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Weapons of Mass Destruction (WMD)

SLUG: 2-310900 Saddam Market Reaction (L-O)










INTRO: On the first trading day (Monday) since the capture of former Iraqi leader Saddam Hussein, the dollar rose in Asia and oil prices dropped. But V-O-A's Barry Wood reports, by the time trading shifted to Europe and North America those moves reversed direction with the dollar ending down and oil up.

TEXT: Amid predictions that financial markets would celebrate Saddam Hussein's arrest, traders anticipated a big rally on equity markets and in the U-S currency. Indeed that was the case in Japan where Tokyo's Nikkei average gained three percent and closed at a five week high. The weakening dollar also got an initial boost rising against both the yen and the euro, the currency of 12 European Union nations.

But with the news of more car bombings in Baghdad (Monday) market participants began to doubt that Saddam's capture would slow the persistent insurgency in Iraq.

Oil -- which has remained stubbornly high all yearinitially fell Monday, at one time being down over one dollar and 30 cents. That drop reversed in New York as oil closed 13 cents higher at 33 dollars 17 cents a barrel. Oil prices have risen nine percent in the past three weeks. Gold, which has been at multi-year highs, closed little changed at 407 dollars an ounce.

The dollar closed lower in both Europe and New York. The euro touched another record high of one dollar 23 cents and the dollar declined to 107 point six Japanese yen. The dollar is down 15 percent this year amid market perceptions that despite statements to the contrary the Bush administration is not displeased with a weakening dollar.

Tom Gallagher of the International Strategy and Investment Group in Washington believes it will be several days before markets fully absorb the impact of Saddam's arrest. He is cautiously optimistic about the security situation in Iraq.

///Gallagher act///

If that improves a lot then there is going to be an improved oil price outlook and then of course an improved chance for President Bush's re-election next year. It is that, the potential for improvement, that the market reaction -- sort of gradually backing off from euphoria -- that indicates people recognize that it is just a step in that direction.

///end act///

Mr. Gallagher spoke on C-N-B-C television.

U-S equities did soar on the opening Monday but then steadily fell back, closing down, but with the Dow Jones Industrials still above the ten thousand level established last week for the first time in two years. (signed)


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