Victory in Iraq fails to ignite the stock markets

TO date the resolution of the war in Iraq has failed to ignite the stock markets.

In the run-up to the Easter weekend, there was little movement in the US or the European markets yesterday as investors marked time.

By late yesterday afternoon the markets globally were showing tiny gains, with the Dow up 12 points the Nasdaq 10 and the FTSE 30.

In Dublin the ISEQ 100 was marginally ahead while the euro continued strong against the dollar and sterling at $1.09 and Stg69.2p.

The view is that unless the US is hit by a major hiccup going forward, the stock markets have probably left its worst bear market since the 1929 Crash behind, if only just.

Shares are still weak, as uncertainty about consumer confidence and capital investment in the US remain up in the air. The view in the markets is that, for those courageous enough to pick value stocks there is good value out there, but a lot of scepticism persists about what levels the US markets will get back to before the year is out.

In the US, the “round table” of chief executives put a damper on investment prospects recently when they said that demand was virtually absent and they would not be investing until there were signs of recovery of demand in prospect.

Some experts are optimistic however the relatively quick victory in Iraq should help the US economy avert double dip recession.

However, there is huge uncertainty out there and an economy that was expected to grow 4% in 2002 managed to produce growth of just 2.4%.

This year Niall Dunne, chief economist Ulster Bank Financial Markets, said it could be as low as 2%, and he is cautious about any massive hike in shares to their pre-crash highs. Prior to the war the Dow was down at 7,500 and it has since rallied to 8,250. In his view, if it gets back up to close to 9,000 by the year end it might be a good result.

To date too many uncertainties have undermined investor confidence and while some big corporates have come in with reasonable first quarter results, these are insufficient to pave the way for a major rally in the markets.

So far this year the Dow is just up by 0.1%; the S&P 500 0.6% and the Nasdaq 3.7%/

In 2002 the Dow lost 16.8% of its value while the Nasdaq dipped by over 31% as the markets continued to slide.

Last year, the FTSE lost 24.5% have dipped by 16.2% in 2001 as investors globally cut their losses and scampered to safer investment havens.