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EDITIONS
Tuesday, 4 February, 2003, 23:25 GMT
US shares fall sharply
Traders on the floor of the New York Stock Exchange
Investors are increasingly nervous about a war in Iraq
Share prices on Wall Street have fallen sharply on Tuesday, depressed by bad news about an insurance giant and ongoing worries about the possible impact of a war in Iraq.

The Dow Jones index closed 97 points lower at 8,013.

Markets 2100 GMT
FTSE: -2.7%
Dax: -4.3%
Cac: -3.2%
Dow Jones: -1.2%
Brokers said investors were nervous ahead of a crucial meeting at the United Nations on Wednesday, and by news from insurance giant American International Group (AIG) that it would have to set aside $1.8bn (1.1bn) to cope with an unexpected number of claims.

"War is overhanging sentiment and that uncertainty is bothering people. Then, while you are waiting for that, you get a bomb like AIG," said Dan Goldstein, trader for investment firm Ehrenkrantz King Nussbaum.

Once again, unnerved investors fled into gold, which leapt to a six-year high.

War jitters drove the dollar lower and drove up oil prices.

Investors were eager to put their money into safe-haven investments one day before US Secretary of State Colin Powell addresses the Security Council.

You hate to blame everything on Iraq. It's misleading to blame everything on Iraq. But it's definitely having a negative impact on the consumer and the economy

Rich Nash, chief market strategist at Victory Capital Management

Mr Powell will provide an update on any evidence that Iraq is hiding banned weapons from UN arms inspectors.

War jitters

"You hate to blame everything on Iraq," said Rich Nash, chief market strategist at Victory Capital Management in Cleveland.

"It's misleading to blame everything on Iraq but it's definitely having a negative impact on the consumer and the economy."

AIG shares lost 6.6% of its value after the insurer said the after-tax charge was to cover runaway costs of workers compensation and directors' and officers' liability claims.

Shares in other insurance companies followed suit, with ACE, Chubb and Travelers Property Casualty all losing between 3% and 5% during the session.

Technology giant Cisco Systems dropped 2.1% on fears it would offer a cautious outlook when it posts earnings after the bell.

Shares in AMR, American Airlines' parent company, were trading at a new all-time low of $2.70, before closing slightly higher on the New York Stock Exchange.

Shares sunk after American Airlines, the world's largest carrier, asked its unions and other workers for $1.8 billion in annual cost cuts, in what it called a "last resort" to turn the cash-strapped airline around.

FTSE falls

Markets on the other side of the Atlantic were already downbeat before Wall Street's opening on Tuesday and deteriorated after the Dow Jones index dropped 100 points after the opening bell.

The FTSE closed down 99 points at 3,590, almost wiping out its 122-point gain the day before.

On Monday, the FTSE had recorded its biggest rise in three months on news strict solvency margins for insurers would be relaxed.

But after a day of strong gains, insurers and banks were among the heaviest fallers in London on Tuesday.

Analysts said investors were keen to take profits after seeing 29bn added to the value of UK shares on Monday.

See also:

04 Feb 03 | Business
03 Feb 03 | Business
30 Jan 03 | Business
29 Jan 03 | Business
28 Jan 03 | Business
28 Jan 03 | Business
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