www.iht.com Judith Rehak International Herald Tribune January 20, 2003   A new populist president in Brazil, a landslide victory for an Islamic-based party in Turkey, a terrorist bombing in Indonesia, plus tensions over Iraq and nuclear saber-rattling from North Korea: Even by emerging-markets measures, the fourth quarter was unusually eventful. Nevertheless, many emerging-market funds beat their developed-country counterparts, and a few with nerves strong enough to take advantage of the turbulence turned in stellar performances. On the relatively calm side, oil and banks proved to be a profitable combination for funds that invest in Europe’s emerging markets. The Luxembourg-domiciled Pictet Eastern European Fund rose 17.4 percent, reinforced by stakes in Russian energy producers as crude oil prices spiked at $32 a barrel. Another winner for the fund was Komercni Banka AS of the Czech Republic. ‘‘The main story was that it was overprovisioned for nonperforming loans, which then did better than expected,’’ said Jack Arnoff, co-manager of the portfolio. The excess cash will now raise the bank’s book value. But the fund’s performance got an extra boost from a nimble bet on Turkey’s notoriously volatile stock market. Managers took a position before the market surged 50 percent leading up to the November elections, and then took profits before it tumbled back. ‘‘That differentiated us from our competitors, because most of them don’t invest in Turkey,’’ Arnoff said. By comparison, offerings that specialize in Asia’s smaller economies had a weak quarter. The Matthews Pacific Tiger Fund was the top U.S. offering, up 6.7 percent, compared with 2.8 percent for the sector. Mark Headley, who co-manages the growth-oriented portfolio of some 50 stocks, said that while the focus of the fund is not technology, much of its fourth-quarter performance was tech-driven. ‘‘There’s a tremendous outsourcing story going on in Asia,’’ Headley said, citing one example: Hon Hai Precision Industry Co., a Taiwan engineering company that designs everything from computers to VCRs and builds them in China. Another winner was Internet Auction Co., a South Korean company that is a dual play on domestic consumer spending and technology. The stock leaped more than 50 percent in the quarter. The company is half owned by eBay Inc., the U.S. online auction leader. But Headley also took a calculated risk in Indonesia. Already a shareholder in Astra International TBK, the big auto assembler and distributor, he bought more when the stock market plunged after the October terrorist attacks in Bali. ‘‘I don’t think Bali was about domestic problems,’’ he said. He was rewarded when Astra re bounded 85 percent from its post-attack low. The fourth quarter also showed how misleading a three-month performance can be in these unpredictable markets. Once Brazil’s political situation calmed, Latin American equity funds rebounded to the top performing category, gaining an average 16.8 percent. But that was not enough to wipe out their losses in a disastrous year when they were also hammered by Argentina’s debt default and, more recently, by political chaos and the general strike in Venezuela. But interestingly, Brazil and Columbia proved to be a catalyst for the ING II Emerging Market Debt Fund, which soared 21 percent in dollar terms in a category that beat most equity offerings for the quarter and the year. With a hefty 17 percent bet in Brazil, the fund was well positioned once the bond market began to recover. ‘‘We added before the election but also after as we became more encouraged,’’ said Rob Drijkoningen, the portfolio manager. To illustrate what fueled the fund’s outperformance, he noted that Brazilian Brady bonds, trading below 50 cents on the dollar in mid-October, are now above 70 cents. ‘‘And that’s on top of a current coupon of 8 percent,’’ he said. ____________________________ For more information: ING II EMERGING MARKETS DEBT FUND. Web site: www.ingfunds.com MATTHEWS PACIFIC TIGER FUND. Web site: www.matthewsfunds.com PICTET EASTERN EUROPEAN FUND. Web site: www.pictetfunds.com

www.morningjournalnews.com Monday January 20, 2003 By RYAN GILLIS, Journal Staff Writer

1/20/2003SALEM - While the local economy appears to have entered this latest recession earlier and has been in recession longer than national averages, better days may soon be on the horizon, economically speaking.

According to George Zeller, who spoke Friday at the Salem Area Chamber of Commerce's annual economic forecast luncheon, there is a 70 percent chance Columbiana County's recessional economy will improve before the end of 2003.

A recession is defined as two consecutive fiscal quarters in which the country's gross domestic product, the sum total of all economic activity nation wide, declines. The national economy saw negative GDP during the first three quarters of 2001.

That decline stopped at the fourth quarter, he said, and all four quarters of 2002 saw positive GDP, meaning the national economic outlook is improving. Unfortunately, that growth is much slower to arrive in Columbiana County and the Mahoning Valley than in the rest of the country, he said.

"I don't think its a secret to most of you that this is not the best economic period we've ever had," Zeller told his audience, and his statistics suggested Columbiana County and surrounding areas have yet to see the end of this low economy.

For example, over the past year, Columbiana County alone has lost over 1,000 jobs, and Mahoning and Trumbull counties have lost an additional 3,000 jobs, meaning the total area has lost almost 4 percent of its employment.

Statistics also show the total aggregate earnings from all jobs in Columbiana County still equal about $200 million each quarter, Zeller said, but that figure is 3 percent less than last year, a loss of about $6 million.

"When there's $6 million less in paychecks circulating in people's pockets, that's a problem," he said. "That's a problem certainly for the household where the paychecks are lost, and it's a problem for the business community, too. There's that much less money circulating."

Locally, the recession has been in place since the third quarter of 2000, according to Zeller's figures, and the entire state was in recession throughout 2002. Job losses are also much larger when viewed over a two-year period, about 7 percent of all jobs in the Youngstown metro area were lost, he said.

Zeller's forecast was not all gloom and doom, however. The number of people applying for unemployment in Columbiana County has been decreasing for the past six weeks, which the economist called "a positive sign."

Based on that fact and national trends, Zeller predicted there was a 70 percent chance the county's recession will end before 2003 is over.

The prediction leaves a 30 percent chance the local economy will not improve this year. Zeller said the possible war with Iraq, political instability in Venezuela and changing interest rates are all "wild cards" in the equation which could keep the economy stagnant.

Zeller is a senior researcher at the Council for Economic Opportunities in Greater Cleveland, which coordinates anti-poverty efforts in Cuyahoga County. He has also worked as a sociology professor at both Ashland and Wittenberg universities and served on several statistical committees and task forces at the national, state and local levels.

He is a 1967 graduate of Salem High School.

rgillis@mojonews.com

sg.biz.yahoo.com Monday January 20, 4:54 AM

                     Latest     Change   %Change    %12/31

New York DJ Indus 8586.74 -111.13 -1.28 +2.94 Jan 17 Nasdaq 1376.19 -47.56 -3.34 +3.05 Jan 17 NYSE Comp 5108.51 -56.83 -1.10 +2.17 Jan 17 S&P 500 901.78 -12.82 -1.40 +2.50 Jan 17 Russell 2000 388.10 -6.78 -1.72 +1.31 Jan 17 Wilshire 5000 8530.32 -120.65 -1.39 +2.24 Jan 17 Toronto TSX 300 6755.92 -71.10 -1.04 +2.14 Jan 17 London FTSE 100 3820.60 -61.20 -1.58 -3.04 Jan 17 FTSE 250 4321.70 -27.80 -0.64 +0.06 Jan 17 Frankfurt Xetra DAX 2918.82 -135.29 -4.43 +0.91 Jan 17 Paris CAC40 3056.93 -85.66 -2.73 -0.23 Jan 17 Tokyo Nikkei 225 8690.25 +81.08 +0.94 +1.30 Jan 17 Nikkei 300 168.39 +0.57 +0.34 +1.78 Jan 17 Hong Kong Hang Seng 9614.59 -128.64 -1.32 +3.15 Jan 17

NEW YORK STOCKS:

Stung by downbeat economic reports, a poor showing by two key technology stocks and geopolitical concerns, U.S. stocks staged a retreat Friday.

The Dow Jones Industrial Average shed 111.13, or 1.28%, to close at 8586.74. The Nasdaq Composite Index dropped 47.55, or 3.34%, to end at 1376.20. And the Standard & Poor's 500-stock index fell 12.82, or 1.4%, to 901.78.

ADVERTISEMENT The decline in stock prices came on the heels of economic-data releases that showed an unexpected decline in industrial production in December and waning consumer confidence. Add to that worries over the Iraq situation and a lackluster showing by tech bellwethers and Dow components International Business Machines and Microsoft - IBM fell 5.5% and Microsoft lost 7% - and the end result wasn't pretty.

For the week, the Dow industrials lost 2.26%, while the Nasdaq index shed 4.94%. Both indexes, though, are still up for the year.

"After the first two weeks of the year, I was full of confidence. Quite frankly, this week has hurt not only my confidence, but also the confidence of many investors," said Hugh Johnson, chief investment strategist at First Albany. "The message is fairly clear: Investors are now not so sure that the economy is going to strengthen in 2003."

On the New York Stock Exchange, there were 1,103 issues advancing, 2,143 declining and 158 unchanged.

NYSE volume totaled 1,346,306,020 shares, compared with 1,476,120,850 Thursday.

The NYSE Composite Index was 5108.51, down 56.83. The average price per share fell 26 cents.

NEW YORK PRECIOUS METALS:

Comex gold futures eased slightly Friday on light long liquidation and week-end profit taking - but nevertheless ended the session with the highest end-of-week close in the contract's history and near six-year highs on the spot market.

The most-active Feb contract settled at US$356.80 per ounce, down US$1.30 on the day.

Extended U.S. dollar weakness relative to other currencies, equity market wobbles and taut geopolitical tensions contributed to gold's recent sturdiness and the scaling of the six-year highs of US$359 scored Thursday.

Also helping prices has been a recent reluctance of dealers to establish short positions in the metal amid the current uncertain times and particularly ahead of the approaching U.S. long weekend.

However, some profit taking by speculators and banks was noted Friday to trim Feb gold's recent gains - although prices remained above the US$355 level throughout.

Spot gold followed a similar path, ending the week around US$356.50 which is the highest end-of-week close since February 1997.

Dealers said gold prices are set to remain prone to spurts higher on any further geopolitical shocks as long as the dollar remains on its southerly path and uncertainty shrouds the global economic outlook.

However, according to the latest Commitments of Traders Report, the speculative community is currently hosting historically high net-long exposure to the market (of over 63,500 contracts), so some players are concerned that the funds' appetite for further buying may be waning.

"There's always alarm bells ringing when (fund) net length gets to historic levels and that usually precedes a reversal in price movement," said a floor dealer with a precious metals refiner.

"The only problem now is that is makes good sense to be long and would be dangerous to go short, so most people don't really know what to do except to keep going with the flow - and the flow is higher," he added.

Beyond the US$360 level the next key areas of resistance are deemed to be at US$363, US$365 and US$370.

Mar silver was 2.5 cents lower at US$4.81 in accord with gold's tone, after having tread water in a US$4.785-4.840 range through the day.

Resistance for Mar is seen at the 10-day moving average around the top end of the intraday range at US$4.835 initially and then at the US$4.85 level. Support is expected around US$4.77, US$4.75 and the 30-day moving average around US$4.745.

Nymex Apr platinum was US$4.70 higher at US$619 after light fund buying amid thin conditions pushed prices to fresh contract highs and register the highest week-end close on the spot market since April 2001.

Dealers said a promising demand and uncertain supply outlook will continue to steer prices higher over the coming weeks, although some light long liquidation is expected to appear into the strength.

Mar palladium crept higher in platinum's slipstream and settled at four- day highs of US$258, but is not expected to extend those gains over the coming days given palladium's less stellar demand forecasts.

Settlements: London PM Gold Fix: US$357.00, Vs US$352.30 Thursday PM Fix U.S. spot gold 1345 ET: US$356.47, down US$0.78; Range US$355.20-358.60 Feb gold (RGCG03) US$356.80, down US$1.30; Range: US$355.30-358.70 Mar silver (RSIH03) US$4.810, down US$0.025; Range: US$4.785-4.840 Apr platinum (RPLJ03) US$619.00, up US$4.70; Range: US$617.00-621.00 Mar palladium (RPAH03) US$258.00, up US$7.50; Range US$255.00-260.00

NYMEX:

Worries about a possible war with Iraq lifted U.S. crude oil futures to US$34 Friday for the first time since November 2000.

Profit taking pushed prices down through most of the session. But with growing talk of a U.S. attack on Iraq, traders concluded it was too risky to short crude futures ahead of the long weekend, analysts said.

"In general, we know that things are moving forward on the war front," said Tom Bentz, an analyst at brokerage house BNP Paribas Futures in New York, alluding to a massive U.S. troop buildup in the Persian Gulf. "That will continue to lend support" to the market.

On the New York Mercantile Exchange, nearby February crude climbed to a high of US$34.00 a barrel, the highest for a front-month contract since November 2000, before settling at US$33.91, up 25 cents. The contract had fallen as low as US$32.90 earlier in the session.

Heating oil and gasoline futures also recovered from earlier losses. February heating oil closed up 19 points at 89.86 cents a gallon after falling as low as 87.40 cents. February gasoline futures edged up 35 points to close at 91.11 cents a gallon, well off its intraday low of 88.00 cents a gallon.

On London's International Petroleum Exchange, Brent and gasoil futures ended in negative territory.

March North Sea Brent futures slipped 4 cents to close at US$30.54 a barrel. February gasoil futures dropped US$5 to settle at US$256.75 a metric ton.

Comments by U.S. Secretary of State Colin Powell heightened worries that the U.S. is edging close to an invasion of Iraq, Bentz said.

Powell was quoted by Germany's Sueddeutsche Zeitung newspaper as saying that "we believe a persuasive case will be there at the end of the month that Iraq is not cooperating" with U.N. weapons inspectors.

U.N. weapons inspectors are scheduled to report to the Security Council on Jan. 27 on Iraq's weapons of mass destruction program and Iraq's cooperation with the inspection.

Chief weapons inspector Hans Blix said Thursday that Iraq must cooperate more fully with inspectors to avoid war. The comment helped lift crude oil prices.

Iraq has declared itself free of weapons of mass destruction.

But U.N. officials say the declaration contains many gaps, while U.S. officials contend it is false.

U.N. inspectors reported finding 12 empty chemical warheads outside Baghdad on Thursday, a discovery some analysts say could provide the U.S. with a justification to launch an attack against Iraq.

The recent developments make war with Iraq increasingly inevitable, said analyst Peter Beutel of Cameron Hanover in Connecticut.

"Yesterday's discovery of empty missile shells is being discussed as the possible 'smoking gun' that will lead to war," Beutel said. "If it is not, something else almost certainly will."

Concerns about a possible war with Iraq come at a time when Venezuelan oil output remains crippled by a prolonged strike in the Latin American country.

Despite attempts by the embattled government of President Hugo Chavez to restore oil operations and optimistic predictions by other government officials, analysts believe it would take months for Venezuelan production and exports to return to normal.

"Even if there is a quick compromise or resolution of the crisis, a lot of the fields are fairly mature and it's going to be difficult to restart those wells," said Antoine Halff, an analyst at the Paris-based International Energy Agency. "How is Venezuela going to afford it? That problem isn't going to go away, it's going to get worse probably."

Fear that both Venezuelan and Iraqi oil supplies could remain curtailed at a time when U.S. crude oil inventories are at historically low levels is likely to keep prices high in the near term, Bentz of BNP Paribas said.

www.forbes.com Reuters, 01.19.03, 4:22 PM ET  By Hugh Bronstein

NEW YORK, Jan 19 (Reuters) - Ecuador sovereign bonds, bolstered by a new government austerity plan, are set to rise this week, while Venezuelan debt is sapped by the country's seven-week-old national strike, Wall Street analysts said.

Ecuador bonds are trading at spreads wider than those of Venezuela, reflecting the perception of greater risk. But if Ecuador takes concrete steps toward solvency while Venezuela's economy falls victim to political conflict, analysts said Ecuador could trade inside Venezuela before the end of the month.

Ecuador's new president, Lucio Gutierrez, will freeze wages and raise fuel prices under an austerity decree aimed at closing a financing gap inherited when he took office, the government said on Sunday.

The decree raises the price of the most commonly used gasoline from $1.12 to $1.48 a gallon for consumers, a hike that Gutierrez's leftist and Indian supporters have threatened to protest.

"There are two bets," said Jose Cerritelli, a Bear Stearns debt strategist.

"Either Gutierrez succeeds and he gets an International Monetary Fund agreement within a month, which would prompt an Ecuadorean bond rally, or you think his ex-supporters will go to the streets and force him to backtrack," Cerritelli said. "This would probably be the first step toward default."

Investors will watch this week for protests in Ecuador as well as any signals that might come from the IMF.

"My bet is that the protests will not be serious, the new economic program will survive and that Gutierrez will get a new IMF deal within a month," Cerritelli said. "Therefore the country that will probably rally the most this week and this month will be Ecuador." Daniel Tillotson, an emerging markets analyst at Prudential Securities, was more moderate in his optimism.

"It sounds like (Gutierrez) is delivering some seriousness that will impress the IMF," Tillotson said. "But will the IMF demand legislative endorsement of the decrees, and will the opposition-dominated legislature deliver that endorsement if required? There's still some uncertainty."

Ecuador spreads ended last week at 1541 basis points. Venezuela spreads ended at 1371. Narrower spreads reflect the perception of decreased risk as measured against safe-haven U.S. Treasury bonds.

CHAVEZ, MORE DEFIANT THAN EVER Venezuelan President Hugo Chavez, meanwhile, named a new interior minister and head of the army, placing loyal generals in key posts as he fought to beat a 49-day-old opposition strike that has strangled vital oil exports.

"The damage to the government's finances is continuing," Tillotson said. "Until that turns around, Venezuela bond spreads will have to widen to reflect the increasing risks."

Chavez said on Sunday his government would use "everything we've got" to defeat the strike launched by opposition leaders, who are pressing him to resign and hold early elections.

Chavez was elected in 1998 after vowing to wrest control from the country's corrupt elite and enact reforms to help the poor. But opposition has grown amid charges the president wants to establish a Cuban-style authoritarian state.

The only reason Venezuelan bonds might stop their decline would be if investors start to believe that the opposition will force Chavez from office.

"But I think it's too early for that and the people who might be planning to remove him are not going to broadcast their plans ahead of time," Cerritelli said. "So there's really no reason for investors not to reduce their exposure to Venezuela this week."

Venezuela total returns have fallen 8.36 percent so far this month while Ecuador's are 14.19 percent higher, according to JP Morgan's Emerging Markets Bond Index Plus. The index itself stands 1.5 percent higher so far in January.

BRAZILIAN INTEREST RATES Economists largely expect Brazil's Central Bank to hold its benchmark interest rate steady at 25 percent on Wednesday, according to a Reuters poll.

Nineteen of 22 economists surveyed this week bet the bank would leave the Selic rate unchanged when the Monetary Policy Committee (Copom) finishes its monthly meeting on Wednesday, its first under Brazil's new left-leaning president, Luiz Inacio Lula da Silva, and Central Bank President Henrique Meirelles.

"It might be good for the new central banker to establish credibility by raising rates," said Mark Dow, a portfolio manager at MFS Investment in Boston.

"That might drive a stake through the heart of fear that Lula will follow an inflationist policy," Dow said. "But I'm not sure which way the central bank is going to go."

sg.biz.yahoo.com Thursday January 16, 5:20 AM GLOBAL STOCK INDEXES at 15:15 EST/2015 GMT

                     Latest     Change   %Change    %12/31

New York DJ Indus 8748.34 -94.28 -1.07 +4.88 Intraday Nasdaq 1444.72 -16.27 -1.11 +8.18 Intraday NYSE Comp 5185.76 -47.90 -0.92 +3.72 Intraday S&P 500 921.28 -10.38 -1.11 +4.71 Intraday Russell 2000 396.42 -2.03 -0.51 +3.48 Intraday Wilshire 5000 8706.40 -86.77 -0.99 +4.35 Intraday Toronto TSE 300 6803.44 -7.54 -0.11 +2.86 Intraday London FTSE 100 3887.80 -57.80 -1.46 -1.33 Close FTSE 250 4339.90 -36.50 -0.83 +0.48 Close Frankfurt Xetra DAX 3049.40 -49.32 -1.59 +5.42 Close Paris CAC40 3134.66 -39.37 -1.24 +2.31 Close Tokyo Nikkei 225 8611.75 +58.69 +0.69 +0.38 Close Nikkei 300 167.63 +2.12 +1.28 +1.32 Close Hong Kong Hang Seng 9873.49 +77.18 +0.79 +5.92 Close NEW YORK STOCKS:

U.S. stocks are down Wednesday after Intel sparked concern about the semiconductor industry, a favorite sector among traders, despite itself reporting promising quarterly results.

Intel said it will curtail spending on production equipment, delivering a blow to builders of chip manufacturing equipment, which now can't plan on as much business from the No. 1 semiconductor maker. Intel will spend between US$3.5 billion to US$3.9 billion on such equipment, less than the US$4.7 billion spent last year.

Intel's announcement comes as analysts have cut their forecasts for the fourth quarter, which companies are about to report. They expect fourth-quarter earnings to rise 10.9% versus the prior year, according to Thomson First Call, but their growth forecast was 12.9% just two weeks ago.

Automatic Data Processing, a payroll-processing firm, hasn't helped sentiment by cutting its earnings forecast for the fiscal year ending June 30, saying profit should grow by a low-single-digit rate, not the mid-single-digit pace previously expected. The stock is down 3.20, or 8.1%, to 36.28.

A surge in the price of oil is also hurting equities. A U.S. government report showed a surprisingly steep decline in crude oil inventories in the week ended Jan. 10, which has sent prices up 83 cents, or 2.6%, to US$33.20 a barrel Wednesday.

While Intel played down the significance of its spending plans - saying it needs to buy less equipment because the machines it has are more efficient - some on Wall Street are concerned the company is playing coy, not revealing that the cutback is due to its belief that demand will be tepid this year.

As for Intel's good news, it earned 16 cents a share during the fourth quarter, better than the 14 cents a share anticipated by analysts, and revenue of US$7.16 billion also beat expectations slightly.

Nonetheless, reflecting the general worry over the chip business - despite Intel's relative strength - the Philadelphia Stock Exchange Semiconductor Index is down 11.49, or 3.4%, to 325.24. Applied Materials, a big chip equipment maker, is down 85 cents, or 5.5%, to 14.51, while Advanced Micro Devices, another chip maker, has lost 9 cents, or 1.2%, to 7.34.

Even Linear Technologies, a chip maker that projected third-quarter earnings above the analyst estimate, is down, falling 1.39, or 4.5%, to 29.43.

Intel is down 22 cents, or 1.2%, to 17.57, which puts it in the middle of the pack on the Dow Jones Industrial Average, which is off 112.38, or 1.3%, to 8730.24.

The Nasdaq Composite Index is down 19.70, or 1.4%, to 1441.29 while the Standard & Poor's 500-stock index has lost 12.38, or 1.3%, to 919.28.

Among small-cap stocks, the Russell 2000 Index is down 2.70, or 0.7%, to 395.75 and the Standard & Poor's SmallCap 600 Index has dropped 1.30, or 0.7%, to 199.92.

Transkaryotic Therapies is sinking 2.21, or 25%, to 6.52 after it didn't convince a panel of Food and Drug Administration advisers that its experimental treatment Replagal should be approved for Fabry's disease, which affects about 5,000 people worldwide.

Footstar is surging 2.56, or 35%, to 9.95 after playing down the financial significance of bankrupt discount retailer Kmart Corp.'s planned closure of 326 stores, noting that those locations generated only about US$200 million, or 8.4%, of Footstar's total sales last year.

Scholastic is up 2.05, or 5.9%, to 36.58 after author J.K. Rowling turned in the manuscript for the delayed, fifth "Harry Potter" book, which Scholastic will publish. The delay had prompted Scholastic to cut its fiscal 2003 earnings forecast in December.

NEW YORK PRECIOUS METALS:

Comex Feb gold futures settled US$1.30 lower at US$351.10 per ounce Wednesday after a choppy session in which prices dipped to five-day lows early on fund selling before rebounding later in the session on renewed weakness in the U.S. dollar.

The barrage of early fund selling had taken many by surprise, sources said, and is thought to have been sparked by gold's lack of fresh upside impetus of late despite dollar and equity market wobbles and continued geopolitical concerns.

However, bargain hunting and good levels of bank buying remained evident as soon as Feb slipped below the US$350 level, particularly once the U.S. dollar swooned against the euro between 0930 (1430 GMT) and 1000 ET (1500 GMT).

Thereafter, the early fund selling pressure waned and the dealer buying managed to lever prices back above the US$350.50 level to a US$350-$351.50 range that prevailed through the later stages of the session.

Dealers agreed that the fund community had become a little overloaded with gold in recent weeks and that the market was in store for a slight pullback before renewed upside progress could be attempted.

They also said that the continued presence of bank buying on any weakness has reaffirmed many market observers' longer-term bullish expectations of the market.

"The fact that the funds sold off was not surprising given the levels of open interest we've got, but the fact that the banks still have a hearty appetite on any dips bodes well over the long term," said one dealer, referring to the 214,684 contracts or 2.14 million ounces of open interest in gold futures reported on Comex Wednesday.

"We could do with that open interest coming lower a little before we turn higher again," he added.

"But, as the dollar is not going to miraculously strengthen any time soon, or the situations with Iraq or North Korea suddenly get worked out without any shots fired, the reasons behind the funds buying gold in the first place have not gone away - so they'll not be doing a complete reversal on their holdings and start only selling gold," he said.

"They'll just probably let (gold) cool off for a while before buying any more," he added.

John Tyree, analyst at Rosenthal Collins Group, said that key support was flagged at US$348 initially and then around US$345, US$343 and US$340.

Resistance was seen at US$357.50 and US$360, he added.

Spot gold followed the same path as Comex futures, swinging lower early to around US$348.50 before leveling off around the US$350-$351 area as the session wore on.

With the potential for fund long liquidation also overhanging the spot market, support is touted at around US$348 initially and then at US$345, US$343 and $340.

Mar silver settled 1.5 cents higher at US$4.78 after having endured a similarly choppy session as seen in gold.

Dealers said silver will continue to look to gold to provide general direction, although good support is seen at US$4.72 and then at US$4.70. Resistance around US$4.95-$5.00 is deemed impenetrable over the short term - which may serve to limit overall movement.

Nymex Apr platinum settled US$2.60 lower at US$609.60 after light speculative selling amid the prevailing very thin conditions.

Apr is seen remained holed up in a US$600-$620 range over the short term. A relatively sound demand outlook is expected to steer prices higher over the longer run.

Mar palladium was bereft of much interest whatsoever and languished in a US$245-$248 range throughout.

A less bright demand forecast compared with platinum is seen pulling palladium back toward the US$225-$230 region over the coming weeks.

Settlements: London PM Gold Fix: US$351.00, Vs US$353.10 Tuesday PM Fix U.S. spot gold 1340 ET: US$350.85, down US$2.05; Range US$348.45-353.65 Feb gold (RGCG03) US$351.10, down US$1.30; Range: US$348.70-352.20 Mar silver (RSIH03) US$4.780, up US$0.015; Range: US$4.720-4.805 Apr platinum (RPLJ03) US$609.60, down US$2.60; Range: US$607.20-613.00 Mar palladium (RPAH03) US$245.40, down US$4.60; Range US$245.00-248.00

NYMEX:

Crude oil futures rose sharply Wednesday after data showed a larger-than-expected weekly decline in U.S. inventories.

Data released by the Department of Energy's Energy Information Administration earlier Wednesday showed that U.S. crude oil stocks fell by 6.4 million barrels to 272.3 million barrels as refiners unexpectedly stepped up production by 1.1% to 92.3% of operating capacity.

The decline came despite a slight increase in imports. The data showed that imports rose by 200,000 barrels a day to 8.489 million barrels a day. Despite last week's increase, however, imports are about 1 million barrels a day lower than a month ago, an analyst at the EIA said.

Separately, the American Petroleum Institute reported that crude oil stocks fell by 3.264 million barrels to 272.236 million barrels last week, as imports tumbled by 676,000 barrels a day to 8.27 million barrels a day.

Analysts surveyed by Dow Jones Newswires had projected a decline of 2 million barrels in crude oil stocks.

Despite the disparity in import figures, traders seized on the data as evidence that the seven-week strike in Venezuela continues to cut into U.S. oil inventories.

It was "the kind of report we thought it would take to keep prices on their upward path," IFR Pegasus energy analyst Tim Evans said of the EIA report.

On the New York Mercantile Exchange, nearby February crude surged 84 cents to close at US$33.21 a barrel, just shy of a two-year high of US$33.65 a barrel hit last month.

Heating oil and gasoline futures rallied in tandem with crude despite bearish petroleum-product stock data.

February heating oil rose 1.70 cents to close at 90.86 cents a gallon, while February gasoline futures advanced 1.27 cents to close at 90.43 cents a gallon.

On London's International Petroleum Exchange, February Brent futures rose 61 cents to close at US$31.22 a barrel. February IPE gasoil futures inched up US$1.25 to close at US$261.75 a metric ton.

The rally in heating oil and gasoline futures was surprsing given that the data indicated that refiners continued to build up petroleum-product stocks.

The DOE report showed that gasoline stocks rose by 5.8 million barrels to 215.6 million barrels, while distillate stocks, which include heating oil and diesel fuel, grew by 2.6 million barrels to 132.3 million barrels.

The API report painted a somewhat mixed picture. It showed that while gasoline stocks swelled by 4.399 million barrels to 215.043 million barrels last week, distillate stocks posted a decline of 104,000 barrels to 134,277 million barrels.

Most analysts surveyed had forecast a moderate decline in both gasoline and distillate stocks.

"Even with the build of nearly six million barrels in gasoline, traders were a lot more interested in what was going on in the crude oil," said Peter Beutel, an analyst at Cameron Hanover in Connecticut. "The bottom line is that the major fundamental factors are still in effect, those being the strike in Venezuela and fear of a war with Iraq."

Beutel said that "the locals are going to smell heavy buy stops over US$33.65 a barrel. If they can somehow get some kind of fundamental justification, they'll work this market higher."

There was little indication Wednesday that either Iraq or Venezuela is going to go away as a bullish factor in the market.

The U.S. made a formal request Wednesday for limited help from the North Atlantic Treaty Organization in the event of a war with Iraq.

Prices for crude oil are in dollars a barrel and the change is in cents; prices for Nymex products are in cents per gallon and the changes are in points; prices for IPE gasoil are in dollars a ton and the change is in cents.

Nymex Prices:

Contract Settle Change Vs Low High Tuesday

Feb crude oil 33.21 +84 32.45 33.30 Mar crude oil 32.45 +67 31.85 32.50 Feb heating oil 90.86 +170 89.00 91.60 Mar heating oil 88.61 +145 87.00 89.00 Feb gasoline 90.43 +127 88.10 90.60 Mar gasoline 90.80 +141 88.60 90.90 NEW YORK LATE FOREIGN EXCHANGE INDICATIONS: Wednesday Tuesday Australia 0.5843-0.5848 0.5829-0.5834 Britain 1.6034-1.6040 1.6058-1.6064 Euro 1.0542-1.0547 1.0564-1.0569 Hong Kong 7.7990-7.7992 7.7988-7.7993 Japan 118.10-118.15 117.97-118.02 New Zealand 0.5384-0.5388 0.5385-0.5390 Singapore 1.7330-1.7340 1.7306-1.7316 LONDON METAL EXCHANGE: Copper at the London Metal Exchange

soared to a one-month high at US$1,690 a metric ton Wednesday on a heavy bout of fund and speculator buying prompted by Tuesday's strong close.

After easing lower during Asian hours, buying interest picked up pace during morning floor trade, with sentiment buoyed by the break of resistance at US$1,665/ton.

The second ring of morning trade saw the three-month contract charge up to the day's high before profit taking and light long liquidation emerged to dampen the upside momentum.

Weakness on the equity markets added to the metal's woes in the afternoon session, as did the fact technical indicators were beginning to look overbought, and the gains were pared back toward US$1,670/ton for the close.

The Dow Jones Industrial Average was around 120 points lower by the LME close while the FTSE 100 ended nearly 60 points weaker.

Although the market has made impressive gains over the last few weeks, dealers were reticent to back the metal for further upside short term. They noted that a deeper retracement would be needed before the US$1,690/ton resistance level is broken.

This sentiment was strengthened by the failure to break resistance and the pullback in the afternoon session, but much will depend on the tone of key economic releases later in the week.

The U.S. industrial production figure for December will be released on Friday and players, especially funds, will be using this number to give direction to their trading strategy.

Although copper's fundamentals are becoming increasingly positive, a poor performance for the industrial sector could dampen the mood in the market and lead to a reversal of the recent gains.

Aluminum was also a star performer Wednesday, building on Tuesday's strong performance with funds again said to behind the move.

The rally has caught a lot of players off guard given that the metal's fundamental outlook remains gloomy but further gains have not been ruled out.

"It has mostly been a sympathy move with the rest of the complex but with the funds in charge there is no telling where we will go from here," said one dealer. "We could be looking at US$1,400/ton before the end of the week but longer term I think the funds will bail and well be back to US$1,340/ton.

The buoyant mood triggered renewed buying in the tin market which helped the three-month contract break resistance at US$4,500/ton to hit a six-month high at US$4,535/ton.

Lead also broke out of its lethargic mood and charged to a one-month high at US$451/ton while zinc briefly broke resistance at US$800/ton.

Nickel continued to consolidate either side of US$8,000/ton and could challenge resistance at US$8,200/ton if Friday's data shows a strong performance by the industrial sector, dealers said.

(Prices in dollars a metric ton)

                 Wednesday PM Kerb                  Change from
                 Bid       Ask                      Tuesday PM kerb bid
Copper           1,678.00-1,678.50                  up 11.00
Lead               449.00-450.00                    up 5.50
Aluminum         1,378.50-1,379.00                  up 9.50
Zinc               799.50-800.00                    up 13.50
Nickel           8,015.00-8,020.00                  up 95.00
Tin              4,505.00-4,510.00                  up 45.00
Al alloy         1,360.00-1,365.00                  up 30.00
Al alloy         1,420.00-1,422.00                  up 15.00
(NASAAC)

EUROPEAN STOCKS:

European stocks were lower Wednesday as gloomy retail sector updates continued to fuel worries over consumer spending and Intel's fourth-quarter trading update provided little cheer for technology stocks.

At the close, London's FTSE-100 Share Index was down 1.5% at 3887.8, while Paris's CAC-40 Index fell 1.2% to 3134.66. Frankfurt's Xetra Dax Index closed down 1.6% at 3049.40.

Technology bellwether Intel easily beat analysts' earnings expectations when it presented its fourth-quarter trading update overnight in the U.S. However, the world's biggest chip maker indicated it would spend US$400 million to US$600 million less on capital expenditures this year than it did in 2002, throwing some cold water on hopes for a tech recovery to come sooner rather than later.

Among tech-sector decliners, Dutch semiconductor-equipment maker ASML fell 5.1% in Amsterdam to EUR8.4, and German chip maker Infineon skidded 2.6% to EUR8.3 in Frankfurt. STMicroelectronics Europe's biggest chipmaker fell 1.6% to EUR20.5.

U.K. high street stalwart Marks & Spencer also did little to whet investor's appetite's with its latest trading update. Shares fell 5.8% to 304 pence despite posting strong sales for its latest quarter. The company said clothing sales fell short of internal targets, and that it has had to reduce the price of more stock than expected in order to sell it, which will lead to higher-than-expected costs.

Analysts at CSFB advised investors to steer clear of some of the consumer related plays that once appeared to be a shelter in the storm. "While the case is still tentative it could be that 2003 will be the year when they too are finally sucked into the downturn," they said.

Investors remain confused as to whether the global economy is on the mend. In economic news, U.S. producer prices were unchanged in December, and core prices, excluding food and energy, declined 0.3% for a second consecutive month.

Economists surveyed by Dow Jones Newswires had forecast an increase of 0.2% overall and of 0.1% in the core figure. The figures show that the country's slowing economic growth is making inflation an increasingly remote threat.

Economists at Dresdner Kleinwort Wasserstein forecast continued sub-trend growth for the global economy during 2003 and remain skeptical that the U.S. can easily break out of its current economic soft spot. "In the Eurozone the speed at which growth picks this year will depend crucially on future policy settings in the interest rate, fiscal and exchange rate spheres," they said in a note published Wednesday.

Media stocks were also putting pressure on indexes across the region after Goldman Sachs downgraded the European media sector to cautious from neutral. The broker cited the weakening dollar, muted advertising prospects, geopolitical fears and high valuations as reasons for its bearish stance.

Continued uncertainty over the evolving situation in Iraq is also weighing on investor sentiment said traders.

Overnight Market Commentary -3-

Earnings are likely to continue dominating market direction as Apple Computer and Yahoo line up to post earnings after U.S. markets close Wednesday.

At 1646 GMT, the Dow Jones Stoxx Index of shares in European companies was trading down 1.4% at 196.98, while the Dow Jones Euro Stoxx Index, which tracks companies in countries that joined the single currency, fell 1.1% at 192.97.

The Dow Jones Euro Stoxx 50 Index was down 1.2% at 2479.9 and the Dow Jones Stoxx 50 Index was down 1.5% at 2454.5.