Markets initially rose yesterday as investors speculated that months of uncertainty about the prospects of war with Iraq were drawing to a close but the US and Dublin markets ended the session in negative territory, writes Dominic Coyle.
The evidence laid before the UN Security Council yesterday by US Secretary of State Mr Colin Powell was seen as raising the likelihood that the US would go to war with President Saddam Hussein's regime with or without support.
However, US stocks stalled later as investors assessed the full impact of Mr Powell's words and analysts differed over whether his evidence would be sufficient to swing the support of key Security Council members, such as France behind any future resolution.
The Dow Jones Industrial Average rose 56.35 by early afternoon to 8,069.64 but fell into the red towards the end of the session to log a loss of 28.11 at 7,985.18. The broader S&P 500 index was down 4.62 at 843.59 while the tech-weighted Nasdaq Composite climbed 0.36 per cent or 4.67 to 1,301.48.
European markets, which had been marking time, took off as he started speaking and ended on or near session highs. London finished 2.47 per cent ahead, helped by a strong performance from Vodafone.
In Dublin, shares recovered some of their early losses but still ended the day down. Analysts were keeping a close eye on the reaction in New York as the US session wore on, looking for something to spark a rally today.
On the Continent, German shares added nearly 4 per cent, while other leading markets rose by about 1 per cent.
After a volatile start US shares moved cautiously higher by midsession, following the conclusion of Mr Powell's address.
Stocks were mostly higher throughout the morning session, but wavered and then fell as UN officials continued to deliberate about Mr Powell's address and the circumstances facing Iraq.
"The move up came up as we were finishing listening to Secretary Powell's speech. The move down came as Russia, France and Iraq went through their speeches," said Mr Tim Smalls, managing director at SG Cowen.
Both France and Russia are in favour of prolonging weapons inspections in Iraq.
In his address, Mr Powell played audio clips and displayed photographs to build the case that Iraqi officials have evaded efforts to disarm the country of weapons of mass destruction.
But analysts were not convinced the address did much to bring investors back to stocks in any convincing numbers.
"There was nothing here to bring people who were reluctant [because we are going to war] back into the market," said Mr Larry Wachtel, market analyst at Prudential Securities. "The thing that has been plaguing the stock market is that we are on the road to war."
Mr Hugh Johnson, chief investment officer at First Albany, agreed. "It is still the case that foreign and domestic investors are worried that the war will take longer and lead to interruptions in international oil supplies," said Mr Johnson. "The speech hasn't changed that and was not a market mover." - (Additional reporting, Financial Times Service/Reuters)
