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K.S. Badri Narayanan

AFTER beginning the New Year optimistically, stock markets across the globe turned volatile amid growing concerns of a US-led war against Iraq. Not a single day passed during the month without war rhetoric. Towards the end of the month, the possibility of a war increased after the UN Chief Weapons Inspector, Mr Hans Blix, strongly criticised Iraq for its failure to answer a host of questions over its suspected weapons programmes.

US stocks: The US stock market ended the month in negative territory. Besides war fears, crude oil prices (touched a two-year high) surged following reports that the US inventories were showing the effects of a disruption of oil supplies from Venezuela owing to a general strike there. Another impact was on gold price, which also skyrocketed. The threat of war swept aside quite a few positive developments — manufacturing activity expanded in the US in December for the first time since late summer, and has been stabilising after hitting a soft patch last year; auto sales too rose by a healthy 14 per cent.

There was also a slew of good corporate earnings' announcement for the fourth quarter. Intel announced that its profits had doubled; Continental Airlines declared better-than-expected results, as its net loss narrowed; GM's net quadrupled; Johnson & Johnson's profit rose 30 per cent; Merrill Lynch swung in to profit; Eli Lily net jumped. However, companies such as Dupont, AT&T, aluminium-major Alcoa and AOL inflicted negative sentiment by posting lower-than-expected performances.

Another negative news that impacted the US market was the data on factory production, which fell in December.

Europe: The European markets were also besieged by the war threat and ignored some good news from the corporate world — SAP reported strong fourth-quarter performance. Telecom equipment major Nokia announced better-than expected numbers. Siemens, the German electronics, engineering and mobile handset company, announced a first-quarter earnings in line with market expectations.

Asia: Led by Tokyo's Nikkei, stocks plunged across the Asian markets. Electronics major Sony led the decline in Japanese stocks. Sony announced that its revenues from electronics for the third quarter fell 4.6 per cent and said the current quarter will be more difficult.

From others, Indonesia declared that some bankers have legally fulfilled their debt obligations to the state, and Jakarta hopes to begin closing the books on one of history's biggest bank bailouts. .

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