Markets advance despite war chill - Sixth advance in row for Dow industrials marks first since August 2000

www.canada.com MALCOLM MORRISON
CP Thursday, March 20, 2003

As zero-hour for a war in Iraq approached, the closely watched Dow average of blue-chip stocks rose yesterday to close up for a sixth session in a row - something that hasn't happened since August 2000.

Most North American stock markets gained on reports that U.S. planes attacked several artillery batteries in southern Iraq.

Hopes for a short war also fired up the U.S. dollar, in turn driving the Canadian currency lower by 0.37 of a cent to 67.45 cents U.S.

Lowered fears about a shortage of oil as a result of a new war in the Persian Gulf took crude prices beneath $30 U.S. a barrel.

While U.S. crude inventories remain low, OPEC producers other than Iraq and strife-torn Venezuela have been increasing production for weeks.

Generally, the tone on stock markets yesterday was of caution ahead of the expiry of the U.S. ultimatum to Saddam Hussein, even as U.S. forces began moving through the Kuwaiti desert toward Iraq.

"We had a pretty strong move in the last week that needs to be digested," said Arthur Hogan, chief analyst at Jefferies & Co. "We now know war is a matter of hours, not weeks. So this is definitely a wait-and-see day."

In New York, the Dow Jones industrials gained 71.22 points to 8265.45. The Dow has racked up more than 700 points in the last six sessions as investors bet any war will be short.

"It has sort of slowed down in intensity from what we've seen in the last couple of days, but the equity markets are proving remarkably resilient here," said Scott Kinnear, economist with MMS in Toronto.

Toronto's S&P/TSX composite index moved 14.87 points higher to 6453.48.

The Nasdaq lost 3.48 points to 1397.07 while the S&P 500 was ahead 7.57 at 874.02.

Generally, stock markets have been driven higher since the middle of last week as investors looked to the rally that followed the start of the 1991 Persian Gulf War and hoped that history would repeat itself.

"The general feeling out there is that there will be a quick war so you don't necessarily want to wait for the start of the war because by that time it will be too late," Kinnear said.

But there are plenty of reasons for caution, including the possibility of torched oil fields, use of biological weapons and terrorist attacks.