Markets & Stocks
Peace dividend?
Global investors Monday were acting like war wasn't quite as likely as it was last week.
February 17, 2003: 3:18 PM EST
By Justin Lahart, CNN/Money Staff Writer

NEW YORK (CNN/Money) - Global investors aren't the likeliest group of peaceniks you'll come across. But Monday they appeared to have joined the millions who protested this past weekend in hoping that war with Iraq would be avoided.

U.S. markets were closed for Presidents Day -- just as well considering the snow drifts piling up on Wall Street -- but markets around the world suggested that traders have come to feel that war is less imminent.

The major international stock exchanges saw big rallies. Gold -- traditionally a safe haven for skittish investors -- saw its price tumble, as did oil. The dollar strengthened. (Check how world markets closed here).

A lot of the reason was Chief U.N. inspector Hans Blix's report on Friday to the Security Council. Blix took a softer line on Iraq than traders anticipated, raising expectations that United States would tone down the rhetoric, giving diplomacy and the inspection process more time before acting.

It was a notion that helped push Dow up 158.93 points on Friday. Overseas markets were wrapping up the day by the time Blix started talking and were closed by the time Secretary of State Colin Powell offered his response. And so they had to bide their time until Monday.

"The Blix report seems to be the major reason for the rally," said one trader in London, where the FTSE finished the day up 2.2 percent.

Takin' it to the streets

But protests across Europe and the United States appear to also have been a factor -- not just because of their size, but their makeup.

These were not the protesters who ran amuck in Seattle in the fall of 2000. They may not represent the consensus, but they represent something more than the fringe.

"I'm astonished how many people I knew, Labor and Tory, who went," said Lehman Brothers global economist John Llewellyn, who works in London. "I don't think you would have a million people out in the street just to say war is bad. What tipped it toward such big numbers is this idea that the U.S.'s approach is such a misdiagnosis."

The strength of the anti-war rally in London, in particular, may have some effect, forcing Prime Minister Tony Blair, who has thus far been the United States' staunchest ally, to soften his stance.

As Foreign Exchange Analytics currency strategist Dave Gilmore pointed out in a morning note on Monday, "In the U.K. in particular, the notion of Blair leading Britain to war with Iraq alongside the U.S. without U.N. backing is political suicide."

But although markets appear to have been cheered by the idea that, in the wake of Blix and the weekend protests, war is not as imminent, some feel that the good vibes will not last for long. Judging from the noise coming out of the White House -- particularly the appearances by national security adviser Condoleeza Rice on the weekend talk shows -- the administration hasn't changed its mind on Iraq.

"I see no officials saying a war is less likely," said HSBC currency strategist Marc Chandler. "I don't think the protesters in Western Europe and the U.S. are enough to change policy makers' minds."

Nor did Chandler put much stock in the general interpretation most observers were gleaning from market movements Monday, believing that they said little about what was going on in the world.

"Lower gold prices and a lower euro means there's less likely to be a war with Iraq? That's politically naive," he said.  Top of page

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