- The Washington Times - Monday, January 27, 2003

NEW YORK, Jan. 27 (UPI) — Stock prices on the New York Stock Exchange and the Nasdaq Stock Market ended sharply lower in active trading Monday amid concerns about the consequences of a war with Iraq.

Shortly after the markets opened, U.N. weapons inspection chief Hans Blix issued a toughly worded assessment of Iraq's performance over the past two months, saying Baghdad had not genuinely accepted the U.N. resolution demanding that it disarm. This was followed by comments from U.S. Secretary of State Colin Powell and the White House signaling that conflict could be fast approaching.

Analysts said the report acts as a key pivotal point for Washington's efforts to bolster international support for a war on Iraq.

At closing Monday, the blue-chip Dow Jones industrial average, which sank 238.46 points Friday, had lost another 141.45 points, or 1.74 percent, to end at 7,989.56. The Dow finished last week at a 3-month low as concerns grew among investors that history's normal pattern — in which war typically is good for stocks — might not apply this time.

The worry is that even if the United States defeats Iraq quickly, or somehow prevails without war, U.S. investors will continue to face a host of world problems that could weigh on stocks for some time to come.

The tech-heavy Nasdaq composite index, which fell 46.13 points in the previous session, dropped 16.86 points Monday, or 1.26 percent, to close at 1,325.28.

The broader New York Stock Exchange composite index fell 93.23 points to close at 4,786.96 while the Standard & Poor's 500 index dropped 13.92 to close at 847.48.

The American Stock Exchange composite index fell 8.75 points to close at 807.09 while the Wilshire 5000 Index dropped 134.34 points to close at 8,041.40.

Volume was 1.66 billion on the Big Board and 1.37 billion on the Nasdaq Stock Market.

Analysts said concerns about the consequences of a war with Iraq continue to punish the market. The market briefly moved into positive territory shortly after the opening bell following a report showing that sales of existing homes surged 5.2 percent in December while home sales for 2002 set a record.

Experts noted that in addition to persistent worries about what a war with Iraq will do to the nation's already lackluster economy, tensions are worsening between the United States and its European allies.

Longtime allies France and Germany have been critical of the United States for moving too rapidly toward war with Iraq. Early Monday, key EU nations France, the United Kingdom, Spain and Germany agreed that U.N. arms inspectors should be given more time in Iraq if they consider it necessary to ensure Baghdad's disarmament.

The agreement came before Blix was to report in New York on Iraq's disarmament record. Officials said they agreed that more time must be given if Blix asks that arms inspections be extended.

U.N. weapons inspectors in Iraq should be given more time to do their jobs and disarm Iraq peacefully, Secretary-General Kofi Annan said ahead of crucial reports from the chief inspectors assessing Iraqi compliance.

"They should be given the time to do their work and all of us, the council and the assembly, must realize that time will be necessary, a reasonable amount of time, I'm not saying forever, but they do need time to get their work done and I suspect the council will allow that to be done," Annan told reporters.

"The council has acted unanimously on this issue. They spoke with one voice in Resolution 1441, and I think the unity of the council and the international community working together is very important," Annan added.

His comments contrasted with the stance of the Bush administration, which believes that Iraq has shown over the past two months an unwillingness to comply with U.N. Security Council resolutions.

"It's clear … that Iraq has failed to comply, that Iraq continues to have weapons of mass destruction that they have not accounted for and that Iraq's failure to comply has led to a situation where the inspectors are getting the run-around," White House spokesman Ari Fleischer told reporters.

"The president will continue to rally the world. And one day, one way, sooner or later, Saddam Hussein will either disarm so peace can be preserved, or a coalition will be assembled to do the job and to protect the peace."

But Annan said: "I have not given up on peace."

Analysts said the European Union is struggling to craft a single policy on Iraq by marrying the U.K.'s stance, which is largely backing the United States, with the more conciliatory approach of France and Germany, which insist that military action can only come after another U.N. Security Council resolution.

Mounting concerns over the possibility of a U.S.-led war against Iraq dragged down stocks in Europe and Asia Monday as well.

Analysts said investors were also awaiting another wave of earnings this week from companies including American Express, Merck, Northrop Grumman, AOL Time Warner, ExxonMobil, and ChevronTexaco. However, earnings news has taken a back seat amid growing geopolitical concerns.

The markets are also awaiting President Bush's State of the Union address Tuesday evening, when he is expected to talk about Iraq and the seesawing economy.

Another factor likely to affect the market in the coming days is the two-day meeting of the Federal Reserve's policy setting Federal Open Market Committee, set to begin Tuesday.

Meanwhile, U.S. Treasury prices were little changed. The 10-year bond eased 8/32 to 100 10/32. Its yield, which moves in the opposite direction of its price, inched up to 3.96 percent from 3.93 percent late Friday.

In Europe, stock prices ended lower in moderate trading in London, Frankfurt and Paris. The London International Stock Exchange's blue-chip FTSE-100 index lost 122.90 to close at 3,480.80. The German DAX index fell 74.02 points to close at 2,643.80 and the French CAC-40 index dropped 102.82 points to close at 2,795.78.

Analysts said European markets fell amid heightened geopolitical tension over Iraq and reaction to Friday's triple-digit slide on Wall Street.

Experts said the markets were led lower by weakness in technology, telecom, banks and insurers despite some strength in oil related issues.

Earlier in Asia, prices on the Tokyo Stock Exchange ended lower as growing war fears rattled investors already edgy about local corporate earnings. The blue-chip Nikkei Average Stock Average fell 122.18 points, or 1.4 percent, to 8,609.47.

Analysts said stocks fell as investors awaited the U.N. report on arms inspections in Iraq.

Investors were also keeping an eye on further developments related to Iraq, including the meeting scheduled Friday in the United States between Bush and British Prime Minister Tony Blair.

Elsewhere in Asia, prices also lost ground in Hong Kong as the blue-chip Hang Seng Index fell 1.7 percent to 9,298 amid growing war fears that sparked selling in major exporter stocks.

Stocks also declined in South Korea, led lower by weakness in chip makers. The South Korean Composite Index fell 2.7 percent to 593.09 — its lowest close since 587.51 on Oct. 11.

Meanwhile, prices ended lower on the Taiwan Stock Exchange in light pre-holiday trading. The Weighted Index lost 1.7 percent to 4,972.59.

Analysts said local investors were reluctant to trade actively ahead of the long holiday. The market will be closed from Wednesday until Feb. 6 for the Chinese New Year holidays.

Prices also ended lower on Singapore Stock Exchange where the key Straits Times Index lost 2 percent at 1,331.

Markets in Australia were closed Monday for a national holiday. Trading is to resume Tuesday.

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