CLOUDS of uncertainty returned to global stock markets yesterday after investors’ initial hopes for a short war in Iraq were dashed by US President George W. Bush’s warning that the conflict could be more difficult and prolonged than anticipated.
Asian stock markets rallied significantly on news that the war had begun, with investors hoping for a speedy resolution of the conflict and a more certain economic outlook.
However, they closed off their highs as it became clear that such hopes could be premature and uncertainty returned to plague them at the end of the trading day.
European stock markets, which had made five consecutive days of gains, opened lower yesterday despite expectations of a “relief rally”.
They moved uncertainly in a narrow band during morning trade, with the FTSE Eurotop 300 index of pan-European blue chips drifting aimlessly between positive and negative territories.
Wall Street, meanwhile, opened with the Dow Jones nearly 1% lower yesterday. At press time, the Dow had slipped further, down 100 points or 1.2% to 8,165. Market analysts expect an unsettled day ahead for the US market.
Analysts also said the military action in the next few days would be a critical pointer to the direction of the war. Meanwhile, they said, investors and hedge funds would continue to adopt a “wait and see” attitude until a clearer picture of the direction of the US-led assault in Iraq emerged.
“I suspect the more force we see employed?the more positively the markets will react because the market’s feeling is that the more force is used, the quicker the war would be over,” Commerzbank economist Peter Dixon was quoted as saying by Reuters news agency.
Yesterday, key Asian bourses ended the day higher with South Korea leading the way. Seoul’s KOSPI index rose 4.9% to close at 568.46 points.
On the home-front, the KLSE Composite Index gained 0.65% or 4.09 points to 632.03, coming off an afternoon high of 635.56 points.
In Tokyo, the Nikkei 225 reached a high of 8,287.09 during afternoon trade before finishing 1.8% up on the day at 8,195.05. The Nikkei's rally was in sharp contrast with its performance the previous day, when it fell to a 20-year low of 7,824.82 in the morning.
Singapore’s Straits Times Index also rose, gaining 1.8% to 1,308.17 points, but off the day's peak of 1,318.53.
Sydney’s All Ordinaries rose 0.75% to 2,835.8 and Hong Kong’s Hang Seng index put on 0.4% to 9,194.56.
At press time, European markets were generally lower. London’s FTSE 100 was down 0.9% at 3,731, the Paris CAC40 was 1.2% lower at 2,803 while Frankfurt’s DAX 30 had fallen by a similar margin to 2,583.
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