GLOBAL MARKETS-Dollar up, stocks swoon as war seen weeks away
www.forbes.com Reuters, 01.31.03, 2:10 AM ET By Bill Tarrant
SINGAPORE, Jan 31 (Reuters) - The dollar was steady, Asian stocks drifted following a mauling on Wall Street and safe-haven gold and oil were firm on Friday, after President George W. Bush said he would give diplomacy just weeks to avert a war with Iraq. Japanese stocks fell broadly amid fresh signs of sluggishness in the global economy, while other key Asian markets were shut ahead of Lunar New Year holidays.
Gold was trading at around $370 an ounce, up 25 cents from New York's last quoted price, while crude oil futures held steady as the market paused for breath after three days of gains.
The dollar stood its ground versus the euro and yen in Asia but mounting war fears and the latest slide in U.S. share prices cast a shadow over the greenback.
"As long as people fret over a U.S. war, it's difficult to buy the dollar," said Itochu Corp chief economist Seiya Nakajima.
Bush on Thursday welcomed the idea of exile for Iraqi President Saddam Hussein and said he would give diplomacy "weeks not months" to end the showdown over disarming Baghdad. That reinforced views in the market that the United States may start a war in late February, when U.S. forces in the Middle East are expected to be ready for combat.
NORTH KOREA NUCLEAR STOCKPILE A New York Times report on Friday, saying American satellites over North Korea had detected what appeared to be trucks moving the country's stockpile of nuclear fuel rods out of storage, rippled through markets as well.
Intelligence analysts have seen activity around the Yongbyon nuclear complex throughout January, prompting fears within the Bush administration that North Korea is preparing to produce a half dozen nuclear weapons.
Japanese technology and telecom stocks fell, but the tech-sensitive Nikkei average <.N225> staged a last-minute rally to close 0.28 percent higher at 8,339.94. The broader TOPIX index <.TOPX> lost 0.48 percent at 821.18.
Telephone giant NTT DoCoMo <9437.T> fell 2.9 percent and Sony Corp <6758.T> lost 1.3 percent. But Pioneer <6773.T> surged 9.3 percent after the world's biggest maker of car audio equipment raised its 2002/03 net profit forecast and Fuji Photo <4901.T> rose 3.7 percent on encouraging third-quarter results.
"The market is basically directionless," said Masaru Kazama, head of equities at Nissan Securities.
Australian shares <.AXJO> fell 0.25 percent, down for a third straight day, with News Corp <NCP.AX> off 1.65 percent following the drubbing that AOL Time Warner (nyse: AOL - news - people) took on Wall Street.
Singapore shares <.STI> dropped 0.3 percent to close at a fresh 16-month low. Markets in Hong Kong, Taiwan, China, South Korea and Malaysia were closed for the Lunar New Year holidays.
U.S. GDP STALLS A report showing U.S. economic growth had stalled in the final quarter of 2002 hit stocks in the world's biggest economy and added fuel to a rally in U.S. Treasuries.
But after-hours trading pushed up U.S. stock futures
The blue-chip Dow Jones Industrial average <.DJI> fell 2.04 percent to 7,945 on Thursday, finishing below the psychological 8,000 level for the second time this week. The Standard & Poor's 500 index <.SPX> fell 2.29 percent to 844.57. The tech-loaded Nasdaq Composite <.IXIC> ended down 2.65 percent at 1,322.11.
U.S. investors have yet to see solid evidence of a healthy recovery in corporate profits at the height of the fourth-quarter reporting season. AOL Time Warner's stock fell 14 percent after the company posted a 2002 net loss of nearly $100 billion -- the largest in U.S. corporate history.
Gross domestic product, a broad measure of economic activity within U.S. borders, crept ahead at a 0.7 percent annual rate in the October-December quarter, well off the four percent of the prior quarter but in line with expectations.
Front-month March crude
Venezuela's two-month oil strike seemed to falter as the government said output was now up to 1.4 million barrels per day (bpd), recovering steadily from lows of 150,000 bpd in December. Currency traders said the market would look ahead to Bush's meeting with British Prime Minister Tony Blair later in the day to see if any timeframe emerged for a possible attack.
As of 0650 GMT, the dollar was at 119.13 yen <JPY=> compared with 119.02 in late U.S. trade. The euro was at $1.0809 <EUR=> against 1.0815 and 128.67 yen <EURJPY=R> versus 128.71.
The euro withstood comments from European central bank council member Ernst Welteke, who reiterated on Thursday the pace of the euro's rise, if maintained, could hamper euro zone growth.
In Asian trade on Friday, U.S. Treasury prices trimmed gains made overnight on slumping stock prices and the worrisome GDP growth report. Two-year notes <US2YT=RR> were at 99-28/32, yielding 1.70 percent, flat from its late New York levels.