LONDON, March 26 - Oil rose on Wednesday as investors remained anxious the war in Iraq could drag on but the dollar held firm and European stocks opened lower. Markets kept their focus on the war as U.S. planes and missiles targeted Iraqi state television in Baghdad and pounded positions held by Republican Guards defending the approaches to the city. Safe-haven gold and government bonds were steady.
"The war is everything," one Amsterdam-based government bond trader said. Oil prices rose, reversing the previous day's losses on concern the war could go on for a long time but with the market also focusing on the impact on supply of ethnic violence in Nigeria. Clashes in Nigeria between the Ijaw ethnic group and the military ahead of elections have removed 817,000 barrels per day of crude from global markets. U.S. May light crude futures rose 58 cents to $28.55 a barrel while Brent crude for May was 57 cents higher at $25.38 a barrel.
"The market is responding to difficulties in the Iraq campaign. It had priced in the perfect war and had gone so far as building in a victory discount, which is now being eroded," Sydney-based oil analyst Simon Games-Thomas said. Reports of an uprising in Basra lifted U.S. and Asian stock markets. The British military said on Tuesday it believed citizens were rising up against President Saddam Hussein, though an Iraqi minister denied a revolt was under way. In the U.S., reports of the uprising in Basra buoyed sentiment. The blue-chip Dow Jones Industrial average <.DJI> closed 0.8 percent higher while the tech-dominated Nasdaq Composite <.IXIC> ended up 1.55 percent.
"We are a headline-driven market," said Arthur Hogan, chief market analyst at Jefferies & Co. WALL STREET BOUNCE BOOSTS TOKYO
The bounce on Wall Street helped propel Tokyo stocks higher as investors snapped up battered shares such as NTT DoCoMo <9437.T> snd selling eased ahead of the fiscal year end on March 31. The Nikkei average <.N225> ended up 1.37 percent while the broader TOPIX index <.TOPX> closed 1.13 percent higher. The FTSE Eurotop 300 index <.FTEU3> of pan-European blue chips was down 0.71 percent, reversing opening gains, while the narrower DJ Euro STOXX 50 index <.STOXX50E> was off 1.06 percent. Gold opened slightly higher in Europe with the rapid advance of U.S. forces towards Baghdad pressuring prices. Spot gold stood at $328.50 an ounce, compared with $328.25 at the New York close on Tuesday.
Safe-haven euro zone government bond prices eased. The two-year German Schatz note's yield , which moves in the opposite direction to the price, rose 0.4 basis points to 2.58 percent. It hit a two-month high of 2.69 percent last week. The 10-year Bund yield was 1.0 basis points higher at 4.216 percent. The dollar firmed in early European trade but remained within recent ranges. The dollar traded in tight ranges in Asia, having cut losses on Tuesday after the uprising reports injected optimism into the market that the U.S. was gaining support from ordinary Iraqis. The greenback was nearly a quarter percent up on the day at $1.0627 per euro and 1.3857 Swiss francs . It was steady against the yen at 120.20 yen .//