SINGAPORE - Asia's beaten-down shares struggled up on Tuesday, but financial markets were edgy after President Bush vowed to confront an Iraqi threat. The dollar slipped against the yen, but the trend for Japan's currency was weak over worries banking reforms could trigger a rash of bankruptcies in the world's second largest economy. Bush said he was concerned Iraq wants to attack the United States with chemical or biological weapons, dispersed by remote-controlled aircraft, and vowed to confront the threat.
Bracing Americans for possible war, Bush told an applauding audience in Cincinnati he hoped military action would not be required, but it might be necessary and could be difficult. Battered banks and tech issues led the Tokyo market up, but analysts said it was a technical rebound after Japanese shares crumbled on Monday in their biggest one-day slide since June.
The Nikkei average ended up 0.24 percent at 8,708.90 and the broader TOPIX closed up 0.04 percent at 860.79.
"There's nothing at all fundamental in today's bounce," said Masaaki Higashida, deputy general manager of investment information at Nomura Securities.
"There are still a whole range of factors -- ranging from fears of financial instability at home to worries of economic slowdown in the U.S. and a war in Iraq -- all conspiring to drag us down."
The yen was on the defensive on concerns about the fallout from banking reforms in Japan. As of 0615 GMT, the dollar was fetching 124.08 yen, little changed from late U.S. levels. The euro was also steady against the dollar at 98.26 cents.
"The current market mood is 'sell Japan'," said Kosuke Hano, head of foreign exchange sales at Royal Bank of Scotland. U.S. stocks fell to multiyear lows on Monday on worries about U.S. intentions toward Iraq. Poor profit outlooks and fears the U.S. economic recovery is stalling also hurt equities.
The Dow Jones industrial average ended down 1.40 percent at 7,422.84 and the broader Standard & Poor's 500 Index lost 1.91 percent to 785.28 -- the weakest close for the Dow since mid-1997, and for the S&P, since the spring of 1997. The tech-packed Nasdaq Composite Index fell 1.80 percent to 1,119.40, its lowest close since August 1996.
Futures trading on Wall Street indicated U.S. stocks may open higher later on Tuesday. European blue chips looked set to slide at the open, tracking Wall Street down on fear of war in the Gulf, but traders say the downside was limited by a sense stocks have already priced in a U.S. military strike on Iraq.
U.S. Treasuries were earlier bolstered by an explosion on Sunday that gutted a French oil supertanker off the coast of Yemen. The cause was still unclear, but a U.S. official told it now appeared to be an accident, not a terror attack.
NYMEX crude oil futures spiked on news of the incident but were trading steady at around $29.71 a barrel in electronic trade in Asia ahead of key weekly U.S. inventory data later on Tuesday. //