Allies advance sends markets soaring

THE rattle of Abrams tank tracks on the streets of central Baghdad sent shares and the dollar soaring while hitting the price of gold and oil.

The textbook reaction of the market to the successes of the Anglo-American forces in the Iraqi capital, as well as the country’s second-largest city Basra, sets the scene for further gains for investors this week, if the war goes according to the allies’ plan.

The coalition’s successes and failures will be marked on world markets very keenly in the coming days.

But the trend appears to be heading upwards as the markets anticipate a rapid end to the war element of the invasion of Iraq.

Metals analyst with Prudential Bache Angus MacMillan summed up market sentiment in a note to clients.

“As US forces advance, so gold and oil prices retreat, but stock markets take comfort with almost every shot fired. Truly, it is a world gone mad.”

On the 19th day of the US/British-led war to topple Iraqi President Saddam Hussein, the US military said 65 of its tanks rumbled into the heart of Baghdad and entered two presidential palace complexes.

The dollar rose the most in three weeks against the euro as US troops arrived on the streets of Baghdad and took control of key government buildings, boosting optimism that the war will end within days.

A strengthening dollar is good news for Irish exporters to the US, the tourist industry and Irish companies with dollar earnings like Kerry, Waterford Wedgewood and CRH.

The Organisation of Petroleum Exporting Countries (OPEC) called for a special meeting on April 24 to discuss cutting oil production in a bid to bolster prices, the group’s president said.

World oil markets are facing “a glut and not a shortage” according OPEC President Abdullah bin Hamad al-Attiyah, who is also Qatar’s oil minister.

He told reporters in Paris that members may discuss lowering supplies at the meeting.

Brent crude oil traded at $24.90 a barrel, up 22 cents, after the comments, compared with an earlier loss of as much as $1.28 a barrel.

Prices have declined this month, in part on traders’ expectation the war in Iraq will soon end.

The OPEC president said members are seeking oil prices at $25 a barrel.

In the US and Europe, key indices from Wall Street to Warsaw saw values rise with the ISEQ, FTSE, CAC and DAX all showing strong gains.

Gold tumbled in Europe yesterday, shedding its safe haven premium, and other precious metals also weakened.

UBS Warburg precious metals analyst John Readet discussed the issue in a daily report.

“Gold continues to weaken as the Iraq war proceeds towards its inevitable conclusion.

“Quite how far gold can fall will be determined by the degree to which the dollar will strengthen,” he noted.

Spot gold was trading at $320.55/321.25 an ounce at 1421 GMT yesterday, falling some $5 from New York’s close on Friday at $325.35/326.05.

The metal recorded a fresh four-month low at $319.00.