The Telegraph
Since 1st March, 1999
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War clouds hover on bourses world-wide

London, Oct. 3 (Reuters): War fears, earnings worries and economic gloom hit many world stock markets again on Thursday, pushing investors into safe-haven bonds and supporting the dollar.

Shares in Japan tumbled to their lowest level since 1983, shaken by fears of failure among Japanese banks and undermined by sharp overnight losses on Wall Street.

European bourses contained losses but remained wracked by uncertainty over a US-led attack on oil-producing Iraq and more fundamental worries about global finances.

“The basic worries about war, economic recovery and corporate earnings are still very much to the fore,” said David Thwaites, European strategist for BNP Paribas in London.

“There are a lot more comments about Iraq and ‘war-war’ rather than ‘jaw-jaw’,” he said.

The FTSE Eurotop 300 index of pan-European blue chips was down about a half a per cent and the narrower DJ Euro Stoxx 50 index dropped 0.77 per cent.

Analysts said technology stocks were being hurt by a profit warning from US chip maker Advanced Micro Devices but that US stock index futures, hinting at only mild losses later on Wall Street, were restraining the slide.

In Tokyo earlier, the Nikkei dropped 112.90 points or 1.25 per cent to 8,936.43, to close below 9,000 for the first time in 19 years. It was the lowest close since the benchmark average ended at 8,920.82 on August 12, 1983.

Shares in major banks and some of their debt-ridden clients were hit hard by signs that Japan was readying tough measures to sort out bad loan problems.

Seeking safety

Uncertainty and the stock losses drove investors into the safe-haven of government bonds—lifting prices and lowering yields—despite a belief among many analysts that they are expensive.

The interest rate-sensitive two-year Schatz yield was down around six basis points at 3.073 per cent, hovering above 10-1/2 month lows. The benchmark 10-year Bund yield lost more than three basis points at 4.363 per cent.

On the foreign exchange markets, the dollar was trapped at recent levels against major currencies, unable to rise because of concern about war, but being supported by sliding Japanese and European stocks.

“We are coming into the earnings season and that is still putting pressure on the dollar, but appetite for European equities has waned,” said Kamal Sharma, currency strategist at Commerzbank.

The dollar was virtually unchanged from the US close at 122.80 yen but weakened by a quarter per cent to around $ 0.9874 per euro.

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