By Elizabeth Lazarowitz
NEW YORK (Reuters) - Investors snatched up U.S. and European
stocks and pushed oil prices to three-month lows on Friday amid
growing hopes for a quick war as U.S. and British forces charged
into Iraq against little resistance.
U.S. blue chip shares were poised to rack up an eighth straight
day of gains, while the dollar surged to a one-month high against
the yen and crept closer to two-month highs recently hit against the
euro and the Swiss franc.
Mounting optimism that a quick U.S. victory may be in the cards
dampened demand for government bonds, an asset often sought in times
of turmoil. Bond yields, which move in the opposite direction as
prices, pushed higher.
``It would appear that things are going well in Iraq and the
market is reacting positively to that,'' said Craig Cummings, a
partner at brokerage Cantor Fitzgerald.
Concerns about burning oil wells in Iraq, terror attacks and
chemical warfare kept financial markets on edge, and British Prime
Minister Tony Blair warned that his side would not win the war
But investors were largely focused on the early successes of
U.S.-led forces. U.S. and British officers predicted a swift victory
after American armored columns raced deep into Iraq and British
marines seized vital oil facilities in the south.
Hundreds of Iraqis surrendered, although the Iraq government
ridiculed the claims of early successes and said the invaders would
not leave the country alive.
Crude oil prices, which slumped sharply as war approached,
continued to retreat despite reports of fires in Iraq oilfields that
had briefly ruffled the market on Thursday.
London's Brent crude was down 57 cents at $24.93 a barrel and
U.S. light crude lost 62 cents to $27.50.
Prices remain vulnerable, however, amid worries about massive
damage to Iraq's oil infrastructure, a spread of the conflict to
other Middle East countries and other factors.
Economists have worried in the run up to the war that high oil
prices would hobble the world's struggling economy.
STOCKS AND BONDS
U.S. stocks gained strongly in early trading as Friday's
offensive convinced many investors the conflict could be wrapped up
Major market gauges saw solid gains. The blue-chip Dow Jones
industrial average rose 90.9 points, or 1.1 percent, to 8,377.50,
and the broad Standard and Poor's 500 index jumped 7.34 points, or
0.84 percent, to 883.18. The tech-laced Nasdaq Composite Index
advanced 11.39 points, or 0.81 percent, to 1,414.16.
Mounting hopes for a quick and decisive U.S. victory have boosted
the Dow and the broad Standard & Poor's 500 seven sessions in a
row -- their longest streak of gains since August 2000.
European shares also roared ahead. The FTSE Eurotop 300 index was
up 2.5 percent and the narrower DJ Euro Stoxx 50 (.STOXX50E) gained
Earlier, stock markets in Asia closed mostly higher, although
Japan's market was closed for a holiday.
Government bond yields rose as investors moved out of the
``With what looks like very good news on the war, the bond market
is selling off,'' said one London analyst. ``If we (U.S.-led forces)
are in Baghdad by Monday, there could be a profound impact on
Benchmark U.S. Treasury 10-year note prices fell 22/32, pushing
yields up to 4.04 percent.
The dollar climbed against other major currencies as traders
banked on a swift conclusion to the war.
``The market is firmly skewed toward a quick resolution,'' said
Ryan Shea, senior international economist at Bank One. ``If there
are more signs they are making clear inroads...we would expect the
dollar to gain.''
The dollar stood at 121.25 yen and $1.0557 per euro, firmer than
the previous New York close.