LONDON, March 20 - Financial markets shifted focus on Thursday from the opening salvo of the war in Iraq to anxiety about how long the conflict would last, sending stocks lower and fuelling a new drive into safe haven bonds. Oil prices, which fell sharply, after U.S. forces launched selective missile and aircraft strikes at Iraq, began to pare back their losses. The dollar fell around one percent against the euro and the Swiss franc as concern mounted about the future course of the conflict.
U.S President George W. Bush warned that the war could be longer and more difficult than expected -- a scenario that many financial market players have feared. For a snapshot of the latest developments in the Iraq crisis, please click on [IQ/UPDATE]. European stocks fell at their open after five days of gains in the run up to war. U.S. stock futures also fell, indicating a choppy start for wall Street. "I don't see any reason to buy more equity until we get some clarity on how this war is going to go," said an equity trader at a German bank. The FTSE Eurotop 300 index <.FTEU3> of pan-European blue chips was one percent weaker, while the narrower DJ Euro Stoxx 50 index <.STOXX50E> was off 1.58 percent. Stocks in Asia closed higher on hopes the war would end quickly, but sentiment changed as investors worried about risks to the scenario. Tokyo's benchmark Nikkei average closed 1.79 percent higher at 8,195.05. South Korean shares closed 4.92 percent higher, Taiwan finished up 1.86 percent and Australia ended 0.68 percent higher. Benchmark indices in Hong Kong, Singapore and almost every other market in Asia were up as well.
OIL, BONDS DOLLAR
Oil prices fell but were well off their earlier losses of more than a $1 a barrel. U.S. crude oil for April delivery was down 78 cents at $29.10 a barrel while Brent crude for May lost 45 cents to $26.30 a barrel. Rising oil prices have sparked concern because of their potentially negative effect on world economic recovery. Worries still remained about the effect of war in the Gulf on oil. "What is foremost in oil traders' minds is the impact on Iraqi oilfields," said Peter Gignoux, head of the London Energy Desk at Salomon Smith Barney. Euro zone government bond yields fell, backing away from two-month highs reached earlier.//