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Global Markets: Stocks Gain, Oil Sags
March 21, 2003 10:29:00 AM ET

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 overnight.

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.


U.S. stocks gained strongly in early trading as Friday's offensive convinced many investors the conflict could be wrapped up quickly.

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 3.4 percent.

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 safe-haven bet.

``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 markets.''

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.

2003 Reuters

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