news.ft.com By Julie Earle and Lauren Foster Published: February 27 2003 4:00 | Last Updated: February 27 2003 4:00

These are unsettling times. US investor optimism fell to the lowest level in at least seven years this month and consumer confidence dropped to a nine-year low, both on fears of war with Iraq.

Last month, nervous equity fund investors withdrew $1bn more than they invested - the first January outflow for equity funds in more than a decade.

Adding fear to already jittery war nerves, Iraq released new information on its weapons of mass destruction, including a biological bomb. The disclosure further divided the United Nations Security Council over whether to back a US-led war against Iraq, which Washington is expected to be preparing for mid- to late-March.

Many investors are wondering if they should head for the exits. Vanguard, the second largest mutual fund firm, says it has had a significantly higher number of calls in recent weeks from investors worried about war and the economy.

So what could happen in the markets if war breaks out?

If the conventional wisdom holds true, war is good for stocks and the economy. Historically, stocks tend to fall in the run-up to war as investors reduce their holdings and allocate funds to "safer" or less-risky investments, such as Treasury bonds or gold. When the bombs start to fall, the saying goes, stocks rally. The adage is: "Buy on the sound of gunfire."

While many people believe this scenario will play out if the second Bush/Saddam showdown takes place, sceptics caution that Iraq is not the only reason behind the recent market malaise and once the war factor is out of the way, investors will once again have to confront the bleak underlying US and global economy.

In the three days following Iraq's invasion of Kuwait the Dow Jones Industrial Average dropped 6.31 per cent.

As the US began gearing up for Operation Desert Storm, stocks started climbing. Within four weeks of the campaign, the Dow gained 17 per cent.

"Once the war starts, it is not unreasonable to expect that investors could start betting on a favourable outcome. After all, the US is hardly the underdog. A quick decisive victory would create at least a temporary big rally," says Alexander Paris, chief economist at Barrington Research Associates, a brokerage and research firm.

But there are caveats: the success of the initial operations, the length of the war and whether the US is in Iraq as part of broad-based coalition that has the support of the international community or not.

"It is clearly different this time around," says Joseph Keating, chief investment officer of AmSouth Funds, referring to the Gulf war, which started in January 1991. "The last time, the US was pushing Iraqi forces out of Kuwait whereas now the effort is to bring about a regime change - this is a different ball game."

Providing there is a quick, successful turn of events, there should be a broad rally in the equity markets. "There is a lot of money sitting on the sidelines. There is a buyer strike out there right now," says Mr Keating. "Investors are waiting to get in."

Phil Dow, market strategist at RBC Dain Rauscher, cautions that investors should not expect "bluebirds and rainbows" once the war fears are taken out of the market. There is still North Korea, he says.

While stocks have been hammered, the debt market has remained strong. Frazzled investors have poured money into bond funds, which have had record inflows. But there is concern now that the bond market may fall apart because bond prices have gone up sharply, and their yields are falling.

US Treasuries, a traditional haven, would likely face a sell-off after the start of the war.

Gold funds have also seen strong inflows as the metal is often viewed as a hedge against war and other potential crises. But once the war is under way, the gold price is expected to fall.

The price of gold soared amid the panic buying just after the start of the Gulf war but fell when it was clear the war was going in the US's favour.

As for the oil price, that, too, should drop. In the last Iraq conflict, oil soared after Iraq's invasion of Kuwait but fell sharply once the war began.

In today's prices, the cost of abarrel of oil jumped from $23 in July 1990 to an average of $47 in October 1990. By February 1991, with the war under way, it was down to $25.

Mr Paris believes that if the war is concluded successfully - and Venezuela's production is back on track - the price of oil could be around $20 by the end of the year. "There is a war premium in oil prices," he says. "Take out the war and you take out the premium."

If Saddam Hussein uses a "scorched earth policy" and sets fire to the oil fields, the price of crude would soar. Some analysts are discounting a worse scenario: that the Iraqi leader could use dirty bombs to destroy the oil fields.

And what if the US goes into Iraq with only Britain and Spain on its side? Or Mr Hussein uses weapons of mass destruction? Or the conflict drags on?

"If the war goes badly, the West fractures and the Middle East explodes, obviously it will create more uncertainty and further disrupt economic activity and world trade," says Barton Biggs, global strategist at Morgan Stanley, in a research note.

"The price of oil will soar, delivering a lethal blow to the world economy. The result will be a worldwide recession and new lows in the stock markets. Cash, government bonds and gold will be the safe havens in a dark and dangerous world."

www.grandforks.com Posted on Wed, Feb. 26, 2003 GEORGE GEDDA Associated Press

WASHINGTON - Top State Department officials told a delegation of Venezuelans Wednesday that political disruptions have created serious doubts about the country's reliability as an oil supplier, an administration official said.

They called on the Venezuelan government and the opposition to negotiate a settlement to their differences, said Charles Barclay, spokesman for the State Department's Bureau of Western Hemisphere Affairs.

The officials passed the message to Energy and Mines Minister Rafael Ramirez and the president of the Venezuelan state oil company, Ali Rodriguez.

The Venezuelan delegation was told that the way for the country to restore its reputation as a reliable oil supplier is for the government and the opposition to reach agreement on a "constitutional, democratic, peaceful and electoral solution," Barclay said.

The U.S. officials also urged that the parties work with Organization of American States Secretary General Cesar Gaviria, who has tried in vain to promote a settlement.

Wednesday's meeting occurred three days after Chavez assailed Gaviria for speaking out about the detention of a strike leader, saying his comments were "totally out of place."

He also criticized State Department spokesman Richard Boucher for saying last week that Washington was concerned that the detention could hinder peace talks.

"Gentlemen of Washington ... we don't meddle in your internal affairs," Chavez said. "Why does a spokesman have to come out and say they are worried? No, that is Venezuela's business."

Venezuela has been a leading source of U.S. oil imports, accounting last year for about 1.5 million barrels a day. Most analysts place part of the blame for the low supplies of crude and petroleum products in the United States on the loss of Venezuelan oil imports.

A general strike that was called in December as a protest against Chavez paralyzed the oil industry for a time and devastated the national economy. Oil production has recovered somewhat in recent weeks but is still well below normal.

www.alertnet.org 27 Feb 2003 01:38

(Adds details, quotes, background)

By Pascal Fletcher

CARACAS, Venezuela, Feb 26 (Reuters) - The U.S. Embassy in Venezuela said on Wednesday it would close for one day on Thursday because of a security threat received after bomb blasts at two other foreign diplomatic buildings in Caracas.

"The U.S. Embassy in Caracas has received a credible threat to its security and will be closed to the public on Thursday, February 27, 2003," the embassy said in a statement.

"We received sufficiently reliable information of a possible attack so we decided to close for the day," embassy press counselor Phillip Parkerson told reporters.

The mission was expected to reopen Friday, he added.

Embassy officials declined to give further details or say whether the threat was related to powerful bomb attacks that badly damaged the Spanish Embassy cooperation office and the Colombian consulate in Caracas early on Tuesday.

The explosions injured five people less than 48 hours after leftist Venezuelan President Hugo Chavez sharply accused Spain, Colombia and the United States Sunday of meddling in his country's political crisis.

In Washington, U.S. ambassador to the Organization of American States Roger Noriega repeated U.S. condemnation of the bomb attacks. But he also questioned the Chavez government's commitment to honoring a non-violence agreement it had signed with political opponents last week.

"There can be little doubt that President Chavez' belligerent rhetoric has contributed to a climate of tension that does not contribute to the search for a peaceful solution," Noriega told the OAS' Permanent Council.

He added the recent events in Venezuela, including the arrest of a prominent anti-Chavez business leader, "raises questions about the Government of Venezuela's commitment to honoring the non-violence agreement".

Ambassador Jorge Valero, Venezuela's representative to the OAS, said the United States was "making very doubtful interpretations" by linking the bombings to Chavez' rhetoric.

"In the name of the Venezuelan government," he said, "I categorically reject these interpretations."

U.S. OIL INTEREST

The United States, Spain and Colombia had expressed concern over the arrest last week of Carlos Fernandez, one of the leaders of an opposition strike in December and January that slashed oil output by the world's No. 5 petroleum exporter.

Clients affected included the United States, which normally got more than 13 percent of its oil imports from Venezuela.

The U.S. State Department said Wednesday it wanted to see Venezuela restore full oil production and resume its traditional position as a "reliable oil supplier" to the U.S..

"We hope that Venezuelans -- both the government and those involved in the strike -- will take the necessary additional steps to return (state oil company) PDVSA to its full production capacity," spokesman Lou Fintor said in Washington.

He was speaking after Assistant Secretary of State Anthony Wayne had talks at the State Department with Venezuelan Oil Minister Rafael Ramirez and PDVSA President Ali Rodriguez.

Anti-Chavez business chief Fernandez is currently under house arrest facing charges of rebellion.

Several thousand anti-government protesters marched in Caracas Wednesday in a show of support for Fernandez and Carlos Ortega, another strike leader who is in hiding after a judge also ordered his arrest.

A Caracas court issued new arrest orders Wednesday for seven other alleged oil strike leaders, local media reported.

Chavez's government has firmly rejected any link between Tuesday's bomb blasts and the president's recent aggressive criticism of the United States, Spain and Colombia.

Ministers suggested the opposition would have more to gain by trying to isolate the government internationally.

Senior government officials met with foreign ambassadors in Caracas Wednesday to coordinate tightening security at diplomatic missions in the Venezuelan capital.

Chavez, who was first elected in 1998 and survived a coup last year, is accused by foes of being a dictator and trying to drag his country toward Cuba-style communism. He says a rich minority elite is opposed to his self-styled "revolution".

No one has claimed responsibility for Tuesday's attacks but leaflets were found at the scene signed by the "Bolivarian Liberation Force - Coordinadora Simon Bolivar urban militias", a known pro-Chavez radical group. Government officials said the leaflets were intended to mislead investigators.

Noriega said the United States supported ongoing efforts by OAS Secretary General Cesar Gaviria to try to broker a negotiated agreement on elections between the feuding Venezuelan government and its foes.

Gaviria, who was also publicly warned by Chavez Sunday not to meddle in Venezuela's affairs, was due to chair the next session of negotiations in Caracas scheduled for Thursday.

www.omaha.com Published Thursday February 27, 2003 BLOOMBERG NEWS

WASHINGTON - The decline in consumer confidence this month wasn't a surprise because higher gasoline prices brought on by events in Iraq and Venezuela are hurting consumer incomes, Federal Reserve Chairman Alan Greenspan said Wednesday.

The Conference Board reported Tuesday that its February index of consumer confidence plunged to a nine-year low of 64 from 78.8 in January. Greenspan blamed a 41 percent rise in gasoline prices over the past three months.

"Consumer confidence indexes tend to be affected to events consumers are acutely aware of, such as the dramatic rise in gasoline prices," Greenspan told a Senate hearing on deposit insurance. The size of the index decline "is a surprise but not the direction," Greenspan said.

Except for a 17-point drop the month of the terrorist attacks, the 14.8-point decline was the largest since April 1980, when a U.S. mission to rescue American hostages in Iran failed.

A sustained drop in confidence could foreshadow weaker consumer spending, which accounts for two-thirds of the economy. That possibility is "a cause for concern," Peter Fisher, the Treasury Department's undersecretary for financial markets, told the senators.

Gas prices are up on fears of war with Iraq and supply constraints because of a strike by oil workers in Venezuela. Together, the two nations pump about 7 percent of the world's oil.

For now, the increase "is an actual constriction in the available cash households have for things," Greenspan said. "Their real incomes, in that regard, have been taxed."

philadelphia.comcastsportsnet.com February 26 John R. Finger ComcastSportsNet.com

CLEARWATER, Fla. — Seemingly behind in his work after arriving at camp with a broken nose suffered when an errant ball caught him flush, second-year reliever Carlos Silva threw two simulated innings under the watchful eyes of manager Larry Bowa and pitching coach Joe Kerrigan, Wednesday morning at Jack Russell Stadium. Silva says he threw approximately 20 pitches and feels no worse for the wear after his first strenuous workout of spring training.

He says he threw all of his pitches and doesn't feel like he is playing catch up despite missing a few days of camp to have his broken nose reset.

Jim Thome smashed another impressive home run during workouts in Clearwater on Wednesday but not quite as impressive as his shot that traveled over 500-feet last week. (AP)

After the workout where the pitchers stretched, worked on fielding drills and threw in the outfield, while the hitters took batting practice, Bowa said he was very pleased with Silva's session and feels confident that the 23-year old Venezuelan righthander will be ready to go when camp breaks. In fact, things are going so well for Silva that Bowa says the only flaw in his game is something he can't do anything about.

"The thing that Silva lacks is experience," the manager said adding that the righty will throw a few more side sessions before appearing in a game.

But the inexperience appears to be something that will be remedied quickly. Last season, Silva appeared in 68 games as a rookie with a 5-0 record and an impressive 3.21 ERA in set-up relief. However, Silva posted so-so numbers with 41 strikeouts in 84 innings while allowing 88 hits which manifested itself to opponents batting .282 against him. Not bad, but not great either.

But as a groundball pitcher, Silva only gave up four homers and seemed to pitch better the more he worked. With two days rest, opponents hit .227 against him and his ERA sank to 1.75.

Certainly, it appears as if Silva will get plenty of work in 2003. During the first three weeks of camp, Kerrigan told reporters he was as impressed with Silva's stuff — his bread-and-butter is a diving sinker — than any pitcher in camp. In fact, Kerrigan suggested that Silva might be closer Jose Mesa's heir apparent. A starter in the minors who didn't begin working in the bullpen until last year with the Phillies, the friendly hurler is game for anything Bowa and Kerrigan want him to do.

"I like being a reliever but someday I would like to be a starter again," Silva said. "Right now, I'm too good in the bullpen but I'll go wherever they want to put me."

Pitching and workouts aside, to say Silva has had a unique spring would be an insult to the word. First he was popped on the schnoz running in the outfield during a workout in Venezuela, and then he couldn't get a visa to get out of the country because his name is similar to one on the government's terror watch list.

If that isn't enough, Silva's home country is mired in civil unrest, labor strikes and violent protests. However, Silva says his hometown Bolivar is 12 hours away from the trouble in Caracas, the capital. Conversely, Bobby Abreu's "30-30 Ranch" in Aragua is just three hours away. Abreu's arrival in camp was delayed when he thought it was too unsafe to drive to the airport in the capital city.

Happy Campers So far, Bowa is very happy with the way things are going in his third camp as the Phillies manager. Sure, adding David Bell, Kevin Millwood and Jim Thome while losing malcontents Scott Rolen, Travis Lee and Robert Person might have a lot to do with it, but Bowa was full of praise for his players after Wednesday's workout.

The enthusiasm has been high, attitudes great and the work ethic strong.

"I'm not concerned about anything," Bowa said. "We have to keep working hard. I'm sure they'll pop up but right now there are no concerns."

I got it! The most enthusiastic workout during Wednesday's session was a fielding drill led by Kerrigan with his pitchers. Kerrigan called out pitches such as "curve!" and "fastball without much on it!" to which the hurlers ran a certain direction, fielded a ball bounced off the plate or batted, and finished the play by throwing to the appropriate base.

The session featured instructor Tug McGraw raucously playing a fielder at the bases and closer Jose Mesa trying to plow him over with his fireball tosses. At one point Mesa looked more like a guy trying to impress his date at a carnival booth game than the confident veteran pitcher that he is. After fielding a ball hit by Kerrigan, Mesa missed McGraw's glove and pegged a bucket filled with balls, littering them all over the third-base line. He did not win a stuffed animal, but drew big laughs from the fans watching in the stands.

In another amusing moment, McGraw taught Randy Wolf how to be more like, well, Tug McGraw. While fielding a popup, Wolf meekly called out, "I got it," causing McGraw to interject and chide the lefty.

"Is that all you got?" the fun-time reliever shouted while running toward Wolf. "All you have to do is be loud."

McGraw then stood on the mound screaming, "I got it! I got it!" demonstrating one aspect of the game that set him apart during his playing days.

McGraw's certainly made an impression. After his demonstration, every player tried to scream louder than the one before, but none could match McGraw's vocal prowess.

When it comes to being loud, Tug is still an All-Star.

All signed up On Wednesday, the team announced that Brandon Duckworth, David Coggin, Jason Michaels and Bud Smith all agreed to terms on split contracts. If they break camp with the Phillies, Duckworth will get $325,000, Coggin $320,000 and Michaels and Smith $305,000. The deadline for all contracts to be renewed is March 2 leaving Joe Roa, Brett Myers and Jimmy Rollins as the only unsigned players.

Farewell tour, spring style Not only is 2003 the last season for the Vet, but the team is closing Jack Russell Memorial Stadium in Clearwater, too. The first game was played in 1955 in a game started by Hall of Famer Robin Roberts, who will return to throw the ceremonial first pitch in the finale on March 28. Special spring hitting instructor Mike Schmidt will toss the first pitch on Friday before a split-squad game against the Yankees.

Game time The Phillies open their exhibition season Thursday against the Pirates in Bradenton.Wolf will face Jeff D'Amico with Duckworth, Hector Mercado and Eric Junge also seeing action. Jim Thome and David Bell will make the trip and play while Pat Burrell, Placido Polanco and Rollins will stay in Clearwater. Burrell will play all nine innings against the Yankees on Friday.

In the game against the Yankees, Kevin Millwood, Vicente Padilla, Rheal Cormier and Mike Fyhrie will pitch, while Roa, Gavin Floyd, Jim Crowell and Amaury Telemaco will head to Orlando, Fla. to pitch against the Braves.

The Braves come to Clearwater on Saturday where Myers, Jose Mesa, Terry Adams and Dan Plesac will pitch.

Thome runs Thome's latest feat of strength during batting practice on Wednesday was a rain-making bomb he clubbed over the 400-foot sign in dead center that soared well above and over the high batting background. Burrell, Bobby Abreu and David Bell also smashed some impressive long balls.

E-mail John R. Finger