Monday, March 24, 2003
Military action against Iraq started late Wednesday night ET. But it was the previous Friday when markets, in a startling turnaround, began to shed uncertainty. Stocks jumped with glee with visions of a quick U.S.-led victory against Iraq. This would provide the necessary stimulus to both economic growth and company earnings that investors had been searching for during months of uncertainty. Needless to say, all 13 indexes followed here were up on the week. And the Dow and NASDAQ soared above their 2002 year-end values. Trading was nevertheless volatile, vacillating on every rumor or fact. Naturally all other news was ignored. Gold, a safe haven, fell in value as the dollar - which had been the ultimate safe haven until recently - rose. Crude oil prices sank as market players became more confidant that there would be sufficient supply (despite a nasty situation brewing in a major oil supplier - Nigeria). Equity gains this week ranged from 0.9 percent (Mexican Bolsa) to 13 percent (Frankfurt DAX).
Both the European Central Bank and the Bank of Japan assured the financial markets that they were monitoring the situation carefully. The ECB said it was ready to provide sufficient liquidity under exceptional circumstances. The Bank of Japan already has injected additional funds into the financial system to cushion any impact of the U.S. attack on Iraq. The Bank of Japan added ¥1 trillion yen ($8.3 billion) to the banking system to ensure sufficient funds are available to lenders. Other central banks including the Swiss National Bank and the Bank of Korea also made similar statements. In the ongoing struggle over the EMU Stability and Growth Pact, Germany, France and Italy are now blaming the Iraqi war for the breach of the 3 percent GDP-deficit ceiling.
War ends uncertainty, for now
