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K. S. Badri Narayanan

GLOBAL investors seem to have pushed the economy and industry/company-level activities to the backburner, as the US-led war on Iraq and the pneumonia virus outbreak in Asia took the centre stage in March.

The global markets were volatile in the beginning of March, as investors were unsure whether the US-led coalition would strike Iraq or not. The mood then turned cautious as Baghdad began destroying missiles and Turkey rejected plans to use the country as a staging post for an attack on Iraq, suggesting that the war might be delayed.

In February, the unexpected slow pace of US manufacturing and weak sales figures of carmakers checked the market direction. The sober comments by the US Federal Reserve Chairman, Mr Alan Greenspan, on the US housing sector further affected the market sentiment.

The downward momentum gained pace once the US and the UK hinted that they would go all out to remove the Saddam Hussein regime. This pushed the Dow Jones Industrial Average to a five-month low.

Nevertheless, stock markets recovered sharply later on hopes that the US-led war on Iraq, which began on March 20, would be short. However, the initial stronger-than-expected Iraqi resistance punctured investor confidence across the global markets. The market movements now were directly in keeping with the war signals even as the conflict entered its decisive phase.

European equities hit a six-year low during the month. Apart from war, the European Central Bank disappointed the markets with a cut of just 25 basis points in key rates while analysts were expecting at least a half-point cut to stimulate the Eurozone economy.

Stocks from the insurance sector were in turmoil after Aegon, the Dutch insurer, reported disappointing full-year results. However, insurance companies got some mild respite in mid-March after the Benelux insurance group Fortis announced that it was maintaining the dividend and the company's solvency ratio was 81 per cent.

Meanwhile, the Nikkei 225 average in Japan reached its 20-year low following the geopolitical threat from North Korea, which test fired a mid-range non-ballistic missile into the Sea of Japan. The Bank of Japan's report that "economic activity remains flat amid substantial uncertainty over the outlook for the economy," also spoiled the mood at Tokyo. Even the BoJ's action of buying Yen 1,000 billion of bills in the spot market failed to arrest the Nikkei's slide

The market sentiment in Hong Kong was affected after reports of deaths because of SARS (Severe Acute Respiratory Syndrome). As a result, the Hang Seng slid sharply.

The bomb blast at the crowded airport in the southern Philippines rekindled fears of terrorism amongst investors.

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