World Markets Shudder At Path of War in Iraq

<a href=www.menafn.com>NewsStand - Monday, March 31, 2003 Agence France-Presse LONDON, March 31 (AFP)

LONDON, March 31 (AFP) - Stock markets slumped in Asia and Europe on Monday, while the dollar tumbled and oil and bond prices rose on growing concerns about how the war in Iraq is unfolding.

Markets shuddered at a warning from US Secretary of Defense Donald Rumsfeld over the weekend that "the most dangerous and difficult days are still ahead of us," in stark contrast to the upbeat US comments heard at the start of the war.

Dealers also took fright at a boast by authorities in Baghdad that thousands of Arab volunteers were primed for suicide missions against coalition forces, after a suicide bomber killed four US soldiers over the weekend.

"With the Iraq campaign likely to be longer, and more expensive, than some initially hoped, equity investors have adopted a more sombre attitude," said Nomura Securities strategist Anais Faraj.

"The rally since March 12 looks to be from the same stable as the other squeezes that have punctuated the three-year bear market," he added.

On European markets, the British FTSE 100 index dropped 2.3 percent to 3, 624.7 points, the German DAX 30 lost 2.9 percent to 2,447.5 points and the French CAC 40 gave up 3.3 percent to 2,642.7 points in early trading.

The stock market rout started in Asia, where some major markets, including Hong Kong and Singapore, were also laid low by the rapid spread of the deadly virus Severe Acute Respiratory Syndrome (SARS), which hit aviation and tourism stocks.

Stocks in Japan and South Korea both plunged 3.71 percent, with Tokyo's Nikkei 225 down 307.45 points at 7,972.71 points and Seoul's composite index down 20.63 points at 535.70.

"The war does not seem to be developing as planned," said Masafumi Okamoto, a dealer at Jyujiya Securities in Tokyo.

"There are growing fears that the war will last longer than expected. Investors cannot buy stocks actively amid such fears," he said.

Rising concerns about the progress of the war in Iraq also pounded the dollar, allowing the single European currency to rally to a two-week high of 1. 0898 dollars from 1.0783 late on Friday in New York.

The dollar fell to 118.90 yen from 119.75 on Friday.

"The dollar has been undermined against the euro and the yen by the belief that war in Iraq will be prolonged and complicated," said Derek Halpenny, economist at Bank of Tokyo-Mitsubishi.

"The suicide attack that killed four US soldiers with a promise of more to come and the news that an attack (by ground forces) on Baghdad may not take place for weeks has fuelled this belief," he added.

Oil prices edged up slightly here on concerns about disruption to supplies from Iraq and Nigeria, which has been shaken by civil unrest.

The price of reference Brent North Sea crude oil for May delivery rose 20 cents per barrel from the previous closing to 26.55 dollars in early trading.

"There is still enough oil coming from Saudi Arabia and even Venezuela to keep the market supplied, but with Iraq out and the conflict in Nigeria still continuing the market is tightly balanced," said Deutsche Bank analyst Adam Sieminski.

Gold prices rose, with the spot price on the London Bullion Market up 3.7 dollars from the previous closing price at 335.55 dollars.

Bond prices gained. The yield on the 10-year German government bond dropped six basis points, or 0.06 percentage points, to 4.06 percent. Bond yields and prices move in opposite directions.