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Stocks fall as financial markets eye Iraq

NEW YORK The prices of oil and gold rose slightly and bonds and stocks drifted lower yesterday as investors kept an eye on headlines from the war with Iraq.

The dollar was softer but within recent ranges as traders assessed developments in Iraq and the war entered a seventh day. Dealers said it was increasingly difficult to gauge progress, leaving investors reluctant to place big bets on currencies.

Weak data on new US home sales and manufacturing weighed somewhat on Wall Street. Sales of new US homes fell 8.1 per cent in February to their lowest level in more than two years. Other data showed orders of durable goods, or big-ticket items, from US manufacturers sank in February, indicating businesses, bothered by war fears, refrained from making investments. But the decline was in line with expectations.

"The red-hot housing market is coming to an end and along with the durable goods orders earlier, this is weighing slightly on stocks," said Peter Cardillo, director of research at Global Partners Securities. "But the bottom line is the war factors. This market will continue to trade on the events of the war."

The blue-chip Dow Jones industrials shed 29.63 points, or 0.36 per cent, at 8,250.60. The tech-laced Nasdaq Composite was up 0.65 of a point, or 0.05 per cent, at 1,391.66. The broad Standard and Poor's 500 lost 2.27 points, or 0.26 per cent, to 872.47.

US warplanes targeted positions of Iraqi President Saddam Hussein's Republican Guards south of Baghdad, and British Prime Minister Tony Blair said reports of a major rebellion in Basra, Iraq's second-biggest city, could be "some way off."

Indications that a popular revolt might be under way in Basra had sent oil and gold prices diving on Tuesday, and helped bolster rising stock prices on investor hopes a rebellion could speed the end of Saddam's government.

Up to 15 people were killed in a poor Baghdad residential district on Wednesday in what enraged residents said was a missile strike during intensified air raids on the city.

US and British spokesmen said they had no immediate information on the explosions, which would be a major setback for British and US efforts to reduce public opposition to the war if a missile strike is confirmed.

Oil prices rose as supply worries mounted. Crude prices recouped losses triggered on Tuesday by what Britain called the "limited" civilian uprising in Basra, while weeklong production closures in Nigeria also kept the heat under crude prices.

US light crude futures for May delivery rose 73 cents to $28.70 a barrel, after a 25 per cent fall last week when dealers took the view that the war would not last long. London Brent gained 61 cents to $25.42 a barrel.

"Two factors are influencing the markets: the potential for Iraqi oil to remain unavailable for longer than expected and the loss of Nigerian oil exports," said analyst Adam Sieminski in a report for Deutsche Bank.

Some encouraging corporate news helped push European shares higher, but they turned flat afttreet opened.

The FTSE Eurotop 300 index was off 0.05 per cent and the narrower DJ Euro Stoxx 50 index fell 0.3 per cent.

Analysts cited gains in Nokia and utility Suez, and good news from HVB as supportive factors.

Earlier in Japan, the Nikkei ended up 1.37 per cent while the broader TOPIX index closed 1.13 per cent higher.