Tue, Apr 01, 2003 - Page 11 News List

SARS, war hit Asian stocks hard

REASONS TO SELL As shares and the US dollar fell on concerns the US-led invasion of Iraq could drag on, the prices of oil and precious metals enjoyed a rebound


The prospect of a drawn-out war in Iraq and worries about a deadly flu-like virus pummelled Asian stocks yesterday, while the dollar sagged on fears of slowing US economic growth.

European stock traders braced for sharp falls at the opening of trade, with the London and Frankfurt markets expected to drop about 2 percent.

Oil prices tagged on an additional 1 percent to last week's 12 percent rally, as renewed violence in Nigeria dampened hopes of a speedy resumption of crude exports from the oil-producing country. Safe-haven bonds and gold rose.

Asian stocks racked up their biggest losses in six months, with major markets down more than 3 percent.

Stocks in Hong Kong, Taiwan and Singapore plunged on fears the flu-like disease severe acute respiratory syndrome (SARS) would cause a tourism slump and dent corporate activity.

"Selling pressure remains heavy because we don't see any positive news. The market has been hurt by uncertainty over war, and now worries over SARS also weigh on sentiment," said More Huang, research manager at UBS Asset Management in Taipei.

Tokyo stocks fell 3.7 percent, with the Nikkei sliding to near 20-year lows, on fears a prolonged conflict in Iraq will hamper global economic growth -- hurting exporters already smarting from the soft US dollar. Airline stocks across Asia fell more than 5 percent.

Wall Street also was expected to open lower, with Nasdaq futures falling 1.3 percent.

Stocks and the dollar have been drifting lower since March 21, as tough Iraqi resistance and overextended US supply lines wiped out expectations of a quick victory by the US-led forces.

The weekend's news from the battlefield -- US troops digging in south of Baghdad for a prolonged campaign and taking casualties from suicide attacks -- reinforced worries a long war will hurt the fragile economic recovery.

Gold advanced 1.1 percent and 10-year Japanese government bond rose, pushing yields to record lows. The dollar hit a two-week low against the euro and fell against the yen.

"The market is shifting back to what it was focusing on two or three months ago, and that's the twin deficits in the US and its economy," said Mitsuru Yaguchi, a senior fixed income strategist at Mitsubishi Securities in Tokyo.

Stock markets worldwide were poised to close the quarter with hefty losses. European stocks were expected to chalk up a 10 percent-plus decline for the period and the blue-chip Dow Jones industrial average a loss of 2 percent.

The numbers belie the period's gyrations.

Uncertainty over a possible US invasion of Iraq hammered US stocks to near five-year lows and shoved European stocks to levels unseen since 1997.

When war appeared all but unavoidable, markets rebounded and Wall Street racked up its biggest weekly gain in 20 years.

Most markets hit multi-month highs on March 21, the second day of the war. But stocks retreated last week as reports of Iraqi resistance and pictures of dead US soldiers brought home the message that the war would be bloodier and longer than many investors expected.

"The market has swung from euphoria to pessimism to uncertainty," said Lynn Reaser, senior market strategist at Banc of America Capital Management in St. Louis.

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