/www.fxserver.com/ Stocks and the dollar rose yesterday as investors welcomed the end of uncertainty over Iraq after the United States and its allies ended diplomatic efforts to win UN approval for an ultimatum to Iraq ahead of what seems certain war.
Safe havens like gold and government bonds weakened and oil prices dropped, while the dollar strengthened against the euro as investors bet a U.S.-led war on Iraq would be a short one.
Wall Street stocks surged shortly after the open, sparking rallies in Europe as well on the view that war would come soon and end quickly.
"The basic thoughts are that the conflict is likely to be on the short side," said Jack Caffrey, equity strategist at JP Morgan Private Bank in New York.
Wall Street erased steep opening losses, with stocks steaming higher as signs pointed to imminent war, lifting the uncertainty that has been plaguing global markets for months.
The blue-chip Dow Jones ind-ustrial average jumped 215.33 points or 2.74 per cent to 8,075.04 and the broad Standard and Poor's 500 climbed 22.02 points, or 2.64 per cent, to 855.29. The tech-laced Nasdaq Composite Index rallied 39.99 points, or 2.98 per cent, to 1,380.32.
"The market seems to be taking it as a positive," said Lex Werkheim, asset manager at Eureffect in Amsterdam. "We are finally getting an answer to our questions about which way it is going to go."
Wall Street's climb sparked a rebound in Europe, with the FTSE Eurotop 300 index surging 4.2 per cent by 1605 GMT, reversing a decline of 1.3 per cent.
Oil prices slumped as traders bet on a short military conflict, combined with the prospect that the United States would release oil from its emergency stockpiles.
Brent crude oil fell 78 cents to $29.35 per barrel on London's International Petroleum Exch-ange, which was forced to close for two hours when anti-war protesters raided the market.
U.S. crude futures dropped 73 cents to $34.65 per barrel, about $6 short of their peak during the 1990-91 Gulf crisis.
"The market believes the war will be short and quick, so there should be a relatively soft landing for oil prices," said Charlie Luke at Aberdeen Asset Management.
The dollar soared to a two-month high against the euro and firmed against major currencies.
"People are trading on the idea that this war is coming, that it will be short-lived and an easy victory, which will lift the geopolitical uncertainty that is weighing on the dollar and pave the way for a better U.S. economy," said Marc Chandler, currency strategist at HSBC in New York.
At midday in New York, the euro fell as far as $1.0589 before retracing to $1.0630. The drop was its lowest since January 16 and down one per cent from its prior U.S. close. The dollar also reached a two-month high against the Swiss franc near 1.38 francs firmed against the yen to stand near 118.40 yen.
Gold prices had risen early in the day but weakened as the dollar strengthened against the euro.
"The dollar is very strong against the euro and as a result gold has suffered accordingly. Gold seems not to be really responding to any war initiatives, but more to what the dollar does as a result of it," said Ross Norman, analyst with TheBullionDesk.com.
Spot gold was quoted at $336.30 /337.30 an ounce, off an earlier high of $345.00 in Asian trading.