit rose 29 percent as the country's No. 2 railroad had a foreign exchange gain and weathered the impact of the drought-stricken western grain crop.

But operating income at CP Rail, which just wrapped up its first full year as a stand-alone firm after its spinoff from defunct Canadian Pacific Ltd., slipped a bit as expenses like employee bonuses and purchased services nudged up 3 percent.

It earned C$126 million ($83 million), or 79 Canadian cents a share, in the fourth quarter, up from year-earlier C$98 million, or 62 Canadian cents a share.

That beat an average estimate of 71 Canadian cents a share among analysts polled by Thomson First Call.

Net income included a C$6.1 million gain from the impact of a strong Canadian dollar on its long-term debt. Without one-time items, profit was C$120 million, down from C$124 million.

Revenues were C$950 million, about flat with the fourth quarter of 2001.

For the full year, net income jumped 33 percent to a company record of C$496 million, or C$3.11 a share, from C$373 million, or C$2.34 a share.

CP Rail said quarterly results were cushioned from an 18 percent drop in grain revenue and a 16 percent fall in coal shipments by large gains in fertilizer, industrial, automotive and especially truck-train intermodal revenues.

This year's grain crop outlook remains a big unknown after two years of drought have led to poor harvests, it said.

The results contrasted sharply those of top competitor Canadian Natural Railway Co. <CNR.TO>, which reported last week its net income fell sharply because of charges from layoffs and asbestos-related injury claims.

"The bottom line is I'm very pleased with what we accomplished this year in spite of the worst Canadian grain crop since I can remember," CP Rail chief executive Rob Ritchie told reporters.

Ritchie predicted similar pressures in 2003, including economic uncertainty and high fuel prices, but said he expected the railway to manage those factors.

"Assuming a grain crop approaching normal levels, we expect to see revenue growth in the 3 to 4 percent range for 2003," he said. Much of that rests on the likelihood of a stronger economy in Canada compared with the United States, he said.

The carrier's operating ratio, or expenses as a percentage of revenues, weakened to 75 percent from 72.5 percent in the fourth quarter of 2001. But it improved to a company record of 76.6 percent for the year and Ritchie said CP Rail was on track to achieve its target of 73 percent in 2004.

During the quarter, fuel costs rose only 0.8 percent despite world oil prices surging 38 percent over fears of a war with Iraq and the protracted strike that has cut shipments from major exporter Venezuela.

Executives cited CP Rail's fuel hedging activities as well as conservation initiatives for the showing.

Chief financial officer Mike Waites said the railway would also reap rewards in the current quarter with 41 percent of fuel needs locked in at C$21.95 a barrel, compared with the current price of more than $32.

Shares in CP Rail fell 52 Canadian cents to C$29.38 in Toronto on Monday, representing a nearly flat performance since the start of the fourth quarter. The Toronto Stock Exchange's main index has risen about 5.5 percent during the same period.

($1=$1.52 Canadian)