STOCK markets across the world were dealt another setback when fears of war between US and Iraq were compounded by news yesterday that the US economy grew at 0.7% in the final quarter of last year, its slowest growth rate since the third quarter of 2000.
The US economy contracted during the first three quarters of 2001, and growth in the world's largest economy during the third quarter was 4%.
The Dow Jones Industrial Average closed 165 points down at 7, 945 on Thursday and the Nasdaq fell to 1, 322, down 35 points.
In Asia, many markets were closed ahead of the Chinese New Year and among those that were open, trading was mixed.
Japan's Nikkei 225, which fell below a 20-year low during trading, managed to muster a 23-point gain to 8,339. Wire reports speculated that Japanese public funds wanted to keep the Nikkei above the 8,300-level to limit the damage on banks and their capital.
The Philippine Stock Exchange rose 16 points to 1,056, Singapore's Straits Times Index fell 4 points to 1,291, Jakarta's Composite Index lost nearly 4 points to 388 and Bangkok's SET index closed 0.6 of a point lower at 369.
Markets around the world, bracing for a critical United Nations Security Council meeting on Feb 5 and dealing with sluggish US corporate profits, were in retreat after media giant AOL Time Warner reported the largest loss in US corporate history and following the release of US fourth-quarter economic growth data.
Although the US grew at a respectable 2.4% last year after a recession-like 0.3% growth in 2001, much of the growth was due to sales of automobiles and houses, inventory rebuilding and spending on defence.
Sales of US-produced goods and services rose 1.8% last year, and consumer spending was up 3.1%.
Investment in houses, which had a strong performance in 2001, rose 3.8% last year.
Spending by the US government increased 4.4% in 2002, the largest gain since 1986. Spending on defence rose 9.3%, the biggest rise since 1967.
The price of gold and oil, bearish indicators in times of uncertainty, rose yesterday.
At the time of writing, the price of gold was up US$2.30 at US$369.7 an ounce and the price of Nymex light crude was up 22 US cents at US$33.85 per barrel.
The threat of war showed no signs of clearing after eight European nations placed an open letter in newspapers backing the US move to disarm Iraq, and chief UN weapons inspector Hans Blix saying he has so far seen no evidence of a promised increase in Iraqi co-operation.