Sirens of war

townsvillebulletin.news.com.au 05feb03

WAR jitters sent local share prices decisively lower today ahead of US Secretary of State Colin Powell's UN presentation on Iraq, weighing heavily on world markets as gold prices surged. The benchmark S&P/ASX 200 index fell 18.6 points to 2928.0, while the all ordinaries index declined a similar amount to 2907.5 at 1213 AEDT.

On the Sydney Futures Exchange, the March share price index contract was down 19 points to 2915.0 - a 13 point discount to the underlying index - on a volume of 5113 contracts.

The sirens of war and weak corporate guidance undermined markets, with investors selling off or staying on the sidelines until a clearer picture emerged on a timetable for US action over Iraq, unloading stocks and collecting profits from a previous two-day rally.

Analysts said there was little reason to buy ahead of the UN address.

In London, shares in Britain's biggest companies ended the day mired in the red, hammered lower by weak financial stocks and a warning by spirits group Allied Domecq that its earnings growth had stalled.

The FTSE 100 benchmark index ended down 99.3 points, or 2.7 per cent, at 3590.1, erasing most of its 122-point gain yesterday. Other European markets also slumped. The DJ Stoxx 50 index of leading euro-zone shares plunged 3.81 per cent to 2184.23 points.

The Dow Jones industrial average lost 92.09 points, or 1.14 per cent, falling to 8016.92, while the tech-heavy Nasdaq shed 17.79, or 1.34 per cent, to close at 1306 points.

The broader Standard and Poor's 500 was 14.79 points lower, or 1.71 per cent, at 845.53.

Powell was to present the US case against Iraq at a special UN Security Council meeting. But he said it would not include "smoking gun" evidence of Iraqi malfeasance but a "convincing case" that Baghdad continues to defy UN disarmament demands.

Shaw Stockbroking head dealer James Spiteri said the market remained cautious but had picked up from earlier lows.

"The market is predictably weak, although it has come off its earlier lows, it is just slightly improving," Mr Spiteri said.

At 1222 AEDT, AMP tumbled 23 cents, or 2.5 per cent to $8.97 after reaching a record low of $8.95 in earlier trade.

Mr Spiteri said the drop was because of AMP's exposure to the UK market which fell sharply overnight.

"There was a weaker UK market overnight ... (and AMP) may be forced to raise more money as provisions against commitments in the UK," he said.

"There is also a little bit of scepticism over global insurance players after overnight in the US the American Insurance Group said it had not taken into account sufficient provisions."

Mr Spiteri said the banking sector was also predictably weaker, with ANZ shares shedding 23 cents to $16.92 at 1227 AEDT.

National Australia Bank shares gave up 20 cents to $31.33, Westpac shed 15 cents to $13.81 and Commonwealth Bank lost 15 cents to $26.23.

Media stocks were also down. News Corp was down 25 cents to $11.06 while the preferred scrip lost 22 cents to $9.24 at 1229 AEDT.

In other stocks Kerry Packer's PBL gave up two cents at $8.33 while Fairfax was four cents lower at $2.98.

Gold prices surged overnight, climbing to six-year highs as war jitters continued.

The spot price of gold in Sydney gained $US7.425 to $US383.55 per fine ounce at 1238 AEDT.

Gold stocks rallied on the back of the increase, with Newcrest Mining gaining two cents to $6.65, Sons of Gwalia lifted three cents to $2.31 and Lihir Gold surged four cents, or 2.63 per cent, to $1.56.

The resources sector was weaker. At 1244 AEDT, BHP Billiton fell two cents to $9.10, Rio Tinto lost 16 cents to $32.75 and Woodside Petroleum dropped 10 cents at $11.17.

The retail sector was mixed. David Jones was steady at $1.07, Woolworths fell six cents to $11.70 and Coles Myer was five cents weaker at $6.25 at 1249 AEDT.

In other news, grain handler and marketer GrainCorp lifted more than three per cent, or 34 cents, to $10.30 after the company said it was talking about a possible merger with the unlisted Grainco Australia.

Specialist broadband telco, Uecomm's shares fell 0.5 of a cent to 15.5 cents after reporting a $5.5 million loss in 2002 an improvement from the $55.2 million loss recorded the previous year.

The maker of the iconic Hills clothes hoist, Hills Industries' shares gained one cent to $3.25 after booking a $13.977 million net profit for the first half, compared to $12.166 million in the previous corresponding period.

The top traded stock by volume was Lihir Gold with 10.87 million shares changing hands worth $17.07 million.

Preliminary national turnover was 359.56 million shares worth $724.3 million, with 321 rising, 481 falling and 336 steady at 1258 AEDT.

"It's a very thin market, not a lot of volume. There is too much negative sentiment going into the speech. We're going into war and everyone knows it," Michael Driscoll, head of listed trading at Bear Stearns in the US.

On the corporate front, a shock $US1.8 billion ($3.04 billion) charge from insurer American International Group and news from Goodyear that it is eliminating its fourth-quarter dividend further undermined Wall St sentiment.

World oil prices bubbled higher as nerves tightened. New York's benchmark light sweet crude March-dated futures, which had slumped in early trade after the end of Venezuela's general strike, reversed course to end 82 cents higher at $US33.58 a barrel in New York.

In London, reference Brent North Sea crude oil for March delivery, which also had declined earlier, rose 83 cents to $US31.08 per barrel. AAP, AP, AFP