Originally created 12/16/03

Saddam's capture pushes stock prices higher overseas



LONDON -- Stocks bounced higher around the globe Monday as investors snapped up shares in the hope that Saddam Hussein's capture might mark a turning point in the Iraq conflict.

The Dow Jones industrial average rose nearly 1 percent as trading opened Monday in New York, only hours after the main index of the Tokyo stock market closed with a gain of more than 3 percent. European exchanges also rose about 1 percent, but trimmed their gains later.

In the United States, the Dow Jones industrial average fell back from its initial surge.

In London, the Financial Times-Stock Exchange 100-share index was essentially flat at its close, up 0.01 percent at 4,348.00. The Paris CAC 40 index of French blue chips ended the day up 0.6 percent, at 3,490.42. The Xetra Dax index of Germany's leading shares was up 0.4 percent in late trading.

"Of course concerns remain, and it's almost certain the stability of Iraq and the region is far from achieved," said Marc Touati, chief economist with French bank Natexis Banques Populaires, in a note to investors. "Nevertheless, the probability of another Vietnam for the Americans is shrinking."

The market response so far has been one of relief, said Laurent Fransolet, head of the European fixed-income desk at J.P. Morgan in London.

"Given that economic data has been on the upside and clearly the global economy is recovering, it's just another positive point for equities that Saddam Hussein has been captured," he said.

In other European stock markets, Spain's Ibex 35 index closed 0.5 percent higher, and Italy's MIB30 rose by 0.6 percent. Leading indexes added 0.7 percent in Stockholm, 0.1 percent in Amsterdam and 0.6 percent in Zurich.

In South America, Brazil's benchmark Bovespa stock index was 0.2 percent lower after rising about 1.5 percent at the start of the session. The Bovespa has hit a series of record highs recently, closing above 21,000 earlier this month, on growing confidence over Brazil's improving domestic economic climate.

The arrest of the former Iraqi dictator by U.S. troops "was definitely an unexpected Christmas present" for stock investors worldwide, said Tsuyoshi Nomaguchi, an equity strategist at the Daiwa Securities brokerage in Tokyo.

Tokyo's Nikkei Stock Average of 225 issues surged by 321.11 points, or 3.2 percent, to finish at 10,490.77.

"It could be the beginning of the end of the war," said UBS Securities equity strategist Shoji Hirawaka, as images of a bearded, disheveled Saddam appeared around the world on televisions and in newspapers.

Stock markets were nearly all higher across the Asia-Pacific region, though Hong Kong shares retreated slightly into negative territory at the close, down 0.6 percent after the Hang Seng Index briefly hit its top level of the year - 12,740.50 points.

"Uncertainties evaporated after Hussein's capture," said Jo Yong-Chan, an analyst at Daishin Securities in Seoul, where prices closed with a gain of 2 percent. "War-related stocks are falling and construction stocks are soaring."

Shares in Australia rose 1.1 percent on the day, while New Zealand prices added almost 1 percent by the close.

Despite earlier euphoria over the capture, the U.S. dollar dropped to a new low against the euro and was mixed against other currencies. Gold rose $1.30 per troy ounce in London, to $407.80.

Analysts had predicted Saddam's capture would ignite a stock market rally but they were unsure how much staying power it would have. Although it erases one big uncertainty about Iraq, it is unclear whether it will bring an end to the frequent attacks being carried out against troops from the U.S.-led coalition.